Increase in net income

Net income improved by 18.4 percent to €73.2 million in the year under review (prior year: €61.8 million). This significant increase resulted from above-average growth of the lucrative licensing business. Ongoing organizational improvements and continued cost discipline also contributed to the increase in net income.

Due to local tax effects, the effective tax rate was 50 basis points below the previous year’s figure.

Earnings per share amounted to €2.60 for fiscal 2006 (prior year: €2.24) based on a share volume of 28,084,763 (prior year: 27,529,560). The increase in shares outstanding resulted from exercise of the stock option plan (MIP1). 669,268 options are still outstanding under existing programs. A total of 457,580 of these may be exercised by the end of 2007. Diluted earnings per share in 2006 amounted to €2.55.

Appropriation of profits, dividend proposal

Given the positive developments in earnings from operating activities and the encouraging cash flow figures, Software AG intends to recommend another dividend increase to €0.90 per share to the Annual Shareholders’ Meeting (prior year: €0.80). This is equivalent to total dividends of €25.3 million and a dividend ratio of approx. 40 percent. The basis for calculating the dividend ratio is after-tax earnings and free cash-flow.

€47.6 million of consolidated income will be taken to other retained earnings.