in € million	Q4 2006	Q4 2005	%	Fiscal year 2006	Fiscal year 2005	%
Total revenue	134.4	123.6	+ 9	483.0	438.0	+ 10
Cost of sales	– 42.8	– 38.6	+ 11	– 149.5	– 143.5	+ 4
Gross profit Margin in %	91.6 68.2	85.0 68.8	+ 8	333.5 69.0	294.5 67.2	+ 13
R&D	– 11.5	– 10.7	+ 7	– 44.9	– 43.2	+ 4
Sales & Marketing	– 33.3	– 33.4	0	– 127.2	– 109.1	+ 17
Management & Administration	– 14.4	– 14.9	– 3	– 52.3	– 48.3	+ 8
Other income/ expenxe	+ 2.0	+ 2.9		+ 2.1	+ 2.5
EBIT Margin in %	34.4 25.6	28.9 23.4	+ 19	111.2 23.0	96.4 22.0	+ 15

Software AG started an initiative to optimize margins in 2003. The initiative aims to steadily increase the EBIT ratio until it reaches 25 percent in 2008. Key components of this initiative consist of a program to enhance customer loyalty and sales efficiency and to optimize costs in the areas of support, IT, procurement and administration. Our optimization measures showed further success in 2006 with an overall reduction in the cost ratio. All cost items with the exception of the strategically important marketing and sales expenses have increased at a lower rate than revenues.

Cost of sales amounted to €149.5 million. This increase of 4 percent was considerably less than the increase in sales, and was primarily thanks to the modified sales structure. The cost of sales is lower for product sales, where revenue has risen very rapidly, than for professional service sales, which has registered lower sales growth.

Our research and development costs also grew at a lower rate than sales, increasing by 4 percent to €44.9 million despite the fact that the number of employees in this area rose by 8 percent as of December 31, 2006. One cost factor in 2006 was the creation of a research and development department in Bulgaria. In terms of product sales, our research and development costs decreased from 13.8 percent in 2005 to 12.7 percent in 2006.

We continued to push expansion of our marketing and sales activities during 2006. Marketing and sales expenses therefore grew at a higher rate than sales, increasing 17 percent to €127.2 million. The proportion of these expenses to total sales was 26.3 percent (prior year: 24.9 percent).

Our administrative costs of €52.3 million reflect the run-up costs for geographical expansion in Japan and Brazil as well as higher expenses for performancerelated compensation incurred during the course of fiscal 2006. When compared to the prior-year figures, however, administrative costs nevertheless showed a disproportionately low rise of 8 percent.

Net interest income rose by more than 55 percent to €7.3 million due to higher net liquidity and increasing interest rates. Pre-tax earnings rose by 17 percent to €118.6 million or 24.5 percent of sales (prior year: 23.1 percent).