European and U.S. stock markets surge at the end of the year

2006 was the fourth consecutive positive year for equities markets. German stock markets increased substantially starting at the beginning of the year: the DAX by 22 percent, the MDAX and SDAX by 28 percent, and the TecDAX by 25.5 percent. German stock markets thus once again surpassed major European benchmark indices and the U.S. stock markets. After years of stagnation, U.S. markets also rose significantly during 2006. The Dow Jones rose 17 percent and reached a new all-time high in October. The MSCI showed a rise of approx. 18 percent and ended at 1,483.58 points as of December 29, 2006.

In the spring of 2006, the DAX experienced a correction phase lasting approximately four weeks, and fell by approximately 1,000 points. A modest recovery in the European and U.S. stock markets ensued in the second quarter. The stock markets were influenced by a variety of factors in the second half of the year. Corporate profits overshot expectations, the economy surpassed forecasts both domestically and abroad, and there was speculation on several takeover possibilities. In most countries, stock markets picked up sharply toward the end of the year. Unusually large gains were evidenced on stock exchanges in both the U.S. and Europe at the end of the year.

The TexDAX recovered after the low at the beginning of the third quarter, bolstered by a high level of interest in both telecommunications and solar industry stocks, and closed at 596 points as of December 29, 2006, an increase of 25.5 percent over the previous year.

 

Software AG shares outperform benchmark indices with a rise of 45 percent

Software AG shares performed significantly better than the benchmark indices, the TecDAX and the Nasdaq 100. The stock closed the year on December 29, 2006, at €59.74 in Xetra trading (previous year: €41.15). This marked the highest price in five years. A total of €30 million Software AG shares were traded during fiscal 2006, corresponding to an average volume of 5.57 million per trading day. Our shares are thus among the 100 most liquid stocks listed in Germany and meet the Category A liquidity criteria for the German stock exchange (Xetra liquidity measure).

The graphs in this section contain additional details on price growth.
Market capitalization grew significantly compared to the prior year, rising by €537 million to €1.68 billion. Software AG attracted increased attention in the mid-cap field and appealed to new investor groups. These factors contributed to an expansion of the shareholder base.

Software AG stock moved up again in the TecDAX ranking of Deutsche Börse AG: Measured in terms of market capitalization, it reached 6th place (2005: 7th place) and in terms of trading volume, the stock moved up to 8th place (2005: 10th place).

Dividend for 2006 also higher

In addition to share price gains, our investors also profited from higher dividend payments in 2006. Software AG paid out a total of approx. €22.4 million (€0.80 per share) to shareholders as resolved by the Annual Shareholders’ Meeting. This corresponds to a dividend ratio of over 40 percent of the average of net operating earnings and free cash flow. We expect to maintain this dividend policy in the future, depending on earnings and liquidity. The Executive and Supervisory Boards are recommending to the Annual Shareholders’ Meeting that dividends of €0.90 be paid for each share entitled to dividends for fiscal 2006. Based on the share price at the end of 2006 (€59.74), this represents a dividend yield of 1.5 percent.

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