Seasonal influences

Revenues and earnings before taxes were distributed over fiscal 2006 as follows:

As a result of the purchase of SPL Software, Ltd., Israel, effective April 1, 2007, and the acquisition of webMethods, Inc., USA, in the second quarter of 2007, the revenues of the Software AG Group and the revenues of webMethods for the four quarters of fiscal 2006 were combined. In 2007, the distribution of revenue over the quarters is expected to approximate that of the previous year based on the purchasing behavior of our customers. However, the distribution of earnings before taxes over the quarters cannot yet be projected since the extent of the cost synergies anticipated from the acquisition of webMethods cannot yet be reliably predicted. For this reason, the table above only presents the earnings before taxes of the previous Software AG Group not including webMethods.

Contingent liabilities

Stock option plans

Software AG has two different stock option plans for members of the Executive Board, officers, and employees. This resulted in personnel expenses of €1,482 thousand in the first half of 2007 – thereof €97 thousand in the second quarter of 2007 – based on the transition regulations set out in IFRS 2. Additional personnel expenses of approx. €192 thousand are expected for the remainder of fiscal 2007. The high level of personnel expenses in the first quarter of 2007 (€1,385 thousand) resulted from exercise of a greater number of stock options than had been expected when budgeting expenses. A total of 327,067 options were exercised in the first quarter of 2007. Another 16,729 stock options were withdrawn. In the second quarter of 2007, an additional 40,689 stock options were exercised and 4,689 options withdrawn. As a result, as of June 30, 2006, a total of 270,893 stock options remained outstanding for exercise by members of the Executive Board and officers. As of December 31, 2006, 660,067 stock options had been issued to members of the Executive Board and officers.

Please refer to the 2006 Annual Report for further disclosures on the option plans.

Other financial commitments

The Company has entered into rent and lease agreements for buildings, land, computer and telephone equipment, and vehicles. The obligations under these agreements for their remaining non-cancelable terms up until the end of fiscal year 2007 amount to €7,407 thousand. Obligations of €41,090 thousand exist for the period up until the end of fiscal year 2012, and obligations of €17,267 thousand for the period after fiscal year 2012. The lease agreements are operating leases as defined in IAS 17.

Segment report

The segment report for the first half of 2007 will be prepared and published for the first time broken down by product line (primary segment reporting) due to the realignment of Executive Board areas of responsibility to reflect the product lines of ETS and webMethods and the according change in internal segment reporting.

The segment report included in these notes corresponds to the new IFRS 8 regulations. However, since IFRS 8 has not yet been endorsed by the European Union, we have also included a breakdown by region (secondary segment reporting; see below) as required by IAS 14, which is still in effect for the EU, to supplement the segment report in accordance with IFRS 8. To comply with the requirements of IAS 14, the Company has broken down revenue to reflect the geographical regions of Europe, the Middle East, and Africa (EMEA), the Asian and Pacific regions (ASIAPAC), and North and South America (the Americas).

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