During fiscal 2006, the Supervisory Board of Software AG supervised the Executive Board and, in consideration of all significant business events, also closely monitored the development of the Company and the Group, as required by the German Corporate Governance Code. The Supervisory Board met five times during the year under review, with at least one session taking place each quarter. All members of the Supervisory Board took part in all sessions.

During these sessions, the Supervisory Board analyzed the ongoing business development and strategic direction in detail with the Executive Board. Any transactions requiring Supervisory Board approval in accordance with the Articles of Incorporation or applicable legislation were reviewed and, where appropriate, approved.

Consultations covered the financial status of Software AG and its subsidiaries, as well the as current and longer-term development of individual business segments and the corresponding Strategys for products, sales and marketing. The Chairman of the Supervisory Board also received written reports on business development from the Executive Board on a monthly basis.

The Supervisory Board includes the following committees:

• The Committee for Compensation and Succession Issues
• The Audit Committee.

The Committee for Compensation and Succession Issues met four times, and the Audit Committee met once during the year under review.

The Supervisory Board continued to hold detailed deliberations on the subject of corporate governance and the German Corporate Governance Code in the course of several meetings in fiscal 2006. The Supervisory and Executive Boards have taken the necessary steps to continue to comply in full with the recommendations of the Code during the year under review. Since fiscal 2004, the accounting has been performed in accordance with International Financial Reporting Standards (IFRS). Remuneration of Executive and Supervisory Board members is again reported individually in fiscal 2006 (refer to the Remuneration Report on p. 30 et seqq. and p. 107 et seqq.).

The declaration pursuant to Section 161 of the German Stock Corporation Act (AktG), issued jointly with the Executive Board, states that in 2006, Software AG complied with the recommendations of the Code in the version dated June 2, 2005, as well as the most recent version of June 12, 2006, without exception and will continue to do so in the future. This declaration of compliance has been made public on the Company’s website www.softwareag.com.

Software AG’s Supervisory Board focused mainly on expanding and solidifying the Groups’ growth rate.

• Topics of the session that met in March 2006 included preparation for the Annual Shareholders’ Meeting, which took place in Frankfurt on May 12, 2006, as well as the establishment of a development company in Bulgaria.
• The foundation for development in the growth markets of the Middle East was laid in the session of May, 2006, in which it was decided to establish a subsidiary in Saudi Arabia and Bahrain.
• Discussions took place in the July 2006 session on the restructuring and re-orientation of Software AG’s global Professional Services business.
• The October 2006 session dealt with Software AG’s acquisition strategy.

In accordance with the direction of the Annual Shareholders’ Meeting, the Supervisory Board appointed BDO Deutsche Warentreuhand Aktiengesellschaft, Frankfurt am Main, to audit the financial statements and the consolidated financial statements of Software AG for fiscal 2006.

BDO Deutsche Warentreuhand Aktiengesellschaft examined the financial statements, consolidated financial statements and management report for the year ended December 31, 2006, including the accounting books and records. The auditors issued an unqualified audit opinion.

The audit reports were presented to the Supervisory Board, and the head of the audit team explained the results in person to the Audit Committee, as well as the entire Supervisory Board and the Executive Board. The Audit Committee and the Supervisory Board thoroughly reviewed the audit results in their meeting of March 9, 2007. The Supervisory Board concurs with the results of the audit and approves the financial statements and consolidated financial statements. This constitutes formal approval and acceptance of the annual financial statements. We concur with the recommendation of the Executive Board with respect to the appropriation of profits.

The following changes took place in the membership of the Executive Board as the result of reorganization. As of January 8, 2007, David Broadbent is the Executive Board member responsible for product management and product marketing, as well as research and development, in the Enterprise Transaction Systems (ETS) business line. The former Executive Board member Christian Barrios Marchant left the Company under mutual agreement.

There were no changes in membership of Software AG’s Supervisory Board during fiscal 2006.

The Supervisory Board would like to thank the Executive Board and all employees for their commitment, as well as their achievements, during fiscal 2006.

Darmstadt, March 2007

The Supervisory Board
Frank F. Beelitz
Chairman