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

                                    FORM 10-K

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

                  For the fiscal year ended September 30, 2004

                        Commission file number: 000-21377


                          ROFIN-SINAR TECHNOLOGIES INC.
                          -----------------------------
             (Exact name of Registrant as specified in its charter)

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



  40984 Concept Drive, Plymouth, MI                            48170
----------------------------------------              -------------------------
(Address of principal executive offices)                     (Zip Code)

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

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



<PAGE>



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]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

          YES [ X ]  NO [   ]

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant (based upon the closing price of the stock on
the NASDAQ National Market on December 10, 2004) was approximately
$575,229,534.00.

15,070,200 shares of the Registrant's common stock, par value $.01 per share,
were outstanding as of December 10, 2004.

Certain sections of the Company's Proxy Statement to be filed in connection with
the Company's 2005 Annual Meeting of Stockholders to be held in March 2005 are
incorporated by reference herein at Part III, Items 10-14.



                                        2

<PAGE>




                          ROFIN-SINAR TECHNOLOGIES INC.

                                TABLE OF CONTENTS

                                                                           Page

PART I

   ITEM 1.    BUSINESS........................................................4

   ITEM 2.    PROPERTIES.....................................................25

   ITEM 3.    LEGAL PROCEEDINGS..............................................25

   ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............26


PART II

   ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
              MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES..............27

   ITEM 6.    SELECTED FINANCIAL DATA........................................28

   ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS......................................29

   ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....35

   ITEM 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......35

   ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
              AND FINANCIAL DISCLOSURE.......................................35

   ITEM 9A.   CONTROLS AND PROCEDURES........................................36


PART III

   ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............37

   ITEM 11.   EXECUTIVE COMPENSATION.........................................37

   ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT.....................................................37

   ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................37

   ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES.........................38


PART IV

   ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.....................39



                                       3


<PAGE>




PART I

Cautionary Note Regarding Forward-Looking Statements

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

These factors include (among others):

     o   downturns in the machine tool, automotive, semiconductor and
         electronics industries which may have, in the future, a material
         adverse effect on sales and profitability of the Company;

     o   the ability of the Company's OEM-customers to incorporate its laser
         products into their systems;

     o   the impact of exchange rate fluctuations, which may be significant
         because a substantial portion of the Company's operations are located
         overseas;

     o   the level of competition and the ability of the Company to compete in
         the markets for its products;

     o   the Company's ability to develop new and enhanced products to meet
         market demand or to adequately utilize its existing technology;

     o   third party infringement of the Company's proprietary technology or
         third party claims against the Company for the infringement or
         misappropriation of their proprietary rights;

     o   competing technologies that are similar to or that serve the same uses
         as the Company's technology;

     o   the scope of patent protection that the Company is able to obtain or
         maintain;

     o   the Company's ability to efficiently manage the risks associated with
         its international operations; and

     o   the other risks described under "Business-Risk Factors".

In making these forward-looking statements, we claim the protection of the
safe-harbor for forward-looking statements contained in the Reform Act. We do
not assume any obligation to update these forward-looking statements to reflect
actual results, changes in assumptions, or changes in other factors affecting
such forward-looking statements.

ITEM 1.  BUSINESS

COMPANY OVERVIEW AND HISTORY

Rofin-Sinar Technologies Inc., founded in 1996, (herein also referred to as
"Rofin" or "RSTI" or the "Company" or "we", "us" or "our") is a leader in the
design, development, engineering, manufacture and marketing of laser-based
products, primarily used for cutting, welding and marking a wide range of
materials. Lasers are a non-contact technology for material processing which
have several advantages compared to conventional manufacturing tools that are
desirable in industrial applications. The Company's lasers all deliver a
high-quality beam at guaranteed power outputs and feature compact design, high
processing speed, flexibility, low operating and maintenance costs and easy
integration into the customer's production process. As a technological leader in
CO2, solid-state lasers and diode lasers, the Company is able to meet a broad
range of its customers' material processing requirements.

Based on 2003 industry data, for laser products used for macro (cutting and
welding) and marking and micro (fine cutting and fine welding and perforating)
applications combined, the Company believes it has a worldwide market share
(based on sales volume) of approximately 21% and that it is among the largest
suppliers of laser products used


                                       4

<PAGE>


for marking applications worldwide. The Company has sold more than 30,000 laser
sources since 1975 and currently has over 3,000 active customers (including
multinational companies with multiple facilities purchasing from the Company).
During fiscal 2004, 2003, and 2002, respectively, approximately 49%, 53%, and
53% of the Company's revenues related to sales of laser products for macro
applications and approximately 51%, 47%, and 47% related to sales of laser
products for marking and micro applications.

Through its global manufacturing, distribution and service network, the Company
provides a comprehensive range of laser sources and laser-based system solutions
to three principal target markets: the machine tool, automotive, and
semiconductor and electronics industries. The Company sells directly to
end-users and to original equipment manufacturers ("OEMs") (principally in the
machine tool industry) that integrate Rofin's laser sources with other system
components. Many of Rofin's customers are among the largest global participants
in their respective industries. During fiscal 2004, 2003, and 2002, 22%, 21%,
and 27%, respectively, of the Company's sales were in North America, 59%, 65%,
and 60%, respectively, were in Europe and 19%, 14%, and 13%, respectively, were
in Asia. See Note 13 "Geographic Information", to the consolidated financial
statements for further information.

The financial statements included in this Annual Report on Form 10-K present the
historical financial information of Rofin-Sinar Technologies Inc. and its
wholly-owned subsidiaries. These financial statements include the consolidated
accounts of Rofin-Sinar Inc. ("RS Inc."), PRC Laser Corp ("PRC"), Lee Laser,
Inc. ("Lee") and Rofin-Sinar Technologies Europe S.L. ("RSTE"). RSTE, a European
holding company formed in 1999, owns 100% of Rofin-Sinar Laser GmbH ("RSL"), 95%
of Dilas Diodenlaser GmbH ("Dilas"), 100% of Rofin-Baasel Italiana S.r.l., 100%
of Rofin-Baasel France S.A., 71% of Rofin-Sinar UK Ltd., 100% of Rofin-Baasel UK
Ltd., 100% of Rofin-Baasel Benelux B.V., 100% of Rofin-Baasel Singapore Pte.
Ltd., 100% of Rofin-Baasel Taiwan Ltd., 100% of Rofin-Baasel Korea Co. Ltd., and
83% of Rofin-Baasel Espana S.L. ("RBE").

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

The financial statements of RSL include the consolidated accounts of its
88%-owned subsidiary, Rofin-Baasel Japan Corporation (a Japanese corporation),
its 100%-owned subsidiary, Rasant-Alcotec Beschichtungstechnik GmbH ("Rasant"),
its 100%-owned subsidiary, Carl Baasel Lasertechnik GmbH & Co. KG ("CBL"), its
90%-owned subsidiary Optoskand AB ("Optoskand") and its 100%-owned subsidiary,
CBL Verwaltungsgesellschaft mbH.

The financial statements of CBL include the consolidated accounts of its
wholly-owned subsidiaries, Rofin-Baasel Inc., Wegmann-Baasel Laser und
elektrooptische Geraete GmbH, and PMB Elektronik GmbH.

Effective December 31, 2002, the remaining 9.99% of shares of CBL were purchased
by the Company through RSL in January 2003 under an option agreement between the
Company and the former minority shareholder of CBL.

On March 31, 2003, the Company acquired an additional 37% of the share capital
of Rofin-Marubeni Laser Corporation, Atsugi-shi, Japan, through its wholly-owned
subsidiary RSL. The Company currently holds 88% of the share capital. As of May
1, 2003 Rofin-Marubeni Laser Corporation, Atsugi-shi Japan was renamed
Rofin-Baasel Japan Corporation.

On February 28, 2004, the Company acquired 90% of the share capital of Optoskand
AB, Gothenburg, Sweden, through its wholly-owned subsidiary RSL. The Company has
a call option exercisable beginning in 2009 for the remaining 10% of the common
stock.

On March 29, 2004, the Company issued and sold 2.5 million shares of its common
stock at a price of $28.00 per share. The underwriters exercised their
over-allotment option resulting in an additional 360,000 shares of common stock
being issued and sold on April 8, 2004. The Company realized net proceeds of
$75.3 million as a result of these transactions. The Company intends to use the
aggregate net proceeds from the offering for working capital, and other general
corporate purposes, including acquisitions of complementary products,
technologies or businesses as opportunities arise.



                                       5


<PAGE>

On August 20, 2004, the Company acquired an additional 15% of the share capital
of Dilas Diodenlaser GmbH, Mainz, Germany, through its wholly owned subsidiary
RSTE. The Company currently holds 95% of the share capital.

On August 31, 2004, the Company acquired 100% of the share capital of PRC Laser
Corporation based in Landing, New Jersey (including its wholly-owned European
subsidiary PRC Europe N.V., Oudenaarde, Belgium) and Lee Laser, Inc. based in
Orlando, Florida.

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



BUSINESS STRATEGY

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

     o   Developing New Laser Products through Technological Innovation: Product
         innovation in response to evolving customer needs for increased output
         power, greater penetration and higher processing speeds is a key
         component of the Company's strategy. The Company is currently focusing
         its research and development activity on increasing the output power of
         its CO2/diffusion-cooled, wave-guide Slab lasers and enhancing the
         performance of its line of high-power, fast flow CO2 lasers. The
         Company is also further expanding its series of end-pumped solid state
         lasers for marking and micro applications and is actively engaged in
         the development of diode-pumped, solid-state lasers based on the
         so-called "disc design". The Company's objective is that this new type
         of solid-state laser will be capable of performing heavy industrial
         material processing applications, as well as fine cutting and fine
         welding applications, more precisely than previously possible.

     o   Focusing on Cross-Selling to Existing Customers in Target Markets: The
         Company intends to continue to focus its sales and marketing activities
         on the machine tool, automotive, semiconductor and electronics, and
         medical device industries. The Company has targeted and will continue
         to target these industries because they use advanced manufacturing
         processes that require continuing investments to improve production
         efficiency and because the Company has significant market presence in
         these sectors. In addition, the Company has begun to focus on new
         markets such as medical instruments and components for medical
         instruments and the packaging industry. To exploit its opportunities by
         developing new applications for existing laser technologies, the
         Company is exploring the potential for use of high-power CO2 lasers in
         car body assembly by using its Remote Welding Systems concept in
         response to the interest shown by car manufacturers in reducing their
         reliance on spot-welding guns. In addition, building on the success of
         its laser marking of small integrated circuits, the Company intends to
         develop new applications, such as fine-welding and micro-soldering for
         the semiconductor and electronics industry. In the packaging industry,
         the Company is seeking new opportunities for foil perforation based on
         its extensive knowledge of paper perforation with lasers. The Company
         is marketing a low-priced version of its laser marker, that it has
         developed, to capture additional market share through sales in the
         low-end marking market.

     o   Capitalizing on Global Presence to Attract New Customers: The Company
         intends to capitalize on its customer base and the presence of its
         manufacturing, sales and service operations in the three principal
         geographic markets in which its customers operate (North America,
         Europe and the Asia/Pacific region) to increase market share in its
         existing industrial and geographic markets. The Company believes its
         global manufacturing, distribution and service network allows it to be
         more responsive to customers' needs and positions it to expand into
         additional promising markets which offer high long-term potential for
         growth.



                                       6


<PAGE>

     o   Offering Customized Solutions Based on Standard Platform: While the
         Company offers a wide range of laser applications and develops
         customized solutions for its customers, these applications and
         solutions are built on a focused number of product families comprised
         of standardized laser sources. For example, for its OEM customers in
         the machine tool industry, the Company provides customized power supply
         packaging services. For its marking customers, the Company combines its
         standard laser marker with customized parts handling and software. For
         its micro applications customers, the Company delivers its standard
         laser sources in different customized packages. The Company believes
         that this product strategy has contributed to increases in product
         sales and intends to continue offering focused customization services
         and pursuing its initiatives to standardize its core products so as to
         lower its production costs and continue to improve its profitability.

     o   Acquiring Complementary Business Operations or Products: Since 1997 the
         Company has completed eight acquisitions, including its acquisitions of
         Dilas (80% in 1997, 15% in 2004), assets of Palomar Technologies UK
         Ltd. (1998), Rasant Alcotec GmbH (1999), Baasel Lasertech (2000),
         Z-Laser S.A. (2001), Optoskand AB (2004), PRC Laser Corporation (2004),
         and Lee Laser Inc. (2004) a majority interest in Rofin Marubeni Laser
         Corporation (Japan) (2003), and has successfully integrated these
         acquired businesses. Management believes that, collectively, these
         acquisitions have advanced the Company's worldwide expansion,
         consolidated the Company's position in the industrial laser material
         processing market and contributed to the Company's financial
         performance during the last several years. The Company will continue to
         seek opportunities to make value-based acquisitions that complement its
         business operations, broaden its product offerings, or provide access
         to new geographical markets.

THE INDUSTRIAL LASER MARKET FOR MATERIAL PROCESSING

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

LASER TECHNOLOGY

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

Lasers are used for material processing because of the excellent focusability of
laser beams. When focused through lenses and mirrors, the energy density in the
focus spot is so high that metals and other materials can be melted and
vaporized. The principal factors that distinguish different types of lasers and
determine the particular laser suitable for a specific application are pulse
duration, wavelength, output power, spatial coherence and cost per watt of laser
power. The three principal types of laser technologies used for material
processing are CO2 lasers, solid-state lasers and diode lasers.



                                       7


<PAGE>

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

Solid-state lasers use flash lamps or laser diodes as source of excitation and
are referred to as "flash-lamp pumped" or "diode pumped". The lasing medium is a
solid-state crystal, in general in the form of a rod. The crystal material is
either Neodymium Yttrium Aluminium Garnet (Nd:YAG) or Neodymium Vanadate
(Nd:YVO4). The crystal rod is positioned in a cavity, which is either a gold or
ceramic reflector, and pumped using flash lamps or laser diodes from the side,
or alternatively the rod is pumped from its ends with laser diodes. Typical
output powers vary from 3 to 500 Watts from a single rod and output powers up to
6,000 Watts can be achieved by combining several cavities within a resonator.
Solid-state lasers can be run either in a pulsed or continuous-wave manner.
Marking applications generally require higher pulsing frequencies which are
achieved by inserting a Q-switch, which is a fast electro-optical shutter, into
the laser resonator, enabling frequencies to be switched up or down in multiples
of 10 kHz at a time. Recent development efforts in the area of solid-state
lasers have focused on the so-called "disc-design". In the "disc design" the
lasing medium has the form of a thin crystal (typically Ytterbium:YAG) disc,
which is excited by laser diodes in an optical multipass configuration.

Diode lasers involve the production of laser light in a special semiconductor
structure on a Gallium Arsenide (GaAs) basis. A typical 10 mm long diode laser
bar contains approximately 25 single laser emitters. When mounted on a
specially-designed, highly-efficient heat sink, a diode bar is able to produce
up to 50 watts of laser output power. A single high-power diode module consists
of: (1) a semiconductor wafer bar; (2) a micro channel cooling device, on which
the laser bar is mounted; and (3) a micro-lens system, which is mounted in front
of the laser bar and which collimates the laser beam in the high divergent
optical axis. Power can be increased by stacking several diode modules on top of
each other. Through optical combination of such stacks, output power in the
kilowatt range can be achieved. Diode lasers typically have larger spot
diameters when focused, and are typically used for surface treatment, soldering
and plastic welding.

THE COMPANY'S LASER PRODUCTS

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

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

     o   cutting and welding (macro applications);

     o   marking; and

     o   fine cutting and fine welding and perforating (micro applications)


                                       8


<PAGE>


Besides offering laser systems for some specialized niche applications, the
Company works directly with its customers to develop and customize optimal
solutions for their unique manufacturing requirements. In developing its
laser-based solutions, the Company offers customers its expertise in:

     o   product development and manufacturing services based on more than 25
         years of laser technology experience and applications know-how;

     o   application and process development, which means developing new
         laser-based applications for manufacturing customers and assisting them
         in integrating lasers into their production processes;

     o   system engineering, which means advising customers on machine design,
         including tooling, automation and controls for customers in need of
         "turn-key" solutions; and

     o   extensive after-sales support of its laser products, including
         technical support, field service, maintenance and training programs,
         and rapid spare parts delivery.

The following table sets forth the Company's net sales of laser products used
for macro applications and of laser products used for marking and micro
applications in fiscal 2004, 2003, and 2002:

<TABLE>
<CAPTION>
                                                                     September 30,
                                                  -------------------------------------------------
Product Category*                                     2004              2003             2002
--------------------------------------------      ---------------  ---------------  ---------------
                                                                     (in thousands)
<S>                                               <C>                 <C>             <C>
Laser macro products                              $  158,820          $  136,715      $  117,341
Laser marking and micro products                     163,808             121,031         104,607
                                                  ---------------  ---------------  ---------------
                                                  $  322,628          $  257,746      $  221,948
                                                  ===============  ===============  ===============
</TABLE>

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


The laser sources sold by the Company consist of a laser head (containing the
lasing medium, resonator, source of excitation, resonator mirrors and cooling
mechanism), power supply, and microcontroller (for control and monitoring). For
a more detailed discussion of the components of a laser source, see "Laser
Technology". Products are offered in different configurations and utilize
different design principles according to the desired application.

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

<TABLE>
<CAPTION>
PRODUCT CATEGORY             PRINCIPAL MARKETS                      PRINCIPAL APPLICATIONS
----------------             -----------------                      ----------------------
<S>                          <C>                                    <C>
Laser macro products         Machine tool                           Cutting and welding of metals

                             Automotive                             Cutting and welding of metals

Laser marking products       Semiconductor and electronics          Marking of integrated circuits,
                                                                    electronic components, smart cards

                             Automotive                             Marking of labels and car components

Laser micro products         Dental and jewelry, medical            Spot welding, fine cutting
                             components

                             Paper, plastic foils                   Perforating of cigarette tip paper
                                                                    and packaging foils

</TABLE>

                                       9

<PAGE>

LASER MACRO PRODUCTS
--------------------

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

     o   increasing its market share in its existing CO2 laser market through
         increased sales of its low and high power diffusion-cooled, wave-guide
         Slab-lasers;

     o   developing diffusion-cooled Slab-lasers with higher output power to
         achieve higher welding depths and faster speeds and thereby widen their
         potential usage;

     o   further developing the Remote Welding System concept;

     o   continuing ongoing product engineering for its diode-pumped, rod type
         solid-state lasers to further penetrate the market; and

     o   focusing on the development of a diode-pumped, solid-state disc laser
         for precise material processing and further increase of the output
         power of this laser type for heavy automotive applications.

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

<TABLE>
<CAPTION>
                                               MODE OF           PRINCIPAL
 LASER SERIES          POWER RANGE           EXCITATION           MARKETS               APPLICATIONS
----------------     ----------------      --------------      ------------        -------------------
<S>                 <C>                    <C>                 <C>                <C>
DC Slab Series      1.0 kW - 6.0 kW        High Frequency      Machine tool       Cutting and welding
HF / RF Series      4.0 kW - 8.0 kW        High Frequency      Automotive           Welding
TR/FA Series        2.0 kW - 10.0 kW       Direct Current      Machine tool       Cutting and welding
SC Series           100 W - 300 W          High Frequency      Machine tool       Cutting and marking
XL Series           1000 - 1500 W          Direct Current      Machine tool       Cutting and welding
STS Series          2000 - 5000 W          Direct Current      Machine tool       Cutting and welding
FH Series           6000 - 7000 W          Direct Current      Machine tool       Cutting and welding

</TABLE>

The Company believes that it is the only laser manufacturer of diffusion cooled,
Slab-based lasers in the high-power range. In the DC Slab Series laser design, a
radio-frequency excited gas discharge occurs between two water-cooled electrodes
that have a large surface area that permits maximum heat dissipation. The core
diffusion-cooled, wave-guide technology is protected by three patents, and the
Company has exclusive license rights to this technology on a worldwide basis for
power levels above 500 watts for material processing applications. The Company's
current focus with respect to its Slab Series lasers is on continuing to both
increase power output and further reduce manufacturing costs in order to achieve
more attractive pricing. Principal markets for the Slab Series lasers are the
machine tool and automotive industries.

The Company's HF Series lasers combine proven cross-flow design principles with
modern high-frequency discharge excitation technology. The Company ships this
product predominantly to customers in the automotive industry, and their
sub-suppliers, in the United States and Europe, where it has been used in a
significant number of welding applications, including transmissions, tailored
blanks, steel tubes and many other car parts and components. The RF Series uses
the fast-axial flow technology from the Company's TR Series in combination with
radio-frequency excitation and is especially designed for thick metal cutting.

The Company's TR/FA, XL, STS, and FH Series fast-axial flow CO2 lasers are 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. TR, XL, STS, and FH Series
products are used primarily by the machine tool industry.

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


                                       10

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

<TABLE>
<CAPTION>
                                               MODE OF           PRINCIPAL
 LASER SERIES          POWER RANGE           EXCITATION           MARKETS               APPLICATIONS
----------------     ----------------      --------------      ------------        -------------------
<S>                   <C>                  <C>                 <C>                <C>
DY Series             550 W - 6.0 kW       Laser Diodes        Automotive         Cutting and welding
</TABLE>

Rofin's DY Series of continuous wave solid-state lasers are designed exclusively
for use with flexible fiber-optic beam delivery systems, making them
particularly well-suited for integration into complex production systems for
cutting and welding applications. The key competitive advantages of the DY
Series lasers are the fact that they are diode-pumped and that they are designed
to allow multiple power output configurations. These configurations include
continuous-wave, pulsed and power ramping modes, which allow Rofin to address a
wide range of customer applications. Power ramping is particularly suited for
achieving smooth welds and avoiding cracks during the welding process. In
addition, several features of the DY Series laser such as the simple modular
resonator design, easily accessed power supply and PC-based controller equipped
with a modem, which allows communication with a remote service center, are
designed for easy maintenance. The diode pumping technology is characterized by
high beam quality and high efficiency. These lasers are used principally in the
automotive industry.

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

<TABLE>
<CAPTION>
                                               MODE OF           PRINCIPAL
 LASER SERIES          POWER RANGE           EXCITATION           MARKETS               APPLICATIONS
----------------     ----------------      --------------      ------------        -------------------
<S>                  <C>                   <C>                 <C>                   <C>
Diode Lasers         10 W - 4.0 kW         Direct Current      Electronics               Soldering
                                                               Machine tool          Surface hardening
</TABLE>



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

LASER MARKING PRODUCTS
----------------------

The Company entered the laser-marking business in 1989 when it acquired Laser
Optronic GmbH from Coherent General Inc. and designed and introduced the
"PowerLine" laser marker. Since then the Company has developed a broad line of
leading laser markers that deliver optimal marking quality and speed on a wide
range of materials. Rofin's advanced design and manufacturing capabilities in
fiber-optic beam delivery systems allow it to offer flexible laser marking
systems and easy laser integration for complex production processes, without
compromising marking quality, contrast or speed.

Rofin builds its own solid-state laser sources and utilizes its own proprietary
marking software, VisualLaserMarker and LaserCAD, that enable it to tailor its
marking solutions to a customer's unique requirements. Rofin's in-house software
engineering group works with customers, particularly in the automotive and
semiconductor industries, that have enterprise-wide computer networks linking
production facilities in disparate geographic locations and that desire
customized network interface solutions. The Company's laser marking products
also incorporate high value-added software that enable them to efficiently
interface with a customer's computers and support a broad range of network
communications protocols.


                                       11


<PAGE>



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

     o   the Company's ability to tailor its laser marking solutions to the
         customer's requirements;

     o   the Company's expertise in solid-state laser beam power, mode structure
         and high-frequency switching capability, which provides optimal marking
         quality (in terms of marking contrast and speed) on a wide variety of
         materials;

     o   the Company's expertise in the design and manufacture of fiberoptic
         beam delivery systems, which allows it to offer flexible laser marking
         systems and easy laser integration for complex production processes,
         without compromising marking quality, contrast or speed; and

     o   the Company's proprietary software, VisualLaserMarker and LaserCAD
         software, and other know-how that enable its laser marking products to
         interface with a customer's computers and support a broad range of
         network communications software.

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

     o   to expand its position in the worldwide laser marking market, with a
         particular focus on the automotive and semiconductor and electronics
         industries;

     o   to capitalize on its installed base of CO2 and solid-state laser
         customers, primarily in the automotive industry, in order to cross-sell
         its marking products to these same customers;

     o   to widen the product range and sales coverage of its VectorScan
         product, sold primarily into the packaging industry, which produces
         "on-the-fly" laser marking of moving objects by synchronizing object
         speed and galvo-head movement; and

     o   to market the newly developed, compact, stand-alone laser marker for
         low-volume marking applications.

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

<TABLE>
<CAPTION>
                                            MODE OF            PRINCIPAL
 LASER SERIES          POWER RANGE        EXCITATION            MARKETS              APPLICATIONS
----------------     ----------------    --------------        ------------      --------------------
<S>                    <C>               <C>                   <C>               <C>
   PowerLine           10 W - 130 W      Flash Lamp or Laser   Semiconductor     Integrated circuits
StarMark Series                               Diodes           and electronics        marking

    CombiLine          10 W - 130 W            n.a.            Automotive        Label marking
StarMark Systems

 MultiScan             100 W             High Frequency        Packaging         Consumer goods
VectorScan                                                                           marking
</TABLE>

PowerLine/StarMark Series - The Company's standard PowerLine and StarMark laser
marking products consist of a CO2 or solid-state laser in the range of 10 watts
to 130 watts, a galvo-head, a personal computer with state-of-the-art processor,
and Rofin's proprietary VisualLaserMarker and LaserCAD software. The modular
design of the PowerLine and StarMark markers enable customers to order the most
suitable configuration for their production processes or systems (e.g.,
OEM-customers may order the laser head, power 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 and StarMark
solid-state lasers incorporate either a dual or single lamp ceramic cavity
design using "long-life" lamps or diode modules, both of which result in higher
output power (and therefore higher marking speeds), higher energy efficiency
(and therefore reduced operating costs), high beam quality (and therefore
constant and reliable marking quality), and longer service intervals. The
Company's proprietary VisualLaserMarker and LaserCAD 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 a
double-marking head allowing marking speeds of up to 1,200 characters per second
in certain applications (most notably marking of integrated circuits), as well
as beam-switching and -splitting

                                       12


<PAGE>


options for marking of products in multiple production lines using a single
laser. Their main application, among a wide variety of possible applications, is
the marking of plastics and smart cards in the semiconductor and electronics
industries.

CombiLine/StarMark Systems - Built on a modular design, the CombiLine and
StarMark Systems consist of a PowerLine or StarMark laser marker that can be
combined with a variety of parts handling systems developed by the Company,
including: motor-driven positioning tables, foil handling systems for marking
labels, conveyor belts and pick-and-place systems. These allow the CombiLine and
StarMark Systems to be customized as a turn-key system.

MultiScan and VectorScan - These Dot Matrix and Vectorscanning markers utilize a
100 watt sealed-off CO2 laser (SC Series) and feature the ability to mark
components that are moving at high speeds.

LASER MICRO PRODUCTS
--------------------

After the acquisition of Baasel Lasertech the Company formed a separate sales
and marketing group focused on micro applications. This group markets and sells
a broad range of laser products, including lamp-pumped, pulsed, solid-state
lasers for various spot welding and fine cutting applications, CO2 Slab lasers
for perforating applications, Q-switched solid-state lasers for surface
structuring and diode lasers for soldering and plastic welding applications.
Relying on its many years of experience in perforating cigarette paper, the
Company is pursuing new perforating applications in the packaging industry.

The Company's business strategy for its micro applications business is to:

     o   further increase its share of the manual spot welding market in the
         jewelry and dental industries and develop customers in other industries
         that use a similar product and technology for industrial applications,
         such as tool repair;

     o   focus on manufacturers of medical instruments and components for
         medical instruments using the Company's installed base of laser stent
         cutting systems in this industry;

     o   increase its sales of perforating systems to the packaging industry for
         applications like easy-tear and special perforated foils for food
         packaging that allow the transfer of air and keep moisture in packaged
         goods; and

     o   develop a new market for plastic welding applications.

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

<TABLE>
<CAPTION>
                                              MODE OF           PRINCIPAL
 LASER SERIES          POWER RANGE          EXCITATION           MARKETS               APPLICATIONS
----------------     ----------------      --------------      ------------        -------------------
<S>                    <C>                   <C>             <C>                      <C>
 Star Weld Series      20 W - 500 W          Flash Lamp      Dental, Jewelry          Spot welding

  StarCut Series       150 W - 300 W         Flash Lamp         Medical               Fine cutting
 PerfoLas Systems          n.a.                 n.a.            Paper                 Perforating
StarShape Systems          n.a.                 n.a.            Packaging             Perforating
    Series 800           2 - 500 W           Flash Lamp         OEM                   Micro/Marking
    Series 600          25 - 100 W           Flash Lamp         OEM                   Micro/Marking
    Series LDP          10 - 200 W           Diode              OEM                   Micro/Marking
    Series LEP           4 - 6 W             Diode              OEM                   Micro/Marking
</TABLE>

StarWeld Series - Rofin's standard StarWeld laser products consist of pulsed
solid-state lasers in the range of 20 watts to 500 watts. Although the StarWeld
Series has a wide variety of possible applications, their main application is
the fine welding of jewelry and dental parts.

StarCut Series - Rofin's StarCut laser products use pulsed solid-state lasers in
the range of 150 watts to 300 watts. Their main application is the fine cutting
of medical devices and integrated circuits.


                                       13


<PAGE>

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

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

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

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

APPLICATIONS DEVELOPMENT

In addition to manufacturing and selling laser sources for macro applications
(cutting and welding) and marking and micro applications, Rofin operates
application centers in eight countries where it develops laser-based solutions
for customers seeking alternatives to conventional manufacturing techniques.
Revenues derived from application development are not a significant component of
total revenues. Applications development is generally a support service to the
sales and marketing function and is performed to customize the laser to the
particular needs of the customer. The Company currently has approximately 20
employees in applications development.

MARKETS AND CUSTOMERS

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

<TABLE>
<CAPTION>

                                                       Fiscal Years
                                   ---------------------------------------------------
Principal Market                        2004              2003               2002        Primary Applications
---------------------------------  ----------------  ---------------    --------------   --------------------
<S>                                       <C>              <C>                <C>        <C>
Machine Tool                              33%              34%                38%        Cutting and welding

Automotive                                14%              13%                18%        Cutting, welding and
                                                                                         component marking

                                                                                         Marking of integrated
                                                                                         circuits, electronic
Semiconductor and                                                                        components and smart cards
Electronics                               16%              13%                 9%
                                    ----------------  ---------------    --------------
                                          63%              60%                65%
</TABLE>

The remaining 37%, 40%, and 35%, respectively, of total laser sales in fiscal
2004, 2003, and 2002 were attributable to customers in a wide variety of other
industries including aerospace, consumer goods, medical device manufacturers,
job shops, jewelry, universities and institutes. No one customer accounted for
over 10% of total sales in any of these periods.

SALES, MARKETING AND DISTRIBUTION

Rofin sells its products in approximately 35 countries to OEMs, systems
integrators and industrial end-users who have in-house engineering resources
capable of integrating Rofin's products into their own production systems.
Lasers for cutting applications are marketed and sold principally to OEMs in the
machine tool industry who sell laser cutting machines incorporating Rofin's
products without any substantial involvement by Rofin. Lasers for welding
applications are marketed and sold both to systems integrators and to end-users.
Laser marking products are marketed and sold directly to end-users and to OEMs
for integration into their handling systems (mainly for integrated circuit and
smart card marking applications). Laser micro products are marketed and sold
directly to end-


                                       14


<PAGE>


users and to OEM-customers (mainly for jewelry and dental applications). In the
case of both welding lasers and laser marking products, the end-user is
significantly involved in the selection of the laser component and will often
specify to the OEM that it desires a Rofin laser. In these cases, Rofin's
application engineers work directly with the end-user to optimize the
application's performance and demonstrate the advantages of the Company's
products.

Rofin has approximately 110 direct sales engineers operating in 24 countries,
approximately 30 of whom are dedicated to marketing lasers for macro
applications and approximately 80 of whom are dedicated to marketing laser
marking and micro applications. Rofin sales engineers work either in a
well-defined geographic territory or are dedicated to specific industries or
applications. In addition, Rofin has 18 independent representatives marketing
the Company's laser products in Australia, Brazil, Denmark, Finland, India,
Israel, Mexico, the People's Republic of China, the Philippines, Poland, Russia,
Singapore, South Africa, Sweden, Thailand and United Kingdom. These independent
representatives provide Rofin with sales leads and opportunities, but do not
distribute Rofin's products. All sales and delivery of product are conducted by
the Company. Eight of the independent representative agreements are on an
exclusive basis, with the other six on a non-exclusive basis. These agreements
provide for a standard percentage of the net sales price to be paid as
commissions to the representatives. The duration of the agreements is usually
one year (with an automatic one-year extension) and a six months cancellation
clause.

Rofin directs its worldwide sales and marketing of lasers for macro applications
from its offices in Hamburg (Germany) and of laser diode components from Mainz
(Germany). Worldwide sales and marketing of laser marking products is directed
from Rofin's offices in Gunding-Munich (Germany) and, for laser micro products,
from Starnberg (Germany). In Europe, Rofin also maintains sales and service
offices in Belgium, France, Italy, the Netherlands, Spain, Switzerland and the
United Kingdom.

U.S. sales of Rofin's macro and micro laser products are managed out of the
Company's Plymouth, Michigan facility and marking products are managed out of
its Boxborough, Massachusetts facility. The Company also maintains a sales
office in Tempe, Arizona to support the expansion of Rofin's laser marking
business in the North American market.

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

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

CUSTOMER SERVICE, REPLACEMENT PARTS AND COMPONENTS

During fiscal 2004, 2003, and 2002, approximately 35%, 33%, and 31%,
respectively, of the Company's revenues were generated from sales of after-sale
services, replacement parts and components for laser products. The Company
believes that a high level of customer support is necessary to successfully
develop and maintain long-term relationships with its OEM and end-user
customers. This close relationship is maintained as customers' needs change and
evolve.

Recognizing the importance of its existing and growing installed multinational
customer base, the Company has expanded its local service and support platform
into new geographic regions. Rofin has 292 customer service personnel. The
Company's field service and in-house technical support personnel receive ongoing
training with respect to the Company's laser products, maintenance procedures,
laser-operating techniques and processing technology. Most of the Company's
OEM-customers also provide customer service and support to end-users.


                                       15

<PAGE>


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

Of Rofin's 292 customer service personnel, approximately 190 employees operate
in the field in 50 countries. Field service personnel are also involved in the
installation of the Company's systems.

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

COMPETITION

Laser Macro Products

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

Rofin believes it is among the top three suppliers of laser sources in the
worldwide market for macro applications. Companies such as Trumpf and Fanuc (for
high-power CO2 lasers), Excel/Synrad and Coherent (for low-power CO2 lasers),
Trumpf (for solid-state lasers) and Optopower and Jenoptik (for diode lasers and
laser diodes) compete in certain of the markets in which Rofin operates.
However, in the Company's opinion, none of these companies competes in all of
the industries, applications and geographic markets currently served by Rofin.
We believe that only Trumpf has a product range and worldwide presence similar
to that of the Company. The Company believes that it has a competitive advantage
over these companies due to its exclusive access (for material applications of
500 watts and above) to the patented diffusion cooling technology incorporated
in its CO2 Slab lasers. See "Intellectual Property".

Laser Marking and Micro Products

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


                                       16

<PAGE>


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

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

MANUFACTURING AND ASSEMBLY

Rofin manufactures and tests its high-power CO2 and solid-state laser macro
products at its Hamburg (Germany), Aschheim-Munich (Germany), Plymouth,
Michigan, Landing, New Jersey, Atsugi-shi (Japan) and Kingston upon Hull (UK)
facilities. The Company's laser marking products are manufactured and tested at
its facilities in Gunding-Munich (Germany), Starnberg (Germany), Singapore,
Boxborough, Massachusetts and Orlando, Florida. Rofin's micro application
products are manufactured and tested in Starnberg (Germany). The Company's diode
laser products are manufactured and tested at its Mainz (Germany) facility. The
Company's low-power CO2 laser products are manufactured and tested in Kingston
upon Hull (UK). Coating of Rofin's Slab laser electrodes is performed at the
Overath (Germany) facility. The Company's fiber optics and beam delivery systems
are manufactured and tested in Gothenburg, Sweden.

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

Rofin's in-house manufacturing includes only those manufacturing operations that
are critical to achieve quality standards or protect intellectual property.
These manufacturing activities consist primarily of product development, testing
of components and subassemblies (some of which are supplied from within the
Company and others of which are supplied by third party vendors and then
integrated into the Company's finished products), assembly and final testing of
the completed product, as well as proprietary software design and
hardware/software integration. Although the Company minimizes the number of
suppliers and component types wherever practicable it has at least two sources
of supply for key items. The Company has a qualifying program for its vendors
and generally seeks to build long-term relationships with such vendors. The
Company purchases certain major components from single suppliers. The Company
estimates that 22% of its revenues are from the sale of products that require
specialized components currently only available from single sources. The Company
has written agreements with such suppliers and has not had material delays in
supplies from these sources. The Company believes that it could, if necessary,
purchase such components from alternative sources, within four to six months,
following appropriate qualification of such new vendors.

Rofin is committed to meeting internationally recognized manufacturing
standards. Its Hamburg, Gunding-Munich, Starnberg, and Mainz facilities are ISO
9001 certified. In addition, the following facilities are ISO 9002 certified:
Pamplona (Spain), Milan (Italy) and Paris (France).

RESEARCH AND DEVELOPMENT

During fiscal 2004, 2003, and 2002, Rofin's net spending on research and
development was $20.5 million, $18.1 million, and $13.2 million, respectively.
The Company's net spending on research and development reflects receipt of
funding under German government and European Union grants totaling $1.1 million,
$0.9 million, and $1.1 million, in fiscal 2004, 2003, and 2002, respectively.
Rofin has approximately 180 employees engaged in product research and
development.


                                       17

<PAGE>

Rofin's research and development activities are directed at meeting customers'
manufacturing needs and application processes. Core competencies include CO2 gas
lasers, solid-state lasers, diode lasers, precision optics, electronic power
supplies, 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 ten centers
in Hamburg, Aschheim-Munich, Gunding-Munich, Starnberg, and Mainz (all Germany),
Kingston upon Hull (UK), Gothenburg (Sweden), Plymouth, Michigan, Landing, New
Jersey and Orlando, Florida (all USA), and are centrally coordinated and
managed. Rofin maintains close working relationships with the leading
industrial, government and university research laboratories in Germany,
including the Fraunhofer Institute for Laser Technology in Aachen, the Institute
for "Technische Physik" of the German Space and Aerospace Research Center in
Stuttgart, the Fraunhofer Institute for Material Science in Dresden, the Laser
Center in Hanover, and elsewhere around the world, including the University of
Edinburgh in the United Kingdom. These relationships include funding of
research, joint development programs, personnel exchange programs, and licensing
of patents developed at these institutes.

INTELLECTUAL PROPERTY

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

While policies and procedures are in place to protect critical intellectual
property rights, Rofin believes that its success depends to a larger extent on
the innovative skills, know-how, technical competence and abilities of Rofin's
personnel. The Company is also a worldwide licensee of two U.S. patents, one
Japanese patent and their corresponding foreign counterparts, which expire in
2007, 2009 and 2010, respectively. These licenses are exclusive for industrial
material processing applications of 500 watts and above for the
diffusion-cooled, wave-guide technology used in the Company's Slab Series CO2
lasers and non-exclusive for applications below 500 watts. In Rofin's view, the
technology protected by these three patents represents a significant step
forward in industrial laser technology for material processing and is an
important source of Rofin's current revenues and future growth and
profitability.

Rofin protects its intellectual property in a number of ways including, in
certain circumstances, patents. Rofin has sought patent protection primarily in
the United States, Europe and Japan. Rofin currently holds 134 separate patents
for inventions relating to lasers, processes and power supplies with expiration
dates ranging from 2004 to 2023. In addition, 58 patent applications have been
filed and are under review by the relevant patent authorities. Rofin requires
its employees and certain of its customers, suppliers, representatives, agents
and consultants to enter into confidentiality agreements to further safeguard
Rofin's intellectual property.

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

In September 2003, a claim brought by a competitor at the European Patent Office
("EPO") in July 1996 challenging one of the patents licensed exclusively by
Rofin covering certain aspects of its diffusion-cooled, wave-guide CO2 Slab
laser was settled. In August 2002, Rofin settled a claim brought by a competitor
against Rofin-Baasel, Inc. and Baasel Lasertech in U.S. federal courts for
alleged infringement of a U.S. patent concerning a method of marking
semiconductor material.


                                       18

<PAGE>

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

ORDER BACKLOG

The Company's order backlog was $72.8 million, $59.0 million, and $46.4 million,
as of September 30, 2004, 2003, and 2002, respectively. The Company's order
backlog, which contains relatively little service, training and spare parts,
represents approximately three months of laser shipments. The increase in the
Company's order backlog from September 30, 2003 to September 30, 2004 was mainly
attributable to PRC's and Lee Laser's acquired backlog and increased orders in
the Company's component business. The fluctuation of the U.S. dollar in fiscal
2004 had a favorable effect of approximately $5.4 million on year-to-year order
backlog. The increase in the Company's order backlog from September 30, 2002 to
September 30, 2003, was attributable to higher orders for markers from the
semiconductor and electronics industries in Europe and Asia and higher macro
laser orders from the machine tool industry. The fluctuation of the U.S. dollar
in fiscal 2003 had a favorable effect of approximately $6.8 million on
year-to-year order backlog.

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

The Company anticipates shipping the present backlog during fiscal 2005.
However, the Company's backlog at any given date is not necessarily indicative
of actual sales for any future period.

EMPLOYEES

At September 30, 2004, Rofin had 1,377 full-time employees, of which 817 were in
Germany, 234 in the United States, 34 in France, 45 in Italy, 104 in the United
Kingdom, 29 in Spain, 8 in the Netherlands, 11 in Belgium, 23 in Sweden, 21 in
Singapore, 11 in Korea, 13 in Taiwan, and 27 in Japan, whereas at September 30,
2003, Rofin had 1,194 full-time employees, of which 799 were in Germany, 119 in
the United States, 32 in France, 43 in Italy, 105 in the United Kingdom, 23 in
Spain, 8 in the Netherlands, 18 in Singapore, 9 in Korea, 11 in Taiwan, and 27
in Japan. The average number of employees for the fiscal year ended September
30, 2004 was 1,250.

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

GOVERNMENT REGULATION

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

                                       19

<PAGE>

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

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

AVAILABLE INFORMATION

The Company makes available, free of charge on its internet website, its Annual
Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and any amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after they
are electronically filed with, or furnished to, the Securities and Exchange
Commission (the SEC). You can find these reports on the Company's website at
www.rofin.com under the heading "Investor Relations".

These reports may also be obtained at the SEC's Public Reference Room at 450
Fifth Street NW, Washington, D.C. 20549. Information on the operation of the
Public Reference Room is available by calling the SEC at (202) 942-8090. You may
also access this information at the SEC's website (http://www.sec.gov). This
site contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.

RISK FACTORS

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

Our business depends substantially upon capital expenditures particularly by
manufacturers in the machine tool, automotive, and semiconductor and electronics
industries. We estimate that approximately 63% of our laser sales during fiscal
2004 were to these three industry markets. These industries are cyclical and
have historically experienced periods of oversupply, resulting in significantly
reduced demand for capital equipment, including the products manufactured and
marketed by us. For the foreseeable future, our operations will continue to
depend upon capital expenditures in these industries, which, in turn, depend
upon the market demand for their products. Decreased demand from manufacturers
in these industries, for example, during a downturn, may lead to decreased
demand for our products. Although such decreased demand would reduce our sales,
we may not be able to reduce expenses quickly, due in part to the need for
continual investment in research and development and the need to maintain
extensive ongoing customer service and support capability. Although we order
materials for assembly in response to firm orders, the lead time for assembly
and delivery of some of our products creates a risk that we may incur
expenditures or purchase inventories for products which we cannot sell.

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

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

Although we report our results in U.S. dollars, approximately 71% of our current
sales are denominated in other currencies, including the Euro, Swedish krona,
British pound, Singapore dollar, Japanese yen, Korean won and Taiwanese NT
dollar. The fluctuation of the Euro, and the other functional currencies,
against the U.S. dollar has had the effect of increasing and decreasing (as
applicable) reported net sales as well as cost of goods sold 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. Our
subsidiaries will, from time to time, pay dividends in their respective
functional currencies, thus presenting another area of potential currency
exposure for us in the future.


                                       20

<PAGE>

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

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

Our products are currently marketed in approximately 35 countries, with Germany,
the rest of Europe, the United States and the Asia/Pacific region being our
principal markets. Our operations and sales in our principal markets are subject
to risks inherent in international business activities, including:

     o   the general political and economic conditions in each such country or
         region;

     o   overlap of differing tax structures;

     o   management of an organization spread over various jurisdictions; and

     o   unexpected changes in regulatory requirements and compliance with a
         variety of foreign laws and regulations, such as import and export
         licensing requirements and trade restrictions.

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

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

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

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

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

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

     o   the timing of the receipt of orders from major customers;

     o   product mix;

     o   competitive pricing pressures;

     o   the relative proportions of domestic and international sales;

                                       21


<PAGE>

     o   our ability to design, manufacture and introduce new products on a
         cost-effective and timely basis;

     o   the delayed effect of incurrence of expenses to develop and improve
         marketing and service capabilities;

     o   foreign currency fluctuations;

     o   ability of our suppliers to produce and deliver components and parts,
         including sole or limited source components, in a timely manner, in the
         quantity desired and at the prices we have budgeted;

     o   our ability to control expenses; and

     o   costs related to acquisitions of businesses.

These and other factors make it difficult for us to release precise predictions
regarding the results and the development of our business.

In addition, our backlog at any given time is not necessarily indicative of
actual sales for any succeeding period. As our delivery schedule typically
ranges from one week to six months, our sales will often reflect orders shipped
in the same quarter that they are received. Moreover, customers may cancel or
reschedule shipments and production difficulties could delay shipments.
Accordingly, the Company's results of operations are subject to significant
fluctuations from quarter to quarter. See also "Business - Order Backlog."

Other factors that we believe may cause the market price of our common stock to
fluctuate, perhaps substantially, include announcements of new products,
technologies or customers by us or our competitors, developments with respect to
intellectual property and shortfalls in our operations relative to analysts'
expectations. In addition, in recent years, the stock market in general, and the
shares of technology companies in particular, have experienced wide price
fluctuations. These broad market and industry fluctuations, particularly in the
semiconductor and electronics and automotive industries, may adversely affect
the market prices of our common stock on the NASDAQ and the Frankfurt Stock
Exchange.

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

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

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

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

If we are to increase our laser sales in the near term, these sales will have to
come through increases in market share for our existing products, through the
development of new products, or through the acquisition of competitors or their
products. To date, a substantial portion of our revenues has been derived from
sales of high-powered CO2 laser

                                       22

<PAGE>

sources, solid-state laser sources and diode lasers. In order to increase market
demand for these products, we will need to devote substantial resources to:

     o   continuing to broaden our CO2 laser product range;

     o   continuing to increase the output power of our CO2 laser sources, diode
         lasers and diode pumped, solid-state laser products; and

     o   continuing to reduce the manufacturing costs of our product range to
         achieve more attractive pricing.

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

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

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

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

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

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

In addition:

     o   the key personnel of the acquired company may decide not to work for
         us;

     o   we may experience additional financial and accounting challenges and
         complexities in areas such as tax planning, treasury management and
         financial reporting;

     o   we may be held liable for risks and liabilities (including for
         environmental-related costs) as a result of our acquisitions, some of
         which we may not discover during our due diligence;

     o   our ongoing business may be disrupted or receive insufficient
         management attention; and

     o   we may not be able to realize the cost savings or other financial
         benefits we anticipated.

                                       23


<PAGE>

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

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

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

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

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

We currently hold 134 United States and foreign patents on our laser sources,
with expiration dates ranging from 2005 to 2023. We have also obtained licenses
under certain patents covering lasers and related technology incorporated into
our products. Of particular importance is the license of three patents related
to the sales of our Slab Series CO2 lasers, which we estimate to account for
approximately 22% of our revenue. In addition, 58 patent applications have been
filed and are under review by the patent authorities. There can be no assurance
that other companies are not investigating or developing other technologies that
are similar to ours, that any patents will issue from any application filed by
us or that, if patents do issue, the claims allowed will be sufficiently broad
to deter or prohibit others from marketing similar products. In addition, there
can be no assurance that any patents issued to us will not be challenged,
invalidated or circumvented, or that the rights thereunder will provide a
competitive advantage to us. See also "Business - Intellectual Property".

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

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


                                       24


<PAGE>




ITEM 2.  PROPERTIES

The Company's manufacturing facilities include the following:

<TABLE>
<CAPTION>
                                                Owned or            Size
Location of Facility                             Leased           (sq. ft.)      Primary Activity
------------------------------------         --------------      ------------    ---------------------------------
<S>                                           <C>                  <C>           <C>
Hamburg, Germany                                 Owned*            139,970       CO2 lasers, solid-state lasers,
                                                                                 diode laser
Starnberg, Germany                               Leased             92,439       Laser marking and micro products,
                                                                                 power supplies
Gunding-Munich, Germany                          Leased             65,302       Solid-state lasers, laser marking
                                                                                 products
Plymouth, Michigan                               Leased             52,128       CO2 lasers, laser micro and marking
                                                                                 systems
Kingston upon Hull,
   United Kingdom                                Leased             48,485       Low-power CO2 lasers
Orlando, Florida                                  Owned             35,224       Solid-state lasers
Landing, New Jersey                           Owned/Leased          34,292       CO2 lasers
Mainz, Germany                                   Leased             32,054       Diode lasers and components
Aschheim-Munich, Germany                         Leased             23,080       CO2 lasers
Boxborough, Massachusetts                        Leased             22,000       Laser marking systems
Gothenburg, Sweden                               Leased             15,225       Fiber optic production
Overath, Germany                                 Leased             14,447       Coating of materials
Sakai, Atsugi-shi, Japan                         Leased              9,763       CO2 lasers
Pamplona, Spain                                   Owned              7,532       Laser marking systems
Singapore                                        Leased              6,026       Laser marking products
</TABLE>

-----------
*    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 Kingston upon Hull, United Kingdom facility lease expires in 2007. The
Gunding-Munich (Germany) facility lease expires in 2005 and 2007, with an
optional yearly notice of termination. The leases on our Japanese facilities in
Atsugi-shi expire in 2007. The Mainz (Germany) facility lease expires in 2010
and the Overath (Germany) facility leases expire in 2008. The Singapore facility
lease expires in 2006, with a renewal option for three years. The Starnberg
(Germany) main facility is leased until 2017 from a member of the Company's
board of directors and includes a clause to terminate the lease contract within
a two-year notice period during the contract period. The Aschheim-Munich
(Germany) facility lease expires in 2010, with a renewal option until 2015. The
leases on our U.S. facilities in Boxborough, Massachusetts, Plymouth, Michigan
and Landing, New Jersey expire in 2006, 2012 and 2007, respectively. The
Gothenburg, Sweden facility lease expires in 2005, with a renewal option for
five years.

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

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

ITEM 3.  LEGAL PROCEEDINGS

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

                                       25

<PAGE>

The licensor of patents covering the technology used in certain of the Company's
CO2 lasers has asserted that the Company has calculated royalties due in respect
of certain sales of such CO2 lasers in a manner that is not consistent with the
applicable license agreement. In addition, the licensor claims that it has not
been provided with copies of invoices and other documentation relating to such
sales, to which it asserts it is entitled under the license agreement. The
Company disputes these and related allegations and believes that it is in
compliance with its obligations under the license agreement. The Company is
currently in discussions with the licensor in order to resolve these
disagreements. Management believes that it will achieve a resolution of this
matter that will not have a meterial adverse impact on the Company's financial
condition or results of operations.

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 2004.

                                       26

<PAGE>


                                    PART II


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

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

                                                Common Trade Prices
                                          --------------------------------
       Quarter ended                        High                   Low
       --------------------------         ------------       --------------
       December 31, 2002                  $   8.82                $  5.18
       March 31, 2003                     $  11.45                $  7.32
       June 30, 2003                      $  17.32                $ 10.87
       September 30, 2003                 $  27.21                $ 13.27
       December 31, 2003                  $  36.12                $ 21.40
       March 31, 2004                     $  38.87                $ 28.13
       June 30, 2004                      $  31.95                $ 23.13
       September 30, 2004                 $  29.53                $ 19.27


At December 10, 2004, the Company had 13 holders of record of its common stock
and 15,070,200 shares outstanding. The Company has not paid dividends on its
common stock and does not anticipate paying dividends in the foreseeable future.

The following table sets forth the number of securities authorized for issuance
under our equity compensation plans at September 30, 2004.

<TABLE>
<CAPTION>
                                                                                                  Number of securities
                                                                                                remaining available for
                                                   Number of securities     Weighted-average     future issuance under
                                                     to be issued upon     exercise price of      equity compensation
                                                        exercise of           outstanding           plans (excluding
                                                   outstanding options,    options, warrants    securities reflected in
                                                    warrants and rights        and rights             column (a))
                                                   ---------------------   ------------------   ------------------------
                                                            (a)                    (b)                    (c)
<S>                                                      <C>                     <C>                    <C>
Equity compensation plans approved by security holders:
   Equity Incentive Plan                                 1,130,650               15 6/7                 679,500
                                                   ---------------------   ------------------   ------------------------
Total equity compensation plans approved by              1,130,650               15 6/7                 679,500
   security holders
Equity compensation plans not approved by                    --                   --                       --
     security holders                              ---------------------   ------------------   ------------------------
Total                                                     1,130,650              15 6/7                  679,500
                                                   =====================   ==================   ========================
</TABLE>


                                       27


<PAGE>




ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the five
fiscal years ended September 30, 2004. 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,
                                               ---------------------------------------------------------------------------
                                                   2004            2003             2002              2001          2000
                                                ---------       ---------        ----------       ----------     ---------
                                                             (in thousands, except per share amounts)
<S>                                             <C>             <C>              <C>              <C>           <C>
STATEMENT OF OPERATION DATA:
Net sales                                       $322,628        $257,746         $221,948         $220,557      $171,187
Cost of goods sold                               190,473         161,465          143,128          138,408       109,702
Gross profit                                     132,155          96,281           78,820           82,149        61,485
Selling, general & administrative
expenses                                          58,336          51,282           46,401           41,841        29,593

Research & development expenses                   20,473          18,060           13,249           14,798        12,953
Amortization expense                               2,389           1,654            3,762            3,653         1,701
Special charge                                        --              --               --              700            --
Income from operations                            50,957          25,285           15,408           21,157        17,238
Net interest expense                               1,771           3,249            3,407            3,328           637
Income before income taxes                        50,078          24,727           12,385           18,177        16,079
Net tax expense                                   17,648           9,422            7,384           10,962         8,202
Net income                                        32,430          15,305            5,001            7,215         7,877
Net income per average common
   share - Basic                                    2.41            1.31             0.43             0.62          0.68
Net income per average common
   share - Diluted                                  2.31            1.29             0.43             0.62          0.68
Shares used in computing net
   income per average share - Basic               13,479          11,640           11,552           11,547        11,538
Shares used in computing net
   income per average share - Diluted             14,020          11,863           11,592           11,601        11,622

OPERATING DATA (as percentage of sales):
Gross profit                                       41.0%           37.4%            35.5%            37.2%         35.9%
Selling, general & administrative expenses         18.1%           19.9%            20.9%            19.0%         17.3%
Research & development expenses                     6.4%            7.0%             6.0%             6.7%          7.6%
Income from operations                             15.8%            9.8%             6.9%             9.6%         10.1%
Income before income taxes                         15.5%            9.6%             5.6%             8.2%          9.4%


BALANCE SHEET DATA:
Working capital                                 $163,540         $98,759          $81,661          $65,407       $62,648
Total assets                                     413,806         291,486          240,815          227,304       218,414
Line of credit and loans                          54,802          68,833           63,135           64,312        74,921
Stockholders' equity                             257,384         140,586          108,418           99,051        90,719
</TABLE>

                                       28


<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

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

During fiscal year 2004, 49% of revenues related to sales for macro applications
and approximately 51% related to sales of laser products for marking and micro
applications.

Effective December 31, 2002, the minority shareholder of CBL resigned from the
limited partnership and the remaining 9.99% of shares of CBL were purchased by
RSL during fiscal 2003.

On March 31, 2003, the Company acquired an additional 37% of the share capital
of Rofin-Marubeni Laser Corporation, Atsugi-shi, Japan, through its wholly-owned
subsidiary Rofin-Sinar Laser GmbH, Hamburg (Germany). The Company subsequently
holds 88% of the share capital. As of May 1, 2003, Rofin-Marubeni Laser
Corporation, Atsugi-shi, Japan, was renamed Rofin-Baasel Japan Corporation.

On February 28, 2004, the Company acquired 90% of the share capital of Optoskand
AB, Gothenburg, Sweden, through its wholly-owned subsidiary RSL. The Company has
a call option exercisable commencing October 1, 2008 for the remaining 10% of
the common stock.

On March 29, 2004 the Company issued and sold 2.5 million common shares at a
price of $28.00 per share. The underwriters exercised their over-allotment
option on April 8, 2004, resulting in 360,000 additional common shares being
issued and sold. The Company realized net proceeds of $75.3 million as a result
of these transactions. The Company intends to use the aggregate net proceeds
from the offering for working capital and other general corporate purposes,
including acquisitions of complementary products, technologies or businesses as
opportunities arise.

On August 20, 2004 the Company acquired an additional 15% of the share capital
of Dilas Diodenlaser GmbH, Mainz, Germany, through its wholly-owned subsidiary
RSTE. The Company currently holds 95% of the share capital.

On August 31, 2004, the Company acquired 100% of the share capital of PRC Laser
Corporation based in Landing, New Jersey (and its wholly-owned European
subsidiary PRC Europe N.V., Oudenaarde, Belgium) and Lee Laser, Inc. based in
Orlando, Florida, from Dover Industries, Inc. PRC manufactures high-power,
fast-axial flow CO2 lasers and Lee Laser produces solid-state lasers for
material processing.

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

Outlook

Management believes that near-term growth in the laser macro business depends,
especially in North America and Europe, on the general investment cycle for
capital goods. Revenues from a technical license will contribute to sales in the
next fiscal year by approximately $1.4 million. In the marking and micro
businesses management sees after the fourth quarter peak some softening of the
demand in the semiconductor sector, but the Company does not consider it an
indication of a deepening downward trend. The Company believes that its broad
product portfolio and its diversified customer base should help mitigate a
worsening of business conditions in single industrial or geographical markets
in the future. The recent acquisitions of PRC and Lee Laser should further
strengthen its position in the North American market for industrial lasers,
increase its customer base in the U.S. and Asia and generally further
consolidate the Company's worldwide market position in industrial lasers.
Management will continue to invest in increasing its sales and service
activities in Asia.


                                       29

<PAGE>

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:

<TABLE>
<CAPTION>

                                                        Fiscal Year ended September 30,
                                                       ------------------------------------
                                                          2004       2003           2002
                                                        -------    ---------       --------
<S>                                                       <C>        <C>             <C>
Net sales                                                 100%       100%            100%
Cost of goods sold                                         59%        63%             64%
Gross profit                                               41%        37%             36%
Selling, general and administrative expenses               18%        20%             21%
Research & development expenses                             6%         7%              6%
Intangibles amortization                                    1%         0%              2%
Income from operations                                     16%        10%              7%
Income before income taxes                                 16%        10%              6%
Net income                                                 10%         6%              2%
</TABLE>


Fiscal 2004 Compared to Fiscal 2003

Net Sales - Net sales of $322.6 million represents an increase of $64.9 million,
or 25%, over the prior year. Net sales increased $47.4 million, or 23%, in
Europe/Asia and increased $17.5 million, or 33%, in the United States, as
compared to the prior year. The U.S. dollar weakened against foreign currencies,
which had a favorable effect on net sales of $26.3 million. Net sales of laser
products for macro applications increased by 16%, to $158.8 million, over the
prior year. These increases represent mainly the additional revenue of $7.1
million recognized from a technical license agreement, increased revenue of the
Company's component businesses and higher demand for the Company's lasers from
the machine tool industry. Net sales of lasers for marking and micro
applications increased by 35% to $163.8 million compared to fiscal 2003. This
increase can be attributed primarily to a recovery in demand for lasers for
marking applications from the semiconductor and electronic industries, increased
sales to the automotive industries, and higher volumes of lasers for micro
application such as dental and jewelry. The overall net sales increase was also
supported by a strong service and spare parts business.

Gross Profit - The Company's gross profit of $132.2 million increased by $35.9
million, or 37%, over the prior year. As a percentage of sales, gross profit
increased from 37% to 41%. The higher percentage margin in fiscal 2004 was
primarily a result of the more favorable product mix and revenues from the
technical license agreement as described under net sales. Gross profit was
favorably affected by $7.8 million in fiscal 2004 due to the weakening of the
U.S. dollar.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased $7.1 million, or 14%, to $58.3 million,
compared to fiscal 2003 and reflects the support of a higher sales volume. As a
percentage of net sales, selling, general and administrative expenses decreased
from 20% to 18%. Selling, general and administrative expenses were unfavorably
affected by $4.7 million in fiscal 2004 due to the weakening of the U.S. dollar.

Research and Development - The Company spent net $20.5 million on research and
development, which represents an increase of $2.4 million, or 13%, over fiscal
2003 primarily due to ongoing research and development work mainly in the area
of diode pumped, solid-state lasers and CO2 diffusion-cooled, wave-guide
technology. Gross research and development expenses for fiscal 2004 and 2003
were $21.6 million and $19.0 million, respectively, and were reduced by $1.1
million and $0.9 million of government grants during the respective periods. The
Company will continue to apply for, and expects to continue receiving government
grants towards research and development, especially in Europe. The Company
conducts a significant portion of R&D in Europe, and therefore incurs expenses
in foreign currencies. Research and development expenses were unfavorably
affected by $2.1 million in fiscal 2004 due to the weakening of the U.S. dollar.


                                       30

<PAGE>

Income Tax Expense - Income tax expense of $17.6 million in fiscal 2004 and $9.4
million in fiscal 2003 represent effective tax rates of 35.2% and 38.1%,
respectively. The lower effective tax rate in 2004 is mainly due to a higher
earnings basis, higher income in countries with lower statutory income tax
rates, tax exempt interest income in the U.S. and the benefit from the
utilization of net operating loss carryforwards which had a full valuation
allowance.

Net Income - As a result of the foregoing factors, the Company's net income of
$32.4 million in fiscal 2004 increased by $17.1 million over the prior year's
net income of $15.3 million. Basic and diluted earnings per share equaled $2.41
and $2.31, respectively, based upon a weighted average of 13.5 million and 14.0
million common shares outstanding, as compared to basic and diluted earnings per
share of $1.31 and $1.29, respectively, based upon a weighted average of 11.6
million and 11.9 million common shares outstanding for the same period in fiscal
2003. Currency translation decreased net income by $0.9 million, or 2.8%, of
fiscal 2004 net income.


Fiscal 2003 Compared to Fiscal 2002

Net Sales - Net sales of $257.7 million represents an increase of $35.8 million,
or 16%, over the prior year. Net sales increased $41.4 million, or 25%, in
Europe/Asia and decreased $5.6 million, or 10%, in the United States, as
compared to the prior year. The U.S. dollar weakened against foreign currencies,
which had a favorable effect on net sales of $28.2 million. Net sales of laser
products for macro applications increased by 17% to $136.7 million, over the
prior year, primarily due to a result of higher macro laser shipments to the
machine tool industry. Net sales of lasers for marking and micro applications
increased by 16% to $121.0 million compared to fiscal 2002, mainly as a result
of slightly higher marking laser shipments to the semiconductor and electronics
industry and higher micro laser shipments to the dental and jewelry industries.

Gross Profit - The Company's gross profit of $96.3 million increased by $17.5
million, or 22%, over the prior year. As a percentage of sales, gross profit
increased from 36% to 37%. The higher percentage margin in fiscal 2003 was
primarily a result of the overall change in the product mix and lower costs in
relation to our high powered, solid-state laser products. Gross profit was
favorably affected by $7.7 million in fiscal 2003 due to the weakening of the
U.S. dollar.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased by $4.9 million, or 11%, to $51.3 million,
compared to fiscal 2002 primarily due to the implementation of a new computer
system within the German operations ($1.2 million) and severance expenses ($0.5
million). As a percentage of net sales, selling, general and administrative
expenses decreased from 21% to 20%. Selling, general and administrative expenses
were unfavorably affected by $5.3 million in fiscal 2003 due to the weakening of
the U.S. dollar.

Research and Development - The Company spent net $18.1 million on research and
development, which represents an increase of $4.9 million, or 37%, over fiscal
2002 primarily due to ongoing research and development work mainly in the area
of diode pumped solid-state lasers. Gross research and development expenses for
fiscal 2003 and 2002 were $19.0 million and $14.3 million, respectively, and
were reduced by $0.9 million and $1.1 million of government grants during the
respective periods. The Company will continue to apply for, and expects to
continue receiving government grants towards research and development,
especially in Europe. Research and development expenses were unfavorably
affected by $2.5 million in fiscal 2003 due to the weakening of the U.S. dollar.

Income Tax Expense - Income tax expense of $9.4 million in fiscal 2003 and $7.4
million in fiscal 2002, represent effective tax rates of 38.1% and 59.6%,
respectively. The lower effective tax rate in 2003 is mainly due to a higher
earnings basis, the elimination of non-deductible goodwill amortization and the
utilization of foreign tax credits.

Net Income - As a result of the foregoing factors, the Company's net income of
$15.3 million ($1.29 per diluted share) in fiscal 2003 increased by $10.3
million over the prior year's net income of $5.0 million ($0.43 per diluted
share). Currency translation decreased net income by $1.2 million, or 7%, of
fiscal 2003 net income.


                                       31

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity at September 30, 2004 were cash and
cash equivalents of $100.3 million, an annually renewable $25.0 million line of
credit with Deutsche Bank AG and several other lines of credit to support
foreign subsidiaries in their local currencies in an aggregate amount of $44.6
million (translated at the applicable exchange rate at September 30, 2004). As
of September 30, 2004, $12.7 million was outstanding under the Deutsche Bank
facility and $18.1 million under other lines of credit. Therefore, $38.7 million
is unused and available under Rofin's lines of credit. There are no financial
covenants which would restrict the Company from drawing money under these lines
of credit.

Additionally, the Company has outstanding short-term and long-term debt with a
German bank, which was used to finance part of the acquisition, and to refinance
the existing debt, of Baasel Lasertech. At September 30, 2004, $23.9 million was
outstanding under this credit agreement. Based on maturities, $21.2 million has
been included in the caption "line of credit and short-term borrowings" in the
accompanying consolidated balance sheet.

Cash and cash equivalents increased by $55.8 million during fiscal 2004.
Approximately $38.9 million in cash and cash equivalents were provided by
operating activities, primarily as the result of increased net income and other
non-cash items, principally depreciation and amortization. Operating cash-flow
was negatively affected by an increase in income taxes payable and accrued
liabilities, mainly employee compensation and warranty reserves, offset by an
increase in accounts receivable and inventory.

Uses of cash for investing activities totaled $39.3 million for the year ended
September 30, 2004 and related primarily to the acquisition of businesses ($34.9
million) and various additions to property and equipment in connection with the
expansion of the Company's operations ($4.5 million) partially offset by the
receipt of cash proceeds from sale of fixed assets ($0.1 million).

Net cash provided by financing activities totaled $56.6 million and was
primarily related to the issuance of 2.9 million shares of common stock with net
cash proceeds of $75.3 million, partially offset by current period repayments,
net of borrowings, of bank debt of $19.7 million.

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

The following table illustrates the Company's contractual obligations as of
September 30, 2004:

<TABLE>
<CAPTION>
                                                         Payments due by period (in thousands)
                                                         -------------------------------------
                                                        Less than        1-3         3-5       More than
Contractual Obligations                      Total        1 Year        Years       Years       5 Years
------------------------                   --------     ---------    ---------   ----------    ----------
<S>                                        <C>          <C>          <C>           <C>         <C>
Long term debt                                4,983          --         4,983           --          --
Capital lease obligations                       335          303           33           --          --
Operating lease obligations                  18,150        5,899        8,749        2,887         616
Purchase obligations                         57,158       55,909        1,249           --          --
Other long-term liabilities                     996           27          221          367         381
                                           --------     ---------    ---------     --------    ----------
Total                                      $ 81,622     $ 62,137     $ 15,235      $ 3,254     $   997
                                           ========     =========    =========     ========    ==========

</TABLE>



                                       32

<PAGE>


CURRENCY EXCHANGE RATE FLUCTUATIONS

Although the Company prepares its consolidated financial statements in U.S.
dollars, approximately 71% of its net sales are denominated in other currencies,
primarily Euro, Swedish krona, British pound, Singapore dollar, Taiwanese
dollar, Korean won 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 U.S. dollars are accumulated as a separate component of equity. The currency
translation adjustment component of shareholders' equity had the effect of
increasing total equity by $11.6 million at September 30, 2004 as compared to
$6.7 million at September 30, 2003.

The fluctuation of the Euro and the other relevant functional currencies against
the U.S. dollar has had the effect of increasing or decreasing (as applicable)
reported net sales, as well as cost of goods sold 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 2004, 2003 and 2002 net sales, gross profit and income from
operations.

<TABLE>
<CAPTION>

                                 --------------------------  --------------------------  --------------------------
                                         Fiscal 2004                  Fiscal 2003                Fiscal 2002
                                 --------------------------  --------------------------  -----------   ------------
                                                 At 2003                    At 2002                      At 2001
                                                Exchange                   Exchange                     Exchange
                                   Actual        Rates         Actual       Rates          Actual        Rates
                                 ------------  ---------     ----------   ----------     ----------    -----------
                                                                       (in millions)
<S>                              <C>           <C>           <C>            <C>          <C>           <C>
Net sales                        $ 322.6       $ 296.3       $ 257.7        $ 229.5      $ 221.9       $ 217.6
Gross profit                       132.2         124.4          96.3           88.5         78.8          78.4
Income from operations              51.0          50.0          25.3           25.3         15.4          16.3
</TABLE>



Between fiscal 2004 and 2003, the Euro yearly average strengthened against the
U.S. dollar by approximately 11%. The impact of this strengthening was to
increase net sales and gross profit by $26.3 million and $7.8 million,
respectively, because approximately 71% of sales are denominated in other
currencies, primarily the Euro. However, because approximately 82% of operating
expenses are also denominated in these other currencies, this same strengthening
of the Euro had the effect of increasing operating expenses, thereby only
increasing income from operations by $1.0 million.

Between fiscal 2003 and 2002, the Euro yearly average strengthened against the
U.S. dollar by approximately 15%. The impact of this strengthening was to
increase net sales and gross profit by $28.2 million and $7.8 million,
respectively, because approximately 75% of sales are denominated in other
currencies, primarily the Euro. However, because more than 75% of operating
expenses are also denominated in these other currencies, this same strengthening
of the Euro had the effect of increasing operating expenses, thereby having no
impact on income from operations.


                                       33



<PAGE>

Between fiscal 2002 and 2001, the Euro yearly average strengthened against the
U.S. dollar by approximately 4%. The impact of this strengthening was to
increase net sales and gross profit by $4.3 million and $0.4 million,
respectively, because approximately 67% of sales are denominated in other
currencies, primarily the Euro. However, because more than 67% of operating
expenses are also denominated in these other currencies, this same strengthening
of the Euro had the effect of increasing operating expenses and thereby
decreasing income from operations by $0.9 million.

CRITICAL ACCOUNTING POLICIES

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

Allowance for Doubtful Accounts

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

Inventory Valuation

Inventories are stated at the lower of cost or market, after provisions for
excess and obsolete inventory salable at prices below cost. Provisions for slow
moving and obsolete inventories are provided based on current assessments about
historical experience and future product demand and production requirements for
the next twelve months. These factors are impacted by market conditions,
technology changes, and changes in strategic direction, and require estimates
and management judgment that may include elements that are uncertain. The
Company evaluates the adequacy of these provisions quarterly. Although the
Company strives to achieve a balance between market demands and risk of
inventory excess or obsolescence, it is possible that, should conditions change,
additional provisions may be needed. Any changes in provisions will impact
operating income during a given period.

Warranty Reserves

The Company provides reserves for the estimated costs of product warranties when
revenue is recognized. The Company relies upon historical experience,
expectation of future conditions, and its service data to estimate its warranty
reserve. The Company continuously monitors these data to ensure that the reserve
is sufficient. To the extent we experience increased warranty claim activity or
increased costs associated with servicing those claims (such costs may include
material, labor and travel costs), revisions to the estimated warranty liability
would be required. Increases in reserves will impact operating income during the
period. While such expenses have historically been within its expectations, the
Company cannot guarantee this will continue in the future.

Pension Obligations

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


                                       34


<PAGE>

These differences may result in a significant impact on the amount of pension
benefits expense the Company has recorded or may record.

The discount rate enables the Company to state expected future cash-flows at a
present value on the measurement date. The rate the Company has selected
represents the market rate of high-quality fixed income investments. A lower
discount rate increases the present value of benefit obligations and increases
pension expense.

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

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rate Sensitivity

As of September 30, 2004, the Company maintained a cash equivalents portfolio of
$63.5 million, consisting mainly of non-taxable interest bearing securities and
demand deposits all with maturities of less than three months. If short-term
interest rates were to increase or decrease by 10%, there would be no material
impact on interest income due to the low level of interest rates in the current
year.

At September 30, 2004, the Company had $24.9 million of variable rate debt on
which the interest rate is reset every six months, $12.7 million of variable
rate debt on which the interest rate is set annually and $17.2 million of fixed
rate debt. Maturities of this debt are as follows: $49.9 million is due in 2005,
$4.0 million is due in 2006, $0.6 million is due in 2007, and $0.3 million is
due in 2008. A 10% change in the variable interest rates of the Company's debt
would result in an increase or decrease in pre-tax interest expense of
approximately $0.1 million.

Foreign Currency Exchange Risk

The Company enters into foreign currency forward contracts and forward exchange
options generally of less than one year duration to hedge a portion of its
foreign currency risk on sales transactions. At September 30, 2004, the Company
held Euro forward exchange options with notional amounts of $1.8 million. The
gains or losses resulting from a 10% change in currency exchange rates would
result in a pretax gain of $0.2 million. Additionally, the Company entered into
currency and interest swap agreements of total notional amount 40.4 million
Swiss Franc to minimize the interest expense on short and long-term debt. As of
September 30, 2004, an amount of 30.1 million Swiss Franc (equivalent to $24.3
million based on the exchange rate at September 30, 2004) was outstanding under
these swap agreements. The gains or losses resulting from a 10% change in
currency exchange rates would result in an increase of $1.6 million or a
decrease of $1.4 million of net income after tax.

ITEM 8.  CONSOLIDATED 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 IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None


                                       35

<PAGE>

ITEM 9A.      CONTROLS AND PROCEDURES

The Company's chief executive officer and chief financial officer have concluded
that, as of September 30, 2004, the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934, as amended) were effective, based on the evaluation of these controls and
procedures required by Rule 13a-15(b) or 15d-15(b) of the Securities Exchange
Act of 1934, as amended.

Such disclosure controls and procedures are controls and procedures designed to
ensure that all information required to be disclosed in the Company's reports
filed under the Exchange Act is recorded, processed, summarized and reported
within the time periods set forth in applicable Securities and Exchange
Commission forms, rules and regulations. In addition, Rofin has reviewed its
internal control over financial reporting and has concluded that there has been
no change in such internal control during the fourth quarter of fiscal 2004 that
has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.


                                       36
<PAGE>

                                    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", "Section 16(a) Beneficial
Ownership Reporting Compliance", and "Committees of the Board of Directors;
Meetings and Compensation of Directors", sections of the Company's Proxy
Statement to be filed in connection with the Company's 2005 Annual Meeting of
Stockholders to be held in March 2005, 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 2005 Annual Meeting of Stockholders to be held in
March 2005, 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 2005 Annual Meeting of
Stockholders to be held in March 2005, 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 2005 Annual Meeting of Stockholders to be held in March 2005, and is
incorporated by reference herein.

The Company had sales to its minority shareholder in Japan amounting to $1.8
million, $1.6 million and $2.6 million in fiscal years 2004, 2003, and 2002,
respectively and the amounts outstanding related to those sales is listed as
accounts receivable related party in the consolidated balance sheet.

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

The main facility in Starnberg is rented under a 25 year operating lease from
the former minority shareholder of CBL, who is also a member of the board of
directors of the Company, and includes a clause to terminate the lease contract
within a two-year notice period during the contract period. The Company paid
rent expense of $0.6 million and $0.5 million to the former minority shareholder
during fiscal years 2004 and 2003, respectively. Payables to the director and
former minority shareholder of CBL as of September 30, 2004 amounted to $0.6
million and are included in other accrued liabilities.

                                       37

<PAGE>

The Company has accrued $1.1 million, at September 30, 2004 ($1.1 million at
September 30, 2003) for the option purchase prices for the minority interests in
RBE, and $0.4 million ($0.3 million at September 30, 2003) was accrued for
accumulated interest on this obligation (see Note 1 to the accompanying
financial statements). Additionally the company has accrued $0.1 million at
September 30, 2004 for the option purchase price for the minority interests in
Optoskand AB. These amounts are included in accounts payable to related party in
the accompanying consolidated balance sheet. The corresponding interest on this
obligation ($0.1 million in 2004, 2003 and 2002) is included in interest
expense in the accompanying consolidated statement of operations. Effective
October 22, 2004 the minority shareholder of RBE resigned from the limited
partnership and the remaining shares were purchased for the price of Euro 1.2
million (equivalent to $1.5 million based on the exchange rate at September 30,
2004), including interest accumulated on the obligation.

Accounts payable to related party also includes a short-term loan from the
minority shareholder of Dilas of $0.1 million at September 30, 2004.

The Company believes that all transactions noted above have been executed on an
arms-length basis. Except for the foregoing, no director, officer, nominee
director, 5% holder of the Company's shares, or immediate family member,
associate or affiliate thereof, had any material interest, direct or indirect,
in any transaction since the beginning of fiscal 2003 or has any material
interest, direct or indirect, in any proposed transaction, having a value of
$60,000 or more.

Indebtedness of Officers and Directors

Since the beginning of fiscal 2003, there has been no indebtedness to the
Company by any director or officer or associates of any such person, other than
reimbursements for purchases, for ordinary travel and expense advances and for
other transactions in the ordinary course of business.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information set forth under "Independent Public Accountants - All Other
Fees" in the definitive form of the Company's Proxy Statement relating to the
2005 Annual Meeting of Shareholders to be held in March 2005 is incorporated by
reference herein.


                                       38

<PAGE>

                                    PART IV




ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a.   1.    Consolidated Financial Statements

           The following financial statements are filed as part of this
           Annual Report.

           Report of Independent Registered Public Accounting Firm          F-1

           Consolidated Balance Sheets as of September 30, 2004 and 2003    F-2

           Consolidated Statements of Operations for the years ended
           September 30, 2004, 2003, and 2002                               F-3

           Consolidated Statements of Stockholders' Equity and
           Comprehensive Income for the years ended
           September 30, 2004, 2003, and 2002                               F-4

           Consolidated Statements of Cash-Flows for the years ended
           September 30, 2004, 2003, and 2002                               F-5

           Notes to Consolidated Financial Statements                       F-6

     2.    Financial Statement Schedules

           Report of Independent Registered Public Accounting Firm          F-24

           Schedule II - Valuation and Qualifying Accounts                  F-25

           Schedules not listed above have been omitted because the matter or
           conditions are not present or the information required to be set
           forth therein is included in the Consolidated Financial Statements
           hereto.

     3.    Exhibits

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




                                       39

<PAGE>



EXHIBIT
NUMBER        DESCRIPTION
----------    ------------------------------------------------------------------

3.1           Certificate of Incorporation of the Company and Form of
              Certificate of Amendment thereto(*)

3.2           By-Laws of the Company  (**)

4.1           Form of Rights Agreement  (*)

10.1          Form of Sale and Transfer Agreement between Siemens
              Aktiengesellschaft and Rofin-Sinar Technologies Inc.  (*)

10.2          Form of Sale and Transfer Agreement by and among Siemens Power
              Corporation and Rofin-Sinar Technologies Inc.  (*)

10.3          Form of Tax Allocation and Indemnification Agreement among
              Rofin-Sinar Technologies Inc., Rofin-Sinar, Inc., Siemens
              Corporation and Siemens Power Corporation  (*)

10.4          Joint Venture Agreement, dated as of May 27, 1992, by and among
              Rofin-Sinar Laser GmbH, Marubeni Corporation and Nippei Toyama
              Corporation  (*)

10.5          Cooperation Agreement, dated as of May 27, 1992, among Nippei
              Toyama Corporation, Rofin-Sinar Laser GmbH and Marubeni
              Corporation  (*)

10.6          Cooperation Agreement, dated as of May 27, 1992, among Rofin-Sinar
              Laser GmbH, Marubeni Corporation and Nippei Toyama
              Corporation  (*)

10.7          Inheritable Building Right (Erbbaurecht), dated as of March
              1, 1990, between Rofin-Sinar Laser GmbH and Lohss GmbH (in
              German, English summary provided) (*)

10.8          Lease Agreement, dated August 10, 1990, between Josef and
              Maria Kranz and Rofin-Sinar Laser GmbH (in German, English summary
              provided)  (*)

10.9          Lease Agreement, dated 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

                                       40

<PAGE>


EXHIBIT
NUMBER        DESCRIPTION
----------    ------------------------------------------------------------------

              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)  (***)

10.18         English Translation of Acquisition Agreement, dated as of
              April 29, 2000, by and between Mannesmann Demag Krauss-Maffei
              AG and Rofin-Sinar Laser GmbH (****)

10.19         English Translation of Option Agreement between Carl Baasel and
              Rofin-Sinar Laser GmbH (***)

10.20         Lease Agreement between Carl Baasel and Rofin-Sinar Laser
              GmbH (***)

10.21         2002 Equity Incentive Plan  (*****)

14.1          Code of Business Ethics (******)

21.1          List of Subsidiaries of the Registrant

23.1          Consent of Independent Registered Public Accounting Firm

31.1          Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
              Officer

31.2          Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1          Section 1350 Certification of Chief Executive Officer

32.2          Section 1350 Certification of Chief Financial Officer

 (*)     Incorporated by reference to the exhibits filed with the Company's
         Registration Statement on Form S-1 (File No. 333-09539) which was
         declared effective on September 25, 1996.

(**)     Incorporated by reference to the exhibit filed with the Company's
         Quarterly Report for the period ended March 31, 1998.

(***)    Incorporated by reference to the exhibit filed with the Company's
         Current Report on Form 8-K filed with the Securities and Exchange
         Commission on May 24, 2000.

(****)   Incorporated by reference to the exhibit filed with the Company's
         Annual Report on Form 10-K/A filed with the Securities and
         Exchange Commission on January 18, 2001.

(*****)  Incorporated by reference to the exhibit filed with the Company's
         Annual Report on Form 10-K filed with the Securities and Exchange
         Commission on December 23, 2003.

(******) Incorporated by reference to the exhibit filed with the Company's
         Proxy Statement on Schedule 14A filed with the Securities and
         Exchange Commission on January 30, 2004.


                                       41


<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 13, 2004              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.

<TABLE>
<CAPTION>
      SIGNATURE                          TITLE                                  DATE
---------------------------      ------------------------------        -------------------
<S>                              <C>                                    <C>
/s/   Peter Wirth                Chairman of the Board of               December 13, 2004
-------------------------        Directors, Chief Executive
      Peter Wirth                Officer and President


/s/   Gunther Braun              Executive Vice President,              December 13, 2004
-------------------------        Finance and Administration,
      Gunther Braun              Chief Financial Officer,
                                 Principal Accounting Officer
                                 and Director

/s/   William Hoover             Director                               December 13, 2004
-------------------------
      William Hoover

/s/   Ralph Reins                Director                               December 13, 2004
-------------------------
      Ralph Reins

/s/   Gary Willis                Director                               December 13, 2004
-------------------------
      Gary Willis

/s/   Carl F. Baasel             Director                               December 13, 2004
-------------------------
      Carl F. Baasel

/s/   Daniel Smoke               Director                               December 13, 2004
-------------------------
      Daniel Smoke
</TABLE>



                                       42




<PAGE>



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Rofin-Sinar
Technologies Inc. and subsidiaries as of September 30, 2004 and 2003, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended September 30, 2004. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 2004, in conformity with U.S. generally
accepted accounting principles.

As discussed in Note 4 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets", effective October 1, 2002.

/s/ KPMG LLP
Detroit, Michigan
November 8, 2004




                                      F-1


<PAGE>



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

                                                                                   September 30,
                                                                       ----------------------------------
                                                                            2004                 2003
                                                                       ----------------    --------------
<S>                                                                       <C>                <C>
ASSETS
Current Assets:
         Cash and cash equivalents                                        $ 100,266          $   44,487
         Accounts receivable, trade                                          82,833              66,614
         Less allowance for doubtful accounts                                (2,519)             (2,066)
                                                                        ----------------    --------------
                  Trade accounts receivable, net                             80,314              64,548
         Accounts receivable from related party (note 12)                       172                 247
         Other accounts receivable                                            1,647                 997
         Inventories (note 2)                                               106,420              86,738
         Prepaid expenses                                                     1,260               1,073
         Deferred income tax assets - current (note 9)                        7,554               6,419
                                                                        ----------------    --------------
                  Total current assets                                      297,633             204,509
Property and equipment, at cost (note 3)                                     68,931              57,520
         Less accumulated depreciation                                      (34,803)            (29,828)
                                                                        ----------------    --------------
                  Property and equipment, net                                34,128              27,692
Deferred income tax assets - noncurrent (note 9)                              1,793               2,167
Goodwill, net (note 4)                                                       61,779              48,058
Intangibles, net (note 4)                                                    18,069               8,866
Other assets                                                                    404                 194
                                                                        ----------------    --------------
                  Total assets                                            $ 413,806           $ 291,486
                                                                        ================    ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
         Line of credit and short-term borrowings (notes 6 and 7)         $  49,819           $  35,781
         Accounts payable, trade                                             17,306              12,476
         Accounts payable to related party (note 12)                          1,790               2,158
         Income taxes payable (note 9)                                        9,307               6,980
         Deferred income tax liabilities - current (note 9)                   5,280               4,440
         Accrued liabilities (notes 5 and 12)                                50,591              43,915
                                                                        ----------------    --------------
                  Total current liabilities                                 134,093             105,750
Long-term debt (note 7)                                                       4,983              33,052
Pension obligations (note 10)                                                 8,567               7,830
Deferred income tax liabilities - noncurrent (note 9)                         6,078               2,320
Minority interests                                                            1,700               1,756
Other long-term liabilities                                                   1,001                 192
                                                                        ----------------    --------------
                  Total liabilities                                         156,422             150,900
Commitments and contingencies (note 8)
Stockholders' equity:

         Preferred stock, 5,000,000 shares authorized,
                  none issued or outstanding                                     --                --
         Common stock, $0.01 par value, 50,000,000 shares authorized,
                  14,930,550 (11,908,600 at September 30, 2003)
                  shares issued and outstanding                                 149                 119
         Additional paid-in capital                                         158,777              79,918
         Retained earnings                                                   87,096              54,666
         Accumulated other comprehensive income                              11,362               5,883
                                                                        ----------------    --------------
                  Total stockholders' equity                                257,384             140,586
                                                                        ----------------    --------------
                  Total liabilities and stockholders' equity              $ 413,806           $ 291,486
                                                                       ================     ==============
</TABLE>

See accompanying notes to consolidated financial statements


                                      F-2

<PAGE>


                                 ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                  YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002
                                (dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                          Years ended September 30,
                                                     -----------------------------------------------------------------
                                                            2004                     2003                 2002
                                                     --------------------   --------------------    ------------------
<S>                                                        <C>                     <C>                  <C>
Net sales                                                  $ 322,628               $ 257,746            $ 221,948
Cost of goods sold                                           190,473                 161,465              143,128
                                                     --------------------   --------------------    ------------------
         Gross profit                                        132,155                  96,281               78,820
                                                     --------------------   --------------------    ------------------
Selling, general, and administrative expenses                 58,336                  51,282               46,401
Research and development expenses                             20,473                  18,060               13,249
Amortization expense                                           2,389                   1,654                3,762
                                                     --------------------   --------------------    ------------------
         Income from operations                               50,957                  25,285               15,408

Other expense (income):
         Interest, net (note 12)                               1,771                   3,249                3,407
         Minority interest                                       708                     709                  772
         Foreign currency gains                               (1,148)                 (3,139)                (526)
         Miscellaneous                                          (452)                   (261)                (630)
                                                     --------------------   --------------------    ------------------
         Total other expense, net                                879                     558                3,023
                                                     --------------------   --------------------    ------------------
         Income before income taxes                           50,078                  24,727               12,385
Income tax expense (note 9)                                   17,648                   9,422                7,384
                                                     --------------------   --------------------    ------------------
         Net income                                        $  32,430               $  15,305             $  5,001
                                                     ====================   ====================    ==================
Net income per share (note 11):
Basic                                                         $ 2.41                 $  1.31               $  0.43
Diluted                                                       $ 2.31                 $  1.29               $  0.43
                                                     ====================   ====================    ==================
Weighted average shares used in computing
        net income per share (note 11):

Basic                                                     13,478,606              11,639,898            11,551,800
Diluted                                                   14,020,154              11,863,094            11,591,505
                                                     ====================   ====================    ==================
</TABLE>

See accompanying notes to consolidated financial statements


                                      F-3


<PAGE>



<TABLE>
<CAPTION>
                               ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                                    YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002
                                                  (dollars in thousands)


                                                                                                                 Accumulated
                                                       Number of        Common       Additional                    Other
                                                     Common Shares      Stock         Paid-in        Retained   Comprehensive
                                                      Outstanding      Par Value       Capital        Earnings   Income (loss)
                                                     -------------    -----------   -------------   -----------  --------------
<S>                                                    <C>              <C>         <C>             <C>            <C>
BALANCES at September 30, 2001                         11,546,500       $  115      $  76,123       $  34,360      $ (11,547)
Comprehensive income:
         Fair value of interest swap agreement                 --           --             --              --            (80)
         Foreign currency translation adjustment               --           --             --              --          4,413
         Net income                                            --           --             --           5,001             --

                  Total comprehensive income
Common stock issued in connection with
         stock incentive plans                              5,300          --             33              --             --
                                                      ------------    -----------   -------------   -----------  --------------
BALANCES at September 30, 2002                         11,551,800       $  115      $  76,156       $  39,361         (7,214)
                                                      ============    ===========   =============   ===========  ==============
Comprehensive income:
         Fair value of interest swap agreement                 --           --             --              --            204
         Foreign currency translation adjustment               --           --             --              --         12,893
         Net income                                            --           --             --          15,305             --

                  Total comprehensive income
Common stock issued in connection with
         stock incentive plans                            356,800            4          3,762              --             --
                                                      ------------    -----------   -------------   -----------  --------------
BALANCES at September 30, 2003                         11,908,600       $  119      $  79,918       $  54,666       $  5,883
                                                      ============    ===========   =============   ===========  ==============
Comprehensive income:
         Fair value of interest swap agreement                 --           --             --              --            606
         Foreign currency translation adjustment               --           --             --              --          4,873
         Net income                                            --           --             --          32,430             --

                  Total comprehensive income
Tax benefit applicable to exercise of stock options            --           --          1,793              --
Common stock issued in connection with:
         Secondary stock offering                       2,860,000           29         75,236              --             --
         Stock incentive plans                            161,950            1          1,830              --             --
                                                       -----------    -----------   -------------   -----------  --------------

BALANCES at September 30, 2004                         14,930,550       $  149       $158,777        $ 87,096       $ 11,362
                                                       ===========    ===========   =============   ===========  ==============
</TABLE>



                                                         Total
                                                      Stockholders'
                                                          Equity
                                                       --------------
BALANCES at September 30, 2001                          $  99,051
Comprehensive income:
         Fair value of interest swap agreement               (80)
         Foreign currency translation adjustment            4,413
         Net income                                         5,001
                                                       --------------
                  Total comprehensive income                9,334
Common stock issued in connection with
         stock incentive plans                                33
                                                       --------------
BALANCES at September 30, 2002                          $ 108,418
                                                       ==============
Comprehensive income:
         Fair value of interest swap agreement                204
         Foreign currency translation adjustment           12,893
         Net income                                        15,305
                                                       --------------
                  Total comprehensive income               28,402
Common stock issued in connection with
         stock incentive plans                              3,766
                                                       --------------
BALANCES at September 30, 2003                          $ 140,586
                                                       ==============
Comprehensive income:
         Fair value of interest swap agreement                606
         Foreign currency translation adjustment            4,873
         Net income                                        32,430
                                                       --------------
                  Total comprehensive income               37,909
Tax benefit applicable to exercise of stock options         1,793
Common stock issued in connection with:
         Secondary stock offering                          75,265
         Stock incentive plans                              1,831
                                                       --------------

BALANCES at September 30, 2004                          $ 257,384
                                                       ==============

See accompanying notes to consolidated financial statements


                                       F-4

<PAGE>




                               ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF CASH-FLOWS
                               YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002
                                          (dollars in thousands)
<TABLE>
<CAPTION>

                                                                                  Years ended September 30,
                                                                   -------------------------------------------------------

                                                                       2004                2003               2002
                                                                   -------------      --------------      -------------
<S>                                                                  <C>                 <C>                <C>
CASH-FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                      $ 32,430            $ 15,305           $ 5,001
     Adjustments to reconcile net income
         to net cash provided by (used in)
              operating activities:
              Depreciation and amortization                             6,730               5,888             7,496
              Issuance of restricted stock                                146                  27                27
              Provision for doubtful accounts                             230                 282              (635)
              Unrealized loss from securities                              --                  --               181
              Exchange rate gains                                        (864)             (3,371)             (933)
              Loss on disposal of property and equipment                  280                 251                99
              Gain on sale of medical business                             --                  --              (718)
              Deferred income taxes                                      (559)              2,511             1,618
              Increase in minority interest                               708                 709               772
              Change in operating assets and liabilities:
                  Trade accounts receivable                             3,498               2,872               909
                  Other accounts receivable                              (540)              1,427               556
                  Inventories                                          (3,756)               (366)              313
                  Prepaid expenses and other                             (405)                700               212
                  Accounts payable                                     (7,819)             (9,143)            1,262
                  Income taxes payable                                  3,265                  78             1,055
                  Accrued liabilities and pension obligations           5,538               8,688            (1,060)
                                                                   -------------      --------------      -------------
                      Net cash provided by operating
                           activities                                  38,882              25,858            16,155
                                                                   -------------      --------------      -------------
CASH-FLOWS FROM INVESTING ACTIVITIES:
     Additions to property and equipment                               (4,469)             (3,499)           (4,547)
     Proceeds from the sale of property and equipment                     132                 157               143
     Proceeds from the sale of business                                    --                  --               938
     Acquisition of business, net of cash acquired                    (34,960)                 --                --
                                                                   -------------      --------------      -------------
              Net cash used in investing activities                   (39,297)             (3,342)           (3,466)
                                                                   -------------      --------------      -------------
CASH-FLOWS FROM FINANCING ACTIVITIES:
     Borrowings from bank                                               8,792               3,576             5,503
     Repayments to bank                                               (28,477)             (8,249)          (10,834)
     Payment to subsidiary's minority shareholders                       (715)               (141)             (435)
     Issuance of additional shares                                     75,265                  --                --
     Issuance of common stock                                           1,685               3,739                 6
                                                                   -------------      --------------      -------------
         Net cash provided by/(used in) financing activities           56,550              (1,075)          ( 5,760)
                                                                   -------------      --------------      -------------
Effect of foreign currency translation on cash                           (356)              2,734              (104)
                                                                   -------------      --------------      -------------

Net increase in cash and cash equivalents                              55,779              24,175             6,825
Cash and cash equivalents at beginning of year                         44,487              20,312            13,487
                                                                   -------------      --------------      -------------
Cash and cash equivalents at end of year                            $ 100,266            $ 44,487          $ 20,312
                                                                   =============      ==============      =============
Cash paid during the year for interest                              $   2,966            $  4,143          $  3,105
                                                                   =============      ==============      =============
Cash paid during the year for income taxes                          $  11,883            $  5,920          $  1,468
                                                                   =============      ==============      =============
</TABLE>

See accompanying notes to consolidated financial statements

                                      F-5

<PAGE>



                 ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       September 30, 2004, 2003, and 2002
                (dollars in thousands, except per share amounts)

1. SUMMARY OF ACCOUNTING POLICIES

(a)   Description of the Company and Business

The primary business of Rofin is to develop, manufacture and market industrial
lasers and supplies used for material processing applications. The majority of
the Company's customers are in the machine tool, automotive, and semiconductor
and electronics industries and are located in the United States, Europe, and
Asia. For the years ended September 30, 2004 and 2003, Rofin generated
approximately 65% and 67%, respectively of its revenues from the sale of lasers
and laser systems and approximately 35% and 33%, respectively, from aftermarket
support for the Company's existing laser products and from its components
business.

The accompanying financial statements present the historical financial
information of Rofin-Sinar Technologies Inc. ("Rofin" or "RSTI" or "the
Company") and its wholly-owned subsidiaries. Rofin consists of Rofin-Sinar, Inc.
("RS Inc."), PRC Laser Corp. ("PRC"), Lee Laser, Inc. ("Lee") and Rofin-Sinar
Technologies Europe S.L. ("RSTE"). RSTE, a European holding company formed in
1999, owns 100% of Rofin-Sinar Laser GmbH ("RSL"), 95% of Dilas Diodenlaser GmbH
("Dilas"), 100% of Rofin-Baasel Italiana S.r.l., 100% of Rofin-Baasel France
S.A., 71% of Rofin-Sinar UK Ltd., 100% of Rofin-Baasel UK Ltd., 100% of
Rofin-Baasel Benelux B.V., 100% of Rofin-Baasel Singapore Pte. Ltd., 83% of
Rofin-Baasel Espana S.L.("RBE"), 100% of Rofin-Baasel Taiwan Ltd. and 100% of
Rofin-Baasel Korea Co., Ltd.

RSL includes the consolidated accounts of its 88%-owned subsidiary Rofin-Baasel
Japan Corp. (a Japanese corporation), its 100%-owned subsidiaries Rasant-Alcotec
Beschichtungstechnik GmbH ("Rasant"); CBL Verwaltungsgesellschaft GmbH; its 90%-
owned subsidiary Optoskand AB ("Optoskand"), and its 100%-owned subsidiary Carl
Baasel Lasertechnik GmbH & Co. KG. ("CBL").

CBL includes the consolidated accounts of its wholly-owned subsidiaries
Rofin-Baasel, Inc. ("RB Inc"), Wegmann-Baasel Laser und elektrooptische Geraete
GmbH, and PMB Elektronik GmbH.

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

On March 29, 2004 the Company issued and sold 2.5 million common shares at a
price of $28.00 per share. The underwriters exercised their over-allotment
option on April 8, 2004 resulting in 360,000 additional common shares being
issued and sold. The Company realized net proceeds of $75,265 as a result of
these transactions. The Company intends to use the aggregate net proceeds from
the offering for working capital, other general corporate purposes and for
acquisitions of complementary products, technologies or businesses as
opportunities arise.

(b)   Acquisitions

The Company made several acquisitions during fiscal year 2004 for a total cash
purchase price of $34,960. The Company has followed the purchase method of
accounting for these acquisitions with the respective results of operations
included in the consolidated results from the date of acquisition. The fiscal
year 2004 acquisitions included the following:

     o   On February 28, 2004, the Company acquired 90% of the share capital of
         Optoskand AB, Gothenburg, Sweden, through its wholly-owned subsidiary
         RSL. The Company has a call option exercisable beginning in 2009 for
         the remaining 10% of the common stock.

                                      F-6


<PAGE>

     o   On August 20, 2004 the Company acquired an additional 15% of the share
         capital of Dilas Diodenlaser GmbH, Mainz, Germany, through its wholly-
         owned subsidiary RSTE. The Company currently holds 95% of the share
         capital.

     o   On August 31, 2004, the Company acquired 100% of the share capital of
         PRC Laser Corporation based in Landing, New Jersey (including its
         wholly-owned European subsidiary PRC Europe N.V., Oudenaarde, Belgium)
         and Lee Laser, Inc. based in Orlando, Florida.

Goodwill and other intangibles, resulting from the acquisitions, totaled
$21,928.

The following unaudited pro-forma financial information for the PRC and Lee
Laser acquisition reflects the consolidated results of operations as if the
acquisition had taken place on October 1, 2002.

<TABLE>
<CAPTION>
                                                                 2004                  2003
                                                             ------------          --------------
<S>                                                          <C>                   <C>
     Net sales                                               $   357,541           $  285,889
     Net income                                              $    33,016           $   14,364
     Earnings per average weighted share - basic                    2.45                 1.23
     Earnings per average weighted share - diluted                  2.35                 1.21
</TABLE>


(c)      Cash Equivalents

Cash equivalents consist of liquid instruments with an original maturity of
three months or less as well as taxable and tax-exempt variable rate demand
obligations, which are redeemable upon a five day minimum notice. Interest
income was $1,108, $422, and $365 for the years ended September 30, 2004, 2003,
and 2002, respectively, and was offset by interest expense in the accompanying
consolidated statements of operations.

(d)      Inventories

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

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

(e)      Property and Equipment

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

                                                            Useful Lives
                                                            ------------
              Buildings                                         40 Years
              Machinery and equipment                         3-10 Years
              Furniture and fixtures                          3-10 Years
              Computers and software                           3-4 Years
              Leasehold improvements                          3-15 Years


                                      F-7


<PAGE>


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

(f)      Goodwill and Other Intangible Assets

On October 1, 2002, the Company adopted Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
and Other Intangibles". Under SFAS No. 142, goodwill is no longer subject to
amortization, but will be subject to an annual impairment test. Intangible
assets that are not deemed to have an indefinite life will continue to be
amortized over their useful lives.

SFAS No. 142 requires that goodwill be tested on an annual basis, at minimum,
for potential impairment at the reporting unit level. A reporting unit is
defined as the lowest level of an entity that is a business and that can be
distinguished, physically and operationally and for internal reporting purposes,
from other activities, operations, and assets of the entity. A reporting unit
can be no higher than a reportable operating segment and would generally be
lower than that level of reporting. The Company identified three reporting
units: the German reporting unit; the United States reporting unit; and the
reporting unit for the rest of the world.

Under SFAS No. 142, the fair value of each reporting unit is compared to its
carrying amount. If the carrying value is below the fair value assessment, there
will be no impairment loss. If the fair value is below the carrying value, then
the Company is required to perform an additional test to determine the impaired
fair value of the goodwill and its carrying amount.

The Company completed the initial and annual goodwill impairment testing
required by SFAS No. 142 and determined that the fair value of each reporting
unit exceeds its carrying value and accordingly, the second step of the
impairment test was not required to be performed.

Prior to the adoption of SFAS No. 142, goodwill was amortized on a straight-line
basis over 15 years. The amount of goodwill impairment, if any, was measured
based on projected discounted future operating cash-flows compared to the
unamortized goodwill balance.

(g)      Revenue Recognition and Accounts Receivable Valuation

Revenue is recognized when persuasive evidence of an arrangement exists, the
product has been delivered, the price is fixed or determinable and collection is
probable. Terms under these arrangements are generally free on board ("FOB")
shipping point, or ("EXW")ex works factory, at which time legal title passes
from the Company to the customer. Therefore, delivery is generally considered to
have occurred upon shipment. In certain circumstances customers may negotiate
different terms. In these situations, delivery is considered to have occurred
once legal title has passed from the Company to the customer. This may be at
delivery to the customer's destination or acceptance by our customer. The
Company's products typically include a one-year warranty and the estimated cost
of product warranty claims is accrued at the time the sale is recognized, based
on historical experience.

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


                                      F-8

<PAGE>

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

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

(h)      Income Taxes

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

(i)      Accounting for Warranties

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

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

(j)      Foreign Currency Translation

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

(k)      Net Earnings per Share (EPS)

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




                                      F-9


<PAGE>


(l)      Comprehensive Income

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

<TABLE>
<CAPTION>
                                                                                        September 30,
                                                                               --------------------------------
                                                                                  2004                2003
                                                                               -----------         ----------
<S>                                                                             <C>                 <C>
Foreign currency translation adjustment                                         $  11,603           $  6,730
Fair value of interest swap agreements (net of tax effect of $139                    (241)              (847)
     in 2004 and $499 in 2003)                                                 -----------         ----------
Total accumulated other comprehensive income/(loss)                             $  11,362           $  5,883
                                                                               ===========         ==========
</TABLE>

(m)      Research and Development Expenses

Research and development costs are expensed when incurred and are net of German
government and European grants of $1,056, $936, and $1,077 received for the
years ended September 30, 2004, 2003, and 2002, respectively. The Company has no
future obligations under such grants.

(n)      Financial Instruments

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

(o)      Derivative Financial Instruments

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

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

Interest differentials resulting from interest rate swap agreements designated
as hedges of the Company's financial liabilities are recorded on an accrual
basis as an adjustment to interest expense.

From time to time, the Company enters into foreign currency forward contracts
and forward exchange options generally of less than one year duration to hedge a
portion of its sales transactions denominated in foreign currencies. At
September 30, 2004, the Company held Euro forward exchange options with notional
amounts of $1,800.

The Company manages exposure to counterparty credit risk by entering into
derivative financial instruments with highly rated institutions that can be
expected to fully perform under the terms of such agreements.


                                      F-10


<PAGE>

(p)      Use of Estimates

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

(q)      Stock Incentive Plans

The Company applies the intrinsic-value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, to account for its fixed-plan stock options. Under this method,
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeded the exercise price. SFAS No. 123,
Accounting for Stock-Based Compensation, established accounting and disclosure
requirements using a fair-value-based method of accounting for stock-based
employee compensation plans. As allowed by SFAS No. 123, the Company has elected
to continue to apply the intrinsic-value-based method of accounting described
above, and has adopted only the disclosure requirements of SFAS No. 123.

The Company follows Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees", to account for stock options. No compensation cost
is recognized because the option exercise price is equal to the market price of
the underlying stock on the date of grant. Had compensation cost for these
plans, as prescribed by SFAS 123, been determined based on the Black-Scholes
value at the grant dates for awards, pro-forma net income and earnings per share
would have been:

<TABLE>
<CAPTION>
                                                                       Year ended September 30,
                                                             --------------------------------------------
                                                                 2004             2003            2002
                                                             --------------   ------------    -----------
<S>                                                             <C>              <C>            <C>
   Net income - as reported                                     $ 32,430         $ 15,305       $ 5,001
   Add back:
   Stock-based compensation expense
        included in reported net income                              146               27            27
   Deduct:
   Stock-based compensation expense
         determined under fair value method                       (1,270)           (621)         (488)
                                                             --------------   ------------    -----------
   Pro-forma net income                                          $31,306         $ 14,711       $ 4,540
                                                             ==============   ============    ============
   Basic earnings per share:
        As reported                                              $  2.41         $   1.31       $  0.43
        Pro-forma                                                $  2.32         $   1.26       $  0.39
   Diluted earnings per share:
        As reported                                              $  2.31         $   1.29       $  0.43
        Pro-forma                                                $  2.23         $   1.24       $  0.39
</TABLE>

The following assumptions were used in the determination of pro-forma
compensation cost under the provisions of SFAS 123:

<TABLE>
<CAPTION>
                                                    2004 Grant        2003 Grant      2002 Grant
                                                     (285,500          (262,000        (273,000
                                                      Shares)           Shares)         Shares)
                                                   ------------      -------------   --------------
<S>                                                 <C>                <C>              <C>
     Weighted Average Grant Date Fair Value         $ 15.18             $ 4.54           $ 4.31
     Expected Life                                  5 Years            5 Years          5 Years
     Volatility                                       50.0%              50.0%            50.0%
     Risk-Free Interest Rate                          2.79%              2.78%             4.7%
     Dividend Yield                                      0%                 0%               0%
     Annual Forfeiture Rate                           1.09%              1.87%             1.0%
</TABLE>


                                      F-11


<PAGE>

(r)      Shipping and Handling Costs

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

2.       INVENTORIES

Inventories are summarized as follows:

                                                         September 30,
                                                --------------------------------
                                                     2004              2003
                                                --------------    -------------
         Finished goods                            $ 14,147          $12,809
         Work in progress                            26,659           25,793
         Raw materials and supplies                  38,804           24,717
         Demo inventory                               9,525            6,585
         Service parts                               17,285           16,834
                                                --------------    -------------
         Total inventories                         $106,420          $86,738
                                                ==============    =============

3. PROPERTY AND EQUIPMENT


Property and equipment include the following:

                                                        September 30,
                                                --------------------------------
                                                     2004              2003
                                                --------------    -------------
         Buildings                                 $ 28,348         $ 22,530
         Technical machinery and equipment           17,003           14,356
         Furniture and fixtures                      12,670           11,042
         Computers and software                       6,070            5,302
         Leasehold improvements                       4,840            4,290
                                                --------------    -------------
         Total property and equipment, at cost     $ 68,931         $ 57,520
                                                ==============    =============

4. GOODWILL AND OTHER INTANGIBLE ASSETS

The following sets forth a reconciliation of net income and earnings per share
information for the year ended September 30, 2002, adjusted for the
non-amortization provisions of SFAS No. 142:

        Net income - as reported                        $5,001
        Add back:
           Goodwill amortization
              (net of tax)                               3,121
                                                       ---------
           Adjusted net income                          $8,122
                                                       =========

        Basic earnings per share:
           Reported net income                           $0.43
           Goodwill amortization                          0.27
                                                        --------
           Adjusted net income                           $0.70
                                                        ========

        Diluted earnings per share:
           Reported net income                           $0.43
           Goodwill amortization                          0.27
                                                        --------
           Adjusted net income                           $0.70
                                                        ========

                                      F-12

<PAGE>


The changes in the carrying amount of goodwill for the years ended September 30,
2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                 Germany         United States     Rest of World        Total
                                              -------------     ---------------   ---------------    ------------
<S>                                              <C>               <C>               <C>              <C>
Balance as of September 30, 2002                 $ 28,802          $   2,197         $ 10,054         $ 41,053
    Currency exchange difference                    4,764                413            1,828            7,005
                                              -------------     ---------------   ---------------    ------------
Balance as of September 30, 2003                 $ 33,566          $   2,610         $ 11,882         $ 48,058
    Additional goodwill from acquisitions           4,149              6,751              362           11,262
    Currency exchange difference                    1,675                145              639            2,459
                                              -------------     ---------------   ---------------    ------------
Balance as of September 30, 2004                 $ 39,390          $   9,506         $ 12,883         $ 61,779
                                              =============     ===============   ===============    ============
</TABLE>

The carrying values of other intangible assets are as follows:

<TABLE>
<CAPTION>
                                                       September 30, 2004                       September 30, 2003
                                                ---------------------------------         ------------------------------
                                                                                            Gross
                                                 Gross Carrying    Accumulated             Carrying       Accumulated
                                                     Amount        Amortization             Amount        Amortization
                                                ---------------   ---------------         ----------   -----------------
<S>                                               <C>                <C>                    <C>              <C>
Amortized intangible assets:
     Patents                                      $  7,421           $ 1,698                $  5,279         $ 1,192
     Customer base                                  13,655             3,943                   6,952           2,370
     Other                                           3,668             1,034                     622             425
                                                ---------------   ---------------         ----------   -----------------
     Total                                        $ 24,744           $ 6,675                $ 12,853         $ 3,987
                                                ===============   ===============         ==========   =================
</TABLE>

Patents are amortized over the life of the patent which ranges from 1 to 20
years. Customer base is amortized on a straight-line basis over seven years.
Amortization expense for the years ended September 30, 2004, 2003, and 2002 was
$2,389, $1,654, and $698 respectively. At September 30, 2004, estimated
amortization expense for the next five fiscal years based on the average
exchange rates as of September 30, 2004, are as follows:


           2005                                           $ 5,200
           2006                                             3,400
           2007                                             2,900
           2008                                             2,100
           2009                                             1,900

5. ACCRUED LIABILITIES

Accrued liabilities are comprised of the following:


                                                         September 30,
                                             --------------------------------
                                                  2004                2003
                                             ---------------     -------------
           Employee compensation                $ 14,308            $ 11,896
           Warranty reserves                      13,375              10,528
           Other taxes payable                       298                 267
           Customer deposits                      11,313              12,875
           Other                                  11,297               8,349
                                             ---------------     -------------
           Total accrued liabilities            $ 50,591            $ 43,915
                                             ===============     =============



The Company provides for the estimated costs of product warranties when revenue
is recognized. The estimate of costs to fulfill our warranty obligations is
based on historical experience and expectation of future conditions. The change
in warranty reserves for the years ended September 30, 2004 and 2003 is as
follows:


                                      F-13


<PAGE>

Balance at September 30, 2002                                        $  10,036
     Additional accruals for warranties during the period                8,400
     Usage during the period                                            (9,177)
     Currency translation                                                1,269
                                                                    -----------
Balance at September 30, 2003                                           10,528
     Additional accruals for warranties during the period                9,471
     Usage during the period                                            (7,151)
     Currency translation                                                  527
                                                                    -----------
Balance at September 30, 2004                                        $  13,375
                                                                    ===========


6. LINE OF CREDIT

The Company maintains a $25,000 annually renewable line of credit with Deutsche
Bank AG to support its working capital needs. As of September 30, 2004 and 2003,
$12,745 and $12,600, respectively, were outstanding under this loan facility as
a result of borrowings by RSL, Rofin-Baasel Japan Corp., Rofin-Baasel Italiana
S.r.l., Rasant, Rofin-Sinar UK Ltd. and Rofin-Baasel Singapore Pte. Ltd. at an
average fixed interest rate of 2.9% for fiscal 2004 and 3.2% for fiscal 2003.

In addition, the Company's non-U.S. subsidiaries have several lines of credit,
which allow them to borrow in the applicable local currency. At September 30,
2004 and 2003, direct borrowings under these agreements totaled $15,865 and
$5,546, respectively. The remaining unused portion of the lines of credit, at
September 30, 2004, was $26,460, in aggregate. Fixed interest rates vary from
1.1% up to 4.6%, depending upon the country and usage of the available credit.

The short-term portion of the refinancing of the acquisition of CBL and its
existing debt ($21,209) is included in the caption "Line of Credit and
Short-Term Borrowings" (see note 7) in the accompanying consolidated balance
sheet.

7. LONG-TERM DEBT

Dilas and RSL maintain additional long-term credit facilities of $1,172, which
expire in 2006, of $555, which expire in 2007 and of $247 which expire in 2008.
Rasant and RBF maintain long-term credit facilities of $134 and $143
respectively that expire in 2009. As of September 30, 2004, $2,251 was borrowed
against such facilities at an average interest rate of 3.8%. As of September 30,
2003, $10,274 was borrowed against such facilities at an average interest rate
of 4.4%.

On December 15, 2000, the Company refinanced its existing credit facilities for
the financing of the acquisition and the assumption of the debt of CBL. As of
September 30, 2004, two separate notes aggregating $23,941 were outstanding
under these credit facilities, bearing interest at the six-month Euribor rate.
Maturities of these loans are as follows: $21,209 in 2005 and $2,732 in 2006.
Based on the above maturities, $21,209 has been included in the caption "Line of
Credit and Short-Term Borrowings" in the accompanying consolidated balance sheet
(see note 6).

The Company has entered into currency and interest swap agreements to hedge the
risk of changes in future cash-flows due to the variable rate basis of the short
and long-term debt and to reduce the Company's overall cost of borrowing. At
September 30, 2004 a total amount of 30.1 million Swiss Franc (equivalent to
$23,918 based on the exchange rate at September 30, 2004) with maturity dates of
June, 15 and December, 15, 2005 was outstanding under these swap agreements.

8. LEASE COMMITMENTS

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


                                      F-14


<PAGE>

Minimum lease payments for future fiscal years under non-cancelable operating
leases as of September 30, 2004 are:

                     Fiscal year ending September 30,                Total
        --------------------------------------------------------    -------
        2005                                                        $5,899
        2006                                                         4,574
        2007                                                         2,480
        2008                                                         1,695
        2009 and thereafter                                          3,503

Rent expense charged to operations for the years ended September 30, 2004, 2003,
and 2002, approximated $5,622, $5,183, and $3,959, respectively.

9. INCOME TAXES

Total income taxes for the years ended September 30, 2004, 2003, and 2002 were
allocated as follows:

<TABLE>
<CAPTION>
                                                                          Years ended September 30,
                                                               --------------------------------------------------
                                                                   2004              2003                2002
                                                               --------------   ---------------     --------------
<S>                                                              <C>              <C>                  <C>
        Income from continuing operations                        $  17,648        $  9,422             $ 7,384
        Stockholders' equity, for the tax benefit
             applicable to the exercise of stock
             options                                                (1,793)             --                --
                                                               --------------   ---------------     --------------
        Total                                                    $  15,855        $  9,422             $ 7,384
                                                               ==============   ===============     ==============
</TABLE>

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


<TABLE>
<CAPTION>
                                                                          Years ended September 30,
                                                               --------------------------------------------------
                                                                   2004              2003                2002
                                                               --------------   ---------------     --------------
<S>                                                             <C>                  <C>               <C>
        United States                                           $  9,634             $  2,898          $  1,170
        Germany                                                   33,042               16,341             8,830
        France                                                       555                  260                98
        Italy                                                        582                1,053               593
        Japan                                                        494                  113               330
        United Kingdom                                             2,395                2,443             1,078
        Singapore                                                  2,298                  244                92
        Other                                                      1,078                1,375               194
                                                               --------------   ---------------     --------------
        Total income before income taxes                        $ 50,078             $ 24,727          $ 12,385
                                                               ==============   ===============     ==============
</TABLE>

Income tax expense is comprised of the following amounts:

<TABLE>
<CAPTION>
                                                                          Years ended September 30,
                                                               --------------------------------------------------
                                                                   2004              2003                2002
                                                               --------------   ---------------     --------------
<S>                                                             <C>                  <C>                 <C>
        Current:
              United States                                     $   2,215            $  (58)             $   (4)
              Foreign                                              14,996             7,022               5,770
                                                               --------------   ---------------     --------------
                    Total current                                  17,122             6,964               5,766
                                                               --------------   ---------------     --------------
        Deferred:
              United States                                           680               614                 392
              Foreign                                                (154)            1,844               1,226
                                                                --------------   ---------------     --------------
                    Total deferred                                    526             2,458               1,618
                                                                --------------   ---------------     --------------
                    Total income tax expense                     $ 17,648           $ 9,422             $ 7,384
                                                                ==============   ===============     ==============
</TABLE>



                                      F-15


<PAGE>

Statutory tax rates in the U.S., U.K., Italy, France, Spain, Belgium, the
Netherlands, Sweden, Singapore, Japan, Taiwan and South Korea approximate 34%,
30%, 38.25%, 34.33%, 35%, 33.99%, 34.5%, 28%, 22%, 44.64%, 25% and 15%
respectively. Generally, in Germany retained corporate income is subject to a
municipal trade tax (which approximates 17%), which is deductible for federal
corporate income tax purposes, a federal corporate income tax of 25% and a
surcharge of 5.5% on the federal corporate income tax amount. In September 2002
the German government enacted the Flood Victim Solidarity Law which increased
the base rate of German federal corporation taxation from 25% to 26.5% for
fiscal year ending September 30, 2003 only. In 2001 and prior years, German
corporate tax law applied the imputation system with regard to the taxation of
the income of a corporation (such as RSL, WBL and Dilas).

The difference between actual income tax expense and the amount computed by
applying the U.S. federal income tax rate of 34% is as follows:

<TABLE>
<CAPTION>

                                                                               Years ended September 30,
                                                                     ----------------------------------------------
                                                                        2004             2003              2002
                                                                     ------------    -------------      -----------
<S>                                                                   <C>               <C>              <C>
Computed "expected" tax expense                                       $ 17,027          $ 8,407          $ 4,211
Difference between U.S. and foreign statutory rates                      1,117              659              588
Non-deductible goodwill amortization                                        --               --              661
Utilization of foreign tax credits                                          --           (1,102)            (370)
Minority interest and other permanent differences                          389              390            1,183
Change in tax law                                                           --               --             (486)
Adjustment of valuation allowance                                         (740)             771              489
Adjustment of prior-year tax estimates                                      --             (208)             248
Other                                                                     (145)             505              860
                                                                     ------------    -------------      -----------
Actual tax expense                                                    $ 17,648          $ 9,422          $ 7,384
                                                                     ============    =============      ===========
</TABLE>


                                      F-16


<PAGE>


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

<TABLE>
<CAPTION>
                                                                       September 30,
                                                               --------------------------------
                                                                     2004              2003
                                                               ---------------  ---------------
<S>                                                            <C>                 <C>
Deferred income tax assets:
     Foreign
        Net operating loss carryforwards                       $      215          $     186
        Pension obligations                                           803                571
        Inventories                                                 1,114              1,714
        Other                                                         528                201
                                                                ---------------  ---------------
            Total Foreign                                           2,660              2,672
                                                                ---------------  ---------------
     United States:
        Net operating loss carryforwards                            2,651              4,117
        Property and equipment                                         --                 57
        Warranty accrual                                              642                639
        Inventories                                                 3,509              2,128
        Allowance for doubtful accounts                               256                213
        Pension obligations                                           198                199
        Other                                                         583              1,223
                                                                ---------------  ---------------
            Total United States                                     7,839              8,576
                                                                ---------------  ---------------
        Gross deferred income tax assets                           10,499             11,248
        Less:  Valuation allowance                                 (3,110)            (4,396)
                                                                ---------------  ---------------
            Net deferred income tax assets                      $   7,389          $   6,852
                                                                ---------------  ---------------
Deferred income tax liabilities:
     Foreign:
        Property and equipment                                     (1,852)            (2,050)
        Accrued liabilities                                           (32)               (67)
        Accounts receivable                                          (374)              (287)
        Accounts payable                                           (3,029)            (2,553)
        Other                                                        (569)               (69)
                                                                ---------------  ---------------
            Total Foreign                                          (5,856)            (5,026)
                                                                ---------------  ---------------
     United States:
        Property & equipment                                         (367)                --
        Intangibles                                                (3,177)                --
                                                                ---------------  ---------------
            Total United States                                    (3,544)                --
                                                                ---------------  ---------------
        Gross deferred income tax liabilities                      (9,400)            (5,026)
                                                                ---------------  ---------------
        Net deferred income tax assets (liabilities)            $  (2,011)         $   1,826
                                                                ===============  ===============
</TABLE>


The total deferred income tax asset (liability) is included in the accompanying
consolidated balance sheet as follows:

<TABLE>
<CAPTION>
                                                                       September 30,
                                                               --------------------------------
                                                                     2004              2003
                                                               ---------------  ---------------
<S>                                                                <C>             <C>
        Deferred income tax assets - current                       $  7,554        $  6,419
        Deferred income tax assets - non current                      1,793           2,167
        Deferred income tax liabilities - current                    (5,280)         (4,440)
        Deferred income tax liabilities - non current                (6,078)         (2,320)
                                                                ---------------  ---------------
            Net deferred income tax asset (liability)              $ (2,011)       $  1,826
                                                                ===============  ===============
</TABLE>


                                      F-17

<PAGE>

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, 2004. The Company had established a valuation allowance related to net
operating loss carryforwards at RB Inc. due to uncertainty regarding RB Inc.'s
ability to generate future taxable income required to utilize these
carryforwards. The valuation allowance decreased in fiscal 2004 by $1,286 due to
utilization of the net operating loss carryforward.

At September 30, 2004, the Company has net operating loss carryforwards
available of $6,116 in the United States (which expire as follows: $1,058 in
2005; $768 in 2020; $747 in 2021; $2,502 in 2022 and $1,041 in 2023) and $493 in
Germany and $376 in other European countries (which have no expiration date).
The annual utilization by the Company of its U.S. net operating loss
carryforwards will be subject to certain annual limitations under Section 382 of
the Internal Revenue Code.

The Company does not provide for U.S. income taxes or foreign withholding taxes
on undistributed earnings of foreign subsidiaries because these earnings are
intended to be permanently reinvested in those operations. It is not practicable
to estimate the amount of unrecognized deferred tax liability for these
undistributed earnings.

10. EMPLOYEE BENEFIT PLANS

The Company has defined benefit pension plans for the RSL and RS Inc. employees.
The Company's U.S. plan began in fiscal 1995 and is funded. As is the normal
practice with German companies, the German pension plan is unfunded. Any new
employees, hired after the acquisition of CBL, are not eligible for the RSL
pension plan.

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

<TABLE>
<CAPTION>
                                                                         September 30,
                                                               --------------------------------
                                                                     2004            2003
                                                               ---------------  ---------------
<S>                                                               <C>               <C>
   Change in benefit obligation:
   Benefit obligation at beginning of year                        $  11,016         $  8,561
   Service cost                                                         566              589
   Interest cost                                                        635              551
   Amendment                                                           (355)              --
   Actuarial (gains) and losses                                         205              354
   Foreign exchange rate changes                                        456            1,115
   Benefits paid                                                       (161)            (154)
                                                               --------------   ---------------
   Benefit obligation at end of year                                 12,362           11,016
                                                               ===============  ===============
   Change in plan assets:
   Fair value of plan assets at beginning of year                     2,844            2,103
   Actual return on plan assets                                         207              420
   Employer contributions                                               345              400
   Benefits paid                                                       (130)             (79)
                                                               ---------------  ---------------
   Fair value of plan assets at end of year                           3,266            2,844
                                                               ===============  ===============
   Funded status                                                     (9,096)          (8,172)
   Unrecognized net actuarial loss                                      441              191
   Unrecognized prior service cost                                       88              151
                                                               ---------------  ---------------
   Accrued benefit cost                                           $  (8,567)        $ (7,830)
                                                               ===============  ===============
</TABLE>

                                      F-18

<PAGE>


<TABLE>
<CAPTION>

<S>                                                                    <C>               <C>
   Discount rate:
        United States                                                   5.8%             6.5%
        Foreign                                                        5.25%             5.5%
   Expected return on plan assets -
        United States only                                              8.0%             7.0%
   Rate of compensation increase
        United States                                                   3.0%             3.0%
        Foreign                                                         1.3%             2.0%
</TABLE>


The following table sets forth the components of net periodic benefit cost for
the respective fiscal years:

<TABLE>
<CAPTION>
                                                                          Years ended September 30,
                                                               --------------------------------------------------
                                                                   2004              2003                2002
                                                               --------------   ---------------     --------------
<S>                                                              <C>             <C>                  <C>
   Service cost                                                  $   566         $    589             $  613
   Interest cost                                                     635              551                487
   Expected return on plan assets                                   (197)            (156)              (166)
   Amortization of prior service cost                                 63               63                 63
                                                               --------------   ---------------     --------------
   Net periodic benefit cost                                     $ 1,067         $  1,047             $  997
                                                               ==============   ===============     ==============
</TABLE>


RS Inc., Rofin-Baasel, Inc., PRC and Lee Laser have 401(k) plans for the benefit
of all eligible U.S. employees, as defined by the plan. Participating employees
may contribute up to 16% of their qualified annual compensation. The Companies
match 50% of the first 5 to 6% of the employees' compensation contributed as a
salary deferral. Company contributions for the years ended September 30, 2004,
2003 and 2002 were $246, $163, and $149, respectively.


11. NET INCOME PER COMMON SHARE

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

<TABLE>
<CAPTION>
                                                                          Years ended September 30,
                                                               --------------------------------------------------
                                                                   2004              2003                2002
                                                               --------------   ---------------     --------------
<S>                                                               <C>             <C>                  <C>
     Weighted average number of shares for basic
          net income per common share                             13,478,606      11,639,898           11,551,800
     Potential additional shares due to outstanding
          dilutive stock options                                     541,548         223,196               39,705
                                                               --------------   ---------------     --------------
     Weighted average number of shares for diluted net
          income per common share                                 14,020,154      11,863,094            11,591,505
                                                               ==============   ===============     ==============
</TABLE>

Excluded from the calculation of diluted EPS for the years ended September 30,
2004 and 2003, were 285,500 and 141,000, respectively, outstanding stock
options. These could potentially dilute future EPS calculations but were not
included in the current period because their effect on earnings per share would
be anti-dilutive.


12. RELATED PARTY TRANSACTIONS

The Company had sales to its minority shareholder in Japan amounting to $1,811,
$1,644 and $2,644 in fiscal years 2004, 2003, and 2002, respectively and the
amounts outstanding related to those sales is listed as accounts receivable
related party in the consolidated balance sheet.

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


                                      F-19

<PAGE>


The main facility in Starnberg is rented under a 25-year operating lease from
the former minority shareholder of CBL, who is also a member of the board of
directors of the Company, and includes a clause to terminate the lease contract
within a two-year notice period during the contract period. The Company paid
rent expense of $614 and $538 to the former minority shareholder during fiscal
years 2004 and 2003, respectively. Payables to the director and former minority
shareholder of CBL as of September 30, 2004 amounted to $643 and are included in
other accrued liabilities.

The Company has accrued $1,114, at September 30, 2004 ($1,055 at September 30,
2003) for the option purchase prices for the minority interests in RBE, and $425
($278 at September 30, 2003) was accrued for accumulated interest on this
obligation (see Note 1 to the accompanying financial statements). Additionally
the Company has accrued $123 at September 30, 2004 for the option purchase price
for the minority interests in Optoskand AB. These amounts are included in
accounts payable to related party in the accompanying consolidated balance
sheet. The corresponding interest on this obligation ($134 in 2004, $82 in 2003,
and $81 in 2002) is included in interest expense in the accompanying
consolidated statement of operations. Effective October 22, 2004 the minority
shareholder of RBE resigned from the limited partnership and the remaining
shares were purchased for the price of Euro 1,248 (equivalent to $1,539
based on the exchange rate at September 30, 2004).

Accounts payable to related party also includes a short-term loan from the
minority shareholder of Dilas of $128 at September 30, 2004.

13. GEOGRAPHIC INFORMATION

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

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

ASSETS                                              September 30,
                                           ---------------------------------
                                                2004               2003
                                           --------------     --------------
     United States                         $  179,741           $  53,061
     Germany                                  237,044             223,413
     Other                                    132,809             113,238
     Intercompany eliminations               (135,788)            (98,226)
                                           --------------     --------------
     Total assets                           $ 413,806           $ 291,486
                                           ==============     ==============



REVENUES - TOTAL BUSINESS
                                              Years ended September 30,
                                  ---------------------------------------------
                                      2004             2003            2002
                                  -------------   -------------    ------------
     United States                $  74,643         $  57,282       $  63,167
     Germany                        284,876           218,920         187,511
     Other                          111,589            76,965          62,590
     Intercompany eliminations     (148,480)          (95,421)        (91,320)
                                  -------------   -------------    -----------
                                  $ 322,628         $ 257,746       $ 221,948
                                  =============   =============    ===========


                                      F-20

<PAGE>




INTERCOMPANY REVENUES

                                              Years ended September 30,
                                  ---------------------------------------------
                                      2004             2003            2002
                                  -------------   -------------    ------------
     United States                  $  3,928        $ 4,071         $ 4,322
     Germany                         117,974         76,533          76,835
     Other                            26,578         14,817          10,163
     Intercompany eliminations      (148,480)       (95,421)        (91,320)
                                  -------------   -------------    -----------
                                     $  --          $  --           $  --
                                  =============   =============    ===========

EXTERNAL REVENUES


                                              Years ended September 30,
                                  ---------------------------------------------
                                      2004             2003            2002
                                  -------------   -------------    ------------
     United States                  $ 70,715        $ 53,211        $  58,845
     Germany                         166,902         142,387          110,676
     Other                            85,011          62,148           52,427
                                  -------------   -------------    ------------
                                   $ 322,628       $ 257,746        $ 221,948
                                  =============   =============    ============

INCOME BEFORE INCOME TAXES

                                              Years ended September 30,
                                  ---------------------------------------------
                                      2004             2003            2002
                                  -------------   -------------    ------------
     United States                    9,634         $  2,898        $  1,170
     Germany                         33,042           16,341           8,830
     Other                            7,402            5,488           2,385
                                  -------------   -------------    ------------
                                   $ 50,078         $ 24,727        $ 12,385
                                  =============   =============    ============




14. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)


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

<TABLE>
<CAPTION>

                                                                Quarters ended
                                           ---------------------------------------------------
                                            Dec. 31,      March 31,      June 30,    Sept. 30,
                                              2003          2004          2004         2004
                                           ---------     ----------     ----------  ----------
<S>                                         <C>            <C>           <C>           <C>
     Net sales                              $ 71.1         $ 75.9        $ 82.1        $ 93.5
     Gross profit                             27.8           29.2          33.2          42.0
     Net income                                5.2            5.6           7.4          14.2
     Net income per share - Basic             0.43           0.47          0.50          0.95
     Net income per share - Diluted           0.41           0.45          0.48          0.92
</TABLE>


<TABLE>
<CAPTION>
                                                                Quarters ended
                                           ---------------------------------------------------
                                            Dec. 31,      March 31,      June 30,    Sept. 30,
                                              2002          2003          2003         2003
                                           ---------     ----------     ----------  ----------
<S>                                         <C>            <C>           <C>          <C>
     Net sales                              $ 58.1         $ 61.1        $ 64.5       $ 74.1
     Gross profit                             22.4           23.2          23.6         27.0
     Net income                                3.5            3.4           3.6          4.9
     Net income per share - Basic             0.30           0.29          0.31         0.41
     Net income per share - Diluted           0.30           0.29          0.30         0.39
</TABLE>


                                      F-21


<PAGE>

15. 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 also 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 Company records compensation expense based on
the fair market value of the common stock, as determined by the closing price at
the date of issuance. 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 26,000 shares are issued
and outstanding under the plan at September 30, 2004.

Equity Incentive Plan

The Company maintains an Equity Incentive Plan, whereby incentive and
non-qualified 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. The term of the Equity Incentive Plan continues through 2011.
There were no incentive stock options, restricted stock or performance shares
granted in fiscal 2004, 2003, or 2002. Non-qualified stock options were granted
to officers and other key employees in fiscal 2004, 2003, and 2002. Options
generally vest over five years and will expire not later than ten years after
the date on which they are granted.

The balance of outstanding stock options for the three-year periods ended
September 30, 2004, and all options activity for the periods then ended are as
follows:

<TABLE>
<CAPTION>
                                                                           Price per Share
                                                               --------------------------------------
                                          Number of Shares         Price Range       Weighted Average
                                          -----------------    ------------------    ----------------
<S>                                        <C>                  <C>                   <C>
Outstanding at September 30, 2001            839,500            $7 3/8 - 16 7/8       $ 11 1/37
                                          -----------------    ------------------    ----------------
Granted                                      273,000            $8 3/4
Exercised                                       (800)
Forfeited                                     (9,600)
                                          -----------------    ------------------    ----------------
Outstanding at September 30, 2002          1,102,100            $7 3/8 - 16 7/8       $ 10 1/2
                                          -----------------    ------------------    ----------------
Granted                                      262,000            $9 4/5
Exercised                                   (353,800)
Forfeited                                    (10,700)
                                           -----------------    ------------------    ----------------
Outstanding at September 30, 2003            999,600           $7 3/8 - 16 7/8       $ 10 2/7
                                           -----------------    ------------------    ----------------
Granted                                      285,500           $ 32 5/7
Exercised                                   (154,450)
                                           -----------------    ------------------    ----------------
Outstanding at September 30, 2004          1,130,650           $7 3/8 - 32 5/7       $ 15 6/7
                                           -----------------    ------------------    ----------------
</TABLE>




                                      F-22




<TABLE>
<CAPTION>
                      Outstanding Options                                Exercisable Options
      --------------------------------------------------------       -------------------------------
                        Remaining Life       Weighted Average                       Weighted Average
       Shares               (years)                Price              Shares              Price
      -----------       --------------      -----------------        ----------     ----------------
      <S>                     <C>                 <C>                 <C>             <C>
          9,000                2                  $  9 1/2              9,000         $  9 1/2
         88,000                3                  $ 16 7/8             88,000         $ 16 7/8
         12,800                4                  $  9 3/8             12,800         $  9 3/8
         96,800                5                  $  7 3/8             66,800         $  7 3/8
          8,000                5                  $ 12 5/8                --          $ 12 5/8
         12,000                6                  $ 15                  6,000         $ 15
        139,600                6                  $ 10 3/8             57,600         $ 10 3/8
        227,350                8                  $  8 3/4             64,150         $  8 3/4
        251,600                9                  $  9 4/5             42,000         $  9 4/5
        285,500               10                  $  32 5/7               --          $ 32 5/7
      ---------                                                       -------
      1,130,650                                                       346,350
      =========                                                       =======
</TABLE>


                                      F-23


<PAGE>


Report of Independent Registered Public Accounting Firm


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

On November 8, 2004, we reported on the consolidated balance sheets of
Rofin-Sinar Technologies Inc. and Subsidiaries as of September 30, 2004 and
2003, and the related consolidated statements of operations, stockholders'
equity and comprehensive income, and cash flows for each of the years in the
three-year period ended September 30, 2004, 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, Valuation and Qualifying Accounts, 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.

/s/ KPMG LLP
Detroit, Michigan
November 8, 2004



                                      F-24


<PAGE>




                 ROFIN-SINAR TECHNOLOGIES INC. AND SUBSIDIARIES
       Valuation and Qualifying Accounts - Allowance for Doubtful Accounts
                  Years ended September 30, 2004, 2003 and 2002
                             (dollars in thousands)
<TABLE>
<CAPTION>
                         Balance at                      Charged to
                        Beginning of       Acquired      Costs and                     Balance at End of
                           Period           Reserve       Expenses      Deductions           Period
                        ------------       ---------     -----------    ----------      ----------------
<S>                      <C>              <C>            <C>             <C>              <C>
September 30, 2002       $  2,033         $     --       $  (635)        $   100          $  1,498

September 30, 2003       $  1,498         $     --       $   282         $   286          $  2,066

September 30, 2004       $  2,066         $    109       $   230         $   114          $  2,519
</TABLE>



                                      F-25


<PAGE>


                                INDEX TO EXHIBITS


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




                                      F-26