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Significant events during the reporting period

Software AG continued to grow very profitably again in the third quarter of 2009. Third-quarter performance for the first time included consolidated financial results following the Company’s takeover bid for IDS Scheer. Consolidated results showed 19 percent revenue growth, a 26 percent EBIT margin and a 23 percent profit increase. The revenue growth in combination with the high EBIT margin was particularly encouraging. Our profitable growth was the basis for the raised forecast for revenue and our EBIT margin for full year 2009. Software AG’s standalone third-quarter financial performance was good in spite of the ongoing economic recession and in comparison with the industry as a whole.

Of particular note for the third quarter of 2009 was Software AG’s takeover bid of IDS Scheer AG, a software company based in Saarbrücken, Germany. The merger with IDS Scheer will create a global player in business process excellence solutions, with approximately one billion euros in total annual revenue and 6,000 employees. Software AG’s strengths – technology leadership in middleware products, financial power and a global presence – and IDS Scheer’s expertise in analytics, modeling and business process controlling, its solid partnerships and widespread service relationships with 7,500 customers are excellent complements to each other. IDS Scheer also brings to the table profound industry-specific know-how, direct access to vertical markets and a strong market position in SAP consulting. Software AG acquired Teconomic AG on July 1, 2009. The Swiss software company is based in Freienbach, near Zurich, providing comprehensive financial services and solutions, particularly associated with SWIFT, to the European market. Among the highlights of our market presence and customer relations activities was an international webMethods 8 conference series for new and existing customers as well as a customer Business Innovation Forum (BIF) in darmstadt. webMethods 8 was released last quarter and is the newest version of our webMethods integration software product suite.

1.1 aCquISItIon oF IDS SCheer ag

Software AG announced its intention to acquire IDS Scheer AG of Saarbrücken, Germany on July 13, 2009. The acceptance period for the bid made to IDS Scheer AG shareholders began on August 17, 2009 with the publication of the official takeover offer document. According to the offer, IDS Scheer shareholders could sell their shares to Software AG for €15 in cash per share. This represented a purchase price for the total share capital, plus transaction fees, of about €490 million. To finance the purchase, Software AG raised €340 million in outside funds through bank loans, promissory note loans and a subordinated loan with favorable terms from majority shareholder Software AG Foundation. The takeover transaction is through SAG Beteligungs Gmbh, a whollyowned Software AG subsidiary.

As of the end of the first acceptance period on September 18, 2009, Software AG had acquired about 88 percent of IDS Scheer shares. This included the approximately 48 percent of those shares previously owned by the company’s founders and majority shareholders, Professor Scheer and Professor Pocsay. To date, Software AG has acquired about 90 percent of all shares.

Professor Scheer and Professor Pocsay relinquished their seats on the IDS Scheer AG supervisory board as of September 30, 2009. Karl-heinz Streibich, CEO of Software AG, and Arnd Zinnhardt, CFO of Software AG, have since been appointed to the supervisory board of IDS Scheer AG. As part of the next stage of integration, a domination and profit transfer agreement between IDS Scheer AG and SAG Beteiligungs Gmbh will be drafted. An extraordinary shareholders’ meeting of IDS Scheer AG is thus likely to convene in the first quarter of 2010. The agreement will facilitate integration of both companies’ operations and the exploitation of cost and sales synergies.

The two technology-leading product portfolios are ideal complements to each other. They cover the entire business-process-excellence value chain, from business process analytics and modeling to implementation, controlling and monitoring. The combination will be one of a kind in the global marketplace. Furthermore, it will ensure for the joint company a strengthened long-term competitive position in the software sector, which is currently characterized by continued consolidation. By reaching a critical mass in additional core European regions, our market access will be notably greater. Thanks to IDS Scheer’s consulting expertise, we will be optimally qualified to implement our products in large-scale, industry-specific projects. The integrated company will enhance its global status in the high-growth business process management (BPM/BPA) market. In addition, the merger will create a new and highly competitive integrator of SAP solutions in heterogeneous application environments. These solutions enable more efficient, Web-based systems, which, in turn, offer customers significant competitive advantages.

We expect the joining of the two successful business models to lead to an increase in Software AG’s operational earnings per share as early as 2010, which will be the first full fiscal year of consolidation.

The merger is an opportunity for the IDS Scheer business segment to bolster growth, to secure the long-term future of ARIS, to expand globally and to secure its consulting expertise and market presence. Both companies have strong brands, excellent global images and consistent corporate cultures. For employees of IDS Scheer and Software AG, the merger will mean working for a larger employer – the technology leader in infrastructure software and business process management – that can offer numerous attractive long-term international career opportunities.

IDS Scheer’s widely established name as a consulting specialist as well as the ARIS software brand are not expected to change. IDS Scheer will continue to be used as a consulting brand, known for know-how excellence in this segment.

1.2 Core buSIneSS – InnovatIon and CuStomer orIentatIon

Software AG concluded a second corporate acquisition in the third quarter of 2009. The acquired company, Swiss Teconomic AG, provides the European financial sector with comprehensive IT consulting and solutions. Seven of Switzerland’s top ten financial institutes, such as UBS AG, Crédit Suisse and Zürich Financial Services, use Teconomic’s consulting services. With the takeover of Teconomic, Software AG plans to strengthen its position in the global market for worldwide exchange of financial data (SWIFT) and to further expand its operations in Switzerland. Financial institutes currently face enormous challenges that can be overcome with flexible IT infrastructures, which equip them for the sector’s imminent worldwide re-regulation.

Teconomic AG was established in 2002 by Rudolf Gunz. It is a certified SWIFTReady services and software partner and offers IT consulting to the European financial sector. The team has more than 100 man years of experience in banking services.

Software AG was awarded the SWIFTReady Financial EAI label for 2009 by the Society for Worldwide Interbank Financial Telecommunications (SWIFT) in mid-September. This is SWIFT’s highest level of recognition for interoperability. The certification exemplifies Software AG’s leadership in connecting systems within and between banks and is a result of our improved position in the SWIFT solutions space following the recent acquisition of Teconomic AG.

Software AG combines high-performance enterprise software with industry-specific expertise. In this way, we enable our customers to achieve their business goals faster and reduce their operating costs. Our IT services division, renamed as Global Consulting Services as part of a relaunch in recent quarters, plays an important role here. Changes in the quarter under review included new global service offerings with international points of contact and a Web portal intended to serve as a hub for efficient communication and intensive knowledge exchange around the world.

At CeBIT 2009 we announced AlignSpaceTM , which is the first social BPM platform and will enable the development of the largest social network for business process management (BPM) specialists. This new product is a platform through which all parties of a BPM environment can collaborate. data, documents, and services generated in such an environment are provided across organization boundaries and can be reused in this manner. Social networks can also be integrated. development of the product was concluded in recent months, which means that the product is now ready to go to market. All Software AG employees will gain access in the fourth quarter. The platform will be introduced to the public at CeBIT 2010 at which time all external users will also be granted access.

The quarter under review was also very successful in terms of customers and markets. Announced sales included software solutions purchased for connecting government agencies in different municipalities in Germany. The state of Brandenburg began employing Software AG solutions in order to implement European service directives. With Software AG’s webMethods business process management, the state of Brandenburg significantly cut costs and time necessary for establishing new businesses, thus further opening its economy to international investors. Penn State University, a long-standing customer in Pennsylvania, USA, publicized a joint project in the third quarter. A Software AG customer for 27 years, Penn State decided to modernize its Adabas and natural applications. This helped the university meet the needs of its students, faculty and staff by building a platform that is equipped to grow and expand.

We held our second German Business Innovation Forum (BIF) on September 23, 2009 in darmstadt. It was opened with a presentation of the “digital Company of the Future.“ high-ranking corporate executives spoke to more than 500 attendees from industry and the public sector on topics such as current and future trends in the German and global software industry. during numerous meetings with users, customers and partners, we illustrated the benefits of process-oriented information technology and how it can be implemented using real customer scenarios. We met with representatives of the states of hesse and Saarland to discuss trends in e-government. The talks concentrated on agile e-government based on a service-oriented architecture (SOA) and business process management (BPM). The use of AlignSpace, Software AG’s social community for BPM, in the public sector was also a focal point.

Software AG unveiled webMethods 8.0 in the third quarter of this year. It is the first fully integrated version of this software platform since the acquisition of webMethods, Inc. We also kicked off a series of customer events in eight cities, primarily in the U.S.A. We will introduce the latest areas of application of webMethods 8.0, while raising awareness on the benefits of employing Adabas and natural in combination with webMethods. The first event took place in September, a half-day workshop in Atlanta with almost 100 attendees. Upcoming host cities will be Boston, Chicago, Toronto, Washington, d.C., Paris and Amsterdam.

In cooperation with our itCampus subsidiary and trade publication TeleTalk, Software AG successfully co-hosted the well-known CC Science 2009 conference in leipzig on September 15-16, 2009. The motto of the two-day conference was “Stay in touch with the future,” addressing executives from small and medium-sized businesses and ITC industry decision-makers from Germany, Austria and Switzerland. At the event, itCampus introduced the latest communications solutions from its ElSBETh product suite, which helps communication-intensive organizations significantly improve the quality and efficiency of their customer contact. itCampus will unveil a new IT solution at our joint CeBIT booth in 2010.

1.3 Corporate reSponSIbIlIty

In honor of its 40th birthday, Software AG published its first report on corporate responsibility. Entitled Corporate Social Responsibility – Sustainability and Responsibility, the 48-page report describes the values and projects that define our Company’s operations. Business accomplishment combined with sustainable, responsible action is the foundation of our Company’s success. To us at Software AG, sustainable and responsible action means being a successful company. We define business success as the following: enabling our customers around the world to be successful, researching and developing our own solutions, setting standards, developing patents, being a credible and reliable technology partner, helping employees grow with the Company, growing and staying profitable, creating added value for society, respecting exemplary values and social standards in our daily operations, promoting education and innovation – globally and locally.

Further education and supporting young members of the IT community as well as social commitment play particularly important roles. We invest millions of euros each year in our Software AG Corporate University and our University Relations Program, started in 2007. As part of our “Move Your Feet“ campaign, Software AG, the two supervisory board employee representatives, and Software AG Foundation donate money for every kilometer run by any staff member worldwide at official races. This money goes toward social causes around the world. Research and development is also an essential component of our efforts, with investments totaling several hundred million euros in recent years.

For more information on the topic of corporate social responsibility or to read the CSR report, please visit www.softwareag.com/de/Press/csr/