Annual Report 2007

Report of the Supervisory Board

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 Group, as required by the German Corporate Governance Code during the fiscal year 2007. The Supervisory Board met nine times during the year under review, of which one meeting was a telephone conference. At least one session took place each quarter. All members of the Supervisory Board attended all sessions.

During these sessions, the Supervisory Board analyzed the ongoing business development and strategic direction of the company 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 approved, where appropriate.

Consultations covered the financial status of Software AG and its subsidiaries, the acquisition strategy of Software AG, the current and longer-term development of the individual business segments, and the corresponding strategies for products, sales, and marketing. 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 Nomination Committee (since December 14, 2007)

The Committee for Compensation and Succession Issues met six times, and the Audit Committee met twice during 2007. The Nomination Committee convened for the first time on January 18, 2008.

The Supervisory Board continuously held detailed deliberations on the subject of corporate governance and the German Corporate Governance Code in the course of several meetings during fiscal year 2007. The Supervisory and Executive Boards took the necessary steps to continue to comply in full with the recommendations of the Code during the year under review. Remuneration of Executive and Supervisory Board members is again reported individually for fiscal year 2007 (refer to the Remuneration Report).

The declaration pursuant to Section 161 of the German Stock Corporation Act (AktG), issued jointly with the Executive Board, states that in 2007 Software AG complied with the recommendations of the Code in the version dated June 12, 2006, as well as the most recent version of June 14, 2007, 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.

In 2007, the efforts of the Supervisory Board of Software AG were primarily focused on the acquisitions undertaken by the Company with the objective of expanding the product portfolio and stabilizing the Group's growth:

• The meetings in March 2007 were in preparation for the Annual Shareholders' Meeting, which took place on May 11, 2007 in Frankfurt, and the acquisition of SPL Software in Israel.
• In the meeting in April 2007, the resolution to acquire webMethods, Inc., in Fairfax, USA, laid the foundation for the technological expansion of the product portfolio and hence for sustainable medium-term to long-term growth for Software AG.
• In the meetings in May and July 2007, a new Management Incentive Plan was discussed and adopted to support the integration of the acquired companies.
• In another meeting in July 2007, a fundamental reorganization of Executive Board responsibilities was adopted. In this connection, Software AG discontinued its existing regional sales structure and aligned the entire Company in accordance with the two business divisions webMethods and Enterprise Transaction Systems (ETS). Since then, each of the two business lines is represented by two Executive Board members: one for development and one for sales.
• In October 2007, the Supervisory Board decided to conclude an asset deal with Jacada Ltd., Israel.

In accordance with a resolution adopted at 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 year 2007.

BDO Deutsche Warentreuhand Aktiengesellschaft examined the financial statements, consolidated financial statements, and management report for the year ended December 31, 2007, 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. They were also presented to the Executive Board. The Audit Committee and the Supervisory Board thoroughly reviewed the audit results in their meeting of March 12, 2008. 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, the Supervisory Board, concur with the recommendation of the Executive Board with respect to the appropriation of profits.

The following personnel changes took place on the Executive Board and Supervisory Board of Software AG in 2007:

Effective January 8, 2007, David Broadbent was appointed as successor for Christian Barrios Marchant, who left the Company by mutual agreement. David Broadbent is responsible for development for the ETS business line.

Effective August 1, 2007, David Mitchell was appointed as a member of the Executive Board and took on responsibility for sales for the webMethods business line. Former Executive Board member Alfred Pfaff left the Company by mutual agreement.

The term of office of Karl Heinz Achinger ended at the Annual Shareholders' Meeting on May 11, 2007. Mr. Achinger had been a member of the Supervisory Board since April 30, 2002. Upon the recommendation of the Supervisory Board, the shareholders appointed Alf Henryk Wulf as successor of Karl Heinz Achinger. Alf Henryk Wulf is Executive Officer Sales & Marketing at Alcatel-Lucent Deutschland AG.

Employee representative Reinhard Springer also left the Supervisory Board effective May 11, 2007. The employees elected Rainer Burckhardt, Chairman of the Darmstadt Works Council, to the Supervisory Board.

The Supervisory Board would like to thank the outgoing members for their dedication and trusting cooperation.

The Supervisory Board would also like to thank the Executive Board and all employees for their commitment, as well as their achievements, during fiscal year 2007.

Darmstadt, March 2008

The Supervisory Board
Frank F. Beelitz
Chairman

Please refer to the Notes for additional information on the members of the Supervisory Board.