Softing AG — Interim / Quarterly Report 2003

May 15, 2003

Quarterly Report

Technology & Services

Competence in Industrial Automation and Automotive Electronics

Ladies and gentlemen, dear friends,

The Softing Group achieved significant improvements in terms of incoming orders, sales revenue and earnings in the first quarter of 2003. Incoming orders were up 30 percent to EUR 4.8 million.

Worldwide sales came in at EUR 4.9 million, an increase of 45 percent over the same period last year. The result was almost balanced as earnings improved by EUR 1.2 million compared to the first quarter of fiscal year 2002.

Another positive sign is the fact that the Industrial Automation and the Automotive Electronics division contributed equally to the business success in the first quarter. The first quarter thus confirmed the turnaround of the Softing Group which was already recognizable in the fourth quarter of 2002. We expect the result in fiscal year 2003 to be more or less balanced. The first quarter of 2003 was also the second consecutive quarter in which the Softing Group managed to increase its cash and cash equivalents.

The core objective for 2003 is to lead Softing back to profitability even in a recessive market environment. We will continue to focus on powerful products and services with high added value and on expanding strong market positions. The expansion of the "Diagnostics" segment of Softing's Automotive Electronics division exemplifies this strategy. We were able to win another key customer, the VOLKSWAGEN Group, for our DTS BaseSystem. Further negotiations with customers and cooperation partners are close to being finalized. This segment is expected to contribute several million euros to the company's sales in upcoming years.

In the Industrial Automation sector, early indications point towards growth potential in communications and control technology, despite the persistent slump in the overall market. We also see opportunities and potential in expanding our foreign sales channels with industrial customers and in the cooperation with partners in the industrial fieldbus sector.

Although we are very pleased with what has been achieved, we must not forget that the general economic environment continues to be unstable and strained. We will therefore intensify our efforts to achieve these goals especially in our sales department.

The unmistakable turnaround at Softing is of special significance for me. I joined Softing one year ago. Back then, the situation was difficult. The task was to stop losses, join forces and adjust our cost structures to the existing market conditions. The very positive first quarter of 2003 clearly shows that we were successful in implementing the measures that were resolved. I would like to particularly thank our employees who have made this possible with their loyalty and commitment.

We will keep you informed of the progress at Softing.

Sincerely,

Directors' Holdings as of 03/31/2003

	Number of shares		Number of options
	As of As of		As of	As of
	03/31/2003	12/31/2002	03/31/2003	12/31/2002
Dr. Trier	28,692	24,992	37,200	37,200
Mr. Himmelsdorfer	410,450	410,450	3,500	3,500
Dr. Mittmann	408,250	408,250	3,500	3,500
Dr. Schießl	–	–	–	–
Mr. Faltenbacher	1,000	1,000	–	–
Prof. Dr. Färber	500	500	–	–

Company Schedule

General Shareholders' Meeting	05/28/2003
Quarterly Report 2/2003	08/13/2003
Quarterly Report 3/2003	11/14/2003
Analyst conference, Frankfurt am Main	11/26 - 11/27/2003

Contact: Softing AG

Investor Relations Phone: +49 (89) 4 56 56-0 Fax: +49 (89) 4 56 56-492 InvestorRelations@softing.com www.softing.com

Consolidated Balance Sheet

According to IAS as of March 31, 2003, unaudited

	Quarterly Report 03/31/2003	Financial statements 12/31/2002
Assets	EUR	EUR
Cash and cash equivalents	2,255,904	2,180,931
Short-term investments/marketable securities	2,748,625	2,748,625
Trade accounts receivable	3,401,272	4,023,584
Inventories	920,800	1,002,020
Prepaid expenses and other current assets	371,277	325,298
Total current assets	9,697,878	10,280,458
Property, plant and equipment	506,376	551,051
Intangible assets	4,357,906	4,551,090
Notes receivable/loans	–	2,013
Deferred taxes	3,533,409	3,474,754
Total non-current assets	8,397,691	8,578,908
Total assets	18,095,569	18,859,366
Liabilities and shareholders' equity
Liabilities due to banks	–	28,809
Trade accounts payable	311,543	484,881
Advance payments received	118,097	350,692
Accrued expenses	1,980,503	1,949,698
Deferred income and other current liabilities	490,915	875,949
Total current liabilities	2,901,058	3,690,029
Accounts payable, long-term production contracts	446,831	436,053
Deferred tax liability	1,848,000	1,805,000
Pension accrual	544,659	490,704
Total non-current liabilities	2,839,490	2,731,757
Share capital	5,000,000	5,000,000
Additional paid-in capital	10,326,278	10,326,278
Consolidated retained earnings/accumulated deficit	-2,971,257	-2,888,698
Total shareholders' equity	12,355,021	12,437,580
Total liabilities and shareholders' equity	18,095,569	18,859,366

Consolidated Income Statement

According to IAS as of March 31, 2003, unaudited

	Quarterly report I/2003 01/01/2003 - 03/31/2003	Quarterly report I/2002 01/01/2002 - 03/31/2002
	EUR	EUR
Revenues Other operating income Change in inventories of finished goods and work in progress Production of own fixed assets capitalized Cost of purchased materials and services Personnel expenses Depreciation and amortization Other operating expenses Operating income/loss	4,856,701 38,196 – 433,971 -942,063 -2,927,774 -765,709 -788,328 -95,006	3,348,797 373,477 37,493 902,994 -640,816 -3,210,935 -945,457 -1,122,157 -1,256,604
Interest income and expense	8,220	54,649
Result before income taxes (and minority interest)	-86,786	-1,201,955
Income tax Other taxes Result before minority interest	8,138 -3,911 -82,559	453,522 – -748,433
Minority interest Net income/loss (-)	– -82,559	9,286 -739,147
Retained earnings, brought forward Consolidated net income/ loss (-)	-2,888,697 -2,971,257	1,395,060 655,913
Earnings per share pursuant to DVFA/SG	-0,02	-0,15

Changes in Shareholders' Equity

01/01 - 03/31/2003

Thsd. EUR	Share capital	Difference from capital consolidation	Additional paid-in capital	Profit reserves	Retained earnings	Total
Balance as of December 31, 2002 Net loss for 2003 Balance as of March 31, 2003	5,000 5,000	–	10,326 10,326	– –	-2,889 -82 -2,971	12,437 -82 12,355

01/01 - 12/31/2002

Thsd. EUR	Share capital	Difference from capital consolidation	Additional paid-in capital	Profit reserves	Retained earnings	Total
Balance as of December 31, 2001 IPO costs offset against	5,000	–	10,435	–	1,395	16,830
additional paid-in capital			-109			-109
Net loss for 2002					-4,284	-4,284
Balance as of Dezember 31, 2002	5,000	–	10,326	–	-2,889	12,437

Consolidated Cash Flow Statement

According to IAS as of March 31, 2003, unaudited

	01/01/2003 - 03/31/2003	01/01/2002 - 03/31/2002
	Thsd, EUR	Thsd. EUR
Cash flows from operating activities
Net profit/loss for the period	-83	-739
Adjustments for
Minority interest	–	-9
Depreciation and amortization of fixed assets	766	945
Increase/decrease in provisions and accruals	128	-103
Increase/decrease in net working capital	-176	965
Net cash provided by operating activities	635	1,059
Cash flows from investing activities
Payments made for investments
in self-produced intangible assets	-476	-1,019
Payments made for investments in other
intangible and tangible assets	-55	-197
Net cash used in investing activities	-531	-1,216
Cash flows from financing activities
Cash repayments of amounts borrowed	-29	–
Cash flow provided by financing activities	-29	–
Increase in cash and cash equivalents	75	-157
Cash and cash equivalents at beginning of period	4,930	7,174
Cash and cash equivalents at end of period	5,005	7,017

Notes to the Consolidated Financial Statements for Q1/2003

This quarterly report was prepared using the same accounting and valuation methods as in fiscal year 2002.

The recession tendencies, especially in the area of factory automation, which was evident in fiscal year 2002, continued during the reporting period.

As of 03/31/2003, orders on-hand in the Group amounted to EUR 3.2 million (2002: EUR 2.5 million). As of 03/31/2003, the Group had 150 employees (2002: 186). During the reporting period, no stock options were issued to employees.

Dr. Rainer Mittmann, chief financial officer of Softing AG, left the executive board effective 04/30/2003. Dr. Mittmann will continue to actively support Softing AG with his expertise and commitment. His tasks will be assumed by the chairman of the executive board, Dr. Wolfgang Trier.

Group Division Before Consolidation

Thsd. EUR	Quarterly report I/2003 01/01/2003 - 03/31/2003	Quarterly report I/2002 01/01/2002 - 03/31/2002
Subsidiary (before consolidation)
Softing Industrial Solutions Italia S.r.l., Bozen, Italy
Incoming orders	75	84
Revenues	56	71
EBIT	-22	-67
Subsidiary (before consolidation) Softing North America, Inc., Massachusetts, USA Incoming orders Revenues EBIT	252 107 -143	92 92 -7
Softing AG (before consolidation)
Incoming orders	4,477	3,497
Revenues	4,793	3,062
EBIT	77	-1,183

Segment Reporting

As of March 31, 2003

Thsd. EUR	Quarterly report I/2003 01/01/2003 - 03/31/2003	Quarterly report I/2002 01/01/2002 - 03/31/2002
Automotive Electronics
Incoming orders	1,990	1,580
Revenues	2,178	1,588
EBIT	186	-61
Book value of capitalized product developments (assets)	1,919	2,092
Investments (without financial assets)	202	655
Depreciation/amortization	343	329
Industrial Automation
Incoming orders	2,796	2,079
Revenues	2,647	1,625
EBIT	-281	-1,142
Book value of capitalized product developments (assets)	1,929	5,391
Investments (without financial assets)	308	525
Depreciation/amortization	355	551
Not distributed
Incoming orders	18	14
Revenues	32	12
EBIT	–	-54
Investments (without financial assets)	21	35
Depreciation/amortization	68	66
Total
Incoming orders	4,804	3,673
Revenues	4,857	3,225
EBIT	-95	-1,257
Book value of capitalized product developments (assets)	3,848	7,483
Investments (without financial assets)	531	1,215
Depreciation/amortization	766	946
Other assets	14,247	15,628

The division into business segments in accordance with IAS 14 (revised 1997) is shown in the above table