Our stock continued its strong upward trend in the first quarter of 2005, again outperforming its benchmark indices Nasdaq 100 and TecDAX. The good business results of the first quarter provided an additional boost and led to a pronounced double-digit rise in share price in the following weeks.

In the first quarter of 2005, equity markets developed considerably better in Europe than in the United States. While the U.S. indices continued the negative trend of the prior year, European equities showed signs of an upward trend that became particularly apparent at the beginning of the year. This upswing was then followed by a phase of consolidation. Investors snapped up energy stocks and commodities but did not show much intererest in the technology sector.

In this scenario, U.S. technology index Nasdaq 100 dropped more than 8 percent from its level at year-end 2004 while its German counterpart, the TecDAX, where Software AG’s shares are listed, gained just under 1 percent in the first quarter of 2005.

Stock continues its upward trend
Largely unaffected by the development of the market on the whole, Software AG’s stock continued its upswing. By the end of the first quarter, the share price had increased more than 6 percent to €25.26. Publication of the quarterly results added further momentum and by mid-May the share price stood at €29, representing a 20 percent increase from the price at year-end 2004.

Capital market responds favorably to promising development of business
The superior performance of our stock reflects the progress made by the Company. Financial analysts regarded the first quarter of 2005 as a convincing start that will enable Software AG to achieve its goals for the current fiscal year. They were especially impressed by the highly promising license revenues and the sound development in a period that traditionally tends to be weak. The majority of analysts’ recommendations were “buy” or “outperform.”

Dividend supplements share price gains
In addition to the gains in share price, our shareholders profited from the reintroduction of dividend payments. Following a resolution adopted at the Annual Shareholders’ Meeting on May 13, 2005, Software AG distributed a dividend of €0.75 per share entitled to dividends for fiscal 2004. On the basis of the average annual share price of €23.09 in 2004, the dividend yield amounts to 3.25 percent.

At the Annual Shareholders Meeting, all of the voting items were adopted by the majority of shareholders. The shareholders also approved the cancellation of the existing authorization to issue warrant and convertible bonds and its replacement with a new provision. At the same time, a resolution was adopted to partially cancel the existing conditional capital and create a new conditional capital along with the corresponding amendment of article 5 of the Articles of Incorporation.