2003 FORM 10-K ZIMMER HOLDINGS, INC. AND SUBSIDIARIES for earlier degenerative changes in the knee as compared to individuals without meniscus damage. Most patients today are treated by removal of the torn portion of the meniscus. The Company believes that the CMI is the only product of its kind that is commercially available outside the United States for meniscus generation after partial meniscectomy, thus offering recipients the opportunity to slow the progression of degenerative changes in their knees. This biological product was introduced in 2000 in Europe and 2002 in Australia to a limited number of medical centers. A broader product rollout is planned utilizing surgical skills transfer via Zimmer Institute satellites. The product is part of an FDA clinical study in the United States. The Company sells the CMI in Europe pursuant to a distribution arrangement with ReGen Biologics, Inc. Sysorb ˛  Screw System. The unique design of the bioresorbable interference screws  Sysorb  and its associated instrumentation accommodate the use of an amorphous polymer. The benefits of an amorphous polymer are that it has an excellent biocompatibility and degrades completely within approximately one year. It maintains a strong fixation during the entire healing process. The patented turbine-like drive of the  Sysorb  distributes the torque equally over the whole screw length during its insertion, which helps to prevent screw failure during screw placement. The Company has extensive research and development activities underway to introduce new surgical techniques, materials, and product designs intended to advance the field of orthopaedics. The product development function is integrated with strategic brand marketing, which allows the Company to understand its customers’ needs and to respond more quickly with top-quality products. The rapid commercialization of innovative new materials, product designs, and surgical techniques remains one of the Company’s core strategies and continues to be an important driver of sales growth. Key new products, surgical techniques and instruments introduced by the Company in 2003 include, among others: PRODUCT DEVELOPMENT ) MIS Minimally Invasive Solutions $^{TM}$ Surgical Techniques and Instrumentation for knee, hip and trauma, including the initial releases of the first  Zimmer Ortho Guidance TM Navigated techniques developed with partner, Medtronic/SNT: ) MIS  mini-incision TKA technique and instruments for NexGen  Knee; ) Initial releases of  Ortho Guidance  Instruments for  MIS Mini Incision and  2-Incision  Hip techniques; and ) Initial releases of  MIS Quad-Sparing  Technique and Instruments for TKA. ) Monoblock Tibial Components for  NexGen  Knee in CR and LPS; ) Trabecular Metal  Modular Cup for  Trilogy  Acetabular system; and ) Acetabular Augments and Revision Acetabular Shells. ) New Materials/Technologies: ) NexGen  CR-Flex total knee; and ) BAK  Vista PEEK – Carbon Fiber Cage. ) New Implant Systems: ) ITST  Nail; ) M/L Taper Hip Stem System; ) Durom  Hip Resurfacing System; ) PureForm  ceramic crown system; and ) Atlantis Abutments for improved aesthetics. ) Expansions to existing systems: ) Bigliani/Flatow  shoulder; ) Coonrad/Morrey Elbow; ) VerSys  Hip System Line Extensions; ) ZMR  Revision Hip Line Extension; ) Periarticular Plating System Line Extension; ) Zimmer  Cannulated Screw System; ) Natural-Knee II $^{TM}$ – Cemented Tibial Plates; ) Innex Revision Knee System; ) Revitan  Modular Revision Hip; ) Durasul ˛  Constrained Inserts for Revision Acetabular Surgery; ) Navitrack ˛  CT-based THA Cup Software, Technique and Instruments; ) Navitrack  CT-less THA Cup and Stem Software, Technique and Instruments; and ) Alloclassic  Offset Stem. On a Zimmer standalone basis, these and other new products introduced in the last 3 years accounted for approximately 17 percent of 2003 total sales, consistent with the Company’s goal of 15 to 20 percent on an annual basis. The Company is actively broadening its product offerings in each of the product areas and exploring new technologies that have applications in multiple areas. For the years ended December 31, 2003, 2002 and 2001, the Company spent $105.8 million, $80.7 million and $71.6 million, respectively, on research and development. For 2003, the pro forma research and development investment of Zimmer and Centerpulse was $149 million. The substantial increase in research and development expenditures has accelerated the output of new orthopaedic and dental reconstructive implants, spine and trauma products, including advanced new materials, product designs and surgical techniques. The Company’s primary research and development facility is located in Warsaw, Indiana, but the Company also has other research and development personnel based in, among other places, Dover, Ohio; Austin, Texas; Carlsbad, California; Minneapolis, Minnesota; and Winterthur, Switzerland. As of December 31, 2003, the Company employed more than 550 research and development employees worldwide. ) New Materials –  Trabecular Metal  products: 11