Software AGInvestor Presentation

July 2003

Investor Presentation July 2003 2

Software AG Profile

Germany’s second largest software vendor

In the high-end, mission-critical IT business since 1969

Worldwide customer base of several thousand blue chip

companies and public sector organizations

Leader in XML system technology (DBMS and

integration)

System integrator for own products and solutions

Listed at Frankfurt stock exchange (TecDAX)

Market Cap 325 mio. € / Free Float: 68.4%

Investor Presentation July 2003 3

Global Business

Four Business Regions (share of revenue 2002):

Americas (35%)

Southern/ Western Europe (26%)

Central/ Eastern Europe (24%)

Asia/Northern Europe (15%)

Investor Presentation July 2003 4

Source of Revenue / Business Lines

Project Services(Consulting and Implementation)

Licensing of Software ProductsMaintenance (24x7 world wide)

Product Business

0

20

40

60

80

100

120

140

160

180

1999 2000 2001* 2002 2003

(in mio. euros)

* first consolidation of US acquisition

Investor Presentation July 2003 5

1999 2000 2001* 2002

Results

(in mio. euros)

6669

91

3238

67

3934

70

-19

83

41

* first consolidation of US acquisition

62 62

110

54

Operating result

Net profit

Op. cash flow

Op. EBITA

-40

-20

0

20

40

60

80

100

120

Strategy

Investor Presentation July 2003 7

Positioning of Software AG

Focus on product business

Licensing of software products

Excellent maintenance services

Global presence

Technology leader in XML

Expansion of the product portfolio to include

standardized solutions

System integrator for own products and solutions

Investor Presentation July 2003 8

                           

          XML Server

- native XML server

- Storage, management, publishing and exchange of XML documents

- Extremely fast and reliable database

- Available on all major platforms

- For large and mission-critical applications

- Integration server

- Leveraging legacy systems for use in new (e-)business solutions

- Development platform

- For large-scale (e-)business applications

Core Products

Investor Presentation July 2003 9

Number 2 worldwide market share for mainframe DBMS

Customers are predominantly blue chip companies and

large public authorities

Adabas and Natural currently account for about ¾ of

product revenue

Adabas and Natural being continuously enhanced:

Support for new platforms and technologies (Linux, 64 bit, XML,

SQL) protects customers’ software investment

1/3 of R&D resources are allocated for Adabas and Natural

(20 mio. euros in 2002)

Adabas and Natural remain the main sources of revenue

Investor Presentation July 2003 10

Tamino XML Server sold more than 500 times

Great success with XML technology in projects

Daimler Chrysler – content management system (xDWS)

Local government in UK – e-government portal (IESD)

Vodafone – document management

North American Logistics (Van Lines) – Mobile field service application

California State Board of Equalization – e-filing

EntireX serves as (XML) integration server

Technologically and economically very attractive customer

solutions will be converted into standardized solutions

Strategy Realignment

Investor Presentation July 2003 11

Tamino in Projects:IESD, UK

Project size Licenses 60 K€ Implementation 30 K€ Application Support 40 K€

Integrated Electronic Service Delivery (IESD) is a powerful framework for building Public Sector applications (Call Centres, CRM, etc.)

Already repeated at Aylesbury Vale District Council Welland Tewkesbury

Hinckley & Bosworth Borough CouncilUnited Kingdom

Investor Presentation July 2003 12

IESD Overview

SAG

Products

IESD

Components

Contact Centre Internet

Portal

XML Gateway

Vertical Applications

Business

Applications Call Centre

Content

Management

C.R.M

Management

Reporting

Workflow

Security &

Audit

Investor Presentation July 2003 13

“Diogenes” / xDWS Project size

Licenses: 285 K€ PS: 1.3 mio. €

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

Solution Seamless development of automotive electronic control units with function

prototyping, production code generation and hardware-in-the-loop test based on common XML based DTD’s (xDWS / Tamino).

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

Tamino in Projects:DaimlerChrysler

Investor Presentation July 2003 14

Tamino in Projects:Vodafone Spain

Project size : 2.2 mio. €

Licenses: 1.4 mio. € PS: 740 K€

Description: 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).

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.

Investor Presentation July 2003 15

North American Logistics (Van Lines)

nAL Mobile project Project size: $710K (License $280K, PS $430K)

Description:

Mobile field service application integrated with SAG

and non-SAG backend systems Repeatable, Yes

Partnering with Extended Systems, Inc. for mobile solution called One Bridge

Our Extended System partner brought valuable expertise in mobile and was key to securing this phase of nAL’s business

Integrated the One Bridge Toolset with EntireX and Tamino

Cellular

EntireX

ViaPhoneTamino

Bill of Lading

Asset Mgmt

Warehouse Mgmt

Product Tracking

LEGACY SYSTEMS

Investor Presentation July 2003 16

Software AG PortfolioEvolving from Technology to Solutions

Products Capabilities Solutions

• Tamino

• Communicator

• Mediator

• Adabas/Natural

• Partners

• Content

Management

• Digital Library

• Mobile

• Data Exchange

• Web Enablement

• Data Integration

• Self-Service Portals

• Content Suite

• Mobile Suite

• Partner Solutions

• Regional Solutions

• Individual Customer

Solutions

Committed to delivering value for our customers

Investor Presentation July 2003 17

Current solution-business situation

Expansion of Portfolio with Solutions

Future solution business

Business Lines

Develop a custom application

Core products (Tamino, EntireX,Adabas/Natural)

Delivery to customer

Project services/system integration

Product business

(Licensing and Maintenance)

Standardized solution platform

Modify a solution to meet customer requirements

Core products (Tamino, EntireX,Adabas/Natural)

1st Quarter 2003Financial Report

Investor Presentation July 2003 19

Revenue Q1 2002/2003

30.6

40.0 -24%

(-21%)

47.4

21.9

0.3

0.3

51.5

24.6

-8%

(+3%)

-11%

(-2%)

116.4 100.2

Q1 2002 Q1 2003

-14%(-6%)

(...) in constant currencies

(in mio. euros)

Other

Project Services(Consulting and Implementation)

Maintenance(24x7 world wide)

Licensing of Software Products

Product Business

Investor Presentation July 2003 20

Licensing Revenue by Product Group Q1 2002/2003

Q1 2002 Q1 2003

Solutions

Tamino

EntireX

Enterprise Transaction

Other

11%

4%

60%

15%

10%

56%

18%

8%

8%

24.6 21.9

10%

(in mio. euros)

Investor Presentation July 2003 21

Revenue by Region Q1 2002/2003

33.139.5

Americas Southern / Western Europe

Northern EuropeAsia-SA

Central / Eastern Europe

Actual Q1 2002

Actual Q1 2003

7.8

24.4

7.2

0.1

Project ServicesMaintenance Licensing Other

4.1

21.3

7.4

0.3

Actual Q1 2002

Actual Q1 2003

Actual Q1 2002

Actual Q1 2003

Actual Q1 2002

Actual Q1 2003

28.029.3 16.917.5 23.030.4

18.6

6.8

3.8

0.1

16.8

6.7

4.5

3.5

9.7

4.3

1.8

9.4

5.6

0.1

10.4

10.6

9.3

0.1

8.3

10.2

4.4

0.1

0.0

0.0

(in mio. euros)

Investor Presentation July 2003 22

Operating EBITA by Region Q1 2002/2003

Q1 2002 Q1 2003

7.5

6.9

+9%

2.9 2.9 3.4

1.2

2.2

4.0

+0% +82% -65%

Americas Southern / Western Europe

Northern EuropeAsia-SA

Central / Eastern Europe

(in mio. euros)

Investor Presentation July 2003 23

R&D by Product Group

Q1 2002 Q1 2003

30%

35%

25%

10%

36%

20%

16%

4%

18.0 15.2

24%

0%

Solutions

Tamino

EntireX

Enterprise Transaction

Other

(in mio. euros)

Investor Presentation July 2003 24

Result Q1 2002/2003

2003 2002 Operating EBI TDA 9.0 5.6

Depreciation -2.2 -2.7

Operating EBI TA 6.8 2.9

Goodwill Amortization -5.5 -5.5

Financial income +1.0 +0.6

Operating result 2.3 -2.0

I ncome 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

(in mio. euros)

Investor Presentation July 2003 25

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

I nventories 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

Balance Sheet(in mio. euros)

Investor Presentation July 2003 26

Cash flow Q1 2002/2003

Q1 2003

Q1 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

(in mio. euros)

Investor Presentation July 2003 27

Our medium-term goal is a Profit Margin of 15%

(operating result = PbT excluding one-time effects)

Savings potential of 55 to 60 million euros annually

Increase in profitability

Alignment of the organization in the regions

Focusing R&D on the future portfolio

Reduction of overhead

Headcount reduction ca. FTE 300

Approx. 1/3 of the savings will be reinvested in the

development of new solutions

Cost cuts in 2003 cover the restructuring expenses

Rightsizing of the Company

Investor Presentation July 2003 28

Full year product revenue same level as 2002

(at constant currency)

Maintenance ensuring about 45% of total revenue

Project services continue to show weakness

Positive operating result (about the amount of 2002)

Positive operating cash flow

Positive net income

Outlook 2003

Software AG Stock information(as of June 30, 2003)

Investor Presentation July 2003 30

Shareholder Structureas of June 30, 2003 (Number of Shares: 27,3 mio.)

Software-AG-Foundation

31.6%

Private Investors

11.5%

InstitutionalInvestors

56.9%

Germany36.2%

UK14.9%

Rest of Europe35.7%

USA13.1%

Shareholder Structure Free Float by Region

Market Cap: 325 mio. euros Free Float: 68.4%

Major Funds:Classic Fund Aktiengesellschaft, LiechtensteinCapital Group Companies, Inc., USAFidelity International Ltd., USA

Rest of World: 0.1%

Investor Presentation July 2003 31

24.03.03 Entry in TecDAX

Software AG

MDAX

Nemax/TecDAX

Share Price Developmentas of June 30, 2002 – June 30, 2003

SAG share price:30.06.02: 14.30 €30.06.03: 11.90 €

Investor Presentation July 2003 32

Top Ten TecDAX as of June 30, 2003

Stock Turnover (in Euro)

I ndex Weight (in % )

EPCOS AG

2,491,266,923 7.81

T-ONLINE INTERN.

2,200,613,731 10.93

QIAGEN

1,022,178,127

9.96

SINGULUS

951,385,894 7.92

MOBILCOM AG

690,050,909 2.00

AIXTRON AG

577,685,595 3.14

BB BIOTECH

370,149,580 9.69

UTD.INTERNET AG

239,853,722 5.15

Software AG

235,174,363 3.15

NORDEX 175,905,977

0.48

(in euros)

Investor Presentation July 2003 33

Key Figures per Share(in euros)

2002 2001 2000 1999 Earnings

1.23 1.44 2.55 1.47

Operating cash flow

1.49 3.05 -0.71 2.70

Dividend 0.00 0.43 0.38 0.28

Price High

44.10 87.00 167.00 63.55

Price Low

8.41 35.90 57.00 22.50

Price / earnings ratio at fiscal year-end

7 30 32 41