annual report carl zeiss group - ku leuvenin the company carl zeiss industrielle mess-technik gmbh...

We make it visible.

Annual Report Carl Zeiss Group2002/03

Carl Zeiss is an international group of enterprises and a global leaderin the optical and opto-electronic industry. The Carl Zeiss Group issystematically and consistently managed according to the principlesof corporate value enhancement. It supplies products and services forthe three strategic growth fields of biosciences and healthcare,consumer goods, and system solutions for industrial markets. TheGroup’s corporate operations are organized into six business groups,each of which is responsible for its own activities. These businessgroups are generally one of the top two performers in their markets.Between 1998 and 2002, Carl Zeiss grew by an average of 11% a yearsolely through its own efforts and considerably 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 and advance the value-orienteddevelopment of the Group are continuing. This process, which isclearly stipulated in the corporate Vision and is binding upon all units of the company, is being implemented worldwide in sixcorporate projects.

Carl Zeiss is owned by the Carl Zeiss Stiftung (Carl ZeissFoundation). The way has now been paved for the transformation of the enterprise into a stock corporation that will remain in thepossession of the Foundation. The legal form of a stock corporationwill provide greater transparency thanks to enhanced corporategovernance, strengthen employees’ codetermination rights, andsharpen the Group’s competitive edge on an international basis.

Table of Contents

Foreword by the Commissioner 4

Foreword by the Board of Management 7

Management Report 10

Research and Technology 18

Human Resources 22

Environmental Protection and Industrial Safety 26

Business Groups

Medical Systems 30

Semiconductor Technology 36

Consumer Optics 42

Microscopy 48

Industrial Metrology 54

Opto-Electronic Systems 60

Highlights of the Fiscal Year 66

Organizational Structure

Organizational Structure of the

Carl Zeiss Stiftung 74

Members of the Board of Management 74

Members of the Advisory Board 75

Major Affiliated and Associated Companies 77

Financial Statements of the Carl Zeiss Group

Balance Sheet 82

Changes in Fixed Assets and Investments 84

Statement of Income 86

Notes to the Financial Statements 87

Cover photo:Close-up of a lithography lensfrom Carl Zeiss SMT AG

Carl Zeiss Group

2000/01 2001/02 2002/03

million EUR % million EUR % million EUR %

Net sales 2,056 100 2,257 100 2,029 100

Domestic (Germany) 386 19 433 19 447 22

Foreign 1,670 81 1,824 81 1,582 78

Net income 110 5 106 5 16 1

Income taxes 29 2 41 1 33 1

Net income before taxes 139 7 147 6 49 2

Depreciation, amortization and write-downs on fixed assets and investments, net of post-capitalization / write-up 78 4 91 4 126 6

Change in the provision for pension plans and other long-term provisions 20 1 43 2 17 1

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

Adjustment for unusual income and expensesand those not affecting cash flow –13 –1 – – – –

Cash flow before income taxes1) 226 11 280 12 190 9

Personnel expenses 773 38 848 38 823 41

Total assets 1,684 100 1,930 100 1,823 100

Tangible assets 340 20 395 20 364 20

Capital expenditures 122 138 105

Depreciation and amortization 76 89 114

Inventories 419 25 418 22 400 22

Equity 174 10 309 16 338 19

Equity and long-term provisions2) 983 58 1,166 60 1,219 67

Net liquid assets3) 230 387 525

Number of employees at September 30, 2003 14,220 14,702 14,151

1) Determined following the recommendations of the German Financial Analysis Association/Schmalenbach-Gesellschaft2) Equity including special items with an equity portion, provisions for pension plans, etc.3) Liquid assets net of liabilities to banks and notes payable

In the past fiscal year an interna-

tional photo contest was organized

among the employees of the Carl

Zeiss Group. They were asked to

provide their personal photo-

graphic interpretation of the cor-

porate slogan “We make it visible.”

1st prize was won by Walter

Schwab, an employee of the Carl

Zeiss subsidiary Hensoldt AG,

Wetzlar with a photo entitled

“How small things help to discover

new worlds”. It shows his son

Michel looking at the lunar eclipse

visible on August 11, 1999 near

Lake Chiem to the southeast of

Munich, Germany.

Poised for the Future

Despite the difficult economic climate con-

fronting it in the past fiscal year, the Carl

Zeiss Group successfully defended its leading

positions in the relevant markets. However,

some of the original plans had to be revised

due to the ailing global economy. As in the

previous years, the company was once again

able to strengthen its equity base.

In a total of four meetings, the Advisory

Board was provided with information about

all important subjects and discussed up-

coming decisions with the Board of Manage-

ment. The agenda centered on four primary

objectives: continuing the development of

the Group under the very difficult conditions

in the global economy, focusing on core

fields of business, eliminating weak points,

and utilizing new opportunities. We on the

Advisory Board were also given information

on current operational business.

In my capacity as Commissioner of the

Carl Zeiss Stiftung, I also accompanied the

work of the Board of Management in regular

personal discussions with its members and

obtained on-site information at the various

corporate locations in exactly the way stipu-

lated by the constitution of the Carl Zeiss

Stiftung.

The most important decisions made in

the fiscal year include:

the competitive edge of Industrial Metro-

logy has been sharpened by combining sales,

development, assembly and logistics activities

in the company Carl Zeiss Industrielle Mess-

technik GmbH at the Oberkochen plant

After the end of fiscal year 2002/03, Dr.-Ing. E. h. Heinz Dürr’s tenure as Commissioner of theCarl Zeiss Stiftung (Carl Zeiss Foundation) cameto an end on December 31, 2003. He had heldthis post since January 1, 1999. On January 1,2004 he was succeeded by Tilman Todenhöfer,longtime Deputy Chairman of the Board of Management of Robert Bosch GmbH, Stuttgart.Todenhöfer is currently a member of the Super-visory Board of Robert Bosch GmbH and is a personally liable shareholder of the Bosch management holding.

Carl Zeiss GroupForeword by the Commissioner 4of the Carl Zeiss Stiftung

Dr.-Ing. E. h. Heinz Dürr

Commissioner of the

Carl Zeiss Stiftung from

Sept. 1, 1999 to Dec. 31, 2003

Carl Zeiss Display Technologies Co., Ltd.

has set up its first production plant in China.

The new assembly plant in Suzhou near

Shanghai will start production in April 2004.

Work continued on the entrepreneurial

preparations to utilize opportunities offered

to Carl Zeiss and Schott Glas by a modernized

corporate constitution tailored to meet the

challenges of the future. This means: internal

corporate structures have been adapted to

the needs of a global, 21st century player,

and the workforce has been prepared accord-

ingly.

It is planned to present the revised consti-

tution of the Carl Zeiss Stiftung to the public

in January 2004. This was developed jointly

by the Foundation Commissioner, Administra-

tion and the Boards of Management in con-

junction with the Employee Representative

Councils. With the transformation of Carl

Zeiss and Schott Glas into stock corporations,

the future constitution will then come into

effect, marking the successful completion of

several years of work.

This will lead to a more even distribution

of responsibility for the operating enterprises

in line with their increased size. It will also

provide greater scope of action for the

Board of Management, the future Supervi-

sory Board and the Employee Representative

Council. However, a new constitution will not

be presented, but the framework of action –

and this is determined and defined by the

corporate constitution – will be adapted to

the requirements of today and to the

predictable challenges of tomorrow.

Promoting this process of modernization

was, and continues to be, the obligation

imposed by § 1 of the constitution on the

Administration and Commissioner of the

Carl Zeiss Stiftung, and also indirectly on the

Advisory Boards and Employee Representa-

tive Councils: “Permanent measures shall be

taken to safeguard the economic foundations

of the enterprises ... as sources of subsis-

tence for a large number of people and as

beneficial organizations acting in the service

of scientific and practical interests”.

This obligation is expressed in more detail

by Ernst Abbe in § 118 in the form of a clear

directive: “If, at a subsequent time, important

suppositions of the present constitution with

regard to its legal basis or to technical or

economic conditions should be altered to

such a degree that the further strict observ-

ance of the provisions of this constitution ...

should become impossible within the

foreseeable future, the statutory Administra-

tion of the Carl Zeiss Stiftung ... shall be

5

Carl Zeiss GroupForeword by the Commissioner 6of the Carl Zeiss Stiftung

After my 70th birthday, I will be resigning

from my office as Commissioner of the Carl

Zeiss Stiftung at the end of the year in

accordance with § 5a, Paragraph 1 of the

constitution. Therefore, I would like to use

this opportunity to express my gratitude to

the Administration of the Carl Zeiss Stiftung,

the Boards of Management, the Advisory

Boards and the employee representatives for

the constructive, target-oriented cooperation

which I have experienced in the past five

years, a period during which I had the honor

of performing the tasks required of the Com-

missioner. I am certain that this proven form

of interaction will continue with my succes-

sor, Mr. Tilman Todenhöfer. The primary goal

at all times is to point the way to a secure

and reliable future for the enterprises of the

Carl Zeiss Stiftung and their employees. Ac-

cording to the wishes of our founder Ernst

Abbe, this future means: satisfied customers,

high-quality products, long-term job safety

and an appropriate level of profit.

The Commissioner and the members of

the Advisory Board would like to thank the

Board of Management and employees for the

commitment they have shown. This was of

key importance in allowing Carl Zeiss to suc-

cessfully assert its market position despite the

harsh economic climate prevailing during the

past fiscal year and to satisfy the require-

ments of its customers.

Dr.-Ing. E. h. Heinz Dürr

empowered to amend this constitution in

compliance with the altered circumstances

to the extent required in order to remove the

aforesaid hindrances.”

It can be justifiably said that that there

has been a fundamental change in the legal,

technical and economic conditions since

1896.

If they are to live up to this legacy, Carl

Zeiss and Schott Glas must be able to

conduct their business within the hotly con-

tested markets on the same entrepreneurial

basis as their competitors.

Also in the future – and this is something

on which all persons responsible agree – the

following principles will remain inviolable:

due consideration must be given to the

entrepreneurial and social stipulations of

Ernst Abbe;

the companies in the foundation must be

given the scope to ensure that they can

safeguard the company’s future and the jobs

of its employees in the long term;

the rights and obligations of the foundation

employees must remain intact, but a currently

accepted form of codetermination must apply.

7Carl Zeiss GroupForeword by the

Board of Management

Ladies and Gentlemen,

Dear Business Partners,

During fiscal year 2002/03 the Carl Zeiss

Group successfully asserted its position in

the market despite the difficult economic

climate and unfavorable currency influences.

In the face of the predominantly downward

trend evident on the markets, the business

groups were able to maintain or even expand

their position. A clear operating profit was

once again achieved, underlining the good

balance of our corporate portfolio. With a

further increase in R&D spending, we once

again focused our investments on the ex-

pansion of our technological leadership and

improved our competitiveness.

In the period between 1998 and 2002,

Carl Zeiss grew by an average of 11 % a year

on a self-financed basis, markedly improving

the financial strength of the Group. The

company is steadfastly pursuing its objective

of implementing the ambitious goals of the

corporate Vision: not only the aspiration to

provide customers with optimum solutions at

all times, but also the other targets defined

in the Vision such as consistent value orienta-

tion, increasing the company’s attractiveness

for top executives and process excellence are

central to our efforts and endeavors.

Our customer closeness has helped us to

react quickly to the changes occurring in

the markets. Our technological strength and

expertise in the field of system solutions have

contributed significantly to the success we

have achieved in asserting our position in the

competitive arena during an economic down-

turn. The positive contribution made to

the result by all business groups despite the

weakness of the markets testifies to the high

performance and cost consciousness of our

employees.

In order to counteract the negative trend

in general economic activity, full use was

made of all tools available to us for flexible

cost and volume adjustment. In areas where

structural weaknesses became additionally

evident, appropriate targeted measures were

initiated. Important increases in efficiency

were achieved by tightening the Group’s site

structure and streamlining its portfolio. In

some areas, manpower levels have been

adapted to the changed conditions. These

measures were focused almost solely on

corporate sites in Germany.

We have further strengthened our market

presence for customers in all parts of the

world. We have enhanced the efficiency of

our international sales and service units

through targeted expansion. The synchro-

nized, global launch of new products is en-

suring that they are available to all customers

right from the outset.

The business fields in which the Carl Zeiss

Group operates offer potential for dynamic

development. We aim to return to two-digit

growth rates. In this process, all business

units will earn their cost of capital through

their own efforts.

Major challenges once again lie ahead for

fiscal year 2003/04. The first signs of an eco-

nomic recovery are discernible on the world

markets. Given the prevailing uncertainty sur-

rounding industry’s investment behavior in

“Customer orientation

is the key driver for all our

activities.”From the Carl Zeiss Vision

Carl Zeiss Group 2002/03 –

Maintaining Our Hold, Strengthening Our Base

Carl Zeiss GroupForeword by the 8Board of Management

particular, however, it is not currently possi-

ble to forecast how the situation may devel-

op. Additionally, the relative strength of the

euro is leaving its mark on exports from the

European region. Against this background,

Carl Zeiss will continue to focus on its

strengths and constantly adjust its structures

to meet changing requirements. We will

systematically identify new fields of business

and aggressively utilize the opportunities

offered by the market.

Together with our customers and part-

ners, we have good prospects for success in

the new fiscal year. Important foundations

for a secure future are being laid not only by

fostering long-standing business relationships

built on a foundation of joint success, but

also by our involvement in international net-

works where knowledge and experience are

actively exchanged. We would like to thank

our customers and business partners for

the trust they have placed in us. This both

motivates and inspires us to continue to fulfill

their expectations in the future.

Our special thanks go to our employees

for their exceptional dedication, cost con-

sciousness, commitment and the determina-

tion to grasp the opportunities offered to

them under adverse conditions.

We also extend our gratitude and appre-

ciation to the Commissioner of the Carl Zeiss

Foundation, Dr. Heinz Dürr, who retired from

office at the end of the calendar year. The

reform of the Carl Zeiss Foundation has made

decisive headway under his guidance. This

paves the way for Carl Zeiss to operate inde-

pendently as a stock corporation in the

future. It will continue to be wholly owned

by the Carl Zeiss Foundation. Employees in

the operating enterprises and in the consoli-

dated companies which are not part of the

Foundation are well poised for this transfor-

mation. Internal structures have been aligned

to meet the requirements of the planned

stock corporation.

We would like to express our gratitude to

the Administration of the Carl Zeiss Founda-

tion which has actively supported the process

required to revise the corporate constitution.

Last but not least, our thanks also go to the

Advisory Board and Employee Representative

Council for their fair and goal-oriented co-

operation for the benefit of the company.

Together with our employees, we look

forward to implementing the motto of our

corporate Vision also in fiscal year 2003/04:

“We make it visible”.

Dr. Norbert GornyDr. Dieter Kurz Dr. Michael Kaschke

9

Dr. rer. nat. Norbert Gorny

Member of the Board responsible for

Microscopy, Opto-Electronic Systems,

the Service Centers, Information

Technology and Central Procurement

Born in Schweinfurt, Germany in

1963. 1984 – 1989 Studies in biology

at the Universities of Marburg, Tübin-

gen 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 Manag-

er 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


Consumer Optics, Medical Systems,

Corporate Finance/Controlling,

Quality and Processes, and Research

and Technology

Born in Greiz, Germany in 1957.

1979 – 1983 Studies in 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, Medical Systems

Group, Member of the Board since

October 1, 2000.

Dr. rer. nat. Dieter Kurz

President and CEO


Semiconductor Technology, Industrial

Measuring Technology, Strategic

Corporate Development, Corporate

Communications, Corporate Human

Resource Management, Corporate

Auditing, and Legal Affairs and

Patents

Born in Tübingen, Germany in 1948.

1969 – 1974 Studies in physics at

the Eberhard Karls University in

Tübingen. 1979 Doctorate in the field

of semiconductor and electron beam

technology. 1979 Joined Carl Zeiss.

Management positions in develop-

ment/research, marketing/sales and

general management, 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 CEO since January 1, 2001.

Carl Zeiss GroupManagement Report 10

Successfully Holding Our Ground

The Carl Zeiss Foundation, located in the

German cities Heidenheim an der Brenz and

Jena, is the sole owner of the two enterprises

Carl Zeiss in Oberkochen and Schott Glas in

Mainz. These conduct the business activities

of the Carl Zeiss Foundation, each under its

own name and with its own assets.

Carl Zeiss and Schott Glas have a number

of domestic and foreign subsidiaries which

have been combined into two organizations,

the Carl Zeiss Group and the Schott Group.

This annual report contains the financial

statements of the Carl Zeiss Group.

The consolidated accounting of the two

groups is shown in the financial statements

of the Carl Zeiss Foundation which are

published in the German Federal Gazette

(“Bundesanzeiger”).

General Scenario

After several years of strong growth, the

Carl Zeiss Group felt the effects of the diffi-

cult situation in the global economy in fiscal

year 2002/03. The market trend and currency

influences led to a downturn in both revenue

and earnings. Right from the start of the

fiscal year, our cautious assessment of the

general economic scenario was already seen

to be justified. This trend intensified in the

course of the year.

The negative impact of the changed cur-

rency parities with the US dollar and the yen

was felt in international business. The relative

strength of the euro increased cost pressure

in business outside the euro zone. Special in-

fluences in Germany such as collective wage

agreements and higher non-wage labor costs

led to a further increase in costs.

Balanced Portfolio

All in all, the company once again steered a

steady course thanks to its balanced portfo-

lio. The continued low level of capital spend-

ing in the automotive and semiconductor

industries, the downward trend in private

consumption, the healthcare reforms and

associated cost-curbing measures being im-

plemented in many regions of the world, as

well as cuts in the budgets available to

government agencies all left their mark on

the trend in some of our fields of business.

However, positive momentum was evident

in the markets for medical systems, laser

microscope systems and optronic products.

Revenue

Outside Germany 79%

in EUR millions

81%

2,056

81%

1,998 2,257 2,029

74%

1,643

78%

11

“We balance short-term

and long-term economic

thinking.”From the Carl Zeiss Vision

Operating resultin EUR millions

6417617212019

Drop in Revenue

after Last Year’s Record

With a total of EUR 2,029 million, revenues

for the Carl Zeiss Group fell by 10 % over the

previous year. Business outside Germany

accounted for 78 % of total revenue and

hence remained at approximately the same

level as last year (81 %). The largest decreases

were recorded by the Semiconductor Tech-

nology Group with a figure of 19 %, followed

by Industrial Metrology and Microscopy with

10 % each. Incoming orders totaled EUR

1,970 million, 11 % less than in 2001/02.

Special influences approximating EUR 110

million in the volume of new business re-

ported by the enterprise Carl Zeiss SMT AG

accounted for a significant portion of this

downturn. Without this value, the decrease

totaled 6 %.

Operating Profit in all Business Groups

Despite the difficult overall situation, all six

business groups posted a profit. All in all,

the Carl Zeiss Group turned in a respectable

result with an operating profit of EUR 64 mil-

lion (last year EUR 176 million). The result

of ordinary business operations totaled EUR

52 million (last year around EUR 151 million).

This figure includes one-time expenditures of

more than EUR 50 million for restructuring

measures. This yields a net annual income of

EUR 16 million (last year EUR 106 million).

Further Increase in Equity

The equity ratio increased by a further 3 per-

centage points to 19 %. In the past five years

the Carl Zeiss Group has upped its equity by

roughly EUR 330 million. At the same time,

there was an increase in long-term funds

(equity and long-term provisions) which, with

a figure totaling EUR 1,219 million (last year

EUR 1,166 million), accounted for about

67 % of the balance sheet total.

Manpower

As of the balance sheet date, the Carl Zeiss

Group had a global workforce of 14,151

(last year 14,702), including 4,044 employees

outside Germany (last year 4,157). This de-

crease was largely achieved through natural

attrition and manpower reduction measures

aimed at causing minimum social hardship.

Special training enterprises were set up in

Oberkochen and Jena for employees who

had to leave the company. Measures designed

to reduce staffing levels will continue in fiscal

year 2003/04.


Investments Remain at a High Level

After last year’s record value of EUR 138 mil-

lion, investments in plant, property and

equipment remained at a high level with a

total of EUR 105 million. Depreciation

amounted to EUR 114 million compared to

EUR 89 million the previous year. This

includes extraordinary depreciation of capital

assets totaling EUR 13 million in conjunction

with revaluations of new technologies of the

Semiconductor Technology Group. Capital

spending was once again focused on semi-

conductor technology, consumer optics and

production, with our international sales

organizations being added as a further focal

point of investment.

Further Rise in Net Liquidity

Due to the drop in earnings, pre-tax cash

flow amounted to EUR 190 million, falling

short of the high value recorded the previous

year (EUR 280 million). This was equivalent to

9 % (last year 12 %) of revenue (using the

method recommended by the German Finan-

cial Analysis Association/Schmalenbach-

Gesellschaft DVFA/SG). Through efficient

asset management, the Carl Zeiss Group im-

proved its net liquidity considerably over the

previous year. On the balance sheet date, it

“Innovation and technical

excellence are our passion.”

From the Carl Zeiss Vision

Net annual incomein EUR millions

1610611053–59

reached a record value of EUR 525 million.

Receivables management in particular was

intensified, with an improvement in Days

Sales Outstanding (DSO) from 70 to 68 days.

Even More Innovative

Despite the harsh economic climate con-

fronting it, the Carl Zeiss Group continues to

attach central importance to innovation.

Spending on research and development rose

again to EUR 190 million (last year EUR 186

million), the equivalent of 9 % of revenue.

This places Carl Zeiss among the leading

technology groups. The ongoing high level

of investment in the future in this area is

enhancing our innovativeness and plays a key

role in the fight for market share. This is

reflected by the high proportion of new

products in sales. In fiscal year 2002/03 the

Carl Zeiss Group generated roughly 41 % of

its revenue with products launched over the

past three years. Examples of successful

product launches during the reporting year

include the GageMax® multi-coordinate

measuring system, the ApoTome® 3D light

microscopy solution, Skypol® sunglass lenses,

a small-format “light engine” for even more

compact digital projectors, a number of new

scanning electron microscopes, new systems

13

Outside Germany

Employees

4,081

14,220

3,873

13,845

4,044

14,15114,702

4,1573,761

13,643

eyeglass lens production formerly based in

Nattheim into the Aalen plant, leading to

substantial synergetic effects.

Carl Zeiss Microelectronic Systems GmbH

(MES), Jena, was also reorganized and has

been operating under the name Carl Zeiss

SMS GmbH (Semiconductor Metrology Sys-

tems) since October 1, 2003. This company

offers systems incorporating both light-

optical and electron-optical technologies for

quality assurance and process monitoring in

the semiconductor industry.

Increase in Share Capital at

Carl Zeiss Meditec AG

Carl Zeiss Meditec AG, an enterprise listed in

the Prime Standard segment of the German

stock exchange, issued 2.6 million new

shares in September 2003. The aim of this

measure was to increase the free float – and

hence enhance the stock’s attractiveness

for investors. At the same time, this laid the

foundations for further growth. The quota

was impressively oversubscribed by institu-

tional investors in Europe within a few hours.

The increased share capital of Carl Zeiss

Meditec AG now totals EUR 28.4 million,

for semiconductor mask repair (Cross Beam®),

and the OPMI Movena® and OPMI PROergo®

surgical microscopes for procedures in ENT

medicine and dentistry. In the past fiscal year,

applications for patents or registered designs

were filed for 344 inventions, an increase of

32 % over last year.

Structures Further Optimized

The business groups further optimized their

structures during the reporting year. The

business activities of the Industrial Metrology

Group which were formerly conducted in

two enterprises were combined at Carl Zeiss

IMT GmbH on October 1, 2003. More

efficient processes are permitting further cost

savings in this area. The relocation of the

production area for horizontal-arm measur-

ing machines from Esslingen to Oberkochen

is resulting in a further enhancement of

processes in the Industrial Metrology Group –

all for the benefit of our customers.

In the Oberkochen Service Center which

combines the prefabrication departments and

internal services, processes were streamlined

and structures adjusted. The Consumer

Optics Group integrated the branches of


with Carl Zeiss diluting its stake to under

75 %. In the first year after its creation, the

newly formed Meditec achieved a two-digit

increase in revenue. Earnings more than

doubled over the previous year. The positive

trend at Carl Zeiss Meditec AG is also reflec-

ted in its share price.

Pledge of Excellence

Our brand is a promise. The outstanding

reputation of the ZEISS brand in the markets

of the various business fields is the direct re-

sult of the excellent services that we offer

our customers; they directly associate the

name with innovation, quality, product per-

formance and customer care. Consistent im-

plementation of the new Corporate Design

directives has further strengthened our brand

image on the international stage. One good

example is the uniform website design of all

our sales organizations across the globe.

Corporate Vision in Practice

After its Group-wide inception phase the

previous year, the Carl Zeiss Vision was

implemented in many different ways during

fiscal year 2002/03. The corporate slogan

“We make it visible.” has been readily

Investmentsin property, plant

and equipmentin EUR millions

10512293 13874

“Our brand name

is a promise.”From the Carl Zeiss Vision

accepted in the market as a concise and

convincing statement of our corporate aspi-

ration. Customers across the globe and our

employees in the enterprises of the Carl Zeiss

Group see this as a promise that Zeiss can

offer the right solution for the applications

and tasks our customers wish to perform.

Turning Goals into Projects

Six strategic projects running under the name

“Excelle” are currently driving the process

required to implement the company’s long-

term Vision goals. Each of these projects is

overseen by two members of the Board of

Management. The commitment of our em-

ployees to the content of the Carl Zeiss

Vision and the corporate “Excelle” initiatives

are laying important foundations for the

future success of the Carl Zeiss Group.

Employees Play an Active Role

The content of the Vision goals – employee

orientation, customer focus, innovation

leadership in all business fields, pioneering

process excellence, long-term economic

efficiency and ongoing innovation – have

already become reality in many areas of the

company’s practical activities.

15

“We act fast and

regard changesas

opportunities.”From the Carl Zeiss Vision

Cash flow (gross)in EUR millions

of revenue

190

9%

226

11%

219

11%

280

12%

90

5%

is responsible for the central monitoring and

coordination of the risk management

process. It also consolidates the risk reports

received from the individual areas.

Individual Risks

The individual risks for which the Carl Zeiss

Group is well prepared include the general

economic scenario and the trend in currency

parities. The Semiconductor Technology

Group is subject to the pronounced volatility

of the chip industry. A major portion of rev-

enue generated by Carl Zeiss SMT AG is addi-

tionally dependent on one large customer.

Business with multi-coordinate measuring

machines is strongly influenced by cyclical

trends in the automotive industry, as are

sales of scientific instruments by budget cut-

backs in research and education. Consumer

restraint is leaving its mark on business in the

Ophthalmic Products and Sports Optics divi-

sions. The upcoming reform in the German

healthcare system may hamper sales of med-

ical systems and eyeglass lenses. The global

competition for Intellectual Property (IP)

portfolios is leading to an increasing number

of patent disputes. These constitute risks

to the company’s technological lead and

competitiveness.

One of the most outstanding measures

taken to implement the Vision Goals was

the Carl Zeiss Group’s very first “Innovation

Days”. Staff from R&D areas of the company

met to present the results of their work and

expand the internal network in their fields

of activity.

Risk Management Expanded

In view of the continuing difficult situation

in the overall economy, entrepreneurial deci-

sions are now more dependent than ever on

a reliable assessment of potential risks. In the

past fiscal year we constantly expanded and

enhanced our risk management system, with

the result that risks in all business groups and

subsidiaries are systematically recorded, their

damage potential and likelihood of occur-

rence evaluated, and the appropriate meas-

ures implemented to handle them.

Clear Allocation of Responsibility

Operational management has direct respon-

sibility for engendering risk awareness in

the workforce and for the early detection,

evaluation, control and communication of

risks. Coordinators have been appointed to

support risk management activities in the in-

dividual areas and subsidiaries. A unit which

reports directly to the Board of Management


Net liquidityin EUR millions

387230 52521821

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 presently perceivable

that, either individually or in interaction with

each other, could endanger the continued

existence of the Carl Zeiss Group in the

foreseeable future.

Outlook

An improvement in the economic climate is

discernible in both Germany and the USA at

the beginning of the new fiscal year. Given

the prevailing uncertainty surrounding indus-

try’s investment behavior, it is not currently

possible to forecast how the situation will

develop. Public sector customers are still con-

fronted with substantial reductions in their

budgets. A lack of consumer confidence is

currently impacting the associated areas of

the company, e.g. the Ophthalmic Products

Division. German healthcare reforms, which

plan to more or less eliminate health insur-

ance contributions to eyeglass lenses, are

exacerbating the situation even further.

In view of the poor predictability of the

economic trend, the political risks and the

unfavorable exchange rates, Carl Zeiss does

not anticipate any general improvement in

business conditions. After months of decline,

we assume that a slight recovery will take

place in the first half of the current fiscal

year. However, the second half remains diffi-

cult to predict. Another challenge which

faces us is the changes taking place in some

of the markets important for Carl Zeiss,

which will no longer be able to sustain

their past dynamic growth in the mid-term.

However, opportunities are discernible in

ophthalmology in particular, the field in

which Carl Zeiss Meditec AG operates.

It remains our goal to sharpen our com-

petitive edge and systematically promote the

ongoing value-oriented development of the

Carl Zeiss Group.

The company will strengthen its ability

to counter cyclical fluctuations with greater

flexibility. In addition, we will make use of

variable work time models wherever possible.

Global projects initiated some months ago

to reduce fixed costs will be consistently con-

tinued and intensified.

If fundamental changes become evident,

we must amend our structures accordingly.

Therefore, further cutbacks in manpower are

unavoidable to safeguard the company’s

future. In addition to the measures already

17

Spending onresearch anddevelopmentin EUR millions

186146 190139131

transformation of the foundation enterprises

Carl Zeiss and Schott Glas into stock corpora-

tions is permitted. A renewed application

for leave to appeal against the verdict of the

Regional Appeal Court is now still pending at

the Federal Appeal Court in Germany. A deci-

sion is expected in spring 2004. The bodies

of the Carl Zeiss Foundation have drafted a

new version of the constitution tailored to

the legal form of the foundation enterprises

as independent stock corporations. The

Foundation Council has already approved

this new version. The new constitution will

come into effect with the transformation of

the foundation enterprises into independent

stock corporations. This transformation will

be implemented immediately after the

Federal Appeal Court has reached its verdict.

It is to be assumed that the enterprises

will be transformed into the internationally

recognized legal form of stock corporations

in fiscal year 2003/04. The Carl Zeiss Founda-

tion will remain the 100 % owner of the

stock corporations. Major benefits will result

from clear structures for transparent corpo-

rate governance, improved codetermination,

uniform rights for all employees of the Carl

Zeiss Group in Germany, and the termination

of joint liability between the operating enter-

prises.

under way in the Oberkochen Service Center,

this will primarily affect the Semiconductor

Technology Group in Oberkochen, Jena and

Wetzlar, as well as the Consumer Optics

Group in Aalen. In all personnel measures

taken, we will work closely with employee

representatives to find a solution that reduces

social hardship for the persons concerned.

We will attach special importance to the

strengthening and expansion of our global

sales activities in order to safeguard our mar-

ket share and new business.

Despite the difficult economic situation,

we will maintain our high rate of innovation

in all business groups. New fields of business

will be systematically identified, and business

models conforming to the needs of the

market will be established. R&D spending

remains at a high level in order to increase

Carl Zeiss’ competitiveness in the long term.

With optimized structures focused on

growth, the company is well poised for the

next economic upturn.

Foundation Receives New Constitution

In fiscal year 2002/03 the Carl Zeiss Foun-

dation made decisive headway on the road

to a successful future. In June 2003 the Re-

gional Appeal Court in Stuttgart dismissed

the legal action taken against § 37 of the

corporate constitution, according to which a

Good Conditions for Innovation

The number of registrations for industrial

property rights significantly rose during fiscal

year 2002/03. Applications for patents or

registered designs were submitted for 344

inventions, 32 % more than the previous

year. To better employ the creative abilities

of the company, research and technology

actively promotes communication between

scientists, technicians and marketing experts.

Expansion of our networking activities inside

and outside the company an integral part of

knowledge management in the Carl Zeiss

Group.

Carl Zeiss GroupResearch and Technology 18

Research and Technology –

Services for the Future

Innovation is the key to success. For the Carl Zeiss Group, itplays an essential role in enabling the company to maintainits leading position in all of its areas of operation. One of thepillars of the company’s Vision is the aspiration that “Carl Zeisswill be regarded as the most innovative company in its fieldsof business.” For this reason, research and technology takeon added importance for the company’s self-image andstrategic direction. During the reporting year, Carl Zeiss bud-geted EUR 190 million, or 9 % of total revenue, for researchand development. This places Carl Zeiss among the leadingtechnology companies. Corporate research and technology isclosely networked with the development departments in thevarious business groups. The know-how of 1,669 highly-skilled employees, or 12 % of the total workforce, is dedica-ted to research and development. Together, they provide thebackbone of the company’s technological expertise.

Innovation Days

The research and technology department

held the first “Innovation Days” for staff

from all areas of the Group during fiscal year

2002/03. 120 employees from research,

development and marketing met to actively

exchange ideas and information. Under the

heading “Creating Networks for Innovation”,

technological development and technology

management were discussed in detail during

lectures and in work groups. Business groups

presented their current projects and ad-

dressed the possibilities of cross-divisional

cooperation.

19

Technology with precision:

mandrels for a segment of

the x-ray mirror for NASA’s

Constellation X project, with a

super-accurate shape and extremely

low micro-roughness (0.3 nm)

Recognizing Top Performance

This fiscal year marked the introduction of an

internal innovation prize. The Carl Zeiss Inno-

vation Award was presented in six categories

during the Innovation Days. A jury of internal

and external experts identified projects that

yielded excellent results according to the cri-

teria of innovative business design, leading

edge technology, short time to market, high

risk project, and successful failure. Along

with recognizing outstanding performance,

the award – and the fifth category in particu-

lar – also addresses the change in corporate

philosophy in which risk taking is encouraged

and failure is seen as an incentive on the

road to success. The Innovation Award will

be presented annually in the future.

Technology with a Future

In “the age of the photon” – as the 21st

century has already been described – opto-

electronic technologies are continually find-

ing new uses as more efficient alternatives

to conventional processes. By identifying and

using new technological possibilities, Carl

Zeiss intends to employ its expertise to

remain at the leading edge of development.

One of the focal points in the field of techno-

logical development is diffractive optics. It

offers many new approaches for making

imaging systems simpler, more compact and

lighter, opening up extensive possibilities to

the various divisions of the company.

which are then processed into verifiable

model calculations and samples. At each of

these stages the number of product and busi-

ness ideas decreases, while the number of

experts supporting the project increases. As a

further service, the Research and Technology

Department assists in the practical implemen-

tation of a successful project within a busi-

ness unit.

One example of a current project still

in its early phase is the search for ideas

concerning new applications for existing

technologies in the field of medical systems.

A project dealing with what are known as

Head Mounted Displays (HMD) is currently in

its second or evaluation phase. For applica-

tions in bio-sciences and healthcare, the

Research and Technology Department is

already investigating the possible uses of an

analysis device for biochips (DNA structures

on substrate material for the investigation of

genetic mutations) using demonstration

models in the USA.

Partner for New Initiatives

The Central Research and Technology Depart-

ment is a strategic partner for the Carl Zeiss

Group as a whole and for the individual busi-

ness groups when it comes to identification

and building of technology-based business

options. Experts from the department closely

monitor the setup of new business initiatives.

In screening projects, they determine market

and technology-related boundary conditions.

They develop concepts and conduct feasibili-

ty studies. They assist during the develop-

ment of prototypes and the organization of

teams for new business fields, and they are

there to help when new core competencies

for the company are developed from techno-

logical focal points.

Step by Step to New Business

In a multistage process, ideas are initially

collected, and suggestions and proposals as-

sessed. More and more in-depth evaluations

and plans result in more concrete concepts

Carl Zeiss GroupResearch and Technology 20

Employees inresearch anddevelopment

1,6781,455 1,6691,4051,343

21

Room for precision optics: vacuum

chamber of an EUV illumination

system intended for future litho-

graphy systems used in semiconductor

production.

Excellence in Technology

Leading-edge technology is the core of Carl

Zeiss’ success. In the intensely and increas-

ingly competitive markets in which the com-

pany operates, ZEISS brand products offer

customers not only outstanding quality, but

also increased benefits through leading edge

performance. These product properties are

attributable to a high level of technological

expertise that places new solutions, methods

or materials at the disposal of our customers

at the earliest possible stage. This technologi-

cal excellence also makes the company more

attractive as an employer for top-flight en-

gineers and scientists.

Cutting-edge Technology for

Everyday Business

Research and technology developments are

already an integral part of everyday life in

many different ways in the business groups.

With its operations covering optical processes

for manufacturing semiconductor chips, for

example, Carl Zeiss SMT AG is already a

leader in optical innovations. To meet the

challenge of ever increasing miniaturization,

pilot programs were created to process struc-

tures in the Extreme Ultraviolet (EUV). Con-

ventional lens systems no longer suffice as

optical systems for this wavelength. Mirror

systems with barely conceivable quality

requirements and featuring specially coated,

aspheric surfaces that must be operated

within a vacuum are being developed to

meet the needs of EUV.

The ongoing advances being achieved in

the biosciences also present the company

with a constant technological challenge.

They are propelling the development of an

increasing number of different imaging possi-

bilities in the Microscopy Group. New fluo-

rescence techniques and three-dimensional

display now only need a very short time to

market. The Medical Systems Group imple-

ments research results and newly developed

treatment technologies at the same speed.

Setting Our Sights High

On September 30, 2003, the Carl Zeiss Group had a globalworkforce of 14,151, of which 10,545 were employed in Germany and 4,044 abroad. This represents a decrease of551 or approximately 4 % over the previous year. The pro-portion of employees in research and development, however, increased once again. As of the closing date, the Carl ZeissGroup had 1,669 employees in this area. This corresponds to 12 % of the corporate workforce. The number of traineesrose to 595, with 208 new traineeships being added in2002/03.

Most Valuable Asset

The corporate Vision adopted by Carl Zeiss in

fiscal year 2001/02 recognizes its employees

as its most valuable asset. Complex tasks,

creativity and dedication to customer service

can only succeed when employees find the

right working environment, are challenged

and, as a result, motivated, qualified and

committed to the company. During the im-

plementation of the corporate Vision, leader-

ship tasks took on added importance. A per-

sonnel unit at corporate headquarters is

responsible for controlling all company-wide

human resource activities.

Focus on Leadership

An important component of Carl Zeiss’ suc-

cess is executives’ widespread recognition of

employee responsibility. This is based on a

common understanding of the system span-

ning the company, locations and processes,

as stipulated by the Vision. Executives cham-

pion the processes and motivate their em-

ployees. They support changes, innovation

and progress. They focus their activities on

continuously improving the value of the com-

pany. Motivation, training and improvement

of employees’ sense of responsibility and per-

formance all play an important role in leader-

ship. Successes are assessed and rewarded,

early feedback enables timely adjustments.

Numbers, facts and figures are the basis for

decision making: they are traceable, transpar-

ent and are communicated to all involved.

Structured staff appraisals are an essential

element of the leadership culture.

Carl Zeiss GroupHuman Resources 22

“Leaders are people with ideas andvalues, who have the energy and thedetermination to make things happen.Installing a leadership culture by settingyourself as an example may very well be a corporate manager’s most importantresponsibility.”

Luigi Magliocchi

President, Carl Zeiss S.p.A, Italy

“In order to be successful in our busi-ness areas, we have to be quick and

focused in dealing with change.To achieve this, we need employees,who capably and responsibly create

new approaches at all levels.”

Margit Krause-Bonte,

Office Market Manager,

Surgical Products Division,

Germany

Company in Transition

The company is currently introducing this

new strategy to various levels of the organi-

zation. Employee cooperation is changing

from a hierarchical system to a network of

partnership and task-related connections.

Customer and value-oriented processes are

replacing long-established business proces-

ses. Along with increasing individual skills, im-

proving cooperation in teams is also gaining

ground. At the same time, speed is becoming

a more valued barometer than costs when

making decisions. High priority is placed on

short reaction times and efficient customer

23

“Besides a clear growth strategy and a passion for excellence, we believe

our ability to attract & retain the bestpeople in the industry, and the speed with

which we implement things, will be thedeciding factors in our success.”

A. Vaidyanathan Srinivasan

President of Carl Zeiss Australasia, India, South East Asia

care. Work processes are being redefined

and offer employees improved opportunities

for individual development by providing

multi-faceted job profiles in a flexible and

team oriented environment.

First Stop for Job Seekers

An important goal in personnel management

is to improve the attractiveness of the com-

pany as an employer. The fight to obtain

qualified and expert employees not only

takes place at individual locations, but also

nationally and internationally. Being able to

attract specialists with excellent knowledge

and abilities is a deciding factor for compa-

nies whose market success depends on tech-

nological prominence. This is where the ex-

cellent reputation of the ZEISS brand helps in

conveying a sense of trust and reliability to

prospective employees. Successful companies

attract success oriented workers.

Qualification Drives Expertise

Improving the expertise of employees who

have already gained experience in the com-

pany is also very important. It is also an

effective instrument for enhancing value

creation in the company. Advanced internal

and external training is being systematically

intensified and geared towards the compe-

tence profiles of the various assignments.

Uniform Culture of Leadership

A worldwide initiative within the company’s

strategic initiative “Excelle” is dedicated not

only to promoting prospects and specialists,

but also to executive development. 50 em-

ployees in 20 countries are involved in this

project. The goal is to establish a globally

recognized leadership culture. To accomplish

this, a worldwide program designed to

systematically record employee expertise is

being implemented. Another important

Carl Zeiss GroupHuman Resources 24

Ilona Radics

Head of Quality Management

at Carl Zeiss Hungary

(until July 2003)

Today: “Progress” Project Manager

Hensoldt AG, Germany

“Being a leader requires coaching youremployees, motivating them, helpingthem to perform well, showing them your personal example of the values andculture of leadership on a daily basis.But most importantly, it means givingthem the feeling of being a part of Zeiss –in every Zeiss plant or division.”

Jim Kelly

President of Carl Zeiss Inc.,

Thornwood, USA

“Effective leadership requires motivating employeeswith inspirational vision and values while guidingtheir efforts through regular, honest feedback. Wesupport them and remove barriers so that they canmaximize their performance for the benefit of ourCarl Zeiss customers.”

25

component is the implementation of meas-

ures to promote the careers of specialists,

similar to those already introduced for exe-

cutives.

Popular Training Ground

Preparing young people for future careers

has always been important to the Carl Zeiss

Group. From the first day of their training,

they experience the close connection be-

tween theory and practice. The number of

traineeships once again significantly in-

creased during the reporting year. Trainees

account for 5 % of the total workforce, a

figure above the industry average. More than

2000 applicants competed for the 208 new

traineeships.

Carl Zeiss GroupEnvironmental Protection 26and Industrial Safety

Strategic Benefit

Carl Zeiss operates in an area that does not

belong to one of the “classical” industries

that are harmful to the environment or pre-

sent high safety risks to their employees.

Processing glass and metals, assembling elec-

tronic components, creating software or pro-

viding services for applications, preventive

maintenance and training have a relatively

low impact on the environment and the peo-

ple who carry out these tasks. However, it

is still important to systematically include en-

vironmental protection and industrial safety

measures in all phases of product creation,

right from the initial planning stage. This

occurs not only out of the respect for people

and the environment, but more importantly

it offers the opportunity to strategically

develop the company while casting an eye

towards new products and business areas.

In practice, environmental protection and

industrial safety at Carl Zeiss focus on the

following aspects:

More effective use of resources

Encourage industrial safety and

environmental protection at all levels

of leadership

Reduce consumption of raw materials,

energy and water

Avoid industrial accidents and job-related

illnesses

Creation of largely reusable and environ-

mentally-friendly disposable products

Utilize recycling and closed-loop recycling

management

Commitment to low emission and low

waste technologies

Prevent the release of environmentally

harmful materials

Above all, integrated industrial safety and

environmental protection serve as preventive

measures and are important contributions to

proactive risk management.

Environmental Protection and Industrial Safety

Combining sustained environmental protection, industrialsafety and economic efficiency is a challenge taken directlyfrom the Carl Zeiss Vision. We view environmental protectionand preservation of our natural resources as our corporateduty. The continual enhancement of industrial safety andhealth protection also plays a pivotal role in our company’ssocietal and social responsibility. Both areas contribute to the quality of the work environment, leading to higherperformance and the economic efficiency of the company.These are part of the duties that every employee must fulfill.

27

Integration at the Forefront

Consolidating existing management systems

following the corporate quality management

model is an important step in integrating en-

vironmental protection and industrial safety

into the business processes of the Carl Zeiss

Group. A project initiated by the Environmen-

tal Protection and Industrial Safety Officer is

leading to the integration of the environmen-

tal protection and industrial safety manage-

ment systems into the existing quality man-

agement system. As a result, quality, indus-

trial safety and environmental protection

management will be evaluated in a combined

audit, beginning with fiscal year 2003/04.

During fiscal year 2002/03, Carl Zeiss

Jena implemented an industrial safety man-

agement system (AMS). This tool supports

the integration of industrial safety measures

for all tasks and operational procedures. It

establishes the basis for additional improve-

ments.

Certification and Training

Simultaneously, we are laying the foundation

for the certification of the environmental

protection and industrial safety programs

according to internationally recognized

standards. Our goal is to implement a

uniform standard at all Carl Zeiss production

sites. During the reporting year, the US site

for industrial metrology in Minneapolis, MN,

received environmental certification accord-

ing to the DIN EN ISO 14001 standard. An

additional component of these projects is a

manual for developing environmentally-

friendly products, also defining ecologically-

sound principles for purchasing and produc-

tion. It is an important component for the

integration of environmental protection

practices throughout the operational process

chain.

Training modules have been created for

hazardous materials, waste management,

emissions control, soil and water protection,

and environmental management. They can

be used for advanced training and briefings

on environmental protection.

New Building Looks to the Future

Industrial safety and environmental protec-

tion were particularly important during con-

struction of the new Carl Zeiss SMT AG me-

chanical production facilities. Heavy lifting

work is now all being carried out by the

handling system installed in the air-condi-

tioned, vibration-free factory. Mechanical

parts in this area weigh up to 150 kg

(330 lbs.) and must be positioned with the

highest precision.

With closed loop and purification

systems, the waste water treatment

installation in the new factory

opened by Carl Zeiss SMT AG

meets the highest standards

Carl Zeiss GroupEnvironmental Protection 28and Industrial Safety

SMT AG’s facility in Oberkochen, where con-

trolling water pollution is very important, is

shaped as a basin, which effectively prevents

leakage of emulsions, e.g. cooling lubricants.

Any damage to the neighboring water con-

servation area is avoided. Closed loop sys-

tems and water-saving rinsing techniques

reduce water consumption to a minimum.

Recycling and Purification

By installing distillation systems to recycle

solvents used in washing and purification

processes, Carl Zeiss Jena succeeded in sig-

nificantly reducing the amount of waste pro-

duced and materials costs. The installation

of local closed loop systems contributed to a

reduction in water consumption of approxi-

mately 30 % over the year before. Environ-

mentally friendly technology also leads to

cost savings here.

A system for cleaning waste air in the

electroplating area aids in reducing harmful

emissions.

Conservative Use of Resources in

Production

The new insulation of a production hall, as

well as the modernization of the central con-

trol technology to increase the efficiency of

the air-conditioning and ventilation systems,

led to a potential saving of approximately

20 % in heating oil consumption over the

year before.

An integrated approach for improving

waste water treatment, the use of closed

loop technology, systems for micro-filtration

and ultra-filtration, and water conservation

measures led to considerable potential

savings in resource consumption in the Aalen

eyeglass lens production plant.

This approach led to a reduction of up to

70 % in water consumption in eyeglass lens

production between 1998 and 2002 – this

corresponds to approximately 90,000 m3

(approx. 24,000 US gallons) of water, or

enough for 600 single-family homes.

Water consumption of production

facilities [in thousands of m3]

Total water consumption

[in thousands of m3]

Volume of waste water

[in thousands of m3]

“Environmental preservation

is a core consideration

in all our activities.”

From the Carl Zeiss Vision.

29

No Problems with Electro-smog

Avoiding the pollution caused by electro-

magnetic fields (EMF) is another step taken

towards health protection. Employees should

be protected in all areas where electrical,

magnetic or electromagnetic fields between

0 Hz and 300 GHz occur. During the reporting

year, measuring programs were conducted at

all locations around the company headquar-

ters in Oberkochen. Designed to create a

detailed EMF register, the inspections were

carried out over several days. It verified that

threshold values were neither reached nor

exceeded at any workstation – all worksta-

tions are completely safe.

Worldwide Initiatives

Motivated by the inclusion of environmental

protection in the Carl Zeiss Vision, many em-

ployees throughout the world turned their

attention towards protecting the environ-

ment: a comprehensive and practical initia-

tive in Japan, as well as a project in Canada

dedicated to waste management, or efforts

to promote measures aimed at protecting

wild tigers in India, are among the many

undertakings in the Carl Zeiss Group.

Using extensive measuring

programs, electromagnetic fields

were determined and documented

at the locations surrounding

corporate headquarters

Water consumption and waste

water volume, Carl Zeiss Group

in Germany

Carl Zeiss GroupBusiness Groups 30

The Medical Systems Group is a mainstay of business at Carl Zeissdue to its constantly high level of earnings. It is structured into theSurgical Products and the Ophthalmology divisions. The marketleadership enjoyed by the Surgical Products division spans a periodof over fifty years. In 1953, a surgical microscope from Carl Zeissheralded the dawn of microsurgery. The product family with thetrade name OPMI® has since been extended and enhanced on anongoing basis. Today, a key role is played, for example, by solutionsfor intraoperative diagnosis and instrument integration. Time andagain, the development of new fields of application, e.g. in spinesurgery and dentistry, provide new momentum for innovation.

The ophthalmic systems and instruments business has been com-bined in Carl Zeiss Meditec AG, a company listed on the PrimeSegment of the German stock exchange. The company has fully met expectations in the first fiscal year following the acquisition of Asclepion-Meditec AG. As a stock corporation, it is optimallypositioned to meet the requirements of a market currently display-ing two-digit growth rates. The capital market is showing keeninterest in the first publicly listed company of the Carl ZeissGroup. In September, the company completed a successful capitalincrease which was impressively oversubscribed. Carl ZeissMeditec offers an innovative product range providing solutions forthe four major diseases of the eye. With two main locations in theUSA and Germany and its own subsidiary in Japan, the companyis directly represented in the key markets.

Medical Systems


Medical Systems Group

In fiscal year 2002/03, the Medical Systems Group with itsSurgical Products and Ophthalmology divisions matched itsoutstanding results of the previous year, with revenue totalingEUR 476 million. Despite unfavorable currency influences, the operating result was maintained at a high level thanks to efficiency improvement and cost cutting measures.Disregarding currency influences, earnings exceeded lastyear’s level.

Holding our Ground

The medical sector has become less willing to

invest due to the general weakness of the

economy, although clients are still investing

in innovative medical technology if it enables

them to improve patient outcomes and

heighten efficiency. Overall, international

business was impacted by the persistently

strong euro. While the Ophthalmology divi-

sion (Carl Zeiss Meditec AG) was able to

compensate for this influence through its

manufacturing sites in the USA, the result of

the Surgical Products division suffered from

the strength of the euro.

Surgical Products

Market Trends Vary

The Surgical Products division operates on all

global markets. Besides the major mainstays

of business in North America, Japan and

Europe, emerging economies such as India

Magnification for optimum

results: OPMI® surgical

microscopes from Carl Zeiss

Compact and mobile: the OPMI

Movena® microscope for ENT

surgery

33

Treating in an upright position

with minimum fatigue: OPMI

PROergo® dental microscope

The microscope system for

dentistry: OPMI PROergo allows

innovative approaches to diagnosis

and therapy

and China are playing an increasingly im-

portant role. Sales in Japan slowed down

markedly as a result of changes in the charg-

ing methods for certain surgical procedures.

In the USA, there was an obvious reluctance

to invest in medical capital goods. Business in

Europe, on the other hand, showed a posi-

tive trend, with revenue markedly above last

year’s level in some areas.

Market Leader for 50 Years

Carl Zeiss leads the market for surgical

microscopes. The first surgical microscope,

the OPMI® 1, was used in ENT surgery back

in 1953. In the sixties and seventies, the sur-

gical microscope became firmly established in

ophthalmology, a discipline where cataract

surgery – one of the most frequent proce-

dures – would be inconceivable today without

this instrument. The field of applications was

later extended by neurosurgery. Surgical mi-

croscopes are now also used on a regular

basis in spine, plastic and reconstructive

surgery and other disciplines. Leading experts

from across the globe have been actively in-

volved in the ongoing enhancement of the

equipment. Nowadays, two out of every

three microsurgeons worldwide use surgical

microscopes from Carl Zeiss.

Innovations Move at Fast Pace

The 2003 anniversary year was marked by

the launch of two new, innovative products

focused once again on ENT surgery. The

OPMI Sensera® microscope became estab-

lished as a new standard due to its superb

mobility and outstanding working range.

“When the world’s first OPMI 1 surgical microscope was launched in 1953, Carl Zeiss set milestones for the success of microsurgery in close cooperation with medical pioneers such as Prof. Dr. H.L. Wullstein. Like many of mycolleagues, I rely on the excellent qualityprovided by Carl Zeiss.”

Prof. Dr. Sabina Regina Wullstein

Physician for ENT and Plastic Surgery,

Würzburg, Germany


OPMI Movena®, an extremely compact

manual system, completes the range of ENT

products. For dentists, the OPMI PROergo®

model offers unparalleled ease of use. All

these microscopes – plus the OPMI VISU 150

Brightflex® system for ophthalmology –

can be optimally integrated into the OR or

the dentist’s office using the new S7 ceiling

mount. Further innovation potential is

offered by peripheral systems which enhance

the functionality of the surgical microscope.

Measuring and visualization technologies,

for example, will be increasingly incorporated

in the future.

Ophthalmology

Ongoing Growth in Ophthalmology

In spite of the difficult economic climate, the

ophthalmic instruments business successfully

remained on course to further growth. The

merging of Asclepion-Meditec AG and Carl

Zeiss Ophthalmic Systems AG to form Carl

Zeiss Meditec AG was successfully completed

in the reporting year. Carl Zeiss Meditec AG

supplies eyecare professionals with intelligent

solutions that enable them to work more ef-

ficiently. The goal is to provide patients with

improved possibilities for diagnosis and treat-

ment. Carl Zeiss Meditec is benefiting from a

number of long-term growth trends. In addi-

tion to the growing age of the world’s popu-

lation, these include intensified efforts in the

treatment of eye diseases in newly industrial-

izing countries and the desire for “perfect”

vision in industrial nations.

Focusing Completed

In the fiscal year under review, the company

sold off various marginal operations of

Asclepion-Meditec in the field of dermatol-

ogical and dental lasers, thus completing the

planned process of focusing activities on the

core ophthalmology business.

Japanese Subsidiary

The company has founded its own subsidiary

in Japan in order to make better use of busi-

ness opportunities in the world’s second

largest market for medical technology in the

future. With a sales staff of its own in the

largest markets USA, Japan and Germany,

some 40 sales organizations and 100 agen-

cies of the Carl Zeiss Group, Carl Zeiss

Meditec ensures that is represented all over

the world.

35

Success through Innovation

Innovative products enabled Carl Zeiss Medi-

tec AG to achieve growth even in difficult

market conditions. The STRATUSOCT™ diag-

nostic instrument provides real-time, high-

resolution images similar to photos of the

cross-sectional structure of the eye. It is ideal

for the early diagnosis of age-related eye

diseases. The Humphrey MATRIX™ diagnos-

tic system recently presented for the first

time completes the spectrum of screening

systems for glaucoma diagnosis at an early

stage. The CRS-Master™ module is a major

addition to the range of products for the

correction of visual defects. It combines the

MEL 80™ refractive laser with a wavefront

diagnostic system of unprecedented accura-

cy, permitting laser therapy of visual defects

to be performed with even greater precision.

Bestseller with Further Potential

An important mainstay of business is the

IOLMaster® system, of which more than 3000

have been delivered to date. It is used prior

to cataract surgery to determine the power

of the intraocular lenses to be implanted, in a

non-contact process placing minimum strain

on the patient. A decision was recently taken

by the US Centers for Medicare & Medicaid

Services (CMS) granting doctors significantly

increased cost reimbursement for examina-

tions using the IOLMaster system.

Fight against Blindness

Carl Zeiss supports the Vision 2020 initiative,

a worldwide WHO program for blindness

prevention in particular in developing and

newly industrializing countries. Vision 2020 is

primarily focused on improving medical care

by promoting medical competence on a local

basis.

Off to a good start: the MEL 80™

refractive laser has become an

important mainstay of business

Bestseller: the 3000th IOLMaster®

system was delivered for the

non-contact measurement of the

dimensions of intraocular lenses

The CRS-Master™ uses all para-

meters of the patient’s eye to control

the correction of visual defects using

the MEL 80 laser


The Semiconductor Technology Group operates under the nameCarl Zeiss SMT AG (Semiconductor Manufacturing Technologies).It is organized as a legally independent stock corporation withinthe Carl Zeiss Group. The enterprise is 100 % owned by Carl Zeiss.The company sees itself as a pioneer for new technologies and aspiresto “enable the nano-age world.” As a world leader in this sector,Carl Zeiss SMT AG is committed to technical excellence in all itsdivisions. This dedication allows the SMT Group to supply world-wide providers of manufacturing and inspection technologies formicro and nano structures, enabling further development andgrowth in these key technologies. SMT’s leading position is basedon its core competencies in optics and electron beam technology.Lithography optics for wafer steppers and wafer scanners for thefirm ASML, the leading provider of lithography machines formanufacturing integrated circuits (IC), are its main products. Inaddition, the company’s product line includes optical componentsand sub-systems for lithography lasers and synchrotron optics.The group also offers wafer and mask inspection systems. SMT isusing its expertise in electron and ion beam technology to developinnovative systems necessary for defect analysis and mask repairfor the semiconductor industry. The LEO Group, which is part of Carl Zeiss SMT AG, manufactures a comprehensive line of scan-ning electron microscopes, transmission electron microscopes andion beam systems. Their fields of application include materialsanalysis, biology, pharmaceuticals and diagnostics.

Semiconductor Technology


Semiconductor Technology Group

The Semiconductor Technology Group reported revenues ofEUR 447 million at the close of the fiscal year, equivalent toa decline of 19 % over the previous year. A key factor for thisnegative development was the ongoing weak demand for thegroup’s main product – optical systems for microlithography.Other areas successfully maintained the previous year’s revenue levels. Laser Optics was able to register some growth.All in all, the group’s operating profit remained well behindexpectations and the healthy results achieved in the previousyears.

“IBM would like to extend its most sincere congratulations on thesuccess of the Starlith 1200 lenses. Clearly the results are worldclass. Fantastic job!”

Dan Corliss, Exposure Tool Development, IBM Microelectronics Division, Hopewell Junction, NY, USA

Precise mechanics for

high-performance optics:

mount of a lithography lens

Every component is optimally

aligned: a lens in the

Starlith® 1200 series

39

Lackluster Semiconductor Market

During the fiscal year, Carl Zeiss SMT AG felt

the effects of the continuing crisis – now in

its third year – in the worldwide chip market.

Its core business of optical systems for

photolithographic structuring of microchips

shrank by 25 % to EUR 321 million. Wafer

and mask inspection systems were also im-

pacted by a lack of consumer confidence

worldwide. However, business with laser op-

tics increased in the same period, as SMT AG

now supplies complete modules instead of

components to its key customer Cymer.

Cost Reduction

The enduring reluctance of chip manufac-

turers to invest prompted the lithographic

optics unit to introduce comprehensive cost-

cutting measures and led to shorter work

times during the fiscal year. The emerging

market trends are necessitating rigorous ad-

justments to fixed cost structures to allow

more flexibility in reacting to changes. This

will also impact the need for structure-

related adjustments to manpower levels.

Electron Optics Steers Steady Course

Subsidiary LEO Electron Microscopy supplies

electron optical technologies to a wide range

of markets. Due to positive developments in

individual segments and the introduction of

numerous new products, the business unit

was able to post steady sales. Incoming

orders increased substantially over the same

period.

Structural Modifications

Additional focal points were the further de-

velopment of the organizational structure,

as well as programs to maintain profitability.

These are part of the OPEX (OPerational

EXcellence) project that is currently being

introduced and will continue in the next

fiscal year. As a result, potential to increase

efficiency was determined in the develop-

ment area. Process improvements in produc-

tion enabled faster reaction times to changes

in the order situation caused by market

fluctuations.

The clean rooms of Carl Zeiss

SMT AG provide ideal conditions

for the production of

high-performance systems


Inspection Business Consolidated

At the end of the reporting year, the semi-

conductor inspection systems business of

Carl Zeiss Microelectronic Systems GmbH

(MES) and the SMT subsidiary LEO Electron

Microscopy joined to create Carl Zeiss SMS

GmbH (Semiconductor Metrology Systems).

The company began operations on

October 1, 2003. By systematically focusing

its activities on the semiconductor market,

the company is able to optimally utilize

synergetic effects between light optical and

electron optical technologies.

Technology Offensive

To meet market challenges, SMT AG rein-

forced the development of innovative pro-

ducts in all areas. The “roadmap“, the semi-

conductor industry’s long-term innovation

plan, details the steps toward the continuous

improvement of productivity. SMT AG re-

mains a leader in developing new technolo-

gies. In its core lithography optics market,

the company is faced with the challenge of

simultaneously pursuing many development

projects aimed at further increasing resolu-

tion. This led to the creation of immersion

technology for the exposure wavelength of

193 nm – a completely new procedure to

enhance resolving power. Using SMT AG’s

leading edge immersion optics, ASML be-

came the first manufacturer to perform expo-

sures under immersion during the dynamic

operation of a wafer scanner. The perform-

ance of this technology is comparable to the

157 nm exposure wavelength, whose devel-

opment has reached a very advanced stage

and for which the first illumination system

has been delivered. At the moment, all signs

indicate that the introduction of the 157 nm

systems, and most likely the product versions

that have already been developed, will not

take place as planned. At the same time,

SMT is currently working on 193 nm optics

with an even larger lens aperture.

EUV Makes Headway

EUV (Extreme Ultraviolet) lithography is also

at an advanced stage of development. By the

end of the decade, this technology is expect-

ed to be used in the mass production of

chips. With a wavelength of 13.5 nm, it will

venture into entirely new dimensions. As, un-

like conventional lithography, no lens systems

can be used in this area, this poses an unpar-

alleled technological challenge. EUV technol-

ogy allows another dramatic increase in

packing densities in chip fabrication. After

the Micro-Exposure Tool, the first projection

optics, an illumination system for EUV litho-

graphy was completed during the fiscal

year and delivered to the system integrator

Exitech (UK). As a result, all optical systems

needed for a first microstepper are in place.

41

Multi-faceted Electron Optic Systems

LEO Electron Microscopy introduced a new

generation of transmission electron micro-

scopes – LIBRA® – to characterize the atomic

structure of materials. It presented the scan-

ning electron microscopes series SUPRA™,

ULTRA™ and EVO® for a wide range of

applications in nanotechnology, semicon-

ductor defect analysis and biotechnology. In

addition, an alpha tool, based on electron

beam optics and a gas injection system, for

repairing photo masks was finished and

factory-qualified together with a leading

chip manufacturer.

Laser Optics Broadens its Focus

Laser Optics succeeded in expanding its close

cooperation with Cymer, the market leader

for lithography lasers. Along with the joint

development of an optical module for a new

generation of lithography lasers, the product

line was successfully extended to include

measurement modules for laser beam

characterization.

Alliance for Inspection Systems

A strategic alliance for the development of

wafer inspection systems was expanded with

KLA Tencor, a major equipment supplier for

the chip industry. Along with the upcoming

delivery of DUV optics for wafer inspection,

the joint effort was enlarged to also include

mask inspection based on AIMS technology.

The first system for defect analysis of photo

masks with an exposure wavelength of

157 nm was delivered to an international

consortium of leading chip manufacturers.

The LEO LIBRA® 200 FE electron

microscope offers high resolution

imaging and materials analysis at

the level of atomic structures

User-friendly: the benefits offered

by the ease of use of the LEO

LIBRA 200 FE are particularly

evident in such complex applica-

tions as spectroscopy

Optics focused on the future:

mirror system for the sample

of an EUV exposure system

(Extreme Ultra Violet) for

upcoming chip generations


The Consumer Optics Group offers high-quality eyeglass lenses, anextensive line of examination systems for eye care professionals, andeyeglass lens production technology. Binoculars and hunting opticsfrom Carl Zeiss provide highly discerning and demanding userswith 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. By far the most important marketfor the Ophthalmic Products Division is Germany. Customersinclude eye care professionals such as opticians and optometrists,as well as ophthalmic retail chains. In addition to eyeglass lenses,the division offers each of these customer groups an extensive lineof other products – including all instruments and systems requiredfor diagnosis, fitting and consultation.The System Technology division provides innovative productionsystems that allow retailers to quickly provide their customers with eyeglass lenses featuring Carl Zeiss design and quality intheir outlets.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 quality andtop optical performance all over the world. Digital technology isnow finding its way into one of the company’s most traditionaloptical products – binoculars. New night scopes allow detailedobservation of nature, even in dark conditions. ZEISS brand rifle-scopes enjoy an excellent reputation with hunters.

Consumer Optics


Despite the difficult competitive environment in its market,the most important business unit of the Consumer OpticsGroup was able to almost match its performance of the pre-vious year. At EUR 347 million, overall revenue of the groupfell 7 % short of the figure achieved in fiscal year 2001/02.Eyeglass lens business remained on the same level as lastyear. However, consumer restraint clearly left its mark on the Sports Optics division. The volatile, project-based SystemsTechnology business lagged well behind the very goodperformance seen the previous year.

Consumer Optics Group

Good vision also at night: Victory

NV T* binoculars provide detailed

images, even in intense darkness

Good vision in an elegant package:

SkyPol® polarizing sunglass lenses

display excellent color rendition

Products from the Consumer Optics

Group are ambassadors of the

“Carl Zeiss” brand name all over

the world

Shifts in the Market

The German market accounts for some 50 %

of all revenue generated by the Ophthalmic

Products division. Here, the ailing global eco-

nomy resulted in a marked decline in private

consumption, a trend also witnessed by other

western European markets. Two parallel

developments are evident: the trend toward

premium products (high-tech progressive len-

ses with high-quality coatings) is continuing.

This is contributing to a relative stabilization

of the market. At the same time, however,

very low-priced, imitation products are gain-

ing ground. This polarization of the market

is resulting in a thinning of the mid-price

segment.

45

Competition Intensifies

Tough predatory competition focused on the

terms of sale and prices offered to custom-

ers currently abounds among eyeglass lens

suppliers in Germany. In numerous markets,

independent eye care professionals, retail

chains and large-scale international organi-

zations are all vying for the customers’ atten-

tion. With its quality products and excellent

range of customized services, the Ophthalmic

Products division offers attractive solutions

for every type of marketing. The large inter-

national organizations are important partners

of the division on the global stage.

Products Create Markets

The ophthalmic market is characterized by

three trends for which Carl Zeiss offers

attractive products. Progressive lenses, for

example, are still the fastest growing product

group. The resounding success of individu-

alized Gradal Individual® progressive lenses in

particular has continued. Progressive lenses

specially designed for small frames – Gradal®

Short is one example – also met with a very

favorable response on the market. There is

also an obvious trend toward the use of new

lens materials and coatings. New base mate-

rials, e.g. plastic with a refractive index of

1.74, and polarizing lenses result in a marked

improvement in wearing and visual comfort.

New coatings enhance the durability of len-

ses and facilitate lens care. The third trend is

the increasing use of professional centration

systems for optimally determining the posi-

tion of the lens relative to both the eyeglass

frame and the topography of the wearer’s

face. These systems are the logical response

to constantly increasing quality and individu-

alized designs of prescription lenses. The out-

standing benefits offered by these products

can only be fully utilized when fitted with the

computer-aided fitting system Video Infral® II

developed by Carl Zeiss. As the technology

leader in this field, Carl Zeiss is also achieving

considerable success with this system in

European countries outside Germany.


Innovations Focused on Good Vision

We have introduced a polarizing sun protec-

tion lens in order to offer our customers even

better vision. The new lens type SkyPol® sets

new standards in the visual comfort of sun-

glasses. The polarizing properties reduce

reflections, e.g. on metallic surfaces or water.

At the same time, the lens provides the

excellent contrast enhancement of the

patented Skylet® effect.

With new services, Carl Zeiss is now as-

sisting the eyecare professional in providing

patients with optimum information and con-

sultation. The web-based systems have al-

ready won several awards and have been

voted the industry’s best provider platform

by the German ophthalmic media. New

modules are now supplementing the NetFral®

system. The NetConsult function provides

the eyecare professional with a tool that

supports patient consultations online. Para-

meters such as weight, edge thickness and

center thickness can be simultaneously

displayed for up to six different lens types.

An object of value: ZEISS Diadem®

opera glasses allow their user to

experience everything in close-up

Sports Optics

Binoculars and riflescopes are sold not only

in ophthalmic businesses, but also via camera

and hunting dealers and gunsmiths. After a

sluggish start due to weak demand for its

products, business in the Sports Optics divi-

sion regained momentum toward the end of

the fiscal year. In Europe, consumer caution

is particularly evident in the market for high-

quality consumer goods. In the USA, how-

ever, the division achieved an increase in

business. Overall, however, revenues fell

short of last year’s figure.

Binoculars for Evening and Night

With the Diadem® model, the Sports Optics

Division has launched an attractive, compact

binocular on the market – for use in the the-

ater, opera, musicals or vaudeville. It provides

a brilliant image with 3.6x magnification and

outstanding color rendition down to even the

finest nuances. The Victory NV 5.6x62 T*

night scope represents a new generation of

top-performance, robust binoculars featuring

a residual light intensifier. They are ideal for

night viewing by hunters and security forces.

The up to 20,000x residual light intensifier

requires very little energy.

47

Glare protection and contrast en-

hancement: SkyPol® lenses provide

the eye with more information

On-site precision: System Technology

machines make Carl Zeiss technology

available anywhere

“The name Carl Zeiss is synonymous with excellence inoptics. Optical retailers and final consumers recognizeand appreciate the undisputed quality and technology ofZEISS lenses.”

Paolo Baiocchi, President of Intercast Europe S.P.A., Parma, Italy.

Intercast is a leading supplier of sunglass lenses

System Technology

Sets its Sights on Growth

With its production systems for close-to-

market, regional eyeglass lens production,

the System Technology division has added

new components to its product line. The new

production machines now also allow the

manufacture of the customized Gradal Indi-

vidual progressive lenses. After a phase of

reduced capital spending, new opportunities

for growth are now discernible on the hori-

zon for this business again.


The Microscopy Group supplies its instruments to a marketcharacterized by the current trends in the fields of healthcare,medical research and the pharmaceutical industry. It is system-atically expanding its leading position in the fields of microscopesand systems for use in research and demanding routine appli-cations. In the field of biology, Carl Zeiss aspires to cover all areasof microscopic observation and documentation. Through targetedalliances with partners in specialized fields, the group is steppingup its activities in growth areas and new applications. Carl Zeissis further expanding its market leadership in the field of laserscanning microscopy in particular. In materials microscopy, CarlZeiss is utilizing the good growth potential with new products andis opening up new business fields for this group. Microscopy isrising to the challenges posed by global efforts to reduce healthcarecosts and by the stagnation in the investment activities of scientificinstitutes.

Microscopy


Intensified Competition

The difficult situation in the global economy

had a negative overall impact on microscopy

business and led to stagnation and even

downturns in some segments. In many areas,

funds for research were cut. In the routine

and training fields, for example, public bud-

gets were reduced or provided too late, thus

leading to a considerable drop in revenue.

Competition for the remaining funds has

become more aggressive in all markets as a

result of the poor financial situation in both

the public sector and industry.

The Microscopy Group was able to consid-

erably increase its revenue in North America.

Business decreased in parts of Europe and

South East Asia. Market conditions in Japan

were particularly difficult. Currency effects

had a negative influence on business due to

the large volume of exports to these regions.

Microscopy Group

After many years of particularly strong growth, the order volume in the Microscopy Group decreased in the past fiscalyear. At approximately EUR 295 million, revenue was 10 percent below the previous year’s level. Despite the difficult market environment, complex laser scanning microscopesystems made a very good showing. The earnings trendfollowed the trend in revenue.

New image quality for materials

analysis: EC Epiplan-Neofluar

objectives

51

Laser Scanning Microscopy Scores Big

Success

In the high-end research area of biomedical

applications where confocal laser scanning

microscope systems are used, the Microscopy

Group was able to further expand its market

leadership and hence generate increased

revenue and improve its result. Here, the LSM

510 META system presented last year has

become an important mainstay of business.

This system was optimized for the optical

manipulation of proteins and was upgraded

with major software modules. The system

won the “Readers’ Choice Award“ as the

“Product of the Year“ in its class from the

journal “The Scientist“. The LSM 510 META

also received the Innovation Award 2002 of

the German federal state of Thuringia.

To be able to quickly meet the high level of

demand for laser scanning microscopes, a

second production line was created for these

systems in the Jena plant.

Molecular Medicine Unit

The market for systems in the field of drug

research (instruments for high sample through-

put) has become markedly smaller. Budgets

for technology investments in the pharma-

ceutical industry are not expected to rise in

the course of the next few years. The

Molecular Medicine division will be run as a

business unit within the Advanced Imaging

division in the future. This enables even

better utilization of the process and tech-

nology synergies between the two areas.

Innovative 3D Imaging

The Microscopy Group sets standards

with new products for biomedical applica-

tions. One focal point was the introduction

of the innovative ApoTome® light microscope

system, which provides customers with

access to 3D microscopy at an affordable

price. ApoTome® was extremely well received

by the market and has already won the

prestigious R&D 100 Award in the USA.

The importance of software for the con-

trol of microscopes and interactive or auto-

matic image analysis is constantly increasing.

This enables the customer to obtain repro-

ducible and quantitative information and

measuring results. The new release 4.0 of

the AxioVision® software specially optimized

The examination of bio-materials

requires modern microscopic

analysis: mouse melanoma cell on

a microstructured substrate

Complete solution for materials

microscopy: Axiovert® 200 Mat

inverted microscope with an

AxioCam® digital camera and

AxioVision® image analysis

software


for these applications allows even greater

flexibility and provides efficient problem solu-

tions in image analysis. The new AxioCam®

MRc 5 five-megapixel digital camera is a fur-

ther addition to the existing line of AxioCam®

microscope cameras.

Alliances with partners, e.g. in the fields

of laser microdissection (P.A.L.M. in Bernried/

Germany), automated cell examinations

(Cellomics, Pittsburgh/USA) or chromosome

analysis (Metasystems, Altlussheim/Germany),

provide the Microscopy Group with access to

specialized microscopy applications.

Materials Microscopy Offensive

One strategic area of focus was the targeted

expansion of business activities in the field of

materials microscopy. Its broadened product

portfolio is providing the Microscopy Group

with greater access to industrial budgets. As

a major component in quality inspection and

materials research, modern materials analysis

will offer attractive growth opportunities in

the future. The continuing trend toward fur-

ther miniaturization, including microsystems

technology and the research and develop-

ment of new materials (compound materials,

bio-materials), make the use of modern

microscope systems indispensable. Further-

more, this provides an opportunity to

cushion the impact of the differing business

cycles in industry and government-funded

research.

With its new microscopes and systems,

the Carl Zeiss Microscopy Group offers an

attractive line of products for all applications

in materials analysis. To further increase cus-

tomer value, a new generation of objectives

and complete systems has been developed

and tailored to the requirements of industry

and materials research by using application-

specific software.

“The ApoTome system with itsstructured illumination is the next big thing in fluorescencemicroscopy.”

Jeff W. Lichtman, Dept. Anatomy and Neurobiology,

Washington University School of Medicine, St. Louis, USA

53

Optical 3D sections with

ApoTome® offer markedly

enhanced image quality

Fluorescence photo of a

kidney section without (top left)

and with (bottom right) the

ApoTome technique

Technological excellence and

leading-edge quality safeguard

the market position enjoyed by

Carl Zeiss: Axioplan® 2 imaging

fluorescence microscope with

LSM tube

World market leader for laser

scanning microscopes: 3D recon-

struction from 108 single images

of an epithelial cell of a lachrymal

gland

For the first time ever, a “mobile lab“ was

used to convince customers on site of the

performance capabilities offered by the new

equipment. Under the motto “Microscopy

on the move“, a truck with fully equipped

microscope workstations was sent on a

seven-month sales tour, visiting users in the

main European countries. The success of this

campaign is impressively underlined by the

attention it received in the marketplace and

by the number of orders directly placed by

the customers. A similar tour is planned for

North America.

Poised for the Future

In the Göttingen plant, a new 5,500 m2 pro-

duction hall was opened, in which all assem-

bly and system integration processes are con-

centrated. The new building is a major com-

ponent of extensive optimization measures in

microscope production and the associated

supply chains. Thanks to state-of-the-art pro-

duction technologies and an optimized mate-

rial flow, the Microscopy Group will markedly

enhance its efficiency and productivity.


The Industrial Metrology Group (IMT) is one of the leading pro-viders in the field of industrial coordinate measuring technology.With the launch of the world’s first CNC measuring machine backin 1973, Carl Zeiss paved the way for today’s 3D CNC metrology.IMT offers a wide product spectrum covering measuring tasks indiverse measuring conditions, from the metrology lab to shopfloormeasurement in a rough production environment without air-conditioning. The main customers for these products are the automotive, mechanical engineering and aeronautical industries.In recent years, the business group has undergone a transitionfrom a machine manufacturer to a solution provider, and nowoffers an impressive range of services from contract programmingto worldwide on-site support. More than 25 % of IMT revenue isalready generated with services alone. The Carl Zeiss IndustrialMetrology Group sets itself apart from its competitors by offeringthe most comprehensive technological know-how. All componentswhich are crucial for performance are developed and manufactu-red in-house by IMT. This is a vital prerequisite for guaranteeingthe recognized high quality of the products. On the basis of its leading market position in the industrial countries, this businessgroup is now expanding its activities in the growth regions of Asia.

IndustrialMetrology


Industrial Metrology Group

“Carl Zeiss Industrial Metrology has truly impressed uswith the constantly high quality of its products andservices, its value for the money and the reliability of itsdeliveries.”

Dr. Ulrich Eichler, Senior Vice President, Corporate Purchasing and Logistics,

Robert Bosch GmbH, Stuttgart, Germany

Precision and efficiency: measuring

technology by Carl Zeiss offers

optimum solutions for demanding

and complex tasks

In the 2002/03 fiscal year, the Industrial Metrology Group(IMT) generated revenue of EUR 256 million, equivalent to adecline of 10 per cent. With its global market share of 26 %,the group remains the No. 1 supplier in a market character-ized by a sharp downturn in 2003.

57

Market Trends Vary

Innovative quality assurance solutions com-

bining customized software and comprehen-

sive services are meeting with considerable

customer interest. Positive momentum is

being generated by shopfloor metrology,

while a decline in demand is evident in

business with horizontal-arm CMMs. The

plant in Minneapolis/USA is benefiting from

the slight recovery of the US and Japanese

economies.

Customer Satisfaction is the Benchmark

Systematic customer satisfaction surveys

conducted for several years now and the

rigorous implementation of their results have

led to a marked improvement in business

processes. The already high level of delivery

punctuality and quality has been further

enhanced. This is confirmed by customers

in their assessment of IMT products and

services.

New Organizational Structure

The IMT Group has strengthened its competi-

tiveness by optimizing its structures and pro-

cesses and reducing internal costs. This has

been achieved by relocating the manufactur-

ing activities of the Esslingen plant to Ober-

kochen. At the same time, we merged the

IMT Group with the independently operating

sales and service organization to form the

company Carl Zeiss Industrielle Messtechnik

GmbH. This wholly-owned subsidiary com-

pany based in Oberkochen is now responsi-

ble for all industrial metrology business at

Carl Zeiss. This form of organization acting

as a company within the Carl Zeiss Group

with sole responsibility for its operations is

the ideal structure for IMT, permitting it to

focus on customer and market requirements

in industrial business.

Weak Demand for Capital Goods

The manufacturing industry’s reluctance to

invest has also impacted the IMT business.

Although the German market remained

stable, a marked drop in business was dis-

cernible in the other European countries.

A slight upturn over the previous year was

evident in the markets in Asia. A noticeable

recovery is emerging in the USA after the

weak previous year.

Taking time for the customer:

services ranging from contract

measurement to training develop

the full performance potential

Productivity factor: GageMax®

measures the entire part spectrum

in the workshop and on the shop-

floor quickly and with extreme

precision


Innovations Reach Record Level

The 2002/03 fiscal year saw more launches

of new products and services than any other

year in the history of the Industrial Metrology

Group. GageMax® is a new CMM developed

for measurement in the production environ-

ment. Devised in close cooperation with cus-

tomers from various industries, the design is

focused on direct shopfloor use, reduced life

cycle costs and increased productivity. The

VAST® Navigator substantially accelerates the

measuring process, permitting productivity

and throughput rates to be increased by as

much as 30 %. The Calypso® measuring soft-

ware from Carl Zeiss, the leading software

for the measurement of components manu-

factured in a machining process, is setting

pioneering standards in object orientation

and degree of automation.

New Machine Design

The new PRO® Select horizontal-arm meas-

uring machine meets increasing accuracy

requirements, while achieving maximum pro-

ductivity in sheet-metal measurement. With

“bionic design“, the innovation leader Carl

Zeiss is once again spearheading technical

evolution. Unlike the standard horizontal-arm

configuration used in industry, the new

design is based on trapezoidal cross sections,

combining low weight, high rigidity and

good vibration behavior. This ensures high

accuracy and outstanding measuring speed

at the same time.

Making the Invisible Visible

The tomography technology used with great

success in medicine is now also being utilized

in industrial metrology. In conjunction with

ZEISS metrology software, the technique per-

mits not only length measurement, but also

quality testing of workpieces. IMT has

entered into an alliance with Hans Wälisch-

miller GmbH (HWM), Markdorf, Germany, for

the sale, use and development of industrial

tomography.

59

Low-cost Teleservice

With its innovative teleservice, Carl Zeiss is

playing a pioneering role in the industry.

Using the internet connection of the CMM

computer, machine statuses can be moni-

tored and parameters corrected, if required,

regardless of the machine location. This solu-

tion can put the machine rapidly back into

action, and hence offers considerable cost

saving potential.

Recognition by the Customer

During the reporting year, the presentation

of a much-coveted award reaffirmed the

sharp customer focus of Carl Zeiss Industrielle

Messtechnik GmbH. The Bosch Group pres-

ented the company with its supplier prize in

recognition of the consistently high quality of

its products and services, its value for money

and reliability of supply.

In action: Pininfarina Deutschland

relies on the precision and speed of

the PRO® Select system

New approach: PRO Select horizontal-

arm measuring machines incorporate

bionic design for high rigidity and low

weight


The Opto-Electronic Systems Group offers a diverse product line in the Carl Zeiss Group’s classic areas of operation as well as in itsnew lines of business. Planetariums and camera lenses, modulesfor digital projection and spectral analysis in addition to productsof the Optronics Division belong to the Opto-Electronic SystemsGroup. The group’s products represent a leading technologicalposition that gives the customer the certainty of receiving the bestpossible performance. The high-quality brand clearly underlinesthe quality of the product and creates trust with the end-user.The Camera Lens Division is building on its proven associationwith 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 whatare known as “light engines”, Carl Zeiss already equips well-known providers with optical systems. A new production facility isbeing erected in the Far East to produce these systems.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 converting from manufacturing sensors to the deliveryof systems.Carl Zeiss is continuing to expand its market dominance and technological leadership in planetariums. Newly developed laserprojection systems allow a unique display on the planetariumdome. Examples of this new technology can be seen in Hamburgand Peking.

Opto-Electronic Systems


During the year under review, the Opto-Electronic SystemsBusiness Group matched the previous year’s performancewith EUR 196 million in revenue. Optronics provided amomentum for growth, while digital projection stagnatedand the camera lens business decreased. Profits improvedslightly over the previous good year.

Opto-Electronic Systems Group

A name synonymous with

excellence: lenses from Carl Zeiss

are used in top-class cameras

Camera Lens Division in Transition

The Camera Lens division offers advanced

products for still, video and movie photogra-

phy which are marketed through partnerships

with ARRI, BandPro, Hasselblad, Kyocera and

Sony. The transition from analog to digital

systems has picked up speed. However, the

division was able to strengthen its position in

this difficult environment. In the reporting

year it sold nearly four million ZEISS brand

lenses. In line with the general market trend,

the lens business for analog systems contin-

ued to decline. Despite this trend, Carl Zeiss

was able to gain market share, together with

Sony, in the field of digital camcorders and

cameras. In the field of big-screen lenses, the

company was able to consolidate its position

as market leader. The market launch of the

63

Everthing at a glance: such surveil-

lance systems as the OPHELIOS

thermal camera are suitable for

stationary and mobile use

Digital Sony Cyber-Shot DSC-F717

cameras featuring high quality

ZEISS optics are very successful in

the market

DigiPrime® series in the fall of 2002 created a

new standard. As a result of the high accept-

ance, we achieved market leadership in this

product class.

The improvement of internal processes

enabled us to further enhance our compe-

titiveness. All in all, we posted satisfactory

earnings for the past fiscal year.

Ongoing Growth in Optronics

The Optronics Division is pushing ahead with

growth. It acquired ambitious projects in Ger-

many, the USA and Asia despite stiff national

and international competition. A modern

product line of optical and optronic devices

for the military as well as border surveillance

laid the foundation for its success. The divi-

sion set new standards with the development

and manufacture of special optics and tele-

scopes for satellites.

The consolidated company Hensoldt Sys-

temtechnik GmbH changed its name to Zeiss

Optronik Wetzlar GmbH as of October 1,

2003. The Optronics division provides a one-

stop market presence for optical visors and

non-stabilized periscopes from Wetzlar and

thermal cameras, laser range finders, stabiliz-

ed periscopes, border surveillance systems,

submarine periscopes and air-borne sensor

systems from Zeiss Optronik GmbH in Ober-

kochen. Despite cutbacks in the German

defense budget, the division succeeded in

increasing its number of orders, revenues

and operating profit.

“Zeiss ... is a professional, reliable andtrustworthy partner. The highest levels of integrity are adopted as part of its normal business transactions.”

Dr. Jeffrey Miles, Marketing and Sales Director,Thales Optronics, Staines, UK


Planetariums Holding Orbit

In the face of a severe deterioration in market

conditions, the Planetariums business unit

also performed well over the past year. This

unit largely depends on public contracts. As

a result of tightening budgets, however, the

awarding of contracts was often delayed.

New accessories for existing systems, and

innovative display technology created new

demand for this business area. Interest in

digital solutions as a supplement to classic

projection technology continued to rise.

Laser Display Technology is an extraordinarily

attractive technique. The initial contract from

Peking for this technology confirmed that we

are heading in the right direction. Carl Zeiss

remains the market leader in planetariums.

Based on the number of systems already in-

stalled, and a satisfactory number of current

orders, the division is looking toward the

future with confidence.

Digital Projection Beaming

into the Future

The market for projection display systems

continues to exhibit growth potential for the

coming years in the “Business Projection“

and “Rear Projection TV“ segments. However,

revenues and operating profit were consider-

ably affected by the weak US dollar, prevent-

ing the division from fulfilling its expecta-

tions. Asia is becoming the most important

market for these products, as important cus-

tomers (projector and TV manufacturers) are

relocating their production plants to this re-

gion. The division is responding to this trend

and will open its own plant in China during

the course of the current fiscal year. As a

production site near important suppliers and

customers’ production plants, the factory in

Suzhou (near Shanghai) will continue to im-

prove our competitiveness. More compact

and lighter optical modules based on Texas

Instrument’s market leading DLP (Digital

Light Processing) technology, make it possi-

ble to produce even smaller digital projec-

tors. One such Carl Zeiss module forms the

core of the new, ultra-light projector from In-

Focus. Together with our partner Loewe, we

have succeeded in breaking into the growing

market for projection TVs. Here, the division

65

Compactness as the key to success:

increasingly smaller optical modules

are leading to greater compactness

and constant reductions in weight

for digital projectors

The dome: the crowning success. In

the Peking Science Center the dome

area of the new planetarium features

ADLIP laser projection by Carl Zeiss.

also delivers optical systems that expand on

a platform (field lens design) developed and

patented by Carl Zeiss. At the same time,

systems are also being designed for Philips’

LCOS (Liquid Crystal on Silicone) technology.

With the product line now available, the

division expects to see a significant increase

in revenues in the current fiscal year.

Spectral Sensor Systems Marching On

The Spectral Sensor business unit generated

slightly higher revenue and a significant im-

provement in profits. Measuring systems

used for process monitoring during the

coating of architectural glass exhibited a

particularly positive trend. New orders and

revenues increased considerably. Additionally,

approximately 40 companies received spec-

tral sensors that will be used in devices for

environmental and process monitoring. A

spectral sensor for measurements in the near

infrared is part of SMART, the first European

moon mission that launched in September

2003. The spectrometer modified on behalf

of the Max Planck Institute for Aeronomy

will use remote spectral sensing to provide

information about the mineral composition

of the moon’s surface.

Carl Zeiss GroupHighlights 66

The author Armin Hermann

presenting his book

Microscopy on Tour

Innovative: high-quality materials microscopes

on the road

With its new approach to market promotion,

the Microscopy Group is setting new

standards in the industry. In December 2002,

the “Mat-Mobile“ – a huge truck equipped

with complete workstations for materials

microscopy – started off on a tour across

Europe. Its goal: to take the latest systems

directly to customers. The state-of-the-art

products they used to examine samples on

site ranged from a simple stereomicroscope

and new reflected light microscopes to the

LSM 5 Pascal. What better way to make the

outstanding performance of ZEISS systems

visible to the customer? The tour will con-

tinue in the USA in the current fiscal year.

A demonstration room is installed in the truck

Among Brothers

The development of Carl Zeiss during the

partition of Germany is the subject of the

book “Und trotzdem Brüder“ (“Brothers

Despite It All“) by Prof. Dr. Armin Hermann.

The publicist specializing in the history of

science and technology presented his most

recent book about Carl Zeiss in November

2002. He deals with the period from the last

days of World War II in 1945 and reunifi-

cation of Germany and the company to the

year 2002.

Fighting Glaucoma

Cutting the ribbon: the Aravind Hospital celebrates its

alliance with Carl Zeiss

Together with the Aravind Eye Hospital in

Madurai, India, Carl Zeiss set up the “Carl

Zeiss Center of Excellence in Glaucoma“ in

December 2002. The joint project is aimed at

combating preventable blindness caused by

glaucoma. For the initiators of the center, the

improved patient care and advanced training

provided to ophthalmologists for early diag-

nosis and therapy of the disease offer major

potential for future progress in this field. The

Aravind Hospital numbers among the most

productive in the world.

Highlights of Fiscal Year 2002/03

67

Industry Promotes Science

Signed and sealed: (from left): Dr. Franz-Ferdinand

von Falkenhausen (President and CEO, Carl Zeiss

Jena GmbH), President and CEO Dr. Dieter Kurz and

the Jena University President Prof. Dr. Karl-Ulrich

Meyn at the signing of the contract.

An agreement has now been signed on the

future cooperation between Carl Zeiss and

the Friedrich Schiller University in Jena. The

partnership initiated five years ago is being

continued. Carl Zeiss is once again providing

EUR 52,000 for this scientific and economic

alliance for each of the next five years. This

fund will be used to finance projects, award

scholarships, or enhance library collections.

Honorary Doctorate Awarded

Member of the Board Dr. Michael Kaschke (right)

presenting an engraved glass lens to Prof. Dr. med.

Prof. Dr. h.c. mult. Mahmut Gazi Yasargil

In December 2002, as part of a ceremony

held to present Prof. Mahmut Gazi Yasargil

with an honorary doctorate at the University

of Jena, Carl Zeiss invited guests from the

fields of medicine, politics and commerce to

participate in a podium discussion. Prof.

Yasargil has been making key contributions

to neurosurgery for several decades. It was

he who, together with Carl Zeiss and Contra-

ves, initiated the development of a highly

flexible and mobile suspension system. The

counterbalanced Contraves NC 1 stand allow-

ed greater surgical precision thanks to the

enhanced positioning of the surgical micro-

scope. Dialog with Shareholders

Carl Zeiss Meditec AG was the first company

of the Carl Zeiss Group to be publicly listed

in July 2002. In the first general meeting held

in Jena on March 12, 2003, shareholders

were provided with information on results

and strategies. Revenues are increasing, the

earning situation is healthy – investors are

satisfied. The market for ophthalmology

instruments and systems promises further

growth.

Full house: the first shareholders’

meeting of Carl Zeiss Meditec AG

A look back at the past: still

modern after 50 years – ZEISS

OPMI at the ENT congress in

Dresden


Hands-on for 120 Physicians

The eye in focus: Japanese ophthalmologists at the

Kyoto workshop

Carl Zeiss provided the equipment for the

congress held by the Japanese Society of

Ophthalmologists in Kyoto in January 2003.

In various workshops, leading ophthalmolo-

gists demonstrated the possibilities offered

by surgical microscopes. Special interest was

shown in the new illumination capabilities

provided by Zeiss OPMI® systems. In close

dialog with users, staff from our Japanese

sales organization were able to present the

impressive performance spectrum of Carl

Zeiss products and intensify customer contact

at the same time.

Market Leader for 50 Years

2003 was an anniversary year for the surgical

microscope: in 1953, the use of the first

“OPMI“ from Carl Zeiss by leading medical

experts heralded the dawn of microsurgery.

50 years later, the Surgical Products division

celebrated this milestone in the history

of medicine by organizing several events.

The festivities started with the 74th annual

congress of the German Society for ENT

Medicine and Head and Throat Surgery in

Dresden, Germany in May 2003.

School for Ophthalmologists

The unveiling of a plaque marked the official opening

of the Excellence Center in Chennai

A “Center of Excellence“ for the enhance-

ment of medical care in the field of retinal

disease was jointly founded by Carl Zeiss and

the Sankara Nethralaya Institute in Chennai,

India. The aim of the facility is to enhance

the training of ophthalmologists. It is located

on the campus of Sankara Nethralaya, one of

Asia’s most modern ophthalmic institutes.

Here, students have been receiving practical

training in the use of leading-edge diagnostic

and therapy systems since March 2003.

Macrocenter for Microscopes

Opening of the new microscope production center in

the Göttingen plant

In June 2003 the Light Microscopy Division

opened a new production center at its Göttin-

gen location in the presence of the Secretary

of Trade and Commerce of the German state

of Lower Saxony Walter Hirche. The center

took less than one year to build. 80 employ-

ees from the mechanical and optical produc-

tion areas work on a surface area measuring

5,500 m2. The new center improves produc-

tivity and flexibility in microscope production.

69

Mirror of Excellence

The Büssing Science Award was presented to

Dr. Holger Kierey, a scientist at Carl Zeiss

Laser Optics GmbH. Dr. Kierey received this

prize in June 2003 for his work on the Raman

effect (change in energy when light is scat-

tered) on what are known as switchable mirrors.

By the storage of hydrogen in yttrium crystals,

coated surfaces can be switched so that they

are either reflecting or transparent by the use

of electrical current. Possible applications in-

clude hydrogen detectors, optical switches,

sensors and “smart windows“, devices that

transmit or block light “at the press of a but-

ton“.

Innovation Awards

Winners galore: Innovation Awards were presented in

five categories from a total of 40 project entries

Knowledge transfer and networking topped

the agenda during the first Carl Zeiss Inno-

vation Days from May 22 – 24, 2003. Around

120 research scientists and managers from

all areas of the company met in Göttingen

for the event. The occasion was also used to

present the Carl Zeiss Group’s first internal

Innovation Award. From a total of 40 projects,

the best projects were selected in the cate-

gories Innovative Business Design, Leading

Edge Technology, High Risk Project, Success-

ful Failure and Short Time to Market. The

awards will be presented annually in the

future.

Specialist for switchable mirrors:

Dr. Holger Kierey (left) together

with other Büssing award winners


Promoting Young Blood

Take a peek: Carl Zeiss microscopes at the Museum of

Natural History in Berlin

The Museum of Natural History in Berlin has

had its own Carl Zeiss microscope center

since August 30, 2003. Visitors can dive into

the microcosm using the center’s 26 Stemi®

2000 and Axiostar® plus microscopes. It pro-

mises to be an adventure in natural science

for the primarily young guests.

Nature live: a popular attraction

for visitors

Room for technology: the new plant in Rugby

IMT Technology Center

Room to measure: ideal presentation possibilities

The opening of the new Technology Center

in Rugby has provided our British distributors

with a state-of-the-art facility for industrial

metrology. After assuming responsibility for

distribution last year, Carl Zeiss Ltd. in Wel-

wyn Garden City moved the division to its

new quarters in the geographic center of the

machine tools industry. The new building

accommodates sales, technical service, appli-

cations and training areas. It is manned by

30 employees.

71

Serving Russia for 100 Years

Festive atmosphere: Dr. Dieter Kurz congratulates

Maxim Igelnik, President of the sales organization in

Russia

Carl Zeiss delivered the first microscope to

Russia way back in 1848 – it was the 24th

microscope produced by the new company.

In 1903, Carl Zeiss opened its first office in

St. Petersburg. Today, 100 years later, Carl

Zeiss has branches in St. Petersburg and

Moscow. The Moscow office is responsible

for customers in Uzbekistan, Kazakhstan,

Belarus and the Ukraine. At a celebration in

Moscow, Carl Zeiss President & CEO

Dr. Dieter Kurz conveyed the congratulations

of everyone at company headquarters.

Laurels from the USA

Carl Zeiss received the prestigious R&D 100

Award in 2003 for ApoTome® – a system which

enables the low-cost projection of 3D images

in light microscopy. As a result, a new market

has been opened up for 3D microscopy. The

award was announced to the company in

July 2003 and later presented at a ceremony

in Chicago shortly after the end of the fiscal

year.

A winning team: (from left) Roger

Unger, James Sharp (USA) and

Dr. Hubert Bauch (Göttingen)

receive the award for Carl Zeiss

Kudos from Bosch

Outstanding performance: Dr. Manfred Möllendorf

(left) and Dr. Ulrich Eichler (right, both Bosch) honor

Dr. Rainer Ohnheiser (President & CEO Carl Zeiss

IMT), and Werner Gerstner (Vice President IMT

Sales)

For the constant high quality of its products

and services, value for the money and delive-

ry reliability, Carl Zeiss Industrial Metrology

(IMT) GmbH was presented the Suppliers

Award from the Bosch Group on July 22,

2003. The measuring machines produced by

IMT for the manufacturing industry have

been used for decades at Bosch. As one of

the largest customers, Bosch benefits from

the worldwide availability of services, and

IMT’s engineering know-how.

73

Organizational Structure of the Carl Zeiss Stiftung

Members of the Board of Management

Members of the Advisory Board

Carl Zeiss StiftungOrganizational Structure 74Board of Management

The Carl Zeiss Foundation, domiciled in

the German cities Heidenheim an der

Brenz and Jena, is the sole owner of the

two enterprises Carl Zeiss in Oberkochen

and Schott Glas in Mainz. These conduct

the business activities of the Carl Zeiss

Foundation, each under its own name

and with its own assets.

Administration of the Stiftung

The obligations and rights of the Admin-

istration of the Stiftung are looked

after by a committee. This committee

comprises five members: the current

Ministers responsible for the scientific

universities of the German states of

Baden-Württemberg and Thuringia, the

Chairman of the “Kreditanstalt für

Wiederaufbau”, the President of the

Donors’ Association for the Promotion

of Science in Germany and the current

President of the Max Planck Society.

The chairman of the Administration

of the Stiftung is the above Minister of

the state of Baden-Württemberg.

The committee is domiciled in Stutt-

gart, Germany.

Commissioner of the Stiftung

Heinz Dürr, Dr.-Ing. E. h.

Berlin

Industrialist

until December 31, 2003

Tilman Todenhöfer

Stuttgart

Personally liable shareholder of Robert

Bosch Industrietreuhand KG, Stuttgart

as of January 1, 2004

Members of the Boards

The members of the Boards of Manage-

ment of the operating enterprises

Carl Zeiss, Oberkochen, and Schott Glas,

Mainz

Organizational Structure of the

Carl Zeiss Stiftung

The Owner

Dieter Kurz, Dr. rer. nat.

Aalen

President and CEO of the Board of

Management


Semiconductor Technology, Industrial

Measuring Technology, Strategic

Corporate Development, Corporate

Communications, Corporate Human

Resource Management, Corporate

Auditing, and Legal Affairs and Patents

Norbert Gorny, Dr. rer. nat.

Westhausen


Microscopy, Opto-Electronic Systems, the

Service Centers, Information Technology

and Central Procurement

Michael Kaschke, Dr. sc. nat.

Oberkochen


Consumer Optics, Medical Systems, Cor-

porate Finance/Controlling, Quality and

Processes, and Research and Technology

Members of the Board of Manage-

ment of the operating enterprise

Carl Zeiss, Oberkochen, and Manda-

tories of the Carl Zeiss Stiftung

75Carl Zeiss Group

Advisory Board

Dr. Michael Claus

Aalen

Research Manager, Imaging Technology

Carl Zeiss, Oberkochen

Prof. Dr. Adolf G. Coenenberg

Stadtbergen

Chair of Business Administration,

Auditing and Controlling at the

University of Augsburg

Reinhard Dickehuth

Friedland

Chairman of the Employee Representative

Council of the Göttingen plant of


until Sept. 30, 2003

Adalbert Hanssen, Dipl.-Math.

Königsbronn

Member of Scientific Staff, Carl Zeiss,

Oberkochen, Aalen plant

as of October 1, 2003

Eberhard Knoblauch, Dipl.-Kfm.

Böblingen

Former CEO of the Board of Management,

Hewlett-Packard GmbH,

Böblingen

Anton Kuhn

Aalen

Sales Manager, Central and

Eastern Europe, Carl Zeiss, Oberkochen,

Aalen plant


Hermann-Josef Lamberti, Dipl.-Kfm.

Königstein/Taunus

Member of the Board of Managing

Directors, Deutsche Bank AG,

Frankfurt am Main

Dr. Hansjörg Manger

Uhldingen-Mühlhofen

Former Managing Director,

Robert Bosch GmbH, Stuttgart

Edwin Michler, Dipl.-Ing. (FH)

Kirchheim am Ries

Former Head of Pensions Department,



Heinz Müller

Aalen

Former Head of Logistics, Carl Zeiss,

Oberkochen, Aalen plant


Dr. Michael Rogowski

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,


Roland Seipold

Oberkochen

Final Assembly Fitter, Carl Zeiss,

Oberkochen


Members of the Advisory Board at


Harry Tauber, Dipl.-Ing. (FH)

Aalen

Member of the Employee Representative

Council, Carl Zeiss, Oberkochen, Aalen plant


Willy Theilacker


Chairman of the Employee Representative

Council of the plants in Oberkochen, Aalen

and Nattheim, and Chairman of the Group

Employee Representative Council of



Prof. Dr. Klaus-Dieter Vöhringer

Baden-Baden

Former Member of the Board of Managing

Directors, DaimlerChrysler AG, Stuttgart

Ingeborg Wagner

Göttingen

Photographic Laboratory Assistant,

Carl Zeiss, Oberkochen, Göttingen plant


Karl-Heinz Winter

Essingen

Process Engineer in Process Development –

Coating, Carl Zeiss, Oberkochen,

Aalen plant


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 GmbHEsslingen/NeckarC: EUR 10,400 100%

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 73.1%

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

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%

LEO ElektronenmikroskopieGmbHOberkochenC: EUR 515 100%

Marwitz & Hauser GmbHAalenC: EUR 8,436 100%

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

Zeiss Optronik GmbHOberkochenC: EUR 4,090 100%

Zeiss Optronik WetzlarGmbHWetzlarC: EUR 26 100%

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 *)

LEO MicroscopieElectronique 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%

LEO Electron Microscopy Ltd.CambridgeC: GBP 2,700 100%

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 Surgical Inc.ThornwoodC: USD 0.002 100%

LEO Electron Microscopy Inc.ThornwoodC: USD 0.1 100%

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%

Carl Zeiss Optica Ltda.Rio de JaneiroC: BRL 3,863 100%

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 Shanghai Co. Ltd.ShanghaiC: USD 200 100%

Carl Zeiss Display Technologies (Suzhou) Co. Ltd.SuzhouC: EUR 100 100%

Special Carl Zeiss Far East Co. Ltd.administration Kowloon

region Hong Kong C: HKD 10,000 100%

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 51%

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

Australia

Australia Carl Zeiss Pty. Ltd.CamperdownC: 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, 2003The 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

*) shares are held by the Schott Group; assigned to the Carl Zeiss Group for economic reasons

C = capital in thousands ofEUR or other currency

81

Carl Zeiss GroupFinancial Statements

Carl Zeiss GroupBalance Sheet 82

Balance Sheet as of September 30, 2003

Assets Notes Sept. 30, 2003 Sept. 30, 2002

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

Fixed assets 6

Intangible assets 15,294 18,049

Tangible assets 363,959 394,855

Financial assets 39,315 56,107

418,568 469,011

Current assets

Inventories 7 535,529 590,351

Payment received on account –135,545 –171,994

399,984 418,357

Receivables and other assets 8

Accounts receivable 356,477 436,779

Other receivables and other assets 95,507 109,186

451,984 545,965

Funds 9 533,204 472,180

1,385,172 1,436,502

Prepaid expenses 10 19,461 24,624

1,823,201 1,930,137

83

Liabilities Notes Sept. 30, 2003 Sept. 30, 2002

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

Equity 11

Capital of the Carl Zeiss Stiftung 175,000 175,000

Revenue reserves 61,148 47,257

Net income 68,783 61,298

Minority interests 32,682 25,251

337,613 308,806

Special items with an equity portion 12 11 1,832

Provisions 13

Provisions for pension plans and similar commitments 844,209 826,218

Other provisions 449,865 453,279

1,294,074 1,279,497

Liabilities 14

Liabilities to banks 7,997 85,490

Accounts payable 82,774 141,601

Other liabilities 75,340 85,982

166,111 313,073

Deferred income 25,392 26,929

1,823,201 1,930,137

Carl Zeiss GroupFixed Asset Movement 84

Fixed Asset Movement Schedule for the 2002/03 Fiscal Year

Acquisition / Manufacturing Cost

As of Currency AdditionsOct. 1, 2002 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 15,761 –174 5,342

Goodwill 29,703 – –

Payments on account – – 789

45,464 –174 6,131

Tangible assets

Land, land rights and buildings,including buildings on third-party land 307,916 –3,838 7,608

Plant and machinery 494,507 –5,632 31,539

Other fixtures and fittings, tools and equipment 331,333 –4,796 51,783

Payments on account and construction in progress 38,925 –670 13,968

1,172,681 –14,936 104,898

Financial assets

Interests in affiliated companies 23,237 –214 435

Loans to affiliated companies 99 – 5

Investments in associated companies 7,870 – –

Other investments 17,061 –1,368 –

Loans to companies in whichan investment is held 2 – –

Long-term investments 2,729 –4 56

Other loans 20,406 –39 5,172

71,404 –1,625 5,668

1,289,549 –16,735 116,697

85

Accumulated Book value Book value Depreciation

Disposals Transfers As of depreciation Sept. 30, 2003 Sept. 30, 2002

Sept. 30, 2003

(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)

1,285 – 19,644 16,477 3,167 1,911 1,415

616 – 29,087 17,749 11,338 16,138 4,184

– – 789 – 789 – –

1,901 – 49,520 34,226 15,294 18,049 5,599

3,887 1,357 309,156 184,817 124,339 127,899 8,735

19,686 11,225 511,953 405,475 106,478 112,283 41,853

25,789 19,125 371,656 254,175 117,481 115,748 63,883

4,855 –31,707 15,661 – 15,661 38,925 –

54,217 – 1,208,426 844,467 363,959 394,855 114,471

– – 23,458 350 23,108 22,887 –

35 – 69 – 69 99 –

7,870 – – – – 7,870 –

334 – 15,359 12,475 2,884 11,999 8,295

2 – – – – 2 –

1,901 – 880 118 762 2,453 6

6,286 – 19,253 6,761 12,492 10,797 2

16,428 – 59,019 19,704 39,315 56,107 8,303

72,546 – 1,316,965 898,397 418,568 469,011 128,373

Carl Zeiss GroupStatement of Income 86

Statement of Income for the Fiscal Year

from October 1, 2002 to September 30, 2003

Notes 2002/03 2001/02

(in thousands (in thousandsof EUR) of EUR)

Sales 17 2,028,938 2,256,518

Increase or decrease in finished goods inventories and work in progress –17,068 3,221

Own work capitalized 50,678 67,500

Total operating performance 2,062,548 2,327,239

Other operating income 18 164,286 133,905

Cost of materials 19 731,908 848,319

Personnel expenses 20 822,538 848,284

Depreciation of intangible assetsand tangible assets 21 120,070 92,330

Other operating expenses 22 505,477 528,602

Results from investments 23 2,315 695

Income from other investments andlong-term loans 409 354

Depreciation of financial assets and investmentsheld as current assets 24 9,318 1,035

Net interest income 25 11,832 6,612

Results from ordinary activities 52,079 150,235

Taxes on income 26 32,691 40,757

Other taxes 3,525 3,956

Income for the year 15,863 105,522

Profit / loss carried forward from the previous year 61,106 –30,951

Withdrawals from revenue reserves 7,102 3,567

Amount allocated to the capital of the Carl Zeiss Stiftung – 4,995

Transfers to revenue reserves 12,866 10,690

Minority interests in income 2,422 1,155

Net profit 68,783 61,298

87

Carl Zeiss GroupNotes to the Financial Statements

Carl Zeiss GroupNotes 88

Two companies are no longer included in the

scope of consolidation, one having been

merged with another consolidated company.

In addition, an interest held in another

company previously valued at equity was sold

in the reporting year.

The change in the scope of consolidation

does not have a marked effect on the com-

parability with the Group’s financial state-

ments from the previous year.

The financial statements of the Carl Zeiss

Group are combined with those of the Schott

Group to form the financial statements of the

Carl Zeiss Stiftung and its consolidated com-

panies. These consolidated financial state-

ments are published in the German Federal

Gazette and are filed together with the com-

plete list of interests held by the Carl Zeiss

Stiftung and its consolidated companies with

the Commercial Registers of the District

Courts of Heidenheim an der Brenz and Gera.

3 Principles of Consolidation

The book-value method is used to consoli-

date our investments, i.e. the acquisition cost

is offset against the share of the Carl Zeiss

Group in the equity of the subsidiary con-

cerned at the date of its acquisition or initial

consolidation. Any resultant differences have

been allocated to the assets concerned and

depreciated with them, inasmuch as their

current market value differs from their book

value. Any differences remaining on the

assets side are shown as goodwill under in-

tangible assets and depreciated over the ex-

pected useful life. Goodwill offset against

revenue reserves in previous years was not

capitalized retroactively. Depending on its

nature, any difference resulting from capital

consolidation has been included in the bal-

ance sheet under revenue reserves.

Principles and Methods

1 General Accounting Principles


Group are published pursuant to the German

Disclosure Law and the German Commercial

Code and have been prepared in accordance

with the principles of accounting and valua-

tion applicable to major corporations.

For the sake of clarity, individual items are

combined in the balance sheet and the state-

ment of income and shown separately in the

Notes. The method of total costs has been

used for the compilation of the statement of

income.

2 Scope of Consolidation


Group always include all domestic and for-

eign companies whose business activities are

conducted by the Carl Zeiss Group or where

the Group directly or indirectly holds a

majority interest.

In addition, as the management responsi-

bility for Carl Zeiss S.A.S., Le Pecq (France)

rests with Carl Zeiss, this company has also

been included in the Group’s financial state-

ments, although its shares are held by

Schott-Zeiss France Holding S.à.r.l., Clichy

(France) which is a company consolidated in

the Schott Group. To this extent, the scope

of consolidation has been expanded on the

basis of economic criteria.

Subsidiaries which are of minor importance

for the net assets, financial position and

results of operations of the Carl Zeiss Group

have not been included in the financial

statements.

In addition to Carl Zeiss, the scope of con-

solidation includes 22 domestic and 36

foreign companies at September 30, 2003.

Notes to the Financial Statements

for the 2002/03 Fiscal Year

89

mean exchange rate valid on the balance

sheet date. Any differences 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.

5 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

valuation principles applicable to the Carl

Zeiss Group. Inasmuch as the financial state-

ments of the individual companies markedly

depart from these principles, the necessary

adjustments have been made. For companies

whose balance sheet date differs from that

of the Group’s balance sheet, interim finan-

cial statements are used as a basis.

Acquired intangible assets are capitalized

at acquisition cost and systematically depreci-

ated. Acquired goodwill is depreciated over a

period of 10 years.

Tangible fixed assets are valued at acquisi-

tion cost or manufacturing cost, less depreci-

ation. The manufacturing cost of the compa-

ny-produced assets includes not only direct

cost, but also appropriate factory overhead

costs for materials and production. Insofar as

permissible under tax laws, the declining bal-

ance method is used for depreciation by the

domestic companies, otherwise the straight-

line method. The change-over from the de-

clining balance method to the straight-line

method is made as soon as the latter results

in higher depreciation. We have always made

use of the possibility of special depreciation

permitted by tax laws. The foreign subsid-

iaries mainly use the straight-line method for

depreciation. Minor fixed assets are written

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 resultant differences in

currency are included in revenue reserves.

Intercompany profits resulting from de-

liveries and services have been eliminated,

inasmuch as they are not of secondary

importance.

The deferred taxation principle has been

applied to consolidation adjustments

affecting net income.

In the statement of income, intercompany

sales and other internal earnings have been

offset against corresponding expenses or

have been reclassified as changes in inven-

tories or own work capitalized.

4 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

currencies and included in the consolidated

financial statements have been converted

at the mean exchange rates valid on the

balance sheet date. Differences in currency

resulting from the conversion of equity using

different exchange rates from those of the

previous year are taken into account in

revenue reserves or minority interests without

affecting net income.

The income and expenses shown in the

statements of income have been converted

at the average annual exchange rate. Results

for the year have been converted at the


Investments held as current assets are capi-

talized at acquisition cost or the lower quot-

ed price valid on the balance sheet date.

Special items with an equity portion have

been formed in compliance with German tax

regulations or equivalent foreign regulations,

insofar as their approval by the tax authori-

ties is dependent on their inclusion in the

commercial balance sheet.

The pension plan provisions and similar

obligations of the domestic companies are

based on actuarial computations and the

1998 mortality 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” pension charter, and the present value

method of an expectancy being used for

pension commitments covered by the “Pen-

sion Strategy 2000”. At foreign subsidiaries,

provisions for pension plans and similar ob-

ligations 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.

The other provisions are sufficient to cover

all perceivable risks.

Liabilities are stated at the amount due for

repayment.

off completely in the year of acquisition.

Extraordinary depreciation is taken for fore-

seeable permanent reduction in value.

Financial assets are valued at acquisition

cost or the lower current value. The book-

value method has been used to value invest-

ments in associated companies, as they are

of minor importance for the net assets, finan-

cial position and results of operations of the

Carl Zeiss Group.

Inventories of raw materials, supplies and

merchandise for resale are valued at the

lower 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

reduced marketability; no adjustment is made

for unrealized losses.

Receivables and other assets are carried

at their face value. All perceivable loan-loss

risks are taken into account by individual

adjustments. To cover the general credit risk,

receivables have been reduced by a flat-rate

allowance for each country.

91

All payments received on account are shown

as deductions from inventories.

Notes to the Balance Sheet

6 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.

Goodwill almost exclusively includes credit

differences resulting from capital consolida-

tion.

Sept. 30, 2003 Sept. 30, 2002


Raw materials and supplies 133,701 144,768

Unfinished goods,work in progress 244,638 260,419

Finished goods and goods for resale 153,176 171,416

Payments on account 4,014 13,748

Inventories 535,529 590,351

Payments received on account –135,545 –171,994

399,984 418,357

7 Inventories


The receivables from affiliated companies

result from deliveries and services provided

to affiliated companies of the Schott Group

and to non-consolidated companies of the

Carl Zeiss Group.

Other assets also include accruals whose

amounts are, however, of minor importance.

8 Receivables and Other Assets

Sept. 30, including Sept. 30, including2003 those due 2002 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 356,477 7,549 436,779 6,531

Other receivables and other assets

Receivables from affiliated companies 29,863 5,394 43,953 –

Receivables from companiesin which an investment is held 16,840 – 22,992 7,175

Other assets 48,804 8,200 42,241 4,726

95,507 13,594 109,186 11,901

451,984 21,143 545,965 18,432

93

Deferred taxation is due to time-limited

differences in results attributable to consoli-

dation measures. Other prepaid expenses

include pre-payments.

The securities held mainly include fixed-

interest-bearing loans and shares in funds

companies.

Liquid funds include checks, cash-in-hand

and bank balances.

9 Funds

Sept. 30, 2003 Sept. 30, 2002


Securities 230,502 216,761

Liquid funds 302,702 255,419

533,204 472,180

10 Prepaid Expenses

Sept. 30, 2003 Sept. 30, 2002


Deferred taxation 7,690 8,986

Discount 1 57

Other prepaid expenses 11,770 15,581

19,461 24,624


11 Equity

The equity of the Carl Zeiss Group amounts

to EUR 338 million. Revenue reserves mainly

include retained income from subsidiaries,

differences arising from capital consolidation,

the consolidation adjustment made under

the old law pursuant to Article 27 of the

Introductory Law to the German Commercial

Code. Also included are currency differences

resulting from capital and debt consolidation.

In addition, goodwill resulting from the capi-

tal consolidation performed in previous

years has partly been deducted from revenue

reserves.

Due to an increase in the capital of Carl

Zeiss Meditec AG, Jena, in the form of a cash

contribution totaling EUR 25 million made by

parties not belonging to the Carl Zeiss Group,

the share held in this company by the Carl

Zeiss Group has been reduced from 80.6 %

to 73.1 %. This has also had a corresponding

effect on the difference resulting from capital

consolidation allocated to revenue reserves

and the amount shown for minority interests.

In addition to the share of third parties

in the equity of consolidated domestic and

foreign subsidiaries, minority interests also

include capital and reserves amounting to

EUR 6 million held by Carl Zeiss S.A.S. (France),

which is assigned to the Carl Zeiss Group

for economic reasons.

12 Special Items with an Equity Portion

The amount shown for the reporting year

only includes special items required by

foreign regulations.

The amount disclosed last year also in-

cluded a special item with an equity portion

pursuant to Section 35, Para. 3, Income

Tax Regulations, totaling EUR 1,817,000.

95

The provisions for pension plans include

commitments undertaken by Carl Zeiss 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, restruc-

turing, warranties, anticipated losses from

pending business, price discounts and for

various other obligations and risks.

13 Provisions

Sept. 30, 2003 Sept. 30, 2002


Provisions for Pension Plans andSimilar Commitments 844,209 826,218

Other provisions

Provisions for taxes 39,468 44,761

Other provisions 410,397 408,518

449,865 453,279

1,294,074 1,279,497


The reduction in liabilities to banks is mainly

due to the redemption of a multi-currency

loan.

The liabilities to affiliated companies result

from deliveries and services provided by

affiliated companies of the Schott Group and

non-consolidated companies of the Carl Zeiss

Group.

EUR 5,173,000 of the total liabilities is

secured by mortgages.

Liabilities for taxes, which are included in

other liabilities, amount to EUR 19,536,000

(previous year: EUR 18,954,000). Liabilities

relating to social security come to EUR

8,981,000 (previous year: EUR 14,526,000).

14 Liabilities

Sept. 30, including including Sept. 30, including including2003 those due those due 2002 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)

Liabilities to banks 7,997 3,042 3,714 85,490 79,663 5,204

Accounts payable 82,774 82,006 329 141,601 139,942 439

Other liabilities

Liabilities to affiliated companies 11,799 11,799 – 17,805 17,805 –

Liabilities to companies in whichan investment is held 391 391 – 151 151 –

Other liabilities 63,150 60,020 1,546 68,026 64,214 2,131

75,340 72,210 1,546 85,982 82,170 2,131

166,111 157,258 5,589 313,073 301,775 7,774

97

16 Other Financial Obligations

During the fiscal year, expenses from leasing,

rental and similar agreements amounted to

EUR 39,204,000. They will probably remain

at a similar level for the next few years.

On September 30, 2003, obligations result-

ing from capital spending plans etc. existed

in the amount of EUR 46,563,000.

15 Contingent Liabilities

Sept. 30, 2003 Sept. 30, 2002


Notes payable 188 –

Liabilities on guarantees 21,237 23,637

attributable to affiliated companies 1,487 1,156

Liabilities from warranty contracts 327 330

attributable to affiliated companies – 102

Liabilities arising from the provision of collateral for third-party liabilities 91 185


17 Sales

Sales have been achieved with precision-

mechanical, optical and electronic products

and can be divided by geographic areas as

follows:

18 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 pro-

visions mainly includes the release of provi-

sions no longer needed in the personnel

area, and risks resulting from supply and

services.

The income from the disposal of fixed

assets shown for the reporting year mainly

results from the sale of real estate and

buildings. The amount disclosed last year

was mainly attributable to the sale of an

investment in a company.

2002/03 2001/02

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

Germany 447,129 22 432,629 19

Rest of Europe 767,012 38 900,616 40

America 519,020 26 607,975 27

Other areas 295,777 14 315,298 14

2,028,938 100 2,256,518 100

2002/03 2001/02


Release of other provisions 39,796 19,769

Income from the diposal of fixed assets 1,789 9,125

Post-capitalization and write-upsof fixed assets 2,807 1,568

Release of special items with an equity portion 1,821 626

Notes to the Statement of Income

99

19 Cost of Materials

2002/03 2001/02


Cost of raw materials, consumables andsupplies, and of purchased materials 666,683 776,652

Cost of purchased services 65,225 71,667

731,908 848,319

20 Personnel Expenses

2002/03 2001/02


Wages and salaries 631,285 642,629

Social security costs 114,727 114,244

Pension costs 75,894 89,935

Other benefits 632 1,476

822,538 848,284


21 Depreciation of Intangible Fixed Assets and Tangible Assets

22 Other Operating Expenses

Other operating expenses consist primarily

of administration costs, sales costs, mainte-

nance expenses, consultants’ fees, exchange

losses, expenditures for staff cutbacks

and allocations to other provisions.

23 Results from Investments

2002/03 2001/02


Depreciation of intangible fixed assetsand tangible assets 120,070 92,330

of which non-scheduled depreciation 19,321 120

of which special depreciation allowance for tax purposes 1,817 416

2002/03 2001/02


Investment income 1,600 275

Income from profit transfer agreements 499 260

Expenses from loss absorption – 146

Income from investments in associated companies – 177

Taxes charged to affiliated companies deemed integrated for tax purposes 216 129

2,315 695

Investment income includes income of

EUR 1,460,000 (previous year: EUR 225,000)

attributable to affiliated companies.

101

24 Depreciation of Financial Assets and Investments held as Current Assets

2002/03 2001/02


Depreciation of financial assets 8,303 856

Depreciation of investments held as current assets 1,015 179

9,318 1,035

25 Net Interest Income

2002/03 2001/02


Other interest and similar income 15,814 16,349

attributable to affiliated companies 265 12,091

Interest and similar expenses 3,982 9,737

attributable to affiliated companies 248 5,398

11,832 6,612


26 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.

Other Information

Net income is only slightly affected by the

utilization of tax-allowed depreciation, the

creation and/or the release of special items

with an equity portion and the non-reversal

of write-downs in previous years.

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.

Number of employees 2002/03 2001/02(average for the year)

Quantity Quantity

Wage-earning employees 5,498 5,805

Salaried employees 8,162 7,959

Trainees/Interns 504 465

14,164 14,229

103

Information on Related Party

Transactions

The term “related party” comprises the oper-

ating enterprise Schott Glas, 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 is-

sued a declaration on the recommendations

of the “Government Commission on the

German Corporate Governance Code” in

accordance with Art. 161 of the German

Stock Corporation Act (AktG). This declara-

tion has been made public and is available

to shareholders on the company’s website

(www.meditec.zeiss.de).

Oberkochen, December 3, 2003

The Board of Management of the

operating enterprise Carl Zeiss

Dr. Dieter Kurz

Dr. Norbert Gorny

Dr. Michael Kaschke

Carl Zeiss GroupAuditors’ Report 104

Auditors’ Report

We have audited the financial statements of

the Carl Zeiss Group and its consolidated

companies (comprising the Group’s balance

sheet, statement of income and notes to the

financial statements) and the Group manage-

ment report for the fiscal year from October

1, 2002 to September 30, 2003. The prepa-

ration of the Group financial statements and

the Group management report in accordance

with German commercial law is the responsi-

bility of the Board of Management of Carl

Zeiss. It is our responsibility to express an

opinion on the Group financial statements

and the Group management report based on

our audit.

We conducted our audit of the Group’s

annual 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

Group management report are detected with

reasonable certainty.

Knowledge of the business activities and

the economic and legal environment of the

Group and its consolidated companies and

evaluations of possible misstatements are

taken into account when determining audit

procedures. As part of the audit, the effec-

tiveness of the accounting-related internal

control system and the evidence supporting

the disclosures in the financial statements

and the 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 companies

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 financial statements and the manage-

ment report. We believe that our audits

provide a reasonable basis for our opinion.

Our audit has not yielded any reservations.

With due regard to generally accepted

accounting principles, the financial state-

ments provide a true and fair view of the

net assets, financial position and results of

operations of the Carl Zeiss Group and its

consolidated companies. The management

report of the Carl Zeiss Group correctly

presents the position of the Group and its

consolidated companies and the risks of

future developments.

Stuttgart, December 5, 2003

PricewaterhouseCoopers GmbH

Wirtschaftsprüfungsgesellschaft

Schwarzhof

Wirtschaftsprüfer

(independent auditor)

Lange

Wirtschaftsprüfer

(independent auditor)

Carl Zeiss 73446 Oberkochen Germany Phone +49 (0)7364 20-0Fax +49 (0)7364 6808www.zeiss.com

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