Dear Shareholders,

Software AG has had an excellent start in the new fiscal year with net income growth of 19 percent. Sales increased 6 percent when adjusted for currency effects and are therefore at the upper level of projections. These figures demonstrate that our strategy is bearing fruit.

Following the concentration on our core businesses, the Company has developed favorably. Our highly motivated sales staff serves to strengthen our main businesses and tap additional sales potentials. Our solid financials safeguard our independence and broaden the scope of decisions available to management. Strict control of costs, an optimized product portfolio and growthoriented international expansion are our main goals.

Modernization and integration drive progress
Increasingly complex information technology requirements and smaller budgets indicate that customers today prefer to protect their existing IT investments. As they strive for integration of businesses and shorter decision cycles, they need to retrieve data in real time and require a single view of critical information. The answer to these demands lies in customized applications and the modernization and integration of existing systems.

Backbone of the globally networked economy
The world economy is growing together. Networks are emerging that extend beyond corporate and national borders. The multilayered activities of these virtual organizations have to be reliably managed and monitored at all times. IT systems have to be linked and IT applications integrated.

Software AG is ready for the requirements of the globally networked economy. We have learned to work with our customers and with hardware providers. Using the future technology XML and web-based applications, we enable new, efficient scenarios of corporate partnership.

Karl-Heinz Streibich
Chief Executive Officer