We report the first observation of charmed mesons with the ZEUS detector at HERA using the decay channel ${\rm D}~{*+}\rightarrow (\Do \rightarrow {\rm K}~-\pi~+)\pi~+$ (+ c.c.). Clear signals in the mass difference $\Delta M$=$M$(D$~*$)--$M$(D$~0)$ as well as in the $M(K\pi)$ distribution at the D$~0$ mass are found. The $ep$ cross section for inclusive \DSpm\ production with $Q~2<4\GeV~2$ in the $\gamma p$ centre-of-mass energy range $115 < W < 275$ \GeV\ has been determined to be $(32 \pm 7~{+4}_{-7} )$ nb in the kinematic region \mbox{\{$p_T(\DS)\geq $ 1.7 \,\GeV, $|\eta(\DS)| < 1.5 $\}}. Ex\-tra\-po\-la\-ting outside this region, assuming a mass of the charm quark of 1.5 \GeV, we estimate the $ep$ charm cross section to be $\sigma(e p \rightarrow c \bar{c}X ) = (0.45 \pm 0.11~{+0.37}_{-0.22}) \, \mu {\rm b} $ at \mbox{$\sqrt{s} = 296$}\GeV\ and $\langle W \rangle = 198$ \GeV. The average $\gamma p$ charm cross section \mbox{$\sigma(\gamma p \rightarrow c \bar{c}X )$} is found to be \mbox{$(6.3 \pm 2.2~{+6.3}_{-3.0}) \, \mu {\rm b} $} at $\langle W \rangle = 163$ \GeV\ and \mbox{$(16.9 \pm 5.2~{+13.9}_{-8.5}) \, \mu {\rm b} $} at $\langle W \rangle = 243$ \GeV. The increase of the total charm photoproduction cross section by one order of magnitude with respect to low energy data experiments is well described by QCD NLO calculations using singular gluon distributions in the proton.
Inclusive photoproduction of $\dspm$ in ep collisions at HERA has been measured with the ZEUS detector for photon-proton centre of mass energies in the range \linebreak \wrang and photon virtuality Q~2 < 4 \g2. The cross section $\sigma_{ep \to \ds X} $ integrated over the kinematic region \ptrangand \etarang is {\xsecs}. Differential cross sections as functions of $p_{\perp}~{\ds}$, $\eta~{\ds}$ and W are given. The data are compared with two next-to-leading order perturbative QCD predictions. For a calculation using a massive charm scheme the predicted cross sections are smaller than the measured ones. A recent calculation using a massless charm scheme is in agreement with the data.