Softing AG — Interim / Quarterly Report 2004

Nov 12, 2004

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e Quart rly Report 3/2004

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Moving in the right direction!

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----- Start of picture text ----- Quarterly Report 3/2004Dr. Wolfgang Trier Dipl.-Ing. Bernd HäußlerMoving in the right direction!Ladies and gentlemen,dear friends of Softing AG,I am very pleased to introduce you to my new colleagueon the executive board, Dipl.-Ing. Bernd Häußler,who was appointed effective October 1, 2004 as part ofa generation change in the company's management.After studying electrical engineering, Mr. Häußler devel-oped and brought to production automotive electronicsbus systems at major international car manufacturers.Initially, he will be heading the Automotive Electronicsdivision together with my current colleague on the execu-tive board, Dipl.-Ing. Eduard Himmelsdorfer. I am pleasedto have our new colleague aboard and I am sure thatBernd Häußler will have a successful start at Softing AG.Eduard Himmelsdorfer, co-founder and long-time mem-ber of the executive board of Softing AG, will leave theexecutive board at the end of this year. Mr. Himmelsdorferwill continue to support Softing AG with his great exper-tise and commitment. He will also remain a major share-holder of the company.Let us now look at the current figures: In the third quarter,Softing has followed up on the positive figures reportedfor the first six months of 2004. Please see the tablebelow for a quick and clear overview of the most impor-tant key figures.All figures in Quarterly Quarterly Nine - Nine -EUR million report report month monthIII/2004 III/2003 report report2004 2003Incoming orders 5.3 5.9 15.2 15.3Sales 5.1 5.0 14.7 14.4Earnings (EBIT) 0.3 0.2 0.3 -0.5Net income/loss 0.2 -0.2 0.2 -0.6As you can see, we significantly improved our operatingand net income while incoming orders and sales wereon par with the previous year. We are extremely confidentthat we will reach the goals we set ourselves for fiscalyear 2004: achieving a sales increase and positive earningsin excess of EUR 0.5 million while laying the foundationfor growth in the next years by introducing a number of----- End of picture text -----

As you can see, we significantly improved our operating and net income while incoming orders and sales were on par with the previous year. We are extremely confident that we will reach the goals we set ourselves for fiscal year 2004: achieving a sales increase and positive earnings in excess of EUR 0.5 million while laying the foundation for growth in the next years by introducing a number of new products.

Cash and cash equivalents as of September 30, 2004 were EUR 5.5 million, up EUR 0.3 million versus the previous year. Compared to the previous quarter, cash and cash equivalents also increased by EUR 0.3 million. At the end of the third quarter of 2004, the Group's equity was EUR 12.1 million. This translates to EUR 2.42 per Softing share based on the current share price of approximately EUR 1.90.

We are very ambitious as regards the final quarter of the year. In October, our Industrial Automation division presented its process industry expertise at the ISA Expo 2004 in Houston. Several significant contract wins during the exhibition were an impressive validation of our strategy, which was backed by the new products. We were also represented at IKK, the International Trade Fair for Refrigeration, Air Conditioning and Ventilation in Nuremberg, and at EuroBLECH in Hannover. In November, we will unveil our new products and services at SPS/IPC/DRIVES at Nuremberg, which for us is the most important automation exhibition. In Automotive Electronics, a total of nine events and trade fairs are on the calendar in the fourth quarter. You can find out more about this on our website at www.softing.com.

Our current share price reflects neither the present business outlook nor the sound financial position of the Softing Group. We will therefore highlight the potential and the renewed profitability of Softing at the German Equity Forum of Deutsche Börse AG in late November and at the Small Cap Conference in Munich in early December. Softing will present itself as a promising stock with a future to numerous analysts and institutional investors.

We hope that you, dear friends of Softing, will continue to accompany us on the path that we have chosen.

Sincerely,

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Quarterly Report 3/2004

Stock Price – Directors’ Holdin s g

Com an Schedule p y

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----- Start of picture text ----- EUR3.23.02.82.62.42.22.01.801/01/04 04/01/04 07/01/04 09/30/04Final quotation Frankfurt stock exchange (floor)----- End of picture text -----

Directors' Holdings as of 09/30/2004

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Number	of	shares	Number	of	options
As	of	As	of	As	of	As	of
09/30/2004	06/30/2004	09/30/2004	06/30/2004
Dr.	Trier	39,753	39,753	37,200	37,200
Mr.	Himmelsdorfer	414,450	414,450	3,500	3,500
Dr.	Schiessl	–	–	–	–
Mr.	Butscher	–	–	–	–
Dr.	Patz	405,750	405,750	–	–

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Company Schedule

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German	Equity	Forum,	Frankfurt	11/24/2004
General	Shareholders'	Meeting	in	Munich	04/22/2005
Quarterly	Report	1/2005	05/13/2005
Quarterly	Report	2/2005	08/12/2005
Quarterly	Report	3/2005	11/15/2005

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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

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Quarterly Report 3/2004

Consolidated Balance Sheet

According to IAS as of September 30, 2004, unaudited

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----- Start of picture text ----- Quarterly Financialreport statements09/30/2004 12/31/2003Assets EUR EURCash and cash equivalents 2,661,914 3,231,372Short-term investments/marketable securities 2,802,757 2,802,757Trade accounts receivable 3,263,539 3,208,618Inventories 1,132,424 1,065,555Prepaid expenses and other current assets 214,881 153,175Total current assets 10,075,515 10,461,477Property, plant and equipment 393,232 376,688Intangible assets 4,214,977 4,260,608–Notes receivable/loans 2,013Deferred taxes 3,314,423 3,316,475Total non - current assets 7,922,632 7,955,784Total assets 17,998,147 18,417,261Liabilities and shareholders' equityTrade accounts payable 304,889 465,370Advance payments received 24,857 27,507Accrued expenses 1,726,240 2,011,563Deferred income and other current liabilities 627,978 999,438Total current liabilities 2,683,964 3,503,878Accounts payable, long-term production contracts 363,919 346,069Deferred tax liability 1,916,000 1,807,000Pension accrual 922,498 823,054Total non - current liabilities 3,202,417 2,976,123Share capital 5,000,000 5,000,000Additional paid-in capital 10,326,278 10,326,278Accumulated deficit -3,214,512 -3,389,018Total shareholders' equity 12,111,766 11,937,260Total liabilities and shareholders' equity 17,998,147 18,417,2614----- End of picture text -----

Quarterly Report 3/2004

Consolidated Income Statement

According to IAS as of September 30, 2004, unaudited

RevenuesOther operating incomeProduction of ownfixed assets capitalizedCost of purchased materialsand servicesPersonnel expensesDepreciation and amortizationOther operating expensesOperating income/lossInterest income and expenseResult before income taxesIncome taxOther taxesNet income/lossLoss, brought forwardConsolidated net lossUndiluted earnings per sharepursuant to IAS 33Diluted earnings per sharepursuant to IAS 33	Quarterly reportIII/200407/01/2004-09/30/2004EUR5,089,674157,424627,917-1,005,210-2,979,355-772,989-840,255277,206-898276,308-85,236-22,752168,3200,030,03	Quarterly reportIII/200307/01/2003-09/30/2003EUR4,997,71041,518599,224-1,021,669-2,747,364-814,184-846,235209,00015,619224,619-316,765-74,466-166,612-0,03-0,03	Nine-monthreport 200401/01/2004-09/30/2004EUR14,681,510607,9251,997,425-3,326,618-8,701,285-2,340,764-2,603,054315,1392,098317,237-113,453-29,278174,506-3,389,018-3,214,5120,030,03	Nine-monthreport 200301/01/2003-09/30/2003EUR14,431,111132,2461,534,869-2,889,760-8,758,447-2,360,820-2,558,876-469,67722,973-446,704-156,584-20,614-623,902-2,888,698-3,512,600-0,12-0,12

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Quarterly Report 3/2004

Chan es in Shareholders’ E uit g q y

01/01 - 09/30/2004

Thsd. EURBalance as of December 31, 2003Net income for 2004Balance as of September 30, 2004	Share capital5,0005,000	Additionalpaid-incapital10,32610,326	Retainedearnings-3,389175-3,214	Total11,93717512,112

- 01/01 09/30/2003

Thsd. EURBalance as of December 31, 2002IPO costs offset againstadditional paid-in capitalNet loss for 2003Balance as of September 30, 2003	Share capital5,0005,000	Additionalpaid-incapital10,326-4210,284	Retainedearnings-2,889-624-3,513	Total12,437-42-62411,771

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Quarterly Report 3/2004

Consolidated Cash Flow Statement

According to IAS as of September 30, 2004, unaudited

Cash flows from operating activitiesNet profit/loss for the periodDepreciation and amortization of fixed assetsIncrease/decrease in provisions and accrualsDecrease/increase in net working capitalNet cash provided by operating activitiesCash flows from investing activitiesPayments made for investmentsin self-produced intangible assetsPayments made for investments in otherintangible and tangible assetsNet cash used in investing activitiesCash flows from financing activitiesChange in the reserves from capital consolidationCash repayments of amounts borrowedCash flow provided by financing activitiesDecrease (previous year: increase) in cash and cash equivalentsCash and cash equivalents at beginning of periodCash and cash equivalents at end of period	01/01/2004-09/30/2004TEUR1752,341-78-6941,744-2,122-191-2,313––0-5696,0345,465	01/01/2003-09/30/2003TEUR-6242,3613642042,305-1,721-244-1,965-42-29-712694,9305,199

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Quarterly Report 3/2004

Notes to the Consolidated Financial Statements for Q3/2004

This quarterly report was prepared using the same accounting and valuation methods as in fiscal year 2003. The economy again failed to pick up momentum in the second half of 2004. This was particularly true for Germany. As a result, the continuing general economic weakness, which already was evident in fiscal year 2003 and in the first half of 2004, continued during the reporting period. The persistent investment restraint once again impacted business development, especially in the Automotive sector. Even if slight improvements in the economic environment can be expected, they will probably not significantly affect the course of business of the Softing Group in the current fiscal year. Investments in self-constructed intangible assets amounted to EUR 2.1 million in the first nine months of 2004 (2003: EUR 1.7 million). As of 09/30/2004, orders on hand in the Group amounted to EUR 2.9 million (06/30/2004: EUR 2.8 million).

As of 09/30/2004, the Group had 156 employees (2003: 147). During the reporting period, no stock options were issued to employees. On 09/17/2004, the supervisory board of Softing AG appointed Dipl.-Ing. Bernd Häußler (42) to the executive board of Softing AG effective 10/01/2004. After studying electrical engineering, Mr. Häußler developed and brought to production automotive electronics bus systems at major international car manufacturers. Initially, Mr. Häußler will be heading the Automotive Electronics division of Softing AG together with the current executive board member, Dipl.-Ing. Eduard Himmelsdorfer. Mr. Himmelsdorfer, co-founder and long-time member of the executive board of Softing AG, agreed with the supervisory board to be relieved of his duties as a member of the executive board effective 12/31/2004. Mr. Himmelsdorfer will continue to support Softing AG with his great expertise and commitment. He will also remain a major shareholder of the company.

Group Division Before Consolidation

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----- Start of picture text ----- Thsd. EUR Quarterly report Quarterly report Nine - month Nine - monthIII/2004 III/2003 report 2004 report 200307/01/2004 07/01/2003 01/01/2004 01/01/2003- 09/30/2004 - 09/30/2003 - 09/30/2004 - 09/30/2003Subsidiary (before consolidation)Softing Industrial Solutions Italia S.r.l.,Bozen, ItalyIncoming orders – 224 – 443Revenues – 171 – 381EBIT 4 -76 -5 -151Subsidiary (before consolidation)Softing North America, Inc.,Massachusetts, USAIncoming orders 234 252 703 723Revenues 241 512 683 855EBIT -51 97 -120 -108Softing AG (before consolidation)Incoming orders 5,101 5,664 14,459 14,392Revenues 4,999 4,915 14,413 14,181EBIT 317 192 440 -211----- End of picture text -----

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Quarterly Report 3/2004

Se ment Re ortin g p g

As of September 30, 2004

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----- Start of picture text ----- Thsd. EUR Quarterly report Quarterly report Nine - month Nine - monthIII/2004 III/2003 report 2004 report 200307/01/2004 07/01/2003 01/01/2004 01/01/2003- 09/30/2004 - 09/30/2003 - 09/30/2004 - 09/30/2003Automotive ElectronicsRevenues 2,349 2,002 5,915 6,112Segment result (EBIT) 169 8 -325 126Depreciation/amortization 450 387 1,335 1,095– –Segment assets 4,352 4,412– –Segment liabilities 1,865 2,015Capital expenditure (not includinglong-term investments) 628 554 1,306 1,267Industrial AutomationRevenues 2,741 2,974 8,767 8,235Segment result (EBIT) 108 201 640 -596Depreciation/amortization 323 344 1,006 1,045– –Segment assets 4,436 4,479– –Segment liabilities 2,105 2,426Capital expenditure (not includinglong-term investments) 102 186 936 550Not distributedRevenues – 22 – 84– – – –Segment result (EBIT)Depreciation/amortization – 83 – 221– –Segment assets 9,249 8,990– –Segment liabilities 1,916 1,668Capital expenditure (not includinglong-term investments) 18 112 78 155TotalRevenues 5,090 4,998 14,682 14,431Segment result (EBIT) 277 209 315 -470Depreciation/amortization 773 814 2,341 2,361– –Segment assets 18,037 17,881– –Segment liabilities 5,886 6,109Capital expenditure (not includinglong-term investments) 748 852 2,320 1,972----- End of picture text -----

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

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