annual report carl zeiss group - ku leuven · carl zeiss is a stock corporation which is wholly...

We make it visible.

Annual Report Carl Zeiss Group2003/04

Carl Zeiss is an international group of companies which is a globalleader in the optical and opto-electronic industry. The Carl ZeissGroup is systematically and consistently managed according to theprinciples of ongoing corporate value enhancement. The Group offersproducts and services for the three strategic growth fields of bio-medical sciences and healthcare, consumer goods, and system solu-tions for industrial markets. The various fields of corporate activityare organized into six business groups, each of which is responsiblefor its own operations within the Group. These business groups aregenerally one of the top two performers in their markets. Between1994 and 2004, Carl Zeiss grew by an average of five percent a yearsolely through its own efforts and successfully improved its balancesheet performance. ZEISS brand products stand for technologicalprogress and outstanding quality. Customer orientation and leading-edge technology are the keys to this success.

Systematic efforts to promote the ongoing value-oriented develop-ment of the Group are continuing. This process, which is clearly stipulated in the corporate Vision and is binding upon all units, is being implemented worldwide in six corporate projects.

Carl Zeiss is a stock corporation which is wholly owned by the CarlZeiss Stiftung (Carl Zeiss Foundation). The Carl Zeiss Stiftung iscommitted to promoting the interests of its member companies,fulfiling special social responsibilities, supporting the optical andprecision engineering industries and cultivating research and education.

Table of Contents

Foreword from the Board of Management 5

Report from the Supervisory Board 8

Management Report of the Carl Zeiss Group 10

Research and Technology 20

Human Resources 24

Environmental Protectionand Health & Safety 28

Business Groups

Semiconductor Technology 30

Medical Systems 36

Consumer Optics 42

Microscopy 48

Industrial Metrology 54

Opto-Electronic Systems 60

Highlights of the Fiscal Year 66

Carl Zeiss AG

Board of Management 74

Supervisory Board 75

Major Affiliated and Associated Companies 77

Consolidated Financial Statements of the Carl Zeiss Group

Consolidated Balance Sheet 82

Statement of Changes in Consolidated Equity 84

Fixed Asset Movement Schedule 86

Consolidated Statement of Income 88

Consolidated Cash Flow Statement 89

Notes to the Consolidated Financial Statements 90

Cover photo:

Clear optics for better visibility:

Eyeglass lenses coated with LotuTec® repel dirt

and liquids – just like a lotus leaf

Carl Zeiss Group

2001/02 2002/03 2003/04

million EUR % million EUR % million EUR %

Net sales 2,257 100 2,029 100 2,135 100

Domestic (Germany) 433 19 447 22 425 20

Foreign 1,824 81 1,582 78 1,710 80

Net income for the year 106 5 16 1 77 4

Income taxes 41 1 33 1 52 2

Net income before taxes 147 6 49 2 129 6

Depreciation, amortization and write-downson fixed assets and investments,net of post-capitalization/write-ups 91 4 126 6 97 4

Change in the provisions for pension plansand other long-term provisions 43 2 17 1 36 2

Change in special items with an equity portion –1 – –2 – – –

Adjustment for unusual income and expensesand those not affecting cash flow – – – – 2 –

Cash flow before income taxes1) 280 12 190 9 264 12

Personnel expenses 848 38 823 41 848 40

Total assets 1,930 100 1,823 100 2,094 100

Tangible assets 395 20 364 20 362 17

Capital expenditures 138 105 81

Depreciation and amortization 89 114 97

Inventories 418 22 400 22 396 19

Equity 309 16 338 19 420 20

Equity and long-term provisions2) 1,166 60 1,219 67 1,337 64

Net liquid assets3) 387 525 672

Number of employees on balance sheet date 14,702 14,151 13,667(September 30)

1) Determined following the recommendations of the German Financial Analysis Association/Schmalenbach-Gesellschaft2) Equity, provisions for pension plans, etc.3) Funds net of loans and liabilities to banks

Financial HighlightsGerman Commercial Code (HGB)

A time for new departures: with

the business success achieved in

fiscal year 2003/04, the Carl Zeiss

Group created a basis for further

growth. After the conversion to a

stock corporation, Carl Zeiss AG

now has access to new courses of

action in its international business

5

Ladies and Gentlemen,

Dear Business Partners,

The Carl Zeiss Group looks back on a success-

ful 2003/04 fiscal year. The pleasing year-end

figures include a healthy growth in revenues,

an operating result almost double that

reported last year and a substantial rise in

corporate value. A new era in the history of

Carl Zeiss – the first year as a stock corpora-

tion – has gotten off to a good start.

Our success reflects the trust placed in us by

our customers, and this trust is an incentive

for us to become even better in the future.

With innovative products and services, we

aspire to offer our customers even more

benefits. By implementing new business ideas

and opening up new fields of application, we

aim to provide additional customers with our

leading edge technologies. We plan to make

Carl Zeiss know-how accessible to new target

groups all over the world by means of license

agreements. Through strategic alliances and

targeted acquisitions, we are laying the foun-

dations for the Carl Zeiss Group to venture

into new dimensions in the years ahead.

We have an ideal starting position to achieve

these objectives. The business groups are

generating healthy earnings, and they are all

playing their part in enhancing corporate

value. This is the result of consistent, deter-

mined efforts focused on value enhancement.

We are convinced that the Carl Zeiss Group is

correctly poised for the future and that it will

rise successfully to the increasingly tough

challenges facing it in the competitive arena.

Our efforts will be focused on expanding our

position as a technology leader. We have once

again increased our spending on research

and development. We invest ten percent of

revenues in opportunities for future success.

This is an outstanding ratio as compared to

other high-tech corporations.

In the future, we will place more emphasis

on faster growth. This is necessary to coun-

teract mounting global competition. We aim

to grow to a size that will allow us to achieve

market positions with which we can expand

our technological capabilities in the long

term. During the reporting year we success-

fully strengthened some of our business

groups by means of acquisitions and new

partnerships. Further additions to our busi-

ness fields are in the pipeline.

Carl Zeiss Group in 2003/04 –

On Track to New Growth

Carl Zeiss GroupForeword from the

Board of Management

“We will find the balancebetween short-term and

long-term economicthinking, act fast and see

changes as opportunities.”

From the Carl Zeiss Vision

Carl Zeiss GroupForeword from the 6Board of Management

The aspirations we are pursuing in this

process are derived from our corporate Vision

which defines the mission of Carl Zeiss:

“Since pioneering science in optics, we con-

tinue to challenge the limits of man’s imagi-

nation. With our passion for excellence, we

create value for our customers and inspire

the world in new ways.”

This mission inspires and motivates us to set

sail for new shores.

We view fiscal year 2004/05 with confidence.

We know that forecasts are becoming more

and more difficult to make. This applies not

only to the economy, exchange rates and raw

material costs, but also to the global political

development. One thing is certain, however:

performance, speed and flexibility will win

the day every time. It will become increasing-

ly hard to be and stay one of the best. We

will rise to this challenge with eager anticipa-

tion and confidence.

Dr. Norbert GornyDr. Dieter Kurz Dr. Michael Kaschke

We would like to thank our customers and

business partners for the success accomplished

in the past years. Their trust and ideas repre-

sent an important acknowledgement of our

achievements and motivate us to do even

better in the future.

Our special thanks go to our employees for

their exceptional dedication, commitment

and their determination to support the

process of change in the company on the

road to further growth. The skills and abilities

of our employees are the key to our success.

Together with our employees, we look for-

ward to rendering special services to our

customers in 2004/05.

7

Dr. rer. nat. Norbert Gorny

Member of the Board responsible for

Microscopy, Opto-Electronic Systems,

the Service Centers, Information

Technology, Central Procurement,

Quality and Processes.

Born in Schweinfurt, Germany in 1963.

1984 – 1989 Studies in biology at the

Universities of Marburg, Tübingen and

Rome. 1990 – 1993 Doctorate in

Tübingen and Constance, where he

was also a member of the scientific

staff from 1990 to 1994. 1994 – 1998

Consultant at McKinsey & Company,

Inc., Stuttgart. 1998 Joined Carl Zeiss

as Vice President and General Manager

in the Light Microscopy Division.

1999 Executive Vice President and

General Manager in the Microscopy

Group and Manager of the Göttingen

plant. Member of the Board since

January 1, 2001.

Dr. sc. nat. Michael Kaschke

Member of the Board responsible for

Consumer Optics, Medical Systems,

Corporate Finance/Controlling, and

Research and Technology.

Born in Greiz, Germany in 1957.

1979 – 1983 Studies of physics at the

Friedrich Schiller University in Jena.

Subsequently scientific assistant,

doctorate, guest scientist at the Max

Planck Institute, Göttingen and mem-

ber of the scientific staff at IBM, USA.

1992 Joined Carl Zeiss in Oberkochen,

1998 Vice President and General

Manager, Surgical Products Division,

1999 Executive Vice President and

General Manager in the Medical

Systems Group. Member of the

Board since October 1, 2000.

Dr. rer. nat. Dieter Kurz

President and Chief Executive Officer,

Labor Director, Member of the Board

responsible for Semiconductor Technol-

ogy, Industrial Measuring Technology,

Strategic Corporate Development,

Corporate Communications, Corporate

Human Resource Management, Corpo-

rate Auditing, and Legal Affairs and

Patents.

Born in Tübingen, Germany in 1948.

1969 – 1974 Studies of physics at the

Eberhard Karls University in Tübingen.

1979 Doctorate in the field of semicon-

ductor and electron beam technology.

1979 Joined Carl Zeiss. Management

positions in research/development,

marketing/sales and general manage-

ment, including two years in North

America. Vice President and General

Manager, Semiconductor Technology

Division and Executive Vice President

and General Manager, Semiconductor

Technology Group. 1999 Member of the

Board. President and Chief Executive

Officer of Carl Zeiss since January 1,

2001, President and CEO of Carl Zeiss

AG since September 6, 2004.

Carl Zeiss AGReport from the Supervisory Board 8

Report from the Supervisory Board

Tilman Todenhöfer

Chairman of the Supervisory Board

of Carl Zeiss AG

In this context, the former function of Com-

missioner was transferred to the Foundation

Council of the Carl Zeiss Stiftung (Chairman

Tilman Todenhöfer, other members Dr. Arend

Oetker, President of the Donors’ Association

for the Promotion of German Science and

Ludwig Georg Braun, President of the Asso-

ciation of the German Chambers of Industry

and Commerce) and to the Supervisory

Boards of the foundation enterprises. The

Foundation Council exercises the rights of

the general meeting of shareholders in both

stock corporations.

In view of this special situation, four meet-

ings of the former Advisory Board were

held during the reporting period and the

constituent meeting of the Supervisory Board

in September. In the period to December 31,

2003, the then Commissioner of the

Carl Zeiss Stiftung Dr.-Ing. E.h. Heinz Dürr

supervised the work of the Advisory Board.

Ladies and Gentlemen,

This is the first report from a chairman of the

Supervisory Board in the history of Carl Zeiss.

Due to the retroactive conversion of the

company in July, Carl Zeiss has prepared its

balance sheet for the entire 2003/04 fiscal

year as a stock corporation. This conversion

marks the successful conclusion of a process

driven forward with commitment and deter-

mination by the former Commissioner of the

Carl Zeiss Stiftung Dr.-Ing. E.h. Heinz Dürr

together with the various organs of the Carl

Zeiss Stiftung.

With entry of the stock corporation in the

commercial register on July 1, 2004, the new

constitution of the Carl Zeiss Stiftung allow-

ing the conversion of its member enterprises

also came into effect. The operating enter-

prise SCHOTT Glas was simultaneously trans-

formed into the stock corporation SCHOTT

AG, Mainz. The Carl Zeiss Stiftung will remain

the sole owner of both stock corporations.

With retroactive economic effect to the

beginning of the fiscal year, i.e. October 1,

2003, the conversion of the operating

enterprise Carl Zeiss to a stock corporation

was undertaken on July 1, 2004. The Super-

visory Board was appointed in August 2004

on the basis of codetermination.

9

report will not follow until the planned

changeover of the consolidated financial

statements to International Financial Report-

ing Standards in the financial statements for

fiscal year 2005/06. The Supervisory Board

accepts the results of the audit. The financial

statements have hence been approved. The

Supervisory Board has endorsed the Board of

Management’s proposal for the appropria-

tion of the year’s profit.

The Chairman and members of the Super-

visory Board would like to thank the Board

of Management and all employees for their

committed and dedicated work. This was

the key factor contributing to the success

achieved by the Carl Zeiss Group during the

fiscal year.

Stuttgart, December 2004

On behalf of the Supervisory Board

Tilman Todenhöfer

Chairman

The Advisory and Supervisory Boards received

extensive information about corporate plan-

ning, the position of the company and the

course of business. The Commissioner of the

Stiftung and the Supervisory Board regularly

advised the Board of Management in the

performance of its duties and monitored the

conduct of business. All transactions of im-

portance for the company were discussed in

detail. In its new legal form, Carl Zeiss AG is

well poised to meet the challenges of inter-

national competition. Clear, internationally

recognized structures lay the foundation for

the transparency and flexibility required in

today’s world.

Carl Zeiss AG reported a pleasing trend in the

reporting year. The company has underlined

its efficiency and has substantially strength-

ened its financial position and corporate

value. Major business decisions during this

period concerned investments and acquisi-

tions aimed at strengthening the company’s

technological position in the fields of micro-

scopy, semiconductor technology and medical

systems.

The PricewaterhouseCoopers GmbH auditing

company in Stuttgart, Germany, audited the

annual financial statements of Carl Zeiss AG,

the consolidated annual financial statements

of the Carl Zeiss Group and the management

report. The audit received an unqualified

report with the exception of one segment

report for the Carl Zeiss Group. The segment

New Structure

The current annual report describes the busi-

ness development of the Carl Zeiss Group in

fiscal year 2003/04 (at balance sheet date on

September 30). The Group consists of Carl

Zeiss AG, Oberkochen, and a number of sub-

sidiaries in Germany and abroad.

A major change was made to the Group’s

legal structure during the reporting period.

With retroactive economic effect to October 1,

2003, Carl Zeiss was transformed into the

stock corporation Carl Zeiss AG by entry in

the commercial register on July 1, 2004. The

sole owner of Carl Zeiss AG, which has a

capital stock of EUR 120 million, is the Carl

Zeiss Stiftung (Foundation).

Upon entry of the new enterprise in the com-

mercial register on July 1, 2004, the new sta-

tutes of the Carl Zeiss Stiftung also came into

effect, completing the transition from a foun-

dation with primarily commercial activities to

one acting as a shareholder. This enabled the

conversion of the operating enterprises of the

Carl Zeiss Stiftung into stock corporations. At

the same time, SCHOTT Glas, the other enter-

prise within the Carl Zeiss Stiftung, was trans-

formed into the stock corporation SCHOTT AG,

Mainz.

Carl Zeiss GroupCorporate Management Report 10

Substantial Increase in Earnings and Corporate Value

1999/00 2000/01 2001/02 2002/03 2003/04

Revenue

Outside Germany 81%

in EUR millions

78%

2,257

81%

2,056 2,029 2,135

79%

1,998

80%

“We act fastand

see changes asopportunities.”


General Scenario

The Carl Zeiss Group looks back on a success-

ful 2003/04 year. Revenues and incoming

orders were clearly above the previous year’s

figures. Business received major momentum

from the upturn in the semiconductor indus-

try. The unfavorable currency development

relative to the dollar prevented a further

increase in revenues, particularly as the share

of business with the USA and Mexico re-

mained at a high level. All in all, the business

trend surpassed budget projections, with a

marked improvement in the profits generated

by the Carl Zeiss Group.

Portfolio Structure Stands the Test

The Carl Zeiss Group is well positioned in the

strategic growth fields of bio-medical sci-

ences and healthcare, consumer goods and

system solutions for industry. In addition to

the favorable development for suppliers of

the semiconductor industry, there were good

business opportunities for modern digital

projection technology and optronics systems.

Sales of medical systems increased, but no

growth was achieved because of the unfavor-

able trend in currency relations. The nega-

tive market development in the eyeglass lens

business due to healthcare reforms in Ger-

many was partly offset by prior purchases by

11

Operating result

1999/00 2000/01 2001/02 2002/03 2003/04

in EUR millions13064176172120

consumers in the first quarter of the fiscal

year before enactment of the changes. In

the field of capital goods for the automobile

industry and mechanical engineering, the

downturn appeared to have come to a halt

towards the end of the fiscal year. After

adjustment for currency influences, the

Microscopy Group successfully asserted its

position in the market.

Revenues Increased

The revenues generated by the Carl Zeiss Group

rose considerably to EUR 2,135 million, five

percent more than last year. After adjustment

for currency effects – primarily due to the US

dollar and the Japanese yen – this increase

totaled eight percent. The volume of sales

generated outside Germany increased by two

percentage points to 80 percent. The largest

growth in sales was posted by the Semicon-

ductor Technology Group with an increase of

25 percent. Considerable growth was also

recorded by the Opto-Electronic Systems

Group. The other business groups remained

below last year’s level. With a volume of EUR

2,234 million, an increase of 13 percent over

last year, incoming orders showed an even

stronger upward trend than revenues.

Strong Improvement in Profits

The favorable business trend led to a marked

improvement in profits. Virtually all business

groups increased their contribution to the

overall profits of the Carl Zeiss Group. The

measures initiated the previous year to en-

hance cost structures have aided this trend.

The Carl Zeiss Group recorded overall profits

of EUR 130 million, almost double the

value reported last year (EUR 64 million).

The result from ordinary business operations

increased from EUR 52 million the previous

year to EUR 133 million. Net annual income

amounted to EUR 77 million (last year

EUR 16 million). This value would have been

even higher without the special expenditure

of EUR 33 million required for a cross-licens-

ing agreement providing the Semiconductor

Group with licensed access to the patent

portfolio of its competitor Nikon in the field

of optics for wafer steppers.


1999/00 2000/01 2001/02 2002/03 2003/04

Net annual incomein EUR millions

771610611053

ments initiated last year in Germany in the

Consumer Optics, Semiconductor Technology

and Microscopy (Jena site) Groups, in the

Oberkochen Service Center and in the Wetzlar

plant. For the most part, the decrease was

achieved by natural attrition or by measures

aimed at causing minimum social hardship.

Decreased Investments

Investments in plant, property and equip-

ment totaled EUR 81 million (last year EUR

105 million). Depreciations amounted to

EUR 97 million compared to the high figure

of EUR 114 million recorded the previous

year due to special depreciations in the Semi-

conductor Technology Group. Capital spend-

ing was once again concentrated on semi-

conductor technology, ophthalmic products

and the Oberkochen and Jena Service Centers.

Net Liquid Assets at Record Level

The substantial rise in earning power is also

reflected in the pre-tax cash flow. At EUR

264 million, the value exceeded last year’s

level (EUR 190 million) by a good third. This

is equivalent to 12 percent (last year 9 per-

cent) of revenues. There has been a further

strong rise in the net liquid assets of the Carl

Zeiss Group. After EUR 525 million the previ-

ous year, the record figure of EUR 672 million

was reached on the balance sheet date.

Corporate Value is Growing

The growth in corporate value paralleled the

rise in profits. On the basis of the financial

performance measure EVA® (Economic Value

Added), all six business groups achieved an

enhancement of their value and improved

their position compared to last year. Overall,

EVA® at Carl Zeiss grew to the very positive

number of EUR 42 million.

Further Increase in Equity

The Carl Zeiss Group has once again expand-

ed its equity in fiscal year 2003/04. The equi-

ty ratio increased by one percentage point to

20 percent. At the same time, there was an

increase in the funds available in the long

term (equity and long-term provisions) which,

with a figure totaling EUR 1,337 million (last

year EUR 1,219 million), accounted for about

64 % of the balance sheet total.

Manpower Reduced

On the balance sheet date, the Carl Zeiss

Group had a global workforce of 13,667

people (last year 14,151), including 3,984

outside Germany (last year 4,044). The drop

was largely attributable to capacity adjust-

13

“Carl Zeiss willbe regarded as the

most innovativecompany in its

fields of business.”From the Carl Zeiss Vision

Outside Germany

Employees

9.30.00 9.30.01 9.30.02 9.30.03 9.30.04

4,157

14,702

4,081

14,220

3,984

13,66714,151

4,0443,873

13,845

eyeglass lens fitting systems. The Industrial

Metrology Group launched its first measuring

machine for microsystems technology – the

Model F25. Other new products included op-

tical systems for rear projection TVs and the

Zeiss Ikon® camera featuring lenses in a new

performance category. With innovative

product ideas, the Research and Technology

division is systematically opening up new

business possibilities. In a structured new

business generation process, opportunities

are identified, and the most successful pro-

jects are then accompanied and supported to

the point of product maturity. One example

of such a project is the optical system of an

ultra-compact digital projector that was

transferred during the fiscal year to the

Display Technologies Division for its market

launch.

Portfolio Strengthened

One focal point of the growth-focused

strategy of the Carl Zeiss Group is the value-

oriented development of the corporate

portfolio. Carl Zeiss is shaping the corporate

structure for the future through the organic

growth of the existing divisions, the develop-

ment of new fields of business, the expansion

Roughly EUR 210 million is invested in special

mid-term funds managed according to a total

return approach, while the remainder is avail-

able in the short term.

Innovative Potential Strengthened

To expand its leading technological position

in the competitive arena, the Carl Zeiss

Group once again increased its investments

in innovation. With a total of EUR 209 million

(last year EUR 190 million), spending on

research and development reached a record

high. This corresponds to 10 percent of rev-

enues and underlines the Group’s aspiration

to expand its technology leadership and turn

it into tangible market success. This is reflect-

ed by the percentage of new products in

overall sales. In fiscal year 2003/04 the Carl

Zeiss Group generated roughly 43 % of its

revenue with products launched on the

market in the past three years. Examples of

the most important new products introduced

during the reporting period include immer-

sion lenses and an electron beam mask repair

device for semiconductor technology, the

OPMI Pentero® Surgical Microscope for neu-

rosurgery with digital visualization possibilities,

eyeglass lenses with the dirt-repellent and

easy-to-clean LotuTec® coating, and new


Investmentsin property, plant

and equipmentin EUR millions

1999/00 2000/01 2001/02 2002/03 2003/04

81138122 10593

“Customerorientation

is the keyto all our

activities.”From the Carl Zeiss Vision

confocal microscopy division of the Californian

company Bio-Rad Laboratories, Inc. This

provides Carl Zeiss with exclusive access to

femtosecond, two-photon microscopy, one

of the most important technological innova-

tions in the field of microscopy. Carl Zeiss has

also acquired a significant participation in its

US partner company Cellomics which special-

izes in automated systems for microscopic

screening in pharmaceutical research.

Meditec Expands its Software

Competence

Carl Zeiss Meditec AG has acquired the soft-

ware specialist hiko medical communications

GmbH, its collaboration partner of many

years’ standing. The company, now called

Carl Zeiss Meditec Systems GmbH, is focusing

its activities on the administration and archiv-

ing of diagnostic and treatment data in

ophthalmic hospitals and doctors’ offices.

Access to Lithographic Technology

Carl Zeiss SMT AG gained access to a new

lithographic technology for semiconductor

production by investing in the young US

company Molecular Imprints, Inc., Austin,

Texas.

In September 2004, the Semiconductor

Technology Group (Carl Zeiss SMT AG) and its

partner ASML agreed on an extensive exchange

of the licensing business and by acquisitions

and alliances. Important portfolio manage-

ment measures included the following:

Display Technologies Now a Division

In view of the dynamic development in the

field of digital projection, the former Display

Technologies business unit is now being

operated as an independent division. Business

with projectors and projection TV systems

also promises further growth possibilities in

the future.

Production Facility Opened in China

The customers of digital projection optics are

the manufacturers of entertainment electron-

ics and information technology. The major

suppliers in this field are concentrating an

increasing proportion of their production

capacities in China. Against this background,

the Display Technologies division opened a

production facility called Carl Zeiss Display

Technologies (Suzhou) Co., Ltd. near Shanghai

in May 2004.

Microscopy Expands its Operations

The Microscopy Group expanded its technol-

ogy spectrum by the acquisition of the

15

Cash flow (gross)in EUR millions

1999/00 2000/01 2001/02 2002/03 2003/04

of revenue

264

12%

280

12%

226

11%

190

9%

219

11%

of industrial rights (cross licensing) with its

main competitor Nikon in the field of instru-

ments for optical lithography. This agreement

regulates payments by ASML and SMT to

Nikon. Carl Zeiss SMT AG has now trans-

ferred the first installment of its total share of

USD 58 million (about EUR 48 million). Further

payments will be made in the period to 2007.

LEO Becomes ZEISS

In addition, the Semiconductor Technology

Group assigned its business with electron

beam technology, formerly part of the activi-

ties of the company LEO Elektronenmikrosko-

pie GmbH, to the ZEISS umbrella brand. This

business will now be conducted as the

Nanotechnology Systems Division under the

name Carl Zeiss NTS GmbH. The systems

previously marketed under the LEO brand will

now all bear the name ZEISS.

Ophthalmic Products Sharpens Focus

on India

On the high growth Indian market, the

Ophthalmic Products Division strengthened

its position by participating in the firm GKB

Hi-Tech Lenses Ltd. in Mapusa (Goa). From

the end of 2004, the subcontinent’s leading

manufacturer of prescription eyeglass lenses

will offer ZEISS lenses featuring leading edge

coatings for the first time. Carl Zeiss has the

option of increasing its investment in the

company.

Shares Acquired in South Korea

After Carl Zeiss acquired 49 percent of the

shares in the firm held by long-time local

partners, the sales organization in South

Korea is now a fully owned subsidiary of

the Carl Zeiss Group.

Brand Creates Value

The ZEISS brand owes its global presence and

recognition not only to products that the

company itself has manufactured. For more

and more international instrument manufac-

turers, the excellence and reputation of Carl

Zeiss products are an incentive to acquire

licenses. In this way, camcorders and digital

cameras from such manufacturers as Sony

and Kyocera are entering the market with

ZEISS lenses. Up to one million consumers all

over the world are opting for these products

every month. Constant quality monitoring

ensures that the company meets its aspiration

to provide superior optics. Opportunities for

license agreements are also offered by the


Net liquid assets

9.30.00 9.30.01 9.30.02 9.30.03 9.30.04

in EUR millions525387 672230218

market for mobile camera phones. The divi-

sion also signed an agreement with mobile

communications specialist Dialog Semicon-

ductor, based in Kirchheim/Teck, Germany, to

develop compact camera modules for mobile

telephones. The licensing business enhances

brand visibility and plays a major role in the

healthy profits achieved by the business

groups concerned.

Group-wide Risk Management

The situation on the global political stage,

the overall economic trend and the develop-

ments in the various regions of the world

clearly demonstrate that influences outside

the corporate arena have different repercus-

sions on the prospects of success available to

market players. The Carl Zeiss Group system-

atically charts external and internal risks for

all business groups and subsidiaries before

evaluating their damage potential and likeli-

hood of occurrence. Direct responsibility

for the early recognition, control and com-

munication of risks lies with the respective

management of the business groups and

subsidiaries. Risk coordinators in the various

areas of the company ensure a uniform

reporting procedure. Risk management is

coordinated at corporate headquarters.

Overall responsibility lies with the Board of

Management.

Discernible Risks

The individual risks for which the Carl Zeiss

Group is prepared include the trend in the

global economy and currency parities. Cur-

rency developments, in particular with regard

to the US dollar and Japanese yen, entail

risks for business outside Germany. By cur-

rency risk management, the direct negative

impact on the profits of the business groups

was more than offset by the earnings gener-

ated from currency hedging transactions by

Carl Zeiss Financial Services GmbH. A high

technology group of companies such as Carl

Zeiss is particularly dependent on the avail-

ability of its IT facilities. State-of-the-art pro-

tective devices have been installed and are

constantly enhanced. There are currently no

pending litigations that could pose any sub-

stantial threat to any area of the company or

to the company itself. Attacks on intellectual

property and patent protection can jeopar-

dize the technological lead and hence the

competitiveness of the Carl Zeiss Group. Carl

Zeiss is taking precautions against such risks

by implementing an active IP strategy.

“Our brandis a

promise.”From the Carl Zeiss Vision

17

Spending onresearch anddevelopment

1999/00 2000/01 2001/02 2002/03 2003/04

in EUR millions

190186 209146139

The Semiconductor Technology Group is sub-

ject to the pronounced volatility of this

branch of industry. In the past, it succeeded

in creating and maintaining a development

lead. If the pace of development slows or a

rapid, unexpected technology change occurs,

this could have a detrimental effect on earn-

ings. A large proportion of the revenues

generated by Semiconductor Technology is

dependent on one large customer. Business

with multicoordinate measuring machines is

strongly influenced by cyclical trends in the

automotive industry, as are sales of scientific

instruments by budget cutbacks in research

and education. Reforms being implemented

in the German healthcare system may lead to

a reduction in sales of medical systems and

eyeglass lenses. The business groups are

counteracting the risk of supplier dependence

by implementing systematic measures to safe-

guard the supply chain.

Overall Risk Situation

On the basis of the information currently

available to us, it can be said that, taking

into account the measures adopted or

planned, no risks are currently perceivable

that, either individually or in interaction with

each other, could jeopardize the continued

existence of the Carl Zeiss Group in the fore-

seeable future.

Important Events after the End of the

Fiscal Year

Carl Zeiss continued its policy of active port-

folio management in the initial months of

fiscal year 2004/05 with the implementation

and preparation of further important changes

as follows:

IT Division Goes to HP

In October 2004, Carl Zeiss concluded an

agreement for the transfer of the Information

Technology Division to Hewlett-Packard. A

total of 151 employees at the Oberkochen,

Jena, Calmbach, Wetzlar and Göttingen loca-

tions switched to HP. The entire IT facilities

and existing supplier agreements are also

being transferred to HP. As a powerful global

player, HP is in a position to provide all loca-

tions of Carl Zeiss with optimum IT facilities

and service.

Special Provider Enriches Microscopy

At the beginning of December 2004, the

Microscopy Group acquired all shares in the

company P.A.L.M. Microlaser Technologies

AG, Bernried, Germany. P.A.L.M. Microlaser


Technologies AG is the leading manufacturer

in the field of microdissection and microma-

nipulation systems. The key technology used

here is Laser Microdissection and Pressure

Catapulting (”LMPC“).

New Diagnostics for Ophthalmology

At the beginning of December, Carl Zeiss

Meditec AG concluded the acquisition of

Laser Diagnostic Technologies, Inc. (LDT),

San Diego, California. This allows the Oph-

thalmology Division to offer its customers

an even broader spectrum of products for

the diagnosis and management of glaucoma.

Offer for International Eyeglass Lens

Provider

On December 6, 2004, Carl Zeiss AG an-

nounced its intention, together with the

private equity EQT III fund, to acquire the

majority shareholding in SOLA International

Inc., San Diego, California. The goal is to

merge the eyeglass lens business of Carl Zeiss

with SOLA, one of the world’s leading suppli-

ers in this field. The two companies are an

excellent match – both from the product and

technology viewpoints and with regard to

their presence in the world’s sales regions.

After approval by SOLA shareholders and the

antitrust authorities, the merger is scheduled

to take place in the first quarter of 2005.

Outlook

The global economy will probably continue

to grow in the coming months, although to a

lesser extent than last year. There seems

to be a slowdown in the level of business

activity in the US. The rising cost of energy

and raw materials is holding back the eco-

nomy. Together with the US, China is now

developing into a growth engine and is

accounting for an increasing share of overall

economic performance. However, the pace is

slowing here also. With the low exchange

rate of the dollar, the euro countries are less

affected by the global rise in raw material

prices, but a strong euro is making conditions

difficult for the heavily export-oriented Ger-

man industry. A situation of minimum growth

is likely to remain on the German market.

The overall economic scenario does not

promise any general improvement in the

conditions of business. By constant adapta-

tion to the opportunities and requirements of

the market, however, the business units of

the Carl Zeiss Group are well poised to sharp-

en their competitive edge in their respective

fields of operation. The high level of effort

invested in the expansion of the company’s

technological position in the past few years

has led to a state-of-the-art, powerful spec-

trum of products. Further important market

launches have already taken place or are

imminent in the new fiscal year.

“The nameCarl Zeiss

is a synonymfor quality and

precision all over the world.”


19

In the semiconductor sector, only minor in-

creases are expected after the unexpectedly

strong growth of the past months. The Medi-

cal Systems and Microscopy Groups are parti-

cularly subject to the effects of currency fluc-

tuations. However, the innovation lead and

market position in the segments in which

Carl Zeiss Meditec AG operates offer good

opportunities for further growth despite the

unfavorable economic climate. Little change

is to be expected in the budgets available to

government agencies for spending on scien-

ce and research. However, a reversal of this

trend ought to be possible here with new

products for microscopy. In the eyeglass lens

business, the repercussions of the cost-cur-

bing measures implemented in the German

healthcare system are still evident. A normali-

zation of this situation could occur in the

second half of the current fiscal year. In in-

dustrial business with metrology products,

growth possibilities are emerging thanks to

new applications. The digital display market

will continue to grow.

In addition to strengthening its performance

in the existing fields of activity, Carl Zeiss is

launching an increasing number of initiatives

aimed at utilizing any opportunities available

to enhance the market presence of the excel-

lently positioned ZEISS brand. Portfolio

measures being implemented by the business

units are part of a new offensive with which

the Carl Zeiss Group intends to initiate

greater growth.

Overall, the Carl Zeiss Group looks toward

fiscal year 2004/05 with cautious confidence.

The ongoing high level of spending on re-

search and development has provided the

business groups with a sound foundation for

new business potential. Against a background

of growing pricing pressure in many markets

and the lack of dynamism evident in the

global economy, the Carl Zeiss business units

have strengthened their market position and

further enhanced their cost position and in-

novative strength. The financial structures of

the Carl Zeiss Group, and not least the legal

form of a stock corporation (AG), have

opened up new possibilities for future action.

Creative Inventors

The corporate Vision defines the company’s

aspirations: “Carl Zeiss will be regarded as

the most innovative company in its fields of

business.” During the past fiscal year, the Carl

Zeiss Group submitted 371 applications for

patents or registered designs – an increase of

eight percent over the previous year. The

continuously rising number of applications

underscores the company’s focus on further

increasing its innovative strength.

Carl Zeiss GroupResearch and Technology 20

Research and Technology –

Innovative Approaches to New Business

With its innovative products, Carl Zeiss is at the forefront of technological development. It is rare to find anothercompany which can boast a tradition of innovation spanningmore than 150 years. Maintaining this tradition requiresoutstanding performance in research and technologicaldevelopment. An important requirement for success in thisarea is the availability of capital for research and develop-ment (R&D). During fiscal year 2003/04, the company invest-ed more than ever in the expansion of its technologicallyleading position, providing a basis for a prosperous future.Total investments rose to EUR 209 million, equivalent to anR&D ratio of ten percent, enabling the Carl Zeiss Group tomaintain its position among the leading high-tech corpora-tions. Manpower levels in this area are high. On the balancesheet date, there were approximately 1,553 employees inresearch and development – 11 percent of total manpower inthe Carl Zeiss Group.

Innovation as a Motor of Growth

Professional innovation management is a de-

cisive requirement in maintaining sustained

and profitable growth. It extends to all of a

company’s traditional approaches to growth:

– Maintain and expand the product line

– Develop new business opportunities

– Acquisitions and collaborations with partners

– Sales possibilities resulting from licenses.

Carl Zeiss’ core competencies create opportu-

nities for growth options. Identifying new

approaches for the application of existing

techniques is just as important as the creative

analysis of future customer needs based on

new technological possibilities. Hundreds of

new ideas and concepts are developed,

recorded and evaluated during this process.

The targeted, structured processing of these

various approaches is the key to economical

innovation management.

21

Excellent wearing comfort and

optimum field of view: the Head

Mounted Display developed by the

Research Center ensures mobile

availability of images and videos

New Business the Systematic Way

The Carl Zeiss Group devotes special atten-

tion to the creation of new fields of growth

and business. To better accomplish this goal,

Corporate Research and Technology has

established a “New Business Generation

Process” that systematically examines, devel-

ops and promotes business ideas based on

existing corporate competencies. All mem-

bers of the Board of Management and Exe-

cutive Vice Presidents are included in this

process. The plan for an internal corporate

“future forger” was created on the basis of

set timelines, selection criteria, review sched-

ules and a clear framework for costs and

personnel deployment. The methodology

corresponds to screening processes used in

the new venture business of venture capital

companies – the process, however, is imple-

mented at an earlier point in time.

From Project to Practice

Initial business initiatives from the new busi-

ness generation process indicate that this ap-

proach delivers successful business strategies.

The development of Head Mounted Displays

(HMD) is just one business resulting from this

process. Also known as data glasses, such

display instruments are suitable for a variety

of applications. They can directly project

digital pictures in front of the wearer’s eye,

making them ideal suppliers of supplementary

information on a current environment, as

well as for exclusive observation of projected

content.“Innovation and

technical excellenceis our passion.”


Number ofpatent applications

1999/00 2000/01 2001/02 2002/03 2003/04

344260 371240150

Projections Anywhere

The Display Technologies Division also as-

sumed responsibility for a project for a new

type of LED miniature display (Light Emitting

Diode). A prototype of an extremely compact,

digital projection display was built in the

research area. The outstanding features of

the device include not only its small dimen-

sions, but also its low energy consumption.

As a result, it is battery powered and line

independent, enabling the projection tech-

nology to be used anywhere. For example, it

can be used at any time to display pictures

taken with a camera phone, or graphics from

a PDA (Personal Digital Assistant/handheld

computer), on a large surface.

Culture of Innovation

Along with the strategic planning and control

of research and technology subjects, Corpo-

rate Research and Technology is devoted to

promoting the exchange of information be-

tween scientists, managers and specialists in

other disciplines. For this reason, it organizes

an internal event known as the Innovation

Days, during which specialists from different

areas and disciplines can discuss the current

Corporate Research and Technology accom-

panied the project from concept to proto-

type. Potential customers have already shown

great interest in the use of the devices for

complex tasks, in technical service for exam-

ple. The advantages of these systems can

also be experienced by people with severe

visual impairments. The next step involves

transfer to an internal new venture project or

to one of the company’s divisions for volume

production.

Better Driving with Optics

The numerous opportunities in the automo-

bile industry for the integration of optics and

electronics to improve safety and comfort

provide a new area of application for optical

technology from Carl Zeiss. Corporate Re-

search and Technology is exploring possible

business opportunities with a series of

promising product ideas. The focus lies on

sensors within the vehicle and for monitoring

its surroundings, as well as on display sys-

tems. Based on this development work, the

Display Technologies Division decided to set

up the Automotive Optics business unit.

Carl Zeiss GroupResearch and Technology 22

23

Digital projection of the future:

Corporate Research and Technology

has created an ultra-compact optical

module which makes mini-projectors

possible

status of important projects. The Innovation

Days, along with the company’s internal

Innovation Award, pave the way towards a

new culture of innovation within the Carl

Zeiss Group.

Under the motto “Managing the Innovation

Pipeline”, the Innovation Days were held for

the second time during the reporting period.

The subject of the meeting was strategic

planning of technological developments and

product innovations. Internal and external

speakers presented different approaches to

the theory and practice of innovation man-

agement, with current projects also being

presented.

Competition Stimulated

The number of entries for the Carl Zeiss

Innovation Award increased significantly over

the previous year. More than twice as many

teams entered the competition in its second

year. 78 projects were submitted for the

Leading Edge Technology, Innovative Business

Design, Short Time to Market, High Risk

Project and Successful Failure categories.

The Quality of Leadership

Highly qualified and motivated employees are essential tothe success of a high-tech corporation such as Carl Zeiss.Providing them with the best possible employment and development opportunities is one of the top objectives ofcorporate management. Carl Zeiss views management asleadership and promotes a performance mentality, customerorientation and internationality, giving the company an appealing image and enabling it to attract additional, highly-qualified employees. At the same time, personnel manage-ment focuses on the challenges posed by ambitious growthtargets and implements Carl Zeiss’ culture of leadershipwhich is oriented toward value enhancement worldwide.

High-tech Jobs

The Carl Zeiss Group has an exceptionally

large number of employees in research and

development. On the balance sheet date,

September 30, 2004, there were 1,553 em-

ployees in this area, equivalent to 11 percent

of the corporate workforce. The Carl Zeiss

Group has a global workforce of 13,667, of

which 9,683 are employed in Germany and

3,984 abroad. This represents a slight decrease

over the previous year (14,151). The number

of trainees in the Group rose to 597, or four

percent of all employees. 174 new trainee

positions were filled in 2003/04.

Increasing Internationality

Human Resources in the Carl Zeiss Group

promotes expertise and qualified employees

throughout the world. The personal commit-

ment of the employees is recognized by

providing them with attractive development

opportunities and clear, motivating perfor-

mance benchmarks. The challenges facing a

growing company with global aspirations

necessitate personnel reinforcement, particu-

larly in management. As the company con-

tinues to receive an increasing percentage of

its growth impetus from markets outside

Germany, the importance of employees at

locations abroad rises. This development

brings with it an increasing internationaliza-

tion among the leadership personnel.

Carl Zeiss GroupHuman Resources 24

Intercultural Skills

The Display Technologies Division’s new pro-

duction facility in Suzhou, China, provides a

clear example of the range of tasks faced by

personnel management. Personnel sent to

China were trained not only in specialty and

leadership issues concerning their future area

of responsibility, but also in intercultural rela-

tions. This requires interaction with employees

and business partners in another country, as

well as dealing with customers from other

regions of the world. The new objectives re-

sulting from the growing internationalization

are also expanding the profile of training

measures offered by the Carl Zeiss Group.

Measuring Leadership

The performance of leadership personnel

plays a decisive role in the success of the

company. A binding, corporate management

assessment framework was agreed upon as

an evaluation tool for this group of employ-

ees. It will be used for the comprehensive,

annual interviews between executives and

their superiors. Furthermore, it provides

orientation for the evaluation of performance-

25

Dr. Ulrich Simon,

Executive Vice President & General

Manager of the Microscopy Group

“The uniform performance review and the Performance & Development Dialogue help me to quickly develop the relevant aspects with the management team. Employees have also completely embraced these instruments.”

“The Performance & Development Dialogueis designed for international use.

It creates worldwide transparency and enhances the global team spirit.”

Jan Willem de Cler,

President of Carl Zeiss N.V.-S.A.,

Belgium and

Carl Zeiss B.V., Netherlands

Carl Zeiss GroupHuman Resources 26

“The Competence Model enables us to clearly determine what Carl Zeiss is all about, even at locations outside Germany.”

José Manuel Alonso,

President of Carl Zeiss de México

S.A. de C.V.

“Working for the “Competence Model”project was certainly time well spent:

comprehensive definition ofrequirements and abilities allows

us to precisely describe managementrequirements and functions.”

Dr. Rainer Ohnheiser,

President of

Carl Zeiss IMT GmbH

related compensations. The highest bench-

mark among the goals to be achieved is

increasing the value of the company in the

respective area. The performance assessment

is an essential component of an even more

comprehensive management instrument –

the “Performance & Development Dialogue”.

It incorporates performance, linked with an

assignment and development interview, as

well as the target agreements (“Management

by Objectives”) for the upcoming period.

The dialogue is an important element for the

continuous improvement of both personal

success and the success of the company.

Gerhard Fürter,

Vice President of Technology, Lithography Optics,

Carl Zeiss SMT AG

“The opportunities created by thespecialist career deliver interestingdevelopment perspectives to top per-formers in the technical and scientificareas. They help us optimally deploytop executives and generate interestin working for the company in thelong term.”

Skills Defined

The performance & development dialogue is

based in no small part on a clear determina-

tion of the skills required for the activity at

each level of the organization. For this pur-

pose, Human Resource Management worked

with the various business groups to develop

a “competence model” which describes the

demands on the individual skills of the em-

ployees beyond subject-specific knowledge.

Furthermore, 25 single competence features

were defined for entrepreneurial, leadership,

interaction, methodology and personal skills.

A profile can be determined based on these

criteria, from which the suitability of an em-

ployee for a certain job profile is derived.

27

Specialist Career

In addition to a leadership career in manage-

ment, Carl Zeiss also offers development

opportunities on a separate path to qualified

specialists. Within the framework of a know-

ledge-oriented career, scientists and engineers

can be appointed to specialist careers based

on their personal performance, opening a

five-step path leading from “Senior Engineer/

Scientist” to “Fellow”. Allocation to this

career path eliminates the possibility of a

parallel career on a management level. It is,

however, possible to switch paths. The spe-

cialist career raises the attractiveness of the

company for employees with outstanding

qualifications.

Carl Zeiss GroupEnvironmental Protection 28and Health & Safety

Well Positioned

The processing of glass and metal, as well as

the assembly of electronic modules, performed

by the Carl Zeiss Group does not involve any

manufacturing processes which critically im-

pact the environment. In addition, the num-

ber of sources of environmental and indus-

trial hazards is reduced by the increasing

amount of software development, applica-

tion support, maintenance and training.

Nonetheless, various aspects of environmen-

tal protection and industrial safety play a

key role in all phases of planning and delivery

of services in the company. Expanding the

expertise in these areas creates opportunities

for new businesses and often points the way

to considerable savings potential.

Certification

Environmental protection and health & safety

management have been continually expand-

ed in past years. Regular internal audits en-

sure the transparency of any measures taken.

The management systems for the two activi-

ties were merged, enabling a single audit of

the company’s largest production site – the

Oberkochen Service Center – and the Indus-

trial Metrology Group during the reporting

year. They received both environmental and

health & safety certification as per ISO 14001

and OHSAS 18001. Carl Zeiss Jena GmbH

was certified to ISO 14001 in addition to

health & safety certification.

Environmental Protection and Health &

Safety Online

The integration of environmental protection

and health & safety into daily procedures is

significantly simplified via online media. Both

subjects have their own pages on the exten-

sively-used corporate intranet and are always

available. Employees can quickly access

comprehensive documentation and current

reports. The large number of manuals which

provide the basis for certification are also

available online. All required information has

been divided into single documents and

linked to a clearly structured directory, en-

abling users to quickly find the necessary file.

Environmental Protection and Health & Safety –

Success Made Visible

The Carl Zeiss Group views safeguarding the environment andpreserving its natural surroundings as its corporate duty. Italso applies the same high standards to industrial safety andhealth protection. Finding economic solutions that minimizethe potential pollution caused by industrial production,prevent detriment to employees, and efficiently utilize mate-rials and energy is a top priority throughout the company.Successfully managing these tasks requires the motivationand ability of all employees and can lead to more efficientprocesses.

29

Transparent Materials List

Observance of environmental aspects in all

phases of a product lifecycle demands com-

prehensive knowledge of material properties,

design requirements, technical guidelines,

international environmental standards and

numerous other considerations. A new aid is

now available for the proper, environmentally-

friendly, economical use of materials: a data-

base for material management for developers

and design engineers provides detailed infor-

mation on materials, components, semi-

finished products and ingredients contained

therein. All relevant data, including informa-

tion on use in existing products throughout

the company, can be accessed, providing Carl

Zeiss with a powerful system for the effective

control of material usage, the benefits of

which extend far beyond simple environmen-

tal protection.

Ratio for Health & Safety

Statistically recording safety is the goal of a

new ratio that provides larger corporate units

with a reliable means of comparison. The

basis is the absence times resulting from in-

dustrial accidents. These are weighed against

total working hours recorded within a com-

parable period in the respective area. The

safety performance of organizational units is

documented quarterly based on the “absence

rate” ascertained, enabling early recognition

of problematic developments.

Projects Around the World

Protecting the environment and responsibly

utilizing resources are enshrined in the long-

term goals of the corporate Vision. Employees

throughout the world rise to this challenge

on a daily basis with initiatives that protect

the environment and resources. The corpo-

rate Vision Award attracts numerous teams

with projects on this subject. For example,

the US company of the Industrial Metrology

Group in Minneapolis, Minnesota, succeeded

in implementing numerous environmental

protection measures in quantifiable reduc-

tions of material consumption and waste.

Another project addressed the expensive

packaging required to transport large suspen-

sion systems for surgical microscopes. A

project team was successful in reducing the

packaging materials required, creating a

particularly sturdy, reusable container and

replacing wood with environmentally-friendly

cardboard. Their efforts also led to consider-

able cost savings.

Material properties and environ-

mental information on all impor-

tant materials and components

are displayed at a glance by the

materials management database

“Environmentalpreservation is a

core conside-ration in all

our activities.”From the Carl Zeiss Vision

Carl Zeiss GroupBusiness Groups 30

The Semiconductor Technology Group operates under the nameCarl Zeiss SMT AG (Semiconductor Manufacturing Technologies).It is organized as a legally independent unit of the Carl ZeissGroup. The enterprise is wholly owned by Carl Zeiss. It sees itselfas a pioneer of new technologies and aspires to “enable the nano-age world.” As one of the world market leaders in its sector, CarlZeiss SMT AG is committed to technical excellence in all its busi-ness areas. On a broad basis, the SMT Group supplies worldwideproviders of manufacturing and verification technology for nano-structures, enabling growth in these key technologies. SMT’s lead-ing position is based on its core competencies in optics and elec-tron beam technology. Its main products are lithography optics forwafer steppers and wafer scanners for its partner ASML, the lead-ing provider of semiconductor production machines. In addition,the company’s product line includes optical components and mod-ules for lithography lasers and synchrotron optics. For photomaskinspection and repair, SMT offers a system featuring unique tech-nology as a complete solution. Optical modules for automatedwafer inspection systems complete the product line.

The competence of Carl Zeiss SMT AG in electron and ion beamtechnology is also reflected in the extensive range of scanningelectron microscopes, transmission electron microscopes and ionbeam systems. Their fields of application include the semiconduc-tor industry, materials research and pharmaceuticals.


Semiconductor Technology Group

In fiscal year 2003/04, the Semiconductor Technology Grouponce again posted strong revenue growth following a periodof weakness in the semiconductor market. Business grew byone quarter to EUR 560 million. The most important motorsof growth among the activities consolidated under the CarlZeiss SMT AG (SMT) umbrella were the group’s main revenuegenerators – lithography optics with its lenses for the fabri-cation of semiconductor chips, and laser optics. SMT earningsalso rose sharply in line with revenues.

“The significance of Carl Zeiss SMT’s AIMS systems for maskqualification will even increase for future technologies,where immersion and polarization will play a critical role insemiconductor lithography.”

Dr. Iwao Higashikawa, Chief Specialist, Process & Manufacturing Engineering Center Toshiba Corporation, Yokohama, Japan

Pages 31 and 32, center:

Laser optics for the chips of the

future: mirror systems direct the

extremely short-wave light of the

next technology generation

33

Market on the Move

The market for instruments and systems re-

quired for the fabrication of semiconductors

once again departed from industry forecasts

over the past fiscal year. The business clearly

surpassed generally cautious estimates, with

worldwide chip production exceeding the

record 2000 figure in both volume and value.

The Semiconductor Technology Group was

able to utilize opportunities that arose at

short notice and adjust production to the

changed conditions. The company strategi-

cally positioned itself for the unchanged con-

tinuation of strong fluctuations exhibited by

the semiconductor industry and increased its

flexibility in manufacturing and development.

The opening of a highly modern factory in

Oberkochen during fiscal year 2001/02 sig-

nificantly increased the company’s efficiency

and adaptability. Steps taken by personnel

management, such as highly flexible working

hour accounts, assisted in the new orienta-

tion.

Immersion Lithography Sharpens

Competitive Edge

The introduction of lenses for the new im-

mersion lithography process, which extends

the product life of 193 nanometer technolo-

gy by two to three optic generations, added

important momentum to the success of Carl

Zeiss SMT AG. SMT quickly reacted to market

trends and provided powerful, cost-efficient

alternatives within a short time following the

discontinuation of 157 nanometer technolo-

gy. It is well-known in microscopy that im-

mersion liquids between the lens and speci-

men significantly increase optical resolution.

This principle was converted to a usable

procedure for semiconductor fabrication.

SMT succeeded in delivering several systems

with this technology to its partner ASML

following trials with a pilot project last year.

SMT once again demonstrated its ability to

quickly implement innovations. In doing so, it

strengthened its technological position. In

the space of a single year, the company has

turned a setback into a new approach to

success.

Experience and sensitivity are required

to master the barely conceivable preci-

sion of a Starlith® 1400


Electron Beam Repairs Masks

Technological progress and success in busi-

ness go hand-in-hand in semiconductor tech-

nology. This is highlighted in the instruments

used to evaluate and repair the photo masks

required for chip fabrication. The costs of

such masks, which serve as templates for the

circuits on a chip, are immense. If they can-

not be inspected and repaired, considerable

economic damage can result from production

errors. SMT introduced the first electron-

beam repair system in 2004 under the name

MeRiT®. It was developed in cooperation

with NaWoTec GmbH in Rossdorf, Germany,

which received the German Industry’s Inno-

vation Award in 2003 as a start-up company

for this procedure. In conjunction with SMT’s

market-leading AIMS® inspection technology,

the system uses electron beams and targeted

gas injection to correct the tiny defects on

the expensive masks by removing or adding

material with nanometer precision.

One-brand Strategy

The electron-beam technology business,

which previously operated under the aegis of

LEO Elektronmikroskpie GmbH, was restruc-

tured and supplemented with activities from

the field of nanotechnology. It now operates

as the Nanotechnology Systems Division. LEO

Electronmikroskopie GmbH became Carl Zeiss

NTS GmbH. Instruments which entered the

market under the LEO banner are now clearly

recognizable as Carl Zeiss products and also

benefit from the outstanding image the par-

ent company enjoys around the globe. The

move enabled Carl Zeiss SMT AG to realize

its goal of a uniform appearance and the dis-

tinct identity of the ZEISS brand.

There is currently fierce price competition un-

derway between providers of electron-beam

technology. The high-power ULTRA scanning

electron microscope, which achieves maxi-

mum resolution at a low acceleration volt-

age, is generating new impetus for this busi-

ness. The EsB™ detection procedure from

Carl Zeiss employs energy and angular analy-

ses of backscattered electrons to achieve an

35

extraordinarily high-contrast display of a

specimen’s topography and composition. To-

gether with the Gemini® detector for imag-

ing, the EsB detector transforms the ULTRA

model into one of the most versatile scan-

ning electron microscopes on the market.

Inspection of semiconductor wafers and

testing of ceramics, plastics, nano-particles

and immunogold markings are a few of the

many possible applications.

Masks for semiconductor chips are

extremely critical and expensive

tools: the MeRiT electron beam

repair instrument allows their cost-

effective repair

Comb structure etched from silicon

for the building of sensors; the

image captured with ULTRA 55

shows the high etching depth with

minimum line width

Extraordinarily high-contrast

visualization of a specimen and

clear information about the mate-

rial composition are provided by

the high-performance ULTRA

scanning electron microscope

Optimization

Carl Zeiss SMT AG, along with partner ASML,

has made good progress towards consolidat-

ing its market and technology leading posi-

tion as a supplier of the semiconductor in-

dustry. The group’s performance was en-

hanced as a result of the increased flexibility

and the additional acceleration of processes

from product development to delivery to the

customer. Internal procedures were further

improved and optimized using the Six Sigma

method.

Property Rights Clarified

The group took a significant step forward in

September 2004 with the signing of an

agreement that ended a long patent dispute

between main competitor Nikon, and Carl

Zeiss SMT AG and its partner ASML. All par-

ties involved agreed to a comprehensive

cross-licensing deal for lithography optics.


With its constantly healthy level of earnings, the Medical SystemsGroup is a mainstay of business at Carl Zeiss. It is structured intothe Surgical Products and the Ophthalmology divisions. The mar-ket leadership enjoyed by the Surgical Products division spans aperiod of over fifty years. In 1953, a surgical microscope from CarlZeiss heralded the dawn of microsurgery. The product family withthe trade name OPMI® has since been extended and enhanced onan ongoing basis. Today, solutions for intraoperative diagnosis anddigital visualization, for example, are gaining special importance.Time and again, the development of new fields of application insurgery – in spine surgery and dentistry, for example – providenew momentum for innovation.

The ophthalmic systems and instruments business is combined inCarl Zeiss Meditec AG, a company listed on the Prime Segment ofthe Frankfurt stock exchange. As a stock corporation, it is optimal-ly positioned to meet the requirements of a market promising long-term growth. The capital market is showing keen interest in thepublicly listed company of the Carl Zeiss Group. Carl Zeiss Meditecoffers an innovative product range providing solutions for the fourmajor diseases of the eye. With two headquarters in the USA andGermany, more than 50 percent of its workforce in the USA and itsown subsidiary in Japan, it is directly represented in the largestand most important markets.


Medical Systems Group

Despite the difficult economic climate, the Medical SystemsGroup has successfully asserted its position in the reportingyear. Incoming orders increased over the previous year’s levelin spite of unfavorable exchange rate developments. Whileproduct sales rose, revenues dropped slightly to EUR 466 mil-lion due to the currency influences. Nevertheless, the SurgicalProducts Division and the Ophthalmology Systems from Carl Zeiss Meditec AG each once again improved their results.

Market Recovery

A recovery was evident in the global market

for medical systems, which is developing in

line with the sustained growth anticipated

by long-term forecasts. Demographic devel-

opments, with a growing proportion of

elderly people in the population, and the in-

creasing economic power of fast-developing

countries are helping to boost demand. With

their restraining effect on investment, health-

care reforms are leaving their mark on the

market. The medical systems business con-

tinues to be heavily reliant on exports. The

effects of changes in currency parities are

clearly noticeable. Countries which are

dependent on dollar and yen exchange rates

account for a large proportion of exports.

European markets outside Germany which

reported growth in fiscal year 2002/03 were

able to maintain the previous year’s healthy

level. Business in Germany, on the other hand,

was more subdued. In the USA, a stable

market trend and the launch of new products

led to substantial growth in the national

currency. Japan, the most important Asian

market, recorded a slight upturn. With their

still relatively small volume of business, sales

in countries such as China and India showed

a very pleasing trend.

Optical brilliance and attractive

design in one: the OPMI Pentero®

surgical microscope

Internationally recognized design:

OPMI Pentero received the

“reddot” award

39

The OPMI Pentero surgical micro-

scope is configured in next to no

time via touch screen input

The MediLive® MindStream video

system integrates documentation

into the OR

Differentiation through Innovation

The Medical Systems Group is working

intensely on strengthening its position as a

leading innovator. Consistently high R&D

spending and a close dialog with leading

medical experts in the relevant disciplines

enable Carl Zeiss to respond to trends at an

early stage and to play a key role in setting

the pace of development.

Networking and Digitization

One example of these trends is digitization.

There is currently a noticeable increase in

hospital networking and the standardization

of information sources at a digital level.

Flexible access to diagnostic data and data

archiving offer a huge potential for organiz-

ing processes in hospitals and offices more

efficiently and cost-effectively. This potential

is opened up by a variety of products from

Carl Zeiss such as the latest generation of

surgical microscopes, accessory equipment

for digital visualization or software solutions

for the networking of diagnostic systems in

ophthalmology. The network solutions were

developed by software specialist hiko medical

communication GmbH in Pirmasens, Germany,

which was acquired by Carl Zeiss Meditec AG

in the reporting year and now operates as

Carl Zeiss Meditec Systems GmbH.

Neurosurgery and ENT Surgery

The latest example of innovativeness in the

field of microsurgery is the OPMI Pentero

surgical microscope system which has already

led to a noticeable boost in demand in

neurosurgery. This system is a unique combi-

nation of outstanding optical performance

and ease of use, and provides access to

digitized image material and diagnostic data.


“The quality of ZEISS optical systems is unrivaled – and when I am working in my office with the slit lamp or in the OR with the microscope, a sharply defined, brilliant image is absolutely essential.”

Robert H. Osher, M.D., Cincinnati Eye Institute, University of Cincinnati, USA

The new PreView PHP examination system

enables the early diagnosis of age-related

macular degeneration (AMD) and makes

a substantial contribution to preserving

patients’ vision. More than 25 million people

worldwide are affected by this disease which

frequently causes blindness.

The approval of the VISULAS 690s laser for

the Japanese market means that patients

throughout the country can now also be

treated using photodynamic AMD therapy.

In the USA, initial treatments were conducted

using the MEL 80 excimer laser system within

the scope of a study for product approval.

The system, which has already been success-

fully introduced in Europe and Asia, is used

to correct such visual defects as shortsighted-

ness and farsightedness by laser surgery. This

means that patients no longer need such

visual devices as eyeglasses or contact lenses.

For the first time, it permits surgeons to ob-

tain additional diagnostic information during

surgery and thus to improve the surgical out-

come for the benefit of the patient. New mo-

mentum was also provided in the field of ENT

surgery thanks to the OPMI Movena® and

OPMI Sensera® model series launched in the

previous year.

Ophthalmology

The ophthalmology business is operated by

Carl Zeiss Meditec AG. The global leader for

instruments and systems in the field of oph-

thalmology successfully expanded its position

in a constantly growing market. New prod-

ucts primarily intended for the diagnosis of

retinal disorders and glaucoma as well as

software for system and data networking

significantly improve the early detection of

dangerous eye diseases and the efficiency of

diagnostic and therapeutic processes.

The Glaucoma Progression Analysis software

(GPA), for example, permits the various

stages of glaucoma to be diagnosed even

more accurately, allowing physicians to make

better decisions on required therapy on a

more objective basis.

41

With the new OPMI® VISU 140, 160 and 210

product series, the Surgical Products Division

strengthened the position of Carl Zeiss in the

field of ophthalmic surgery. Further impetus

for growth is expected from the addition of

further innovative products to the product

portfolio and the targeted expansion of sales

activities.

Dentistry

The latest-generation products in this field

include the OPMI PROergo® and OPMI Pico

microscopes and a range of head-worn

loupes for examination and treatment in the

office. They offer physicians optimum, mag-

nified viewing and an ergonomically correct

working position. Digital image capture and

visualization provide a new basis for commu-

nication between the physician and patient

and form an integral part of the patient file.

The MEL 80 refractive laser system

corrects visual defects with the

ultimate precision

International triumph: the success

story of the IOL Master® continues

New instrument system with lead-

ing technology: optical biometry of

the anterior segment of the eye with

the ACMaster offers extremely high

precision


The Consumer Optics Group offers high-quality eyeglass lenses, anextensive line of examination systems for eye care professionalsand eyeglass lens production technology. Binoculars and huntingoptics from Carl Zeiss provide highly discerning and demandingusers with premium, prestigious products.

The Ophthalmic Products Division aspires to provide high-qualityvision to a large number of end users. The division’s main productsare eyeglass lenses made of a broad spectrum of materials. Theyoffer additional, technically advanced features such as high-per-formance coatings, polarization filters or individualized opticaldesigns for progressive lenses. Thanks to its extensive knowledge of all factors relevant to vision and high-performance systems for optimum eyeglass fitting, Carl Zeiss offers its customers unique expertise and competence: Relaxed Vision. The division’s clienteleinclude not only eyecare professionals such as opticians and optometrists, but also ophthalmic retail chains.

Binoculars and hunting optics are the domain of the Sports Opticsdivision. With a tradition of innovation, these products are impor-tant ambassadors of the brand name that stands for top opticalperformance and quality all over the world. Digital technology is now entering one of the company’s most traditional opticalproducts – binoculars: night scopes allow detailed observation ofnature, even in dark conditions.


After an exceptional business trend marked by special effectsin fiscal year 2003/04, the Consumer Optics Group reportedrevenues totaling EUR 332 million. Sales were about 4 percentbelow the previous year. New regulations for cost reimburse-ment by health insurance companies in Germany left theirmark on business in the Ophthalmic Products Division, whichaccounts for more than 80 percent of the sales generated bythis business group. Earnings topped last year’s figure.

Consumer Optics Group

Comfort for the customer: eyeglass

lenses featuring the LotuTec®

coating repel dirt and liquid – just

like a lotus leaf

Healthcare Reforms Hit Eyeglass

Business

The reforms in the German healthcare system

that came into effect at the beginning of

2004 triggered a boom in demand in the

latter months of 2003. Numerous consumers

used the final opportunity to purchase eye-

glass lenses with the financial support of

their health insurer. Since the beginning of

2004, most eyeglass wearers have received

no funding from the healthcare system.

Short Boom at End of Year

The boom experienced at the end of the year

presented the Ophthalmic Products Division

with a unique challenge. Although it had

made the necessary preparations for this rise

in demand, the division was nevertheless

surprised by the sheer volume of incoming

orders which were 100 percent above the

45

The Gradal Brevis® progressive

lens is particularly suitable for

small eyeglass frames

LotuTec can be combined with

other coatings – with different

colors, for example

seasonal average in November and Decem-

ber. This considerably surpassed the volume

of business received before previous health-

care reforms. It took until February 2004 to

clear the backlog of additional orders posted

in the last months of 2003.

As a result, the downturn in orders in the

New Year was greater than anticipated. The

eyeglass industry estimates that the drop in

business totaled about 30 percent.

Stiff Competition

The ophthalmic sector is currently in the midst

of a consolidation process that has lasted for

some time now. This affects both the distribu-

tion channels and the providers of eyeglass

frames and lenses. It is becoming apparent

that there will be a further decrease in the

number of providers operating in all of these

areas. The product spectrum is becoming

increasingly polarized into the low-price

segment at one end of the market and high

quality, leading edge products at the other.

The mid-price, mid-performance range is

losing more and more ground.

In the face of this difficult situation, Carl Zeiss

was able to win additional customers. The

Ophthalmic Products Division strengthened

its position with new products and sales

initiatives. The targeted expansion of the

product portfolio underlines the division’s

position as a one-stop partner in the field

of eyewear.

Global Growth Potential

The ophthalmic business showed a stable

trend on all European markets outside Ger-

many. All in all, the regions outside Europe

also reported a slight rise in demand. On the

whole, the global ophthalmic market offers

healthy growth potential. The world popula-

tion is growing, and more than 50 percent of

people need a visual aid at some stage of

their lives. Eyeglasses will remain unchal-

lenged as the most widely used devices for

some time to come.


new model in the series of Polatest® vision

testing instruments makes it easier for eye-

care professionals to determine and measure

visual defects. With the aid of a computer,

Polatest® II E displays test types in an alter-

nating, non-learnable sequence and hence

reduces the possible sources of error during

an examination. The digital centration and

measuring system known as the Relaxed

Vision Terminal (RV Terminal) was created for

optimum fitting to the face of the eyeglass

wearer. It allows ultra-precise lens fitting

thanks to accuracy to the nearest tenth of a

millimeter. Lenses fitted with this leading

edge system provide totally natural vision.

Sports Optics Holds its Ground

The Sports Optics Division, whose business is

primarily focused on binoculars and hunting

optics, achieved a slight increase in revenue

and earnings. The market for these premium

quality branded products is marked by the

current lack of consumer confidence. Business

momentum is being provided here by prod-

uct innovations with which Carl Zeiss repeat-

edly documents its expertise as a provider of

systems offering unique image quality.

Light Weight, High Quality

The Sports Optics Division has introduced a

new, advanced series of binoculars that offer

“My customers are impressed by Relaxed Vision and by the new type of eyeglass fitting.Trust in my skills has risen.”

Dirk Martens, Owner of Optiek Dirk Martens, Tervuren, Belgium

LotuTec Enhances Wearing Comfort

Carl Zeiss eyeglass lenses featuring the new

LotuTec surface coating offer more comfort

and better vision. In addition to the properties

offered by modern coatings such as reflec-

tion reduction, a filter effect and resistance

to damage, LotuTec displays an additional

benefit: it facilitates lens care for the eyeglass

wearer. Like a lotus leaf, the lens surface

repels water and dirt. As a result, the lenses

practically never get dirty. Any residue is

removed in next to no time. After its market

launch for high-index lenses, the high-tech

LotuTec coating will be gradually introduced

as an option for all other lens types.

State-of-the-art Systems

The refraction and lens prescribing processes

play a decisive role in determining the quality

of vision enjoyed by an eyeglass wearer. A

47

many outstanding benefits to users. In the

FL series, special lenses featuring fluoride

glass deliver image quality that sets standards

in the sector. The Victory 8x32 T* FL and

Victory 10x32 T* FL models are extremely

convenient and light and offer exceptionally

large fields of view.

Further Improvement in Performance

The Consumer Optics Group is rising to the

challenges facing it in the competitive arena

Polatest E II increases the precision

of refraction

Thanks to lenses with fluoride glass,

the Victory 8x32 T* FL binoculars

offer image quality that sets standards

The VisuLight® S illuminated

magnifier reveals even the tiniest

details, also in poor light or in

the dark

by implementing targeted measures in the

cost, speed and quality areas and by intro-

ducing special marketing initiatives. Here,

achieving a further increase in productivity is

of major importance. Thanks to process en-

hancements, attractive employee incentives

and quality optimization, a further rise in

earnings was achieved. Delivery times were

once again reduced. In its dealings with

eyecare professionals, dealers and consumers,

the business group is placing great emphasis

on communicating the brand promise.

The Brand Promise

Carl Zeiss is the only provider in the oph-

thalmic sector that covers the entire product

spectrum from refraction and lens prescrip-

tion to the eyeglass products themselves and

their fitting. With its expertise and compe-

tence, also in the field of ophthalmology, the

company offers the basis for giving optimum

consideration to the interaction between the

human eye and the eyeglass lens. Its under-

standing of the physiology of vision allows

Carl Zeiss to develop products that provide its

customers with the ultimate in comfort. Re-

laxed Vision is the term used by the company

to encapsulate this achievement. It allows

the company’s customers to actively experi-

ence the promise of the ZEISS brand.


The Microscopy Group supplies its instruments to a market characterized by the current trends in the fieldsof healthcare, medical research and the pharmaceuticalindustry. It is expanding its leadership in the fields ofmicroscopes and systems for use in research and de-manding routine applications. In the field of biologicalapplications, Carl Zeiss aspires to cover all areas ofmicroscopic observation and documentation. The groupis opening up new growth fields by offering system solu-tions for cell or tissue applications sharply focused on thework processes of its customers. The Microscopy Group isrising to the challenges posed by global efforts to reducehealthcare costs and by the stagnation in the investmentactivities of scientific institutes.


Weak Market

The difficult market scenario left its mark on

the field of microscopy. Life sciences and

industrial applications, market segments that

normally display different cyclical trends,

both experienced a downturn at the same

time in the reporting year. Furthermore,

unfavorable currency parities had a detrimen-

tal effect on the strongly export-oriented

business.

Tight Research Budgets

Most of the instruments supplied by the

Microscopy Group are used for research pur-

poses. Customers in research and training are

directly dependent on the budgets of public

authorities. Cutbacks in public spending

Microscopy Group

After several years of continuous growth, business in the Microscopy Group declined for two years in a row for the firsttime. In fiscal year 2003/2004, revenues totaled EUR 273 million,8 percent below the previous year’s level. After adjustment for foreign currency influences, the group successfully assertedits position. Thanks to consistent restructuring measures in the past few years, it also generated healthy earnings underunfavorable circumstances. Acquisitions supplemented thegroup’s competencies in important fields of application.

Filtered and bundled: light for

fluorescence microscopy

51

therefore have a direct impact on the market

and the group’s business. With only a few

exceptions, this development has taken place

in most markets.

Microscopy in Transition

In the past few years, fundamental changes

have taken place in microscopy. The technol-

ogy used for optical examination methods

has been further enhanced in many different

ways. Highly specialized techniques have al-

lowed the dramatic developments achieved

in genetic research. Innovative possibilities

for visualization in fluorescence microscopy

are providing physicians and biologists with

new knowledge.

Increasing Automation

Automation is an important, general trend in

microscopy. Microscopic examinations – par-

ticularly in biomedical applications – are

becoming more and more “industrialized”. In

order to answer such questions as, for exam-

ple, what genes or proteins cause diseases,

the examination of an enormous number of

specimens is required. The only solution here

is the use of mass screening techniques, an

approach that has become known as “large-

scale biology”. In many cases, examinations

must be performed up to 30,000 times in

order to test all gene types.

3D Increasingly a Matter of Routine

Major technological developments include

three-dimensional imaging in the microscope.

Here, special Advanced Imaging Microscopy

Systems are now being supplemented with

systems for routine examinations in the life

sciences. Visualization techniques such as the

ApoTome® system from Carl Zeiss permit

differentiated and high-contrast imaging of

biological specimens.

Rising to the Challenges

The Carl Zeiss Microscopy Group is facing a

double challenge. Revenues must be secured

and the price war won in spite of decreasing

market volumes on the one hand, while new

applications must be accessed with innovative

solutions, and customer requirements met

more satisfactorily on the other. To enhance

its economic performance, the group has

consistently increased the flexibility of its costs

and capacities in the past few years. One

major milestone was the opening of a new

microscope production facility in Göttingen

last year. Thanks to consistent cost manage-

ment, the group has succeeded in achieving

Now also increasingly important

in materials microscopy:

ergonomic convenience and

digital documentation

Complete solution for live cell

imaging: Axiovert® 200 inverted

microscope with an incubation

device, ApoTome® system,

AxioCam® digital camera and

AxioVision® image analysis

software


above-average profitability compared to

other companies in the industry. Sales pro-

grams entitled “Leadership for Performance”

will further improve revenues.

No Reduction in Investments

In spite of the modest market trend, spending

on product development has been continued

at an unchanged high level in the reporting

year. In close cooperation with leading scien-

tists, the group has prepared the launch of a

new instrument generation that will replace

the entire line of mid-range “upright micro-

scopes” and the large research microscopes

in the current fiscal year.

Access to Technology

In addition to investments in product devel-

opment, the group has also strengthened its

position through acquisitions, e.g. of the

confocal microscopy division of the Califor-

nian company BioRad Laboratories, Inc. This

provides Carl Zeiss with exclusive access to

femtosecond, two-photon microscopy, one

of the most important future-oriented

technological innovations in the field of mi-

croscopy. This technique enables 3D imaging

of thick living tissue specimens using ultra-

short laser light pulses in a manner that is

particularly gentle on the object examined.

The US partner company Cellomics has

launched the Array Scan VTI system devel-

oped by the Microscopy Group. Carl Zeiss

has acquired a significant participation in

Cellomics which manufactures automated

systems for high content screening, a tech-

nique that is important in pharmaceutical

research, for example.

“I am impressed by the ease withwhich scientists in our imaging labo-ratories become quickly autonomous,allowing them to achieve excellentresults by using Carl Zeiss micro-scope imaging systems.”

Spencer L. Shorte, PhD, Plateforme d'Imagerie Dynamique (PFID),

Institut Pasteur, Paris, France

LSM 510 META confocal laser

scanning microscope with spectral

detection

LSM 510 NLO multiphoton

laser scanning microscope with

femtosecond excitation

Fluorescence photo of neurons in

a rat’s brain

Fluorescence photo of a zebra fish,

multiple marking of the nerve

system

Success with Innovations

Innovations from the Microscopy Group were

also applauded by the professional world in

the reporting year. In the USA, the group

received the renowned “R&D 100” award for

“PlasDIC®”, a new technique for high-con-

trast imaging of biological specimens on

low-cost, plastic slides. The creators of the

LSM 510 META laser scanning microscope

have also been honored. Together with three

other teams, they were nominated for the

German President’s Future Prize.

Integrated Solutions in Demand

In the medium and long terms, an expanded

market offers highly attractive business

opportunities. One focus is being placed on

sciences dealing with the examination of

living cells. In highly specialized applications,

it is currently often up to the customer to

efficiently integrate the various examination

tasks into one complete process. Carl Zeiss

considers this as an opportunity to offer

customers not just single instruments, but

optimized total solutions for complex appli-

cations.


The Industrial Metrology Group (IMT) is one of the leadingproviders in the field of industrial coordinate measuring technolo-gy. With the launch of the world’s first CNC measuring machineback in 1973, Carl Zeiss paved the way for modern 3D CNCmetrology. IMT offers a wide product spectrum covering measur-ing tasks in diverse measuring conditions, from the metrology labto shop floor measurement in a rough production environmentwithout air-conditioning. The main customers for these productsare the automotive, mechanical engineering and aeronautical industries. In recent years, the business group has undergone atransition from a machine manufacturer to a solution provider,and now offers an impressive range of services from contract programming to worldwide on-site support. More than 25 % of theIMT revenue is already generated by services alone. The Carl ZeissIndustrial Metrology Group sets itself apart from its competitorsby offering the most comprehensive technological know-how. Allcomponents which are crucial to performance are developed andmanufactured in-house by IMT. This is a vital prerequisite forguaranteeing the recognized high quality of the products. On thebasis of its leading market position in the industrial countries,this business group is now expanding its activities in the growthregions of Asia.


Industrial Metrology Group

Tiny parts can be measured with the

stylus of the F 25 measuring machine

Close-up of the illumination unit of

the F 25 measuring machine

Industry Stabilized

The market for coordinate measuring

machines is influenced by developments in

the manufacturing industries, primarily

mechanical engineering, and in the car and

aerospace industries. These sectors have

roughly maintained their levels in fiscal year

2003/04 following considerable reductions

the year before. The negative trend appears

to have stopped. The Industrial Metrology

Group used the opportunities thereby creat-

ed and once again recorded stable business.

The Industrial Metrology Group (IMT) maintained its positionduring fiscal year 2003/04 despite the subdued market trend.Revenue of EUR 244 million was five percent less than theprevious year. Streamlining of the organization, systematiccost management and location optimization enabled IMT tofurther increase its earning power. The group has operated asCarl Zeiss Industrielle Messtechnik GmbH since October 1, 2003.

Streamlined Structures

On October 1, 2003, the group combined

the organizationally separate functions of

development, assembly and logistics on the

one hand, and sales and service on the other,

into a single company. The entire group now

operates as Carl Zeiss Industrielle Messtech-

nik GmbH. Simultaneously, locations in

Germany were restructured and consolidated

further.

57

Microsystems technology

makes major demands on

metrology

Global Availability

A regional expansion of market developments

reveals that there is very weak demand in

Western Europe. Eastern Europe, however,

is showing an upturn in metrology business.

The American markets are beginning to pick

up again following a slowdown. The Japanese

market is well on its way to a noticeable

recovery. Overall, the Asian theater exhibits

the largest growth potential.

The mainstay of Carl Zeiss Industrielle

Messtechnik GmbH on the Asian market is a

service and application center in Shanghai,

which once again expanded during the re-

porting year. An assembly facility was estab-

lished for mid-class coordinate measuring

machines. With the completion of this

production site, IMT is represented in the

markets of the triad by powerful centers in

Oberkochen, Germany, Minneapolis and

Shanghai. Presence in three time zones

enables IMT to provide support to its world-

wide customers around the clock.

Fast Help from Far Away

Teleservice for measuring machines from Carl

Zeiss enables short reaction times and direct

help without interrupting operations. The

responsible control center can diagnose the

problem remotely via an online connection

and implement measures to solve the problem.

All coordinate measuring machines delivered

since the beginning of 2004 have been con-

figured for teleservice.

New Focus on Micosystem Technology

This year, IMT presented the F 25 measuring

system for measuring tasks in microsystem

technology. Micro-motors, micro-switches

and tiny components, e.g. for medical tech-

nology, are the ultimate challenge for tactile

or optical measuring. Other forces are at

work in these extremely small dimensions,

other principles apply than in traditional

metrology. A resolution of 7.5 nanometers

and special micro-sensors enable the F 25

measuring machine to conduct tactile meas-

urements on bores smaller than one milli-

meter in diameter.

3D measurements with a resolution

of 7.5 nanometers are the domain

of the F 25 measuring system


Computer Tomography Measures and

Tests

The computer tomography measuring proce-

dure has also already undergone practical

testing. This method, which is known from

medical technology, enables inspection of the

inner structures of the workpiece parallel to

measurements on the surface and geometry.

An initial RayScan measuring machine

produced in cooperation with HWM Hans

Wälischmiller, in Markdorf, Germany, is

currently in use at the IMT 3D Academy.

Measurements are carried out on a customer-

order basis. The system is already a success,

and its capacity is completely utilized.

Successful Product Lines

Measuring systems from IMT set the pace in

their areas of application. GageMax® and

CenterMax® measuring systems have contin-

ued their success in their respective markets.

They are ideal for direct shop-floor integra-

tion with in-line applications for components

manufactured in a machining process, an

area where its performance features are par-

ticularly useful. CALYPSO® software developed

by Carl Zeiss has played a key role in the suc-

cess of the system. The in-line systems and

CALYPSO are market leaders in this segment.

Horizontal-arm measuring machines are the

key players in car body and tool design and

construction, in metal forming and in mold

making. The PRO® model achieves high speeds

as a result of the extremely lightweight and

sturdy bionic design. Optical “EagleEye”

sensors also help these machines to achieve

measuring times which could previously only

be reached with single-job measuring robots.

“For more than 30 years, we have establishedour image as a quality leader with the help ofZEISS measuring technology. With the newmeasuring systems, we continue to increaseproductivity for the benefit of our customers.”

Rune Karlsson, Vice President, Production & Logistics, AB Sandvik Coromant,

Sandviken, Sweden

59

A successful duo: the Prismo®

measuring system and the

CALYPSO software are bestsellers

in the Industrial Metrology Group

The VAST® Gold probe head allows

tactile measurement with active

scanning technology

New Customers for IMT

IMT is entering new market segments with

F 25 and RayScan, enabling it to access

customer groups with which it had previously

no contact. As the traditional segment offers

only minimal impetus for growth, gaining

new users is of paramount importance for

future success.

Service Business Increasing

The Industrial Metrology Group is well posi-

tioned to meet the challenges of the coming

months. It is at the forefront of development

of innovative solutions in both hardware and

software, and is poised to open new areas

of applications for measuring technology.

Its future achievements will be centered on

services that have contributed to its leading

position until now: proximity to customers,

outstanding service and rapid availability

throughout the world. The proportion of

service in overall business has continually

grown to 28 percent in recent years. This

business will continue to expand. Applica-

tions will focus on microsystem technology,

x-ray technology and the extension of the

service offering resulting from the establish-

ment of additional local measuring centers

for customer support and contract measure-

ments.


The Opto-Electronic Systems Group offers a diverse product lineboth in the Carl Zeiss Group’s classic areas of operation and in itsnew lines of business. Its products represent a leading technologi-cal position that gives the customer the certainty of receiving thebest possible performance. The high-quality brand clearly under-lines the quality of the product and creates trust with the end-user.

The Camera Lens Division is building on its proven collaborationwith leading manufacturers of camera systems for conventionalstill and movie photography, as well as its dynamic cooperationwith licensee Sony in the field of digital cameras and camcorders.This successful joint effort is now being expanded to includedigital projection; a field where, as the market leader for “lightengines”, Carl Zeiss already equips well-known providers withoptical systems. These systems are manufactured in close prox-imity to the production sites of the globally operating customers.

Carl Zeiss Optronik GmbH is reporting extraordinarily dynamicdevelopment in the saturated market for opto-electronic modulesand sub-systems. This success can be attributed to the mid-termstrategy of moving away from the manufacture of sensors to thedelivery of subsystems.

Carl Zeiss is continuing to expand its market dominance and technological leadership in planetariums. Newly developed laserprojection systems, for example, allow unique display possibilitieson the planetarium dome.


Business developments in the Opto-Electronic Systems Group(OES) were marked by strong growth, with revenue increasing17 percent to EUR 229 million and a significant rise in earn-ings. The young Display Technologies Division performed particularly well with its systems for digital projection andoptronics. The Planetarium and Camera Lens Divisions assert-ed their positions in the market. A new factory in China issupporting the dynamic development of display technologiesat Carl Zeiss.

Opto Electronic Systems Group

Light makes information visible

Growing with Digital Displays

Business with digital projection optics was

the most important driver of growth for OES.

Revenues from these products increased by

almost fifty percent during the reporting

year. In response to rapidly growing volumes,

the Display Technologies Division was created

at the beginning of the fiscal year from a

business unit with the same name. Earnings

also rose despite the high investments in the

expansion. The market for digital projection

systems is developing with extraordinary

speed. The division considerably increased

its capacities with the opening of its own

production facility in Suzhou, China (near

Shanghai) in May 2004. Carl Zeiss now man-

ufactures its display systems where its most

important customers and suppliers have their

production centers. Here, increased volume

is possible this year in addition to expanded

capacities.

63

DLP rear projection TV systems

with optical modules from Carl

Zeiss offer outstanding brightness

and rich contrast

Compact performance: optical

modules for digital projectors in the

“Field Lens Design™” patented for

Carl Zeiss

Breakthrough in Projectors

Digital projectors and rear-projection TV

systems have now made the breakthrough to

the mass private consumer market. In sys-

tems with large screen diagonals, digital light

processing technology won the upper hand

from the two competing processes. The

trigger of this success was a substantial cost

reduction for these systems resulting from

the introduction of the latest generation of

projection components. Important electronics

suppliers, such as Samsung, HP, Thomson,

Philips and Sharp, number among the cus-

tomers for projection systems from Carl Zeiss.

Fierce competition between manufacturers in

the USA and South Korea is emerging on the

projector market.

Planetariums Hold Their Ground

A stable business trend enabled planetariums

to once again post good results. The market

for star projections is stagnating as a result

of cutbacks in public budgets triggered by

the current subdued trend in the economy. In

addition to fiscal constraints for educational

projects, the most important market, the USA,

is also influenced by unfavorable currency

developments. A large planetarium utilizing

the latest technology opened in Hamburg,

Germany during the reporting year. Another

three large projects are currently being in-

stalled in Europe and Asia.

Small Domes – Large Images

The most recent new development in plane-

tariums is a digital, all-dome projection system

for dome diameters of 6 – 8 meters. Systems

of this size are ideal for presentations to small

groups, e.g. school classes. The projection

transforms the dome into a movie screen.

The projectors are specially-adjusted ZEISS

display systems from the Display Technologies

Division. A prototype of this system with a

mobile, inflatable dome has been presented

in several countries.


Changeover Complete

The Camera Lens Division introduced several

important projects during the reporting year.

It was able to expand its global leadership in

lenses for professional movie cameras. As ex-

pected, overall business leveled off. Earnings

were once again better than the previous

year. The transition from analog to the digital

market has also been completed. Business

with partner Sony in the field of digital cam-

eras and camcorders once again increased.

Up to one million camera and video fans

around the world purchase a Sony camera

with a ZEISS lens every month.

Sony digital cameras transport

the name Carl Zeiss to millions of

photo fans all over the world

Hollywood Bound

Carl Zeiss reinforced its position as the lead-

ing provider of lenses for professional movie

cameras. DigiZoom was the first ZEISS zoom

lens for digital systems in this segment of

the market. All major productions are still

recorded on 35 mm film. The creative possi-

bilities and long-term economic efficiency of

this format remains unparalleled. The new

MasterPrime line, the most powerful lenses in

their class, was introduced for these systems.

Brand Revival

A new camera generated significant interest

towards the end of the fiscal year – and also

revived the Zeiss Ikon® brand. It is the basis

of a lens system in which advanced and

sophisticated features of movie lenses were

transferred to 35 mm cameras. Designed

around a universal lens connector, the high-

quality camera system is multifaceted and

maintains its value.

The division also signed an agreement with

mobile communications specialist Dialog

Semiconductor, based in Kirchheim/Teck,

Germany, to develop compact camera

modules for mobile telephones.

“Optics from Carl Zeiss play a key role in our product strategy for digital cameras and camcorders. Their performance is outstanding,and they enjoy a reputation of being the best possible choice for the exacting consumer.”

Shoji Nemoto, Vice President, Sony Corporation, Tokyo, Japan

President of Digital Imaging Company and IT & Mobile Solutions Network Company

65

The Zeiss Ikon® camera system

with high-performance lenses

from Carl Zeiss mark the revival

of a brand steeped in tradition

The hand-held Nestor® instrument

is used for observation and

determining target coordinates

Optronics Moving Forward

The Optronics Division once again increased

its business volume. Revenue improved clearly,

with more incoming orders than the year

before. The major momentum originated out-

side Germany. Unlike other industries, this

defense-oriented business is only marginally

affected by its direct economic environment.

Furthermore, it is based on relatively long

product life cycles. The rising number of

foreign deployments by the German military

and allied NATO states improved the overall

conditions for the division. Equipment needs

have also changed as a result of the new

deployment scenarios. New market potential

evolved from border control and internal

security. The division was particularly success-

ful with optronic systems for reconnaissance

vehicles, submarines and border surveillance

systems. It was able to secure important

large projects despite tough international

competition.

Carl Zeiss GroupHighlights 66

History Lessons

from the Ocean Floor

Delving into the ocean floor

The Japanese subsidiary of Carl Zeiss AG com-

pleted equipping the Usa Marine Biological

Institute at Kochi University with 51 research

microscopes – including the LSM 510 NLO

confocal laser scanning microscope. The mi-

croscopes are used to examine soil samples

obtained from the ocean floor. Researchers

gather information on the formation of the

earth from the composition of the samples.

The composition of the layers is not the only

thing that will be closely studied. Fossils and

plankton captured in the sediment will also

be examined under the microscope.

Highlights of Fiscal Year 2003/2004

Partnership with the University of

Moscow

Carl Zeiss signed a contract with the University

of Moscow to promote science and education

in Russia. The objective is to develop new,

optical technologies for biology, bio-tech-

nology, physics and medicine, disciplines in

which scientists in Moscow are considered

pioneers. Furthermore, the partnership

will create special education programs for

students. The five-year project was agreed

upon in September 2003.

The University of Moscow and

Carl Zeiss conduct research to-

gether. Dr. Victor A. Sadovnichy,

President of the University of

Moscow (left), and Dr. Norbert

Gorny, Member of the Board at

Carl Zeiss, signed the cooperation

contract

Namibia: Help for Self-help

Dr. Jürgen Lautermann (left) treats hearing-impaired

youths in Namibia using an OPMI® 1 FC surgical

microscope and is gradually training and incorporat-

ing local hospital personnel

Rural regions in Namibia will be able to help

themselves treat ear, nose and throat illnes-

ses. It is an ambitious goal in which German

specialists train local doctors and nurses to

treat young hearing impaired patients. Con-

veying knowledge of diagnostics and therapy

is the only way to help those who want to

help themselves. It is particularly important in

Namibia where there are only two ENT doc-

tors and few specialists. Carl Zeiss supported

the pilot project by providing an OPMI® surgi-

cal microscope in October 2003.

67

Mars Magnifier

The “Mars Express” probe is equipped with

a high-resolution mirror tele lens built by

Carl Zeiss in Jena. It will be used in a special

stereo camera to systematically map the

surface of a planet for the first time using

high-resolution, 3D color photos. The lens

works like a telescope and can precisely iden-

tify boulders the size of a garage or layers

of rock. The resolution of the lens is approxi-

mately ten meters at an altitude of 250 kilo-

meters. The probe is now on location and

returning pictures with outstanding quality.

The camera on Mars Express

delivers razor-sharp images of

Phobos, one of Mars’ moons

(Photo: Copyright ESA/DLR/FU

Berlin (G. Neukum))

Carl Zeiss Lecture 2004

Prof. Dr. Roger Tsien is the winner of the

award known as the Carl Zeiss Lecture, the

highest scientific commendation granted by

the German Association for Cell Biology (DGZ).

The DGZ presented the award donated by

Carl Zeiss to the scientist from the University

of California, San Diego in La Jolla, at its

annual meeting in Berlin in March 2004.

Tsien played a key role in the development

of fluorescence methods. One of his most

significant contributions, the determination

of cell structures and their functions with

“green fluorescent protein”, is one of the

most important aids used in making single

molecules in a cell visible. Every year, the

DGZ uses the Carl Zeiss Lecture to honor

outstanding performances in cell biology in

light and electron microscopy.

Winner of the 2004 Carl Zeiss

Lecture: Prof. Dr. Roger Tsien

Environmental Protection and Health &

Safety Certified

Using synergies and simplifying processes

were the objectives for the introduction of

a uniform management system for environ-

mental protection and health & safety at

Carl Zeiss AG’s largest facility in Oberkochen,

Germany. The efforts bore fruit in April 2004.

Following a joint audit, the Oberkochen

Service Center received both environmental

and health & safety certification as per

ISO 14001 and OHSAS 18001.

Many people are involved in

environmental protection and

health & safety – their success

is certified


Production in China

Carl Zeiss’ first production site in China

opened in May 2004. Carl Zeiss produces

large volumes of optic modules for digital

projectors, and later also for rear-projection

TVs at the 3000 square meter facility located

in Suzhou, about 80 km west of Shanghai.

A wholly-owned subsidiary of Carl Zeiss

Jena GmbH, Carl Zeiss Display Technologies

(Suzhou) Co. Ltd. was founded in 2003.

By the end of 2004, production increased

to 25,000 optic modules per month at the

100-employee factory.

Professorship Financed

A professor for Aalen (from left): Assistant Secretary

Christoph Keller, new endowed professor Dr. Rainer

Börret, Prof. Dr. Dr. Ekbert Hering, Director of the

Aalen University of Applied Sciences, and President

and CEO of Carl Zeiss Dr. Dieter Kurz

Carl Zeiss places great emphasis on training

qualified junior personnel in optical technolo-

gies. This close cooperation with universities

and institutes of higher learning boasts a

long tradition at the company. In June 2004,

Carl Zeiss reached an agreement with the

University of Applied Sciences in Aalen to

finance an endowed professorship for optical

production technologies with a focus on

aspheric optics for a period of four years. It

will be headed by Prof. Dr. Rainer Börret, a

former long-time employee at Carl Zeiss.

The new chair is the highlight of more than

40 years of cooperation between the univer-

sity and Carl Zeiss.

Carl Zeiss Award for L.V. Prasad

The L.V. Prasad Institute in Hyderabad, India,

has been honored with the Carl Zeiss Award

for Excellence. The institute was singled out

in recognition of its initiatives and contribu-

tions to eye care in India and in developing

countries in Southeast Asia. L.V. Prasad also

supports training of eye care specialists in the

use of the most modern instruments. Further-

more, the best graduate each year receives a

scholarship. Carl Zeiss supports the institute

in a number of projects.Professor Ravi Thomas, Director of

L.V. Prasad Institute, receives the

Carl Zeiss Award for Excellence

from Ulrich Krauss, Carl Zeiss

Meditec AG

Business openings and other im-

portant festivals in China are

greeted with the traditional lion’s

dance. The lion stands for happi-

ness and strength. Member

of the Board, Dr. Norbert Gorny

and Zhang Yihong, responsible for

public relations at the Suzhou In-

dustrial Park (from left), symboli-

cally paint the eye of the lion to

awaken its spirit

69

Gold for GageMax

GageMax, the measuring machine for pro-

duction integration, is scoring increasing

success after another in Eastern Europe. The

Industrial Metrology Group received a gold

medal at the International trade fair in Poz-

nan, Poland in June 2004 for the machine

which is used for in-line measurements. The

most important trade fair in Poland identified

GageMax as one of the outstanding techni-

cal innovations of the year.

Carl Zeiss Research Award Presented

Professor Mark Kasevich received the 2004

Carl Zeiss Research Award for his outstanding

achievements in basic research and applica-

tions in optics. The physicist from Stanford

University in California is particularly interest-

ed in experimental atomic and laser physics

and specific procedures in diluted, ultra-cold

liquid quantities. He has been involved with

atom interferometry for more than ten years.

Kasevich received the 2004 Carl Zeiss Research

Award in June for his research on precision

atomic interferometers. The award is present-

ed every two years. There have been a total

of seven winners.

Prof. Mark Kasevich is the current

winner of the Carl Zeiss Research

Award

The GageMax production system

received recognition on the Polish

market

Award-winning Innovations

The Carl Zeiss Innovation Days took place at

the beginning of July in Paderborn, Germany,

under the motto “Managing the Innovation

Pipeline”. Approximately 150 researchers,

managers and sales and marketing experts

from all areas of Carl Zeiss met to build net-

works, exchange knowledge and learn from

each other. The winners of the Innovation

Award 2004 were honored during the event.

79 Teams submitted projects in the Innovative

Business Design, Leading Edge Technology,

High Risk Project, Successful Failure and

Short Time to Market categories.

The winners of the Innovation

Award with President and CEO

Dr. Dieter Kurz (left), Member of

the Board Dr. Michael Kaschke

(third from right) and Dr. Augustin

Siegel (right), Senior Vice Presi-

dent of Corporate Research and

Technology.


Center for Microscopic Image

Processing

Gaining knowledge of new technologies in

microscopy for digital imaging systems and

image analysis and sharing it with scientists

in India is the main goal of the Center for

Cellular and Molecular Biology (CCMB) in

Hyderabad, India. The new facility will enable

the CCMB to become a knowledge center in

microscopy and imaging systems and to offer

a forum with which the CCMB will be able

to distinguish itself as a test center for new

microscopes and imaging systems in India.

Samsung Prefers Carl Zeiss

Carl Zeiss is a member of the club (from left): Albrecht

Richter and Dr. Franz von Falkenhausen, Carl Zeiss,

J.K. Kim and Yonghoy Kim, Samsung Electronics,

Visual Display Division

The Display Technologies Division has been

part of Samsung’s Digital Members Club

since September 2004. This makes Carl Zeiss

one of the preferred suppliers for the micro-

display projection business at South Korean-

based Samsung. Membership enables partici-

pation in promising key projects such as the

mini LED projector, or rear-projection TVs,

for example. Furthermore, members receive

early information on new project invitations

to tender and the most up-to-date market

developments.

Oscar for Inventions

The Microscopy Group won its third consecu-

tive R&D Award in July 2004. The prize pre-

sented by the leading US research and tech-

nology magazine honors the innovative

PlasDIC microscopic contrasting procedure.

For the first time, it is possible to use cost-

effective, plastic slides – without losing infor-

mation – for observation of living cells or

for cell micromanipulation on a microscope.

PlasDIC generates a larger depth of field than

conventional contrasting procedures, enabling

users to quickly assess both thin and thick

objects at a single glance.

Photomicrograph of human cells

from the lining of the mouth

1. without PlasDIC (left),

2. with PlasDIC (right)

Dr. Norbert Gorny, Member of the

Board at Carl Zeiss, and Kapil

Sibla, the Indian Minister for

Science and Technology, opened

the Center for Microscopic Image

Processing at the CCMB in

Hyderabad, India in August 2004

71

A Star Is Born

Preparations for the launch of the Zeiss Ikon camera:

Dr. Winfried Scherle (standing) and Larry Hansen

(right) from Carl Zeiss, Cosina President, Hirofumi

Kobayashi (middle) and Keiji Kato from Cosina

For the first time since 1972, there is now a

camera with the name Zeiss Ikon®. Working

closely with camera manufacturer Cosina,

Carl Zeiss created a rangefinder camera with

both peak performance and image quality.

The heart of the new camera is a line of

lenses with unique features. Significant

know-how in creating the optimal picture

was incorporated in the camera design. The

team produced an instrument for enthusiastic

photographers. The Zeiss Ikon premiered at

Photokina in Cologne in September 2004.

The name says it all: Zeiss Ikon

The Clearest Skies

The Universarium IX projector for the new Hamburg

dome

Nowhere is Hamburg’s night sky more beau-

tiful than in the North German city’s new

planetarium. One of the most popular plane-

tariums in Germany was closed for more than

a year while it underwent comprehensive

renovations. A new 21 meter dome provides

an ideal projection surface. The images of

the celestial bodies which cannot be distin-

guished from their natural counterparts are

created in a Universarium IX projector specifi-

cally configured for Hamburg. The new

facility was officially inaugurated in October

2004. The number of visitors in the first

months has doubled compared to previous

years.

73

Carl Zeiss AGBoard of ManagementSupervisory Board

Carl Zeiss AGBoard of Management 74

Board of Management

Dieter Kurz, Dr. rer. nat.

Aalen

President and CEO, and Labor Director

Member of the Board responsible for Semi-

conductor Technology, Industrial Measuring

Technology, Strategic Corporate Develop-

ment, Corporate Communications, Corporate

Human Resources Management, Corporate

Auditing, and Legal Affairs and Patents

Norbert Gorny, Dr. rer. nat.

Westhausen

Member of the Board responsible for Micro-

scopy, Opto-Electronic Systems, the Service

Centers, Information Technology and Central

Procurement, Quality and Processes

Michael Kaschke, Dr. sc. nat.

Oberkochen

Member of the Board responsible for Con-

sumer Optics, Medical Systems, Corporate

Finance/Controlling, and Research and

Technology

Board of Management and Supervisory Board

of Carl Zeiss AG

75Carl Zeiss AG

Supervisory Board

Supervisory Board of Carl Zeiss AG

Tilman Todenhöfer

Stuttgart

Chairman

Chairman of the Foundation Council of the

Carl Zeiss Stiftung, Heidenheim an der Brenz

and Jena

Personally Liable Shareholder of Robert Bosch

Industrietreuhand KG, Stuttgart

Jürgen Dömel 2) 3)

Jena

Deputy Chairman

Chairman of the Group Employee Represen-

tative Council of Carl Zeiss AG, Oberkochen;

Chairman of the Employee Representative

Council of Carl Zeiss Jena GmbH, Jena

Dr. Martin Allespach 2) 3)

Stuttgart

District Secretary of IG Metall union, District

Management, Baden-Württemberg, Stuttgart

Dr. Michael Claus 2) 3)

Aalen

Research Manager, Imaging Technology

Carl Zeiss AG, Oberkochen

Prof. Dr. Adolf G. Coenenberg 2)

Stadtbergen

Chair of Business Administration, Auditing

and Controlling at the University of Augsburg

Wolfgang Grothe 2) 3)

Aalen

Senior Vice President, Corporate Taxes

Carl Zeiss AG, Oberkochen

Roland Hamm 2) 3)

Aalen

First Authorized Representative of IG Metall

union, Administration Office Aalen, Aalen

Hans-Jürgen Heinicke 2) 3)

Aalen

Technical Services Manager, Carl Zeiss

Optronics GmbH, Oberkochen

Prof. Dr. Michael Hoffmann-Becking 1)

Düsseldorf

Attorney

Hermann-Josef Lamberti 2)

Königstein/Taunus

Member of the Board of Managing Directors,

Deutsche Bank AG, Frankfurt am Main

Dr. Hansjörg Manger 2)

Uhldingen-Mühlhofen

Former Managing Director,

Robert Bosch GmbH, Stuttgart

Dr. Michael Rogowski 2)

Heidenheim an der Brenz

President of the Bundesverband der

Deutschen Industrie e.V., Berlin;

Chairman of the Shareholders’ Committee

and the Supervisory Board, J.M. Voith AG,

Heidenheim an der Brenz

Dr. Georg Seyfarth 1)

Düsseldorf

Attorney

Prof. Dr. Klaus-Dieter Vöhringer 2)

Baden-Baden

Former Member of the Board of Managing

Directors, DaimlerChrysler AG, Stuttgart

1) until August 10, 20042) as of August 11, 20043) Employee Representatives

77

Carl Zeiss GroupMajor Affiliated and Associated Companies

Carl Zeiss GroupMajor Affiliated and 78Associated Companies

Europe

Germany Carl Zeiss 3D MetrologyServices GmbH AalenAalenC: EUR 103 75.1%

Carl ZeissBeteiligungs-GmbHOberkochenC: EUR 27,400 100%

Carl Zeiss FinancialServices GmbHOberkochenC: EUR 500 100%

Carl Zeiss IndustrielleMesstechnik GmbHOberkochenC: EUR 20,000 100%

Carl Zeiss Jena GmbHJenaC: EUR 6,187 100%

Carl Zeiss Jena Grundstücks GmbH & Co. KGJenaC: EUR 1,000 100%

Carl Zeiss Laser Optics GmbHOberkochenC: EUR 1,000 100%

Carl Zeiss Meditec AGJenaC: EUR 28,417 71.9%

Carl Zeiss Meditec SystemsGmbHPirmasensC: EUR 315 100%

Carl Zeiss NTS GmbHOberkochenC: EUR 515 100%

Carl Zeiss Oberkochen Grundstücks GmbH & Co. KGOberkochenC: EUR 1,000 100%

Carl Zeiss Optronics GmbHOberkochenC: EUR 6,600 100%

Carl Zeiss Optronics Wetzlar GmbHWetzlarC: EUR 26 100%

Carl Zeiss Schönkirchen GmbHSchönkirchenC: EUR 3,579 100%

Carl Zeiss SMS GmbH JenaC: EUR 2,500 100%

Carl Zeiss SMT AG OberkochenC: EUR 49,985 100%

Carl Zeiss Vision GmbHHallbergmoosC: EUR 511 100%

Hensoldt AGWetzlarC: EUR 5,800 100%

Hensoldt Grundstücks GmbH & Co. KGWetzlarC: EUR 1,000 100%

Marwitz & Hauser GmbHAalenC: EUR 8,436 100%

Prontor-WerkAlfred Gauthier GmbHBad WildbadC: EUR 3,579 100%

Austria Carl Zeiss GmbHViennaC: EUR 1,235 100%

Belarus Zeiss-Belomo TOOMinskC: USD 4,937 60%

Belgium Carl Zeiss N.V. – S.A.ZaventemC: EUR 551 100%

Czech Carl Zeiss s.r.o.Republic Prague

C: CZK 26,450 100%

France Carl Zeiss S.A.S.Le PecqC: EUR 5,800 100%

Carl Zeiss SMT S.à.r.l.Rueil MalmaisonC: EUR 375 100%

Hungary Carl Zeiss Hungaria Optikai Kft.MátészalkaC: HUF 1,639,030 100%

Italy Carl Zeiss S.p.A.AreseC: EUR 4,000 100%

Netherlands Carl Zeiss B.V.SliedrechtC: EUR 2,723 100%

Norway Carl Zeiss ASLØrenskogC: NOK 12,000 100%

Poland Carl Zeiss Sp.zo.o.PoznanC: PLN 3,515 100%

Romania Carl Zeiss Instruments s.r.l.BucharestC: ROL 17,750 100%

Slovenia Carl Zeiss d.o.o.LjubljanaC: SIT 2,100 100%

Spain Carl Zeiss S.A.Tres CantosC: EUR 1,435 100%

Sweden Carl Zeiss ABStockholmC: SEK 6,100 100%

Switzerland Carl Zeiss AGFeldbachC: CHF 1,500 100%

Optiswiss AGBaselC: CHF 210 100%

United Kingdom Carl Zeiss Ltd.Welwyn Garden CityC: GBP 1,570 100%

Carl Zeiss SMT Ltd.CambridgeC: GBP 2,700 100%

Major Affiliated and Associated Companies by Region

79

America

USA Carl Zeiss IMT CorporationMinneapolisC: USD 0.01 100%

Carl Zeiss Inc.ThornwoodC: USD 4,800 100%

Carl Zeiss Meditec Inc.DublinC: USD 0.02 100%

Carl Zeiss Microlmaging Inc.ThornwoodC: USD 0.02 100%

Carl Zeiss Optical Inc.ChesterC: USD 0.01 100%

Carl Zeiss SMT Inc.ThornwoodC: USD 0.1 100%

Carl Zeiss Surgical Inc.ThornwoodC: USD 0.002 100%

Cellomics Inc.PittsburghC: USD 882 47.9%

Canada Carl Zeiss Canada Ltd.TorontoC: CAD 6,170 100%

Argentina Carl Zeiss Argentina S.A.Buenos AiresC: ARS 0.008 99.9%

Brazil Carl Zeiss do Brasil Ltda.São PauloC: BRL 5,319 100%

Mexico Carl Zeiss de México S.A. de C.V.México D.F.C: MXN 14,030 100%

Africa

South Africa Carl Zeiss (Pty.) Ltd.RandburgC: ZAR 7,825 100%

Asia

China Carl Zeiss Display Technologies (Suzhou) Co. Ltd.SuzhouC: EUR 3,780 100%

Carl Zeiss IMT (Shanghai)Co. Ltd.ShanghaiC: USD 400 100%

Carl Zeiss Shanghai Co. Ltd.ShanghaiC: USD 200 100%

Special Carl Zeiss Far East Co. Ltd.administration Kowloon

region Hong Kong C: HKD 14,000 100%

India GKB Hi-Tech Lenses Ltd.MapusaC: INR 13,443 22.9%

Japan Carl Zeiss Co. Ltd.TokyoC: JPY 594,000 100%

Carl Zeiss Meditec Co. Ltd.TokyoC: JPY 50,000 100%

Malaysia Carl Zeiss Sdn. Bhd.Kuala LumpurC: MYR 500 100%

Singapore Carl Zeiss India Pte. Ltd.SingaporeC: SGD 750 100%

Carl Zeiss Pte. Ltd.SingaporeC: SGD 2,000 100%

South Korea Carl Zeiss Co. Ltd.SeoulC: KRW 2,720,000 100%

Thailand Carl Zeiss Co. Ltd.BangkokC: THB 3,000 49%

Australia

Australia Carl Zeiss Pty. Ltd.North RydeC: AUD 1,051 100%

New Zealand Carl Zeiss (N.Z.) Ltd.AucklandC: NZD 4 100%

Major affiliated and associ-ated companies: Status as of Sept. 30, 2004The percentage shares ofcapital given represent thoseshares held by the enterprisesas defined by the German Commercial Code,§ 285 No. 11

Not included in the Group’sfinancial statements

C = capital in thousands ofEUR or other currency

81

Carl Zeiss GroupConsolidated Financial Statements

Carl Zeiss GroupConsolidated Balance Sheet 82

Consolidated Balance Sheet as of September 30, 2004

Assets Notes Sept. 30, 2004 Sept. 30, 2003

(in thousands (in thousandsof EUR) of EUR)

Fixed assets 8

Intangible assets 31,580 15,294

Tangible assets 362,023 363,959

Financial assets 72,671 39,315

466,274 418,568

Current assets

Inventories 9 570,870 535,529

Advance payments from customers –175,059 –135,545

395,811 399,984

Receivables and other assets 10

Accounts receivable 402,479 356,477

Other receivables and other assets 73,263 95,507

475,742 451,984

Funds 11 734,724 533,204

1,606,277 1,385,172

Prepaid expenses 12 21,826 19,461

2,094,377 1,823,201

83

Liabilities Notes Sept. 30, 2004 Sept. 30, 2003


Equity 13

Subscribed capital (last year: proportionate share of Carl Zeiss Stiftung) 120,000 175,000

Capital reserves 52,770 –

Revenue reserves 76,872 61,148

Consolidated net income 137,373 68,783

Minority interests 32,709 32,682

419,724 337,613

Special items with an equity portion 14 – 11

Provisions 15

Provisions for pension plans and similar commitments 865,388 844,209

Other provisions 515,458 449,865

1,380,846 1,294,074

Liabilities 16

Loans 57,168 –

Liabilities to banks 5,487 7,997

Accounts payable 128,317 82,774

Other liabilities 77,224 75,340

268,196 166,111

Deferred income 25,611 25,392

2,094,377 1,823,201

Carl Zeiss GroupConsolidated Equity Statement 84

Statement of Changes in Consolidated Equity

during the 2003/2004 Fiscal Year

Subscribed Capital Generated Cumulative Consolidatedcapital reserves consolidated miscellaneous equity

equity consolidated of parentresult company

(in thousands (in thousands (in thousands (in thousands (in thousandsof EUR) of EUR) of EUR) of EUR) of EUR)

As of Oct. 1, 20031) 120,000 52,770 146,603 1,923 321,296

Dividends – – – – –

Other changes – – –5,663 – –5,663

Consolid. income for the year – – 72,546 – 72,546

Miscellaneous consolidated result2) – – – –1,164 –1,164

Consolidated total result – – 72,546 –1,164 71,382

As of Sept. 30, 2004 120,000 52,770 213,486 759 387,015

1) after conversion of the operating enterprise

Carl Zeiss to a stock corporation, including

valuation changes due to tax-basis elimina-

tions (deletion of § 308 Para. 3, German

Commercial Code (HGB)) and goodwill deduc-

tion

2) in particular adjustments for foreign curren-

cy translation

85

Minority Cumulative Minority Consolidatedcapital miscellaneous interests equity

consolidatedresult

(in thousands (in thousands (in thousands (in thousandsof EUR) of EUR) of EUR) of EUR)

32,682 – 32,682 353,978

–359 – –359 –359

–4,123 – –4,123 –9,786

4,528 – 4,528 77,074

– –19 –19 –1,183

4,528 –19 4,509 75,891

32,728 –19 32,709 419,724

Carl Zeiss GroupFixed Asset Movement Schedule 86

Acquisition / Manufacturing CostAs of Currency Additions

Oct. 1, 2003 differences

(in thousands (in thousands (in thousandsof EUR) of EUR) of EUR)

Intangible assets

Industrial property rights and similar rights and assets,and licenses in such rights and assets 19,644 –33 29,593

Goodwill 29,087 – –

Payments on account 789 – 75

49,520 –33 29,668

Tangible assets

Land, land rights and buildings,including buildings on third-party land 309,156 –1,370 4,122

Plant and machinery 511,953 –807 19,151

Other fixtures and fittings, tools and equipment 371,656 –1,214 48,455

Payments on account and construction in progress 15,661 –81 16,275

1,208,426 –3,472 88,003

Financial assets

Interests in affiliated companies 23,458 –151 17,277

Loans to affiliated companies 69 – 2,032

Investments in associated companies – 21 9,955

Other investments 15,359 –381 12,235

Long-term investments 880 –1 37

Other loans 19,253 –22 9,409

59,019 –534 50,945

1,316,965 –4,039 168,616

Fixed Asset Movement Schedule for the 2003/04 Fiscal Year

87

Accumulated Book value Book value Depreciation /Disposals Transfers As of depreciation Sept. 30, 2004 Sept. 30, 2003 Write-ups = Z

Sept. 30, 2004 during fiscal year

(in thousands (in thousands (in thousands (in thousands (in thousands (in thousands (in thousandsof EUR) of EUR) of EUR) of EUR) of EUR) of EUR) of EUR)

4,433 810 45,581 14,401 31,180 3,167 2,321

17,682 – 11,405 11,080 325 11,338 61

– –789 75 – 75 789 –

22,115 21 57,061 25,481 31,580 15,294 2,382

4,358 201 307,751 163,771 143,980 124,339 8,426

27,295 3,226 506,228 419,820 86,408 106,478 38,322

41,624 9,994 387,267 270,308 116,959 117,481 50,365

91 Z

3,737 –13,442 14,676 – 14,676 15,661 –

77,014 –21 1,215,922 853,899 362,023 363,959 97,113

91 Z

11,589 –26 28,969 349 28,620 23,108 –

580 – 1,521 – 1,521 69 –

1,508 1,421 9,889 1,349 8,540 – –

100 –1,395 25,718 10,951 14,767 2,884 92

– – 916 118 798 762 –

3,497 – 25,143 6,718 18,425 12,492 69

17,274 – 92,156 19,485 72,671 39,315 161

116,403 – 1,365,139 898,865 466,274 418,568 99,656

91 Z

Carl Zeiss GroupConsolidated Statement of Income 88

Consolidated Statement of Income

from October 1, 2003 to September 30, 2004

Notes 2003/04 2002/03


Sales 19 2,134,596 2,028,938

Increase or decrease in finished goods and work in progress 28,257 –17,068

Own work capitalized 42,183 50,678

Total operating performance 2,205,036 2,062,548

Other operating income 20 177,740 164,286

Cost of materials 21 790,068 731,908

Personnel expenses 22 847,799 822,538

Depreciation of intangible assets and tangible assets 23 99,495 120,070

Other operating expenses 24 523,512 505,477

Result from investments in other companies 25 279 2,315

Income from other investments and long-term loans 281 409

Depreciation of financial assets and investments held as current assets 26 2,352 9,318

Net interest income 27 12,699 11,832

Results from ordinary activities 132,809 52,079

Taxes on income 28 52,412 32,691

Other taxes 3,323 3,525

Income for the year 77,074 15,863

Profit carried forward from previous year 68,584 61,106

Withdrawals from revenue reserves 1,314 7,102

Transfers to revenue reserves 5,071 12,866

Minority interests in income 4,528 2,422

Consolidated net income 137,373 68,783

89

2003/04

(in thousandsof EUR)

Income for the year 77,074

Depreciation of fixed assets net of post-capitalization/write-ups 96,553

Increase in provisions 90,849

Other non-cash expenses 1,508

Loss from the disposal of fixed assets (balance) 2,976

Decrease in inventories 1,308

Increase in receivables –52,661

Decrease in other assets 18,319

Increase in payables 46,326

Increase in other liabilities 3,714

Cash flows from operating activities 285,966

Proceeds from the disposal of tangible and intangible assets 13,161

Purchase of tangible and intangible assets –110,229

Proceeds from the disposal of financial assets 6,497

Acquisition of financial assets –50,945

Increase in investments held as current assets (terms longer than 90 days) –124,270

Cash flows from investing activities –265,786

Cash payments to minority interests –359

Cash proceeds from issuing bonds/loans and short or long-term borrowings 58,616

Cash repayments of short or long-term borrowings –3,127

Cash flows from financing activities 55,130

Change in cash funds from cash relevant transactions 75,310

Change in cash funds from exchange rate movements 1,960

Cash funds as of October 1, 2003 370,161

Cash funds as of September 30, 2004 447,431

Consolidated Cash Flow Statement

from October 1, 2003 to September 30, 2004

Carl Zeiss GroupConsolidated Cash Flow Statement

Carl Zeiss GroupNotes to the Consolidated 90Financial Statements

3 Changes in the Principles of

Accounting and Valuation

As a result of the deletion of § 308, Para. 3

German Commercial Code, the option to

transfer tax values and/or special items with

an equity portion included in the individual

statements to the consolidated financial

statements is no longer applicable. For this

reason, the inclusion of these values and

special items in the consolidated financial

statements has been discontinued for the

first time. This has resulted in an increase in

fixed assets of EUR 27,764,000. The adjust-

ments are shown in revenue reserves and do

not affect the operating result.

4 Scope of Consolidation

The consolidated financial statements of Carl

Zeiss AG include 22 domestic and 35 foreign

companies, the business activities of which

are conducted by Carl Zeiss AG or in which it

directly or indirectly holds a majority interest.

In addition, one foreign investment has been

valued using the equity method.

Subsidiaries which are of minor importance

for the net assets, financial position and re-

sults of operations of the Carl Zeiss Group

have not been included in the financial state-

ments.

One company is no longer included in the

scope of consolidation. This change does

not markedly impair the comparability with

the Group’s financial statements from the

previous year.

A list of the Group’s investment holdings is

filed with the Commercial Register of the

District Court in Aalen.

Principles and Methods

1 Conversion of the Operating Enter-

prise Carl Zeiss to a Stock Corporation

With retroactive economic effect as per

October 1, 2003, the conversion of the oper-

ating enterprise Carl Zeiss to the stock corpo-

ration Carl Zeiss AG became legally effective

with its entry in the Commercial Register on

July 1, 2004. The sole shareholder of Carl

Zeiss AG is the Carl Zeiss Stiftung domiciled

in Heidenheim an der Brenz and Jena, Germany.

2 General Accounting Principles

The consolidated financial statements of Carl

Zeiss AG, Oberkochen, comprising the Con-

solidated Balance Sheet, the Consolidated

Statement of Income, the Consolidated Equity

Statement, the Consolidated Cash Flow

Statement and the Notes to the Consolidated

Financial Statements have been prepared in

accordance with the German Commercial

Code (HGB). In view of the planned application

of the International Financial Reporting

Standards (IFRS) to the consolidated financial

statements for the first time in the 2005/06

fiscal year and the harmonization of internal

and external accounting associated with it,

we have dispensed with business segment

reporting.

The consolidated financial statements have

been compiled in euros. Unless stated other-

wise, all amounts are given in thousands of

euros.

For the sake of clarity, individual items are

combined in the consolidated balance sheet

and the consolidated statement of income

and are shown separately in the Notes. The

method of total costs has been used for the

compilation of the consolidated statement of

income.

Notes to the Consolidated Financial Statements

for the 2003/04 Fiscal Year

91

In the consolidated statement of income, in-

tercompany sales and other internal earnings

have been offset against corresponding ex-

penses or have been reclassified as changes

in inventories or own work capitalized.

6 Currency Conversion

In the individual statements, receivables and

payables in foreign currencies are initially

valued at the rate applicable on the date of

transaction. Book losses resulting from

changes in foreign exchange rates are taken

into account by revaluation on the balance

sheet date.

All balance sheet items of the individual

financial statements compiled in foreign cur-

rencies and included in the consolidated

financial statements have been converted at

the mean exchange rates valid on the balance

sheet date. Currency exchange differences

resulting from the conversion of equity using

different exchange rates from those of the

previous year are taken into account in re-

venue reserves or minority interests without

affecting net income. The income and ex-

penses shown in the statements of income

have been converted at the average annual

exchange rate. The results for the year have

been converted at the mean exchange rate

valid on the balance sheet date. Any differ-

ences resulting from the conversion using the

average annual exchange rate and the mean

exchange rate valid on the balance sheet

date have been shown under other operating

expenses or other operating income.

7 Principles of Accounting and Valuation

The financial statements of the companies

included in consolidation have all been pre-

pared pursuant to German legal provisions

and in accordance with the accounting and

5 Principles of Consolidation

As part of the process of converting the op-

erating enterprise Carl Zeiss to a stock corpo-

ration, Carl Zeiss AG completely acquired its

assets and liabilities in exchange for the

granting of shares in the company. This creat-

ed, at Group level, the conditions for chang-

ing to the capital consolidation method pur-

suant to § 302 German Commercial Code, of

which use was also made. To the extent that

the net assets transferred to Carl Zeiss AG

also included investments in subsidiaries, the

application of the choice of method pursuant

to § 302 German Commercial Code means

that the previous capital consolidation using

the book value method pursuant to § 301,

Para. 1, No.1 (German Commercial Code)

and/or Art. 27 of the Introductory Law to

the German Commercial Code (EGHGB) can

continue to be used for these companies in

the consolidated financial statements of

Carl Zeiss AG. Accordingly, the remaining

goodwill of EUR 9,169,000 has been deduct-

ed from consolidated revenue reserves.

Interests of third parties in shareholders’

equity are included in minority interests in

the Group’s financial statements.

Receivables and payables between consoli-

dated companies have been offset against

each other. Any currency exchange differ-

ences arising are included in revenue reserves.

Intercompany trade profits resulting from

deliveries and services have been eliminated,

inasmuch as they are not of secondary im-

portance.

The deferred taxation principle has been ap-

plied to consolidation adjustments affecting

net income.


Inventories of raw materials, supplies and

merchandise for resale are valued at the low-

er of acquisition cost or current market price.

Unfinished and finished products are valued

at manufacturing cost. This includes not only

the cost of materials and wages, but also

adequate factory overhead costs for materials

and production.

An allowance is made for possible declines in

value caused by prolonged storage or re-

duced marketability; no adjustment is made

for unrealized losses.

Receivables and other assets are carried at

their face value. All perceivable default risks

are taken into account by means of individual

adjustments. To cover the general credit risk,

receivables have been reduced by a flat-rate

allowance for each country.

Investments held as current assets are capi-

talized at acquisition cost or the lower quoted

price valid on the balance sheet date.

The pension plan provisions and similar oblig-

ations of the domestic companies are based

on actuarial computations and the 1998 mor-

tality tables compiled by Dr. Klaus Heubeck.

They are set up at 6 % interest, with the

statutory method being used for pension

commitments covered by the “P82 neu” pen-

sion charter, and the present value method

of an expectancy being used for pension

commitments covered by the “Pension Strate-

gy 2000”. At foreign subsidiaries, provisions

for pension plans and similar obligations are

made on the basis of principles specific to

the country concerned.

Deferred taxes are stated for the timing

differences between the commercial balance

sheet and the tax balance sheet only if the

overall result is a provision.

valuation principles applicable to the Carl Zeiss

Group. Inasmuch as the financial statements

of the individual companies markedly depart

from these principles, the necessary adjust-

ments have been made. Pursuant to § 312,

Para. 5, German Commercial Code, these

adjustments have not been made for the

company valued at equity in the balance

sheet. For companies whose balance sheet

date differs from that of the Group’s balance

sheet, interim financial statements are used

as a basis.

Acquired intangible assets are capitalized at

acquisition cost and systematically depreciat-

ed. Acquired goodwill is depreciated over a

period of 10 years.

Tangible fixed assets are valued at acquisition

cost or manufacturing cost, less depreciation.

The manufacturing cost of the company-pro-

duced assets includes not only direct costs,

but also proportionate factory overhead costs

for materials and production. The declining

balance method is mainly used for deprecia-

tion by domestic companies, otherwise the

straight-line method. Foreign subsidiaries

mainly use the straight-line method for de-

preciation. Minor fixed assets are written off

completely in the year of acquisition. Extra-

ordinary depreciation is undertaken for fore-

seeable permanent reduction in value.

Investments in associated companies are val-

ued at equity using the book value method,

unless they are of minor significance for the

net assets, financial position and results of

operations of the Group. Other financial

assets are valued at acquisition cost or the

lower current value.

93

All payments received from customers are

shown as deductions from inventories.

The other provisions are sufficient to cover all

perceivable risks.

Liabilities are stated in the amount due for

repayment.

Notes to the Consolidated Balance Sheet

8 Fixed Assets

Changes in the individual items of the fixed

assets are shown in the fixed asset move-

ment schedule, with any currency differences

being given separately.

Sept. 30, 2004 Sept. 30, 2003


Raw materials and supplies 132,279 133,701

Unfinished goods,work in progress 289,841 244,638

Finished goods and goods for resale 136,981 153,176

Payments on account 11,769 4,014

Inventories 570,870 535,529

Advance payments from customers –175,059 –135,545

395,811 399,984

9 Inventories


The receivables from affiliated companies

result from Cash Management and from trade

deliveries and services provided by companies

not included in the consolidated financial

statements of Carl Zeiss AG.

Other assets also include accruals whose

amounts are, however, of minor importance.

10 Receivables and Other Assets

Sept. 30, including Sept. 30, including2004 those due 2003 those due

after more after morethan than

one year one year

(in thousands (in thousands (in thousands (in thousandsof EUR) of EUR) of EUR) of EUR)

Accounts receivable 402,479 10,710 356,477 7,549

Other accounts receivable and other assets

Receivables from affiliated companies 20,683 4,651 29,863 5,394

Receivables from companiesin which an investment is held 3,359 – 16,840 –

Other assets 49,221 10,775 48,804 8,200

73,263 15,426 95,507 13,594

475,742 26,136 451,984 21,143

95

Deferred taxation is due to time-limited

differences in results attributable to consoli-

dation measures. Other prepaid expenses

include pre-payments.

The securities held as current assets mainly

include fixed-interest-bearing loans and

shares in funds companies.

Liquid funds include checks, cash-in-hand

and bank balances.

11 Funds

Sept. 30, 2004 Sept. 30, 2003


Securities held as current assets 371,794 230,502

Liquid funds 362,930 302,702

734,724 533,204

12 Prepaid Expenses

Sept. 30, 2004 Sept. 30, 2003


Deferred taxation 10,252 7,690

Discount 1 1

Other prepaid expenses 11,573 11,770

21,826 19,461


13 Equity

After conversion of the operating enterprise

Carl Zeiss to a stock corporation, the sub-

scribed capital of Carl Zeiss AG amounts

to EUR 120,000,000. It is divided into

120,000,000 par-value stocks held by the

Carl Zeiss Stiftung. The capital reserves result

from the conversion of the operating enter-

prise Carl Zeiss to a stock corporation. In ad-

dition to the legal reserves of EUR 2,318,000,

revenue reserves also include retained earn-

ings from consolidated subsidiaries, credit

differences arising from capital consolidation,

consolidation adjustments pursuant to Art 27,

Introductory Law to the German Commercial

Code (EGHGB), valuation changes due to tax-

basis eliminations, and currency differences

resulting from capital consolidation and the

consolidation of intercompany balances. In

addition, goodwill resulting from capital con-

solidation has partly been deducted from

consolidated revenue reserves.

Minority interests cover third-party shares in

the equity of domestic and foreign sub-

sidiaries. Last year’s figure included EUR

5,886,000 of the capital and the reserves

of Carl Zeiss S.A.S., Le Pecq (France), as this

company was previously assigned to the

Group only on the basis of economic criteria.

All shares previously held by SCHOTT-Zeiss

France Holding S.à.r.l., Clichy (France), a

company consolidated in the SCHOTT Group,

were acquired in the reporting year.

The development of the consolidated equity

is shown in the equity statement, which is

based on the German Accounting Standard

No. 7 (DRS 7) of the Deutsche Rechnungs-

legungsstandards Committee e.V.

14 Special Items with an Equity Portion

As § 308 Para. 3, German Commercial Code,

has been deleted, special items with an

equity portion set up in individual statements

are no longer included in the consolidated

financial statements.

The amount shown for the previous year

includes solely special items required by

foreign regulations.

97

The provisions for pension plans include com-

mitments undertaken by Carl Zeiss AG and

various subsidiaries for current pensions and

for vested rights to future pension payments.

This item also includes the provisions made

by our US companies for the post-retirement

health-care liabilities.

Provisions for taxes include amounts for taxes

not yet finally assessed.

Other provisions mainly include amounts for

obligations in the personnel area, restructur-

ing, warranties, anticipated losses from pend-

ing business, price discounts and for various

other obligations and risks.

15 Provisions

Sept. 30, 2004 Sept. 30, 2003


Provisions for pension plans andsimilar commitments 865,388 844,209

Other provisions

Provisions for taxes 58,137 39,468

Other provisions 457,321 410,397

515,458 449,865

1,380,846 1,294,074


The loans cover a “private placement” by a

US subsidiary.

The liabilities to affiliated companies result

from Cash Management and from trade

deliveries and services provided by non-con-

solidated companies of the Carl Zeiss AG.

EUR 4,903,000 of the total liabilities is

secured by mortgages.

Liabilities for taxes, which are included in

other liabilities, amount to EUR 15,370,000

(previous year EUR 19,536,000). Liabilities

relating to social security come to EUR

8,902,000 (previous year EUR 8,981,000).

16 Liabilities

Sept. 30, including including Sept. 30, including including2004 those due those due 2003 those due those due

within after more within after moreone year than 5 years one year than 5 years

(in thousands (in thousands (in thousands (in thousands (in thousands (in thousandsof EUR) of EUR) of EUR) of EUR) of EUR) of EUR)

Loans 57,168 – 37,283 – – –

Liabilities to banks 5,487 844 3,714 7,997 3,042 3,714

Accounts payable 128,317 127,659 219 82,774 82,006 329

Other liabilities

Liabilibies to affiliated companies 16,980 16,980 – 11,799 11,799 –

Liabilities to companies in whichan investment is held 327 327 – 391 391 –

Other liabilities 59,917 48,342 49 63,150 60,020 1,546

77,224 65,649 49 75,340 72,210 1,546

268,196 194,152 41,265 166,111 157,258 5,589

99

18 Other Financial Obligations

During the fiscal year, expenses from leasing,

rental and similar agreements amounted to

EUR 41,481,000. They will probably remain

at a similar level for the next few years.

On September 30, 2004, obligations resulting

from capital spending plans, etc. existed in

the amount of EUR 32,414,000.

17 Contingent Liabilities

Sept. 30, 2004 Sept. 30, 2003


Notes payable 445 188

Liabilities on guarantees 13,235 21,237

attributable to affiliated companies 1,540 1,487

Liabilities from warranty contracts 734 327

Liabilities arising from the provisionof collateral for third-party liabilities 97 91


19 Sales

Sales have been achieved with precision-

mechanical, optical and electronic products

and can be divided by geographic areas as

follows:

20 Other Operating Income

This item includes foreign exchange gains,

income from license agreements, grants for

research and development, and the release of

general provision of bad debt to receivables.

Other operating income also includes:

The income due to the release of other provi-

sions mainly includes the release of provisions

for risks resulting from supply and services,

and for restructuring measures.

The income from the disposal of fixed assets

shown for the reporting year mainly results

from the sale of technical equipment and

machinery. The amount disclosed last year

was mainly attributable to income from the

sale of real estate and buildings.

2003/04 2002/03

(in thousands % (in thousands %of EUR) of EUR)

Germany 424,549 20 447,129 22

Rest of Europe 917,987 43 767,012 38

America 482,285 23 519,020 26

Other areas 309,775 14 295,777 14

2,134,596 100 2,028,938 100

2003/04 2002/03


Release of other provisions 61,536 39,796

Income from the disposal of fixed assets 1,904 1,789

Post-capitalization and write-upsof fixed assets 3,103 2,807

Release of special items with an equity portion – 1,821

Notes to the Consolidated Statement of Income

101

21 Cost of Materials

2003/04 2002/03


Cost of raw materials, consumables andsupplies, and of purchased materials 709,532 666,683

Cost of purchased services 80,536 65,225

790,068 731,908

22 Personnel Expenses

2003/04 2002/03


Wages and salaries 649,777 631,285

Social security costs 115,152 114,727

Pension costs 82,479 75,894

Other benefits 391 632

847,799 822,538

23 Depreciation of Intangible Fixed Assets and Tangible Assets

2003/04 2002/03


Depreciation of intangible fixed assetsand tangible assets 99,495 120,070

of which non-scheduled depreciation 85 19,321

of which special depreciation allowancefor tax purposes – 1,817


2003/04 2002/03


Investment income 1,583 1,600

Income from profit transfer agreements 170 499

Expenses from loss absorption 75 –

Income from investments in associated companies –1,508 –

Taxes charged to subsidiaries deemedintegrated for tax purposes 109 216

279 2,315

Also included are: 2003/04 2002/03


Losses from the disposal of fixed assets 4,880 2,184

Investment income includes income of

EUR 668,000 (previous year EUR 1,460,000)

attributable to affiliated companies.

24 Other Operating Expenses

Other operating expenses consist primarily of

administration costs, sales costs, maintenance

expenses, consultants’ fees, exchange losses,

and allocations to other provisions. This also

includes special expenses in the amount of

EUR 33 million incurred for an agreement on

industrial property rights which gives access

to patents covering lithography optical prod-

ucts made by the company’s competitor

Nikon.

25 Results from Investments

103

26 Depreciation of Financial Assets and Investments Held as Current Assets

2003/04 2002/03


Depreciation of financial assets 161 8,303

Depreciation of investmentsheld as current assets 2,191 1,015

2,352 9,318

27 Net Interest Income

2003/04 2002/03


Other interest and similar income 17,190 15,814

attributable to affiliated companies 327 265

Interest and similar expenses 4,491 3,982

attributable to affiliated companies 283 248

12,699 11,832

28 Taxes on Income

The taxes on income include domestic and

foreign taxes on income, the release of

provisions for taxes, tax refunds and deferred

taxes for the timing differences of results

arising from consolidation measures.


Number of employees 2003/04 2002/03(average for the year)

Heads Heads

Wage-earning employees 5,023 5,498

Salaried employees 7,963 8,162

Trainees/Interns 557 504

13,543 14,164

Other Information

Comments on the Cash Flow Statement

We have observed the German Accounting

Standard No. 2 (DRS 2) of the Deutsche

Rechnungslegungsstandards Committee e.V.

when compiling the cash flow statement.

The flow of funds has been divided into the

cash flows for operating activities, investing

activities and financing activities. The cash

funds totaling EUR 447,431,000 include

liquid assets of EUR 362,930,000 disclosed

in the Notes to the Consolidated Financial

Statements, and securities held as current

assets with maturities shorter than 90 days

totaling EUR 84,501,000. EUR 1,631,000 of

these funds was subject to disposal and

transfer restrictions.

Employees include the employees working

for the companies incorporated in the finan-

cial statements. The above numbers also in-

clude the relevant proportions of employees

working on a part-time basis and employees

with temporary employment contracts.

105

Information on Related Party Trans-

actions

The term “related party” comprises the oper-

ating enterprise SCHOTT AG, Mainz, as well

as non-consolidated subsidiaries.

Business relations with these companies are

handled on generally accepted market terms

and conditions.

Corporate Governance Code

The Board of Management and the Super-

visory Board of Carl Zeiss Meditec AG, Jena,

quoted on the stock exchange and included

in the Group’s financial statements, have

issued a declaration on the recommendations

of the “Government Commission on the

German Corporate Governance Code” in ac-

cordance with Art. 161 of the German Stock

Corporation Act (AktG). This declaration has

been made public and is available to share-

holders on the company’s website

(www.meditec.zeiss.de).

Remuneration of the Board of

Management and the Supervisory Board

The total remuneration of the Members

of the Board amounted to EUR 2,031,000 in

the reporting year.

The amount paid to former members of the

Board of Management and their surviving

dependents was EUR 1,219,000 in the

reporting year.

EUR 13,120,000 has been set aside for

pension commitments to former members

of the Board of Management and their sur-

viving dependents.

No fee was paid to the members of the

Supervisory Board for their Supervisory Board

activities in the reporting year.

Oberkochen, December 7, 2004

Board of Management of Carl Zeiss AG

Dr. Dieter Kurz

Dr. Norbert Gorny

Dr. Michael Kaschke

Carl Zeiss GroupAuditors’ Report 106

Auditors’ Report

We have audited the consolidated financial

statements and the Corporate Management

Report prepared by Carl Zeiss AG, Ober-

kochen, for the fiscal year from October 1,

2003 to September 30, 2004. The prepara-

tion of the consolidated financial statements

and the Corporate Management Report of

the Carl Zeiss Group in accordance with Ger-

man commercial law is the responsibility of

the Board of Management of Carl Zeiss AG.

It is our responsibility to express an opinion

on the consolidated financial statements and

the Corporate Management Report of the

Carl Zeiss Group based on our audit.

We conducted our audit of the annual con-

solidated financial statements in accordance

with § 317, German Commercial Code, and

the generally accepted standards for the

audit of financial statements promulgated by

the Institut der Wirtschaftsprüfer (IDW) in

Germany. Those standards require that we

plan and perform the audit in such a way

that misstatements materially affecting the

presentation of the net assets, financial posi-

tion and results of operations in the financial

statements in accordance with the German

principles of proper accounting and in the

management report of the Carl Zeiss Group

are detected with reasonable certainty.

Knowledge of the business activities and

the economic and legal environment of the

Carl Zeiss Group and evaluations of possible

misstatements are taken into account when

determining audit procedures. As part of the

audit, the effectiveness of the accounting-

related internal control system and the

evidence supporting the disclosures in the

consolidated financial statements and the

Corporate Management Report of the Carl

Zeiss Group are examined primarily on a test

basis. The audit includes the assessment of

the annual financial statements of the compa-

nies included in the scope of consolidation,

the determination of the companies to be in-

cluded in consolidation, the accounting and

consolidation principles used and the signifi-

cant estimates made by management, as well

as the evaluation of the overall presentation

of the consolidated financial statements and

the Corporate Management Report of the

Carl Zeiss Group. We believe that our audits

provide a reasonable basis for our opinion.

With the exception of the following restriction,

our audit has not yielded any reservations.

Contrary to § 297, Para.1, sentence 2, Ger-

man Commercial Code, no business segment

report has been compiled.

Apart from this exception and with due re-

gard to generally accepted accounting princi-

ples, the consolidated financial statements

provide a true and fair view of the assets,

financial position and earnings of the Carl

Zeiss Group. The Corporate Management

Report of the Carl Zeiss Group correctly

presents the position of the Group and the

risks of future developments.

Stuttgart, December 8, 2004

Price WaterhouseCoopers GmbH

Wirtschaftsprüfungsgesellschaft

Wagner

Wirtschaftsprüfer

(independent auditor)

Lange

Wirtschaftsprüfer

(independent auditor)

The Annual Report is also available

in German.

Carl Zeiss AG73446 OberkochenGermany Phone +49 (0)7364 20-0Fax +49 (0)7364 6808www.zeiss.com

annual report carl zeiss group - ku leuven · carl zeiss is a stock corporation which is wholly...

Documents