Basler AG

Interim / Quarterly Report • Aug 4, 2016

6-MONTH REPORT 2016

KEY FIGURES

in € m*	01/01/ - 06/30/2015	01/01/ - 06/30/2016	Changes to previous year	04/01/ - 06/30/2015	04/01/ - 06/30/2016	Changes to previous year
Sales revenues	44.2	48.5	10 %	21.9	26.1	19 %
Incoming orders	41.6	50.2	21 %	20.6	26.7	30 %
Gross results	21.4	24.1	13 %	10.4	13.0	25 %
Gross profit margin	48.4 %	49.7 %	1 Pp.	47.5 %	49.8 %	2 Pp.
Full costs for research and development	6.2	6.8	10 %	3.3	3.4	3 %
Research and development ratio	14.0 %	14.0 %	0 Pp.	15.1 %	13.0 %	-2 Pp.
EBITDA	8.3	9.0	8 %	3.8	5.0	32 %
EBIT	5.6	5.7	2 %	2.4	3.3	38 %
EBT	5.3	5.3	0 %	2.3	3.1	35 %
Net income	4.2	3.8	-10 %	1.9	2.2	16 %
Weighted average number of shares	3,183,495	3,240,137	2 %	3,188,361	3,239,218	2 %
Result per share (€)	1.30	1.19	-8 %	0.58	0.68	17 %
Cash flow from operating activities	2.7	6.4	>100 %	1.1	5.7	>100 %
Cash flow from investing activities	-5.2	-3.8	-27 %	-2.3	-1.8	-22 %
Free Cash flow	-2.5	2.6	>100 %	-1.2	3.9	>100 %

in € m*	12/31/2014	12/31/2015	Changes to 06/30/16 previous year
Total assets	72.3	76.7	83.9	9 %
Long-term assets	38.8	42.5	43.1	1 %
Equity	37.3	45.2	46.8	4 %
Liabilities	35	31.5	37.1	18 %
Equity ratio	51.6 %	58.9 %	55.8 %	-3 Pp.
Net cash	4.5	6.6	5.7	-14 %
Working Capital	17.1	15.8	18.6	18 %
Number of employees for the fiscal year (full time equivalents)	375	438	455	4 %
Share price (XETRA) in €	38.66	43.43	49.21	13 %
Number of shares in circulation	3,181,136	3,241,363	3,235,505	0 %
Market capitalization	123	140.8	159.2	13 %

* sofern nicht anders angegeben

OVERVIEW, GROUP RESULTS Q2/2016:

• ¼ Incoming orders: € 50.2 million (previous year: € 41.6 million, +21 %)
• ¼ Sales: € 48.5 million (previous year: € 44.2 million, +10 %)
• ¼ EBIT: € 5.7 million (previous year: € 5.6 million, +2 %)
• ¼ EBT: € 5.3 million (previous year: € 5.3 million)
• ¼ Operating cash flow: € 6.4 million (previous year: € 2.7 million, >100 %)
• ¼ Free cash flow: € 2.6 million (previous year: € -2.5 million, >100 %)

Dear Ladies and Gentlemen,

In a dynamic market environment, Basler AG closed the first half-year of 2016 with record values in incoming orders and sales. Also the operating cash flow increased significantly.

For the first five months of the year, the VDMA (Verband Deutscher Maschinenund Anlagenbau; German Engineering Federation) reported a stagnant market for German manufacturers of image processing components, whereas incoming orders increased by 15 %compared to the same period of the previous year.

Compared to the market, in the first half–year, Basler AG achieved an increase in sales of 10 % and thus clearly gained market shares. In particular regarding orders, Basler AG developed better than the market. In the first half-year, incoming orders of Basler reached the € 50 million mark and recorded a growth of 21 %. Thus, in three consecutive quarters the trend of a positive book-to-bill ratio continued.

The main growth drivers in the first half-year were the Asian region, the semiconductor and electronics industries, the interface technologies GigE, USB, as well as CMOS sensor technology.

The high sales level as well as slightly increasing gross margins led to a solid pre-tax return rate above the long-term target value (10 % EBT margin).

In parallel to the commercial progress, new attractive product variants of the ace camera line based on CMOS sensors were transferred to series production. Furthermore, the company worked on expanding the camera business for medical applications and, for the first time, exhibited at the "Analytica" - the leading trade fair for laboratory automation and microscopy. Regarding new technologies, in the first half year, strides were particularly made in the 3D field based on the so-called time-of-flight (TOF) technology. An increasing number of leading customers tested 3D cameras and gave positive feedback.

BUSINESS DEVELOPMENT

The positive development of sales and incoming orders is particularly due to the very positive development of the Asian markets. Basler AG expanded its sales in Asia to 45 % (previous year 35 %). Despite a slight weakening, the company expects a strong demand from the Asian region for the upcoming months. This development is also reflected in the increasing number of units manufactured at the Singapore production site where the number of units was roughly doubled compared to the first half-year of 2015. Compared to the previous year, there were no major projects in the EMEA region so that the sales share decreased to 37 % (previous year: 45 %). The American sales remained relatively stable at 18 % (previous year: 20 %).

Overall, the management of Basler AG feels the Asian market to be slightly overheated in the second quarter. Allocation situations of semi-conductor factories as well as earth quakes led to a shortage in the procurement markets for sensors and electronic components. This in turn caused longer delivery times for camera products and consequently to panic buying. The current forecast reflects a slight weakening of the Asian markets in the second half of the year. Due to long-term contracts, the company estimates the risk of increasing purchase prices to be low right now

INTERIM GROUP MANAGEMENT REPORT

SALES & ORDER ENTRY

For the last six quarters (in € mill.)

Sales revenues to previous year

Incoming orders, sales, and gross profit

In the second quarter of 2016, the positive trend continued and incoming orders as well as sales siginificantly increased. In the first six months of 2016, sales amountetd to € 48.5 million (previous year: € 44.2 million, + 10 %) and the incoming orders amounted to € 50.2 million (previous year: € 41.6 million, +21 %). The gross margin slightly increased to 49.7 % (previous year: 48.4 %) in the elapsed half year. Consequently, the gross profit grew disproportionately by 13 % compared to the first half-year of 2015.

GROSS PROFIT (IFRS)

Development of IFRS Gross Profit (incl. R&D depreciation)

Gross profit incl. depr. mill. €/% Gross profit w/o depr. mill. €/%

EARNING BEFORE TAX

For the last six quarters

Expenses, costs, profit, and equity

Despite the increase of the gross result the pre-tax result (EBT) remained stable at € 5.3 million (previous year: € 5.3 million). Thus, the pre-tax result was slightly above the EBT-return of 10 % strived for in the long term.

The net result decreased to € 3.8 million (previous year: € 4.2 million). Equity increased toward the end of the reporting period to € 46.8 million (12/31/2015: € 45.2 million, -10 %)

Compared to the previous year, expenses increased due to a higher cost basis caused by recently recruited staff in R&D, sales & marketing, and the setting up of provisions for bonus payments.

Additionally, the extraordinary results were dampened due to a lower capitalization ratio of R&D. The capitalization ratio reached a level 11 percentage points below the level of last year.

CASH FLOW AND LIQUIDITY

FREE CASH FLOW

For the last six Quarters (in € mill.)

The operating cash flow significantly increased and amounted to € 6.4 million in the reporting period (previous year: € 2.7 million, >100%). Trade payables were € 2.8 million above the previous year's figure. The increase is mainly due to a higher sales level but also to an increase of the days outstanding.

Furthermore, due to the positive results, the company formed provisions for employee bonuses in the second quarter. However, in the same period of the previous year, provisions were reversed.

The cash flow from investing activities decreased by 27 % to € -3.8 million (previous year: € -5.2 million). Compared to the previous year, in the first half-year of 2016 no extraordinarily high investments in production lines were made.

The free cash flow summed up to € 2.6 million (previous year: € -2.5 million, 100 %). It covered the cash flow from financing activity in an amount of € -2.3 million and led to a slight liquidity surplus of € 0.4 million. The payment of the dividend for financial year 2015 amounting to € 1.9 million was settled against the taking up of a low-interest KfW loan amounting to € 1.6 million.

The positive development of the cash flow will probably continue in the second half-year of 2016. At the end of the reporting period, liquid assets amounted to € 14.4 million and were thus above the value of the same period of the previous year (06/30/2015: € 9.1 million). The net cash position amounted to € 5.7 million (06/30/2015: € 1.2 million, <100 %) at the reporting date.

The expansion of employees mainly took place in 2015.In the course of the current financial year, the company will focus on the efficient training of these new employees and the adjustment of structures. Consequently, the potential of the expanded staff will be better used and productivity will be increased. Only few new positions will be added in the upcoming months.

7

Outlook

For Basler AG, the financial year 2016 successfully started slightly above the budget planning. We expect a minor slowdown of the Asian markets for the second half-year. However, we feel confident about the second half-year and confirm the forecast adjusted in mid-July according to which the group sales 2016 will be within a corridor of € 92 – 94 million at a pre-tax margin of 10 – 11 %. Given the solid results of the first half-year, we will decisively push forward with our growth strategy in the course of the year.

SHARE PRICE DEVELOPMENT

BASLER (Xetra) vs. TecDax 2016/01/01-2016/03/31

On April 21, 2016, the Management Board together with the Supervisory Board of Basler AG decided to carry out an additional share buyback program. Based on a solid liquidity as well as an effective resolution of the shareholders' meeting of June 4, 2014, the company wants to use the currently favorable share price to buy back additional bearer shares via the stock market. Ultimately in August 2015, the company sold bearer shares to the capital market. At the reporting date of June 30, 2016, the number of 264,495 own shares was in the possession of Basler AG, corresponding to 7.6 % of overall shares.

The shareholders' meeting of June 4, 2014, authorized the company to buy back own shares up to a total of 10 % of the share capital of Basler AG existing at the time the resolution was adopted. The authorization is approved until June 3, 2019. The shares can be used for all purposes provided for in the authorization of the shareholders' meeting of June 4, 2014. When acquiring own shares via the stock exchange, the price paid per share (without considering incidental purchase costs) must not differ by more than 10 % from the share price of the company for shares with same conditions as determined on the trading day by the opening auction on the trading day for XETRA trade on the Frankfurt stock exchange.

Declaration of the legal representatives

We affirm to the best of our knowledge that the interim consolidated financial statements, in accordance with the accounting principles applicable to interim reporting, provide a true and fair view of the group's asset, financial, and earnings situation and that the group's interim annual report represents a true and fair picture of the course of business, including the operating result, and the group's financial situation as well as describing the essential opportunities and risks concomitant with the expected development of the group during the remainder of the fiscal year.

The management board

Dr. Dietmar Ley John P. Jennings Arndt Bake Hardy Mehl CEO CCO CMO CFO/COO

Consolidated Profit and Loss Statement

Group´s annual balance sheet according to IFRS for the fiscal year from January 1, 2016 to June 30, 2016

in € k	01/01/ - 06/30/2015	01/01/ - 06/30/2016	04/01/ - 06/30/2015	04/01/ - 06/30/2016
Sales revenues	44,203	48,508	21,886	26,142
Cost of sales	-22,849	-24,444	-11,478	-13,108
- of which depreciations on capitalized
developments	-1,391	-1,516	9,980	-696
Gross profit on sales	21,354	24,064	10,408	13,034
Other operating income	1,392	594	342	288
Sales and marketing costs	-7,873	-8,272	-4,141	-4,193
General administration costs	-5,668	-6,116	-2,165	-3,259
Research and development	-3,291	-4,136	-1,835	-2,197
Other expenses	-275	-411	-163	-380
Operating result	5,639	5,723	2,446	3,293
Financial income	274	103	150	34
Financial expenses	-599	-522	-288	-256
Financial result	-325	-419	-138	-222
Earnings before tax	5,314	5,304	2,308	3,071
Income tax	-1,163	-1,460	-454	-876
Group´s period surplus	4,151	3,844	1,854	2,195
of which are allocated to
shareholders of the parent company	4,151	3,844	1,854	2,195
non-controlling shareholders	0	0	0	0
Average number of shares	3,183,828	3,240,137	3,188,361	3,239,218
Earnings per share diluted / undiluted (€)	1.30	1.19	0.58	0.68

Consolidated Statement of Comprehensive Income

Group´s annual balance sheet according to IFRS for the fiscal year from January 1, 2016 to June 30, 2016

in € k	01/01/ - 06/30/2015	01/01/ - 06/30/2016
Group's year surplus	4.151	3.844
Result from differences due to currency conversion, directly recorded in equity	25	-37
Surplus from cashflow hedges	0	0
Total result, through profit or loss	25	-37
Total result	4.176	3.807
of which are allocated to
shareholders of the parent company	4.176	3.807
non-controlling shareholders	0	0

Consolidated Cash Flow Statement

Group´s annual balance sheet according to IFRS for the fiscal year from January 1, 2016 to June 30, 2016

in T€	01/01/ - 06/30/2015	01/01/ - 06/30/2016	04/01/ - 06/30/2015	04/01/ - 06/30/2016
Operating activities
Group's period surplus	4,151	3,844	1,854	2,195
Increase (+) / decrease (-) in deferred taxes	367	210	94	158
Payout/ incoming payments for interest	691	605	356	299
Depreciation of fixed assets	2,644	3,235	1,334	1,710
Change in capital resources without affecting payment	301	-37	-140	75
Increase (+) / decrease (-) in accruals	-1,536	1,618	-1,095	1,224
Profit (-) / loss (+) from asset disposals	0	-2	0	0
Increase (-) / decrease (+) in reserves	108	-847	520	-667
Increase (+) / decrease (-) in advances from demand	-116	58	58	32
Increase (-) / decrease (+) in accounts receivable	-3,697	-5,110	-701	-2,579
Increase (-) / decrease (+) in other assets	-254	-377	167	170
Increase (+) / decrease (-) in accounts payable
	386	3,149	-428	2,930
Increase (+) / decrease (-) in other liabilities	-358	76	-951	121
Net cash provided by operating activities	2,687	6,422	1,068	5,668
Investing activities
Payout for investments in fixed assets	-5,274	-3,801	-2,294	-1,791
Incoming payments for asset disposals	63	6	1	4
Net cash provided by investing activities	-5,211	-3,795	-2,293	-1,787
Financing activities
Payout for amortisation of bank loans	-444	-344	-222	-122
Payout for amortisation of finance lease	-698	-741	-351	-373
Incoming payment for borrowings from banks	0	1,600	0	1,600
Interest payout	-691	-605	-356	-299
Incoming payment for sale of own shares	3,068	0	3,068	0
Payout for own shares	-247	-288	0	-288
Dividends paid	-2,222	-1,878	-2,222	-1,878
Net cash provided by financing activities	-1,234	-2,256	-83	-1,360
Change in liquid funds	-3,758	371	-1,308	2,521
Funds at the beginning of the period	12,812	14,043	10,362	11,893
Funds at the end of the period	9,054	14,414	9,054	14,414
Composition of liquid funds at the end of the period
Cash in bank and cash in hand	9,054	14,414	9,054	14,414
Payout for taxes	1,048	845	689	785

Group Balance Sheet

Group´s annual balance sheet according to IFRS for the fiscal year from January 1, 2016 to June 30, 2016

in € k 12/31/2015 06/30/2016
Assets
A. Long-term assets
I. Intangible assets	20,859	21,747
II. Fixed assets	6,276	6,294
III. Buildings and land in finance lease	15,316	14,970
IV. Other financial assets	5	5
V. Deferred tax assets	64	53
	42,520	43,069
B. Short-term assets
I. Inventories	10,763	11,610
II. Receivables from deliveries and services and from
production orders	7,793	12,903
III. Other short-term financial assets	233	324
IV. Other short-term assets	521	850
V. Claim for tax refunds	791	750
VI. Cash in bank and cash in hand	14,043	14,414
	34,144	40,851
	76,664	83,920

Liabilities
A. Equity
I. Subscribed capital	3,241	3,236
II. Capital reserves	2,443	2,443
III. Retained earnings including group's earnings	38,944	40,627
IV. Other components of equity	543	506
	45,171	46,812
B. Long-term debt
I. Long-term liabilities
1. Long-term liabilities to banks	6,825	8,181
2. Other financial liabilities	0	0
3. Liabilities from finance lease	10,117	9,375
II. Non-current provisions	748	748
III. Deferred tax liabilities	4,046	4,245
	21,736	22,549
C. Short-term debt
I. Other financial liabilities	1,579	1,864
II. Short-term accrual liabilities	1,970	3,161
III. Short-term other liabilities
1. Liabilities from deliveries and services	2,731	5,880
2. Other short-term financial liabilities	1,194	944
3. Liabilities from finance lease	2,157	2,157
IV. Current tax liabilities	126	553
	9,757	14,559
	76,664	83,920

Consolidated Statement of Changes in Equity

Group´s annual balance sheet according to IFRS for the fiscal year from January 1, 2016 to June 30, 2016

				Other components of equity
			Retained	Differences	Reserves
			earnings	due to	for cash	Sum of other
	Subscribed	Capital	incl. group's	currency	flow	components
in € k	capital	reserve	earnings	conversion	hedges	of equity	Total
Shareholders´ equity as of
01/01/2015	3,181	0	33,931	195	0	195	37,307
Total result			4,151	301	0	301	4,452
Share salesback	54		3,014			0	3,068
Share buyback	-6		-242			0	-248
Dividend
outpayment*			-2,222			0	-2,222
Shareholders´
equity as of 06/30/2015	3,229	0	38,632	496	0	496	42,357
Total result			2,062	47	0	47	2,109
Share salesback	12	2,443	-1,750			0	705
Dividend
outpayment*			0			0	0
Shareholders´
equity as of 12/31/2015	3,241	2,443	38,944	543	0	543	45,171
Total result			3,844	-37		-37	3,807
Share salesback			0			0	0
Share buyback	-5	0	-283			0	-288
Dividend
outpayment**	0	0	-1,878			0	-1,878
Shareholders´
equity as of 06/30/2016	3,236	2,443	40,627	506	0	506	46,812

* 0,70 € per share

** 0,58 € per share

IR EVENTS 2016

Date	Event	Venue
11/02/2016	Publication 9-month report 2016	Ahrensburg, Germany
11/10/2016	Analyst conference on exhibition VISION	Stuttgart, Germany
	Deutsches Eigenkapitalforum 2016	Frankfurt am Main,
11/21 - 23/2016	(German equity forum)	Germany

BASLER AG An der Strusbek 60-62 22926 Ahrensburg Germany Tel. +49 4102 463 0 Fax +49 4102 463 109 info@baslerweb.com

BASLER, INC. 855 Springdale Drive, Suite 203 Exton, PA 19341 USA Tel. +1 610 280 0171 Fax +1 610 280 7608 usa@baslerweb.com

BASLER ASIA PTE. LTD.

35 Marsiling Industrial Estate Road 3 #05-06 Singapore 739257 Tel. +65 6367 1355 Fax +65 6367 1255 singapore@baslerweb.com

BASLER VISION TECHNOLOGIES

TAIWAN INC. No. 21, Sianjheng 8th St. Jhubei City, Hsinchu County 30268 Taiwan/R.O.C. Tel. +886 3 558 3955 Fax +886 3 558 3956 taiwan@baslerweb.com