UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF l934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

PFEIFFER VACUUM TECHNOLOGY AG

FEDERAL REPUBLIC OF GERMANY

BERLINER STRASSE 43, D-35614 ASSLAR, GERMANY

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section l2(g) of the Act.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or 15(d) of the Securities Exchange Act of l934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark which financial statement item the registrant has elected to follow.

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Preliminary Remarks

     These consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP) and the regulations of the United States Securities and Exchange Commission (SEC), Washington D.C., U.S.A.

Unless the context otherwise requires, the terms “Pfeiffer Vacuum” and “the Company” are used synonymously for Pfeiffer Vacuum Technology AG and the subsidiaries included in the consolidated financial statements.

Unless express reference is made to a differing presentation, all amounts in the Company’s corporate reports are expressed in euros (€). The consolidated financial statements for the years 1999 through 2000 were prepared in Deutsche Marks (DM), and have been translated into euros at the officially stipulated conversion rate.

Forward-Looking Statements

     This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended by Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based predominantly upon the Company’s current expectations and are subject to certain risks and uncertainties. The accuracy of such forward-looking statements is — among other things — dependent upon:

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Part I

Item 1.    Identity of Directors, Senior Management and Advisers

     Not applicable.

Item 2.    Offer Statistics and Expected Timetable

     Not applicable.

Item 3.    Key Information

A.    Selected Financial Data

Selected Financial Data

     The following selected financial data should be read in conjunction with, and are qualified in their entirety by reference to the Company’s Consolidated Financial Statements and Operating and Financial Review and Prospects included elsewhere in this Report.

The consolidated statement of income data and balance sheet data have been derived from the Company’s Audited Consolidated Financial Statements, prepared in accordance with accounting principles generally accepted in the United States.

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In conformity with the tax reform that has been in effect in Germany since January 1, 2001, and to assure comparability of the data, the presentation of the dividend payment per share has been changed from a gross-dividend to a cash-dividend basis.

Exchange Rate Information

     Fluctuations in the exchange rate between the euro (€) and the U.S. dollar will affect the U.S. dollar amounts received by holders of ADRs on the conversion by the Depositary into U.S. dollars of cash dividends paid in euros on the Ordinary Shares represented by the ADRs.

The table below sets forth, for periods after the introduction of the euro on January 1, 1999, the high, low, average and period-end noon buying rates for the euro expressed as U.S. dollars per € 1.

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B.    Capitalization and Indebtedness

     Not applicable.

C.    Reasons for the Offer and Use of Proceeds

     Not applicable.

D.    Risk Factors

     Within the context of its global operations, the Company is naturally subject to various risks, which are intrinsically linked with its entrepreneurial activities. In order to be able to specifically deal with these risks, Pfeiffer Vacuum utilizes suitable instruments for identification, analysis and action in its risk management system and evolves these instruments in the individual departments. The Company has defined the risk areas of risk management within the individual departments and put in place the necessary procedures, early warning and monitoring systems. It takes the defined risk factors into consideration in its annual budgeting process and its multiple-year strategic planning. The planning processes are accompanied by comments from the planning and supervising bodies. Moreover, the strategic planning, budget and current business position are comprehensively deliberated with the Supervisory Board. The Supervisory Board receives detailed monthly overviews of the Company’s financial results, as well as reports from the Management Board that could be of particular importance with respect to profitability or liquidity. The Supervisory Board is involved in the entire risk management process.

General Economic Conditions

     A substantial portion of the Company’s sales are generated in Europe and the United States. As a result, an economic weakness or a decline in growth in these markets can have a negative impact on Pfeiffer Vacuum’s profitability. A substantial slow-down or decline in demand for the Company’s products could have serious effects on its economic and financial positions. In addition, the strong competition that prevails in the Company’s market poses the risk of loss of market share and name recognition. In order to limit these market risks, Pfeiffer Vacuum constantly analyzes its environment and its competitive situation. It relativizes negative economic changes through measures aimed at adjusting capacities and swift cost reduction. Ongoing contact and the market intimacy that this brings supplies the Company with important information about the needs of its customers.

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Pfeiffer Vacuum utilizes the information about technology needs that it gains from the marketplace to enhance its competitive position and name recognition.

Industry and Business

Technological Changes and Introduction of New Products

     The vacuum industry is characterized by ongoing technological change, as well as by enhancements and new developments to its products. A substantial portion of the Company’s economic success is dependent upon its ability to continue to market enhanced or new products on a timely basis and at competitive prices. The failure of the Company to preserve its technological lead and manufacture adequate new products in the event of substantial technological change or the superiority of a competition product could lead to serious changes with respect to the Company’s business operations, financial condition and profitability. In fiscal 2003, the Company spent a total of € 8.9 million on research and development, to combat the risk of technology losses and to satisfy the quality standard. Strict quality controls reduce the risk of quality shortcomings.

Highly Competitive Industry

     The Company is one of the leading full-line suppliers of vacuum technology and operates in a highly competitive market. Significant factors that affect competition include product performance, applications support, post-sales service and training, a network of sales and service organizations, pricing and product availability, as well as brand name recognition. Certain of Pfeiffer’s competitors have greater resources and a broader product line. There can be no absolute assurance that the Company will be able to continue to increase or maintain its market share or that stronger competition might not have a negative effect on its business operations, financial condition and profitability.

Manufacturing Facilities

     Until year-end 2001, most of the products marketed by the Company had been manufactured in the factory in Asslar, Germany. Beginning January 2002, components and systems for the production of DVDs are being developed and manufactured at a second manufacturing facility in Aschaffenburg, Germany. Nevertheless, an interruption in production in Asslar could have a material effect on the Company’s operations, finances and profitability.

Risks Associated with International Operations

     As in the case of all internationally operating enterprises, the Company is subject to general risks with respect to regional economic conditions, differing taxation and legislation, unexpected changes in national regulatory requirements, compliance with import and export conditions, as well as foreign legislation. It also has to observe foreign import and export licensing requirements, trade restrictions and changes in tariff and freight rates, etc., which can involve risks.

Financial

Currency Risk

     The Company prepares its financial reports in euros (€). Approximately 35% of its sales are invoiced in foreign currencies, primarily in U.S. dollars. The Company’s sales, operating profit and cash flow are significantly exposed to changes in exchange rates between the euro and foreign currencies.

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The Company utilizes foreign currency forward transactions to hedge anticipated receipts in foreign currencies against foreign currency exchange fluctuations. Such hedging transactions are restricted to currencies in which the Company generates substantial sales (primarily U.S. dollars) and are conducted exclusively with well established financial institutions. The Company does not engage in speculative foreign currency forward transactions for investment purposes.

Organisation and History

     Pfeiffer Vacuum Technology AG is domiciled at Berliner Strasse 43, D-35614 Asslar, Germany; telephone: +49-(0)6441-802-0, fax: +49-(0)6441-802-202, http://www.pfeiffer-vacuum.de.

The Company is a stock corporation (“Aktiengesellschaft”) organized under the laws of the Federal Republic of Germany. It develops, manufactures, sells and services a broad range of vacuum technology products for various applications. Pfeiffer Vacuum was founded in 1890. The Company had already been active in the vacuum technology industry since the early 20th century, and developed into a leader in vacuum technology with such developments as the turbomolecular pump in 1958. In 1996, the Company was converted from a limited liability company (“Gesellschaft mit beschränkter Haftung”) into a stock corporation (“Aktiengesellschaft”) and listed on the New York Stock Exchange (“NYSE”). A second listing of the Company’s common shares on the Frankfurt Stock Exchange has been in effect since April 15, 1998.

Business and Capital Expanditures

     In May 1999, the Company purchased 100% of the assets and liabilities of Catalano Associates, Inc. (Semivac), which is domiciled in the United States, for a purchase price of U.S. dollar 3.3 million. Semivac distributes and services vacuum components. In June 2000, Pfeiffer Vacuum acquired 75% of the shares of Pfeiffer Vacuum Systems (International) AG (formerly Memex Optical Media Solutions AG), Zuzwil/Switzerland, in consideration for payment of a purchase price of 2.5 million Swiss francs (€ 1.6 million). At July 31, 2003 the Company acquired the remaining 250 registered shares of Pfeiffer Vacuum Systems (International) AG, Zuzwil/Switzerland. The purchase price was 1 Swiss franc. The Company now owns 100% of the share capital. The subsidiary sells and services production systems for Digital Versatile Discs (DVDs).

In January 2002, the Company acquired fixed assets, intangible assets and inventories from the bankruptcy trustee of Multimedia Machinery GmbH for a purchase price of € 2.4 million. Pfeiffer also hired 45 former employees of Multimedia Machinery GmbH. This acquisition will enable the Company to expand its activities relating to the development, manufacture and marketing of complete manufacturing lines for the production of prerecorded and rewritable DVDs.

Introduction

     The Company develops, manufactures, sells and services a broad range of turbomolecular pumps, backing pumps, such as rotary vane, Roots and dry pumps, complete pumping stations, as well as customized vacuum systems. Its product portfolio also includes digital pressure gauges, complementary vacuum components and vacuum instruments, as well as components and systems for the production of prerecorded and rewritable DVDs.

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Pfeiffer possesses a global sales and service network, comprised of its own sales offices, subsidiaries and exclusive marketing agents. Moreover, there are service support points in all major industrial locations throughout the world. The Company’s primary markets are in Europe, the United States of America and Asia.

Nature of the Company’s Operations and Principal Activities

     The Company’s products are employed in a broad range of commercial and analytical applications. Many products used in daily life can only be manufactured with the aid of a vacuum process. Materials having differing melting points, e.g. metal and plastic or metal and glass, can only be bonded to one another in a vacuum chamber. Through utilization of vacuum technology, it is possible to reproduce pressure conditions similar to those that exist in space, which are required for the production of numerous high-tech products, e.g. the fabrication of semiconductors, computer hard disks, optical lenses, architectural glass, coated eyeglass lenses, television tubes, computer monitors, mobile phone displays, CDs and DVDs, incandescent lamps, automotive electronics, automotive headlamps, surface-treated replacement and machine parts, as well as electron microscopes. Moreover, vacuum technology is employed in scientific research and space simulation.

Pfeiffer possesses decades of research and development experience relating to vacuum systems and the manufacture of efficient, dependable vacuum pumps. The Company maintains close contact with its customers, primarily during the product development phase, to assure the manufacture of products that satisfy market requirements. In addition to highly precise engineering, the manufacture of vacuum pumps also necessitates differentiated quality controls. Pfeiffer possesses a highly developed CAD/CAM system that assures a high degree of precision engineering of its products.

The Company’s customers include manufacturers of analytical instruments and manufacturers of vacuum process equipment, research and development institutions, as well as companies that employ vacuum processes in their production operations. Pfeiffer Vacuum’s customer base also assures that income can be generated from the sale of replacement parts and the provision of customer service. In the years 2003, 2002 and 2001, no single customer accounted for more than 10% of the Company’s total sales.

The Company’s sophisticated environmental management system has been certified under ISO 14001 since 1996. In connection with a follow-up audit in November 2003, compliance with the requirements contained in ISO 14001:1996 was confirmed without restriction. In 2003, Pfeiffer Vacuum was included in the Kempen/SNS Smaller Europe SRI Index, which was established in October of that year. Only companies that satisfy the highest standards and requirements in the three fields of business ethics, human resources and the environment are included in this index.

Principal Markets

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The Company’s sales by geographical area are as follows:

Seasonality

     The Company’s business is subject to neither seasonal nor cyclical fluctuations.

Raw Materials and Suppliers

     The Company satisfies its requirements for raw materials, auxiliaries, supplies and finished products from various suppliers in Germany and other countries. Pfeiffer’s sole major supplier, accounting for 27% of its total purchasing volume in 2003, is Inficon AG in Balzers, Liechtenstein (approximately 26% in 2002, and 21% in 2001). The Company has been purchasing from Inficon for more than twenty years. The Company presently purchases from Inficon primarily vacuum gauges and mass spectrometers, as well as leak detectors. Other sources are available for these products.

Marketing Channels

     The Company is represented through its own sales and service subsidiaries in all major industrialized nations throughout the world. In addition more than 20 exclusive agencies offer Pfeiffer Vacuum’s customers competent advice and on-site service. This efficient service presence clearly sets the Company apart from its competitors.

Dependence of the Company on Intellectual Property, Contracts and New Manufacturing Processes

     The Company holds numerous patents and has certain patent applications pending. It is convinced that it is not substantially dependent upon any one particular patent or license. Nor is the Company dependent upon special manufacturing contracts, marketing contracts, financing contracts or new manufacturing processes.

Material Effects of Government Regulations

     Manufacturing operations in Germany are subject to numerous laws and regulations. Such laws and regulations impose strict limitations upon permissible environmental impact through pollutants and contain stringent requirements relating to the treatment and disposal of wastes. Through its certification under ISO 14001, the Company subjects itself to a corresponding environmental management system, which involves internal and external monitoring at differing intervals. Although Pfeiffer believes that it is in compliance with all environmental requirements and codes, there can be no assurance that the Company will not be subject to environmentally related liabilities in the future and/or that expenses will not be incurred in order to cover environmentally related liabilities or to assure compliance with environmental requirements.

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     The Company has 16 subsidiaries in Europe, the United States and Asia, more than 20 exclusively operating marketing agents in other countries, as well as service support points in all major industrial locations throughout the world.

     The Company’s subsidiaries are:

     The Company is the owner of an approximately 80,000 m² (861,000 ft²) site in Asslar, Germany. The buildings in which the corporate headquarters, main sales and marketing office and manufacturing operations are housed consist of approximately 45,000 m² (484,000 ft²) of floor space. The main part thereof is owned by the Company, only approximately 7,000 m² (75,000 ft²) are leased from a charitable foundation. Pfeiffer leases approximately 13,000 m² (140,000 ft²) of its own real property to third parties. Approximately 6,000 m² (65,000 ft²) of leased floor space is available for the manufacturing, sales and marketing and administrative operations of the facility in Aschaffenburg, Germany. In addition, the Company leases premises for sales and service subsidiaries in various countries.

Essentially, the Company manufactures vacuum pumps, vacuum equipment and vacuum systems at the production location in Asslar, Germany, as well as systems for DVD production in Aschaffenburg, Germany.

All capital investments are financed through the Company’s cash assets.

Pfeiffer Vacuum regularly monitors and assesses all relevant environmental factors. Twelve environmental and quality audits were performed during the course of the year. The items that were audited included handling of hazardous materials and water pollutants (coolant-lubricants, oils, cleaning agents, paints, solvents). Proper storage of hazardous materials was also monitored. No material variances from legal requirements and the criteria defined in the quality handbook were identified.

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In 2003, thirty-three job safety audits were conducted, twelve of them together with a plant physician and the Employee Council. The variances that were identified were rectified in a timely fashion. Four employees attended external accident prevention seminars in 2003. The Company’s employees are familiarized with all requirements relating to noise abatement, handling of hazardous materials, accident and fire prevention, as well as other safety requirements. Every employee has access to the required EU safety data sheets and standard operating procedures under the point entitled “List of Substances” in our quality handbook.

     The Company’s job safety organization and job safety measures were reviewed in November 2003 in connection with the audits under ISO 9001:2000 and ISO 14001:1996 and certified without restriction. The comprehensive annual job safety report was submitted in January 2004.

     The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The comparability of the financial statements for different periods may be affected by the effects of currency translation resulting from Pfeiffer Vacuum’s international operations, most notably as a result of changes in the exchange rate between the euro and U.S. dollar.

The rates of inflation in Germany during 2003, 2002, 2001, 2000 and 1999 were 1.1%, 1.3%, 2.5%, 2.3% and 1.4%, respectively. The effects of inflation on the Company’s operations have not been significant in recent years.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion should be read in conjunction with the Financial Statements and notes thereto included elsewhere herein.

2003 Compared to 2002
(Percentages calculated based on amounts in thousands €)

Net Sales

     The following table summarizes the Company’s net sales by geographical area:

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The Company’s total net sales decreased by € 6.9 million or 4.6% from € 150.9 million for the year ended December 31, 2002 to € 144.0 million in 2003.

Germany

     In Germany net sales decreased slightly from € 40.5 million in 2002 to € 40.4 million in 2003. The market in Germany was characterized by a hesitancy to invest. There was a significant decline in new orders from customers in the research & development, consisting primarily of universities and major research institutions. The reasons for this consisted of both cutbacks in government funding as well as an aggressive price war on the part of the Company’s competitors involving dumping prices. Pfeiffer Vacuum was primarily successful when the need was for technically demanding vacuum technology, such as in European-sponsored nuclear fusion research or in the fields of plasma research and nanotechnology.

In the semiconductor industry, the Company was able to qualify itself at major German production facilities with its turbopumps for ion implanters, in both retrofit and new product business.

All major German manufacturers in the field of mechanically resistant coating — which is defined as the application of anti-wear coatings on drills and cutting tools — employ the Company’s vacuum products because of their engineering superiority. Stagnation among end-customers in Europe and the United States was able to be partially offset through strong growth in China.

There were new and innovative application examples at various industrial customers, such as electron beam welding systems for the aerospace industry, or in conjunction with recycling of galvanized steel by means of VOD (vacuum oxygen degassing) processes.

Following years of decline and stagnation, the Company now anticipates a moderate upswing in Germany for the coming year, especially in the industrial customer segment.

Europe (excluding Germany)

     The sales in Europe decreased by € 2.6 million from € 50.9 million in fiscal 2002 to € 48.3 million in fiscal 2003. The new European Union member countries are expected to bring sales growth in Europe over the medium term. In most of the countries of Europe, the Company suffers — just as its competitors — from a hesitancy to invest on the part of industry due to the unsettled state of economic development and a lack of government research grants. However, Pfeiffer Vacuum was able to note a significant increase in new orders during the final months of the year. This gives reasons to view the new year with cautious optimism. Several highlights from various countries in Europe:

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United States

     The Company’s sales in the United States decreased in the period ended December 31, 2003 to € 32.8 million from € 35.8 million in the previous year. In fact, the U.S. subsidiary recorded in U.S. dollars increased sales, but due to the weakness of the U.S. dollar against the euro the Company’s sales were adversely impacted by the effect of changes in this exchange rates. The exchange rate accounted for € 6.5 million or 93.4% of the total sales decrease in the year ended December 31, 2003.

Demand rose sharply in the United States during the second half of the year. The Company’s sales organization in the U.S. can be satisfied with the past year’s results. For the first time in three years, sales in U.S. dollars rose moderately year on year from U.S. dollars 33.9 million in 2002 to U.S. dollars 37.2 million in 2003. Totaling U.S. dollars 39.5 million, new orders in fact were up significantly from the previous year’s level (U.S. dollars 29.2 million). Beginning in the third quarter of 2003, demand for the Company’s products rose sharply, especially from the semiconductor market, as well as from various industrial customers. The largest American customer this year was again Novellus Systems, a major manufacturer of tools for the semiconductor industry.

The Company anticipates a further increase in business in the United States for the year 2004. However since the U.S. dollar is expected to continue to remain weak, this will have a negative impact on the consolidated numbers.

Several success stories from the United States:

Asia and the Rest of the World

     The Company recorded in the Rest of World (including Asia) sales decreases amounting to 1.2 million.

Economic growth differed significantly in the countries of Asia. The Chinese market offers a huge growth opportunities. The most important growth market for Pfeiffer Vacuum in Asia is China. However, the Company will additionally be further expanding our existing presence in Japan, Taiwan, India, Korea and the other countries of Asia.

The most important countries outside Asia in which Pfeiffer Vacuum is represented through agencies and service points include Australia, Israel, South Africa and Brazil.

In China, the Company further expanded its presence with the assistance of its agency. A new service center was established in Shanghai. The greatest success this year in China was the breakthrough in the glass coating segment. The country’s largest production system, as well as a further system, is being equipped with Pfeiffer pumps.

In Korea, Pfeiffer Vacuum succeeded in displacing competition products with the turbopumps on all tools at one of the largest manufacturers of semiconductor storage devices. The crucial factors for this customer were the better performance specifications and reliability of the Company’s pumps, as well as its better service.

In India, Pfeiffer Vacuum succeeded in displacing competition products at two OEM manufacturers.

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In Japan, the Company is the most important supplier of vacuum pumps for manufacturers of analytical equipment and for research & development facilities. The analytical market again suffered from economic stagnation this year. Even though sales declined, Pfeiffer Vacuum was able to retain its market share. For the first time, it also succeeded in gaining a foothold in the Japanese semiconductor industry, which had previously been difficult to enter. 25 large turbopumps from competitors in existing tools were replaced by higher-performance Pfeiffer Vacuum pumps.

The Company views growth potential in the coming year first and foremost in China, especially in the glass coating, flat panel display and semiconductor segments. In Japan, there are several projects in the analytical market that are up for decision in 2004, and the agencies in Japan, Taiwan and China are expected to benefit from the recovery of the semiconductor market.

Order-intake and Order-backlog

     Orders received by the Company increased by € 4.7 million or 3.2%, from € 145.5 million for the year ended December 31, 2002 to € 150.2 million for the year ended December 31, 2003. The majority of this increase was attributable to an increase in orders of turbo pumps.

The Company’s backlog increased by € 6.3 million or 30.1%, from € 20.9 million as of December 31, 2002 to € 27.2 million as of December 31, 2003. The majority of the increase was related to turbo pumps. Contracts are included in backlog only if they represent firm orders and include firm shipping schedules. The backlog position at any particular time generally should not be construed to represent future levels of sales and orders.

Gross Profit

     The Company’s gross profit decreased by € 6.1 million or 8.9%, from € 68.4 million in the twelve months ended December 31, 2002 to € 62.3 million in the twelve months ended December 31, 2003.

Gross margin, which is gross profit expressed as a percentage of net sales, decreased from 45.3% in 2002 to 43.3% in 2003. Declining sales and rising cost of sales led to the lower margin. An essential part of this decrease is due to negative exchange rate differences between the strong euro against the U.S. dollar which accounted for approximately € 5.5 million. Additionally the slight decline in the plant utilization rate due to the weakening economy led to a lower gross profit.

Saving on external services and postponing capital investments produced further cost reductions. Another measure that was instituted, although it will not translate into cost savings until the economy revives, was to expand the flexible worktime hours-worked accumulation total to minus 150 hours per employee. These paid but unworked hours will then be available at no cost when the economy recovers.

Selling and Marketing Expenses

     Selling and marketing expenses decreased € 3.2 million or 13.3% from € 24.2 million in 2002 to € 20.9 million in 2003. The worldwide reorganization and streamlining of the Company’s sales organization led to cost reductions. As a percentage of sales, selling and marketing expenses decreased from 16.0% in 2002 to 14.5% in 2003. The manpower of the sales and marketing force dropped by approximately 11.6% and led to the decrease in selling and marketing expenses.

General and Administrative Expenses

     General and administrative expenses increased by € 0.7 million, from € 12.2 million in the year ended December 31, 2002 to € 13.0 million in 2003.

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As a percentage of sales, general and administrative expenses increased from 8.1% in 2002 to 9.0% in 2003. The general and administrative expenses in 2003 turned back to the normal level. The Company payed within 2002 employees profit sharings/benefits which were lower than the estimated and accrued amounts, due to its economic situation. The retransfer of the provisions resulted to a positive effect in 2002. Additionally, lower net sales revenue of the Company in 2003 led to an increase in the percentage of its general and administrative expenses.

Research and Development Expenses

     The Company’s research and development expenses decreased by € 1.9 million, or 17.7%, from € 10.8 million in the year ended December 31, 2002 to € 8.9 million in 2003. As a percentage of sales, research and development expenses decreased from 7.2% in 2002 to 6.2% in 2003. Developing new products and evolving its successful existing product portfolio enjoy high priority at Pfeiffer Vacuum. In addition to its own specialists in the engineering and development departments, it also collaborates closely with universities and with companies in Germany and other countries who possess key technologies.

The Company expenses all research and development costs as they are incurred and anticipates that future spending on research and development will be comparable to current levels.

Operating profit

     Operating profit for the year ended December 31, 2003 was € 19.5 million and decreased by € 1.7 million from € 21.2 million in 2002. The weak U.S. dollar affected the operating profit adversely by approximately € 4.2 million.

Nevertheless, the Company reduced personnel-costs, in the production, in sales and administration departments, by implementing a variety of cost reduction measures. The workforce was lowered from 811 to 761 in a socially compatible manner by not renewing temporary employment contracts and not re-staffing the jobs of retiring employees, primarily in Germany and the United States. For the production facility in Asslar, the 35-hour workweek under the collective bargaining agreement was reduced for a stipulated period of time to 32.5 hours per week, with a corresponding reduction in pay. Those staff members to whom the regular pay scale does not apply accepted weekly 2.5 hours overtime without compensation.

Interest Income and Interest Expense

     Interest expense amounting to € 0.2 million for the period ended December 31, 2003 decreased by € 0.3 million, and are primarily due to interest expense entitled of the loan of Kreditanstalt für Wiederaufbau, repaid in 2003. Interest income decreased by € 0.4 million from € 2.2 million in the year ended December 31, 2002 to € 1.8 million in 2003 as a result of lower interest rates and the repayment of the loan (using cash).

Foreign Exchange Gain/Loss

     The Company’s foreign exchange gain in the year 2002 amounted to approximately € 1.9 million; in 2003 was it approximately € 2.1 million, primarily a consequence of to the weakness of the U.S. dollar against the euro.

Income Tax Expense

     Under current German corporate tax law, taxes on income are composed of corporate taxes, trade taxes and an additional surtax and amount to a combined tax rate of 39.5% for the German companies for the year 2003, and 38.9% for 2002 and 2001, respectively.

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For the year 2003 the corporation tax including the additional surtax rate was 28.0% (26.4% for the years 2002 and 2001), the effective rate for trade tax was 11.5% (12.5% for the years 2002 and 2001).

Effective January 1, 2002, a corporation and trade tax entity with corresponding profit and loss transfer agreements was established for the consolidated German companies. Additionally, the Company had a claim to a tax credit on distributed earnings in 2003 for the fiscal year 2002. In conformity to the German Tax Legislation this claim reduced the income tax expense and the income tax rate for the year 2002. Consequently, the effective calculated tax rate in the year ended December 31, 2002 was 29.3%.

On April 11, 2003 the German Tax Authorities passed a resolution — effective April 12, 2003 — regarding the refund of corporation tax credits resulting from distributed earnings to the shareholders. The Company’s dividend payments for the year 2002, paid in 2003, are no longer eligible for tax credit. Accordingly, the Company’s tax credit for the year 2003 was retroactively uncollectible. Beginning December 31, 2005 it is possible, to claim a partial utilisation of the corporation tax credit in light of the circumstances of the case. As a result of this new legislation and among other things the effective tax rate of the Company increased to 45.0% for the fiscal year 2003.

Net Income

     Net income decreased from € 17.5 million in 2002 to € 12.7 million in 2003, primarily as a result of the factors discussed above.

2002 Compared to 2001
(Percentages calculated based on amounts in thousands €)

Net Sales

     The following table summarizes the Company’s net sales by geographical area:

The Company’s net sales decreased by € 19.2 million or 11.3% from € 170.1 million for the year ended December 31, 2001 to € 150.9 million in 2002. The major decreases were recorded in the U.S. by € 9.0 million and in Germany by € 7.5 million. Sales in Europe (excluding Germany) decreased by € 5.7 million. However, in the rest of world the Company was able, to realize a sales increase by € 3.0 million. Turbo pump sales decreased by € 7.3 million, or 11.3%, from € 64.0 million in 2001 to € 56.7 million in 2002. The sales in vacuum components and instruments decreased by € 6.2 million or 13.0% from € 48.0 million in the year 2001 to € 41.7 million. The global down-turn of the economy, and especially the weakness of the semiconductor industry led to worldwide decreased sales of the Company. To improve its market position during the year 2002 the Company increased its sales force in the U.S.; the German sales force were reorganized and key-account managers were appointed for the most important market segments.

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Due to the weakness of the U.S. dollar against the euro the Company’s net sales were adversely impacted by the effect of changes in this exchange rates. The exchange rate accounted for € 2.0 million or 10.2% of the total sales decrease in the year ended December 31, 2002.

Order-intake and Order-backlog

     Orders received by the Company decreased by € 13.1 million or 8.3%, from € 158.6 million for the year ended December 31, 2001 to € 145.5 million for the year ended December 31, 2002. The majority of this decrease, € 6.3 million, was attributable to a decrease in orders of turbo pumps, partly offset by an increase of € 4.7 million of orders received in service and spare parts.

The Company’s backlog decreased by € 5.4 million or 20.5%, from € 26.3 million as of December 31, 2001 to € 20.9 million as of December 31, 2002. The majority of the decrease was related to turbo pumps which declined by approximately € 4.2 million. Contracts are included in backlog only if they represent firm orders and include firm shipping schedules. The backlog position at any particular time generally should not be construed to represent future levels of sales and orders.

Gross Profit

     The Company’s gross profit decreased by € 6.5 million or 8.7%, from € 74.9 million in the twelve months ended December 31, 2001 to € 68.4 million in the twelve months ended December 31, 2002. Gross margin, which is gross profit expressed as a percentage of net sales, increased from 44.0% in 2001 to 45.3% in 2002, principally as a result of better cost management in the factory.

Selling and Marketing Expenses

     Selling and marketing expenses decreased € 1.5 million or 5.8% from € 25.7 million in 2001 to € 24.2 million in 2002. The worldwide reorganization and streamlining of the Company’s sales organization led to cost reductions. As a percentage of sales, selling and marketing expenses increased from 15.1% in 2001 to 16.0% in 2002. The lower net sales revenue of the Company led to an increase in the percentage of its selling and marketing expenses.

General and Administrative Expenses

     Although material start-up costs of the newly formed production subsidiary in Aschaffenburg (approximately € 1.3 million) are included, the general and administrative expenses decreased by € 0.3 million, or 2.7%, from € 12.6 million in the year ended December 31, 2001 to € 12.2 million in 2002. As a percentage of sales, general and administrative expenses increased from 7.4% in 2001 to 8.1% in 2002, due to the decreased net sales.

Research and Development Expenses

     The increase of the Company’s research and development expenses by € 2.3 million, or 27.5%, from € 8.5 million in the year ended December 31, 2001 to € 10.8 million in 2002 was primarily a result of increased research and development activities in the newly acquired DVD-business (approximately € 3.3 million). As a percentage of sales, research and development expenses increased from 5.0% in 2001 to 7.2% in 2002. The Company depends to a significant extent on continuing technological advances in vacuum pump design and manufacturing and has invested in entering new markets and expanding its share of markets in which the Company presently competes, including increasing its sales of products to be used in the manufacturing of prerecorded and rewritable DVDs (coating under vacuum), especially metalizers and complete DVD lines for production.

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The Company expenses all research and development costs as they are incurred and anticipates that future spending on research and development will be comparable to current levels.

Operating Profit

     Operating profit for the year ended December 31, 2002 was € 21.2 million, a decrease of € 7.0 million from € 28.2 million in 2001, principally as a result of significant decreased sales and increased research and development expenses.

Interest Income and Interest Expense

     Interest expense amounting to € 0.5 million for the period ended December 31, 2002 decreased by € 0.1 million, and are primarily due to interest expense entitled of the loan of Kreditanstalt für Wiederaufbau. Interest income decreased slightly by € 0.2 million from € 2.4 million in the year ended December 31, 2001 to € 2.2 million in 2002.

Foreign Exchange Gain/Loss

     The Company’s foreign exchange loss in the year 2001 was approximately € 0.6 million. In 2002 a gain of € 1.9 million resulted due to the weakness of the U.S. dollar against the euro. Based on U.S. GAAP requirements, in 2002 an unrealized exchange gain (approximately € 1.4 million) was recorded. Depend on fluctuating exchange rates of the euro against the U.S. dollar, in future periods the record of foreign exchange losses is possible.

Income Tax Expense

     The Company’s effective tax rate decreased from 35.8% in the year ended December 31, 2001 to 29.3% in the year ended December 31, 2002. In 2002 the Company entered into an integrated inter-company relation for tax purposes and a profit and loss pooling agreement for the German entities. This decision reduced the tax burden.

In 2002, the Company generated taxable income of € 18.0 million in Germany and € 6.8 million outside Germany. The Company’s current tax expense decreased from € 10.5 million in 2001 to € 7.5 million in 2002 as a result of lower taxable income and the Company’s lower effective tax rate.

Deferred tax benefits amounted to € 0.2 million in 2002 compared with a minor expense in 2001. For further information see Note 11 to the notes to Consolidated Financial Statements.

Net Income

     Net income decreased from € 18.9 million in 2001 to € 17.5 million in 2002, primarily as a result of the factors discussed above.

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     The Company’s business has historically generated sufficient cash to fund the Company’s operations, including its working capital requirements, capital expenditures and debt repayments.

Net cash provided by operating activities was in the period ended December 31, 2002 € 19.6 million. As at December 31, 2003 the Company’s cash flow used in operating activities was € 13.4 million.

The Company’s German pension plans, consistent with German requirements and practice, traditionally were unfunded. On December 19, 2003, the Company established the Pfeiffer Vacuum Trust e.V. This Trust is an independent, bankruptcy-remote, separate legal entity and its sole purpose is to act in a fiduciary capacity as trustee for the assets held. In connection with the formation of the trust, the Company made a contribution of K€ 35,955 in cash. The Company’s intention is to assure the financing of its employee’s pension claims using its high cash position. Additionally, the usage of cash flow by operating activities was influenced by the lower net income and the increased tax liabilities due to new legislation (see notes to the Consolidated Financial Statements 11 “Income Taxes”). The Company’s inventories decreased in the year ended December 31, 2003 by € 2.0 million to € 20.4 million, primarily in the production plant in Asslar.

The cash flow used in investing activities increased by € 5.9 million, due to the purchase of note receivables amounting to € 9.0 million offset by the lower capital expenditures amounting to € 1.9 million in 2003 and € 2.6 million in 2002, and the acquisition of business in 2002 amounting to € 2.4 million.

The Company repaid its loan from Kreditanstalt für Wiederaufbau in 2003 amounting to € 9.0 million, and started a share buy back program using € 2.4 million. The cash used in financing activities increased from € 6.1 million to € 16.4 million.

The Company’s working capital is sufficient for its present requirements.

For six years in a row, Pfeiffer Vacuum has been enabling its shareholders to participate in the Company’s success in the form of a dividend. Because of its high level of cash and cash equivalents, the Management and Supervisory Board will propose to the Annual Shareholders’ Meeting that, in addition to a dividend of € 0.40, a bonus dividend in the amount of € 0.30, totalling € 0.70 per share will be paid (2002: € 0.56). An aggregate dividend of approximately € 4.9 million was approved and paid in 2003.

The Company and its subsidiaries have various lines of credit available for operating purposes of approximately € 12.3 million. No amounts were used on these lines during 2003 or 2002. Substantially all of the credit facilities are denominated in euros.

Other than solvency requirements, there are no legal restrictions on the transfer of funds by the Company’s subsidiaries. The subsidiaries are legally independent enterprises, financing their cash obligations through their business activities.

     The Company operates in a market with high-tech vacuum products. As the inventor of the turbopump, Pfeiffer Vacuum views it as its commitment to drive the development of vacuum technology with innovative work through its own research projects as well as by rigorously fostering teaching and science in technical disciplines. Developing new products and evolving the successful existing product portfolio enjoy high priority at Pfeiffer Vacuum. In addition to its own specialists in the engineering and development departments, it also collaborates closely with universities and with companies in Germany and other countries who possess key technologies. The Company regularly sponsors postgraduate thesis work in the field of R&D and offers internships for physics or engineering students.

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For over 40 years, Pfeiffer Vacuum has been one of the two companies that sponsor the prestigious Roentgen Prize, which is awarded annually at Justus Liebig University in Giessen in recognition of outstanding research work performed by the coming generation of physicists. This year, Dr. Hermann Dürr, BESSY Berlin, received the prize for his outstanding research findings in the field of X-radiation in solid state physics.

Nearly 50 years ago, the turbomolecular pump was invented at Pfeiffer Vacuum. Today, it is still the vacuum pump of choice for high and ultra-high vacuum, offering an extremely varied range of potential applications. Pfeiffer Vacuum has steadily broadened its technology leadership in this class of pumps, bringing a number of evolved models to market during the year.

In 2003, the Company again invested in evolving products for the DVD business. It views expanding the DVD business as a forward-looking investment in a growth market. During the second half of 2003, Pfeiffer Vacuum received several orders in this segment, which means that for the first time the start-up costs are now being offset by significant sales.

In the spring of 2003, Pfeiffer Vacuum received a particular distinction: Working in collaboration with top-flight companies, the Production Systems Chair at the Technical University of Aachen (RWTH Aachen) conducted a benchmarking project on the subject of Research & Development (R&D) in Mechanical Engineering. The objective of this project was to identify successful R&D practices at over 100 of Germany’s most successful companies in the field of mechanical and plant engineering. The Company numbered among the five companies that were honored at the project’s concluding conference.

The Company invested € 8.9 million in 2003, € 10.8 million in 2002 and € 8.5 in 2001 in expenditures for research and development projects.

     The year 2003 was characterized by a weak dollar, declining exports and a lackluster economy. Although the Company was unable to compensate for all of these influences, it was able to moderate them through enterprise and cost-consciousness. There were no signs of recovery in the world economy in 2003. Modest to zero growth worldwide reflects the situation of the vacuum industry. On balance, the industry posted negative growth year on year. The positive development of new orders during the fourth quarter of 2003 clouded only by the fact that the growth engine of the countries of Europe continues to sputter.

The Company intends to significantly improve its sales and earnings during the 2004 fiscal year. One of the factors upon which the growth prospects are based includes the development of new orders. DVD business would also appear to be developing on a positive note. During the fourth quarter of 2003, it received several orders for DVD Lines and individual components.

In the field of purchasing, Pfeiffer Vacuum will continue to work on optimizing its ordering processes in order to assure a high level of availability of inputs, while keeping inventories low. Rising sales will be accompanied by only a moderate increase in administration and selling as well as research & development expenses. The same also holds true with respect to capital investment volume.

During the 2004 fiscal year, the Company will be critically analyzing all of its major business processes within the framework of its “Turbo Office” project and then further optimizing them. This is only one of the ways in which Pfeiffer Vacuum intends to get its plants “in shape” again for the future and keep it that way.

For further trend information, please see item A, Operating Results, Management’s Discussion and Analyses of Financial Condition and Results of Operations.

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Guarantees

     As of December 31, 2003, the Company’s exposure under guarantees amounted to K€ 91 (2002: K€ 123). These guarantees relate to residential rentals. The terms of guarantees are unlimited; as a general rule, they are called upon termination of the individual rental leases.

Contractual Obligations

     The Company has entered into rental-, leasing- or maintenance-agreements which expire at various dates. The table below presents the maximum amount of the off-balance sheet contractual commitments as of December 31, 2003, classified by periods in which the contingent liabilities or commitments expire:

The Company did not have any debt or capital lease obligations at December 31, 2003.

Critical Accounting Policies

     The process of preparing financial statements requires the use of estimates on the part of management. The estimates used by management are based on the company’s historical experiences combined with management’s understanding of current facts and circumstances. Certain of the company’s accounting policies are considered critical as they are both important to the portrayal of the company’s financial condition and results and require significant or complex judgment on the part of management. The following is a summary of certain accounting policies considered critical by management of the company.

Revenue Recognition and Accounts Receivable

     The Company recognizes revenue when title and risk of ownership have passed to the buyer. Allowances for doubtful accounts are estimated at the individual operating companies based on estimates of losses related to customer receivable balances. Estimates are developed by using standard quantitative measures based on historical losses, adjusting for current economic conditions and, in some cases, evaluating specific customer accounts for risk of loss.

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The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Though the Company considers these balances adequate and proper, changes in economic conditions in specific markets in which the Company operates could have a material effect on reserve balances required.

Inventory Valuation

     Management reviews its inventory balances to determine if inventories can be sold at amounts equal to or greater than their carrying amounts. The review includes identification of slow moving inventories, obsolete inventories, and discontinued products. The identification process includes historical performance of the inventory, current operational plans for the inventory, as well as industry and customer specific trends.

Employment Related Benefits

     The company incurs certain employment-related expenses associated with pensions. In order to measure the expense associated with these employment-related benefits, management must make a variety of estimates including discount rates used to present value certain liabilities, assumed rates of return on assets set aside to fund these expenses, compensation increases, employee turnover rates, and anticipated mortality rates. The estimates used by management are based on the company’s historical experience as well as current facts and circumstances. The company uses third-party specialists to assist management in appropriately measuring the expense associated with these employment-related benefits. Different estimates used by management could result in the company recognizing different amounts of expense over different periods of time (See notes to the Consolidated Financial Statements 8. “Pension Benefits and Similar Obligations”).

New Accounting Rules and Standards

     Detailed explanation please see Notes to the Consolidated Financial Statements “Adoption of New Accounting Rules and Accounting Standards”.

General

     In accordance with the German Stock Corporation Law (Aktiengesetz), the Company has a Supervisory Board (Aufsichtsrat) and a Management Board (Vorstand). The two boards are separate, and no individual may simultaneously be a member of both Boards.

In March 2003 the Company established an Audit Committee. All its individuals are members of the Supervisory Board.

The Management Board is responsible for managing the day-to-day business of the Company in accordance with applicable laws, the Articles of Association (Satzung) of the Company and the Internal Rules of Procedure (Geschäftsordnung) of the Company.

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The principal function of the Supervisory Board is to supervise the Management Board. It is also responsible for appointing and removing the members of the Management Board. In addition to the requirements of the German Stock Corporation Law, the Articles of Association or the Supervisory Board may provide that certain major or unusual transactions, for example, those involving large capital expenditures or decisions regarding the strategy of the Company, require the prior consent of the Supervisory Board. The Supervisory Board is not, however, involved in the day-to-day business of the Company.

The Audit Committee supervises the Management Board and installed controls and procedures to examine the Company’s reporting and book-keeping system.

In carrying out their duties, the members of the Supervisory Board, the Audit Committee and the Management Board must exercise the standard of care of a diligent and prudent businessperson. In complying with this standard of care, the members of the Supervisory Board, the Audit Committee and the Management Board must take into account a broad range of considerations, including the interests of the Company and its shareholders, employees and creditors.

Management Board (Vorstand)

     The Management Board of the Company presently consists of two members who are appointed by the Supervisory Board in accordance with the German Stock Corporation Law. Pursuant to the Articles of Association of the Company, any two members of the Management Board, or one member of the Management Board and the holder of a special power of attorney (Prokura), may legally bind the Company.

The Management Board must report regularly to the Supervisory Board and the Audit Committee, in particular, on proposed business policy, budgets and strategy, profitability and on the current business of the Company as well as on any exceptional matters that arise periodically. Initially in 1996, the members of the Management Board were appointed by the Supervisory Board for a term of five years. Later on the members of Management Board were appointed for terms of up to five years. The normal retirement age for members of the Management Board is sixty-five, though it is possible for a member of the Management Board to continue in office beyond this age with the approval of the Supervisory Board.

Under certain circumstances, such as a serious breach of duty or a bona fide vote of no confidence by the shareholders, a member of the Management Board may be removed by the Supervisory Board prior to the expiration of such term. A member of the Management Board may not deal with, or vote on, matters relating to proposals, arrangements or contracts between himself and the Company.

According to the Articles of Association of the Company, decisions of the Management Board are approved by a simple majority of the votes. In the event of a tie, the Chairman of the Management Board (Vorstands-vorsitzender) or, in his absence, the Deputy Chairman, has the deciding vote. Currently, no Deputy Chairman of the Management Board has been appointed.

The present members of the Management Board of the Company are as follows:

Wolfgang Dondorf

     Wolfgang Dondorf (age 60), Chairman of the Management Board, was appointed Managing Director of the Company in July 1994 and has been a member of the Management Board since 1996 for a five-year term, renewed in 2001. From 1989 to 1994, Mr. Dondorf served as Managing Director of King Plastic GmbH, a plastic components manufacturing company. He has also served as Managing Director of Pulsotronic GmbH from 1982 to 1989, Starkstrom Gummersbach GmbH from 1979 to 1982, and Sprague Electric Inc. from 1971 to 1979. Mr. Dondorf received a master’s degree in electrical engineering from RWTH Aachen.

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Amandus Waterkamp

     Amandus Waterkamp, (age 51), Chief Financial Officer, joined the Company in January 2003, was appointed in April 2003 as a member of the Management Board. Beginning July 1, 2003 Mr. Waterkamp assumed the duties as Chief Financial Officer of Pfeiffer Vacuum Technology AG. He served with international responsibility at various German companies (Siemens AG, Moeller GmbH) most recently as member of the Management Board responsible for finance, controlling and IT at an internationally operating corporate group (Harting). In addition to the customary responsibilities in finance and controlling he enjoys a broad range of experience in the fields of equity investment management, corporate acquisitions and sales, risk management, internal auditing and information technology. Mr. Waterkamp holds a Master degree in Telecommunication Engineering from Fachhochschule Köln and a further Master degree in Business Administration and Finance from University of Köln.

Wilfried Glaum

     Wilfried Glaum (age 57), retired end of June 2003. He served more than 31 years for the Company, from 1996 through June 2003 as a member of the Management Board and Chief Financial Officer.

Senior Officers (Prokuristen)

     Manfred Bender (age 38), who graduated with a degree in business economics (Dipl.-Betriebswirt) from Fachhochschule Giessen-Friedberg, joined the Company in 1998. He is responsible for the Finance and Controlling Department. In August 2001 the Management Board granted Mr. Bender a special power of attorney (Prokura), which grants him the authority to bind the Company with any member of the Management Board. Prior to 1998, he served as Controller, Internal Auditor and IT-Manager for Schunk GmbH, a multinational industrial group.

Supervisory Board (Aufsichtsrat)

     In accordance with the Company’s Articles of Association, the Supervisory Board consists of six members, four of whom are elected by the shareholders at a general meeting in accordance with the provisions of the German Stock Corporation Law, and two of whom are elected by the employees in accordance with the Labor-Management-Relations Act (Betriebsverfassungsgesetz) (1952).

A member of the Supervisory Board elected by the shareholders may be removed by the shareholders by a majority of the votes cast at a general meeting of shareholders or for cause by court order of the municipal court (Amtsgericht) upon motion by a simple majority of the members of the Supervisory Board. Upon request of the Works Council or at least twenty percent of the employees entitled to elect members of the Supervisory Board, a member of the Supervisory Board elected by the employees may be removed by at least three-quarters of the votes cast by the employees entitled to vote. In addition, such member may be removed for cause by a court order of the municipal court upon motion by a simple majority of the members of the Supervisory Board. The Supervisory Board appoints a Chairman and a Deputy Chairman from among its members. At least half the members of the Supervisory Board must be present to constitute a quorum. Resolutions are passed by a simple majority of the Supervisory Board.

The members of the Supervisory Board are each elected for a term of five years (the term expires at the end of the general meeting of shareholders in which the shareholders discharge the Supervisory Board member for the fourth fiscal year following the year in which such member was elected). The terms of the current members of the Supervisory Board will end as of the date of the General Shareholder Meeting to be held within the first eight months of the year 2006.

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The following individuals are members of the Supervisory Board:

Audit Committee

     In accordance with the Sarbanes-Oxley-Act the Company installed in March 2003 an Audit Committee. The following individuals are members of the Audit Committee:

The Audit Committee recommends the appointment of independent auditors to be elected by the Company’s shareholders at the annual general meeting. The Audit Committee also engages the independent auditors, determines their compensation and reviews the scope of the external audit. The Audit Committee reviews the Company’s quarterly and annual reports and financial statements, taking into account the results of the audits and/or reviews performed by the independent auditors.

     The Company has entered into service agreements with both members of the Management Board. Base salaries are established based on a comparative analysis of base salaries, paid by similarly situated industrial companies. Additional annual bonuses are determined in relation to the profitability of the Company. They are expressed as a percentage of base salary and may be adjusted, upward or downward, based on the profitability of the Company.

Mr. Günter Schneider and Mr. Edgar Keller, two members of the Supervisory Board, also have employment contracts with the Company, in their capacity as employees. Mr. Schneider and Mr. Keller were elected by the Company’s employees to the Supervisory Board in accordance with the Labor Management Relations Act (Betriebsverfassungsgesetz) (1952). Their employment contracts are standard-form contracts governed by the terms of a collective wage agreement between the labor union representing certain of the Company’s employees and an employer’s association representing the Company and other companies in the industry. As stipulated in the collective wage agreement, there are no benefits payable to Mr. Schneider or Mr. Keller upon termination of their employment contracts. Please see Item 6. D below for more information about the collective wage agreement. The Company has not entered into any other service contracts with this two members of its Supervisory Board.

In accordance with the Sarbanes-Oxley-Act the Company installed in March 2003 an Audit Committee. The members of the Audit Committee are also members of the Supervisory Board.

See also Item 6. A. Directors, Senior Management and Employees.

     The following table includes certain information known to the Company with respect to beneficial ownership of the Company’s Ordinary Shares as of December 31, 2002 by all members of the Supervisory Board and the Management Board:

Stock-based Compensation Plans

Employee Participation Program, Term: 2000 through 2005

     On July 10, 2000, the Company issued € 0.6 million in convertible bonds to members of management and key employees of the Company and its subsidiaries at a purchase price equal to 100% of their principal amount. Each convertible bond with a par value of € 128 is convertible into 50 no-par value ordinary shares upon payment of a conversion price. Each holder of convertible bonds may convert up to 30% two years after issuance beginning July 2002, up to 60% three years after issuance beginning July 2003 and up to 100% four years after issuance beginning July 2004, subject to certain closed periods. The last date of conversion is December 9, 2005.

The convertible bonds bear interest at 6% per annum and will be redeemed at 100% of their principal amount on December 10, 2005 unless previously converted. The bonds must be repurchased in the case of termination of employment.

The Company financed the employees’ purchase of such convertible bonds with an interest bearing loan. The loans must be repaid at the execution of conversion rights and are classified as other long-term assets on the balance sheet.

Through December 31, 2003, 2,000 convertible bonds totaling par value approximately € 256,000 were repurchased from employees voluntarily exiting the plan.

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Employee Participation Program, Term: 2002 through 2007

     On July 7, 2002, the Company issued € 0.6 million in convertible bonds to members of management and key employees of the Company and its subsidiaries at a purchase price equal to 100% of their principal amount. Each convertible bond with a par value of € 128 is convertible into 50 no-par value ordinary shares upon payment of a conversion price. Each holder of convertible bonds may convert up to 30% after the annual general meeting of the shareholders in 2004, up to 60% after the annual general meeting of the shareholders in 2005 and up to 100% after the annual general meeting of the shareholders in 2006, subject to certain closed periods. The last date of conversion is December 9, 2007.

The convertible bonds bear interest at 6% per annum and will be redeemed at 100% of their principal amount on December 10, 2007 unless previously converted. The bonds must be repurchased in the case of termination of employment. The Company financed the employees’ purchase of such convertible bonds with an interest bearing loan. The loans must be repaid at the execution of conversion rights and are classified as other long-term assets on the balance sheet.

Through December 31, 2003, 400 convertible bonds totaling par value approximately € 51,200 were repurchased from employees voluntarily exiting the plan.

     To the best knowledge of the Company, it is not directly or indirectly owned or controlled by another corporation, by any foreign government, or by any natural or legal persons, severally or jointly.

The following table includes certain information known to the Company with respect to beneficial ownership of 5% or more of the Company’s Ordinary Shares:

These shareholders have the same voting rights as any other holder of the Company’s ordinary shares.

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     The Company did not enter into transactions with related parties in the year ended December 31, 2003, and is not presently proposing to enter into transactions with related parties, that are material either to the Company or any related party, or that are unusual in their nature of conditions. In addition, there are no related party loans outstanding at December 31, 2003.

Not applicable.

See Item 18.

Legal Proceedings

     In the normal course of business, the Company is subject to various legal proceedings and claims. The Company believes that the matters the Company is aware of will not have a material effect on its financial condition or results of operations. The Company it not aware of any unasserted claims that may have an adverse affect on its financial condition or results of operation.

Policy on Dividend Distributions

     The Management Board proposes dividends based on Pfeiffer Vacuum Technology AG’s year-end unconsolidated financial statements. Aggregate cash dividend of € 0.56 per ordinary share were approved and paid in both, 2003 and 2002, respectively. A similar cash dividend of € 0.40 per ordinary share and an additional bonus dividend of € 0.30 per ordinary share has been proposed and is expected, upon final approval by the shareholders of the Company, to be paid in 2004. The Company has declared an annual dividend since 1998.

N/A

Items 9.A.1-3, and 5-7, B, D, E, and F are not applicable.

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Trading of ADRs on the New York Stock Exchange

     The table below sets forth, for the periods indicated, the high and low closing sales prices in U.S. dollars for the ADRs on the NYSE, as reported on the NYSE Composite Tape.

On January 31, 2004, the closing sales price per ADR was $34.85 as reported on the NYSE Composite Tape.

Trading of Ordinary Shares on the Frankfurt Stock Exchange

     The Ordinary Shares are listed and principally traded outside the United States on the Frankfurt Stock Exchange, where high and low closing sales prices have been expressed in euros since January 1, 1999.

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The table below presents, for the periods indicated, the high and low closing sales prices in euro for the Ordinary Shares on the Frankfurt Stock Exchange, based on the exchange from euro to U.S. dollars at the Noon (Buying) Rate, in each case as in effect on the last trading day of the periods presented.

On January 31, 2004, the closing sales price per Ordinary Share on the Frankfurt Stock Exchange, as reported by Deutsche Börse was € 33.15.

The average daily volume of Ordinary Shares traded at the Frankfurt Stock Exchange (previously Neuer Markt) during 2003 was 18,668. Such number is based on monthly turnover statistics supplied by the Frankfurt Stock Exchange.

General

     Since July 16, 1996 the Company’s American Depositary Receipts, each representing one Ordinary Share, are listed on the New York Stock Exchange and trade under the symbol PV. The depositary for the ADRs was until March 12, 2002 the Bank of New York, since March 13, 2002 it is the Deutsche Bank Trust Company Americas in New York. The ADRs also trade on the Berliner Freiverkehr, the Stuttgart Freiverkehr, the Frankfurt Freiverkehr, the Düsseldorf Freiverkehr and the Hamburg Freiverkehr in Germany.

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The Company’s Ordinary Shares have been listed and principally traded on the Neuer Markt of the Frankfurt Stock Exchange since April 15, 1998. The Neuer Markt was a segment of Deutsche Börse AG. Deutsche Börse reorganized the stock exchange segments in 2003 and differentiated it by a “General Standard” and a “Prime Standard.” The General Standard is subject to the requirements prescribed under German law; the Prime Standard additionally includes internationally customary transparency requirements (quarterly reporting, IAS/IFRS or U.S. GAAP accounting standards, presentation of a corporate calendar, at least one analyst conference per year, as well as ad-hoc press releases in German and English). Pfeiffer is already in conformity with all inclusion criteria. The Deutsche Börse AG confirmed the Company’s inclusion in the Prime Standard beginning January 1, 2003. In June 2003, all previously at Neuer Markt listed companies were integrated in the new segments “Prime Standard” or “General Standard” of Deutsche Börse AG. Consequently, Neuer Markt was closed on June 5, 2003.

In 2003, Deutsche Börse introduced a new index system that was specifically tailored to the needs of investors. Since March 24, 2003 the Company belongs to the newly created TecDax Index, which includes the 30 most important technology companies. Previously the Company was included in the index system NEMAX 50 containing fifty selected companies from the Neuer Markt, introduced on July 1, 1999. In order to assure the continuity of financial instruments issued on this basis, it is anticipated that the NEMAX 50 Index will continue to be calculated in parallel until year-end 2004.

All Ordinary Shares have been issued in bearer form.

Not applicable.

Registration, Objects and Purposes of the Company

     Pfeiffer Vacuum Technology AG is a stock corporation (Aktiengesellschaft) organized under the Stock Corporation Law (Aktiengesetz) of the Federal Republic of Germany. The Company’s registered office is in Asslar and it is registered in the commercial register of the local court of Wetzlar under the number HR B 44.

According to §2 of its Articles of Association, the objects and purposes of the Company are the development, planning, design, manufacture, application, sale and distribution of technical apparatuses and equipment, especially those incorporating the “Pfeiffer Vacuum Technology” and marketed under the “Pfeiffer” trademark, as well as the participation in domestic and foreign enterprises.

Directors

     The Company has a two-tier board structure consisting of a Management Board and a Supervisory Board. In accordance with the Sarbanes-Oxley-Act the Company installed in March 2003 an Audit Committee. (See Item 6.A. Directors and Senior Management).

A member of the Management or Supervisory Board may not vote on proposals, arrangements or contracts in which that member has a material interest pursuant to general principles of German law applicable to corporate bodies.

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The compensation of members of the Management Board is determined by the Supervisory Board (§87 (1) of the German Stock Corporation Law). According to §11 of the Company’s Articles of Association, the General Shareholders’ Meeting determines the compensation of the members of the Supervisory Board.

The Company may make loans to members of its Management Board and their family members only pursuant to a resolution of the Supervisory Board if the loan exceeds the amount of the Management Board member’s monthly compensation (§89 of the German Stock Corporation Law). Company loans to members of its Supervisory Board and their family members require the consent of the Supervisory Board (§115 of the German Stock Corporation Law).

Membership of the Management and Supervisory Board or the Audit Committee is not limited by any age limit requirement. Membership ends at the end of the period for which a member was appointed.

Management and Supervisory Board and Audit Committee members are not required to hold any shares in the Company while in office.

Ordinary Shares

     The Company has issued a single class of Ordinary Shares without par value, all of which have been issued in the form of bearer shares. The form and content of share certificates as well as that of dividend and renewal coupons are determined by the Management Board with the consent of the Supervisory Board. The Company may combine several individual shares into one or more share certificates, which document or documents then represent several shares (“global-share certificates”). Shareholders are not entitled to the issuance of individual share certificates subject to the requirements of any stock exchange on which shares may be listed.

Under the German Stock Corporation Law (§186 (1), an existing shareholder in a stock corporation has a preferential right to subscribe for issues by such corporation of shares, debt instruments convertible into shares, debt instruments with warrants attached and participating debt instruments in proportion to the shares held by such shareholder in the existing share capital of such corporation. The German Stock Corporation Law provides that this preferential right can only be excluded in certain limited circumstances and in the same shareholder resolution authorizing the capital increase (§186 (3)). A majority of at least three-quarters of the share capital represented at the meeting is required for the exclusion. The exclusion of pre-emptive rights is permitted with a majority of three-quarters of the share capital present if the capital increase against cash contribution (Barkapitalerhöhung) does not exceed an amount of 10% of the Company’s share capital (Grundkapital) and the issue price does not significantly fall below the exchange price. Pre-emptive rights may be transferred by agreement and delivery of the coupon evidencing such rights. If the shares to which the pre-emptive rights relate are held in a clearing system, the rights may be transferred in accordance with the rules of such clearing system.

The Management Board is authorized to increase, subject to the consent of the Supervisory Board, the Company’s share capital on or prior to June 5, 2005 by issuing no-par value shares against cash contributions, in one or several tranches, for an amount up to K€ 8,640. The shareholders will be granted a pre-emptive right. The Management Board is authorized to exclude, subject to the consent of the Supervisory Board, fractional shares from the pre-emptive right. The Management Board is authorized to increase, subject to the consent of the Supervisory Board, the Company’s share capital on or prior to June 5, 2005 by issuing new no-par value shares against cash contributions, in one or several tranches, for an amount up to K€ 2,160.

With the consent of the Supervisory Board, the Management Board may exclude the pre-emptive rights of the shareholders in order to be able to issue the new shares in an overall nominal amount of up to K€ 1,660 at an issue price that is not substantially below the stock exchange price or to be able to issue the new shares in a nominal amount of up to K€ 500 to employees.

If the Management Board does not exercise its authority to exclude the pre-emptive rights, the pre-emptive rights of the shareholders may be excluded, with the consent of the Supervisory Board, for fractional shares only.

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The share capital has been conditionally increased by up to K€ 1,152 through the issuance of up to 450,000 no-par value bearer shares, to be issued based on the authorization of the shareholders, dated June 6, 2000. The conditional capital increase will be implemented only insofar as the holders of the convertible bonds actually convert them. The new shares will participate in the profits for the entire fiscal year in which the right to convert is exercised.

Shareholders share in the Company’s profits pro rata in accordance with their holding of Ordinary Shares in the Company (§ 60 German Stock Corporation Law). However, the Company may decide on a different profit participation of new shares issued following a capital increase (§5 (4) of the Articles of Association of the Company). Shareholders participate in the Company’s profits in the form of dividends.

Dividends are paid following approval by shareholders at the annual general meeting of shareholders. Dividends are paid upon presentation of the relevant dividend coupon (Dividendenschein) to the Company or the paying agent or agents appointed from time to time by the Company. If the Ordinary Shares which are entitled to dividend payments are held in a clearing system, the dividends will be paid in accordance with the rules of such clearing system. Notice of the dividends paid and appointment of the paying agent or agents for this purpose will be published by the Company in the German Federal Gazette (Bundesanzeiger).

The shareholders vote on a recommendation made by the Management Board and Supervisory Board as to the amount of dividend which should be paid. Under German law, dividends are payable from balance sheet profits (Bilanzgewinn). In determining the annual financial statements (including the balance sheet profit), the Management Board and the Supervisory Board are, in accordance with German law, required to appropriate a certain portion of the Company’s annual surplus (Jahresüberschuss) to reserves until such “statutory” reserves amount in the aggregate to 10% of the Company’s share capital. In addition, the Management Board and the Supervisory Board may appropriate up to 50% of the Company’s annual surplus (after deduction of any loss carried forward and after appropriation to “statutory” reserves) to voluntary reserves. Further, pursuant to §16 of the Company’s Articles of Association, the remaining 50% of the Company’s annual surplus may also be appropriated to voluntary reserves, unless the voluntary reserves exceed or would exceed (after appropriation) 50% of the Company’s share capital. Thus, the balance sheet profit available for payment as a dividend is reduced by the aggregate amount of any such appropriation.

Each Ordinary Share entitles the holder thereof to one vote at general meetings of the shareholders of the Company. Resolutions are passed at general meetings of the shareholders of the Company by a majority of the votes cast, unless a higher vote is required by mandatory law. The German Stock Corporation Law requires that, among others, the following significant resolutions be passed by a majority of the votes cast and at least 75% of the capital represented in connection with the vote taken on such resolution: change of corporate purpose, issues of preferred non-voting shares, certain capital increases, capital decreases, a dissolution of the Company, a merger of the Company into or a consolidation of the Company with another stock corporation, a split off or spin off, a transfer of all of the Company’s assets, conclusion of enterprise agreements (Unternehmensverträge), in particular the inclusion of subsidiaries under contractual domination (Beherrschungsverträge) and profit and loss pooling (Gewinnabführungsverträge), change of the Company’s corporate form and the elimination of pre-emptive rights.

Members of the Supervisory Board are not reelected at staggered intervals. They are elected by the General Shareholders’ Meeting for periods not exceeding five years and may be replaced during a term only for the remainder of that term. Members of the Management Board are appointed by the Supervisory Board for periods not exceeding five years and a staggered reelection is possible, but cumulative voting does not take place.

In accordance with the German Stock Corporation Law (§271), upon a liquidation of the Company, liquidation proceeds remaining after paying off all of the Company’s liabilities would be distributed among holders of Ordinary Shares in proportion to the total nominal value of the shares held by each holder. Distribution of liquidation proceeds may not occur until the first anniversary of the third publication of the liquidation in the Federal Gazette.

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The Articles of Association of the Company do not permit the redemption of shares. However, the Company may redeem shares in lieu of an ordinary capital decrease pursuant to the German Stock Corporation Law (§§237-239).

The Articles of Association of the Company do not include sinking fund provisions.

Shareholders are not liable to further capital calls by the Company in the form of capital increases or otherwise.

Pursuant to the German Stock Corporation Law (§53a) discrimination of shareholders is prohibited and the Articles of Association of the Company do not contain provisions that discriminate against shareholders with substantial shareholdings.

Change of Shareholders’ Rights

     Amendments of the Articles of Association may be proposed either jointly by the Supervisory Board and the Management Board or by a shareholder or group of shareholders holding a number of Ordinary Shares having, in the aggregate, a minimum nominal value of € 0.5 million. A resolution amending the Articles of Association must be passed by a majority of the votes cast and at least a majority of the nominal capital represented at the meeting of shareholders at which the resolution is considered, unless the German Stock Corporation Law requires that the resolution be passed by at least three-quarters of the nominal capital represented at the meeting as described earlier in this Item 10.B.

General Shareholders’ Meeting

     A general meeting of the shareholders of the Company may be called by the Management Board or the Supervisory Board. Shareholders holding in the aggregate at least 5% in nominal value of the Company’s issued share capital may request the calling of a general meeting for a specific purpose. The right to attend and vote at a shareholders’ meeting is only accorded to those shareholders who deposit their shares with the Company, with a German notary, with a bank serving as a Depositary for such securities or at any other place of deposit specified in the notice of the general meeting, until the end of the meeting. Shares are also deemed to have been deposited if, with the consent of a depositee, they are blocked in the bank account in which they are held until the end of the general meeting. In order to exercise the right to attend and vote at the general meeting shareholders must provide the Company at the general meeting with appropriate documentation which evidences the deposit of Ordinary Shares as described above. Following such deposit of Ordinary Shares or the blocking of the account in which they are held, a holder of Ordinary Shares may still sell or otherwise dispose of such holder’s Ordinary Shares; provided, however, that any voting instructions such shareholder may have given with respect to such Ordinary Shares will be invalidated and any admission cards such shareholder may have received that would entitle such shareholder to attend and vote at the meeting must be returned to the deposit bank or the Company unless the buyer of such Ordinary Shares authorizes the seller to vote in his own name. Notice of shareholder meetings must be published in the Federal Gazette (Bundesanzeiger) at least one month prior to the last day on which the shares must be deposited, which is required by the Articles of Association to be not later than the seventh business day prior to the date of the general meeting.

Although notice of each shareholders’ meeting (whether for the annual general meeting or an extraordinary meeting) is required to be given as described above, neither the German Stock Corporation Law nor the Articles of Association have any minimum quorum requirement applicable to such meetings.

Limitations on the Right to own Securities

     German law or the Company’s Articles of Association do not limit the right of Non-residents or foreign owners to hold or vote the Ordinary Shares or the ADRs .

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Provisions that would delay a Change in Control

     The Company’s Articles of Association do not contain provisions that would have the effect of delaying, deferring or preventing a change in control of the Company.

Notification Requirements

     Under the German Stock Corporation Law, any enterprise (Unternehmen) owning shares in the Company must notify the Company without delay, inter alia, if the aggregate number of shares held by it (or any enterprise connected with it) exceeds or falls below a threshold of 25% to 50% of the Company’s share capital. For the purposes of this notice requirement, shares owned by an enterprise include shares owned by another enterprise that is directly or indirectly controlled by the first enterprise and shares held by another person on behalf of the first enterprise or the controlled enterprise. Failure to notify the Company will, for as long as such failure continues, disqualify the shareholder from exercising any rights attached to the Ordinary Shares (e.g., voting rights and dividends). In addition, in the event that the Company’s Ordinary Shares are listed on an European stock exchange, under the Securities Trading Act (Wertpapierhandelsgesetz) any person who reaches, exceeds or falls below 5%, 10%, 25%, 50% or 75% of the voting rights in a company listed on any European stock exchange, whether by acquiring or disposing of shares or otherwise, shall forthwith, and at the latest within seven calendar days, inform the Company and the Federal Supervisory Authority for Securities Trading (Bundesanstalt für Finanzdienstleistungsaufsicht) in writing that such person has reached, exceeded, or fallen below the aforesaid thresholds, the extent of such person’s voting rights, and notify the Federal Supervisory Authority for Securities Trading of such person’s address. Failure to notify the Company will, for so long as such failure continues, disqualify the shareholders for exercising the voting rights attached to the shares.

Provisions of German Law that are significantly different from Provisions of U.S. Law

     As described in “Ordinary Shares” above, German law provides that existing shareholders of a stock corporation have a preferential right to subscribe for new shares issued by the corporation in proportion to their holding of shares in the existing share capital of the corporation. This preferential right can only be excluded in certain limited circumstances and in the same shareholder resolution authorizing the capital increase and protects shareholders from being diluted.

Provisions governing changes in the capital that are more stringent than required by law

     The Articles of Association of the Company do not contain provisions relating to changes in the capital of the Company that are more stringent than applicable statutory law.

     The Company has not entered into any material contracts, other than contracts entered into in the ordinary course of business, to which it or any of its subsidiaries is a party, for the two years immediately preceding the publication of this document.

     At the present time, Germany does not restrict the export or import of capital, except for certain restrictions regarding Angola, Afghanistan, Birma/Myanmar, Iraq, Yugoslavia and Simbabwe.

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However, for statistical purposes only, every individual or corporation residing in Germany (hereinafter a “Resident”) must report to the Deutsche Bundesbank, subject only to certain immaterial exceptions, any payment received from or made to an individual or a corporation resident outside of Germany (a “Non-resident”) if such payment exceeds approximately € 12,500 (or the equivalent in a foreign currency). In addition, German residents must report any claims against or any liabilities payable to non-residents if such claims or liabilities, in the aggregate, exceed approximately € 5.0 million (or the equivalent in a foreign currency) during any month.

Taxation

     In this section the Company discusses the material United States federal income and German tax consequences to its Shareholders/ADR-holders.

If the shareholder/ADR-holder:

The Company has based its discussion on existing United States federal income and German tax law, including legislation, regulations, administrative rulings and court decisions, as in effect on the date of this annual report. These tax laws are subject to change, possibly with retroactive effect. The discussion does not address all aspects of United States federal income and German taxation that may be relevant to Pfeiffer Vacuum’s shareholders/ADR-holders in light of their particular circumstances. For example, the discussion does not address tax consequences resulting from shares acquired pursuant to the exercise of an employee stock option or shares otherwise received as compensation and it does not include tax consequences to shareholders/ADR-holders who are subject to special treatment under United States federal income tax laws (for example, financial institutions, insurance companies, tax-exempt organizations, broker-dealers and corporations that own 10% or more of the Company’s ordinary shares/ADR). The discussion also does not address any aspects of state, local or non-United States tax law other than some aspects of German tax law.

EACH SHAREHOLDER IS STRONGLY URGED TO CONSULT HER OR HIS TAX ADVISOR AS TO THE UNITED STATES FEDERAL INCOME AND GERMAN TAX CONSEQUENCES OF HOLDING PFEIFFER-VACUUM ORDINARY SHARES/ADR, INCLUDING THE PARTICULAR FACTS AND CIRCUMSTANCES THAT MAY BE UNIQUE TO SUCH SHAREHOLDER, AND AS TO ANY OTHER TAX CONSEQUENCES OF HOLDING PFEIFFER-VACUUM ORDINARY SHARES/ADR.

Withholding Tax on Dividends

     German law requires German corporations, including Pfeiffer Vacuum Technology AG, to withhold German tax on dividends paid to non-resident stockholders at a total rate of 21.1% (consisting of a 20% withholding tax and a 1.1% surcharge). The shareholder/ADR-holder can obtain a partial refund of this 21.1% aggregate German withholding tax under the Income Tax Treaty.

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Generally, United States federal income tax law requires shareholders/ADR-holders to pay taxes on dividends she/he receives from a German corporation. She/he may be permitted to claim a foreign tax credit for German income taxes that she/he paid on the dividend to the extent that she/he is not entitled to a refund for those taxes from the German tax authorities.

The Income Tax Treaty reduces the German withholding tax rate from 21.1% to 15% of the gross amount of the dividend a shareholder/ADR-holder receives from a German corporation. Therefore, she/he may apply for a refund of German withholding tax in an amount equal to 6.1% of the gross amount of the dividend she/he received (21.1% aggregate German withholding tax rate minus 15% Income Tax Treaty withholding tax rate).

Thus, each $1,000 of gross dividend paid to a shareholder/ADR-holder will be subject to a German withholding tax of $211, of which $61 may be refunded to her/him under the Income Tax Treaty. Assuming she/he receives the $61 refund, she/he will receive in total $850 of cash for each $1,000 of gross dividend ($789 directly and $61 by way of refund).

The United States federal income tax rules will treat a shareholder/ADR-holder as if she/he received a total dividend of $1,000, and she/he will have to include $1,000 in her/his gross income. She/he may also be entitled to a foreign tax credit, subject to applicable limitations of United States federal income tax law.

The shareholder/ADR-holder must include Pfeiffer Vacuum’s euro-denominated dividends in her/his gross income in a U.S. dollar amount that is based on the exchange rate on the date she/he receives or is treated as having received the dividends. If she/he convert these dividends into U.S. dollars on the date she/he receives or is treated as having received the dividends, she/he should not be required to recognize foreign currency gain or loss on the dividend. She/he may, however, be required to recognize foreign currency gain or loss on her/his receipt of refunds of German withholding tax to the extent that (A) the U.S. dollar value of the refund she/he received or was treated as having received differs from (B) the U.S. dollar equivalent of the refund on the date she/he received or was treated as having received the underlying dividend. United States federal income tax rules treat any such foreign currency gain or loss as ordinary income or loss.

Withholding Tax Refund Procedures

     To claim the refund reflecting the current reduction of the German withholding tax from 20% to 15% and the refund of the effective 1.1% German surtax, when applicable, a Shareholder/ADR-holder must submit a claim for refund, together with documentation of the tax withheld and certification of their last filed U.S. federal income tax return, to the German tax authorities, within four years from the end of the calendar year in which the dividend is received. Claims for refunds are made on a special German claim for refund form, which must be filed with the German tax authorities: Bundesamt für Finanzen, 53221 Bonn-Beuel, Germany. The German claim for refund forms may be obtained from the German tax authorities at the same address where the applications are filed or from the Embassy of the Federal Republic of Germany, 4645 Reservoir Road, N.W., Washington, D.C. 20007-1998. Additionally, the form can be downloaded from the following website: http://www.bff-online.de/Steuer_Vordrucke/KSt_KapSt/AntragErstattungKapE_USA.pdf         .

Shareholders/ADR-holders must also submit to the German tax authorities certification (IRS Form 6166) of their last filed United States federal income tax return. Such certification is obtained from the office of the Director of the Internal Revenue Service Center by filing a request for the certification with the Internal Revenue Service — Philadelphia Service Center, Foreign Certification Request, P.O. Box 16347, Philadelphia, PA 19114-0447. (Additional information, including IRS Publication 686, can be obtained from the Internal Revenue Service website at http://www.irs.gov/pub/irs-pdf/p686.pdf). Requests for certification are to be made in writing and must include the shareholder’s/ADR-holder’s name, social security number or employer identification number, tax return form number and tax period for which certification is requested. The Internal Revenue Service will send the certification directly to the German tax authorities if the shareholder/ADR-holder authorizes the Internal Revenue Service to do so. This certification is valid for three years and need only be resubmitted in a fourth year in the event of a subsequent application for refund.

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Shareholders/ADR-holders of Pfeiffer Vacuum ordinary shares/ADR who receive a refund attributable to reduced withholding taxes under the Income Tax Treaty may be required to recognize foreign currency gain or loss, which will be treated as ordinary income or loss, to the extent that the U.S. dollar value of the refund received or treated as received by the shareholder/ADR-holder differs from the U.S. dollar equivalent of the refund on the date the dividend on which such withholding taxes were imposed was received or treated as received by the shareholder/ADR-holder.

Reduced United States Tax Rate for Certain Dividends

     Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the maximum rate of United States federal income tax on qualified dividend income received by an individual (and certain trusts and estates) is reduced to 15%. The reduced maximum rate applies to eligible dividends received after December 31, 2002 and before January 1, 2009. Qualified dividend income generally includes dividends paid by United States corporations and qualified foreign corporations. A foreign corporation is a qualified foreign corporation for these purposes if:

In addition, to qualify for the reduced rate, the share of stock on which the dividend is paid must be held more than 60 days in the 120-day period beginning 60 days before the ex-dividend date and the stockholder must not be under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.

Special rules for determining a taxpayer’s foreign tax credit limitation shall apply in the case of qualified dividend income. Rules similar to those of Internal Revenue Code section 904(b)(2)(B) concerning adjustments to the foreign tax credit limitation to reflect any capital gain rate differential shall also apply to any qualified dividend income.

Taxation of Capital Gains

     The Income Tax Treaty provides that the German capital gains tax does not apply to gains on the sale or other disposition of a shareholder’s/ADR-holder’s Pfeiffer Vacuum ordinary shares/ADR.

If a shareholder/ADR-holder sells or otherwise disposes of her/his Pfeiffer Vacuum ordinary shares/ADR, she/he will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the amount realized and the adjusted tax basis in those shares. If she/he is an individual and has held the Pfeiffer Vacuum ordinary shares/ADR more than 12 months, the capital gain will generally be subject to a maximum United States federal income tax rate of 15%.

German Capital Tax (Vermögensteuer)

     As a result of a judicial decision, the German capital tax (Vermögensteuer) is not imposed at the present time. In addition, under the Income Tax Treaty a shareholder/ADR-holder would not have to pay German capital tax (Vermögensteuer) even if it were currently in effect.

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Other German Taxes

     There are no German transfer, stamp or other similar taxes that would apply to a shareholder/ADR-holder in connection with receiving, purchasing, holding or selling Pfeiffer Vacuum’s ordinary shares/ADR.

Not applicable.

Not applicable.

     The Company files this annual report on form 20-F, the exhibits thereto and other information with the Securities and Exchange Commission (the “SEC”). Any documents that the Company files with the SEC may be read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549 and at the Commission’s regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 233 Broadway, New York, New York 10274, at prescribed rates. The SEC also maintains a website at “www.sec.gov” that contains reports and other information regarding registrants that file electronically with the Commission. The annual reports and some other information of the Company are available.

As required by German law, the Company files its consolidated financial statements in accordance with U.S. GAAP in the English and German languages with Deutsche Börse AG.

Additionally, Pfeiffer Vacuum’s Annual Report (Geschäftsbericht) in English and German language and the annual report on Form 20-F is available from the Company’s Internet site (http://www.pfeiffer-vacuum.de).

Not applicable.

Item 11.    Quantitative and Qualitative Disclosures about Market Risk

     The global nature of the Company’s businesses exposes it to market risks resulting from changes in foreign currency exchange rates and interest rates. The Company seeks to manage and control these market risks primarily through its regular operating and financing activities and evaluates it by monitoring changes in key economic indicators and market information on an ongoing basis. The Company does not hold risk-sensitive instruments for investment purposes.

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Interest Rate Risk

     The Company faces typical interest rate risk insofar as changes of future interest rates will lead to changes in interest income and interest paid. However, the Company currently has no long-term debts. Pfeiffer Vacuum invested in a note receivable amounting to approximately € 9.0 million with interest based on the six-months-Euribor. This note receivable may include an interest rate risk. Cash assets are invested in instruments with maturities of less than ninety days.

Foreign Currency Exchange Risk

     The Company’s principal foreign currency exchange risk involves changes in the value of the euro relative to the U.S. dollar and the British pound. Approximately 35% of the Company’s sales are denominated in currencies other than the euro. The table below shows the portion of sales denominated in the U.S. dollar, the British pound, and other foreign currencies for the year ended December 31, 2003.

The Company enters into foreign currency forward contracts to hedge the exposure of its forecasted foreign-currency sales to fluctuations in exchange rates. These forward contracts are limited to currencies in which the Company has significant sales that are denominated in currencies other than the euro (i.e., the U.S. dollar). The contracts are designed to protect specifically against the impact of changes in exchange rates on these sales and typically cover approximately sixty to seventy percent of the Company’s foreign exchange risk. The maturities for all forward contracts are aligned with the date the sales are anticipated to occur. Please see note 14 “Financial Instruments” of the notes to the Consolidated Financial Statements for further discussion of the Company’s foreign exchange hedging activities.

The portion of the Company’s forecasted foreign currency sales that are not covered by its hedging activities would be adversely affected by a devaluation of foreign currencies relative to the Euro. A hypothetical, simultaneous, instantaneous, and unfavorable ten percent decrease in the value of the U.S. Dollar relative to the Euro would result in a decline in the Company’s forecasted sales denominated in U.S. Dollars for the first six months of 2004 of an amount equal to approximately € 1.4 million. The foregoing calculations are based on the assumption that sales in the first six months of 2004 will be equal to the Company’s sales in the six month period that ended on December 31, 2003.

Item 12.    Description of Securities other than Equity Securities

Not applicable.

Not applicable.

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Not applicable.

Not applicable.

Part II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

Changes with Respect to Ordinary Shares

Treasury Stock

     In the shareholders meeting at June 11, 2002 the shareholders authorized the Company to acquire treasury stock. The number of ordinary shares that may be repurchased (subject to statutory limitation) is limited up to a maximum of 10% of all issued shares. In 2003, the Company repurchased 100,076 shares for cash on the market.

Item 15.    Controls and Procedures

New U.S. Legislation

     As a result of the Company’s listing at New York Stock Exchange, it is subject not only to the provisions of German law (corporation, codetermination and capital market legislation) and of its own Articles of Association but also to the licensing requirements of the New York Stock Exchange. American capital market legislation — specifically, the Sarbanes-Oxley Act and the rules and regulations of the Securities and Exchange Commission (SEC) — also applies to Pfeiffer. The Company is in the process of assessing the impact of the recently issued provisions of the Sarbanes-Oxley Act and the related rules in order to adopt the appropriate plan of action required for the proper implementation and compliance of the act.

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All annual and quarterly reports are reviewed by the Company’s Management Board prior to publication. In accordance with German law, the members of the Management Board confirm through their signatures that, to the best of their knowledge and belief, all required information is contained therein and that they have no knowledge of any material irregularities that could negatively impact the Company’s operating or financial results. All annual and quarterly reports are also provided to all members of the Supervisory Board and the Audit Committee prior to publication. Furthermore, all members of the Supervisory Board and the Audit Committee receive comprehensive information about all material business transactions, the order situation and the results of all consolidated companies within the context of a detailed monthly reporting system.

The Company has a risk management system in place that enables existing risks to be identified and correctly treated early on. Methods of avoiding, reducing and securing risks are developed and implemented. The risk early warning system is regularly reviewed for its fundamental suitability for identifying developments that could endanger the continued existence of the Company. The Company’s risk coordinator is responsible for compiling timely risk reports and forwarding them to the risk committee, comprising the Management Board, department heads and the risk coordinator. The risk coordinator is also responsible for monitoring the adopted measures. The respective department heads bear the responsibility for instituted measures. The department heads are required to comment on risk development on a quarterly basis.

Item 16A.    Audit Committee Financial Expert

Audit Committee

     In accordance with the Sarbanes-Oxley-Act the Company established in March 2003 an Audit Committee. The following individuals are members of the Audit Committee:

The Audit Committee recommends the appointment of independent auditors to be elected by the Company’s shareholders at the annual general meeting. The Audit Committee also engages the independent auditors, determines their compensation and reviews the scope of the external audit. The Audit Committee reviews the Company’s quarterly and annual reports and financial statements, taking into account the result of the audits and/or reviews performed by the independent auditors.

Item 16B.    Code of Ethics

     On February 26, 2002, a German government commission adopted the “German Corporate Governance Code” (“DCGK”). The corresponding legislation went into force on July 26, 2002. The DCGK governs the publication of annual and quarterly reports, defines the Management Board’s information and reporting obligations to the Supervisory Board and governs the formation of audit committees dealing with accounting, risk management, the issuance of auditing commissions to independent auditors, conflicts of interest of Supervisory Board members and other matters.

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The Company has incorporated most of the recommendations of the Coporate Governance Code into its corporate strategy. More detailed information about DCGK is published on the Company’s internet-homepage (www.pfeiffer-vacuum.de) and filed as exhibit 2.6 to this report.

Item 16C.    Principal Accountant Fees and Services

     In the annual general meeting of the Company the Audit Committee (members of the Supervisory Board) proposed and the shareholders elected KPMG Deutsche Treuhandgesellschaft AG, Wirtschaftsprüfungs-gesellschaft, located Frankfurt/M., to its auditing company for the year 2003. Through fiscal year 2002 the auditing company was Ernst & Young, Deutsche Allgemeine Treuhand AG, Frankfurt.

Principal accountant fees and services consist of the following:

Audit-related fees are charged by KPMG for assurance and related services that are related to the performance of the audit (especially audit of employee benefit plans and pension schemes).