Software AG

Investor Presentation • Jul 2, 2003

Software AG Investor Presentation

June 2003

• n Germany's second largest software vendor
• n In the high-end, mission-critical IT business since 1969
• n Worldwide customer base of several thousand blue chip companies and public sector organizations
• n Leader in XML system technology (DBMS and integration)
• n System integrator for own products and solutions
• n Listed at Frankfurt stock exchange (TecDAX)
• n Market Cap 275 Mio. € / Free Float: 68.4%

Global Business

Four Business Regions (share of revenue 2002):

n Americas (35%)

• n Southern/ Western Europe (26%)
• n Central/ Eastern Europe (24%)
• n Asia/Northern Europe (15%)

Source of Revenue / Business Lines

Investor Presentation June 2003 4

Results

1st Quarter 2003 Financial Report

Licensing Revenue by Product Group Q1 2002/2003

(in mio. euros)

Operating EBITA by Region Q1 2002/2003

(in mio. euros)

Result Q1 2002/2003

(in mio. euros)

	2003	2002
Operating EBITDA	9.0	5.6
Depreciation	-2.2	-2.7
Operating EBITA	6.8	2.9
Goodwill Amortization	-5.5	-5.5
Financial income	+1.0	+0.6
Operating result	2.3	-2.0
Income from investments	0.0	+9.3
Restructuring expenses	-23.8	-11.3
Profit before tax	-21.5	-4.0
Taxes	+11.8	+1.6
Net income	-9.7	-2.4
Earnings per share (in euro)	-0.36	-0.09

Investor Presentation June 2003 12

Balance Sheet

(in mio. euros)

Assets	March 31, 2003	Dec. 31, 2002	Liabilities	March 31, 2003	Dec. 31 2002
Fixed Assets	215.7	221.1	Shareholders' equity	216.9	214.5
Inventories	5.7	4.6	Provisions	124.9	108.7
Trade receivables and other assets	125.2	132.6	Liabilities to Banks	0.0	0.0
Cash and cash equivalents	80.9	75.4	Other liabilities	29.9	35.9
Prepaid expenses	40.5	7.1	Deferred income	96.3	81.7
Total	468.0	440.8	Total	468.0	440.8

Cash flow Q1 2002/2003

(in mio. euros)

	Q1	Q1
	2003	2002
Net cash used in / provided by operating activities	11.5	12.1
Net cash used in / provided by investing activities	-2.0	5.6
Net cash used in / provided by financing activities	-2.9	-27.0
Change in cash funds from exchange rate movements, changes in group structure for cash funds	-1.1	0.1
Net change in cash and cash equivalents	5.5	-9.2
Cash and cash equivalents as of December 31	75.4	50.3
Cash and cash equivalents as of March 31	80.9	41.1
Operating cash flow per share	0.42	0.44

Rightsizing of the Company

• n Our medium-term goal is a Profit Margin of 15% (operating result = PbT excluding one-time effects)
• n Savings potential of 55 to 60 million euros annually
• n Increase in profitability
  • u Alignment of the organization in the regions
  • u Focusing R&D on the future portfolio
  • u Reduction of overhead
  • u Headcount reduction ca. FTE 300
• n Approx. 1/3 of the savings will be reinvested in the development of new solutions
• n Cost cuts in 2003 cover the restructuring expenses

Outlook 2003

• n No improvement of market situation in sight
• n Product revenue same level as 2002

(at constant currency)

• n Maintenance ensuring about 40% of total revenue
• n Project services continue to show weakness
• n Positive operating result (about the amount of 2002)
• n Positive operating cash flow
• n Positive net income

Positioning of Software AG

n Focus on product business

• u Licensing of software products
• u Excellent maintenance services
• n Global provider
• n Technology leader in XML
• n Expansion of the product portfolio to include

standardized solutions

n System integrator for own products and solutions

Core Products

• Extremely fast and reliable database
• Available on all major platforms
• For large and mission-critical applications
• Development platform
• For large-scale (e-)business applications
• Integration server
• Leveraging legacy systems for use in new (e-)business solutions
• native XML server
• Storage, management, publishing and exchange of XML documents

Adabas and Natural remain the main sources of revenue

• n Worldwide number 2 in mainframe DBMS
• n Customers are predominantly blue chip companies and large public authorities
• n Adabas and Natural currently account for about ¾ of product revenue
• n Support for new platforms and technologies, such as Linux, 64 bit, XML, SQL protects customers' software investment
• n Approx. 1/3 of R&D resources (approx. 20 million euros in 2002)

Investor Presentation June 2003 20

Strategy Realignment

n Tamino as XML server technology

• u Tamino sold more than 500 times
• u Licensing revenues declined in 2002

n IDC market prognosis for native XML databases

Strategy Realignment

n Tamino in projects

Great success with XML technology in projects

• l Daimler Chrysler content management system (xDWS)
• l Local government in UK e-government portal (IESD)
• l Vodafone document management
• n EntireX serves as (XML) integration server
• n Technologically and economically very attractive customer solutions are converted into standardized solutions

Tamino in Projects: DaimlerChrysler

• n "Diogenes" / xDWS
• n Project size

u Licenses: 285 K€

u PS: 1.3 mio. €

n Problem

Reduce the effort and expense to maintain and adapt automation and test systems in the areas of development, production and service.

n Solution

Seamless development of automotive electronic control units with function prototyping, production code generation and hardware-inthe-loop test based on common XML based DTD's (xDWS / Tamino).

n Benefits

Tight integration of all supply-chain-members. Cost-reduction. Better Quality. FASTER development!

Tamino in Projects: IESD, UK

Hinckley & Bosworth Borough Council United Kingdom

n Project size

• u Licenses 60 K€
• u Implementation 30 K€
• u Application Support 40 K€
• n Integrated Electronic Service Delivery (IESD) is a powerful framework for building Public Sector applications (Call Centres, CRM, etc.)

n Already repeated at

• u Aylesbury Vale District Council
• u Welland
• u Tewkesbury

Tamino in Projects: Vodafone Spain

u	Licenses:	1.4 mio. €
u	PS:	740 K€

n Description:

• u Electronic Bills Presentation Solution Phase: A system that enables its clients and its internal users to see their invoices and the billing information through Internet, using XML technology (Tamino XML Server).
• u Archiving System Solution Phase: Prepare a corporate platform to archive different types of documents coming from other applications (SAP, Lotus Notes, MS Exchange,…) using Ixos products.

Expansion of Portfolio with Solutions

Software AG Stock information

Shareholder Structure

as of March 31, 2003 (Number of Shares: 27,3 mio.)

Market Cap: 315 mio. euros Free Float (excl. SAG-Foundation): 68.4%

Investor Presentation June 2003 29

Share Price Development

as of March 31, 2002 – March 31, 2003

Top Ten TecDAX by Turnover as of March 31, 2003

(in euros)

	Turnover (in Euro)	Index Weight (in %)
EPCOS AG	3,356,216,504	8.54
T-ONLINE INTERN.	1,820,416,755	11.02
QIAGEN	1,350,701,583	10.04
SINGULUS	1,019,310,856	8.80
MOBILCOM AG	946,096,656	1.28
AIXTRON AG	720,243,126	2.28
BB BIOTECH	449,211,815	9.92
SOFTWARE AG	392,059,385	3.92
JENOPTIK	192,969,468	5.41
SAP SI	166,432,400	1.65
Investor Presentation June 2003 31