Q4 Message to Shareholders, June 4, 2003

The fourth quarter marks the end of a transition year for MKS, during which we achieved profitable, cash generating operations for the second half of the year marking the second consecutive quarter of profitability and positive cash generation by operations. The financial position of the company has been strengthened and we enter fiscal 2004 with a higher backlog of both sales opportunities and deferred revenue.

MKS had another good quarter. By growing new licensing 14% over Q3 we capped a year of steady licensing gains that have seen operating results improve from a loss of $1.5 million in the first quarter of fiscal 2003 to finish the year with a 600k profit in the fourth quarter. All of this while investing heavily in our future with major advances in field operations and product enhancements. Those accomplishments give us confidence that further revenue gains in fiscal 2004 will result in a net profit for the entire year.

This quarter we had strong performance across the company. Both of our business segments increased sales over the previous quarter with many encouraging new customer wins. We also improved our industry visibility and profile with recognition as one of the most innovative offering in the market by Software Development times. With our major product release, we strengthen our product depth, breadth and positioning for significant broadening of functionality in the years ahead.

In our SCM business this quarter, new licensing growth of 18% over the third quarter, and a full 88% over the 4th quarter of last year continued to demonstrate that the focus on enterprise values in our product line and proactive support and services in our customer relationships is enjoying wide acceptance in the marketplace. In both the SCM and Interoperability businesses, we completed many significant enterprise customer wins. Some of the names on the sales list this past quarter include Abbott Laboratories, GE Medical Systems, HSBC, HP Services, L-3 Communications, Mentor Graphics, NCR, Towers Perrin, and Philips Medical Systems.

We have now finished our annual strategic planning cycle with even more commitment to the strategy that is brought us our improved results.

The focus of the Company’s strategic plan is growth. To achieve maximum long-term earnings growth the Company intends to remain focused on the high growth enterprise segment of the SCM market and achieve increasing returns on revenue through:

• new license sales of enterprise SCM products
• increased SCM revenue per head productivity
• reduction in overhead costs relative to revenue, and
• reduced erosion from legacy products as their relative weight declines.

In addition we will boost spending on our research and development activities to further expand the functionality of our product offering as part of a new 3 year product plan. To that end, in the past quarter, we released a major upgrade of our MKS Source Integrity Enterprise and MKS Integrity Manager products. The new versions boast significant upgrades in security, administration, reporting and collaboration as well as extending the functionality of our solution to build and deployment.

We are very much focused on continuing to improve our development and delivery of software and services to increase our enterprise SCM market share. As the market trend toward enterprise SCM continues,we continue to enjoy the results of our ability to stand behind our product and deliver immediate and significant value to our customers.

We were gratified recently to learn that our efforts to build the best platform for enterprise development and collaboration are being increasingly recognized by the software development industry. MKS was featured by Software Development Times in its recently published list of the SD Times 100. This recognition is helping MKS gain the credibility and visibility that is essential in gaining the attention of the Global 1000. Looking forward to fiscal 2004 we see no abatement in the demand for our products and services. The pace at which we can continue to increase the size of our sales force will largely govern our growth. At the same time, we have recently completed a very ambitious research and development plan to keep our technology ahead of its competitors that will take significant new resources to complete.

We are gratified by the increasing enthusiasm of our shareholders and are thankful for their support and confidence. We look forward to reporting further on our progress.

Philip C. Deck
Chairman & CEO