Return of the bull market
After a three-year bear market, stock markets closed the year on a positive note, benefiting from the first signs of economic recovery and efforts to rebuild investor confidence. In Europe, the Stoxx 50 gained 15 percent over 2003; in the US, the Dow Jones climbed 25 percent, and the NASDAQ-100 rose 49 percent.

Strong performer
Software AG stock developed positively in 2003. Especially in the second half of the year, it broke away from the pack, closing the year up 81 percent at €16.30. Over the same period, the benchmark TecDAX index only managed a 51 percent gain.

Increasingly at home with value-driven investors
The strong performance of Software AG shares not only reflects a general improvement in investor confidence, especially for tech stocks, but also the increasing appeal of the Company for value-driven investors. The combination of a strong, reliable revenue stream from mainframe products, as well as sustainable, strong cash flow, and the Company’s unique position in the ETS and XML integration markets, attracted intense interest from the capital market. This was reinforced by the Company meeting or exceeding both its own financial forecasts and the expectations of the market in all four fiscal quarters.

Rightsizing had a rapid impact, helping to significantly improve Software AG’s cost base. Toward the end of the year, further momentum was gained from the Company’s strategic realignment. The focus on two new business lines, Enterprise Transaction Systems (ETS) and XML Business Integration, allows the Company to concentrate on and fully exploit its core strengths. The overwhelmingly positive response to the new strategy is shared by analysts, as can be seen improving “Buy” recommendations.

Constructive, candid dialog with investors
The Company is fully committed to open, constructive, continuous communications with analysts and investors. In practice, this means, for example, interim results being compiled within four weeks of the close of each quarter. Unaudited full-year figures for 2003 were released as early as mid-February 2004. Press and analyst conferences can be followed worldwide via online Webcasts. And all important investor relations information, including press releases and analyst documents, is available via the Software AG Website, or on request via email.

Conversion to bearer shares
The resolution of the Annual Shareholders’ Meeting of April 29, 2003, to convert Software AG stock from registered shares to bearer shares, took effect on June 30, 2003. This move reduced costs, in particular because a share register is no longer required, and proved in no way detrimental to communications with shareholders.