Softing AG — Interim / Quarterly Report 2005

May 13, 2005

Quarterly Report 1/2005

Light and shadow

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Quarterly Report 1/2005

Light and shadow

Dear shareholders, employees, partners and friends of Softing AG,

Dr. Wolfgang Trier

Did you also get the feeling this year that spring would never come? It was way into March that winter finally started to retreat. Spring fatigue everywhere: Mother Nature, neighbors or coworkers – nobody was able to get into gear as quickly as originally planned. As a result, we are, too, unable to present our business figures for the first few months of 2005 in the desired, springlike colors. We weren't really happy with our first quarter, since it doesn't express our growth potential.

Sales and earnings were slightly below the same quarter in 2004. However, there is no reason to worry. We still expect to achieve our goals for 2005, but let's talk about figures first.

The Softing Group recorded incoming orders worth EUR 5.3 million in the first quarter of 2005, which is on par with the same period of last year (2004: EUR 5.3 million). Global sales in the quarter just ended amounted to EUR 4.4 million (2004: EUR 4.8 million). The operating result was negative at EUR - 0.2 million (2004: EUR 0.1 million). It has to be noted that these figures reflect the fact that some sales which we expected in the first quarter will not be posted until the second quarter for reasons attributable to customers. The first three months of 2005 are thus in line with the traditionally weaker first quarters of previous fiscal years.

As of March 31, 2005, cash and cash equivalents were EUR 7.2 million, up EUR 1.4 million versus the previous year. Compared to December 31, 2004, cash and cash equivalents increased by EUR 0.9 million. The increase in cash and cash equivalents of Softing AG results from the 10% capital increase carried out in February of 2005. In doing so, we used some of the authorized capital according to the company's Articles of Incorporation

to carry out a capital increase excluding shareholders' subscription rights. The shares were placed with institutional investors. The capital increase strengthens our equity base and creates the foundation for financing our planned growth including by external measures.

Our participation in this year's Hannover Industrial Fair in April has turned out much more promising for us than in previous years. The numerous discussions and negotiations encouraged us to expect some additional business.

For us, the Executive Board and employees, the first quarter is an incentive for making an even greater commitment to achieving our goals for 2005.

This year's Annual Shareholders' Meeting will take place on July 15, 2005, before the publication of our next quarterly report. We cordially invite you to join us.

Sincerely,

softing

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Quarterly Report 1/2005

Stock Price – Directors’ Holdings

Company Schedule

EUR Final quotation Frankfurt stock exchange (floor)

Directors' Holdings as of 03/31/2005

	Number of shares		Number of options
	As of 03/31/2005	As of 12/31/2004	As of 03/31/2005	As of 12/31/2004
Dr. Trier	44,753	44,753	37,200	37,200
Mr. Häußler	2,000	-	-	-
Dr. Schiessl	-	-	-	-
Mr. Butscher	-	-	-	-
Dr. Patz	405,750	405,750	-	-

Company Schedule

Quarterly Report 1/2005	05/13/2005
Annual Shareholders' Meeting in Munich	07/15/2005
Quarterly Report 2/2005	08/12/2005
Quarterly Report 3/2005	11/15/2005

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

softing

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Quarterly Report 1/2005

Consolidated Balance Sheet

According to IFRS as of March 31, 2005, unaudited

| | Quarterly Report 03/31/2005 | Financial statements 12/31/2004 | | --- | --- | --- | | Assets | EUR | EUR | | Cash and cash equivalents | 4,433,875 | 3,534,204 | | Short-term investments/marketable securities | 2,803,624 | 2,803,624 | | Trade accounts receivable | 2,949,581 | 3,514,069 | | Inventories | 1,166,934 | 1,213,105 | | Prepaid expenses and other current assets | 255,382 | 256,327 | | Total current assets | 11,609,396 | 11,321,329 | | Property, plant and equipment | 420,055 | 382,300 | | Intangible assets | 4,098,184 | 4,210,229 | | Deferred taxes | 3,124,438 | 3,005,364 | | Total non-current assets | 7,642,677 | 7,597,893 | | Total assets | 19,252,073 | 18,919,222 |

Liabilities and shareholders' equity

Trade accounts payable	377,455	363,546
Accrued expenses	1,515,577	1,778,469
Deferred income and other current liabilities	932,434	1,214,844
Total current liabilities	2,825,466	3,356,859
Accounts payable, long-term production contracts	410,120	551,469
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Deferred tax liability	1,837,000	1,792,000
Pension accrual	822,961	798,930
Total non-current liabilities	3,070,081	3,142,399
Share capital	5,499,998	5,000,000
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Additional paid-in capital	1,489,194	879,197
Retained earnings	– 5,915	18,204
Consolidated accumulated profits	6,373,249	6,522,563
Total shareholders’ equity	13,356,526	12,419,964
Total liabilities and shareholders’ equity	19,252,073	18,919,222

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Quarterly Report 1/2005

Consolidated Income Statement

According to IFRS as of March 31, 2005, unaudited

| | Quarterly report 1/2005 01/01/2005

• 03/31/2005 | Quarterly report 1/2004 01/01/2004
• 03/31/2004 | | --- | --- | --- | | | EUR | EUR | | Revenues | 4,396,295 | 4,813,820 | | Other operating income | 235,610 | 133,342 | | Production of own fixed assets capitalized | 512,041 | 696,776 | | Cost of purchased materials and services | - 952,689 | - 1,176,719 | | Personnel expenses | - 2,836,072 | - 2,863,892 | | Depreciation and amortization | - 741,149 | - 786,224 | | Other operating expenses | - 835,842 | - 726,716 | | Operating income/loss | - 221,806 | 90,387 | | Interest income and expense | 7,668 | 917 | | Result before income taxes | - 214,138 | 91,304 | | Income tax | 69,564 | - 56,000 | | Other taxes | - 4,740 | - 5,498 | | Net income/loss (-) | - 149,314 | 29,806 | | Retained earnings, brought forward | 6,522,563 | - 3,389,018 | | Consolidated net income/ loss (-) | 6,373,248 | - 3,359,213 | | Undiluted earnings per share pursuant to IAS 33 | - 0.03 | 0.01 | | Diluted earnings per share pursuant to IAS 33 | - 0.03 | 0.01 |

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Quarterly Report 1/2005

Changes in Shareholders' Equity

01/01 - 03/31/2005

Thsd. EUR

Balance as of December 31, 2004 Capital increase Valuation of financial instruments Net loss 2005 Balance as of March 31, 2005

Share capital	Additional paid-in capital	Retained earnings	Accumulated profits	Total
5,000	879	18	6,523	12,420
500	609			1,109
		-23		-23
			-149	-149
5,500	1,488	-5	6,374	13,357

01/01 - 03/31/2004

Thsd. EUR

Balance as of December 31, 2003 Net income 2004 Balance as of March 31, 2004

Share capital	Additional paid-in capital	Retained earnings	Accumulated profits	Total
5,000	10,326	-	-3,389	11,937
			30	30
5,000	10,326	-	-3,359	11,967

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Quarterly Report 1/2005

Consolidated Cash Flow Statement

According to IFRS as of March 31, 2005, unaudited

Cash flows from operating activities Net profit/loss for the period

• Depreciation and amortization of fixed assets

• Decrease in provisions and accruals

• Decrease in net working capital = Net cash provided by operating activities

Cash flows from investing activities

• Payments made for investments in self-produced intangible assets
• Payments made for investments in other intangible and tangible assets = Net cash used in investing activities

Cash flows from financing activities

• Proceeds from capital increase = Cash flow provided by financing activities

Increase/decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

01/01/2005	01/01/2004
- 03/31/2005	- 03/31/2004
Thsd, EUR	Thsd. EUR
- 149	30
741	786
- 193	- 212
59	13
458	617
- 570	- 739
- 98	- 71
- 668	- 810
1,110	-
1,110	-
900	- 193
6,338	6,034
7,238	5,841

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Quarterly Report 1/2005

Notes to the Consolidated Financial Statements for Q1/2005

This quarterly report was prepared using the same accounting and valuation methods as in fiscal year 2004.

The economy again failed to pick up momentum in the first three months of 2005. This was particularly true for Germany. As a result, the general economic weakness, which already was evident in fiscal year 2004, continued during the reporting period. The persistent investment restraint impacted business development in both the Automotive Electronics and Industrial Automation division. The first three months of 2005 are thus in line with the traditionally weaker first quarters of the Softing Group.

Investments in self-constructed intangible assets amounted to EUR 0.6 million (2004: EUR 0.7 million) in the first quarter of 2005.

As of 03/31/2005, orders on hand in the Group amounted to EUR 3.6 million (12/31/2004: EUR 2.8 million).

As of 03/31/2005, the Group had 158 employees (2004: 151).

During the reporting period, no stock options were issued to employees.

Softing established a wholly-owned subsidiary for development work in Romania in February. This subsidiary will expand Softing's development capacities in fiscal year 2005 and result in a further improvement of the cost structure.

In February, the Executive Board of Softing AG utilized the authorized capital in accordance with § 4 para. 4 of its Articles of Incorporation to carry out a capital increase, excluding subscription rights, by 499,998 shares. The capital increase was approved by the company's Supervisory Board. The shares were placed with institutional investors at a price of EUR 2.22 per no-par value share. This corresponded to a total value of EUR 1,109,995.56. The capital increase was entered in the commercial register at the Munich local court on February 18, 2005. The application to have the new shares listed was initiated immediately thereafter. After carrying out the capital increase, the share capital is EUR 5,499,998. It is divided into 5,499,998 no-par value shares. With this measure, Softing AG strengthens its equity base and creates the foundation for financing its planned growth.

Group Division Before Consolidation

Thsd. EUR	Quarterly report	Quarterly report
	I/2005	I/2004
	01/01/2005 - 03/31/2005	01/01/2004 - 03/31/2004
Subsidiary (before consolidation)
Softing Industrial Solutions Italia S.r.l., Bozen, Italy
Incoming orders	-	-
Revenues	-	-
EBIT	- 11	- 32
Subsidiary (before consolidation)
Softing North America, Inc., Massachusetts, USA
Incoming orders	488	177
Revenues	245	177
EBIT	- 23	- 13
Softing AG (before consolidation)
Incoming orders	4,818	5,145
Revenues	4,313	4,743
EBIT	- 211	147

softing

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Quarterly Report 1/2005

Segment Reporting

As of March 31, 2005

Thsd. EUR

Quarterly report	Quarterly report
1/2005	1/2004
01/01/2005	01/01/2004
- 03/31/2005	- 03/31/2004

Automotive Electronics

Revenues	1,876	2,028
Segment result (EBIT)	-354	-210
Depreciation/amortization	463	447
Segment assets	4,413	4,272
Segment liabilities	2,029	2,199
Capital expenditure (not including long-term investments)	410	419

Industrial Automation

Revenues	2,520	2,786
Segment result (EBIT)	132	301
Depreciation/amortization	278	339
Segment assets	4,089	4,251
Segment liabilities	2,030	2,184
Capital expenditure (not including long-term investments)	222	353

Not distributed

Revenues	-	-
Segment result (EBIT)	-	-
Depreciation/amortization	-	-
Segment assets	10,750	9,677
Segment liabilities	1,837	1,850
Capital expenditure (not including long-term investments)	34	38

Total

Revenues	4,396	4,814
Segment result (EBIT)	-222	91
Depreciation/amortization	741	786
Segment assets	19,252	18,200
Segment liabilities	5,896	6,233
Capital expenditure (not including long-term investments)	666	810

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

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