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Software AG GB 2012, englisch

SOFTWARE AG | ANNUAL REPORT 2012 90 Financing instruments We use bank loans, promissory note loans, finance leasing and internal financing with strong free cash flow as financ- ing instruments. A financing risk arises from the possibility that the Company may not be able to satisfy existing finan- cial liabilities, for example, arising from loan agreements, lease agreements or trade accounts payable. The risk is limited by active management of working capital and Group- wide liquidity control and is, if necessary, balanced by avail- able cash and bilateral lines of credit. The loans used are predominantly at fixed interest rates and have terms to maturity of no later than 2017. Fixed-interest rates were secured for some of the loans using interest rate swaps. Variable interest payments are based on the prevail- ing interest rate on the reporting date. We calculate liabilities in foreign currency at the exchange rate as of December 31, 2012. OTHER INTANGIBLE ASSETS In addition to the assets reported in the Consolidated Balance Sheet, Software AG has off-balance sheet assets. These relate primarily to rented office space, leased company cars, and hardware. Off-balance sheet assets also include the Software AG brand and internally developed software prod- ucts, which are important intangible assets. The brand was continuously enhanced in the year under review. FINANCING The objective of Software AG’s financial management is primarily to support the sustainable growth of the Group through an adequate financing structure and to ensure sol- vency of all affiliated Group companies at all times. To do this we have sufficient liquid assets from net cash provided by operations and through credit agreements. A high equity ratio and strong free cash flow create the basis for organic growth and allow us to make acquisitions. Based on guidelines determined by the Management Board, a central Finance department implements financial policy and risk management. It controls the Group’s liquidity posi- tion centrally through active working capital management. Financial investments are essentially oriented toward the short term. This means that Group funds are invested at near money-market rates. We minimize default risk by careful selection of transaction partners based on stringent criteria and broadly diversified investment. Our Finance department also monitors currency risks centrally for all Group companies and hedges them using derivative financial instruments. In doing so, we only hedge existing balance sheet items or expected cash flows. Cash and cash and cash equivalents increased year on year to €315.7 million (2011: €216.5 million). Net financial liabilities decreased from €277.4 million on December 31, 2011 to €266.0 million on the same date in 2012. Share- holders’ equity rose to €1,060.1 million (2011: €951.5 mil- lion) year on year. Accordingly equity ratio was quite high at 59.8 percent (2011: 56.6 percent).

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