Stock-market sentiment worsened during the second quarter. The high oil price and rising US interest rates had a negative impact on the global economy. Coupled with a troubled labor market in Germany, this had a negative impact on shares. In view of this poor climate, the development of Software AG stock is all the more impressive.

Having already significantly exceeded market expectations in both the fourth quarter of 2003 and the first three months of 2004, Software AG's Q2 2004 figures again outperformed projections. Two factors in particular led to a higher valuation for the Company, and a higher share price: The healthy positive development of license sales for products from our Enterprise Transaction Systems business line, and a further reduction in costs. The improved licensing situation in the Enterprise Transaction Systems business line helped to persuade investors and analysts that our decision to focus the Company on two business lines would succeed. This, in conjunction with successful moves to reduce costs, helped us to further improve profitability.

In the light of our six-month figures, we have again raised our full-year forecast for earnings per share (EPS). We now expect EPS to be between € 2.75 and € 2.85. This includes approximately € 0.88 attributable to the sale of shareholdings.

High resonance among investors
During the second quarter, we stepped up efforts to communicate our new strategic orientation. Software AG management met investors for group and one-on-one discussions on nine roadshows. We also presented our first-half results at an analyst and investor conference in London. This event was Webcast live, and a recording can be viewed online. JP Morgan is the latest major investment bank to provide coverage of Software AG shares. This is indicative of our higher profile, and will increase awareness of the Company among both private and institutional investors.

Shareholder's meeting passes all motions with overwhelming majority
The annual shareholders' meeting took place on April 30, 2004. CEO Karl-Heinz Streibich and CFO Arnd Zinnhardt introduced the Company's strategy and presented figures for full-year 2003 and firstquarter 2004. All agenda motions were adopted with overwhelming majorities. Dr. Andreas Bereczky was elected to the Supervisory Board to replace Dr. Peter Lex, whose mandate ended. The meeting also approved revised contingent capital and renewed the Executive Board’s share buyback authorization. The next annual shareholders' meeting will take place on May 13, 2005.