Baldwin Technology Letter to Shareholders

Dear Shareholder,
     Fiscal year 2005 was a good year for Baldwin Technology Company, Inc. We continued to build on the momentum generated in 2004, reporting further gains in sales, operating income and net income before taxes.
     Improved gross margin due to increased labor productivity, material price reductions and better management of the supply chain was a significant contributor to the improvement on the income statement. With respect to the balance sheet, we recorded higher inventory turns and achieved a reduction in days sales outstanding compared to the prior year. The end result was operating cash flow in excess of $14 million and a substantially strengthened balance sheet with virtually no net debt, which we define as total debt less cash on hand. On June 30, 2005, the company's order backlog was $48.1 million, up from $44.9 million a year earlier. Subsequent to the fiscal year end as this letter is being written, the order backlog has further increased to more than $54 million.
     With offices and manufacturing facilities in 11 countries in North and South America, Europe, Asia and Australia, we are competing with increasing effectiveness in the accessories and control market. Demand for our patented cleaning systems, fluid management products, ink controls, dryers and press protection systems is strong from both end-users and printing press manufacturers (OEMs). The fundamental health of our business is a reflection of this demand.
     We are the overall market leader with strong positions in various product lines and as such, we vigorously defend our intellectual property (IP) whenever and wherever it is challenged. With numerous patents, industry certifications and awards, we believe a strong IP position is a competitive advantage. Following favorable court rulings on patent validity and patent infringement, our German subsidiary has filed suit against a competitor for damages arising from a patent infringement. After careful consideration, Baldwin decided to pursue this next phase of litigation even though the competitor has appealed the rulings of both the patent validity and the infringement of that patent. This phase may take several years before reaching a resolution.

     Innovation has long been a focus of Baldwin Technology, and we continue to make investments in markets, processes and product development that will lead to additional revenue and improved margins. We place special emphasis on remaining close to our customers and listening carefully to them so we can better address the needs associated with productivity, quality, safety and environmental compliance. Because Baldwin's circulators, dampeners and cleaning products are essential to good press performance in the critical part of the printing process where "the ink hits the paper," we believe we are well-positioned to address printing issues such as manpower and paper savings, faster startups and turnarounds, and improved print quality.
     Baldwin possesses a global organization, widespread brand recognition and a technology leadership position in our core strength of accessories and controls. These strengths, when combined with our solid customer relationships, provide an excellent platform to execute a strategy of assembling and integrating products, systems and consumables that can provide customers with printing process automation and control. We are actively seeking to locate, develop and combine products and systems that can help us achieve this objective.
     As an example, earlier this year we signed an agreement with Hildebrand Systeme GmbH, a German-based company that manufactures high-performance web cleaning products. The agreement gives Baldwin Technology exclusive global distribution rights for the worldwide offset market for the Jetstream and Jetvac web cleaning systems made by Hildebrand. These are valuable extensions to our existing automatic cleaning systems product range and enable us to offer new value-added solutions to our OEM and end-user customers.

     We are optimistic about our future prospects. With the changing dynamics of the marketplace, and the opportunities we see for Baldwin in that marketplace, we have made adjustments to the organizational structure and responsibilities within Baldwin to take advantage of those possibilities. One important change was the July 1, 2005 appointment of Karl S. Puehringer as president and chief operating officer to lead the company's global operations. Karl had been serving as vice president in charge of our European operations, which accounted for nearly half of our sales in FY '05. He has played a major role in our growth and success in Germany and other European markets. By expanding Karl's responsibilities to our full worldwide operations, Baldwin will benefit globally from his proven managerial skills and experience, and allow your chairman to focus more attention on Baldwin's strategic opportunities.
     We are achieving good results. The adversities that challenged us in the earlier part of this decade have been overcome thanks to the dedication, determination and skills of our employees around the world.
     We also wish to thank our customers for their loyal support. Our pledge to them is that we will work daily to earn their continuing loyalty. Finally, we wish to thank our shareholders who have provided us their support. They should remain assured that we are committed to continuing the process of building shareholder value.


Gerald A. Nathe
Chairman of the Board and Chief Executive Officer


Karl S. Puehringer
President and Chief Operating Officer