Remuneration report

This remuneration report provides details on remuneration amounts and the structure of the remuneration system for the Executive and Supervisory Boards. Remuneration of board members is reported as total amounts. The proportions of the individual components are indicated, and the total figure is broken down into fixed payments, performance-related components, and long-term incentive components.

Section 5.4.7 of the German Corporate Governance Code advises taking into account elements related to longterm corporate profits in performance-related remuneration for the Supervisory Board. Software AG has adjusted its previous remuneration system to take this recommendation into account, which it has been following since January 1, 2006.

Executive Board remuneration in accordance with Section 314 (1), No. 6a of the German Commercial Code

In line with our objective of lastingly increasing enterprise value, Executive Board remuneration has been more closely geared towards corporate profits since 2005. At least two-thirds of the remuneration is linked to sales, earnings, and other corporate targets.

Remuneration of active Executive Board members for fiscal 2006 is composed as follows:

	Fixed remuneration	Variable remuneration/ bonuses	Long-term components	Other remuneration components	Phantom shares
	in €	in €	in €	in €	Number
Karl-Heinz Streibich (Chief Executive Officer)	382,500.00	1,265,683.80	860,192.39	16,589.64	12,471
Christian Barrios Marchant	231,999.96	614,923.43	304,135.40	62,006.29	0
Mark Edwards	236,890.02	825,082.04	728,021.63	45,947.99	10,795
Dr. Peter Krpick	200,000.04	507,859.93	447,890.00	26,387.52	6,913
Alfred Pfaff	249,999.96	395,333.33	304,259.69	26,004.53	5,114
Arnd Zinnhardt	231,999.96	811,427.88	711,790.93	22,498.01	10,768

Total remuneration for members of the Executive Board amounted to €9,509 thousand in the fiscal year.

A total of 46,061 phantom shares were granted to Executive Board members.

Expenses of €530 thousand were recorded for pension commitments for the Executive Board in fiscal 2006. Expenses of €217 thousand accrued for one Executive Board member based on employer contributions to social security. These two items were not included in the figure for total remuneration of Executive Board members pursuant to Section 314 (1), No. 6a of the German Commercial Code.

Remuneration for former Executive Board members totaled €169 thousand.

Pension provisions for former Executive Board members amounted to €2,470 thousand.

Variable remuneration/bonuses

Individual Executive Board members are paid a bonus based on sales and earnings performance of the Group. In addition, a variety of quantitative and qualitative targets have been agreed on depending on area of responsibility. The bonuses are calculated based on the extent to which targets are reached.

Long-term remuneration components

a) Stock option plan

The stock option plan has been in existence since 2001. No new options have been issued in conjunction with this program since January 1, 2005. As of December 31, 2006, 136,875 subscription rights had been issued to Executive Board members. The plan will continue until the end of 2011. Fiscal 2006 was the first year in which all conditions for exercising the options were fulfilled. Net income rose by more than 10 percent over the previous year, and profit from ordinary activities surpassed 10 percent of sales. The exercise price averages €18.08 for all persons eligible to exercise options. Personnel expenses of €165 thousand were incurred for members of the Executive Board during fiscal 2006. These expenses are reflected in the long-term components column above.

b) Phantom share plan

A portion of the variable remuneration is paid as a long-term component on the basis of a phantom share plan. As in the previous year, the portion accruing for fiscal 2006 is converted into virtual (phantom) shares on the basis of the average share price of Software AG stock in February 2007 less 10 percent. The resulting number of shares will become due in three identical tranches with terms of one, two, and three years. On the due dates in March 2008, 2009, and 2010, the number of phantom shares is multiplied with the then applicable average share price for February of the relevant year. This amount is adjusted to reflect the amount (measured in percent) by which the shares outperform or underperform the TecDAX30 index and is then paid to the members of the Executive Board. The members of the Executive Board receive an amount per phantom share equal to the dividends paid to Software AG shareholders prior to payment of a phantom share tranche. Personnel expenses of €3,191 thousand were incurred under this program during fiscal 2006. These expenses are reflected in under long-term components in the table above.

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