» Together with the Executive Board, the necessary steps were implemented to once again comply in full with the recommendations of the Code during the year under review. «
Frank F. Beelitz, Chairman of the Supervisory Board

During fiscal 2005, the Supervisory Board of Software AG oversaw the performance and activities of management and closely monitored all key business events as well as the development of the Company and the Group. The Supervisory Board met at least once per quarter for a total of six meetings during the year under review, with full attendance at all meetings.

Each meeting involved comprehensive analysis of current business performance and the discussion of strategy with the Executive Board. Any transactions requiring Supervisory Board approval in accordance with the Articles of Incorporation or applicable legislation were examined in detail, carefully considered, and where appropriate, approved.

The meetings covered the current status of Software AG and its subsidiaries, prospects for individual business segments and the corresponding strategies for products, sales, and marketing. The Chairman of the Supervisory Board also received written reports on business development from the Executive Board on a monthly basis.

The Supervisory Board includes the following committees:

• The Committee for Compensation and Succession Issues
• The Audit Committee

The Committee for Compensation and Succession Issues met four times, and the Audit Committee met once during the year under review.

Executive Board membership changed as follows during 2005:
Andreas Zeitler, Managing Director for the Central and Eastern Europe/Asia region, left the Executive Board effective August 22, 2005. Responsibility for this region was assumed by Alfred Pfaff, who was appointed to the Executive Board by the Supervisory Board effective November 1, 2005.

There were no changes in the membership of the Supervisory Board of Software AG.

The Supervisory Board held detailed deliberations on the subject of corporate governance and the German Corporate Governance Code during several meetings in 2005. Together with the Executive Board, the necessary steps were implemented to once again comply in full with the recommendations of the Code during the year under review. The financial statements have been prepared in accordance with IFRS since 2004, and remuneration for members of the Executive and Supervisory Boards was again reported individually in 2005.

The declaration pursuant to Section 161 of the German Stock Corporation Act (AktG) submitted jointly with the Executive Board stated that Software AG complied in 2005 with the recommendations of the Code as amended on May 21, 2003 without exception and will continue to do so in the future. The declaration of compliance is available to Company share-holders on the website of Software AG.

The new remuneration system for Executive Board members, passed by the Supervisory Board at the end of 2004, was applied for the first time in 2005. The fixed salary component of the Board members’ remuneration was reduced to approximately 30 percent of target salary. Two-thirds of the variable salary component is linked to the sales and earnings targets of the Software AG Group on a uniform basis for all Executive Board members. The remaining one-third depends on attainment of individual targets in the functional areas of each Executive Board member. Approximately 30 percent of the variable remuneration actually earned in 2005 will be paid out over a period of three years based on a phantom share plan.

In 2005, the meetings of the Supervisory Board of Software AG focused on discussing and adopting a growth strategy for the Company:

• The development strategy for South America was adopted at the meeting in January 2005.
• The meeting in March 2005 involved preparations for the Annual Shareholders’ Meeting, which was held in Frankfurt on May 13, 2005, as well as the strategic partnership with Fujitsu.
• The continuing development of the product portfolio of the Company’s two business lines, ETS and XMLi, was discussed at the meeting in July 2005, and the acquisition of Casabac Technologies GmbH was resolved – a step which has provided Software AG with core technology for its XMLi portfolio.
• The long-term growth strategy of Software AG was discussed at a special session in December.

In accordance with the wishes of the Annual Shareholders’ Meeting, the Supervisory Board assigned BDO Deutsche Warentreuhand Aktiengesellschaft, Frankfurt am Main, to audit the financial statements and the consolidated financial statements of Software AG for fiscal 2005.

BDO Deutsche Warentreuhand Aktiengesellschaft examined the financial statements and the consolidated financial statements for the year ended December 31, 2005, including consideration of the accounting policies and the management report, and issued an unqualified audit opinion.

The results of the audit were submitted to the Supervisory Board. The head of the auditing team explained the results in person to the Audit Committee as well as the entire Supervisory Board and the Executive Board. The Audit Committee and the Supervisory Board thoroughly reviewed the audit results in their meeting of March 10, 2006. The Supervisory Board declared its agreement with the results of the audit and approved the financial statements and the consolidated financial statements. We concur with the recommendation of the Executive Board with respect to the appropriation of profits.

The Supervisory Board would like to thank the Executive Board and all employees for their commitment as well as their achievements in fiscal 2005.

Darmstadt, March 2006

The Supervisory Board
Frank F. Beelitz
Chairman

Members of the Supervisory Board:

Frank F. Beelitz (Chairman)

Karl Heinz Achinger (Deputy Chairman)

Dr. Ing. Andreas Bereczky

Justus Mische

Monika Neumann (employee representative)

Reinhard Springer (employee representative)

Please see the notes to the consolidated financial statements of Software AG for further information on the members of the Supervisory Board.