Beta Systems Software AG

Quarterly Report • May 10, 2006

01/06

Contents

Report for the First Quarter	Page 3
Consolidated Statements of Operations	Page 11
Consolidated Balance Sheets	Page 12
Consolidated Statements of Cash Flow	Page 13
Consolidated Statements of Shareholders' Equity	Page 14
Notes to the Consolidated Financial Statements	Page 15

Key financial data, first quarter 2006 Beta Systems showing positive effects

• Sales revenues increase by 10.2% to 21.8 m € (Q1 2005: 19.8 m €)
• One-off expenses of 0.8 m € for further cost optimizations in line with the new business structure, influencing operating result
• Operating result (from continuing business operations, including the above mentioned one-off expenses) rises from -4.1 m € to -3.6 m €
• Net result -1.5 m € / -0.17 € per share (Q1 2005: -2.1 m € / -0.26 € per share)

Increase in sales reflects successful restructuring

Kamyar Niroumand, CEO of Beta Systems Software AG, said, "Our quarterly results show that we achieved our first successes in the first quarter, and that we are on the right track in terms of our operational development. Our sales and results for the first quarter of 2006 improve upon the previous year's figures, and have even slightly exceeded our expectations. We regard this as a positive indicator that our new alignment and business structure are providing us with the right conditions for future profitable growth. After the first few weeks, I am persuaded that the market-related strategies of the individual business lines of IdM, ECM and DCI still require further fine-tuning in terms of portfolio optimisation, industry focus and regional orientation. My purpose in this is to direct our business even more strongly than previously to meeting the needs of our many major customers, and to concentrate our sales, marketing and development activities on the demands of these customers."

Mr. Niroumand added, "At the same time, we will speedily complete the implementation of the optimization opportunities already identified at the beginning of the year, and are currently undertaking the previously announced cost adjustments so that our business is able to move from restructuring into growth mode during the course of the rest of the year."

Important Operational Events

• Hungarian Post Office committed to Beta Systems
• Partner business further expanded
• Personnel changes on management and supervisory boards
• Takeover bid of Delta Beteiligungen AG to Beta Systems shareholders ends
• Scanner/sorter manufacture transferred to long-term partner SIS SEAC ICR Systeme GmbH

Hungarian Post Office committed to Beta Systems

• New hardware and software components enable the Hungarian Post Office to achieve even quicker and more efficient processing of their daily load of approx. 1.2 million documents

During the first quarter of 2006, as part of a major contract, the Hungarian Post Office has renewed its Beta Systems hardware and software for the electronic processing of payment documents, and expanded its equipment with a large number of new components. Magyar Posta has been a customer of Beta Systems since 1996, and has processed around 3 billion documents using the system over this period. The hardware and software of the installed high-speed document readers are being overhauled as part of this contract, to upgrade them to the latest standards. Among other measures being carried out, the document reader control software is being converted to the universal scan programm ProSort. The possibility is also being created to include electronic input in the system in the form of text and/or image information, in addition to the documentary information, making it available for downstream business processes. Thanks to these new applications and components, the postal service will be able in future to process its documents even more quickly and efficiently.

Partner business further expanded

• Start of the 'Partner Success' program emphasizes crucial importance of partner business

At the beginning of the business year 2006, Beta Systems began its 'Partner Success Program (PSP)'. The aim of this program is to enter into long-term partnerships with qualified partners in each business line - Identity Management (IdM), Enterprise Content Management (ECM) and Data Centre Infrastructure (DCI). The partner program addresses different partner types, containing various certification levels, and is tailor-made for the demands of the different business segments of Beta Systems. The focus is placed particularly on the growth markets of ECM and IdM. With its launch of the 'Partner Success Program', Beta Systems emphasizes the strategic importance of partner business for the concern, with future turnover growth and project business being generated via qualified partners.

Personnel changes on management and supervisory boards

• Kamyar Niroumand new CEO from April 1, 2006
• William P. Schmidt becomes Chairman of Supervisory Board after retirement of Harald J. Joos
• Management Board member Dr. Oskar von Dungern leaves the company at mid-year

With effect from April 1, 2006, Kamyar Niroumand has taken over as CEO of Beta Systems. In his former capacity as Chief Sales & Service Officer on the Executive Committee of the Deutsche Telekom subsidiary T-Systems, Mr. Niroumand headed the major customer business of T-Systems. As director of T-Systems International GmbH, he was responsible for business in growth regions. His previous activities have afforded Mr. Niroumand excellent contacts with many multinational groups and major public institutions, and outstanding management and industry expertise in the field of international IT solutions.

At its meeting of May 2, 2006, the Supervisory Board of Beta Systems Software AG elected William P. Schmidt as its new Chairman. Mr. Schmidt is one of the major shareholders of Beta Systems, having for many years been a member of the Management Board, and being one of the founders of the company. Mr. Jürgen Dickemann, CEO of Deutsche Balaton AG was appointed Vice Chairman. Mr. Dickemann has been a member of the Supervisory Board since June 14, 2005.

Previously, Harald J. Joos, CEO of DEMAG Cranes & Components GmbH, had made the company aware of his intention to relinquish his mandate after the completion of the Supervisory Board meeting of May 2, 2006. The background to this decision was the considerable commitment of time required by the company he heads.

The Management Board member responsible for research and development, Dr. Oskar von Dungern, and the Supervisory Board of the company have agreed not to extend his contract beyond its expiry at the end of the year 2006. Dr. von Dungern will leave the company at his own request with effect from July 1, 2006, in order to endeavor new business opportunities. However, he will continue to be associated with the company in future on an advisory basis.

Takeover bid of Delta Beteiligungen AG to Beta Systems shareholders ended

• Bid phase ends with Delta Beteiligungen proportion of voting rights at approx. 34%

Delta Beteiligungen Aktiengesellschaft published its unsolicited, public takeover bid to Beta Systems shareholders for the acquisition of their Beta Systems shares on February 22, 2006. After careful study and canvassing of opinion concerning the takeover bid, the Management and Supervisory Boards recommended shareholders to reject the bid owing to the inadequacy of the benefits offered. The takeover bid ended with a proportion of voting rights of approximately 34% for Delta Beteiligungen AG. This proportion of voting rights was achieved during the term of the bid - as well as by acquisitions in the course of the bid - by the transfer of voting rights from Delta's parent company Deutsche Balaton AG and exchange and off-exchange purchases.

Scanner/sorter manufacture transferred to long-term partner SIS SEAC ICR Systeme GmbH

• Focus on marketing, sales and service for scanner/sorter hardware in line with ECM solution business

In line with the purchase of the wholly-owned subsidiary Kleindienst Scanner GmbH, Beta Systems has transferred its own hardware manufacture to its long-term partner SIS SEAC ICR Systeme GmbH, Konstanz (SIS SEAC). The sale took place retroactively to January 1, 2006, and management of Kleindienst Scanner GmbH was transferred to SIS SEAC as from April 1, 2006. With this acquisition, SIS SEAC takes over control of development and manufacture of scanner/sorter systems of the H series; product and marketing rights remain with Beta Systems.

Beta Systems will in future focus more strongly on the marketing and sales of scanner systems as part of its own ECM solution offering in the field of Input Management. Important connected IT services are included here, including project settlement and maintenance. Scanner/sorter hardware will in future be purchased by commission on the basis of fixed, agreed conditions, so that a clear reduction in vertical manufacture range and increased flexibility as compared to the current fixed costs position are attained. SIS SEAC intends to combine the development and production of scanners/sorters with its own manufacturing operations, and this combination will equip it to provide a broader overall portfolio of products for Beta Systems' ECM solution business. In the course of the agreements reached, SIS SEAC has also secured the requisite and unique technological and manufacturing expertise, taking on all 28 of the employees of Kleindienst Scanner GmbH on their existing contracts.

Financial Position, Financial Performance and Cash Flows Important notes and preliminary remarks

All reports are prepared in accordance with the generally recognised International Financial Reporting Standards (IFRS). Previous year figures, i.e. all balance sheet items and all items for calculation of profit and loss, have been converted accordingly. Owing to the cessation in 2005 of business operations in the field of the Outsourcing Service, all result values before tax for the year 2005 are suffixed "from continuing operations" and take into account neither the sales nor the operational expenses of the field of operations ceased. The result from the field of operations ceased is shown after tax, and is incorporated directly into the result of the reporting period.

The results given below refer to the consolidated business results of the Beta Systems Group. In the reporting year 2006, the conversion of segment information to conform to the new business structure, i.e. the business segments Identity Management (IdM), Enterprise Content Management (ECM) and Data Center Infrastructure (DCI) will be implemented.

Development of Revenues

As a provider of complex IT business solutions, Beta Systems achieves sales from the components of software licencing, maintenance and service. Sales also result from hardware in the form of scanner systems and other retail goods (e.g. PC workstations and servers).

Sales revenues rose by 10.2% to 21.8 m € in the first quarter of 2006 from 19.8 m € in the first quarter of 2005, in particular owing to successful conclusion of contracts in the ECM business segment within the financial services sector. The businesses of the Beta Systems Group succeeded worldwide in concluding a number of contracts with substantial customers. Among the sales successes in the IdM segment were service contracts with the Hypovereinsbank and Deutsche Bank (both financial services, Germany). Major contracts were agreed in the ECM segment with Magyar Posta (financial services, Hungary), Zagrebacka Banka (financial services, Croatia), Bank Austria (financial services, Austria) and AMB Generali Informatik (IT services, Germany) and the Office for National Statistics (public administration, Great Britain). The most important sales successes in the DCI segment included DAK (insurance, Germany), Porsche (automotive, Germany) and CNETI (automotive, France).

Revenue from the sale of software licences dropped by 11.2% to 4.5 m € in the first quarter of 2006 (Q1 2005: 5.0 m €). At 11.1 m € in Q1 2006, maintenance revenues were slightly below the previous year's 11.5 m €. Revenues from services rose by 50.1% from 2.0 m € in Q1 2005 to 3.0 m € in Q1 2006. To this is added hardware revenue of 3.2 m € in the first quarter of 2006 as against 1.3 m € in the corresponding quarter of the previous year. The growth in revenues from services and hardware results in particular from the realization and completion of numerous projects in the service and consultancy-intensive

segments of IdM and ECM, linked to a higher share of hardware in the ECM segment, especially in connection with the major contract obtained with the Hungarian Post Office in the first quarter.

Performance of Business Segments

In the IdM segment, sales for the first quarter of 2006 amounted to 1.7 m € (previous year: 2.1 m €). High levels of investment in research and development and marketing and sales led to a negative operating result of -2.5 m € which was, as expected, poorer than the previous year's level of -1.2 m €. The ECM segment showed clear sales growth in the first quarter of 2006 to 13.6 m € (previous year, 9.6 m €) and achieved a positive operating result of 0.4 m € (previous year: -0.4 m €). In the DCI segment, sales dropped from 8.1 m € to 6.5 m € in the first quarter of 2006. The operating result of 1.7 m € was almost unchanged from the previous year's figure (1.8 m €).

Gross Profit

The gross profit dropped by 6.8% to 9.2 m € in the first quarter of 2006 as against 9.9 m € in the first quarter of 2005. The gross margin dropped to 42.2% in Q1 2006 from 49.8% the previous year, mainly owing to the higher hardware share in the ECM segment, which had a negative impact on the gross margin.

Costs and Expenses Development

Operational expenses dropped by 1.2 m € to 12.8 m € in Q1 2006 as against 14.0 m € in Q1 2005. This includes one-off expenditures amounting to 0.8 m € for further costing optimizations within the scope of the new business structure. The level of operating expenses measured against sales dropped markedly from 70.7% in the previous year period to 58.8% in the first quarter of 2006, in particular owing to lower administrative costs and reduced costs for research and development at a comparatively higher level of sales. This was as a result of the cost-cutting measures undertaken in the previous year. At the same time, sales and marketing costs rose, particularly in the growth segments of IdM and ECM.

Income

In the first quarter of 2006, Beta Systems showed a negative operational result from continuing operations of -3.6 m € as against an operating loss of -4.1 m € in the same quarter of the previous year. The result from continuing business operations before taxes and interest (EBIT) was -2.9 m € in the first quarter of 2006 as against -2.4 m € in the first quarter of 2005. The business achieved a balanced financial result (previous year: -0.1 m €). The pre-tax result from continuing operations (EBT) was -2.9 m € in the first quarter of 2006 (previous year: -2.5 m €).

Income Tax and Net Result

In the first quarter of 2006, the net result was improved from the previous year at -1.5 m € or -0.17 € per share (Q1 2005: -2.1 Mio. €/-0.26 € per share). This includes an income tax benefit of 1.4 m € (Q1 2005: 0.9 m €). The weighted average number of shares issued in the first quarter of 2006 was 8,738,666 shares (previous year: 8,221,580 shares).

Financial Position and Shareholder's Equity

As of March 31, 2006, Beta Systems showed liquid assets amounting to 6.8 m € and equity amounting to 29.9 m €, as against liquid assets of 4.4 m € and equity of 31.5 m € on December 31, 2005. The longterm financial liabilities of the Beta Systems Group rose from 4.3 m € on December 31, 2005 to 6.2 m € on the quarter cut-off day.

Personnel

The number of employees of the Beta Systems Group dropped from 733 at the end of the business year 2005 to 689 on March 31, 2006. This fall primarily resulted from the release of scanner/sorter manufacture to the long-term partner SIS SEAC and the staff adjustment measures undertaken in line with the group restructuring of the previous year and effective as from the first quarter of 2006.

Hotline for investors, analysts and journalists

For questions regarding the results of the first quarter of 2006, the Investor Relations Team is at your disposal: telephone +49 30 726 118 -170 / -171 or email ir@betasystems.com.

The Management Board

Disclosure of Directors' Holdings of Beta Systems Software AG

At March 31, 2006	Number of shares
Management Board Kamyar Niroumand Dietmar Breyer Dr. Oskar von Dungern	10,000 - -
Supervisory Board William P. Schmidt Jürgen Dickemann Stefan Hillenbach Wilhelm Terhaag Thomas Engelhardt Harald J. Joos (until May 2, 2006)	1,136,372 - 4,288 - 66,960 4,000
Beta Systems Software AG Treasury stock	120,610

None of the Supervisory Board or Management Board members currently hold stock options or conversion rights to shares of Beta Systems Software AG.

Beta Systems Software AG, Berlin, Germany

Beta Systems Software AG (Deutsche Börse - Prime Standard: BSS) is a leading supplier of infrastructure software for en-terprise critical applications for the automation and protection of business processes. Beta Systems provides software in the following areas: Identity Management (IdM), Enterprise Content Management (ECM) and Data Centre Infrastructure (DCI). All solutions are able to process high-volumes of information and throughput. They secure business critical data and help achieve compliance by addressing regulatory requirements. The ECM product range includes scanners and sorters from Kleindienst - a brand owned by Beta Systems Software AG.

Beta Systems with headquarter in Berlin has been listed on the Deutsche Börse (German stock exchange) since 1997 and currently employs about 700 people. The company has 17 subsidiaries worldwide, as well as numerous business partners. Beta Systems' worldwide customer base comprises more than 1,000 IT service providers and large organisations from the fields of finance and insurance, manufacturing, commerce, telecommunications, logistics and energy supply, along with public sector organisations. For further information please visit: www.betasystems.com

Contact information

Company Contact: Beta Systems Software AG Arne Baßler Tel: +49 (0)30 726 118-170 Fax: +49 (0)30 726 118-881 Email: arne.bassler@betasystems.com Agency Contact: HBI PR&MarCom GmbH Corinna Voss, Melanie Körner Tel: +49 (0)89 99 38 87-0 Fax: +49 (0)89 930 24 45 Email: corinna_voss@hbi.de; melanie_koerner@hbi.de

This quarterly report contains forward-looking statements based on current assumptions and forecasts by the management of Beta Systems. Although these assumptions and forecasts are based on prudent commercial judgment, there can be no assurance that the expectations expressed therewith are correct or will materialize. The assumptions and forecasts contained herein may be subject to risks or uncertainties which could cause actual results or outcomes to differ materially from those expressed in the assumptions and forecasts. Factors that may cause actual results to differ materially are, among others, changes in economic conditions and the business-related environment, changes in exchange rates and interest rates, introduction of competing products, lack of demand for or interest in new products or services, as well as changes with regard to the Company's strategy. Beta Systems disclaims any obligation to update any forward-looking statements to reflect subsequent events or circumstances.

All trade names, trademarks, and service marks or logos used in this document are the property of the respective companies.

Beta Systems Software AG and Subsidiaries Consolidated Income Statement (According to IFRS; in Thousand €, except share data)

			Three months to March 31,
	Note	2005	2006
		(unaudited)	(unaudited)
Revenues:
Software Licences		5,039	4,476
Hardware Sales Maintenance		1,281 11,451	3,202 11,089
Services		2,028	3,044
Total Revenues	1	19,799	21,811
Cost of Revenues:
Software Licences		1,920	953
Hardware Sales		1,283	3,518
Maintenance		4,454	4,684
Services		2,275	3,461
Total Cost of Revenues		9,932	12,615
Gross Profit		9,867	9,196
Operating Expenses:
Selling		5,469	6,499
General and Administrative		4,042	2,296
Research and Development		4,254	3,104
Amortization of Intangible Assets		230	125
Severance Payments and Restructuring Costs	2	-	795
Total Operating Expenses		13,995	12,819
Operating Loss from Continuing Operations		(4,128)	(3,623)
Other Income		1,694	722
Operating Loss from Continuing Operations,
including Other Income		(2,434)	(2,901)
Interest Income		83	20
Interest Expense		(176)	(26)
Financing Result		(93)	(6)
Loss from Continuing Operations, before
Income Taxes		(2,527)	(2,907)
Income Tax Benefit		(903)	(1,403)
Loss from Discontinued Operations, less Income Taxes	3	521	-
Net Loss for the Fiscal Period		(2,145)	(1,504)
Earnings per Ordinary Share
Basic and Diluted		(0.26)	(0.17)
Weighted Average Number of Shares Outstanding used to
compute Earnings per Ordinary Share Basic and Diluted		8,221,580	8,738,666

See accompanying Notes to the Consolidated Financial Statements

Beta Systems Software AG and Subsidiaries Consolidated Balance Sheet (According to IFRS; in Thousand €, except share data)

	At December 31,	At March 31,
	2005	2006
	(audited)	(unaudited)
Cash and Cash Equivalents	4,383	6,844
Trade Accounts Receivable Work in Process Project Orders (POC)	28,609 4,023	32,018 14,937
Inventories	4,737	3,691
Prepaid Expenses and Deferred Charges	1,517	2,291
Other Current Assets	894	1,856
Current Income Taxes	946	-
Total Current Assets	45,109	61,637
Other Non-Current Assets	1,743 4	-
Total Current Assets, including Assets Held for Sale	46,852	61,637
Fixed Assets	5,965	5,856
Goodwill	2,846	2,838
Other Intangible Assets Acquired Software Development Costs	2,656 4,038	2,136 3,738
Deferred Tax Assets	5,068	6,198
Other Non-Current Assets	7,169	6,572
Total Assets	74,594	88,975
Short-Term Debt and Current Installments of Long-Term Debt
and Finance Leases	4,912	401
Trade Accounts Payable	3,511	6,988
Deferred Revenues	6,008	26,987
Current Income Taxes	927	385
Accrued Expenses	2,306	5,173
Other Current Liabilties Total Current Liabilities	14,502 32,166	8,418 48,352
Liabilities Associated with Assets Held for Sale	519 4	-
Total Current Liabilities, including Liabilities
Associated with Assets Held for Sale	32,685	48,352
Long-Term Debt and Finance Leases	4,317	6,174
Pension Obligations and Obligations for Partial Retirement	2,038	2,772
Deferred Tax Liabilities Other Non-Current Liabilities	1,904 2,158	1,368 376
Total Liabilities	43,102	59,042
Shareholders' Equity:
Ordinary Shares: € 1.28 imputed Nominal Value per Ordinary Share	11,324	11,324
Additional Paid-In Capital	20,178	20,178
Accumulated Loss	(870)	(2,374)
Accumulated Other Comprehensive Income	1,279	1,224
Treasury Stock at Cost: 120,610 Ordinary Shares	(419)	(419)
Total Shareholders' Equity	31,492	29,933
Total Liabilities and Shareholders' Equity	74,594	88,975

See accompanying Notes to the Consolidated Financial Statements

12

Beta Systems Software AG and Subsidiaries Consolidated Statement of Cash Flow (According to IFRS; in Euro Thousand (T€), except share data)

		Three months to March 31,
	2005	2006
	(unaudited)	(unaudited)
Operating Activities:
Net Loss for the Fiscal Period Adjustments to reconcile Net Loss to Net Cash	(2,145)	(1,504)
Provided by Operating Activities:
Depreciation and Amortization	961	1,139
Non-Cash Expenditures of Discontinued Operations	521	-
Gain on Sale of Fixed Assets	2	3
Interest Expense	139	26
Interest Paid	(161)	(152)
Current Tax Expenses	249	305
Deferred Tax Expenses	(2,563)	(1,667)
Income Taxes Paid	(67)	(171)
Foreign Currency Losses	-	(172)
Changes in Assets and Liabilities:
- Decrease in Trade Accounts Receivable	1,758	59
- Increase (Decrease) in Trade Accounts Payable	(1,554)	3,477
- Increase in Deferred Revenues	10,615	20,980
- Change in other Assets and Liabilities, including
Assets Held for Sale	3,985	(17,060)
Net Cash Provided by Operating Activities	11,740	5,263
Investing Activities:
Interest Income	47	20
Purchases of Fixed Assets	(152)	(234)
Proceeds from Disposals of Fixed Assets Acquisition of Software Development Costs	(15) (367)	8 -
Cash Paid for Investments and Payments for Asset Deals	(373)	-
Net Cash Used in Investing Activities	(860)	(206)
Financing Activities:
Repayment of Short-Term Borrowings	(7,040)	(2,532)
Repayment of Long-Term Debt and Finance Leases	-	(9)
Net Cash Used in Financing Activities	(7,040)	(2,541)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(98)	(54)
Increase in Cash and Cash Equivalents	3,742	2,461
Cash and Cash Equivalents at the Beginning of the Fiscal Period	10,836	4,383
Cash and Cash Equivalents at the End of the Fiscal Period	14,578	6,844

See accompanying Notes to the Consolidated Financial Statements

	Dela Systems Sutware At and Suisinated Statement of Chaiges in Sharenduers Equity and Comprehensive Income Loss			(According to IFRS; in Thousand €, except share data) At March 31, 2006 (unaudited)
	Ordinary Shares Number of shares Danssi	Nominal amount	Additional Paid-In Capital	comprehensive income (loss) Accumulated other	Accumulated income (loss)	comprehensive income (loss) Net income, including	Treasury Stock Number of Amount, shares	at cost	attributable to the Shareholders' equity shareholders of the parent company	interests Minority	shareholders equity Total
Balance at January 1, 2005	8,342,190	10.663	18,387	1.491	(1,413)		(120,610)	(419)	28.709	8.886	37,595
suance of ordinary shares	517,086	661	2,312						2,973		2,973
ost of increase in paid-in capital			(521)						(521)		(521)
ividend distribution					(1,028)				(1,028)		(1,028)
ther comprehensive income, net of tax effect et income for the year					1,571	1,571			1,571	(364)	1,207
Unrealized loss on investment securities Currency translation adjustments ther comprehensive income otal comprehensive income				(212)		(212) (212) 1 359			(212)		(212)
linority interests										(8,522)	(8,522)
alance at 'December 31, 2005	8,859,276	11,324	20.178	1.279	(870)		(120,610)	(419)	31.492		31,492
suance of ordinary shares
lividend distribution
Other comprehensive loss, net of tax effect et loss for the fiscal period					(1,504)	(1,504)			(1,504)		(1,504)
Other comprehensive loss, net of tax effect Currency translation adjustments otal comprehensive loss				(55)		(55) (55) 559)			(55)		(55)
Onne alonoo at Morah 21	070 030 0						C1 UCHY				CCD DC

Beta Systems Software AG and Subsidiaries Notes to the Consolidated Financial Statements (According to IFRS; in Thousand €, except share data) March 31, 2005 and 2006 (unaudited)

Summary of Significant Accounting Policies

Description of Business Activity — Beta Systems Software Aktiengesellschaft and subsidiaries ("Beta Systems" or "the Company") develops, markets and supports enterprise automation software solutions for mainframe computers and other hardware managed by information systems departments of large corporations, government agencies and other organizations. The Company's products are designed to increase the productivity of data centers by automating manual tasks and optimizing the use of hardware resources. The Company's products feature a common comprehensive architecture which facilitates the development and integration of the Company's products across applications. The ECM business segment develops and sells Document-Management-Solutions for various sectors and especially for the payment processing in the banking sector.

The Company's principal offices are located in Berlin, Germany, and subsidiaries are located throughout Europe, Africa and North America.

Financial Reporting Principles — The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) for interim financial reports. Accordingly they do not include all of the information and footnotes required by International Financial Reporting Standards (IFRS) for annual financial statements. In the opinion of management, all adjustments considered necessary for fair presentation (normal recurring accruals) were included. Operating results for the period ended March 31, 2006 are not necessarily indicative of the results that may be expected for the fiscal year 2006. For further information, refer to the Company's financial statements and footnotes thereto for the fiscal year ended December 31, 2005.

Basis of Consolidation and Consolidation Methods — All companies in which Beta Systems has legal control are fully consolidated. The effects of intercompany transactions are eliminated.

As the reporting structure in use by the Kleindienst Group does not comprise any comparable differentiation into the reporting categories applied by Beta Systems Software AG effective from January 1, 2006, the allocation of the revenues realized by the Kleindienst Group and the cost of revenues viz. the manufacturing costs for the comparative period are partially based on estimates and assumptions.

Revenue Recognition — Product license revenue, consisting of new product licenses and CPU upgrades, is recognized when persuasive evidence of an arrangement exists, when delivery has occurred, the fee is fixed or determinable, and collectibility is probable. According to IFRS, regulations for the allocation of the purchase price for multiple element licence contracts do not exist. If a licensing agreement includes multiple elements, revenues are allocated to those elements based on vendor specific objective evidence of Fair Value. Maintenance revenue is recognized ratably over the maintenance period.

Service revenue consists principally of installation and training services and is recognized as the services are performed. In addition to the existing standard software product range, the Company also offers products to meet the demand for individually customized software solutions. Revenues from these construction contracts are recognized according to the percentage-of-completion method, a method requiring the following criteria to be satisfied for revenue recognition: rights and responsibilities must be clearly defined in the contract, pre-project calculation of costs and revenues must be possible, the final profitability of the project must be able to be determined

reliably and objectively, i.e. further projected costs and revenues must equally be able to be estimated accurately, risks may not hinder the ability to deliver the contract (e.g. credit risks, legal considerations), and payment by the customer must be probable. The Company uses the Costto-Cost Method to determine the percentage of completion.

Research and Development and Acquired Software Development Costs — Research and development costs are charged to expenses as incurred. The development of new software products and substantial enhancements to existing software products takes place incrementally and iteratively. The research phase of an internal development project to create a software product cannot be distinguished from the development phase, accordingly expenses cannot be distinctly allocated to these phases. The Company treats these expenditures as if they were incurred in the research phase only, in accordance with IAS 38.52 and IAS 38.53.

Acquired capitalized software development costs are amortized each reporting period by the greater of (i) the straight-line method over the estimated useful life of the software (normally five years) or (ii) the ratio of current gross revenues from sales of the software to the total of current and anticipated future gross revenues from sales of that software.

At each balance sheet date, unamortized acquired capitalized software development costs are compared to net realizable values of those products to determine whether an impairment exists. If an impairment has occurred, the amount by which the unamortized capitalized software development costs exceed the net realizable value (the present value of future estimated sales of the products less costs to sell) of that asset is written off.

Net Loss Per Ordinary Share — The net loss per ordinary share is calculated by dividing the net loss by the weighted average number of ordinary shares outstanding during the reporting period. Diluted net loss per ordinary share is calculated in accordance with IAS 33 to reflect the diluting effect of shares.

Cash and Cash Equivalents — Cash and cash equivalents represent cash and highly liquid certificates of deposit and investments with original maturities of three months or less.

Inventories — Inventories are stated at the lower of historical costs or net selling price, considering the lower of cost or market principle. Inventory risks are accounted for by adequate reserves for slow-moving, obsolete and damaged items where appropriate. Obsolete allowances are reversed.

Fixed Assets — Fixed Assets are valued at acquisition cost and subsequently depreciated using the straight-line method over the assets' useful lives as follows: building improvements — five to ten years; computer equipment — three to five years; facilities and office equipment — three to thirteen years.

Goodwill and Other Intangible Assets — Intangible assets including goodwill are valued at acquisition cost, net of impairments. At each reporting date the Company assesses the recoverability based on future cash flows in accordance with IAS 36.

Other Non-Current Assets — Other non-current assets include an investment intended to fund a portion of the Company's pension obligations. The Company accounts for such investment at cash surrender value. In addition, other non-current assets include tax receivables and receivables from unbilled invoices.

Fair Value of Financial Instruments — Financial instruments of the Company consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued liabilities. The Fair Value of long-term debt does not vary materially from its carrying value. The carrying value of other financial instruments approximates their Fair Value because of the short maturity of such instruments.

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Foreign Currencies — The balance sheets of foreign subsidiaries are translated to Euro on the basis of period-end exchange rates, while the income statements are translated using average exchange rates during the period. Cumulative translation adjustments are reported as a separate component of other comprehensive income.

Use of Accounting Estimates — The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent amounts at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

1. Segment Information

All segments derive revenues from sales of product licenses as well as maintenance, consulting and services. Additionally, hardware sales are realized.

The accounting policies of the operating segments are the same as those described in Summary of Significant Accounting Policies. Segment amounts disclosed are prior to any elimination entries made in consolidation. Additionally, entities in Germany and Canada engage in research and development activities.

The results for the active business segments of the Company are presented according to the primary reporting format for the business segments of the Beta Systems Group:

Three months to March 31, 2005	DCI	IdM	ECM	Total Group
Revenues from Customers Intersegment Revenues Total Revenues	8,080 1,147 9,227	2,101 298 2,399	9,618 1,365 10,983	19,799 2,810 22,609
Segment Income (Loss) from Continuing Operations	1,754	(1,163)	(447)	144
Three months to March 31,	DCI	IdM	ECM	Total
2006				Group
Revenues from Customers Intersegment Revenues Total Revenues	6,472 766 7,238	1,704 202 1,906	13,635 1,615 15,250	21,812 2,583 24,395

A reconciliation of the revenues of the reportable segments to the Company's consolidated totals is as follows:

	Three months to March 31,
	2005	2006
Operating Loss of the Business Segments	144	(407)
Unallocated Overhead Costs	(4,272)	(3,216)
Other Income	1,694	722
Operating Loss from Continuing Operations, including
Other Income	(2,434)	(2,901)
Financing Costs	(93)	(6)
Loss from Continuing Operations, before Income Taxes	(2,527)	(2,907)
Loss from Discontinued Operations, less Income Taxes	521	-
Income Tax Benefit	(903)	(1,403)
Net Loss for the Fiscal Period, as reported	(2,145)	(1,504)

2. Restructuring

Further measures to reduce operating expenses by streamlining business processes were introduced during the current quarter. The staff reduction plan concerns employees at the Augsburg location. These measures only affected the ECM business unit. The measures are expected to be completely implemented by the first half of the year.

As at March 31, 2006 costs for severance payments were incurred and expensed in the income statement as follows:

	As at March 31, 2006
Cost of Sales	55
Selling Costs	51
Administrative Costs	689
Total Restructuring Expenses	795

The amount incurred during the current reporting quarter 2006. Of the above costs T€ 106 directly relate to staff reduction measures, while T€ 689 incurred for consulting fees and other professional services in connection with the staff measures.

3. Sale of the Outsourcing Service business unit

On April 10, 2005, the Outsourcing Service business unit was sold to the Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG (TAI AG), a subsidiary of the DZ Bank AG. The sale was economically effective retrospectively to January 1, 2005.

The operating revenues, expenses and income taxes transacted by this business unit for the fiscal quarter 2005 is shown in the consolidated income statement for the comparative reporting period under the position "Loss from Discontinued Operations, less Income Taxes".

4. Outsourcing of the Kleindienst Scanner and Sorter Hardware Manufacture through the Sale of the Kleindienst Scanner GmbH

On March 6, 2006 the Company announced that the outsourcing of the Kleindienst scanner and sorter hardware manufacture through the sale of the subsidiary Kleindienst Scanner GmbH to SIS SEAC was concluded. The sale was economically effective retrospectively to January 1, 2006. No effect to the income statement resulted from this in the reporting period.

The assets and liabilities held by this business unit as at December 31, 2005 are shown in the consolidated balance sheet for the comparative reporting period under the positions "Assets Held for Sale" viz. "Liabilities associated with Assets Held for Sale".

5. Change in Management

In an extraordinary meeting held on December 17, 2005 the Supervisory Board appointed Mr. Kamyar Niroumand as Chief Executive Officer. Effective April 1, 2006, Mr. Niroumand assumed his position. Mr. Dietmar Breyer was appointed Deputy Chief Executive Officer effective April 1, 2006.

6. Takeover bid by Delta Beteiligungen Aktiengesellschaft

On February 22, 2006 the Delta Beteiligungen Aktiengesellschaft published a public takeover bid to the shareholders of Beta Systems Software AG. In terms of this bid the Delta Beteiligungen Aktiengesellschaft offers for each ordinary share of Beta Systems Software AG (imputed nominal value: € 1.28 per ordinary share) 1.75 new shares of the Delta Beteiligungen Aktiengesellschaft (imputed nominal value of € 1.00 per ordinary share) and an additional cash payment in the amount of € 1.50 per ordinary share. The acceptance period ended on March 22, 2006.

On March 27, 2006 the Delta Beteiligungen Aktiengesellschaft notified the Management Board of the Company that the public takeover bid had been accepted at March 22, 2006 for altogether 1,063,794 shares. The takeover bid ended with a proportion of voting rights of approximately 34% for Delta Beteiligungen AG (publ.).

7. Events after the Reporting Date

On April 3, 2006 the Company announced that Dr. Oskar von Dungern, member of the Management Board, would leave the Company effective July 1, 2006.

On April 26, 2006 the Company announced that Harald J. Joos, Chairman of the Supervisory Board, would terminate his mandate upon conclusion of the Supervisory Board meeting of May 2, 2006.

During its meeting on May 2, 2006, the Supervisory Board appointed Mr. William P. Schmidt as Chairman of the Supervisory Board. Mr. Jürgen Dickemann was appointed Vice Chairman of the Supervisory Board.