Run BetteR - SAP · The Best-Run Businesses Run SAP® 2010 AnnuAl RepoRt on FoRm 20-F Run BetteR...

Run

BetteR

2010

An

nu

Al R

epo

Rt o

n Fo

Rm

20-F

GROUP HEAD QUARTERS

SAp AGDietmar-Hopp-Allee 1669190 WalldorfGermanywww.sap.com

5010

3479

The Best-Run Businesses Run SAP®

2010 AnnuAl RepoRt on FoRm 20-F

Run BetteR

Th

e Best-R

un

Bu

sinesses R

un

SA

P®

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-Fn REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)

OF THE SECURITIES EXCHANGE ACT OF 1934OR

¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010

ORn TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934OR

n SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company reportFor the transition period from to

Commission file number: 1-14251

SAP AG(Exact name of Registrant as specified in its charter)

SAP CORPORATION(Translation of Registrant’s name into English)

Federal Republic of Germany(Jurisdiction of incorporation or organization)

Dietmar-Hopp-Allee 1669190 Walldorf

Federal Republic of Germany(Address of principal executive offices)

Wendy Bouffordc/o SAP Labs

3410 Hillview Avenue, Palo Alto, CA, 94304, United States of America650-849-4000 (Tel)650-849-2650 (Fax)

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registered

American Depositary Shares, each Representingone Ordinary Share, without nominal value

New York Stock Exchange

Ordinary Shares, without nominal value New York Stock Exchange*Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneIndicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares, without nominal value: (as of December 31, 2010)** 1,226,822,697Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¥ No n

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934.

Yes n No ¥

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 fromtheir obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ¥ No n

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files.)

Yes n No n

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer ¥ Accelerated filer n Non-accelerated filer n Smaller Reporting company n

(Do not check if a smaller reporting company)Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S. GAAP n International Financial Reporting Standards as issued by the International Accounting Standards Board ¥ Other n

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.Item 17 n Item 18 n

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes n No ¥

* Listed not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares representing such ordinary shares pursuant to the requirements of the Securities and ExchangeCommission.

** Including 39,166,641 treasury shares.

%%TRANSMSG*** Transmitting Job: E03567 PCN: 001000000 ***%%PCMSG| |00012|Yes|No|03/16/2011 22:27|0|0|Page is valid, no graphics -- Color: D|

[THIS PAGE INTENTIONALLY LEFT BLANK]


Table of Contents

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2FINANCIAL MEASURES CITED IN THIS REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. . . . . . . . 11ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . 11ITEM 3. KEY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14ITEM 4. INFORMATION ABOUT SAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27The SAP Group of Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Portfolio of Software and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Partner Ecosystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Sales, Marketing and Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Intellectual Property, Proprietary Rights and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60ITEM 4A. UNRESOLVED STAFF COMMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS . . . . . . . . . . . . . . . . . 61Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Outlook for 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Operating Results (IFRS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Foreign Currency Exchange Rate Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

i

%%TRANSMSG*** Transmitting Job: E03567 PCN: 002000000 ***%%PCMSG|i |00021|Yes|No|03/23/2011 09:12|0|0|Page is valid, no graphics -- Color: D|

Critical Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91New Accounting Standards Not Yet Adopted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES . . . . . . . . . . . . . . . . . . 93Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93Executive Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94Compensation Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115Share-Based Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS . . . . . . . . . 115Major Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115Related-Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117ITEM 8. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117Consolidated Financial Statements and Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . 117Other Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117ITEM 9. THE OFFER AND LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118ITEM 10. ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124Change in Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125Rights Accompanying our Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132Documents on Display . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES . . . . . . . 133American Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES . . . . . . . . . . . . . 134ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

AND USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134ITEM 15. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134Evaluation of Disclosure Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134Management’s Annual Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . 135Changes in Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135ITEM 16. [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

ii

%%TRANSMSG*** Transmitting Job: E03567 PCN: 003000000 ***%%PCMSG|ii |00020|Yes|No|03/23/2011 09:12|0|0|Page is valid, no graphics -- Color: D|

ITEM 16B. CODE OF ETHICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . 136Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 136Audit Committee’s Pre-Approval Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT

COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED

PURCHASERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT . . . . . . . . . . . . . . 138ITEM 16G. DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES . . . . . . . . . . . . . 138PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143ITEM 17. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143ITEM 18. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143ITEM 19. EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145SAP AG and Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3

iii

%%TRANSMSG*** Transmitting Job: E03567 PCN: 004000000 ***%%PCMSG|iii |00025|Yes|No|03/23/2011 09:12|0|0|Page is valid, no graphics -- Color: D|



INTRODUCTION

SAP AG is a German stock corporation(Aktiengesellschaft) and is referred to in thisreport, together with its subsidiaries, as SAP, oras “Company,” “Group,” “we,” “our,” or “us.”Our Consolidated Financial Statementsincluded in “Item 18. Financial Statements” inthis report have been prepared in accordancewith International Financial Reporting Stan-dards as issued by the International AccountingStandards Board, referred to as IFRS through-out this report.

In this report: (i) references to “US$,” “$,” or“dollars” are to U.S. dollars; (ii) references to‘‘A” or “euro” are to the euro. Our financialstatements are denominated in euros, which isthe currency of our home country, Germany.Certain amounts that appear in this report maynot add up because of differences due torounding.

Unless otherwise specified herein, euro finan-cial data have been converted into dollars at thenoon buying rate in New York City for cabletransfers in foreign currencies as certified forcustoms purposes by the Federal Reserve Bankof New York (the “Noon Buying Rate”) onDecember 30, 2010, which was US$1.3269 perA1.00. No representation is made that such euroamounts actually represent such dollar amountsor that such euro amounts could have been orcan be converted into dollars at that or anyother exchange rate on such date or on anyother date. The rate used for the conveniencetranslations also differs from the currencyexchange rates used for the preparation of theConsolidated Financial Statements. This conve-nience translation is not a requirement underIFRS and, accordingly, our independent regis-tered public accounting firm has not auditedthese US$ amounts. For information regardingrecent rates of exchange between euro and dol-lars, see “Item 3. Key Information — ExchangeRates.” On March 3, 2011, the Noon BuyingRate for converting euro to dollars wasUS$1.3947 per A1.00.

Unless the context otherwise requires, refer-ences in this report to ordinary shares are toSAP AG’s ordinary shares, without nominalvalue. References in this report to “ADRs” areto SAP AG’s American Depositary Receipts,each representing one SAP ordinary share.

SAP, R/3, SAP NetWeaver, Duet, PartnerEdge,ByDesign, SAP BusinessObjects Explorer,StreamWork, and other SAP products and ser-vices mentioned herein as well as their respec-tive logos are trademarks or registeredtrademarks of SAP AG in Germany and othercountries. Business Objects and the BusinessObjects logo, BusinessObjects, Crystal Reports,Crystal Decisions, Web Intelligence, Xcelsius,and other Business Objects products and ser-vices mentioned herein as well as their respec-tive logos are trademarks or registeredtrademarks of Business Objects Software Ltd.Business Objects is an SAP company. Sybaseand Adaptive Server, iAnywhere, Sybase 365,SQL Anywhere and other Sybase products andservices mentioned herein as well as theirrespective logos are trademarks or registeredtrademarks of Sybase, Inc. Sybase is an SAPcompany. All other product and service namesmentioned are the trademarks of their respec-tive companies. Data contained in this docu-ment serves informational purposes only.National product specifications may vary.

Throughout this report, whenever a reference ismade to our website, such reference does notincorporate by reference into this report theinformation contained on our website.

We intend to make this report and other peri-odic reports publicly available on our Web site(www.sap.com) without charge immediatelyfollowing our filing with the U.S. Securitiesand Exchange Commission (SEC). We assumeno obligation to update or revise any part ofthis report, whether as a result of new informa-tion, future events or otherwise, unless we arerequired to do so by law.

1

%%TRANSMSG*** Transmitting Job: E03567 PCN: 005000000 ***%%PCMSG|1 |00013|Yes|No|03/23/2011 08:49|0|0|Page is valid, no graphics -- Color: D|

FORWARD-LOOKING STATEMENTS

This report contains forward-lookingstatements and information based on the beliefsof, and assumptions made by, our managementusing information currently available to them.Any statements contained in this report that arenot historical facts are forward-looking state-ments as defined in the U.S. Private SecuritiesLitigation Reform Act of 1995. We have basedthese forward-looking statements on our currentexpectations, assumptions, and projectionsabout future conditions and events. As a result,our forward-looking statements and informationare subject to uncertainties and risks. A broadrange of uncertainties and risks, many of whichare beyond our control, could cause our actualresults and performance to differ materiallyfrom any projections expressed in or impliedby our forward-looking statements. The uncer-tainties and risks include, but are not limitedto:

• Third parties may claim we infringetheir intellectual property rights; thatcould result in damages being awardedagainst us and limit our ability to uti-lize certain technologies in the future.

• Claims and lawsuits against us mayhave adverse outcomes.

• The uncertainty in the global economyand in political conditions has nega-tively impacted our business, financialposition, profit, and cash flows, andmay continue to do so in the future.

• If our established customers do notbuy additional software products,renew maintenance agreements, or pur-chase additional professional services,our business, financial position, profit,or cash flows could be negativelyimpacted.

• Undetected security flaws in our soft-ware may be exploited by other per-sons, damaging SAP or our customers.

• We might not acquire and integratecompanies effectively or successfullyand our strategic alliances might not besuccessful.

• We may not be able to prevent unau-thorized disclosure of our future strate-gies, technologies, and products, or ofinformation that is subject to data pro-tection or privacy law, and such disclo-sure may harm our business.

• Our IT security measures may bebreached or compromised, and we maysustain unplanned IT systemunavailability.

• We may be subject to attacks thatdegrade or deny our users’ access toour products and services or result intheft or misuse of intellectual propertyand confidential data.

• We may not be able to obtain adequatetitle to or licenses in, or to enforce,intellectual property.

• We use technologies under licensefrom third parties. The loss of the rightto use technologies could delay imple-mentation of our products or force usto pay higher license fees.

• Our revenue mix may vary and maynegatively impact our profit margins.

• An economic downturn may impactour liquidity and increase the defaultrisk associated with and the valuationof our financial assets and tradereceivables.

• Our international business activitiessubject us to different regulatoryrequirements in different countries andto economic and other risks that couldharm our business, financial position,profit, or cash flows.

• If we do not effectively manage ourgeographically dispersed workforce,our business may not operate effi-ciently, and this could have a negativeimpact on our profit.

• If we are unable to attract and retainmanagement and employees with spe-cialized knowledge and technologyskills, we may not be able to manage

2


our operations effectively or developsuccessful new products and services.

• Implementation of SAP software ofteninvolves a significant commitment ofresources by our customers and is sub-ject to a number of significant risksover which we often have no control.

• Corporate governance laws and regula-tory requirements in Germany, theUnited States, and elsewhere havebecome much more onerous.

• Management’s use of estimates mayaffect our profit and financial position.

• Current and future accounting pro-nouncements and other financialreporting standards, especially but notonly concerning revenue recognition,may adversely affect the financialresults we present.

• We may not be able to protect ourcritical information or assets or safe-guard our business operations againstdisruption.

We describe these and other risks anduncertainties in the Risk Factors section.

If one or more of these uncertainties orrisks materializes, or if management’s underly-ing assumptions prove incorrect, our actualresults could differ materially from thosedescribed in or inferred from our forward-look-ing statements and information.

The words “aim,” “anticipate,” “assume,”“believe,” “continue,” “could,” “counting on,”“is confident,” “estimate,” “expect,” “forecast,”“guidance,” “intend,” “may,” “outlook,” “plan,”“project,” “predict,” “seek,” “should,” “strat-egy,” “want,” “will,” “would,” and similarexpressions as they relate to us are intended toidentify such forward-looking statements. Suchstatements include, for example, those made inthe Operating Results section, our quantitativeand qualitative disclosures about market riskpursuant to the International Financial Report-ing Standards (IFRS), namely IFRS 7 andrelated statements in our Notes to the Consoli-dated Financial Statements, the Risk Factorssection, our outlook and other forward-looking

information appearing in other parts of thisreport. To fully consider the factors that couldaffect our future financial results both ourAnnual Report and Annual Report onForm 20-F should be considered, as well as allof our other filings with the Securities andExchange Commission (SEC). Readers are cau-tioned not to place undue reliance on theseforward-looking statements, which speak onlyas of the date specified or the date of thisreport. Except where legally required, weundertake no obligation to publicly update orrevise any forward-looking statements as aresult of new information that we receive aboutconditions that existed upon issuance of thisreport, future events, or otherwise unless weare required to do so by law.

This report includes statistical data aboutthe IT industry that comes from informationpublished by sources including Gartner, Inc., orGartner, a provider of market information andstrategic information for the IT industry; Inter-national Data Group, or IDC, a provider ofmarket information and advisory services forthe information technology, telecommunica-tions, and consumer technology markets;investment bank Goldman Sachs; financial ser-vices company UBS; Forrester Research, amajor market research company; AltimeterGroup, a digital strategies company; SiteIQ, acontact center outsourcing company; and TNSInfratest, an independent customer survey com-pany. This type of data represents only theestimates of Gartner, IDC, Goldman Sachs,UBS, Forrester Research, Altimeter Group,SiteIQ and other sources of industry data. SAPdoes not adopt nor endorse any of the statisticalinformation provided by sources such as Gart-ner, IDC, Goldman Sachs, UBS, ForresterResearch, Altimeter Group, SiteIQ or othersimilar sources that is contained in this report.In addition, although we believe that data fromthese companies is generally reliable, this typeof data is inherently imprecise. We caution younot to place undue reliance on this data.

3


FINANCIAL MEASURES CITED IN THIS REPORT

Reporting Standards

Since 2007, we have been required byGerman and European law to prepare Consoli-dated Financial Statements in accordance withIFRS. Beginning with our audited ConsolidatedFinancial Statements for the year endedDecember 31, 2009, we fully migrated to IFRSand discontinued preparing U.S. GAAP finan-cial information as of the end of 2009. There-fore, our 2009 Annual Report as well as ourAnnual Report on Form 20-F for fiscal year2009 were presented in accordance with IFRSfor the first time. As such, in 2010 our businessoutlook was, for the first time, based on non-IFRS numbers derived from IFRS numbers.Concurrently with this change in our externalfinancial communication, we modified ourinternal management reporting, planning andforecasting, and variable compensation plans,which are now aligned with the non-IFRS num-bers that we provide in our external communi-cations. We have also retrospectively updatedour non-IFRS financial information for the fis-cal year 2009 as a result of this change ininternal reporting. As disclosed in our 2009Annual Report the non-IFRS amounts wereported did not result in a significant differ-ence from the non-GAAP figures we reported,and therefore our internal management report-ing also did not change significantly.

Managing for Value

In 2010, we based our internal manage-ment reporting and operational targets primarilyon constant currency non-IFRS measures asdescribed in more detail below.

In 2010 and in 2009, for purposes of ourinternal management reporting, we eliminateddeferred support revenue write-downs resultingfrom acquisitions, the results of our discontin-ued activities, as well as recurring acquisition-related charges from certain key IFRS-derivedmeasures we mainly used to manage our opera-tional business, specifically, non-IFRS softwareand software-related service revenue, non-IFRSoperating profit and non-IFRS operatingmargin.

Performance Measures We Use to ManageOperating Items

We use various performance measures tohelp promote our primary goal of sustainedgrowth in corporate value and our ancillarygoal of profitable revenue growth. The follow-ing are some of these key measures:

• Non-IFRS SSRS revenue: Our softwareand software-related service revenue(SSRS) includes software and supportrevenue plus subscription and othersoftware-related service revenue. Theprincipal source of software revenue isthe fees customers pay for softwarelicenses. Software revenue is our keyrevenue driver because it tends toaffect our other revenue streams. Gen-erally, customers that buy softwarelicenses also enter into maintenancecontracts, and these generate recurringsoftware-related service revenue in theform of support revenue after the soft-ware sale. Maintenance contracts coversupport services and software updatesand enhancements. We also generatesoftware-related service revenue whenwe provide software on subscription orwith obligatory hosting terms. Softwarerevenue also tends to stimulate servicerevenue from consulting and trainingsales.

• Non-IFRS operating margin: In 2010,we used non-IFRS operating marginand constant currency non-IFRS oper-ating margin to measure our overalloperational process efficiency andoverall business performance. Non-IFRS operating margin is the ratio ofour non-IFRS operating profit to totalnon-IFRS revenue, expressed as a per-centage. See below for a discussion ofthe IFRS and non-IFRS measures weuse.

• Cash conversion rate: Our cash conver-sion rate is defined as the ratio of ournon-IFRS net cash flows from operat-ing activities to non-IFRS profit aftertax. Our cash conversion rate measures

4


the proportion of our non-IFRS profitafter tax that is converted to cash flow.

Performance Measures We Use to ManageNon-Operating Items

We use the following performance mea-sures to manage non-operating items:

• Finance income, net: This measureprovides insight especially into thereturn on liquid assets and capitalinvestments and the cost of borrowedfunds. To manage our financialincome, net, we focus on cash flow,the composition of our liquid asset andcapital investment portfolio, and theaverage rate of interest at which assetsare invested. We also monitor averageoutstanding borrowings and the associ-ated finance costs.

• DSO and DPO: We manage workingcapital by controlling the days’ salesoutstanding for receivables, or DSO(defined as average number of daysfrom the raised invoice to cash receiptfrom the customer), and the days’ pay-ables outstanding for liabilities, or DPO(defined as average number of daysfrom the received invoice to cash pay-ment to the vendor).

• Effective tax rate: We define our effec-tive tax rate as the ratio of income taxexpense to profit before tax, expressedas a percentage.

Performance Measures We Use to ManageOperating and Non-Operating Items

Earnings per share (EPS) measures ouroverall performance, because it captures alloperating and non-operating elements of profit.It represents the portion of profit after taxallocable to each SAP share outstanding (usingthe weighted average number of shares out-standing over the reporting period). EPS isinfluenced not only by our operating and non-operating business but also by the weightedaverage number of shares outstanding. Webelieve that stock repurchases and dividend dis-tributions are a good means to return value to

shareholders in accordance with the authoriza-tions granted by them.

Our holistic view of the performancemeasures described above together with ourassociated analyses comprise the informationwe use for value-based management. We useplanning and control processes to manage thecompilation of these key measures and theiravailability to our decision makers across vari-ous management levels.

SAP’s long-term strategic plans are thepoint of reference for our other planning andcontrolling processes, including creating a mul-tiyear plan. We identify future growth and prof-itability drivers at a highly aggregated level.This process is intended to identify the bestareas in which to target sustained investment.The next step is to evaluate our multiyear plansfor areas of support and development functionsand to break down the customer-facing plansby sales region. We allocate resources toachieve targets we derive from detailed annualplans. We also have processes in place to fore-cast revenue and profit on a quarterly basis, inorder to quantify whether we expect to realizeour strategic goals and to identify any devia-tions from plan. We closely monitor the con-cerned units in the Group to analyze thesedevelopments and define any appropriateactions.

Our entire network of planning, control,and reporting processes is implemented in inte-grated planning and information systems, basedon SAP software, across all organizational unitsso that we can conduct the evaluations andanalyses needed to make informed decisions.

Measures Used in This Report

We provided our 2010 outlook on thebasis of certain non-IFRS measures as describedabove. Therefore, this report contains a compar-ison of our actual performance in 2010 againstthat outlook.

This introductory section provides:

• A reconciliation of IFRS measures tothe respective and most comparablenon-IFRS measures.

5


• An explanation of the non-IFRS mea-sures we disclose in this report, thereasons why management believesthese measures are useful to investorsand the limitations of these measures.

• An explanation of changes we madewith effect from January 1, 2011, tothe definitions we use for non-IFRSprofit and margin measures.

Reconciliations of IFRS to Non-IFRS Numbers for 2010 and 2009

The following tables reconcile our IFRS numbers to the respective and most comparable non-IFRS numbers for each of 2010 and 2009. Due to rounding, the sum of the numbers presented inthese tables might not precisely equal the totals we provide.

IFRS Adjustment Non-IFRSCurrency

Impact

Non-IFRSConstantCurrency IFRS Adjustment Non-IFRS

2010 2009for the years ended December 31,E millions, unless otherwise stated

Revenue numbers

Software revenue . . . . . . . . . . . . . . . . . 3,265 0 3,265 �244 3,021 2,607 0 2,607

Support revenue. . . . . . . . . . . . . . . . . . 6,133 74 6,207 �313 5,894 5,285 11 5,296

Subscription and other software-relatedservice revenue . . . . . . . . . . . . . . . . 396 0 396 �13 383 306 0 306

Software and software-related servicerevenue . . . . . . . . . . . . . . . . . . . . . . . 9,794 74 9,868 �570 9,298 8,198 11 8,209

- thereof SAP excluding Sybase . . . . 9,539 0 9,539 �545 8,994 8,198 11 8,209

Consulting revenue. . . . . . . . . . . . . . . . 2,197 0 2,197 �118 2,079 2,074 0 2,074

Other service revenue . . . . . . . . . . . . . . 473 0 473 �22 451 400 0 400

Professional services and other servicerevenue . . . . . . . . . . . . . . . . . . . . . . . 2,670 0 2,670 �140 2,530 2,474 0 2,474

Total revenue . . . . . . . . . . . . . . . . . . . . . . 12,464 74 12,538 �709 11,829 10,672 11 10,683

Total operating expense numbers

Cost of software and software-relatedservices . . . . . . . . . . . . . . . . . . . . . . �1,823 198 �1,625 �1,658 184 �1,474

Cost of professional services and otherservices . . . . . . . . . . . . . . . . . . . . . . �2,071 9 �2,062 �1,851 4 �1,847

Research and development . . . . . . . . . . �1,729 5 �1,725 �1,591 4 �1,587

Sales and marketing . . . . . . . . . . . . . . . �2,645 80 �2,565 �2,199 73 �2,126

General and administration . . . . . . . . . . �636 16 �620 �564 3 �561

Restructuring. . . . . . . . . . . . . . . . . . . . 3 �5 �2 �198 4 �194

TomorrowNow litigation . . . . . . . . . . . . �981 981 0 �56 56 0

Other operating income, net . . . . . . . . . . 9 0 9 33 0 33

Total operating expenses . . . . . . . . . . . . . . �9,873 1,283 �8,591 370 �8,221 �8,084 327 �7,756

Operating profit and margin

Operating profit . . . . . . . . . . . . . . . . . . . . 2,591 1,357 3,947 �339 3,608 2,588 339 2,927

Operating margin in % . . . . . . . . . . . . . . . 20.8 31.5 30.5 24.3 27.4

This report discloses certain financialmeasures, such as non-IFRS revenue, non-IFRSexpenses, non-IFRS operating profit, non-IFRSoperating margin, constant currency revenue,and operating profit measures that are not pre-pared in accordance with IFRS and are there-fore considered non-IFRS financial measures.

Our non-IFRS financial measures may not cor-respond to non-IFRS financial measures thatother companies report. The non-IFRS financialmeasures that we report should only be consid-ered in addition to, and not as substitutes for orsuperior to, revenue, operating profit, operating

6


margin, or other measures of financial perfor-mance prepared in accordance with IFRS.

Explanations of Non-IFRS Measures

We believe that the supplemental histori-cal and prospective non-IFRS financial infor-mation presented in this report provides usefulinformation to investors because managementuses this information — in addition to financialdata prepared in accordance with IFRS — toattain a more transparent understanding of ourpast performance and our future results. In2010, we used these non-IFRS measures con-sistently in our internal planning and forecast-ing, reporting and compensation, as well as inour external communications as follows:

• Our management primarily uses thesenon-IFRS measures rather than IFRSmeasures as the basis for making finan-cial, strategic and operating decisions.

• The variable remuneration componentsof our Executive Board members andemployees are based on non-IFRS rev-enue and non-IFRS operating profitrather than the respective IFRSmeasures.

• The annual budgeting process for allmanagement units is based on non-IFRS revenue and non-IFRS operatingprofit numbers rather than the respec-tive IFRS numbers, whereas in 2010costs such as share-based compensa-tion and restructuring were consideredonly on a company level.

• All forecast and performance reviewswith all senior managers globally arebased on these non-IFRS measures,rather than the respective IFRSnumbers.

• Company-internal target setting andoutlook provided to the capital marketsare both based on non-IFRS revenuesand non-IFRS profit measures ratherthan the respective IFRS numbers.

Our non-IFRS financial measures reflectadjustments based on the items below, as well

as adjustments for the related income taxeffects:

Non-IFRS Revenue

Revenue items in this report identified asnon-IFRS revenue have been adjusted from therespective IFRS numbers by including the fullamount of support revenue that would havebeen recorded by entities acquired by SAP hadthey remained stand-alone entities but whichwe are not permitted to record as revenue underIFRS due to fair value accounting for the sup-port contracts in effect at the time of therespective acquisitions.

Under IFRS, we record at fair value thesupport contracts in effect at the time entitieswere acquired. Consequently, our IFRS supportrevenue, our IFRS software and software-related service revenue, and our IFRS totalrevenue for periods subsequent to acquisitionsdo not reflect the full amount of support reve-nue that would have been recorded for thesesupport contracts absent these acquisitions bySAP. Adjusting revenue numbers for this reve-nue impact provides additional insight into thecomparability across periods of our ongoingperformance.

Non-IFRS Operating Expense

Operating expense figures in this reportthat are identified as non-IFRS operatingexpenses have been adjusted by excluding thefollowing acquisition-related charges:

• Acquisition-related charges

• Amortization expense/impair-ment charges of intangiblesacquired in business combina-tions and certain stand-aloneacquisitions of intellectual prop-erty (including purchased in-pro-cess research and development)

• Restructuring expenses and set-tlements of preexisting businessrelationships in connection witha business combination

• Acquisition-related third-partyexpenses

7


• Discontinued activities: Results of dis-continued operations that qualify assuch under IFRS in all respects exceptthat they do not represent a major lineof business. Under U.S. GAAP, whichwe reported under until 2009, we pre-sented the results of operations of theTomorrowNow entities as discontinuedoperations. Under IFRS, results of dis-continued operations may only be pre-sented as discontinued operations if aseparate major line of business or geo-graphical area of operations is discon-tinued. Our TomorrowNow operationswere separate, but were not a major lineof business and thus did not qualify forseparate presentation under IFRS.

The operating profit and operating mar-gin outlook provided for 2011 and the compa-rable 2010 operating profit and operatingmargin numbers are based on an updated non-IFRS operating expenses definition that addi-tionally excludes the following:

• Expenses from our share-based com-pensation plans

• Restructuring expenses

Non-IFRS Operating Profit, Non-IFRSOperating Margin

Operating profit and operating margin inthis document identified as non-IFRS operatingprofit and non-IFRS operating margin have beenadjusted from the respective IFRS measures byadjusting for the abovementioned non-IFRS rev-enue and non-IFRS operating expenses.

We exclude certain acquisition-relatedexpenses for the purpose of calculating non-IFRS operating profit and non-IFRS operatingmargin when evaluating SAP’s continuing oper-ational performance because these expensesgenerally cannot be changed or influenced bymanagement after the relevant acquisition otherthan by disposing of the acquired assets. Sincemanagement at levels below the ExecutiveBoard has no influence on these expenses, wegenerally do not consider these expenses forthe purpose of evaluating the performance ofmanagement units. Additionally, these non-

IFRS measures have been adjusted from therespective IFRS measures for the results of thediscontinued activities.

We believe that our non-IFRS measuresare useful to investors for the following reasons:

• The non-IFRS measures provide inves-tors with insight into management’sdecision-making, since managementuses these non-IFRS measures to runour business and make financial, stra-tegic and operating decisions.

• The non-IFRS measures provide inves-tors with additional information thatenables a comparison of year-over-yearoperating performance by eliminatingcertain direct effects of acquisitionsand discontinued activities.

• Non-IFRS and non-GAAP measuresare widely used in the software indus-try. In most cases, our non-IFRS mea-sures are more suitable for comparisonwith our competitors’ correspondingnon-IFRS and non-GAAP measuresthan are our IFRS measures.

Additionally, we believe that our adjust-ments to our IFRS numbers for the results ofour discontinued TomorrowNow activities areuseful to investors for the following reasons:

• Despite the migration from U.S. GAAPto IFRS, we will continue to internallytreat the ceased TomorrowNow activi-ties as discontinued operations and thuswill continue to exclude potential futureTomorrowNow results, which areexpected to mainly comprise expensesin connection with the Oracle lawsuit,from our internal management report-ing, planning, forecasting, and compen-sation plans. Therefore, adjusting ournon-IFRS measures for the results ofthe discontinued TomorrowNow activi-ties provides insight into the financialmeasures that SAP uses internally.

• By adjusting the non-IFRS numbersfor the results from our discontinuedTomorrowNow activities, the non-IFRSnumbers are more comparable to the

8


non-GAAP measures that SAP usedthrough the end of 2009. Thatenhances the comparability of SAP’sperformance measures before and afterthe full IFRS migration.

Our outlook for operating profit and oper-ating margin in 2011 and their 2010 compara-tive amounts are based on amended non-IFRSdefinitions that exclude expenses for share-basedcompensation and restructuring. In the past, weallocated and managed these expenses only atthe Group level. We excluded them at all levelsbelow that in the Group for the purpose ofmanaging operating performance. By amendingthe non-IFRS definitions and adjusting the mea-sures we use for Group-level managementaccordingly, we have standardized the measureswe use for operational purposes across all levelsin the Group. In addition, the changes renderour non-IFRS measures more suitable for com-parison with the non-GAAP measures of someof our closest competitors.

We include the revenue adjustments out-lined above and exclude the expense adjust-ments outlined above when making decisions toallocate resources, both on a company leveland at lower levels of the organization. In addi-tion, we use these non-IFRS measures to gain abetter understanding of SAP’s comparativeoperating performance from period to period.We believe that our non-IFRS financial mea-sures described above have limitations, whichinclude but are not limited to the following:

• The eliminated amounts may be mate-rial to us.

• Without being analyzed in conjunctionwith the corresponding IFRS measuresthe non-IFRS measures are not indica-tive of our present and future perfor-mance, foremost for the followingreasons:

• While our non-IFRS profit num-bers reflect the elimination ofcertain acquisition-relatedexpenses, no eliminations aremade for the additional revenueand other revenue that resultfrom the acquisitions.

• The acquisition-related chargesthat we eliminate in deriving ournon-IFRS profit numbers arelikely to recur should SAP enterinto material business combina-tions in the future.

• The acquisition-related amortiza-tion expense that we eliminate inderiving our non-IFRS profitnumbers is a recurring expensethat will impact our financialperformance in future years.

• The revenue adjustment for thefair value accounting of theacquired entities’ support con-tracts and the expense adjust-ment for acquisition-relatedcharges do not arise from a com-mon conceptual basis. This isbecause the revenue adjustmentaims to improve the comparabil-ity of the initial post-acquisitionperiod with future post-acquisi-tion periods while the expenseadjustment aims to improve thecomparability between post-acquisition periods and pre-acquisition periods. This shouldparticularly be considered whenevaluating our non-IFRS operat-ing profit and non-IFRS operat-ing margin numbers as thesecombine our non-IFRS revenueand non-IFRS expenses despitethe absence of a common con-ceptual basis.

• Our discontinued activities,share-based compensationexpense and restructuringcharges could result in signifi-cant cash outflows.

• The valuation of our cash-settled,share-based payment plans couldvary significantly due to the fluc-tuation of our share price anddue to the other parameters usedin the valuation of these plans.

9


• We have in the past issuedshare-based compensationawards to our employees everyyear, and intend to continuedoing so in the future. Thus ourshare-based compensationexpenses are recurring althoughthe amounts usually change fromperiod to period.

We believe, however, that the presenta-tion of the non-IFRS measures and the corre-sponding IFRS measures, together with therelevant reconciliations, provides useful infor-mation to management and investors regardingpresent and future business trends relating toour financial condition and results of opera-tions. We do not evaluate our growth and per-formance without considering both the non-IFRS measures and the relevant IFRS mea-sures. We caution the readers of this documentto follow a similar approach by considering ournon-IFRS measures only in addition to, and notas a substitute for or superior to, revenue orother measures of our financial performanceprepared in accordance with IFRS.

Constant Currency Period-Over-PeriodChanges

We believe it is important for investors tohave information that provides insight into oursales. Revenue measures determined under IFRSprovide information that is useful in this regard.However, both sales volume and currency effectsimpact period-over-period changes in sales reve-nue. We do not sell standardized units of prod-ucts and services, so we cannot provide relevantinformation on sales volume by providing dataon the changes in product and service units sold.To provide additional information that may beuseful to investors in breaking down and evalu-ating changes in sales volume, we present infor-mation about our revenue and various valuesand components relating to operating profit thatare adjusted for foreign currency effects. Wecalculate constant currency year-over-yearchanges in revenue and operating profit bytranslating foreign currencies using the averageexchange rates from the previous year instead ofthe current year.

We believe that data on constant cur-rency period-over-period changes has limita-tions, particularly as the currency effects thatare eliminated constitute a significant elementof our revenue and expenses and could impactour performance significantly. We thereforelimit our use of constant currency period-o-ver-period changes to the analysis of changesin volume as one element of the full change ina financial measure. We do not evaluate ourresults and performance without consideringboth constant currency period-over-periodchanges in non-IFRS revenue and non-IFRSoperating profit on the one hand and changesin revenue, expenses, profit, or other measuresof financial performance prepared in accor-dance with IFRS on the other. We caution thereaders of this report to follow a similarapproach by considering data on constant cur-rency period-over-period changes only in addi-tion to, and not as a substitute for or superiorto, changes in revenue, expenses, profit, orother measures of financial performance pre-pared in accordance with IFRS.

Free Cash Flow

We use our free cash flow measure toestimate the cash flow remaining after allexpenditures required to maintain or expand theorganic business have been paid off. This pro-vides management with supplemental informa-tion to assess our liquidity needs. We calculatefree cash flow as net cash from operating activ-ities minus purchases of intangible assets andproperty, plant, and equipment. Free cash flowshould be considered in addition to, and not asa substitute for or superior to, cash flow orother measures of liquidity and financial per-formance prepared in accordance with IFRS.

Free Cash Flow2010 2009 Change

E millions

Net cash flows fromoperating activities. . 2,932 3,015 �3%

Purchases ofintangible assetsand property, plant,and equipment . . . . �334 �225 48%

Free cash flow . . . . . . . 2,598 2,790 �7%

10


Part I

Item 1, 2, 3

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIORMANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTEDTIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

SELECTED FINANCIAL DATA

The following table sets forth ourselected consolidated financial data as of and

for each of the years in the five-year periodended December 31, 2010. The consolidatedfinancial data has been derived from, andshould be read in conjunction with, our Consol-idated Financial Statements prepared in accor-dance with International Financial ReportingStandards as issued by the InternationalAccounting Standards Board (IFRS), presentedin “Item 18. Financial Statements” of thisreport.

Our selected financial data and our Con-solidated Financial Statements are presented ineuros. Financial data as of and for the yearended December 31, 2010 has been translatedinto U.S. dollars for the convenience of thereader.

11


Part I

Item 3

SELECTED FINANCIAL DATA: IFRS

2010(1) 2010 2009 2008 2007 2006US$ E E E E E

millions, unless otherwise stated

Income Statement Data: Years Ended December 31,

Software and software-related servicerevenue . . . . . . . . . . . . . . . . . . . . . . . . 12,996 9,794 8,198 8,457 7,427 6,605

Total revenue . . . . . . . . . . . . . . . . . . . . . . 16,538 12,464 10,672 11,575 10,256 9,402

Operating profit . . . . . . . . . . . . . . . . . . . . 3,438 2,591 2,588 2,701 2,698 2,503

Operating margin in %(2) . . . . . . . . . . . . . 20.8 20.8 24.3 23.3 26.3 26.6

Profit after tax . . . . . . . . . . . . . . . . . . . . . 2,406 1,813 1,750 1,848 1,908 1,836

Profit attributable to owners of parent . . . 2,403 1,811 1,748 1,847 1,906 1,835

Earnings per share(2)

Basic in A. . . . . . . . . . . . . . . . . . . . . . . 2.02 1.52 1.47 1.55 1.58 1.50

Diluted in A . . . . . . . . . . . . . . . . . . . . . 2.02 1.52 1.47 1.55 1.58 1.49

Other Data:

Weighted-average number of sharesoutstanding

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . 1,188 1,188 1,188 1,190 1,207 1,226

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . 1,189 1,189 1,189 1,191 1,210 1,231

Statement of Financial Position Data: At December 31,

Cash and cash equivalents . . . . . . . . . . . . 4,668 3,518 1,884 1,280 1,608 2,399

Total assets(3) . . . . . . . . . . . . . . . . . . . . . . 27,654 20,841 13,374 13,900 10,161 9,332

Current financial liabilities(4). . . . . . . . . . 188 142 146 2,563 82 63

Non-current financial liabilities(4) . . . . . . 5,903 4,449 729 40 6 3

Issued capital(5) . . . . . . . . . . . . . . . . . . . . 1,628 1,227 1,226 1,226 1,246 1,268

Total equity . . . . . . . . . . . . . . . . . . . . . . . 13,035 9,824 8,491 7,171 6,478 6,123(1) Amounts presented in US$ have been translated

for the convenience of the reader at A1.00 toUS$1.3269, the Noon Buying Rate for convert-ing A1.00 into dollars on December 30, 2010.See “Item 3. Key Information — ExchangeRates” for recent exchange rates between theEuro and the dollar.

(2) Operating profit is the numerator and total reve-nue is the denominator in the calculation ofoperating margin. Profit attributable to ownersof parent is the numerator and weighted averagenumber of shares outstanding is the denominatorin the calculation of earnings per share.

(3) The large increase in total assets from 2009 to2010 was mainly due to the acquisition of Syb-ase in 2010 and the large increase in total assets

from 2007 to 2008 was due to the acquisition ofBusiness Objects in 2008. See Note (4) to ourConsolidated Financial Statements for moreinformation on acquisitions.

(4) The balances include primarily bonds, privateplacements and bank loans. Current is defined ashaving a remaining life of one year or less; non-current is defined as having a remaining termexceeding one year. The significant increase incurrent financial liabilities during 2008 was due tofinancial debt incurred to finance the acquisitionof Business Objects. The significant increase innon-financial liabilities in 2010 was due to anacquisition-term loan used to finance the acquisi-tion of Sybase. In addition, we issued two bondsand a U.S. private placement transaction, of

12


which, the proceeds were primarily used tofinance the acquisition of Sybase. See Note (18b)to our Consolidated Financial Statements for moreinformation on our liabilities.

(5) The 2007 and 2008 figures reflect cancellationsof 23 million and 21 million treasury shareseffective September 7, 2007 and September 4,2008, respectively. See “Item 9. The Offer andListing — General” for more detail on the can-cellation of shares.

Exchange Rates

The prices for ordinary shares traded onGerman stock exchanges are denominated ineuro. Fluctuations in the exchange rate betweenthe euro and the dollar affect the dollar equiva-lent of the euro price of the ordinary sharestraded on the German stock exchanges and, asa result, may affect the price of the ADRstraded on the NYSE in the United States. See“Item 9. The Offer and Listing” for a descrip-tion of the ADRs. In addition, SAP AG payscash dividends, if any, in euro. As a result, anyexchange rate fluctuations will also affect thedollar amounts received by the holders ofADRs on the conversion into dollars of cashdividends paid in euro on the ordinary sharesrepresented by the ADRs. Deutsche BankTrust Company Americas is the depositary (theDepositary) for SAP AG’s ADR program. Thedeposit agreement with respect to the ADRsrequires the Depositary to convert any dividendpayments from euro into dollars as promptly aspracticable upon receipt. For additional infor-mation on the Depositary and the fees associ-ated with SAP’S ADR program see “Item 12Description of Securities Other Than EquitySecurities — American Depositary Shares.”

A significant portion of our revenue andexpense is denominated in currencies other thanthe euro. Therefore, fluctuations in the exchangerate between the euro and the respective curren-cies to which we are exposed could materiallyaffect our business, financial position, income orcash flows. See “Item 5. Operating and FinancialReview and Prospects — Foreign CurrencyExchange Rate Exposure” for details on theimpact of these exchange rate fluctuations.

The following table sets forth (i) the aver-age, high and low Noon Buying Rates for theeuro expressed as U.S. dollars per A1.00 for thepast five years on an annual basis and (ii) thehigh and low Noon Buying Rates on a monthlybasis from July 2010 through March 3, 2011.Year Average(1) High Low

2006 . . . . . . . . . 1.2661 1.3327 1.1860

2007 . . . . . . . . . 1.3797 1.4862 1.2904

2008 . . . . . . . . . 1.4695 1.6010 1.2446

2009 . . . . . . . . . 1.3955 1.5100 1.2547

2010 . . . . . . . . . 1.3216 1.4536 1.1959

Month High Low

2010

July . . . . . . . . . . . . . . . . . 1.3069 1.2464

August . . . . . . . . . . . . . . . 1.3282 1.2652

September . . . . . . . . . . . . 1.3638 1.2708

October . . . . . . . . . . . . . . 1.4066 1.3688

November . . . . . . . . . . . . 1.4224 1.3036

December . . . . . . . . . . . . 1.3395 1.3089

2011

January . . . . . . . . . . . . . . 1.3715 1.2944

February . . . . . . . . . . . . . 1.3794 1.3474

March (through March 3,2011) . . . . . . . . . . . . . . 1.3947 1.3813

(1) The average of the applicable Noon BuyingRates on the last day of each month during therelevant period.

The Noon Buying Rate on March 3,2011 was US$1.3947 per A1.00.

DIVIDENDS

Dividend Distribution Policy

Dividends are jointly proposed by SAPAG’s Supervisory Board (Aufsichtsrat) and Exec-utive Board (Vorstand) based on SAP AG’s year-end stand-alone statutory financial statements,subject to approval by the shareholders. Divi-dends are officially declared for the prior year atSAP AG’s Annual General Meeting of Sharehold-ers. SAP AG’s Annual General Meeting of

13

Part I

Item 3


Shareholders usually convenes during the secondquarter of each year. Dividends are usually remit-ted to the custodian bank on behalf of the share-holder within one business day following theAnnual General Meeting of Shareholders. Recordholders of the ADRs on the dividend record datewill be entitled to receive payment of the divi-dend declared in respect of the year for which itis declared. Cash dividends payable to such hold-ers will be paid to the Depositary in euro and,subject to certain exceptions, will be convertedby the Depositary into U.S. dollars.

Dividends paid to holders of the ADRsmay be subject to German withholding tax. See“Item 8. Financial Information — Other Finan-cial Information — Dividend Policy” and“Item 10. Additional Information — Taxation,”for further information.

Annual Dividends Paid and Proposed

The following table sets forth in euro theannual dividends paid or proposed to be paidper ordinary share in respect of each of theyears indicated. One SAP ADR currently repre-sents one SAP AG ordinary share. Accordingly,the final dividend per ADR is equal to thedividend for one SAP AG ordinary share and isdependent on the euro/U.S. dollar exchange rate.The table does not reflect tax credits that maybe available to German taxpayers who receivedividend payments. If you own our ordinaryshares or ADRs and if you are a U.S. resident,refer to “Item 10. Additional Information— Taxation,” for further information.

Year Ended December 31, E US$

Dividend Paidper Ordinary

Share

2006 . . . . . . . . . . . . . . . . . . . 0.46 0.62(1)

2007 . . . . . . . . . . . . . . . . . . . 0.50 0.77(1)

2008 . . . . . . . . . . . . . . . . . . . 0.50 0.68(1)

2009 . . . . . . . . . . . . . . . . . . . 0.50 0.60(1)

2010 (proposed) . . . . . . . . . . 0.60(2) 0.84(2)(3)

(1) Translated for the convenience of the readerfrom euro into U.S. dollars at the Noon BuyingRate for converting euro into U.S. dollars on thedividend payment date. The Depositary isrequired to convert any dividend payments

received from SAP as promptly as practicableupon receipt.

(2) Subject to approval at the Annual General Meet-ing of Shareholders of SAP AG currently sched-uled to be held on May 25, 2011.

(3) Translated for the convenience of the readerfrom euro into U.S. dollars at the Noon BuyingRate for converting euro into U.S. dollars onMarch 3, 2011 of US$1.3947 per A1.00. Thedividend paid may differ due to changes in theexchange rate.

The amount of dividends paid on theordinary shares depends on the amount of prof-its to be distributed by SAP AG, which dependsin part upon our performance. In addition, theamount of dividends received by holders ofADRs may be affected by fluctuations inexchange rates (see “Item 3. Key Informa-tion — Exchange Rates”). The timing andamount of future dividend payments willdepend upon our future earnings, capital needsand other relevant factors, in each case as pro-posed by the Executive Board and the Supervi-sory Board of SAP AG and approved at theAnnual General Meeting of Shareholders.

RISK FACTORS

Economic, Political, and Regulatory Risk

The uncertainty in the global economy andin political conditions has negativelyimpacted our business, financial position,profit, and cash flows, and may continue todo so in the future.

Our customers’ willingness to invest inacquiring and implementing SAP products gen-erally varies with economic and other businessconditions. In the regions in which we do busi-ness and the industries in which our customersoperate, persistent economic uncertainty couldcontinue to have negative effects, including:

• Generally declining IT investment

• Decreased customer demand for oursoftware and services, includingdelayed, canceled, and smaller orders

14

Part I

Item 3


• Customers’ inability to obtain credit onacceptable terms, or at all, to financepurchases of our software and services

• Increased incidence of default andinsolvency of customers, business part-ners, and key suppliers

• Increased default risk, which may leadto significant write-downs in the future

• Greater pressure on the prices of ourproducts and services

• Pressure on our operating margin

If economic conditions worsen, weexpect a sustained negative impact on our reve-nue growth, more defaults, and a consequentnegative impact on our income. Moreover, con-tinued or further economic deterioration couldexacerbate the other risks we describe in thisreport.

Our international business activities subjectus to different regulatory requirements indifferent countries and to economic andother risks that could harm our business,financial position, profit or cash flows.

We currently market our products andservices in over 120 countries in the Americas,APJ, and EMEA regions. Sales in these coun-tries are subject to risks inherent in interna-tional business operations. Among others, theserisks include:

• Regional and local economic declineor instability and resulting marketuncertainty

• General economic or political condi-tions in each country or region

• Conflict and overlap among differenttax regimes

• Possible tax constraints impeding busi-ness operations in certain countries

• The management of an organizationspread over various jurisdictions

• Exchange rate fluctuations

• Longer payment cycles

• Regulatory constraints such as importand export restrictions, competitionlaw regimes, legislation governing theuse of the Internet, additional require-ments for the development, certifica-tion, and distribution of software andservices, trade restrictions, changes intariff and freight rates and travel andcommunication costs

• Expenses associated with the custom-ization of our products on a local leveland transacting business in the localcurrency

• Differing demands from works coun-cils and labor unions in the differentcountries

• The higher cost of doing businessinternationally

As we expand further into new regionsand markets, these risks could intensify. One ormore of these factors could negatively impactour operations globally or in one or more coun-tries or regions. As a result, our business,financial position, reputation, profit, or cashflows could be impacted.

Social and political instability caused, forexample, by terrorist attacks, war or interna-tional hostilities, pandemic disease out-breaks, or natural disasters could negativelyimpact our business.

Terrorist attacks and other acts of violenceor war, pandemic disease outbreaks, or naturaldisasters could have a negative impact on theworld economy. The resultant social and politicalinstability could contribute further to the currenteconomic decline and economic and politicaluncertainty in many regions in which we dobusiness. That could negatively impact our reve-nue and investment decisions, and those of ourcustomers. Our corporate headquarters, whichincludes our main research and developmentdepartments and certain other critical businessfunctions, is located in the German state ofBaden-Wurttemberg. A catastrophic event affect-ing the northern part of Baden-Wurttembergcould have a highly material impact on our

15

Part I

Item 3


operations. Catastrophic events at other SAP cen-ters, notably Buenos Aires (Argentina), Sao Paulo(Brazil), Shanghai (China), Prague (CzechRepublic), Bangalore (India), Dublin (Ireland),Paris (France), Ra’anana (Israel), Tokyo (Japan),Mexico City (Mexico), London (United King-dom), Vancouver (Canada), or Singapore, or atour U.S. locations in New York, Dublin (Califor-nia), Palo Alto (California), or Newtown Square(Pennsylvania), could also impact our operations.For example, on March 11th, 2011, a massiveearthquake hit Japan and a subsequent tsunami aswell as aftershocks resulted in substantial damageand loss of life in Japan. Nuclear power plantswere also affected, leading to a nuclear crisis inthe areas surrounding the affected power plants.The stock markets have already reacted to thedevelopments in Japan and most of the majorindices have declined. SAP’s share price experi-enced a similar decline since then. At the timethis statement is given there were no reliablepredictions on the further development of thissituation and resulting impacts.

As a result we cannot judge the impact thisnatural disaster may have on our business forQ1 2011 and beyond, but it may negativelyimpact our financial position, cash flow andresult of operations as well as stock price.

In addition, a catastrophic event that results inthe loss of significant percentages of personnelor the destruction or disruption of operations atour headquarters or other key locations couldaffect our ability to provide normal businessservices and to generate the expected income.

Market Risks

If our established customers do not buy addi-tional software products, renew maintenanceagreements, or purchase additional professionalservices, our business, financial position, profit,or cash flows could be negatively impacted.

Our large installed customer base tradi-tionally generates additional new software,maintenance, consulting, and training revenue.In 2010, we continued to offer a wide range ofsupport services. To achieve our business goals,we depend materially on the success of our

support portfolio and on our own ability todeliver high-quality services. If existing cus-tomers cancel or do not renew their mainte-nance contracts, or if they seek alternativeofferings from other vendors or decide not tobuy additional products and services, this willhave a material negative impact on our busi-ness, financial position, profit, or cash flows.

Our market share and profit may declinedue to intense competition and consolidationin the software industry.

The software industry continues toevolve rapidly, due to consolidation and techno-logical innovation. As a result, the market forour products and services remains intenselycompetitive. Over the last decade, we haveexpanded from our traditional large enterpriseresource planning (ERP) offerings to new prod-ucts and services, like on demand and ondevice, which expose us to competitors varyingin size, geographic location, and specialty.Competitors may gain market share because ofacquisitions, or because the growing popularityof new development models, such as service-oriented architecture (SOA), and new deliveryand licensing models, such as software as aservice (SaaS), business process outsourcing(BPO), and cloud computing, enables them toalso offer integrated package solutions thatcompete with ours. For example, IBM, Micro-soft and Oracle have acquired companies toextend their solutions portfolios or marketshare, which has increased competitive pressureon SAP. SaaS providers such as Salesforce.com,part of a growing SaaS ecosystem for applica-tions, also compete with SAP for segmentshare. Cloud computing is driving fast adoptionof Web-based business models. Any companycan orchestrate or own end-to-end value chainsand so impact our key growth markets. Aggres-sive tactics by mobile device and platform pro-viders could impact the market potential forSAP in mobile applications and could cut SAPoff from potential revenue sources. Current andpotential competitors are establishing or may inthe future establish or extend cooperative rela-tionships among themselves or with third par-ties to better address their customers’ needs.

16

Part I

Item 3


This increased competition could result inincreased price pressure, cost increases, andloss of market share for SAP.

Business Strategy Risks

Demand for our new products may notdevelop as planned and our strategy for newmarkets, new business models, and new con-sumption models may not be successful.

The demand for, and customers’ accep-tance of, the products and services we haverecently introduced are subject to a high levelof uncertainty. Our strategy centers on innovat-ing on our stable core, and developing businessapplications — on premise, on demand, ondevice, and orchestration. In that context, intro-ducing new business and consumption models,expanding our partner ecosystem, and creatingthe infrastructure for volume business are all ofgreat importance. Despite our efforts, demandfor our products and services may fail todevelop as planned, and this could have a mate-rial negative impact on our business, financialposition, income, or cash flows. In addition,entering new market segments exposes us tothe risks associated with developing andlaunching new products. For more information,see the Product Risks section.

If we fail to develop new relationships andenhance existing relationships with channelpartners, software suppliers, system integra-tors, value-added resellers, and independentsoftware vendors (ISVs) that contribute tothe sale of our products and services, ourbusiness, financial position, profit, or cashflows may be adversely impacted.

We have entered into cooperation agree-ments with channel partners and leading soft-ware and hardware vendors. Most of theseagreements are of relatively short duration andare nonexclusive. The parties concerned typi-cally maintain similar arrangements with ourcompetitors, and some are our competitors.Additionally, we maintain a network of ISVsthat develop their own business applications forthe SAP NetWeaver technology platform. These

third-party relationships carry numerous risks.For example:

• The relevant counterparties may notrenew their agreements with us at allor on terms acceptable to us

• The relevant counterparties may fail toprovide high-quality products andservices

• The relevant counterparties may notdevote sufficient resources to promote,sell, support, and integrate their prod-ucts within our portfolio

If one or more of these risks materialize,the marketing of and demand for our productsand services may be negatively impacted, andwe may not be able to compete successfullywith other software vendors, which could harmour reputation or negatively impact our busi-ness, financial position, profit, or cash flows.

Human Capital Risks

If we do not effectively manage our geo-graphically dispersed workforce, our busi-ness may not operate efficiently, and thiscould have a negative impact on our profit.

Our success is dependent on appropriatealignment of our workforce planning processand location strategy with our general strategy.Changes in headcount and infrastructure needscould result in a mismatch between ourexpenses and revenue. It is critical that wemanage our internationally dispersed workforceeffectively; otherwise our business may notoperate efficiently. That could have a negativeimpact on our financial position, profit, or cashflows.

If we are unable to attract and retain man-agement and employees with specializedknowledge and technology skills, we may notbe able to manage our operations effectivelyor develop successful new products andservices.

Our highly qualified employees and man-agers provide the foundation for our continuedsuccess. Competition in our industry for highly

17

Part I

Item 3


skilled and specialized personnel and leaders isintense. If we are unable to attract well-quali-fied personnel, or if our highly skilled andspecialized personnel leave SAP and qualifiedreplacements are not available, we may not beable to manage our operations effectively ordevelop successful new products and services.This is particularly true as we continue to intro-duce new and innovative technology offerings.Hiring such personnel may also expose us toclaims by other companies seeking to preventtheir employees from working for a competitor.

Organizational and Governance-Related Risks

Corporate governance laws and regulatoryrequirements in Germany, the United States,and elsewhere have become much moreonerous.

As a stock corporation domiciled inGermany with securities listed in Germany andthe United States, we are subject to German,U.S., and other governance-related regulatoryrequirements. The standards have become signif-icantly more onerous in recent years, notablywith the implementation of the U.S. Sarbanes-Oxley Act and the U.S. Dodd-Frank Act and anincreasingly more rigorous application of theU.S. Foreign Corrupt Practices Act, and theincreasing degree of regulation in Germany. Therules are highly complex, and there can be noassurance that we will not be held in breach ofregulatory requirements if, for example, individ-ual employees behave fraudulently or negligently,or if we fail to comply with certain formal docu-mentation requirements. Any related allegationsof wrongdoing against us, whether merited ornot, could have a material negative impact onour reputation as well as on the trading price ofour common stock and ADRs.

SAP’s sustainability strategy may be difficultto maintain, and a failure by us to meetcustomer or partner expectations or gener-ally accepted sustainability standards couldhave an adverse impact on our results ofoperations, our business, and our reputation.

For SAP, sustainability is a managementapproach that guides our engagement in new

business opportunities — holistically encompass-ing profitable growth, environmental value, andsocietal benefit. Therefore, we address sustain-ability risks, especially relating to:

• Climate change and other environmen-tal issues like energy management,water use, and waste

• Corporate integrity

• Human resource management, includ-ing health, safety, diversity, andemployee satisfaction

• The ethical behavior of suppliers

• Customer satisfaction

• The accessibility and safety of ourproducts

• Privacy and data protection in connec-tion with the use of SAP products

If our sustainability strategy — asdescribed in our online 2010 SAP SustainabilityReport (www.sapsustainabilityreport.com) — isnot sufficient to meet the expectations of ourcustomers, investors, and partners, or generallyaccepted sustainability standards, this couldharm our reputation and have an adverseimpact on our business, profit, financial posi-tion, or cash flows.

Principal shareholders may be able to exertcontrol over our future direction andoperations.

If SAP AG’s principal shareholders andthe holdings of entities controlled by them votein the same manner, this could delay, preventor facilitate a change in control of SAP or othersignificant changes to SAP AG or its capitalstructure. See “Item 7. Major Shareholders andRelated-Party Transactions — Major Sharehold-ers” for further information.

Sales of ordinary shares by principal share-holders could adversely affect the price ofour capital stock.

The sale of a large number of ordinaryshares by any of the principal shareholders andrelated entities could have a negative effect on

18

Part I

Item 3


the trading price of our ADRs or our ordinaryshares. We are not aware of any restrictions onthe transferability of the shares owned by anyof the principal shareholders or related entities.

U.S. judgments may be difficult or impossibleto enforce against us or our Board members.

Currently, except for Bill McDermott andVishal Sikka, all members of SAP AG’s Execu-tive Board and all members of the SupervisoryBoard are non-residents of the United States. Asubstantial portion of the assets of SAP and ourBoard members are located outside the UnitedStates. As a result, it may not be possible toeffect service of process within the UnitedStates upon non-U.S. resident persons or SAPor to enforce against non-U.S. resident personsjudgments obtained in U.S. courts predicatedupon the civil liability provisions of the securi-ties laws of the United States. In addition,awards of punitive damages in actions broughtin the United States or elsewhere may be unen-forceable in Germany.

Communication and Information Risks

We may not be able to prevent unauthorizeddisclosure of our future strategies, technolo-gies, and products, or of information that issubject to data protection or privacy law,and such disclosure may harm our business.

We have taken a range of measures tomitigate the risk that internal confidential com-munications and information about sensitivesubjects, such as our future strategies, technolo-gies, and products, or information that is sub-ject to data protection or privacy law, areimproperly or prematurely disclosed to the pub-lic. However, there is no guarantee that theprotective mechanisms we have established willwork in every case. Our competitive positioncould sustain serious damage if, for example,confidential information about the future direc-tion of our product development becomes pub-lic knowledge, resulting in reduced revenue inthe future. Any such premature disclosure couldhave a negative impact on our business, assets,profit, or cash flows.

Financial Risks

Our revenue mix may vary and may nega-tively impact our profit margins.

Variances or slowdowns in our softwarelicense sales may negatively impact current orfuture revenue from maintenance and services,since such revenue typically follows and isdependent on software sales. Any decrease inthe percentage of our total revenue derivedfrom software licensing could have a materialnegative impact on our business, financial posi-tion, income, or cash flows. We have intro-duced new licensing and deployment modelssuch as on-demand and subscription modelswhich typically result in revenue being recog-nized over an extended period. A significantportion of the related cost of developing, mar-keting, and providing our solutions to custom-ers under such new models could be incurredprior to the recognition of revenue, thusimpacting our profit margin in the short term.

An economic downturn may impact ourliquidity and increase the default risk associ-ated with and the valuation of our financialassets and trade receivables.

An economic downturn may negativelyimpact our future liquidity. We use global cen-tralized financial management to control liquidassets, interest, and currencies. The primaryaim is to maintain liquidity in the Group at alevel that is adequate to meet our obligations.Our total group liquidity was A3.5 billion onDecember 31, 2010. This position is supportedby our strong operating cash flow, of which alarge part is of a recurring nature, and by creditfacilities on which we can draw if necessary.

However, an economic downturn couldincrease the default risk associated with ourtotal group liquidity. That could negativelyimpact the valuation of our financial assets.SAP’s investment policy with regard to totalGroup liquidity is set out in our internal trea-sury guideline document, which is a collectionof uniform rules that apply globally to all com-panies in the Group. Among its stipulations, itrequires that we invest only in assets and funds

19

Part I

Item 3


rated A- or better. The weighted average ratingof our total group liquidity is in the range AA-to A+. We pursue a policy of cautious invest-ment characterized by wide portfolio diversifi-cation with a variety of counterparties,predominantly short-term investments, andstandard investment instruments.

An economic downturn could increasethe default risk associated with trade receiv-ables. That could negatively impact the valua-tion of our trade receivables. SAP’s receivablesmanagement policy is set out in our internalcredit management and accounting guidelinedocuments, which are collections of uniformrules that apply globally to all companies in theGroup.

There can be no assurance that the pre-scribed measures will be successful or thatuncertainty in global economic conditions willnot negatively impact our business, financialposition, profit, or cash flows.

Management’s use of estimates may affectour profit and financial position.

To comply with IFRS and GermanGAAP, management is required to make manyjudgments, estimates, and assumptions. Thefacts and circumstances on which managementbases these estimates and judgments, and man-agement’s judgment regarding the facts andcircumstances, may change from time to timeand this may result in significant changes inthe estimates, with a potential negative impacton our financial position or profit. For moreinformation, see the Notes to the ConsolidatedFinancial Statements section, Note (3c).

Current and future accounting pronounce-ments and other financial reporting stan-dards, especially but not only concerningrevenue recognition, may adversely affect thefinancial results we present.

We regularly monitor our compliancewith all of the financial reporting standards thatare applicable to us and any new pronounce-ments that are relevant to us. As a result, wemight be required to change our internalaccounting policies, particularly concerning

revenue recognition, to alter our operationalpolicy so that it reflects new or amended finan-cial reporting standards, or to restate our pub-lished financial accounts. We cannot excludethe possibility that this may have a materialimpact on our assets, financial position, profit,or cash flows. For a summary of significantaccounting policies, see the Notes to the Con-solidated Financial Statements section,Note (3).

Because we conduct operations throughoutthe world, our assets, profit, or cash flowsmay be affected by currency and interestrate fluctuations.

Our Group-wide management and exter-nal financial reporting is in euros. Nevertheless,a significant portion of our business is con-ducted in currencies other than the euro.Approximately 67% of our revenue in 2010was attributable to operations outside the euroarea and was translated into euros. Conse-quently, period-over-period changes in the eurorates for particular currencies can significantlyaffect our reported revenue and income. Ingeneral, appreciation of the euro relative toanother currency has a negative effect whiledepreciation of the euro relative to anothercurrency has a positive effect. Variable-interestbalance-sheet items are also subject to changesin interest rates, so there is a risk that thesebalance-sheet items may result in a negativeimpact on our assets, profit, or cash flows. Formore information about our currency and inter-est-rate risks and our related hedging activity,see the Notes to the Consolidated FinancialStatements section, Notes (25) and (26).

The cost of using derivative instruments tohedge share-based compensation plans mayexceed the benefits of hedging them.

We use derivative instruments to reducethe impact of our share-based compensationplans on our income statement and to limitfuture expense associated with those plans. Wedecide case by case whether and to what extentwe seek to hedge this risk. However, we cannotexclude the possibility that the expense ofhedging the share-based compensation plans

20

Part I

Item 3


may exceed the benefit achieved by hedgingthem or that a decision to leave the plansmaterially unhedged may provedisadvantageous.

Our sales are subject to quarterly fluctua-tions and our sales forecasts may not beaccurate, which could cause our revenue andresults of operations to fall below our andinvestors’ expectations.

Our revenue and operating results canvary and have varied in the past, sometimessubstantially, from quarter to quarter. Our reve-nue in general, and in particular our softwarerevenue, is difficult to forecast for a number ofreasons, including:

• the relatively long sales cycles formany of our products;

• the large size and extended timing ofindividual license transactions;

• the timing of the introduction of newproducts or product enhancements byus or our competitors;

• changes in customer budgets;

• seasonality of a customer’s technologypurchases; and

• other general economic, social andmarket conditions, such as the globaleconomic crisis.

As many of our customers make and plantheir IT purchasing decisions at or near the endof calendar quarters, and with a significantpercentage of those decisions being made dur-ing the fourth quarter, even a small delay inpurchasing decisions could have a materialadverse effect on our results of operations.While our dependence on single, large scalesales transactions has decreased in recent yearsdue to a relative increase in the number oflicense transactions and a decrease in averagedeal size concluded by SAP, we cannot guaran-tee that our results will not be adverselyaffected by the loss or delay of one or a fewlarge sales, which continue to occur especiallyin the large enterprise segment.

We use a “pipeline” system to forecastsales and trends in our business. While thispipeline analysis may provide us with someguidance in business planning, budgeting andforecasting, these pipeline estimates do not nec-essarily consistently correlate to revenue in aparticular quarter and could cause us toimproperly plan, budget or forecast. Becauseour operating expenses are based on anticipatedrevenue levels and because a high percentageof our expenses are relatively fixed in the nearterm, any shortfall in anticipated revenue ordelay in recognition of revenue could result insignificant variations in our results of opera-tions from quarter to quarter or year to year.Deterioration in global economic conditionswould make it increasingly difficult for us toaccurately forecast demand for our productsand services, and could cause our revenue,results of operations and cash flows to fallshort of our expectations and public forecasts,which could have a negative impact on ourstock price. In 2009, we limited our expendi-tures to respond to the global economic crisis.However, we increased our expenditures in2010 and may in the future continue to increasethe following expenditures in comparison to2009 depending on, among other things, eco-nomic conditions, ongoing results and evolvingbusiness needs:

• expansion of our operations;

• research and development directedtowards new products and productenhancements; and

• development of new deployment mod-els, particular on demand and ondevice, and new distribution and resalechannels, particularly for small andmidsize enterprises.

To the extent any future expenses pre-cede or are not subsequently followed byincreased revenue, our quarterly or annual oper-ating results may be materially adverselyaffected and may vary significantly from pre-ceding or subsequent periods.

21

Part I

Item 3


The market price for our ADRs and ordi-nary shares may be volatile.

The trading prices of our ADRs andordinary shares have experienced and may con-tinue to experience significant volatility inresponse to various factors including, but notlimited to:

• the announcement of new products orproduct enhancements by us or ourcompetitors;

• technological innovation by us or ourcompetitors;

• quarterly variations in our results ofoperations or results that fail to meetour or our financial analysts’expectations;

• changes in revenue and revenue growthrates on a consolidated basis or forspecific geographic areas, businessunits, products or product categories;

• changes in our externally communi-cated outlook;

• changes in our capital structure, forexample due to the potential futureissuance of addition debt instruments;

• general market conditions specific toparticular industries;

• litigation to which we are a party;

• general and country specific economicor political conditions (particularlywars, terrorist attacks, etc.);

• proposed and completed acquisitionsor other significant transactions by usor our competitors; and

• general market conditions.

Many of these factors are beyond ourcontrol. In the past, companies that have expe-rienced volatility in the market price of theirstock have been subject to shareholder lawsuitsincluding securities class action litigation. Anysuch lawsuits against us, with or without merit,could result in substantial costs and the diver-sion of management’s attention and resources,

resulting in a decline in our results of opera-tions and our stock price.

Project Risks

Implementation of SAP software ofteninvolves a significant commitment ofresources by our customers and is subject toa number of significant risks over which weoften have no control.

These risks include, for example:

• Our SAP trained consultants may notbe immediately available to assist cus-tomers in the implementation of ourproducts

• The features of the implemented soft-ware may not meet the expectations orthe software may not fit the businessmodel of the customer

• Third-party consultants may not havethe expertise or resources to success-fully implement the software

• Customer-specific factors may destabi-lize the implementation of the software

• Customers and partners may not imple-ment the measures offered by SAP tosafeguard against technical risks

As a result of these and other risks, someof our customers have incurred significantthird-party consulting costs in connection withthe purchase and installation of SAP softwareproducts. Also, some customers’ implementa-tion projects have taken longer than planned.We cannot guarantee that we can reduce oreliminate protracted installation or significantthird-party consulting costs, that shortages ofour trained consultants will not occur, or thatour costs will not exceed the agreed fees onfixed-price contracts. Unsuccessful customerimplementation projects could result in claimsfrom customers, harm SAP’s reputation, andcause a loss of future revenues.

22

Part I

Item 3


Product Risks

Undetected security flaws in our softwaremay be exploited by other persons, damagingSAP or our customers.

Our products include security featuresthat are intended to protect the privacy andintegrity of our customers’ data. Despite thesesecurity features, our products may be vulnera-ble to attacks by unauthorized individuals ororganizations. Such attacks or other disruptionscould jeopardize the security of informationstored in and transmitted through the computersystems of our customers or business partnersand lead to significant claims against us fordamages. Despite testing prior to their release,our software products may contain securityflaws, particularly when first introduced orwhen new versions are released. Actual oralleged defects could expose us to productliability claims, warranty claims, and harm toour reputation that could impact our futuresales of products and services.

We use technologies under license from thirdparties. The loss of the right to use technolo-gies could delay implementation of our prod-ucts or force us to pay higher license fees.

We have taken numerous third-party tech-nologies under license and incorporated theminto our products. We may be highly dependenton those technologies in the aggregate. Therecan be no assurance that the licenses for thesethird-party technologies will not be terminated,that the licenses will be available in the futureon terms acceptable to us, or that we will beable to license third-party software for futureproducts. Changes to or the loss of third-partylicenses could lead to a material increase in thecost of licensing, or SAP software products maybecome unusable or materially reduced in theirfunctionality. As a result, we may need to incuradditional development or licensing costs toensure the continued functionality of our prod-ucts. The risks increase where we acquire acompany or a company’s intellectual propertyassets that have been subject to third-party tech-nology licensing and product standards less rig-orous than our own.

If we are unable to keep up with rapid tech-nological innovations and the expectations ofour customers, we may not be able to com-pete as effectively as our competitors.

Our future success depends in part onour ability to:

• Continue to enhance and expand ourexisting products and services

• Develop and introduce new productsand provide new services that satisfyincreasingly sophisticated customerrequirements, keep pace with techno-logical developments, and are acceptedin the market

There can be no assurance that we willbring new solutions, solution enhancements, andservices to market before our competitors, or thatwe will be able to generate enough revenue tooffset the significant research and developmentcosts we incur in bringing products and servicesto market. We may not anticipate and developtechnological improvements. In addition, we maynot succeed in adapting our products to techno-logical change, changing regulatory requirements,emerging industry standards, and changing cus-tomer requirements. Finally, we may not succeedin producing high-quality products, enhance-ments, and releases in a timely and cost-effectivemanner to compete with applications and othertechnologies offered by our competitors.

Undetected defects or delays in new productsand product enhancements may result inincreased costs to us and reduced demandfor our products.

To achieve customer acceptance, our newproducts and product enhancements oftenrequire long development and testing periods.Development work is subject to various risks.For example, scheduled market launches couldbe delayed, or products may not completelysatisfy our stringent quality standards, meet mar-ket needs or the expectations of customers, orcomply with local standards and requirements.New products may contain undetected defects orthey may not be mature enough to process largevolumes of data. In some circumstances, we

23

Part I

Item 3


may not be in a position to rectify such defectsor entirely meet the expectations of customers.As a result, we may be faced with customerclaims for cash refunds, damages, replacementsoftware, or other concessions. The risk ofdefects and their adverse consequences mayincrease as we seek to introduce a variety ofnew software products simultaneously. Signifi-cant undetected defects or delays in introducingnew products or product enhancements couldaffect market acceptance of SAP software prod-ucts, and could have a material negative impacton our business and reputation.

The use of SAP software products bycustomers in business-critical applications andprocesses and the relative complexity of oursoftware products creates a risk that customersor third parties may pursue warranty, perfor-mance, or other claims against us for actual oralleged defects in SAP software products, inour provision of services, or in our applicationhosting services. We have in the past been, andmay in the future be, subject to warranty, per-formance, or other similar claims.

Although our contracts generally containprovisions designed to limit our exposure aris-ing out of actual or alleged defects in SAPsoftware products or in our provision of ser-vices, these provisions may not cover everyeventuality or be effective under the applicablelaw. Regardless of its merits, any claim couldentail substantial expense and require the devo-tion of significant time and attention by keymanagement personnel. Publicity surroundingsuch claims could affect our reputation and thedemand for our software.

Our technology platform strategy may notsucceed or may make some of our productsless desirable.

The success of SAP’s expanded technol-ogy platform (which, in addition to traditionalSAP NetWeaver components, now includes theSybase Unwired Platform, as well as an on-demand platform and in-memory computingtechnology) depends on our ability to maintain adynamic network of independent software ven-dors developing their own business applications

using SAP platform technology. As with anyopen platform design, the greater flexibility pro-vided to customers to use data generated bynon-SAP software might reduce customerdemand to select and use certain SAP softwareproducts. If SAP’s technology platform strategyis not well received by customers, if competitorsdevelop superior technology, or if our solutionshave significant defects, this could have a mate-rial adverse impact on our business, financialposition, profit, or cash flows.

Other Operational Risks

Third parties may claim we infringe theirintellectual property rights; that could resultin damages being awarded against us andlimit our ability to utilize certain technolo-gies in the future.

Third parties have claimed, and mayclaim in the future, that we have infringed theirintellectual property rights. We believe our soft-ware products will increasingly be subject tosuch claims as the number of products in ourindustry segment grows, and as we expand intonew industry segments with our products,resulting in greater overlap in the functionalscope of products.

Any claims, with or without merit, andnegotiations or litigation relating to suchclaims, could preclude us from utilizing certaintechnologies in our products, be time-consum-ing, result in costly litigation, or require us topay damages to third parties and, under certaincircumstances, pay fines. They could alsorequire us to enter into royalty and licensingarrangements on terms that are not favorable tous, cause product shipment delays, subject ourproducts to injunctions, require a complete orpartial redesign of products, result in delays toour customers’ investment decisions, and dam-age our reputation.

Software includes many components ormodules that provide different features and per-form different functions. Some of these featuresor functions may be subject to intellectualproperty rights. The rights of another partycould encompass technical aspects that are

24

Part I

Item 3


similar to one or more technologies in one ormore of our products. We cannot exclude thepossibility that, in the future, intellectual prop-erty rights of third parties may preclude usfrom utilizing certain technologies in our prod-ucts or require us to enter into royalty andlicensing arrangements on unfavorable orexpensive terms.

Alongside our global compliance team,we have an intellectual property complianceteam, tasked to assess and control third-partyIP compliance risks by investigating our prac-tice, establishing internal policy, and monitor-ing policy compliance.

The software industry is making increas-ing use of open source software in its develop-ment work on solutions. We also integratecertain open source software components fromthird parties into our software. Open sourcelicenses may require that the software code inthose components or the software into whichthey are integrated be freely accessible underopen source terms. We cannot exclude the pos-sibility that third-party claims may require usto make freely accessible under open sourceterms a product of ours or non-SAP softwareupon which we depend. We cannot exclude thepossibility of a resultant material impact on ourassets, financial position, or profit.

Claims and lawsuits against us may haveadverse outcomes.

A variety of claims and lawsuits arebrought against us, including claims and law-suits involving businesses we have acquired.Adverse outcomes in some or all of the claimsand lawsuits pending against us might result inthe award of significant damages or injunctiverelief against us that could negatively impactour ability to conduct our business. We haverecorded a provision of A997 million for theTomorrowNow litigation. We currently believethat resolving all other claims and suits willhave no material adverse effect, either individu-ally or in aggregate, on our business, financialposition, profit, or cash flows. However, theoutcome of litigation and other claims or law-suits is intrinsically subject to considerable

uncertainty. Management’s view of the litiga-tion may also change in the future. Actualoutcomes of litigation and other claims or law-suits may differ from the assessments made bymanagement in prior periods, which couldresult in a material negative impact on ourbusiness, financial position, profit, cash flows,or reputation.

We might not acquire and integrate compa-nies effectively or successfully and our stra-tegic alliances might not be successful.

To complement or expand our business,we have in the past made acquisitions of busi-nesses, products, and technologies. We expect tocontinue to make such acquisitions in the future.Management’s negotiation of potential acquisi-tions and alliances and integration of acquiredbusinesses, products, or technologies demandstime, focus, and resources of management andof its workforce. Acquisitions carry many addi-tional risks. These include, among others:

• It may not be possible to successfullyintegrate the acquired business, and itsdifferent business and licensingmodels.

• It may not be possible to integrate theacquired technologies or products withcurrent products and technologies.

• It may not be possible to retain keypersonnel of the acquired business.

• We may assume material unknown lia-bilities and contingent liabilities ofacquired companies, including legal,tax, intellectual property, or other sig-nificant liabilities that may not bedetected by the due diligence process.

• We may incur debt or significant cashexpenditures.

• We may have difficulty implementing,restoring, or maintaining internal con-trols, procedures, and policies.

• There may be a negative impact onrelationships with customers, partners,or third-party providers of technologyor products.

25

Part I

Item 3


• We may have difficulty integrating theacquired company’s accounting, humanresource, and other administrativesystems.

• There may be regulatory constraints.

• The acquired business may have prac-tices or policies that are incompatiblewith our compliance requirements.

In addition, acquired businesses mightnot perform as anticipated, resulting in chargesfor the impairment of goodwill and other intan-gible assets. Such charges may have a signifi-cant negative impact on operating margins andincome. Furthermore, we have entered into, andexpect to continue to enter into, alliancearrangements for a variety of purposes includ-ing the development of new products and ser-vices. There can be no assurance that any suchproducts or services will be successfully devel-oped or that we will not incur significant unan-ticipated liabilities in connection with sucharrangements. We may not be successful inovercoming these risks and we may thereforenot benefit as anticipated from acquisitions oralliances. We cannot exclude the possibilitythat our business, financial position, profit, orcash flows will be negatively impacted.

Our IT security measures may be breachedor compromised, and we may sustainunplanned IT system unavailability.

Our core processes, such as softwaredevelopment, sales and marketing, customerservice, and financial transactions, rely on ourIT infrastructure and IT applications. Outage ofour infrastructure may be caused by malicioussoftware, sabotage, natural disasters, or the fail-ure of an underlying technology (such as theInternet). Such events could lead to a substan-tial denial of service giving rise to productiondowntime, recovery costs, and customer claims.This could have a negative impact on ourassets, financial position, profit, or cash flow,

We may be subject to attacks that degradeor deny our users’ access to our productsand services or result in theft or misuse ofintellectual property and confidential data.

SAP products and services, includingthose used by our customers on the Internet,rely on our IT infrastructure and applications.Unauthorized users may seek, by masqueradingas authorized users, to gain access to our sys-tems and introduce malicious software or steal,use without authorization, and sabotage ourintellectual property and confidential data. Abreach of our IT security could lead to loss ofproduction, to recovery costs, or to litigationbrought by customers or business partners,which could have a negative impact on ourfinancial position or profit.

We may not be able to obtain adequate titleto or licenses in, or to enforce, intellectualproperty.

We use a variety of means to protect ourintellectual property. These include applyingfor patents, registering trademarks and othermarks and copyright and rights of authorship,taking certain action to stop copyright andtrademark infringement, entering into licensing,confidentiality, and nondisclosure agreements,and deploying protection technology. Despiteour efforts, there can be no assurance that wecan prevent third parties from obtaining, using,or selling without authorization what we regardas our proprietary technology and information.All of these measures afford only limited pro-tection, and our proprietary rights could bechallenged, invalidated, held unenforceable, orotherwise affected. Some intellectual propertymay be vulnerable to disclosure or misappropri-ation by employees, partners, or other thirdparties. There can also be no assurance thatthird parties will not independently developtechnologies that are substantially equivalent orsuperior to our technology. Also, it may bepossible for third parties to reverse-engineer orotherwise obtain and use technology and infor-mation that we regard as proprietary. Accord-ingly, we might not be able to protect ourproprietary rights against unauthorized third-party copying or utilization, which could nega-tively impact our competitive position and ourfinancial position, and result in reduced sales.Any legal action we bring to enforce our pro-prietary rights could be costly, distract

26

Part I

Item 3


management from day-to-day operations, andlead to claims against us, which could nega-tively impact our income. Such actions by uscould also involve enforcement against a part-ner or other third party, thereby adverselyaffecting our ability, and our customers’ ability,to use that partner’s or other third parties’ prod-ucts. In addition, the laws and courts of certaincountries may not offer effective means toenforce our intellectual property rights.

We may not be able to protect our criticalinformation or assets or safeguard our busi-ness operations against disruption.

As a global software business, we are to asubstantial extent dependent on the exchange ofa wide range of information and on the avail-ability of our communications and IT networks.We have implemented a number of barriersdesigned to ensure the security of our informa-tion, IT resources, and other assets. Nonetheless,there is a danger of industrial espionage, misuse,or theft of information or assets, or damage toassets by trespassers in our facilities or by peo-ple who have gained authorized access to ourfacilities, systems, or information. Any misuse,theft, or breach of security could have a negativeimpact on our business, financial position,profit, or cash flows.

Our insurance coverage may not be suffi-cient to prevent claim settlements from nega-tively impacting our financial position,profit, or cash flows.

We maintain insurance coverage againsta diverse portfolio of risks. Our objective is toensure that financial effects of occurrences areexcluded or minimized to the extent practicableat reasonable cost. Despite these measures, cer-tain categories of risks are not currently insur-able at reasonable cost. Even if we obtaininsurance, our coverage may be subject toexclusions that limit or prevent our indemnifi-cation under the policies. Further, we cannotguarantee the ability of the insurance compa-nies to meet their liabilities from claims. If thisrisk materializes, it may have a significant neg-ative impact on our business, financial position,profit, or cash flows.

We may incur losses in connection with ven-ture capital investments.

We plan to continue investing in technol-ogy businesses. Many of these enterprises cur-rently generate net losses and require additionalcapital outlay from their investors. Changes toplanned business operations have in the past,and also may in the future, affect the perfor-mance of companies in which SAP holds invest-ments, and that could negatively affect the valueof our investments. Moreover, for tax purposes,the use of capital losses and impairments ofequity securities is often restricted, which maynegatively affect our effective tax rate.

ITEM 4. INFORMATION ABOUT SAP

Our legal corporate name is SAP AG. SAPAG is translated in English to SAP Corporation.SAP AG, formerly known as SAP Aktiengesell-schaft Systeme, Anwendungen, Produkte in derDatenverarbeitung, was incorporated under thelaws of the Federal Republic of Germany in1972. Where the context requires in the discus-sion below, SAP AG refers to our predecessors,Systemanalyse und Programmentwicklung GbR(1972-1976) and SAP Systeme, Anwendungen,Produkte in der Datenverarbeitung GmbH(1976-1988). SAP AG became a stock corpora-tion (Aktiengesellschaft) in 1988. Our principalexecutive offices, headquarters and registeredoffice are located at Dietmar-Hopp-Allee 16,69190 Walldorf, Germany. Our telephone numberis +49-6227-7-47474.

In July, we acquired Sybase, a U.S. com-pany headquartered in Dublin, California(United States). Sybase delivers a range ofsolutions to ensure that customer information issecurely managed and mobilized, includingenterprise and mobile databases, middleware,synchronization, encryption and device man-agement software, and mobile messaging ser-vices. The combination of SAP and Sybasesolutions offer customers a complete and opti-mized high-performance business analyticsinfrastructure. In addition, as part of our activ-ities to reduce the number of legal entities inthe SAP group, in 2010 we integrated certainsubsidiaries into the following significant SAP

27

Part I

Item 3, 4


subsidiaries: SAP Canada Inc., SAP America,Inc. and SAP Labs France S.A.

For a (i) description of our principal cap-ital expenditures and divestitures for the lastthree years, including the amount invested untilthe date of this report and (ii) a discussion ofour principal capital expenditures and divesti-tures currently in progress, including the distri-bution of these investments geographically andthe method of financing, see “Item 4. Informa-tion About SAP — Description of Property —Capital Expenditures.”

THE SAP GROUP OF COMPANIES

SAP is the world leader in enterpriseapplications in terms of software and software-related service revenue. Based on market capi-talization, we are the world’s third-largest inde-pendent software manufacturer. We have morethan 109,000 customers in over 120 countries.The SAP Group includes subsidiaries in everymajor country and employs more than53,000 people. Newly acquired Sybase operatesas an independent business unit.

BUSINESS ACTIVITY AND ORGANIZATIONALSTRUCTURE

Business Activity

Our core business is selling licenses forsoftware solutions and related services todeliver a broad range of choices fitting thevarying functional needs of our customers. Oursolutions, which cover standard business appli-cations and technologies, as well as specificindustry applications, are designed to help com-panies make their business processes more effi-cient and agile, enable real-time decisionmaking, and create sustainable new value. In-memory technology across our data manage-ment offerings enables customers to instanta-neously access the data that they need, wherethey need it, when they need it.

Our product portfolio is based on deliv-ering our solutions on premise, on demand, andon device. We offer the following key softwareapplications for those deployment and con-sumption options with complete orchestration

of data and processes across all of the operat-ing environments:

• SAP Business Suite software isdesigned for use by large organizationsand international corporations. Thesoftware supports core business opera-tions ranging from supplier relation-ships to production, warehousemanagement, sales, and all administra-tive functions, through to customerrelationships. We offer specific solu-tions for industries, for instance, bank-ing, high tech, oil and gas, utilities,chemicals, healthcare, retail, consumerproducts, and the public sector.

• SAP Business All-in-One solutions, theSAP Business ByDesign solution, andthe SAP Business One applicationaddress the needs of small businessesand midsize companies.

• The SAP BusinessObjects portfoliocovers a variety of demands for smallto large companies with solutions forbusiness users who need to analyzeand report information, make informedstrategic and tactical decisions, buildbusiness plans, and manage risk andcompliance.

• SAP solutions for sustainability helpenable organizations’ sustainability ini-tiatives. These solutions include themeasurement of sustainability key per-formance indicators, energy and carbonmanagement, and solutions for productsafety, environment, health, and safety.

• The SAP NetWeaver technology plat-form integrates information and busi-ness processes across diversetechnologies and organizationalstructures.

• Sybase delivers mission-critical enter-prise software and services to manage,analyze and mobilize information. WithSybase software, companies migrate towireless communication in which criti-cal information and applications areavailable on mobile devices at any time.

28

Part I

Item 4


Organizational Structure

Our legal corporate name is SAP AG.SAP is headquartered in Walldorf, Germany.Our Company is structured along the followingareas, which work seamlessly together:

• Technology & Innovation Platform

• Products & Solutions

• Global Customer Operations

• Chief Operations Office

• Global Finance & Administration

• Human Resources

• On Device & Sybase

SAP markets and distributes its productsand services primarily through a worldwidenetwork of local subsidiaries, which arelicensed to distribute SAP products to custom-ers in defined territories. Under their licenseagreements, the subsidiaries pass on to thelicensor a certain percentage of the revenuegenerated by distributing the products. Distrib-utorship agreements are in place with indepen-dent resellers in some countries.

For a complete list of subsidiaries, asso-ciates, and other equity investments, see theNotes to the Consolidated Financial Statementssection, Note (34).

Our management reporting breaks ouractivities down into four segments: Product,Consulting, Training, and Sybase. For moreinformation about our segments, see the Notesto the Consolidated Financial Statements sec-tion, Note (29).

Mission and Strategy

Market

The market for enterprise applicationsoftware is a global growth market impacted bythe very trends that shape the world economy.Today, a multitude of market forces are con-verging to change how business is run: theemergence of fast-growing new economies, anoperating environment that is more unpredict-able, connected and digitized, tension betweenrapidly rising resource consumption and

sustainability, an unprecedented explosion indata across business and society, and a work-force that expects more from technology andapplications. To compete, businesses musttransform around changing customer expecta-tions, bring innovative and competitive productsto market, and continuously optimize their ownstructures and processes internally and acrosstheir business network. Only with leading-edgetechnology solutions, can companies success-fully compete and win in the new globalmarketplace.

Trends and Orientation

Given this market context, companiesneed to reinvent how they structure their busi-ness model — whether it is a move to theemerging markets or entry into completely new,unfamiliar industries, or whether it is learninghow to compete as a network of companiesversus an individual company. At the sametime, today’s customer marketplace and societyare demanding openness from the public andprivate sector alike; transparency and stronggovernance have become business imperatives.

Technology will be critical as companiesimplement their strategies. We believe thatthree major technology trends will cometogether in the next three to five years: In-memory computing, mobility, and cloud, andthat these trends will represent the biggest gen-erational shift since moving from mainframe toclient/server in the early 1990s. We believe thatthese technology breakthroughs will not justsupport companies in innovating their business,but will actually drive business change. Com-panies will need to take advantage of and con-tend with the speed at which people andcustomers are connecting in new ways usingmobile devices. Speed is increasing as mobileadoption — on-device access — is ramping upat a rate faster than the PC and Internet informer times. Today’s powerful and location-aware smart devices will impact how businessis conducted.

Accompanying the speed and increasingconsumption rates of technology is a dramaticexplosion of data. In an increasingly connected

29

Part I

Item 4


world, people, machines, devices, and otherphysical items will produce information at ever-increasing speeds and intensity. Businesses —small and large, private and public — will needto analyze this vast volume of data in real timeto drive meaningful insight, capitalize on theopportunity that the data represents, and makeeducated decisions. In-memory computing rep-resents a sea change in computing. It takesadvantage of the advances in storage technologythat allows enormous amounts of data to bestored in the main memory thus reducing accesstime to that data. In the future, it will allowcompanies to analyze their transactional datafrom core ERP systems in real time.

Companies will continue to focus onoperating more efficiently and sustainablythroughout their business network. The adventof cloud computing and virtualization representa new consumption and delivery model for ITservices based on the Internet. Private and pub-lic cloud infrastructures allow for the sustain-able consumption of services as they areneeded — on-demand — thus avoiding infra-structure and implementation costs and reduc-ing energy waste on idle technology.

Technology solutions are at the core ofthese trends, helping companies improve theirdecision making based on more data, linkingstrategy to execution, and mobilizing the work-force, all at a lower cost and increased pacenecessary to conduct business in the new globalmarketplace.

Mission

Our mission is to make every customer abest-run business. As many companies dependon our solutions and services to run their busi-nesses today, we intend to help them meet thebusiness challenges of tomorrow. By designingsolutions that work on any device and appeal toa new market of business users, we are workingto better enable the technology-savvy work-force, driving increased value and productivityfor both corporations and the individuals thatwork for them.

By leveraging innovative technologiesand services to help companies become best-

run businesses, we help customers around theglobe perform at a significantly higher level ofeffectiveness and efficiency. In reaching for thisgoal, we are also contributing to global eco-nomic development on a grand scale. SAP’sportfolio of software and service helps custom-ers optimize their business processes and usebusiness analytics to attain the insight, effi-ciency, and flexibility that enables them torespond to changes in the business environmentwith more agility and effectiveness and capturethe full benefits of business networks.

We offer both on-premise and on-demandsolutions that help companies of all sizes closethe gap between strategy and execution throughreal-time business analytics. We also offer ourmarket-leading business process applicationsand analytics solutions to customers’ increas-ingly mobile workforces, with complete orches-tration and data and process consistencybetween all deployment environments.

At the heart of our strategy standsaccountability to our customers by helping themincrease the value of their investments in infor-mation technology and lower their total cost ofownership. We are motivated to serve andimpress our customers, employees, ecosystem,influencers, and shareholders through our pas-sion for growth and for developing true, trustedpartnerships with our customers and our peers.

Competition

In terms of software and software-relatedservice revenue, SAP is the world leader inenterprise applications. In the global market, ourchief competitors are IBM, Microsoft, and Ora-cle. Whereas we concentrate on the enterpriseapplication software segment, our chief compet-itors derive much of their revenue from othersegments of the IT market, such as databasemanagement applications (Oracle), operatingsystems and desktop applications (Microsoft)and IT services (IBM). Additionally, unlike amajority of our competitors, we offer customersa choice of deployment models, such as a hybridmodel that combines on-premise and on-demandsolutions. Customers can also use enterprisesoftware on mobile devices.

30

Part I

Item 4


Our competitors in the on-demand soft-ware segment include, among others, NetSuite,Salesforce.com, and Workday. Our competitorsin the business intelligence segment offeringsolutions that address the needs of businessusers include SAS Institute, Oracle, and IBMamong others. Principal competitors for Sybaseproducts include IBM, Microsoft, and Oracle.We also compete with specialized vendors insubsegments of our offerings, depending on theproduct or service offered.

Strategy for Growth

Our growth strategy is to reinforce andstrengthen our position as the market leader.We believe that the market trends and compet-itive environment provide an immense opportu-nity for us to deliver value to customers, leadthrough innovation, and grow our business. Ourstrategy is to innovate on a stable core bydeveloping the world’s best business applica-tions, deliver innovation without disruption, andleverage our ecosystem to deliver the best valueand innovation. We intend to combine the fol-lowing measures to help us realize our fullgrowth potential.

Deliver the World’s Best BusinessApplications

Our product strategy is to extend ourleadership in on-premise business applications(core ERP and SAP Business Suite). At thesame time, we will introduce new on-demandsolutions, enable new connectivity to themobile on-device world, and orchestrate thedata and processes across all deployment envi-ronments to create networked solutions. Webelieve that by expanding our focus on on-demand and on-device applications and by con-centrating on business intelligence and ana-lytics, middleware, cloud-based solutions, andin-memory computing, we can double ouraddressable market and grow our business.

Over the past years, our focus has movedin this direction. Our on-premise enterprise solu-tions for specific industries are the foundation ofour product portfolio. Our business analytics

solutions, which integrate products from ouracquisition of Business Objects, have been a keydriver for growth. Utilizing in-memory technol-ogy, we are enabling business analytics applica-tions that may not have been technically feasibleor economical in the past. We have also releasedour SAP Business ByDesign solution, whichoffers a full suite of applications, running com-pletely in the cloud and opening new marketsegments for us. This modern solution will alsobe SAP’s cloud-based platform, on which part-ners can build solutions. Finally, the acquisitionof Sybase in 2010 enables us to help companiesbecome unwired enterprises by combining enter-prise applications, business analytics, and amobile infrastructure. Customers will have theability to harness the explosion of data in a waythat is consumable by employees on multipledevices, with the assurance that data and pro-cesses are orchestrated across each environment.

In 2010, we introduced additional SAPsolutions for sustainability focused on tacklingenergy consumption, greenhouse gas emissions,product safety, healthcare, and sustainabilityperformance management. Our customers wantto measure business results and create greatertransparency of their use of resources as theyoptimize their businesses, extended valuechains, and business networks. They look toSAP to support the balance between social,economic, and environmental demands andtransform their end-to-end business processesin a sustainable fashion.

Accelerate Innovation Without Disruption

Our industry is at a major inflectionpoint as in-memory technology combined withmobility and business analytics can potentiallyopen up new applications and disrupt the tradi-tional IT stack (including hardware, database,middleware, applications). At the same time,our customers have made significant invest-ments in their business applications infrastruc-ture to optimize their business operations overthe past decades. We intend to unlock tremen-dous value for our customers by delivering newproducts and applications that address the mar-ket trends of analytics, mobile, and real-time

31

Part I

Item 4


business while using the data and transactionalsystems in their on-premise foundation.

Expand our Ecosystem

Our belief is that customer choice, inno-vation, and a completely open platform andpartnerships are key to achieving our growthobjectives. Our customers support this belief aswell. We will continue to invest in our broadpartner ecosystem to tie products and technolo-gies into a seamless whole solution for ourcustomers, and to use partners as a channel toreach the various customer and market seg-ments, to offer more choice and value for ourcustomers.

Financial Strategy

The primary aim of our financial man-agement is to maintain liquidity in the Group atthe level that is adequate to meet our obliga-tions at all times. Financing may be required toproactively sustain liquidity at that level. It mayalso be necessary to enter into financing trans-actions when additional funds are required thatcannot be wholly sourced from free cash flow(for example, to finance large acquisitions).The financing transactions we entered into in2010 were mostly to finance the acquisition ofSybase.

Finance Plan for SAP Solutions

To help companies invest in SAP solu-tions and the associated services and hardware,we cooperate with leading global financiersthat specialize in IT to deliver the SAP Financ-ing service, a finance plan for customers. Inter-est in the plan, which is a firmly establishedSAP Services offering, is high: Since its incep-tion, it has helped arrange more than 2,500finance deals in more than 45 countries for

SAP customers in all segments — small busi-nesses, midsize companies, and large enter-prises. To give customers flexibility to chooseamong potential economic benefits, the planoffers all of the popular finance models withtheir different advantages: It can help conserveliquidity and it provides an alternative to creditfrom the bank.

PORTFOLIO OF SOFTWARE AND SERVICES

Working closely with customers and part-ners worldwide, SAP is committed to a productand services strategy that enables customers touse enterprise application software whereverand whenever they need it — on premise, ondemand, or on device.

Building on the scalable, stable, and fea-ture-rich SAP NetWeaver technology platform,SAP is accelerating product innovation and co-innovating with partners and customers to har-ness the business value of new software, com-plementary solutions, and “disruptivetechnologies” — such as SaaS, cloud comput-ing, and in-memory computing — that promiseto revolutionize the industry and generate sub-stantial value.

In taking great care to safeguard ourcustomers’ technology investments, we alsostrive to enhance their business value —enabling customers to adopt innovation at theirown pace, without disruption, for their specificindustry needs.

We take equally great care to help ensurethe integrity and security of customers’ busi-ness operations and data, protecting them fromtoday’s myriad of threats. Security is integral toour commitment to delivering high-quality soft-ware, and we continually enhance security indevelopment and by acquiring new technologiesand expertise.

32

Part I

Item 4


Business Process Business Analytics Technology Services

Enterprise resourceplanning (hr. financeand operations)

Supplier relationshipmanagement

Supply chain management

Product lifecyclemanagement

Customer relationshipmanagement

Collaboration

Industry specificapplications

Business intelligence

Enterprise informationmanagement

Enterprise performancemanagement

Governance, risk,and compliance

Sustainability

Application foundation

Database

Integration/orchestration

Mobility platform

Implementationconsulting

Business analyticsconsulting

Transformationalconsulting

Custom development

Support and maintenance

Program managementand quality assurance

Education and training

Solution Categories

Core Competencies

Product and Service Portfolio

Software Portfolio

On-Premise Solutions

Solutions for Lines of Business

SAP BUSINESS SUITE

SAP Business Suite software helps com-panies execute and optimize their business andIT strategies with an integrated portfolio ofbusiness applications. Companies can manageessential, industry-specific processes with mod-ular solutions designed to work with other SAPand non-SAP software. Customers can deploySAP Business Suite applications on a modularbasis to address specific business needs withintheir own timelines, targeting business pro-cesses with the highest potential impact. Thesoftware provides better insight and visibilityacross the extended enterprise while improvingoperational efficiency and increasing the flexi-bility needed to address business change.

Companies can incrementally enhanceSAP Business Suite applications throughenhancement packages that they receive throughour support offerings and that alleviate the needfor costly and time-consuming upgrades. The

solutions increase visibility across departmentsand business silos — improving the ability tomake clearer business decisions.

SAP Business Suite software includes thefollowing applications:

• SAP Customer Relationship Manage-ment (SAP CRM) helps organizationsmanage and monitor sales, service, andmarketing processes. The applicationalso supports key backoffice activitiessuch as spare-parts management,demand planning, billing, and fulfill-ment. With built-in analytical and busi-ness intelligence functionalities,support for the mobile workforce, andsubstantial multichannel capabilities,SAP CRM helps companies developcustomer insight, predict changes, andmake real-time course corrections.

• SAP ERP supports end-to-end businessprocesses including finance, human cap-ital management, asset management,sales, procurement, and other essentialactivities. SAP ERP enables industry-specific processes with functionality thatcan be activated selectively, keeping the

33

Part I

Item 4

%%TRANSMSG*** Transmitting Job: E03567 PCN: 037000000 ***%%PCMSG|33 |00021|Yes|No|03/23/2011 08:49|0|0|Page/graphics valid 03/23/2011 08:51 -- Color: D|

application core stable and helping toensure maximum performance.

• SAP Product Lifecycle Management(SAP PLM) helps companies manage,track, and control product-related infor-mation over the complete product andasset life cycle — and across theextended supply chain. SAP PLM isdesigned to facilitate creativity and tofree the product innovation processfrom organizational constraints.

• SAP Supplier Relationship Management(SAP SRM) supports key procurementactivities including demand-driven sourc-ing, centralized contract management,operational procurement, and interactionwith suppliers through multiple channels.

SAP SRM helps accelerate and optimizethe entire procure-to-pay cycle byenabling integrated processes andenforcing contract compliance, whichcan result in realizable savings.

• SAP Supply Chain Management (SAPSCM) enables companies to adapt theirsupply-chain processes to the rapidlychanging competitive environment.The application helps transform tradi-tional supply chains — with linear,sequential processes — into open, con-figurable, and responsive supply net-works. As a result, companies canimprove their response to demand andsupply dynamics across a globally dis-tributed environment.

Industry Solutions

SAP provides targeted solution portfolios that support end-to-end business processes, helpingto deliver tangible business and IT value for functional areas and across the extended enterprise. Oursolution portfolios are designed to meet the needs of the major industry sectors listed below. Theportfolios also include applications for numerous industry subsectors and segments.

Consumer Industries• Consumer products• Retail• Wholesale distributionFinancial Services Industries• Banking• InsuranceDiscrete Manufacturing Industries• Aerospace and defense• Automotive• Engineering, construction, and operations• High tech• Industrial machinery and componentsProcess Manufacturing Industries• Chemicals• Life sciences• Mill products• Mining• Oil and gas

Public Service Industries• Defense and security• Healthcare• Higher education and research• Public sectorService Industries• Media• Professional services• Telecommunications• Transportation and logistics• Utilities

Solutions for Sustainability

SAP is not only working to become amore sustainable company, but also provides a

broad range of solutions to help our customerspursue a sustainable business strategy. Our sus-tainability solutions are at the heart of our prod-uct strategy. In 2010, we further improved our

34

Part I

Item 4


position in the market by acquiring a long-timedevelopment and services partner of ours, Techni-Data, which is a leading supplier of compliancemanagement solutions. The acquisition enablesus to offer more of the content and strategicservices our customers require in this field. As aresult, SAP is driving fast return on customers’investment, providing a holistic and integratedportfolio of sustainability solutions that help ourcustomers implement, measure, and report sus-tainability activities across the full enterprise.

These solutions include:

• SAP Advanced Metering InfrastructureIntegration for Utilities enables energysuppliers to operate on various businessprocesses with their customer, fromtracking consumption to billing andmany other processes in one integratedsystem. This drives the optimization ofrevenue and demand, enables morecost-effective customer service, andfacilitates market efficiency and theautomation of data exchanges at newbusiness networks of energy suppliersand infrastructure operators.

• SAP BusinessObjects SustainabilityPerformance Management, an applica-tion that helps organizations more eas-ily set sustainability goals andobjectives, measure and communicateperformance, and reduce data collec-tion costs and errors.

• SAP Carbon Impact (SAP CI), an on-demand solution that helps organiza-tions accurately measure, profitablyreduce, and confidently report green-house gas emissions and other environ-mental impacts across internaloperations and the supply chain.

• SAP Environmental Health and SafetyManagement (SAP EHS), an applica-tion that addresses regulatory compli-ance and helps companies efficientlycomply and protect their people andplant by taking an integrated approachto all aspects of risk and compliance.

• SAP Manufacturing Integration andIntelligence (SAP MII), an applicationthat provides the tools and content tohelp customers track and identifyopportunities for energy reduction inmanufacturing.

Duet and Alloy

Business users need direct access to peo-ple, processes, and information to work effi-ciently — without having to give up familiarapplications or master complex software. Duetsoftware and Alloy software provide directaccess to SAP Business Suite software usingfamiliar Microsoft Office and IBM Lotus Notessoftware. As a result, business users canbecome more productive, their decision-makingcan improve, and their compliance with corpo-rate policies can increase.

Solutions for Small Businesses and MidsizeCompanies

SAP offers a number of targeted solu-tions that combine the capabilities of businessmanagement and business intelligence applica-tions for small businesses and midsize compa-nies. Like large corporations, these firms seekto streamline business processes, cut costs,drive growth, and increase profitability. Opti-mizing cash flow is also essential, as is theneed to supply the right information at the righttime — across all operations.

SAP Business All-in-One

SAP Business All-in-One solutions aredesigned for midsize companies or fast-growingsmall businesses with about 100 to2,500 employees that are looking for a compre-hensive, integrated industry solution to powertheir business activities. The software comeswith built-in support for industry best practicesas well as business intelligence functionality.SAP Business All-in-One helps companies man-age everything from financials, humanresources, procurement, inventory, manufactur-ing, logistics, product development, sales, and

35

Part I

Item 4


marketing — all in a single, configurable solu-tion. In all major markets (more than 50 coun-tries) customers can also choose between an on-premise deployment or a hosted deployment(provided through qualified partners) purchasedon a subscription basis.

Qualified SAP Business All-in-One part-ner solutions are available from a wide networkof qualified partners that deliver more than 700industry-specific solutions in more than50 countries. Supported by robust deploymenttools and methodologies, the solutions aredesigned to enable fast implementation, lowcost, and rapid time to value.

SAP Business One

The SAP Business One application isdesigned for small businesses with fewer than100 employees that have outgrown theiraccounting-only systems and are looking tostreamline their operations with a single unifiedsolution. The application supports virtually theentire business — with support for financials,sales, customer relationships, inventory, andoperations. Integrated business intelligencefunctionality allows visibility across all busi-ness processes. By streamlining end-to-endoperations and gaining access to accurate infor-mation, small business can boost efficiency andaccelerate profitable growth. And, with a pub-lished software development kit, industry-spe-cific solutions and functional add-ons availablefrom the global partner network, SAP BusinessOne can be tailored and extended to meet spe-cific business needs.

Business Analytics Solutions

SAP BusinessObjects Portfolio

The SAP BusinessObjects portfolioincludes analytic applications that are designed tohelp business users reach strategic goals, deliverpredictable results, and make sound decisions.Business intelligence and enterprise informationmanagement applications enable companies toprovide trusted information to every member of a

business network, helping them to respond fasterand make better decisions.

The SAP BusinessObjects portfolio alsoincludes enterprise performance managementand governance, risk, and compliance solutions,which help customers maximize profitability,manage risk and compliance, and optimize sys-tems and processes. Reflecting SAP’s commit-ment to openness and interoperability inheterogeneous software landscapes, the solutionsare designed to integrate with non-SAP datasources and systems as well as SAP BusinessSuite applications and other SAP BusinessOb-jects solutions.

SAP BusinessObjects business intelligence(BI) solutions enable users to interact with busi-ness information and get answers to ad hocquestions without advanced knowledge of theunderlying data sources. Available in both on-demand and on-premise deployment options, thesoftware allows users to access data across allsources and formats and then deliver it as useful,consumable information. BI tools also help cus-tomers uncover trends and patterns, solve busi-ness problems, anticipate changes, and reachorganizational goals.

SAP BusinessObjects enterprise informa-tion management (EIM) solutions help custom-ers manage and enhance data integration, dataquality management, and metadata manage-ment. Augmenting and leveraging EIM func-tions in the SAP NetWeaver technologyplatform, the solutions allow companies tobuild a trustworthy data foundation that sup-ports both business and IT initiatives. Custom-ers can access, integrate, move, or cleansedata — structured and unstructured — todeliver timely, unified information.

SAP BusinessObjects enterprise perfor-mance management (EPM) solutions help com-panies improve their control performance,organization agility, and decision making. Thesolutions support processes across multiplelines of business including finance, supplychain, and procurement. The EPM portfolioincludes applications for strategy management;planning, budgeting and forecasting; financial

36

Part I

Item 4


consolidation; profitability and cost manage-ment; and spend and supply chain performancemanagement.

SAP BusinessObjects governance, risk,and compliance (GRC) solutions provide orga-nizations with a proactive, real-time approachto managing governance, risk, and complianceacross heterogeneous environments.

In addition, industry-specific analyticapplications address challenges in specificindustries and lines of business. Co-createdwith customers and designed to work in virtu-ally any environment, the applications providethe insight and best-practice support companiesneed to better understand risk, uncover oppor-tunities, and make the right decisions to opti-mize their business. The applications, whichcan be deployed quickly, are designed to workin virtually any IT system and deliver value tocustomers rapidly.

SAP Crystal solutions are an integratedintuitive family of offerings for reporting, dash-boarding, presentation, and ad-hoc analysis.They allow business people to discover andshare insight for improved decision making.

Various components within the portfolioof SAP Crystal software help users design inter-active reports, view and share reports on manydifferent collaboration platforms, provide ad hocqueries and analysis functions in a self-serviceenvironment for business professionals and alsoallow the creation of flash-based interactive datapresentations from ordinary spreadsheets.

SAP BusinessObjects Edge solutions areversatile business intelligence (BI) and enter-prise performance management (EPM) solu-tions that support flexible ad hoc reporting andanalysis, dashboard-based data visualization,data integration, and data quality management.The solutions help midsize companies stream-line and enhance their budgeting, planning andconsolidation, and strategy managementprocesses.

Sybase Analytical Offerings

Sybase IQ is a highly optimized analyticsserver, designed to deliver faster results formission-critical business intelligence, analytics,data warehousing, and reporting solutions.Sybase IQ delivers fast query performance andstorage efficiency for structured and unstruc-tured data, making it ideal for both data martsand enterprise data warehouse implementations.Sybase IQ, with its columnar data storagestructure, combines speed and agility with lowtotal cost of ownership, enabling enterprises toperform analysis and reporting.

Sybase RAP — The Trading Edition is aunified market analytics platform that lets finan-cial services firms make safer, better tradingand portfolio decisions across the trading lifecycle. From better model development to real-time trade and risk analytics to multiyear histor-ical quantitative analysis, Sybase RAP — TheTrading Edition is optimized to support demand-ing analytics requirements. It enables a commonview and accelerates data availability by provid-ing a single platform for shared access to com-mon data needed by multiple usercommunities — including quantitative analysts,traders, and risk managers.

Sybase Replication Server moves and syn-chronizes data in real time, allowing companiesto gain better use of data trapped in applicationsilos and to create reports without impactingoperational systems. Adopted by many Fortune1000 companies, Sybase Replication Serverallows database administrators to quickly set upredundant disaster recovery sites and to distrib-ute, consolidate, and synchronize data acrossmultiple platforms, including Sybase ASE,Sybase IQ, Oracle, IBM DB2, and MicrosoftSQL Server.

Sybase PowerDesigner is a data-model-ing and application design tool for enterprisesthat need to build or reengineer applicationsquickly and cost-effectively. Its Link and Synctechnology makes it an effective solution forenterprise architecture and businesstransformation.

37

Part I

Item 4


Sybase PowerBuilder is a rapid applica-tion development (RAD) tool that increasesdeveloper productivity through tight integrationof design, modeling, development, and manage-ment for a variety of platforms.

SAP High-Performance Analytic Appliance(SAP HANA)

SAP HANA is a flexible, data-agnostic,in-memory appliance that combines SAP soft-ware components optimized for hardware pro-vided and delivered by SAP partners. WithSAP HANA, organizations can instantly ana-lyze their business operations, using huge vol-umes of detailed transactional and analyticinformation from virtually any data source. Inaddition to revolutionizing customers’ access todata, SAP HANA provides the foundation forbuilding new, innovative applications. Theseapplications will leverage the in-memory data-base and calculation engine within SAPHANA, allowing customers to conduct complexplanning, forecasting and simulation based onreal-time data.

On-Demand Solutions

SAP Business ByDesign

SAP Business ByDesign is one of themost modern on-demand solutions and platformsin the industry today. Currently serving mainlysmall businesses and midsize companies thatwant the benefits of large-scale, integrated busi-ness management applications without a complexIT infrastructure, SAP Business ByDesign isengineered for customer- and partner-specificbusiness extensions and to enable changes todefault user interfaces, reports, and forms. SAPhas entered into initial agreements with largeenterprises that intend to use SAP BusinessByDesign for their subsidiaries.

The solution leverages best-practiceexpertise for managing financials, customerrelationships, human resources, projects, pro-curement, and supply chains. It also includes in-memory analytics to support faster, better-informed decision making and provides support

for mobile devices. SAP Business ByDesign isdesigned to help customers boost efficiency inall business activities by enabling collaborationand improving productivity. With a single userinterface, personalized business portals for eachemployee, and built-in help features, the solutioncan also reduce software-related training andsupport costs.

Starter packages — which are predefinedsubsets of the full SAP Business ByDesignsolution — enable customers to rapidly andcost-effectively address specific functionalrequirements and business pain points. Thepackages can be deployed quickly, and areavailable at fixed implementation prices. Adedicated implementation methodology, andembedded e-learning, enables these packages tobe implemented in as little as three weeks,depending on customer requirements.

Managed, monitored, and maintained bySAP experts in hosted data centers, SAP Busi-ness ByDesign also provides built-in serviceand support that can help customers achievesmooth, predictable deployment and operation.Currently, SAP continues to expand its partnerecosystem around SAP Business ByDesignwhich already includes more than 100 partnerswho resell the solution and/or provide addi-tional services, features, and extensions basedon unique company and industry needs.

SAP BusinessObjects BI OnDemand

The SAP BusinessObjects BI OnDemandsolution is a comprehensive business intelli-gence application that enables users to get upand running in minutes. Available as a SaaSsolution, it is free to try and has an intuitiveinterface that makes it easier for business usersto explore, report, and share data. In mostcases, the solution can be deployed quickly,without a complex implementation project. Byproviding secure access to the most currentdata, it helps employees, customers and part-ners across all lines of business make timely,data-driven decisions. Offerings for industryand business-specific uses are available fromSAP partners.

38

Part I

Item 4


Line-of-Business On-Demand Solutions

SAP offers a number of on-demand solu-tions designed to provide additional capabilitiesfor line-of-business users. These solutions fea-ture relevant functionalities — such as analy-tics — that support specific line-of-businessneeds. Examples include:

• SAP Sourcing OnDemand: Largeenterprises, under constant pressure toboost profitability, must find ways toreduce costs associated with procure-ment of goods and services. The SAPSourcing OnDemand solutionaddresses these challenges with supportfor key processes such as strategicsourcing, contract life-cycle manage-ment, and supplier management. Thesolution streamlines the contract cre-ation, negotiation and amendment pro-cesses while also supporting complexsupplier identification, qualification,and evaluation processes.

• SAP Contract Lifecycle ManagementOnDemand: Contract life-cycle manage-ment software from SAP allows sourcingprofessionals to generate, negotiate, andmanage contracts within a central con-tract repository. Contract managers cancreate a library of standard contracts andcontract clauses to promote and enforcelegal standards during the contractauthoring process. Support for check-in/check-out, redlining, and version com-parison is also provided.

• SAP Supplier Management OnDe-mand: The supplier management appli-cation enables an organization toestablish a central repository of theirsuppliers used in sourcing and con-tracting events. In addition, this mod-ule provides the ability to define keymetrics and scorecards to manage sup-plier performance.

• The SAP Carbon Impact OnDemandsolution helps companies reduce theirenergy and carbon footprint across their

entire operations and product supplychains. Designed for the global econ-omy, the software allows organizationsto report, analyze, and reduce theirworldwide energy and greenhouse gasemissions in the most cost-effectiveway. The solution enables companies toadapt their carbon reduction strategy tothe swiftly changing global marketenvironments, characterized by volatileenergy prices and tightening regula-tions, such as the introduction of theU.S. EPA Mandatory Reporting Rule.

SAP StreamWork

The SAP StreamWork application is acollaborative decision-making solution thatbrings together people, information, and provenbusiness approaches to drive fast, meaningfulresults. Team members inside or outside theorganization can interact in a cohesive onlineenvironment to strategize, solve problems, makedecisions, and track activity for later referenceor reuse. A built-in catalog of preconfigured,interactive business tools — covering processeslike agenda-building, ranking, polling, and cost/benefit analysis — enables team members toframe discussions and build consensus. SAPStreamWork is suited for companies of any size,line of business, or industry. Available ondemand, the solution allows business users to beup and running in a matter of minutes.

Technology

SAP NetWeaver

The SAP NetWeaver technology platformserves as the foundation for SAP BusinessSuite applications, SAP BusinessObjects solu-tions, and other SAP software. It enables enter-prises to orchestrate and optimize businessprocesses on premise, on demand, and ondevice. Additionally, as a technical foundationfor service-oriented architecture, SAP NetWea-ver delivers a modular set of capabilities thatcan help reduce complexity and increase

39

Part I

Item 4


business flexibility across heterogeneous ITlandscapes.

SAP continues to invest in SAPNetWeaver, enabling it to move beyond tradi-tional middleware to enable comprehensiveorchestration of business applications — regard-less of whether the supported applications aredeployed and consumed on premise, ondemand, or on device. The concept of orches-tration begins with support for key areas suchas application architecture, product and tech-nology standards, and the integrity of pro-cesses, information, and interfaces. However,orchestration also encompasses mission-criticalactivities including business process manage-ment, application life-cycle management, andmaster data management.

The SAP NetWeaver platform — togetherwith SAP BusinessObjects technology — deliv-ers key capabilities to enable business applica-tion orchestration, providing the applicationinfrastructure for SAP’s business applicationsand delivering solutions that help enhance teamproductivity, streamline business and applica-tion integration, and close the gap betweeninsight and action.

Sybase Adaptive Server Enterprise

Sybase Adaptive Server Enterprise(ASE) is a powerful data management platformfor high-performance business applicationsespecially in large database, high-transaction,mission-critical environments. Sybase ASEcombines a low total cost of ownership withreliability, security, and scalability. Key featuresinclude encryption, partitioning technology,query technology for “smarter” transactionsand continuous availability in clustered envi-ronments. With the addition of in-memorydatabases technology within ASE 15.5, Sybaseenables data virtualization and scaling criticalto high data volume and high concurrent user

organizations, whether deployed in public cloudor private datacenter environments.

On-Device Solutions

SAP Mobile Applications

The population of mobile workers contin-ues to grow exponentially — as does the num-ber and variety of mobile devices. With mobileworkers predicted to represent more than athird of the global workforce by 2013 (accord-ing to a forecast from the market researchcompany IDC), mobile technology, operatingsystems, and applications must all keep pacewith the demand for usable, powerful, and cost-effective approaches.

SAP has taken a leadership position inthe development of mobile computing and com-municating. We are committed to providing acomplete enterprise mobility stack — one thatencompasses business processes, platforms,development tools, and applications. With built-in integration to SAP software, our mobile tech-nology is designed to provide secure access tobusiness processes — anytime, anywhere, andon different devices. The goal of our mobilitystrategy is to increase the adoption, reach, andvalue of SAP solutions by delivering moreapplications on multiple device platforms — allwith the rich user experience that customersexpect. This, in turn, will enable our customersto get more out of their SAP investments.

Along with our newly-acquired subsid-iary Sybase, we launched two new solutions formobile workers in 2010. Accessed via iPhoneand Windows Mobile, and built on the SybaseUnwired Platform, the solutions extend theworkflow management capabilities of SAPBusiness Suite applications, including espe-cially SAP Customer Relationship Management(SAP CRM), and also can be customized to tapinto a variety of back-end data sources. Withseamless integration to business processes andnetworks, the solutions help mobile workersincrease their own productivity and maketimely business decisions.

40

Part I

Item 4


In addition to these new solutions, SAPstarted to offer easy-to-consume mobile appli-cations, such as iPhone and iPad applicationsfor SAP Business ByDesign, SAP BusinessOne, and SAP Business Explorer. These mobileapplications provide real-time access to SAPbusiness applications to run their business fromany location at anytime.

Within the mobility space, SAP co-inno-vates with leading providers to develop applica-tions on multiple platforms. In addition, theSAP ecosystem — a business network of SAPemployees, partners, customers, and industryexperts — plays a major role in defining, devel-oping, and selling targeted mobile products andservices that meet unique customer needs. And,of course, SAP will continue to build applica-tions with a focus on creating useful,easy-to-consume software that can be deployedquickly to provide instant value.

Sybase Mobile Solutions

iAnywhere Solutions (iAS) enable enter-prises to deliver greater productivity to the frontlines of business. iAS holds worldwide marketleadership positions in mobile device manage-ment, wireless e-mail, mobile middleware plat-forms, database access and synchronization, andBluetooth and infrared protocol technologies.

Sybase Unwired Platform is a mobileenterprise application platform that reduces acompany’s cost of enabling strategic mobiledeployments. It simplifies the development,deployment, and management of mobile enter-prise applications, while addressing the difficultmobile application challenges of backofficeintegration, secure access for mobile devicesinto the enterprise, and support for multipledevice types, all within a reliable push datasynchronization architecture.

SQL Anywhere is an industry-leadingmobile and embedded solution providing datamanagement and data synchronization technol-ogies that extend information in corporateapplications and enterprise systems to databasesrunning in frontline environments withoutonsite IT support. It offers features in databases

that are easily embedded and widely deployedin server, desktop, remote office, and mobileapplication environments.

Afaria is mobile management softwarethat allows companies to centrally manage andsecure devices. Afaria helps companies provi-sion, configure, and secure devices, as well asdeploy and manage software, content, and datathroughout the device life cycle. Afaria supportsa broad range of mobile devices, includinghandhelds, smartphones, laptops, and tablets.

iAnywhere Mobile Office helps enter-prises securely extend personal informationmanagement (PIM), e-mail, and business pro-cesses to mobile workers. It combines infra-structure support with enhanced on-devicesecurity, usability, and performance. It offerskey features for a company’s “mobile inbox ofthe future,” which enables the ability to takeaction on time-sensitive business processes,such as approving purchase orders or submit-ting reports, all through a single, secure mobilee-mail client.

Advantage Database is a fully featuredand easily embedded high-performance client/server database ideal for small and midsize ITenvironments. It is unique among the Sybasedatabase offerings because it also supports agrowth path from legacy database applicationswritten in languages like Delphi and FoxPro totoday’s code.

Mobile Device SDKs are standards-basedsoftware development kits for implementing pro-tocol stack technologies for infrared, Bluetooth,data synchronization and device management.

SAP Services Portfolio

The SAP Services portfolio includesindustry and solution-focused services, businesstransformation services, IT transformation ser-vices, custom development services, support ser-vices, program, project management and qualityassurance, and education and certification.

Software-related services are support ser-vices provided by SAP’s support units (SAPActive Global Support), and customer-specific

41

Part I

Item 4


development services provided by the SAPCustom Development organization. Our profes-sional services are provided by SAP Consultingand SAP Education.

SAP provides a holistic approach withapplication life-cycle management, incorporat-ing a broad array of methodologies, tools, andcertified partner offerings to help our customersgain value from their SAP investment whilemeeting their business needs. Tightly integratedwith our development organization, servicescontribute to a closed customer feedback loopand an end-to-end risk and quality managementthroughout the entire customer life cycle.

SAP Services has a local presence inmore than 50 countries and runs more than 70training centers, seven global support centers,and ten custom development centers in Europe,Asia, and the Americas. With around 21,000SAP services professionals around the world,customers’ needs can be met around the clockto support SAP-centric solutions.

Software-Related Services

SAP Custom Development

The SAP Custom Development organiza-tion develops customer-specific solutions andbusiness functions on SAP technology coveringthe life cycle of services to develop and supportcustom solutions at every stage.

Support Services

To support customers’ increasingly com-plex solution landscapes and their respectiveneeds, SAP offers several support options. SAP’ssupport units offer a range of services to supportour customers before, during, and after imple-mentation of our software solutions. We providearound-the-clock technical support in everyregion. We also offer proactive, preventive sup-port services to protect and enhance our custom-ers’ investments in SAP technology and software.

SAP Enterprise Support services are ourcomprehensive, proactive support and mainte-nance offering, providing our customers with an

application life-cycle management approach thatcan help them manage increased IT complexityand integrate solutions across their IT land-scapes. SAP Enterprise Support services providean overall blueprint to help customers optimizethe operation of their entire landscape. Mission-critical support provides continuous qualitychecks that analyze technical risks as well asupdates. We aim to deliver the quality manage-ment methodology, processes, and tools neededto perform advanced testing and implementsolutions deployment, operations, and continu-ous improvement initiatives using the SAP Solu-tion Manager application management solutionfor all customers and partners.

SAP Standard Support delivers supportservices to enable continuous and effective IToperations. This baseline level of support pro-vides our customers with the services and toolsto minimize the cost and risk associated withkeeping IT systems up and running, includingupdates. SAP Standard Support ensures thatcustomers’ SAP solutions run efficiently bydelivering improvements, quality management,knowledge transfer, and problem resolution.

The SAP MaxAttention support optionexpands SAP Enterprise Support, covering allstages of an SAP solution’s life cycle in atailored format for customers — from planningand implementation to operations and optimiza-tion — with a full range of services that helporganizations safeguard complex solutions, planfor new releases and upgrades, and improveproductive solution operations. SAP MaxAtten-tion is designed to provide customers our high-est level of customer support built on adedicated engagement model with a technicalsupport advisor and service-level agreements,supported by long-term commitments deliveredby the SAP Active Global Support organization.

SAP Safeguarding services help our cus-tomers mitigate the technical risks of an imple-mentation, integration, migration, or upgradeproject. They smooth the go-live process andhelp customers prepare for live use of the soft-ware. An on-site technical quality managerhelps ensure that customers receive the support

42

Part I

Item 4


they need, that knowledge transfer takes place,and that our customers improve the perfor-mance, data consistency, and availability oftheir IT solution from SAP.

Consulting, Training and Other Services

SAP Consulting

With an industry focus, SAP Consultingoffers planning, implementation, and optimiza-tion services for business solutions.

One component includes business trans-formation services, such as Executive AdvisoryServices, Value Partnerships and Business Pro-cess and Platform Services, that support ourcustomers in responding to business challengesin a rapidly changing business environment aim-ing to guide executives toward better insights bybridging IT and business processes. IT Transfor-mation Services seek to reduce customers’ totalcost of ownership with tangible business valueaccompanied by reduced effort and costs, andnew performance and insight optimization ser-vices create complex analysis and modeling ofbusiness challenges to introduce innovative busi-ness processes. We advise and support custom-ers on designing business processes and ITinfrastructure and help customers with projectmanagement and solution implementation andintegration. We also help customers optimizesolutions and IT landscapes accommodatingchallenges from mergers and acquisitions ordivestiture of business units. By delivering SAPpredefined services — standardized on industrybest practices and proven business processeswith clearly defined cost and scope for a fasttime to value to our customers — SAP solutionsbecome easier to consume.

SAP Education

SAP Education offerings assist SAP cus-tomers and partners with knowledge transfer.SAP Education offerings include training needsanalysis, certification assessments, learningsoftware, and tools. We provide a consistentcurriculum for learners around the world anddeliver these offerings through a number of

delivery models, including online e-learning,virtual live classroom, learning on demand, andincreasingly nontraditional classroom training.Every year, hundreds of thousands of individu-als are trained by SAP Education, making itone of the largest IT training organizations inthe world.

Sybase Services Portfolio

The comprehensive Sybase Services port-folio is designed to provide uninterrupted cov-erage to the entire market capabilities, rangingfrom mobile messaging interoperability tomobile content delivery and mobile commerceservices, for operators, content providers, enter-prises and financial institutions.

As a global leader in enabling mobileinformation and mCommerce services formobile operators, financial institutions andenterprises, we deliver advanced mobile ser-vices to our customers by addressing the com-plexities of the wireless ecosystem:incompatible networks, messaging protocols,handsets, and billing systems.

Sybase Mobile Services

Sybase 365 addresses operator servicesfocused on Short Message Service (SMS), Mul-timedia Message Service (MMS), GPRS Roam-ing Exchange (GRX), and Internet ProtocolExchange (IPX) messaging interoperabilitybetween mobile operators worldwide. Messagesare delivered through a secure operator-grademessaging platform, with advanced protocolconversion, routing, queuing, and transcodingcapabilities. The interoperability service greatlysimplifies the deployment and delivery of inter-operator messaging over incompatible net-works, protocol stacks, and handsets. Servicesinclude traffic analysis and detailed reportingand statistics.

Enterprise Services provide mobile ser-vices for enterprises, brands, and content pro-viders, enabling customers to monetizepremium mobile content and deliver interactiveservices, mobile CRM, mobile advertising and

43

Part I

Item 4


mobile marketing campaigns globally. Servicesinclude MMS 365, content delivery gateway tosend and receive MMS from multiple sources;application and content management, mobileadvertising services, global billing, settlement,reporting and analysis.

mCommerce Services provide anend-to-end platform covering mBanking, mPay-ments, mRemittance, to both developed andemerging markets. Coupled with our leadingmessaging platform and global reach (SMS,MMS) we are well-positioned to enable mobileoperators, financial institutions, and enterprisesto realize the potential of mCommerce.

Sybase Support Services

The Sybase Customer Service and Sup-port organization offers technical support forSybase family of products. It maintains regionalsupport centers in Asia, Europe, North Amer-ica, and Latin America, providing uninterruptedtechnical services around the world. Sybaseusers and partners have access to softwarefixes, technical information sources, and news-groups on the Sybase support. Website Supportprograms include updates, and new versionreleases that become available during the main-tenance period.

Sybase Standard Support services aredesigned for high-quality around the clock sup-port for critical issues, access to new releases,and online support services.

Sybase Enterprise Support services offerpersonalized high-availability support for com-panies with mission-critical projects. Servicesinclude priority access to the Enterprise Techni-cal Team, proactive services, and other special-ized options. Sybase Enterprise Supportprovides the highest priority of response times.

In addition, Sybase also offers some sup-port service options geared towards partners andusers, primarily for designated workplace leveland tools products, and certain iAS products.

Sybase 365 operates two Network Opera-tions Centers to monitor our messaging serviceinfrastructure, direct and monitor global

maintenance and repair activities, and providedirect technical support to Sybase customersaround the clock.

Sybase Professional Services

Consulting

The Sybase Professional Services (SPS)organization offers customers comprehensiveconsulting, education and integration servicesdesigned to optimize their business solutionsusing Sybase and non-Sybase products.

Education

Sybase provides a broad education cur-riculum allowing customers and partners toincrease their proficiency in its products. Basicand advanced courses are offered at Sybaseeducation centers, and specially tailored cus-tomer classes and self-paced training are alsoavailable. A number of Sybase distributors andauthorized training providers also provide edu-cation in Sybase products.

RESEARCH AND DEVELOPMENT

To capitalize on the power of diversitywhile at the same time best serving ourregional and global markets, SAP develops itssoftware in strategic countries across the worldsuch as Brazil, China, Germany, India, theUnited States, and other key centers. The SAPLabs and SAP Research organizations workwith partners, customers, and universities tocreate and cultivate breakthrough IT trends andtechnologies on a global scale. This collabora-tion contributes significantly to our productportfolio’s technological edge.

A Global Research and Development Presence

The development centers of SAP (SAPLabs) are distributed worldwide. The largest ofthese SAP Labs is in Walldorf, Germany, fol-lowed by Bangalore, India; Palo Alto, Califor-nia (United States); Shanghai, China; andVancouver, Canada. All labs deploy a common

44

Part I

Item 4


framework of development standards and keyperformance indicators, which is certifiedaccording to ISO 9001: 2000. Each of the SAPResearch centers is collocated with a partneruniversity or an SAP development center, creat-ing a sound foundation for collaborativeapplied research. When we acquired Sybase inAugust 2010, the SAP development networkwas strengthened by the addition of highlyqualified specialists bringing new expertise,and varied cultural insights.

With the global distribution of SAP’sresearch and development network, we canreact quickly to new customer and marketrequirements. Our worldwide presence alsoenables us to develop products and services incollaboration with customers and partners —wherever they are located. In 2010, we imple-mented new development methodologies andadjusted our organizational structure to sharpenthe customer focus and bring customer-driveninnovations to market faster.

The Global Research & Development Network

Development Center

Bangalore & Gurgaon INDIA Bangalore INDIA Bangalore INDIA

Belfast UNITED KINGDOM

Brisbane AUSTRALIA

Darmstadt GERMANY

Dresden GERMANY

Karlsruhe GERMANY

Montréal CANADA

Palo Alto USA

Palo Alto USA

Sao Paulo BRAZIL

Tokyo JAPAN

Alpharette USA

Sybase Research and

Development Locations

Concord USA

Dublin USA

Pune INDIA

Reston USA

Shanghai CHINA

Singapore SINGAPORE

Waterloo CANADA

Dublin IRELAND

Budapest HUNGARY

SAP Research Locations Co-Innovation Labs

Dublin IRELAND

Montreal & Toronto CANADA

Markdorf GERMANY

Palo Alto USA

Paris FRANCE

Paris FRANCE

Pretoria SOUTH AFRICA

Ra’anana ISRAEL

Ra’anana ISRAEL

Sao Leopoldo BRAZIL

Shanghai & Chengdu CHINA

Sofia BULGARIA

Sophia Antipolis FRANCE

Vancouver CANADA Sofia BULGARIA

Sophia Antipolis FRANCE

St. Gallen SWITZERLAND

Sydney AUSTRALIA

Vancouver CANADA

Walldorf & St. Leon-Rot GERMANY

Walldorf GERMANY

Zurich SWITZERLAND

Committing Resources to Research and Development

We must continuously improve our port-folio of products if we wish to maintain andbuild on our current leading position as a

vendor of enterprise application software. In2010, we increased our research and develop-ment (R&D) expense A138 million, or 9%, toA1,729 million (2009: A1,591 million). Wespent 13.9% of total revenue on R&D in 2010

45

Part I

Item 4


(2009: 14.9%). Our R&D expense as a portionof total operating expenses declined from19.7% to 17.5% year over year. Excludingexpenses associated with the TomorrowNow

litigation, our R&D expense as a portion oftotal operating expenses was little changedsince the previous year.

€ millions change since previous year

Research and Development

+ 23 %

1.344

2006 2007 2008 2009 2010

+ 9 %

1.461

+ 11 %

1.627

- 2 %

1.591

+ 9 %

1.729

The importance of R&D was alsoreflected in the breakdown of employee pro-files. At the end of 2010, our total FTE countin development work was 15,884 (2009:14,814). Measured in FTEs, our R&D head-count was 30% of total headcount (2009: 31%).Total R&D expense includes not only our ownpersonnel costs but also the external cost ofworks and services from the providers andcooperation partners we work with to deliverand enhance our products. We also incur exter-nal costs for testing and obtaining certificationfor products, and for patent attorney servicesand strategy consulting. The ratio of externalR&D costs to internal R&D personnel costshas tended to decline in recent years.

Our R&D investment was primarily inthe following fields:

SAP Research

Goals and Scope

A technology enterprise must explorenew trends and develop promising ideas andprototypes. Our global technology researchunit, SAP Research, aims to do this for us. Theunit is our IT trend scout, exploring and evalu-ating the critical developments, technologies,and business models that have significantpotential for our customers. Its tasks are to do

research that provides useful input to our prod-uct portfolio and to develop and showcaseinnovative prototypes. It has established aworldwide co-innovation network to help itachieve these aims.

Co-Innovation in a Network of Partners

Each SAP Research center is near a part-ner university or is collocated with an SAPdevelopment lab, which is ideal for collabora-tive research. A structured approach to researchand trend management helps SAP Researchgenerate the greatest possible value from itscreative work. The unit plays a leading role inmany research projects, collaborating with theuniversities, research institutes, customers, andpartners in its large co-innovation network.

Living Labs Concept

One route to product impact is throughthe living labs, in which SAP Research co-innovates with customers, partners, and SAPproduct groups early in the research process.The purpose of living labs is to maximize thebusiness value of new solutions. SAP Researchruns three of its own living labs and collabo-rates in other living labs hosted by researchpartners.

46

Part I

Item 4


One example of a living lab shared withpartners is the THESEUS Innovation Center inBerlin, Germany, which is funded by the Ger-man Federal Ministry of Economics and Tech-nology. Opened in June 2010, the Centerdemonstrates technological research results anduse cases in real-world settings in the servicesindustry and the Future Internet.

Next Big Things

SAP Research explores fields of businessand uses the findings of its research projects toidentify potential “next big things” — maxi-mum impact, next-generation technologies andapplications.

One of these areas is the Future Internet,which aims to connect the real world morefully with the virtual world by better integratingthe many technology stages, such as the Inter-net of Things, the Internet of Services, cloudcomputing, social media, and Web-based busi-ness process management. Because it is ser-vice-oriented, its processes can be dynamic andefficient. However, the Future Internet can domuch more than just link services: In theFuture Internet, services, things, and peoplewill interact in a global network.

One practical illustration of the power ofthe Future Internet is from the world of publicsecurity. At the CeBIT 2010 exhibition inHanover, Germany, a prototype urban manage-ment platform was presented. Based on a vio-lent storm scenario, the platform demonstratedhow IT and the facilities that the Future Inter-net offers could help rescue teams handle disas-ter situations. Emergency task forces can betterinteract, enhancing the safety and security ofcitizens and communities and improving theuninterrupted delivery of critical functions,including transportation, sanitation, energy,water, and health and educational services.

Another possible application of theFuture Internet is energy management. Today,climate change, rapidly increasing energydemand, and the depletion of fossil fuels areattracting much public attention. Efficientpower supply systems facilitating the

integration of renewable energies must bedeveloped in response to these challenges. SAPResearch is evaluating modern information andcommunication technologies (ICT) that canplay a vital role in accomplishing this goal. Forexample, ICT can coordinate the distributedgeneration and consumption of energy to opti-mize the entire power supply system.

With this in mind, SAP Research and itspartners are together examining the potential ofelectric vehicles, energy marketplaces, newbusiness processes for energy suppliers, andother possible developments.

Today’s Students and Tomorrow’s Talents

Since its inception in 2005, the SAPResearch PhD program has always attracted topcandidates who wish to research their technicalor business-oriented doctorate in a real businesscontext. SAP Research also collaborates withthe global SAP University Alliances program,and its researchers regularly hold seminars, lec-tures, and conferences on topics of currentinterest at universities.

New SAP Offerings

In 2010, our research and developmentteams delivered innovation throughout our port-folio of products and services. Our focus hasbeen on strengthening and enhancing customerchoices and capabilities in on-premise, on-demand, and on-device technology. As the incu-bator of innovation, we were able to makesubstantial improvements in the software ourcustomers use to orchestrate their applicationsacross their unique IT landscapes. Throughoutthe continual changes in demands and trends inthe enterprise application software space, thereis one constant: our commitment to generatinga significant and lasting competitive advantagefor SAP by creating value for customers.

47

Part I

Item 4


On-Premise

Rapid Deployment Solutions

SAP launched SAP Rapid Deploymentsolutions, which are business software solutionstargeting specific line-of-business needs. Theycan be deployed in as little as 12 weeks. SAPRapid Deployment solutions are a ready-to-usecombination of software, predefined services,and preconfigured content — at a predefinedprice. The first deployed solutions are based onSAP Business Suite applications for customerrelationship management, supplier relationshipmanagement, and business communicationsmanagement.

Sustainability Analytics

To help companies ensure product safety,comply with environmental regulations, andbetter protect their employees, we released SAPBest Practices packages for sustainability,including the SAP Best Practices for Analyticsin Health and Safety, SAP Best Practices forAnalytics in Product Safety and Stewardship,and SAP Best Practices for Analytics in Envi-ronmental Compliance packages. The newpackages feature operational analytics designedto give line-of-business managers in environ-ment, health, and safety (EHS) and productareas improved insight into core processes andinformation.

New Version of SAP Business One

Building on strong market acceptance forthe SAP Business One application, which cur-rently has thousands of customers from smallbusinesses and midsize companies in over 100countries, we added an enhanced user interface,embedded analytics, and business network con-nectivity to this popular application. Drawingon strong co-innovation from SAP partners, thenew release enables accelerated time-to-value,facilitates business adaptability, and increasesease of use and affordability.

Industry-Specific Analytic Applications

As part of the SAP BusinessObjects port-folio, we launched a number of analytic appli-cations tailored to address challenges inspecific industries and lines of business. Co-created with customers and designed to work inany environment, the applications provide theinsight and best-practice support that compa-nies need to better understand risk, uncoveropportunities, and make the right decisions tooptimize their business.

Best-Practices Templates for Manufacturers

SAP now delivers preconfigured, best-practices templates for its SAP ManufacturingIntegration and Intelligence (SAP MII) applica-tion to support batch manufacturing. The tem-plates extend the architecture of SAP MII byproviding prebuilt composites to support thepreparation, execution, documentation, andreporting of manufacturing processes. Thisenhancement stems from a successful co-inno-vation project supported by SAP, SAP partnersCiber, Systec & Services, and Trebing + Him-stedt, along with several manufacturingcustomers.

On Demand

New Sustainability Offering

Companies can use the September 2010enhanced version of the SAP Carbon ImpactOnDemand solution to help reduce their energyand carbon footprint across entire operationsand product supply chains worldwide. SAPCarbon Impact OnDemand helps alleviate therising global pressure on companies to addressthe costs of energy and carbon.

SAP Sourcing OnDemand

To help companies reduce the costs asso-ciated with procured goods and services, wereleased a new version of the SAP SourcingOnDemand solution. Our customers are usingthe solution to enhance business activities, such

48

Part I

Item 4


as strategic sourcing, contract life-cycle man-agement, and supplier management. The newversion integrates readily with SAP ERP, andcontains an enhanced user interface along withadditional embedded best practices and on-demand services.

SAP BusinessObjects BI OnDemand

Meeting the growing demand for SaaSbusiness intelligence (BI) tools that are easy touse, we now offer a complete BI toolset in oneflexible offering. The SAP BusinessObjects BIOnDemand solution, designed for casual BIusers currently underserved by products on themarket, helps people get up and running withno prior experience or training. The solutionfeatures scalable, needs-based pricing modelsthat allow customers to easily and cost-effec-tively expand use of the software as required.

Cloud-Based Decision Making

Currently, most businesses use a range ofapplications — including e-mail, collaborationproducts, and business software — to do theirwork and help make decisions. As a result,projects often become chaotic. SAP Stream-Work, our new on-demand, collaborative deci-sion-making software, addresses this challengeby helping teams at different locations worktogether, gather input, and effectively collabo-rate toward goals and outcomes in a securecloud computing environment.

Feature Pack for SAP Business ByDesign

The new feature pack for the SAP Busi-ness ByDesign solution provides significantcustomer-centric innovations including real-time in-memory analytics, support for mobiledevices, and a rich, customizable user interface.We also introduced three new predefined starterpackages that give customers a logical startingpoint for deploying the complete SAP BusinessByDesign solution.

On Device

Extending the Reach of SAP Business Suite

Along with our newly acquired subsid-iary Sybase, we launched two new solutions formobile workers. Accessed via iPhone and Win-dows Mobile, and built on the industry-leadingSybase Unwired Platform, the solutions extendthe workflow management capabilities of SAPBusiness Suite applications, including SAPCustomer Relationship Management (SAPCRM), and also can be customized to tap intoa variety of back-end data sources. With seam-less integration to business processes and net-works, the solutions help mobile workersincrease their own productivity and maketimely business decisions.

Mobile Applications for Small and Midsize Businesses

We created an iPhone application for theSAP Business One application, available on theApple iTunes Store. The mobile applicationprovides constant access to important data andkey functionality of SAP Business One, and isavailable as part of the maintenance contractwith SAP. We also launched an iPhone applica-tion for the SAP Business ByDesign solution.This mobile version of the integrated on-demand solution specifically dedicated to mid-size companies is easy to use and available toall customers of Feature Pack 2.5 for SAPBusiness ByDesign.

SAP Business Analytics and SAP BusinessObjects

SAP BusinessObjects Mobile providesremote access to business intelligence (BI)reports, metrics, and right-time data with asingle click of a wireless device, enabling usersto navigate and analyze these familiar reportswithout a need for additional training. SAPBusinessObjects Mobile supports a broad set ofmobile devices including BlackBerry, WindowsMobile, Symbian, and others.

49

Part I

Item 4


SAP BusinessObjects Explorer for iPhone/iPad

SAP released iPad and iPhone versionsof SAP BusinessObjects Explorer on the AppleiTunes Store, providing customers real-timeaccess to business information at theirfingertips.

Orchestration

New Release of SAP NetWeaver Technology Platform

With the release of a new version ofSAP NetWeaver in October 2010, SAP addedcomponents that simplify the adoption ofemerging technology, providing customers witha comprehensive foundation for new innova-tions in cloud computing, mobility, and in-memory computing. New features addenhanced functionality for Portal, BusinessWarehouse, Mobile, Process Integration, andComposition Environments. SAP NetWeaverdelivers an innovation-rich environment withoutany disruptions or delays.

New Software for SAP Business All-in-One

In March 2010, we introduced new SAPNetWeaver Business Client software for cus-tomers that use SAP Business All-in-One solu-tions. It enables midsize companies to enhancecollaboration, connect people, and base deci-sions on real-time data. It also helps users gaininsight into business-critical information in a“one-stop workplace” that can integrate enter-prise applications, analytics, and Web services.

SAP High-Performance Analytic Appliance (SAPHANA)

SAP HANA is a flexible, data-agnostic,in-memory appliance that combines SAP soft-ware components optimized for hardware pro-vided and delivered by SAP partners. WithSAP HANA, organizations can instantly ana-lyze their business operations, using huge vol-umes of detailed transactional and analyticinformation from virtually any data source. Inaddition to revolutionizing customers’ access to

data, SAP HANA provides the foundation forbuilding new, innovative applications. Theseapplications will leverage the in-memory data-base and calculation engine within SAP HANAallowing customers to conduct complex plan-ning, forecasting and simulation based on real-time data.

Services

Tiered Support Program

We now offer a comprehensive, tieredsupport model to customers worldwide. Theoffering includes SAP Enterprise Support ser-vices and the SAP Standard Support option.Customers choose the option that best meetstheir requirements. However, the majority ofcustomers chose SAP Enterprise Support. Theexpanded maintenance and support portfoliohelps deliver choice, predictable pricing, andvalue for customers.

New Developments for Services

Additional service developments focuson giving customers an accurate view of wheremaximum value can be achieved, while consis-tently keeping business costs to a minimum.SAP delivers predefined services to make iteasier for customers to deploy and use SAPsolutions while lowering costs. Such servicesare part of the SAP Rapid Deployment solu-tions, providing customers with fixed-price,predefined software with implementation accel-erators designed for implementations within12 weeks. IT transformation services focus onreducing total cost of ownership.

New Sybase Offerings

New Version of ASE Database

The latest release of the Sybase ASEenterprise-class database enables businesses tomeet the extreme performance, efficiency, andservice-level demands of next-generation trans-action-processing systems. It features the addi-tion of two new options: ASE In-memory

50

Part I

Item 4


Databases (IMDB) and Advanced Backup Ser-vices. With these enhancements, ASE continuesto deliver unparalleled performance and man-ageability for data-intensive environments thatrequire very low response times and highthroughput.

Redefining Massive Parallel Processing inAnalytics

To meet customer needs for increasedanalytic performance, scalability and architec-tural flexibility, we introduced new innovationin Sybase IQ 15.3 analytics server. Specifically,the PlexQ Distributed Query Platform, a Mas-sively Parallel Processing architecture, acceler-ates highly complex queries by distributingwork to many computers in a gridconfiguration.

Advancing Innovation for Capital Markets

With a steady stream of innovationaimed at the capital markets, Sybase continuesto strengthen its leadership in this sector. Wereleased the Sybase Liquidity ManagementSuite (LMS), providing the global financialservices industry with a variety of new modulesenabling native support for Sybase’s relationaldatabase management system and analyticsplatform.

IP Exchange Services

With the mobile industry increasinglyturning to Internet Protocol (IP) as its preferredtechnology, demand has grown for private IPnetworks that ensure quality technical perfor-mance for high-value data transport in a secureenvironment. We now offer the industry’s firstIP exchange platform — Sybase IPX 365 —delivering a full suite through one secure IPnetwork. With this platform, network operatorscan gain an upper hand in high service quality,efficient business operations, and costreduction.

Enhanced Mobile Device Management

We are now offering the industry’s mostadvanced and complete mobile device manage-ment and security solution for iOS 4 andAndroid-powered smartphones and tablets. Therecent release of Sybase Afaria empowersenterprise IT to fully manage mobile devicesfrom a single console, meeting strict corporatesecurity standards.

Expanding Mobile Commerce Offering

We expanded our mobile commerceoffering by launching version 3.0 of SybasemBanking 365 — the recognized market-lead-ing and award-winning mobile banking plat-form. It significantly enhances functionalitiesand simplifies the deployment process, enablingfinancial institutions to more quickly create aricher mobile banking experience and increasecustomer satisfaction.

Patents

As a leader in enterprise applications,SAP actively seeks intellectual property protec-tion for innovations and proprietary informa-tion. Our software innovations continue tostrengthen our market position, producingworld-class enterprise solutions and services.Our investment in R&D has resulted in numer-ous patents. In 2010, we obtained 900 grantedand validated patents worldwide. Our portfolioincludes patent families covering, for example,the SAP Business Suite, SAP BusinessObjectsproducts, and SAP Business ByDesign. In addi-tion, SAP also acquired over 230 granted andvalidated patents worldwide with its acquisitionof Sybase.

While our intellectual property is impor-tant to our success, we believe our business asa whole is not entirely dependent on any partic-ular patent.

PARTNER ECOSYSTEM

The SAP ecosystem is an innovation-driven business network made up of software

51

Part I

Item 4


and hardware partners and providers of out-sourcing, content, hosting, education, and sup-port services, as well as developers, industryspecialists, and users of SAP software. Amongthem are well-known companies, such asAdobe, Cisco, EMC, HP, IBM, Intel, Microsoft,Novell, and Research In Motion, as well asthousands of smaller vendors. Serving as acornerstone of our strategy and value proposi-tion, the partner ecosystem promotes customerchoice by providing a rich array of complemen-tary hardware, software, and service solutions.As an open, collaborative, and interactive com-munity, the SAP ecosystem enables customersto access products and services that expand andaugment the SAP portfolio with offerings basedon their unique business needs.

Partnerships Foster Innovation

In 2010, we continued to build relation-ships and support joint projects that we believewill help shape the future of enterprise applica-tion software. We now have 21 global servicespartners, more than 1,700 services partnersworldwide, more than 500 software partners,and 29 global technology partners. As a resultof these local, regional, and global partnerships,the universe of SAP solution extensions hasgrown significantly, as detailed in the examplesbelow:

• SAP and ClickSoftware Technologiesjointly offer the SAP Workforce Sched-uling and Optimization application byClickSoftware. Resold by SAP, thesolution helps businesses maximizemobile workforce performance anddrive operational excellence throughdecision support and optimizationtechnology.

• Building on a highly successful strate-gic relationship, SAP and Open Textsigned an agreement that allows SAPto resell Open Text’s text digital assetmanagement solution as the SAP Digi-tal Asset Management application byOpen Text. Designed to help busi-nesses optimize a full spectrum of rich

media, the application supports market-ing departments in all industries, aswell as media industry publishinghouses, entertainment firms, andbroadcasters. Also, SAP and Open Textannounced continued expansion oftheir strategic relationship to includeemployee file management capabilities.SAP resells Open Text’s solution foremployee information managementunder the name SAP Employee FileManagement application by Open Text.

• SAP and EMC announced an expan-sion of their global strategic alliance,which includes a reseller relationship,deeper technology integrations, andjoint sales and marketing activities.Under the agreement, SAP will resellnewly developed solutions — leverag-ing EMC Documentum enterprise con-tent management, EMC Captivaintelligent enterprise capture and EMCDocument Sciences customer commu-nications management. The solutionsare designed to help financial servicesfirms automate paper-intensive pro-cesses, such as loan origination andclaims handling.

• SAP accelerated the creation of a part-ner ecosystem around the SAP Busi-ness ByDesign solution. By equippingpartners with robust tools and engage-ment support, SAP aims to establishthe on-demand solution as a foundationon which partners can offer additionalfeatures and industry expertise thatmeet the needs of a broader group ofcustomers.

• Speeding the journey toward cloudcomputing, SAP and several strategicpartners demonstrate together with cus-tomers promising test results runningSAP software on Vblock architecture.Utilizing the Virtual Computing Envi-ronment (VCE) coalition and itsVblock Infrastructure Packages, Cisco,EMC, and VMware are working with

52

Part I

Item 4


SAP to unleash the benefits of virtuali-zation — an emerging data centerarchitecture that can enable enhancedagility and reduced costs.

• In an effort to meet growing demandsof the governance, risk, and compli-ance (GRC) market, SAP and CATechnologies have begun collaboratingto help customers manage risk acrosstheir business and IT processes. Lever-aging products from CA Technologieswith leading GRC applications fromSAP will allow our customers to gaintighter control over their IT risk andcompliance initiatives while focusingon long-term value creation for thebusiness.

• To help businesses increase operationalefficiency while enhancing the waythey communicate with their custom-ers, SAP and StreamServe agreed tooffer StreamServe’s leading documentautomation solution as a solutionextension from SAP. Resold as theSAP Document Presentment applica-tion by StreamServe, this innovativesolution automates the generation andpersonalization of documents (such asbilling statements) and communica-tions from multiple applications tomultiple output types, including print,e-mail, fax, and mobile.

Communities of Innovation

Building on a culture of co-innovationand collaboration, SAP Community Network(SCN) continues to garner recognition as aleading example of an ecosystem strategy thatdelivers significant value to customers. Forexample, in March 2010 the Aspen Institutenoted that SCN illustrates the most extensiveuse of social media by a corporation to date todevelop new products and services.

SAP fosters a number of different commu-nities — interactive networks of developers, cus-tomers, and partners that come together to

collaborate on a broad range of topics. These aresome of the major communities in the network:

• The SAP Developer Network (SDN)community offers more than two mil-lion members in more than 200 coun-tries the chance to trade experienceand insights, pursue business opportu-nities, and learn from each other. It isthe biggest innovation communityassociated with SAP. SDN includesdiscussion forums, blogs, wikis, soft-ware, and tool downloads, and e-learn-ing. A wealth of technical assetsattracts more than half a million visi-tors to SDN every month.

• The Business Process Expert (BPX)community is a business process com-munity with more than 800,000 mem-bers in 18 industries covering a widevariety of horizontal subjects. Collabo-ration in the community, the sharing ofbest practices, and advanced trainingofferings are among the catalysts thatcan generate process innovation. Com-munity members, including, for exam-ple, specialists on diverse industries,business and application consultants,CIOs, and business process experts,find ample opportunities to exchangeideas in moderated forums, wikis, andexpert blogs.

• The SAP BusinessObjects communityhas more than 500,000 members andprovides an environment for SAP Busi-nessObjects users and developers toshare best practices and pursue innova-tion opportunities on SAP BusinessOb-jects offerings.

• The SAP University Alliances commu-nity, with more than 250,000 members,focuses on bringing real-life SAPknowledge and skills into universityclassrooms. This is part of SAP’s cor-porate citizenship commitment to edu-cate and mentor the students andgraduates who will become tomorrow’sbusiness experts and IT leaders.

53

Part I

Item 4


User Groups

To date, SAP customers have establishedmore than 32 user groups worldwide. The goalof these user-guided networks is to sharehands-on knowledge of SAP software and playa role in guiding SAP’s development efforts.The two largest are the Americas’ SAP Users’Group (ASUG), and the German-Speaking SAPUser Group (DSAG). SAP supports and encour-ages these highly influential groups to sharetheir expertise, experience, and insights with allSAP users and stakeholders. The SAP UserGroup Executive Network (SUGEN), whichencompasses 13 SAP user groups, has theshared aim of defining priorities and agreeingplans of action that bring greater focus betweenSAP and its user groups throughout the world.

ACQUISITIONS

We continue to undertake targeted acqui-sitions to support and complement our corefocus of product and technological innovation.We made the following acquisitions in 2010and early 2011:

• In July, we acquired Sybase, aU.S. company headquartered in Dublin,California (United States). Sybasedelivers a range of solutions to ensurethat customer information is securelymanaged and mobilized, includingenterprise and mobile databases, mid-dleware, synchronization, encryptionand device management software, andmobile messaging services. Informa-tion management, analytics, and enter-prise mobility solutions by Sybase areproven in the most data-intensiveindustries on all major systems, net-works, and devices. The acquisitionunderpins our vision of the unwiredenterprise. It brings to us technologieswith which we can deliver a leadingmobile platform for business that isbased on open standards, runs on allmajor mobile operating systems, andmanages and supports all major devicetypes. The combination of SAP and

Sybase solutions offer customers acomplete and optimized high-perfor-mance business analytics infrastructure.By porting, certifying, and optimizingSAP Business Suite and other solutionson Sybase data management servers,we will bring our customers a greaterchoice of database platforms for theirSAP applications.

• In July, we acquired TechniData, aGerman company and a strategic SAPpartner for more than 15 years. Thisacquisition is in line with our commit-ment to helping companies executetheir sustainability strategies. Techni-Data is a leading supplier of productsafety and of environment, health, andsafety (EHS) solutions. TechniDataprovides software, systems integration,and managed EHS services, and con-tent to help companies comply withthe applicable regulations.

• In December, we acquired certainassets, including intellectual property,customer contracts, and employee con-tracts, from cundus, a German com-pany. The acquisition of cundus’sfinancial disclosure management solu-tions extends our portfolio of financesolutions with a collaborative offeringthat helps enterprises achieve a timely,accurate, and more cost-effective, andcontrolled financial close process. Incurrent economic conditions, compa-nies and their finance departments areunder greater pressure to comply withInternational Financial Reporting Stan-dards (IFRS) and requirements to filefinancial and business informationusing extensible business reporting lan-guage (XBRL).

• In February 2011, SAP acquired secu-rity software, identity and access man-agement software, as well as assetsincluding development and consultingresources from SECUDE, a leadingvendor of application security solutions

54

Part I

Item 4


in Switzerland. SAP will include SecureLogin and Enterprise Single Sign-On inits product portfolio to provide its cus-tomers with secure client-server com-munications for their SAP systems.

Venture Activities

SAP began its venture activities in 1996by investing in innovative and fast growingsoftware and software services companies. SAPVentures focuses on bringing substantial benefitto its portfolio companies and to SAP by facil-itating interactions between the innovative com-panies in its portfolio and the SAP ecosystem.SAP Ventures invests globally and has portfoliocompanies in Europe, India, Mauritius, and theUnited States. In 2010, SAP Ventures investedin the following companies:

• Spring Wireless is based in Brazil anddelivers end-to-end mobility solutionsdesigned to enable business and organi-zations to increase productivity, optimizereal-time processes and operations, andmaximize their business success.

• Aepona is a pioneer and global marketleader in bringing mobile intelligenceto cloud computing and is based inNorthern Ireland (UK).

• Splashtop (formerly known asDeviceVM) is a privately held softwarecompany based in San Jose, California(United States), offering products thatimprove the personal computing expe-rience on tablets, smartphones, laptops,and netbooks.

• MuleSoft, headquartered in San Fran-cisco, California (United States), is aWeb middleware company, providingenterprise-class software to integrateon-premise and cloud applications.

• Based in San Jose, California(United States), Lavante provides on-demand supplier information manage-ment and recovery audit solutions forcompanies and their suppliers.

• On Deck Capital lends capital to main-street businesses through a software plat-form which incorporates a proprietarycredit model based on business informa-tion rather than personal credit scores.The company is headquartered in NewYork City, New York (United States).

Sustainability

Sustainability is core to the overall busi-ness strategy at SAP and contributes to ourmission to make the world run better. Weapproach sustainability as the holistic manage-ment of social, environmental, and economicrisks and opportunities for increased near-termand long-term profitability.

SAP is delivering customer solutions toimprove sustainability on a grand scale,improving its own operations to be more sus-tainable, and helping provide equal access toeconomic opportunity through the use of infor-mation technology. Over the past 10 years, thisstrategy has led to inclusion in the Dow JonesSustainability Index for upholding ethical, envi-ronmental, social, and governance values. Forthe last four years, the index has named SAPas the leader in the software sector. In addition,in recent years, SAP has been acknowledgedconsistently for its sustainable business prac-tices by leading global sustainability rankings,including the Global 100 list of the most sus-tainable corporations in the world, the FTSE4-Good index, the Global Challenges Index andthe Nasdaq OMX CRD Global Sustainability50 Index. In Germany, we were nominated forthe 2010 German Sustainability Award in theMost Sustainable Strategy category.

In our Sustainability Report atwww.sapsustainabilityreport.com, we providemore detailed information about our environmen-tal, social, and economic performance andimpact, and about our products and services thatsupport sustainable operations. We publicly reporton the following 11 core metrics across environ-mental, social, and economic dimensions:

• Carbon footprint: SAP recognizes itsresponsibility to protect the environment

55

Part I

Item 4


by lowering emissions contributing toclimate change. We acknowledge carbonemissions as a proxy measure for ineffi-cient operations and excess spend. SAP’sgoal is to reduce total GHG emissions tolevels of the year 2000 by 2020. Thisequates to lowering emissions by about50% from 2007 levels. GHG emissionsfor 2010 totaled approximately 425 kilo-tonnes. This represents a decrease of 6%compared to the 450 kilotonnes level in2009. The main contributors to the 2010GHG savings were energy efficiencyprojects, changes of our employees’commuting behavior, and the continuedpurchase of renewable energy.

• Total energy consumption: Our totalenergy consumption includes all energyproduced or purchased by our organiza-tion (for example, the electricity power-ing our buildings and data centers aswell as the fuel propelling our corporatecars). We did not have an overall goalfor reducing total energy consumption in2010, but rather pursued program goalssuch as reducing facility electricity use.These related efforts allowed us toreduce our energy consumption from2,907 terajoules in 2009 to 2,847 tera-joules in 2010.

• Data center energy: We focus onmaking data centers more energy effi-cient by measuring and managing theenergy use of the data center on a peremployee basis. In 2010, two data cen-ters in Germany were certified asenergy efficient by TUV Rheinland.The data centers were specifically rec-ognized for the use of advanced tech-nologies like virtualization, optimaltemperature reduction, and climatecontrol. Our continuous efforts led to adecrease of the data center energyintensity from 3,038 kilowatt hours perFTE (2009) to 2,763 kilowatt hours perFTE in 2010.

• Renewable energy consumed: SAP isusing more and more electricity fromrenewable sources. We purchase someof this green electricity from local util-ity companies and produce some usingsolar panels on our facilities. At theend of 2010, about 48% of our totalelectricity consumption stemmed fromrenewable sources. More specifically,35% of total electricity consumption isbought by SAP and 13% stems fromrenewable electricity already availablewithin country electricity grids.

• Employee turnover: We are committedto attracting, developing and retainingthe best people in the industry. We viewour turnover rate as an important gaugeof our performance. In 2010, our globalemployee turnover rate was 9%, adecrease compared to 2009 (11%) whenemployee turnover was also driven bythe reduction of workforce under thecost-containment program in 2009.

• Women in management: Becausewomen are significantly underrepre-sented in engineering, science, and infor-mation technology (IT), the IT industrystruggles with gender equality, especiallyin management. SAP is working torecruit, retain, and promote qualifiedwomen. We pay attention to the percent-age of women in top management as ameasure of our success. Their numberremained relatively flat, 11.5% in 2010compared to 11.0% in 2009.

• Employee engagement: The engage-ment of our employees is a leadingindicator of being an employer ofchoice and of our ability to deliverinnovative solutions to the market. Wemeasure employee engagement as acombination of commitment, pride,and loyalty, as well as being an advo-cate of SAP. A bright spot in ourrecent employee survey was that 83%of our employees confirmed they areproud to work for SAP. At the same

56

Part I

Item 4


time our employee engagement indexfell from 69% to 68% between 2009and 2010. While 68% is still an aver-age ranking compared to the industrybenchmark, it is an all-time low forSAP. The employee engagement willbe addressed using a comprehensivefollow-up process based on activitiesranging from education to workshops,team analysis, feedback sessions toaction plans.

• Health: SAP’s health managementorganization has developed a holisticand comprehensive program to meetthe needs of our employees who havesedentary, highly demanding intellec-tual jobs. We use the Business HealthCulture Index (BHCI) to measure thestress/satisfaction balance of employ-ees, an indicator of organizationalhealth and readiness to meet strategicobjectives. In 2010, our BHCI was59% compared to 61% in 2009.

• Customer satisfaction: We firmlybelieve that SAP’s success was and willalways be linked to the success andsatisfaction of our customers. We mea-sure customer satisfaction using a num-ber of indicators. Most importantly, weanalyze overall satisfaction and likeli-hood of our customers to recommendSAP. On a scale of 1 to 10, overallcustomer satisfaction remains at a sat-isfactory level of 7.6 globally, com-pared to 7.7 in 2009. The likelihood torecommend increased by 0.1 to 8.1.SAP identifies areas that need attentionon a yearly basis.

• Software and software-related ser-vice revenue and operating margin:For information about these two sus-tainability indicators, see the OperatingResults (IFRS) section.

As detailed in our Sustainability Report,we are also working to help communitiesworldwide recognize economic opportunitythrough the power of IT. We believe in the

power of IT as a driver of social innovation, beit in education or as a way to provide moreequal access to economic opportunity.

• Strengthening communities andimproving education: SAP gave atotal of A12,844,914 in cash donations,we contributed approximately 59,000volunteer hours in our schools andcommunities, and donated our technol-ogy solutions to 700 eligible non-profitorganizations to support our globalcommunities. Through its UniversityAlliances program, SAP donateslicenses for its world leading businesssoftware to schools and universitiesand improves career opportunities inbusiness and information technologyfor more than 200,000 studentsworldwide

• Economic opportunity: Our solutionsand expertise provide fundamentalinfrastructure for economic develop-ment in our global markets. In 2010,we contributed technology and fundingto several pilot programs in Ghana,including the Shea Value Chain Initia-tive that improves the living conditionsfor 1,500 Ghanaian women in the sheanut harvesting and butter business, andthe Ghana Extractives Industries Trans-parency Initiative that improves trans-parency in the oil and miningindustries. We have also started initia-tives in Haiti to train young entrepre-neurs and incubate local businesses tosupport economic recovery.

For more information about how SAPsolutions help companies run better from theenvironmental, social, and economic perspec-tives, see the Portfolio of Software and Servicessection.

SEASONALITY

Our business has historically experiencedthe highest revenue in the fourth quarter ofeach year, due primarily to year-end capitalpurchases by customers. Such factors have

57

Part I

Item 4


resulted in 2010, 2009, and 2008 first quarterrevenue being lower than revenue in the prioryear’s fourth quarter. We believe that this trendwill continue in the future and that our revenuewill continue to peak in the fourth quarter ofeach year and decline from that level in thefirst quarter of the following year.

SALES, MARKETING AND DISTRIBUTION

SAP primarily uses its worldwide networkof subsidiaries to market and distribute SAP’sproducts and services locally. These subsidiarieshave entered into license or commissionaireagreements with the SAP entity owning theunderlying intellectual property (generally SAPAG) pursuant to which the subsidiary acquiredthe right to sublicense or sale SAP’s products tocustomers within a specific territory. Underthese agreements, the subsidiaries retain a cer-tain percentage of the revenue generated by thesublicensing activity. We began operating in theUnited States in 1988 through SAP America,Inc., a wholly owned subsidiary of SAP AG.Since then, the United States has become one ofour most important markets.

In addition to our subsidiaries’ salesforces, we have developed an independent salesand support force through value-added resellersunrelated to SAP who assume responsibility forthe licensing, implementation and some initiallevel of support of our solutions. We have alsoentered into partnerships with major systemintegration firms, telecommunication firms andcomputer hardware providers to offer certainSAP Business Suite applications.

We establish partnerships with hardwareand software suppliers, systems integrators andthird-party consultants with the goal of provid-ing customers with a wide selection of third-party competencies. The role of the partnerranges from pre-sales consulting for businesssolutions to the implementation of our softwareproducts to project management and end-usertraining for customers and, in the case of cer-tain hardware and software suppliers, to tech-nology support. Beyond these partnerships, asignificant amount of consulting and training

regarding SAP products is handled by third-party organizations that have no formal rela-tionship or partnership with SAP.

Traditionally, our sales model has been tocharge a one-time, up front license fee for aperpetual license to our software (without anyrights to future products) which is typicallyinstalled at the customer site. We now offer oursolutions in a variety of ways which include on-demand, hosted solutions, and subscription-basedmodels. Although revenues from these new typesof models currently are not material, we expectthese revenues to increase in the future.

Our marketing efforts cover large, multi-national groups of companies as well as smalland midsize enterprises. We believe our broadportfolio of solutions and services enables us tomeet the needs of customers of all sizes andacross industries.

Capitalizing on the possibilities of theInternet, we actively make use of online mar-keting. Some of our solutions can be testedonline via the Internet demonstration and eval-uation system, which also offers special ser-vices to introduce customers and prospects tonew solutions and services.

INTELLECTUAL PROPERTY, PROPRIETARYRIGHTS AND LICENSES

We rely on a combination of the protec-tions provided by applicable statutory and com-mon law rights, including trade secret,copyright, patent, and trademark laws, licenseand non-disclosure agreements, and technicalmeasures to establish and protect our propri-etary rights in our products. For further detailson risks related to SAP’s intellectual propertyrights, see “Item 3 Key Information — RiskFactors — Other Operational Risks.”

We may be dependent in the aggregateon technology that we license from third partiesthat is embedded into our products or that weresell to our customers. We have licensed andwill continue to license numerous third-partysoftware products that we incorporate intoand/or distribute with our existing products. We

58

Part I

Item 4


endeavor to protect ourselves in the respectiveagreements by obtaining certain rights in casesuch agreements are terminated.

We are a party to certain patent cross-license agreements with certain third parties.

We are named as a defendant in variouslegal proceedings for alleged intellectual prop-erty infringements. See Note (24) to our Con-solidated Financial Statements for a moredetailed discussion of these legal proceedings.

ORGANIZATIONAL STRUCTURE

As of December 31, 2010, SAP AG con-trolled directly or indirectly 203 subsidiaries.Our subsidiaries perform various tasks such asthe distribution of SAP’s products and provid-ing SAP services on a local basis, research anddevelopment, customer support, marketing, andadministration. Our primary research and devel-opment facilities, the overall group strategy andthe corporate administration functions are con-centrated at our headquarters in Walldorf,Germany.

The following table illustrates our most significant subsidiaries based on revenues as ofDecember 31, 2010:

Name of SubsidiaryOwnership

%Country of

Incorporation Function

GermanySAP Deutschland AG & Co.

KG, Walldorf . . . . . . . . . . . . . 100 Germany Sales & Marketing, Consulting, Trainingand Administration

Rest of EMEASAP (UK) Limited, Feltham . . . . 100 Great Britain Sales & Marketing, Consulting,

Training, Customer Support, Researchand Development and Administration

SAP (Schweiz) AG, Biel . . . . . . . 100 Switzerland Sales & Marketing, Consulting,Training, Customer Support, Researchand Development and Administration

SAP France S.A., Paris . . . . . . . . 100 France Sales & Marketing, Training andAdministration

United StatesSAP America, Inc., Newtown

Square . . . . . . . . . . . . . . . . . . 100 USA Sales & Marketing, Consulting,Training, Customer Support, Researchand Development and Administration

Rest of AmericasSAP Canada Inc., Toronto. . . . . . 100 Canada Sales & Marketing, Consulting,


JapanSAP JAPAN Co., Ltd., Tokyo . . . 100 Japan Sales & Marketing, Consulting,


Rest of APJSAP Australia Pty Limited,

Sydney . . . . . . . . . . . . . . . . . . 100 Australia Sales & Marketing, Consulting,Training, Customer Support, Researchand Development and Administration

Sybase Inc. (an independent businessunit) would constitute a significant subsidiary

had we owned Sybase Inc. for the full 2010fiscal year. This calculation is based on

59

Part I

Item 4


combining the revenue from Sybase, Inc. andits subsidiaries that were realized before weacquired Sybase, Inc. (January to July2010) and the months since the acquisition(August to December 2010).

DESCRIPTION OF PROPERTY

Our principal office is located in Wall-dorf, Germany, where we own and occupyapproximately 410,000 square meters of officeand datacenter space including our facilities inneighboring St. Leon-Rot. We also own andlease office space in various other locations inGermany, totaling approximately 170,000 squaremeters. In approximately 65 countries world-wide, we occupy roughly 1,475,000 squaremeters. The space in most locations other thanour principal office in Germany is leased. Wealso own certain real properties in NewtownSquare and Palo Alto (United States); Banga-lore (India); Sao Leopoldo (Brazil), London(UK) and a few other locations in and outsideof Germany.

The office and datacenter space weoccupy includes approximately 285,000 squaremeters in the EMEA region, excluding Ger-many, approximately 400,000 square meters inthe region North and Latin America, andapproximately 210,000 square meters in theAPJ Region.

The space is being utilized for variouscorporate functions including research anddevelopment, customer support, sales and mar-keting, consulting, training, administration andmessaging. Substantially all our facilities arebeing fully used. For a discussion on our non-current assets by geographic region see Note(29) to our Consolidated Financial Statements.Also see, “Item 6. Directors, Senior Manage-ment and Employees — Employees,” which dis-cusses the numbers of our employees, in FTE’s,by business area and by geographic region,which may be used to approximate the produc-tive capacity of our workspace in each region.

We believe that our facilities are in goodoperating condition and adequate for our presentusage. We do not have any significant

encumbrances on our properties. We do notbelieve we are subject to any environmentalissues that may affect our utilization of our anyof our material assets. We are currently under-taking construction activities in various locationsto increase our capacity for future expansion ofour business. Some of our significant construc-tion activities are described below, under theheading “Principal Capital Expenditures andDivestitures Currently in Progress.”

Capital Expenditures

Principal Capital Expenditures and Divesti-tures Currently in Progress

In Singapore, we commenced a project inthe second half of 2010 to consolidate three ofour current offices into one new building. Theproject involved moving approximately830 employees to the new location. The total costof this project was approximately A13 million.We funded this project with internally generatedcash flows. The consolidation of these officeswas completed by the end of 2010 and theemployees have occupied the new building sinceearly January 2011.

Principal Capital Expenditures and Divesti-tures for the Last Three Years

Our capital expenditures for property,plant, and equipment amounted to A287 millionfor 2010 (2009: A207 million; 2008: A344 mil-lion). Capital expenditures in 2010 for property,plant, and equipment increased compared to2009 due mainly to an increase in spending onIT hardware and cars. The decrease from 2008to 2009 was mainly due to a decrease in spend-ing on real estate and buildings. For a relateddiscussion on our property, plant, and equip-ment see Note (17) to our Consolidated Finan-cial Statements.

Our capital expenditures for intangibleassets such as software licenses, acquired tech-nologies and customer contracts amounted toA1,814 million in 2010 from A51 million in2009 (2008: A1,043 million). This increase wasdue primarily to the acquisition of Sybase. Our

60

Part I

Item 4


investments allocated to goodwill amounted toA3,401 million in 2010 from A41 million in2009 (2008: A3,511 million). This increase wasdue primarily to the acquisition of Sybase. Thesignificant decrease from 2008 to 2009 in theadditions to goodwill and intangible assets wasprimarily attributable to the acquisition of Busi-nessObjects in 2008, whereas in 2009 we onlyhad some small acquisitions. For further detailson acquisitions and related capital expenditures,see Note (4) and Note (16) to our ConsolidatedFinancial Statements.

For further information regarding theprincipal markets in which SAP competes,including a breakdown of total revenues bycategory of activity and geographic market foreach of the last three years, see “Item 5. Oper-ating and Financial Review and Prospects —Operating Results” of this report.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEWAND PROSPECTS

OVERVIEW

Our principal sources of revenue aresales of software products and related services.Software revenue is primarily derived fromsoftware license fees that customers pay to useour products. Support revenue is derived fromsupport services which provide the customerwith unspecified upgrades, updates andenhancements and software support. Our soft-ware and support revenue is included withinsoftware and software-related services on ourincome statement. In addition to those revenuestreams, our software and software-related ser-vice revenue includes subscription and othersoftware-related service revenue.

Subscription revenues flow from con-tracts that have both a software element and asupport element. Subscription contracts typi-cally give our customers the use of currentsoftware and the right to unspecified future

products. We typically charge a fixed monthlyor quarterly fee for a definite term up to fiveyears. Software rental revenue flows from soft-ware rental contracts, which include softwareand support service elements. These contractsprovide the customer with current softwareproducts and support but do not provide theright to receive unspecified future softwareproducts. Customers pay a periodic fee over therental term and we recognize fees from soft-ware rental contracts ratably over the term ofthe arrangement. Our revenue from other soft-ware-related services includes revenue from ouron-demand offerings, from hosting contractsthat do not entitle the customer to readily exitthe arrangement, and from software-related rev-enue-sharing arrangements.

We also earn revenue from our profes-sional services, which are included within pro-fessional services and other service revenue onour income statement. This revenue consists ofconsulting and other service revenue; consult-ing revenue is primarily derived from the ser-vices rendered with respect to implementationof our software products and other service rev-enue results primarily from our training andhosting activities; and the messaging servicesbusiness that we acquired as a part of theSybase acquisition.

Other service revenue primarily resultsfrom training revenue and messaging revenue;training revenue results from rendering trainingfor customer project teams and end-users, aswell as training third-party consultants withrespect to SAP software products. Our messag-ing revenue primarily results from per messagetransaction fees. Hosting revenue results fromnon-mandatory hosting services, applicationmanagement services, and sales commissionreceived from third-parties. Non-mandatoryhosting services revenue consists of revenuefrom hosting contracts from which the cus-tomer can readily exit if it wishes to run thesoftware on its own systems.

See “Item 4. Information about SAP —Portfolio of Software and Services” for a more

61

Part I

Item 4, 4A, 5


detailed description of the products and ser-vices we offer.

The following discussion is provided toenable a better understanding of our operatingresults for the periods covered, including:

• the economic conditions that webelieve impacted our performance in2010;

• our outlook for 2010 compared to ouractual performance (non-IFRS);

• a discussion of our operating resultsfor 2010 compared to 2009 and for2009 compared to 2008;

• the economic conditions we believewill impact our performance in2011; and

• our operational targets for 2011 (non-IFRS).

The preceding overview should be readin connection with the more detailed discussionand analysis of our financial condition andresults of operations in this Item 5, “Item 3.Key Information — Risk Factors” and “Item 18.Financial Statements.”

ECONOMIC CONDITIONS

Global Economic Trends

There was “positive momentum” behindthe global economy in 2010, with economicactivity growing more vigorous worldwide,leading economic research bodies report. Therevival of activity was, however, less pro-nounced than it had been in the early stages ofrecovery after past economic crises. Andalthough the first half of 2010 saw a steeprebound in the global economy, progress fal-tered in the second half. One contributory fac-tor was that, increasingly, governments werewithdrawing their stimulus programs.

The emerging markets recuperated betterfrom the crisis than the advanced economies.Overall in 2010, the emerging market econo-mies grew sturdily. By contrast, the advanced

nations struggled all year with labor marketsthat were weak and consumer markets that hadlittle faith in sustained recovery. In conse-quence, the recovery remained relatively frailin the advanced nations.

The strength of the recovery in theEMEA region was uneven. The euro area econ-omies expanded slowly but surely, although notto precrisis levels. Recovery in the euro areadrew strength from a revival of export tradeand an increase in consumer spending. On theother hand, the banks’ circumspect lending pol-icy continued to drag on progress. Among theeuro area countries, the German economy wasnotably upbeat in 2010: It made considerableprogress, resulting in a surprisingly rapidimprovement in the employment situation inGermany over the year. The economies of Cen-tral and Eastern Europe, which had taken asevere blow in the crisis, fared less well, withdomestic demand remaining inadequate to sup-port any strong rebound. In Africa and theMiddle East, economies turned the corner andbegan to grow again. Chief among the factorsencouraging recovery there were the price ofpetroleum, which rose again, and governmentstimulus measures, with which the governmentsof petroleum-exporting countries aided sectorsof the economy unrelated to oil.

In the Americas region, U.S. economicrecovery hesitated from the second quarter of2010 despite plentiful government stimulus pro-grams. Industrial output expanded slowly; onlyconsumer spending increased in the fourthquarter. By the end of 2010, the U.S. economyhad recovered to approximately its precrisislevel. However, in Latin America high single-digit percentage growth was sustained through-out the year, greatly supported by buoyant com-modity prices.

The emerging economies of the AsiaPacific Japan (APJ) region grew fastest of allin 2010. Helped by burgeoning domesticdemand and government measures, the averageof gross domestic product (GDP) percentageincreases in these countries was just short ofdouble digits. Economic growth was so stable

62

Part I

Item 5


and self-supporting that, by the end of the year,the emerging economies in the APJ region hadsurpassed their precrisis levels. Alone in theregion, the Japanese economy had not recov-ered from the crisis by the end of the year.Despite two fiscal packages, it was stalled sig-nificantly below the level it had attained beforethe recession. As an export-oriented economy,Japan’s major difficulty lay in the persistentlyweak demand from its overseas customers.

The IT Market

In 2010, the global IT market recoveredfrom the crisis of the preceding two years.Percentage growth in worldwide IT investmentfor the year was in the upper single digits.Goldman Sachs reports that by the end of theyear, IT investment was greater than at anytime since 2007. The final quarter was true tonormal for the season, and no longer sufferingfrom the effects of the crisis.

Throughout the year, IT investment grewmore rapidly in the emerging economies thanin the advanced nations. According to Interna-tional Data Corporation (IDC), a marketresearch firm based in the United States, thedifference is that in the advanced nations, busi-nesses and consumers were cautious aboutspending in view of the crisis, and banksremained cautious about lending. The disparitymight have been greater still, IDC says, had theIT market in the advanced nations not bene-fited almost all year from government stimulusprograms.

IDC reports that the market for hardwaregrew by double-digit percentages in 2010, asbusinesses made investments they had post-poned during the crisis. However, growth in thesoftware and services market was in the lowersingle-digit range. Nonetheless, several newtechnologies gained in importance in 2010. Forexample, the social Web began to penetrate theworld of business, according to Forrester, amarket research organization based in theUnited States. Forrester notes that new, nonrela-tional database technologies were another fea-ture of the software market in 2010. They

manage very large numbers of users and vol-umes of data, and they may replace relationaldatabases. Another market research firm basedin the United States, Gartner, reports that themarket for software as a service (SaaS) grewby a double-digit percentage in 2010.

Reporting specifically about the EMEAregion, IDC notes that in Western Europeinvestment in IT increased markedly in 2010after the crisis. IDC reports that in the Ameri-cas region, it was mainly small and mediumbusinesses that started to invest in IT again in2010 and that the hardware segment and thesoftware and services segment were at the fore-front. In 2010, IT investment in the APJ regiongrew even more strongly than IDC had pro-jected, but IDC says this was largely becauseinvestment had contracted more there in the2009 crisis than it had originally expected.

OUTLOOK FOR 2010

Performance Against Outlook for 2010 (Non-IFRS)

Our 2010 operating income-related inter-nal management goals and published outlookwere based on non-IFRS terms. For this reason,in the following section we discuss perfor-mance against our outlook exclusively andexpressly in terms of non-IFRS numbersderived from IFRS measures. All subsequentdiscussions in the Operating Results (IFRS)section are in terms of IFRS measures. As aresult, the numbers in that section are notexplicitly identified as IFRS measures.

Outlook for 2010 (Non-IFRS)

At the beginning of 2010, we projectedthat our operating margin (non-IFRS) for 2010would be between 30% and 31% (2009: 27.4%)on a constant currency basis. We also antici-pated in 2010 that software and software-related service revenue (non-IFRS) wouldincrease between 4% and 8% on a constantcurrency basis (2009: A8.2 billion).

In April 2010, we confirmed the outlookwe published in January 2010. In July 2010, we

63

Part I

Item 5


changed our outlook to take into account theacquisition of Sybase: we expected 2010 non-IFRS software and software-related service rev-enue to increase between 9% and 11% on aconstant currency basis (2009: A8.2 billion).We still expected SAP’s business without Syb-ase results to contribute 6 to 8 percentagepoints to this growth. We expected the 2010non-IFRS operating margin to be between 30%

and 31% (2009: 27.4%) on a constant currencybasis.

In October 2010, we reiterated the out-look we published in July 2010.

Throughout 2010, we projected an effec-tive tax rate of between 27.5% and 28.5%(IFRS) for 2010 (2009: 28.1%).

To assist in understanding our 2010 performance as compared to our 2010 outlook areconciliation from our IFRS financial measures to our non-IFRS financial measures is providedbelow. These IFRS financial measures reconcile to the nearest non-IFRS equivalents as follows:

IFRSFinancialMeasure

SupportRevenue Not

RecordedUnderIFRS

Acquisition-RelatedCharges

DiscontinuedActivities

Non-IFRSFinancialMeasure

CurrencyEffect on the


Non-IFRSFinancial

Measure atConstantCurrency

E millions, except operating margin

Software and software-related service revenue . . . 9,794 74 n/a n/a 9,868 �570 9,298

Total revenue(1) . . . . . . . . . . 12,464 74 n/a n/a 12,538 �709 11,829Operating profit(1) . . . . . . . . 2,591 74 300 983 3,947 �339 3,608Operating margin in % . . . . . 20.8 0.5 2.4 7.8 31.5 �1.0 30.5

(1) Operating profit is the numerator and total revenue is the denominator in the calculation of our IFRS oper-ating margin and the comparable non-IFRS operating margin, and are included in this table for the conve-nience of the reader.

2010 Actual Performance Compared to Out-look (Non-IFRS)

On a constant currency basis, our non-IFRS software and software-related service rev-enue grew 13% in 2010 to A9.3 billion (2009:A8.2 billion), surpassing the outlook we pub-lished in January 2010 (4% to 8%) and updatedoutlook we published in July 2010 (9% to11%). The increase was primarily due to theincipient economic recovery in 2010, whichencouraged new and existing customers to con-siderably step up investment. SAP’s businesswithout Sybase results contributed 10 percent-age points to non-IFRS software and software-related service revenue growth on a constantcurrency basis.

Our 2010 non-IFRS operating margin ona constant currency basis was 30.5%, meetingthe outlook we provided in 2010 (30% to31%). Our 2010 non-IFRS operating margin

was 3.1 percentage points higher than the pre-vious year’s non-IFRS operating margin of27.4%. In contrast to 2009, restructuringexpenses did not materially impact our operat-ing margin in 2010, whereas in 2009 restructur-ing expenses negatively impacted our non-IFRSoperating margin by 1.8 percentage points.

We achieved an effective tax rate of22.5% for 2010 (based on IFRS), which isconsiderably lower than the effective tax rateprojected for 2010 (27.5% to 28.5%). Thisdecrease in comparison to the outlook mainlyresulted from the tax effect of the increase inprovision recorded for the TomorrowNowlitigation.

OPERATING RESULTS (IFRS)

This Operating Results (IFRS) sectiondiscusses results exclusively in terms of IFRSmeasures, so the IFRS numbers are not explic-itly identified as such.

64

Part I

Item 5


We acquired Sybase at the end of July2010. Therefore, the Sybase results are

incorporated in our results only for the monthsAugust to December 2010.

Our 2010 Results Compared to our 2009 Results (IFRS)

Revenue

2010 2009Change

2010 vs 2009E millions

Software revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,265 2,607 25%Support revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,133 5,285 16%Subscription and other software-related service revenue . . . . . . . . . . . . . 396 306 29%Software and software-related service revenue . . . . . . . . . . . . . . . . . . . 9,794 8,198 19%Consulting revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,197 2,074 6%Other service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 400 18%Professional services and other service revenue . . . . . . . . . . . . . . . . . . 2,670 2,474 8%Total revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,464 10,672 17%

Total Revenue

Total revenue increased fromA10,672 million in 2009 to A12,464 million in2010, representing an increase of A1,792 millionor 17%. SAP’s business without the Sybaseresults contributed 14% to this growth. Thistotal revenue growth reflects a 10% increasefrom changes in volumes and prices and a 7%increase from currency effects. Specifically, oursoftware revenue increased by A658 million ascompared to 2009 and our support revenueincreased by A848 million as compared to2009. Additionally, our SSRS revenueincreased, resulting in software and software-related service revenue of A9,794 million in2010. Software and software-related servicerevenue represented 79% of our total revenuein 2010 compared to 77% in 2009. Professionalservices and other service revenue contributedA2,670 million to our total revenue in 2010.This represents an increase of 8% compared to2009. Professional services and other servicerevenue accounted for 21% of our total revenuein 2010 compared to 23% in 2009.

For an analysis of our total revenue byregion and industry, see the Revenue by Regionand Revenue by Industry sections.

Software and Software-Related Service Revenue

Software revenue represents fees earnedfrom the sale or license of software to custom-ers. Support revenue represents fees earnedfrom providing customers with technical sup-port services and unspecified softwareupgrades, updates, and enhancements. Sub-scription and other software-related service rev-enue represents fees earned from softwaresubscriptions, on-demand offerings, rentals, andother types of software-related servicecontracts.

In 2010, software and software-relatedservice revenue increased from A8,198 millionin 2009 to A9,794 million, representing anincrease of 19%. The software and software-related service revenue growth reflects a 13%increase from changes in volumes and pricesand a 6% increase from currency effects. SAP’sbusiness without the Sybase results contributed16% to this growth.

Software revenue increased fromA2,607 million in 2009 to A3,265 million in2010, representing an increase of A658 millionor 25%. The software revenue growth consistsof a 16% increase from changes in volumesand prices and a 9% increase from currencyeffects.

65

Part I

Item 5


SAP Business Suite revenue contributedmost to the overall organic increase in softwarerevenue, followed by SAP BusinessObjectssolutions as well as our products based on ourSAP NetWeaver platform.

Our customer base increased again in2010. Based on the value of software ordersreceived, excluding Sybase, 18% of our soft-ware orders received in 2010 were attributableto deals with new customers (2009: 17%). Thevalue of software orders received, excludingSybase, increased 21% year over year. The totalnumber of new software deals closed, excludingSybase, increased by 5% to 44,875 (2009:42,639).

Support revenue increased fromA5,285 million in 2009 to A6,133 million in2010, representing an increase of A848 millionor 16%. This support revenue growth reflects a10% increase from changes in volumes andprices and a 6% increase from currency effects.The SAP Enterprise Support maintenance ser-vice was the largest contributor to our supportrevenue. Our increased support revenue resultedfrom our stable customer base and the continuedsale of software to existing and new customersthroughout 2010.

Subscription and other software-relatedservice revenue increased A90 million or 29% toA396 million compared to A306 million in 2009.The increase in revenue reflects a 25% increasefrom volumes and prices and a 4% increase fromcurrency effects. It derives primarily from sub-scription contracts concluded in 2009 and 2010.

Professional Services and Other Service Revenue

Professional services and other servicerevenue consists primarily of consulting and

other service revenue. We generate most of ourconsulting revenue from the implementation ofour software products. Other service revenueconsists mainly of training revenue from pro-viding educational services to customers andpartners on the use of our software productsand related topics, such as revenue from theSybase acquired messaging services business.

Professional services and other servicerevenue increased A196 million or 8% fromA2,474 million in 2009 to A2,670 million in2010. The rise consists of a 2% increase fromchanges in volumes and prices and a 6%increase from currency effects.

Consulting revenue increased 6% fromA2,074 million in 2009 to A2,197 million in2010. The increase was derived from currencyeffects. In 2010, consulting contributed 82% ofprofessional services and other service revenue(2009: 84%). Consulting revenue contributed18% of total revenue (2009: 19%). A substan-tial portion of consulting revenue follows onfrom software license sales. Software licensesales were relatively weak in 2009. In thiscontext, the growth in consulting revenue in2010 is unremarkable.

Other service revenue increased 18%from A400 million in 2009 to A473 million in2010. The other service revenue increase con-sists of a 13% increase from changes in vol-umes and prices and a 5% increase fromcurrency effects. This increase resulted prima-rily from training revenue, hosting revenue thatthe SAP IT organization generates by operating,managing, and maintaining SAP solutions andmessaging revenue from Sybase, which weacquired in July 2010.

66

Part I

Item 5


Revenue by Region and Industry

Revenue by Region

2010 2009Change in %2010 vs 2009

E millions

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,195 2,029 8%Rest of EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,068 3,614 13%Total EMEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,263 5,643 11%United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,243 2,695 20%Rest of Americas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,192 925 29%Total Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,435 3,620 23%Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 476 8%Rest of APJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,253 933 34%Total APJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,766 1,409 25%Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,464 10,672 17%

Revenue by Industry

2010 2009Change in %2010 vs. 2009

E millions

Process industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,529 2,008 25%Discrete industries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,420 2,127 14%Consumer industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,367 1,976 21%Service industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,788 2,516 10%Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,058 909 16%Public services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,302 1,136 14%Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,464 10,672 17%

Revenue by Region

We operate our business in three principalgeographic regions: the Europe, Middle East,and Africa (EMEA) region; the Americasregion, which comprises North and Latin Amer-ica; and the Asia Pacific Japan (APJ) region,which comprises Japan, Australia, and otherparts of Asia. We allocate revenue amounts toeach region based on where the customer islocated. For additional information with respectto operations by geographic region, see theNotes to the Consolidated Financial Statementssection, Note (29).

The EMEA Region

In 2010, 50% of our total revenue wasderived from the EMEA region (2009: 53%).Our revenue from the EMEA region grew 11%in 2010 to A6,263 million (2009: A5,643 million).This growth reflects an 8% increase from

changes in volumes and prices and a 3%increase from currency effects. Total revenue inGermany increased 8% to A2,195 million in2010 (2009: A2,029 million). Germany contrib-uted 35% to our total revenue from the EMEAregion, which is a decrease of 1 percentagepoint compared to 2009. Other EMEA revenuein 2010 originated primarily from the UnitedKingdom, France, Switzerland, the Netherlands,Italy, and Russia. Software and software-relatedservice revenue generated in the EMEA regionin 2010 totaled A4,883 million (2009: A4,336 mil-lion). Software and software-related service rev-enue accounted for 78% of all revenue in theEMEA region in 2010 (2009: 77%).

The Americas Region

Of our 2010 total revenue, 36% (2009:34%) was recognized in the Americas region.Revenue in the region increased 23% toA4,435 million in 2010. Revenue from the

67

Part I

Item 5


United States rose 20% to A3,243 in 2010,which represents an increase of 13% fromchanges in volumes and prices and a 7%increase from currency effects. The UnitedStates contributed 73% (2009: 74%) of theAmericas region revenue. Revenue from therest of the Americas region increased 29% toA1,192 million, which represents an increase of15% from changes in volumes and prices and a14% increase from currency effects. This reve-nue was principally generated in Canada,Brazil, and Mexico. In 2010, software and soft-ware-related service revenue from our Ameri-cas region grew 26% to A3,427 million (2009:A2,718 million). This growth included a 9%increase from currency effects. Software andsoftware-related service revenue represented77% of all revenue in the Americas region in2010 (2009: 75%).

The APJ Region

In 2010, the APJ region contributed 14%(2009: 13%) to our total revenue, with most ofthis revenue being derived from Japan. In theAPJ region, revenue rose by 25% to A1,766 mil-lion in 2010. Revenue from Japan increased8% to A513 million, which represents 29%(2009: 34%) of our revenue from the APJregion. The revenue rise in Japan reflects a 5%decrease due to changes in volumes and pricesand a 13% increase from currency effects.Together, the other countries in the APJregion — principally Australia, India, and Chi-na — saw a 34% increase in revenue, reflectinga 16% increase in volumes and prices and an18% increase from currency effects. In 2010,

our APJ region achieved software and soft-ware-related service revenue growth of 30%(including 17% from currency effects) to reachA1,485 million (2009: A1,144 million). Soft-ware and software-related service revenue rep-resented 84% of all revenue in the APJ regionin 2010 (2009: 81%).

Revenue by Industry

We have identified six industry sectorson which to focus our development efforts inthe key industries of our existing and potentialcustomers. We provide best business practicesand specific integrated business solutions tothose industries. We allocate our customers toan industry at the outset of an initial arrange-ment. All subsequent revenue from a particularcustomer is recorded under that industry sector.

Our revenue growth percentage in everyindustry sector was in double digits in 2010.Two of our industry sectors outperformed theCompany’s total revenue growth percentage of17% in 2010: process manufacturing industriesachieved A2,529 million revenue and ayear-over-year growth rate of 26%; and con-sumer industries achieved A2,367 million reve-nue at a growth rate of 20%. Our otherindustry sectors performed as follows: Financialservices industries revenue grew 16% toA1,058 million; public service industriesachieved A1,302 million revenue, an increase of15%; discrete manufacturing industries revenuewas A2,420 million, an increase of 14%, andservice industries revenue grew 11% toA2,788 million.

68

Part I

Item 5


Operating Profit and Margin

Total Operating Expense

2010 2009Change

2010 vs. 2009E millions

Cost of software and software-related services . . . . . . . . . . . . . . . . �1,823 �1,658 10%Cost of professional services and other services . . . . . . . . . . . . . . �2,071 �1,851 12%Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �1,729 �1,591 9%Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �2,645 �2,199 20%General and administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �636 �564 13%Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 �198 G-100%TomorrowNow litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �981 �56 H100%Other operating income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 33 �73%Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �9,873 �8,084 22%

Operating Profit and Operating Margin

2010 2009Change

2010 vs. 2009E million, except

for operatingmargin

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,591 2,588 0%Operating margin in % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.8 24.3 �3.5pp


In 2010, our operating profit was almostunchanged year over year at A2,591 million(2009: A2,588 million) despite costs totalingA981 million (2009: A56 million) that nega-tively impacted our operating profit. Thesecosts resulted from an increase in the provisionwe recorded for the TomorrowNow litigation.For more information about the TomorrowNowlitigation, see the Notes to the ConsolidatedFinancial Statements section, Note (24). Acqui-sition-related charges of A300 million (2009:A271 million) also had a greater effect on oper-ating profit than in the previous year.

Our operating margin was 20.8% (2009:24.3%), a decrease of 3.5 percentage points.Acquisition-related charges and effects fromdiscontinued TomorrowNow activities nega-tively impacted our operating margin by10.3 percentage points in 2010 (2009: 3.1 per-centage points). In 2009, restructuring chargesof A198 million impacted the operating marginby 1.9 percentage points, whereas in 2010

restructuring expenses did not materiallyimpact our operating margin.

Our total operating expenses increasedA1,789 million or 22% to A9,873 million com-pared with A8,084 million in 2009, primarily asa result of the greater expense from discontin-ued TomorrowNow activities and the acquisi-tion of Sybase.

The sections that follow discuss our costsby line item. All cost line items below wereimpacted by the inclusion of Sybase for themonths August to December 2010.

Cost of Software and Software-Related Services

Cost of software and software-relatedservices consists primarily of various customersupport costs, cost of developing custom solu-tions that address customers’ unique businessrequirements, and license fees and commissionspaid to third parties for databases and the othercomplementary third-party products sublicensedby us to our customers.

69

Part I

Item 5


Cost of software and software-relatedservices increased 10% from A1,658 million in2009 to A1,823 million in 2010. The principalreason for this increase was an increase inheadcount to cover growing demand for SAPEnterprise Support in 2010, demand that wasalso reflected in growing software-related ser-vice revenue. The margin on our software andsoftware-related services, defined as the ratioof the gross software and software-related ser-vices result to software and software-relatedservice revenue, expressed as a percentage, was81% in 2010 (2009: 80%).

Cost of Professional Services and Other Services

Cost of professional services and otherservices consists primarily of the cost of con-sulting and training personnel and the cost ofbought-in third-party consulting and trainingresources. This item also includes sales andmarketing expenses for our professional ser-vices and other services resulting from salesand marketing efforts where those efforts can-not be clearly distinguished from providing theprofessional services and other services.

Cost of professional services and otherservices rose 12% from A1,851 million in 2009to A2,071 million in 2010. The margin on ourprofessional services and other services,defined as the ratio of the gross professionalservices and other services result to profes-sional services and other services revenue,expressed as a percentage, was 22% in 2010(2009: 25%).

The reasons for the decline in the profit-ability of our professional services and otherservices were investments we made to preparefor growing demand in 2010 after the downturnin 2009 and costs incurred on unprofitableconsulting contracts.


Our research and development (R&D)expense consists primarily of the personnel costof our R&D employees, costs incurred for inde-pendent contractors we retain to assist in our

R&D activities, and amortization of the com-puter hardware and software we use for ourR&D activities.

Our total R&D expense rose 9% toA1,729 million in 2010. The increase wasmainly due to the inclusion of Sybase and tounfavorable currency effects.

Our R&D expense as a percentage oftotal revenue declined to 14% (2009: 15%).Total revenue increased more steeply thanR&D expense, resulting in a reduction in theR&D ratio.

Sales and Marketing

Sales and marketing expense consistsmainly of personnel costs and direct sales coststo support our sales and marketing lines ofbusiness in selling and marketing our productsand services.

Sales and marketing expenses increased20% to A2,645 million in 2010 compared toA2,199 million in 2009. The increase wasmainly due to increased travel and marketingexpenses driven by an increase in our businessactivity, and unfavorable currency effects. Byincreasing our sales force we accelerated ourrevenue growth. Sales and marketing expenseas a percentage of total revenue was 21% in2010, little changed since 2009.

General and Administration

Our general and administration (G&A)expense consists mainly of personnel costs tosupport our finance and administrationfunctions.

Our G&A expense rose from A564 millionin 2009 to A636 million in 2010, representing anincrease of 13%. The increase in cost was mainlydriven by the inclusion of Sybase and by unfa-vorable currency effects. G&A expenses as apercentage of total revenue in 2010 were consis-tent with the 2009 level of 5%.

70

Part I

Item 5


Segment Discussions

The acquisition of Sybase, Inc. affectedour internal reporting to management. In addi-tion to our previously reported segments, Prod-uct, Consulting, and Training, we added a newreportable segment: Sybase. While this newsegment is named Sybase, it is not identical tothe acquired Sybase business since parts of theacquired business are now integrated with andthus reported in other segments, and certainSAP activities are now in our Sybase segment.

Total revenue and profit figures for eachof our operating segments differ from therespective revenue and profit figures classifiedin our Consolidated Statements of Incomebecause of several differences between ourinternal management reporting and our externalIFRS reporting. For further details of our seg-ment reporting and a reconciliation from ourinternal management reporting to our externalIFRS reporting, see the Notes to the Consoli-dated Financial Statements section, Note (29).

Product Segment 2010 2009Change in %2010 vs. 2009

E millions, unlessotherwise stated

External revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,020 7,846 15Segment expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �3,625 �3,115 16Segment contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,395 4,731 14Segment profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60% 60% 0pp

Consulting Segment 2010 2009Change in %2010 vs. 2009

External revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,714 2,498 9Segment expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �1,968 �1,717 15Segment contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 746 781 �5Segment profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28% 31% �4pp

Training Segment 2010 2009Change in %2010 vs. 2009

External revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 332 9Segment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �226 �217 4Segment contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 115 18Segment profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38% 35% 3pp

Sybase Segment 2010 2009Change in %2010 vs. 2009

External revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387 0 N/ASegment expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �260 0 N/ASegment contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 0 N/ASegment profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33% N/A N/A

Product Segment

The Product segment is primarilyengaged in marketing and licensing our soft-ware products and providing support for them.Support includes technical support for ourproducts, assistance in resolving problems, pro-viding user documentation, unspecified soft-ware upgrades, updates, and enhancements.

The Product segment also performs certain cus-tom development projects. The Product seg-ment includes the sales, marketing, and serviceand support lines of business.

Product segment revenue increased 15%from A7,846 million in 2009 to A9,020 millionin 2010. This growth reflects an 8% increasefrom changes in volumes and prices and a 7%

71

Part I

Item 5


increase from currency effects. The increasewas driven by an increase in customer licensingof our software, which in turn contributed to anincrease in support revenue. Software revenueas part of the total Product segment revenueincreased 17% from A2,373 million in 2009 toA2,766 million in 2010. This growth reflects an8% increase from changes in volumes andprices and a 9% increase from currency effects.Support revenue increased 14% fromA5,076 million in 2009 to A5,776 million in2010. This growth reflects an 8% increase fromchanges in volumes and prices and a 6%increase from currency effects. Subscriptionand other software-related service revenueincreased 28% from A304 million in 2009 toA387 million in 2010.

Product segment expenses increased 16%from A3,115 million in 2009 to A3,625 millionin 2010. Expenses from the sales line of busi-ness account for roughly 54% of the entireProduct segment expenses, while expenses fromthe marketing line of business account forroughly 17% and expenses from the serviceand support line of business account forroughly 29% of overall Product segmentexpenses. The increase in Product segmentexpenses is related to accelerated businessactivities due to incipient economic recovery in2010.

Product segment contribution increased14% from A4,731 million in 2009 to A5,395 mil-lion in 2010. Product segment profitabilityremained at 60% in 2010.

Consulting Segment

The Consulting segment is primarilyengaged in the implementation of our softwareproducts.

Consulting segment revenue increased 9%from A2,498 million in 2009 to A2,714 million in2010. This growth reflects a 3% increase fromchanges in volumes and prices and a 6% increasefrom currency effects. Geographically all regionscontributed to this segment revenue increase, pre-dominantly in North America and our APJ region.

Consulting segment expenses increased15% from A1,717 million in 2009 to A1,968 mil-lion in 2010. This expense growth was prima-rily the result of investments to prepare for theincreased demand in 2010 after the downturnin 2009.

Consulting segment contributiondecreased 5% from A781 million in 2009 toA746 million in 2010. Consulting segment prof-itability was 27% in 2010 compared to 31% in2009.

Training Segment

The Training segment is primarilyengaged in providing educational services onthe use of our software products and relatedtopics for customers and partners. Training ser-vices include traditional classroom training atSAP training facilities, customer and partner-specific training and end-user training, as wellas e-learning.

Training segment revenue was A362 millionin 2010, which represents an increase of 9%from A332 million in 2009. This growth reflectsa 2% increase from changes in volumes andprices and a 7% increase from currency effects.Geographically, the Americas and APJ regionswere the primary contributors to our 2010 Train-ing segment revenue increase. In 2010, our Train-ing segment revenue growth was especially highin North America, with a 29% increase, whereasTraining segment revenue decreased 3% in theEMEA region.

Our Training segment expenses increased4% from A217 million in 2009 to A226 millionin 2010. Costs increased to support the growingbusiness activities in 2010 after the downturnin 2009.

The Training segment contributionincreased 18% from A115 million in 2009 toA136 million in 2010. Training segment profit-ability was 38% in 2010 compared to 35% in2009.

72

Part I

Item 5


Sybase Segment

The Sybase segment is primarily engagedin enabling the unwired enterprise for custom-ers and partners by delivering enterprise andmobile software solutions for information man-agement, development, and integration. Themeasurement of the result for the Sybase seg-ment differs from the measurements for theother segments, as the Sybase segment resultincludes development, administration, and othercorporate expenses while these expenses areexcluded from the measurement of the resultsof the other segments.

Sybase segment revenue was A387 mil-lion, mainly driven by sales of databases,mobility solutions, and messaging services.Sybase segment expenses were A260 million in2010.

The Sybase segment contribution wasA127 million in 2010, resulting in a Sybasesegment profitability of 33%.

Finance Income, Net

Finance income, net, improved to-A67 million (2009: -A80 million). Our financeincome in 2010 was A73 million (2009:A37 million) and our finance costs wereA140 million (2009: A117 million).

Finance income mainly consists of inter-est income from loans and receivables (e.g.cash, cash equivalents, and current investments;A34 million in 2010 compared to A35 millionin 2009). The decrease was mainly due to

interest rate reductions which were partly offsetby an increase in average liquidity in 2010compared to 2009.

Finance cost mainly consists of interestexpense on financial liabilities (A77 million in2010 compared to A63 million in 2009). Theincrease compared to 2009 resulted mainlyfrom the financial debt incurred in connectionwith the Sybase acquisition. We used bankloans, bonds, and private placements to financethis acquisition. For more information aboutthese financing instruments, see the Notes tothe Consolidated Financial Statements section,Note (18b). In addition, the pending Tomorrow-Now litigation caused interest expenses ofA12 million in 2010 (2009: A0 million).

Another significant contribution to thefinance income, net in 2010 came from thederivatives that we utilize to execute our finan-cial risk management strategy. These deriva-tives caused time value effects that werereflected in interest income with an amount ofA25 million (2009: A0 million) and in interestexpense with an amount of A31 million (2009:A38 million).

Income Tax

The 2010 effective tax rate was 22.5%compared to 28.1% in 2009. Approximately5 percentage points of this decrease resultedfrom the increase in provision recorded for theTomorrowNow litigation. For more informa-tion, see the Notes to the Consolidated Finan-cial Statements section, Note (11).

73

Part I

Item 5


Our 2009 Results Compared to our 2008 Results (IFRS)

Revenue

2009 2008Change


Software revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,607 3,606 �28%Support revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,285 4,602 15%Subscription and other software-related service revenue . . . . . . . . . . 306 258 19%Software and software-related service revenue . . . . . . . . . . . . . . . 8,198 8,466 �3%Consulting revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,074 2,498 �17%Other service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 611 �35%Professional services and other service revenue . . . . . . . . . . . . . . 2,474 3,109 �20%Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,672 11,575 �8%

Total Revenue

Total revenue decreased fromA11,575 million in 2008 to A10,672 million in2009, representing a decrease of A903 millionor 8%. This entire decrease was caused bychanges in volumes and prices. The declinemainly relates to a decrease in software revenueof A999 million or 28% as compared to 2008.This decrease was offset in part by increasedsupport and subscription revenue, whichresulted in software and software-related ser-vice revenue of A8,198 million in 2009. Soft-ware and software-related service revenuerepresented 77% of our total revenue in 2009compared to 73% in 2008. Professional ser-vices and other service revenue contributedA2,474 million to our total revenue in 2009.This represents a decrease of 20% compared to2008. Professional services and other servicerevenue accounted for 23% of our total revenuein 2009 compared to 27% in 2008.

For an analysis of our total revenue byregion and industry, see the Revenue by Regionand Revenue by Industry sections.

Software and Software-Related Service Revenue

In 2009, software and software-relatedservice revenue decreased from A8,466 millionin 2008 to A8,198 million, representing adecrease of A268 million or 3%. This decreasewas caused by a decrease in software revenue

that was countered by a smaller increase insupport revenue.

Software revenue decreased fromA3,606 million in 2008 to A2,607 million in2009, representing a decrease of A999 millionor 28%. The software revenue decline consistsof a 27% decrease from changes in volumesand prices and a 1% decrease from currencyeffects.

In 2009, we continued to focus on ourestablished product portfolio: SAP BusinessSuite, our platform-related products based onSAP NetWeaver, and the solutions aimed atbusiness users primarily available in the SAPBusiness Objects portfolio. We continued tointegrate our SAP BusinessObjects solutionswith products from SAP Business Suite andSAP NetWeaver to provide added value to ourcustomers.

SAP Business Suite revenue contributedmost to the overall decrease of software reve-nue with a 38% decrease, but a recovery startedin the second half of 2009. Positive contribu-tion to software revenue development camefrom customer development projects (the devel-opment of customer specific software solu-tions), which rose 35% compared to 2008.

Throughout 2009 our customer baseremained relatively stable. Based on the num-ber of deals closed, 37% of our software reve-nue in 2009 was attributable to contracts withnew customers (2008: 32%). The total number

74

Part I

Item 5


of new software deals settled decreased by 10%to 42,639 (2008: 47,572). The value of softwareorder entry declined 28% year over year. Basedon the order entry value, the new customershare increased from 13% in 2008 to 17% in2009.

Our stable customer base and the contin-ued sale of software to existing and new cus-tomers throughout 2009 resulted in an increasein support revenue from A4,602 million in 2008to A5,285 million in 2009, representing anincrease of A683 million or 15%. The supportrevenue growth reflects a 14% increase fromchanges in volumes and prices and a 1%increase from currency effects.

Subscription and other software-relatedservice revenue increased A48 million or 19%to A306 million compared to A258 million in2008. The increase in revenue reflects a 16%increase from volumes and prices and a 3%increase from currency effects. The increaserelated primarily to new global enterpriseagreements and flexible license agreements rep-resenting a foundation for future subscriptionand other software-related service revenuegrowth.

Professional Services and Other Service Revenue

Professional services and other servicerevenue decreased from A3,109 million in 2008to A2,474 million in 2009, representing adecrease of A635 million or 20% due entirelyto changes in volumes and prices. The decrease

in professional services and other service reve-nue is mainly due to economic conditions,which caused our customers to decrease theirspending on software, postpone implementationprojects, and reduce training activities.

Consulting revenue decreased fromA2,498 million in 2008 to A2,074 million in2009, representing a decrease of 17% which isentirely due to changes in volumes and prices.Our 2009 consulting revenue declined primarilydue to the economic conditions, which led todecreased customer spending on softwareinvestments, and continued strict cost controlpolicies. In 2009, consulting contributed to85% of our revenue result in professional ser-vices and other service revenue compared to82% in 2008. Consulting revenue as a percent-age of total revenue decreased to 19% in 2009compared to 22% in 2008.

Other service revenue decreased fromA611 million in 2008 to A400 million in 2009,representing a decrease of 35%. The declinewas mainly attributable to a decrease in train-ing revenue of 37%. The decline in trainingrevenue resulted primarily from economic con-ditions, which led customers to implement tightcost controls on software projects and relateduser enabling. This led to a significant decreaseof attendee rates in our training offerings. Inaddition, our hosting revenue, generated byoperating, managing, and maintaining SAPsolutions, decreased by 17%.

75

Part I

Item 5


Revenue by Region and Industry

Revenue by Region

2009 2008Change in %2009 vs. 2008

E millions

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,029 2,193 �7%Rest of EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,614 4,013 �10%Total EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,643 6,206 �9%United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,695 2,890 �7%Rest of Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925 990 �7%Total Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,620 3,880 �7%Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476 515 �8%Rest of APJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 933 974 �4%Total APJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,409 1,489 �5%Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,672 11,575 �8%

Revenue by Industry

2009 2008Change in %2009 vs. 2008

E millions

Process industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,008 2,367 �15%Discrete industries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,127 2,434 �13%Consumer industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,976 2,235 �12%Service industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,516 2,706 �7%Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 909 774 17%Public services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,136 1,059 7%Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,672 11,575 �8%

Revenue by Region

The EMEA Region

In 2009, 53% (2008: 54%) of our totalrevenue was derived from the EMEA region.Our total revenue from the EMEA region wasA5,643 million, which represents a decline of9% compared to 2008 (2008: A6,206). Thisdecrease reflects a 7% decrease from changesin volumes and prices and a 2% decrease fromcurrency effects. Total revenue in Germanydecreased 7% to A2,029 million in 2009 (2008:A2,193 million). Germany contributed 36% toour total revenue from the EMEA region in2009, which is a slight increase of 0.6 percent-age points compared to 2008. Most of the restof our EMEA revenue in 2009 originated fromthe United Kingdom, France, Switzerland, theNetherlands, Italy, and Spain.

The Americas Region

Of our 2009 total revenue, 34% (2008:34%) was recognized in the Americas region.Total revenue in the region decreased 7% toA3,620 million in 2009. Total revenue from theUnited States declined 7% in 2009, which repre-sents a decrease of 10% from changes in volumesand prices and a 3% increase from currencyeffects. The United States contributed 74% (2008:74%) of our total revenue from the Americasregion. The rest of the Americas region saw a 7%decrease in total revenue to A925 million, whichrepresents a decrease of 3% from changes involumes and prices and a 4% decrease fromcurrency effects. This revenue was principallygenerated in Canada, Brazil, and Mexico.

76

Part I

Item 5


The APJ Region

In 2009, the APJ region contributed 13%(2008: 13%) to our total revenue, with most ofthis revenue being derived from Japan. In theAPJ region, total revenue declined by 5% toA1,409 million in 2009. Revenue from Japandecreased 8% to A476 million, which represents34% (2008: 35%) of our total revenue from theAPJ region. The revenue decline in Japan reflectsa 19% decrease due to changes in volumes andprices and an 11% increase from currencyeffects. The rest of the APJ region saw adecrease in total revenue of 4%, which was allcaused by changes in volumes and prices. Reve-nue from the APJ region was principally gener-ated in Australia, China, and India.

Revenue by Industry

In comparison with our total revenuechange in 2009, we outperformed in the

financial services industry sector with revenueof A909 million, which represents a growth rateof 17%, and in public services, where our totalrevenue amounted to A1,136 million, represent-ing an increase of 7% compared to 2008. Infinancial services, we performed particularlywell due to our increased industry focus inbanking and insurance.

In our mature industry sectors, notably inthe process and discrete manufacturing indus-tries, the market was difficult as a result of thefinancial crisis. Customers reduced their spend-ing, especially on new software and profes-sional services. Compared to 2008, our totalrevenue from the process manufacturing indus-tries declined 15%, and from the discrete man-ufacturing industries it declined 13%.


Total Operating Expense

2009 2008Change


Cost of software and software-related services . . . . . . . . . . . . . . . . �1,658 �1,672 �1%Cost of professional services and other services . . . . . . . . . . . . . . �1,851 �2,285 �19%Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �1,591 �1,627 �2%Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �2,199 �2,546 �14%General and administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �564 �624 �10%Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �198 �60 H100%TomorrowNow litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �56 �71 �21%Other operating income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 11 H100%Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �8,084 �8,874 �9%


2009 2008Change

2009 vs. 2008E million, except

for operatingmargin

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,588 2,701 �4%Operating margin in % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.3 23.3 1.0pp

77

Part I

Item 5


Cost-Containment Measures in 2009

We announced in January 2009 that toenable our company to adapt its size to marketconditions and the broader impact of the globalrecession, we were implementing a globalreduction of our workforce to 48,500 by year-end 2009, taking full advantage of attrition as afactor in reaching this goal. We confirmed theannouncement in July and October of 2009. In2009, we incurred a restructuring charge ofA198 million, which was recorded in total oper-ating expenses. To counter these additionalcosts and to react to the global financial crisis,throughout 2009 we continued the cost-contain-ment measures we initially implemented in thefourth quarter of 2008.

Total Operating Expenses

Our total operating expenses for 2009decreased to A8,084 million compared toA8,874 million in 2008 representing a decreaseof A790 million or 9%. The main driver for thisdecrease was the cost-containment measuresimplemented in the fourth quarter of 2008 andcontinued through 2009. These cost savingsrealized through the cost-containment measureswere partially offset by the restructuringcharges mentioned above and an increase invariable compensation resulting from over-achievement of our company targets in 2009(especially in Germany), in comparison to2008.


The cost of software and software-relatedservices decreased 2% from A1,743 million in2008 to A1,714 million in 2009. As a percent-age of software and software-related servicerevenue, cost of software and software-relatedservices remained stable at 21% in 2009.

Throughout 2009 the support organiza-tion continued its efforts to improve the effi-ciency of our processes by continuing to moveinto low-cost locations (Bulgaria, China, andIndia). Approximately 23% of our global sup-port resources were based in the low-cost

locations at the end of 2009, which is anincrease of 1.5 percentage points compared to2008.


Cost of professional services and otherservices declined 19% from A2,285 million in2008 to A1,851 million in 2009 as a result ofstrict cost controls. As a percentage of profes-sional services and other services revenue, costof professional services increased slightly from75% in 2008 to 76% in 2009. Despite the strictcost controls on our professional services andother services, our decreased revenue in 2009resulted in a contraction of our professionalservices and other services margin.


R&D expenses in 2009 decreased by 2%to A1,591 million compared to A1,627 millionin 2008. The decrease in R&D expense wasmainly the result of a decline in third-partynon-customer-related costs. As a percentage oftotal revenue, R&D expenses increased from14% in 2008 to 15% in 2009. This increasewas primarily due to a reduction in total reve-nue of 8%. This decline in revenue was par-tially offset by a R&D headcount reduction of5%. Despite the reduction in R&D headcount,personnel expenses for the R&D employeesincreased due to an increase in variable com-pensation resulting from overachievement ofour company targets in 2009.

Sales and Marketing

Sales and marketing expenses decreased14% from A2,546 million in 2008 to A2,199 mil-lion in 2009. The decrease in sales and market-ing expenses was mainly the result of lowerpersonnel expenses due to headcount reductionand tight cost controls in all areas. As a per-centage of total revenue, sales and marketingexpenses decreased from 22% in 2008 to 21%in 2009.

78

Part I

Item 5



G&A expenses decreased from A624 millionin 2008 to A564 million in 2009. This representsa decrease of 10%. This decrease was driven bylower personnel expenses due to the reduction inheadcount and cost savings in the area of non-customer-related third-party and travel expenses.As a percentage of total revenue, G&A expensesremained relatively stable compared to the 2008at 5%.

Operating Profit

Our 2009 operating profit decreased by4% to A2,588 million (2008: A2,701 million).We were able to achieve this result despite theslowdown in revenue (8%) brought about bythe global financial crisis and the additional

one-time impact from the restructuring charges(A198 million) incurred in 2009 due to thesavings realized from the cost-containmentmeasures, which partially offset the negativeimpacts of our decreased revenue on ourmargin.

Operating Margin

Our operating margin, which is the ratioof operating profit to total revenue, expressedas a percentage was 24.3%, one percentagepoint higher than in the previous year (2008:23.3%). The A198 million in restructuringcharges resulting from the reduction of posi-tions announced in January 2009 negativelyimpacted our operating margin by 1.9 percent-age points.

Segment Discussions

2009 2008Change in %2009 vs. 2008

E millions, unlessotherwise stated

Product Segment

External revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,846 8,366 �6Segment expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �3,120 �3,655 �15Segment contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,726 4,711 0Segment profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60% 56% 4pp

Consulting Segment 2009 2008Change in %2009 vs. 2008

External revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,499 2,824 �12Segment expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �1,724 �2,040 �15Segment contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775 784 �1Segment profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31% 28% 3pp

Training Segment 2009 2008Change in %2009 vs. 2008

External revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 525 �37Segment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �217 �300 �28Segment contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 225 �49Segment profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35% 43% �8pp

Product Segment

Product segment revenue decreased 6%from A8,366 million in 2008 to A7,846 millionin 2009. All of the decrease resulted from

changes in volumes and prices. The reason forthe decrease is that the decline in revenue fromsoftware solution licensing was greater than theincrease in our support revenue. Software reve-nue as part of the total Product segment

79

Part I

Item 5


revenue decreased 29% from A3,356 million in2008 to A2,373 million in 2009. The change insoftware revenue in the Product segment resultsentirely from changes in volumes and prices.Support revenue increased 10% fromA4,596 million in 2008 to A5,076 million in2009. This growth results entirely from changesin volumes and prices. Subscription and othersoftware-related service revenue increased 18%from A257 million in 2008 to A304 million in2009.

Product segment expenses decreased 15%from A3,655 million in 2008 to A3,120 million in2009. Expenses from the sales line of businessaccount for roughly 55% of the entire Productsegment expenses, while expenses from the mar-keting line of business account for roughly 20%and expenses from the service and support lineof business account for roughly 25% of overallProduct segment expenses. The decrease in Prod-uct segment expenses was the result of our cost-containment measures.

Product segment contribution increasedfrom A4,711 million in 2008 to A4,726 millionin 2009, or 60% of total segment revenue com-pared to 56% of total segment revenue in 2008.

Consulting Segment

Consulting segment revenue decreased 12%from A2,824 million in 2008 to A2,499 million in2009. This decrease was due entirely to changesin volumes and prices. Geographically the EMEAregion, North America, and the APJ region haveall contributed to the segment revenue decline. InLatin America revenue also declined, but at alower rate. We reacted to a decrease in demandfor our consulting services by decreasing ourConsulting segment resources by 11%. Our head-count reduction was highest in North Americaand the APJ region at 17% and 16%, respectively.We were able to mitigate this revenue decreasewith cost savings realized from the reduction inthird-party non-customer-related costs.

Consulting segment expenses decreased15% from A2,040 million in 2008 to A1,724 mil-lion in 2009. This expense decrease is primarilythe result of the reduction of our workforce,

decreased purchase of third party services, andother savings realized from our cost-contain-ment measures.

Consulting segment contributiondecreased 1% from A784 million in 2008 toA775 million in 2009. Consulting segment prof-itability increased three percentage points to31%.

Training Segment

Training segment revenue was A332 mil-lion in 2009, which represented a decrease of37% from A525 million in 2008. This revenuedecrease was due entirely to changes in vol-umes and prices. Our training revenue shortfallwas especially high in the Americas regionwith a 47% decrease. Revenue decreased 31%in both the EMEA and APJ regions. The pri-mary drivers for this revenue decline were inthe area of traditional classroom training (40%)and in education consulting (53%).

Our Training segment expensesdecreased 28%, from A300 million in 2008 toA217 million in 2009, mainly due to the declinein demand for our training services and to ourcost-containment measures.

The Training segment contributiondecreased 49% from A225 million in 2008 toA115 million in 2009. Training segment profit-ability decreased eight percentage points to35%.

Finance Income, Net

Finance income, net, decreased to-A80 million (2008: -A50 million). Our financeincome in 2009 was A37 million (2008:A98 million) and our finance costs wereA117 million (2008: A148 million). Our financeincome substantially comprised income fromcash and cash equivalents and from currentinvestments. Our 2009 finance costs arose prin-cipally in connection with the financing for ouracquisition of Business Objects and with ourissuance of private placement transactions(“Schuldscheindarlehen”, SSD) in 2009.

80

Part I

Item 5


The decrease in finance costs in 2009was mainly due to the repayment of our out-standing credit facility in connection with theBusiness Objects acquisition. Finance costsassociated with our SSD transactions offset partof that effect. The decrease in finance incomein 2009 resulted mainly from significant inter-est-rate reductions, which were only partly off-set by an increase in average liquidity since2008.

Income Tax

Our effective tax rate decreased to 28.1%in 2009 from 29.6% in the previous year. Thedecrease in our effective tax rate and in ourincome tax expense in 2009 mainly resultedfrom nonrecurring acquisition-related items.For more information, see the Notes to theConsolidated Financial Statements section,Note (11).

FOREIGN CURRENCY EXCHANGE RATEEXPOSURE

Although our reporting currency is theeuro, a significant portion of our business isconducted in currencies other than the euro.Since the Group’s entities usually conduct theirbusiness in their respective functional curren-cies, our risk of exchange rate fluctuationsfrom ongoing ordinary operations is not consid-ered significant. However, occasionally we gen-erate foreign-currency-denominated receivables,payables, and other monetary items by transact-ing in a currency other than the functionalcurrency; to mitigate the extent of the associ-ated foreign currency exchange rate risk, themajority of these transactions are hedged asdescribed in Note (26) to our ConsolidatedFinancial Statements. Also see Notes (3) and(25) for additional information on foreigncurrencies.

Approximately 67% and 64% of our totalrevenue 2010 and 2009, respectively, wasattributable to operations in non-euro participat-ing countries. As a result, those revenues hadto be translated into euros for financial report-ing purposes. Fluctuations in the value of the

euro had a favorable impact on our total reve-nue of A705 million, profit before tax ofA68 million and profit after tax of A72 millionfor 2010, and had favorable impacts on ourtotal revenue of A18 million, profit before taxof A1 million and unfavorable impacts on ourprofit after tax of A12 million for 2009. For2008 the euro had unfavorable impacts on ourtotal revenue of A402 million, profit before taxof A141 million and profit after tax ofA122 million.

The impact of foreign currency exchangerate fluctuations discussed in the precedingparagraph is calculated by translating currentperiod figures in local currency to euros at themonthly average exchange rate for the corre-sponding month in the prior year. Our revenueanalysis, included within the “OperatingResults,” section of this Item 5, discusses attimes increases and decreases due to currencyeffects, which are calculated in the samemanner.

OUTLOOK

Future Trends in the Global Economy

Leading economic research organizationsexpect the global economy to continue to growin 2011. They assume the financial marketswill return to normal, businesses will be betterable to refinance debt and invest more, andprivate consumption will increase as confidencein sustained economic growth recovers.Accordingly, they foresee full-year growth inthe middle of the single-digit percentage rangein 2011. Many fiscal stimulus programs willexpire during the first half of the year, sorecovery will be slower in that period, theypredict. In the second half, economic growth isexpected to accelerate under its own steam.

The researchers expect the growth dispar-ity between advanced and emerging economiesto continue: Tight labor markets will constraingrowth in the advanced economies, whereasrecovery is expected to progress much morerapidly in the emerging economies.

81

Part I

Item 5


Looking at the EMEA region, theresearchers believe the euro area economy canexpect consistent low single-digit percentagegrowth in 2011 and 2012. They expect theeconomy of the euro area to benefit both fromgreater demand for exports driven by the globalrecovery and from greater domestic consumerdemand. However, they expect slow progresson European labor markets to remain a prob-lem. Demand for Germany’s exports isexpected to remain relatively weak, a factorthat analysts believe will hold back the furtherrecovery of the German economy. Nonetheless,they expect that in 2011 Germany’s grossnational product will return to approximatelyits pre-crisis level. The Central and EasternEuropean economies are expected to growmore rapidly than the euro area economies, butnot as rapidly as the emerging economies out-side of Europe.

Turning to the Americas region, theresearchers believe the U.S. economy will con-tinue its protracted recuperation in 2011. Thereason for its slow pace is the difficult condi-tions on the labor market as well as consumerconcerns about the sustainability of the eco-nomic upswing.

For the APJ region, the research organi-zations expect two fiscal packages introducedin Japan in late 2010 to have an impact on thatcountry’s economy, leading to growth in thelow single-digit percentage range. Butincreased private consumption, an easing of thelabor market, and greater profitability are notexpected to make themselves felt until 2012.

The researchers warn that global eco-nomic growth may be slower in 2012 thancurrently projected. Factors that may result inslower growth include depressed housing mar-kets, high government debt associated with themassive fiscal programs of recent years, tightfinancial markets, and rising commodity prices.On the other hand, there may be factors thatresult in stronger growth than currently pro-jected. In particular, business and consumerconfidence in a sustained economic upturn mayimprove.

IT Market: The Outlook for 2011

According to International Data Corpora-tion (IDC), a market research firm based in theUnited States, investment in IT will growworldwide by a percentage in the middle singledigits. Investment bank Goldman Sachs offerssimilar guidance. UBS, a major Swiss bank, ismore cautious, predicting little growth in theglobal IT market in 2011.

UBS believes the post-crisis rush to buynew hardware, evident in 2010, has run itscourse, and believes the hardware market willlose momentum in 2011. On the other hand,both IDC and Goldman Sachs believe the hard-ware market will expand appreciably, helped bymore demand for mobile devices (especiallysmartphones) and network equipment.

Spending on software and services isexpected to increase even more in 2011 than itdid in 2010. IDC believes this growth will beprimarily driven by cloud services, mobileapplications, and social networking. In 2011,these are no longer innovations: They belong tothe mainstream now and herald a step changein the software market, IDC says. It believesthat by 2014, more than one-third of all invest-ment in software will be for cloud services.

IDC predicts the emerging markets willhead the standings for IT investment growth.Growth there could be several times more rapidthan in the advanced nations. Brazil, China,India, and Russia are expected to lead the way:IDC expects them to account for almost one-half of emerging-market IT spending in 2011.China is expected to be in the vanguard, andmay overtake Japan as the second-biggest ITspender in the world by 2013. The emergingmarkets have been outpacing the world in ITspending for years, and IDC projects that theywill account for one-fourth of the global ITmarket in 2011, and for almost one-third by2014.

In the EMEA region, UBS foreseesmarked growth in the IT sector, most conspicu-ously in Germany. IDC expects IT investmentto grow more rapidly in Germany than in the

82

Part I

Item 5


rest of Western Europe in 2011, but that growthwill fall back again in 2012 and 2013. UBSand IDC predict that in 2011, IT investmentgrowth in the United States will be similar toin 2010, that is to say in the middle single-digitpercentages. Much of that growth will be gen-erated by small businesses and midsize compa-nies. In the APJ region as a whole, IDCexpects IT investment to grow by a rate in theupper single-digit percentages, but in Japan itforesees little expansion of IT spending. It doesnot expect steeper growth rates there until 2012to 2014.

The generally optimistic outlook notwith-standing, IDC believes it may possibly have torevise its projections for the IT market down-ward in the course of the year. It sees develop-ments in the economies of the United Statesand Western Europe as the major risk to itspredictions: The IT business could be impactedunless unemployment there declines and thehomes markets improve. Government spendingcurbs in response to high levels of governmentdebt in the United States and Western Europealso pose a risk, IDC believes.

FORECAST FOR SAP

Delivering on Our Strategy

SAP wants to achieve profitable growthacross its portfolio of products and services.We believe that our strategy to double ouraddressable market by delivering the best busi-ness applications for on-premise, on-demand,and on-device, and focusing on groundbreakinginnovation positions us favorably in segmentsof the enterprise market with higher growthrates than expected global GDP growth. Ourinvestments in countries such as Brazil, Russia,India, and China, will extend our position inareas that are growing at an accelerated rate,while, we plan to continue to grow our marketshare in all regions through our deep industryand line of business focus.

Achieving this level of growth willdepend on our capability to execute by bringinginnovative solutions to market and driving

value for our customers. To deliver on ourpromise to customers, we are simplifying ourinternal structures to accelerate our new prod-uct introduction, investing in our go-to-marketchannels to expand our total sales capacity, andexpanding our ecosystem to enable furthergrowth and innovation delivery.

Investing in our Go-to-Market and CustomerExperience

SAP will continue to go to market byregion, market segment, and industry. Withinthe regions, we intend to focus on the growthof our sales capacity in the fastest growingregions of the world. Further, we intend toevolve and invest in our go-to-market coveragemodel to more effectively sell industry-specificsolutions and provide additional services tocustomers in specific business functions (forexample, human resources, sales, and market-ing) and to users of business analytics solu-tions. We will continue to provide choice tolarge, midsize, and small customers on newsoftware purchasing models that align to thebudgetary concerns of our customers, and tocultivate our relationship with our existing cus-tomers. One example is SAP Business ByDe-sign. We expect to expand our customer baseon the SAP Business ByDesign platform from255 customers at the end of 2010 to 1,000 bythe end of 2011.

Driving Growth and Lower Cost through an OpenEcosystem

SAP intends to significantly increase thelevel of engagement with the partner ecosystemto expand SAP’s market coverage, enhance oursolutions portfolio, and drive future innovation.We will do this by expanding and leveragingour ecosystem and channels as a force-multi-plier of growth for SAP and value for ourcustomers through continued leadership in co-innovation and a true multichannel approachacross all segments. Our partners provide anattractive channel for SAP’s products and solu-tions across all segments and geographies. In2011 and thereafter, we plan to substantially

83

Part I

Item 5


increase the share of our software revenue thatwe generate through indirect channels: By2015, we expect it to reach up to 40%, whichwould be more than twice the proportion wegenerated through indirect channels in 2010. Inthe execution of our strategy, technology part-ners are essential to advance our researchagenda, monetize in-memory technologies, andenhance our solution portfolio.

Organic Growth and Targeted Acquisitions

Our strategy remains primarily focusedon organic growth. As a result, we will con-tinue to invest in our own product developmentand technology innovation, as well as our infra-structure, sales, and marketing. Our platformstrategy enables us to leverage the innovativepotential of our partners to drive customervalue. In addition, we expect to continue tomake targeted, strategic, and “fill-in” acquisi-tions to add to our broad solution offerings andimprove our coverage in key strategic marketsto best support our customers’ needs.

To achieve this growth we also intend tohire in all regions in 2011, including Germany.

Operational Targets for 2011 (Non-IFRS)

Revenue and Operating Profit Outlook

With effect from 2011, we are amendingour definitions of non-IFRS operating profitand non-IFRS operating margin to align themwith the performance measures we currentlyuse internally in managing SAP’s segments,which are reflected in SAP’s segment reporting.This will also improve comparability with othersoftware companies. For 2011, non-IFRS

operating profit and non-IFRS operating marginwill exclude share-based compensationexpenses and restructuring charges, in additionto the items that were already excluded in thepast (deferred support revenue write-downsfrom acquisitions, acquisition-related charges,and discontinued activities). Additionally, weare providing a non-IFRS effective tax ratestarting in 2011.

The Executive Board is providing thefollowing outlook for the full-year 2011:

• We expect full-year 2011 non-IFRSsoftware and software-related servicerevenue to increase in a range of 10%to 14% at constant currencies (2010:A9.87 billion).

• We expect full-year 2011 non-IFRSoperating profit to be in a range ofA4.45 billion to A4.65 billion at con-stant currencies (2010: A4.01 billion),resulting in 2011 non-IFRS operatingmargin increasing in a range of 0.5 to1.0 percentage points at constant cur-rencies (2010: 32.0%).

• For the full-year 2011, we project anIFRS effective tax rate of 27.0% to28.0% (2010: 22.5%) and a non-IFRSeffective tax rate of 27.5% to 28.5%(2010: 27.3%).

Generally, we expect our software reve-nue to grow at a faster rate than our softwareand software-related service revenue. Webelieve that all of the regions will support thisgrowth but anticipate that the Americas regionand the APJ region will grow at a faster ratethan the EMEA region.

84

Part I

Item 5


To facilitate a comparison between our IFRS and our non-IFRS numbers for our 2011 outlook,we have presented the following reconciliation from our 2010 IFRS software and software-relatedservice revenue, IFRS total revenue, IFRS operating profit and IFRS operating margin to the non-IFRS equivalents as follows:

IFRSFinancialMeasure

SupportRevenue

NotRecorded

Under IFRSOperatingExpenses(1)

DiscontinuedActivities(3)


E millions, unless otherwise stated

Software and software-relatedservice revenue . . . . . . . . . . . . . . . . . . . . . . . . 9,794 74 N/A N/A 9,868Total revenue(2) . . . . . . . . . . . . . . . . . . . . . . . . 12,464 74 N/A N/A 12,538Operating profit(2) . . . . . . . . . . . . . . . . . . . . . . 2,591 74 360 983 4,007Operating margin in % . . . . . . . . . . . . . . . . . . 20.8 0.5 2.9 7.8 32.0

(1) Included in operating expenses are acquisition-related charges, share-based compensation expenses, andrestructuring charges.

(2) These financial measures are the numerator or the denominator in the calculation of our non-IFRS operat-ing margin and the comparable IFRS operating margin, and are included in this table for transparency.

(3) The discontinued activities include the results of our discontinued TomorrowNow business.

Goals for Liquidity and Finance

We will seek to return to positive netliquidity by the end of 2011. We do not there-fore currently expect to repurchase stock fortreasury in 2011, except as needed for ourshare-based payment plans; rather, we will pri-oritize reducing debt. We will consider issuingnew debt, such as bonds or U.S. private place-ments, only if market conditions areadvantageous.

Investment Goals

Excepting any acquisitions, our plannedcapital expenditures for 2011 will be covered infull by operating cash flow and will chiefly bespent on new computer hardware.

Proposed Dividend

We wish to continue our recent dividendpolicy, which is that the payout ratio should bein the region of 30%, and we are not includingthe TomorrowNow litigation expense in thecalculation. If the Annual General Meeting ofShareholders so resolves, in 2011 we will

increase the dividend from A0.50 to A0.60 pershare.

Premises on Which our Outlook Is Based

In preparing our outlook, we have takeninto account all events known to us at the timewe prepared these financial statements thatcould influence SAP’s business going forward.

Among the premises on which this out-look is based are those presented concerningeconomic development and our expectation thatwe will not benefit from any positive effects in2011 from a major acquisition.

Medium-Term Prospects

We expect our business, our revenue, andour profit to grow, assuming there is a sus-tained recovery in the global economy. Ourstrategy is to increase software and software-related service revenue and our operating mar-gin through greater efficiency across all saleschannels, services, our support infrastructure,and research and development. By the middleof the present decade, we aim to achieve a non-IFRS operating margin of 35% in average

85

Part I

Item 5


annual increments up to 100 basis points. Overthe same period, we aim to increase our annualtotal revenue to at least A20 billion. To achievethese objectives, we are planning to realign ourorganizational structure to further drive growth,innovation, and simplicity.

We are seeing significant structuralchange in the enterprise software space, andwith this change comes opportunity for us. Ourobjective is to bring to our customers the bestbusiness solutions, leveraging all relevant tech-nology innovations and deployment environ-ments, making them as reliable and easy toconsume as possible. Our product portfolio isdesigned to deliver our solutions in on-premiseand on-demand environments, as well as onmobile devices. What differentiates us from ourcompetition is the enablement of complete dataand process consistency for our customers, irre-spective of the environment the customer oper-ates in.

We understand our customers want sta-bility from a core business suite and a lowercost to operate. Accordingly, we will continueto focus on easy-to-use software innovation thatdelivers more value to our customers for theirinvestments in our technology. We will con-tinue innovating in multiple areas, providingcapabilities that are modular and can bedeployed side by side with the solutions thatcustomers are already running. We intend tomeet our promise of true value delivery to ourcustomers.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

Centralized Financial Management

We use global centralized financial man-agement to control liquid assets and monitorexposure to interest rates and currencies. Theprimary aim of our financial management is tomaintain liquidity in the Group at a level thatis adequate to meet our obligations. MostGroup companies have their liquidity managedby the Group, so that liquid assets across the

Group can be consolidated, monitored, andinvested in accordance with Group policy. Highlevels of liquid assets provide a strategicreserve, helping to keep SAP flexible, sound,and independent. In addition, various creditfacilities are currently available for additionalliquidity, if required. In December 2010, wefurther increased our financial flexibility byrefinancing our existing undrawn syndicatedcredit facility until December 2015 (availableline of A1.5 billion). For more informationabout these facilities, see the Credit Facilitiessection.

We manage credit, liquidity, interest rate,equity price, and foreign exchange rate risks ona Group-wide basis. We use selected derivativesexclusively for this purpose and not for specu-lation, which is defined as entering into aderivative instrument for which we do not havea corresponding underlying transaction. Therules for the use of derivatives and other rulesand processes concerning the management offinancial risks are collected in our treasuryguideline document, which applies globally toall companies in the Group. For more informa-tion about the management of each financialrisk and about our risk exposure, see the Notesto the Consolidated Financial Statements sec-tion, Notes (25) to (27).

Liquidity Management

Our primary source of cash, cash equiva-lents, and current investments are funds gener-ated from our business operations. Over thepast several years, our principal use of cash hasbeen to support continuing operations and ourcapital expenditure requirements resulting fromour growth, to acquire businesses, to pay divi-dends on our shares, and to buy back SAPshares on the open market. Cash, cash equiva-lents, and current investments were primarilyheld in euros and U.S. dollars on December 31,2010. We invest only in assets from issuers orfunds with a rating of A- or better and pursue apolicy of cautious investment characterized bywide portfolio diversification with a variety ofcounterparties, predominantly short-term

86

Part I

Item 5


investments, and the use of standard investmentinstruments.

We believe that our liquid assets com-bined with our undrawn credit facilities aresufficient to meet our present operating needsand, together with expected cash flows fromoperations, will support our currently plannedcapital expenditure requirements over the nearterm and medium term.

To expand our business, we have madeand expect to further make acquisitions of busi-nesses, products, and technologies, and to enterinto joint venture arrangements. For more infor-mation about the significant financial debtincurred in 2010 mainly in connection with theacquisition of Sybase, see the Analysis of NetLiquidity section. Depending on our future cashposition and future market conditions, we mightissue additional debt instruments to fund acqui-sitions, maintain financial flexibility, and limitrepayment risk. Therefore, we continuouslymonitor funding options available in the capitalmarkets and trends in the availability of funds,as well as the cost of such funding.

Capital Structure Management

The primary objective of our capitalstructure management is to maintain a strong

financial profile for investor, creditor, and cus-tomer confidence and to support the growth ofour business. We aim for a capital structure thatgives us a high degree of independence, secu-rity, and financial flexibility so that we can, forexample, access capital markets on reasonableterms to satisfy funding requirements.

We currently do not have a credit ratingwith any agency. We do not believe that arating would have a substantial effect on ourcurrent or future borrowing conditions andfinancing options.

Our goal is to remain in a position toreturn excess liquidity to our shareholders bydistributing annual dividends and repurchasingshares. The amount of future dividends and theextent of future repurchases of shares will bebalanced with our effort to continue to maintainan adequate liquidity position. For more infor-mation about dividends and share repurchasesand about our current capital structure ratios,see the Notes to the Consolidated FinancialStatements section, Note (22).

We regularly calculate the weighted aver-age cost of capital (WACC) for the SAP Groupand use it internally for a variety of purposes(for example, impairment testing). Our WACCwas 8% per year-end 2010 (2009: 8%).

Analysis of Net Liquidity

The table below presents our total group liquidity, total financial debt and net liquidity as ofDecember 31, 2010 and 2009:

2010 2009 Change in %E millions

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,518 1,884 87Current investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 400 �98Total group liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,528 2,284 54Current bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 �75Net liquidity 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,527 2,280 54Non-current bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,106 2 H100Private placement transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,071 697 54Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,200 0 N/ANet liquidity 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �850 1,581 G-100

87

Part I

Item 5


Current investments are included in otherfinancial assets on the statement of financialposition. Bank loans, private placement transac-tion, and bonds are included within financialliabilities on the statement of financial position.Total Group liquidity mainly consisted ofamounts held in euros (A1,951 million) andU.S. dollars (A653 million) on December 31,2010. Total financial debt mainly consisted ofamounts held in euros (A4,002 million) and inU.S. dollars (A374 million) on December 31,

2010. Approximately 23% of our total financialdebt has variable interest and is not hedged.

Total Group liquidity consists of cashand cash equivalents (for example, cash atbanks, money market funds, and time depositswith original maturity of three months or less)and current investments (for example, invest-ments with original maturities of greater thanthree months and remaining maturities of lessthan one year) as reported in our IFRS Consol-idated Financial Statements.

€ millions

Total Group Liquidity Development

Total Group

liquidity

12/31/2009

2.284

+2.932

-334

-4.194-594 +5.380

-2.196 +250

3.528

Total Group

liquidity

12/31/2010

Operating

cash flow

Capital

expenditure

Acquisitions Dividends

paid

Proceeds from

borrowings

Repayments

of borrowings

Other

Total financial debt consists of currentfinancial liabilities (for example, overdrafts andcurrent bank loans) and non-current financialliabilities (for example, non-current bank loans,bonds, and private placements) as reported inour IFRS Consolidated Financial Statements.For more information about our financial debt,see the Notes to the Consolidated FinancialStatements section, Note (18).

Net liquidity is total Group liquidity lesstotal financial debt as defined above. Netliquidity should be considered in addition to,and not as a substitute for, cash and cashequivalents, other financial assets, and financial

liabilities included in our IFRS ConsolidatedFinancial Statements.

The increase in total Group liquidityfrom 2009 was mainly due to proceeds fromour operations. The increase in total financialliabilities from 2009 was mainly due to bankloans, bonds, and private placements connectedwith the acquisition of Sybase.

For information about the impact of cash,cash equivalents, current investments, and ourfinancial liabilities on our income statements,see the analysis of our finance income, net, inthe Operating Results (IFRS) section.

88

Part I

Item 5


Analysis of Consolidated Statements of Cash Flow

2010 2009 2008Change in %2010 vs. 2009

Change in %2009 vs. 2008

Years Ended December 31,

E millions

Net cash flows from operating activities . . . . . 2,932 3,015 2,158 �3 40Net cash flows from investing activities . . . . . �3,994 �299 �3,766 H100 �92Net cash flows from financing activities . . . . 2,510 �2,166 1,281 G-100 G-100

Analysis of Consolidated Statements ofCash Flow: 2010 Compared to 2009

Net cash provided by operating activitiesdecreased A83 million or 3% to A2,932 millionin 2010 (2009: A3,015 million). The compara-tive operating cash inflows in 2009 had, how-ever, been supported by payments fromcustomers on trade receivables for which pay-ment was deferred in 2008 in the context ofthat year’s financial crisis. The A102 million wepaid out in connection with the TomorrowNowlitigation had a negative effect on 2010 operat-ing cash flows. This was partly offset by theeffective management of our working capital asevidenced by a decrease of our average collec-tion period, which is measured in days salesoutstanding, or DSO (defined as average num-ber of days from revenue recognition to cashreceipt from the customer) by 14 days from79 days in 2009 to 65 days in 2010.

Net cash used in investing activitiesincreased significantly from A299 million in2009 to A3,994 million in 2010 mainly due toour acquisition of Sybase in 2010. In 2010, weinvested A334 million in our technology andbusiness infrastructure by purchasing intangibleassets and property, plant, and equipment, asignificant portion of which represented thepurchase of patents, vehicles, IT hardware, andthe cost of constructing office buildings (2009:A225 million).

Net cash inflows from financing activitieswere A2,510 million in 2010 compared to netcash outflows of A2,166 million in 2009. The netcash inflows in 2010 were mainly due to theproceeds from our financing transactions con-ducted in connection with the Sybase acquisition.In total, the financing transactions conducted in2010 led to cash inflows in the amount of

A5,380 million of which A2,196 million wereused to partly repay the acquisition-related termloan and assumed outstanding convertible bondsfrom Sybase. The net cash outflows in 2009 weremainly due to the repayment of the credit facilitywe entered into in connection with our acquisi-tion of Business Objects. The dividend distrib-uted in 2010 was A594 million, unchanged fromthe previous year (2009: A594 million). We repur-chased shares for treasury in the amount ofA220 million in 2010 (2009: A0 million).

Analysis of Consolidated Statements ofCash Flow: 2009 Compared to 2008

Net cash provided by operating activitiesincreased by A857 million or 40% in 2009 over2008 mainly attributable to effective manage-ment of our working capital. On the other hand,our DSO increased from 71 days in 2008 to79 days in 2009, mainly as a result of thedifficult economic environment in 2009, whichled to an extension of payment terms and morelate payments. Net cash used in investing activ-ities decreased significantly from A3,766 millionin 2008 to A299 million in 2009. The prior yearfigure resulted mainly from our acquisition ofBusiness Objects. In 2009 we investedA225 million in our technology and businessinfrastructure by purchasing intangible assetsand property, plant and equipment, a significantportion of which represented the purchase ofvehicles, IT hardware and the cost of construct-ing office buildings. Net cash used in financingactivities decreased by A3,447 million mainlydue to repayment of the credit facility weentered into in connection with our acquisitionof Business Objects. In addition, we issuedSSD transactions totaling A697 million. Thedividend distributed in 2009 was A594 million,unchanged since the previous year(2008: A594 million). We did not buy back any

89

Part I

Item 5


shares for treasury in 2009 (2008:A487 million).

Credit Facilities

Various credit facilities are currentlyavailable to us as additional sources of funds(there is no seasonality in our borrowing) ifrequired.

We are party to a revolving A1.5 billionsyndicated credit facility agreement with aninitial term of five years ending in December2015. The use of the facility is not restricted byany financial covenants. Potential proceeds arefor general corporate purposes. Borrowingsunder the facility bear interest at the euro inter-bank offered rate (EURIBOR) or London inter-bank offered rate (LIBOR) for the respectivecurrency plus a margin ranging from 45 to75 basis points that depends on the amountdrawn. We pay a commitment fee of 15.75 basispoints per annum on unused amounts of theavailable credit facility. We entered into thiscredit facility to replace an existing credit facil-ity that would have matured in November2012. We have not drawn on the facility andcurrently have no plans to do so. Consequently,there were no borrowings outstanding under thefacility as at December 31, 2010.

As at December 31, 2010, SAP AG hadadditional available credit facilities totalingapproximately A545 million. As at December 31,2010, there were no borrowings outstandingunder these credit facilities. Certain of our for-eign subsidiaries have credit facilities availablethat allow them to borrow funds in their localcurrencies at prevailing interest rates, generallyto the extent SAP AG has guaranteed suchamounts. As at December 31, 2010, approxi-mately A60 million was available through sucharrangements. Total aggregate borrowings underthese lines of credit amounted to A1 million asat December 31, 2010.

OFF-BALANCE SHEET ARRANGEMENTS

Several SAP entities have entered intooperating leases for office facilities, computerhardware and certain other equipment. Thesearrangements are sometimes referred to as aform of off-balance sheet financing. Rentalexpenses under these operating leases are setforth below under “Contractual Obligations.”We believe we do not have other forms ofmaterial off-balance sheet arrangements thatwould require disclosure other than thosealready disclosed.

CONTRACTUAL OBLIGATIONS

The table below presents our on- and off-balance sheet contractual obligations as of Decem-ber 31, 2010:

Contractual obligations TotalLess than

1 year 1-3 years 3-5 yearsMore than

5 years

Payments due by period

E millions

Debt obligations(1). . . . . . . . . . . . . . . . . . . . . . . . 4,960 211 2,915 1,097 737Other non-current obligations on the statement

of financial position(2) . . . . . . . . . . . . . . . . . . . 85 0 6 2 77Operating lease obligations(3) . . . . . . . . . . . . . . . 754 210 276 158 110Purchase obligations(3) . . . . . . . . . . . . . . . . . . . . 461 305 95 27 34

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,260 726 3,292 1,284 958

(1) This represents bank loans, private placement transactions, bonds, other financial liabilities and interestthereon.

(2) Amounts mainly consist of employee-related liabilities. Not included in the table are non-current tax liabil-ities of A371 million, which include provisions for uncertainties in income taxes.

90

Part I

Item 5


(3) See Note (23) to our Consolidated Financial Statements for additional information about operating leaseand purchase obligations. Our expected contributions to our pension and other post employment benefitplans are not included in the table above. We expect to contribute in 2011 statutory minimum and discre-tionary amounts of A1 million to our German defined benefit plans and A31 million to our foreign definedbenefit plans, all of which are expected to be paid as cash contributions. Our contributions to our Germanand foreign defined contribution plans have ranged from A100 million to A136 million in 2008 through2010; we expect similar contributions to be made in 2011.

We expect to meet these contractual obli-gations with our existing cash, our cash flowsfrom operations and our financing activities.The timing of payments for the above contrac-tual obligations is based on payment schedulesfor those obligations where set payments exist.For other obligations with no set paymentschedules, estimates as to the most likely tim-ing of cash payments have been made. Theultimate timing of these future cash flows maydiffer from these estimates.

Obligations under Indemnifications and Guarantees

Our software license agreements gener-ally include certain provisions for indemnifyingcustomers against liabilities if our softwareproducts infringe a third party’s intellectualproperty rights. In addition, we occasionallyprovide function or performance guarantees inroutine consulting contracts and developmentarrangements. We also generally provide a sixto twelve month warranty on our software. Ourwarranty liability is included in other provi-sions. For more information on other provisionssee Note (19b) to our Consolidated FinancialStatements. For more information on obliga-tions and contingent liabilities refer to Note(3) and Note (23) in our Consolidated FinancialStatements.

RESEARCH AND DEVELOPMENT

For information on our R&D activitiessee “Item 4. Information about SAP —Research and Development.” For informationon our R&D costs see “Item 5. Operating andFinancial Review and Prospects — OperatingResults” and for information related to ourR&D employees see “Item 6. Directors, SeniorManagement and Employees — Employees.”

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statementsare prepared based on the accounting policiesdescribed in Note (3) to our ConsolidatedFinancial Statements in this report. The appli-cation of such policies requires management tomake judgments, estimates and assumptionsthat affect the application of policies and thereported amounts of assets, liabilities, revenuesand expenses in our Consolidated FinancialStatements. We base our judgments, estimatesand assumptions on historical and forecastinformation, as well as regional and industryeconomic conditions in which we or our cus-tomers operate, changes to which couldadversely affect our estimates. Although webelieve we have made reasonable estimatesabout the ultimate resolution of the underlyinguncertainties, no assurance can be given thatthe final outcome of these matters will beconsistent with what is reflected in our assets,liabilities, revenues and expenses. Actualresults could differ from original estimates.

The accounting policies that most fre-quently require us to make judgments, esti-mates, and assumptions, and therefore arecritical to understanding our results of opera-tions, are:

• revenue recognition;

• valuation of trade receivables;

• accounting for share-basedcompensation;

• accounting for income tax;

• accounting for business combinations;

• subsequent accounting for goodwilland other intangibles;

• accounting for legal contingencies; and

91

Part I

Item 5


• recognition of internally generatedintangible assets from development.

Our management periodically discussesthese critical accounting policies with the AuditCommittee of the Supervisory Board. See Note(3c) to our Consolidated Financial Statementsfor further discussion on our critical accountingestimates and critical accounting policies.

NEW ACCOUNTING STANDARDS NOT YETADOPTED

See Note (3e) to our Consolidated Finan-cial Statements for our discussion on newaccounting standards not yet adopted.

92

Part I

Item 5


ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

SUPERVISORY BOARD

The current members of the Supervisory Board of SAP AG, each member’s principal occupa-tion, the year in which each was first elected and the year in which the term of each expires,respectively, are as follows:

Name Age Principal Occupation

YearFirst

Elected

YearTerm

Expires

Prof. Dr. h.c. mult. Hasso Plattner,Chairman(1)(2)(4)(6)(7)(8)(11) . . . . . . . . 67 Chairman of the Supervisory Board 2003 2012

Pekka Ala-Pietila(1)(7)(8)(11) . . . . . . . . . 54 Co-founder and CEO Blyk Ltd. 2002 2012Prof. Dr. Wilhelm

Haarmann(1)(2)(4)(5)(11) . . . . . . . . . . . 60 Attorney at Law, Certified PublicAuditor and Certified Tax Advisor;HAARMANNPartnerschaftsgesellschaft,Rechtsanwalte, Steuerberater,Wirtschaftsprufer

1988 2012

Bernard Liautaud(7)(12) . . . . . . . . . . . . 48 General Partner, Balderton Capital 2008 2012Dr. h.c. Hartmut Mehdorn(1)(5)(6) . . . . . 68 Independent Consultant 1998 2012Prof. Dr.-Ing. Dr. h.c. Dr.-Ing. E.h.

Joachim Milberg(1)(2)(3)(4)(7)(8) . . . . . 67 Chairman of the Supervisory Board ofBMW AG

2007 2012

Dr. Erhard Schipporeit(1)(3)(10)(11) . . . . 62 Management Consultant 2005 2012Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus

Wucherer(1)(7) . . . . . . . . . . . . . . . . . 66 Managing Director of Dr. KlausWucherer Innovations- undTechnologieberatung GmbH

2007 2012

Lars Lamadé, ViceChairman(4)(6)(9)(11) . . . . . . . . . . . . . 39 Employee, Project Manager Service &

Support2002 2012

Thomas Bamberger(3)(9) . . . . . . . . . . . 43 Employee, Chief Operating OfficerOperations

2007 2012

Panagiotis Bissiritsas(2)(5)(9) . . . . . . . . . 42 Employee, Support Expert 2007 2012Willi Burbach(4)(7)(9) . . . . . . . . . . . . . . 48 Employee, Developer 1993 2012Peter Koop(4)(7)(9) . . . . . . . . . . . . . . . . 44 Employee, Industry Business

Development Expert2007 2012

Christiane Kuntz-Mayr(7) . . . . . . . . . . . 48 Employee, Deputy Chairperson of theWorks Council of SAP AG

2009 2012

Dr. Gerhard Maier(2)(3)(9) . . . . . . . . . . . 57 Employee, Development ProjectManager

1989 2012

Stefan Schulz(5)(6)(7)(9)(11) . . . . . . . . . . 41 Employee, Development ProjectManager

2002 2012

(1) Elected by SAP AG’s shareholders on May 10, 2007.(2) Member of the Compensation Committee.(3) Member of the Audit Committee.

93

Part I

Item 6


(4) Member of the General Committee.(5) Member of the Finance and Investment Committee.(6) Member of the Mediation Committee.(7) Member of the Technology and Strategy Committee.(8) Member of the Nomination Committee.(9) Elected by SAP AG’s employees on April 23, 2007.

(10) Member of the Audit Committee and determined to be the Audit Committee financial expert.(11) Member of the Special Committee.(12) Elected by SAP AG’s shareholders on June 3, 2008, replaced August-Wilhelm Scheer who resigned from

the Supervisory Board on the same day.

For detailed information on the Supervi-sory Board committees and their tasks, includ-ing the Audit Committee and CompensationCommittee, please refer to “Item 10 AdditionalInformation — Corporate Governance.”

Pursuant to the German Co-determina-tion Act of 1976 (Mitbestimmungsgesetz),members of the Supervisory Board of SAP AGconsist of eight representatives of the share-holders and eight representatives of the employ-ees. Of the eight employee representatives, twomust be nominated by the trade unions. Theelected employees must be at least 18 years ofage and must have been in the employment ofSAP AG or one of its German subsidiaries forat least one year. They must also fulfill theother qualifications for election codified inSection 8 of the German Works Council Con-stitution Act. These qualifications include,among other things, not having been declaredineligible or debarred from holding publicoffice by a court.

Certain current members of the Supervi-sory Board of SAP AG were members of super-visory boards and comparable governing bodiesof enterprises other than SAP AG in Germanyand other countries as of December 31, 2010.See Note (30) to our Consolidated FinancialStatements for more detail. Apart from pensionobligations towards employees, SAP AG hasnot entered into contracts with any member ofthe Supervisory Board that provide for benefitsupon a termination of the employment or ser-vice of the member.

EXECUTIVE BOARD

The current members of the ExecutiveBoard, the year in which each member was firstappointed and the year in which the term ofeach expires, respectively, are as follows:

NameYear FirstAppointed

Year CurrentTerm Expires

Bill McDermott,Co-CEO . . . . . . . . . . 2008 2012

Jim Hagemann Snabe,Co-CEO . . . . . . . . . . 2008 2012

Dr. Werner Brandt . . . . 2001 2013Dr. Angelika

Dammann . . . . . . . . 2010 2013Gerhard Oswald . . . . . . 1996 2011Vishal Sikka . . . . . . . . 2010 2012

The following changes occurred in theExecutive Board in 2010:

• In February 2010, Léo Apothekerresigned as a member of the ExecutiveBoard and CEO.

• In February 2010, Bill McDermott andJim Hagemann Snabe became Co-CEOs, succeeding Léo Apotheker.

• In February 2010, Vishal Sikka becamea member of the Executive Board.

• In February 2010, John Schwarzresigned as a member of the ExecutiveBoard.

• In February 2010, Gerhard Oswaldbecame COO replacing Erwin Gunstwho stepped down.

94

Part I

Item 6


• In July 2010, Angelika Dammannbecame a member of the ExecutiveBoard.

A description of the management respon-sibilities and backgrounds of the current mem-bers of the Executive Board are as follows:

Bill McDermott, Co-CEO (Vorstands-sprecher), 49 years old, holds a master’s degreein business administration. He joined SAP in2002 and became a member of its ExecutiveBoard on July 1, 2008. On February 7, 2010 hebecame Co-CEO alongside Jim HagemannSnabe. Besides the duties as Co-CEO, he isresponsible for strategy, governance, corporatedevelopment, innovation, sales, field services,consulting, ecosystem activities, communica-tions, and marketing.

Jim Hagemann Snabe, Co-CEO (Vor-standssprecher), 45 years old, holds a masterdegree in operational research. He joined SAPin 1990 and became a member of its ExecutiveBoard on July 1, 2008. On February 7, 2010 hebecame Co-CEO alongside Bill McDermott.Besides the duties as Co-CEO, he is responsiblefor strategy, governance, corporate develop-ment, innovation, products and solutions devel-opment, communications, and marketing.

Werner Brandt, 57 years old, businessadministration graduate. Werner Brandt joinedSAP in early 2001 as the Chief Financial Offi-cer and member of the Executive Board. He isresponsible for finance and administrationincluding investor relations and data protectionand privacy. Prior to joining SAP, WernerBrandt was CFO and member of the ExecutiveBoard of Fresenius Medical Care AG since1999. In this role, he was also responsible forlabor relations. Before joining Fresenius Medi-cal Care AG, Werner Brandt headed thefinance function of the European operations ofBaxter International Inc.

Angelika Dammann, 51 years old, holdsa doctorate in law. She joined SAP on July 1,2010 as the Chief Human Resources Officerand member of its Executive Board. She isresponsible for global human resources (includ-ing labor relations).Prior to joining SAP,

Angelika Dammann was a member of theboard and vice president of human resources atUnilever Deutschland GmbH — responsible forGerman-speaking countries (Germany, Austria,and Switzerland). Before joining Unilever,Angelika Dammann was Vice President HR ITfor Royal Dutch/Shell Group, Netherlands andheld other international roles in UK and Ger-many with Shell.

Gerhard Oswald, 57 years old, econom-ics graduate. Gerhard Oswald joined SAP in1981 and became a member of the ExecutiveBoard in 1996. He became Chief OperatingOfficer on February 11, 2010. In this positionhe is responsible for SAP active global support,global IT, globalization services, quality gover-nance & production, operations, and SAP Labsnetwork.

Vishal Sikka, 43 years old, holds a PH.D. degree in computer science from StanfordUniversity. He joined SAP in 2002 and becamea member of its Executive Board on February 7,2010 leading technology and innovation. Beforejoining the Executive Board, he was the firstChief Technology Officer at SAP, and prior tothat was SAP’s Chief Software Architect.Before joining SAP, he was area vice presidentfor platform technologies at Peregrine Systems.He is responsible for innovation, technologyand architecture across the company, and globalresearch.

The members of the Executive Board ofSAP AG as of December 31, 2010 that aremembers on other supervisory boards and com-parable governing bodies of enterprises, otherthan SAP, in Germany and other countries, areset forth in Note (30) to our ConsolidatedFinancial Statements. SAP AG has not enteredinto contracts with any member of the Execu-tive Board that provide for benefits upon atermination of the employment of service ofthe member, apart from pensions, benefits pay-able in the event of an early termination ofservice, and abstention compensation for thepostcontractual noncompete period.

95

Part I

Item 6


To our knowledge, there are no familyrelationships among the Supervisory Board andExecutive Board members.

COMPENSATION REPORT

This compensation report outlines the cri-teria that we apply to determine compensationfor Executive Board and Supervisory Boardmembers, discloses the amount of compensationpaid, and describes the compensation systems. Italso contains information about Executive Boardmembers’ share-based compensation plans,shares held by Executive Board and SupervisoryBoard members, and the directors’ dealingsrequired to be disclosed in accordance with theGerman Securities Trading Act.

Compensation System

In 2010, the SAP Supervisory Boardadopted a new system of compensation for theExecutive Board members in line with legalrequirements introduced in the German Appro-priate Executive Board Remuneration Act andwith the recent amendments to the GermanCorporate Governance Code.

Executive Board members’ compensationis intended to reflect SAP’s size and globalpresence as well as our economic and financialstanding. The compensation level is internation-ally competitive to reward committed, success-ful work in a dynamic environment.

The Executive Board compensation pack-age is performance-based. It has four elements:

• A fixed annual salary

• A variable short-term incentive (STI)plan to reward performance in the planyear

• A variable medium-term incentive(MTI) plan to reward performance inthe plan year and the two subsequentyears

• A share-based long-term incentive(LTI) plan tied to the price of SAPstock

The Supervisory Board sets a compensa-tion target for the sum of the fixed element andthe two variable elements. It reviews, and ifappropriate revises, this compensation targetevery year. The review takes into accountSAP’s business performance and the compensa-tion paid to directors at comparable companieson the international stage. The amount of vari-able compensation depends on SAP’s perfor-mance against performance targets that theSupervisory Board sets for each plan year. Theperformance targets are key performance indi-cator (KPI) values aligned to the SAP budgetfor the plan year.

The following criteria apply to the ele-ments of Executive Board compensation for2010:

• The fixed element is paid as a monthlysalary.

• The variable compensation under theSTI plan depends on the SAP Group’sperformance against the KPI target val-ues for non-IFRS constant currencysoftware and software-related servicerevenue growth, non-IFRS constantcurrency operating margin, and thecash conversion rate (that is, the ratioof non-IFRS operating cash flow tonon-IFRS profit after tax). In addition,the STI element has a discretionarycomponent that allows the SupervisoryBoard, at the end of the period in ques-tion, to address not only an ExecutiveBoard member’s individual perfor-mance, but also SAP’s performance interms of market position, innovativepower, customer satisfaction, employeesatisfaction, and attractiveness as anemployer. Moreover, if there has beenany extraordinary and unforeseeableevent the Supervisory Board can, at itsreasonable discretion, retroactivelyadjust payouts up or down in the inter-est of SAP. On February 10, 2011, theSupervisory Board assessed SAP’s per-formance against the agreed targetsand determined the amount of STI

96

Part I

Item 6


payable. The STI pays out after theAnnual General Meeting of Sharehold-ers in May 2011.

• The variable compensation under theMTI plan depends on the SAP Group’sperformance over the three years 2010to 2012 against the KPI target valuesfor software and software-related ser-vice revenue growth and earnings pershare (both of which are non-IFRS,constant currency values). In addition,the MTI element has a discretionarycomponent that allows the SupervisoryBoard, at the end of the period in ques-tion, to address not only an ExecutiveBoard member’s individual perfor-mance, but also SAP’s performanceover the three years 2010 to 2012 interms of market position, innovativepower, customer satisfaction, employeesatisfaction, and attractiveness as anemployer.

• The LTI component consists of theissue of virtual stock options under theterms of the 2010 stock option (SAPSOP 2010) plan. For the terms anddetail of the SAP SOP 2010 plan, seethe Notes to Consolidated FinancialStatements section, Note (28). Thenumber of virtual stock options to beissued to each member of the Execu-tive Board in 2010 by way of long-term incentive was decided by theSupervisory Board on July 6, 2010,with effect from September 9, 2010,and reflects the fair value of the virtualstock options awarded.

The contracts of Executive Board mem-bers Bill McDermott and Vishal Sikka includeclauses that determine the exchange rates forthe translation of euro-denominated compensa-tion into U.S. dollars. The contract with JohnSchwarz contained a similar clause.

Amount of Compensation

Executive Board members’ compensation in 2010 was as follows:

Salary Other(1)

Directors’Profit-

Sharing (STI)

Share-BasedCompensation

(SAP SOP 2010)(2)

Fixed ElementsPerformance-Related

Element

Long-TermIncentiveElements

TotalE(000)

Bill McDermott (co-CEO fromFebruary 7, 2010)(3) . . . . . . . . . . . . . . . 1,355.2 196.4 1,920.6 950.0 4,422.2

Jim Hagemann Snabe (co-CEO fromFebruary 7, 2010). . . . . . . . . . . . . . . . . 1,150.0 114.5 1,648.7 950.0 3,863.2

Dr. Werner Brandt . . . . . . . . . . . . . . . . . . 700.0 18.4 997.7 577.0 2,293.1Dr. Angelika Dammann (member from

July 1, 2010) . . . . . . . . . . . . . . . . . . . . 350.0 106.4 498.9 288.5 1,243.8Gerhard Oswald . . . . . . . . . . . . . . . . . . . . 700.0 97.6 997.7 577.0 2,372.3Vishal Sikka (member from February 7,

2010)(7) . . . . . . . . . . . . . . . . . . . . . . . . 697.3 215.4 969.9 577.0 2,459.6Léo Apotheker (CEO and member until

February 7, 2010)(4) . . . . . . . . . . . . . . . 187.5 37.5 — — 225.0Erwin Gunst (member until January 31,

2010)(5) . . . . . . . . . . . . . . . . . . . . . . . . 113.8 9.0 — — 122.8John Schwarz (member until

February 11, 2010)(6) . . . . . . . . . . . . . . 164.5 7.4 — — 171.9Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,418.3 802.6 7,033.5 3,919.5 17,173.9

97

Part I

Item 6


(1) Insurance contributions, benefits in kind, expenses for maintenance of two households due to work abroad,reimbursement legal and tax advice fees, nonrecurring payments, security services

(2) Fair value at the time of grant(3) Includes discrete payments arising through application of the fixed exchange-rate clause to the following

items: salary for 2010: A 205,200; profit-sharing bonus for 2010: A 271,900(4) Léo Apotheker’s appointment as CEO and member of the Executive Board ended on February 7, 2010.

His contract with SAP AG ended on March 31, 2010.(5) Erwin Gunst’s appointment as member of the Executive Board ended on January 31, 2010. His contract

with SAP AG ended on March 31, 2010.(6) John Schwarz’s appointment as member of the Executive Board ended on February 11, 2010. His contract

with SAP AG ended on March 31, 2010. Includes discrete payments arising through application of thefixed exchange-rate clause to the following items: Salary for 2010: A 4,900

(7) Includes discrete payments arising through application of the fixed exchange-rate clause to the followingitems: salary for 2010: A 70,100; profit-sharing bonus for 2010: A 76,100

Assuming 100% target achievement, the MTI 2010 amounts to be paid in 2013 would be asfollows:

MTI 2010Target

Payouts 2013E(000)

Bill McDermott (co-CEO from February 7, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820.0Jim Hagemann Snabe (co-CEO from February 7, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . 820.0Dr. Werner Brandt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495.5Dr. Angelika Dammann (member from July 1, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247.8Gerhard Oswald . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495.5Vishal Sikka (member from February 7, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443.9Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,322.7

The share-based compensation amounts in 2010 result from the following virtual stock optiongrants under the SAP SOP 2010:

Quantity

FairValue perRight atTime ofGrant

Total FairValue atTime ofGrant

FairValueper

Right onDec. 31,

2010

TotalFair

Value onDec. 31,

2010

2010 Grants

E E(000) E E(000)

Bill McDermott (co-CEO from February 7, 2010) . . . . 135,714 7.00 950.0 8.19 1,111.5Jim Hagemann Snabe (co-CEO from February 7,

2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,714 7.00 950.0 8.19 1,111.5Dr. Werner Brandt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,428 7.00 577.0 8.19 675.1Dr. Angelika Dammann (member from July 1, 2010) . . 41,214 7.00 288.5 8.19 337.5Gerhard Oswald. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,428 7.00 577.0 8.19 675.1Vishal Sikka (member from February 7, 2010) . . . . . . . 82,428 7.00 577.0 8.19 675.1Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559,926 3,919.5 4,585.8

98

Part I

Item 6


The following table shows total Executive Board compensation in 2009, including SOP Perfor-mance Plan 2009 stock options granted:

Salary Other(1)Directors’

Profit-Sharing

Share-BasedCompensation

(SAP SOP 2009)(2)

Fixed Elements

Performance-RelatedElement

Long-TermIncentive Element

TotalE(000)

Prof. Dr. Henning Kagermann (co-CEO andmember until May 31, 2009). . . . . . . . . . . 312.5 7.4 2,026.2 — 2,346.1

Léo Apotheker (CEO). . . . . . . . . . . . . . . . . . 750.0 137.3 4,862.8 950.0 6,700.1Dr. Werner Brandt. . . . . . . . . . . . . . . . . . . . . 455.0 19.1 2,950.1 577.0 4,001.2Erwin Gunst . . . . . . . . . . . . . . . . . . . . . . . . . 455.0 36.0 2,950.1 577.0 4,018.1Prof. Dr. Claus E. Heinrich (member until

May 31, 2009). . . . . . . . . . . . . . . . . . . . . . 189.6 9.3 658.8 — 857.7Bill McDermott(3) . . . . . . . . . . . . . . . . . . . . . 900.4 74.9 2,776.7 577.0 4,329.0Gerhard Oswald . . . . . . . . . . . . . . . . . . . . . . 455.0 437.5 2,950.1 577.0 4,419.6John Schwarz(4). . . . . . . . . . . . . . . . . . . . . . . 581.5 28.2 2,910.7 577.0 4,097.4Jim Hagemann Snabe . . . . . . . . . . . . . . . . . . 455.0 131.1 2,950.1 577.0 4,113.2

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,554.0 880.8 25,035.6 4,412.0 34,882.4

(1) Insurance contributions, benefits in kind, expenses for maintenance of two households due to work abroad,reimbursement legal and tax advice fees, leave compensation

(2) Fair value at the time of grant(3) Includes discrete payments arising through application of the fixed exchange-rate clause to the following

items: salary for 2008: A 29,600; profit-sharing bonus for 2008: A 53,200; salary for 2009: A 47,500;profit-sharing bonus for 2009: A 91,900

(4) Includes discrete payments arising through application of the fixed exchange-rate clause to the followingitems: salary for 2009: A 5,000; profit-sharing bonus for 2009: A 29,000

99

Part I

Item 6


Share-Based Compensation Under SOP Performance Plan 2009

Quantity

Fair Valueper Rightat Time of

Grant

Total FairValue of

Long-TermIncentiveElements

at Time ofGrant

Fair Valueper Right on

Dec. 31,2009

TotalValue onDec. 31,

2009

2009 Allocations

E E(000) E E(000)

Bill McDermott (co-CEO from February 7,2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,670 5.62 577.0 4.89 167.4

Jim Hagemann Snabe (co-CEO from February 7,2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,670 5.62 577.0 4.89 167.4

Dr. Werner Brandt . . . . . . . . . . . . . . . . . . . . . . . . . 102,670 5.62 577.0 4.89 167.4Gerhard Oswald . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,670 5.62 577.0 4.89 167.4Léo Apotheker (CEO and member until

February 7, 2010)(1) . . . . . . . . . . . . . . . . . . . . . . 169,040 5.62 950.0 4.89 275.5Erwin Gunst (member until January 31,

2010)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,670 5.62 577.0 4.89 167.4John Schwarz (member until February 11,

2010)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,670 5.62 577.0 4.89 167.4

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785,060 4,412.0 1,279.9

(1) Léo Apotheker’s appointment as CEO and member of the Executive Board ended on February 7, 2010.His contract with SAP AG ended on March 31, 2010.

(2) Erwin Gunst’s appointment as member of the Executive Board ended on January 31, 2010. His contractwith SAP AG ended on March 31, 2010.

(3) John Schwarz’s appointment as member of the Executive Board ended on February 11, 2010. His contractwith SAP AG ended on March 31, 2010.

End-of-Service Benefits

Regular End-of-Service Undertakings

Retirement Pension Plan

Members of the Executive Board receivea retirement pension when they reach the retire-ment age of 60 and vacate their ExecutiveBoard seat or a disability pension if, beforereaching the regular retirement age, theybecome subject to occupational disability orpermanent incapacity. A surviving dependant’spension is paid on the death of a former mem-ber of the Executive Board. The disability pen-sion is 100% of the vested retirement pensionentitlement and is payable until the benefi-ciary’s 60th birthday, after which it is replacedby a retirement pension. The surviving depend-ant’s pension is 60% of the retirement pension

or vested disability pension entitlement atdeath. Entitlements are enforceable againstSAP AG.

If service is ended before the retirementage of 60 is reached, pension entitlement isreduced in proportion as the actual length ofservice stands in relation to the maximum pos-sible length of service.

On January 1, 2000, SAP AG introduceda contributory retirement pension plan. Thecontribution is 4% of applicable compensationup to the applicable income threshold plus 14%of applicable compensation above the applica-ble income threshold. For this purpose, applica-ble compensation is 180% of annual basesalary. The applicable income threshold is thestatutory annual income threshold for the state

100

Part I

Item 6


pension plan in Germany (West), as amendedfrom time to time.

Exceptional retirement pension agree-ments apply to the following Executive Boardmembers:

• Bill McDermott and Vishal Sikka haverights to future benefits under the pen-sion plan of SAP America. The pensionplan of SAP America is a cash balanceplan that on retirement provides eithermonthly pension payments or a lumpsum. The pension becomes availablefrom the beneficiary’s 65th birthday.Subject to certain conditions, the planalso provides earlier payment or inval-idity benefits. The SAP America pen-sion plan closed with effect fromJanuary 1, 2009. Interest continues tobe paid on the earned rights to bene-fits. SAP also made contributions to athird-party pension plan for BillMcDermott and Vishal Sikka. SAP’scontributions reflect Bill McDermott’sand Vishal Sikka’s payments into thispension plan. Additionally in view ofthe close of the SAP America pensionplan, SAP adjusted its payments to thisnon-SAP pension plan. In 2010, SAPpaid contributions for Bill McDermotttotaling A765,700 (2009: A199,600)and for Vishal Sikka totaling A153,200.

• Instead of paying for entitlementsunder the pension plan for ExecutiveBoard members, SAP pays equivalentamounts to a non-SAP pension planfor Jim Hagemann Snabe. In 2010,SAP paid contributions totalingA283,100 (2009: A108,400).

• Gerhard Oswald’s performance-basedretirement plan was discontinued whenSAP introduced a contributory retire-ment pension plan. The pension bene-fits are derived from any accruedentitlements on December 31, 1999,under performance-based pensionagreements and a salary-linked contri-bution for the period commencingJanuary 1, 2000.

• Léo Apotheker’s agreement providedonly for a retirement pension, but notfor a surviving dependant’s or disabil-ity pension. The pension contributionreflected his participation in the Frenchsocial security system in that theemployer contributions paid by SAPunder the French social insurance planare deducted from it.

• SAP made no retirement pension plancontributions in respect of JohnSchwarz in 2009 and 2010.

101

Part I

Item 6


The following table shows the change in total projected benefit obligation (PBO) and in thetotal accruals for pension obligations to Executive Board members:

Bill McDermott(co-CEO

fromFebruary7, 2010)

Dr.WernerBrandt

Dr.Angelika

Dammann(Memberfrom July1, 2010)

GerhardOswald

VishalSikka

(Memberfrom

February7, 2010)

LéoApo the-

ker (CEOand

Memberuntil

February7, 2010)

ErwinGunst

(Memberuntil

January31, 2010) Total

E(000)

PBO January 1, 2009. . . . . . . . . . 955.0 701.8 — 3,099.1 — 439.8 389.2 5,584.9Less plan assets market value

January 1, 2009 . . . . . . . . . . . . 33.3 624.0 — 2,636.6 — 658.8 48.1 4,000.8

Accrued January 1, 2009 . . . . . . 921.7 77.8 — 462.5 — �219.0 341.1 1,584.1PBO change in 2009 . . . . . . . . . . 3.1 201.0 — 527.1 — 88.4 92.0 911.6Plan assets change in 2009 . . . . . 9.2 31.1 — 237.6 — 29.2 97.4 404.5PBO December 31, 2009 . . . . . . . 958.1 902.8 — 3,626.2 — 528.2 481.2 6,496.5Less plan assets market value

December 31, 2009 . . . . . . . . . 42.5 655.1 — 2,874.2 — 688.0 145.5 4,405.3

Accrued December 31, 2009 . . . 915.6 247.7 — 752.0 — �159.8 335.7 2,091.2Accrued January 1, 2010 (new

Board members) . . . . . . . . . . — — 0.0 — 0.2 — — 0.2PBO change in 2010 . . . . . . . . . . 115.1 381.5 62.9 501.2 13.3 93.2 �370.2 797.0Plan assets change in 2010 . . . . . 10.1 266.6 78.7 500.7 11.8 29.2 38.3 935.4PBO December 31, 2010 . . . . . . . 1,073.2 1,284.3 62.9 4,127.4 46.7 621.4 111.0 7,326.9Less plan assets market value

December 31, 2010 . . . . . . . . . 52.6 921.7 78.7 3,374.9 45.0 717.2 183.8 5,373.9

Accrued December 31, 2010 . . . 1,020.6 362.6 �15.8 752.5 1.7 �95.8 �72.8 1,953.0

The following table shows the annual pension entitlement of each member of the ExecutiveBoard on reaching age 60 based on entitlements from SAP under performance-based and salary-linked plans vested on December 31, 2010:

Vested onDecember 31,

2010

Vested onDecember 31,

2009E(000)

Bill McDermott (co-CEO from February 7, 2010)(1) . . . . . . . . . . . . . . . . . 101.1 124.2Dr. Werner Brandt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.9 54.1Dr. Angelika Dammann (member from July 1, 2010). . . . . . . . . . . . . . . . . 3.5 —Gerhard Oswald . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228.1 208.4Vishal Sikka (member from February 7, 2010)(1) . . . . . . . . . . . . . . . . . . . . 6.3 —Léo Apotheker (CEO and member until February 7, 2010) . . . . . . . . . . . . 45.5 45.5Erwin Gunst (member until January 31, 2010) . . . . . . . . . . . . . . . . . . . . . . 8.8 34.4

(1) The rights shown here for Bill McDermott and Vishal Sikka refer solely to rights under the SAP America,Inc. pension plan.

These are vested entitlements. To theextent that members continue to serve on theExecutive Board and that therefore more

contributions are made for them in the future,pensions actually payable at the age of 60 willbe higher than the amounts shown in the table.

102

Part I

Item 6


Postcontractual Noncompete Provisions

During the agreed 12-month postcontrac-tual noncompete period, Executive Board

members receive abstention payments corre-sponding to 50% of their final average contrac-tual compensation as members.

The following table presents the net present values of the postcontractual noncompeteabstention payments. The net present values in the table reflect the discounted present value of theamounts that would be paid in the fictitious scenario in which the Executive Board members leaveSAP at the end of their respective current contract terms and their final average contractualcompensation prior to their departure equals the compensation in 2010. Actual postcontractualnoncompete payments will likely differ from these amounts depending on the time of departure andthe compensation levels and target achievements at the time of departure.

ContractTerm

Expires

Net PresentValue of

PostcontractualNoncompeteAbstentionPayment

E(000)

Bill McDermott (co-CEO from February 7, 2010) . . . . . . . . . . . . . . . . . . . . . . . . June 30, 2012 4,313.0

Jim Hagemann Snabe (co-CEO from February 7, 2010) . . . . . . . . . . . . . . . . . . . . June 30, 2012 3,767.8

Dr. Werner Brandt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2013 2,116.3

Dr. Angelika Dammann (member from July 1, 2010). . . . . . . . . . . . . . . . . . . . . . June 30, 2013 1,174.8

Gerhard Oswald . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2011 2,335.4

Vishal Sikka (member from February 7, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2012 2,357.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,064.9

Early End-of-Service Undertakings

Severance Payments

The standard contract for all ExecutiveBoard members since January 1, 2006, providesthat on termination before full term (for exam-ple, where the member’s appointment isrevoked, where the member becomes occupa-tionally disabled, or in connection with achange of control), SAP AG will pay to themember the outstanding part of the compensa-tion target for the entire remainder of the term,appropriately discounted for early payment. Amember has no claim to that payment if he orshe leaves SAP AG for reasons for which he orshe is responsible.

If an Executive Board member’s post onthe Executive Board expires or ceases to existbecause of, or as a consequence of, change orrestructuring or due to a change of control,SAP AG and each Executive Board memberhas the right to terminate the employment con-tract within eight weeks of the occurrence by

giving six months’ notice. A change of controlis deemed to occur when a third party isrequired to make a mandatory takeover offer tothe shareholders of SAP AG under the GermanSecurities Acquisition and Takeover Act, whenSAP AG merges with another company andbecomes the subsumed entity, or when a con-trol or profit transfer agreement is concludedwith SAP AG as the dependent company. AnExecutive Board member’s contract can also beterminated before full term if his or herappointment as an SAP AG Executive Boardmember is revoked in connection with a changeof control.

Postcontractual Noncompete Provisions

Abstention compensation for the post-contractual noncompete period as describedabove is also payable on early contracttermination.

103

Part I

Item 6


Permanent Disability

In case of permanent disability, the con-tract will end at the end of the quarter in whichthe permanent inability to work was deter-mined. The Executive Board Member receivesthe monthly basic salary for a further twelvemonths starting from the date the permanentdisability is determined.

Payments to Executive Board MembersRetiring in 2010

Léo Apotheker resigned from his posi-tion as member and CEO of the ExecutiveBoard with effect from February 7, 2010, withthe approval of the Supervisory Board. Hereceived the following payments in connectionwith his retirement with effect from March 31,2010:

• Léo Apotheker received monthlyabstention compensation of A183,300,corresponding to 50% of his final aver-age contractual compensation, in con-sideration of an agreed 12-monthpostcontractual noncompete period.Due to Léo Apotheker’s taking on newemployment, the abstention compensa-tion was ended on October 31, 2010.

• He received a payment of A3,168,500in relation to the early termination ofhis contract, in accordance with theagreement on payments for earlytermination.

• Upon termination of his employmentcontract, Léo Apotheker received com-pensation for unused leave totalingA459,500.

Erwin Gunst’s contract as an ExecutiveBoard member was ended with effect fromMarch 31, 2010, for health reasons. Hereceived the following payments in 2010 inconnection with his retirement:

• He received a payment of A2,036,000in accordance with the agreements onpayments for early termination forhealth reasons.

• We have set aside the postcontractualnoncompete provisions in his contract.No payment was made by SAP.

John Schwarz retired from his position asExecutive Board member with immediate effecton February 11, 2010, with the approval of theSupervisory Board. He received the followingpayments in connection with his retirementwith effect from March 31, 2010:

• In February 2010, we waived the post-contractual noncompete provisions inhis contract. The postcontractual non-compete provisions were subject to atermination notice of six months. Ashe retired at the end of March 2010, hereceived monthly abstention compensa-tion of A141,900, corresponding to50% of his final average contractualcompensation for the remaining non-compete period of five months.

• John Schwarz received a payment ofA2,934,500 in relation to the early ter-mination of his contract, in accordancewith the agreements on payments forearly termination.

• Upon termination of his employmentcontract, John Schwarz received com-pensation for unused leave totalingA70,500.

• For the above mentioned amounts ineuros payable in U.S. dollars theagreed fixed exchange rate of A1 =US$1.55664 based on the employmentcontract dated June 30, 2009 wasapplied.

We made agreements with each of thethree retiring Executive Board members to theeffect that rights that had been allocated tothem under SAP SOP 2007 and the SOP Perfor-mance Plan 2009 would not lapse on theirretirement as provided in the plan terms butwould remain available to them without restric-tion until their expiration, which in all cases isfive years after grant.

104

Part I

Item 6


Payments to Former Executive BoardMembers

In 2010, we paid pension benefits ofA1,290,000 to Executive Board members whohad retired before January 1, 2010 (2009:A764,000). At the end of the year, the PBO forformer Executive Board members wasA24,878,000 (2009: A15,777,000). Plan assetsof A25,120,000 are available to service theseobligations (2009: A16,512,000).

Executive Board Members’ Long-TermIncentives

Members of the Executive Board holdvirtual stock options under the SAP SOP 2010,SOP Performance Plan 2009 and SAPSOP 2007, stock appreciation rights (STARs)under the Incentive Plan 2010, stock options

under SAP SOP 2002, and stock options andconvertible bonds under the LTI Plan 2000,which were granted to them in previous years.For information about the terms and details ofthese plans, see the Notes to the ConsolidatedFinancial Statements section, Note (28).

SAP SOP 2010

The table below shows Executive Boardmembers’ holdings, on December 31, 2010, ofvirtual stock options issued to them under theSAP SOP 2010 since its inception. The strikeprice for an option is 115% of the base price.The issued options have a term of seven yearsand can only be exercised on specified datesafter the four-year vesting period. The optionsissued in 2010 can be exercised with effectfrom September 2014.

SAP SOP 2010 Stock Options

YearGranted

StrikePrice

per Share

Quantityof

Options

RemainingTerm in

Years

Quantityof

Options

Price onExercise

Date

Quantityof

Options

Quantityof

Options

Quantityof

Options

RemainingTerm in

Years

Allocation onSeptember 9, 2010

RightsExercised

in 2010

ExercisableRights ofRetired

Membersof the

ExecutiveBoard

ForfeitedRights

Holding onDecember 31, 2010

E

Bill McDermott (co-CEO fromFebruary 7, 2010) . . 2010 40.80 135,714 7.00 — — — — 135,714 6.69

Jim Hagemann Snabe(co-CEO fromFebruary 7, 2010) . . 2010 40.80 135,714 7.00 — — — — 135,714 6.69

Dr. Werner Brandt . . . 2010 40.80 82,428 7.00 — — — — 82,428 6.69

Dr. AngelikaDammann (memberfrom July, 1,2010) . . . . . . . . . . 2010 40.80 41,214 7.00 — — — — 41,214 6.69

Gerhard Oswald . . . . . 2010 40.80 82,428 7.00 — — — — 82,428 6.69Vishal Sikka (member

from February 7,2010) . . . . . . . . . . 2010 40.80 82,428 7.00 — — — — 82,428 6.69

Total . . . . . . . . . . . . 559,926 559,926

SOP Performance Plan 2009

The table below shows the current Exec-utive Board members’ holdings, on

December 31, 2010, of virtual stock optionsissued under the SOP Performance Plan 2009.

105

Part I

Item 6


The strike price for an option varies withthe performance of SAP stock over time againstthe TechPGI index. The gross profit per optionis limited to A30.80, corresponding to 110% ofthe SAP share price on the date of issue.

The issued options have a term of fiveyears and can only be exercised on specifieddates after the two-year vesting period. There-fore, none of the options held could be exer-cised on December 31, 2010.

SOP Performance Plan 2009 Stock Options

YearGranted

StrikePrice

per Share

Quantityof

Options

RemainingTerm in

Years

Quantityof

Options

Price onExercise

Date

Quantityof

Options

Quantityof

Options

Quantityof

Options

RemainingTerm in

Years

Holding onJanuary 1, 2010

RightsExercisedin 2010


Membersof the

ExecutiveBoard

ForfeitedRights


E

Bill McDermott (co- CEO fromFebruary 7, 2010) . . . . . . . . . . 2009 variable 102,670 4.35 — — — — 102,670 3.35

Jim Hagemann Snabe (co-CEOfrom February 7, 2010) . . . . . . 2009 variable 102,670 4.35 — — — — 102,670 3.35

Dr. Werner Brandt . . . . . . . . . . . 2009 variable 102,670 4.35 — — — — 102,670 3.35

Gerhard Oswald . . . . . . . . . . . . . 2009 variable 102,670 4.35 — — — — 102,670 3.35Vishal Sikka (member from

February 7, 2010)(1) . . . . . . . . 2009 variable 35,588 4.35 — — — — 35,588 3.35

Léo Apotheker (CEO and memberuntil February 7, 2010)(2) . . . . . 2009 variable 169,040 4.35 — — �169,040 — — 3.35

John Schwarz (member untilFebruary 11, 2010)(3) . . . . . . . . 2009 variable 102,670 4.35 — — �102,670 — — 3.35

Total . . . . . . . . . . . . . . . . . . . . 717,978 �271,710 446,268

(1) The holding was allocated before appointment to the Executive Board.(2) Léo Apotheker’s appointment as CEO and member of the Executive Board ended on February 7, 2010.

His contract with SAP AG ended on March 31, 2010.(3) John Schwarz’s appointment as member of the Executive Board ended on February 11, 2010. His contract

with SAP AG ended on March 31, 2010.

SAP SOP 2007

The table below shows Executive Boardmembers’ holdings, on December 31, 2010, ofvirtual stock options issued to them under theSAP SOP 2007 plan since its inception, includ-ing virtual stock options issued to them bothduring and before their respective membershipof the Executive Board.

The strike price for an option is 110% ofthe base price. The issued options have a termof five years and can only be exercised onspecified dates after the two-year vestingperiod. The options issued in 2007 could beexercised with effect from June 2009, followingexpiration of the two-year vesting period. Theoptions issued in 2008 could be exercised witheffect from March 2010, following expirationof the two-year vesting period.

106

Part I

Item 6



YearGranted

StrikePrice

per Share

Quantityof

Options

RemainingTerm in

Years

Quantityof

Options

Price onExercise

Date

Quantityof

Options

Quantityof

Options

Quantityof

Options

RemainingTerm in

Years




Membersof the

ExecutiveBoard

ForfeitedRights


E

Bill McDermott (co-CEO fromFebruary 7, 2010)(1) . . . . . . . . 2007 39.28 62,508 2.23 — — — — 62,508 1.23

2008 35.96 70,284 3.18 — — — — 70,284 2.18

Jim Hagemann Snabe (co-CEOfrom February 7, 2010)(1) . . . . . 2007 39.28 37,505 2.23 — — — — 37,505 1.23

2008 35.96 56,228 3.18 — — — — 56,228 2.18

Dr. Werner Brandt . . . . . . . . . . . 2007 39.28 72,216 2.23 — — — — 72,216 1.232008 35.96 81,200 3.18 — — — — 81,200 2.18

Gerhard Oswald . . . . . . . . . . . . . 2007 39.28 72,216 2.23 — — — — 72,216 1.23

2008 35.96 81,200 3.18 — — — — 81,200 2.18Vishal Sikka (member from

February 7, 2010)(1) . . . . . . . . 2007 39.28 12,502 2.23 — — — — 12,502 1.23

2008 35.96 17,571 3.18 — — — — 17,571 2.18Léo Apotheker (CEO and member

until February 7, 2010)(2) . . . . . 2007 39.28 79,093 2.23 — — �79,093 — — 1.23

2008 35.96 88,933 3.18 — — �88,933 — — 2.18Erwin Gunst (member until

January 31, 2010)(3) . . . . . . . . 2007 39.28 56,258 2.23 — — �56,258 — — 1.23

2008 35.96 70,284 3.18 — — �70,284 — — 2.18John Schwarz (member until

February 11, 2010)(4) . . . . . . . . 2008 35.96 81,200 3.18 — — �81,200 — — 2.18

Total . . . . . . . . . . . . . . . . . . . . 939,198 �375,768 563,430


His contract with SAP AG ended on March 31, 2010.(3) Erwin Gunst’s appointment as member of the Executive Board ended on January 31, 2010. His contract

with SAP AG ended on March 31, 2010.(4) John Schwarz’s appointment as member of the Executive Board ended on February 11, 2010. His contract

with SAP AG ended on March 31, 2010.

Incentive Plan 2010

The additional nonrecurring share-basedcompensation awarded in 2006 comprised stockappreciation rights for the Incentive Plan2010 share-based compensation plan. The stockappreciation rights awarded under this planexpired on December 31, 2010, without anypayments.

SAP SOP 2002

The table below shows Executive Boardmembers’ December 31, 2010, holdings ofstock options issued in previous years underthe SAP SOP 2002 plan since its inception.

The strike price for an SAP SOP 2002stock option is 110% of the base price of oneSAP share. The base price is the arithmetic

107

Part I

Item 6


mean closing auction price for SAP stock inthe Xetra trading system (or its successor sys-tem) over the five business days immediatelybefore the issue date of that stock option. Thestrike price cannot be less than the closingauction price on the day before the issue date.The issued options have a term of five yearsand can only be exercised on specified datesafter the two-year vesting period.

As a result of the issue on December 21,2006, of bonus shares at a one-to-three ratiounder a capital increase from corporate funds,on exercise each stock option now entitles itsbeneficiary to four shares. For better compara-bility with the price of SAP stock since imple-mentation of the capital increase, the followingtable shows not the number (quantity) of

options but the number (quantity) of shares towhich they entitle the holder. Consequently, thestrike prices shown are prices per share and notper option. The number of shares shown in thetable is four times the number of options, andthe strike price for an option is four times thestrike price per share shown in the table.

In December 2009, the SupervisoryBoard agreed an amendment to the terms ofSAP SOP 2002 for options granted in 2005.For details of the amendment, see the Notes tothe Consolidated Financial Statements section,Note (28).

The right to exercise options issued in2005 expired in February 2010.


YearGranted

StrikePrice

per Share

Quantityof

Shares

RemainingTerm in

Years

Quantityof

Shares

Price onExercise

Date

Quantityof

Shares

Quantityof

Shares

Quantityof

Shares

RemainingTerm in

Years

Holdingon

January1, 2010



Membersof the

ExecutiveBoard

ForfeitedRights

Holding onDecember31, 2010

E E

Bill McDermott (co- CEOfrom February 7,2010)(1) . . . . . . . . . . . . . 2006 46.48 77,296 1.10 — — — — 77,296 0.10

Jim Hagemann Snabe (co-CEO from February 7,2010)(1) . . . . . . . . . . . . . 2005 33.55 51,180 0.11 �22,008 33.67 — �29,172 — 0.00

2006 46.48 37,164 1.10 — — — — 37,164 0.10Dr. Werner Brandt . . . . . . . 2005 33.55 149,980 0.11 �64,496 33.67 — �85,484 — 0.00

2006 46.48 87,292 1.10 — — — — 87,292 0.10Gerhard Oswald . . . . . . . . . 2005 33.55 149,980 0.11 �64,496 33.67 — �85,484 — 0.00

2006 46.48 87,292 1.10 — — — — 87,292 0.10Vishal Sikka (member from

February 7, 2010)(1) . . . . . 2006 46.48 7,436 1.10 — — — — 7,436 0.10Léo Apotheker (CEO and

member until February 7,2010)(2) . . . . . . . . . . . . . 2005 33.55 149,980 0.11 �64,496 33.67 — �85,484 — 0.00

2006 46.48 95,604 1.10 — — �95,604 — — 0.10Erwin Gunst (member until

January 31, 2010)(3) . . . . . 2005 33.55 61,264 0.11 �26,344 33.67 — �34,920 — 0.002006 46.48 44,596 1.10 — — �44,596 — — 0.10

Total . . . . . . . . . . . . . . . . 999,064 �241,840 �140,200 �320,544 296,480


His contract with SAP AG ended on March 31, 2010.

108

Part I

Item 6


(3) Erwin Gunst’s appointment as member of the Executive Board ended on January 31, 2010. His contractwith SAP AG ended on March 31, 2010.

LTI Plan 2000

Beneficiaries under the LTI Plan 2000could choose between convertible bonds andstock options. The chief difference was in theway the exercise or conversion price was deter-mined. The bond conversion price depends onthe closing price of SAP stock the day beforethe bond was issued, while the option strikeprice varies with the performance of SAP stockover time against the S&P North Software-Software Index (the successor of the GSTISoftware index). The issued options have aterm of ten years and could only be exercisedin portions of one-third each on specified datesafter two-year, three-year, or four-year vestingperiods respectively. On December 31, 2010,no current member of the Executive Board heldLTI plan 2000 stock options.

The table below shows convertible bondsheld by members of the Executive Board onDecember 31, 2010, granted in earlier yearsunder the LTI Plan 2000. The strike prices forLTI Plan 2000 convertible bonds reflect the

prices payable by an Executive Board memberfor one SAP share on conversion of the bond.The strike prices are fixed and correspond tothe quoted price of one SAP share on thebusiness day immediately preceding the grantof the convertible bond. As a result of the issueon December 21, 2006, of bonus shares at aone-to-three ratio under a capital increase fromcorporate funds, on conversion each bond nowentitles its beneficiary to four shares. For bettercomparability with the price of SAP stock sinceimplementation of the capital increase, the fol-lowing table shows not the number (quantity)of convertible bonds but the number (quantity)of shares to which they entitle the holder. Con-sequently, the strike prices shown are prices pershare and not per bond. The number of sharesshown in the table is four times the number ofbonds, and the strike price for a bond is fourtimes the strike price per share shown in thetable.

The right to exercise convertible bondsissued in 2000 expired in February 2010.

LTI Plan 2000 Convertible Bonds

YearGranted

Strike Priceper Share

Quantityof Shares

RemainingTerm in

YearsQuantity of

Shares

Price onExercise

DateQuantity of

SharesQuantity of

SharesQuantity of

Shares

RemainingTerm in

Years


RightsExercised

in 2010

ExerciseableRights ofRetired

Membersof the

ExecutiveBoard Forfeited

Rights


E E

Dr. Werner Brandt . . . . . 2001 47.81 20,000 1.14 — — — — 20,000 0.142002 37.88 120,000 2.14 — — — — 120,000 1.14

Gerhard Oswald . . . . . . . 2000 72.58 65,700 0.14 — — — �65,700 — 02001 47.81 88,000 1.14 — — — — 88,000 0.14

Léo Apotheker (CEO andmember untilFebruary 7, 2010)(1) . . . 2001 47.81 120,000 1.14 — — �120,000 — — 0.14

2002 37.88 70,000 2.14 — — �70,000 — — 1.14

Total . . . . . . . . . . . . . . 483,700 �190,000 �65,700 228,000

(1) Léo Apo theker’s appointment as CEO and member of the Executive Board ended on February 7, 2010.His contract with SAP AG ended on March 31, 2010.

109

Part I

Item 6


Total Expense for Share-Based Compensation

In the report year and the prior year, total expense for the share-based compensation plans ofExecutive Board members was recorded as follows:

2010 2009E(000)

Bill McDermott (co-CEO from February 7, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . 382.9 339.3Jim Hagemann Snabe (co-CEO from February 7, 2010) . . . . . . . . . . . . . . . . . . . . . . . 373.8 318.3Dr. Werner Brandt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355.2 351.8Dr. Angelika Dammann (member from July 1, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . 28.1 —Gerhard Oswald . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355.2 351.8Vishal Sikka (member from February 7, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151.8 —Léo Apotheker (CEO and member until February 7, 2010)(1) . . . . . . . . . . . . . . . . . . . 575.0 376.3Erwin Gunst (member until January 31, 2010)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371.7 343.1John Schwarz (member until February 11, 2010)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 393.8 397.0

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,987.5 2,477.6

(1) Materially, the expense recorded in the report year reflects the fact that the rights did not expire on retire-ment but subsist until the end of the plan. IFRS 2 requires that it be immediately recognized at full fairvalue.

SHAREHOLDINGS AND TRANSACTIONSOF EXECUTIVE BOARD MEMBERS

No member of the Executive Board holdsmore than 1% of the common stock of SAP

AG. Members of the Executive Board held atotal of 13,747 SAP shares on December 31,2010 (2009: 15,336 shares).

The table below shows transactions by Executive Board members and persons closely associ-ated with them notified to SAP pursuant to the German Securities Trading Act, section 15a, in 2010.

Transactions in SAP SharesTransaction Date Transaction Quantity Unit Price in E

Jim Hagemann Snabe . . . . . . . . . . . . February 1, 2010 Stock sale(1) 22,008 33.6677Gerhard Oswald . . . . . . . . . . . . . . . . . February 1, 2010 Stock sale(1) 64,496 33.6677Léo Apotheker (CEO and member of

the Executive Board untilFebruary 7, 2010) . . . . . . . . . . . . . February 1, 2010 Stock sale(1) 64,496 33.6677

Dr. Werner Brandt . . . . . . . . . . . . . . . February 1, 2010 Stock sale(1) 64,496 33.6677Dr. Angelika Dammann (member of

the Executive Board from July 1,2010) . . . . . . . . . . . . . . . . . . . . . . . August 23, 2010 Stock purchase 1,420 35.38

(1) Sale of shares in line with SAP SOP 2002

Executive Board: Other Information

We did not grant any compensationadvance or credit to, or enter into any

commitment for the benefit of, any member ofour Executive Board in 2010 or the previousyear.

110

Part I

Item 6


As far as the law permits, SAP AG andits affiliated companies in Germany and else-where indemnify and hold harmless theirrespective directors and officers against andfrom the claims of third parties. To this end, wemaintain directors’ and officers’ (D&O) groupliability insurance. The policy is annual and isrenewed from year to year. The insurance cov-ers the personal liability of the insured groupfor financial loss caused by its managerial actsand omissions. The current D&O policyincludes an individual deductible for ExecutiveBoard members of SAP AG as required bysection 93 (2) of the German Stock CorporationAct.

Compensation for Supervisory Board Members

Compensation System

Supervisory Board members’ compensa-tion is governed by our Articles of Incorpora-tion, section 16. The section was amended byresolution of our June 8, 2010, Annual GeneralMeeting of Shareholders in order to align itwith the remuneration level and ratio of fixedto variable remuneration elements at other com-parable companies. Each member of the Super-visory Board receives, in addition to thereimbursement of his or her expenses, compen-sation composed of fixed elements and a vari-able element. The variable element depends onthe dividend paid by SAP on its shares.

The fixed element is A100,000 for thechairperson, A70,000 for the deputy chairper-son, and A50,000 for other members. For

membership of the Audit Committee, Supervi-sory Board members receive additional fixedannual remuneration of A15,000, and for mem-bership of any other Supervisory Board com-mittee A10,000, provided that the committeeconcerned has met in the year. The chairpersonof the audit committee receives A25,000, andthe chairpersons of the other committeesreceive A20,000. The fixed remuneration ispayable after the end of the year.

The variable compensation element isA10,000 for the chairperson, A8,000 for thedeputy chairperson, and A6,000 for the othermembers of the Supervisory Board for eachA0.01 by which the dividend distributed pershare exceeds A0.40. The variable remunerationis payable after the end of the Annual GeneralMeeting of Shareholders that resolves on thedividend for the relevant year.

However, the aggregate compensationexcluding compensation for committee mem-berships must not exceed A250,000 for thechairperson, A200,000 for the deputy chairper-son, and A150,000 for other members of theSupervisory Board.

Any members of the Supervisory Boardhaving served for less than the entire yearreceive one-twelfth of the annual remunerationfor each month of service commenced. Thisalso applies to the increased compensation ofthe chairperson and the deputy chairperson andto the remuneration for the chairperson and themembers of a committee.

111

Part I

Item 6


Amount of Compensation

Subject to the resolution on the appropriation of retained earnings by the Annual GeneralMeeting of Shareholders on May 25, 2011, the compensation paid to Supervisory Board members inrespect of 2010 will be as set out in the table below:

FixedCompensation

Compensationfor Committee

Work

VariableCompen-

sation TotalFixed

Compensation

Compensationfor Committee

WorkVariable

Compensation Total

2010 2009

E(000)

Prof. Dr. h.c. mult. HassoPlattner (chairperson) . . . . . 100.0 60.0 150.0 310.0 75.0 20.0 125.0 220.0

Lars Lamadé (deputychairperson) . . . . . . . . . . . 70.0 1.7 130.0 201.7 50.0 2.5 100.0 152.5

Pekka Ala-Pietila . . . . . . . . . 50.0 20.0 100.0 170.0 37.5 5.0 62.5 105.0Thomas Bamberger . . . . . . . . 50.0 15.0 100.0 165.0 37.5 2.5 62.5 102.5Panagiotis Bissiritsas . . . . . . . 50.0 20.0 100.0 170.0 37.5 5.0 62.5 105.0Willi Burbach . . . . . . . . . . . . 50.0 10.0 100.0 160.0 37.5 5.0 62.5 105.0Prof. Dr. Wilhelm Haarmann. . 50.0 31.7 100.0 181.7 37.5 10.0 62.5 110.0Peter Koop . . . . . . . . . . . . . . 50.0 10.0 100.0 160.0 37.5 4.8 62.5 104.8Christiane Kuntz-Mayr . . . . . . 50.0 10.0 100.0 160.0 37.5 2.3 62.5 102.3Bernard Liautaud . . . . . . . . . 50.0 10.0 100.0 160.0 37.5 2.5 62.5 102.5Dr. Gerhard Maier . . . . . . . . . 50.0 25.0 100.0 175.0 37.5 5.0 62.5 105.0Dr. h.c. Hartmut Mehdorn . . . 50.0 10.0 100.0 160.0 37.5 2.5 62.5 102.5Prof. Dr.-Ing. Dr. h.c. Dr.-Ing.

E.h. Joachim Milberg . . . . . 50.0 35.0 100.0 185.0 37.5 10.0 62.5 110.0Dr. Erhard Schipporeit . . . . . . 50.0 35.0 100.0 185.0 37.5 7.5 62.5 107.5Stefan Schulz . . . . . . . . . . . . 50.0 21.7 100.0 171.7 37.5 5.0 62.5 105.0Prof. Dr.-Ing. Dr.-Ing. E.h.

Klaus Wucherer . . . . . . . . . 50.0 10.0 100.0 160.0 37.5 2.5 62.5 102.5

Total . . . . . . . . . . . . . . . . . . 870.0 325.0 1,680.0 2,875.0 650.0 92.1 1,100.0 1,842.1

In addition, we reimburse to members ofthe Supervisory Board their expenses and thevalue-added tax payable on their compensation.

The total compensation of all Supervi-sory Board members in 2010 for work for SAPexcluding compensation relating to the officeof Supervisory Board member was A995,000(2009: A1,095,100). Those amounts are com-posed entirely of remuneration received byemployee representatives on the SupervisoryBoard relating to their position as SAP employ-ees in 2009 and 2010 respectively.

Supervisory Board member WilhelmHaarmann is an attorney at the German bar anda partner at HAARMANN Partnerschaftsgesell-schaft in Frankfurt am Main, Germany. Wil-helm Haarmann and HAARMANNPartnerschaftsgesellschaft occasionally adviseSAP on particular projects, tax matters, and

questions of law. In 2010, the fees for suchservices totaled A73,000 (2009: A839,000).

For consulting services in connectionwith a study we carried out into the potentialof in-memory database technology for businessleaders, we paid Supervisory Board memberHartmut Mehdorn a fee of A29,000 in 2010(2009: no consulting services beside service onthe Supervisory Board).

Long-Term Incentives for the SupervisoryBoard

We do not offer members stock optionsor other share-based compensation for theirSupervisory Board work. Any stock options orother share-based compensation received byemployee-elected members relate to their posi-tion as SAP employees and not to their workon the Supervisory Board.

112

Part I

Item 6


Shareholdings and Transactions of Supervi-sory Board Members

Supervisory Board chairperson HassoPlattner and the companies he controlled held122,148,302 SAP shares on December 31, 2010(December 31, 2009: 127,186,143 SAP shares),representing 9.956% (2009: 10.374%) of SAP’s

capital stock. No other member of the Supervi-sory Board held more than 1% of the SAP AGcommon stock at the end of 2010 or of theprevious year. Members of the SupervisoryBoard held a total of 122,156,130 SAP shareson December 31, 2010 (December 31, 2009:127,193,136 SAP shares).

The table below shows transactions by Supervisory Board members and persons closelyassociated with them notified to SAP pursuant to the German Securities Trading Act, section 15a, in2010:

Transactions in SAP SharesTransaction Date Transaction Quantity Unit Price in E

Thomas Bamberger(1). . February 1, 2010 Stock sale 4,404 33.6677Stefan Schulz(1) . . . . . . February 1, 2010 Stock sale 300 33.6677Dr. Gerhard Maier(2) . . November 15, 2010 Stock sale 7,000 36.40

(1) Sale of shares in line with SAP SOP 2002(2) Sale of shares in line with the LTI Plan 2000

Supervisory Board: Other Information

We did not grant any compensationadvance or credit to, or enter into any commit-ment for the benefit of, any member of ourSupervisory Board in 2010 or the previousyear.

Hasso Plattner, the chairperson of theSupervisory Board, entered into a consultingcontract with SAP after he joined the Supervi-sory Board in May 2003. The contract does notprovide for any compensation. The only cost

we incurred under the contract was the reim-bursement of expenses.

As far as the law permits, we indemnifySupervisory Board members against, and holdthem harmless from, claims brought by thirdparties. To this end, we maintain directors’ andofficers’ group liability insurance. The currentD&O policy does not include an individualdeductible for Supervisory Board members, asenvisaged in the German Corporate GovernanceCode.

113

Part I

Item 6


EMPLOYEES

Headcount

The following tables set forth the number of employees, measured in full-time equivalents byfunctional area and by geographic region:

Full-time equivalents EMEA(1) Americas

AsiaPacificJapan Total EMEA(1) Americas


AsiaPacificJapan Total

December 31, 2010 December 31, 2009 December 31, 2008

Software and software-related services . . . . . . 3,804 1,827 2,254 7,885 3,227 1,276 1,919 6,422 3,269 1,306 1,891 6,466

Professional services andother services . . . . . . . 6,787 3,955 2,410 13,152 6,635 3,473 2,240 12,348 7,326 4,142 2,583 14,051

Research anddevelopment . . . . . . . . 8,617 3,154 4,113 15,884 8,525 2,534 3,755 14,814 8,687 2,767 4,094 15,548

Sales and marketing . . . . 4,593 4,214 2,180 10,987 4,202 3,559 1,752 9,513 4,645 4,014 2,042 10,701

General andadministration . . . . . . . 2,053 1,005 518 3,576 1,919 724 408 3,051 1,996 788 459 3,243

Infrastructure . . . . . . . . . 1,135 628 266 2,029 854 408 174 1,436 905 445 185 1,535

SAP Group(December 31) . . . . . . 26,989 14,783 11,741 53,513 25,362 11,974 10,248 47,584 26,828 13,462 11,254 51,544

thereof Sybase . . . . . . . 813 1,866 1,047 3,726

SAP Group (average) . . . 25,929 13,164 10,877 49,970 25,927 12,288 10,554 48,769 26,561 13,872 11,128 51,561

(1) Europe, Middle east, Africa

At the end of 2010, our total worldwideheadcount expressed in full-time equivalents(FTEs) was 53,513 (December 31, 2009:47,584 FTEs). This represents an increase inheadcount of 5,929 in comparison to 2009. Ofthe overall headcount increase in 2010, 4,233resulted from acquisitions, and of those, 3,817resulted from the acquisition of Sybase in July.On December 31, 2010, the number of employ-ees working for the acquired Sybase businesswas 3,726. The average number of employeesin 2010 was 49,970 (2009: 48,769).

We define the FTE headcount as thenumber of people we would employ if we onlyemployed people on full-time employment con-tracts. Students employed part time and certainpeople who are employed by SAP but who forvarious reasons are not currently working areexcluded from our figures. Also, certain tempo-rary employees are not included in our figures.The number of such temporary employees isnot material.

On December 31, 2010 the largest num-ber of SAP employees (50%) were employed in

the EMEA region (including 29% in Germany),while 28% were employed in the Americasregion (including 20% in the United States)and 22% in the Asia Pacific Japan (APJ)region.

Our general and administration head-count increased 17% to 3,576 full-time employ-ees at the end of the year (2009: 3,051).Professional services and other servicescounted 13,152 employees at the end of2010 — an increase of 7% (2009: 12,348). OurR&D headcount grew 7% to 15,884 (2009:14,814). Our worldwide headcount in the fieldof software and software-related services grew23% to 7,885 (2009: 6,422). Sales and market-ing headcount grew 15% to 10,987 at the endof the year (2009: 9,513), because we investedheavily in the sales and marketing of our prod-ucts and services in 2010 and employed moresales staff in all regions. Our infrastructureemployees, who provide IT and facility man-agement services, numbered 2,029, an increaseof 41% (2009: 1,436).

114

Part I

Item 6


We had high numbers of new hiresresulting from acquisitions in 2010: In theAmericas region, the number of acquisition-related hires was 1,975; in the EMEA region itwas 1,174, and in the APJ region it was 1,084.In the Americas region headcount increased by2,809, or 23%; in the EMEA region theincrease was 1,627 or 6%; in the APJ region itwas 1,493 or 15%.

Employee Relations and Labor Unions

On a worldwide basis, we believe thatour employee relations are excellent. Employ-ees of SAP France S.A. are subject to a collec-tive bargaining agreement.

On the legal entity level, the SAP AGworks council represents the employees of theAG with 39 members; the employees of SAPDeutschland AG & Co. KG (SAP Germany)are represented by a works council with 31members. For different areas of co-determina-tion the entity-level works councils have electedcommittees. By law the works councils areentitled to consultation- and in some areas toco-determination- rights concerning labor con-ditions at SAP AG and SAP Germany. Otheremployee representatives include the groupworks council currently having seven members(members of the works councils of SAP AGand SAP Germany), the representatives ofseverely disabled persons in all entities and ongroup level (Germany) and the spokespersonscommittee as the representation of theexecutives.

Each of SAP France S.A. and SAP LabsFrance S.A. are represented by a French workscouncil. A French works council is responsiblefor protecting the employees’ collective inter-ests by ensuring that management considers theinterests of employees in making decisions onbehalf of the company. A French works councilis entitled to certain company information andto consult with management on matters that areexpected to have an impact on company struc-ture or on the employees it represents.

In addition, the employees of our subsid-iaries SAP Espana S.A., SAP Belgium N.V. and

SAP Nederland B.V. are also represented byworks councils. In SAP (UK) Limited anemployee consultation forum exists. The Syb-ase France SARL and Sybase Nederland B.V.employees are represented by a works council.

SHARE OWNERSHIP

Beneficial Ownership of Shares

The ordinary shares beneficially ownedby the persons listed in Item 6. Directors,Senior Management and Employees — Com-pensation Report” is disclosed in “Item 7.Major Shareholders and Related-Party Trans-actions — Major Shareholders.”

SHARE-BASED COMPENSATION PLANS

Share-Based Compensation

We maintain certain share-based compen-sation plans. The share-based compensationfrom these plans result from cash-settled andequity-settled awards issued to employees. Formore information on our share-based compen-sation plans refer to “Item 6. Directory, SeniorManagement and Employees — CompensationReport” and Note (28) to our ConsolidatedFinancial Statements.

ITEM 7. MAJOR SHAREHOLDERS ANDRELATED-PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

The share capital of SAP AG consists ofordinary shares, which are issued only in bearerform. Accordingly, SAP AG generally has noway of determining who its shareholders are orhow many shares a particular shareholder owns.SAP’s ordinary shares are traded in the UnitedStates by means of ADRs. Each ADR currentlyrepresents one SAP AG ordinary share. OnMarch 3, 2011, based on information providedby the Depositary there were 45,754,284 ADRsheld of record by 1,257 registered holders. Theordinary shares underlying such ADRs repre-sented 3.73% of the then-outstanding ordinary

115

Part I

Item 6, 7


shares (including treasury stock). BecauseSAP’s ordinary shares are issued in bearer formonly, we are unable to determine the number ofordinary shares directly held by persons withU.S. addresses.

The following table sets forth certaininformation regarding the beneficial ownershipof the ordinary shares to the extent known toSAP as of March 3, 2011 of: (i) each person orgroup known by SAP AG to own beneficially5% or more of the outstanding ordinary shares;and (ii) the beneficial ownership of all mem-bers of the Supervisory Board and all membersof the Executive Board, individually and as agroup, in each case as reported to SAP AG bysuch persons. There was, as far as we are ableto tell given the nature of our shares, no

significant change in the percentage ownershipheld by any major shareholder during the pastthree years. None of the major shareholdershave special voting rights. On September 10,2010, BlackRock, Inc., New York, USA, Black-Rock Financial Management, Inc., New York,USA, and BlackRock Holdco 2, Inc., Wilming-ton, Delaware, USA, notified us as follows:The percentage of voting shares of BlackRock,Inc. exceeded 3% on September 6, 2010 andwas then 3.59%. The percentage of votingshares of BlackRock Financial Management,Inc. exceeded 3% on September 6, 2010 andwas then 3.46%. The percentage of votingshares of BlackRock Holdco 2, Inc. exceeded3% on September 6, 2010 and was then 3.46%.

Major Shareholders Number% of

Outstanding

Ordinary SharesBeneficially Owned

Dietmar Hopp, collectively(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,273,200 6.132%Hasso Plattner, Chairperson Supervisory Board, collectively(2) . . . . . . 122,148,302 9.951%Klaus Tschira, collectively(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,079,595 7.583%Executive Board Members as a group (6 persons) . . . . . . . . . . . . . . . . . . . 13,747 0.001%Supervisory Board Members as a group (16 persons) . . . . . . . . . . . . . . . . 122,156,188 9.952%Executive Board Members and Supervisory Board Members as a

group (22 persons)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,169,935 9.953%Options and convertible bonds that are vested and exercisable within

60 days of March 3, 2011, held by Executive Board Members andSupervisory Board Members, collectively(5) . . . . . . . . . . . . . . . . . . . . . 35,075 N/A

(1) Represents 75,273,200 ordinary shares beneficially owned by Dietmar Hopp, including 3,404,000 ordinaryshares owned by DH Besitzgesellschaft mbH & Co. KG (formerly known as Golf Club St. Leon-Rot GmbH &Co. Betriebs-oHG) of which DH Verwaltungs-GmbH is the general partner and 71,869,200 ordinary sharesowned by Dietmar Hopp Stiftung, GmbH. Mr. Hopp exercises voting and dispositive powers of the ordinaryshares held by such entities. The foregoing information is based solely on a Schedule 13G filed by DietmarHopp and Dietmar Hopp Stiftung, GmbH on February 15, 2011.

(2) Includes Hasso Plattner Forderstiftung gGmbH and Hasso Plattner GmbH & Co. Beteiligungs-KG inwhich Hasso Plattner exercises sole voting and dispositive power.

(3) Includes Klaus Tschira Stiftung gGmbH and Dr. h. c. Tschira Beteiligungs GmbH & Co. KG in whichKlaus Tschira exercises sole voting and dispositive power.

(4) We believe each of the other members of the Supervisory Board and the Executive Board beneficiallyowns less than 1% of SAP AG’s ordinary shares as of March 3, 2011.

(5) Includes 2,675 stock options and 32,400 convertible bonds. Each of these stock options and convertible bondsentitles the holder, if exercised or converted, to four SAP AG ordinary shares.

116

Part I

Item 7


We at present have no knowledge aboutany arrangements, the operation of which mayat a subsequent date result in a change incontrol of the company.

RELATED-PARTY TRANSACTIONS

In 2010, SAP entered into a loan agreementfor a total amount of A6.0 million at an interestrate of 15.0% with its associate Crossgate AG inorder to support the partnership with CrossgateAG. At December 31, SAP had lent CrossgateAG A3.5 million under this agreement, which wasalso the largest amount outstanding during 2010as well as the balance at March 3, 2011.

For further information on related-partytransactions see Note (31) to our ConsolidatedFinancial Statements.

ITEM 8. FINANCIAL INFORMATION

CONSOLI DATED FINANCIAL STATEMENTS ANDFINANCIAL STATEMENT SCHEDULE

See “Item 18. Financial Statements” andpages F-1 through F-106.

OTHER FINANCIAL INFORMATION

Legal Proceedings

We are subject to a variety of legal pro-ceedings and claims, either asserted or unas-serted, which arise in the ordinary course ofbusiness. We have recorded a provision in theamount of A997 million for the TomorrowNowlitigation. Although the outcome of such proceed-ings and claims cannot be predicted with cer-tainty, management does not believe that theoutcome of all other matters currently pendingagainst us has had or will have a material adverseeffect on our business, financial position, profitor cash flows. Any litigation, however, involvespotential risk and potentially significant litigationcosts, and therefore there can be no assurancethat any litigation which is now pending or whichmay arise in the future will not have such amaterial adverse effect on our business, financialposition, profit or cash flows.

See a detailed discussion of our legalproceedings in Note (24) to our ConsolidatedFinancial Statements.

Dividend Policy

For more information on dividend policysee the disclosure in “Item 3. Key Information —Dividends — Dividend Distribution Policy.”

Significant Changes

In February 2011, SAP acquired securitysoftware, identity and access management soft-ware, and assets including development andconsulting resources from SECUDE .

For more information about this acquisi-tion, see the Acquisitions section.

On February 28, 2011, we repaid a portionof the outstanding balance of the acquisition termloan in the amount of A500 million. The balanceoutstanding in the amount of A1 billion as atDecember 31, 2010 is contractually due in May2012 (for more information see the Notes to theConsolidated Financial Statements, Note (18b)).The early repayment will reduce interest expense,a component of finance income, net, by a single-digit millions of euro amount in 2011.

On March 11th, 2011, a massive earthquake hitJapan and a subsequent tsunami as well asaftershocks resulted in substantial damage andloss of life in Japan. Nuclear power plants werealso affected, leading to a nuclear crisis in theareas surrounding the affected power plants.The stock markets have already reacted to thedevelopments in Japan and most of the majorindices have declined. SAP’s share price experi-enced a similar decline since then. At the timethis statement is given there were no reliablepredictions on the further development of thissituation and resulting impacts.

As a result we cannot judge the impact thisnatural disaster may have on our business forQ1 2011 and beyond, but it may negativelyimpact our financial position, cash flow andresult of operations as well as stock price.

117

Part I

Item 7, 8


ITEM 9. THE OFFER AND LISTING

General

Our ordinary shares are officially listedon the Frankfurt Stock Exchange, the BerlinStock Exchange and the Stuttgart StockExchange. The principal trading market for theordinary shares is Xetra, the electronic dealing

platform of Deutsche Boerse AG. The ordinaryshares are issued only in bearer form.

ADRs representing SAP AG ordinaryshares are listed on the New York StockExchange (NYSE) under the symbol “SAP,”and currently each ADR represents one ordi-nary share.

Trading on the Frankfurt Stock Exchange and the NYSE

The table below sets forth, for the periods indicated, the high and low closing sales prices forthe ordinary shares on the Xetra trading System of the Frankfurt Stock Exchange together with theclosing highs and lows of the DAX, and the high and low closing sales prices for the ADRs on theNYSE (information is provided by Reuters):

High Low High Low High Low

Price perOrdinary Share(1) DAX(2) Price per ADR

In E In points In US$

Annual Highs and Lows2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.86 34.56 6,611.81 5,292.14 57.00 43.572007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.27 33.37 8,105.69 6,447.70 59.86 44.452008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.93 23.45 7,949.11 4,127.41 58.98 29.702009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.26 25.00 6,011.55 3,666.41 52.37 31.692010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.40 31.12 7,077.99 5,434.34 54.08 41.59Quarterly Highs and Lows2009

First Quarter. . . . . . . . . . . . . . . . . . . . 29.64 25.00 5,026.31 3,666.41 38.61 31.69Second Quarter . . . . . . . . . . . . . . . . . 31.25 27.00 5,144.06 4,131.07 44.87 35.73Third Quarter . . . . . . . . . . . . . . . . . . . 35.26 27.32 5,736.31 4,572.65 51.70 37.87Fourth Quarter . . . . . . . . . . . . . . . . . . 35.08 30.09 6,011.55 5,353.35 52.37 44.28

2010First Quarter. . . . . . . . . . . . . . . . . . . . 35.86 31.12 6,156.85 5,434.34 50.64 42.81Second Quarter . . . . . . . . . . . . . . . . . 37.68 33.97 6,332.10 5,670.04 49.93 41.59Third Quarter . . . . . . . . . . . . . . . . . . . 37.86 34.46 6,351.60 5,816.20 49.84 43.54Fourth Quarter . . . . . . . . . . . . . . . . . . 38.40 35.84 7,077.99 6,134.21 54.08 46.93

Monthly Highs and Lows2010

July . . . . . . . . . . . . . . . . . . . . . . . . . . 37.86 35.04 6,209.76 5,816.20 48.61 45.03August . . . . . . . . . . . . . . . . . . . . . . . . 35.61 34.46 6,351.60 5,899.50 47.11 43.54September . . . . . . . . . . . . . . . . . . . . . 37.09 35.19 6,298.30 6,083.85 49.84 44.72October . . . . . . . . . . . . . . . . . . . . . . . 38.30 36.18 6,639.21 6,134.21 54.08 49.63November. . . . . . . . . . . . . . . . . . . . . . 37.39 35.84 6,879.66 6,604.86 52.98 46.93December . . . . . . . . . . . . . . . . . . . . . . 38.40 36.24 7,077.99 6,866.63 50.76 47.59

2011January. . . . . . . . . . . . . . . . . . . . . . . . 42.22 37.45 7,155.58 6,857.06 57.90 48.76February . . . . . . . . . . . . . . . . . . . . . . . 44.67 42.55 7,426.81 7,130.50 60.56 58.49March (through March 3, 2011). . . . . 44.10 43.67 7,225.96 7,181.12 61.67 59.83

118

Part I

Item 9


(1) Share prices for 2006 are retrospectively adjusted for the effect of the fourfold increase in the number ofshares resulting from the capital increase which became effective December 15, 2006.

(2) The DAX is a continuously updated, capital-weighted performance index of 30 German blue chipcompanies. In principle, the shares included in the DAX are selected on the basis of their stock exchangeturnover and the issuer’s free-float market capitalization. Adjustments to the DAX are made for capitalchanges, subscription rights and dividends.

On March 3, 2011, the closing salesprice per ordinary share on the Frankfurt StockExchange (Xetra Trading System) was A44.10and the closing sales price per ADR on theNYSE was US $61.67, as reported by Reuters.

ITEM 10. ADDITIONAL INFORMATION

ARTICLES OF INCORPORATION

Organization and Register

SAP AG is a stock corporation organizedin the Federal Republic of Germany under theStock Corporation Act (Aktiengesetz). SAP AGis registered in the Commercial Register (Han-delsregister) at the Lower Court of Mannheim,Germany, under the entry number “HRB350269.” SAP AG publishes its official noticesin the Internet version of the Federal Gazette(www.ebundesanzeiger.de).

Objects and Purposes

SAP’s Articles of Incorporation state thatour objects involve, directly or indirectly, thedevelopment, production and marketing ofproducts and the provision of services in thefield of information technology, including:

• developing and marketing integratedproduct and service solutions fore-commerce;

• developing software for informationtechnology and the licensing of its useto others;

• organization and deployment consult-ing, as well as user training, for e-com-merce and other software solutions;

• selling, leasing, renting and arrangingthe procurement and provision of all

other forms of use of information tech-nology systems and relatedequipment; and

• making capital investments in enter-prises active in the field of informationtechnology to promote the opening andadvancement of international marketsin the field of information technology.

SAP is authorized to act in all the busi-ness areas listed above and to delegate suchactivities to affiliated enterprises within themeaning of the German Stock Corporation Act;in particular SAP is authorized to delegate itsbusiness in whole or in part to such enterprises.SAP AG is authorized to establish branchoffices in Germany and other countries, as wellas to form, acquire or invest in other companiesof the same or related kind and to enter intocollaboration and joint venture agreements.SAP is further authorized to invest in enter-prises of all kinds principally for the purposeof placing financial resources. SAP is autho-rized to dispose of investments, to consolidatethe management of enterprises in which it par-ticipates, to enter into affiliation agreementswith such enterprises, or to limit its activitiesto manage its shareholdings.

CORPORATE GOVERNANCE

Introduction

SAP AG, as a German stock corporation,is governed by three separate bodies: the Super-visory Board, the Executive Board and theAnnual General Meeting of Shareholders. Theirrules are defined by German law, by the Ger-man Corporate Governance Code and by SAP’sArticles of Incorporation (Satzung) and aresummarized below. See “Item 16G. Differencesin Corporate Governance Practices” for

119

Part I

Item 9, 10


additional information on our corporate gover-nance practices.

The Supervisory Board

The Supervisory Board appoints andremoves the members of the Executive Boardand oversees and advises the management ofthe corporation. At regular intervals it meets todiscuss current business as well as businessdevelopment and planning. The SAP ExecutiveBoard must consult with the Supervisory Boardconcerning the corporate strategy, which isdeveloped by the Executive Board. The Super-visory Board maintains a list of transactions forwhich the Executive Board requires the Super-visory Board’s consent. Accordingly, the Super-visory Board must also approve the annualbudget of SAP upon submission by the Execu-tive Board and certain subsequent deviationsfrom the approved budget. The SupervisoryBoard is also responsible for representing SAPAG in transactions between SAP AG and Exec-utive Board members.

The Supervisory Board, based on a rec-ommendation by its Audit Committee, providesits proposal for the election of the independentpublic accountant to the Annual General Meet-ing of Shareholders. The Supervisory Board isalso responsible for monitoring the auditor’sindependence, a task it has delegated to itsaudit committee.

The German Co-determination Act of1976 (Mitbestimmungsgesetz) requires supervi-sory boards of corporations with more than2,000 employees to consist of an equal numberof representatives of the shareholders and rep-resentatives of the employees. The minimumtotal number of supervisory board members,and thus the minimum number of shareholderrepresentatives and employee representatives, islegally fixed and depends on the number ofemployees employed by the corporation and itsGerman subsidiaries. Our Supervisory Boardcurrently consists of sixteen members, of whicheight members have been elected by SAP AG’sshareholders at the Annual General Meeting ofShareholders and eight members which have

been elected by the employees of the GermanSAP entities (i.e. entities of the SAP Grouphaving their registered office in Germany).

Any Supervisory Board member electedby the shareholders at the Annual GeneralMeeting of Shareholders may be removed bythree-quarters of the votes cast at the AnnualGeneral Meeting of Shareholders. Any Supervi-sory Board member elected by the employeesmay be removed by three quarters of the votescast by the employees of the German SAPentities.

The Supervisory Board elects a chairper-son and a deputy chairperson among its mem-bers by a majority of vote of its members. Ifsuch majority is not reached on the first vote,the chairperson will be chosen solely by themembers elected by the shareholders and thedeputy chairperson will be chosen solely by themembers elected by the employees. Unless oth-erwise provided by law, the Supervisory Boardacts by simple majority. In the case of anydeadlock the chairperson has the deciding vote.

The members of the Supervisory Boardcannot be elected for a longer term thanapproximately 5 years. The term expires at theclose of the Annual General Meeting of Share-holders giving its formal approval of the acts ofthe Supervisory Board and the Executive Boardin the fourth fiscal year following the year inwhich the Supervisory Board was electedunless the Annual General Meeting of Share-holders specifies a shorter term of office whenelecting individual members of the SupervisoryBoard or the entire Supervisory Board. Re-election is possible. Our Supervisory Boardnormally meets four times a year. The remuner-ation of the members of the Supervisory Boardis determined by the Articles of Incorporation.

As stipulated in the German CorporateGovernance Code (GCGC), an adequate num-ber of our Supervisory Board members areindependent. To be considered for appointmentto the Supervisory Board and for as long asthey serve, members must comply with certaincriteria concerning independence, conflicts ofinterest and multiple memberships of

120

Part I

Item 10


management, supervisory and other governingbodies. They must be loyal to SAP in theirconduct and must not accept any position incompanies that are in competition with SAP.Members are subject to insider trading prohibi-tions and the respective directors’ dealing rulesof the German Securities Trading Act. A mem-ber of the Supervisory Board may not vote onmatters relating to certain contractual agree-ments between such member and SAP AG.Further, as the compensation of the SupervisoryBoard members is laid down in the Articles ofIncorporation, Supervisory Board members areunable to vote on their own compensation, withthe exception that they are able to exercisevoting rights in a General Meeting of Share-holders in connection with a resolution amend-ing the Articles of Incorporation.

Pursuant to the German Stock Corpora-tion Act publicly traded stock corporations likeSAP must have at least one independent mem-ber of the supervisory board with expertise inthe fields of financial reporting or auditing.The Supervisory Board may appoint commit-tees from among its members and may, to theextent permitted by law, entrust such commit-tees with the authority to make decisions onbehalf of the Supervisory Board. Currently theSupervisory Board maintains the followingcommittees:

The focus of the Audit Committee (Pru-fungsausschuss) is the oversight of SAP’s exter-nal financial reporting as well as SAP’s riskmanagement, internal controls (including inter-nal controls over the effectiveness of the finan-cial reporting process), internal audit andcompliance matters. According to German LawSAP’s Audit Committee includes at least oneindependent member with specialist expertisein the fields of financial reporting or auditing.Among the tasks of the Audit Committee arethe discussion of SAP’s quarterly and year endfinancial reporting prepared under German andU.S. regulations, including this report. TheAudit Committee proposes the appointment ofthe external auditor to the Supervisory Board,determines focus audit areas, discusses criticalaccounting policies and estimates with and

reviews the audit reports issued and audit issuesidentified by the auditor. The audit committeealso negotiates the audit fees with the auditorand monitors the auditor’s independence. BothSAP’s Global Internal Audit Services (GIAS)and SAP’s Global Compliance Office (GCO)report upon request or at the occurrence ofcertain findings, but in any case at least once ayear (GCO) or twice a year (GIAS), directly tothe Audit Committee.

The Audit Committee has establishedprocedures regarding the prior approval of allaudit and non-audit services provided by ourindependent auditor. See “Item 16C. PrincipalAccountant Fees and Services” for details. Fur-thermore the Audit Committee monitors theeffectiveness of our internal risk managementand other monitoring processes that are or needto be established.

The Supervisory Board has determinedErhard Schipporeit to be an audit committeefinancial expert as defined by the regulationsof the SEC issued under Section 407 of theSarbanes-Oxley Act as well as an independentfinancial expert as defined by the GermanStock Corporation Act. See “Item 16A. AuditCommittee Financial Expert” for details. He isalso the chairperson of the Audit Committee.

The General Committee (Prasidialaus-schuss) coordinates the Supervisory Boardagenda, meetings and deals with corporate gov-ernance issues.

The Compensation Committee (Persona-lausschuss) deals with the employment con-tracts of Executive Board members. It preparesproposals for the Executive Board remunerationsystem and the Executive Board members’actual compensation for approval by the Super-visory Board. As of August 5, 2009 the Ger-man Stock Corporation Act, as amended by theGerman Act on the Appropriateness of Execu-tive Board Remuneration (Gesetz zur Angemes-senheit der Vorstandsvergutung), prohibits theCompensation Committee from deciding on theremuneration of the Executive Board memberson behalf of the Supervisory Board andrequires that such decision is made by the

121

Part I

Item 10


entire Supervisory Board. As of August 5,2009, the German Stock Corporation Act, asamended by the German Act on the Appropri-ateness of Executive Board Remuneration, alsoprovides the General Meeting of Shareholderswith the right to vote on the system for theremuneration of Executive Board members,such vote not being legally binding for theSupervisory Board. SAP AG provided share-holders with this right at its Annual GeneralMeeting of Shareholders 2010. The GeneralMeeting of Shareholders approved the new sys-tem for the remuneration of Executive Boardmembers that was resolved by the SupervisoryBoard on March 25, 2010.

The Finance and Investment Committee(Finanz- und Investitionsausschuss) addressesgeneral financing issues. Furthermore, it regu-larly discusses acquisitions of intellectual prop-erty and companies, venture capital investmentsand other investments with the Executive Boardand reports to the Supervisory Board on suchinvestments. It is also responsible for theapproval of such investments if the individualinvestment amount exceeds certain specifiedlimits.

Required by the German Co-determina-tion Act of 1976 (Mitbestimmungsgesetz), theMediation Committee (Vermittlungsausschuss)convenes only if the two-thirds majorityrequired for appointing/revoking the appoint-ment of Executive Board members is notattained. This committee has never held ameeting in SAP AG’s history.

The Strategy and Technology Committee(Strategie- und Technologieausschuss) monitorstechnology transactions and provides the Super-visory Board with in-depth technical advice.

The Nomination Committee (Nominier-ungsausschuss) is exclusively composed ofshareholder representatives and is responsiblefor identifying suitable candidates for member-ship of the Supervisory Board for recommenda-tion to the Annual General Meeting ofShareholders.

The Special Committee (Sonderaus-schuss) is tasked with coordinating and

managing the Supervisory Board’s externallegal advisors concerned with the investigationand analysis of the facts in connection with thelegal action brought by Oracle Corporation.

The duties, procedures and committeesof the Supervisory Board are specified in theirrespective bylaws, if any, which reflect therequirements of the German Stock CorporationAct and the recommendations of the GCGC.

According to the provisions of the Sar-banes-Oxley Act, SAP does not grant loans tothe members of the Executive Board or theSupervisory Board.

The Executive Board

The Executive Board manages the Com-pany’s business, is responsible for preparing itsstrategy and represents it in dealings with thirdparties. The Executive Board reports regularlyto the Supervisory Board about SAP operationsand business strategies and prepares specialreports upon request. A person may not serveon the Executive Board and on the SupervisoryBoard at the same time.

The Executive Board and the Supervi-sory Board must cooperate closely for the ben-efit of the Company. Without being asked, theExecutive Board must provide to the Supervi-sory Board regular, prompt and comprehensiveinformation about all of the essential issuesaffecting the SAP Group’s business progressand its potential business risks. Furthermore,the Executive Board must maintain regular con-tact with the chairperson of the SupervisoryBoard. The Executive Board must inform thechairperson of the Supervisory Board promptlyabout exceptional events that are of signifi-cance to SAP’s business. The chairperson mustinform the Supervisory Board accordingly.

Pursuant to the Articles of Incorporation,the Executive Board must consist of at least 2members. Currently, SAP AG’s Executive Boardis composed of 6 members. Any 2 members ofthe Executive Board jointly or one member ofthe Executive Board and the holder of a specialpower of attorney (Prokurist) jointly may

122

Part I

Item 10


legally represent SAP AG. The SupervisoryBoard appoints each member of the ExecutiveBoard for a maximum term of 5 years, with thepossibility of re-appointment. Under certain cir-cumstances, a member of the Executive Boardmay be removed by the Supervisory Boardprior to the expiration of that member’s term. Amember of the Executive Board may not voteon matters relating to certain contractual agree-ments between such member and SAP AG, andmay be liable to SAP AG if such member has amaterial interest in any contractual agreementbetween SAP and a third party which was notdisclosed to and approved by the SupervisoryBoard. Further, as the compensation of theExecutive Board members is set by the Super-visory Board, Executive Board members areunable to vote on their own compensation, withthe exception that they are able to exercisevoting rights in a General Meeting of Share-holders resolving a non-binding vote on thesystem for the remuneration of ExecutiveBoard members.

Under German law SAP AG’s Supervi-sory Board members and Executive Boardmembers have a duty of loyalty and caretowards SAP AG. They must exercise the stan-dard of care of a prudent and diligent business-man and bear the burden of proving they did soif their actions are contested. Both bodies mustconsider the interest of SAP AG shareholdersand our employees and, to some extent, thecommon good. Those who violate their dutiesmay be held jointly and severally liable for anyresulting damages, unless they acted pursuantto a lawful resolution of the Annual GeneralMeeting of Shareholders.

SAP has implemented a Code of Busi-ness Conduct for employees (see “Item 16B.Code of Ethics” for details). The employeecode is equally applicable to managers andmembers of the Executive Board.

Under German law the Executive Boardof SAP AG has to assess all major risks for theSAP Group. In addition, all measures taken bymanagement to reduce and handle the riskshave to be documented. Therefore, SAP’s

management has adopted suitable measuressuch as implementing an enterprise-wide moni-toring system to ensure that adverse develop-ments endangering the corporate standing arerecognized at a reasonably early point in time.

The Global Compliance Office (GCO),an extension of SAP’s Global Legal Depart-ment, was created by the SAP Executive Boardin 2006 to oversee and coordinate legal andregulatory policy compliance at SAP. EffectiveMarch 1, 2007, the Company appointed a ChiefGlobal Compliance Officer who reports to theGeneral Counsel, and also has direct communi-cation channels and reporting obligations to theExecutive Board and the Audit Committee ofthe Supervisory Board. The GCO manages anetwork of more than 100 local subsidiaryCompliance Officers who act as the point ofcontact for local questions or issues under theSAP Code of Business Conduct for employees.The GCO provides training and communicationto SAP employees to raise awareness andunderstanding of legal and regulatory compli-ance policies. Employee help lines are alsosupported in each region where questions canbe raised or questionable conduct can bereported without fear of retaliation.

Pursuant to Sec. 289a of the GermanCommercial Code (Handelsgesetzbuch) theExecutive Board of publicly listed companieslike SAP AG are required to issue a corporategovernance declaration (Erklarung zur Unter-nehmensfuhrung) every year in connection withthe annual financial statements. Companies arefree to include the corporate governance decla-ration in their annual report to shareholders orpublish the declaration on their website. SAPhas chosen to publish the declaration on itswebsite under (http://www.sap.com/about/gov-ernance/statement/index.epx). As stipulated bylaw the declaration comprises the declaration ofcompliance with the recommendations of theGCGC pursuant to Sec. 161 of the GermanStock Corporation Act, relevant disclosures ofthe company’s corporate governance practicessuch as ethical, work and welfare standards,and a description of the Executive Board andSupervisory Board’s rules of procedure as well

123

Part I

Item 10


as information on the composition and rules ofprocedure of their sub-committees.

The Annual General Meeting of Shareholders

Shareholders of the Company exercisetheir voting rights at shareholders’ meetings.The Executive Board calls the Annual GeneralMeeting of Shareholders, which must takeplace within the first eight months of eachfiscal year. The Supervisory Board or the Exec-utive Board may call an extraordinary meetingof the shareholders if the interests of the stockcorporation so require. Additionally, sharehold-ers of SAP AG holding in the aggregate aminimum of 5% of SAP AG’s issued sharecapital may call an extraordinary meeting ofthe shareholders. Shareholders as of the recorddate are entitled to attend and participate inshareholders’ meetings if they have providedtimely notice of their intention to attend themeeting.

At the Annual General Meeting of Share-holders, the shareholders are asked, amongother things, to formally approve the actionstaken by the Executive Board and the Supervi-sory Board in the preceding fiscal year, toapprove the appropriation of the corporation’sdistributable profits and to appoint an indepen-dent auditor. Shareholder representatives of theSupervisory Board are generally elected at theAnnual General Meeting of Shareholders for aterm of approximately five years. Shareholdersmay also be asked to grant authorization torepurchase treasury shares, to resolve on mea-sures to raise or reduce the capital of the Com-pany or to ratify amendments of our Articles ofIncorporation. The Annual General Meeting ofShareholders can make management decisionsonly if requested to do so by the ExecutiveBoard.

CHANGE IN CONTROL

There are no provisions in the Articles ofIncorporation of SAP AG that would have aneffect of delaying, deferring or preventing achange in control of SAP AG and that wouldonly operate with respect to a merger,

acquisition or corporate restructuring involvingit or any of its subsidiaries.

According to the German SecuritiesAcquisition and Takeover Act (Wertpapierer-werbs- und Ubernahmegesetz) a bidder seekingcontrol of a company with its corporate seat inGermany and traded on a European Unionstock exchange must publish advance notice ofa tender offer, submit a draft offer statement tothe Federal Financial Supervisory Authority(Bundesanstalt fur Finanzdienstleistungsauf-sicht) for review, and obtain certification froma qualified financial institution that adequatefinancing is in place to complete the offer.Once a bidder has acquired shares representing30% of the voting power of the target company,it must make an offer for all remaining shares.The Securities Acquisition and Takeover Actrequires the executive board of the target com-pany to refrain from taking any measures thatmay frustrate the success of the takeover offer.However, the target executive board is permit-ted to take any action that a prudent and dili-gent management of a company that is not thetarget of a takeover bid would also take. More-over, the target executive board may search forother bidders and, with the prior approval ofthe supervisory board, may take other defensivemeasures, provided that both boards act withinthe parameters of their general authority underthe German Stock Corporation Act. An execu-tive board may also adopt specific defensivemeasures if such measures have been approvedby the supervisory board and were specificallyauthorized by the shareholders no later than18 months in advance of a takeover bid byresolution of 75% of the votes cast.

Effective as of July 14, 2006 the GermanImplementation Act for the European TakeoverDirective amended the German SecuritiesAcquisition and Takeover Act. Under the Euro-pean Takeover Directive member states maychoose whether EU restrictions on frustratingaction apply to companies that are registered intheir territory. Germany decided to opt out andto retain its current restrictions on a boardtaking frustrating action (as described above).As required by the Directive if a country

124

Part I

Item 10


decides to opt out the German SecuritiesAcquisition and Takeover Act grants companiesthe option of voluntarily applying the Europeanstandard by a change of the Articles of Incor-poration (opt-in). SAP AG has not made use ofthis option.

CHANGE IN SHARE CAPITAL

Under German law, the capital stock maybe increased in consideration of contributionsin cash or in kind, or by establishing authorizedcapital or contingent capital or by an increaseof the company’s capital reserves. Authorizedcapital provides the Executive Board with theflexibility to issue new shares for a period ofup to five years. The Executive Board mustobtain the approval of the Supervisory Boardbefore issuing new shares with regard to theauthorized capital. Contingent capital allowsthe issuance of new shares for specified pur-poses, including stock option plans for Execu-tive Board members or employees and theissuance of shares upon conversion of convert-ible bonds and exercise of stock options. Bylaw, the Executive Board may only issue newshares with regard to the contingent capital forthe specified purposes. Capital increasesrequire an approval by 75% of the votes cast atthe General Meeting of Shareholders in whichthe increase is proposed, and requires anamendment to the Articles of Incorporation.

The share capital may be reduced by anamendment to the Articles of Incorporationapproved by 75% of the votes cast at the Gen-eral Meeting of Shareholders. In addition, theExecutive Board of SAP AG is allowed toauthorize a reduction of the company’s capitalstock by canceling a defined number of repur-chased treasury shares if this repurchasing andthe subsequent reduction have already beenapproved by the General Meeting ofShareholders.

The Articles of Incorporation do not con-tain conditions regarding changes in the sharecapital that are more stringent than those pro-vided by German law.

RIGHTS ACCOMPANYING OUR SHARES

There are no limitations imposed byGerman law or the Articles of Incorporation ofSAP AG on the rights to own securities, includ-ing the rights of non-residents or foreign hold-ers to hold the ADRs or ordinary shares, toexercise voting rights or to receive dividends orother payments on such shares.

According to the German stock corpora-tion law, the rights of shareholders cannot beamended without shareholders’ consent. TheArticles of Incorporation do not provide morestringent conditions regarding changes of therights of shareholders than those provided byGerman law.

Voting Rights

Each ordinary SAP AG share representsone vote. Cumulative voting is not permittedunder German law. A corporation’s articles ofincorporation may stipulate a majority neces-sary to pass a shareholders’ resolution differingfrom the majority provided by law, unless thelaw does not mandatorily require a certainmajority. Section 21 (1) of SAP AG’s Articlesof Incorporation provides that resolutions maybe passed at the General Meeting of Sharehold-ers by the majority as provided by law. Thismeans that resolutions may be passed by amajority of 50% plus one vote of votes cast(simple majority), unless the law provides orrequires a higher majority. German law requiresthat the following matters, among others, beapproved by at least 75% of the votes cast atthe General Meeting of Shareholders in whichthe matter is proposed:

• changing the corporate purpose of thecompany set out in the articles ofincorporation;

• capital increases and capital decreases;

• excluding preemptive rights of share-holders to subscribe for new shares orfor treasury shares;

• dissolution;

125

Part I

Item 10


• a merger into, or a consolidation with,another company;

• a transfer of all or virtually all of theassets; and

• a change of corporate form.

Section 21 (3) of SAP AG’s Articles ofIncorporation provides that, if no candidatereceives a simple majority of votes during thefirst ballot in an election, a second, decidingballot shall be conducted between the candi-dates who received the largest number of votes.If the second ballot is tied, the election shall bedetermined by drawing lots.

Dividend Rights

See “Item 3. Key Information —Dividends.”

Preemptive Rights

Shareholders have preemptive rights tosubscribe (Bezugsrecht) for any issue of addi-tional shares in proportion to their sharehold-ings in the issued capital. The preemptiverights may be excluded under certain circum-stances by a shareholders’ resolution (approvedby 75% of the votes cast at the General Meet-ing of Shareholders) or by the Executive Boardauthorized by such shareholders’ resolutionsand subject to the consent of the SupervisoryBoard.

Liquidation

If SAP AG were to be liquidated, anyliquidation proceeds remaining after all of ourliabilities were paid would be distributed to ourshareholders in proportion to theirshareholdings.

Disclosure of Shareholdings

SAP AG’s Articles of Incorporation donot require shareholders to disclose their shareholdings. The German Securities Trading Act(Wertpapierhandelsgesetz), however, requiresholders of voting securities of SAP AG to

notify SAP AG and the Federal FinancialSupervisory Authority of the number or sharesthey hold if that number reaches, exceeds orfalls below specified thresholds. These thresh-olds are 3%, 5%, 10%, 15%, 20%, 25%, 30%,50% and 75% of the corporation’s outstandingvoting rights. In respect of certificates repre-senting shares, the notification requirementshall apply exclusively to the holder of thecertificates. In addition, the German SecuritiesTrading Act also obliges anyone who holds,directly or indirectly, financial instruments thatresult in an entitlement to acquire, on one’sinitiative alone and under a legally bindingagreement, shares in SAP AG, to notify SAPAG and the Federal Financial SupervisoryAuthority if the thresholds mentioned abovehave been reached, exceeded or fallen below,with the exception of the 3% threshold. Inconnection with this notification obligationpositions in voting rights and other financialinstruments have to be aggregated.

Exchange Controls and Other Limitations AffectingSecurity Holders

The euro is a fully convertible currency.At the present time, Germany does not restrictthe export or import of capital, except forinvestments in certain areas in accordance withapplicable resolutions adopted by the UnitedNations and the European Union. However, forstatistical purposes only, every individual orcorporation residing in Germany (“Resident”)must report to the German Central Bank(Deutsche Bundesbank), subject only to certainimmaterial exceptions, any payment receivedfrom or made to an individual or a corporationresiding outside of Germany (“Non-Resident”)if such payment exceeds A12,500 (or the equiv-alent in a foreign currency). In addition, Ger-man Residents must report any claims againstor any liabilities payable to Non-Residents ifsuch claims or liabilities, in the aggregate,exceed A5 million (or the equivalent in a for-eign currency) at the end of any calendarmonth. Residents are also required to reportannually to the German Central Bank anyshares or voting rights of 10% or more which

126

Part I

Item 10


they hold directly or indirectly in non-residentcorporations with total assets of more thanA3 million. Corporations residing in Germanywith assets in excess of A3 million must reportannually to the German Central Bank anyshares or voting rights of 10% or more helddirectly or indirectly by a Non-Resident.

TAXATION

General

The following discussion is a summaryof certain material German tax and U.S. federalincome tax consequences of the acquisition,ownership and disposition of our ADRs or ordi-nary shares to a U.S. Holder. In general, aU.S. Holder (as hereinafter defined) is any ben-eficial owner of our ADRs or ordinary sharesthat (i) is a citizen or resident of the U.S. or acorporation organized under the laws of theU.S. or any political subdivision thereof, anestate whose income is subject to U.S. federalincome tax regardless of its source or a trust, ifa U.S. court can exercise primary supervisionover its administration and one or moreU.S. persons are authorized to control all sub-stantial decisions of the trust; (ii) is not aresident of Germany for purposes of theincome tax treaty between the U.S. and Ger-many (Convention between the Federal Repub-lic of Germany and the United States ofAmerica for the Avoidance of Double Taxationand the Prevention of Fiscal Evasion withrespect to Taxes on Income and Capital and tocertain other Taxes, as amended by the Protocolof June 1, 2006 and as published in the GermanFederal Law Gazette 2008 vol. II pp. 611/851;the “Treaty”); (iii) owns the ADRs or ordinaryshares as capital assets; (iv) does not hold theADRs or ordinary shares as part of the businessproperty of a permanent establishment or afixed base in Germany; and (v) is fully entitledto the benefits under the Treaty with respect toincome and gain derived in connection with theADRs or ordinary shares.

THE FOLLOWING IS NOT A COM-PREHENSIVE DISCUSSION OF ALL GER-MAN TAX AND U.S. FEDERAL INCOME

TAX CONSEQUENCES THAT MAY BERELEVANT FOR U.S. HOLDERS OF OURADRS OR ORDINARY SHARES. THERE-FORE, U.S. HOLDERS ARE STRONGLYURGED TO CONSULT THEIR OWN TAXADVISORS REGARDING THE OVERALLGERMAN TAX AND U.S. FEDERALINCOME TAX CONSEQUENCES OF THEACQUISITION, OWNERSHIP AND DISPOSI-TION OF OUR ADRS OR ORDINARYSHARES IN LIGHT OF THEIR PARTICU-LAR CIRCUMSTANCES, INCLUDING THEEFFECT OF ANY STATE, LOCAL OROTHER FOREIGN OR DOMESTIC LAWS.

German Taxation

The summary set out below is based onGerman tax laws, interpretations thereof andapplicable tax treaties to which Germany is aparty and that are in force at the date of thisreport; it is subject to any changes in suchauthority occurring after that date, potentiallywith retroactive effect, that could result inGerman tax consequences different from thosediscussed below. This discussion is also based,in part, on representations of the Depositaryand assumes that each obligation of the DepositAgreement and any related agreements will beperformed in accordance with its terms. Foradditional information on the Depository andthe fees associated with SAP’S ADR programsee “Item 12. Description of Securities OtherThan Equity Securities — American DepositoryShares.”

For purposes of applying German taxlaw and the applicable tax treaties to whichGermany is a party, a holder of ADRs willgenerally be treated as owning the ordinaryshares represented thereby.

German Taxation of Dividends

Under German income tax law, the fullamount of dividends distributed by a companyare generally subject to German withholdingtax at a domestic rate of 25% plus a solidaritysurtax of 5.5% (effectively 1.375% of dividendsbefore withholding tax), resulting in an

127

Part I

Item 10


aggregate withholding tax rate from dividendsof 26.375%. Corporate non-resident sharehold-ers will generally be entitled to a refund in theamount of two fifths of the withholding tax(including solidarity surtax). This does not pre-clude a further reduction of withholding tax, ifany, available under a relevant tax treaty.

Generally, for many non-resident share-holders the withholding tax rate is currentlyreduced under applicable income tax treaties.Rates and refund procedures may vary accord-ing to the applicable treaty. To reduce the with-holding tax to the applicable treaty tax rate anon-resident shareholder must apply for arefund of withholding taxes paid. Claims forrefund, if any, are made on a special Germanclaim for refund form, which must be filedwith the German Federal Tax Office (Bundes-zentralamt fur Steuern, D-53221 Bonn, Ger-many; http://www.bzst.de). The relevant formscan be obtained from the German Federal TaxOffice or from German embassies and consu-lates. For details, such non-resident sharehold-ers are urged to consult their own tax advisors.Special rules apply for the refund to U.S. Hold-ers (we refer to the below section “RefundProcedures for U.S. Holders”).

Refund Procedures for U.S. Holders

Under the Treaty, a partial refund of the25% withholding tax equal to 10% of the grossamount of the dividend and a full refund of thesolidarity surtax can be obtained by aU.S. Holder. Thus, for each US$100 of grossdividends paid by SAP AG to a U.S. Holder,the dividends (which are dependent on theeuro/dollar exchange rate at the time of pay-ment) will be initially subject to a Germanwithholding tax of US$26.375, of whichUS$11.375 may be refunded under the Treaty.As a result, a U.S. Holder effectively wouldreceive a total dividend of US$85 (provided theeuro/dollar exchange rate at the time of pay-ment of the dividend is the same as at the timeof refund, otherwise the effective dividend maybe higher or lower).

To claim the refund of amounts withheldin excess of the Treaty rate, a U.S. Holder mustsubmit (either directly or, as described below,through the Data Medium Procedure partici-pant) a claim for refund to the German taxauthorities, with, in the case of a direct claim,the original bank voucher (or certified copythereof) issued by the paying entity document-ing the tax withheld, within four years from theend of the calendar year in which the dividendis received. Claims for refund are made on aspecial German claim for refund form, whichmust be filed with the German Federal TaxOffice (Bundeszentralamt fur Steuern, D-53221Bonn, Germany). The German claim for refundform may be obtained from the German taxauthorities at the same address where applica-tions are filed, from the Embassy of the FederalRepublic of Germany, 4645 Reservoir Road,N.W., Washington, D.C. 20007-1998, or can bedownloaded from the homepage of the GermanFederal Tax Office (http://www.bzst.de).

U.S. Holders must also submit to theGerman tax authorities a certification of theirU.S. residency status (IRS Form 6166). Thiscertification can be obtained from the InternalRevenue Service by filing a request for certifi-cation (generally on an IRS Form 8802, whichwill not be processed unless a user fee is paid)with the Internal Revenue Service,P.O. Box 71052, Philadelphia, PA 19176-6052.U.S. Holders should consult their own tax advi-sors regarding how to obtain an IRSForm 6166.

An IT-supported quick-refund procedureis available for dividends received (the “DataMedium Procedure — DMP”). If the U.S. Hold-er’s bank or broker elects to participate in theDMP, it will perform administrative functionsnecessary to claim the Treaty refund for thebeneficiaries. The refund beneficiaries mustconfirm to the DMP participant that they meetthe conditions of the Treaty provisions and thatthey authorize the DMP participant to fileapplications and receive notices and paymentson their behalf. Further each refund beneficiarymust confirm that (i) it is the beneficial ownerof the dividends received; (ii) it is resident in

128

Part I

Item 10


the U.S. in the meaning of the Treaty; (iii) itdoes not have its domicile, residence or placeof management in Germany; (iv) the dividendsreceived do not form part of a permanent estab-lishment or fixed base in Germany; and (v) itcommits, due to its participation in the DMP,not to claim separately for refund.

The beneficiaries also must provide anIRS Form 6166 certification with the DMPparticipant. The DMP participant is required tokeep these documents in its files and prepareand file a combined claim for refund with theGerman tax authorities by electronic media.The combined claim provides evidence of aU.S. Holder’s personal data including itsU.S. Tax Identification Number.

The German tax authorities reserve theright to audit the entitlement to tax refunds forseveral years following their payment pursuantto the Treaty in individual cases. The DMPparticipant must assist with the audit by provid-ing the necessary details or by forwarding thequeries to the respective refund beneficiaries.

The German tax authorities will issuerefunds denominated in euros. In the case ofshares held through banks or brokers participat-ing in the Depository, the refunds will be issuedto the Depository, which will convert therefunds to dollars. The resulting amounts willbe paid to banks or brokers for the account ofthe U.S. Holders.

German Taxation of Capital Gains

Under German income tax law, a capitalgain derived from the sale or other dispositionof ADRs or ordinary shares by a non-residentshareholder is subject to income tax in Ger-many only if such shareholder has held, directlyor indirectly, ADRs or ordinary shares repre-senting 1% or more of the registered sharecapital of a company at any time during thefive-year period immediately preceding the saleor other disposition.

Generally, a capital gain derived from thesale or other disposition of ADRs or ordinaryshares by a corporate non-resident shareholder

is, in principle, exempt from corporation tax.However, a portion of 5% of a capital gainderived is treated as non-deductible businessexpenses. Therefore, effectively a portion of95% of a capital gain derived from the sale orother disposition of ADRs or ordinary sharesby a corporate non-resident shareholder isexempt and a portion of 5% of a capital gainderived is subject to corporation tax.

However, a U.S. Holder of ADRs or ordi-nary shares that qualifies for benefits under theTreaty is not subject to German income orcorporation tax on the capital gain derived fromthe sale or other disposition of ADRs or ordi-nary shares.

German Gift and Inheritance Tax

Generally, a transfer of ADRs or ordinaryshares by a shareholder at death or by way ofgift will be subject to German gift or inherit-ance tax, respectively, if (i) the decedent ordonor, or the heir, donee or other transferee isresident in Germany at the time of the transfer,or with respect to German citizens who are notresident in Germany, if the decedent or donor,or the heir, donee or other transferee has notbeen continuously outside of Germany for aperiod of more than five years; (ii) the ADRsor ordinary shares are part of the businessproperty of a permanent establishment or afixed base in Germany; or (iii) the ADRs orordinary shares subject to such transfer formpart of a portfolio that represents 10% or moreof the registered share capital of a companyand has been held, directly or indirectly, by thedecedent or donor, respectively, actually or con-structively together with related parties.

However, the right of the German gov-ernment to impose gift or inheritance tax on anon-resident shareholder may be limited by anapplicable estate tax treaty. In the case of aU.S. Holder, a transfer of ADRs or ordinaryshares by a U.S. Holder at death or by way ofgift generally will not be subject to Germangift or inheritance tax by reason of the estatetax treaty between the U.S. and Germany (Con-vention between the Federal Republic of

129

Part I

Item 10


Germany and the United States of America forthe Avoidance of Double Taxation with respectto Estate, Gift and Inheritance Taxes, GermanFederal Law Gazette 1982 vol. II page 847, asamended by the Protocol of December 14,1998 and as published on December 21, 2000,German Federal Law Gazette 2001 vol. II,page 65; the “Estate Tax Treaty”) so long asthe decedent or donor, or the heir, donee orother transferee was not domiciled in Germanyfor purposes of the Estate Tax Treaty at thetime the gift was made, or at the time of thedecedent’s death, and the ADRs or ordinaryshares were not held in connection with apermanent establishment or a fixed base inGermany. In general, the Estate Tax Treatyprovides a credit against the U.S. federal gift orestate tax liability for the amount of gift orinheritance tax paid in Germany, subject tocertain limitations, in a case where the ADRsor ordinary shares are subject to German gift orinheritance tax and U.S. federal gift or estatetax.

Other German Taxes

There are currently no German networth, transfer, stamp or other similar taxesthat would apply to a U.S. Holder on the acqui-sition, ownership, sale or other disposition ofour ADRs or ordinary shares.

U.S. Taxation

The following discussion applies toU.S. Holders only if the ADRs and ordinaryshares are held as capital assets for tax pur-poses. It does not address tax considerationsapplicable to U.S. Holders that may be subjectto special tax rules, such as dealers or tradersin securities, financial institutions, insurancecompanies, tax-exempt entities, regulatedinvestment companies, U.S. Holders that holdordinary shares or ADRs as a part of a straddle,conversion transaction or other arrangementinvolving more than one position, U.S. Holdersthat own (or are deemed for U.S. tax purposesto own) 10% or more of the total combinedvoting power of all classes of voting stock of

SAP AG, U.S. Holders that have a principalplace of business or “tax home” outside theUnited States or U.S. Holders whose “func-tional currency” is not the dollar and U.S. Hold-ers that hold ADRs or ordinary shares throughpartnerships or other pass-through entities.

The summary set out below is basedupon the U.S. Internal Revenue Code of 1986,as amended (the “Code”), the Treaty and regu-lations, rulings and judicial decisions thereun-der at the date of this report. Any suchauthority may be repealed, revoked or modi-fied, potentially with retroactive effect, so as toresult in U.S. federal income tax consequencesdifferent from those discussed below. No assur-ance can be given that the conclusions set outbelow would be sustained by a court if chal-lenged by the IRS. The discussion below isbased, in part, on representations of the Depos-itary, and assumes that each obligation in theDeposit Agreement and any related agreementswill be performed in accordance with its terms.

For U.S. federal income tax purposes, aU.S. Holder of ADRs will be considered toown the ordinary shares represented thereby.Accordingly, unless the context otherwiserequires, all references in this section to ordi-nary shares are deemed to refer likewise toADRs representing an ownership interest inordinary shares.

U.S. Taxation of Dividends

Subject to the discussion below under“Passive Foreign Investment Company Consid-erations”, distributions made by SAP AG withrespect to ordinary shares (other than distribu-tions in liquidation and certain distributions inredemption of stock), including the amount ofGerman tax deemed to have been withheld inrespect of such distributions, will generally betaxed to U.S. Holders as ordinary dividendincome.

As discussed above, a U.S. Holder mayobtain a refund of German withholding taxunder the Treaty to the extent that the Germanwithholding tax exceeds 15% of the dividenddistributed. Thus, for each US$100 of gross

130

Part I

Item 10


dividends paid by SAP AG to a U.S. Holder,the dividends (which are dependent on theeuro/dollar exchange rate at the time of pay-ment) will be initially subject to German with-holding tax of US$25 plus US$1.375 solidaritysurtax, and the U.S. Holder will receiveUS$73.625. A U.S. Holder who obtains theTreaty refund will receive from the German taxauthorities an additional amount in euro thatwould be equal to US$11.375. For U.S. taxpurposes, such U.S. Holder will be consideredto have received a total distribution of US$100,which will be deemed to have been subject toGerman withholding tax of US$15 (15% ofUS$100) resulting in the net receipt of US$85(provided the euro/dollar exchange rate at thetime of payment of the dividend is the same asat the time of refund, otherwise the effectivedividend may be higher or lower).

In the case of a distribution in euro, theamount of the distribution generally will equalthe dollar value of the euro distributed (deter-mined by reference to the spot currencyexchange rate on the date of receipt of thedistribution, or receipt by the Depositary in thecase of a distribution on ADRs), regardless ofwhether the holder in fact converts the eurointo dollars, and the U.S. Holder will not real-ize any separate foreign currency gain or loss(except to the extent that such gain or lossarises on the actual disposition of foreign cur-rency received). However, a U.S. Holder maybe required to recognize foreign currency gainor loss on the receipt of a refund in respect ofGerman withholding tax to the extent theU.S. dollar value of the refund differs from theU.S. dollar equivalent of that amount on thedate of receipt of the underlying dividend.

Dividends paid by SAP AG generally willconstitute “portfolio income” for purposes ofthe limitations on the use of passive activitylosses (and, therefore, generally may not beoffset by passive activity losses) and as “invest-ment income” for purposes of the limitation onthe deduction of investment interest expense.Dividends paid by SAP AG will not be eligiblefor the dividends received deduction generallyallowed to U.S. corporations under Section 243

of the Code. Dividends paid by SAP AG to anindividual after December 31, 2002 andreceived prior to January 1, 2013 are treated as“qualified dividends” subject to capital gainsrates, i.e. at a maximum rate of 15%, if SAPAG was not in the prior year and, is not in theyear in which the dividend is paid, a passiveforeign investment company (“PFIC”). Basedon our audited financial statements and relevantmarket and shareholder data, we believe thatwe were not treated as a PFIC for U.S. federalincome taxes with respect to our 2010 tax year.In addition, based on our audited financialstatements and our current expectations regard-ing the value and nature of our assets, thesources and nature of our income, and relevantmarket and shareholder data, we do not antici-pate becoming a PFIC for the 2011 tax year.

U.S. Taxation of Capital Gains

In general, assuming that SAP AG at notime is a PFIC, upon a sale or exchange ofordinary shares to a person other than SAP AG,a U.S. Holder will recognize gain or loss in anamount equal to the difference between theamount realized on the sale or exchange andthe U.S. Holder’s adjusted tax basis in the ordi-nary shares. Such gain or loss will be a capitalgain or loss and will be considered a long-termcapital gain (taxable at a reduced rate for indi-viduals) if the ordinary shares were held formore than one year. The deductibility of capitallosses is subject to significant limitations. Upona sale of ordinary shares to SAP AG, aU.S. Holder may recognize a capital gain orloss or, alternatively, may be considered to havereceived a distribution with respect to the ordi-nary shares, in each case depending upon theapplication to such sale of the rules of Sec-tion 302 of the Code.

Deposit and withdrawal of ordinaryshares in exchange for ADRs by a U.S. Holderwill not result in its realization of gain or lossfor U.S. federal income tax purposes.

131

Part I

Item 10


U.S. Foreign Tax Credit

In general, in computing its U.S. federalincome tax liability, a U.S. Holder may electfor each taxable year to claim a deduction or,subject to the limitations on foreign tax creditsgenerally, a credit for foreign income taxes paidor accrued by it. For U.S. foreign tax creditpurposes, subject to the applicable limitationsunder the foreign tax credit rules, German taxwithheld from dividends paid to a U.S. Holder,up to the 15% provided under the Treaty, willbe eligible for credit against the U.S. Holder’sfederal income tax liability or, if theU.S. Holder has elected to deduct such taxes,may be deducted in computing taxable income.

For U.S. foreign tax credit purposes, div-idends paid by SAP AG generally will betreated as foreign-source income and as “pas-sive category income” (or in the case of certainholders, as “general category income”). Gainsor losses realized by a U.S. Holder on the saleor exchange of ordinary shares generally willbe treated as U.S.-source gain or loss.

Passive Foreign Investment CompanyConsiderations

Special and adverse U.S. tax rules applyto a U.S. Holder that holds an interest in apassive foreign investment company (PFIC).Based on current projections concerning thecomposition of SAP AG’s income and assets,SAP AG does not believe that it will be treatedas a PFIC for its current or future taxable years.However, because this conclusion is based onour current projections and expectations as toits future business activity, SAP AG can provideno assurance that it will not be treated as aPFIC in respect of its current or any futuretaxable years.

MATERIAL CONTRACTS

Pursuant to the Merger Agreement datedMay 12, 2010 by and among Sybase, Inc., SAPAmerica, Inc., a wholly owned subsidiary ofSAP AG, and Sheffield Acquisition Corp., awholly owned subsidiary of SAP America, Inc.,

Sheffield Acquisition Corp. commenced a cashtender offer for all of the outstanding shares ofSybase common stock at US$65.00 per share,representing an enterprise value of approxi-mately US$5.9 billion. The transaction closedon July 26, 2010 after receipt of the majorityof the outstanding shares of Sybase’s commonstock and clearance by the relevant antitrustauthorities. Subsequently, SAP acquired theremaining common shares and the combinationwas completed on July 29, 2010. The transac-tion was funded from SAP’s cash on hand anda euro 2.64 billion acquisition term loan facil-ity. Refer to the Notes to the ConsolidatedFinancial Statements section, Note (4) BusinessCombinations, for additional information onthe Merger Agreement and the Sybaseacquisition.

This description is a summary of theMerger Agreement and is qualified in itsentirety by the Merger Agreement which isincorporated by reference as Exhibit 4.7 to thisreport.

DOCUMENTS ON DISPLAY

We are subject to the informationalrequirements of the Securities Exchange Act of1934, as amended. In accordance with theserequirements, we file reports and furnish otherinformation as a foreign private issuer with theSEC. These materials, including this report andthe exhibits thereto, may be inspected and cop-ied at the SEC’s Public Reference Room at100 F Street, N.E., Room 1580, Washing-ton, D.C. 20549. The SEC also maintains aWeb site at www.sec.gov that contains reportsand other information regarding registrants thatfile electronically with the SEC. This report aswell as some of the other information submit-ted by us to the SEC may be accessed throughthis Web site. In addition, information about usis available at our Web site: www.sap.com.

ITEM 11. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

We are exposed to various financial risks,such as market risks, including changes in

132

Part I

Item 10, 11


foreign currency exchange rates, interest ratesand equity prices, as well as credit risk andliquidity risk. We manage these risks on aGroup-wide basis. Selected derivatives areexclusively used for this purpose and not forspeculation, which is defined as entering intoderivative instruments without a correspondingunderlying transaction. Financial risk manage-ment is done centrally. See Notes (25),(26) and (27) to our Consolidated FinancialStatements for our quantitative and qualitativedisclosures about market risk.

ITEM 12. DESCRIPTION OF SECURITIES OTHERTHAN EQUITY SECURITIES

American Depositary Shares

Fees and Charges Payable by ADR Holders

Deutsche Bank Trust Company Americasis the Depositary for SAP AG’s ADR program.ADR holders may be required to pay the fol-lowing charges:

• taxes and other governmental charges;

• registration fees as may be in effectfrom time to time for the registrationof transfers of SAP ordinary shares onany applicable register to the Deposi-tary or its nominee or the custodian orits nominee in connection with depos-its or withdrawals under the DepositAgreement;

• applicable air courier, cable, telex andfacsimile expenses of the Depositary;

• expenses incurred by the Depositary inthe conversion of foreign currency;

• $5.00 or less per 100 ADSs (or portionthereof) to the Depositary for the exe-cution and delivery of ADRs (includ-ing in connection with the depositingof SAP ordinary shares or the exercis-ing of rights) and the surrender ofADRs as well as for the distribution ofother securities;

• a maximum aggregate service fee ofU.S. $2.00 per 100 ADSs (or portionthereof) per calendar year to theDepositary for the services performedby the Depositary in administering theADR program, including for process-ing any cash dividends and other cashdistributions; and

• $5.00 or less per 100 ADSs (or portionthereof) to the Depositary for distribu-tion of securities other than SAP ordi-nary shares or rights.

These charges are described more fully inSection 5.9 of the Amended and Restated DepositAgreement dated November 25, 2009, incorpo-rated by reference as Exhibit 4.1.2 to this report.

Applicable service fees are either deductedfrom any cash dividends or other cash distribu-tions or charged separately to holders in a mannerdetermined by the Depositary, depending onwhether ADSs are registered in the name ofinvestors (whether certificated or in book-entryform) or held in brokerage and custodian accounts(via DTC). In the case of distributions of securi-ties other than SAP ordinary shares or rights, theDepositary charges the applicable ADS recorddate holder concurrent with the distribution. In thecase of ADSs registered in the name of the inves-tor, whether certificated or in book entry form,the Depositary sends invoices to the applicablerecord date ADS holders. For ADSs held inbrokerage and custodian accounts via DTC, theDepositary may, if permitted by the settlementsystems provided by DTC, collect the feesthrough those settlement systems from the brokersand custodians holding ADSs in their DTCaccounts. The brokers and custodians who holdtheir clients’ ADSs in DTC accounts in such casemay in turn charge their clients’ accounts theamount of the service fees paid to the Depositary.

In the event of a refusal to pay applicablefees, the Depositary may refuse the requestedservices until payment is received or may setoff the amount of the service from any distribu-tion to be made to the ADR holder, all inaccordance with the Deposit Agreement.

133

Part I

Item 11, 12


If any taxes or other governmentalcharges are payable by the holders and/or ben-eficial owners of ADSs to the Depositary, theDepositary, the custodian or SAP may withholdor deduct from any distributions made inrespect of the deposited SAP ordinary shareand may sell for the account of the holderand/or beneficial owner any or all of the depos-ited ordinary shares and apply such distribu-tions and sale proceeds in payment of suchtaxes (including applicable interest and penal-ties) or charges, with the holder and the benefi-cial owner thereof remaining fully liable forany deficiency.

Fees and Other Payments Payable by theDepositary to SAP

The Depositary has agreed to make cer-tain payments to SAP as reimbursement forexpenses incurred by SAP in connection withits ADR program and in support of SAP’songoing investor relations activities related tothe ADR program. For the year ended Decem-ber 31, 2010, the Depositary has made directand indirect payments to SAP of US$2,658,758 for investor relations activitiesrelated to the ADR program, including the pro-duction of annual reports and Form 20-F fil-ings, 2010 NYSE listing fees, road shows,production of investor targeting, peer analysis,shareholder identification reports and percep-tion studies, postage for mailing annual andinterim reports and other communications toADR holders and participation in retail investoractivities, broker conferences, SAP sponsoredanalyst events and capital markets days.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGESAND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THERIGHTS OF SECURITY HOLDERS AND USE OFPROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS ANDPROCEDURES

Disclosure controls and procedures arecontrols and other procedures of SAP that aredesigned to ensure that information required tobe disclosed by SAP in the reports that it filesor submits under the Exchange Act is recorded,processed, summarized and reported within thetime periods specified in the Commission’srules and forms. Disclosure controls and proce-dures include, without limitation, controls andprocedures designed to ensure that informationrequired to be disclosed by SAP in the reportsthat it files or submits under the Exchange Actis accumulated and communicated to SAPmanagement, including SAP’s principal execu-tive and financial officers (i.e. SAP’s co-chiefexecutive officers (Co-CEOs) and chief finan-cial officer (CFO)), or persons performing sim-ilar functions, as appropriate to allow timelydecisions regarding required disclosure. SAP’smanagement evaluated, with the participationof SAP’s Co-CEOs and CFO the effectivenessof SAP’s disclosure controls and procedures asof December 31, 2010. The evaluation was ledby SAP’s Global Governance Risk & Compli-ance function, including dedicated “SOXChampions” in all of SAP’s major entities andbusiness units with the participation of processowners, SAP’s key corporate senior manage-ment, senior management of each businessgroup, and as indicated above under the super-vision of SAP’s Co-CEOs and CFO. Based onthe foregoing, SAP’s management, includingSAP’s Co-CEOs and CFO, concluded that as ofDecember 31, 2010, SAP’s disclosure controlsand procedures were effective.

134

Part I, II

Item 12, 13, 14, 15


MANAGEMENT’S ANNUAL REPORT ON INTER-NAL CONTROL OVER FINANCIAL REPORTING

The management of SAP is responsiblefor establishing and maintaining adequate inter-nal control over financial reporting as suchterm is defined in Rules 13a-15(f) and15d-15(f) under the Securities Exchange Act of1934. SAP’s internal control over financialreporting is a process designed under the super-vision of SAP’s Co-CEOs and CFO to providereasonable assurance regarding the reliability offinancial reporting and the preparation of finan-cial statements for external reporting purposesin accordance with International FinancialReporting Standards as issued by the Interna-tional Accounting Standards Board.

SAP’s management assessed the effec-tiveness of the Company’s internal control overfinancial reporting as of December 31, 2010. Inmaking this assessment, it used the criteria setforth by the Committee of Sponsoring Organi-zations of the Treadway Commission (COSO)in “Internal Control — Integrated Framework.”

Based on the assessment under these cri-teria, SAP management has concluded that, asof December 31, 2010, the Company’s internalcontrol over financial reporting was effective.

KPMG, our independent registered publicaccounting firm has issued its attestation reporton the effectiveness of SAP’s internal controlover financial reporting, which is included inItem 18. Financial Statements,” “Report ofIndependent Registered Public AccountingFirm.”

CHANGES IN INTERNAL CONTROL OVERFINANCIAL REPORTING

There has been no change in our internalcontrol over financial reporting during theperiod covered by this report that has materiallyaffected, or is reasonably likely to materiallyaffect, our internal control over financialreporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIALEXPERT

Our Supervisory Board has determinedthat Erhard Schipporeit is an “audit committeefinancial expert,” as defined by the regulationsof the Commission issued pursuant to Sec-tion 407 of the Sarbanes-Oxley Act of 2002and meeting the requirements of Item 16A. Heis “independent,” as such term is defined inRule 10A-3 under the Exchange Act.

ITEM 16B. CODE OF ETHICS

In 2003, SAP adopted a Code of Busi-ness Conduct that applies to all employees(including all personnel in the accounting andcontrolling departments) and the members ofSAP’s Executive Board (including our CEOand CFO). Our Code of Business Conduct con-stitutes a “code of ethics” as defined inItem 16.B of Form 20-F. Our Code of BusinessConduct sets standards for all dealings withcustomers, partners, competitors and suppliersand includes, among others, regulations withregard to confidentiality, loyalty, preventingconflicts of interest, preventing bribery, andavoiding anti-competitive practices. Interna-tional differences in culture, language, andlegal and social systems make the adoption ofuniform Codes of Business Conduct across anentire global company challenging. As a result,SAP has set forth a master code containingminimum standards. In turn, each companywithin the SAP Group has been required toadopt a similar code that meets at least theseminimum standards, but may also include addi-tional or more stringent rules of conduct.Newly acquired companies also are required tomeet the minimum standards set forth in theCode of Business Conduct.

We have made our Code of BusinessConduct publicly available by posting the fulltext on our Web site under www.sap.com/corp-governance (section “Policies and Statutes”).

135

Part II

Item 15, 16, 16A, 16B


ITEM 16C. PRINCIPAL ACCOUNTANT FEES ANDSERVICES

AUDIT FEES, AUDIT-RELATED FEES, TAX FEESAND ALL OTHER FEES

Refer to Note (32) to our ConsolidatedFinancial Statements for information on feespaid to our independent registered publicaccounting firm, KPMG, for audit services andother professional services.

AUDIT COMMITTEE’S PRE-APPROVAL POLICIESAND PROCEDURES

As required under German law, our share-holders appoint our independent auditors to auditour financial statements, based on a proposal thatis legally required to be submitted by the Super-visory Board. The Supervisory Board’s proposalis based on a proposal by the Audit Committee.See also the description in “Item 10. AdditionalInformation — Corporate Governance.”

In 2002 our Audit Committee adopted apolicy with regard to the pre-approval of auditand non-audit services to be provided by ourindependent auditors. This policy, which isdesigned to assure that such engagements donot impair the independence of our auditors,was amended and expanded in 2003, 2007 and2009 (changes in 2009 only related to informa-tion requirements). The policy requires priorapproval of the Audit Committee for all ser-vices to be provided by our independent audi-tors for any entity of the SAP Group. Withregard to non-audit services the policy distin-guishes among three categories of services:

1. “Prohibited services:” This categoryincludes services that our independentauditors must not be engaged to per-form. These are services that are notpermitted by applicable law or thatwould be inconsistent with maintain-ing the auditors’ independence.

2. “Services requiring universalapproval:” Services of this categorymay be provided by our independentauditors up to a certain aggregate

amount in fees per year that isdetermined by the Audit Committee.

3. “Services requiring individualapproval:” Services of this categorymay only be provided by our inde-pendent auditors if they have beenindividually (specifically) pre-approved by the Audit Committeeor an Audit Committee memberwho is authorized by the AuditCommittee to make such approvals.

Our Chief Accounting Officer reviews allindividual requests to engage our independentauditors as a service provider in accordance withthis policy and determines the category to whichthe requested service belongs. All requests forengagements with expected fees over a specifiedlimit are additionally reviewed by our CFO.Based on the determination of the category therequest is (i) declined if it is a “prohibitedservice,” (ii) approved if it is a “service requiringuniversal approval” and the maximum aggregateamount fixed by the Audit Committee has notbeen reached or (iii) forwarded to the AuditCommittee for individual approval if the “servicerequires individual approval” or is a “servicerequiring universal approval” and the maximumaggregate amount fixed by the Audit Committeehas been exceeded.

Our Audit Committee’s pre-approval pol-icies also include information requirements toensure the Audit Committee is kept aware ofthe volume of engagements involving our inde-pendent auditors that were not individually pre-approved by the Audit Committee itself.

Applicable regulations permit the pre-approval requirement to be waived with respectto engagements for non-audit services aggregat-ing no more than five percent of the totalamount of revenues we paid to our principalaccountants, if such engagements were not rec-ognized by us at the time of engagement andwere promptly brought to the attention of ourAudit Committee or a designated memberthereof and approved prior to the completion ofthe audit. Fees for non-audit services subject to

136

Part II

Item 16C


such waiver amounted to less than A0.005 mil-lion in 2010 (A0 in 2009).

Substantially all of the work performedto audit our Consolidated Financial Statementswas performed by our principal accountant’sfull-time, permanent employees.

ITEM 16D. EXEMPTIONS FROM THE LISTINGSTANDARDS FOR AUDIT COMMITTEES

Rule 10A-3 of the Exchange Act requiresthat all members of our audit committee beindependent, subject to certain exceptions. Inaccordance with German law, the Audit Commit-tee consists of both employee and shareholderelected members. Rule 10A-3 provides an excep-tion for an employee of a foreign private issuersuch as SAP who is not an executive officer ofthat issuer and who is elected to the supervisoryboard or audit committee of that issuer pursuantto the issuer’s governing law. In this case, theemployee is exempt from the independencerequirements of Rule 10A-3 and is permitted tosit on the audit committee.

We rely on this exemption. Our AuditCommittee includes two members who are

non-executive employees of SAP AG, ThomasBamberger and Gerhard Maier, who werenamed to our Supervisory Board pursuant tothe German Co-determination Act (see “Item 6.Directors, Senior Management and Employees.”for details). We believe that the reliance on thisexemption does not materially adversely affectthe ability of our Audit Committee to act inde-pendently and to satisfy the other requirementsof Rule 10A-3.

ITEM 16E. PURCHASES OF EQUITY SECURITIESBY THE ISSUER AND AFFILIATED PURCHASERS

We did not purchase any ADRs in 2010.The following table sets out information con-cerning repurchases of our ordinary shares,which we mainly use to serve our employeediscount stock purchase programs, Long-TermIncentive Plans, Stock Option Plans and othersuch plans. The maximum number of sharesthat may yet be purchased under these plansand programs as of December 31, 2010 was83,515,629.

137

Part II

Item 16C, 16D, 16E


Period

(a)TotalNumber of

Shares Purchased

(b)AveragePrice Paidper Share

(in E)

(c)TotalNumber of

SharesPurchased as

Part ofPublicly

AnnouncedPlans andPrograms

(d)MaximumNumberof Sharesthat May

Yet Be PurchasedUnder these Plans

and Programs

January 1/1/10 — 1/31/10 . . . . . . . . . . . . . . 0 — 0 85,376,024February 2/1/10 — 2/28/10. . . . . . . . . . . . . . 2,080,000 33.68 2,080,000 85,739,597March 3/1/10 — 3/31/10 . . . . . . . . . . . . . . . 1,452,221 34.43 1,452,221 84,342,011April 4/1/10 — 4/30/10 . . . . . . . . . . . . . . . . 0 — 0 84,377,528May 5/1/10 — 5/31/10 . . . . . . . . . . . . . . . . . 0 — 0 84,414,338June 6/1/10 — 6/30/10 . . . . . . . . . . . . . . . . . 0 — 0 84,452,898July 7/1/10 — 7/31/10 . . . . . . . . . . . . . . . . . 0 — 0 84,522,861August 8/1/10 — 8/31/10 . . . . . . . . . . . . . . . 2,852,250 35.05 2,852,250 81,721,099September 9/1/10 — 9/30/10 . . . . . . . . . . . . 0 — 0 83,229,826October 10/1/10 — 10/31/10 . . . . . . . . . . . . 0 — 0 83,263,076November 11/1/10 — 11/30/10 . . . . . . . . . . 0 — 0 83,446,772December 12/1/10 — 12/31/10. . . . . . . . . . . 0 — 0 83,515,629

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,384,471 34.46 6,384,471

Purchases between January 1, 2010 andJune 8, 2010 were made in accordance with theauthorization to acquire and use treasury sharesgranted at the Annual General Meeting ofShareholders on May 19 2009, pursuant towhich the Executive Board was authorized toacquire, on or before October 31, 2010, up to120 million shares of SAP.

Purchases between June 9, 2010 andDecember 31, 2010 were made in accordancewith the authorization to acquire and use trea-sury shares granted at the Annual GeneralMeeting of Shareholders on June 8, 2010, pur-suant to which the Executive Board was autho-rized to acquire, on or before June 30, 2013, upto 120 million shares of SAP. The authorizationfrom June 8, 2010 replaced the authorizationfrom May 19, 2009.

Both authorizations were subject to theprovision that the shares to be purchased,together with any other shares already acquiredand held by SAP, do not account for more than10% of SAP’s capital stock.

ITEM 16F. CHANGES IN REGISTRANT’S CERTI-FYING ACCOUNTANT

Not applicable.

ITEM 16G. DIFFERENCES IN CORPORATE GOV-ERNANCE PRACTICES

The following summarizes the principalways in which our corporate governance prac-tices differ from the New York Stock Exchange(NYSE) corporate governance rules applicableto U.S. domestic issuers (the NYSE Rules).

Introduction

SAP is incorporated under the laws ofGermany, with securities publicly traded onmarkets in Germany (Frankfurt Exchange) andthe United States (NYSE).

The NYSE Rules permit foreign privateissuers to follow applicable home country cor-porate governance practices in lieu of theNYSE corporate governance standards, subjectto certain exceptions. Foreign private issuerselecting to follow home country corporate

138

Part II

Item 16E, 16F, 16G


governance rules are required to disclose theprincipal differences in their corporate gover-nance practices from those required under theNYSE Rules. This Item 16G summarizes theprincipal ways in which SAP’s corporate gover-nance practices differ from the NYSE Rulesapplicable to domestic issuers.

Legal Framework

The primary source of law relating to thecorporate governance of a German stock corpo-ration is the German Stock Corporation Act(Aktiengesetz). Additionally, the SecuritiesTrading Act (Wertpapierhandelsgesetz), theGerman Securities Purchase and Take Over Act(Wertpapiererwerbs- und Ubernahmegesetz),the Stock Exchange Admission Regulations,the German Commercial Code (Handelsgesetz-buch) and certain other German statutes containcorporate governance rules applicable to SAP.In addition to these mandatory rules, the Ger-man Corporate Governance Code (“GCGC”)summarizes the mandatory statutory corporategovernance principles found in the GermanStock Corporation Act and other provisions ofGerman law. Further, the GCGC contains sup-plemental recommendations and suggestionsfor standards on responsible corporate gover-nance intended to reflect generally acceptedbest practices.

The German Stock Corporation Actrequires the executive and the supervisoryboard of exchange-listed companies like SAPto declare annually that the recommendationsset forth in the GCGC have been and are beingcomplied with or which of the recommenda-tions have not been or are not being compliedwith and why not. SAP has disclosed andreasoned deviations from a few of the GCGCrecommendations in its Declaration of Compli-ance on a yearly basis since 2003. These decla-rations are available on the SAP website(www.sap.com/about/governance/statement/index.epx).

Significant Differences

We believe the following to be the signif-icant differences between German corporategovernance practices, as SAP has implementedthem, and those applicable to domestic compa-nies under the NYSE Rules.

German Stock Corporations are Required to have aTwo-Tier Board System

SAP is governed by three separate bod-ies: (i) the Supervisory Board, which counsels,supervises and controls the Executive Board;(ii) the Executive Board, which is responsiblefor the management of SAP; and (iii) the Gen-eral Meeting of Shareholders. The rules appli-cable to these governing bodies are defined byGerman law and by SAP’s Articles of Incorpo-ration. This corporate structure differs from theunitary board of directors established by therelevant laws of all U.S. states and the NYSERules. Under the German Stock CorporationAct, the Supervisory Board and ExecutiveBoard are separate and no individual may be amember of both boards. See “Item 10. Addi-tional Information — Corporate Governance”for additional information on the corporatestructure.

Director Independence Rules

The NYSE Rules require that a majorityof the members of the board of directors of alisted issuer and each member of its nominat-ing, corporate governance, compensation andaudit committee be “independent.” The NYSERules stipulate that no director qualifies as“independent” unless the board of directors hasmade an affirmative determination that thedirector has no material direct or indirect rela-tionship with the listed company. However,under the NYSE Rules a director may still bedeemed independent even if the director or amember of a director’s immediate family hasreceived during a 12 month period within theprior three years up to $120,000 in direct com-pensation. In addition, a director may also bedeemed independent even if a member of the

139

Part II

Item 16G


director’s immediate family works for the com-pany’s auditor in a non-partner capacity and noton the company’s audit. By contrast, the GCGCrequires that the Supervisory Board ensure thatproposed candidates are persons with the nec-essary knowledge, competencies and applicableexperience, and that the Supervisory Boardincludes what it considers an adequate numberof independent members. A Supervisory Boardmember is considered independent if he or shehas no business or personal relations with SAPor its Executive Board that could give rise to aconflict of interest. The members of the Super-visory Board must have enough time to per-form their board duties and must carry outtheir duties carefully and in good faith. For aslong as they serve, they must comply with thecriteria that are enumerated in relation to theselection of candidates for the SupervisoryBoard concerning independence, conflict ofinterest and multiple memberships of manage-ment, supervisory and other governing bodies.They must be loyal to SAP in their conductand they must not accept appointment in com-panies that are in competition with SAP. Super-visory Board members must disclose anyplanned non-ordinary course business transac-tions with SAP to the Supervisory Boardpromptly. The Supervisory Board memberscannot carry out such transactions before theSupervisory Board has given its permission.The Supervisory Board may grant its permis-sion for any such transaction only if the trans-action is based on terms and conditions that arestandard for the type of transaction in questionand if the transaction is not contrary to SAP’sinterest. SAP complies with these GCGC direc-tor independence requirements.

German corporate law requires that forlisted stock corporations at least one memberof the Supervisory Board who has expertknowledge in the areas of financial accountingand audit of financial statements must be inde-pendent. Mr. Erhard Schipporeit who is theChairman of SAP’s Audit Committee meetsthese requirements. However, German corpo-rate law and the GCGC do not require theSupervisory Board to make an affirmative

determination for each individual member thatis independent or that a majority of SupervisoryBoard members or the members of a specificcommittee are independent.

The NYSE independence requirementsare closely linked with risks specific to unitaryboards of directors that are customary forU.S. companies. In contrast, the two-tier boardstructure requires a strict separation of theexecutive board and supervisory board. In addi-tion, the supervisory board of large Germanstock corporations is subject to the principle ofemployee codetermination as outlined in theGerman Co-Determination Act of 1976 (Mit-bestimmungsgesetz). As a result, the Supervi-sory Board of SAP AG consists of 16 members,of which eight have been elected by SAP AG’sshareholders at the Annual General Meetingand eight members have been elected byemployees of SAP AG and its German subsid-iaries. Typically, the chairperson of the supervi-sory board is a shareholder representative. Incase of a tie vote, the supervisory board chair-person may cast the decisive tie-breaking vote.This board structure creates a different systemof checks and balances, including employeeparticipation, and cannot be directly comparedwith a unitary board system.

Audit Committee Independence

As a foreign private issuer, the NYSERules require SAP to establish an Audit Com-mittee that satisfies the requirements ofRule 10A-3 of the Exchange Act with respectto audit committee independence. SAP is incompliance with these requirements. The Chair-man of SAP’s Audit Committee and Mr. Joa-chim Milberg meet the independencerequirements of Rule 10A-3 of the ExchangeAct. The other two Audit Committee members,Messrs. Thomas Bamberger and GerhardMaier, are employee representatives who areeligible for the exemption provided by Rule 10A-3 (b) (1) (iv) (C) (see “Item 16D Exemptionsfrom the listing standards for audit committees”for details).

140

Part II

Item 16G


The Audit Committee independencerequirements are similar to the Board indepen-dence requirements under German corporatelaw and GCGC. See the section above under“Director Independence Rules.” Nonetheless,SAP meets the NYSE Rules on audit commit-tee independence applicable to foreign privateissuers.

Rules on Non-Management Board Meetings areDifferent

Section 303 A.03 of the NYSE Rulesstipulates that the non-management board ofeach listed issuer must meet at regularly sched-uled executive sessions without the manage-ment. Under German corporate law and theGCGC the Supervisory Board is entitled butnot required to exclude Executive Board mem-bers from its meetings. The Supervisory Boardexercises this right temporarily during its meet-ings, for example when it discusses or decidesExecutive Board member affairs like theappointment of new Executive Board members.

Rules on Establishing Committees Differ

Pursuant to Section 303 A.04 and 303A.05 of the NYSE Rules listed companies arerequired to set up a Nominating/CorporateGovernance Committee and a CompensationCommittee, each composed entirely of indepen-dent directors and having a written charterspecifying the committee’s purpose and respon-sibilities. In addition, each committee’s perfor-mance must be reviewed annually. With oneexception, German corporate law does notmandate the creation of specific supervisoryboard committees. Required by the GermanCo-Determination Act of 1976 (Mitbestim-mungsgesetz), the Mediation Committee (Ver-mittlungsausschuss) convenes only if the 2⁄3majority required for appointing/revoking theappointment of Executive Board Members isnot attained. This committee has never beenconvened in SAP’s history. In addition, theGCGC recommends that the Supervisory Boardestablish an Audit Committee and a Nomina-tion Committee. In addition to the legally

required Mediation Committee, SAP has thefollowing committees, which are in compliancewith the GCGC: General Committee, Compen-sation Committee, Audit Committee, Strategyand Technology Committee, Finance andInvestment Committee, Nomination Committee,and Special Committee (See “Item 10. Addi-tional Information — Corporate Governance”for more information).

Rules on Shareholders’ Compulsory Approval areDifferent

Section 312 of the NYSE Rules requiresU.S. companies to seek shareholder approval ofall equity-compensation plans, including certainmaterial revisions thereto (subject to certainexemptions as described in the rules), issuancesof common stock, including convertible stock,if the common stock has, or will have uponissuance, voting power of or in excess of 20%of the then outstanding common stock, andissuances of common stock if they trigger achange of control.

According to the German Stock Corpora-tion Act and other applicable German laws,shareholder approval is required for a broadrange of matters, such as amendments to thearticles of association, certain significant cor-porate transactions (including inter-companyagreements and material restructurings), theoffering of stock options and similar equitycompensation to its Executive Board membersor its employees by a way of a conditionalcapital increase or by using treasury shares(including significant aspects of such an equitycompensation plan as well as the exercisethresholds), the issuance of new shares, theauthorization to purchase the corporation’s ownshares, and other essential issues, such as trans-fers of all, or substantially all, of the assets ofthe stock corporation, including shareholdingsin subsidiaries.

Specific Principles of Corporate Governance

Under the NYSE Rules Section 303A.09listed companies must adopt and disclose cor-porate guidelines. Since October 2007, SAP

141

Part II

Item 16G


has applied, with few exceptions, the recom-mended corporate governance standards of theGCGC rather than company-specific principlesof corporate governance. The GCGC recom-mendations differ from the NYSE Standardsprimarily as outlined in this Item 16G.

Specific Code of Business Conduct

NYSE Rules Section 303 A.10 requireslisted companies to adopt and disclose a codeof business conduct and ethics for directors,officers and employees, and to disclosepromptly any waivers of the code for directorsor executive officers. Although not requiredunder German law, SAP has adopted a Code ofBusiness Conduct, which is equally applicableto employees, managers and members of theExecutive Board. SAP complies with therequirement to disclose the Code of BusinessConduct and any waivers of the code withrespect to directors and executive officers. See“Item 16B. Code of Ethics” for details.

142

Part II

Item 16G


PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

The Consolidate Financial Statements areincluded herein on pages F-1 through F-106.

The following are filed as part of thisreport:

• Report of Independent Registered Pub-lic Accounting Firm.

• Consolidated Financial Statements

• Consolidated Income Statementsfor the years ended 2010, 2009and 2008.

• Consolidated Statements ofComprehensive Income for theyears ended December 31, 2010,2009 and 2008.

• Consolidated Statements ofFinancial Position as of Decem-ber 31, 2010 and 2009.

• Consolidated Statements ofChanges in Equity for the yearsended December 31, 2010, 2009and 2008.

• Consolidated Statements of CashFlows for the years endedDecember 31, 2010, 2009 and2008.

• Notes to the Consolidated Finan-cial Statements.

ITEM 19. EXHIBITS

The following documents are filed as exhibits to this report:

1 Articles of Incorporation (Satzung) of SAP AG, as amended to date (English translation).2.1 Form of global share certificate for ordinary shares (English translation).(1)

Certain instruments which define rights of holders of long-term debt of SAP AG and itssubsidiaries are not being filed because the total amount of securities authorized under each suchinstrument does not exceed 10% of the total consolidated assets of SAPAG and its subsidiaries.SAP AG and its subsidiaries hereby agree to furnish a copy of each such instrument to theSecurities and Exchange Commission upon request.

4.1.2 Amended and Restated Deposit Agreement dated as of November 25, 2009 among SAP AG,Deutsche Bank Trust Company Americas as Depositary, and all owners and holders from time totime of American Depositary Receipts issued thereunder, including the form of AmericanDepositary Receipts.(2)

4.7 Merger Agreement dated May 12, 2010 by and among SAPAmerica, Inc., Sheffield AcquisitionCorp. and Sybase, Inc.(3)

8 For a list of our subsidiaries, associates and equity investments, see Note (34) to ourConsolidated Financial Statements in “Item 18. Financial Statements”.

12.1 Certification of Bill McDermott, Co-Chief Executive Officer, required by Rule 13a-14(a) orRule 15d-14(a).

12.2 Certification of Jim Hagemann Snabe, Co-Chief Executive Officer, required by Rule 13a-14(a)or Rule 15d-14(a).

12.3 Certification of Werner Brandt, Chief Financial Officer, required by Rule 13a-14(a) orRule 15d-14(a).

143

Part III

Item 17, 18, 19


13.1 Certification of Bill McDermott, Co-Chief Executive Officer, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

13.2 Certification of Jim Hagemann Snabe, Co-Chief Executive Officer, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

13.3 Certification of Werner Brandt, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

15 Consent of Independent Registered Public Accounting Firm.

(1) Incorporated by reference to Exhibit 2.1 of SAP AG’s Annual Report on Form 20-F filed onMarch 22, 2006.

(2) Incorporated by reference to Exhibit 99(A) of Post Effective Amendment #1 to SAP AG’s Reg-istration Statement on Form F-6 filed on November 25, 2009.

(3) Incorporated by reference to Exhibit 2.1 to Sybase, Inc.’s Current Report on Form 8-K filed onMay 13, 2010.

144

Part III

Item 19


SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-Fand that it has duly caused and authorized the undersigned to sign this report on its behalf.

SAP AG(Registrant)

By: /s/ BILL MCDERMOTT

Name: Bill McDermottTitle: Co-Chief Executive Officer

Dated: March 18, 2011

By: /s/ JIM HAGEMANN SNABE

Name: Jim Hagemann SnabeTitle: Co-Chief Executive Officer

Dated: March 18, 2011

By: /s/ WERNER BRANDT

Name: Dr. Werner BrandtTitle: Chief Financial Officer

Dated March 18, 2011

145




SAP AG AND SUBSIDIARIES

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . F-2Consolidated Financial Statements:

Consolidated Income Statements for the years ended 2010, 2009 and 2008 . . . . . . . F-3Consolidated Statements of Comprehensive Income for the years ended

December 31, 2010, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4Consolidated Statements of Financial Position as of December 31, 2010 and

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5Consolidated Statements of Changes in Equity for the years ended December 31,

2010, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6Consolidated Statements of Cash Flows for the years ended December 31, 2010,

2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8 to F-106

F-1

%%TRANSMSG*** Transmitting Job: E03567 PCN: 153000000 ***%%PCMSG|F-1 |00023|Yes|No|03/21/2011 11:03|0|0|Page is valid, no graphics -- Color: D|

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Supervisory Board of SAP AG:

We have audited the accompanying consolidated statements of financial position of SAP AG andsubsidiaries (“SAP” or “the Company”) as of December 31, 2010 and 2009, and the related consolidatedstatements of income, comprehensive income, changes in equity, and cash flows for each of the years inthe three-year period ended December 31, 2010. We also have audited SAP’s internal control overfinancial reporting as of December 31, 2010, based on criteria established in Internal Control — IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).SAP’s management is responsible for these consolidated financial statements, for maintaining effectiveinternal control over financial reporting, and for its assessment of the effectiveness of internal control overfinancial reporting, included in the accompanying Management’s Annual Report on Internal Control OverFinancial Reporting. Our responsibility is to express an opinion on these consolidated financial statementsand an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement and whether effectiveinternal control over financial reporting was maintained in all material respects. Our audits of theconsolidated financial statements included examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accounting principles used and significantestimates made by management, and evaluating the overall financial statement presentation. Our audit ofinternal control over financial reporting included obtaining an understanding of internal control overfinancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. Our audits also includedperforming such other procedures as we considered necessary in the circumstances. We believe that ouraudits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness to future periods aresubject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all materialrespects, the financial position of SAP AG and subsidiaries as of December 31, 2010 and 2009, and theconsolidated results of their operations and their cash flows for each of the years in the three-year periodended December 31, 2010, in conformity with International Financial Reporting Standards as issued bythe International Accounting Standards Board (IASB). Also in our opinion, SAP AG maintained, in allmaterial respects, effective internal control over financial reporting as of December 31, 2010, based oncriteria established in Internal Control — Integrated Framework issued by the COSO.

/s/ KPMG AGWirtschaftsprufungsgesellschaft

Mannheim, GermanyMarch 3, 2011

F-2



CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENTS OF SAP GROUPfor the years ended December 31,

Note(Unaudited)

2010(1) 2010 2009 2008US$ E E E

millions, unless otherwise stated

Software revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,332 3,265 2,607 3,606Support revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,138 6,133 5,285 4,602Subscription and other software-related service

revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525 396 306 258Software and software-related service revenue . . . . . . 12,996 9,794 8,198 8,466

Consulting revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,915 2,197 2,074 2,498Other service revenue . . . . . . . . . . . . . . . . . . . . . . . . . 628 473 400 611

Professional services and other service revenue . . . . . 3,543 2,670 2,474 3,109Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 16,538 12,464 10,672 11,575

Cost of software and software-related services . . . . . . . . (2,419) (1,823) (1,658) (1,672)Cost of professional services and other services . . . . . . . (2,748) (2,071) (1,851) (2,285)Research and development . . . . . . . . . . . . . . . . . . . . . . . (2,294) (1,729) (1,591) (1,627)Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,510) (2,645) (2,199) (2,546)General and administration . . . . . . . . . . . . . . . . . . . . . . . (844) (636) (564) (624)Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) 4 3 (198) (60)TomorrowNow litigation . . . . . . . . . . . . . . . . . . . . . . . . . (24) (1,302) (981) (56) (71)Other operating income, net . . . . . . . . . . . . . . . . . . . . . . (7) 12 9 33 11

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . (8) (13,100) (9,873) (8,084) (8,874)Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,438 2,591 2,588 2,701

Other non-operating expense, net . . . . . . . . . . . . . . . . (9) (247) (186) (73) (27)Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 73 37 98

Finance costs TomorrowNow litigation . . . . . . . . . . (24) (16) (12) 0 0Other finance costs . . . . . . . . . . . . . . . . . . . . . . . . . (170) (128) (117) (148)

Finance costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (186) (140) (117) (148)Finance income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) (89) (67) (80) (50)

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,102 2,338 2,435 2,624Income tax expense TomorrowNow litigation . . . . . . . 500 377 20 26Other income tax expense . . . . . . . . . . . . . . . . . . . . . . (1,197) (902) (705) (802)

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) (697) (525) (685) (776)Profit after tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,406 1,813 1,750 1,848— Profit attributable to noncontrolling interests . . . . . . . . . 3 2 2 1— Profit attributable to owners of parent . . . . . . . . . . . . . . 2,403 1,811 1,748 1,847Basic earnings per share, in E . . . . . . . . . . . . . . . . . . . . . (12) 2.02 1.52 1.47 1.55Diluted earnings per share, in E . . . . . . . . . . . . . . . . . . . (12) 2.02 1.52 1.47 1.55

(1) The 2010 figures have been translated solely for the convenience of the reader at an exchange rate ofUS$1.3269 to A1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York onDecember 30, 2010.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-3



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF SAP GROUPfor the years ended December 31,

Note 2010 2009 2008E millions

Profit after tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,813 1,750 1,848

Gains (losses) on exchange differences on translation, beforetax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 76 (63)

Reclassification adjustments on exchange differences ontranslation, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 (2) 0

Exchange differences on translation . . . . . . . . . . . . . . . . . . . . . 193 74 (63)

Gains (losses) on remeasuring available-for-sale financial assets,before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) 5 15 1

Reclassification adjustments on available-for-sale financialassets, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) (2) 0 (3)

Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . (27) 3 15 (2)

Gains (losses) on cash flow hedges, before tax . . . . . . . . . . . . . . . (26) (88) (41) (15)

Reclassification adjustments on cash flow hedges, before tax . . . (26) 67 84 (55)

Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26) (21) 43 (70)

Actuarial gains (losses) on defined benefit plans, before tax . . (19) (39) (6) (54)

Other comprehensive income, before tax. . . . . . . . . . . . . . . . . . . . 136 126 (189)

Income tax relating to components of other comprehensiveincome. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 18 (12) 39

Other comprehensive income, after tax . . . . . . . . . . . . . . . . . . . . . 154 114 (150)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,967 1,864 1,698

- Profit attributable to non-controlling interests . . . . . . . . . . . . . . . . 2 2 1

- Profit attributable to owners of parent . . . . . . . . . . . . . . . . . . . . . . 1,965 1,862 1,697


F-4



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION OF SAP GROUPas at December 31,

Note(Unaudited)

2010(1) 2010 2009US$ E E

millions

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,668 3,518 1,884Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) 210 158 486Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 4,112 3,099 2,546Other non-financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) 240 181 147Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 248 187 192

Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,478 7,143 5,255Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) 11,187 8,431 4,994Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) 3,153 2,376 894Property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17) 1,923 1,449 1,371Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) 630 475 284Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 103 78 52Other non-financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) 41 31 35Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 162 122 91Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 977 736 398

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,176 13,698 8,119Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,654 20,841 13,374

Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) 1,223 922 638Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 218 164 125Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) 188 142 146Other non-financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) 2,290 1,726 1,577

Provision TomorrowNow litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24) 1,323 997 93Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381 287 239

Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19) 1,704 1,284 332Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20) 1,209 911 598

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,832 5,149 3,416Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) 40 30 35Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 492 371 239Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) 5,903 4,449 729Other non-financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) 113 85 12Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19) 387 292 198Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 767 578 190Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20) 84 63 64

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,786 5,868 1,467Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,618 11,017 4,883

Issued capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,628 1,227 1,226Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447 337 317Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,960 9,767 8,571Other components of equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (188) (142) (317)Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,834) (1,382) (1,320)

Equity attributable to owners of parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,013 9,807 8,477Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 17 14

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21) 13,035 9,824 8,491Equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,654 20,841 13,374



F-5



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY OF SAP GROUPas at December 31,

IssuedCapital

SharePremium

RetainedEarnings

ExchangeDifferences

Available-for-Sale

FinancialAssets

CashFlow

HedgesTreasuryShares

EquityAttributableto Owners of

Parent

Non-Controlling

InterestsTotal

Equity

Other Components of Equity

E millions

January 1, 2008 . . . . . . . . . 1,246 347 6,925 (330) 1 10 (1,734) 6,465 1 6,466Profit after tax . . . . . . . . . . 1,847 1,847 1 1,848Other comprehensive income

after tax . . . . . . . . . . . . . (32) (63) (2) (53) (150) (150)Dividends . . . . . . . . . . . . . (594) (594) (594)Issuance of shares under

share-based paymentsprograms . . . . . . . . . . . . 1 12 13 13

Purchase of treasuryshares . . . . . . . . . . . . . . (487) (487) (487)

Cancellation of treasuryshares . . . . . . . . . . . . . . (21) (723) 744

Reissuance of treasury sharesunder share-basedpayments programs . . . . . (39) 115 76 76

Other . . . . . . . . . . . . . . . . (1) (1) (1)

December 31, 2008 . . . . . . 1,226 320 7,422 (393) (1) (43) (1,362) 7,169 2 7,171Profit after tax . . . . . . . . . . 1,748 1,748 2 1,750Other comprehensive income

after tax . . . . . . . . . . . . . (6) 74 14 32 114 114Dividends . . . . . . . . . . . . . (594) (594) (594)Issuance of shares under

share-based paymentsprograms . . . . . . . . . . . . 5 5 5


Addition of non-controllinginterests . . . . . . . . . . . . . 10 10

Other . . . . . . . . . . . . . . . . 1 1 1

December 31, 2009 . . . . . . 1,226 317 8,571 (319) 13 (11) (1,320) 8,477 14 8,491Profit after tax . . . . . . . . . . 1,811 1,811 2 1,813Other comprehensive income

after tax . . . . . . . . . . . . . (21) 188 3 (16) 154 154Dividends . . . . . . . . . . . . . (594) (594) (594)Issuance of shares under

share-based paymentsprograms . . . . . . . . . . . . 1 23 24 24

Purchase of treasuryshares . . . . . . . . . . . . . . (220) (220) (220)


Other . . . . . . . . . . . . . . . . 1 1

December 31, 2010 . . . . . . 1,227 337 9,767 (131) 16 (27) (1,382) 9,807 17 9,824


F-6



CONSOLIDATED STATEMENTS OF CASH FLOWS OF SAP GROUPas at December 31,

Note(Unaudited)

2010(1) 2010 2009 2008US$ E E E

millions

Profit after tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,406 1,813 1,750 1,848Adjustments to reconcile profit after tax to net cash provided by

operating activities:Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 534 499 539Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 697 525 685 776Finance income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) 89 67 80 50Gains/losses on disposals of non-current assets . . . . . . . . . . . . . . . . (7) (4) (3) (11) 11Decrease/increase in sales and bad debt allowances on trade

receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65) (49) 64 76Other adjustments for non-cash items . . . . . . . . . . . . . . . . . . . . . . . 42 32 14 52Decrease/increase in trade receivables . . . . . . . . . . . . . . . . . . . . . . (163) (123) 593 (48)Decrease/increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . (149) (112) 205 (12)Decrease/increase in trade payables, provisions and other liabilities . . 1,481 1,116 (124) (267)Decrease/increase in deferred income . . . . . . . . . . . . . . . . . . . . . . . 88 66 48 61Cashoutflows due to TomorrowNow litigation . . . . . . . . . . . . . . . . . (24) (135) (102) (19) (13)Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88) (66) (69) (105)Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 52 22 72Income taxes paid, net of refunds. . . . . . . . . . . . . . . . . . . . . . . . . . (1,085) (818) (722) (882)Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . 3,890 2,932 3,015 2,158Business combinations, net of cash and cash equivalents acquired . . . (4) (5,565) (4,194) (73) (3,773)Repayment of acquirees’ debt in business combinations . . . . . . . . . . 0 0 0 (450)Purchase of intangible assets and property, plant, and equipment . . . . (443) (334) (225) (339)Proceeds from sales of intangible assets or property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 44 45 44Cash transferred to restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 (448)Use of restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 1,001Purchase of equity or debt instruments of other entities . . . . . . . . . . (1,117) (842) (1,073) (396)Proceeds from sales of equity or debt instruments of other entities . . 1,767 1,332 1,027 595Net cash flows from investing activities . . . . . . . . . . . . . . . . . . . . (5,300) (3,994) (299) (3,766)Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22) (788) (594) (594) (594)Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22) (292) (220) 0 (487)Proceeds from reissuance of treasury shares . . . . . . . . . . . . . . . . . . 169 127 24 85Proceeds from issuing shares (share-based compensation) . . . . . . . . . 31 23 6 20Proceeds from borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,139 5,380 697 3,859Repayments of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,914) (2,196) (2,303) (1,571)Purchase of equity-based derivative instruments. . . . . . . . . . . . . . . . (19) (14) 0 (55)Proceeds from the exercise of equity-based derivative financial

instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4 4 24Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . 3,331 2,510 (2,166) 1,281Effect of foreign currency exchange rates on cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 186 54 (1)Net increase (decrease) in cash and cash equivalents . . . . . . . . . . 2,168 1,634 604 (328)Cash and cash equivalents at the beginning of the period . . . . . . . (22) 2,500 1,884 1,280 1,608Cash and cash equivalents at the end of the period . . . . . . . . . . . (22) 4,668 3,518 1,884 1,280



F-7



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL INFORMATION ABOUT CONSOLI-DATED FINANCIAL STATEMENTS

The accompanying Consolidated Finan-cial Statements of SAP AG and its subsidiaries(collectively, “we,” “us,” “our,” “SAP,”“Group,” and “Company”) have been preparedin accordance with International FinancialReporting Standards (IFRS). The designation“IFRS” includes all standards issued by theInternational Accounting Standards Board(IASB) and related interpretations issued by theInternational Financial Reporting Interpreta-tions Committee (IFRIC).

We have applied all standards and inter-pretations that were effective on and endorsedby the European Union (EU) as at Decem-ber 31, 2010. There were no standards or inter-pretations impacting our Consolidated FinancialStatements for the years ended December 31,2010, 2009, and 2008, that were effective butnot yet endorsed. Therefore our ConsolidatedFinancial Statements comply with both IFRS asissued by the IASB and with IFRS as endorsedby the EU.

SAP’s Executive Board approved theConsolidated Financial Statements on March 3,2011, for submission to the Company’s Super-visory Board.

All amounts included in the ConsolidatedFinancial Statements are reported in millions ofeuros (A millions) except where otherwisestated. Due to rounding, numbers presentedthroughout this document may not add up pre-cisely to the totals we provide and percentagesmay not precisely reflect the absolute figures.

(2) SCOPE OF CONSOLIDATION

The Consolidated Financial Statementsinclude SAP AG and all entities that are con-trolled directly or indirectly by SAP AG.

All SAP entities prepare their financialstatements as at December 31. All financialstatements were prepared applying the sameGroup IFRS accounting and valuation princi-ples. Intercompany transactions and balancesrelating to consolidated entities have beeneliminated.

The following table summarizes the changes in the number of entities included in theConsolidated Financial Statements:

Overview of Entities Consolidated in the Financial Statements

German Foreign Total

December 31, 2008 22 165 187

Additions 1 11 12

Disposals -4 -32 -36

December 31, 2009 19 144 163

Additions 4 58 62

Disposals -2 -20 -22

December 31, 2010 21 182 203

The additions relate to legal entitiesadded in connection with acquisitions and foun-dations. The disposals are due to mergers andliquidations of consolidated or acquired legalentities.

The 2010 changes in the scope of com-panies included in the Consolidated FinancialStatements impact the comparability with the2009 and 2008 Consolidated Financial State-ments. In 2010, we acquired Sybase Inc., whichis significant to some positions in SAP’s finan-cial statements and may affect comparability

F-8

%%TRANSMSG*** Transmitting Job: E03567 PCN: 160000000 ***%%PCMSG|F-8 |00016|Yes|No|03/18/2011 13:32|0|0|Page/graphics valid 03/21/2011 13:21 -- Color: D|

with our 2009 and 2008 Consolidated FinancialStatements. For more information about ourbusiness combinations and the effect on ourConsolidated Financial Statements, see Note(4).

(3) SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

(3a) Bases of Measurement

The Consolidated Financial Statementshave been prepared on the historical cost basisexcept for the following:

• Derivative financial instruments, avai-lable-for-sale financial assets (exceptfor investments in certain equity instru-ments without a quoted market price),and liabilities for cash-settled share-based payment arrangements are mea-sured at fair value.

• Foreign exchange receivables and pay-ables are translated at period-endexchange rates.

• Pensions are measured according toIAS 19 Employee Benefits (IAS 19) asdescribed in Note (19a).

Where applicable, information about themethods and assumptions used in determiningthe respective measurement bases and fair val-ues is disclosed in the Notes specific to thatasset or liability.

(3b) Relevant Accounting Policies

Reclassifications

We have reclassified and renamed certainrevenue items in our Consolidated FinancialStatements: As a result of the acquisition ofSybase we recognize revenue from messagingservices. This revenue is presented within theother service revenue line item within the pro-fessional services and other service revenuesubsection. In addition, we have merged ourpreviously-presented Training revenue line item(2009: A273 million; 2008: A434 million) andother revenue line item (2009: A42 million;2008: A70 million) into the other service

revenue line item in our income statement. Webelieve that this change further improves theclarity of our income statement. Amountsreported in previous years have been reclassi-fied accordingly to conform to the currentpresentation.

Interest paid, interest received andincome taxes paid, net of refunds are presentedseparately in our Consolidated Statements ofCash Flows. Previously, this information hadbeen presented in a note to the ConsolidatedStatements of Cash Flows. These changesresulted in certain reclassifications within thenet cash flows from operating activities.

We separately present the effects fromthe TomorrowNow litigation in our Consoli-dated Financial Statements, since we signifi-cantly increased the provision for the litigationafter the November 2010 jury verdict describedfurther in Note (19b) and Note (24). We believethat a separate presentation is relevant to gainan understanding of our financial performance,financial position and cash flows. Previously,the expenses had been classified in our Consol-idated Income Statements within cost of soft-ware and software-related services. Theprovision recorded on our Consolidated State-ments of Financial Position has previously beenpresented within other provisions. The amountrecorded as of December 31, 2008 was notmaterial.

We have changed the presentation offinance income, net. The previous line itemother financial gains/losses, net has been split:Gains are now presented within the financeincome line item while losses are reported inthe finance cost line item. We believe that thenew presentation is beneficial for understand-ing what instruments these income andexpenses relate to.

Business Combinations and Goodwill

As of January 1, 2009, we have appliedIFRS 3, Business Combinations (2008) inaccounting for business combinations. Forchanges in estimates, particularly contingentconsideration payments related to businesscombinations that occurred prior to January 1,

F-9


2009, the previous guidance remains relevant.Business combinations are accounted for usingthe acquisition method. The cost of an acquisi-tion is measured at the fair value of the assetstransferred and liabilities incurred at the dateof exchange. For each business combination,the acquirer measures the noncontrolling inter-est in the acquiree either at fair value or at theproportionate share of the acquiree’s identifi-able net assets. Acquisition costs incurred areexpensed and included in general and adminis-tration expenses.

The excess of the cost of acquisition overthe fair value of the Company’s share of theidentifiable net assets acquired is recorded asgoodwill.

In respect to at-equity investments, thecarrying amount of goodwill is included in thecarrying amount of the investment.

Foreign Currencies

Assets and liabilities of our foreign sub-sidiaries that use a functional currency otherthan the euro are translated at the exchange rateon the date of the Statement of Financial Posi-tion. Revenues and expenses are translated ataverage rates of exchange computed on amonthly basis. Translation adjustments result-ing from this process are charged or credited toother components of equity. Exchange differ-ences from monetary items denominated in

foreign currency transactions that are part of along-term investment are also included in othercomponents of equity. When a foreign opera-tion is disposed of, liquidated, or abandoned,the foreign currency translation adjustmentsapplicable to that entity are reclassified fromother components of equity to profit or loss.

Transactions in foreign currencies aretranslated to the respective functional curren-cies of Group entities at the exchange rates atthe dates of the transactions. Monetary assetsand liabilities that are denominated in foreigncurrencies are remeasured at the period-endclosing rate with resulting gains and lossesreflected in other non-operating expense, net inthe Consolidated Income Statements.

Operating cash flows are translated intoeuros using average rates of exchange com-puted on a monthly basis. Investing and financ-ing cash flows are translated into euros usingthe exchange rates in effect at the time of therespective transaction. The effects on cash dueto fluctuations in exchange rates are shown in aseparate line in the Consolidated Statements ofCash Flows.

Any goodwill arising from the acquisi-tion of a foreign operation and any fair valueadjustments to the carrying amounts of assetsand liabilities arising from the acquisition aretreated as assets and liabilities of the foreignoperation and translated at the closing rate.

The exchange rates of key currencies affecting the Company were as follows:

Exchange Rates

equivalent to €1 2010 2009 2010 2009 2008

U.S. dollar USD 1.3362 1.4406 1.3201 1.3962 1.4662

Pound sterling GBP 0.8608 0.8881 0.8570 0.8901 0.8016

Japanese yen JPY 108.65 133.16 115.07 130.66 148.88

Swiss franc CHF 1.2504 1.4836 1.3699 1.5097 1.5786

Canadian dollar CAD 1.3322 1.5128 1.3583 1.5832 1.5486

Australian dollar AUD 1.3136 1.6008 1.4198 1.7394 1.7724

Closing Rate as at December 31, Annual Average Exchange Rate

Revenue Recognition

We derive our revenue from the sale orlicense of our software products and of support,

subscription, consulting, development, training,and other services. The vast majority of oursoftware arrangements include support services,

F-10


and many also include professional servicesand other elements.

Software and software-related servicerevenue, as shown in our Consolidated IncomeStatements, is the sum of our software revenue,support revenue, and revenue from subscrip-tions, on-demand services and other software-related services. Professional services and otherservice revenue as shown in our ConsolidatedIncome Statements is the sum of our consultingrevenue and other service revenue. Other ser-vice revenue as shown in our ConsolidatedIncome Statements mainly consists of revenuefrom training services, messaging services, andSAP marketing events. Revenue information bysegment and geographic region is disclosed inNote (29).

If, for any of our product or serviceofferings, we determine at the outset of anarrangement that the amount of revenue cannotbe measured reliably, we conclude that theinflow of economic benefits associated with thetransaction is not probable, and we defer reve-nue until the arrangement fee becomes due andpayable by the customer. If, at the outset of anarrangement, we determine that collectability isnot probable, we conclude that the inflow ofeconomic benefits associated with the transac-tion is not probable, and we defer revenuerecognition until the earlier of when collectabil-ity becomes probable or payment is received. Ifcollectability becomes unlikely before all reve-nue from an arrangement is recognized, werecognize revenue only to the extent of the feesthat are successfully collected unless collect-ability becomes reasonably assured again. If acustomer is specifically identified as a baddebtor, we stop recognizing revenue except tothe extent of the fees that have already beencollected.

We account for out-of-pocket expensesinvoiced by SAP and reimbursed by customersas support, consulting, and training revenues,depending on the nature of the service forwhich the out-of-pocket expenses wereincurred.

Software revenue represents fees earnedfrom the sale or license of software to custom-ers. Revenue from the sale of perpetual licenses

of our standard products is recognized in linewith the requirements for selling goods statedin IAS 18 Revenue (IAS 18) when evidence ofan arrangement exists, delivery has occurred,the risks and rewards of ownership have beentransferred to the customer, the amount of rev-enue and associated costs can be measuredreliably, and collection of the related receivableis reasonably assured. The sale is recognizednet of returns and allowances, trade discounts,and volume rebates. We usually sell or licensesoftware on a perpetual basis. Occasionally, welicense software for a specified time. Revenuefrom short-term time-based licenses, whichusually include support services during thelicense period, is recognized ratably over thelicense term. Revenue from multi-year time-based licenses that include support services,whether separately priced or not, is recognizedratably over the license term unless a substan-tive support service renewal rate exists; if thisis the case, the amount allocated to the deliv-ered software is recognized as software revenuebased on the residual approach once the basiccriteria described above have been met. In gen-eral, our software license agreements do notinclude acceptance-testing provisions. If anarrangement allows for customer acceptancetesting of the software, we defer revenue untilthe earlier of customer acceptance or when theacceptance right lapses. We usually recognizerevenue from software arrangements involvingresellers on evidence of sell-through by thereseller to the end-customer, because the inflowof the economic benefits associated with thearrangements to us is not probable before sell-through has occurred.

Sometimes we enter into customer-spe-cific software development agreements. Werecognize software revenue in conjunction withthese arrangements using the percenta-ge-of-completion method based on contractcosts incurred to-date as a percentage of totalestimated contract costs required to completethe development work. If we do not have asufficient basis to reasonably measure theprogress of completion or to estimate the totalcontract revenue and costs, revenue is recog-nized only to the extent of the contract costsincurred for which we believe recoverability to

F-11


be probable. When it becomes probable thattotal contract costs exceed total contract reve-nue in an arrangement, the expected losses arerecognized immediately as an expense based onthe costs attributable to the contract.

Support revenue represents fees earnedfrom providing customers with unspecifiedfuture software updates, upgrades, and enhance-ments, and technical product support. We rec-ognize support revenue for most of our servicesratably over the term of the support arrange-ment. We do not separately sell technical prod-uct support or unspecified software upgrades,updates, and enhancements. Accordingly, we donot distinguish within software and software-related service revenue or within cost of soft-ware and software-related services the amountsattributable to technical support services andunspecified software upgrades, updates, andenhancements.

Subscription and other software-relatedservice revenue represents fees earned fromsubscription and software rental arrangements,on-demand solutions, and other software-relatedservices. Subscription contracts combine soft-ware and support service elements, as theyprovide the customer with current softwareproducts, rights to receive unspecified futuresoftware products, and rights to support ser-vices during the subscription term. Customerspay an annual fee for a defined subscriptionterm, and we recognize such fees ratably overthe term of the arrangement beginning with thedelivery of the first product.

Software rental contracts also combinesoftware and support service elements. Suchcontracts provide the customer with currentsoftware products and support but not the rightto receive unspecified future software products.Customers pay a periodic fee over the rentalterm and we recognize fees from softwarerental contracts ratably over the term of thearrangement.

Revenue from on-demand solutionsrelates to software hosting arrangements thatprovide the customer with the right to usecertain software functionality, but do notinclude the right to terminate the hosting con-tract and take possession of the software

without significant penalty. On-demand solu-tion revenue is generally recognized ratablyover the term of the arrangement. Other soft-ware-related service revenue mainly resultsfrom software-related revenue-sharing agree-ments with other software vendors.

We recognize consulting, and other ser-vice revenue when the respective services areperformed. Consulting revenue primarily resultsfrom implementation contracts to install andconfigure our software products. Consultingcontracts do not usually involve significant pro-duction, modification, or customization of soft-ware and are recognized using thepercentage-of-completion method of accountingas outlined above.

Other service revenue consists of feesfrom training services, cancelable hosting con-tracts, application management services (AMS),messaging services, revenue from SAP market-ing events, and referral fees.

Training services provide educational ser-vices to customers and partners regarding theuse of our software products. We recognizetraining revenue when the respective servicesare rendered. Cancelable hosting contractsallow the customer to terminate a softwarehosting arrangement at any time and to takepossession of the hosted software without sig-nificant penalty. In these contracts revenue isallocated to the hosting element and to thesoftware element. The hosting revenue is recog-nized ratably over the agreed hosting period.Our AMS contracts provide post-implementa-tion application support, optimization, andimprovements to a customer’s IT solution. Werecognize revenue from AMS services whenthe respective services are rendered. Messagingrevenue mainly represents fees earned fromtransmitting electronic text messages from onemobile phone provider to another. We recog-nize revenue from message services based uponthe number of messages successfully processedand delivered. Revenue from fixed-price mes-saging arrangements is recognized ratably overthe contractual term of the arrangement. Reve-nue from marketing events hosted by SAP, forwhich SAP sells tickets to its customers, isrecognized after the marketing event takes

F-12


place. Fees from referral services are commis-sions from partners to which we have referredcustomers.

The vast majority of our softwarearrangements form multiple-element arrange-ments, as they include support services, andmany also include professional services andother elements. As authorized by IAS 8Accounting Policies, Changes in AccountingEstimates and Errors (IAS 8), we follow theguidance provided by FASB ASC Subtopic985-605, Software Revenue Recognition, asamended, in order to determine the recogniz-able amount of license revenue in multiple-element arrangements. Revenue from multiple-element arrangements is recognized using theresidual method of revenue recognition whencompany-specific objective evidence of fairvalue exists for all of the undelivered elements(for example, support services, consulting ser-vices, or other services) in the arrangement, butdoes not exist for one or more delivered ele-ments (generally software). We determine thefair value of and allocate revenue to each unde-livered element based on its respective com-pany-specific objective evidence of fair value,which is the price charged when that element issold separately or, for elements not yet soldseparately, the price established by our manage-ment if it is probable that the price will notchange before the element is sold separately.We allocate revenue to undelivered support ser-vices based on the rates charged to renew thesupport services annually after an initial period.Such renewal rates generally represent a fixedpercentage of the discounted software licensefee charged to the customer. The vast majorityof our customers renew their annual supportservice contracts at these rates. We allocaterevenue to future incremental discounts when-ever customers are granted the right to licenseadditional software at a higher discount thanthe one given within the initial software licensearrangement, or to purchase or renew supportor services at rates below company-specificobjective evidence of fair value of the respec-tive service.

We defer revenue for all undelivered ele-ments and recognize the residual amount of thearrangement fee attributable to the delivered

elements, if any, when the revenue recognitioncriteria described above have been met andcompany-specific objective evidence of fairvalue for the undelivered elements exists.

Combining or segmenting multiple-ele-ment arrangements consisting of software andconsulting or other professional servicesdepends on:

• Whether the arrangement involves sig-nificant production, modification, orcustomization of the software, and

• Whether the services are not availablefrom third-party vendors and are there-fore deemed essential to the software.

If neither of the above is the case, reve-nue for the software element and the otherelement is recognized separately. In contrast, ifone or both of the above is the case, theelements of the arrangement are combined andaccounted for as a single unit of accounting,and the entire arrangement fee is recognizedusing the percentage-of-completion method asoutlined above. If the arrangement includesmultiple elements, we exclude those elementsfrom contract accounting that meet the criteriafor separate recognition (for example supportservices or hosting), provided that the elementshave stand-alone value.

Our contributions to resellers that allowour resellers to execute qualified and approvedmarketing activities are recognized as an offsetto revenue, unless we obtain a separate identifi-able benefit for the contribution, and the fairvalue of the benefit is reasonably estimable.


Cost of software and software-relatedservices includes the cost incurred in producingthe goods and providing the services that gen-erate software and software-related service rev-enue. Consequently this line item includesemployee expenses relating to these services,amortization of acquired intangibles, third-partylicenses, shipping and ramp-up cost, etc.

F-13



Cost of professional services and otherservices includes the cost incurred in providingthe services that generate professional serviceand other service revenue including messagerevenues. The item also includes sales and mar-keting expenses related to our professional ser-vices and other services that result from salesand marketing efforts that cannot be clearlyseparated from providing the services.


Research and development includes thecosts incurred by activities related to the devel-opment of software solutions (new products,updates, and enhancements) including resourceand hardware costs for the developmentsystems.

Development activities involve the appli-cation of research findings or other knowledgeto a plan or design of new or substantiallyimproved software products before the start ofcommercial use. Development expenditures arecapitalized only if all of the following criteriaare met:

• The development cost can be measuredreliably.

• The product is technically and com-mercially feasible.

• Future economic benefits are probable.

• We intend to complete developmentand market the product.

We have determined that the conditionsfor recognizing internally generated intangibleassets from our software development activitiesare not met until shortly before the productsare available for sale. Development costsincurred after the recognition criteria are methave not been material. Consequently, allresearch and development costs are expensedas incurred.

Sales and Marketing

Sales and marketing includes costsincurred for the selling and marketing activities

related to our software solutions, software-related service portfolio and messagingbusiness.


General and administration includes costsrelated to finance and administrative functionsas long as they are not directly attributable toone of the other operating expense line items.

Government Grants and Assistance

We record government grants when it isreasonably assured that we will comply withthe relevant conditions and that the grant willbe received. Our government grants generallyrepresent subsidies for activities specified inthe grant. As a result, government grants arerecognized when earned as a reduction of theexpenses recorded for the cost that the grantsare intended to compensate. Government assis-tance that takes the form of a tax credit isrecognized as a reduction of income tax. Gov-ernment grants received were immaterial forfiscal 2010, 2009, and 2008.

Leases

We are a lessee of property, plant, andequipment, mainly buildings, hardware, andvehicles, under operating leases that do nottransfer to us the substantive risks and rewardsof ownership. Rent expense on operating leasesis recognized on a straight-line basis over thelife of the lease including renewal terms if, atinception of the lease, renewal is reasonablyassured.

Some of our operating leases containlessee incentives, such as up-front payments ofcosts or free or reduced periods of rent. Theincentives are amortized over the life of thelease and the rent expense is recognized on astraight-line basis over the life of the lease. Thesame applies to contractually-agreed futureincreases of rents.

Income Tax

Deferred taxes are accounted for underthe liability method. We recognize deferred tax

F-14


assets and liabilities for the future tax conse-quences attributable to differences between thecarrying amounts of existing assets and liabili-ties in the Statements of Financial Position andtheir respective tax bases and on the carryfor-wards of unused tax losses and unused taxcredits. Deferred tax assets are recognized tothe extent that it is probable that future taxableincome will be available against which thedeductible temporary differences, unused taxlosses, and unused tax credits can be utilized.

Deferred tax assets and liabilities aremeasured at the tax rates that are expected toapply to the period when the asset is realizedor the liability is settled, based on tax rates andtax laws that have been enacted or substantivelyenacted by the end of the reporting period. Theeffect on deferred tax assets and liabilities of achange in tax rates is recognized in profit orloss, unless related to items directly recognizedin equity, in the period that includes the respec-tive enactment date.

The carrying amount of a deferred taxasset is reviewed at the end of each reportingperiod and is reduced to the extent that it is nolonger probable that sufficient taxable profitwill be available to allow the benefit of part orall of the deferred tax assets to be utilized.


Share-based compensation covers cash-settled and equity-settled awards issued to ouremployees. The fair values of both equity-set-tled and cash-settled awards are measured atgrant date using an option-pricing model.

The fair value of equity-settled awards isnot subsequently remeasured. The grant-datefair value of equity-settled awards is recognizedas personnel expense in profit or loss over theperiod in which the employees become uncon-ditionally entitled to the rights, with a corre-sponding increase in share premium. Theamount recognized as an expense is adjusted toreflect the actual number of equity-settledawards options that ultimately vest. We grantour employees discounts on certain share-basedcompensation plans. Since those discounts arenot dependent on future services to be provided

by our employees, the discount is recognized asan expense when the rights are granted.

For the share-based payment plans thatare settled by paying cash rather than by issu-ing equity instruments, a liability is recordedfor the rights granted reflecting the vested por-tion of the fair value of the rights at the report-ing date. Personnel expense is accrued over theperiod the beneficiaries are expected to per-form the related service (vesting period), with acorresponding increase in liabilities. Cash-set-tled awards are remeasured to fair value at eachStatement of Financial Position date until theaward is settled. Any changes in the fair valueof the liability are recognized as personnelexpense in profit or loss. The amount of unrec-ognized compensation expense related to non-vested share-based payment arrangementsgranted under our cash-settled plans is depen-dent on the final intrinsic value of the awards.The amount of unrecognized compensationexpense is dependent on the future price of ourcommon share which we cannot reasonablypredict.

In the event we hedge our exposure tocash-settled awards, changes in the fair valueof the respective hedging instruments are alsorecognized as personnel expense in profit orloss. The fair values for hedged programs arebased on market data reflecting current marketexpectations.

For more information about our share-based compensation plans, see Note (28).

Other Components of Equity

Other components of equity include:

• Currency effects arising from the trans-lation of the financial statements ofour foreign operations as well as thecurrency effects from intercompanylong-term monetary items for whichsettlement is neither planned nor likelyto occur in the foreseeable future.

• Unrealized gains and losses on availa-ble-for-sale financial assets.

• Gains and losses on cash flow hedgescomprising the net change in fair value

F-15


of the effective portion of the respec-tive cash flow hedges that have not yetimpacted profit or loss.

Treasury Shares

Treasury shares are recorded at acquisi-tion cost and are presented as a deduction fromtotal equity. Gains and losses on the subsequentreissuance of treasury shares are credited orcharged to share premium on an after-tax basis.On cancellation of treasury shares any excessof their carrying amount over the calculatedpar value is charged to retained earnings.

Earnings per Share

We present basic and diluted earningsper share (EPS). Basic earnings per share isdetermined by dividing profit after tax attribut-able to equity holders of the parent by theweighted average number of common sharesoutstanding. Diluted earnings per share reflectthe potential dilution that would occur if all “inthe money” securities to issue common shareswere exercised or converted. The average mar-ket value of the Company’s shares for purposesof calculating the dilutive effect of shareoptions is based on quoted market prices forthe period during which the options wereoutstanding.

Financial Assets

Our financial assets comprise cash andcash equivalents (highly liquid investments withoriginal maturities of three months or less),loans and receivables, acquired equity and debtinvestments, and derivative financial instru-ments (derivatives) with positive fair values.

These assets are recognized and mea-sured in accordance with IAS 39 FinancialInstruments: Recognition and Measurement(IAS 39). Accordingly, financial assets are rec-ognized in the Consolidated Statements ofFinancial Position if we have a contractual rightto receive cash or other financial assets fromanother entity. Regular way purchases or salesof financial assets are recorded at the tradedate. Financial assets are initially recognized atfair value plus, in the case of financial assets

not at fair value through profit or loss, directlyattributable transaction costs. Interest-free orbelow-market-rate loans and receivables are ini-tially measured at the present value of theexpected future cash flows. The subsequentmeasurement depends on the classification ofour financial assets to the following categoriesaccording to IAS 39:

• Loans and receivables: Loans andreceivables are non-derivative financialassets with fixed or determinable pay-ments that are neither quoted in anactive market nor intended to be soldin the near term. This category com-prises trade receivables, receivablesand loans included in other financialassets, and cash and cash equivalents.We carry loans and receivables atamortized cost less impairment losses.Interest income from items assigned tothis category is determined using theeffective interest method if the timevalue of money is material. For furtherinformation on trade receivables seethe Trade and Other Receivablessection.

• Available-for-sale financial assets:Available-for-sale financial assets arenon-derivative financial assets that arenot assigned to either of the two othercategories and mainly include equityinvestments and debt investments. Ifreadily determinable from market data,available-for-sale financial assets aremeasured at fair value, with changes infair value being reported net of tax inother components of equity. Fair valuechanges are not recognized in profit orloss until the assets are sold orimpaired. Available-for-sale financialassets for which no market price isavailable and whose fair value cannotbe reliably estimated in the absence ofan active market are carried at cost lessimpairment losses.

• Financial assets at fair value throughprofit or loss: Financial assets at fairvalue through profit or loss only com-prise those financial assets that are

F-16


held for trading, as we do not designatefinancial assets at fair value throughprofit or loss on initial recognition.This category solely contains embed-ded and freestanding derivatives withpositive fair values, except wherehedge accounting is applied. Allchanges in the fair value of financialassets in this category are immediatelyrecognized in profit or loss. For moreinformation about derivatives, see theDerivatives section.

All financial assets not accounted for atfair value through profit or loss are assessedfor impairment at each reporting date or if webecome aware of objective evidence of impair-ment as a result of one or more events thatindicate that the carrying amount of the assetmay not be recoverable. Objective evidenceincludes but is not limited to a significant orprolonged decline of the fair value below itscarrying amount, a high probability of insol-vency, or a material breach of contract by theissuer such as a significant delay or a shortfallin payments due. Impairment charges in theamount of the difference of an asset’s carryingamount and the present value of the expectedfuture cash flows or current fair value, respec-tively, are recognized in finance income, net.For available-for-sale financial assets suchimpairment charges directly reduce an asset’scarrying amount while impairments on loansand receivables are recorded using allowanceaccounts. Account balances are charged offagainst the respective allowance after all collec-tion efforts have been exhausted and the likeli-hood of recovery is considered remote.Impairment losses are reversed if the reason forthe original impairment loss no longer exists.No such reversals are made for availa-ble-for-sale equity investments.

Income/expenses and gains/losses onfinancial assets consist of impairment chargesand reversals, interest income and expenses,dividends, and gains and losses from the dis-posal of such assets. Dividend income is recog-nized when earned. Interest income isrecognized based on the effective interestmethod. Neither dividend nor interest incomeare included in net gains/losses at the time of

disposal of an asset. Financial assets are der-ecognized when contractual rights to receivecash flows from the financial assets expire orthe financial assets are transferred togetherwith all material risks and benefits.

Investments in Associates

Companies in which we do not have acontrolling financial interest, but over whichwe can exercise significant operating and finan-cial influence (associates) are accounted forusing the equity method.

Derivatives

We account for derivatives and hedgingactivities in accordance with IAS 39 at fairvalue.

Derivatives without Designated HedgeRelationship

Many transactions constitute economichedges, and therefore contribute effectively tothe securing of financial risks but do not qual-ify for hedge accounting under IAS 39. For thehedging of currency risks inherent in foreigncurrency denominated and recognized monetaryassets and liabilities, we do not designate ourheld-for-trading derivative financial instrumentsas accounting hedges, as the realized profitsand losses from the underlying transactions arerecognized in profit or loss in the same periodsas the realized profits or losses from thederivatives.

Embedded Derivatives

We occasionally have contracts thatrequire payment streams in currencies otherthan the functional currency of either party tothe contract. Such embedded foreign currencyderivatives are separated from the host contractand accounted for separately if the followingare met:

• The economic characteristics and risksof the host contract and the embeddedderivative are not closely related.

F-17


• A separate instrument with the sameterms as the embedded derivativewould meet the definition of aderivative.

• The combined instrument is not mea-sured at fair value through profit orloss.

Derivatives with Designated Cash Flow HedgeRelationship

Derivatives that are part of a hedgingrelationship that qualifies for hedge accountingunder IAS 39 are carried at their fair value. Wedesignate and document the hedge relationship,including the nature of the risk, the identifica-tion of the hedged item, the hedging instru-ment, and how we will assess the hedgeeffectiveness. The accounting for changes infair value of the hedging instrument dependson the effectiveness of the hedging relationship.The effective portion of the unrealized gain orloss on the derivative instrument determined tobe an effective hedge is recognized in othercomponents of equity. We subsequently reclas-sify the portion of gains or losses from othercomponents of equity to profit or loss when thehedged transaction affects profit or loss. Theineffective portion of gains or losses is recog-nized in profit or loss immediately. For moreinformation about our hedges, see Note (26).

Valuation and Testing of Effectiveness

The fair value of our derivatives is calcu-lated by discounting the expected future cashflows using relevant interest rates, and spotrates over the remaining lifetime of thecontracts.

Gains or losses on the spot price and theintrinsic values of the derivatives designatedand qualifying as cash-flow hedges are recog-nized directly in other components of equity,while gains and losses on the interest elementand on those time values excluded from thehedging relationship are recognized in profit orloss immediately.

The effectiveness of the hedging relation-ship is tested prospectively and retrospectively.Prospectively, we apply the critical terms match

for our foreign currency hedges as currencies,maturities, and the amounts are identical forthe forecasted transactions and the spot elementof the forward exchange rate contract or intrin-sic value of the currency options, respectively.For interest rate swaps, we also apply the criti-cal terms match as the notional amounts, cur-rencies, maturities, basis of the variable legs(EURIBOR), reset dates, and the dates of theinterest and principal payments are identical forthe debt instrument and the correspondinginterest rate swaps. Therefore, over the life ofthe hedging instrument, the changes in cashflows of the hedging relationship componentswill offset the impact of fluctuations of theunderlying forecasted transactions.

Retrospectively, effectiveness is tested ona cumulative basis applying the Dollar OffsetMethod by using the Hypothetical DerivativeMethod. Under this approach, the change infair value of a constructed hypothetical deriva-tive with terms reflecting the relevant terms ofthe hedged item is compared to the change inthe fair value of the hedging instrumentemploying its relevant terms. The hedge isdeemed highly effective if the results are withinthe range 80% to 125%.

Trade and Other Receivables

Trade receivables are recorded atinvoiced amounts less sales allowances and anallowance for doubtful accounts. We recordthese allowances based on a specific review ofall significant outstanding invoices. When ana-lyzing the recoverability of our trade receiv-ables, we consider the following factors:

• First, we consider the financial sol-vency of specific customers and recordan allowance for specific customer bal-ances when we believe it is probablethat we will not collect the amount dueaccording to the contractual terms ofthe arrangement.

• Second, we evaluate homogenous port-folios of trade receivables according totheir default risk primarily based onthe age of the receivable and historicalloss experience, but also taking into

F-18


consideration general market factorsthat might impact our trade receivableportfolio. We record a general bad debtallowance to record impairment lossesfor a portfolio of trade receivableswhen we believe that the age of thereceivables indicates that it is probablethat a loss has occurred and we willnot collect some or all of the amountsdue.

Account balances are written off, i.e.charged off against the allowance after all col-lection efforts have been exhausted and thelikelihood of recovery is considered remote.

In our Consolidated Income Statementsexpenses from recording bad debt allowancesfor a portfolio of trade receivables are classi-fied as other operating income, net, whereasexpenses from recording bad debt allowancesfor specific customer balances are classified ascost of software and software-related servicesor cost of professional services and other ser-vices, depending on the transaction from whichthe respective trade receivable results. Salesallowances are recorded as an offset to therespective revenue item.

Included in trade receivables are unbilledreceivables related to fixed-fee andtime-and-material consulting arrangements forcontract work performed to date.

Other Non-Financial Assets

Other non-financial assets are recordedat amortized cost, which approximates fairvalue due to their short-term nature.

We capitalize the discount of our loansto employees as prepaid expenses and release itratably to personnel expenses.

Intangible Assets

Purchased intangible assets with finiteuseful lives are recorded at acquisition cost andare amortized either based on expected usageor on a straight-line basis over their estimateduseful lives ranging from two to 16 years. Allof our intangible assets, with the exception ofgoodwill, have finite useful lives and are there-fore subject to amortization.

We recognize acquired in-processresearch and development projects as an intan-gible asset separate from goodwill if a projectmeets the definition of an asset. Amortizationfor these intangible assets starts when theprojects are complete and the developed soft-ware is taken to the market. We typically amor-tize these intangibles over five years.

Property, Plant, and Equipment

Property, plant, and equipment are car-ried at acquisition cost plus the fair value ofrelated asset retirement costs, if any and ifreasonably estimable, and less accumulateddepreciation. Interest incurred during the con-struction of qualifying assets is capitalized andamortized over the related assets’ estimateduseful lives.

Property, plant, and equipment are depre-ciated over their expected useful lives, gener-ally using the straight-line method. Land is notdepreciated.

Useful Lives of Property, Plant, and Equipment

Useful Lives of Property,

Plant, and Equipment

Buildings 25 to 50 years

Leasehold improvements Based upon the lease contract

Information technology equipment 3 to 5 years

Office furniture 4 to 20 years

Automobiles 4 to 5 years

F-19


Leasehold improvements are depreciatedusing the straight-line method over the shorterof the term of the lease or the useful life of theasset. If a renewal option exists, the term usedreflects the additional time covered by theoption if exercise is reasonably assured whenthe leasehold improvement is first put intooperation.

Impairment of Goodwill and Non-Current Assets

We test goodwill for impairment at leastannually and when events occur or changes incircumstances indicate that the recoverableamount of a cash-generating unit is less than itscarrying value.

The recoverable amount of goodwill isestimated each year at the same time. Further-more, we review non-current assets, such asproperty, plant, equipment, and acquired intan-gible assets for impairment whenever events orchanges in circumstances indicate that the car-rying amount of an asset or group of assetsmay not be recoverable.

For the purpose of impairment testing,assets that cannot be tested individually aregrouped together into the smallest group ofassets that generates cash inflows from continu-ing use that are largely independent of the cashinflows of other assets or groups of assets (thecash-generating unit, or CGU). The recoverableamount of an asset or cash-generating unit isthe greater of its value in use and its fair valueless costs to sell. In assessing value in use, theestimated future cash flows are discounted totheir present value using a pre-tax discount ratethat reflects current market assessments of thetime value of money and the risks specific tothe asset.

Goodwill acquired in a business combi-nation is allocated to segments that areexpected to benefit from the synergies of thecombination. This allocation represents ourmanagement approach. As a result, we conductour goodwill impairment testing at the segmentlevel.

Our corporate assets do not generate sep-arate cash inflows. If there is an indication thata corporate asset may be impaired, then the

recoverable amount is determined for the CGUto which the corporate asset belongs.

An impairment loss is recognized if thecarrying amount of an asset or its CGUexceeds its estimated recoverable amount.Impairment losses are recognized in other oper-ating income, net in profit or loss.

Impairment losses for non-current tangi-ble and intangible assets recognized in the priorperiods are assessed at each reporting date forindicators that the loss has decreased or nolonger exists. Accordingly, if there is an indica-tion that the reasons that caused the impairmentno longer exist, we would consider the need toreverse all or a portion of the impairmentthrough profit or loss. In contrast, impairmentlosses for goodwill are never reversed.

Contingent Assets

We carry insurance policies amongst oth-ers to offset the expenses associated withdefending against litigation matters as well asother risks. To mitigate the risk of customerdefault, our trade receivables are partially cov-ered by merchandise credit insurance. We rec-ognize the respective reimbursements in profitor loss when it is virtually certain that thereimbursement will be received and retained byus.

Liabilities

Financial Liabilities

Financial liabilities include trade andother payables, bank loans, issued bonds, pri-vate placements and other financial liabilitieswhich comprise derivative and non-derivativefinancial liabilities.

They are recognized and measured inaccordance with IAS 39. Accordingly, financialliabilities are recognized in the ConsolidatedFinancial Statements if we have a contractualobligation to transfer cash or another financialasset to another party. Financial liabilities areinitially recognized at fair value, which in thecase of financial liabilities not at fair valuethrough profit or loss includes directly attribut-able transaction costs. If material, financial

F-20


liabilities are discounted to present value basedon prevailing market rates adjusted for creditrisk, with the discount being recognized overtime as interest expense. The subsequent mea-surement depends on the allocation of financialliabilities to the following categories accordingto IAS 39:

• Financial liabilities at fair valuethrough profit or loss only comprisethose financial liabilities that are heldfor trading, as we do not designatefinancial liabilities at fair valuethrough profit or loss on initial recog-nition. This category solely containsembedded and other derivatives withnegative fair values, except wherehedge accounting is applied. Allchanges in the fair value of financialliabilities in this category are immedi-ately recognized in profit or loss. Formore information about derivatives, seethe Derivatives section.

• Financial liabilities at amortized costinclude all non-derivative financial lia-bilities not quoted in an active marketwhich are measured at amortized costusing the effective interest method.

Expenses and gains/losses on financialliabilities consist of interest expenses, andgains and losses from the disposal of suchliabilities. Interest expense is recognized basedon the effective interest method.

Financial liabilities are derecognizedwhen the contractual obligation is discharged,canceled or has expired.

Non-Financial Liabilities

Other non-financial liabilities with fixedor determinable payments that are not quotedin an active market are mainly the result ofobligations to employees and fiscal authoritiesand are generally measured at amortized cost.

Provisions

Provisions are recorded when:

• It is more likely than not that we havea legal or constructive obligation tothird parties as a result of a past event.

• The amount can be reasonablyestimated.

• It is probable that there will be anoutflow of future economic benefits tosettle the obligation, while there maybe uncertainty about the timing oramount of the future expenditurerequired in the settlement.

We regularly adjust provisions as furtherinformation becomes available or circumstanceschange. Non-current provisions are reported atthe present value of their expected settlementamounts as at the reporting date. Discount ratesare regularly adjusted to current market interestrates.

Our software contracts usually containgeneral warranty provisions guaranteeing thatthe software will perform according to SAP’sstated specifications for six to 12 months. Atthe time of the sale or license of our softwarecovered by such warranty provisions, we recorda provision for warranty obligations based onthe historical average cost of fulfilling our obli-gations, which we classify as a currentobligation.

A provision for restructuring is recog-nized when we have approved a detailed andformal restructuring plan and the restructuringhas commenced or has been announced.

Post-Employment Benefits

We measure our pension-benefit liabili-ties and other post-employment benefits basedon actuarial computations using the project-ed-unit-credit method in accordance with IAS19. The assumptions used to calculate pensionliabilities and costs are shown in Note (19a).As a result of the actuarial calculation for eachplan we recognize an asset or liability for theoverfunded or underfunded status of the respec-tive defined benefit plan. We classify a portion

F-21


of the liability as current (determined on aplan-by-plan basis) if the amount by which theactuarial present value of benefits included inthe benefit obligation payable within the next12 months exceeds the fair value of plan assets.Changes in the amount of the defined benefitobligation or plan assets resulting from demo-graphic and financial data different than origi-nally assumed and from changes inassumptions can result in actuarial gains andlosses. We recognize all actuarial gains andlosses directly in retained earnings.

SAP’s pension benefits are classified asdefined contribution plans if the payment to aseparate fund relieves SAP of all obligationsfrom the pension plan. Obligations for contri-butions to defined contribution pension plansare recognized as an expense in profit or losswhen paid or due.

Deferred Income

Deferred income is recognized as soft-ware revenue, support revenue, professionalservice revenue, or other revenue, dependingon the reasons for the deferral, once the basicapplicable revenue recognition criteria havebeen met, for example, when the related ser-vices are performed or when the discounts areused.

Presentation in the Consolidated Statements of CashFlows

We classify interest and taxes paid aswell as interest and dividends received as cashflows from operating activities. Dividends paidare classified as financing activities.

(3c) Management Judgments and Sources of Estima-tion Uncertainty

The preparation of the ConsolidatedFinancial Statements in conformity with IFRSrequires management to make judgments, esti-mates, and assumptions that affect the applica-tion of accounting policies and the reportedamounts of assets, liabilities, revenues, andexpenses, as well as disclosure of contingentassets and liabilities.

We base our judgments, estimates, andassumptions on historical and forecast informa-tion, as well as regional and industry economicconditions in which we or our customers oper-ate, changes to which could adversely affectour estimates. Although we believe we havemade reasonable estimates about the ultimateresolution of the underlying uncertainties, noassurance can be given that the final outcomeof these matters will be consistent with what isreflected in our assets, liabilities, revenues, andexpenses. Actual results could differ from orig-inal estimates.

The accounting policies that most fre-quently require us to make judgments, esti-mates, and assumptions, and therefore arecritical to understanding our results of opera-tions, are:

• Revenue recognition

• Valuation of trade receivables

• Accounting for share-basedcompensation

• Accounting for income tax

• Accounting for business combinations

• Subsequent accounting for goodwilland other intangibles

• Accounting for legal contingencies

• Recognition of internally generatedintangible assets from development

Our management periodically discussesthese critical accounting policies with the AuditCommittee of the Supervisory Board.

Revenue Recognition

As described in the Revenue Recognitionsection of Note (3b), we do not recognize reve-nue before persuasive evidence of an arrange-ment exists, delivery has occurred, the risksand rewards of ownership have been transferredto the customer, the amount of revenue can bemeasured reliably, and collection of the relatedreceivable is reasonably assured. The determi-nation of whether the amount of revenue canbe measured reliably or whether the fees arecollectible is inherently judgmental as it

F-22


requires estimates as to whether and to whatextent subsequent concessions may be grantedto customers and whether the customer isexpected to pay the contractual fees. The tim-ing and amount of revenue recognition can varydepending on what assessments have beenmade.

In most of our revenue-generatingarrangements we sell to the customer more thanone product solution or service. Additionally,we have ongoing relationships with many ofour customers and often enter into severaltransactions with the same customer withinclose proximity in time. We therefore have todetermine:

• Which arrangements with the samecustomer are to be accounted for asone arrangement

• Which deliverables under one arrange-ment are to be accounted for separately

• How to allocate the total arrangementfee to the individual elements of onearrangement

The determination of whether differentarrangements with the same customer are to beaccounted for as one arrangement is highlyjudgmental as it requires us to evaluate whetherthe arrangements are negotiated together orlinked in any other way. The timing andamount of revenue recognition can varydepending on whether two arrangements areaccounted for separately or as one arrangement.

We do not account separately for soft-ware and other deliverables under an arrange-ment if one of the other deliverables (such asconsulting services) is deemed to be essentialto the functionality of the software. The deter-mination whether an undelivered element isessential to the functionality of the deliveredelement requires the use of judgment. The tim-ing and amount of revenue recognition can varydepending on how that judgment is exercisedbecause software revenue which may otherwisehave been recognized up front is recognizedover the term of providing the essentialdeliverable.

We also do not account separately fordifferent deliverables under an arrangement ifwe have no basis for allocating the overallarrangement fee to the different elements of thearrangement. We believe that such allocationbasis exists if we can demonstrate for eachundelivered element of the arrangement a com-pany-specific objective evidence of fair valueas further defined in the Revenue Recognitionsection of Note (3b). Judgment is required inthe determination of company-specific evidenceof fair value which may impact the timing andamount of revenue recognized depending on:

• Whether company-specific evidence offair value can be demonstrated for theundelivered elements of a softwarearrangement

• The approaches used to demonstratecompany-specific evidence of fairvalue

Additionally, our revenue would be sig-nificantly different if we applied a revenueallocation policy other than the residualmethod.

Revenue from consulting, other profes-sional services, and custom software develop-ment projects is determined by applying thepercentage of completion method of revenuerecognition. The percentage-of-completionmethod requires us to make estimates abouttotal revenue, total cost to complete the project,and the stage of completion. The assumptions,estimates, and uncertainties inherent in deter-mining the stage of completion affect the tim-ing and amounts of revenue recognized andexpenses reported. If we do not have a suffi-cient basis to measure the progress of comple-tion or to estimate the total contract revenueand costs, revenue recognition is limited to theamount of contract costs incurred. The determi-nation of whether a sufficient basis to measurethe progress of completion exists is judgmental.Changes in estimates of progress towards com-pletion and of contract revenue and contractcosts are accounted for as cumulative catch-upadjustments to the reported revenue for theapplicable contract.

F-23


Valuation of Trade Receivables

As described in the Trade and OtherReceivables section in Note (3b), we accountfor impairments of trade receivables by record-ing sales allowances and allowances for doubt-ful accounts on an individual receivable basisand on a portfolio basis. The assessment ofwhether a receivable is collectible is inherentlyjudgmental and requires the use of assumptionsabout customer defaults that could change sig-nificantly. Judgment is required when we evalu-ate available information about a particularcustomer’s financial situation to determinewhether it is probable that a credit loss willoccur and the amount of such loss is reasonablyestimable and thus an allowance for that spe-cific account is necessary. Basing the generalallowance for the remaining receivables on ourhistorical loss experience, too, is highly judg-mental as history may not be indicative offuture development, particularly in the globaleconomic circumstances resulting from therecent global financial crisis. Changes in ourestimates about the allowance for doubtfulaccounts could materially impact the reportedassets and expenses in our financial statements,and our profit could be adversely affected ifactual credit losses exceed our estimates. Tomitigate this risk, our trade receivables arepartially covered by merchandise creditinsurance.

Accounting for Share-Based Compensation

As described in Note (28), we haveissued both equity-settled as well as cash-set-tled share-based compensation plans.

We use certain assumptions in estimatingthe fair values for our share-based compensa-tion plans, including expected future stockprice volatility and expected option life (whichrepresents our estimate of the average amountof time remaining until the options are exer-cised or expire unexercised). In addition, finalpayout for these plans also depends on ourshare price at the respective exercise dates. Allthese assumptions may significantly impact thefair value determination and thus the amountand timing of our share-based compensationexpenses. Furthermore, the fair values of the

options granted under our 2009 plans (STARPP and SOP PP) are dependent on our out-performance against the Tech Peer Group Index(TechPGI) since grant date, the volatility andthe expected correlation between the marketprice of this index, and our share price.

For the purpose of determining the esti-mated fair value of our stock options, webelieve expected volatility is the most sensitiveassumption. Regarding future payout under theplans, the price of shares of SAP will be themost relevant factor. In respect to our plansgranted in 2009 (SOP PP and STAR PP), webelieve that future payout will be significantlyimpacted not only by our share price but alsoby the requirement to outperform the TechPGI.Changes in these factors could significantlyaffect the estimated fair values as calculated bythe option-pricing model, and the futurepayout.

Accounting for Income Tax

We conduct operations and earn incomein numerous foreign countries and are subjectto changing tax laws in multiple jurisdictionswithin the countries in which we operate. Ourordinary business activities also include trans-actions where the ultimate tax outcome isuncertain, such as those involving revenue shar-ing and cost reimbursement arrangementsbetween SAP Group entities. In addition, theamount of income tax we pay is generallysubject to ongoing audits by domestic and for-eign tax authorities. As a result, judgments arenecessary in determining our worldwideincome tax provisions. We have made reason-able estimates about the ultimate resolution ofour tax uncertainties based on current tax lawsand our interpretation thereof. Such judgmentscan have a material effect on our income taxexpense, income tax provision, and profit aftertax.

The carrying amount of a deferred taxasset is reviewed at the end of each reportingperiod and is reduced to the extent that it is nolonger probable that sufficient taxable profitwill be available to allow the benefit of part orall of the deferred tax assets to be utilized. Thisassessment requires management judgments,

F-24


estimates, and assumptions. In evaluating ourability to utilize our deferred tax assets, weconsider all available positive and negative evi-dence, including the level of historical taxableincome and projections for future taxableincome over the periods in which the deferredtax assets are recoverable. Our judgmentsregarding future taxable income are based onexpectations of market conditions and otherfacts and circumstances. Any adverse change tothe underlying facts or our estimates andassumptions could require that we reduce thecarrying amount of our net deferred tax assets.

For more information about our incometax, see Note (11).

Accounting for Business Combinations

In our accounting for business combina-tions, judgment is required in identifyingwhether an intangible asset is identifiable, i.e. tobe recorded separately from goodwill. Addition-ally, estimating the acquisition date fair valuesof the identifiable assets acquired and liabilitiesassumed involves considerable managementjudgment. The necessary measurements arebased on information available at the acquisitiondate and are based on expectations and assump-tions that have been deemed reasonable by man-agement. These judgments, estimates, andassumptions can materially affect our financialposition and profit for several reasons, amongwhich are the following:

• Fair values assigned to assets subjectto depreciation and amortization affectsthe amounts of depreciation and amor-tization to be recorded in operatingprofit in the periods following theacquisition.

• Subsequent negative changes in theestimated fair values of assets mayresult in additional expense fromimpairment charges.

• Subsequent changes in the estimatedfair values of liabilities and provisionsmay result in additional expense (ifincreasing the estimated fair value) oradditional income (if decreasing theestimated fair value).

Subsequent Accounting for Goodwill and OtherIntangibles

As described in the Intangible Assetssection in Note (3b), all our intangible assetsother than goodwill have finite useful lives.Consequently, the depreciable amount of theintangible assets is allocated on a systematicbasis over their useful lives. Judgment isrequired in:

• The determination of the useful life ofan intangible asset as this determina-tion is based on our estimates regard-ing the period over which theintangible asset is expected to produceeconomic benefits to us.

• The determination of the amortizationmethod as IFRS requires the straight-line method to be used unless we canreliably determine the pattern in whichthe asset’s future economic benefits areexpected to be consumed by us.

Both the amortization period and theamortization method have an impact on theamortization expense that is recorded in eachperiod.

In making impairment assessments forour intangible assets and goodwill, we use cer-tain assumptions and estimates about futurecash flows, which are complex and requiresignificant judgment and assumptions aboutfuture developments. They can be affected by avariety of factors, including changes in ourbusiness strategy, our internal forecasts, and anestimate of our weighted-average cost of capi-tal. Due to these factors, actual cash flows andvalues could vary significantly from the fore-casted future cash flows and related valuesderived using the discounted cash flow method.Although we believe the assumptions and esti-mates we have made in the past have beenreasonable and appropriate, different assump-tions and estimates could materially affect ourfinancial position and profit.

Additionally, the results of goodwillimpairment tests may depend on the allocationof goodwill to cash-generating units. This allo-cation is judgmental as it is based on ourestimates regarding which cash-generating units

F-25


are expected to benefit from the synergies ofthe respective business combination.

We did not record any charges on ourgoodwill and no significant impairment chargeson our intangible assets during fiscal year2010. Although we do not currently have anindication of any significant impairment, therecan be no assurance that impairment chargeswill not occur in the future. For more informa-tion, see Note (16).

Accounting for Legal Contingencies

As described in Note (24), currently weare involved in various claims and legal pro-ceedings. We review the status of each signifi-cant matter on at least a quarterly basis andassess our potential financial and businessexposures related to such matters. Significantjudgment is required in the determination ofwhether a provision is to be recorded and whatthe appropriate amount for such provisionshould be. This judgment is particularlyrequired in:

• The determination whether an obliga-tion exists

• The determination of the probability ofoutflow of economic benefits

• The determination whether the amountof obligation is estimable

• The estimate of the obligation

Due to uncertainties relating to thesematters, provisions are based on the best infor-mation available at the time.

At the end of each reporting period, wereassess the potential obligations related to ourpending claims and litigation and adjust ourrespective provisions to reflect the current bestestimate. In addition, we monitor and evaluatenew information that we receive after the endof the respective reporting period but beforethe Consolidated Financial Statements areauthorized for issue to determine whether thisprovides additional information regarding con-ditions that existed at the end of the reportingperiod. Such revisions to our estimates of thepotential obligations could have a materialimpact on our financial position and profit.

The effects of changes in estimates of potentialliabilities related to our legal contingencies hadno material impact on our 2009, or 2008results. Due to the November 2010 jury verdictregarding the TomorrowNow litigation, we sig-nificantly increased our provision recorded forthis case. This increase did have a materialimpact on our financial performance, financialposition and cash flows. Further informationregarding this case is presented in Notes (19b)and (24).

Recognition of Internally Generated Intangible Assetsfrom Development

Under IFRS, internally generated intangi-ble assets from the development phase are rec-ognized if certain conditions are met. Theseconditions include the technical feasibility,intention to complete, the ability to use or sellthe asset under development, and the demon-stration of how the asset will generate probablefuture economic benefits. The cost of a recog-nized internally generated intangible asset com-prises all directly attributable cost necessary tomake the asset capable of being used asintended by management. In contrast, allexpenditures arising from the research phaseare expensed as incurred.

We believe that determining whetherinternally generated intangible assets fromdevelopment are to be recognized as intangibleassets requires significant judgment, particu-larly in the following areas:

• Determining whether activities shouldbe considered research activities ordevelopment activities.

• Determining whether the conditions forrecognizing an intangible asset are metrequires assumptions about future mar-ket conditions, customer demand andother developments.

• The term “technical feasibility” is notdefined in IFRS, and therefore deter-mining whether the completion of anasset is technically feasible requiresjudgment and a company-specificapproach.

F-26


• Determining the future ability to use orsell the intangible asset arising fromthe development and the determinationof the probability of future benefitsfrom sale or use.

• Determining whether a cost is directlyor indirectly attributable to an intangi-ble asset and whether a cost is neces-sary for completing a development.

We have determined that the conditionsfor recognizing internally generated intangibleassets from our software development activitiesare not met until shortly before the developedproducts are available for sale. This assessmentis monitored by us on a regular basis.

(3d) New Accounting Standards Adopted in the Cur-rent Period

In July 2008, the IASB issued an amend-ment to IAS 39 Financial Instruments: Recog-nition and Measurement: Eligible HedgedItems (IAS 39). The amendment addresses thedesignation of a one-sided risk in a hedgeditem and the designation of inflation in particu-lar situations. The amendment applies to hedg-ing relationships in the scope of IAS 39. Theamendment is effective for fiscal years begin-ning on or after July 1, 2009. Earlier applica-tion is permitted. The amendment of IAS 39did not have a significant impact on our Con-solidated Financial Statements.

In April 2009, the IASB issued Improve-ments to IFRSs — a collection of amendmentsto several International Financial ReportingStandards — as part of its program of annualimprovements to its standards, which is

intended to make necessary, but non-urgent,amendments to standards that will not beincluded as part of another major project. Theamendments resulting from this standardmainly have effective dates for annual periodsbeginning on or after January 1, 2010, althoughentities are permitted to adopt them earlier.These amendments did not have a significantimpact on our Consolidated FinancialStatements.

(3e) New Accounting Standards Not Yet Adopted

A number of new standards, amendmentsto standards and interpretations are not yeteffective for the year ended December 31,2010, and have not been applied in preparingthese Consolidated Financial Statements. Noneof these is expected to have an effect on theConsolidated Financial Statements of theGroup, except for:

• IFRS 9 Financial Instruments, whichbecomes mandatory for the Group’s2013 consolidated financial statementsand is expected to impact the classifi-cation and measurement of financialassets. The extent of the impact hasnot been determined.

• Amendment to IFRS 7 FinancialInstruments: Disclosures — Amend-ments enhancing disclosures abouttransfers of financial assets (IFRS 7),which becomes mandatory for theGroup’s 2012 consolidated financialstatements and might result in addi-tional disclosures.

F-27


(4) BUSINESS COMBINATIONS

In 2010, we concluded the following business combinations:

Acquired Businesses

Business Acquired Sector Acquisition

Type

Acquired

Voting

Interest

Acquisition

Date

Sybase Inc., Dublin, CA,

USA

Public entity specializing in

database and mobile solutions

Share

purchase

100% July 26, 2010

Technidata AG, Markdorf,

Germany

Privately held company

specialized in developing software

solutions for the management of

product safety and environmental,

health and safety (EHS) solutions

Share

purchase

100% July 27, 2010

cundus AG, Duisburg,

Germany

Privately held company from

which we acquired their

disclosure management solution

business

Asset

purchase

December

31, 2010

All transactions, except the acquisition ofSybase, were immaterial to SAP individuallyand in the aggregate. All of the acquired busi-nesses develop and/or sell software in specificareas of strategic interest to us or complementour service portfolio.

Sybase, Inc. (Sybase), which is headquar-tered in Dublin, California (USA), delivers arange of solutions to ensure that customerinformation is securely managed and mobilized,including enterprise and mobile databases, mid-dleware, synchronization, encryption anddevice management software, and mobile mes-saging services. Before our acquisition, itsstock was traded on the New York StockExchange (NYSE: SY).

SAP’s tender offer to acquire Sybaseannounced on May 12, was made pursuant to atender offer statement which was filed by SAPwith the U.S. Securities and Exchange Commis-sion (the “SEC”) on May 26, 2010. Under theterms and conditions of the tender offer, SAPmade an all cash tender offer for all of the

outstanding shares of Sybase common stock atUS$65.00 per share, representing an enterprisevalue of approximately US$5.9 billion. The trans-action closed on July 26 after receipt of themajority of the outstanding shares of Sybase’scommon stock (92.1% of Sybase’s outstandingshares of common stock, or 91.8% on a fullydiluted basis) and clearance by the relevant anti-trust authorities. Subsequently, SAP used its rightto acquire the remaining common shares underthe applicable corporate law. The business com-bination was completed on July 29. The remain-ing shareholders received $65.00 per share incash without interest and subject to any requiredwithholding of taxes, the same consideration paidto stockholders in the tender offer.

The per share purchase price representeda 44% premium over the three-month averagestock price of Sybase. The transaction wasfunded from SAP’s cash on hand and aA2.64 billion acquisition term loan facility. Forfurther information on the financing of theacquisition see Note (18).

F-28


The components of the consideration transferred for our business combinations are as follows:

Consideration

E millionsThereofSybase

Value of acquired net assets or shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 4,414 4,322Value of acquired and accelerated options, stock appreciation rights and restricted

stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 229Total consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,643 4,551

The acquisition-related costs incurredtotaled A16 million for our 2010 business com-binations, all of which were recognized in gen-eral and administration expense.

The following table shows the allocationof recognized amounts of identifiable assetsacquired and liabilities assumed:

F-29


Recognized Amounts of Identifiable Assets Acquired and Liabilities AssumedE millions Thereof Sybase

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446 427Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 209Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 170Other non-financial assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 23Property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 23Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,735 1,711

Thereof customer relationship and other intangibles

Customer relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,091 1,088Tradename. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 47Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 14

1,166 1,149

Thereof acquired technologyIntellectual property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524 518In process research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 44

569 562Thereof software and database licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 10

Current and deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 23Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,646 2,586

Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 104Loans and borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 475Current and deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607 602Provisions and other non-financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 138 127

Thereof legal and litigation related liabilities . . . . . . . . . . . . . . . . . . . . . . 16 16Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 75Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,408 1,383

Total identifiable net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,238 1,203

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,405 3,348

Total consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,643 4,551

The fair value of Sybase customer rela-tionship intangibles includes the customer rela-tionships relating to Sybase’s core business aswell as its messaging business. The fair valuesof Sybase’s intellectual property includes assets

relating to innovations and technologicaladvances, such as patented and unpatentedtechnology, trade secrets, and databases. Therewere no identifiable intangible assets that havenot been separately recorded.

F-30


The fair value of trade receivables has been estimated as follows:

Valuation of Trade Receivables

E millionsThereofSybase

Gross contractual amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 174Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4Fair value of receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 170

The initial accounting for current anddeferred tax liabilities as well as for litigation-related and similar legal liabilities has onlybeen provisionally determined considering allrelevant facts and circumstances known at thereporting date. We will continue to review these

matters during the measurement period. If newinformation is obtained within one year fromthe acquisition date about facts and circum-stances that existed at the acquisition date, theacquisition accounting will be revised. Contin-gent liabilities recognized are not material.

Goodwill recognized for our 2010 business combinations was assigned to our Product,Consulting, Training, and the Sybase segments as follows. For a description of our segments seeNote (29):

Assignment of Acquired Goodwill to SegmentsE millions Thereof Sybase

Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 730Consulting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 63Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 20Sybase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,535 2,535Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,405 3,348

The goodwill arising from the acquisi-tions is attributable mainly to the skills andtechnical talent of the acquiree’s work forceand the synergies expected to be achieved fromintegrating the activities of the companies.With regard to Sybase, SAP plans to accelerate

the reach of its solutions across mobile plat-forms and drive forward the realization of itsin-memory computing vision. Sybase’s mobileplatform can connect all applications and data(SAP and non-SAP) and enable them to beutilized on mobile devices.

Impact of Sybase on SAP’s Financials

E millions2010 asreported

ThereofSybase

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,464 347Profit after tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,813 10

Had the acquisition of Sybase occurredat the beginning of 2010, we estimate that pro-forma revenue would have amounted toA12,947 million, and pro-forma profit after taxwould have been A1,737 million. Theseamounts have been calculated after applying

the Company’s accounting policies and adjust-ing the results for Sybase to reflect:

• Additional depreciation and amortiza-tion that would have been chargedassuming the fair value adjustment toproperty, plant, and equipment andintangible assets had been applied fromJanuary 1, 2010.

F-31


• The impact of deferred revenue write-downs on maintenance revenue on afull-year basis.

• The borrowing costs on the fundinglevels and debt/equity position of thecompany after the businesscombination.

• Related tax effects.

These pro-forma numbers have been pre-pared for comparative purposes only. Thesepro-forma revenue and profit numbers are notnecessarily indicative of either the results ofoperations that would have actually occurredhad the acquisition been in effect at the begin-ning of the respective periods or of futureresults.

Our revenue and profit after tax as wellas our pro-forma revenue and pro-forma profit

after tax would not have been materially differ-ent from the numbers presented had January 1,2010, been the acquisition date for our otherimmaterial business combinations.

Business combinations of the prior yearare described in the Notes to our ConsolidatedFinancial Statements for 2009. We have notrecorded measurement adjustments for any ofthe 2009 business combinations. We recognizeda reduction in goodwill (A4 million) for a 2008acquisition due to a lower than expected finalcontingent consideration payment.

(5) REVENUE

For detailed information about our reve-nue recognition policies, see Note (3).

For revenue information by segment andgeographic region, see Note (29).

Revenue from construction-type contracts (contract revenue) is included in software revenueand consulting revenue depending on the type of project. The status of our construction projects inprogress at the end of the reporting period accounted for under IAS 11 was as follows:

Construction Projects in Progress

€ millions 2010 2009 2008

Aggregate cost recognized (multi-year)

Revenue recognized in the respective year 141 109 80

Recognized result (+profit/-loss; multi-year)

163 106 126

Advance payments received

17 14 -14

Gross amounts due from customers

5 3 0

Gross amounts due to customers

Loss provisions

21 8 18

35 7 12

28 1 2

F-32


(6) RESTRUCTURING

Restructuring expenses were as follows:

Restructuring Expenses

€ millions 2010 2009 2008

Employee-related

restructuring

expenses

1 187 23

Facility-related

restructuring

expenses

-4 11 37

Total -3 198 60

All 2010 restructuring charges resulted ina release of A3 million in the aggregate relatingto changes in the estimates for restructuringprojects started in previous years. Changes inestimate were made for our 2009 program inwhich we reduced our workforce by 2,983 posi-tions through terminations and early retirementplans, and consolidated certain facilities due tothe reduced number of employees. We also

changed estimates for our 2008 facility restruc-turings that resulted from the Business Objectsacquisition. The restructuring expenses recog-nized in 2008 relate mainly to the BusinessObjects-related restructuring program.

For additional information on the roll-forward of our restructuring provision, see Note(19b).

As restructuring expenses were significant to our operations in 2009, we have presented thoseexpenses separately in our Consolidated Income Statements in accordance with IAS 1.97. If notpresented separately, these expenses would break down as follows:

Restructuring Expenses

€ millions 2010 2009 2008

Cost of software and software-

related services

Cost of professional services and

other services

-1

0 17 11

60 9

Research and development -1 48 15

Sales and marketing -1 59 20

General and administration 0 14 5

Total -3 198 60

F-33


(7) OTHER OPERATING INCOME, NET

Other operating income, net, was as follows:

Other Operating Income, Net

€ millions 2010 2009 2008

General bad debt income/expenses -3 7 -9

Miscellaneous other operating expenses -2 -3 -2

Rental income 5 7 7

Receipt of insurance proceeds 0 3 4

Gain on disposals of non-current assets 3 11 0

Miscellaneous other operating income 6 8 11

Other operating income, net 9 33 11

(8) EMPLOYEE BENEFITS EXPENSE AND HEADCOUNT

Employee Benefits Expense

Employee benefits expense comprises the following:

Employee Benefits Expense

€ millions 2010 2009 2008

Salaries 4,383 4,007 4,168

Social security expense 607 554 509

Pension expense 149 147 127

Share-based payment expense 58 54 63

Termination benefits 63 14 27

Employee-related restructuring

expenses1 187 23

Employee benefits expense 5,261 4,963 4,917

F-34


Number of Employees

On December 31, 2010, the breakdown of our full-time equivalent employee numbers byfunction in SAP and by region was as follows:

Full-time equivalents EMEA(1) Americas



AsiaPacificJapan Total

December 31, 2010 December 31, 2009 December 31, 2008

Software and software-related services . . . . . . 3,804 1,827 2,254 7,885 3,227 1,276 1,919 6,422 3,269 1,306 1,891 6,466

Professional services andother services . . . . . . . 6,787 3,955 2,410 13,152 6,635 3,473 2,240 12,348 7,326 4,142 2,583 14,051

Research anddevelopment . . . . . . . . 8,617 3,154 4,113 15,884 8,525 2,534 3,755 14,814 8,687 2,767 4,094 15,548

Sales and marketing . . . . 4,593 4,214 2,180 10,987 4,202 3,559 1,752 9,513 4,645 4,014 2,042 10,701

General andadministration . . . . . . . 2,053 1,005 518 3,576 1,919 724 408 3,051 1,996 788 459 3,243

Infrastructure . . . . . . . . . 1,135 628 266 2,029 854 408 174 1,436 905 445 185 1,535

SAP Group(December 31) . . . . . . 26,989 14,783 11,741 53,513 25,362 11,974 10,248 47,584 26,828 13,462 11,254 51,544

Thereof Sybase . . . . . . . 813 1,866 1,047 3,726

SAP Group (months’end average) . . . . . . . 25,929 13,164 10,877 49,970 25,927 12,288 10,554 48,769 26,561 13,872 11,128 51,561

(1) Europe, Middle East, Africa

Allocation of Share-Based Compensation Expense

The allocation of expense for share-based compensation to the various expense items is asfollows:


€ millions 2010 20082009

Cost of software and software-related services 4 5 6

Cost of professional services and other services 9 9 12

Research and development 19 18 18

Sales and marketing 16 12 15

General and administration 10 10 12

Total share-based compensation 58 54 63

Thereof cash-settled share-based payment plans 29 49 59

Thereof equity-settled share-based payment plans 29 5 4

For more information about our share-based compensation plans, see Note (28).

F-35


(9) OTHER NON-OPERATING EXPENSE, NET

Other non-operating expense, net was as follows:

Other Non-Operating Expense, Net

€ millions 2010 20082009

Foreign currency exchange gain/loss, net -175 -73 2

Thereof realized gain/loss -317 89 -32

Thereof unrealized gain/loss 199 -168 66

Thereof embedded derivatives -57 6 -32

Other non-operating income 3 8 5

Other non-operating expense -14 -8 -34

Other non-operating expense, net -186 -73 -27

(10) FINANCE INCOME, NET

Other finance income, net was as follows:

Finance Income, Net

€ millions 2010 2009 2008

Finance income

Interest income from

available-for-sale financial assets (debt) 0 0 5

loans and receivables 34 35 70

derivatives 25 0 7

Gains on

available-for-sale financial assets (debt) 2 0 0

-2

available-for-sale financial assets (equity) 9 1 15

Share of result of associates 3 1 1

Finance income 73 37 98

Finance cost

Interest expense from

financial liabilities at amortized cost -77 -63 -131

derivatives -31 -38 0

TomorrowNow -12 0 0

Losses on

available-for-sale financial assets (debt) 0 0

available-for-sale financial assets (equity) -1 -1 0

Impairment losses from

available-for-sale financial assets (equity) -3 -11 -13

loans and receivables 0 0 -1

Fees for credit facilities -16 -4 -1

Finance cost -140 -117 -148

Finance income, net -67 -80 -50

F-36


(11) INCOME TAX

Income tax expense for the years ended December 31 comprised the following components:

Income Tax Expense

€ millions 2010 2009 2008

Current tax expense – Germany 413 344 404

Current tax expense – foreign 459 380 463

872 724 867

Deferred tax expense/income – Germany 23 -16 11

Deferred tax income – foreign -370 -23 -102

-347 -39 -91

Income tax expense 525 685 776

thereof current tax expense for current year 862 783 853

thereof current taxes for prior years 10 -59 14

thereof deferred taxes due to origination and

reversal of temporary differences -388 -51 -107

thereof deferred taxes due to unused tax losses

as well as research and development and

foreign tax credits 41 12 16

Profit before tax consisted of the following:

Profit Before Tax

€ millions 2010 2009 2008

Germany 2,009 1,324 1,636

Foreign 329 1,111 988

2,338 2,435 2,624

F-37


The following table reconciles the expected income tax expense computed by applying ourcombined German corporate tax rate of 26.29% (2009: 26.21%; 2008: 26.33%) to the actual incometax expense. Our 2010 combined German corporate tax rate includes a corporate income tax rate of15.00% (2009: 15.00%; 2008: 15.00%), plus a solidarity surcharge of 5.5% thereon, and trade taxesof 10.46% (2009: 10.38%; 2008: 10.50%).

Reconciliation of Tax Expense

€ millions 2010 2009 2008

Profit before tax 2,338 2,435 2,624

Tax expense at applicable tax rate 615 638 691

Tax effect of foreign tax rates -108 57 49

Tax effect on non-deductible expenses 106 94 56

Prior-year taxes -18 -45 14

Tax effect on tax exempt income -56 -52 -49

Tax effect on research and development

and foreign tax credits -53 -20 -14

Change in realizability of deferred tax

assets as well as research and

development and foreign tax credits 11 -8 7

Other 28 21 22

Total tax expense 525 685 776

Effective tax rate 22.5% 28.1% 29.6%

F-38


Deferred tax assets and liabilities on a gross basis as at December 31, 2010 and 2009, areattributable to the following items:

Deferred Tax Assets and Liabilities

€ millions 2010 2009

Deferred tax assets

Intangible assets 69 69

Property, plant, and equipment 15 15

Other financial assets 12 13

Trade and other receivables 30 120

Net operating loss carryforwards 55 29

Pension provisions 97 37

Share-based compensation 37 23

Other provisions and obligations 548 171

Deferred income 41 30

Research and development and

foreign tax credits 24 4

Other 112 74

Deferred tax assets 1,040 585

Deferred tax liabilities

Intangible assets 512 178

Property, plant, and equipment 47 34

Other financial assets 226 36

Trade and other receivables 21 38

Pension provisions 37 59

Other provisions and obligations 3 5

Deferred income 5 0

Other 31 27

Deferred tax liabilities 882 377

Deferred tax assets, net 158 208

The increase of the deferred tax assetsmainly results from the tax effect of the provi-sion recorded for the TomorrowNow litigation.The increase in deferred tax liabilities mainlyresults from our business combinations in 2010since the fair values of the acquired assets andassumed liabilities differ significantly from the

respective tax bases. It mostly relates to intan-gible assets and other financial assets.

Current income tax payments werereduced in 2010 in the amount of A1 million(2009: A2 million; 2008: A5 million) due to theTomorrowNow litigation.

Deferred tax assets have not been recognized in respect of the following items for the yearsended December 31, 2010, 2009, and 2008, because it is not probable that future taxable profits willbe available against which we can utilize the benefits thereof:

F-39


Items not Resulting in a Deferred Tax Asset

€ millions 2010 2009 2008

Tax losses

Note expiring

Expiring in the following year 5

7 8 8

1 4

Expiring after the following year 86 138 176

Total unused tax losses 98 147 188

Not expiring 21 0 0

Expiring after the following year 2 4 1

Total unused tax credits 23 4 1

Research and development and

foreign tax credits

We have not recognized a deferred taxliability on approximately A4.56 billion (2009:A3.60 billion) for undistributed profits of oursubsidiaries that arose in 2010 and prior yearsbecause we plan to indefinitely reinvest thoseundistributed profits. It is not practicable to

estimate the amount of unrecognized tax liabil-ities for these undistributed foreign profits.

The proposed dividend payment of A0.60per share for the year ended December 31,2010, will not have any effects on the incometax of SAP AG.

Total income tax including the items charged or credited directly to share premium and othercomprehensive income for the years ended December 31, 2010, 2009, and 2008, consists of thefollowing:

Total Income Tax

€ millions 2010 2009 2008

Income tax recorded in profit 525 685 776

Income tax recorded in share premium -1 0 -13

Income tax recorded in other comprehensive

income:

- unrealized gains/losses on available-for-sale

financial assets 0

- gains/losses on cash flow hedges -5 11 -17

- actuarial gains/losses on defined benefit

plans -18 0 -22

- currency effects 5 0 0

506 697 724

1 0

The income tax recorded in share pre-mium relates to our equity-settled share-basedcompensation.

(12) EARNINGS PER SHARE

Convertible bonds, stock options, andrestricted shares (the bonus shares in the Share

Matching Plan 2010 as discussed in Note(28) below) granted to employees under ourshare-based compensation programs areincluded in the diluted earnings per share cal-culations to the extent they have a dilutiveeffect. The computation of diluted earnings pershare does not include certain convertiblebonds and stock options issued in connection

F-40


with the SAP AG 2000 Long Term IncentivePlan (LTI 2000 Plan) and the SAP StockOption Plan 2002 (SAP SOP 2002) becausetheir effect is antidilutive. Such convertiblebonds and stock options, if converted or exer-cised, represented 21.2 million SAP common

shares in 2010 (2009: 35.8 million SAP com-mon shares; 2008: 43.6 million SAP commonshares). The number of outstanding stockoptions and convertible bonds is presented inNote (28).

Earnings per share for the years ended December 31 was calculated as follows:

Earnings per ShareE millions, unless otherwise stated 2010 2009 2008

Profit attributable to owners of parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,811 1,748 1,847Issued ordinary shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,226 1,226 1,239Effect of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �38 �38 �49

Weighted average shares — basic(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,188 1,188 1,190Dilutive effect of stock options(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1

Weighted average shares — diluted(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,189 1,189 1,191

Basic earnings per share, in E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.52 1.47 1.55

Diluted earnings per share, in E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.52 1.47 1.55

(1) Number of shares in million

(13) OTHER FINANCIAL ASSETS

Other Financial Assets

€ millions Current Non-Current Total Current Non-Current Total

Loans and other financial receivables 42 328 370 422 168 590

Debt investments 0 0 0 0 0 0

Equity investments 0 107 107 0 87 87

Available-for-sale financial assets 0 107 107 0 87 87

Derivatives 116 0 116 64 2 66

Investments in associates 0 40 40 0 27 27

Total 158 475 633 486 284 770

20092010

Loans and Other Financial Receivables

Loans and other financial receivablesmainly consist of investments in insurance pol-icies relating to pension assets (semiretirementand time accounts) for which the correspondingliability is included in employee-related obliga-tions (see Note 19b), time deposits, otherreceivables, and loans to employees. Themajority of our loans and other financialreceivables is concentrated in Germany.

As at December 31, 2010, there were noloans and other financial receivables past duebut not impaired. We have no indications ofimpairments of loans and other financialreceivables that are not past due and notimpaired as at the reporting date. For generalinformation on financial risk and the nature ofrisk, see Note (25).

F-41


Available-for-Sale Financial Assets

Available-for-sale financial assets are denominated in the following currencies:


Euros 34 34

U.S. dollars 71 52

Other 2 1

107 87

Our equity investments include securitiesthat do not have a quoted market price and forwhich fair value cannot be reliably measured.These equity investments had a carrying valueof A79 million and A62 million as at Decem-ber 31, 2010, and 2009, respectively. We recog-nized impairment losses of A3 million,A11 million, and A12 million in 2010, 2009,and 2008, respectively, for such equity securi-ties at cost.

As of December 31, 2010, we do notintend to dispose of any equity investments atcost in the near future. For information on fairvalue measurement with regard to our equityinvestments at cost, see Note (27).

Derivatives

Detailed information about our derivativefinancial instruments is presented in Note (26).

(14) TRADE AND OTHER RECEIVABLES

Trade and Other Receivables

2010 2009

€ millions Current Non-current Total Current Non-current Total

Trade receivables, net 3,031 0 3,031 2,507 1 2,508

Other receivables 68 78 146 39 51 90

Total trade and other receivables 3,099 78 3,177 2,546 52 2,598

The carrying amounts of our trade receivables as at December 31 are as follows:

Carrying Amounts of Trade Receivables


Gross carrying amount 3,187 2,698

Sales allowances charged to revenue -112 -142

Allowance for doubtful accounts charged to

expense -44 -48

Carrying amount trade receivables, net 3,031 2,508

F-42


Changes in the allowance for doubtful accounts were as follows:

Increase (Decrease) in Allowance for Doubtful Accounts Charged to Expense


Beginning balance 48 51

Utilization 0 -5

Addition 9 11

Release -14 -11

Exchange rate effects and other changes 1 2

Ending balance 44 48

Concentrations of credit risks are limited due to our large customer base and its distributionacross many different industries and countries worldwide.

The aging of trade receivables as at December 31 was:

Aging of Trade Receivables


Not past due and not individually impaired 2,390 1,861

Past due but not individually impaired

Past due 1-30 days 278 264

Past due 31-120 days 206 156

Past due 121-365 days 60 67

Past due over 365 days 42 60

Total past due but not individually impaired 586 547

Individually impaired, net of allowances 55 100

Carrying amount of trade receivables, net 3,031 2,508

We believe that the recorded sales and bad debt allowances adequately provide for the creditrisk inherent in trade receivables.

For more information about financial risk and how we manage it, see Note (25) and (26).

F-43


(15) OTHER NON-FINANCIAL ASSETS

Other Non-Financial Assets

2010 2009

€ millions Current Non-current Current Non-current Total

Prepaid expenses 101 31 132 91 35 126

Other tax assets 58 0 58 35 0 35

Advance payments 8 0 8 8 0 8

Inventories 12 0 12 11 0 11

Miscellaneous other assets 2 0 2 2 0 2

Total other non-financial assets 181 31 212 147 35 182

Total

Prepaid expenses primarily consist of prepayments for operating leases, support services, andsoftware royalties that will be charged to expense in future periods.

F-44


(16) GOODWILL AND INTANGIBLE ASSETS

Goodwill and Intangible Assets

€ millions Goodwill

Software

and

Database

Licenses

Acquired

Technology/

IPRD

Customer

Relationship

and Other

Intangibles Total

Purchase cost

January 1, 2009 5,070 323 646 763 6,802

Foreign currency exchange differences -23 1 -6 -4 -32

Additions from business combinations 41 0 29 3 73

Other additions 0 19 0 0 19

Retirements/disposals 0 -9 -6 -4 -19

December 31, 2009 5,088 334 663 758 6,843

Foreign currency exchange differences 38 3 7 -5 43

Additions from business combinations 3,401 11 569 1,155 5,136

Other additions 0 79 0 0 79

Retirements/disposals 0 -10 1 -5 -14

December 31, 2010 8,527 417 1,240 1,903 12,087

Accumulated amortization

January 1, 2009 95 191 250 151 687

Foreign currency exchange differences -1 1 -3 -2 -5

Additions depreciation 0 36 135 121 292

Impairments 0 0 0 0 0

Retirements/disposals 0 -9 -6 -4 -19

December 31, 2009 94 219 376 266 955

Foreign currency exchange differences 2 4 7 5 18

Additions depreciation 0 36 143 142 321

Impairments 0 0 0 0 0

Retirements/disposals 0 -10 1 -5 -14

December 31, 2010 96 249 527 408 1,280

Carrying value December 31, 2009 4 ,994 115 287 492 5,888

Carrying value December 31, 2010 8 ,431 168 713 1,495 10,807

The additions to goodwill result from ouracquisitions (A3,405 million) and adjustmentsto goodwill of previous acquisitions (A4 million)due to changes of expected contingent consid-eration payments that had previously beenaccounted for under IFRS 3 (2004). For moreinformation about acquisitions, see Note (4).

Software and database licenses consistprimarily of technology for internal use,whereas acquired technology consists primarilyof purchased software to be incorporated into

our product offerings and in-process researchand development. The additions to softwareand database licenses in 2010 and 2009 wereindividually acquired from third parties andinclude cross-license agreements and patents,whereas the additions to acquired technologyand other intangibles primarily result from ourbusiness combinations discussed in Note (4).

Other intangibles consist primarily ofacquired trademark licenses and customercontracts.

F-45


We carry the following significant intangible assets:

Significant Intangible Assets

2010 2009

Sybase - Acquired technologies 518 0 4-6

Business Objects - Acquired

technologies

86 139 1-5

Sybase - Maintenance related

customer relationships

846 0 12

Sybase - Messaging and license

related customer relationships

189 0 2-10

Business Objects - Maintenance

related customer relationships

250 270 11-14

Business Objects - Other customer

relationship

67 95 6-9

Total significant intangible assets 1,956 504

Remaining

Useful Life in

Years

Description Carrying Amount in €

millions

Amortization expenses of intangibleassets are included in cost of software andsoftware-related services, cost of professional

services and other services, research and devel-opment, sales and marketing, as well as generaland administration based on usage.

Goodwill is allocated to our cash generating units (CGU), which correspond to our segments.The carrying amount of goodwill by reportable segment at December 31, 2010, and 2009, was asfollows:

Goodwill by Segments

€ millions

Segment

12/31/2010 Thereof

changes in

2010

12/31/2009 Thereof

changes in

2009

Product 5,002 777 4,160 38

Consulting 764 67 687 2

Training 171 22 147 1

Sybase 2,494 2,535 0 0

Total 8,431 3,401 4,994 41

For more information about our segmentssee Note (29).

The recoverable amount of our CGUshas been determined based on the value-in-use

calculation. The segments are in complemen-tary businesses, and consequently, the recover-able amounts are based to a certain extent onthe same key assumptions.

F-46


The key assumptions that we have used for purposes of goodwill impairment testing in 2010are as follows:

Growth rate assumed

for the business plan

12-14% 6-12% 5% 4-6%

Terminal growth rate 4% 4%4% 4%

Product Consulting Training Sybase

Pre-tax discount rates 8.56% 8.61% 8.58% 9.56%

In 2009, we used the following key assumptions:

Consulting Training Sybase

Pre-tax discount rates 9.67% 9.53% N/A

Growth rate assumed

for the business plan

8-9% 8-9% N/A

Terminal growth rate

Product

9.61%

10-15%

4% 4% 4% 4%

The Sybase segment is not identical tothe Sybase group acquired in July 2010. Fordetails of the differences, see Note (29). There-fore, the growth rates presented for the Sybasesegment are not identical to our expectationsregarding future revenue from this acquisition.

The calculations use cash flow projec-tions based on actual operating results and afive-year business plan approved by manage-ment. Cash flows for periods beyond this five-year business plan were extrapolated using asegment-specific growth rate. This growth ratedoes not exceed the long-term average growthrate for the market in which our cash-generat-ing units operate. Our estimated cash flow

projections are discounted to present value bymeans of a pre-tax discount rate. The pre-taxdiscount rate used is based on a weighted aver-age cost of capital approach (WACC).

We believe that any reasonably possiblechange in any of the above key assumptionswould not cause the carrying value of anycash-generating unit to exceed its recoverableamount. Even if we apply a growth rate of only0% for extrapolating cash flow projectionsbeyond the years covered by our 2010 and2009 business plan to calculate the value-in-usefor all cash-generating units, the calculatedamounts still exceed the carrying amounts.

F-47


(17) PROPERTY, PLANT, AND EQUIPMENT

Property, Plant, and Equipment

€ millions

Land and

Buildings

Other Property,

Plant, and

Equipment

Advance Payments

and Construction in

Progress

Total

Purchase cost

January 1, 2009 1,165 1,260 76 2,501

Foreign currency exchange differences -2 2 0 0

Additions from business combinations 0 1 0 1

Other additions 91 150 -35 206

Retirements/disposals -10 -136 0 -146

Transfers 8 0 -8 0

December 31, 2009 1,252 1,277 33 2,562

Foreign currency exchange differences 50 38 1 89

Additions from business combinations10 14 0 24

Other additions 30 226 7 263


Transfers 28 3 -31 0

December 31, 2010 1,336 1,393 10 2,739

Accumulated depreciation

January 1, 2009 348 748 0 1,096

Foreign currency exchange differences 1

Additions depreciation 41 162 0 203

Impairments 1 2 0 3

0


Transfers 0 0

0 1

0 0

December 31, 2009 382 809 0 1,191

Foreign currency exchange differences 19 26 0 45

Additions depreciation 45 166 0 211

Impairments 2

Retirements/disposals -23 -136 0

0

-159

Transfers 0

2

0

0

0 0

December 31, 2010 425 865 0 1,290

Carrying value

December 31, 2009 870 468 33 1,371

December 31, 2010 911 528 10 1,449

The additions and disposals in other property, plant, and equipment relate primarily to thereplacement and purchase of computer hardware and cars acquired in the normal course of business.

F-48


(18) TRADE AND OTHER PAYABLES, FINANCIAL LIABILITIES, AND OTHER NON-FINANCIALLIABILITIES

(18a) Trade and Other Payables

Trade and other payables as at December 31 were as follows:

Term Term

€ millions

Current Non-Current Balance on

12/31/2010


12/31/2009

Trade payables 699 0 699 479 0 479

Advance payments received 97 0 97 88 0 88

Miscellaneous other liabilities 126 30 156 71 35 106

Trade and other payables 922 30 952 638 35 673

2010 2009

Miscellaneous other liabilities include mainly deferral amounts for free rent periods andliabilities related to government grants.

(18b) Financial Liabilities

Financial liabilities as at December 31 were as follows:

Financial Liabilities

Term Term

€ millions


12/31/2010


12/31/2009

Bonds 0 2,191 2,191 0 0 0

Private placement transactions 0 1,069 1,069 0 697 697

Bank loans 1 1,098 1,099 4 2 6

Other financial liabilities 141 91 232 142 30 172

Financial liabilities 142 4,449 4,591 146 729 875

2010 2009

Financial liabilities are unsecured, exceptfor the retention of title and similar rightscustomary in our industry. Effective interestrates on our financing debt were 2.76% in2010, 4.32% in 2009, and 4.30% in 2008.

An analysis showing the contractual cashflows of our financial liabilities based on matu-rity is provided in Note (25). Information onthe risk associated with our financial liabilitiesis provided in Note (26) and information onfair values is provided in Note (27).

F-49


Bonds

In 2010, we issued bonds with the following terms:

Bonds

Maturity Issue Price Coupon Rate

EffectiveInterest

Rate

Nominal Volume inRespective Currency

on 12/31/2010

Balance on12/31/2010in E million

Eurobond 1 — 2010 . . . . . . . . . . 2014 99.755% 2.50% (fix) 2.65% A 500 million 498Eurobond 2 — 2010 . . . . . . . . . . 2017 99.780% 3.50% (fix) 3.59% A 500 million 497Eurobond 3 — 2010 . . . . . . . . . . 2012 99.863% 1.75% (fix) 2.01% A 600 million 598Eurobond 4 — 2010 . . . . . . . . . . 2013 99.857% 2.25% (fix) 2.39% A 600 million 598

Bonds . . . . . . . . . . . . . . . . . . . . 2,191

The Eurobonds are listed for trading on the Luxembourg Stock Exchange.

Private Placement Transactions

Our private placement transactions have the following terms:

Private Placements

Maturity Coupon Rate

EffectiveInterest

Rate

Nominal Volume inRespective Currency

on 12/31/2010



German promissory note . . . . A 697 million 696 697Tranche 1 — 2009/2012 . . 2012 4.04% (fix) 4.08% A 63.5 millionTranche 2 — 2009/2012 . . 2012 2.87% (variable) 2.92% A 359.5 millionTranche 3 — 2009/2014 . . 2014 4.92% (fix) 4.98% A 86 millionTranche 4 — 2009/2014 . . 2014 3.22% (variable) 3.27% A 158 millionTranche 5 — 2009/2014 . . 2014 3.28% (variable) 3.32% A 30 million

US private placement . . . . . . US $500 million 373 0Tranche 1 — 2010 . . . . . . 2015 2.34% (fix) 2.40% US $300 millionTranche 2 — 2010 . . . . . . 2017 2.95% (fix) 3.03% US $200 million

Private placements . . . . . . . 1,069 697

The coupon and the effective interest ratefor the floating rate tranches 2, 4, and 5 of theGerman promissory notes (“Schuldscheindarle-hen”, SSD) were calculated based on the lastthree-month EURIBOR interest rate fixing forthe tranches in 2010.

The U.S. private placement notes wereissued through one of our subsidiaries that hasthe U.S. dollar as functional currency.

F-50


Bank Loans

Our bank loans have the following terms:

Bank Loans

Maturity Coupon

Rate

Effective

Interest Rate

Nominal Volume on

12/31/2010 in

Respective Currency

Balance on

12/31/2010

in € million

Balance on

12/31/2009

in € million

Acquisition term loan 2012 1.45% (var.) 2.02% € 1.000 million 992 0

Additional term loan 2012 1.89% (var) 1.89% € 100 million 100 0

Other loans - variable variable € 7 million 7 6

Bank loans € 1.107 million 1,099 6

Initially, an amount of approximatelyA2.64 billion (comprising tranches of A2.25 bil-lion and US$500 million, respectively) wasdrawn from the acquisition term loan to financethe acquisition of Sybase in July 2010. Sincethe initial drawdown, an amount of approxi-mately A1.64 billion has been refinanced,mainly via the issued bonds (A1.2 billion) andprivate placements (US$500 million) describedabove. The outstanding amount of A1.0 billionof the acquisition term loan was syndicated inOctober 2010 and has a remaining maturity of

17 months. In addition, we paid off convertiblebonds taken on in connection with the acquisi-tion of Sybase in the amount of A469 million.

The coupon and the effective interest ratefor the acquisition term loan was calculatedbased on the last 1-month EURIBOR interestrate fixing for this financing instrument in2010 while for the additional term loan the last12-month EURIBOR interest rate fixing forthis financing instrument in 2010 applied.

Other Financial Liabilities

Our other financial liabilities mainly comprise derivative liabilities and liabilities for accruedinterests.

(18c) Other Non-Financial Liabilities

Other non-financial liabilities as at December 31 were as follows:

Other Non-Financial Liabilities

Term Term

€ millions

Current Balance on

12/31/2010

Current Balance on

12/31/2009

Other employee-related liabilities 1,362 85 1,447 1,343 12 1,355

Other taxes 364 0 364 234 0 234

Other non-financial liabilities 1,726 85 1,811 1,577 12 1,589

2010 2009

Non-Current Non-Current

Other employee-related liabilities mainlyrelate to vacation accruals, bonus and salescommission accruals as well as employee-related social security obligations.

Other taxes comprise mainly payroll taxliabilities and value-added tax liabilities.

F-51


(19) PROVISIONS

Provisions based on due dates as at December 31 were as follows:

Provisions

2010 2009

€ millions Current Non-

Current

Total Current Non-

Current

Total

Pension plans and similar obligations

(see Note (19a))

2 78 2 49 51

Other provisions (see Note (19b)) 1,282 216 1,498 330 149 479

1,284 292 1,576 332 198 530

76

(19a) Pension Plans and Similar Obligations

We maintain several defined benefit anddefined contribution plans for our employees inGermany and at foreign subsidiaries, whichprovide for old age, disability, and survivors’benefits. The measurement dates for thedomestic and foreign benefit plans are Decem-ber 31. Individual benefit plans have also beenestablished for members of our ExecutiveBoard. Furthermore, in certain countries weprovide termination indemnity benefits toemployees regardless of the cause for termina-tion. These types of benefits are typicallydefined by law in these foreign countries.

Our domestic defined benefit plans pro-vide participants with pension benefits that arebased on the length of service and compensa-tion of employees.

There is also a domestic employee-financed pension plan for which SAP guaran-tees a minimum return on investment which isequivalent to the return guaranteed by theinsurer. Even though the risk that SAP wouldbe liable for a return that cannot be met by theinsurance company is very remote, theseemployee-financed plans do not qualify asdefined contribution plans under IFRS and are

included in domestic plan assets and planliabilities.

Foreign defined benefit plans provideparticipants with pension benefits that arebased on compensation levels, age, and lengthof service.

Certain of our foreign subsidiaries arerequired to provide to their employees termina-tion indemnity benefits regardless of the reasonfor termination (retirement, voluntary, or invol-untary). We treat these plans as defined benefitplans if the substance of the post-employmentplan is a pension-type arrangement. Most ofthese arrangements provide the employee witha one-time payout based on compensation lev-els, age, and years of service on terminationindependent of the reason (retirement, volun-tary, or involuntary).

Our subsidiaries in the United Statesdecided in 2008 to freeze their defined benefitplan effective December 31, 2008, and insteadoffered additional and improved benefits undertheir defined contribution plan (401k-Plan reg-ulations). As a result, we recognized a curtail-ment gain in the amount of A9 million relatedto the reduction of the defined benefit obliga-tion in 2008.

F-52


The following table shows the development of the present values of the defined benefitobligations and the fair value of the plan assets with a reconciliation of the funded status to netamounts:

Change in the Present Value of the DBO and the Fair Value of the Plan Assets

E millions 2010 2009 2010 2009 2010 2009 2010 2009

DomesticPlans Foreign Plans

Other Post-Employment

Plans Total

Change in benefit obligation

Benefit obligation at beginning of year . . . . . . . . . 346 314 343 306 20 18 709 638

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . �4 �6 17 15 3 2 16 11

Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18 17 15 1 1 36 34

Employee contributions. . . . . . . . . . . . . . . . . . . . 46 35 4 4 0 0 50 39

Actuarial loss(+)/gain(�) . . . . . . . . . . . . . . . . . . 13 �13 29 31 2 0 44 18

Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . �4 �2 �17 �21 �1 �1 �22 �24

Business combinations . . . . . . . . . . . . . . . . . . . . 1 0 4 2 4 0 9 2

Curtailments/settlements . . . . . . . . . . . . . . . . . . . 0 0 0 �1 �4 0 �4 �1

Past service cost . . . . . . . . . . . . . . . . . . . . . . . . 0 0 �3 0 0 0 �3 0

Foreign currency exchange rate changes . . . . . . . . 0 0 45 �8 0 0 45 �8

Benefit obligation at year-end . . . . . . . . . . . . . . 416 346 439 343 25 20 880 709

Thereof fully or partially funded plans . . . . . . . 416 346 404 317 12 8 832 671

Thereof unfunded plans . . . . . . . . . . . . . . . . . . 0 0 35 26 13 12 48 38

Change in plan assets

Fair value of plan assets at beginning of year . . . . 345 314 311 261 4 3 660 578

Expected return on plan assets . . . . . . . . . . . . . . . 17 15 19 14 0 0 36 29

Employer contributions . . . . . . . . . . . . . . . . . . . . 1 1 31 29 5 2 37 32

Employee contributions. . . . . . . . . . . . . . . . . . . . 46 35 4 4 0 0 50 39

Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . �4 �2 �17 �21 �1 �1 �22 �24

Business combinations . . . . . . . . . . . . . . . . . . . . 0 0 2 2 0 0 2 2

Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 �4 0 �4 0

Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0 0 0

Actuarial loss(�)/gain(+) . . . . . . . . . . . . . . . . . . 9 �18 �1 28 0 0 8 10

Foreign currency exchange rate changes . . . . . . . . 0 0 37 �6 0 0 37 �6

Fair value of plan assets at year-end . . . . . . . . . 414 345 386 311 4 4 804 660

Funded status at year-end . . . . . . . . . . . . . . . . . �2 �1 �53 �32 �21 �16 �76 �49

Amounts recognized in the ConsolidatedStatement of Financial Position:

Noncurrent pension assets . . . . . . . . . . . . . . . . . . 0 0 2 2 0 0 2 2

Accrued benefit liability (current) . . . . . . . . . . . . 0 0 �2 �2 0 0 �2 �2

Accrued benefit liability (non-current) . . . . . . . . . �2 �1 �53 �32 �21 �16 �76 �49

�2 �1 �53 �32 �21 �16 �76 �49

F-53


The following weighted average assumptions were used for the actuarial valuation of ourdomestic and foreign pension liabilities as well as other post-employment benefit obligations as atthe respective measurement date:

Actuarial Assumptions for Defined Benefit Liabilities

Percent Domestic Plans Foreign Plans Other Post-

Employment Plans

2010 2009 2008 2010 2009 2008 2010 2009 2008

Discount rate 4.9 5.1 5.8 3.3 4.7 4.8 5.7 5.7 6.4

Rate of compensation

increase

2.5 2.5 2.1 1.8 2.3 2.4 5.0 6.9 5.6

The assumed discount rates are derivedfrom rates available on high-quality corporatebonds and government bonds for which the

timing and amounts of payments match thetiming and the amounts of our projected pen-sion payments.

The components of total expense of defined benefit plans for the years 2010, 2009, and 2008recognized in operating expense were as follows:

Total Expense of Defined Benefit Plans

E millions 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008Domestic Plans Foreign Plans


Plans Total

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . �4 �6 1 17 15 38 3 2 2 16 11 41Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18 15 17 15 14 1 1 1 36 34 30Expected return on plan assets . . . . . . . . . . . . . �17 �15 �14 �19 �14 �21 0 0 0 �36 �29 �35Curtailment . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 �1 �9 0 0 0 0 �1 �9Past service cost . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 �3 0 0 0 0 0 �3 0 0Total expense . . . . . . . . . . . . . . . . . . . . . . . . �3 �3 2 12 15 22 4 3 3 13 15 27Actual return on plan assets . . . . . . . . . . . . . . . 26 �3 6 18 42 �78 0 0 0 44 39 �72

Due to the fact that our domestic definedbenefit plans primarily consist of an employee-financed post-retirement plan that is fullyfinanced with qualifying insurance policies,current service cost may turn into a credit as a

result of adjusting the defined benefit liability’scarrying amount to the fair value of the quali-fying plan assets. Such adjustments arerecorded in service cost.

F-54


We have recognized the following amounts of actuarial gains and losses for our definedbenefit plans:

Actuarial Gains (Losses) on Defined Benefit Plans

E millions 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008Domestic Plans Foreign Plans


Plans Total

Beginning balance of actuarial gains(�) andlosses(+) on defined benefit plans . . . . . . . . . �10 �18 �16 53 57 0 �2 �2 �2 41 37 �18

Actuarial gains(�) and losses(+) on definedbenefit plans recognized during the period . . . 4 5 �2 30 3 54 2 0 0 36 8 52

Other changes . . . . . . . . . . . . . . . . . . . . . . . . . 0 3 0 0 �5 0 0 0 0 0 �2 0Foreign currency exchange rate changes . . . . . . . 0 0 0 3 �2 3 0 0 0 3 �2 3Ending balance of actuarial gains(�) and

losses(+) on defined benefit plans . . . . . . . . �6 �10 �18 86 53 57 0 �2 �2 80 41 37

For the determination of the total expense for the years 2010, 2009, and 2008, the projectionof the defined benefit obligation and the fair value of the plan assets as at December 31, 2010,2009, and 2008, our actuary has used the following principal actuarial assumptions (expressed asweighted averages for our foreign and post-employment benefit plans):

Actuarial Assumptions for Total Expense

Percent Domestic Plans Foreign Plans Other Post-

Employment Plans

2010 2009 2008 2010 2009 2008 2010 2009 2008

Discount rate 5.1

4.5

2.2

5.8

4.5

2.1

5.5

4.9

2.1

4.4

5.1

1.8

5.0

5.3

2.3

4.8

6.5

4.5

5.6

7.6

4.9

6.5 6.1

6.2

4.0

6.5

6.3

Expected return on plan

assets

Rate of compensation

increase

Our investment strategy on domestic ben-efit plans is to invest all contributions in stableinsurance policies. The expected rate of returnon plan assets for our domestic benefit plans is

calculated by reference to the expected returnsachievable on the insured policies given theexpected asset mix of the policies.

The expected return assumptions for our foreign plan assets are based on weighted averageexpected long-term rates of return for each asset class, estimated based on factors such as historicalreturn patterns for each asset class and forecasts for inflation. We review historical return patternsand other relevant financial factors for appropriateness and reasonableness and make modificationsto eliminate certain effects when considered necessary. Our foreign benefit plan asset allocation atDecember 31, 2010, and our target asset allocation for the year 2011 are as follows:

F-55


Plan Asset Allocation for Foreign Plans and Other Post-Employment Obligations

Percent

Asset Category

Target Asset

Allocation

2011

Target Asset

Allocation

2010

Actual % of

2010 Plan

Assets

Actual % of

2009 Plan

Assets

Equity 12 11 43 44

Fixed income 81 80 49 45

Real estate 3 5 3 4

Other 4 4 5 7

Total 100 100 100 100

The investment strategies for foreignbenefit plans vary according to the respectiveconditions in the country in which the benefitplans are situated. Generally, a long-terminvestment horizon has been adopted for allmajor foreign benefit plans. Our policy is toinvest in a risk-diversified portfolio consisting

of a mix of assets within the above target assetallocation range.

Our expected contribution in 2011 isA1 million for domestic defined benefit plansand A31 million for foreign defined benefitplans, all of which is expected to be paid incash.

The amounts for the current year and four preceding years of pension obligation, plan assets,funded status, and experience adjustments are as follows:

Pension Obligation, Plan Assets, Funded Status and Experience Adjustments

E millions 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006Domestic Plans Foreign Plans Other Post-Employment Plans Total

Defined benefitobligation . . . . . . . 416 346 314 274 261 439 343 306 287 275 25 20 18 13 16 880 709 638 574 552

Liability experienceadjustments . . . . . . 13 �13 �10 �37 �17 29 31 �45 0 �5 2 0 0 �1 1 44 18 �55 �38 �21

Plan assets . . . . . . . . 414 345 314 272 255 386 311 261 311 288 4 4 3 0 1 804 660 578 583 544

Asset experienceadjustments . . . . . . 9 �18 �8 �30 �10 �1 28 �99 �10 10 0 0 0 0 0 8 10 �107 �40 0

Funded status . . . . . . �2 �1 0 �2 �6 �53 �32 �45 24 13 �21 �16 �15 �13 �15 �76 �49 �60 9 �8

Defined Contribution Plans / State Plans

We also maintain domestic and foreign defined contribution plans. Amounts contributed by usunder such plans are based on a percentage of the employees’ salaries or the amount of contributionsmade by employees. Furthermore in Germany, as well as in some other countries, we makecontributions to public pension plans that are operated by national or local government or a similarinstitution. The expense of defined contribution plans and state plans for the years 2010, 2009, and2008, were as follows:

Total Expense of Defined Contribution Plans and State Plans

€ millions 2010 2009 2008

Defined contribution plans 136 132 100

State plans 215 183 177

Total expense 351 315 277

F-56


(19b) Other Provisions

Other provisions developed in the reporting year as follows:

E millionsBalance1/1/2010 Addition Accretion

Acqui-sition

Utili-zation Release

CurrencyImpact

Balance12/31/2010

Employee-related provisions

Provisions share-based compensation . . . . . . . 114 42 0 18 �20 �11 4 147

Other employee-related provisions . . . . . . . . . 138 118 0 2 �71 �21 1 167

Customer-related provisions . . . . . . . . . . . . . . 35 119 0 0 �59 �47 2 50

Restructuring provisions

Employee termination benefits . . . . . . . . . . . . 16 1 0 0 �14 0 1 4

Facility-related exit liabilities . . . . . . . . . . . . . 28 6 1 0 �17 �11 3 10

Litigation-related provisions

TomorrowNow litigation . . . . . . . . . . . . . . . . 93 993 0 0 �117 0 28 997

Other litigation-related provisions . . . . . . . . . . 30 40 0 16 �34 �16 4 40

Other provisions . . . . . . . . . . . . . . . . . . . . . . . 25 15 1 52 �8 �2 0 83

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 1,334 2 88 �340 �108 43 1,498

Thereof current . . . . . . . . . . . . . . . . . . . . . . . . 330 1,282

Thereof non-current . . . . . . . . . . . . . . . . . . . . . 149 216

For more information about our share-based compensation programs, see Note (28).

Other employee-related provisions pri-marily comprise obligations for time credits,severance payments, jubilee expenses, andsemiretirement. While most of these employee-related provisions could be claimed within thenext 12 months, we do not expect the relatedcash flows within this time period.

Customer-related provisions includeperformance obligations as well as expectedcontract losses. The associated cash outflowsare substantially short-term in nature.

Restructuring provisions comprise con-tract termination costs, including those relatingto the termination of lease contracts. For moredetails, see Note (6). The cash outflows associ-ated with employee-related restructuring costsare typically short-term in nature except forsome benefits granted to encourage early retire-ment in 2009. Utilization of the portion of thefacility-related restructuring provision dependson the remaining term of the associated lease.Three million euros of the provision is non-current.

Litigation-related provisions relate prima-rily to the litigation matters described in Note(24). After taking our lawyers advice, we haveestablished provisions taking into account the

facts of each case. The timing of the cash out-flows associated with legal claims cannot bereasonably determined in all cases. The legal andlitigation-related provisions assumed in 2010 inconnection with the Sybase acquisition are mea-sured at provisional values. For details see Note(3c). We anticipate that part of the litigation-related expenses included in the provisions willbe recovered through insurance. As ofDecember 31, 2010, we have received A15 millionfrom insurance policies (December 31, 2009:A14 million) which will be recognized when it isvirtually certain that these amounts do not haveto be repaid. For further information about litiga-tion-related provisions see Note (24).

Other provisions relate mainly to assetretirement obligations associated with leasedfacilities and onerous contracts as well as war-ranty obligations. For asset retirement obliga-tions we record the present value of theseobligations in the period in which the obliga-tion is incurred. The associated cash outflowsare generally expected to occur at the dates ofexit of the facilities to which they relate, whichare typically long-term in nature. In connectionwith the acquisition of Sybase, we assumedonerous leases in the amount of A50 million.Utilization of these onerous leases depends onthe terms of the underlying lease contract. The

F-57


related outflow for the remaining other provi-sions is of short-term nature.

(20) DEFERRED INCOME

Deferred income consists mainly of pre-payments made by our customers for supportservices and professional services, fees frommultiple element arrangements allocated toundelivered elements, and amounts recorded inpurchase accounting at fair value for obliga-tions to perform under acquired support con-tracts in connection with acquisitions.

(21) TOTAL EQUITY

Issued Capital

As at December 31, 2010, SAP AG hadissued 1,226,822,697 no-par shares (Decem-ber 31, 2009: 1,226,039,608) with a calculatednominal value of A1 per share. All the sharesissued are fully paid. The following table showsthe changes in the number and the value ofissued shares and treasury shares in millions.

Issued Capital Treasury

Shares

Issued Capital Treasury

Shares

January 1, 2008 1,246 -48 1,246 -1,734

Issuing shares under share-based payment

programs 1

Purchase of treasury shares 0 -14 0 -487

Cancellation of treasury shares -21 21 -21 744

Reissuance of treasury shares under share-based

payment programs 0 3 0 115

December 31, 2008 1,226 -38 1,226 -1,362


programs 0



December 31, 2009 1,226 -37 1,226 -1,320


programs 1

Purchase of treasury shares 0 -6 0 -220



December 31, 2010 1,227 -39 1,227 -1,382

Number of Shares in Millions Value in € Millions

10

0 0 0

0

10 0

The line item “Shares issued to serviceconvertible bonds and stock options exercised”relates to the exercise of awards granted toemployees under certain share-based paymentplans and the shares purchased by employeesunder the Share Matching Plan 2010 (seeNote 28).

Authorized Shares

The Articles of Incorporation authorizethe Executive Board of SAP AG (the ExecutiveBoard) to increase the issued capital:

• Up to a total amount of A250 millionthrough the issuance of new commonshares in return for contributions in

cash until June 7, 2015 (AuthorizedCapital Ia). The issuance is subject tothe statutory subscription rights ofexisting shareholders.

• Up to a total amount of A250 millionthrough the issuance of new commonshares in return for contributions incash or in kind until June 7, 2015(Authorized Capital IIa). Subject tocertain preconditions and the consentof the Supervisory Board, the Execu-tive Board is authorized to exclude theshareholders’ statutory subscriptionrights.

• Up to a total amount of A30 millionthrough the issuance of new common

F-58


shares in return for contributions incash or in kind until June 7, 2015(Authorized Capital III). The newshares can only be used for share-basedcompensation (as employee shares).Shareholders’ subscription rights areexcluded.

Contingent Shares

SAP AG’s issued capital is subject to acontingent increase of common shares. The con-tingent increase may be effected only to theextent that the holders of the convertible bondsand stock options that were issued by SAP AGunder certain share-based payment plans (seeNote 28) exercise their conversion or subscriptionrights. As at December 31, 2010, A207 million,representing 207 million shares, is still availablefor issuance (2009: A208 million).

Share Premium

Share premium represents all capital con-tributed to SAP with the proceeds resultingfrom the issuance of issued capital in excess oftheir calculated par value. Share premiumarises mainly from issuance of issued capital,treasury shares transactions and share-basedcompensation transactions.

Retained Earnings

Retained earnings contain prior years’undistributed profit after tax and unrecognizedpension costs. Unrecognized pension costscomprise actuarial gains and losses relating todefined benefit pension plans and similarobligations.

Treasury Shares

By resolution of SAP AG’s Annual Gen-eral Meeting of Shareholders held on June 8,2010, the Executive Board of SAP AG wasauthorized to acquire, on or before June 30,2013, up to 120 million shares in the Companyon the condition that such share purchases,together with any previously acquired shares,do not account for more than 10% of SAP AG’sissued capital. Although treasury shares are

legally considered outstanding, there are nodividend or voting rights associated with sharesheld in treasury. We may redeem or resellshares held in treasury or we may use treasuryshares for the purpose of servicing subscriptionrights and conversion rights under the Compa-ny’s share-based payment plans. Also, we mayuse the shares held in treasury as considerationin connection with the acquisition of othercompanies.

The Company purchased no SAP Americandepository receipts (ADRs) in 2010, 2009, or2008, (each ADR represents one common shareof SAP AG). The Company held no SAP ADRsas at December 31, 2010, 2009, and 2008,respectively.

Miscellaneous

Under the German Stock CorporationAct (Aktiengesetz), the total amount of divi-dends available for distribution to SAP AG’sshareholders is based on the earnings of SAPAG as reported in its statutory financial state-ments, which are determined under theaccounting rules stipulated by the GermanCommercial Code (Handelsgesetzbuch). For theyear ended December 31, 2010, the ExecutiveBoard and the Supervisory Board of SAP AGintend to propose a dividend of A0.60 per share(estimated to be A713 million).

Dividends per share for both 2009 and2008 were A0.50 and were paid in the succeed-ing year.

(22) ADDITIONAL CAPITAL DISCLOSURES

Capital Structure Management

The primary objective of our capitalstructure management is to maintain a strongfinancial profile for investor, creditor, and cus-tomer confidence, and to support the growth ofour business. We aim for a capital structure thatgives us a high degree of independence, secu-rity, and financial flexibility so that we can, forexample, access capital markets on reasonableterms to satisfy funding requirements.

We currently do not have a credit ratingwith any agency. We do not believe that a

F-59


rating would have a substantial effect on ourcurrent or future borrowing conditions andfinancing options.

Capital Structure

2010 2009% change

€ millions % of

Equity and

Liabilities

€ millions % of

Equity and

Liabilities

Total equity 9,824 47 8,491 63 16

Total current liabilities 5,149 25 3,416 26 51

Total noncurrent liabilities 5,868 28 1,467 11 300

Total liabilities 11,017 53 4,883 37 126

Equity and liabilities 20,841 100 13,374 100 56

Until 2010, we were mainly equity-financed, but our debt ratio (defined as the ratio of totalliabilities to equity and liabilities) increased to 53% at the end of 2010 (as compared to 37% at theend of 2009) mainly due to the issuance of bank loans, bonds and private placements in connectionwith the Sybase acquisition. For the same reason, the ratio of total financial debt to equity andliabilities increased to 21% at the end of 2010 (as compared to 5% at the end of 2009). Totalfinancial debt consists of bank loans, bonds, and private placements. While we monitor those ratioscontinuously, our main focus is on the management of our net liquidity position as outlined in thefollowing table:

Group Liquidity of SAP Group

2010 2009

€ millions € millions Change

Cash and cash equivalents 3,518 1,884 1,634

Current investments 10 400 -390

Total group liquidity 3,528 2,284 1,244

Current bank loans 1 4 -3

Net liquidity 1 3,527 2,280 1,247

Non-current bank loans 1,106 2 1,104

Private placement transactions 1,071 697 374

Bonds 2,200 0 2,200

Net liquidity 2 -850 1,581 -2,431

Our net liquidity position is defined ascash, cash equivalents, and current investments,less financial debt, which consists of bankloans, bonds, and private placements. Our goalis to continuously maintain a positive netliquidity position. However, we might deviatefrom that goal for a limited period of time dueto large acquisitions that require us to enterinto financing instruments. For example, this is

the case as of December 31, 2010, due to theacquisition of Sybase, which we financed withcash on hand and significant financial debt. Westructured the maturity profile of the additionalfinancial debt in a balanced way, so that ourtarget of a positive net liquidity position couldbe reached as quickly as possible given ourunderlying cash flow planning.

F-60


Distribution Policy

Our goal is to remain in a position toreturn excess liquidity to our shareholders bydistributing annual dividends and repurchasingshares. The amount of future dividends and theextent of future repurchases of shares will bebalanced with our effort to continue to maintainan adequate liquidity position.

In each of 2010, 2009, and 2008, wewere able to distribute A594 million in divi-dends from our 2009, 2008, and 2007 profit.Aside from the distributed dividend, in 2010and 2008 we also returned A220 and

A487 million respectively to our shareholdersby repurchasing our own shares (no sharerepurchase occurred in 2009).

Commitments exist to reissue treasuryshares or issue common shares in connectionwith our equity-settled share-based paymentplans as described in Note (28). In all yearspresented we have satisfied and we expect tocontinue to satisfy commitments resulting fromour equity-settled share-based payment plansthrough both reissuance of treasury shares andcapital increases.

(23) OTHER FINANCIAL COMMITMENTS AND CONTINGENT LIABILITIES

Other Financial Commitments

Our other financial commitments at December 31, 2010, and 2009, were as follows:



Operating leases 754 727

Contractual obligations for

acquisition of property,

plant, and equipment and

intangible assets

74 24

Other purchase obligations 387 223

Purchase obligations 461 247

Total 1,215 974

Our operating leases relate primarily tothe lease of office space, hardware, and cars,with non-cancelable lease terms between lessthan 1 and 15 years. On a limited scale, theoperating lease contracts include escalationclauses (based, for example, on the consumerprice index) and renewal options. The contrac-tual obligations for acquisition of property,plant, and equipment, and intangible assets

relate primarily to the construction of new andexisting facilities, hardware, software, patents,office equipment and car purchase obligations.The remaining obligations relate mainly to mar-keting, consulting, maintenance, license agree-ments, and other third-party agreements.Historically, the majority of such purchase obli-gations have been realized.

Commitments under operating leasing contracts and purchase obligations as at December 31,2010, were as follows:

F-61



€ millions Operating Leases Purchase Obligations

Due 2011 210 305

Due 2012-2015 434 122

Due thereafter 110 34

754 461

Our rental and operating lease expenseswere A267 million, A264 million, and A274 mil-lion for the years 2010, 2009, and 2008,respectively.

Contingent Liabilities

In the normal course of business, weusually indemnify our customers against liabili-ties arising from a claim that our softwareproducts infringe a third party’s patent, copy-right, trade secret, or other proprietary rights.In addition, we occasionally grant function orperformance guarantees in routine consultingcontracts or development arrangements. Also,our software license agreements generallyinclude a clause guaranteeing that the softwaresubstantially conforms to the specifications asdescribed in applicable documentation for aperiod of six to 12 months from delivery. Ourproduct and service warranty liability, which ismeasured based on historical experience andevaluation, is included in other provisions (seeNote (19b)).

For contingent liabilities related to litiga-tion matters, see Note (24).

(24) LITIGATION AND CLAIMS

We are subject to a variety of claims andlawsuits that arise from time to time in theordinary course of our business, including pro-ceedings and claims that relate to companieswhich we have acquired, and claims that relateto customers demanding indemnification forproceedings initiated against them based ontheir use of SAP software. We will continue tovigorously defend against all claims and law-suits against us. We record a provision for suchmatters when it is probable that we have a

present obligation that results from a pastevent, is reliably estimable and the settlementof which is probable to require an outflow ofresources embodying economic benefits. Forthe TomorrowNow litigation, we have recordeda provision of A997 million. We currentlybelieve that resolving all other claims and law-suits against us, individually or in the aggre-gate, did not and will not have a materialadverse effect on our business, financial posi-tion, profit, or cash flows. Consequently, theprovisions currently recorded for these otherclaims and lawsuits are neither individually norin aggregate material to SAP. However, allclaims and lawsuits involve risk and could leadto significant financial and reputational damageto the parties involved. Because of significantinherent uncertainties related to these matters,there can be no assurance that our business,financial position, profit or cash flows will notbe materially adversely affected nor can wereliably estimate the maximum possible loss incase of an unfavorable outcome.

For a description of the development ofthe provisions recorded for litigation, see Note(19b).

Among the claims and lawsuits are thefollowing:

Intellectual Property Litigation

In October 2006, United States-basedSky Technologies LLC (Sky) instituted legalproceedings in the United States against SAPand Oracle. Sky alleges that SAP’s productsinfringe one or more of the claims in each offive patents held by Sky. In its complaint, Skysought unspecified monetary damages and per-manent injunctive relief. In September 2010,SAP and Sky resolved this dispute for an

F-62


amount not material to SAP’s business, finan-cial position, profit, or cash flows.

In January 2007, German-based CSB-Systems AG (CSB) instituted legal proceedingsin Germany against SAP. CSB alleges thatSAP’s products infringe one or more of theclaims of a German patent and a German utilitymodel held by CSB. In its complaint, CSB hasset the amount in dispute at A1 million and isseeking permanent injunctive relief. Withinthese proceedings CSB is not precluded fromrequesting damages in excess of the amount indispute. In July 2007, SAP filed its response inthe legal proceedings including a nullity actionand cancellation proceeding against the patentand utility model, respectively. The nullityhearing on the German patent was held inJanuary 2009 and the German court determinedthat the patent is invalid. The cancellation hear-ing for the utility model was held in May 2009and the court determined that the utility modelwas invalid. CSB is appealing, however, theinfringement hearing has been stayed pendingthe appeals.

In May 2010, CSB-Systems International,Inc. (CSB) instituted legal proceedings in theUnited States against SAP. CSB alleges thatSAP’s products infringe one or more of the claimsin one patent held by CSB. In its complaint, CSBseeks unspecified monetary damages and perma-nent injunctive relief. The trial has not yet beenscheduled.

In March 2007, United States-based OracleCorporation and certain of its subsidiaries (Ora-cle) instituted legal proceedings in the UnitedStates against TomorrowNow, Inc., its parentcompany SAP America, Inc. and SAP America’sparent company SAP AG (SAP). Oracle filedseveral amended complaints between 2007 and2009. As amended, the lawsuit alleges copyrightinfringement, violations of the Federal ComputerFraud and Abuse Act and the California Com-puter Data Access and Fraud Act, unfair compe-tition, intentional and negligent interference withprospective economic advantage, and civil con-spiracy. The lawsuit alleges that SAP unlawfullycopied and misappropriated proprietary, copy-righted software products and other confidentialmaterials developed by Oracle to service its own

customers. The lawsuit seeks injunctive relief andmonetary damages, including punitive damages,alleged by Oracle to be in the billions of U.S. dol-lars. The trial was held in November 2010. Priorto trial, SAP AG, SAP America and Tomorrow-Now stipulated to liability for certain claims, andSAP agreed to pay Oracle US$120 million forattorneys fees. After the trial, the jury returned adamages verdict of US$1.3 billion. The judgmentwhich was issued on February 3, 2011, addition-ally provides for prejudgment interest ofUS$15 million. The judgment amount is alsosubject to postjudgment interest which accruesfrom the time judgment is entered.

The jury based its verdict on the theoryof a hypothetical license, that is, the value ofwhat TomorrowNow would have paid if it hadnegotiated with Oracle a license for the copy-rights infringed by TomorrowNow. Before andduring the course of the trial, various damagesamounts had been presented by the parties tothe litigation. They included the following:

a) Before the trial, Oracle hadrequested damages in excess ofUS$3.5 billion based on alleged “savedacquisition costs”; the court dismissedthat damage claim based on a pretrialmotion, but Oracle has the right toappeal that dismissal.

b) During the trial, Oracle’s dam-ages experts presented an amount ofUS$408 million based on lost profits anddisgorgement of infringer’s profit.

c) During the trial, members ofOracle management presented, as part oftheir testimonies, amounts of up toUS$5 billion. Oracle’s damages expertpresented a damages estimate of “atleast” US$1,655,600,000 under a hypo-thetical license theory. Oracle’s counselasked the jury to award “somewherebetween US$1.65 and US$3 billion.”

d) During the trial, the damagesexpert for TomorrowNow and SAP pre-sented an amount of US$28 millionbased on lost profits and infringer’s prof-its or, alternatively, US$40.6 millionbased on a hypothetical license theory.

F-63


Counsel for SAP and TomorrowNowasked the jury to award US$28 million.

We believed both before and during thetrial and continue to believe that the hypotheti-cal license theory is not an appropriate basisfor calculating the damages. Instead, we believethat damages should be based on lost profitsand infringer’s profits. As of the date of thisreport, SAP has filed post-trial motions thatask the judge to overturn the judgment. How-ever, the judge has not yet decided on thesemotions. Based on the outcome of the post-trialmotions, SAP will decide whether to appeal.

Additionally, in June 2007, SAP becameaware that the United States Department ofJustice (U.S. DOJ) had opened an investigationconcerning related issues and had issued sub-poenas to SAP and TomorrowNow. SAP andTomorrowNow are cooperating with the investi-gation and are responding to the original sub-poenas and additional subpoenas issued by theDepartment of Justice.

In April 2007, United States-based Ver-sata Software, Inc. (formerly Trilogy Software,Inc.) (Versata) instituted legal proceedings inthe United States against SAP. Versata allegesthat SAP’s products infringe one or more of theclaims in each of five patents held by Versata.In its complaint, Versata seeks unspecifiedmonetary damages and permanent injunctiverelief. The trial was held in August 2009. Thejury returned a verdict in favor of Versata andawarded Versata US$138.6 million for pastdamages. In January 2011, the court vacatedthe jury’s damages award and ordered a newtrial on damages in April 2011.

In August 2007, United States-basedelcommerce.com, Inc. (elcommerce) institutedlegal proceedings in the United States againstSAP. elcommerce alleges that SAP’s productsinfringe one or more of the claims in onepatent held by elcommerce. In its complaint,elcommerce seeks unspecified monetary dam-ages and permanent injunctive relief. The courtin East Texas granted SAP’s request to transferthe litigation from East Texas to Pennsylvania.The trial in Pennsylvania has not yet beenscheduled.

In May 2008, United States-based Info-Mentis, Inc. (InfoMentis) instituted legal pro-ceedings in the United States against SAP.InfoMentis alleges copyright infringement andunfair competition. The lawsuit sought unspec-ified monetary damages and a permanentinjunction. SAP filed its response in August2008. In August 2010, SAP and InfoMentisresolved this dispute for an amount not materialto SAP’s business, financial position, profit, orcash flows.

In February 2010, United States-basedTecSec, Inc. (TecSec) instituted legal proceed-ings in the United States against SAP, Sybase,IBM and many other defendants. TecSecalleges that SAP’s products infringe one ormore of the claims in five patents held byTecSec. In its complaint, TecSec seeks unspec-ified monetary damages and permanent injunc-tive relief. The trial has not yet been scheduled.The legal proceedings have been stayed againstall defendants except IBM.

In April 2010, SAP instituted legal pro-ceedings (a Declaratory Judgment action) inthe United States against Wellogix, Inc. andWellogix Technology Licensing, LLC (Wello-gix). The lawsuit seeks a declaratory judgmentthat five patents owned by Wellogix are invalidand/or not infringed by SAP. The trial has notyet been scheduled. The legal proceedings havebeen stayed pending the outcome of re-exami-nations filed with the U.S. Patent and Trade-mark Office.

Other Litigation

In April 2008, South African-basedSystems Applications Consultants (PTY)Limited (Securinfo) instituted legal proceedingsin South Africa against SAP. Securinfo allegesthat SAP has caused one of its subsidiaries tobreach a software distribution agreement withSecurinfo. In its complaint, Securinfo seeksdamages of approximately A610 million plusinterest. In September 2009, SAP filed amotion to dismiss. The trial has been scheduledfor June 2011.

In March 2008, United States-basedWaste Management, Inc. (Waste Management)

F-64


and USA Waste Management Resources, L.L.C.instituted legal proceedings in the United Statesagainst SAP alleging several causes of action,including but not limited to fraud, negligentmisrepresentation, and breach of contract. InApril 2010, SAP and Waste Managementresolved this dispute for an amount not materialto SAP’s business, financial position, profit, orcash flows.

(25) FINANCIAL RISK FACTORS

We are exposed to various financial risks,such as market risks (including foreign cur-rency exchange rate risk, interest rate risk, andequity price risk), credit risk, and liquidity risk.

Market Risk

a) Foreign Currency Exchange Rate Risk

Foreign currency exchange rate risk isthe risk of loss due to adverse changes inforeign currency exchange rates. Under IFRS,foreign currency exchange rate risks arise onaccount of monetary financial instrumentsdenominated in currencies other than the func-tional currency where the non-functional cur-rency is the respective risk variable; translationrisks are not taken into consideration.

As a globally active enterprise, we aresubject to risks associated with fluctuations inforeign currencies with regard to our ordinaryoperations. Since the Group’s entities mainlyconduct their operating business in their ownfunctional currencies, our risk of exchange ratefluctuations from ongoing ordinary operationsis not considered significant. However, occa-sionally we generate foreign-currency-denomi-nated receivables, payables, and other monetaryitems by transacting in a currency other thanthe functional currency. To mitigate the extentof the associated foreign currency exchangerate risk, the majority of these transactions arehedged as described in Note (26).

In rare circumstances, transacting in acurrency other than the functional currency alsoleads to embedded foreign currency derivativesbeing separated and measured at fair valuethrough profit or loss.

In addition, SAP AG is exposed to risksassociated with forecasted intercompany cashflows in foreign currencies. These cash flowsarise out of royalty payments from SAP subsid-iaries to SAP AG. The royalties are linked tothe subsidiaries’ external revenue. This arrange-ment leads to a centralization of the foreigncurrency exchange rate risk with SAP AG inGermany, as the royalties are mostly denomi-nated in the subsidiaries’ local currencies,while the functional currency of SAP AG is theeuro. The highest foreign currency exchangerate exposure of this kind relates to the curren-cies of subsidiaries with significant operations,for example the U.S. dollar, the pound sterling,the Japanese yen, the Swiss franc, the Canadiandollar, and the Australian dollar.

We are not exposed to any significantforeign currency exchange rate risk with regardto our investing and financing activities, assuch activities are generally conducted in thefunctional currency of the investing or borrow-ing entity.

b) Interest-Rate Risk

Interest-rate risks result from changes inmarket interest rates, which can cause changes inthe fair values of fixed-rate instruments and inthe interest to be paid or received for variable-rate instruments. We are exposed to interest-raterisk as a result of our investing and financingactivities mainly in the euro and US-dollar.

As at December 31, 2010, our liquiditywas mainly invested in current time depositswith fixed yields and money market funds withvariable yields, held as cash equivalents. Sincewe do not account for the fixed-yield timedeposits held at year-end at fair value, we areonly exposed to a cash flow interest-rate riskwith regard to our variable-rate investments,namely money market funds, mainly in theeuro area and in the United States.

In 2010, financing activities consisted ofthe issuance of four bond tranches, one acquisi-tion term loan, one additional term loan andtwo U.S. private placement notes (for moredetails see Note (18b)). All four bond tranches,which have a total volume of A2.2 billion, pay

F-65


fixed interest. The same applies to the U.S. pri-vate placement notes with a volume ofUS$500 million. The acquisition term loantaken on in connection with the acquisition ofSybase, which was reduced from A2.64 billionto A1 billion during the third quarter of 2010,pays variable interest based on the prevailingEURIBOR-rates, giving rise to a cash flowrisk.

In 2009, financing activities focused onthe SSD, totaling A697 million. The SSD has aA149.5 million fixed-rate tranche, and aA547.5 million variable-rate tranche, whichgives rise to a cash-flow risk, as the interestpayments are based on the prevailing EURI-BOR-rates.

c) Equity-Price Risk

Equity-price risk is the risk of loss dueto adverse changes in equity markets. We areexposed to such risk with regard to our invest-ments in equity securities and our share-basedcompensation plans.

Credit Risk

Credit risk is the risk of economic lossof principal or financial rewards stemmingfrom a counterparty’s failure to repay or servicedebt according to the contractual obligations.We have concluded an agreement with an

insurer to insure part of our trade receivablesagainst credit losses. With the exception of thistransaction, we have not executed significantagreements to reduce our overall credit riskexposure, such as master netting arrangements.Therefore, the total amounts recognized as cashand cash equivalents, current investments, loansand other financial receivables, and derivativefinancial assets represent our maximum expo-sure to credit risks.

Liquidity Risk

Liquidity risk results from the potentialinability to meet financial obligations, such aspayments to suppliers or employees. A maturityanalysis that provides the remaining contractualmaturities of all our financial liabilities held atDecember 31, 2010, is shown in the tablebelow. Financial liabilities shown in the tablebelow for which repayment can be requestedby the contract partner at any time are assignedto the earliest possible period. Variable interestpayments were calculated using the last rele-vant interest rate fixed as at December 31,2010. As we settle our derivative contractsgross, we show the pay and receive legs sepa-rately for all our currency and interest ratederivatives, whether or not the fair value of thederivative is negative. The cash outflows forthe currency derivatives are translated using theapplicable forward rate.

The cash flows for unrecognized but contractually agreed financial commitments are shown inNote (24).

F-66


Contractual Maturities of Financial Liabilities

E millions

CarryingAmount

12/31/2010 2011 2012 2013 2014 2015 ThereafterContractual Cash Flows

Non-derivative financial liabilities— Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �699 �699 0 0 0 0 0— Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . �4,445 �145 �2,220 �667 �824 �253 �695

Derivative financial liabilities and assets— Derivative financial liabilities

Currency derivatives without designated hedgerelationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �109— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �883 �9 �9 �9 �9 �42— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852 0 0 0 0 0

Currency derivatives with designated hedge relationship . . . �27— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �360 �38 0 0 0 0— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333 36 0 0 0 0

Interest rate derivatives with designated hedgerelationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �10— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �12 �9 �5 �3 0 0— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4 2 1 0 0

— Derivative financial assetsCurrency derivatives without designated hedge

relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �4,502 0 0 0 0 0— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,590 0 0 0 0 0

Currency derivatives with designated hedge relationship . . . 3— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �62 0 0 0 0 0— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 0 0 0 0 0

E millions

CarryingAmount

12/31/2009 2010 2011 2012 2013 2014 ThereafterContractual Cash Flows

Non-derivative financial liabilities— Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �479 �479 0 0 0 0 0— Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �749 �60 �26 �441 �11 �281 0

Derivative financial liabilities and assets— Derivative financial liabilities

Currency derivatives without designated hedge relationship . . . . �109— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �2,136 �3 �3 �3 �2 �13— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,053 0 0 0 0 0

Currency derivatives with designated hedge relationship . . . . . . �12— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �384 0 0 0 0 0— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 0 0 0 0 0

Interest rate derivatives with designated hedge relationship . . . . �5— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �12 �12 �9 �5 �3 0— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 3 1 1 0

— Derivative financial assetsCurrency derivatives without designated hedge relationship . . . . 41

— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �1,853 0 0 0 0 0— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,890 0 0 0 0 0

Currency derivatives with designated hedge relationship . . . . . . 3— cash outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �160 0 0 0 0 0— cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 0 0 0 0 0

F-67


The overall increase of cash outflows forour non-derivative financial liabilities com-pared to year-end 2009 is mainly due to our2010 financing activities and interest paymentsthereon. For more information, see Note (18b).

The overall increase of cash outflows andinflows for our currency derivatives withoutdesignated hedging relationship is due to anincrease in the volume of hedged monetaryassets and liabilities, mainly in U.S. dollars.

(26) FINANCIAL RISK MANAGEMENT

We manage market risks (including for-eign currency exchange rate risk, interest raterisk, equity price risk), credit risk, and liquidityrisk on a Group-wide basis through our globaltreasury department. The risk management andhedging strategy is set by our treasury guide-line and other internal guidelines, and is subjectto continuous internal risk analysis. Selectedderivatives are exclusively used for this purposeand not for speculation, which is defined asentering into derivative instruments without acorresponding underlying transaction.

In the following sections we providedetails on the management of each respectivefinancial risk and our related risk exposure. Forthe presentation of market risk exposure, IFRS7 Financial Instruments: Disclosures (IFRS7) requires sensitivity analyses that show theeffects of hypothetical changes of relevant riskvariables on profit or other components ofequity. The periodic effects are determined byrelating the hypothetical changes in the riskvariables to the balance of financial instrumentsat the reporting date.

Foreign Currency Exchange Rate Risk Management

We continually monitor our exposure tocurrency fluctuation risks based on monetaryitems and forecasted transactions and pursue aGroup-wide strategy to manage foreign cur-rency exchange rate risk, using derivativefinancial instruments, primarily foreignexchange forward contracts, as appropriate,with the primary aim of reducing profit or lossvolatility.

Currency Hedges without Designated HedgeRelationship

The foreign exchange forward contractswe enter into to offset exposure relating toforeign currency-denominated monetary assetsand liabilities from our operating activities arenot designated as being in a hedge accountingrelationship, because the realized currencygains and losses from the underlying items arerecognized in profit in the same periods as thegains and losses from the derivatives.

Currency hedges without a designatedhedge relationship also include foreign cur-rency derivatives embedded in non-derivativehost contracts that are separated and accountedfor as derivatives according to the requirementsof IAS 39.

Currency Hedges with Designated Hedge Rela-tionship (Cash-Flow Hedges)

We enter into derivative instruments, pri-marily foreign exchange forward contracts, tohedge significant forecasted cash flows (royal-ties) from foreign subsidiaries denominated inforeign currencies with a defined set of hedgeratios and a hedge horizon of up to 15 months.Specifically, we exclude the interest componentand only designate the spot rate of the foreignexchange forward contracts as the hedginginstrument to offset anticipated cash flowsrelating to the subsidiaries with significantoperations, including the United States, theUnited Kingdom, Japan, Switzerland, Canada,and Australia. We generally use foreignexchange derivatives that have maturities of15 months or less, which may be rolled over toprovide continuous coverage until the applica-ble royalties are received.

In 2010, net losses totaling A55 million(2009: net losses of A18 million; 2008: netlosses of A32 million) resulting from thechange in the component of the derivativesdesignated as hedging instruments were takendirectly to other components of equity.

For the years ended December 31, 2010and 2009, no previously highly probable trans-action designated as a hedged item in a foreigncurrency cash flow hedge relationship ceased to

F-68


be probable. Therefore, we did not discontinueany of our cash flow hedge relationships. Also,we identified no ineffectiveness in 2010 and2008 and only immaterial ineffectiveness forthese hedges in 2009. In 2010, we reclassifiednet losses of A44 million (2009: net losses ofA37 million; 2008: net losses of A16 million)out of other components of equity to profit orloss due to the hedged items affecting income.Generally, the cash flows of the forecastedtransactions are expected to occur and to berecognized as profit or loss monthly within atime frame of 15 months from the date of thestatement of financial position. It is estimatedthat A18 million of the net losses recognizeddirectly in other components of equity as atDecember 31, 2010, will be reclassified toprofit or loss during fiscal year 2011.

Foreign Currency Exchange Rate Exposure

In line with our internal risk reportingprocess, we use the value-at-risk method toquantify our risk positions and to manage for-eign currency exchange rate risk. Our calcula-tion of the value-at-risk includes not only allforeign currency-denominated financial instru-ments but also forecasted intercompany trans-actions that are scoped out of IFRS 7. As ourinternal calculation of value-at-risk is not inline with the requirements of IFRS 7, we haveopted to disclose our risk exposure based on asensitivity analysis considering the following:

• Since the SAP Group’s entities gener-ally operate in their functional curren-cies, the majority of our non-derivativemonetary financial instruments, suchas cash and cash equivalents, tradereceivables, trade payables, loans toemployees and third parties, bank lia-bilities, and other financial liabilities,are denominated in the respective enti-ties’ functional currency. Thus, a for-eign currency exchange rate risk inthese transactions is nearly non-exis-tent. In exceptional cases and limitedeconomic environments, operating andfinancing transactions are denominatedin currencies other than the functionalcurrency, leading to a foreign currency

exchange rate risk for the related mon-etary instruments. Where we hedgeagainst currency impacts on cashflows, these foreign-currency-denomi-nated financial instruments are eco-nomically converted into the functionalcurrency by the use of forwardexchange contracts or options. There-fore, fluctuations in foreign currencyexchange rates neither have a signifi-cant impact on profit nor on othercomponents of equity with regard toour non-derivative monetary financialinstruments.

• Income or expenses recorded in con-junction with the non-derivative mone-tary financial instruments discussedabove are mainly recognized in therelevant entity’s functional currency.Therefore, fluctuations in foreign cur-rency exchange rates neither have asignificant impact on profit nor onother components of equity in thisregard.

• Our free-standing derivatives designedfor hedging foreign currency exchangerate risks almost completely balancethe changes in the fair values of thehedged item attributable to exchangerate movements in the ConsolidatedIncome Statements in the same period.As a consequence, the hedged itemsand the hedging instruments are notexposed to foreign currency exchangerate risks, and thereby have no effecton profit or other components ofequity.

Consequently, we are only exposed toforeign currency exchange rate fluctuationswith regard to:

• Derivatives held within a designatedcash-flow hedging relationship, and

• Foreign currency embeddedderivatives.

With respect to the nominal amounts ofderivatives held within a designated cash-flowhedging relationship and foreign currencyembedded derivatives, the data at year-end is

F-69


not representative of the exposure during theyear as a whole. On average, our exposure toforeign currency exchange rate risk in 2010was based on nominal amounts of A881 million,with a range of exposure on nominal amountsfrom a high of A954 million to a low ofA815 million, which was also the year-endexposure.

As mentioned above, the interest ele-ment, which is not part of the assigned cashflow hedging relationship and is posted toprofit or loss, is not affected by currency fluc-tuations. As we do not have a significant expo-sure to a single currency in our derivatives heldwithin a designated cash-flow hedging relation-ship, we disclose our exposure to our majorcurrencies (as described in Note 26) in total. If,on December 31, 2010, the euro had gained(lost) 10% against all our major currencies, theeffective portion of the foreign currency cash-flow hedge recorded in other components ofequity would have been A46 million higher(lower) (December 31, 2009: A55 millionhigher (lower); December 31, 2008: A68 millionhigher (lower)) than presented.

With respect to our foreign currencyembedded derivatives, any changes in the valueof such derivatives is recorded in profit or loss.If, on December 31, 2010, the euro had gained(lost) 10% against the Swiss franc (which is thecurrency accounting for the majority of ourexposure from foreign currency embeddedderivatives), the effect on other non-operatingexpense, net would have been A42 millionhigher (lower) (December 31, 2009: A38 millionhigher (lower); December 31, 2008: A40 millionhigher (lower)) than presented.

Our sensitivity to foreign currencyexchange rate fluctuations has decreased duringthe current period, mainly due to the reductionof the nominal amounts hedged in a cash-flowhedging relationship.

Interest-Rate Risk Management

The primary aim of our interest-rate riskmanagement is to reduce profit or loss volatil-ity by creating a balanced structure of fixedand variable cash flows. We therefore manage

interest rate risks by adding interest rate-relatedderivative instruments to a given portfolio ofinvestments and debt financing.

The majority of our financial debt carriesa fixed interest rate but approximately A1.6 bil-lion in financial liabilities carry floating inter-est rates. To hedge the cash-flow risk resultingfrom fluctuations in future interest paymentsfor the variable-rate tranches of the Germanpromissory notes (SSD), which have a nominalvalue of A548 million, we entered into interestrate payer swaps. With these instruments, weare economically converting the underlyingfloating rate into a fixed rate, as the changes inthe cash flows of the hedged items resultingfrom changes in EURIBOR are offset againstthe changes in the cash flows of the interestrate swaps. On December 31, 2010, the nomi-nal volume of the interest rate payer swapscovered the total volume of the variable-ratetranches of the SSD. The cash flow risk result-ing from fluctuations in future payments relat-ing to the outstanding balance of A1.1 billionof the acquisition and the additional term loanas at December 31, 2010, was not hedged.

Including interest rate swaps included,approximately 75% (2009: 100%) of our totalinterest-bearing financial liabilities outstandingas at December 31, 2010, had a fixed interestrate. The remaining interest rate risk exposurebrought on by the variable-rate unhedgedfinancing liabilities (primarily the acquisitionterm loan) virtually offset the interest rate riskexposure resulting from the variable rate cashequivalents we had as at December 31, 2010,with similar yield, amount, and remaining termof the financial instrument.

In addition to their offsetting, due to theshort maturities of both our investments (seeNote (13)) and the acquisition term loan (seeNote (18b)), the amount of remaining interest-rate risk related to these positions is notsignificant.

Derivatives with Designated Hedge Relationship(Cash-Flow Hedges)

As at December 31, 2010, we held inter-est rate derivatives with a designated hedge

F-70


relationship that had a negative fair value ofA10 million (2009: A5 million), for which in2010 net losses of A10 million (2009: A14 mil-lion net losses; 2008: A15 million net losses)were recorded in other components of equitydue to the designation as cash-flow hedginginstruments. In 2010, we reclassified net losses

of A6 million (2009: net losses of A26 million;2008: A0 million) out of other components ofequity to finance income, net due to the hedgeditems’ affecting income. We did not record anyineffectiveness for these hedges for the fiscalyears 2010, 2009, and 2008.

The following table shows the contractual maturities of the cash flows for the SSD interestpayments:

End Date

April 9, 2012

April 9, 2014

June 2, 2014

Nominal Volume

€359.5 million

€158 million

€30 million

Reference Rate

3-month-EURIBOR

3-month-EURIBOR

3-month-EURIBOR

April 9, 2009

April 9, 2009

June 2, 2009

Start Date

Interest Rate Exposure

A sensitivity analysis is provided to showour interest rate risk exposure on December 31,2010, considering the following:

• Changes in interest rates only affectnon-derivative fixed-rate financial instru-ments if they are recognized at fairvalue. Therefore, we do not have a fairvalue risk in our non-derivative financialliabilities as we account for them atamortized cost. On December 31, 2010,we did not have non-derivative fixed-ratefinancial assets classified as availa-ble-for-sale. Therefore, an equity-relatedsensitivity calculation is not necessary.As our investment portfolio did not con-tain fixed-rate financial assets during2010, the data at year-end is representa-tive of the entire year of 2010.

• Income or expenses recorded in con-junction with non-derivative financialinstruments with variable interest ratesare subject to interest rate risk if theyare not hedged items in an effectivehedging relationship. Since we haveentered into interest rate payer swapsfor the variable components of theSSD, we therefore have no significantinterest-rate risk arising from our SSDand only take into consideration

interest rate changes relating to ourvariable-interest-rate investments andacquisition term loan in the profit-related sensitivity calculation.

With respect to the invested amounts,the data at year-end is not representa-tive of the year as a whole. On average,our exposure to cash flow interest raterisk from investments in 2010 wasbased on investments of A776 million,with a range of exposure on invest-ments from a high of A1.1 billion to alow of A371 million. The year-endexposure was A874 million.

With respect to the financed amounts, thedata at year-end is not representative ofthe year as a whole. Significant debtamounts from the acquisition term loanraised in connection with the acquisitionof Sybase were refinanced in 2010. Onaverage, our exposure to cash flow inter-est rate risk from financing activities in2010 was based on interest-bearing liabil-ities of A711 million, with a range ofexposure from a high of A2.74 billion toa low of A7 million. The year-end expo-sure was A1.1 billion.

• Due to the designation of interest ratepayer swaps to a cash flow-hedge rela-tionship, the interest rate changesaffect the respective amounts recorded

F-71


in other components of equity. Themovements related to the interest rateswaps’ variable leg are not reflected inthe sensitivity calculation, as they off-set the variable-interest-rate paymentsfor the SSD. We therefore only con-sider interest rate sensitivity in dis-counting the interest rate swaps’ fixedleg cash flows in the equity-relatedsensitivity calculation for the interestrate swaps designated to be in a hedgerelationship.

With respect to the borrowing andrelated hedged amounts, the data atyear-end is representative for the yearas a whole.

While in 2008 we used a yield curve shift of+100/-100 basis points, the 2010 and 2009 sen-sitivity analyses are - due to the current lowinterest rate level-based on a yield curve shift of+100/-20 basis points to avoid negative interestrates. If, on December 31, 2010 and 2009, inter-est rates had been 100 basis points higher(20 basis points lower) (2008: 100 basis pointshigher (lower)), this would not have had a mate-rial effect on:

• The gains/losses on available-for-sale finan-cial assets positions in other components ofequity.

• Finance income, net for our variable-interest-rate investments and financial debt.

• The effective portion of the interest ratecash-flow hedge in other components ofequity.

Equity-Price Risk Management

Our investments in equity instrumentswith quoted market prices in active markets(2010: A28 million; 2009: A25 million) aremonitored based on the current market valuethat is affected by the fluctuation in the volatilestock markets worldwide. An assumed 20%increase (decrease) in equity prices as atDecember 31, 2010, would not have a materialimpact on the value of our investments in mar-ketable securities and the corresponding entriesin other components of equity.

We are exposed to equity price risk withregard to our share-based payment plans. In orderto reduce resulting profit or loss volatility, wehedge certain cash flow exposures associated withthese plans through the purchase of derivativeinstruments, but do not establish a designatedhedge relationship. While the underlying share-based payment plans are not within the scope ofIFRS 7 and thus the resulting equity price risk isnot required to be analyzed, the derivative instru-ments used to hedge these plans are. Neverthe-less, in our sensitivity analysis we include theunderlying share-based payment plans and thehedging instruments. Thus, we base the calcula-tion on our net exposure to equity prices as webelieve taking only the derivative instrument intoaccount would not properly reflect our equityprice risk exposure. An assumed 20% increase(decrease) in equity prices as at December 31,2010, would have increased (decreased) ourshare-based compensation expenses by A53 million(2009: A46 million; 2008: A41 million).

Credit Risk Management

To mitigate the credit risk for our invest-ing activities and derivative financial assets, weconduct all our activities only with approvedmajor financial institutions and issuers thatcarry high external ratings, as required by ourinternal treasury guideline. Among its stipula-tions, the guideline requires that we invest onlyin assets from issuers with a minimum ratingof at least A-. The weighted average rating ofour financial assets is in the range from AA- toA+. We pursue a policy of cautious investmentscharacterized by predominantly current invest-ments, standard investment instruments, as wellas a wide portfolio diversification by doingbusiness with a variety of counterparties. Inaddition, the concentration of credit risk thatexists when counterparties are involved in sim-ilar activities by instrument, sector, or geo-graphic area is further mitigated bydiversification of counterparties throughout theworld and adherence to an internal limit systemfor each counterparty. This internal limit sys-tem stipulates that the business volume withindividual counterparties is restricted to adefined limit, which depends on the lowestofficial long-term credit rating available by at

F-72


least one of the major rating agencies, or par-ticipation in the German Depositors’ GuaranteeFund or similar protection schemes. We contin-uously monitor strict compliance with thesecounterparty limits. As the premium for creditdefault swaps mainly depends on the marketparticipants’ assessments of the creditworthi-ness of a debtor, we also closely observe thedevelopment of CDS spreads in the market toevaluate probable risk developments to timelyreact to changes if these should manifest.

The default risk of our trade receivablesis managed separately, mainly based on assess-ing the creditworthiness of customers throughexternal ratings and our historical experiencewith respective customers, and it is partiallycovered by merchandise credit insurance. Out-standing receivables are continuously monitoredlocally. Credit risks are accounted for throughindividual and portfolio allowances (describedin detail in Note (3)). The impact of default onour trade receivables from individual customersis mitigated by our large customer base and itsdistribution across many different industriesand countries worldwide. For further informa-tion about our trade receivables, see Note (15).For information about the maximum exposureto credit risk, see Note (25).

Liquidity Risk Management

Our liquidity is managed by our globaltreasury department with the primary aim ofmaintaining liquidity at a level that is adequateto meet our financial obligations.

Our primary source of liquidity is fundsgenerated from our business operations, whichhave historically been the primary source of theliquid funds needed to maintain our investingand financing strategy. The majority of oursubsidiaries pool their cash surplus to our glo-bal treasury department, which then arranges tofund other subsidiaries’ requirements or investany net surplus in the market, seeking to opti-mize yields, while ensuring liquidity, by invest-ing only with counterparties and issuers of highcredit quality, as explained above. Hence, highlevels of liquid assets and marketable securitiesprovide a strategic reserve, helping keep SAPflexible, sound, and independent.

Apart from effective working capital andcash management, we have reduced the liquid-ity risk inherent in managing our day-to-dayoperations and meeting our financing responsi-bilities by arranging an adequate volume ofavailable credit facilities with various financialinstitutions on which we can draw if necessary.

In order to retain high financial flexibil-ity, as at December 15, 2010, SAP AG enteredinto a A1.5 billion syndicated credit facilityagreement with an initial term of five yearsending in December 2015, effectively replacingthe A1.5 billion syndicated revolving creditfacility signed in September 2009. The use ofthe facility is not restricted by any financialcovenants. Borrowings under the facility bearinterest of EURIBOR or LIBOR for the respec-tive currency plus a margin of 45 basis pointsto 75 basis points, depending on the amountdrawn. We are also required to pay a commit-ment fee of 15.75 basis points per annum onthe unused available credit. As at December 31,2010, there were no borrowings outstandingunder the facility.

Additionally, as at December 31, 2010,and 2009, SAP AG had available lines of credittotaling A545 million and A545 million, respec-tively. As at December 31, 2010, and 2009,there were no borrowings outstanding underthese lines of credit. As at December 31, 2010,and 2009, certain subsidiaries had lines ofcredit available that allowed them to borrow inlocal currencies at prevailing interest rates upto A60 million and A51 million, respectively.Total aggregate borrowings under these lines ofcredit amounted to A1 million and A6 millionas at December 31, 2010, and 2009,respectively.

(27) ADDITIONAL FAIR VALUE DISCLOSURESON FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

We use various types of financial instru-ments in the ordinary course of business whichare grouped into the following categories: loansand receivables (L&R), available-for-sale(AFS), held for trading (HFT) and amortizedcost (AC).

F-73


The carrying amounts and fair values of our financial instruments as at December 31 were asfollows:

Fair Values of Financial Instruments

E millions Category

BookValue12/31

AtAmortized

CostAt

Cost

AtFair

Value

FairValue12/31

Not inScope ofIFRS 7

BookValue12/31

AtAmortized

CostAt

Cost

AtFair

Value

FairValue12/31

Not inScope ofIFRS 7

Measurement categories Measurement categories

2010 2009

AssetsCash and cash equivalents . . . . . . . . . L&R 3,518 3,518 3,518 1,884 1,884 1,884

Trade receivables . . . . . . . . . . . . . . L&R 3,177 3,031 3,031 146 2,598 2,508 2,508 90

Other financial assets . . . . . . . . . . . 633 770

Debt . . . . . . . . . . . . . . . . . . . . L&R/AFS

Equity . . . . . . . . . . . . . . . . . . . AFS/— 79 28 28 40 62 25 25 27

Other nonderivative financialassets . . . . . . . . . . . . . . . . . . L&R 188 188 182 499 499 91

Derivatives

with hedging relationship . . . . . . — 3 3 3 3

without hedging relationship . . . . HFT 113 113 63 63

LiabilitiesTrade payables . . . . . . . . . . . . . . . AC �952 �699 �699 �253 �673 �479 �479 �194

Financial liabilities . . . . . . . . . . . . . �4,591 �875

Nonderivative financial liabilities . . . AC �4,445 �4,463 �749 �751

Derivatives

with hedging relationship . . . . . . — �37 �37 �17 �17

without hedging relationship . . . . HFT �109 �109 �109 �109

Aggregation according to IAS 39Financial assets

at fair value through profit or loss

held for trading . . . . . . . . . . . . HFT 113 113 113 63 63 63

available-for-sale . . . . . . . . . . . . . AFS 107 79 28 28 87 62 25 25

loans and receivables . . . . . . . . . . L&R 6,883 6,737 6,737 146 4,981 4,891 4,891 90

Financial liabilities

at fair value through profit or loss

held for trading . . . . . . . . . . . . HFT �109 �109 �109 �109 �109 �109

at amortized cost . . . . . . . . . . . . . AC �5,397 �5,144 �5,162 �253 �1,422 �1,228 �1,230 �194

Out of IAS 39

Financial instruments related toemployee benefit plans . . . . . . . . 182 182 91 91

Associates . . . . . . . . . . . . . . . . . 40 40 27 27

Derivatives with hedgingrelationship. . . . . . . . . . . . . . . �34 �34 �34 �14 �14 �14

Determination of Fair Values

IAS 39 defines fair value as the amountfor which an asset could be exchanged, or aliability settled, between knowledgeable, will-ing parties in an arm’s length transaction.Accordingly, best evidence of fair value pro-vides quoted prices in an active market. Wheremarket prices are not readily available, valua-tion techniques have to be used to establish fairvalue. We have classified our financial

instruments into those that are measured at fairvalue and those that are measured at cost oramortized cost.

Financial Instruments Measured at Fair Value

Depending on the inputs used for deter-mining fair value, we have categorized ourfinancial instruments at fair value into a three-level fair value hierarchy as mandated by IFRS7.

F-74


The fair value hierarchy gives the highestpriority to quoted prices in active markets foridentical assets or liabilities (Level 1) and thelowest priority to unobservable inputs (Level 3).The inputs used to measure fair value for onesingle instrument may fall into different levelsof the fair value hierarchy. In such cases, thelevel in the fair value hierarchy within whichthe fair value measurement in its entirety fallshas been determined based on the lowest levelinput that is significant to the fair value mea-surement in its entirety. Our assessment of thesignificance of a particular input to the fairvalue measurement in its entirety requires judg-ment, and considers factors specific to the assetor liability.

The levels of the fair value hierarchy, itsapplication to our financial assets and liabili-ties, and the respective determination of fairvalue are described below:

• Level 1: Quoted prices in active marketsfor identical assets or liabilities.

• Available-for-sale debt and equityinvestments: The fair values ofthese marketable securities arebased on quoted market prices as atDecember 31.

• Level 2: Inputs other than those that canbe observed, either directly or indirectly,such as quoted prices in active markets forsimilar assets or liabilities, quoted pricesfor identical or similar assets or liabilitiesin markets that are not active, or otherinputs that are observable or can be cor-roborated by observable market data forsubstantially the full term of the assets orliabilities.

• Derivative financial instruments:The fair value of foreign exchangeforward contracts is based on dis-counting the expected future cashflows over the respective remainingterm of the contracts using therespective deposit interest rates andspot rates. The fair value of thederivatives entered into to hedge ourshare-based compensation programsare calculated considering risk-freeinterest rates, the remaining term ofthe derivatives, the dividend yields,the stock price and the volatility ofour share. Fair values of our deriva-tive interest-rate contracts are calcu-lated by discounting the expectedfuture cash flows by taking the pre-vailing market and future rates forthe remaining term of the contractsas a basis.

• Available-for-sale equity investmentsin public companies: Certain ofour equity investments in publiccompanies were restricted frombeing sold for a limited period.Therefore, fair value is determinedbased on quoted market prices as atDecember 31, deducting a discountfor the disposal restriction based onthe premium for a respective putoption.

• Level 3: Unobservable inputs that aresupported by little or no market activityand that are significant to the fair value ofthe assets or liabilities.

F-75


The following table allocates those financial assets and liabilities that are measured at fairvalue in accordance with IAS 39 either through profit or loss or other components of equity as atDecember 31, 2010, to the three levels of the fair value hierarchy according to IFRS 7.

Classification of Financial Instruments

E millions Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

2010 2009

Financial assetsDebt investments . . . . . . . . . . . . . 0 0 0 0 0 0 0 0

Equity investments . . . . . . . . . . . . 1 27 0 28 1 24 0 25

Available-for-sale financial assets . . 1 27 0 28 1 24 0 25Derivative financial assets . . . . . . . . 0 116 0 116 0 66 0 66

Total . . . . . . . . . . . . . . . . . . . . . . . . 1 143 0 144 1 90 0 91

Financial liabilitiesDerivative financial liabilities . . . . . 0 146 0 146 0 126 0 126

Total . . . . . . . . . . . . . . . . . . . . . . . . 0 146 0 146 0 126 0 126Financial Instruments Measured at Cost/at

Amortized Cost

The fair values of these financial instru-ments are determined as follows:

• Cash and cash equivalents, tradereceivables, other non-derivativefinancial assets: Because thefinancial assets are primarily short-term, it is assumed that their carry-ing values approximate their fairvalues. Non-interest-bearing orbelow market-rate non-current loansto third parties or employees arediscounted to the present value ofestimated future cash flows usingthe original effective interest ratethe respective borrower would haveto pay to a bank for a similar loan.

• Available-for-sale equity investmentsin private companies: For theseinvestments in equity instrumentsprimarily consisting of venture capi-tal investments, fair values cannotreadily be observed as they do nothave a quoted market price in anactive market. Also, calculating fairvalue by discounting estimatedfuture cash flows is not possible asa determination of cash flows is not

reliable. Therefore, such investmentsare accounted for at cost approxi-mating fair value, with impairmentbeing assessed based on revenuemultiples of similar companies andreview of each investment’s cashposition, financing needs, earningsand revenue outlook, operationalperformance, management and own-ership changes, and competition.

• Accounts payable and non-deriva-tive financial liabilities: Non-derivative financial liabilitiesinclude financial debt and othernon-derivative financial liabilities.Accounts payable and other non-derivative financial liabilities aremainly short-term, and thus theirfair values approximate their carry-ing values. The carrying values offinancial debt with variable interestrates generally approximate the fairvalues. The fair value of fixed-ratefinancial debt is based on quotedmarket prices or determined by dis-counting the cash flows using themarket interest rates onDecember 31.

F-76


(28) SHARE-BASED PAYMENT PLANS

SAP has granted awards under variouscash-settled and equity-settled share-basedcompensation plans to its directors and employ-ees. All of these programs are described in thefollowing sections.

a) Cash-Settled Share-Based Payment Plans

SAP’s stock appreciation rights are cash-settled share-based payment plans and include

the following programs, which are described indetail below: Stock Appreciation Rights (STAR)program, STAR Performance Plan 2009 (STARPP), Incentive 2010, Virtual Stock Option Plan(SOP) program, SOP Performance Plan 2009(SOP PP), Virtual Stock Option Plan 2010(SOP 2010), BO Rights (former Business Objectsawards assumed in connection with the BusinessObjects acquisition in 2008) and Sybase Rights(former Sybase awards assumed in connectionwith the Sybase acquisition in 2010).

The following parameters and assumptions were used for the computation of the fair value atgrant date:

SOP2010

SybaseRights(1)

STARPP

SOPPP STAR

Incentive2010 SOP

BORights(1)

2010 2009 2008

Fair Value and Parameters at Grant Date by Plan

Weighted average fair value . . . . . . . . . . 6.46 A 50.07 A 3.53 A 5.62 A 3.26 A 4.93 A 7.11 A 20.98 A

Expected life (in years) . . . . . . . . . . . . . 5.8 1.5 2.3 4.6 2.5 2.9 4.8 3.3

Risk-free interest rate . . . . . . . . . . . . . . 1.63% N/A 1.55% 2.39% 3.21% 3.54% 3.43% 3.42% to 3.74%

Grant price of SAP share . . . . . . . . . . . . 35.48 A N/A 28.00 A 28.00 A 32.69 A 36.15 A 32.69 A N/A

Share price of SAP share . . . . . . . . . . . . 35.45 A N/A 28.23 A 28.23 A 31.61 A 31.45 A 31.61 A 32.28 A

Expected volatility of SAP shares . . . . . . 26.9% N/A 39.9% 35.0% 31.8% 29.6% 30.0% 29.0%

Expected dividend yield of SAP shares . . . 1.65% N/A 1.76% 1.76% 1.74% 1.56% 1.74% 1.30%

Grant price of reference index . . . . . . . . . N/A N/A 97.54 A 97.54 A N/A 165.59 A N/A N/A

Share price of reference index . . . . . . . . . N/A N/A 108.82 A 108.82 A N/A 191.12 A N/A N/A

Expected volatility of reference index. . . . N/A N/A 35.8% 25.2% N/A 15.9% N/A N/A

Expected dividend yield of referenceindex . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 1.10% 1.06% N/A N/A N/A N/A

Expected correlation SAP share/referenceindex . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 38.1% 36.5% N/A 33.0% N/A N/A

(1) Fair value at acquisition date

F-77


As at December 31, 2010, the valuation of our outstanding cash-settled plans was based onthe following parameters and assumptions:

STAR STAR PP SOP SOP PP SOP 2010BO

RightsSybaseRights

Fair Value and Parameters Used at Dec 31, 2010

Option pricing model used . . . Monte-Carlo Monte-Carlo Binomial Monte-Carlo Monte-Carlo Binomial None

Range of grant dates . . . . . . . 03/2007 05/2009 03/2007 05/2009 09/2010 02/1998 07/2010

04/2008 04/2008 01/2008

Quantity of awards issued inthousands . . . . . . . . . . . . . 37,202 16,029 15,664 10,321 5,397 5,162 745

Weighted average fair value asat Dec 31, 2010 . . . . . . . . 0.13 A 0.01 A 4.58 A 4.60 A 7.74 A 14.79 A 48.65 A

Weighted average intrinsicvalue as at Dec 31, 2010 . . 0.13 A 0.00 A 1.19 A 0.00 A 0.00 A 14.14 A 48.65 A

Expected life as at Dec 31,2010 (in years) . . . . . . . . . 0.1 0.7 1.7 3.1 5.5 2.4 1.1

Risk-free interest rate(depending on maturity) . . . N/A 0.56% 0.56% to 0.87% 1.24% 1.97% to 2.56% 0.75% N/A

Expected volatility SAPshares . . . . . . . . . . . . . . . N/A 24.4% 22.7% to 26.4% 26.8% 26.3% to 26.7% 34.0% N/A

Expected dividend yield SAPshares . . . . . . . . . . . . . . . N/A 1.79% 1.79% 1.79% 1.79% 1.75% N/A

Share price of referenceindex . . . . . . . . . . . . . . . . N/A 165.74 N/A 165.74 N/A N/A N/A

Expected volatility referenceindex . . . . . . . . . . . . . . . . N/A 11.9% N/A 29.4% N/A N/A N/A

Expected dividend yieldreference index . . . . . . . . . N/A 1.11% N/A 1.15% N/A N/A N/A

Expected correlation SAPshare/reference index . . . . . N/A 7.9% N/A 37.4% N/A N/A N/A

Expected volatility of the SAP shareprice is based on a mixture of implied volatilityfrom traded options with corresponding life-times and exercise prices as well as historicalvolatility with the same expected life as theoptions granted. For the STAR PP and theSOP PP valuation, the expected volatility of theTech Peer Group Index (ISINDE000A0YKR94) (TechPGI) is based on the

historical volatility derived from the index pricehistory.

Expected life of the options reflects boththe contractual term and the expected, or histor-ical, exercise behavior. The risk-free interestrate is derived from German government bondswith a similar duration. Dividend yield is basedon expectations of future dividends.

F-78


The number of awards under our cash-settled plans developed as follows in the years endedDecember 31, 2010, 2009, and 2008:

STARSTAR

PPIncentive

2010 SOPSOPPP

SOP2010

BORights

SybaseRights

Changes in Numbers of Outstanding Awards (000)

Outstanding as of 12/31/2007 . . . . . . . . . . . . . . . . . . . . . . . . 24,879 N/A 1,157 6,698 N/A N/A N/A N/A

Granted in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,517 N/A 134 8,650 N/A N/A 5,162 N/A

Exercised/paid in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �4,037 N/A 0 0 N/A N/A �1,720 N/A

Expired in 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 N/A 0 0 N/A N/A 0 N/A

Forfeited in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �2,125 N/A �124 �862 N/A N/A �479 N/A

Outstanding as of 12/31/2008 . . . . . . . . . . . . . . . . . . . . . . . . 37,234 N/A 1,167 14,486 N/A N/A 2,963 N/A

Granted in 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 16,029 0 0 10,321 N/A 0 N/A

Exercised/paid in 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �2,943 0 0 0 0 N/A �704 N/A

Expired in 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 N/A 0 N/A

Forfeited in 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �2,620 �518 �66 �998 �243 N/A �372 N/A

Outstanding as of 12/31/2009 . . . . . . . . . . . . . . . . . . . . . . . . 31,671 15,511 1,101 13,488 10,078 N/A 1,887 N/A

Granted in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0 5,397 745

Exercised/paid in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �15,943 0 0 �167 0 0 �571 �9

Expired in 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 �1,101 0 0 0

Forfeited in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �648 �747 0 �323 �503 �24 �216 �13

Outstanding as of 12/31/2010 . . . . . . . . . . . . . . . . . . . . . . . . 15,080 14,764 0 12,998 9,575 5,373 1,100 723

Additional information

Awards exercisable as of 12/31/2008 . . . . . . . . . . . . . . . . . . . . N/A N/A 0 0 N/A N/A 1,528 N/A

Awards exercisable as of 12/31/2009 . . . . . . . . . . . . . . . . . . . . N/A 0 0 5,965 0 N/A 1,390 N/A

Awards exercisable as of 12/31/2010 . . . . . . . . . . . . . . . . . . . . N/A 0 0 12,998 0 0 1,060 N/A

Aggregate intrinsic value of vested awards in A million, as of12/31/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 0 0 N/A N/A 9.6 N/A

Aggregate intrinsic value of vested awards in A million, as of12/31/2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 0 0 0 0 N/A 18.5 N/A

Aggregate intrinsic value of vested awards in A million, as of12/31/2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 0 0 15.5 0 0 22.4 0

Weighted average exercise price in A . . . . . . . . . . . . . . . . . . . . N/A N/A N/A 37.43 47.58 39.21 24.18 N/A

Provision as of 12/31/2008 in A millions . . . . . . . . . . . . . . . . . . 14.8 N/A 2.1 35.8 N/A N/A 37.1 N/A

Provision as of 12/31/2009 in A millions . . . . . . . . . . . . . . . . . . 12.1 5 0.1 53.3 14.3 N/A 28.9 N/A

Provision as of 12/31/2010 in A millions . . . . . . . . . . . . . . . . . . 1.9 0 0 59.4 35.8 3.9 24.0 22.1

Expense recognized in 2008 in A millions . . . . . . . . . . . . . . . . . 27.9 N/A �0.9 23.6 N/A N/A 8.3 N/A

Expense recognized in 2009 in A millions . . . . . . . . . . . . . . . . . 5.9 14.3 �1.9 19.6 5 N/A 5.9 N/A

Expense recognized in 2010 in A millions . . . . . . . . . . . . . . . . . �2.4 �5.1 �0.1 0.2 21.0 3.9 6.3 4.8

a.1) STAR Plans (STAR)

Under the STAR Plans, we granted stockappreciation rights. The value of these awardswas dependent on the quarterly performance ofthe SAP share.

The 2008 and 2007 STAR grant-base val-ues of A32.69 and A35.71 respectively, werebased on the average fair market value of onecommon share over the 20 business days com-mencing the day after the announcement of theCompany’s preliminary results for the precedingfiscal year. The valuation of the STARs is calcu-lated quarterly over a period of two years. Each

F-79


of the eight quarterly valuations is weighted asfollows in determining the final STAR value:

Weighting Factor for Valuation Calculation of STAR Awards Quarter Ended

March 31 June 30 Sep. 30 Dec. 31 March 31 June 30 Sep. 30 Dec. 31

5% 5% 10% 20% 10% 10% 10% 30%

The valuations for quarters endedDecember 31 are calculated on the basis of theamount by which the grant price is exceededby the average fair market value of one com-mon share, as quoted on the Frankfurt StockExchange, over the 20 consecutive businessdays following the announcement date of theCompany’s preliminary annual results. Theother quarterly valuations are calculated on thebasis of the amount by which the grant price isexceeded by the average fair market value ofone common share over the five consecutivebusiness days following the announcement ofthe Company’s quarterly results. Because eachquarterly valuation is conducted independently,it is unaffected by any other quarterlyvaluation.

When the final value of each STAR isdetermined, beneficiaries receive an initial 50%payment on March 31 and a second one onJanuary 31 of the following year. Beneficiariesonly receive STAR payments if they are stillemployees of the Company on the paymentdates, subject to certain exceptions.

a.2) STAR Performance Plan 2009 (STAR PP)

Under the STAR Performance Plan 2009,we granted stock appreciation rights, the valueof which depends on the quarterly performanceof the SAP share relative to an industry-spe-cific share price index.

The STAR PP grant value of A28.00 isbased on the average fair market value of onecommon share over the 20 business days com-mencing the day after the announcement of theCompany’s preliminary results for the preced-ing fiscal year. As for the STAR plans, thevaluation of the STAR PP is calculated quar-terly, over a period of two years, with a similarweighting allocated to each of the eightquarters.

The quarterly valuation under the STARPP is based on the outperformance of the SAPstock price compared to the TechPGI index,which includes 10 publicly traded software andhardware companies. For this purpose, theSTAR PP agreement sets the initial value of theindex (A97.54) as well as the SAP grant value(A28.00 per share). The quarterly valuations areperformed on eight defined dates from June 10,2009, to March 10, 2011. The outperformanceof SAP stock price over the TechPGI price ismeasured over the last 10 trading days prior tothe target date. The final STAR PP value willbe the sum of the eight quarterly appreciations.The maximum total payout per STAR PP iscapped at 110% of the STAR grant value.

Beneficiaries will receive payments withrespect to the STARs as follows: 50% on bothMarch 31, 2011, and January 31, 2012, pro-vided that they are still employees of the Com-pany on the payment dates, subject to certainexceptions.

a.3) Incentive Plan 2010

Under the Incentive Plan 2010, wegranted to top performers and top executivesstock appreciation rights, the value of whichwas dependent on the multi-year performanceof the SAP share relative to an industry-spe-cific share price index.

The plan provided for a payout only ifthe market capitalization of SAP AG increasedby at least 50% by December 31, 2010. Sincethis requirement was not met, the plan did notresult in a payout to the plan participants.

a.4) SAP Stock Option Plan 2007 (SOP)

Under the SAP Stock Option Plan 2007,we granted in 2007 and 2008 to top executivesand top performers cash-based virtual stock

F-80


options, the value of which was dependent onthe multi-year performance of the SAP share.

The virtual stock options granted underthe SOP give the employees the right to receivea certain amount of money by exercising theoptions under the terms and conditions of thisplan. After a vesting period of two years, theplan provides for 11 predetermined exercisedates every calendar year (one date per monthexcept in April) until the rights lapse five yearsafter the grant date.

The exercise price is 110% of the grantbase value, which is derived from the averagefair market value of one common share overthe 20 business days following the announce-ment date of the Company’s preliminary resultsfor the preceding fiscal year. The awardsgranted in 2008 and 2007 have a grant-basevalue of A32.69 and A35.71, respectively.

Monetary benefits under the SOP arecapped at 100% of the exercise price (A39.28for options granted in 2007, and A35.96 foroptions granted in 2008).

a.5) SOP Performance Plan 2009 (SOP PP)

Under the SOP Performance Plan 2009,we granted to top executives and top perform-ers cash-based virtual stock options, the valueof which depends on the multi-year perfor-mance of the SAP share relative to an industry-specific share price index, the TechPGI.

The future payout at the exercise datewill be based on the outperformance of theSAP share price over the TechPGI. For thatpurpose, the SOP PP 2009 agreement definesthe initial value of the TechPGI (A97.54) aswell as the SAP exercise price (A28.00 pershare). After a vesting period of two years, theplan provides for 12 predetermined exercisedates every calendar year (one date per month)until the rights lapse five years after the grantdate.

Monetary benefits are capped at 110% ofthe exercise price (A30.80).

a.6) SAP Stock Option Plan 2010 (SOP 2010)

Under the SAP Stock Option Plan 2010,we grant to members of the Senior LeadershipTeam, to SAP’s Top Rewards (employees withan exceptional rating) and to members of theExecutive Board cash-based virtual stockoptions, the value of which depends on themulti-year performance of the SAP share.

The awards granted in 2010 have agrant-base value of A35.48, which is based onthe average fair market value of one commonshare over the 5 business days prior to theBoard resolution date.

The virtual stock options granted underthe SOP 2010 give the employees the right toreceive a certain amount of money by exercisingthe options under the terms and conditions ofthis plan. After a three-year vesting period (fouryears for members of the Executive Board), theplan provides for 11 predetermined exercisedates every calendar year (one date per monthexcept in April) until the rights lapse six yearsafter the grant date (seven years for members ofthe Executive Board).

The exercise price is 110% of the grantbase value (115% for members of the Execu-tive Board) (A39.03 and A40.80 respectively peroption for the 2010 grant).

Monetary benefits will be capped at100% of the exercise price (150% for membersof the Executive Board).

a.7) Business Objects Cash-Settled AwardsReplacing Pre-Acquisition BusinessObjects Awards (BO Rights)

Prior to being acquired by SAP, theemployees of Business Objects companies weregranted equity-settled awards giving rights toBusiness Objects shares. Following the Busi-ness Objects acquisition in 2008, the BusinessObjects shares were no longer publicly tradedand mechanisms were implemented to allowthe employees to cash out their awards eitherby receiving cash instead of Business Objectsshares (cash payment mechanism or CPM) orby receiving Business Objects shares that theysubsequently sell to SAP France (liquidityagreement mechanism or LAM). BusinessObjects has since been merged into SAP

F-81


France. In substance, the implementation ofCPM and LAM resulted in a conversion of theequity-settled awards to cash-settled share-based payment awards (replacing awards) thatreplaced the stock options and Restricted StockUnits (RSUs) originally granted (replacedawards).

The replaced awards had vesting periodsin the range of two to five years, and contrac-tual terms in the range of two to ten years.

The replacing awards closely mirror theterms of the replaced awards (including condi-tions such as exercise price and vesting) exceptthat:

• The replaced awards were planned tobe settled by issuing equity instrumentswhereas the replacing awards are set-tled in cash either via the CPM or viathe LAM.

• The replaced awards were indexed toBusiness Objects’ share price whereasthe replacing awards are indexed toSAP’s share price as follows: SAP’soffering price for Business Objectsshares during the tender offer (A42) isdivided by SAP AG’s share price at thetender offer closing date (A32.28) andthe result is multiplied by the weightedaverage closing price of the SAP shareduring the 20 trading days precedingthe exercise or disposition date.

The benefit resulting from the stockoption exercise or the RSU vesting is eitherpaid directly to the employees (in countrieswhere the CPM applies) or the employees con-tinue to receive shares of Business Objects onstock options exercise or RSU vesting (in coun-tries where the LAM applies). In these cases,the employees have a put option to resell theshares to SAP within 3 months from exercise,while SAP has a call option on these shares.

In both cases, these awards are accountedfor as a cash-settled award because the obliga-tion to the employee is ultimately settled incash, both under the CPM and the LAMmechanism.

a.8) Sybase Cash-Settled Awards ReplacingPre-Acquisition Sybase Awards (SybaseRights)

The terms of the acquisition agreementrequired SAP to exchange unvested RestrictedStock Awards (RSAs) held by employees ofSybase, Inc. (the acquiree’s awards) for cash-settled share-based payment awards of SAP(Sybase Rights).

RSAs unvested at the closing of theacquisition were converted into the right toreceive at the originally agreed vesting dates,an amount in cash equal to the number ofRSAs held at the vesting date multiplied byUS$65.00 per share.

There were 745,445 unvested RSAs at theacquisition date representing a fair value ofA35.9 million after considering forfeitures depen-dent on grant dates and remaining vesting peri-ods, of which A18.2 million was earned as at theacquisition date. The fair value of the unearnedSybase Rights expected to vest was estimated atA17.7 million on the acquisition date. Theremaining vesting period for unearned SybaseRights approximated to 1.5 years at acquisitiondate (in accordance with the originally agreedvesting dates). From August 1, 2010, to Decem-ber 31, 2010, 8,472 Sybase awards vested andwere paid to Sybase employees for a totalamount of A0.4 million. The expense recognizedin 2010 for Sybase Rights was A4.8 million. Theunrecognized expense related to Sybase Rightswas A12.4 million as at December 31, 2010, andwill be recognized over a remaining vestingperiod of 1.1 years.

b) Equity-Settled Share-Based Payment Plans

Equity-settled plans include the ShareMatching Plan (SMP), the Employee Dis-counted Stock Purchase Programs (EDSPs), theStock Awards Program, the Stock Option Plan2002, and the Long Term Incentive Plan 2000.With regard to SOP 2002 and LTI 2000 plans,as a result of the issuance on December 21,2006, of bonus shares at a one-to-three ratiounder a capital increase from corporate funds,each stock option or convertible bond issuednow entitles its beneficiary to four shares. For

F-82


better comparability with the price of SAPstock since December 21, 2006, the tables dis-closed in paragraphs b.4 and b.5 have beenadjusted to show the number of shares to whichthe options or bonds entitle the holder ratherthan the number of rights granted. Conse-quently, the strike prices shown are prices pershare and not per option. The number of sharesshown in the tables is four times the number ofoptions, and the exercise price for an option isfour times the price per share shown in thetables.

b.1) Share Matching Plan

Under the Share Matching Plan (SMP)implemented in 2010, SAP offers its employeesthe opportunity to purchase SAP AG shares at adiscount of 40%. The number of SAP shares aneligible employee may purchase through theSMP is limited to a percentage of the employ-ee’s annual base salary. After a three-year hold-ing period, such plan participants will receiveone free matching share of SAP for every threeSAP shares acquired. The terms for the mem-bers of the Senior Leadership Team (SLT) areslightly different than those for the employees.Members of the SLT do not receive a discountwhen purchasing the shares. However, after athree-year holding period, members of the SLTreceive two free matching shares of SAP stockfor every three SAP shares acquired. This planis not open to members of the SAP ExecutiveBoard.

On August 20, 2010, the SAP ExecutiveBoard set the purchase price for the SMP atA35.12 per share. On September 8, 2010 (at theend of offering period), 1.6 million shares werepurchased by SAP employees and approxi-mately 0.5 million bonus shares (489,416granted to employees and 82,090 to the SLT)will be transferred at the end of the 3-yearvesting period if these shares continue to beheld during the three-year holding period. Thefair value of the free matching shares wasestimated at the grant date to be A33.71 pershare using a risk-free interest rate of 0.82%, adividend yield of 1.65% and an expected life of3 years.

In 2010, the Company recognized a com-pensation expense in the amount of A26.4 mil-lion, which includes A21.1 million relating tothe 40% discount granted on the SMP sharepurchase, A1.7 million relating to the amortiza-tion of the free matching shares fair value overthe vesting period, and A3.6 million relating tothe additional discount granted under the StockAward Program now part of the SMP (see b.3).The unrecognized expense on December 31,2010, related to free matching shares is esti-mated to be A14.7 million, considering esti-mated forfeitures and will be recognized overthe remaining vesting period of 2.7 years.

b.2) Employee Discounted Stock Purchase Pro-grams (EDSPs)

Through the EDSPs, the Company offersits employees the opportunity to purchase itsshares on a monthly basis at a discount of15%. The number of SAP shares an eligibleemployee may purchase through an EDSP islimited to a percentage of the employee’sannual base salary. The compensation expenserecognized in 2010 for this plan amounted toA2.9 million (2009: A2.8 million; 2008:A3.3 million).

b.3) Stock Award Program

Employees in Germany receive a A260discount on the purchase of SAP shares once ayear under the Stock Award Program (Vermo-gensbeteiligung). The total expense recordedunder this program was A3.8 million in 2009(2008: A3.6 million). Starting in 2010, the pro-gram was considered as part of the ShareMatching Plan and further reduced the amountpaid by the employees for the acquisition of theshares beyond the 40% discount granted toemployees.

b.4) Stock Option Plan 2002

Under the Stock Option Plan 2002 wegranted stock options, the value of which wasdependent on the multi-year performance of theSAP share. The last grants under the StockOption Plan 2002 occurred in 2006. The

F-83


awards were granted to top executives and topperformers.

Each stock option granted under the SAPSOP 2002 plan entitles its holder to subscribeto four shares of the Company’s common stockby tendering payment of an exercise price peroption equal to a base price and a premium of10% of the base price. The base price is calcu-lated as the average market price of SAP AG’scommon share on the Frankfurt Stock

Exchange during the five trading days preced-ing the issue of the respective stock option.The options cannot be exercised at an exerciseprice that is less than the closing auction stockprice on the day before the issue date. Thecontractual term of the stock options is fiveyears. The fair value of such options wasassessed using the Black-Scholes Mertonoption pricing model.

The number of outstanding and exercisable options under SAP SOP 2002 developed asfollows in the years ended December 31, 2010, and 2009:

Activities Under SAP SOP 2002

Number of

Options Out-

standing and

Exercisable

Weighted

Average

Exercise Price

per Option

Weighted Average

Remaining

Contractual Term

Aggregate

Intrinsic Value

(000) € Years € millions

12/31/2008 19,846 38.83 1.1 0

Exercised -15 33.55 0.0 0

Forfeited or expired -6,575 37.83 0.0 0

12/31/2009 13,256 39.34 0.6 0

Exercised -2,855 33.55 0.0 0

Forfeited or expired -5,059 35.05 0.0 0

12/31/2010 5,342 46.48 0.1 0

As all the options issued under SAPSOP 2002 were fully vested in prior years, weincurred no compensation expense for this planin 2010 (2008: A0.8 million). Due to a modifi-cation of the plan, we incurred an expense of

A2.1 million in 2009. The total intrinsic valueof options exercised during the years endedDecember 31, 2010, 2009, and 2008, wasA0 million, less than A1 million, and A21 mil-lion, respectively.

The following table summarizes information about stock options outstanding as at Decem-ber 31, 2010, and 2009, under SAP SOP 2002:

Stock Options Outstanding under SAP SOP 2002 as at December 31, 2010, and 2009

Exercise Price Number of

Stock

Options

Weighted

Average

Remaining

Contractual Life

Intrinsic Value

of Vested

Awards

Number of

Stock

Options

Weighted

Average

Remaining

Contractual Life

Intrinsic Value

of Vested

Awards

€(000) Years € millions (000) Years € millions

33.55 7,326 0.11 0.0

46.48 5,342 0.10 0.0 5,930 1.10 0.0

33.55 - 46.48 5,342 0.10 0.0 13,256 0.55 0.0

Outstanding and Exercisable at 12/31/2010 Outstanding and Exercisable at 12/31/2009

F-84


The weighted average share price of SAPAG common shares on the SAP SOP 2002exercise dates in 2010, 2009, and 2008, wasA33.08, A34.19 and A34.32, respectively.

b.5) Long Term Incentive 2000 Plan (LTI 2000Plan)

Under the LTI 2000 Plan we grantedconvertible bonds, the value of which weredependent on the multi-year performance of theSAP share and stock options, the value ofwhich were dependent on the multi-year perfor-mance of the SAP share relative to an industry-specific share price index. The last grantsunder the LTI 2000 Plan occurred in 2002. Theawards were granted to top executives and topperformers.

The LTI 2000 Plan offered a choicebetween convertible bonds, stock options, or a50% mixture of each. Beneficiaries wereoffered 25% more units if they chose stockoptions than if they chose convertible bonds.Under the LTI 2000 Plan, each convertible

bond having a A1 nominal value is convertibleinto four common shares over a maximum of10 years, subject to service vesting require-ments. The conversion price is equal to themarket price of a common share as quoted onthe Xetra trading system on the day immedi-ately preceding the grant. Each stock optionmay be exercised in exchange for four commonshares over a maximum of 10 years, subject tothe same vesting requirements. The exerciseprice varies with the outperformance of thecommon share price appreciation against theappreciation of the S&P North Software-Soft-ware Index (formerly GSTI Software Index)from the day immediately preceding grant tothe day on which the exercise price is deter-mined. Both the convertible bonds and stockoptions vested as follows: 33% after two yearsfrom date of grant, 33% after three years, and34% after four years.

In total, 49.2 million conversion and sub-scription rights were issued under the LTI 2000Plan through March 14, 2002.

The number of stock options and convertible bonds under LTI 2000 Plan developed as followsin the years ended December 31, 2010, and 2009:

Activities under the LTI Plan 2000

Number of

Options

Outstanding

Weighted

Average

Exercise Price

per Option

Weighted

Average

Remaining

Contractual Term

Aggregate

Intrinsic Value

Stock options (000) € Years € millions

3,022 17.95 2.7 22

Exercised -763 24.04 0.0 0

Forfeited -24 26.45 0.0 0

12/31/2009 2,235 26.07 1.8 15

Exercised -459 32.60 0.0 0

Forfeited -96 31.89 0.0 0

12/31/2010 1,680 36.13 0.9 3

Convertible bonds

12/31/2008 23,730 50.59 2.2 0

Forfeited -1,197 53.10 0.0 0

12/31/2009 22,533 50.46 1.2 0

Forfeited -6,644 68.00 0.0 0

12/31/2010 15,889 43.12 0.6 0

12/31/2008

All convertible bonds and stock options outstanding as at December, 31, 2010, are exercisable.

F-85


The following tables summarize information about stock options and convertible bondsoutstanding as at December 31, 2010:

LTI 2000 Plan Awards Outstanding as at December 31, 2010

Range of

Exercise Prices

Number of

Stock

Options

Weighted

Average

Remaining

Contractual

Weighted

Average

Exercise Price

Number of

Stock

Options

Weighted

Average

Exercise Price

€ (000) Years € (000) €

30.62 391 0.14 30.62 391 30.62

34.18 12 0.56 34.18 12 34.18

37.83 1,277 1.14 37.83 1,277 37.83

30.62 to 37.83 1,680 0.9 36.13 1,680 36.13

Outstanding Stock Options Exercisable Stock Options

Range of

Exercise Prices

Number of

Bonds

Weighted

Average

Remaining

Contractual

Weighted

Average

Exercise Price

Number of

Bonds

Weighted

Average

Exercise Price

€ (000) Years € (000) €

32.95 to 40.00 7,510 1.13 37.89 7,510 37.89

47.81 8,379 0.14 47.81 8,379 47.81

32.95 to 47.81 15,889 0.61 43.12 15,889 43.12

Outstanding Convertible Bonds Exercisable Convertible

Bonds

The weighted average share price of SAPAG common shares on the LTI 2000 Planoption exercise dates in 2010, 2009, and 2008,was A34.82, A31.30, and A35.59 respectively.The weighted average price of SAP AG com-mon shares on the LTI 2000 Plan convertiblebond exercise dates was A37.44 in 2008 (noexercise since 2009).

Due to the fact that all LTI 2000 Planswere fully vested during 2006, we recorded nocompensation expense in 2007 and thereafter.The fair value of the options and convertiblebonds granted under that plan was assessedusing the Black-Scholes Merton option pricingmodel. The total intrinsic value of stock optionsexercised during the years ended December 31,2010, 2009, and 2008, was A2.9 million,A8.9 million, and A5.1 million, respectively.The total intrinsic value of convertible bondsexercised during the year ended December 31,2008, was A0 million (no exercise since 2009).

(29) SEGMENT AND GEOGRAPHICINFORMATION

Our internal reporting system producesreports in which business activities are pre-sented in a variety of ways, for example, byline of business, geography, and areas ofresponsibility of the individual Executive Boardmembers (Board areas). Based on these reports,the Executive Board, which is responsible forassessing the performance of various companycomponents and making resource allocationdecisions as our Chief Operating DecisionMaker (CODM), evaluates business activities ina number of different ways. Until the secondquarter of 2010 we had only three operatingsegments, which were organized according toour lines of business. After the acquisition ofSybase in July 2010, we implemented a dedi-cated Sybase business unit next to our existingsegments Product, Consulting, and Training.Consequently, a new segment was added to oursegment reporting. Although the new segment

F-86


is called Sybase, it is not identical to theacquired Sybase business. Certain activities ofthe acquired business are integrated and thusreported in our Product, Consulting, and Train-ing segments while certain activities thatexisted in SAP prior to the Sybase businesscombination have been transferred to the Syb-ase segment. In our segment reporting, the rev-enue is presented according to the salesresponsibilities rather than the product beingsold. As such, the Sybase segment is able togenerate revenue selling SAP products as wellas Sybase products, while the revenue shown inthe other segments can also be attributable toboth SAP and Sybase products, which havebeen sold by sales personnel of SAP.

The Product segment is primarilyengaged in marketing and licensing our soft-ware products, performing custom softwaredevelopment services, and providing supportservices for our software products. The Con-sulting segment performs various professionalservices, mainly relating to the implementationof our software products. The Training segmentprovides educational services on the use of oursoftware products and related topics for cus-tomers and partners. The Sybase segmentderives its revenue from licensing a range ofsoftware products, including enterprise andmobile databases, middleware, synchronization,encryption and device management software,from performing support services, professionalservices, and training services associated withthese software products, and from providingmobile messaging services.

Our management reporting systemreports our inter-segment services as costreductions and does not track them as internalrevenue. Inter-segment services mainly repre-sent utilization of manpower resources of onesegment by another segment on a proj-ect-by-project basis. Inter-segment services arecharged based on internal cost rates includingcertain indirect overhead costs but withoutprofit margin.

Following our decision to discontinueour U.S. GAAP accounting at the end of 2009,the accounting policies applied in the internalreporting to our CODM are based on IFRS

starting in 2010. This also affects our prior yearfigures, which we have adjusted accordingly.

The accounting policies applied in theinternal reporting to our CODM differ fromIFRS accounting principles described in Note(3) as follows:

• The internal reporting to our CODMgenerally attributes revenue to the seg-ment that is responsible for the relatedtransaction regardless of revenue clas-sification in our income statement.Thus, for example, the Training seg-ment’s revenue includes certainamounts classified as software revenuein our Consolidated Income State-ments. Additionally revenue for Sybaseproducts might be reported under anyof the four segments.

• The internal reporting to our CODMexcludes share-based compensationexpenses and — since 2009 — restruc-turing costs on segment level. For allyears presented, these expenses weremanaged and reviewed at Group levelonly.

• Differences in foreign currency transla-tions result in deviations between theamounts reported internally to ourCODM and the amounts reported inthe Consolidated Financial Statements.

• The revenue numbers in the internalreporting to our CODM include thesupport revenue that would have beenreflected by acquired entities had itremained a stand-alone entity butwhich are not reflected as revenueunder IFRS as a result of purchaseaccounting for support contracts ineffect at the time of an acquisition.

• The income measures in the internalreporting to our CODM include thefull amount of support revenue andexclude the following acquisition-related charges as well as discontinuedactivities:

— Amortization expense/impair-ment charges of intangibles

F-87


acquired in business combina-tions and certain stand-aloneacquisitions of intellectualproperty

— Expenses from purchased in-process research anddevelopment

— Restructuring expenses and set-tlements of pre-existingrelationships

— Acquisition-related third-partycosts that are required to beexpensed

— Results of the discontinuedoperations that qualify as suchunder IFRS in all respectsexcept that they do not repre-sent a major line of business.For 2010, 2009 and 2008, thisrelates exclusively to the opera-tions of TomorrowNow.

Segment Revenue and ResultsE millions Product Consulting Training Sybase Total

2010External revenue from reportable segment . . . . . . . 9,020 2,714 362 387 12,483Segment result. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,395 746 136 127 6,404Depreciation and amortization directly attributable

to each segment. . . . . . . . . . . . . . . . . . . . . . . . . . �17 �8 �2 �7 �34

2009External revenue from reportable segment . . . . . . . 7,846 2,498 332 N/A 10,676Segment result. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,731 781 115 N/A 5,627Depreciation and amortization directly attributable

to each segment. . . . . . . . . . . . . . . . . . . . . . . . . . �53 �7 �2 N/A �62

2008External revenue from reportable segment . . . . . . . 8,366 2,824 525 N/A 11,715Segment result. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,696 789 225 N/A 5,710Depreciation and amortization directly attributable

to each segment. . . . . . . . . . . . . . . . . . . . . . . . . . �64 �8 �2 N/A �74

F-88


Reconciliation of Revenue and Segment ResultsE millions 2010 2009 2008

External revenue from reportable segments . . . . . . . . . . . . . . . . . . . . 12,483 10,676 11,715External revenue from activities outside of the reportable

segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 7 16Adjustment support revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �74 �11 �166

Revenue from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . 0 0 10

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,464 10,672 11,575

Segment result from reportable segments . . . . . . . . . . . . . . . . . . . . . . 6,404 5,627 5,710External revenue from activities outside of the reportable

segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 7 16

Development expense — management view . . . . . . . . . . . . . . . . . . . . �1,800 �1,801 �1,620

Administration and other corporate expenses — management view . . �651 �659 �734Share-based payment expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �58 �54 �63Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �2 �194 �8

Acquisition-related restructuring expenses . . . . . . . . . . . . . . . . . . . . . 5 �4 �52

Acquisition-related charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �305 �267 �286Adjustment support revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �74 �11 �166Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . �983 �56 �96Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,591 2,588 2,701Other non-operating expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . �186 �73 �27Financial income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �67 �80 �50Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,338 2,435 2,624

Segment Revenue

External revenue from activities outsideof the reportable segments mainly representsrevenue incidental to our main business activi-ties and minor currency translation differences.

Segment Result

The segment results of our segmentsProduct, Consulting, and Training reflects oper-ating expenses directly attributable or reason-ably allocable to the segments, including costsof revenue, and sales and marketing expenses.Costs that are not directly attributable or rea-sonably allocable to the segments such asadministration and other corporate expenses are

not included in the segment result. Develop-ment expense is excluded from the segmentresult because our CODM reviews segmentperformance without taking developmentexpense into account.

The measurement of the segment resultfor the Sybase segment differs from the mea-surement for the other segments, as the Sybasesegment result includes development, adminis-tration and other corporate expenses whilethese expenses are excluded from the measure-ment of the segment results of the othersegments.

F-89


Depreciation and amortization expensesreflected in the segment result include theamounts directly attributable to each segment.

Development expense and administrationand other corporate expense disclosed in thereconciliation above are based on a manage-ment view and do not equal the amounts underthe corresponding caption in the ConsolidatedIncome Statements. The differences are mainlydue to the fact that the development expensewhich is attributed to Sybase is included in the

Sybase segment expenses, and that our man-agement view focuses on organizational struc-tures and cost centers rather than theclassification of cost by functional area.

Segment Assets/Liabilities

Segment asset/liability information is notprovided to our CODM. Goodwill by reportablesegment is disclosed in Note (16).

Geographic Information

The following tables present revenue by location of customers and information about non-current assets detailed by geographic region. Non-current assets comprise goodwill, intangible assets,property, plant, and equipment, tax assets and other non-financial assets.

€ millions Total Revenue by Location of Customers

2010 2009 2008

Germany 2,195 2,029 2,193

Rest of EMEA1) 4,068 3,614 4,013

Total EMEA 6,263 5,643 6,206

United States 3,243 2,695 2,890

Rest of Americas 1,192 925 990

Total Americas 4,435 3,620 3,880

Japan 513 476 515

Rest of Asia Pacific Japan 1,253 933 974

Total Asia Pacific Japan 1,766 1,409 1,489

SAP Group 12,464 10,672 11,575

1) Europe, Middle East, Africa

F-90


€ millions Software and Software-Related Service

Revenue by Location of Customers

2010 2009 2008

Germany 1,564 1,439 1,515

Rest of EMEA1) 3,319 2,897 3,062

Total EMEA 4,883 4,336 4,577

United States 2,497 2,018 1,983

Rest of Americas 930 700 748

Total Americas 3,427 2,718 2,731

Japan 448 404 410

Rest of Asia Pacific Japan 1,036 740 748

Total Asia Pacific Japan 1,484 1,144 1,158

SAP Group 9,794 8,198 8,466


€ millions Software Revenue by Location of

Customers

2010 2009 2008

Total EMEA 1) 1,471 1,304 1,844

Total Americas 1,247 855 1,184

Total Asia Pacific Japan 547 449 578

SAP Group 3,265 2,607 3,606


€ millions Non-Current Assets

2010 2009

Germany 1,896 1,754

Rest of EMEA1) 4,808 4,328

Total EMEA 6,704 6,082

United States 5,565 1,185

Rest of Americas 60 53

Total Americas 5,625 1,238

Japan 4 4

Rest of Asia Pacific Japan 117 88

Total Asia Pacific Japan 121 92

SAP Group 12,450 7,412


For information about the breakdown of our full-time equivalent employee numbers by region,see Note (8).

F-91


(30) BOARD OF DIRECTORS

EXECUTIVE BOARD

Memberships on supervisory boards and other comparablegoverning bodies of enterprises, other than subsidiaries of SAPon December 31, 2010

Bill McDermottCo-Chief Executive Officer (from February 7, 2010)Strategy, Governance, Corporate Development,Innovation, Sales, Field Services, Consulting,Ecosystem Activities, Communications, Marketing

Board of Directors, ANSYS, Inc., Canonsburg,Philadelphia, United StatesBoard of Directors, Under Armour, Inc., Baltimore,Maryland, United StatesBoard of Directors, PAETEC Communications, Inc.,Fairport, New York, New York, United States

Jim Hagemann SnabeCo-Chief Executive Officer (from February 7, 2010)Strategy, Governance, Corporate Development,Innovation, Products and Solutions Development,Communications, Marketing

Board of Directors, Linkage A/S, Copenhagen, DenmarkBoard of Directors, Thrane & Thrane A/S, Lyngby,DenmarkSupervisory Board, Crossgate AG, Munich, Germany(until July 31, 2010)

Dr. Werner BrandtChief Financial OfficerFinance and Administration including Investor Relationsand Data Protection & Privacy

Supervisory Board, Deutsche Lufthansa AG, Frankfurt amMain, GermanySupervisory Board, QIAGEN N.V., Venlo, theNetherlandsSupervisory Board, Heidelberger Druckmaschinen AG,Heidelberg, Germany

Dr. Angelika Dammann (from July 1, 2010)Chief Human Resources OfficerLabor Relations DirectorGlobal Human Resources

Supervisory Board, ESMT European School ofManagement and Technology GmbH, Berlin, Germany(from December 15, 2010)

Gerhard OswaldChief Operating OfficerSAP Active Global Support, Global IT, GlobalizationServices, Quality Governance & Production, Operations,SAP Labs Network

Vishal Sikka (from February 7, 2010)Innovation, Technology and Architecture Across theCompany, Global Research

BOARD MEMBERS WHO LEFT DURING 2010

Erwin Gunst (until January 31, 2010)

Léo Apotheker (until February 7, 2010)

John Schwarz (until February 11, 2010)

F-92


SUPERVISORY BOARD

Memberships on supervisory boards and other comparablegoverning bodies of enterprises, other than subsidiaries of SAPon December 31, 2010

Prof. Dr. h.c. mult. Hasso Plattner (2),(4),(5),(7),(8),(9)

Chairman

Lars Lamadé (1),(4),(7),(9)

Deputy ChairmanProject Manager Service & Support

Pekka Ala-Pietila (5),(8),(9)

Co-founder and CEO Blyk Ltd. London, UKBoard of Directors, Poyry Plc, Vantaa, FinlandBoard of Directors, CVON Group Limited, London, UKBoard of Directors, CVON Limited, London, UKBoard of Directors, CVON Innovations Limited, London,UK Board of Directors, Blyk Services Oy, Helsinki,Finland Board of Directors, CVON Innovation ServicesOy, Turku, FinlandBoard of Directors, CVON Future Limited, London, UKBoard of Directors, HelloSoft Inc., San José, California,United StatesBoard of Directors, Blyk (NL) Ltd., London, UKBoard of Directors, Blyk (DE) Ltd., London, UKBoard of Directors, Blyk (ES) Ltd., London, UKBoard of Directors, Blyk (BE) Ltd., London, UKBoard of Directors, Blyk.nl NV, Amsterdam, theNetherlandsBoard of Directors, Blyk.be SA, Hoeilaart, BelgiumBoard of Directors, Blyk International Ltd., London, UK

Thomas Bamberger (1),(3)

Chief Operating Officer Operations

Panagiotis Bissiritsas (1),(2),(6)

Support Expert

Willi Burbach (1),(5),(7)

Developer

Prof. Dr. Wilhelm Haarmann (2),(6),(7),(9)

Attorney-at-law, certified public auditor, certified taxadvisorSenior Partner HAARMANN Partnerschaftsgesellschaft,Rechtsanwalte,Steuerberater, Wirtschaftsprufer, Frankfurtam Main, Germany

Supervisory Board, Vodafone Holding GmbH, Dusseldorf,Germany (until December 16, 2010)

Peter Koop (1),(5),(7)

Industry Business Development Expert

Christiane Kuntz-Mayr (1),(5)

Deputy Chairperson of the Works Council at SAP AG

Bernard Liautaud (5)General Partner Balderton Capital, London, UK

Board of Directors, Clinical Solutions Holdings Ltd.,Basingstoke, Hampshire, UKBoard of Directors, nlyte Software Ltd., London, UKBoard of Directors, Talend SA, Suresnes, FranceBoard of Directors der Cap Gemini, Paris, FranceBoard of Directors, Quickbridge (UK) Ltd., London, UKBoard of Directors, SCYTL Secure Electronic Voting SA,Barcelona, Spain (from June 30, 2010)Board of Directors, Abiquo Group Inc., Redwood City,California, USA (from November 23, 2010)

Dr. Gerhard Maier (1),(2),(3)

Development Project Manager

Dr. h. c. Hartmut Mehdorn (4),(6)

Independent ConsultantBoard of Directors, Air Berlin PLC, Rickmansworth, UKAdvisory Board, Fiege-Gruppe, Greven, Germany

F-93


Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h. JoachimMilberg (2),(3),(5),(7),(8)

Chairman of the Supervisory Board BMW AG,Munich, Germany

Supervisory Board, Bertelsmann AG, Gutersloh,GermanySupervisory Board, Festo AG, Esslingen, GermanyBoard of Directors, Deere & Company, Moline, Illinois,United StatesSupervisory Board, ZF Friedrichshafen AG,Friedrichshafen, Germany

Dr. Erhard Schipporeit (3),(9)

Management ConsultantSupervisory Board, Talanx AG, Hanover, GermanySupervisory Board, Deutsche Borse AG, Frankfurt amMain, GermanySupervisory Board, HDI V.a.G., Hanover, GermanySupervisory Board, Hannover Ruckversicherung AG,Hanover, GermanySupervisory Board, TUI Travel PLC, London, UKSupervisory Board, Fuchs Petrolub AG, Mannheim,GermanyBoard of Directors, Fidelity Advisor World Funds,Bermuda (until September 30, 2010)Board of Directors, Fidelity Funds SICAV, Luxemburg

Stefan Schulz (1),(4),(5),(6),(9)

Development Project Manager

Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer(5)

Managing Director of Dr. Klaus Wucherer Innovations-und Technologieberatung GmbH, Erlangen, Germany

Supervisory Board, Heitech AG, Erlangen, Germany(from August 9, 2010)Supervisory Board, Durr AG, Bietigheim-Bissingen,GermanySupervisory Board, Infineon Technologies AG, Munich,GermanySupervisory Board, LEONI AG, Nurnberg, Germany

Information as at December 31, 2010(1) Elected by the employees (6) Member of the Company’s Finance and Investment(2) Member of the Company’s Compensation Committee Committee(3) Member of the Company’s Audit Committee (7) Member of the Company’s General Committee(4) Member of the Company’s Mediation Committee (8) Member of the Company’s Nomination Committee(5) Member of the Company’s Technology and Strategy (9) Member of the Company’s Special CommitteeCommittee

The total compensation of the Executive Board members for the years 2010, 2009, and 2008was as follows:

Executive Board Compensation

€ (000) 2010 2009 2008

Short-term employee benefits 13,254.4 30,470.4 20,605.4

Share-based payment 3,919.5 4,412.0 4,467.2

Subtotal 17,173.9 34,882.4 25,072.6

Post-employment benefits 1,999.0 1,479.0 998.8

- thereof defined benefit 797.0 1,171.0 432.2

- thereof defined contribution 1,202.0 308.0 566.6

Termination benefits 10,947.5 2,326.8 4,763.5

Other long-term benefits 3,407.0 0,0 0,0

Total 33,527.4 38,688.2 30,834.9

The share-based compensation amountsdisclosed above are based on the grant date fair

value of the virtual stock options issued to Exec-utive Board members during the year.

F-94



2010 2009 2008

Number of stock options granted 559,926 785,060 628,329

Total expense in € (000) 2,987.5 2,830.0 848.6

In the table above, the share-based com-pensation is the expense for the concerned

reporting period calculated according to IFRS2.

The projected benefit obligation (PBO) for pensions to Executive Board members and theannual pension entitlement of the members of the Executive Board on reaching age 60 based onentitlements from performance-based and salary-linked plans were as follows:

Retirement Pension Plan

€ (000) 2010 2009 2008

PBO December 31, 2010 7,326.9 6,529.9 5,584.9

Annual pension entitlement 466.2 466.6 449.3

Subject to the adoption of the dividend resolution by the shareholders at the Annual GeneralMeeting of Shareholders on May 25, 2011, the total annual compensation of the Supervisory Boardmembers for 2010 is as follows:

Supervisory Board Compensation

€ (000) 2010 2009 2008

Total compensation 2,875.0 1,842.1 1,840.0

- thereof fixed compensation 870.0 650.0 646.9

- thereof committee remuneration 325.0 92.1 98.3

- thereof variable compensation 1,680.0 1,100.0 1,094.8

The Supervisory Board members do notreceive any share-based compensation for theirservices. As far as members who are employeerepresentatives on the Supervisory Board

receive share-based compensation such com-pensation is for their services as employeesonly and is unrelated to their status as membersof the Supervisory Board.

F-95


During fiscal year 2010, payments to former Executive Board members were as follows:

Payments to Former Executive Board Members

€ (000) 2010 2009 2008

Pension benefits 1,290.0 764.0 763.0

PBO 24,878.0 15,777.0 11,367.0

SAP did not grant any compensationadvance or credit to, or enter into any commit-ment for the benefit of, any member of the

Executive Board or Supervisory Board in 2010,2009, or 2008.

On December 31, 2010, the shareholdings of SAP’s board members were as follows:

Shareholdings

2010 2009 2008

Executive Board 13,747 15,336 88,527

Supervisory Board 122,156,130 127,193,136 128,995,306

(31) RELATED PARTY TRANSACTIONS

Certain Executive Board and SupervisoryBoard members of SAP AG currently hold, orheld within the last year, positions of signifi-cant responsibility with other entities, as pre-sented in Note (30). We have relationships withcertain of these entities in the ordinary courseof business, whereby we buy and sell a widevariety of products and services at pricesbelieved to be consistent with those negotiatedat arm’s length between unrelated parties.

After his move from SAP’s ExecutiveBoard to SAP’s Supervisory Board in May2003, Hasso Plattner entered into a contractwith SAP AG under which he provides consult-ing services for SAP. The contract provides forthe reimbursement of out-of-pocket expensesonly, which were immaterial to SAP in allperiods presented.

Hasso Plattner is the sole proprietor ofH.P. Beteiligungs GmbH, which itself holds 90%of Bramasol, Inc., Palo Alto, California, UnitedStates. Bramasol is an SAP partner with whichwe generated revenue which was immaterial toSAP in all periods presented. The amountscharged to SAP for the services of Bramasolwere immaterial to SAP in all periods presented.

Wilhelm Haarmann practices as a partnerof the law firm HAARMANN Partnerschafts-gesellschaft in Frankfurt am Main, Germany.The amounts charged to SAP for the servicesof HAARMANN Partnerschaftsgesellschaftwere immaterial to SAP in all periodspresented.

Supervisory Board member HartmutMehdorn provided consulting services for SAPin connection with a product study. The amountcharged to SAP for these services in 2010 wasimmaterial.

Business is transacted with associates atarm’s length. Further to these transactions, in2010 SAP entered into a loan agreement for atotal amount of A6.0 million with its associateCrossgate AG. SAP had lent Crossgate AGA3.5 million under this agreement by the endof 2010.

(32) PRINCIPAL ACCOUNTANT FEES ANDSERVICES

At SAP AG’s Annual General Meeting ofShareholders held on June 8, 2010, SAP’sshareholders mandated KPMG AG Wirtschaft-sprufungsgesellschaft to serve as SAP AG’sindependent auditor for 2010.

F-96


KPMG AG Wirtschaftsprufungsgesellschaft and other firms in the global KPMG networkbilled the following fees to SAP for audit and other professional services related to 2010 and theprevious years:

Fees for Audit and Other Professional Services

€ millions 2010 2009 2008

Audit fees 9.4 8.0 8.4

Audit-related fees 0.3 0.3 0.6

Tax fees 0.1 0.1 0.6

All other fees 0.1 0.0 0.7

9.9 8.4 10.3

Audit fees are the aggregate fees billedby KPMG for the audit of our ConsolidatedFinancial Statements as well as audits of statu-tory financial statements of SAP AG and itssubsidiaries. Audit-related fees are fees chargedby KPMG for assurance and related servicesthat are reasonably related to the performanceof the audit or review of our financial state-ments and are not reported under audit fees.This category comprises fees billed for

accounting advice on actual or contemplatedtransactions and other agreed procedures. Taxfees are fees for professional services renderedby KPMG for tax advice on transfer pricing,restructuring, and tax compliance on current,past or contemplated transactions. The all otherfees category includes other support services,such as training and advisory services on issuesunrelated to accounting and taxes.

For services provided by KPMG AG Wirtschaftsprufungsgesellschaft and its affiliates werecorded expenses of:

Fees for Audit and Other Professional Services of KPMG AG and its Affiliates

€ millions 2010 2009 2008

Audit fees 3.3 2.8 3.3

Audit-related fees 0.3 0.2 0.4

Tax fees 0.1 0.1 0.2

All other fees 0.1 0.0 0.1

3.8 3.1 4.1

(33) SUBSEQUENT EVENTS

After December 31, 2010, the followingchanges took place:

In February 2011, we acquired security soft-ware, identity and access management software,and relevant assets including development andconsulting resources from SECUDE AG (Swit-zerland), a leading vendor of application secu-rity solutions. This is not a material transactionfor SAP.

For more information about this acquisition,see the Acquisitions section in the ManagementReport.

On February 28, 2011, we repaid a portion ofthe outstanding balance of the acquisition termloan in the amount of A500 million. The bal-ance outstanding in the amount of A1 billion asat December 31, 2010 is contractually due inMay 2012 (for more information please seeNote (18b)). The early repayment will reduceinterest expense, a component of financeincome, net, by a single-digit millions of euroamount in 2011.

F-97


(34) SUBSIDIARIES, ASSOCIATES, AND OTHER EQUITY INVESTMENTS

as at December 31, 2010 Ownership

TotalRevenuein 20101)

Profit/ Loss(-)After Tax for

20101)

Total Equityas of

12/31/20101)

Number ofEmployeesas of12/31/20102)

Name and Location of Company % E(000) E(000) E(000)

I. Subsidiaries

GERMANY

OutlookSoft Deutschland GmbH, Walldorf4) . . . . . . . . . . 100.0 0 18 0 0

SAF Germany GmbH, Konstanz4) . . . . . . . . . . . . . . . . . 70.9 1,007 50 360 0

SAP Beteiligungs GmbH, Walldorf . . . . . . . . . . . . . . . . 100.0 3 2 46 0

SAP Deutschland AG & Co. KG, Walldorf9) . . . . . . . . . 100.0 2,597,168 607,039 1,257,501 4,596

SAP Dritte Beteiligungs- und VermogensverwaltungGmbH, Walldorf4), 5),9) . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 (35,114) 491,956 0

SAP Erste Beteiligungs- und VermogensverwaltungGmbH, Walldorf5),9) . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 23,141 827,703 0

SAP Foreign Holdings GmbH, Walldorf . . . . . . . . . . . . 100.0 0 32 159 0

SAP Funfte Beteiligungs- und VermogensverwaltungGmbH, Walldorf 3), 4) . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 2,244,919 0

SAP Hosting Beteiligungs GmbH, St. Leon-Rot . . . . . . . 100.0 0 0 26 0

SAP Portals Europe GmbH, Walldorf4) . . . . . . . . . . . . . 100.0 0 236 123,471 0

SAP Portals Holding Beteiligungs GmbH, Walldorf4) . . . 100.0 0 (29) 928,967 0

SAP Projektverwaltungs- und Beteiligungs GmbH,Walldorf4), 5),9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 (37,525) 291,654 0

SAP Puerto Rico GmbH, Walldorf7) . . . . . . . . . . . . . . . 100.0 22,802 155 872 32

SAP Retail Solutions Beteiligungsgesellschaft mbH,Walldorf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 179 14,090 0

SAP Vierte Beteiligungs- und VermogensverwaltungGmbH, Walldorf . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 25 0

SAP Zweite Beteiligungs- und VermogensverwaltungGmbH, Walldorf5),9) . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 87,373 90,944 0

Steeb Anwendungssysteme GmbH, Abstatt9) . . . . . . . . . 100.0 61,068 2,022 14,009 191

Sybase Germany GmbH, Dusseldorf3), 4), 8) . . . . . . . . . . 100.0 15,945 474 (2,975) 161

TechniData BCS GmbH, Siegen3), 4) . . . . . . . . . . . . . . . 100.0 4,726 (378) 744 33

TechniData GmbH, Markdorf 3) . . . . . . . . . . . . . . . . . . 100.0 48,579 7,013 83,615 285

Wicommunications GmbH, Munich4). . . . . . . . . . . . . . . 100.0 0 0 49 0

REST OF EUROPE, MIDDLE EAST, AFRICA

Ambin Properties (Proprietary) Limited, Johannesburg,South Africa4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 (60) (562) 0

Armstrong Laing (North America) Limited, London,United Kingdom4) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 1 0

Armstrong Laing Limited, London, United Kingdom4). . . 100.0 0 (2) 2,975 0

Blue-Edge Software Limited, London,United Kingdom4) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 0 0

Business Objects (UK) Limited, London,United Kingdom4) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 461 32,026 0

Business Objects Holding B.V., s-Hertogenbosch, theNetherlands4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 51 36,024 0

Business Objects Software Limited, Dublin, Ireland4) . . . 100.0 683,339 156,511 2,779,237 195

F-98





20101)

Total Equityas of

12/31/20101)



Cartesis UK Limited, London, United Kingdom4) . . . . . . 100.0 0 1 1,116 0

Chemical Exchange Directory S.A., Collonge-Bellerive,Switzerland3),4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 841 216 1,600 1

Christie Partners Holding CV, Rotterdam, TheNetherlands 3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 15 (21,823) 0

Crystal Decisions (Ireland) Limited, Dublin, Ireland4) . . . 100.0 0 205 44,612 0

Crystal Decisions France S.A.S., Levallois-Perret,France4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 52 7,863 0

Crystal Decisions Holding Limited, Dublin, Ireland4). . . . 100.0 0 61 77,556 0

Crystal Decisions UK Limited, London,United Kingdom4) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 1,469 2,125 0

Edgewing Limited, London, United Kingdom4) . . . . . . . . 100.0 0 354 (17) 0

Inxight Software UK Limited, London,United Kingdom4) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 143 0

Joe D Partners CV, Utrecht, The Netherlands 3),4),8) . . . . . 100.0 0 18,112 707,768 0

Limited Liability Company SAP CIS, Moscow, Russia . . 100.0 278,497 29,068 129,782 504

Limited Liability Company SAP Kazakhstan, Almaty,Kazakhstan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 12,267 103 1,295 11

Limited Liability Company SAP Ukraine, Kiev,Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 13,323 (448) (1,559) 103

Merlin Systems Oy, Espoo, Finland4) . . . . . . . . . . . . . . . 100.0 7,929 472 1,873 28

Millsgate Holding B.V., Amsterdam, the Netherlands4) . . 100.0 — — — —

S.A.P. Nederland B.V., s-Hertogenbosch, theNetherlands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 339,452 45,941 332,880 399

SAF Simulation, Analysis and Forecasting AG,Tagerwilen, Switzerland . . . . . . . . . . . . . . . . . . . . . . 70.9 14,610 752 34,788 61

SAF Simulation, Analysis and Forecasting Slovakia s.r.o.,Bratislava, Slovakia4) . . . . . . . . . . . . . . . . . . . . . . . . 70.9 1,242 (88) 170 20

SAP — NOVABASE, A.C.E., Porto Salvo, Portugal3),4) . . 66.7 — — — —

SAP (Schweiz) AG, Biel, Switzerland . . . . . . . . . . . . . . 100.0 485,957 21,245 65,347 541

SAP (UK) Limited, Feltham, United Kingdom . . . . . . . . 100.0 612,522 63,944 94,265 1,044

SAP Belgium — Systems Applications and ProductsNV/SA, Brussels, Belgium4) . . . . . . . . . . . . . . . . . . . 100.0 166,008 12,833 98,102 256

SAP BULGARIA EOOD, Sofia, Bulgaria4) . . . . . . . . . . 100.0 2,549 (184) 795 10

SAP Business Services Center Europe, s.r.o., Prague,Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 22,185 602 6,475 284

SAP Commercial Services Ltd., Valetta, Malta . . . . . . . . 100.0 0 (5) (10) 0

SAP CR, spol. s r.o., Prague, Czech Republic . . . . . . . . . 100.0 85,687 10,447 27,726 225

SAP CYPRUS Ltd, Nicosia, Cyprus4) . . . . . . . . . . . . . . 100.0 3,252 (3) (1,824) 2

SAP d.o.o., Zagreb, Croatia . . . . . . . . . . . . . . . . . . . . . 100.0 6,807 (983) (431) 17

F-99





20101)

Total Equityas of

12/31/20101)



SAP Danmark A/S, Copenhagen, Denmark . . . . . . . . . . 100.0 142,267 17,286 29,753 154

SAP Egypt LLC, Cairo, Egypt 3),4) . . . . . . . . . . . . . . . . 100.0 0 0 9 0

SAP EMEA Inside Sales S.L., Barcelona, Spain . . . . . . . 100.0 14,593 444 1,646 135

SAP España — Sistemas, Aplicaciones y Productos en laInformática, S.A., Madrid, Spain4) . . . . . . . . . . . . . . . 100.0 224,089 27,335 177,793 359

SAP Estonia OU, Tallinn, Estonia . . . . . . . . . . . . . . . . . 100.0 1,320 16 16 1

SAP Finland Oy, Espoo, Finland . . . . . . . . . . . . . . . . . . 100.0 96,985 11,022 65,135 109

SAP France Holding, Paris, France . . . . . . . . . . . . . . . . 100.0 606 91,943 4,879,572 4

SAP France, Paris, France . . . . . . . . . . . . . . . . . . . . . . 100.0 716,143 67,047 1,584,792 1,432

SAP HELLAS SYSTEMS APPLICATIONS AND DATAPROCESSING S.A, Athens, Greece . . . . . . . . . . . . . . 100.0 32,782 1,907 7,451 54

SAP Hungary Rendszerek, Alkalmazások és Termékek azAdatfeldolgozásban Informatikai Kft., Budapest,Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 45,533 229 17,616 367

SAP Ireland Limited, Dublin, Ireland . . . . . . . . . . . . . . 100.0 3,781 777 (1,181) 0

SAP Ireland US-Financials Services Ltd., Dublin,Ireland3),4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 67,288 2,284,278 3

SAP Israel Ltd., Ra’anana, Israel . . . . . . . . . . . . . . . . . 100.0 15,842 196 (3,536) 75

SAP Italia Sistemi Applicazioni Prodotti in DataProcessing S.p.A., Milan, Italy4) . . . . . . . . . . . . . . . . 100.0 306,418 22,256 242,814 508

SAP Labs Bulgaria EOOD, Sofia, Bulgaria . . . . . . . . . . 100.0 19,607 845 4,417 439

SAP Labs Finland Oy, Espoo, Finland4)8) . . . . . . . . . . . . 100.0 7,188 421 45,775 48

SAP LABS France S.A.S., Mougins, France . . . . . . . . . . 100.0 39,206 9,041 22,113 264

SAP Labs Israel Ltd., Ra’anana, Israel. . . . . . . . . . . . . . 100.0 42,020 2,076 12,404 304

SAP Latvia SIA, Riga, Latvia . . . . . . . . . . . . . . . . . . . . 100.0 1,452 138 (508) 2

SAP Malta Investments Ltd., Valetta, Malta . . . . . . . . . . 100.0 0 (5) (10) 0

SAP Middle East and North Africa L.L.C., Dubai,United Arab Emirates7) . . . . . . . . . . . . . . . . . . . . . . 49.0 65,203 (19,775) 19,994 162

SAP Nederland Holding B.V., s-Hertogenbosch, TheNetherlands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 994 518,981 0

SAP Norge AS, Lysaker, Norway . . . . . . . . . . . . . . . . . 100.0 61,484 (4,137) 23,571 86

SAP Osterreich GmbH, Vienna, Austria. . . . . . . . . . . . . 100.0 159,844 18,961 24,015 348

SAP Polska Sp. z o.o., Warsaw, Poland . . . . . . . . . . . . . 100.0 61,850 6,101 29,156 122

SAP Portals Israel Ltd., Ra’anana, Israel4) . . . . . . . . . . . 100.0 53,699 14,299 84,152 291

SAP Portugal — Sistemas, Aplicaçoes e ProdutosInformáticos, Sociedade Unipessoal, Lda., Porto Salvo,Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 52,387 1,968 14,405 99

SAP Public Serv. Hungary, Budapest, Hungary . . . . . . . . 100.0 828 273 399 5

SAP Romania SRL, Bucharest, Romania . . . . . . . . . . . . 100.0 17,592 2,991 5,459 94

SAP Saudi Arabia Software Services Limited, Riyadh,Kingdom of Saudi Arabia . . . . . . . . . . . . . . . . . . . . . 100.0 26,297 2,973 30,207 30

SAP Saudi Arabia Software Trading Limited, Riyadh,Kingdom of Saudi Arabia . . . . . . . . . . . . . . . . . . . . . 51.0 15,919 (1,322) 7,828 31

SAP Service and Support (Ireland) Limited, Dublin,Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 60,434 2,032 27,736 700

F-100





20101)

Total Equityas of

12/31/20101)



SAP sistemi, aplikacije in produkti za obdelavo podatkovd.o.o., Ljubljana, Slovenia. . . . . . . . . . . . . . . . . . . . . 100.0 14,222 1,342 6,585 24

SAP Slovensko s.r.o., Bratislava, Slovakia . . . . . . . . . . . 100.0 35,067 1,346 18,214 140

SAP Svenska Aktiebolag, Stockholm, Sweden . . . . . . . . 100.0 122,313 11,715 17,018 117

SAP Turkiye Yazilim Uretim ve Ticaret A.S., Istanbul,Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 46,496 2,278 16,483 96

SAP UAB (Lithuania), Vilnius, Lithuania. . . . . . . . . . . . 100.0 1,879 (682) (463) 3

SAP West Balkans d.o.o., Belgrade, Serbia . . . . . . . . . . 100.0 8,832 1,414 2,265 26

Set Analyzer UK Limited, London, United Kingdom4). . . 100.0 0 0 1,010 0

Sybase (Schweiz) GmbH, Zurich, Switzerland 3),4),8) . . . . 100.0 586 (14) 1,194 7

Sybase (UK) Limited, Maidenhead, United Kingdom3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 18,092 1,415 (904) 205

Sybase 365 Limited, Maidenhead, United Kingdom3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 0 0

Sybase ApS, Copenhagen, Denmark 3),4),8) . . . . . . . . . . . 100.0 136 7 437 2

Sybase Europe B.V., Utrecht, The Netherlands 3),4),8) . . . . 100.0 65,075 (11,767) 12,508 48

Sybase France S.a.r.l., Paris, France 3),4),8) . . . . . . . . . . . 100.0 19,941 2,607 (10,448) 119

Sybase Iberia S.L., Madrid, Spain 3),4),8) . . . . . . . . . . . . 100.0 5,114 139 (21,723) 33

Sybase Italia SRL, Milano, Italy 3),4),8) . . . . . . . . . . . . . 100.0 3,107 (129) (422) 34

Sybase Luxembourg s.a.r.l, Luxembourg 3),4),8) . . . . . . . . 100.0 99 (4) (25) 0

Sybase Nederland B.V., Utrecht, The Netherlands 3),4),8). . 100.0 924 36 4,949 15

Sybase Norge AS, Oslo, Norway 3),4),8) . . . . . . . . . . . . . 100.0 398 15 819 3

Sybase Software BVBA/SPRL, Zaventem, Belgium3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 1,582 (7) 859 19

Sybase South Africa (Proprietary) Limited, Johannesburg,South Africa 3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 7,788 560 (5,284) 143

Sybase Sverige AB, Kista, Sweden 3),4),8) . . . . . . . . . . . . 100.0 2,052 256 1,544 25

Systems Applications Products Africa Region(Proprietary) Limited, Johannesburg, South Africa4) . . . 100.0 31,534 2,899 17,503 13

Systems Applications Products (Africa) (Proprietary)Limited, Johannesburg, South Africa . . . . . . . . . . . . . 100.0 0 6,950 101,028 0

Systems Applications Products Nigeria Limited, Abuja,Nigeria4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 12,531 953 1,696 26

Systems Applications Products South Africa (Proprietary)Limited, Johannesburg, South Africa4) . . . . . . . . . . . . 89.5 177,582 14,582 36,850 308

TechniData Labs Bulgaria EOOD, Sofia, Bulgaria3),4) . . . 100.0 1,024 277 652 24

TomorrowNow (UK) Limited, Feltham,United Kingdom4) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 438 27 0

TomorrowNow Nederland B.V., Amsterdam, theNetherlands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 (306) (3,207) 1

AMERICAS

110405, Inc., Newtown Square, Pennsylvania, USA. . . . . 100.0 0 0 15,636 0

Business Objects Argentina S.R.L., Buenos Aires,Argentina4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 83 0

F-101





20101)

Total Equityas of

12/31/20101)



Business Objects Option, LLC, Wilmington, Delaware,USA4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 1,133 62,587 0

Clear Standards, Inc., Sterling, Virginia, USA4) . . . . . . . 100.0 66 (1,212) 16,074 0

Extended Systems, Inc., Boise, Idaho, USA3),4) . . . . . . . . 100.0 0 21 17,041 0

Financial Fusion, Inc., Concord, Massachusetts,USA3),4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 0 0

Frictionless Commerce, Inc., Newtown Square,Pennsylvania, USA4) . . . . . . . . . . . . . . . . . . . . . . . . 100.0 2,370 (241) 36,063 0

Highdeal, Inc., New York, USA4) . . . . . . . . . . . . . . . . . 100.0 367 87 (20) 0

iAnywhere Solutions Canada Ltd, Waterloo,Canada3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 726 1,205 5,748 149

iAnywhere Solutions Inc., Dublin, California,USA3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 16,153 8,454 102,682 91

INEA Corporation USA, Wilmington, Delaware,USA4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 76 319 0

Inxight Federal Systems Group, Inc., Wilmington,Delaware, USA4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 (2) 97 0

Khimetrics Canada, Inc., Montreal, Canada4) . . . . . . . . . 100.0 — — — —

Liberia LLC, Wilmington, Delaware, USA4) . . . . . . . . . . 100.0 — — — —

Maxware, Inc., Newtown Square, Pennsylvania, USA4) . . 100.0 227 (333) (412) 0

SAF Simulation, Analysis and Forecasting U.S.A., Inc.,Grapevine, Texas, USA4) . . . . . . . . . . . . . . . . . . . . . 70.9 3,988 83 705 13

SAP America, Inc., Newtown Square, Pennsylvania,USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 3,167,086 356,808 1,211,348 5,201

SAP Andina y del Caribe C.A., Caracas, Venezuela7). . . . 100.0 17,379 (25,867) 306 56

SAP ARGENTINA S.A., Buenos Aires, Argentina . . . . . 100.0 119,988 3,863 20,951 490

SAP Brasil Ltda, Sao Paulo, Brazil . . . . . . . . . . . . . . . . 100.0 407,585 15,130 111,708 1,094

SAP Canada Inc., Toronto, Canada . . . . . . . . . . . . . . . . 100.0 621,852 47,357 416,334 2,053

SAP Colombia S.A.S., Bogota, Colombia . . . . . . . . . . . 100.0 60,675 (31) (3,628) 154

SAP Costa Rica, S.A., San José, Costa Rica3),4) . . . . . . . 100.0 0 0 0 0

SAP Financial Inc., Toronto, Canada4) . . . . . . . . . . . . . . 100.0 0 25,297 7,680 0

SAP Global Marketing, Inc., New York, USA. . . . . . . . . 100.0 224,592 3,042 18,234 469

SAP Government Support & Services, Inc., NewtownSquare, Pennsylvania, USA4). . . . . . . . . . . . . . . . . . . 100.0 38,482 3,237 120,886 173

SAP Industries, Inc., Scottsdale, Arizona, USA4),7) . . . . . 100.0 267,868 32,957 370,017 439

SAP International, Inc., Miami, Florida, USA4) . . . . . . . 100.0 69,959 1,017 11,710 47

SAP Investments, Inc., Wilmington, Delaware, USA4) . . . 100.0 0 11,541 616,468 0

SAP LABS, LLC, Palo Alto, California, USA4) . . . . . . . 100.0 462,541 25,582 115,334 2,091

SAP México S.A. de C.V., Mexico City, Mexico . . . . . . . 100.0 183,702 (13,526) 19,639 381

SAP PERU S.A.C., Inc., Lima, Peru . . . . . . . . . . . . . . . 100.0 20,092 (1,496) (4,734) 47

SAP Public Services, Inc., Washington, D.C., USA4) . . . . 100.0 307,374 40,608 237,316 249

SAP Technologies Inc., Palo Alto, California, USA 3),4) . . 100.0 0 0 0 0

SAP Ventures Fund I Holdings, LLC, Wilmington,Delaware, USA 3) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 — — — —

F-102





20101)

Total Equityas of

12/31/20101)



Sybase 365 LLC, Dublin, California, USA3),4),8) . . . . . . . 100.0 18,813 (482) 96,753 139

Sybase 365 Ltd., Tortola, British Virgin Islands3),4),8) . . . 100.0 0 0 (1,927) 0

Sybase Argentina S.A., Buenos Aires, Argentina3),4),8) . . . 100.0 967 98 1,170 14

Sybase Canada Ltd., Waterloo, Canada3),4),8) . . . . . . . . . 100.0 4,149 234 8,416 61

Sybase de Mexico, S. De R.L. de C.V., Mexico City,Mexico3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 2,047 34 1,615 29

Sybase do Brasil Software Ltda., Sao Paulo,Brasil3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 7,775 344 1,053 30

Sybase Global LLC, Dublin, California, USA3),4),8) . . . . . 100.0 0 0 7,291 0

Sybase Intl Holdings LLC, Dublin, California,USA3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 11,665 0

Sybase, Inc., Dublin, California, USA3),4),8) . . . . . . . . . . 100.0 106,725 105,162 4,484,785 1,216

TechniData America LLC, Wilmington, Delaware,USA3),4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 9,878 (96) (392) 64

TomorrowNow, Inc., Bryan, Texas, USA4) . . . . . . . . . . . 100.0 0 (1,065,737) (991,350) 3

ASIA PACIFIC JAPAN

Beijing Zhang Zhong Hu Dong Xin Si Ju Shu Co. Ltd.,Beijing, China 3),4) . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 810 7 (842) 7

Business Objects Asia Pacific Pte Limited, Singapore4) . . 100.0 0 63 39,646 0

Business Objects Australia Pty Limited, Sydney,Australia4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 (15,276) (51) 0

Business Objects Malaysia Sdn. Bhd., Kuala Lumpur,Malaysia4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 0 262 0

Business Objects Software (Shanghai) Co., Ltd.,Shanghai, China . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 12,724 1,052 4,834 154

Crystal Decisions (Hong Kong) Limited, Hong Kong,China4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 (12) 0 0

iAnywhere K.K., Tokyo, Japan 3),4),8). . . . . . . . . . . . . . . 100.0 3,780 (40) (2,602) 22

PT SAP Indonesia, Jakarta, Indonesia . . . . . . . . . . . . . . 100.0 34,757 4,823 22,869 41

PT Sybase 365 Indonesia, Jakarta, Indonesia 3),4),8) . . . . . 100.0 7 (1) 230 0

Ruan Lian Technologies (Beijing) Co. Ltd., Beijing,China 3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 (4) (1,051) 1

SAP (Beijing) Software System Co., Ltd., Beijing,China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 235,091 (6,910) 59,523 2,143

SAP Asia Pte Limited, Singapore . . . . . . . . . . . . . . . . . 100.0 199,117 8,780 25,829 651

SAP Australia Pty Limited, Sydney, Australia . . . . . . . . . 100.0 421,184 52,771 224,011 573

SAP HONG KONG CO. LIMITED, Hong Kong, China . . 100.0 29,869 1,396 4,245 57

SAP INDIA (HOLDING) PTE LTD, Singapore . . . . . . . 100.0 0 (5) 300 0

SAP INDIA PRIVATE LIMITED, Bangalore, India4). . . . 100.0 257,695 25,835 172,195 1,327

SAP JAPAN Co., Ltd., Tokyo, Japan . . . . . . . . . . . . . . . 100.0 517,418 33,893 436,595 1,075

SAP Korea Limited, Seoul, South Korea . . . . . . . . . . . . 100.0 98,741 10,141 24,010 190

SAP Labs India Private Limited, Bangalore, India . . . . . . 100.0 137,311 (8,821) 8,468 4,112

SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia . . . . . 100.0 68,172 10,496 28,274 119

SAP New Zealand Limited, Auckland, New Zealand . . . . 100.0 43,924 5,509 28,560 34

F-103





20101)

Total Equityas of

12/31/20101)



SAP PHILIPPINES, INC., Makati, Philippines . . . . . . . . 100.0 25,524 1,441 7,866 36

SAP R&D Center Korea, Inc., Seoul, South Korea4) . . . . 100.0 6,929 304 15,561 70

SAP SYSTEMS, APPLICATIONS AND PRODUCTS INDATA PROCESSING (THAILAND) LTD., Bangkok,Thailand10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49.0 35,621 3,964 33,228 41

SAP TAIWAN CO., LTD., Taipei, Taiwan . . . . . . . . . . . 100.0 47,116 5,220 19,796 69

Sybase (N.Z.) Limited, Wellington, New Zealand 3),4),8) . . 100.0 1,107 (414) 3,518 5

Sybase (Singapore) Pte Limited, Singapore 3),4),8) . . . . . . 100.0 3,099 340 1,012 183

Sybase 365 Ltd. (HK), Hong Kong, China 3),4),8) . . . . . . 100.0 — — — —

Sybase Australia Pty Limited, Sydney, Australia 3),4),8) . . 100.0 6,579 (772) 6,053 38

Sybase Hong Kong Limited, Hong Kong, China 3),4),8) . . . 100.0 3,461 (711) 338 77

Sybase India, Ltd., Dublin, California, USA 3),4),8) . . . . . 100.0 0 (46) 1,693 0

Sybase KK, Tokyo, Japan 3),4),8) . . . . . . . . . . . . . . . . . . 100.0 10,759 (3,055) 1,178 58

Sybase Korea, Ltd, Seoul, South Korea 3),4),8) . . . . . . . . . 100.0 4,507 128 2,557 47

Sybase Philippines Inc., Dublin, California, USA 3),4),8) . . 100.0 0 (8) (11) 0

Sybase Software (China) Co. Ltd., Beijing, China3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 7,687 1,039 13,418 383

Sybase Software (India) Private Ltd, Mumbai, India3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 3,257 827 7,090 204

Sybase Software (Malaysia) Sdn. Bhd., Kuala Lumpur,Malaysia 3),4),8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 1,056 58 1,532 3

Sybase Taiwan Co. Ltd., Taipei, Taiwan 3),4),8) . . . . . . . . 100.0 2,311 118 1,458 19

Technidata Asia Pte Limited, Singapore 3),4) . . . . . . . . . . 100.0 176 (183) 97 3

TomorrowNow Australia Pty Limited, Sydney,Australia4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 0 5 385 0

TomorrowNow Singapore Pte Limited, Singapore4) . . . . . 100.0 0 0 87 0

II. INVESTMENTS IN ASSOCIATES

ArisGlobal Holdings, LLC, Stamford, Connecticut,USA4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.00 37,835 4,175 7,145 700

Crossgate AG, Munchen, Munich . . . . . . . . . . . . . . . . . 6.37 33,499 3,673 37,000 251

Greater Pacific Capital (Cayman), L.P., Grand Cayman,Cayman Islands . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.35 — — — 0

Original1 GmbH, Frankfurt am Main, Germany . . . . . . . 40.00 39 (4,085) 3,900 12

Procurement Negócios Eletrônicos S/A, Rio de Janeiro,Brazil4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.00 15,554 1,918 15,921 0

RIB Software AG, Stuttgart, Germany . . . . . . . . . . . . . . 7.15 — — — 219

TechniData IT-Service GmbH, Markdorf, Germany4) . . . . 26.00 9,442 485 892 85

1) These figures are based on our local IFRS financial statements prior to eliminations resulting from con-solidation and therefore do not reflect the contribution of these companies included in the ConsolidatedFinancial Statements. The translation of the equity into group currency is based on period-end closingexchange rates, and on average exchange rates for revenue and net income/loss.

2) As at December 31, 2010, including managing directors, in FTE3) Consolidated for the first time in 2010

F-104


4) Wholly or majority-owned entity of a subsidiary5) Entity with profit and loss transfer agreement6) The remaining shares are held by a trustee7) Restructured and/or renamed in 20108) The revenue and net income figures are based on local financial statements prior to consolidation. Due to

the acquisition of Sybase on July 26, the results are based on IFRS for the period after the acquisition.These figures include acquisition-related adjustments.

9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiaries are exempt from applying certain legalrequirements to their statutory stand-alone financial statements including the requirement to prepare notesto the financial statements and a review of operations, the requirement of independent audit and therequirement of public disclosure.

10) The remaining shares are the preference shares without the right to vote.

F-105


as at December 31, 2010

Name and Location of CompanyIII. OTHER EQUITY INVESTMENTS (ownership 5 or more percent)Aepona Ltd., Belfast, Northern Ireland, United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Apigee Corporation, Santa Clara, California, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Apriso Corporation, Long Beach, California, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Connectiva Systems, Inc., New York, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Deutsches Forschungszentrum fur Kunstliche Intelligenz GmbH, Kaiserslautern, Germany . . . . . . .EIT ICT Labs GmbH, Berlin, Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ignite Technologies, Inc., Frisco, Texas, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .InnovationLab GmbH, Heidelberg, Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iTAC Software AG, Dernbach, Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iYogi Holdings Pvt. Ltd., Port Louis, Mauritius . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Lavante, Inc., San Jose, California, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .MuleSoft, Inc., San Francisco, California, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .MVP Strategic Partnership Fund GmbH & Co. KG, Grunwald, Germany . . . . . . . . . . . . . . . . . . . .OnDeck Capital, Inc., New York, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Onventis GmbH, Stuttgart, Germany. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Post for Systems, Cairo, Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Powersim Corporation, Herndon, Virginia, USA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .QCLS Corporation, Woodside, California, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Qumu, Inc., San Bruno, California, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Realize Corporation, Tokyo, Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Retail Solutions, Inc. (legal name: T3C, Inc.), Mountain View, California, USA . . . . . . . . . . . . . . .Return Path, Inc., New York, USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Smart City Planning, Inc., Tokyo, Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .SupplyOn AG, Hallbergmoos, Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Technologie- und Grunderzentrum Walldorf Stiftung GmbH, Walldorf, Germany

F-106






Run

BetteR

2010

An

nu

Al R

epo

Rt o

n Fo

Rm

20-F

GROUP HEAD QUARTERS

SAp AGDietmar-Hopp-Allee 1669190 WalldorfGermanywww.sap.com

5010

3479

The Best-Run Businesses Run SAP®

2010 AnnuAl RepoRt on FoRm 20-F

Run BetteR

Th

e Best-R

un

Bu

sinesses R

un

SA

P®

Date post:	30-Jul-2020
Category:	Documents
Upload:	others
View:	3 times
Download:	0 times