UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F

 

¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20132015

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from            to            

Commission file number: 1-14251

SAP AGSE

(Exact name of Registrant as specified in its charter)

SAP CORPORATIONEUROPEAN COMPANY

(Translation of Registrant’s name into English)

Federal Republic of Germany

(Jurisdiction of incorporation or organization)

Dietmar-Hopp-Allee 16

69190 Walldorf

Federal Republic of Germany

(Address of principal executive offices)

Wendy Boufford

c/o SAP Labs

3410 Hillview Avenue, Palo Alto, CA, 94304, United States of America

650-849-4000 (Tel)

650-843-2041 (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 Representing
one 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: None

Indicate 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: 1,228,504,232 (as of December 31, 2013)2015)**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  þ    No  ¨

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 Securities Exchange Act of 1934.

Yes  ¨    No  þ

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 from their 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 the preceding 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  þ    No  ¨

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 and posted 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 to submit and post such files.)

Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  þ  Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ¨                 International Financial Reporting Standards as issued by the International Accounting Standards Board  þ                 Other  ¨

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  ¨    Item 18  ¨

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  ¨    No  þ

  *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 Exchange Commission.
**Including 34,795,55430,551,035 treasury shares.

 

 


[THIS PAGE INTENTIONALLY LEFT BLANK]


INTRODUCTIONIntroduction

   1  

FORWARD-LOOKING STATEMENTSForward-Looking Statements

   1  

INTERNAL MANAGEMENT SYSTEMPerformance Management System

   2  

PART I

   9  

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

   9  

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

   9  

ITEM 3. KEY INFORMATION

   9  

Selected Financial Data

   9  

Exchange Rates

   11  

Dividends

   11  

Risk Factors

   12  

ITEM 4. INFORMATION ABOUT SAP

   26

Vision, Mission, and Strategy

2624  

Overview of the SAP Group

   25

Strategy and Business Model

26

Seasonality

29  

Portfolio of Products, Solutions,Research & Development, and Services

   3029  

Business ModelAcquisitions

   36

Research and Development

3734  

Partner Ecosystem

   3934  

AcquisitionsCustomers

   4035  

Environmental Performance: Energy Consumption and Greenhouse Gas Emissions

   41

Seasonality

4337  

Intellectual Property, Proprietary Rights and Licenses

   4339  

Description of Property

   4439  

ITEM 4A. UNRESOLVED STAFF COMMENTS

   4541  

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

   4541  

Overview

   4541  

Economy and the Market

   4641  

Report on Economic PositionPerformance Against Outlook for 2015 (Non-IFRS)

   4843

Operating Results (IFRS)

45  

Foreign Currency Exchange Rate Exposure

   65

Report on Expected Developments

6658  

Liquidity and Capital Resources

   7258  

Off-Balance Sheet Arrangements

   7662  

Contractual Obligations

   7662  

Research and Development

   7763  

Critical Accounting Estimates

   7763  

New Accounting Standards not yet Adopted

   7763

Expected Developments

63  

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

   7869  

Supervisory Board

   7869  

Executive Board

   7970  

Compensation Report

   8071  

Employees

   9487  

Share Ownership

   9588  

Share-Based Compensation Plans

   9588  

ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS

   9588  

Major Shareholders

   9588  

Related-Party Transactions

   9689  

ITEM 8. FINANCIAL INFORMATION

   9689  

Consolidated Financial Statements and Financial Statement Schedule

   9689  

Other Financial Information

   9689  

i


ITEM 9. THE OFFER AND LISTING

   9789  

General

   9789  

Trading on the Frankfurt Stock Exchange and the NYSE

   9890  

ITEM 10. ADDITIONAL INFORMATION

   9991  

Articles of Incorporation

   9991  

Corporate Governance

   9991  

Change in Control

   10395  

Change in Share Capital

   10495  

i


Rights Accompanying our Shares

   10496  

Taxation

   10697  

Material Contracts

   110101  

Documents on Display

   111101  

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   111101  

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

   111102  

American Depositary Shares

   111102  

PART II

   113103  

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

   113103  

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

   113103  

ITEM 15. CONTROLS AND PROCEDURES

   113103  

Evaluation of Disclosure Controls and Procedures

   113103  

Management’s Annual Report on Internal Control Over Financial Reporting

   113103  

Changes in Internal Control Over Financial Reporting

   113103  

ITEM 16. [RESERVED]

   113103  

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

   113103  

ITEM 16B. CODE OF ETHICS

   114103  

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

   114104  

Audit Fees, Audit Related Fees, Tax Fees and All Other Fees

   114104  

Audit Committee’s Pre-Approval Policies and Procedures

   114104  

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

   115104  

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

   115105  

ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

   115105  

ITEM 16G. DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES

   115105  

Introduction

   115105  

Legal Framework

   116105  

Significant Differences

   116105  

German Stock Corporations are Required to HaveSAP SE is a European Company With a Two-Tier Board System

   116105  

Director Independence Rules

   116106  

Audit Committee Independence

   117107  

Rules on Non-Management Board Meetings are Different

   117107  

Rules on Establishing Committees Differ

   118107  

Rules on Shareholders’ Compulsory Approval are Different

   118107  

Specific Principles of Corporate Governance

   118107  

Specific Code of Business Conduct

   118107  

PART III

   119108  

ITEM 17. FINANCIAL STATEMENTS

   119108  

ITEM 18. FINANCIAL STATEMENTS

   119108  

ITEM 19. EXHIBITS

   119108  

Signatures

   121109  

Index to the Consolidated Financial Statements

   F-1  

Report to theof Independent Registered Public Accounting Firm

   F-2  

Consolidated Financial Statements

   F-3  

 

ii


INTRODUCTION

SAP AGSE is a German stock corporation (Aktiengesellschaft)European Company (Societas Europaea, or “SE”) and is referred to in this report, together with its subsidiaries, as SAP, or as “Company,” “Group,” “we,” “our,” or “us.” Our Consolidated Financial Statements included in “Item 18. Financial Statements” in this report have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, referred to as IFRS throughout this report.

In this report: (i) references to “US$,” “$,” or “dollars” are to U.S. dollars; (ii) references to ‘‘” or “euro” are to the euro. Our financial statements are denominated in euros, which is the currency of our home country, Germany. Certain amounts that appear in this report may not add up because of differences due to rounding.

Unless otherwise specified herein, euro financial data have been converted into dollars at the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 31, 2013,2015, which was US$1.37791.0859 per €1.00.1.00. No representation is made that such euro amounts actually represent such dollar amounts or that such euro amounts could have been or can be converted into dollars at that or any other exchange rate on such date or on any other date. The rate used for the convenience translations also differs from the currency exchange rates used for the preparation of the Consolidated Financial Statements. This convenience translation is not a requirement under IFRSInternational Financial Reporting Standards (IFRS) and, accordingly, our independent registered public accounting firm has not audited these US$ amounts. For information regarding recent rates of exchange between euro and dollars, see “Item 3. Key Information – Exchange Rates.” On March 7, 2014,11, 2016, the Noon Buying Rate for converting euro to dollars was US$1.38681.1180 per €1.00.1.00.

Unless the context otherwise requires, references in this report to ordinary shares are to SAP AG’sSE’s ordinary shares, without nominal value. References in this report to “ADRs” are to SAP AG’sSE’s American Depositary Receipts, each representing one SAP ordinary share. References in this report to “ADSs” are to SAP AG’sSE’s American Depositary Shares, which are the deposited securities evidenced by the ADRs.

SAP, ABAP, Adaptive Server, Advantage Database Server, Afaria, Ariba, Business ByDesign,

BusinessObjects, ByDesign, Concur, Crystal Reports, ExpenseIt, Fieldglass, hybris, PartnerEdge, PowerBuilder, PowerDesigner, Quadrem, R/3, Replication Server, SAP BusinessObjects Explorer, SAP Business Workflow, SAP EarlyWatch, SAP Fiori, SAP HANA, SAP Jam, SAP Lumira, SAP NetWeaver, SAP S/4HANA, SAPPHIRE, SAPPHIRE NOW, SQL Anywhere, StreamWork, Sybase, SuccessFactors, The Best-Run Businesses Run

SAP, TravelTrax, TripIt, TripLink, TwoGo, Web Intelligence and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AGSE (or an SAP affiliate company) in Germany and other countries.

Throughout this report, whenever a reference is made to our website, such reference does not incorporate by reference into this report the information contained on our website.

We intend to make this report and other periodic reports publicly available on our Webweb site (www.sap.com) without charge immediately following our filing with the U.S. Securities and Exchange Commission (SEC). We assume no obligation to update or revise any part of this report, whether as a result of new information, future events or otherwise, unless we are required to do so by law.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements and information based on the beliefs of, and assumptions made by, our management using information currently available to them. Any statements contained in this report that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations, assumptions, and projections about future conditions and events. As a result, ourforward-looking statements and information are subject to uncertainties and risks. A broad range of uncertainties and risks, many of which are beyond our control, could cause our actual results and performance to differ materially from any projections expressed in or implied by our forward-looking statements. The uncertainties and risks include, but are not limited to:

Uncertainty in the global economy, financial markets or political conditions could have a negative impact on our business, financial position, profit, and cash flows and put pressure on our operating profit.

Third parties have claimed, and might claim in the future, that we infringe their intellectual

1


  

Uncertainty in the global economy, financial markets or political conditions could have a negative impact on our business, financial position, profit, and cash flows and put pressure on our operating profit.

Third parties have claimed, and might claim in the future, that we infringe their intellectual property rights, which could lead to damages being awarded against us and limit our ability to use certain technologies in the future.

Claims and lawsuits against us could have an adverse effect on our business, financial position, profit, cash flows and reputation.

We may not be able to protect our critical information and assets or to safeguard our business operations against disruption.

Claims and lawsuits against us could have an adverse effect on our business, financial position, profit, cash flows and reputation.

We may not be able to protect our critical information and assets or to safeguard our business operations against disruption.

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

If one or more of these uncertainties or risks materializes, or if management’s underlying assumptions prove incorrect, our actual results could differ materially from those described in or inferred from our forward-looking statements and information.

The words “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “counting on,” “is confident,” “development,” “estimate,” “expect,” “forecast,” “future trends,” “guidance,” “intend,” “may,” “might,” “outlook,” “plan,” “project,” “predict,” “seek,” “should,” “strategy,” “want,” “will,” “would,” and similar expressions as they relate to us are intended to identify such forward-looking statements. Such statements include, for example, those made in the Operating Results section, our quantitative and qualitative disclosures about market risk pursuant to the International Financial Reporting Standards (IFRS), namely IFRS 7 and related statements in our Notes to the Consolidated Financial Statements thesection, Expected Developments section; Risk Factors section, our outlook guidance,section; and other forward-looking information appearing in other parts of this report. To fully consider the factors that could affect our future financial results, both this report and our Annual Report should be considered, as well as all of our other filings with the Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date specified or the date of this report. Except where legally required, weWe undertake no obligation to publicly update or revise any forward-looking statements as a result of new information that we receive about conditions that existed upon issuance of this report, future events, or otherwise unless we are required to do so by law.

This report includes statistical data about the IT industry and global economic trends that comes from information published by sources including International Data Corporation (IDC), a provider of market information and advisory services for the

information technology, telecommunications, and consumer technology markets; the European Central Bank (ECB); and the International Monetary Fund (IMF). This type of data represents only the estimates of IDC, ECB, IMF, and other sources of industry data. SAP does not adopt or endorse any of the statistical information provided by sources such as IDC, ECB, IMF, or other similar sources that is contained in this report. In addition, although we believe that data from these sources is generally reliable, this type of data is imprecise. We caution readers not to place undue reliance on this data.

INTERNALPERFORMANCE MANAGEMENT SYSTEM

We use various performance measures to help manage our performance with regard to our primary financial goals, which are revenuegrowth and margin,profitability, and our primary

non-financial goals, which are customer loyalty and employee engagement. We view revenuegrowth and marginprofitability as indicators for our current performance, while customer loyalty and employee engagement are indicators for our future performance.

Measures We Use to Manage Our Financial Performance

Changes to Income Statement Structure

Starting with the first quarter of 2015, we modified our overall income statement structure. We reclassified premium support revenue and related costs to the respective services line items to align our financial reporting with the changes in our services business. We further simplified and clarified the labeling of several income statement line items. For more information about the changes to our income statement structure, see the Notes to the Consolidated Financial Statements section, Note (3).

Measures We Use to Manage Our Operating Financial Performance

In 2013,2015, we used the following key measures to manage our operating financial performance:

Non-IFRS software and cloud subscriptions:    Our key revenue drivers, software and cloudCloud subscriptions include software plus cloud subscription and support revenue. The principal sourcerevenue (non-IFRS): This revenue driver comprises the main revenues of our software revenue is the fees customers pay for on-premise software licenses resulting in software being installed on the customer’s hardware.fast-growing cloud business. We generate cloud subscriptionsubscriptions and support revenue when we provide software functionality in a cloud-based infrastructure (SaaS) to our customers, when we provide our customers with access to a cloud-based infrastructure to develop, run, and manage applications (PaaS) and also when we provide hosting services for software hosted by SAP (IaaS). Cloud subscriptions and support revenue is also generated when providing additional premium cloud subscription support beyond the respectiveregular support, for deliverywhich is embedded in the cloud.basic cloud subscription fees as well as business network services to our customers. We evaluate softwareuse the measure cloud subscriptions and cloud subscriptionssupport revenue (non-IFRS) both at actual currency and at constant currency.

Non-IFRSCloud and software and software-related service (SSRS) revenue:revenue (non-IFRS): We use non-IFRS SSRScloud and software revenue (non-IFRS) and constant currency non-IFRS SSRScloud and software revenue (non-IFRS) to measure our revenue growth. Our SSRScloud and software revenue includes softwarecloud subscriptions and related support revenue plus cloud subscriptionsoftware licenses and support revenue. SoftwareCloud subscriptions and support revenue and cloud subscription and

2


supportsoftware revenue are our key revenue drivers because they tend to affect our other revenue streams. Generally, customers whothat buy software licenses also enter into maintenancerelated support contracts, and these generate recurring software-related service revenue in the form of support revenue after the software sale. MaintenanceSupport contracts cover standardized support services andthat comprise unspecified future software updates and

enhancements. Software licenses revenue as well as cloud subscriptionsubscriptions and support revenue also tend to stimulate serviceservices revenue earned from consultingproviding customers with professional services, premium support services, training services, messaging services, and training sales.payment services.

Bookings/billings revenue:New cloud bookings: For our cloud activities, we also look at new cloud bookings. This measure reflects the recognized revenue as well as the contract value generatedcommitted order entry from new customers and from incremental purchases by existing customers for offerings that generate cloud subscriptions and support revenue. In this way, it is an indicator for cloud-related sales success in a given period (bookings/billings).and for secured future cloud subscriptions and support revenue. We measure bookings/billings asfocus primarily on the amounts that we are contractually entitled to invoice the customers over the shorteraverage contract value variant of the new cloud bookings measure that takes into account annualized amounts for multiyear contracts. Additionally, we monitor the total contract term andvalue variant of the first 12 months followingnew cloud bookings measure that takes into account the contract execution date, anniversarytotal committed order entry amounts regardless of contract execution date, or contract renewal date (12 months’ bookings/billings). We evaluate bookings/billings both at actual currency and at constant currency. In contrast to the cloud subscription and support revenue recognized over the period of providing the cloud service rather than in the period of contract closure, the bookings/billings numbers give insight into the future revenue potential. When evaluating 12 months’ bookings/billings numbers, we consider both the total bookings/billings and the subset of bookings/billings that results from new customers or additional sales to existing customers in the reporting period rather than from subsequent years or renewals of existing contracts.durations. There isare no comparable IFRS measuremeasures for this figure.these bookings metrics.

Non-IFRSOperating profit (non-IFRS): We use operating profit/non-IFRS operating margin:    In 2013, we used non-IFRS operatingprofit/non-IFRS operating marginprofit (non-IFRS) and constant currency non-IFRS operating profit/non-IFRS operating marginprofit (non-IFRS) to measure our overall operational process efficiency and overall business performance. Non-IFRS operating margin is the ratio of our non-IFRS operating profit to total non-IFRS revenue, expressed as a percentage. See below for more information on the IFRS and non-IFRS measures we use.

Cloud subscriptions and support gross margin (non-IFRS): We use our cloud subscriptions and support gross margin (non-IFRS) to measure our process efficiency and our performance in our cloud business. Cloud subscriptions and support gross margin (non-IFRS) is the ratio of our cloud subscriptions and support gross profit (non-IFRS) to cloud subscriptions and support revenue (non-IFRS), expressed as a percentage.

Measures We Use to Manage Our Non-Operating Financial Performance

We use the following measures to manage our non-operating financial performance:

Financial income, net: This measure provides insight especially into the return on liquid assets

and capital investments and the cost of borrowed funds. To manage our financial income, net, we focus on cash flow, the composition of our liquid assetassets and capital investment portfolio, and the average rate of interest at which assets are invested. We also monitor average outstanding borrowings and the associated finance costs.

Days’Days Sales Outstanding (DSO) and Days’ Payables Outstanding (DPO): We manage working capital by controlling the days’days sales outstanding (DSO) for operating receivables or DSO (defined as the average

number of days from the raised invoice to cash receipt from the customer), and the days’ payables outstanding for operating liabilities, or DPO (defined as average number of days from the received invoice to cash payment to the vendor).

Measures We Use to Manage Overall Financial Performance

We use the following measures to manage our overall financial performance:

Earnings per share (EPS): EPS measures our overall performance because it captures all operating and non-operating elements of profit as well as income tax expense. It represents the portion of profit after tax allocable to each SAP share outstanding (using the weighted average number of shares outstanding over the reporting period).outstanding. EPS is influenced not only by our operating and non-operating business andas well as income taxes but also by the number of shares outstanding. We are authorized by our shareholders to repurchase shares and believe that such repurchases, additional to dividend distributions, are a good means to return value to our shareholders.

Effective tax rate: We define our effective tax rate as the ratio of income tax expense to profit before tax, expressed as a percentage.

Operating, investing, and financing cash flows:flows and free cash flow: Our consolidated statement of cash flows provides insight as to how we generated and used cash and cash equivalents. When usedapplied in conjunction with the other primary financial statements, it provides information that helps us evaluate the changes of our net assets, our financial structure (including our liquidity and solvency), and our ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities. We use our free cash flow measure to determine the cash flow remaining after all expenditures required to maintain or expand our organic business have been paid off. This measure provides management with supplemental information to assess our liquidity needs. We calculate free cash flow as net cash from operating activities minus purchases (other than purchases made in connection with business combinations) of intangible assets and property, plant, and equipment.

3


Measures We Use to Manage Our Non-Financial Performance

In 2013,2015, we used the following key measures to manage our non-financial performance in the areas of employee engagement, customer loyalty and customer loyalty:leadership trust:

Employee Engagement Index: We use the employee engagementthis index to measure the motivation and loyalty of our employees, how proud they are of our company, and how strongly they identify with SAP. The index is derived from surveys conducted among our employees. WithApplying this measure we recognizeis recognition that we can achieve our growth strategy withdepends on engaged employees only.employees.

Customer Net Promoter Score (NPS)(NPS): This score measures the willingness of our customers to

recommend or promote SAP to others. It is derived from our annual customer survey. Conducted each year, this survey that identifies, on a scale of 0–10, whether a customer is loyal and likely to recommend SAP to friends or colleagues, is neutral, or is unhappy. We introduced this measure in 2012, as we are convinced that we can achieve our financial goals only when our customers are loyal to, and satisfied with, SAP and our solutions. To derive the Customer NPS, we start with the percentage of “promoters” of SAP – those who give us a score of 9 or 10 on a scale of 0 to 0–10. We then subtract the percentage of “detractors” – those who give us a score of 0 to 6. The methodology calls for ignoringmethod ignores “passives,” who give us a score of 7 or 8. Due to changes in sampling, resulting from ongoing efforts to implement the survey process holistically in recently acquired entities, the 2015 score is not fully comparable with the prior year’s score.

Leadership Trust Score:We use this score to further enhance accountability and to measure our collective effort to foster a work environment based on trust. It is derived from a question in our annual global employee survey that gauges employees’ trust in our leaders. We measure leadership trust by using the Net Promoter Score (NPS) methodology.

Value-Based Management

Our holistic view of the performance measures described above, together with our associated analyses, comprises the information we use for value-based management. We use planning and

control processes to manage the compilation of these key measures and their availability to our decision makers across various management levels.

SAP’s long-term strategic plans are the point of reference for our other planning and controlling processes, including a multiyear plan through 2017.2020. We identify future growth and profitability drivers at a highly aggregated level. This process is intended to identify the best areas in which to target sustained investment. Next, we evaluate our multiyear plans for our support and development functions and break down the customer-facing plans by sales region. Based on our detailed annual plans, we determine the budget for the respective year. We also have processes in place to forecast revenue and profit on a quarterly basis, to quantify whether we expect to realize our strategicfinancial goals, and to identify any deviations from plan. We continuously monitor the concerned units in the Group to analyze these developments and define any appropriate actions.

Our entire network of planning, control, and reporting processes is implemented in integrated planning and information systems, based on SAP software, across all organizational units so that we can conduct the evaluations and analyses needed to make informed decisions.

Non-IFRS Financial Measures Cited in This Report

As in previous years, we provided our 20132015 financial outlook on the basis of certain non-IFRS measures. Therefore, this report contains a non-IFRS based comparison of our actual performance in 20132015 against our outlook in the Report on Economic PositionPerformance Against Outlook for 2015 (Non-IFRS) section.

 

4


Reconciliations of IFRS to Non-IFRS Financial Measures for 20132015 and 20122014

The following table reconciles our IFRS financial measures to the respective and most comparable non-IFRS financial measures of this report for each of 20132015 and 2012.2014. Due to rounding, the sum of the numbers presented in this table might not precisely equal the totals we provide.

ReconciliationsReconciliation of IFRS to Non-IFRS Financial Measures for the Years Ended December 31

 

€ millions, unless otherwise stated 

 

   2015   2014 
 2013 2012   IFRS   Adj.   Non-IFRS   

Currency

Impact

   

Non-IFRS

Constant

Currency

   IFRS   Adj.   Non-IFRS 
 IFRS Adj. Non-IFRS Currency
Impact
 Non-IFRS
Constant
Currency
 IFRS Adj. Non-
IFRS
 

Revenue measures

                                

Software

  4,516    2    4,518    224    4,743    4,658    0    4,658  

Cloud subscriptions and support

  696    61    757    29    786    270    73    343     2,286     10     2,296     297     1,999     1,087     14     1,101  

Software and cloud subscriptions

  5,212    63    5,275    253    5,529    4,928    73    5,001  

Support

  8,738    19    8,756    371    9,128    8,237    9    8,246  

Software and software-related service revenue

  13,950    82    14,032    625    14,657    13,165    81    13,246  

Consulting

  2,242    0    2,242    87    2,329    2,442    0    2,442  

Other services

  623    0    623    24    647    616    0    616  

Professional services and other service revenue

  2,865    0    2,865    111    2,976    3,058    0    3,058  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Software licenses

   4,835     1     4,836     255     4,581     4,399     0     4,399  

Software support

   10,093     0     10,094     678     9,416     8,829     5     8,834  

Software licenses and support

   14,928     2     14,930     933     13,997     13,228     5     13,233  

Cloud and software

   17,214     11     17,226     1,230      15,996     14,315     19     14,334  

Services

   3,579     0     3,579     276      3,304     3,245     0     3,245  

Total revenue

  16,815    82    16,897    736    17,633    16,223    81    16,304     20,793     11     20,805     1,505      19,299     17,560     19     17,580  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Operating expense measures

                                

Cost of software and software-related services

  –2,597    364    –2,233      –2,555    414    –2,141  

Cost of professional services and other services

  –2,402    123    –2,278      –2,520    128    –2,392  

Cost of cloud subscriptions and support

   1,022     232     789           481     88     393  

Cost of software licenses and support

   2,291     283     2,008           2,076     258     1,818  

Cost of cloud and software

   3,313     516     2,797           2,557     346     2,211  

Cost of services

   3,313     180     3,133           2,716     125     2,590  

Total cost of revenue

  –4,999    487    –4,512      –5,075    542    –4,533     6,626      696     5,930            5,272     471     4,801  

Gross profit

  11,816    570    12,385      11,147    624    11,771     14,167     707     14,874           12,288     490     12,778  

Research and development

  –2,282    120    –2,162      –2,261    129    –2,132     2,845     202     2,643           2,331     127     2,204  

Sales and marketing

  –4,131    205    –3,926      –3,912    223    –3,689     5,401     449     4,952           4,304     170     4,134  

General and administration

  –866    70    –796      –949    164    –784     1,048     116     932           892     86     806  

Restructuring

  –70    70    0      –8    8    0     621     621     0           126     126     0  

TomorrowNow litigation

  0    0    0      0    0    0  

TomorrowNow and Versata litigation

   0     0     0           309     309     0  

Other operating income/expense, net

  12    0    12      23    0    23     1     0     1           4     0     4  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total operating expenses

  –12,336    953    –11,383    –348    –11,731    –12,181    1,067    –11,114     16,541      2,084     14,457      1,062     13,395      13,230     1,288     11,942  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Operating profit measures

        

Operating profit

  4,479    1,035    5,514    388    5,902    4,041    1,148    5,190     4,252     2,095     6,348     443      5,904     4,331     1,307     5,638  

Operating margin (in %)

  26.6     32.6     33.5    24.9     31.8  

Explanation of Non-IFRS Measures

We disclose certain financial measures, such as non-IFRS revenue non-IFRS(non-IFRS), operating expenses non-IFRS(non-IFRS), operating profit non-IFRS(non-IFRS), operating margin non-IFRS(non-IFRS), and earnings per share (non-IFRS), as well as constant currency revenue, expense, and operating profit measures that are not prepared in accordance with IFRS and are therefore considered non-IFRS financial measures. Our non-IFRS financial measures may not correspond to non-IFRS financial measures that other companies report. The non-IFRS

financial measures that we report should only be considered in addition to, and not as substitutes for or superior to, revenue, operating expenses, operating profit, operating margin, earnings per share, or other measures ofour IFRS financial performance prepared in accordance with IFRS.measures.

We believe that the disclosed supplemental historical and prospective non-IFRS financial information provides useful information to investors because management uses this information, in addition to financial data prepared

5


in accordance with IFRS, to attain a more transparent understanding of our past performance and our anticipated future results. In 2013, we used these non-IFRSWe use the revenue (non-IFRS) and profit (non-IFRS) measures consistently in our internal planning and forecasting, reporting, and compensation, as well as in our external communications, as follows:

Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis for making financial, strategic and operating decisions.

The variable remuneration components of our Executive Board members and employees are based on non-IFRS revenue and non-IFRS operating profit measures rather than the respective IFRS measures.

The annual budgeting process for all management units is based on non-IFRS revenue and non-IFRS operating profit numbers rather than the respective IFRS financial measures.

All forecast and performance reviews with all senior managers globally are based on these non-IFRS measures, rather than the respective IFRS financial measures.

Both our internal performance targets and the guidance we provided to the capital markets are based on non-IFRS revenues and non-IFRS profit measures rather than the respective IFRS financial measures.

Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis for making financial, strategic, and operating decisions.

The variable components of our Executive Board members’ and employees’ remuneration are based on revenue (non-IFRS), operating profit (non-IFRS), as well as new cloud bookings measures rather than the respective IFRS measures.

The annual budgeting process for all management units is based on revenue (non-IFRS) and operating profit (non-IFRS) numbers rather than the respective IFRS financial measures.

All forecast and performance reviews with all senior managers globally are based on these non-IFRS measures, rather than the respective IFRS financial measures.

Both our internal performance targets and the guidance we provided to the capital markets are based on revenue (non-IFRS) and profit (non-IFRS) measures rather than the respective IFRS financial measures.

Our non-IFRS financial measures reflect adjustments based on the items below, as well as adjustments for the related income tax effects.

Non-IFRS Revenue (Non-IFRS)

Revenue items identified as non-IFRS revenue (non-IFRS) have been adjusted from the respective IFRS financial measures by including the full amount of software support revenue, cloud subscriptions and support revenue, and other similarly recurring revenuesrevenue that we

are not permitted to record as revenue under IFRS due to fair value accounting for the contracts in effect at the time of the respective acquisitions.

Under IFRS, we record at fair value the contracts in effect at the time entities were acquired. Consequently, our IFRS software support revenue, our IFRS cloud subscriptions and support revenue, our IFRS softwarecloud and cloud subscription revenue, our IFRS software and software-related service revenue, and our IFRS total revenue for periods subsequent to acquisitions do not reflect the full

amount of revenue that would have been recorded by entities acquired by SAP had they remained stand-alone entities. Adjusting revenue numbers for this revenue impact provides additional insight into the comparability across periods of our ongoing performance.

We also report our non-IFRS deferred cloud subscription and support revenue to provide additional insight into amounts that are contracted for and invoiced and that are expected to be recognized in cloud subscription and support revenue in the future. To align the reporting of this non-IFRS deferred revenue number, we adjust this number, like our non-IFRS revenue numbers, for the effect of fair value accounting for the contracts in effect at the time of the respective acquisitions.performance across periods.

Non-IFRS Operating Expense (Non-IFRS)

Operating expense figuresnumbers that are identified as non-IFRS operating expenses (non-IFRS) have been adjusted by excluding the following expenses:

Acquisition-related charges

Amortization expense/impairment charges of intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development)

Settlements of pre-existing business relationships in connection with a business combination

Acquisition-related third-party expenses

Discontinued activities: Results of discontinued operations that qualify as such under IFRS in all respects except that they do not represent a major line of business

Expenses from our share-based payments

��

Restructuring expenses

Non-IFRS Operating Profit, Non-IFRS Operating Margin, and Non-IFRS Earnings per Share

Operating profit, operating margin, and earnings per share identified as non-IFRS operating profit, non-IFRS operating margin, and non-IFRS earnings per share have been adjusted from the respective IFRS measures by adjusting for the above-mentioned non-IFRS revenue and non-IFRS operating expenses.

6


Acquisition-related charges

¡

Amortization expense/impairment charges of intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development)

¡

Settlements of preexisting business relationships in connection with a business combination

¡

Acquisition-related third-party expenses

Expenses from the TomorrowNow litigation (formerly labeled as “discontinued activities”) and the Versata litigation cases

Share-based payment expenses

Restructuring expenses

We exclude certain acquisition-related expenses for the purpose of calculating non-IFRS operating profit non-IFRS(non-IFRS), operating margin (non-IFRS), and non-IFRS earnings per share (non-IFRS) when evaluating SAP’s continuing operational performance because these expenses generally cannot be changed or influenced by management after the relevant acquisition other than by disposing of the acquired assets. Since management at levels below the Executive Board does not influence these expenses, we generally do not consider these expenses for the purpose of evaluating the performance of management units. Additionally, these non-IFRS measures have been adjusted from the respective IFRS measures for the results of the discontinued activities, share-based payment expenses and restructuring expenses, as well as the TomorrowNow and Versata litigation expenses.

Operating Profit (Non-IFRS), Operating Margin (Non-IFRS), and Earnings per Share (Non-IFRS)

Operating profit, operating margin, and earnings per share identified as operating profit (non-IFRS), operating margin (non-IFRS), and earnings per share (non-IFRS)

have been adjusted from the respective IFRS measures by adjusting for the aforementioned revenue (non-IFRS) and operating expenses (non-IFRS).

Constant Currency Information

We believe it is important for investors to have information that provides insight into our sales. Revenue measures determined under IFRS provide information that is useful in this regard. However, both sales volume and currency effects impact period-over-period changes in sales revenue. We do not sell standardized units of products and services, so we cannot provide relevant information on sales volume by providing data on the changes in product and service units sold. To provide additional information that may be useful to investors in breaking down and evaluating changes in sales volume, we present information about our revenue and various values and components relating to operating profit that are adjusted for foreign currency effects.

We calculate constant currency revenue and operating profit measures by translating foreign currencies using the average exchange rates from the comparative period instead of the current period.

Free Cash Flow

The following table shows our free cash flow measure. We use this measure among others to manage our overall financial performance.

Free Cash Flow

millions  2015   2014   in % 
Net cash flows from operating activities   3,638     3,499     4  
Purchase of intangible assets and property, plant, and equipment (without acquisitions)   –636     –737     –14  
Free cash flow   3,001     2,762     9  

Usefulness of Non-IFRS Measures

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

The non-IFRS measures provide investors with insight into management’s decision making because management uses these non-IFRS measures to run our business and make financial, strategic, and operating decisions.

The non-IFRS measures provide investors with additional information that enables a comparison of year-over-year operating performance by eliminating certain direct effects of acquisitions and discontinued activities.

Non-IFRS and non-GAAP measures are widely used in the software industry. In many cases, inclusion of our non-IFRS measures may facilitate comparison with our competitors’ corresponding non-IFRS and non-GAAP measures.

Additionally, we believe that our adjustments to our IFRS financial measures for the results of our discontinued TomorrowNow activities are useful to investors for the following reason:

TomorrowNow activities were discontinued and we will thus continue to exclude potential future TomorrowNow results, which are expected to mainly comprise expenses in connection with the TomorrowNow litigation, from our internal management reporting, planning, forecasting, and compensation plans. Therefore, adjusting our non-IFRS measures for the results of the discontinued TomorrowNow activities provides insight into the financial measures that SAP uses internally.

We include the revenue adjustments outlined above and exclude the expense adjustments outlined above when making decisions to allocate resources, both on a company level and at lower levels of the organization.

Our revenue (non-IFRS), expense (non-IFRS), and profit (non-IFRS) measures provide investors with insight into management’s decision making because management uses these non-IFRS measures to run our business and make financial, strategic, and operating decisions. We include the revenue adjustments outlined above and exclude the expense adjustments outlined above when making decisions to allocate resources. In addition, we use these non-IFRS measures to gain a better understanding of SAP’s operating performance from period to period.

The non-IFRS measures provide investors with additional information that enables a comparison of year-over-year operating performance by eliminating certain direct effects of acquisitions, share-based compensation plans, restructuring plans, and the TomorrowNow and Versata litigation cases.

Non-IFRS and non-GAAP measures are widely used in the software industry. In many cases, inclusion of our non-IFRS measures may facilitate comparison with our competitors’ corresponding non-IFRS and non-GAAP measures.

Limitations of Non-IFRS Measures

We believe that our non-IFRS financial measures described above have limitations, including but not limited to, the following:

The eliminated amounts could be material to us.

Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS measures are not indicative of our present and future performance, foremost for the following reasons:

While our non-IFRS profit numbers reflect the elimination of certain acquisition-related expenses, no eliminations are made for the additional revenue and other revenue that result from the acquisitions.

While we adjust for the fair value accounting of the acquired entities’ recurring revenue contracts, we do not adjust for the fair value accounting of deferred compensation items that result from commissions paid to the acquired company’s salesforce and third parties for closing the respective customer contracts.

The acquisition-related charges that we eliminate in deriving our non-IFRS profit numbers are likely to recur should SAP enter into material business combinations in the future.

The acquisition-related amortization expense that we eliminate in deriving our non-IFRS profit numbers is a recurring expense that will impact our financial performance in future years.

The revenue adjustment for the fair value accounting of the acquired entities’ contracts and the expense adjustment for acquisition-related charges do not arise from a common conceptual basis. This is because the revenue adjustment aims to improve the comparability of the initial post-acquisition period with future post-acquisition periods, while the expense adjustment aims to improve the comparability between post-acquisition periods and pre-acquisition

7


The eliminated amounts could be material to us.

Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS measures are not indicative of our present and future performance, foremost for the following reasons:

 ¡ 

While our profit (non-IFRS) numbers reflect the elimination of certain acquisition-related expenses, no eliminations are made for the additional revenue or other income that results from the acquisitions.

¡

While we adjust for the fair value accounting of the acquired entities’ recurring revenue contracts, we do not adjust for the fair value accounting of deferred compensation items that result from commissions paid to the acquired company’s sales force and third parties for closing the respective customer contracts.

¡

The acquisition-related charges that we eliminate in deriving our profit (non-IFRS) numbers are likely to recur should SAP enter into material business combinations in the future. Similarly, the restructuring expenses that we eliminate in deriving our profit (non-IFRS) numbers are likely to recur should SAP perform restructurings in the future.

¡

The acquisition-related amortization expense that we eliminate in deriving our profit (non-IFRS) numbers is a recurring expense that will impact our financial performance in future years.

¡

The revenue adjustment for the fair value accounting of the acquired entities’ contracts and the expense adjustment for acquisition-related charges do not arise from a common conceptual basis. This is because the revenue adjustment aims to improve the comparability of the initial post-acquisition period with future post-acquisition periods, while the expense adjustment aims to improve the comparability between post-acquisition periods and pre-acquisition periods. This should particularly be considered when

evaluating our non-IFRS operating profit (non-IFRS) and non-IFRS operating margin (non-IFRS) numbers as these combine our non-IFRS revenue (non-IFRS) and non-IFRS expenses (non-IFRS) despite the absence of a common conceptual basis.

¡

Our discontinued activities and restructuring charges could result in significant cash outflows. The same applies to our share-based payment expense because most of our share-based payments are settled in cash rather than shares.

¡

The valuation of our cash-settled share-based payments could vary significantly from period to period due to the fluctuation of our share price and other parameters used in the valuation of these plans.

¡

In the past, we have issued share-based payment awards to our employees every year and we intend to continue doing so in the future. Thus, our share-based payment expenses are recurring although the amounts usually change from period to period.

We believe that constant currency measures have limitations, particularly as the currency effects that are eliminated constitute a significant element of our share-based payments arerevenue and expenses and could materially impact our performance. Therefore, we limit our use of constant currency measures to be settledthe analysis of changes in cash rather than shares.volume as one element of the full change in a financial measure.

The valuationWe do not evaluate our results and performance without considering both constant currency measures in revenue (non-IFRS) and operating profit (non-IFRS) measures on the one hand, and changes in revenue, operating expenses, operating profit, or other measures of financial performance prepared in accordance with IFRS on the other. We caution the readers of our cash-settled, share-based payments could vary significantly from periodfinancial reports to period duefollow a similar approach by considering constant currency measures only in addition to, the fluctuationand not as a substitute for or superior to, changes in revenue, operating expenses, operating profit, or other measures of our share price and other parameters usedfinancial performance prepared in the valuation of these plans.accordance with IFRS.

In the past we have issued share-based payment awards to our employees every year and we intend to continue doing so in the future. Thus, our share-based payment expenses are recurring although the amounts usually change from period to period.

Despite these limitations, we believe that the presentation of the non-IFRS measures and the corresponding IFRS measures, together with the relevant reconciliations, providesprovide useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations. We do not evaluate our growth and performance without considering both non-IFRS measures and the comparable IFRS measures. We caution the readers of our financial reports to follow a similar approach by considering our non-IFRS measures only in addition to, and not as a substitute for or superior to, revenue or other measures of our financial performance prepared in accordance with IFRS.

Constant Currency Information

We believe it is important for investors to have information that provides insight into our sales. Revenue measures determined under IFRS provide information that is useful in this regard. However, both sales volume and currency effects impact period-over-period changes in sales revenue. We do not sell standardized units of products and services, so we cannot provide relevant information on sales volume by providing data on the changes in product and service units sold. To provide additional information that may be useful to investors in breaking down and evaluating changes in sales volume, we present

information about our revenue and various values and components relating to operating profit that are adjusted for foreign currency effects. We calculate constant currency revenue and operating profit measures by translating foreign currencies using the average exchange rates from the previous year instead of the current year.

We believe that constant currency measures have limitations, particularly as the currency effects that are eliminated constitute a significant element of our revenue and expenses and could materially impact our performance. We therefore limit our use of constant currency measures to the analysis of changes in volume as one element of the full change in a financial measure. We do not evaluate our results and performance without considering both constant currency measures in non-IFRS revenue and non-IFRS operating profit measures on the one hand, and changes in revenue, operating expenses, operating profit, or other measures of financial performance prepared in accordance with IFRS on the other. We caution the readers of our financial reports to follow a similar approach by considering constant currency measures only in addition to, and not as a substitute for or superior to, changes in revenue, operating expenses, operating profit, or other measures of financial performance prepared in accordance with IFRS.

Free Cash Flow

We use our free cash flow measure to estimate the cash flow remaining after all expenditures required to maintain or expand our organic business have been paid off. This measure provides management with supplemental information to assess our liquidity needs. We calculate free cash flow as net cash from operating activities minus purchases (other than purchases made in connection with business combinations) of intangible assets and property, plant, and equipment.

Free Cash Flow

€ millions 2013  2012  Change
(in %)
 

Net cash flows from operating activities

  3,832    3,822    0

Purchase of intangible assets and property, plant, and equipment (without acquisitions)

  –566    –541    5
 

 

 

  

 

 

  

 

 

 

Free cash flow

  3,266    3,281    –0
 

8


Part I

Item 1, 2, 3

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

SELECTED FINANCIAL DATA

The following table sets forth our selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 2013.2015. The consolidated financial data has been derived from, and should be read in conjunction with, our Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), presented in “Item 18. Financial Statements” of this report.

Our selected financial data and our Consolidated Financial Statements are presented in euros. Financial data as of and for the year ended December 31, 20132015 has been translated into U.S. dollars for the convenience of the reader.

 

Selected Financial Data: IFRS

 

9


Part I

millions, unless otherwise stated  

2015(1)

US$

   

2015

   

2014

   

2013

   

2012

   

2011

 

Income Statement Data: Years ended December 31,

                              

Cloud subscriptions and support

   2,482     2,286     1,087     696     270     18  

Software licenses and support

   16,210     14,928     13,228     12,809     12,532     11,012  

Cloud and software

   18,693     17,214     14,315     13,505     12,801     11,030  

Total revenue

   22,579     20,793     17,560     16,815     16,223     14,233  

Operating profit

   4,618     4,252     4,331     4,479     4,041     4,884  

Profit after tax

   3,318     3,056     3,280     3,325     2,803     3,437  

Profit attributable to owners of parent

   3,327     3,064     3,280     3,326     2,803     3,435  

Earnings per share(2)

                              

Basic in

   2.78     2.56     2.75     2.79     2.35     2.89  

Diluted in

   2.78     2.56     2.74     2.78     2.35     2.89  

Other Data:

                              

Weighted-average number of shares outstanding

                              

Basic

   1,197     1,197     1,195     1,193     1,192     1,189  

Diluted

   1,198     1,198     1,197     1,195     1,193     1,190  

Statement of Financial Position Data: At December 31,

                              

Cash and cash equivalents

   3,704     3,411     3,328     2,748     2,477     4,965  

Total assets(3)

   44,945     41,390     38,565     27,091     26,306     23,227  

Current financial liabilities(4)

   913     841     2,561     748     802     1,331  

Non-current financial liabilities(4)

   9,427     8,681     8,980     3,758     4,446     2,925  

Issued capital

   1,334     1,229     1,229     1,229     1,229     1,228  

Total equity

   25,296     23,295     19,534     16,048     14,133     12,689  

 

Item 3

 

SELECTED FINANCIAL DATA: IFRS(1) Amounts presented in US$ have been translated for the convenience of the reader at1.00 to US$1.0859, the Noon Buying Rate for converting1.00 into dollars on December 31, 2015. See “Item 3. Key Information – Exchange Rates” for recent exchange rates between the Euro and the dollar.

(2) Profit attributable to owners of parent is the numerator and weighted average number of shares outstanding is the denominator in the calculation of earnings per share. See Note (11) to our Consolidated Financial Statements for more information on earnings per share.

millions, unless otherwise stated  2013(1)   2013   2012   2011   2010   2009 
   US$                

Income Statement Data:
Years ended December 31,

            

Software and software-related service revenue

   19,221     13,950     13,165     11,319     9,794     8,198  

Total revenue

   23,169     16,815     16,223     14,233     12,464     10,672  

Operating profit

   6,171     4,479     4,041     4,884     2,591     2,588  

Operating margin in %(2)

   26.6     26.6     24.9     34.3     20.8     24.3  

Profit after tax

   4,581     3,325     2,803     3,437     1,813     1,750  

Profit attributable to owners of parent

   4,583     3,326     2,803     3,435     1,811     1,748  

Earnings per share(2)

            

Basic in €

   3.84     2.79     2.35     2.89     1.52     1.47  

Diluted in €

   3.83     2.78     2.35     2.89     1.52     1.47  

Other Data:

            

Weighted-average number of shares outstanding

            

Basic

   1,193     1,193     1,192     1,189     1,188     1,188  

Diluted

   1,195     1,195     1,193     1,190     1,189     1,189  

Statement of Financial Position Data: At December 31,

            

Cash and cash equivalents

   3,786     2,748     2,477     4,965     3,518     1,884  

Total assets(3)

   37,332     27,094     26,306     23,227     20,839     13,374  

Current financial liabilities(4)

   1,031     748     802     1,331     142     146  

Non-current financial liabilities(4)

   5,179     3,758     4,446     2,925     4,449     729  

Issued capital

   1,693     1,229     1,229     1,228     1,227     1,226  

Total equity

   22,112     16,048     14,133     12,689     9,824     8,491  

(3) The large increase in total assets from 2011 to 2012 was mainly due to the acquisitions of SuccessFactors and Ariba in 2012, whereas the large increase in total assets from 2013 to 2014 was mainly due to the acquisition of Concur.

(1)

Amounts presented in US$ have been translated for the convenience of the reader at €1.00 to US$1.3779, the Noon Buying Rate for converting €1.00 into dollars on December 31, 2013. See “Item 3. Key Information — Exchange Rates” for recent exchange rates between the Euro and the dollar.

(2)

Operating profit is the numerator and total revenue is the denominator in the calculation of operating margin. Profit attributable to owners of parent is the numerator and weighted average number of shares outstanding is the denominator in the calculation of earnings per share. See Note (11) to our Consolidated Financial Statements for more information on earnings per share.

(3)

The large increase in total assets from 2009 to 2010 was mainly due to the acquisition of Sybase in 2010. The large increase in total assets from 2011 to 2012 was mainly due to the acquisitions of SuccessFactors and Ariba in 2012. See Note (4) to our Consolidated Financial Statements for more information on acquisitions.

(4)

The balances include primarily bonds, private placements and bank loans. Current is defined as having a remaining life of one year or less; non-current is defined as having a remaining term exceeding one year. The significant increase in non-financial liabilities in 2010 was due to an acquisition-term loan used to finance the acquisition of Sybase. In addition, we issued two bonds and a U.S. private placement transaction, of which, the proceeds were primarily used to finance the acquisition of Sybase. The significant increase in non-financial(4) The balances include primarily bonds, private placements and bank loans. Current is defined as having a remaining life of one year or less; non-current is defined as having a remaining term exceeding one year. The significant increase in non-current financial liabilities in 2012 was due to the issuance of a U.S. private placement transaction and Eurobonds in the course of the acquisition of Ariba. The significant increase from 2013 to 2014 was due to a long-term bank loan and the issuance of a three-tranche Eurobond, both in connection with the Concur acquisition. See Note (17b) to our Consolidated Financial Statements for more information on our financial liabilities.

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Item 3

EXCHANGE RATES

The sales prices for our ordinary shares traded on German stock exchanges are denominated in euro. Fluctuations in the exchange rate between the euro and the U.S. dollar affect the dollar equivalent of the euro price of the ordinary shares traded on the German stock exchanges and, as a result, may affect the price of the ADRs traded on the NYSE in the United States. See “Item 9. The Offer and Listing” for a description of the ADRs. In addition, SAP AGSE pays cash dividends, if any, in euro. As a result, any exchange rate fluctuations will also affect the dollar amounts received by the holders of ADRs on the conversion into dollars of cash dividends paid in euro on the ordinary shares represented by the ADRs. Deutsche Bank Trust Company Americas is the depositary (the Depositary) for SAP AG’sSE’s ADR program. The deposit agreement with respect to the ADRs requires the Depositary to convert any dividend payments from euro into dollars as promptly as practicable upon receipt. For additional information on the Depositary and the fees associated with SAP’s ADR program see “Item 1212. Description of Securities Other Than Equity Securities – American Depositary Shares.”

A significant portionFor details on the impact of our revenue and expense is denominated in currencies other than the euro. Therefore, fluctuations in the exchange rate between the euro and the respective currencies in which we conduct business could materially affect our business, financial position, income or cash flows. Seefluctuations see “Item 5. Operating and Financial Review and Prospects – Foreign Currency Exchange Rate Exposure” for details on the impact of these exchange rate fluctuations..

The following table sets forth (i) the average, high and low Noon Buying Rates for the euro expressed as U.S. dollars per €1.001.00 for the past five years on an annual basis and (ii) the high and low Noon Buying Rates on a monthly basis from July 20132015 through and including March 7, 2014.11, 2016.

 

Year

  Average(1)   High   Low   Average(1)   High   Low 

2009

   1.3955     1.5100     1.2547  

2010

   1.3216     1.4536     1.1959  

2011

   1.4002     1.4875     1.2926     1.4002     1.4875     1.2926  

2012

   1.2909     1.3463     1.2062     1.2909     1.3463     1.2062  

2013

   1.3303     1.3816     1.2774     1.3303     1.3816     1.2774  

2014

   1.3210     1.3927     1.2101  

2015

   1.1032     1.2015     1.0524  

Month

  High   Low   High   Low 

2013

    

2015

      

July

   1.3282     1.2774     1.1150     1.0848  

August

   1.3426     1.3196     1.1580     1.0868  

September

   1.3537     1.3120     1.1358     1.1104  

October

   1.3810     1.3490     1.1437     1.0963  

November

   1.3606     1.3357     1.1026     1.0562  

December

   1.3816     1.3552     1.1025     1.0573  

2014

    

2016

      

January

   1.3682     1.3500     1.0964     1.0743  

February

   1.3806     1.3507     1.1362     1.0868  

March (through March 7, 2014)

   1.3868     1.3731  

March (through March 11, 2016)

   1.1180     1.0845  

 

(1)

(1) The average of the applicable Noon Buying Rates on the last day of each month during the relevant period.

The average of the applicable Noon Buying Rates on the last day of each month during the relevant period.

The Noon Buying Rate on March 7, 201411, 2016 was US$1.38681.1180 per €1.00.1.00.

DIVIDENDS

Dividend Distribution Policy

Dividends are jointly proposed by SAP AG’sSE’s Supervisory Board (Aufsichtsrat) and Executive Board (Vorstand) based on SAP AG’sSE’s year-end stand-alone statutory financial statements, subject to approval by the Annual General Meeting of Shareholders. Dividends are officially declared for the prior year at SAP AG’sSE’s Annual General Meeting of Shareholders. SAP AG’sSE’s Annual General Meeting of Shareholders usually convenes during the second quarter of each year. Dividends are usually remitted to the custodian bank on behalf of the shareholder within one business day following the Annual General Meeting of Shareholders. Record holders of the ADRs on the dividend record date will be entitled to receive payment of the dividend declared in respect of the year for which it is declared. Cash dividends payable to such holders will be paid to the Depositary in euro and, subject to certain exceptions, will be converted by the Depositary into U.S. dollars.

Dividends paid to holders of the ADRs may be subject to German withholding tax. See “Item 8. Financial Information – Other Financial Information – Dividend Policy” and “Item 10. Additional Information – Taxation,” for further information.

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Item 3

Annual Dividends Paid and Proposed

The following table sets forth in euro the annual dividends paid or proposed to be paid per ordinary share in respect of each of the years indicated. One SAP ADR currently represents one SAP AGSE ordinary share.

Accordingly, the final dividend per ADR is equal to the dividend for one SAP AGSE ordinary share and is dependent on the euro/U.S. dollar exchange rate. The table does not reflect tax credits that may be available to German taxpayers who receive dividend payments. If you own our ordinary shares or ADRs and if you are a U.S. resident, refer to “Item 10. Additional Information – Taxation,” for further information.

 

   Dividend Paid per
Ordinary Share
 

Year Ended December 31,

     US$ 

2009

   0.50     0.60(1) 

2010

   0.60     0.85(1) 

2011

   1.10(2)    1.38(1) 

2012

   0.85     1.11(1) 

2013 (proposed)

   1.00(3)    1.39(3),(4) 
Year Ended
December 31,
  Dividend Paid per Ordinary Share 
     US$ 

2011

   1.10(2)    1.38(1)  

2012

   0.85     1.11(1)  

2013

   1.00     1.37(1)  

2014

   1.10     1.22(1)  

2015(proposed)

   1.15(3)    1.29(3),(4) 

 

(1)

Translated for the convenience of the reader from euro into U.S. dollars at the Noon Buying Rate for converting euro into U.S. dollars on the dividend payment date. The Depositary is required to convert any dividend payments received from SAP as promptly as practicable upon receipt.

 

(2)

Thereof a special dividend of €0.35

(1) Translated for the convenience of the reader from euro into U.S. dollars at the Noon Buying Rate for converting euro into U.S. dollars on the dividend payment date. The Depositary is required to convert any dividend payments received from SAP as promptly as practicable upon receipt.

(2) Thereof a special dividend of0.35 per share to celebrate our 40th anniversary.

(3) Subject to approval at the Annual General Meeting of Shareholders of SAP SE currently scheduled to be held on May 12, 2016.

(4) Translated for the convenience of the reader from euro into U.S. dollars at the Noon Buying Rate for converting euro into U.S. dollars on March 11, 2016 of US$1.1180 per1.00. The dividend paid may differ due to changes in the exchange rate.

(3)

Subject to approval at the Annual General Meeting of Shareholders of SAP AG currently scheduled to be held on May 21, 2014.

(4)

Translated for the convenience of the reader from euro into U.S. dollars at the Noon Buying Rate for converting euro into U.S. dollars on March 7, 2014 of US$1.3868 per €1.00. The dividend paid may differ due to changes in the exchange rate.

The amount of dividends paid on the ordinary shares depends on the amount of profits to be distributed by SAP AG,SE, which depends in part upon our financial performance. In addition, the amount of dividends received by holders of ADRs may be affected by fluctuations in exchange rates (see “Item 3. Key Information – Exchange Rates”). The timing, declaration, amount and amountpayment of any future dividend payments will depend upon our future earnings, capital needs and other relevant factors, in each case as proposed by the Executive Board and the Supervisory Board of SAP AGSE and approved by the Annual General Meeting of Shareholders.

RISK FACTORS

Economic, Political, Social, and Regulatory Risk

Uncertainty in the global economy, financial markets, or political conditions could have a negative impact on our business, financial position, profit, andas well as cash flows, and put pressure on our operating profit.

Our business is influenced by multiple risk factors that are both difficult to predict and beyond our influence and

control. These factors include global economic and business conditions, and fluctuations in national currencies. Other examples are political developments and general regulations as well as budgetary constraints or shifts in spending priorities of national governments.

Macroeconomic developments, such as afinancial market volatility episodes, global economic crisis,crises, chronic fiscal imbalances, and slowing economic conditions, or disruptions in emerging markets, might decrease thecould limit our customers’ ability of our customersand willingness to invest in our solutions.solutions or delay purchases. In addition, changes in the euro conversion rates for particular currencies might have an adverse effect on business activities with local customers and partners. All of this could have an adverse effect on our business results, financial condition, profitability or expected growth, and could have an adverse effect on our stock price. Furthermore, political instabilities in regions such as the Middle East and Africa, andpolitical crises (such as in Greece or Ukraine), natural disasters, pandemic diseases (such as Ebola in West Africa) and terrorist attacks (such as the attacks in Paris, France, in November 2015) could contribute to economic and political uncertainty that could also have an adverse effect on our business results, financial condition, profitability, and expected growth.uncertainty.

This could have an adverse effect on our customers’ ability and willingness to make investments in our products and services. These events could reduce the demand for SAP software and services, and lead to:

Delays in purchases, decreased deal size, or cancelations of proposed investments

Delays in purchases, decreased deal size, or cancellations of proposed investments

Potential lawsuits from customers due to denied provision of service as a result of sanctioned-party lists or export control issues

Higher credit barriers for customers, reducing their ability to finance software purchases

Increased number of bankruptcies among customers, business partners, and key suppliers

Increased default risk, which may lead to significant impairment charges in the future

Market disruption from aggressive competitive behavior, acquisitions, or business practices

Increased price competition and demand for cheaper products and services

Any one or more of these developments could reduce our ability to financesell and deliver our software purchases

Increased number of bankruptcies among customers, business partners, and key suppliers

Increased default risk, which may lead to significant impairment charges in the future

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Market disruption from aggressive competitive behavior, acquisitions, or business practices

Increased price competition and demand for cheaper product and services

This which could have an adverse effect on our business, financial position, profit, and cash flows.

Our international business activities and processes expose us to numerous and often conflicting laws and regulations, policies, standards or other requirements and sometimes even conflicting regulatory requirements, and to risks that could harm our business, financial position, profit, and cash flows.

We are a global company and currently market our products and services in more than 180 countries and territories in the Americas (including Latin(Latin America and North America), APJ,; Asia Pacific Japan (APJ); China, Hong Kong, Macau, and EMEATaiwan (Greater China); Europe, Middle East, and Africa (EMEA); and Middle and Eastern Europe (MEE) regions. Our business in these countries is subject

to numerous risks inherent in international business operations. Among others, these risks include:

Conflict and overlap among tax regimes

Possible tax constraints impeding business operations in certain countries

Expenses associated with the localization of our products and compliance with local regulatory requirements

Discriminatory or conflicting fiscal policies

Operational difficulties in countries with a high corruption perception index

Protectionist trade policies and regulations for import and export

Works councils, labor unions, and immigration laws in different countries

Data protection and privacy in regard to access by government authorities to customer, partner, or employee data

Difficulties enforcing intellectual property and contractual rights in certain jurisdictions

Country-specific software certification requirements

Data protection and privacy regulation regarding access by government authorities to customer, partner, or employee data

Data residency requirements (the requirement to store certain data only in and, in some cases, also to access such data only from within a certain jurisdiction)

Conflict and overlap among tax regimes

Possible tax constraints impeding business operations in certain countries

Expenses associated with the localization of our products and compliance with local regulatory requirements

Discriminatory or conflicting fiscal policies

Operational difficulties in countries with a high corruption perceptions index

Protectionist trade policies, import and export regulations, and trade sanctions and embargoes

Works councils, labor unions, and immigration laws in different countries

Difficulties enforcing intellectual property and contractual rights in certain jurisdictions

Country-specific software certification requirements

Challenges with effectively managing a large distribution network of third-party companies

Compliance with various industry standards (such as Payment Card Industry Data Security Standard)

As we expand further into new countries and markets, these risks could intensify. The

compliance with applicable application of these laws and regulations to our business is sometimes unclear, subject to change over time, and sometimes mayoften conflict between differentamong jurisdictions. Additionally, these laws and governments’ approachgovernment approaches to enforcement as wellare continuing to change and evolve, just as our products and services are continuing to change andcontinually evolve. Compliance with these types of regulation mayvarying laws and regulations could involve significant costs or require changes in products or business practices. Non-compliance could result in the imposition of penalties being imposed on us or cessation of orders that we stop thedue to alleged noncompliantnon-compliant activity. One or more of these factors could have an adverse effect on our operations globally or in one or more countries or regions, which could have an adverse effect on our business, financial position, profit, and cash flows.

Social and political instability caused by state-based conflicts, terrorist attacks, civil unrest, war, or international hostilities, as well as pandemic disease outbreaks or natural disasters, may disrupt SAP’s business operations.

Terrorist attacks and(such as the attacks in Paris in November 2015) as well as other acts of violence or war, civil, religious, and political unrest (such as in Ukraine, Israel, Syria, and in other parts of the Middle East, Libya, and in other parts of Africa), or; natural disasters (such as

hurricanes, flooding, or similar events); or pandemic diseases (such as Ebola in West Africa) could have a significant adverse effect on the relatedlocal economy orand beyond. Such an event could lead, for example, to the loss of a significant number of our employees, or to the disruption or disablement of operations at our locations, and could affect our ability to provide business services and maintain effective business operations. Furthermore, this could have a significant adverse effect on our partners as well as our customers and their investment decisions, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

Market Risks

Our established customers might not buy additional software solutions, subscribe to our cloud offerings, renew maintenance agreements, purchase additional professional services, or they might switch to other products or service offerings (including competitive products).

In 2013,2015, we offered a wide range of support services including SAP MaxAttention, SAP Enterprise Support, and SAP Product Support for

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Large Enterprises. We continuecontinued to depend materially on the success of our support portfolio and on our ability to deliver high-quality services. Traditionally, our large installed customer base generates additional new software, maintenance, consulting, and training revenue. Despite the high quality and service level of our transformed and expanded service offering in the area of premium support services, we may be unable to meet customer expectations with regards to delivery and value proposition. This may lead to a potentially adverse impact on customer experience. Existing customers might cancel or not renew their maintenance contracts, decide not to buy additional products and services, switchnot subscribe to subscription models,our cloud offerings, or accept alternative offerings from other vendors, whichvendors. In addition, the increasing volume in our cloud business as well as the conversion of traditional on-premise licenses to cloud subscriptions licenses could have a potential negative impact on our software and maintenance revenue streams. This could have an adverse effect on our maintenance business, financial position, profit, and cash flows.

The success of our cloud computing strategy depends on market perception and an increasing market adoption of theour cloud solutions and managed cloud services. Insufficient adoption of our solutions and services could lead to a loss of SAP’s position as a leading cloud company.

The market for cloud computing is increasing and shows strong growth relative to the market for ouron-premise solutions. To offer a broad cloud service portfolio and generate the associated business value for our customers, we have acquired cloud computing companies such as SuccessFactorsAriba, Concur, Fieldglass, and Ariba.SuccessFactors. Due to ongoing contracts and previous

substantial investments to integrate traditional on-premise enterprise software into their businesses, as well as concerns about data protection, security capabilities, and reliability, customers and partners might be reluctant or unwilling to migrate to the cloud.

Other factors that could affect the market acceptance of cloud solutions and services include:

Concerns with entrusting a third party to store and manage critical employee or company confidential data

Customer concerns about security capabilities and reliability

Customer concerns about the ability to scale operations for large enterprise customers

The level of configurability or customizability of the software

Missing integration scenarios between on-premise products and cloud-to-cloud solutions

Concerns with entrusting a third-party to store and manage critical employee or company confidential data

Customer concerns about security capabilities and reliability

Customer concerns about the ability to scale operations for large enterprise customers

The level of configurability or customizability of the software

Missing integration scenarios between on-premise products and cloud-to-cloud solutions

Failure to securely and successfully deliver cloud services by any cloud service provider could have a negative impact on customer trust in cloud solutions

Strategic alliances among our competitors in the cloud area could lead to significantly increased competition in the market with regards to pricing and ability to integrate solutions

Failure to get the full commitment of our partners might reduce speed and impact in the market reach

If organizations do not perceive the benefits of cloud computing, the market for cloud business might not develop further, or it may develop more

slowly than we expect, either of which could have an adverse effect on our business, financial position, profit, reputation and cash flows.

Among measures to communicate and demonstrate the value and the benefits of our cloud solutions to the market, we significantly invest in infrastructure and processes that ensure secure operations of our cloud solutions including compliance with all local legal regulations regarding data protection and privacy as well as data security.

Our market share and profit could decline due to increased competition, market consolidation and technological innovation andas well as new business models in the software industry.

The software industry continues to evolve rapidly and is currently undergoing a significant shift due to innovations in the areas of mobile,enterprise mobility, cybersecurity, Big Data, hyperconnectivity, the Internet of Things, digitization, supercomputing, cloud computing, and social media. While smaller innovative companies tend to create new markets continuously and expand their reach through mergers, large traditional IT vendors tend to enter such markets mostly through acquisitions.

SAP faces increased competition in itsour business environment from traditional as well as new competitors. This competition could result in increasedcause price pressure, cost increases, and loss of market share, which could have an adverse effect on our business, financial position, profit, and cash flows.

Additionally, related to our Applications, Technology, and Services segment, customers could change their buying behavior by accelerating their acceptance of cloud solutions to reduce their investments.investments, which might have a temporary adverse effect on our operating results. Furthermore, the trend in the market to invest more in cloud solutions might lead to a risk related toof the potential loss of existing on-premise customers. It may also have a temporary adverse effect on our revenue due to the number of conversions from on-premise licenses to cloud subscriptions from existing SAP customers in our installed base.base, as we recognize cloud subscriptions revenue over the respective service provision, and that typically ranges from one-to-three years with some up to five years.

Business Strategy Risks

Demand for our new solutions may not develop as planned and our strategy on new business models and flexible consumption models may not be successful.

Our software business consists of new software licenses, software license updates, and support and maintenance fees as well as of cloud

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software subscriptions. Our customers are lookingexpecting to take advantage of technological breakthroughs from SAP without compromising their previous IT investments. However, the introduction of new SAP solutions, technologies, and business models areas well as delivery and consumption models is subject to uncertainties as to whether customers will be able to perceive the additional value and realize the expected benefits. Uncertaintybenefits we deliver along our road maps. There is a risk that such uncertainties may lead customers to wait for proof of concept through reference customers or more mature versions first, which might result in a lower level of adoption of our new solutions, technologies, business models, and flexible consumption models, or no adoption at all. This could have an adverse effect on our business, financial position, profit, and cash flows.

Our Cloud organization recognizes subscription and support revenue from our customers over the term of their agreements, and our business depends substantially on customers renewing their agreements and purchasing additional modules or user licenses from SAP as a cloud provider. Also, anyThough downturns or upturns in cloud sales may not be immediately reflected in our operating results, and any decline in our customer renewals would harm the future operating results of theour cloud business.

We recognize cloud subscription and supportsubscriptions revenue overas we provide the duration of our cloud business customer agreements,respective services, which typically range from one to threeone-to-three years with some up to five years. As a result, most of the respectiveThis revenue recognized in a given period originates from agreements entered into in earlier periods. Consequently, a shortfall in demand forrecognition and our cloud portfolio in any period may not significantly impact our cloudincreasing subscription and support revenue for that quarter, butrevenues could have ana temporary adverse effect on targeted cloud subscriptionour financial position, profit, and support revenue in future periods.cash flows.

To maintain or improve our operating results in the cloud business, it is important that our customers renew their agreements with us when the initial contract term expires and purchase additional modules or additional users.

capacities. Our customers have no obligation to renew their subscriptions after the initial subscription period, and we cannot assure that customers will renew subscriptions at the same or at a higher level of service, or at all.

Our customers’ renewal rates may decline or fluctuate as a result of a number ofvarious factors,

including their satisfaction or dissatisfaction with our cloud product portfolio,solution and services portfolio; our ability to efficiently provide cloud services according to customer expectations and meeting the service level agreements, service availability and provisioning, the integration capabilities of our cloud solutions into their existing IT environment (including hybrid solutions combining both cloud and on-premise solutions); our customer support,support; concerns onregarding stable, efficient, and secure cloud operations and in compliance with legal and regulatory requirements,requirements; our pricing,pricing; the pricespricing of competing products or services,services; mergers and acquisitions affecting our customer base, the effects ofbase; global economic conditions, orconditions; and reductions in our customers’ spending levels.

If our customers do not renew their subscriptions, renew on terms less favorable terms,to us, or fail to purchase additional modules or users, our revenue and billings maywill decline, and we may not realize significantly improved operating results from our customer base. This could have an adverse effect on our business, financial position, profit, and cash flows.

If we are unable to scale and enhance an effective partner ecosystem, increased revenue already included in our forecast might be endangered.not increase as expected.

An open and vibrant partner ecosystem is a fundamental pillar of our success and growth strategy. We have entered into partnership agreements that drive co-innovation on our platforms, profitably expand all our routes-to-marketroutes to market to optimize market coverage, optimize cloud delivery, and provide high-quality services capacity in all market segments. Partners play a key role in driving market adoption of our entire solutions portfolio, by co-innovating on our platforms, embedding our technology, and reselling and/or implementing our software.

If partners consider our products or services model less strategic and/or financially less attractive compared to our competition and/or less appropriate for their respective channel and target market, if partners fear direct competition by SAP or if SAP fails to establish and enable a network of qualified partners that meetmeeting our quality requirements and the requirements of our customers, then, among other things, partners might not:

Develop a sufficient number of new solutions and content on our platforms

Provide high-quality products and services to our customers

Drive growth of references by creating customer use cases and demo systems

Sufficiently embed our solutions to profitably drive product adoption, especially with new innovations like SAP HANA

Enable and train sufficient resources to promote sell and support to scale into targeted markets

Develop a sufficient number of new solutions and content on our platforms

Provide high-quality products and services to meet customer expectations

Drive growth of references by creating customer use cases and demo systems

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Comply with applicable laws and regulations, resulting in delayed, disrupted, or terminated sales and services

Renew their existing agreements with us or enter into new agreements on terms acceptable to us or at all.

Embed our solutions sufficiently enough to profitably drive product adoption, especially with innovations such as SAP S/4HANA and SAP HANA Cloud Platform

Enable and train sufficient resources to promote, sell, and support to scale to targeted markets

Comply with applicable laws and regulations, resulting in delayed, disrupted, or terminated sales and services

Transform their business model in accordance with the transformation of SAP’s business model in a timely manner

Renew their existing agreements with us or enter into new agreements on terms acceptable to us or at all

Provide ability and capacity to meet customer expectations regarding service provisioning.

If one or more of these risks materialize, this may have an adverse effect on the demand for our products and services.services as well as the partner’s loyalty and ability to deliver. As a result, we may not be able to scale our business to compete successfully with other software vendors, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

Human Capital Risks

If we do not effectively manage our geographically dispersed workforce, we may not be able to run our business efficiently and successfully.

Our success is dependent on appropriate alignment of our internal and external workforce planning processes and our location strategy with our general strategy. It is critical that we manage our internationally dispersed workforce effectively, taking shortshort- and long-term workforce and skill requirements into consideration. This applies to the management of our internal as well as our external workforce. Changes in headcount and infrastructure needs as well as local legal or tax regulations could result in a mismatch between our expenses and revenue. Failure to manage our geographically dispersed workforce effectively could hinder our ability to run our business efficiently and successfully and could have an adverse effect on our business, financial position, profit, and cash flows.

If we are unable to attract, develop, and retain leaders and employees with specialized knowledge and technology skills, or are unable to achieve internal diversity and inclusion objectives, we might not be able to manage our operations effectively and successfully, or develop successful new solutions and services.

Our highly qualified workforce is the foundation for our continued success. CompetitionIn certain regions and specific technology and solution areas, we continue to set very

high growth targets, specifically in our industry forcountries and regions such as Africa, China, Latin America, and the Middle East. In the execution of SAP’s strategic priorities, we depend on highly skilled and specialized personnel and leaders, both male and female,female. Successful maintenance and expansion of our highly skilled and specialized workforce in the area of cloud is intense. In certain regionsa key success factor for our transition to be the leading cloud company. The availability of such personnel is limited and, specific technology

as a result, competition in our industry is intense and solution areas, we have set ambitious growth targets, specifically in countries such as Brazil, China, and Russia.could expose us to claims by other companies seeking to prevent their employees from working for a competitor. If we are unable to identify, attract, develop, motivate, adequately compensate, and retain well-qualified personnel, both male and female,engaged personnel, or if existing highly skilled and specialized personnel leave SAP and ready successors or adequate replacements are not available, we may not be able to manage our operations effectively, which could have an adverse effect on our reputation, and our business, financial position, profit, and cash flows. Furthermore, we may not be able to develop, sell, or implement successful new solutions and services as planned. This is particularly true as we continue to introduce new and innovative technology offerings and expand our business in emerging markets. MissingThe lack of appropriate or inadequately executed benefit and compensation programs could limit SAP’s ability to attract or retain qualified employees and lead to financial losses. In addition, we might not be able to achieve our internal gender diversity objectives to increase the number of women in management from 18% in 2010 to 25% by 2017. Finally, hiring such personnel could expose us to claims by other companies seeking to prevent their employees from working for a competitor.

Organizational and Governance-Related Risks

Laws and regulatory requirements in Germany, the United States, and elsewhere have become much more stringent.

As a stock corporationEuropean company domiciled in Germany with securities listed in Germany and the United States, we are subject to European, German, U.S., and other governance-related regulatory requirements. Changes in laws and regulations and related interpretations, including changes in accounting standards and taxation requirements, and increased enforcement actions and penalties may alter the business environment in which we operate. Regulatory requirements have become significantly more stringent in recent years, and some legislation, such as the anticorruption legislation in Germany, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and other local laws prohibiting corrupt payments by employees, vendors, distributors, or agents, is being applied more rigorously. Emerging markets are a significant focus of our international growth strategy. The nature of these markets presents a number of inherent risks. A failure by usSAP to

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comply with applicable laws and regulations, or any related

allegations of wrongdoing against us, whether merited or not, could have an adverse effect on our business, financial position, profit, cash flows and reputation.

Non-compliance with applicable data protection and privacy laws or failure to adequately meet the requirements of SAP’s customers with respect to our products and services could lead to civil liabilities and fines, as well as loss of customers and damage to SAP’s reputation.

As a global software and service provider, SAP is required to comply with thelocal laws in the locations wherewherever SAP does business. SAPConsequently, we must ensure that any legal requirements in connection with the provision of products and its subsidiariesservices are facing a surge ofproperly implemented. With regards to data protection and privacy laws and regulations aroundrequirements, significant changes are expected subject to the world, with further changes to be expected in the future, for example, by theupcoming European Data Protection Regulation proposedRegulation. Furthermore, SAP is affected by the consequences of the decision of the European Commission.Court of Justice (ECJ), which declared Safe Harbor invalid, so that data transfers from within the European Union (EU) to the United States are no longer permitted based on Safe Harbor. This means that acquired SAP affiliates that have not already implemented the requirements for data transfers based on the Standard Contractual Clauses will have to implement these requirements immediately. However, this will be ensured by the implementation of the new Intra Group Agreement that provides a data protection level at the Standard Contractual Clauses within the SAP Group. These laws and regulations amend and supplement existing requirements regarding the processing of personal data that SAP and SAP customers must fulfill and which we must consequently address with our products and services.services, including cloud delivery. Failure to comply with applicable laws or to adequately address privacy concerns of customers, even if unfounded, could lead to investigations by supervisory authorities, civil liability, fines, (in the future, potentially calculated based on the Company’s annual turnover)revenue), loss of customers, damage to our reputation, and could have an adverse effect on our business, financial position, profit, and cash flows.

Further, recent landmark decisions by the ECJ on data protection matters, as well as official statements made by the European data protection supervisory authorities, require SAP to carefully review our globalized business practices. Most importantly, the ECJ on October 6, 2015, ruled that data transfers by European companies to data processors in the United States can no longer be based on Safe Harbor. While SAP has not widely relied upon Safe Harbor, the data protection supervisory authorities have challenged the legality of other transfer mechanisms, such as the Standard Contractual Clauses used by SAP, on the same grounds by which the ECJ has declared Safe Harbor invalid. The data protection

supervisory authorities have threatened to start enforcement activities as early as end of January 2016 against European companies that still transfer data to the United States (or grant U.S. companies remote access to systems containing personal data in the EU) based on a transfer mechanism that the authorities consider invalid. Enforcement activities against SAP or against SAP customers because of services and products that SAP provides with the help of our U.S.-based entities and/or U.S.-based suppliers could lead to fines, civil liability, loss of customers, and damage to our reputation, and could have an adverse effect on our business, financial position, profit, and cash flows.

It is conceivable that data transfers to further countries that do not provide a level of data protection and privacy comparable to the European level may be challenged, too.

Failure to respond to meet customer, partner, or other stakeholder expectations or generally accepted standards on climate change, energy constraints, and our social investment strategy could negatively impact SAP’s business, results of operations, and reputation.

Energy and emissions management are an integral component of our holistic management of social, environmental, and economic risks and opportunities. We have identified risks in these major areas:

Our solutions and green IT

Our own operations – energy management and other environmental issues such as carbon management, water use, and waste

Our solutions

Our own operations – energy management and other environmental issues such as carbon management, water use, and waste

Because our customers, employees, and investors expect a reliable energy and carbon strategy, we have reemphasized our previously communicated targets, especially our 2020 target for greenhouse gas emissions. In addition,case these targets cannot be achieved, our customers might no longer recognize SAP for itsour environmental leadership and might buy other vendors’ products and services. Consequently, we could fail to achieve our revenue target. If we do not meet stakeholder expectations in the areas identified, our rating in sustainable investment indicesindexes might decrease, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

Unethical behavior and non-compliance with our integrity standards due to intentional and fraudulent employee behavior of employees could seriously harm our business, financial position, profit, and reputation.

SAP’s leadership position in the global market is founded on the long-term and sustainable trust of our stakeholders worldwide. Our heritage is one of corporate transparency, open communication with financial markets, and adherence to recognized standards of

business integrity. The SAP Code of Business Conduct, adopted by the Executive Board on January 29, 2003, put into wordsand updated as necessary since then, memorialized and supplemented the already existing guidelines and expectations for the business behavior practiced at SAP.

However, we may encounter unethical behavior and non-compliance with our integrity standards due to intentional and fraudulent behavior of individual employees, possibly in collusion with external third parties. In addition to intentional behavior, problems could also arise due to negligence in the adherence to rules and regulations. Unethical behavior and misconduct attributable to SAP could not only lead to criminal charges, fines, and claims by injured parties, but also to financial loss, and severe reputational damage. This could have an adverse effect on our business, financial position, profit, and cash flows.

Principal shareholders may be able to exert control over our future direction and operations.

If SAP AG’sSE’s principal shareholders and the holdings of entities controlled by them vote in the same manner, this could delay, prevent or facilitate a change in control of SAP or other significant changes to SAP AGSE or its capital

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structure. See “Item 7. Major Shareholders and Related-Party Transactions – Major Shareholders” for further information.

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

Currently, except for Bill McDermott and Vishal Sikka,Robert Enslin, all members of SAP AG’sSE’s Executive Board and all members of the Supervisory Board are non-residents of the United States. A substantial portion of the assets of SAP and our Board members are located outside the United States. As a result, it may not be possible to effect service of process within the United States upon non-U.S. resident persons or SAP or to enforce against non-U.S. resident persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the securities laws of the United States. In addition, awards of punitive damages in actions brought in the United States or elsewhere might be unenforceable in Germany.

Communication and Information Risks

Our controls and efforts to prevent the unauthorized disclosure of confidential information might not always be effective.

Confidential or strictly confidential information that isand internal information related to topics such as our strategy, new technologies, mergers and acquisitions, unpublished financial results, or personal data, could be prematurely or inadvertently disclosed.disclosed and subsequently lead to market

misperception and volatility. This could require us to notify multiple regulatory agencies and comply with applicable regulatory requirements and, where appropriate, the data owner, which could result in a loss of reputation for SAP. For example, leaked information during a merger or acquisition deal could cause the loss of our deal target, or our share price could declinereact significantly in case of prematurely published financial results. This could have an adverse effect on our market position and lead to fines and penalties. In addition, this could have an adverse effect on our business, financial position, profit, and cash flows.

Financial Risks

Our sales are subject to quarterly fluctuations and our sales forecasts may not be accurate.

Our revenue and operating results can vary and have varied in the past, sometimes substantially,

from quarter to quarter. Our revenue in general, and in particular our software revenue in particular, is difficult to forecast for a number of reasons, including:

The relatively long sales cycles for our products

The large size, complexity, and extended timing of individual license transactions

The introduction of new licensing and deployment models such as cloud subscription models

The timing of the introduction of new products or product enhancements by SAP or our competitors

Changes in customer budgets

Decreased software sales that could have an adverse effect on related maintenance and services revenue

The timing, size, and length of a customer’s services projects

Deployment models that require the recognition of revenue over an extended period of time

Seasonality of a customer’s technology purchases

Limited visibility into the ability of acquired companies to accurately predict their sales pipelines and the likelihood that the projected pipeline will convert favorably into sales

Other general economic, social, environmental, and market conditions, such as the global economic crisis and the current difficulties for countries with large debt

The relatively long sales cycles for our products

The large size, complexity, and extended timing of individual customer transactions

The introduction of licensing and deployment models such as cloud subscription models

The timing of the introduction of new products or product enhancements by SAP or our competitors

Changes in customer budgets

Decreased software sales that could have an adverse effect on related maintenance and services revenue

The timing, size, and length of customers’ services projects

Deployment models that require the recognition of revenue over an extended period of time

Adoption of, and conversion to, new business models leading to changed or delayed payment terms

Seasonality of a customers’ technology purchases

Limited visibility during the ongoing integration of acquired companies into their ability to accurately predict their sales pipelines and the likelihood that the projected pipeline will convert favorably into sales

Other general economic, social, environmental, and market conditions, such as a global economic crisis and difficulties for countries with large debt

Since many of our customers make their IT purchasing decisions near the end of calendar quarters, and with a significant percentage of those decisions being made during our fourth quarter, even a small delay in purchasing decisions for our on-premise software could have an adverse effect on our revenue results for a given year. Our dependence on large transactions has decreased in recent years with a trend towards an increased number of transactions coupled with a decrease in deal size. However, the loss or delay of one

or a few large opportunities which are still characteristic of the large enterprise segment, could have an adverse effect on our business, financial position, profit, and cash flows.

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External factors could impact our liquidity and increase the default risk associated with, and the valuation of, our financial assets.

Macroeconomic factors such as an economic downturn could have an adverse effect on our future liquidity. We use a globally centralized financial management to control financial risk, such as liquidity, exchange rate, interest rate, counterparty, and equity price risks. The primary aim is to maintain liquidity in the SAP Group at a level that is adequate to meet our obligations at any time. Our total groupGroup liquidity was €2,841 million on December 31, 2013. This position is supported by our strong operating cash flows, of which a large part is recurring, and by credit facilities onfrom which we can draw if necessary. However, adverse macroeconomic factors could increase the default risk associated with the investment of our total group liquidity.Group liquidity including possible liquidity shortages limiting SAP’s ability to repay financial debt. This could have an impact on the valuationvalue of our financial assets, which could have an adverse effect on our business, financial position, profit, and cash flows.

SAP’s investment policy with regard to total group liquidity is set out in our internal treasury guideline document, which is a collection of uniform rules that apply globally to all companies in the Group. Among its stipulations, it requires that with limited exceptions we invest only in assets and funds rated BBB flat or better. The weighted average rating of the investments of our total group liquidity is in the range A to A–. We continue to pursue a policy of cautious investment characterized by wide portfolio diversification with a variety of counterparties, predominantly short-term investments, and standard investment instruments.

Management’sManagement use of estimates could negatively affect our business, financial position, profit, and cash flows.

To comply with IFRS, management is required to make manynumerous judgments, estimates, and assumptions (among others for our major patent disputes) that affect the reported financial figures. The facts and circumstances, as well as assumptions on which management bases these estimates and judgments and management’s judgment regarding the facts and circumstances, may change from time to time and this could result in significant changes in the estimates and judgments and, consequently, in the reported financials. Such changes could have an adverse effect on our business, financial position, profit and cash flows.

Current and future accounting pronouncements and other financial reporting standards, especially but not only concerning revenue recognition, may negatively impact theour financial results we present.results.

We regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards (including the new IFRS 15 on revenue from contracts with customers that we will need to adopt in 2018) and changes in their interpretation, we might be required to change our accounting policies, particularly concerning revenue recognition, to alter our operational policies so that they reflect new or amended financial reporting standards, or to restate our published financial

statements. Such changes may have an adverse effect on our reputation, business, financial position, and profit, or cause an adverse deviation from our revenue and operating profit target.

Because we conduct operations throughout the world, our business, financial position, profit, and cash flows may be affected by currency and interest rate fluctuations.

Our Group-wide management reporting and our external financial reporting are both in euros. Nevertheless, a significant portion of our business is conducted in currencies other than the euro. Approximately 71%74% of our revenue in 20132015 was attributable to operations outside the euro area and was translated into euros. Consequently, period-over-period changes in the euro rates for particular currencies can significantly affect our reported revenuerevenues, profits and income.cash flows. In general, appreciation of the euro relative to another currency has an adverse effect while depreciation of the euro relative to another currency has a positive effect. Variable interest balance-sheet items are also subject to changes in interest rates. Such changes may have an adverse effect on our business, financial position, profit and cash flows or cause an adverse deviation from our revenue and operating profit target.

For more information about our currency and interest rate risks and our related hedging activity, see the Notes to the Consolidated Financial Statements section, Notes (24) and (25).

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The cost of using derivative instruments to hedge share-based payments may exceed the benefits of hedging them.

We use derivative instruments to reduce the impact of our share-based payments on our income statement and to limit future expense associated with those plans. We decide case-by-case whether and to what extentBased on a defined hedging strategy, we should hedge this risk.align the decision of individual hedging transactions with the Group CFO in the Treasury Committee. The expense of hedging the share-based payments could exceed the benefit achieved by hedging them. On the other hand, a decision to leave the plans materially unhedged could prove disadvantageous. This could have an adverse effect on our business, financial position, profit and cash flows or cause an adverse deviation from our revenue and operating profit target.

The market price for our ADRs and ordinary shares may be volatile.

The market prices of our ADRs and ordinary shares have experienced and may continue to experience significant volatility in response to various factors including, but not limited to:

the announcement of new products or product enhancements by us or our competitors;

technological innovation by us or our competitors;

quarterly variations in our results or our competitors’ results of operations or results that fail to meet market expectations;

changes in revenue and revenue growth rates on a consolidated basis or for specific geographic areas, business units, products or product categories;

changes in our externally communicated outlook;

changes in our capital structure, for example due to the potential future issuance of addition debt instruments;

general market conditions specific to particular industries;

litigation to which we are a party;

general and country specific economic or political conditions (particularly wars, terrorist attacks, etc.);

unauthorized or inadvertent premature disclosure of confidential information, including information concerning pending acquisition negotiations or acquisition rumors;

proposed and completed acquisitions or other significant transactions by us or our competitors; and

general market conditions.

the announcement of new products or product enhancements by us or our competitors;

technological innovation by us or our competitors;

quarterly variations in our results or our competitors’ results of operations or results that fail to meet market expectations;

changes in revenue and revenue growth rates on a consolidated basis or for specific geographic areas, business units, products or product categories;

changes in our externally communicated outlook;

changes in our capital structure, for example due to the potential future issuance of additional debt instruments;

general market conditions specific to particular industries;

litigation to which we are a party;

general and country specific economic or political conditions (particularly wars, terrorist attacks, etc.);

proposed and completed acquisitions or other significant transactions by us or our competitors; and

general market conditions.

Many of these factors are beyond our control. In the past, companies that have experienced volatility in the market price of their stock have been subject to shareholder lawsuits, including securities class action litigation. Any such lawsuits against us, with or without merit, could result in substantial costs and the diversion of management’s attention and resources, resulting in a decline in our results of operations and our stock price.

Project Risks

Implementation of SAP software often involves a significant commitment of resources by our customers and is subject to a number of significant risks over which we often have no control.

A core element of our business is the successful implementation of software solutions to enable our customers to makemaster complexity and help our customers’ business run at their business a best-run business.best. The implementation of SAP software is led by SAP, by partners, by customers, or by a combination thereof. Depending on various factors, such as the complexity of solutions, the customer’s implementation, integration and integrationmigration needs, or the resources required, SAP faces a number of different risks. For example, functional requirement changes, delays in timeline, or deviation from recommended best practices may occur during the course of a project. These scenarios have a direct impact on the project resource model and on securing adequate internal personnel or consultants in a timely manner and could therefore prove challenging.

As a result of these and other risks, SAP and/or some of our customers have incurred significant implementation

costs in connection with the purchase and installation of SAP software products. Some customers’customer implementations have taken longer than planned. We cannot guarantee that we can reduce or eliminate protracted installation or significant third-party consulting costs, for example, that trained consultants will be readily available, that our costs will not exceed the fees agreed in fixed-price contracts, or that customers will be satisfied with the implementation of our software and solutions. Unsuccessful, lengthy, or costly customer implementation and integration

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projects could result in claims from customers, harm SAP’s reputation, and could have an adverse effect on our business, financial position, profit, and cash flows.

Product and Technology Risks

There is a risk that undetectedUndetected security vulnerabilities shipped and deployed within our software products might cause damage to SAP and our customers.customers, and partners.

Customer systems or systems operated by SAP itself to provide services could potentially be compromised by vulnerabilities if they are exploited by hackers. This could lead to theft, destruction, or abuse of data, or systems could be rendered unusable (such as(for example, due to distributed denial of service attack)attacks). The detection of security vulnerabilities in our software, our customers’ systems, or SAP systems used in the provision of services, especially in case of exploitation, could prevent us from meeting our contractual obligations and subsequently might lead to customer claims and reputational damage, which might have an adverse effect on our business, financial position, profit, and cash flows.

Undetected defects in the introduction of new products and product enhancements could increase our costs, and reduce customer demand.

To achieve market acceptanceOur development investment, including new product launches and high customer satisfaction, our new products and product enhancements, often require long development and testing periods. Development work and market introduction areis subject to risks. For example, software products and services might not completely meet our stringent high-quality standards, including security standards,standards; might not fulfill market needs or customer expectations,expectations; or might not comply with local standards and requirements. Furthermore, this risk also exists with respect to acquired companies’ technologies and products where we might not be able to manage these as quickly and successfully as expected. Therefore, market launches, entering new markets, or the introduction of new innovations could be delayed or not be successful.

Also,In addition, new products and cloud offerings, including third-party technologies we have licensed and open source software components we use in those products, could contain undetected defects or they might not be mature enough from the customer’s point of view for business-critical solutions. The detection and correction of any

defects especially after shipmentdelivery could be expensive and time consumingtime-consuming and we might not be able to meet the expectations of customers regarding time and quality in the defect resolution process. In some circumstances, we might not be in a position to rectify such defects or entirely meet the expectations of customers, specifically as we are expanding our product portfolio into additional markets. As a result, we might be faced with customer claims for cash refunds, damages, replacement software, or other concessions. The risk of defects and their adverse consequences could increase as we seek to introduce a variety of new software products simultaneouslyand product enhancements at a higher innovation rate. This is especially relevant for cloud products as delivery cycles are even shorter (up to daily deliveries) and our complete cloud product customer base could receive undetected defects simultaneously. Furthermore, for products that use third-party (not SAP) cloud services, we cannot detect defects in advance. Significant undetected defects or delays in introducing new products or product enhancements could affect market acceptance of SAP software products and could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

The use of existing SAP software products by customers in business-critical solutions and processes and the relative complexity and technical interdependency of our software products and services create a risk that customers or third parties may pursue warranty, performance, or other claims against us for actual or alleged defects in SAP software products, in our provision of services, or in our application hosting services. We have in the past been, and may in the future be, subject to warranty, performance, or other similar claims.

Although our contracts generally contain provisions designed to limit our exposure due to actual or alleged defects in SAP software products or in our provision of services, these provisions may not cover every eventuality or be effective under the applicable law. Regardless of its merits, any claim could entail substantial expense and require the devotion of significant time and attention by key management personnel. Publicity surrounding such claims could affect our reputation and the demand for our software.

 

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Changes in our rights to use software, cloud services, and technologies we license from third parties whichthat are an integral part of SAP’s products could slow down time to market and influence our license pricing and therefore the competitiveness with other software vendors. Furthermore, it could diminish our software’s or cloud functional capabilities and therefore could jeopardize the stability of our solution portfolio offering.

The numerous third-party technologiessolutions we have licensed and certain open source software components we use have become an integral part of our product and service portfolio. We depend on those technologiessolutions for the functionality of our software orand cloud services. Changes to, or the loss of, third-party licenses as well as open source licenses being construed could significantly increase the cost of these licenses and significantly reduce software or cloud functionality and/or usability of SAP’s software products.or cloud offerings. As a result, we might incur additional development or license costs to ensure the continued functionality of our products, which could have an adverse effect on our business, financial position, profit, and cash flows. This risk increases with each acquisitionof our acquisitions of a company or a company’s intellectual property assets that had been subject to third-party technologysolution licensing, open source software and product standards less rigorous than our own.

If we are unable to keep up with rapid technological, process and service innovations, and new business models andas well as changing market expectations, we might not be able to compete effectively.

Our future success depends upon our ability to keep pace with technological and process innovations and new business models, as well as our ability to develop new products and services, enhance and expand our existing products and services portfolio, and integrate products and services we obtain through acquisitions. To be successful, we are required to shiftadapt our products and our go-to-market approach to a cloud-based delivery model to satisfy changing customer demand.

We might not be successful in bringing new business models, solutions, solution enhancements, and/or services to market before our competitors. We may also face increasing competition from open source software initiatives in which competitors may

provide software and intellectual property free and/or under terms and conditions unfavorable for SAP. In addition, we might not be able to generate enough revenue to offset the significant research and development costs we incur to deliver technological innovations.innovations or to offset the required infrastructure costs to deliver our solutions and services as part of our new business models. Moreover, we might not anticipate and develop technological improvements or succeed in adapting our products, services, processes, and processesbusiness models to technological

change, changing regulatory requirements, emerging industry standards, and changing requirements of our customers and partners. Finally, we might not succeed in producing high-quality products, enhancements, and releases in a timely and cost-effective manner to compete with products, solutions, and other technologies offered by our competitors, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

Our technology and/or product strategy may not be successful or our customers and partners might not adopt our technology platforms and other innovations accordingly.

We offer customers a broad portfolio of products, solutions, and services. Our technology strategy centers on SAP HANA as thea real-time in-memory computing platform for analytics and applications.applications, the SAP S/4HANA suite as the digital core, the business network, and SAP HANA Cloud Platform as our platform-as-a-service offering. The success of our technology strategy depends on the convergence of SAP HANA with our mobile, cloud, and SAP NetWeaver technology platform. It also depends on the delivery of SAP solutions based on the SAP HANA platformnew digital framework, as well as the success of our new frameworktechnology continues to deliver business value to meet changing customer expectations regarding end-to-end user experience.expectations. Our technology strategy also relies on our ability to maintain a dynamic network of partner organizations developing their own business applications using our technology platforms.

We might not be successful in integrating our platforms, enabling the complete product and cloud service portfolio, harmonizing our user interface design and technology, integrating acquired technologies, or bringing new solutions based on the SAP HANA platform as well as SAP HANA Cloud Platform to the market as fast as expected.expected, in particular, innovative applications such as SAP S/4HANA. In addition, we may not be able to compete effectively in the area of managed cloud services.services and our new applications and services might not meet customer expectations. As a result, our partner organizations and customers might not adopt the SAP HANA platform and our managedtechnology platforms, applications, or cloud services quickly enough or they might consider competitive solutions. As a result, thisThis could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

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Our cloud offerings might be subject to a security attack, become unavailable, or fail to perform properly.

The software used in our cloud portfolio is inherently complex and any defects in product functionality, system stability, or data center operations, or system stability that cause interruptions in the availability of our application suiteportfolio could result in the following:

Lost or delayed market acceptance and sales

Breach of warranty or other contract breach or misrepresentation claims

Lost or delayed market acceptance and sales

Breach of warranty or other contract breach or misrepresentation claims

Sales credits or refunds to our customers or partners

Loss of customers and/or partners

Diversion of development and customer service resources

Breach of data protection and privacy laws and regulations

Customers considering competitive cloud offerings

Sales credits or refunds to our customers or partners

Loss of customers and/or partners

Diversion of development and customer service resources

Breach of data protection and privacy laws and regulations

Customers considering competitive cloud offerings

Loss of customer satisfaction and brand reputation

The costs incurred in correcting any defects or errors might be substantial and could have an adverse effect on our reputation, business, financial position, profit, and cash flows. The availability of our cloud applications could be interrupted by a number of factors, resulting in customers’ inability to access their cloud applications, system outages, failure of our network due to human or other errors, security breaches, or variability in user traffic for our cloud applications. Because of the large amount of data that we collect and manage, it is possible that hardware failures, defects in our software, or errors in our systems could result in data loss or corruption, or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. Furthermore, the availability of our application suite could be interrupted by a number of factors, including customers’ inability to access the Internet, the failure of our network or software systems due to human or other error, and security breaches, or variability in user traffic for our application suite. Additionally, any loss of the right to use hardware purchased or leased from third parties could result in delays in our ability to provide our application suitecloud applications until equivalent technology is either developed by us or, if available, identified. Furthermore, our cooperation with partners in the area of cloud includes the co-location of data centers that might expose SAP to additional risks in the area of security and data protection, as well as the potential for breached service-level agreements by partners.

We have administrative, technical, and physical security measures in place as well as contracts that require third-party data centers to have appropriate security and data protection and privacy measures in place. In this context, customers might demand to use only use specific

and/or local data centers. However, if these security measures are breached as a result of third-party action, employee error andor malfeasance, or otherwise, and if, as a result, someone obtains unauthorized access to our customers’ data, which may include personally identifiable information regarding users, our reputation could be damaged, our business may suffer, local data protection and privacy laws or regulations might be breached, and we could incur significant liability.

In addition, our insurance coverage might not cover claims against us for loss or security breach of data or other indirect or consequential damages. Moreover, defending a suit, regardless of its merit, could be costly and time-consuming. In addition to potential liability, if we experience interruptions in the availability of our application suite,cloud applications, our reputation could be harmed and we could lose customers.

Operational Risks

Third parties have claimed, and might claim in the future, that we infringe their intellectual property rights, which could lead to damages being awarded against us and limit our ability to use certain technologies in the future.

We believe that we will increasingly be subject to intellectual property infringement claims as the number of products in our industry segment grows,solution portfolio grows; as we acquire companies with increased use of third-party code including open source code,code; as we expand into new industry segmentsindustries with our products,offerings, resulting in greater overlap in the functional scope of products,offerings; and as non-practicing entities that do not design, manufacture, or distribute products increasingly assert intellectual property infringement claims.

Any claims, with or without merit, and negotiations or litigation relating to such claims, could preclude us from utilizing certain technologies in our products, be time-consuming, result in costly litigation, and require us to pay damages to third parties, stop selling or reconfigure our products and, under certain circumstances, pay fines and indemnify our customers, which could have an adverse effect on our business, financial profile, profit, cash flows, and reputation. They could also require us to enter into royalty and licensing arrangements on terms that are not favorable to us, cause product shipment delays, subject our products to

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injunctions, require a complete or partial redesign of products, result in delays to our customers’ investment decisions, and damage our reputation.

Software includes many components or modules that provide different features and perform different functions. Some of these features or functions may be subject to third-party intellectual property rights. The rights of another party could encompass technical aspects that are similar to one or more technologies in one or more of our products. Intellectual property rights of third parties could preclude us from using certain technologies in our products or require us to enter into royalty and licensing arrangements on unfavorable or expensive terms.

The software industry is making increasing use of open source software in its development work on solutions. We also integrate certain open source software components from third parties into our software. Open source licenses may require that the software code in those components or the software into which they are integrated be freely accessible under open source terms. Third-party claims may require us to make freely accessible under open source terms one of our products or non-SAPthird-party (not SAP) software upon which we depend.

Claims and lawsuits against us could have an adverse effect on our business, financial position, profit, cash flows, and reputation.

Claims and lawsuits are brought against us, including claims and lawsuits involving businesses we have acquired. Adverse outcomes to some or all of the claims and lawsuits pending against us might result in the award of significant damages or injunctive relief against us that could hinder our ability to conduct our business and could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

The outcome of litigation and other claims or lawsuits is intrinsically uncertain. Management’s view of the litigation may also change in the future. Actual outcomes of litigation and other claims or lawsuits could differ from the assessments made by management in prior periods.periods, which are the basis for our accounting for these litigations and claims under IFRS.

We might not acquire and integrate companies effectively or successfully and our strategic alliances might not be successful.

To expand our business, we have in the past made acquisitions ofacquire businesses, products, and

technologies. We technologies, and we expect to continue to make such acquisitions in the future. Management’sOver time certain of these acquisitions have increased in size and in strategic importance for SAP, Management negotiation of potential acquisitions and alliances and integration of acquired businesses, products, or technologies demands time, focus, and resources of management and of the workforce. Acquisitions of companies, businesses, and technology expose us to unpredictable operational difficulties, expenditures, and risks. These risks include, among others:

The selection of the wrong integration model for the acquired company

The failure to integrate the acquired business and its different business and licensing models

The failure to integrate the acquired technologies or products with our current products and technologies

The failure to integrate the acquired company’s operations across SAP’s different cultures, languages, and local protocols, all within the constraints of applicable local laws

The failure to meet the needs of the acquired company’s customers and partners in the combined company

The diversion of management’s time and attention from daily operations

The loss of key personnel of the acquired business

Material unknown liabilities and contingent liabilities of acquired companies, including legal, tax, accounting intellectual property, or other significant liabilities that may not be detected through the due diligence process

Legal and regulatory constraints (such as contract obligations, privacy frameworks and agreements, and so on)

Difficulties in implementing, restoring, or maintaining internal controls, procedures, and policies

Practices or policies of the acquired company that may be incompatible with our compliance requirements

An adverse effect on relationships with existing customers, partners, or third-party providers of technology or products

Difficulties in integrating the acquired company’s accounting, HR, and other

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Selection of the wrong integration model for the acquired company and/or technology

Failure to properly evaluate the acquired business and its different business and licensing models

Failure to successfully integrate acquired technologies or solutions into SAP’s solution portfolio and strategy in a timely and profitable manner

Failure to integrate the acquired company’s operations across SAP’s different cultures, languages, and local protocols, all within the constraints of applicable local laws

Failure to meet the needs of the acquired company’s customers and partners in the combined company

The diversion of management’s time and attention from daily operations

Loss of key personnel of the acquired business

Material unknown liabilities and contingent liabilities of acquired companies, including legal, tax, accounting, intellectual property, or other significant liabilities that may not be detected through the acquisition due diligence process

Legal and regulatory constraints (such as contract obligations, privacy frameworks, and agreements)

Difficulties in implementing, restoring, or maintaining internal controls, procedures, and policies

Practices or policies of the acquired company that may be incompatible with our compliance requirements

An adverse effect on relationships with existing customers, partners, or third-party providers of technology or products

Difficulties in integrating the acquired company’s accounting, HR, and other administrative systems and coordination of the acquired company’s research and development (R&D), sales, and marketing functions

Debt incurrence or significant cash expenditures

Debt incurrence or significant cash expenditures

Constraints in enforcing acquired companies’ compliance with existing SAP security standards in a timely manner

Difficulties in customer implementation projects combining technologies and solutions from both SAP and the acquired company

In addition, acquired businesses might not perform as anticipated, resulting in charges for the impairment of goodwill and other intangible assets on our statements of financial position. Such charges may have an adverse effect on our business, financial position, profit, and cash flows. We have entered into, and expect to continue to enter into, alliance arrangements for a variety of purposes, including the development of new products and services. There can be no assurance that any such products or services will be successfully developed or that we will not incur significant unanticipated liabilities in connection with such arrangements. We may not be successful in overcoming these risks and we may therefore not benefit as anticipated from acquisitions or alliances.

We may not be able to obtain adequate title to, or licenses in, or to enforce, intellectual property.

Protecting and defending our intellectual property is crucial to our success. We use a variety of means to identify and monitor potential risks and to protect our intellectual property. These include applying for patents, registering trademarks and other marks and copyrights, implementing measures to stop copyright and trademark infringement, entering into licensing, confidentiality, and nondisclosurenon-disclosure agreements, and deploying protection technology. Despite our efforts, we might not be able to prevent third parties from obtaining, using, or selling without authorization what we regard as our proprietary technology and information. All of these measures afford only limited protection, and our proprietary rights could be challenged, invalidated, held unenforceable, or otherwise affected. Some intellectual property might be vulnerable to disclosure or

misappropriation by employees, partners, or other third parties. Third parties might independently develop technologies that are substantially equivalent or superior to our technology. Finally, third parties might reverse-engineer or otherwise obtain and use technology and information that we regard as proprietary. Accordingly, we might not be able to protect our proprietary rights against unauthorized third-party copying or utilization, which could have an adverse effect on our competitive position and our financial position,positions, and result in reduced sales. Any

legal action we bring to enforce our proprietary rights could also involve enforcement against a partner or other third party, which may have an adverse effect on our ability, and our customers’ ability, to use that partner’s or other third parties’ products. In addition, the laws and courts of certain countries may not offer effective means to enforce our intellectual property rights. This could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

SAP’s business strategy focuses on certain business models that are highly dependent on a working cyberspace. A cybersecurity breach could have an adverse effect on our customers, our reputation, and our business.

The key cybersecurity risks currently applicable to SAPus include state-driven economic espionage as well as competitor-driven industrial espionage, and criminal activities including, but not limited to, cyber-attackscyberattacks and “mega breaches” against cloud services and hosted on-premise software, hosted, and cloud services.software. This might result in, for example, leakagedisclosure of confidential information and intellectual property, defective products, production downtimes, supply shortages, and compromised data (including personal data). A failure of our cybersecurity measures could impact our compliance with legal demands (for example, Sarbanes-Oxley Act, Payment Card Industry Data Security Standard, data privacy) and expose our business operations andas well as service delivery to the described risks, for example, virtual attack, disruption, damage, and/or unauthorized access. Additionally, we could be subject to recovery costs, for example, as well as significant contractual and legal claims by customers, partners, authorities, and third-party service providers for damages against us, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.

We may not be able to protect our critical information and assets or to safeguard our business operations against disruption.

SAP is highly dependent on the exchange of a wide range of information across our global operations and on the availability of our infrastructure. With regardregards to our physical environment, we face several key security risks such as industrial and/or economic espionage, serious

and organized crime, and other illegal activities, as well as violent extremism and terrorism. We might be endangered by threats including, but not limited to, social engineering, misuse, or theft of information or assets, or damage to assets by trespassers in our facilities or by people who have

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gained unauthorized physical access to our facilities, systems, or information, whichinformation. These could have an adverse effect on our business, financial profile, profit, and cash flows.

Our insurance coverage might not be sufficient and we might be subject to uninsured losses may occur.losses.

We maintain insurance coverage to protect us against a broad range of risks, at levels we believe are appropriate and consistent with current industry practice. Our objective is to exclude or minimize risk of financial loss at reasonable cost. However, we may incur losses that aremay be beyond the limits, or outside the scope, of coverage of our insurance and that may limit or prevent indemnification under our insurance policies. In addition, we might not be able to maintain adequate insurance coverage on commercially reasonable terms in the future. Further, certain categories of risks are currently not insurable at reasonable cost, which could have an adverse effect on our business, financial position, profit, and cash flows. Finally, there can be no assurance of the financial ability of the insurance companies to meet their claim payment obligations.

We could incur significant losses in connection with venture capital investments.

Through Sapphire Ventures (formerly SAP Ventures), our partnership with SAP Ventures,consolidated venture investment funds, we plan to continue investing in new and promising technology businesses. Many such investments initially generate net losses and require additional expenditures from their investors. Changes to planned business operations have, in the past affected, and may in the future affect, the performance of companies in which SAPSapphire Ventures holds investments, and that could have an adverse effect on the value of our investments in SAPSapphire Ventures, which could have an adverse effect on our business, financial position, profit, and cash flows. Furthermore, tax deductibility of capital losses and impairment in connection with equity securities are often restricted and could therefore have an adverse effect on our effective tax rate.

ITEM 4. INFORMATION ABOUT SAP

Our legal corporate name is SAP AG.SE. SAP AGSE is translated in English to SAP Corporation.European Company (Societas Europaea, or “SE”). SAP AG, formerly known as SAP Aktiengesellschaft Systeme, Anwendungen, ProdukteSE is organized in der Datenverarbeitung, was incorporated under the laws of the Federal Republic of Germany in 1972.under German and European law, see “Item 10. Additional Information.” Where the context requires in the discussion

below, SAP AGSE also refers to our predecessors,predecessor or previous legal forms and names, as

the case may be, i.e. Systemanalyse und Programmentwicklung GbR (1972-1976) and, SAP Systeme, Anwendungen, Produkte in der Datenverarbeitung GmbH (1976-1988). SAP AG became a stock corporation (Aktiengesellschaft), “SAP Aktiengesellschaft Systeme, Anwendungen, Produkte in 1988.der Datenverarbeitung” (1988-2005) and “SAP AG” (2005-2014). Our principal executive offices, headquarters and registered office are located at Dietmar-Hopp-Allee 16, 69190 Walldorf, Germany. Our telephone number is +49-6227-7-47474.

As part of our activities to reduce the number of legal entities in the SAP group, in 20132015 we integrated certain subsidiaries into the following significant SAP subsidiaries: SAP (UK) Limited, SAP France S.A., SAP America Inc., SAP CanadaSuccessFactors, Inc., SAP Deutschland AG &Japan Co. KG,Ltd., SAP France,Australia Pty Limited and SAP Nederland B.V., and SAP JAPAN Co., Ltd.

For (i) a (i) description of our principal capital expenditures and divestitures and the amount invested (including interests in other companies) since January 1, 20112013 until the date of this report and (ii) information concerning our principal capital expenditures and divestitures currently in progress, including the distribution of these investments geographically and the method of financing, see “Item 4. Information About SAP – Description of Property – Capital Expenditures.”

VISION, MISSION, AND STRATEGYOVERVIEW OF THE SAP GROUP

SAP’sFounded in 1972, SAP today is the global leader in business application and analytics software in terms of market share and the market leader in digital commerce. Further, SAP is the enterprise cloud company with the greatest number of users and the fastest-growing major database company. Our continued growth over more than four decades is attributable to our focus onrelentless innovation, a broaddiverse portfolio, and our ability to stay closeanticipate everchanging customer requirements, and a broad ecosystem of partners. With approximately 300,000 customers in over 180 countries, the SAP Group includes subsidiaries in all major countries and employs approximately 77,000 people.

SAP is headquartered in Walldorf, Germany; our legal corporate name is SAP SE. Our ordinary shares are listed on the Frankfurt Stock Exchange, the Berlin Stock Exchange and the Stuttgart Stock Exchange. The principal trading market for the ordinary shares is Xetra, the electronic dealing platform of Deutsche Börse AG. American Depositary Receipts (ADRs) representing SAP SE ordinary shares are listed on the New York Stock Exchange (NYSE), and currently each ADR represents one ordinary share. As at December 31, 2015, our market capitalization was90.1 billion on the DAX and US$97.2 billion on the NYSE. SAP is a member of Germany’s DAX, the Dow Jones EURO STOXX 50, and the Dow Jones Sustainability Index.

Our company culture puts our customers’ success at the center of everything we do. With our vision to help the world run better and improve people’s lives, and with Run Simple as our operating principle, we focus on helping our customers master complexity, and innovate and transform to become a sustainable digital business.

We derive our revenue from fees charged to our customers for the use of our cloud solutions, for licensing of on-premise software products and understand their ever-changing needs.solutions, and transaction fees for activity on our business networks. Additional sources of revenue are support, professional services, development, training, and other services.

As at December 31, 2015, SAP SE directly or indirectly controlled a worldwide group of 255 subsidiaries in more than 180 countries to distribute our products, solutions, and services. Distributorship agreements are in place with independent resellers in many countries.

Our subsidiaries perform tasks such as sales and marketing, consulting, research and development, cloud delivery, customer support, training, or administration. For a list of subsidiaries, associates, and other equity investments, see the Notes to the Consolidated Financial Statements section, Note (33).

The following table illustrates our most significant subsidiaries based on total revenues as of December 31, 2015. All subsidiaries are wholly owned by SAP SE.

Name of SubsidiaryCountry of Incorporation

Germany

SAP Deutschland SE & Co. KG, Walldorf

Germany

Rest of EMEA

SAP (UK) Limited, Feltham

Great Britain

SAP (Schweiz) AG, Biel

Switzerland

SAP France, Levallois Perret

France

SAP Nederland B.V., ‘s-Hertogenbosch

The Netherlands
SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A., VimercateItaly

United States

SAP America, Inc., Newtown Square

USA

SAP Industries, Inc., Newtown Square

USA

SuccessFactors, Inc., South San Francisco

USA

Ariba, Inc., Palo Alto

USA

Concur Technologies, Inc., Bellevue

USA

Rest of Americas

SAP Brasil Ltda, São Paulo

Brazil

Japan

SAP Japan Co., Ltd., Tokyo

Japan

Rest of APJ

SAP Australia Pty Ltd., Sydney

Australia

SAP (Beijing) Software System Co. Ltd., Beijing

China

STRATEGY AND BUSINESS MODEL

Our Vision and MissionHelping our Customers Reimagine their Businesses

SAP’sThe world is experiencing unprecedented change that is transforming both our use of technology and society more broadly. People are connected in ways like never before. Entire industries have been disrupted by innovations that have brought the once unimaginable within reach. Technology trends such as hyperconnectivity, cloud computing, and Big Data go hand-in-hand with social and business trends that are changing how we live and work. Rapid urbanization, the sharing economy, enormous demographic change, and resource scarcity are demanding that leaders of tomorrow adapt to a world in which the pace of change continues to accelerate.

To remain competitive – and create a sustainable competitive advantage – businesses today must become

sustainable digital businesses. In fact, experts across industries know that in the new digital economy, only the most adaptive businesses will prevail. SAP provides what is needed to become a digital business. Our enduring vision is to help the world run better and improve people’s lives. Our missionvision is to help every customernot just relevant in this time of change and disruption – it is essential.

Complexity has become a best-run business. problem of staggering proportions and stands in the way of digital transformation and innovation. It is what keeps companies from turning the trends of our time – from the explosion of data to a rapidly growing middle class – into business opportunities. Becoming a digital business means that companies must first cut through this complexity, as simplicity is a prerequisite for innovation. Companies must make their digital strategy a core part of their business strategy.

LOGO

We enable organizations to tackle complexity by unlocking their ability to Run Simple. This principle guides everything we do this by delivering technology innovations that address the challenges of today and tomorrow without disruptingpowers our customers’ business operations. For example,transformation into digital businesses. We offer what is required to support this transformation – our deep experience as a leader in enterprise mobilitysoftware for more than 40 years; our solutions and services; and our global reach, which includes a base of approximately 300,000 customers across 25 distinct industries; and an ecosystem of thousands of partners.

Our digital approach is transforming usagebuilt on two critical elements – our SAP Cloud portfolio and the SAP HANA platform. And our strategy to become THE cloud company powered by SAP HANA refers not just to our own transformation but that of IT; in-memory technology is simplifyingour customers – and their customers.

SAP Cloud powered by SAP HANA simplifies consumption and the user experience, while SAP HANA simplifies the IT architecturelandscape. SAP HANA enables business processes and analytics to run on the same platform, something that was simply not conceivable even five years ago.

With the release of SAP S/4HANA in 2015, our next-generation business suite, we have brought a new level of performance and simplicity to core business processes. And SAP HANA Cloud Platform is facilitating the enterprisedevelopment of a much broader and driving high-value applications;richer landscape of applications to support our customers’ needs.

With these capabilities, SAP partners with companies on every aspect of their digital transformation, helping them run better and cloud delivery of IT solutions is simplifying the consumption of technology. We offer solutions that drive business outcomes and enableimproving people’s lives. As they become digital businesses, our customers are becoming more sustainable organizations by improving how they serve their customers, engaging and developing their workforce, increasing transparency of their suppliers’

social performance, using resources more efficiently, and interacting with local communities. Our global business networks expand the world that our customers operate in, connecting them with a vast ecosystem of partners that creates more efficient, powerful, and simpler ways of managing such key functions as procurement, travel, and workforce management.

Furthermore, we connect all of these realms to run better. Wecore business processes, such as finance and logistics, for a seamless and simplified customer experience. And we provide deep industry expertise to help our customers derivedesign an IT strategy that best supports their business strategy. While each of these capabilities would bring value fromon its own, together they set us apart – we are unique in our ability to guide customers on all essential elements of their digital transformation, enabling them to reimagine their business and then realize their vision for the future.

SAP has big ambitions. We measure our success across both financial and non-financial indicators: revenue growth, profitability, customer loyalty, and employee engagement. And we are creating value for our customers by helping them to navigate a changed world so that they can find business opportunities across social, environmental, and economic dimensions.

With our broad portfolio of solutions, we are convinced that we can position our customers for greater success in the digital world. SAP can help our customers better serve their customers with the sophisticated experiences they have come to expect; reach new markets as the world’s cities expand; find new customers as millions of people join the modern economy; and innovate in the face of resource scarcity and ever changing technologies. Most of all, we can help them understand and capitalize on the ways that technology and societal trends intersect, so that – along with SAP – they can not only become better organizations, but also help create a better world.

Creating Societal Impact by Enabling our Customers to Innovate

As a software company that serves many of the world’s leading organizations, we have enormous opportunity to impact people and society by helping our customers innovate, run more efficiently, improve their IT security, and offer new products and services. For example, when major manufacturers gain greater transparency into their energy usage and create more efficient supply chains, they create a more positive impact on society while minimizing impact on environment. When banks offer mobile banking services to people who lack opportunities, they address inequality and promote economic growth. When healthcare companies utilize data in new and faster ways, they help patients gain access to potentially life-saving treatments.

In addition, at SAP and within our ecosystem, we support job creation and economic prosperity through demand for highly qualified workers to develop, sell, implement, and enhance our software for our customers. As our customers grow their own businesses, they also create opportunities for others through new products and services as well as economic growth.

At the heart of realizing these possibilities is our ability to help our customers cut through complexity and direct their resources to the work that matters most: new innovations that help the world run better and improve people’s lives. We work to create long-term value by addressing future needs as well as current ones, with the goal of helping to transform how people use software, conduct business, and live their lives.

To achieve our vision, SAP provides solutions and services to customers throughout the world based on our deep expertise in business processes across industries. As leader of the enterprise software market, we must continually adapt to new technology and business trends. For this reason, we rely on the people of SAP to drive our success – their intellectual and social capital provide us with key knowledge, expertise, and business relationships. Along with the financial capital of our investors, an engaged, highly skilled, and agile workforce is at the core of our business model.

Our organization must be as adaptable as our employees – and in recent years, we have made important shifts to our sales model to accommodate enormous changes in how companies use technology. In the past, our approach was focused on charging a one-time, upfront fee for a perpetual license to our software that is typically installed at the customer site. In addition, the customer usually concludes a support contract covering support, services, and software updates. As we have seen customer preferences evolve, we are increasingly delivering our solutions in the cloud through a cost-effectivesoftware-as-a-service (SaaS) model. Depending on the solution, the customer pays either usage-based or periodic fees to use our software, which is hosted in the cloud, and predictable way,accesses it over the Internet. Further, we receive transaction fees from business conducted over our business networks.

Despite these shifts, we still rely on the strengths of our direct sales organizations to drive most business development. As a global company, we set our sales go-to-market strategies at the global level, with our professional services,regional subsidiaries then adapting and executing them. Our customer-facing employees, in close collaboration with sales support and cloud delivery.marketing, drive demand, build pipeline, and enhance relationships with customers. Our marketing efforts cover large enterprises as well as small and midsize enterprises, with our broad portfolio of

solutions and services addressing the needs of customers of all sizes across industries. Additionale-commerce and digitally native offerings further enable a low-touch or no-touch customer journey.

26Our business model aligns with and supports our business strategy and puts us in a strong position to drive future growth. By helping organizations transform into digital businesses, we see enormous potential to increase our share of their overall IT spend while providing them with greater value. As our technology unlocks simplicity for our customers, they, in turn, bring new advances to their customers in areas that directly impact people’s lives.


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Our Goals for Sustained Business Success

SAP hasWe have strong ambitions for sustainable business success, both for our company and for our customers. We believe the most important indicators to measure this success comprise both financial and non-financial indicators: revenue, margin,growth, profitability, customer loyalty, and employee engagement.

Revenue

Growth: SAP uses various revenue metrics to measure growth. We aimexpect full-year 2016 non-IFRS cloud subscriptions and support revenue to achievebe in a range of2.95 billion to3.05 billion at least €22 billion total revenue by 2017. SAP still aims to achieve at least €20 billion total revenue by 2015 (2013: €16.9 billion non-IFRS total revenue)constant currencies (2015:2.30 billion). An important part to achieving this is our continued focus on innovations, asFurther, we expect to become thefull-year 2016 non-IFRS cloud company with €3.0 to €3.5 billion totaland software revenue from our cloud business by 2017. In 2014, we expect to increase non-IFRS software and software-related services (SSRS) growth by 6% andto 8% at constant currencies.currencies (2015:17.23 billion). Looking beyond 2016, we have raised our 2017 ambition to reflect the current currency exchange rate environment and excellent business momentum. Assuming a stable exchange rate environment going forward, SAP now expects non-IFRS cloud subscriptions and support revenue in a range of3.8 billion to4.0 billion in 2017. By 2017, SAP continues to expect its rapidly growing cloud subscriptions and support revenue to be close to software license revenue and is expected to exceed software license revenue in 2018. Non-IFRS total revenue is expected to reach23.0 billion to23.5 billion in 2017. Our high-level 2020 ambitions remain unchanged, with 2020 non-IFRS cloud subscriptions and support revenue expected to reach7.5 billion to8.0 billion and total revenue is expected to be in a range of26 billion to28 billion.

Margin

We aim for 35% non-IFRS operating margin (2013: 32.6%). In order to capture growth opportunities in the cloud, we expect to reach this goal in 2017 instead of 2015, as previously stated. In 2014, we expect between €5.8 billion to €6.0 billionProfitability: SAP expects full-year 2016 non-IFRS operating profit to be in a range of6.4 billion to6.7 billion at constant currencies.

currencies (2015:Customer Loyalty6.35 billion). We expect non-IFRS operating profit to be in a range of6.7 billion to7.0 billion in 2017 and to be in a range of8.0 billion to9.0 billion in 2020.

We useCustomer loyalty: SAP uses the Customer Net Promoter Score (NPS) as a key performance indicator (KPI) to measure customer loyalty. In 2014, we are aiming for an increaseWe aim to

achieve a Customer NPS score of 25% in NPS by four percentage points (2013: 12.1%2016 (2015: 22.4%). Due to changes in sampling, resulting from ongoing efforts to implement the survey process holistically in recently acquired entities, the 2015 score is not fully comparable with the prior year score.

Employee Engagement

engagement: We use the employee engagement index to measure motivation and loyalty of our employees, how proud they are of our company, and how strongly they identify with SAP. We areremain committed to achieving a score of 82% in 2015 (2013: 77%). Despite the slight drop in employee engagement in 2013 compared to 2012, we expect to see an incremental increase in our industry-leading score in 2014.2016 (2015: 81%).

These four goalscorporate objectives affirm our commitment to innovation and sustainability, and will help us deliver on our vision and mission.vision.

In addition to the primary KPIs, which directly measure our performance with regard toon our four company objectives, SAP managesgoals, we manage a large setnumber of secondary performance indicators, which influence the primary KPIs in a variety of ways. Our integrated report seeks to clarify some of those relationships, for example the link between our energy consumption and our margin.

Our main indicatorsobjectives are presented with more detail throughout the report. For more information on our strategic goals, see the InternalPerformance Management System; Report onSystem section; Expected Developments; Customers;Developments section; Customers section; and Employees section.

Our Strategy: Simplify Everything with SAP Cloud powered by SAP HANASEASONALITY

Organizations aroundOur business has historically experienced the world are now entering a new erahighest revenue in the fourth quarter of business model innovation, made possibleeach year, due primarily to year-end capital purchases by customers. Such factors have resulted in 2015, 2014, and 2013 first quarter revenue being lower than revenue in the convergence of cloud, mobile, social, and in-memory technologies.

However, businesses often contend with layers of IT complexity that have been built up over the decades. This complexity is the result of several factors, including the proliferation of hardware and custom applications. In addition, investments in innovations often take a long time to implement or to realize business value. Due to the complexity of the current consumption model, customers are not able to respond fast enough to changing market conditions.prior year’s fourth quarter. We believe that simplicity isthis trend will continue in the key: By solving the challenge of business complexity, we can help unlockfuture and that our customers’ innovation potential. We are committed to leading this simplification.

In today’s technology industry, the biggest winners have grown by offering simplicity and ease of consumption over a cloud model, which has translated to massive user adoption and market success.

In 2014, SAP will focus on helping its customers “simplify everything, so they can do anything.”

With the SAP HANA platform, we have an opportunity to simplify our product portfolio and IT landscape for our customers. SAP HANA can

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radically simplify enterprise applications as it collapses the entire IT stack. With SAP HANA cloud platform, we have the ability to take our core on-premise applications to the cloud and offer a choice of cloud deployments to our customers.

With SAP Cloud powered by SAP HANA, we will focus our simplification on three areas – simplifying our consumption model, simplifying our portfolio, and simplifying user experience.

Simplify software consumption by moving our entire portfolio to the cloud:    We are transitioning our consumption model to SAP Cloud powered by SAP HANA where we can deliver end-to-end solutions and drive business outcomes for the customers. We will offer our entire portfolio of solutions – applications, analytics, and platform through SAP Cloud powered by SAP HANA. We will move our core SAP Business Suite software to the cloud as a managed service, delivered by both SAP and our partners. We will also accelerate our investments in line-of-business public cloud solutions across SuccessFactors, Ariba, and our cloud portfolio, all running on SAP HANA. We will deliver a true, integrated cloud to our customers. As we are committed to offering flexibility and choice, we will continue to offer an on-premise deployment model to our customers.

Simplify our products with SAP HANA as thecommon platform:    We will standardize every SAP product (including SuccessFactors and Ariba) on the common SAP HANA platform, and deliver integration across our portfolio. This will drive a simplified suite experience for our customers and partners. Our partners and ecosystem can either extend our solutions or build end-to-end applications based on the SAP HANA platform.

Simplify the user experience:    We will simplify the user experience (UX) by offering a “mobile first” approach based on SAP Fiori applications, which offer a simple and easy-to-use experience for broadly used SAP software functions that work seamlessly across devices. We will build applications that show empathy with the user and dramatically improve the experience of our customer’s customers and our customers’ employees.

In addition to simplifying our business model, we will focus on end-to-end delivery of

industry-specific solutions that can drive business value and outcomes. Wetotal revenue will continue to build an open ecosystem and our partner network to deliver SAP Cloud powered by SAP HANA on their cloud infrastructure. Our ecosystem will play a vital rolepeak in building new solutions on the SAP HANA platform and delivering value to our customers.

With our focus on simplification, we aim to better innovate and grow.

Today SAP only receives a small percentagefourth quarter of each customer’s overall IT spend. By investingyear and decline from that level in innovationsthe first quarter of the following year. Unlike our on-premise software revenues, our on-premise support revenues and shiftingcloud subscriptions and support revenues are less subject to seasonality.

PRODUCTS, RESEARCH & DEVELOPMENT, AND SERVICES

Unlocking the Potential of Digital Transformation

For leading companies, the question is no longer whether they need to become a digital business, but how. The role of software has moved beyond enabling the realization of business strategy to becoming an intrinsic part of that strategy. In an increasingly complex landscape – with the amount of stored data doubling every 18 months – speed, innovation, and agility are the new differentiators. It is not just about doing yesterday’s work faster. Companies in every industry must take a unified approach to managing every aspect of their business, and they need solutions whose innovation matches their own ambitions to grow and win in the market.

In 2015, we unveiled one of the most important products in our history: SAP S/4HANA, our next-generation business suite, designed to provide the digital core our customers need to run their entire business in the new digital world. We expect SAP S/4HANA to drive our business for years to come, enabling companies to integrate their core business processes with running their key operations, from their supply chain to their workforce. With SAP S/4HANA, we provide companies a cloudfull business model, we will be ableplatform to helpreimagine their businesses and achieve the creation of their own next-generation products and services so critical in the digital economy.

SAP S/4HANA creates unique opportunities to simplify the IT landscape, helps reduce their total cost of ownership (TCO) on IT. This enableswith SAP HANA, and provides a simple and role-based user experience. Enterprises can now reduce their data footprint and work with larger data sets in one system to save hardware costs, operational costs, and time as well as reduce complexity.

After launching in February 2015, over 2,700 customers to reinvesthave chosen SAP S/4HANA, with approximately 100 customers live at the TCO savings in new innovationsend of 2015.

Driving Simplicity and Innovation through SAP HANA and SAP could capture a higher share of customer IT spend.HANA Cloud Platform

Additionally, SAP will drive innovation and top-line growth across the following dimensions:

Drive the Big Data agenda for our customers with our real-time in-memory SAP HANA platform and predictive analytics solutions

Establish SAP HANA as a standard enterprise business platform and monetize through partners and ecosystem

Focus on the customer’s customer by extending to business-to-business-to-consumer (B2B2C) through our portfolio of omnichannel and CRM solutions

Drive accelerated growth in selected industries such as banking, insurance, retail, public sector, and healthcare

Emerging markets will continue to be a growth driver, with high double-digit growth in software and cloud revenues expected through 2017. In addition to our investments in China, Russia, and the Middle East, we are expanding our investments in Africa.

We will stay committed to our customers’ success and evolve our execution to drive further value creation for our customers. We strive to provide our customers a significant competitive advantage and to help make their growth more sustainable – financially, ecologically, and socially.

For more information about SAP’s goals, see the Report on Expected Developments section.

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OVERVIEW OF THE SAP GROUP

Founded in 1972, SAP today is the world leader in enterprise applications in terms of software and software-related service revenue, and the world’s third-largest independent software manufacturer based on market capitalization. Our continued growth over four decades is attributable to relentless innovation, a diverse portfolio, and our ability to anticipate ever-changing customer requirements. With more than 253,500 customers in over 180 countries, the SAP Group includes subsidiaries in major countries and employs more than 66,500 people.

Our company’s culture puts our customers’ successremains at the center of everything we do,our strategy to help our customers transform their businesses. The SAP HANA platform combines database, data processing, integration, and is driven by our passions – which are:

Success – We measure our success by our customers’ success.

Accountability – We embrace accountability and strive to always make good on our promises.

Professionalism – We exhibit professionalism by consistently delivering quality work.

Integrity – We are honest and fair and take responsibility for all our actions.

Teamwork – We value teamwork because it enables us to exceed our individual limits and share greater success.

Trust – We work for each other’s success and take personal responsibility for all of our relationships.

For more information about our business conduct, see the Business Conduct section of the SAP Integrated Report 2013 online.

SAP is headquartered in Walldorf, Germany; our legal corporate name is SAP AG. The corporation

is listedapplication platform capabilities in-memory. By providing advanced capabilities such as predictive analytics on the Frankfurt Stock Exchangesame architecture, it further simplifies application development and processing across Big Data sources and structures.

The SAP HANA Vora engine adds a new dimension to these capabilities, allowing our customers to combine their business data with Big Data managed on Hadoop compute clusters. It simplifies ownership of Big Data and supports faster, interactive, and more precise decision making.

In addition to expanding our own portfolio, we are enabling others to develop a much broader landscape of applications through SAP HANA Cloud Platform, our strategic platform-as-a-service offering. Providing both ease and flexibility, this cloud platform allows our customers and partners to build, extend, run, and sell applications and services in the cloud. It includes infrastructure, data, and storage, as well as stock exchanges in Berlina toolbox of platform and Stuttgart in Germanyapplication extension services. SAP HANA Cloud Platform also enables connectivity between SAP solutions, including on-premise software such as SAP Business Suite as well as software-as-a-service offerings such as SAP SuccessFactors solutions.

Building on our experience, we are developing a suite of SAP solutions for the Internet of Things (IoT). The functionalities of our SAP HANA Cloud Platform IoT services help accelerate development and deployment, as well as improve the New York Stock Exchangeability to manage real-time IoT and machine-to-machine applications. To support the development of these new innovations, we continue to leverage our customer co-innovation framework, which helps us address the evolving digitization needs of our customers.

The road to becoming a digital business is unique to every organization. Our portfolio supports our customers wherever they are on their journey. We want to offer the broadest integration in the United States.industry, with customers seamlessly connecting SAP and third-party software across a range of environments to reduce IT complexity. At the endsame time, our user experience provides both elegance and ease-of-use across multiple devices and interfaces. Customers also have the benefits of 2013,efficiency and flexibility through a variety of deployment models.

Launching SAP S/4HANA

SAP S/4HANA represents a huge step forward in simplifying how applications are built, consumed, and deployed. It provides real-time, mission-critical industry-specific business processes across organizations and lines of business. As a basis, enterprises can now support end-to-end operations across key business functions through a fully digitized enterprise management solution named SAP S/4HANA Enterprise Management.

A prime example of our market capitalization was €76.5 billion.innovations is SAP isS/4HANA Finance, a membercomprehensive solution for the office of the German DAXCFO. This solution brings enhanced functionality to a range of key areas – from financial planning and of the Dow Jones EURO STOXX 50 index.

We derive our revenue from fees chargedanalysis to collaborative finance operations. It also provides our customers for licensing of on-premise software products and solutions, and the use of our cloud solutions by subscription. We also derive revenue from support, consulting, development, training, and other services.

SAP markets and distributes our products, solutions, and services primarily through a worldwide network of local subsidiaries, which are licensed to distribute SAP offerings to customers in defined territories. Distributorship agreements are in place with independent resellers in some countries. For more information, see the Business Model section.

As of December 31, 2013, SAP AG controlled directly or indirectly 272 subsidiaries. Our subsidiaries perform various tasks such as sales and marketing, consulting, research and development, customer support, training, or administration. For a complete list of subsidiaries, associates, and other equity investments, see the Notes to the Consolidated Financial Statements section, Note (33).

For management reporting, our activities are broken down into two divisions, On-Premise and Cloud, which are further divided into operating segments. Our On-Premise division is composed of two operating segments, On-Premise Products and On-Premise Services. Our Cloud division is also composed of two operating segments, Cloud Applications and Ariba. For more information about our segments, see the Notes to the Consolidated Financial Statements section, Note (28).

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The following table illustrates our most significant subsidiaries based on total revenues as of December 31, 2013:

Name of Subsidiary

Ownership
%
Country of
Incorporation

Function

Germany

SAP Deutschland AG & Co. KG, Walldorf

100

Germany

Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

Rest of EMEA

SAP (UK) Limited, Feltham

100Great BritainSales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

SAP (Schweiz) AG, Biel

100SwitzerlandSales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

SAP France, Paris

100FranceSales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

SAP Nederland B.V.,

s-Hertogenbosch

100

The
Netherlands

Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

Limited Liability Company SAP CIS, Moscow

100

Russia

Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

United States

SAP America, Inc., Newtown Square

100USASales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

SAP Industries, Inc., Newtown Square

100USASales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

Rest of Americas

SAP Brasil Ltda, São Paulo

100BrazilSales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

SAP Canada Inc., Toronto

100CanadaSales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

Japan

SAP JAPAN Co., Ltd., Tokyo

100JapanSales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

Rest of APJ

SAP Australia Pty Limited, Sydney

100AustraliaSales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration

PORTFOLIO OF PRODUCTS, SOLUTIONS, AND SERVICES

Our Focus on Customers and Innovation

SAP’s portfolio of products, solutions, services, and support is designedseamless flexibility, with customer centricity

in mind. Our solutions help customers address the major trends and issues of our time – such as the unprecedented power of people to connect, the ubiquity of mobile technology, the pressures of population growth and rapid urbanization, and the increasing demand on natural resources. Our software enables companies of all sizes to better connect to their customers and suppliers, and to measure, track, and manage their sustainable

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operations. Our solutions also address our customers’ expectations for shorter innovation cycles, an attractive total cost of ownership (TCO), a superior user experience, and choice of consumption options – whetherdeployment either on premise or in the cloud.

SAP’s portfolio offersBeyond SAP S/4HANA Finance, the on-premise edition of SAP S/4HANA drives business value in other areas such as materials management as well as sales and distribution, among others, taking full advantage of a simplified data model and a responsive user experience.

Innovating for Industries and Lines of Business

As the market leader in enterprise application software, we offer end-to-end solutions specific to customers of all sizes and across 25 industries all around the globe. The platform for all our solutions is called SAP HANA. SAP was the first company to introduce an in-memory database not only for analytics, but also for running complete enterprise applications in main memory. SAP HANA is an in-memory data platform that is deployable as an on-premise appliance or in the cloud. It is a revolutionary platform best suited for performing real-time analytics, and developing and deploying real-time applications. Due to its hybrid structure for processing transactional workloads and analytical workloads fully in-memory, SAP HANA combines the best of both worlds. It also offers a unique opportunity for business innovation, simplifying IT landscapes, reducing TCO, and boosting performance by a wide margin. All of our products will be enabled to run on the SAP HANA platform, and we continue to make SAP HANA a key differentiator in both technology and business applications across our entire portfolio.

Solutions

SAP has built a deep expertise in more than 40 years of delivering market-leading software to distinct industries and lines of business. Our end-to-end solutions for industries and12 lines of business, combine assets across our product, service, technology,localized by country and market categories to solve specific customer challenges.

Solutions for Linescompanies of Business

Our line-of-business solutions are relevant across all industries, providing best-practice capabilities to key functional areas within an organization. As a result, they enable professionals to excel within their respective disciplines. Our portfolio of solutions currently covers 12 lines of business:

Asset management

Corporate strategy and sustainability

Finance

Human resources

Information technology

Manufacturing

Marketing

Procurement

R&D and engineering

Sales

Service

Supply chain management

We deliver these solutions on premise or through the cloud as software-as-a-service (SaaS) offerings:

SAP Cloud for Human Resources:    Together with existing HR cloud solutions from SAP, SuccessFactors, an SAP company, offers a full suite of cloud solutions that help companies improve workforce productivity and engage, train, motivate, and retain their people.

SAP Cloud for Finance:    Cloud solutions that support key financial processes including travel and expense reporting.

SAP Cloud for Sales, SAP Cloud for Service, SAP Cloud for Marketing:    These individual cloud portfolios offer applications that manage all aspects of customer interaction – marketing, sales, service – while employing next-generation social capabilities.

SAP Cloud for Procurement:    The portfolio from Ariba, an SAP company, combines the world’s largest cloud-based business network with cloud-based applications for buying, selling, and managing cash used by companies around the globe to connect to their trading partners.

Cloud Suites:    SAP offers SAP Business Suite powered by SAP HANA in the cloud. In addition, SAP Business ByDesign and SAP Business One Cloud provide two cloud suites for subsidiaries and small businesses.

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Solutions for Industries

For decades, SAP has developed deep expertise within specific industry groups. Our product development teams include professionals from within those industries, and we continually engageany size.

with customers to develop solutions that represent industry best practices. With the 2013 addition of the SAP for Sports & Entertainment industry portfolio, SAP now supports enterprises in 25 industries.Industries

 

Industry Sector

 

Industry Portfolio

Consumer

 SAP for Consumer Products
 SAP for Life Sciences
 SAP for Retail
 SAP for Wholesale Distribution

Discrete manufacturing

 SAP for Aerospace & Defense
 SAP for Automotive
 SAP for High Tech
 SAP for Industrial Machinery & Components

Energy and natural resources

 SAP for Chemicals
 SAP for Mill Products
 SAP for Mining
 SAP for Oil & Gas
 SAP for Utilities

Financial services

 SAP for Banking
 SAP for Insurance

Public services

 SAP for Defense & Security
 SAP for Healthcare
 SAP for Higher Education & Research
 SAP for Public Sector

Services

 SAP for Engineering, Construction & Operations
 SAP for Media
 SAP for Professional Services
 SAP for Sports & Entertainment
 SAP for Telecommunications
 SAP for TransportationTravel & LogisticsTransportation

Solutions for Small Businesses and Midsize Companies

SAP offers a numberLines of targeted solutions for small businesses and midsize companies, including the SAP Business All-in-One solution, the SAP Business One application, and Edge solutions, which combine business management and business intelligence software. These solutions are targeted and optimized for small businesses and midsize companies, and provide growing

enterprises with the capabilities they need to compete in a global market.

SAP also offers affordable, scalable solutions in the cloud, such as SAP Business ByDesign and SuccessFactors HCM Suite. These solutions are relevant for companies of all sizes, including small and midsize enterprises. Additionally, we offer SAP Business One Cloud to small businesses and midsize companies. SAP Business One Cloud is a comprehensive and easy-to-consume cloud offering with predictable costs.

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Products

In 2013, SAP offered innovative products in five market categories: Applications, Analytics, Mobile, Database and Technology, and Cloud, all powered by the SAP HANA platform.

We will continue to offer products in these market categories, along with innovations designed to meet customer needs now and in the future. As described in the Vision, Mission, and Strategy section of this management report, our strategy will focus even more on how our products deliver simplicity, better business outcomes, and sustainable business value.

In 2013, our product portfolio comprised the following:

Applications

SAP is the recognized leader in enterprise applications. Based on our leading technology and our unmatched business process know-how, we deliver innovations without disruptions.

SAP Business Suite software helps create a comprehensive business process platform for companies to run better and perform better every day.

The main applications in SAP Business Suite are:

 

SAP Customer RelationshipAsset Management (SAP CRM):    Provides a comprehensive set of functionality for marketing, sales, and service to engage with customers.

 

SAP ERP:    Supports critical business processes such as finance, HR, and other essential corporate functions.Commerce

 

SAP Product Lifecycle Management (SAP PLM):Manages the product and asset lifecycle across the extended supply chain.Finance

 

SAP Supplier Relationship Management (SAP SRM):    Supports key procurement activities.Human Resources

 

SAP Manufacturing

Marketing

R&D/Engineering

Sales

Service

Sourcing and Procurement

Supply Chain Management (SAP SCM):    Helps adapt supply chain processes to a rapidly changing competitive landscape.

Sustainability

In addition, we are building other functional innovations that serve each line of business. For example:

Human capital management (HCM): Our HCM solutions, including SAP SuccessFactors solutions, help organizations increase the value of their total workforce by developing, managing, engaging, and empowering their people. These solutions address the full range of HR needs, from hiring the right people and managing contingent workers to simplifying the way people work. We focus on delivering a simple and intuitive user experience through mobile device or desktop.

Customer engagement and commerce (CEC): Our CEC solutions comprise SAP and SAP Hybris software that serve the commerce, marketing, sales, and service lines of business, enabling business-to-business and business-to-consumer companies to provide real-time, consistent, contextual, and relevant experiences to their customers. Regardless of channel or device, these solutions deliver personalized engagement based on context and proven industry expertise and therefore go beyond traditional customer relationship management, which no longer meets the needs of today’s consumer-driven market.

Providing users with Freedom, Flexibility, and Elegant Design

We believe digital transformation must include a focus on the user experience, as expectations by our customers – and their customers – have risen enormously in recent years. For many, mobile has become the technology of choice, providing simple, always-on access to information, processes, and services. To that end, key mobile services such as app creation and management, security, and extensibility are available as part of SAP HANA Cloud Platform, giving our customers simple access to the technologies that support new business models.

Providing an elegant, intuitive user experience, SAP Fiori has evolved since its introduction in 2013 into the new user experience (UX) for SAP software. It reflects a broader shift in software design that puts as much focus on how people actually use technology as on specific features and functions. SAP Fiori offers innovative new features such as improved contextual interaction and action-oriented personal notifications. The updated design delivers improvements while staying consistent with our original UX principles of being role-based, responsive, simple, coherent, and delightful.

We were awarded the prestigious Red Dot Award for the SAP Fiori UX design concept in the Interaction Category in September 2015.

Delivering Greater Value through the Power of Business SuiteNetworks

In today’s hyperconnected business landscape, how companies interact with the outside world is undergoing profound change. At SAP, we are helping to lead this transformation through our business networks, which are helping drive innovation in key areas that impact an organization’s core operations. Our business network strategy is to bring the world’s vast network of partners, suppliers, and services to best-in-class solutions that fulfill the needs of specific lines of business – all within a few clicks. Moving far beyond basic automation, our network solutions are enabling new processes and outcomes for customers. They are also available“poweredpart of a new wave of solutions that are more consumer-friendly and business-ready than in the past.

We recognize that business applications today must deliver an effortless user experience while ensuring that information and data flow back into the business and across networks in a secure way. These applications serve to maintain compliance while enabling choice. They are designed for a more digital, highly mobile, and interconnected world, and help drive greater value for employees, organizations, and the vast networks of partners and individuals they rely on.

Today, our business network portfolio includes SAP Ariba, Concur, and SAP Fieldglass solutions. Each is a leading provider of cloud applications, services, and cloud networks through open platforms that connect internal business processes to a global ecosystem of partners.

The Ariba Network is a leading marketplace used by approximately two million companies to discover, connect, and collaborate over US$740 billion in commerce every year. The network connects companies across the full commerce process – from sourcing through payment settlement. It also provides insights and technology to help companies improve their operations – and to connect and collaborate in new ways that are only possible in a networked environment.

Concur Travel & Expense is the world’s leading travel and expense management system, with more than 32 million users. The Concur system goes beyond the basic automation of expense reports and provides visibility and insights that support better decision making for employee travel and spend, helping businesses to focus on what matters most.

SAP HANA”Fieldglass solutions simplify the process of procuring and managing external workforce services. They provide visibility into service providers and non-employee workers and help improve compliance and cost control. As a centralized, single point of access to engage with more than 1.9 million external workers in approximately 130 countries, SAP Fieldglass solutions connect consultancies, staffing firms, independent contractors, and other service providers, so business users can procure services from anywhere in the world with just a few clicks. As an open platform, SAP Fieldglass also connects to financial, HR, payroll, and procurement systems.

Each of these three cloud network companies has made connecting to partners, suppliers, and services through an open platform a core part of their architecture and approach. Ultimately, we aim to go further, connecting all the world’s networks. We are working to create platforms for networks and services that will further transform the business landscape – with the purpose of creating new outcomes, services and experiences that make businesses run more simply and with greater opportunities for innovation.

Providing Real-Time, Advanced Analytics to Drive Better Decision Making

The speed of the digital economy demands that companies make informed decisions faster than ever before, as data can become obsolete in a matter of seconds. SAP HANA has vastly increased the efficiency with which our next-generation business suitecustomers can use analytics to drive decision making. With transactions and analytics combined into a single in-memory platform, our customers can access a “single source of truth” for real-time planning, execution, reporting, analysis, and predictive modeling on very large volumes of data.

In 2015, we further simplified our offering with the introduction of the SAP Cloud for Analytics solution, a software as a service that capturesaims to bring all analytics capabilities together for a richer user experience.

Based on SAP Cloud for Analytics, we also launched SAP Digital Boardroom, a multifaceted solution that offers executive decision makers new ease and analyzeselegance in accessing company data in real time, on a single in-memory platform. In the past, companies

would run separate disk-based systems; one to capture transactional data, and one to analyze data in a data warehouse. SAP Business Suite powered by SAP HANA allows customers to work with a single in-memory data management system, empowering customers to run their business in real time to transact, analyze, and predict instantly and proactively. This gives companies the ability to translate real-time insights into action immediately, while removingengage in what-if queries and create visualizations. Designed to provide far greater transparency to board members, executives, and other decision makers, fully automated business intelligence capabilities in the complexitysolution not only improve the quality and speed of redundant systemreporting, but also facilitate greater trust through more effective collaboration and decision making.

Whether in the cloud, on premise, or a combination of the two, our analytics solutions enable our customers to access immediate, actionable intelligence. Even as data and systems. Customers

volumes grow exponentially, companies can now manage mission-criticalsimplify their business processes such asand gain insights to better manage every aspect of their organization – from integrated planning execution, reporting,to risk and analysis, in real time using the same relevant live data. This simplification lowers TCO.compliance.

Analytics

OurAmong other features, key analytics offerings enable users to unleash the power of collective insight by helping them collect massive amounts of Big Data and use it to drive better business outcomes. The solutions enable users to unlock the data they need empowering them with the right information at the right time to make insightful business decisions, anticipate change, and uncover new opportunities. When using software powered by SAP HANA, companies can gain insight by overcoming the classic trade-off between the speed and flexibility of data analysis. As a result, data analysis becomes much faster and more cost-effective.

Analytic solutions from SAP include:

support:

 

Business intelligence (BI):    Helps usersTrusted data discovery and agile visualization to make fact-based decisions with enterprise business intelligence solutions that enable usersbring reliable data to engage with all their data, on any device, across any platform. Our BI solutions include the SAP BusinessObjects BI platform, SAP Crystal Reports, SAP BusinessObjects Dashboards, and SAP Lumira.life in real time through intuitive visualizations

 

Enterprise performance management (EPM):    Helps companies improve performance, organizational agility,Advanced analytics to combine the power of predictive processing with intuitive modeling and decision making. SAP solutions for EPM include SAP Business Planning and Consolidation, SAP Profitability and Cost Management, SAP Financial Consolidation, and SAP Disclosure Management applications.advanced data visualization

 

Governance, risk,Corporate performance management to set and compliance (GRC):    Provides organizations with a real-time approach to manage GRC across heterogeneous business environments. SAP solutions for GRC

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include the SAP Risk Management, SAP Access Control,track measurable performance objectives through planning, budgeting, forecasting, and SAP Global Trade Services applications as well as the SAP Sustainability Performance Management analytic application.

Predictive analytics:    Brings advanced analytics capabilities to a broad spectrum of users – beyond data scientists to line-of-business users and analysts in the workplace – to help uncover new business opportunities, predict trends, and proactively respond to change. This is made possible by automating key modeling and analytical tasks and enabling faster deployment and adoption of predictive analytics tools.financial consolidation tools

MobileResearch and Development

Today’sWith businesses demand mobile access to critical business information. Mobile solutions from SAP offer the foundation for enterprise mobilityshifting at an ever-accelerating pace towards digitalization and seamless integration with the core enterprise applications of our customers. SAP is recognized as a market leader in enterprise mobility.

Our portfolio of mobile solutions includes:

Enterprise mobility management:    In many organizations, employees use different types of mobile devices to access critical enterprise data, content, and applications. To address this demand, SAP offers the SAP Afaria mobile device management solution and the SAP Mobile Documents solution.

Mobile apps:    SAP has a variety of mobile apps that interface with our on-premise solutions and address line-of-business, industry, and consumer needs. In addition, SAP has opened our mobile development platform to our partner ecosystem to support the growing demand for mobile apps.

SAP Mobile Platform:    SAP Mobile Platform combines Sybase Unwired Platform, the former Sybase 365 Mobilizer Platform (for business-to-consumer applications), and Agentry from the acquired company Syclo into a single platform, thus supporting mobile development and deployment across the entire enterprise.

Database and Technology

Our database and technology portfolio provides a solid and comprehensive foundation for business applications. SAP HANA, our ground-breaking in-memory platform, has redefined innovation in the

database and technology market and has become the fastest-growing product in our history. We depend on our ecosystem to expand our reach, and accelerate growth and adoption of SAP database and technology products beyond our installed base customers.

In addition to SAP HANA, we offer a comprehensive family of database and technology solutions that includes:

Application development and integration:    SAP NetWeaver provides a comprehensive technology platform, designed to efficiently develop, run, and extend business applications. SAP NetWeaver provides technology and enterprise software, such as the SAP NetWeaver Business Warehouse (SAP NetWeaver BW) application, and the SAP NetWeaver Application Server, SAP NetWeaver Portal, and SAP NetWeaver Process Orchestration components.

Database:    We offer the technology to make up a real-time data platform, including SAP HANA, SAP IQ database software, SAP Adaptive Server Enterprise (SAP ASE), and the SAP SQL Anywhere suite.

Cloud

In a world where customers need to respond quickly to changing market conditions, the cloud, model offers an ideal combination of flexibility, affordability,leading our customers through change is more important than ever before. We do this every day by empowering our employees and rapid time to value. With SAP Cloud powered by SAP HANA, we are helping customers enjoy the innovation potential of a cloud-based setup. At the same time, we are simplifying our consumption model, our product portfolio, and our customers’ user experience.

Today, SAP offers one of the most comprehensive cloud portfolios on the market. With the decision to offer all our products in the cloud, the cloud category will evolve from a product category to a deployment option forcollaborating with our customers to simplify the consumption of our solutions. Our offerings span cloud applications, business networks, and cloud platforms. In addition, we offer our customers a choice of different cloud deployments to fit their business needs, such as public or private cloud models.

In 2013, SAP began offeringSAP Cloud powered by SAP HANA, which includes infrastructure, platform, and software as services in the cloud, incorporating the former SAP HANA Enterprise Cloud managed cloud services offering. It allows

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entire enterprise systems to be run in the cloud and provides customers with a new deployment option to gain immediate value from the innovations of SAP HANA. This enables the operation of mission-critical business applications as well as new applications powered by SAP HANA. In providing such services, we aim to enable organizations to realize faster time to value coupled with lower total cost of ownership, and benefit from increased flexibility and reliability.

In addition, SAP HANA Cloud Platform is a development platform-as-a-service (PaaS) designed to help customers, independent software vendors, and partners rapidly create innovative enterprise software applications in the cloud leveraging our leading in-memory technology.

SAP supports a hybrid model, allowing customers to integrate new cloud services with their on-premise applications. This gives customers the opportunity to consume new innovations using the cloud while safeguarding their investments in their existing application landscape.

Services and Support

SAP offers comprehensive services and support to help our customers maximize the value of their SAP investments by offering higher value realization, faster adoption of innovation, and higher efficiency in the implementation of our solutions. Our services and support portfolio covers the entire end-to-end application lifecycle, from a tight integration with our development organization, to accelerating innovation and continuous improvement of our software solutions, to complete risk and quality management.

Software-Related Services

Custom Development

The SAP Custom Development organization specializes in building individual software solutions that address the unique needs of our customers, and that fit seamlessly with existing SAP software. SAP Custom Development draws on our innovations, especially SAP HANA, to deliver unmatched impact and value for specific customer use cases.

Maintenance and Support

SAP offers a comprehensive and tiered maintenance and support model to customers of

our on-premise solutions on a global basis. This support offering primarily includes SAP Enterprise Support and SAP Standard Support offerings.

SAP Enterprise Support:    Our premier maintenance and support offering is designed as a strategic, long-term partnership with our customers.

SAP Standard Support:    Our basic support offering delivers functions, knowledge, and tools that help customers implement, maintain, and enhance their SAP solutions.

Our support portfolio also contains two additional premium maintenance offerings:

SAP MaxAttention:    These services provide the highest possible level of support for our customers. The combination of SAP MaxAttention and SAP Enterprise Support offers customers comprehensive all-round support. This strategic offering is designed for continuous business and co-innovation with customers. Through the SAP Active Global Support (SAP AGS) organization, SAP MaxAttention offers support services tailored to the requirements of the customer, expertise acquisition by the customer, and continuous cooperation at senior management level based on an agreed-to balanced scorecard.

SAP ActiveEmbedded:    These enhanced engagement services help optimize solutions and accelerate adoption of technologies without disrupting customer businesses.

For our cloud portfolio, support is included as part of our cloud subscriptions. Customers have the option of choosing standard, premium, and platinum support. In the premium and platinum offerings, customers have access to support offerings, such as access to a dedicated support account manager.

Professional Services

Consulting Services

We offer consulting services for the planning, implementation, and optimization phase of our business solutions. Our consultants engage in a wide range of services, including business transformation, IT transformation, performance and insight optimization, and business applications services. These services help customers optimize business performance and leverage the full power of SAP solutions.

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SAP consultants also implementSAP Rapid Deployment solutions, which combine preconfigureddevelop world-class software and predefined services, such asnext-generation solutions. SAP Best Practices, templates, tools, and user guides. By doing so, they help companies adopt innovations more quickly and at transparent cost.

Education Services

The SAP Education organization offers a complete portfolio of multimodal learning that covers the learning needs of single individuals, as well as organizations. We provide a consistent curriculum for learners around the world, including online e-learning, virtual live classroom sessions, learning on demand, and classroom training. Our educational programs help people become more proficient, efficient, and productive in their use of SAP solutions. Every year, more than 500,000 individuals are trained by SAP Education, making it one of the largest IT training organizations in the world.

For more information about services and support from SAP, see www.sap.com/services-support/svc.html. For more information about how SAP handles security and privacy infurther strengthened our products and services, see the Security and Privacy section of the SAP Integrated Report 2013 online. For more information about SAP products and solutions, see www.sap.com/pc/index.html.

BUSINESS MODEL

Creating economic, social, and environmental value over the long-term is central to our vision of helping the world run better and improving people’s lives. To realize our vision, SAP provides software and services to customers throughout the world, all based on our deep expertise in business processes spanning 25 industries.

To provide software and related services to our customers, we rely on financial capital provided by investors. We leverage our intellectual capital to continually increase our knowledge base and expertise. Engaged, highly skilled, and agile employees are central to innovating with and building relationships with our customers and partners, and ultimately to our business success.

Our direct sales organizations drive most business development. Sales go-to-market strategies are established at the global level, and adapted and executed by the regional subsidiaries. Our customer-facing employees, in close collaboration with sales support and marketing, drive demand, build pipeline, and enhance relationships with customers within our target industries. Our

marketing efforts cover large enterprises as well as small and midsize enterprises. We believe our broad portfolio of solutions and services enables us to meet the needs of customers of all sizes and across industries.

In addition, our extensive ecosystem provides scalability to meet the demand for SAP innovation and provide customers with a wide selection of third-party competencies. We have developed an independent sales and support force through independent value-added resellers. We have also established partnerships with hardware and software suppliers, system integrators, and third-party consultants. For more information, see the Partner Ecosystem section.

Our sales model has been focused on charging a one-time, upfront fee for a perpetual license to our software that is typically installed at the customer site. In addition, the customer usually concludes a maintenance contract that covers support and software updates. As we see customers’ preferences evolve, we are expanding the delivery of our solutions in the cloud, which we believe is a simple and efficient software consumption model. Our cloud solutions are offered under a subscription-based licensing model. With this model, the customer periodically pays a fee to use software for a limited amount of time. This software is installed at an SAP or an SAP partner location, and the customer accesses the software through the Internet.

To help companies invest in SAP solutions and the associated services and hardware, the SAP Financing service offers customers payment plans optimized for maximum economic benefit. It can help preserve liquidity, provide an alternative to credit from their existing banking relationships, and balance their budgetary priorities – while giving customers the flexibility to choose the best possible solution.

We measure the outcome of our activities through four performance indicators: revenue, margin, customer loyalty, and employee engagement. Each of these directly correlates with our ability to deliver financial returns to our providers of capital. Ultimately, it is our highly engaged employees who build our customers’ success and loyalty to SAP.

SAP contributes to the creation of long-term value for society in a number of ways. At SAP and within our ecosystem, we support job creation and economic prosperity through demand for highly qualified workers to sell, implement, and enhance

our software for customers. Our solutions support the learning and talent development of our

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customers’ employees. Other SAP solutions enhance health and safety, both on the manufacturing side and in the final consumer products, which impact millions of people worldwide.

Our greatest positive environmental impact stems from enabling improvements through the solutions we provide to customers. For example, our software plays a primary role in driving supply chain optimization, efficiency gains in production processes, and transparency regarding energy consumption and emissions.

We also leverage our expertise in business processes across industries to direct our innovations to the world’s greatest challenges, such as the social and environmental strains posed by a rapidly expanding global middle class. Our goal is to create long-term value by providing solutions not just for the current challenges faced by our customers, but also those of the future. In this way, we see our role moving beyond the creation of new efficient solutions: We want to help fundamentally change how people live,

conduct business, and use software. This framework underscores how SAP can create its greatest impact through the use of our solutions by more than 253,500 customers worldwide.

RESEARCH AND DEVELOPMENT

Research and development is the source of the discoveries that will shape the future for SAP and its customers. At SAP, research and development is a global effort that is highly collaborative, focused on customer value, and involves co-innovation with customers, partners, and academia.

Global Development, Local Focus

Our Products & Innovation organization is truly global, with the majority of development colleagues located in 14 SAP Labs locations in 12 countries (see graphic). SAP Labs are globally distributed, situated within major technology hubs where access to talent and the latest technology trends create an optimal setup for innovation.

Major Development Locations (SAP Labs) in 12 Countries

LOGO

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SAP Labs locations in fast-growing markets strive to produce market-relevant solutions that complement SAP’s global product portfolio. In addition, they are structured in a manner that allows for close interaction with local stakeholders, including customers, partners, and universities. This strategy of distributed development, focusing on locations with talent availability, fostering diversity and access to new ideas, while also ensuring local market relevance, has proven highly successful for SAP.

To every technology and engineering challenge, SAP brings the strength and experience of a global development team. This helps ensure the rapid impact of research and development activities on our solution portfolio, and contributes to an ever-increasing pace of innovation.

Continuous Innovation

Research and development is only successful if it provides continuous improvement for existing products, while at the same time executing against promising new concepts that can help SAP enter new markets. And it must do so better and faster than our competition.

The following were among our 2013 R&D accomplishments:

SAP HANA

In 2013, SAP made further investments in our next-generation in-memory platform, SAP HANA, as the foundation for all of our products, solutions, and services – so that our customers can run their businesses in real time. A rich and growing ecosystem of partners further drives the adoption of SAP HANA as an open platform, and a number of startup companies now deliver new and innovative applications built on the SAP HANA platform.

Cloud

To further advance our leadership in the cloud, we continued to expand our portfolio of cloud-based applications. For example, customers that want to accelerate their transition to the real-time enterprise can now take advantage of our latest innovation in the cloud, SAP Cloud powered by SAP HANA, which includes infrastructure, platform, and software as services in the cloud, incorporating the former SAP HANA Enterprise Cloud managed cloud services offering. Core elements include an elastic infrastructure, the

in-memory platform, and services for deploying SAP or custom applications in real time.

SAP Business Suite powered by SAP HANA

Our highly engaged and diverse research and development teams are also working to improve SAP Business Suite by simplifying the end-to-end experience of using the applications while also optimizing performance. Combining SAP Business Suite with SAP HANA was a major milestone in 2013, enabling customers to make decisions in real time and gain unmatched visibility into business processes In addition, the software helps customers unleash their full potential when it comes to meeting consumer and competitive demands through real-time access to data, real-time analytics, and unprecedented improvements in performance.

Adhering to our imperative of “SAP runs SAP,” SAP has led the way in the adoption of SAP Business Suite powered by SAP HANA by going live internally with SAP CRM and SAP ERP applications now running on SAP HANA in 2013.

SAP Fiori

With SAP Fiori applications, SAP continues to further renew and simplify the user experience for all our products. For example, SAP Fiori offers an intuitive end-to-end user experience for broadly and frequently used SAP software functions that work seamlessly across devices – desktop, tablet or smartphone.

New Industry Solutions

Across industries, we continue to look for opportunities to help our customers and partners expand their businesses by analyzing, evaluating, and co-innovating business processes. In 2013, for example, SAP brought its knowledge and experience to the sports and entertainment industry. Our solutions help sports teams, leagues, and venues run faster, smarter, and simpler. In addition, they are designed to deepen fan engagement, drive on-field performance, and optimize business efficiency.

A Culture of Customer Centricity, Empowerment, and Accountability

Today, SAP’s development is closely attuned to customers’ business environments, product

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landscapes, and users. In addition, we foster a development culture of customer centricity, empowerment, and accountability. We believe that our work impacts such factors as customer loyalty and employee engagement, and that those factors have significant relevance to our company’s financial performance.

Our design-led research and development methodology puts the customer and user at the center during the entire development process. This results in robust solutions to complex business challenges – solutions that are technically feasible, desirable to users, and viable to the business for both SAP and its customers.

Research and Development Expenditure

SAP’s strong commitment to research and development (R&D) efforts in 2015 by investing in our SAP Labs network and the new SAP Innovation Center Network.

Nearly all of our software products are developed at our 15 SAP Labs locations in 13 countries across the globe. This global reach means that we have access to leading talent worldwide; in addition, we can collaborate with top universities throughout the world and have access to major technology hubs as well as diverse and vibrant startup communities. By understanding trends in different regions, as well as the specific needs of our customers that operate there, SAP has a major strategic advantage in developing products and services for the future.

In addition to our SAP Labs, we also expanded from two SAP Innovation Center locations to an SAP Innovation Center Network of 10 locations across four continents. This network is a dedicated unit within our development organization that is responsible for identifying new markets for SAP and pioneering game-changing solutions using transformational technologies. Through the SAP Innovation Center Network, we can closely collaborate with customers, partners, and academia to explore trends such as machine learning and block chain, among others.

We have identified several key markets and opportunities that hold significant revenue potential and allow us to apply our unique capabilities. Currently, areas include future enterprise applications, personalized medicine,

and smart cities. We are tackling a range of challenges facing these areas, from designing the future of business software to developing new approaches to treating cancer and helping decrease traffic congestion.

Our revitalized research organization has become an applied research entity with its main focus on machine learning for enterprise applications, personalized medicine, in-memory data management, and security. Our new research approach focuses sharply on potential business impact while collaborating with the best research institutions worldwide for selected topics.

Our innovation stems from many places, and we draw on the ideas of our customers, partners, startups, academia, and, most importantly, our own employees. Our overarching goal is to foster organic innovation and support the transformation of great ideas into profitable business. In support of this vision, we established a Company-wide “intrapreneurship” program that enables employees to develop their ideas in an internal incubator at SAP.

In addition to our employees, our customers provide us with unique insights about their business models and digitization challenges. We also work with customers on co-innovation and custom development projects. Our partners and their solutions enhance these efforts in a range of ways, such as at our SAP Co-Innovation Lab locations, which support engagements ranging from strategic alliances to key proofs of concept.

R&D Investment

SAP’s strong commitment to R&D is reflected in our expenditures: In 2013,2015, we increased our R&D expense (IFRS) slightly by €21515 million, to €2,2822,845 million (2012: €2,261(2014:2,331 million). We spent 13.6%13.7% of total revenue on R&D in 2013 (2012: 13.9%2015 (2014: 13.3%). Our non-IFRS R&D expense as a portion of total operating expenses declined slightly from 19.2%18.5% to 19.0% year over year. While we continue to increase our innovative capacity, we increased our efficiency.18.3% year-over-year.

LOGO

At the end of 2013,2015, our total full-time equivalent (FTE) count in development work was 17,804 (2012: 18,012)20,938 (2014: 18,908). Measured in FTEs, our R&D headcount was 27% of total headcount (2012: 28%(2014: 25%). Total R&D expense includes not only includes our own personnel costs but also the external cost of works and services from the providers and cooperation partners we work with to deliver and enhance our products. We also incur external costs for translating, localizing, and testing products, for obtaining certification for them in different markets, patent attorney services and fees, strategy consulting, and the professional development of our R&D workforce.

Research and Development (IFRS)

LOGO

Patents

As a market leader in enterprise applications, SAP actively seeks intellectual property protection for innovations and proprietary information. Our software innovations continue to strengthen our market position in enterprisebusiness solutions and services. Our investment in R&D has resulted in numerous patents. As at December 31, 2015, SAP holds a total of more than

5,500 7,224 validated patents worldwide. Of these, more than 700893 were granted and validated in 2013.2015.

While our intellectual property is important to our success, we believe our business as a whole is not dependent on any particular patent.

PARTNER ECOSYSTEMGuiding our Customers through Every Step of their Digital Transformation

In addition to creating new solutions for the digital era, we recognize that we must partner with our customers to help them make the most of these innovations based on their unique needs and goals. Through our worldwide service and support, we guide companies at every stage of their digital transformation. We focus on creating and delivering strategies for our customers’ digital journey, accelerating innovation, driving simplification of business and IT, and ensuring that expected business value is realized and continuously optimized.

In 2015, we radically simplified how we engage with our customers and deliver services, greatly harmonizing our portfolio. Under the new SAP engagesONE Service approach, we also introduced a new commercial model providing one service portfolio, out of one global organization, and under one contract.

We see enormous potential for our customers to simplify their own businesses and seize new opportunities through SAP HANA, with an extensive partner ecosystemSAP S/4HANA as their new digital core. For this reason, adoption of these innovations is a key pillar in our service and support strategy. To ensure the expected customer outcomes, we offer high-value services tailored to address the needs of customers aroundvarious customer scenarios supporting the world. With nearly 11,500 partners at the end of 2013, we continue to foster our partner ecosystem. Partners operate independentlyadoption of SAP and complement our business in one or more of the following ways:S/4HANA:

 

 

SellingSystem conversion: Customers changing their current SAP software:system to SAP partners help companies of all sizes identify, purchase, and deploy the ideal solutions to address their business needs. SAP value-added resellers (VARs) and multitier distribution channels offer local market and industry expertise that addresses specific market needs.S/4HANA

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SAP closely aligns its sales efforts with those of our partners through well-defined rules of engagement that outline each organization’s roles and responsibilities. In most markets, partners are the primary sales channel to address the needs of small and midsize enterprises (SMEs). Our company also sells select products through our own online channel, SAP Store, which includes complementary solutions developed by SAP partners. In addition, SAP resells applicable partner solutions as part of our solution extensions portfolio. These partner-developed solutions are tested, validated, and approved by SAP development organizations, and supported by SAP.

 

Developing solutions that complementLandscape transformation: Customers consolidating their landscape or carving out selected entities or processes into a system running SAP software:    SAP has a vibrant community of partners that develop on SAP platforms and create complementary products integrating with SAP applications. This community is vital to providing our customers with a broad portfolio of solutions that leverage the capabilities of SAP HANA, SAP Mobile Platform, our cloud offerings, and more. At the same time, we maintain strategic relationships with industry-leading technology, software, and services firms. SAP engages with the partner community in the development of new solutions, and works closely with partners on new product initiatives. Partners can embed SAP technology within their offerings under an original equipment manufacturer (OEM) licensing agreement. We also work actively with partners to enable new and innovative delivery and go-to-market approaches to support customer needs and preferences. Beyond these formal partnerships, companies can also certify their integration with SAP technology through the SAP Integration and Certification Center (SAP ICC).S/4HANA

 

Providing implementation and other services:    SAP has strong partnerships withNew implementation: Customers migrating from a broad network of IT professional services firms that provide consulting,third-party legacy system integration, hosting, education, and more. At the end of 2013, our partners collectively had more than 380,000 skilled resources in SAP solutions and technology. These companies are critical to the successful implementation and deploymentor installation of SAP solutions at customers we serve together. In response to growingS/4HANA for a new customer demand for flexible deployment and purchase options, SAP is working closely with the partner ecosystem to offer innovative cloud-based offerings and business models, including OEM and managed

cloud services, and by making SAP platforms and applications available through public cloud offerings.

ToIn mid-2015, we also introduced SAP Activate, an innovation adoption framework to further support the fast and effective implementation of SAP S/4HANA. Offering a unique combination of SAP Best Practices and guided configuration, the new methodology provides ready-to-run digitized business processes optimized for SAP S/4HANA. It allows customers to flexibly choose the approach for their business needs, from a new implementation to an integration to a migration scenario.

As they continue on their path to digitization, we work with large enterprise customers to forge a co-engineering and co-innovation relationship, so that they can influence and shape existing SAP solutions while gaining early access to product innovation. We help define future software solution standards together with our customers in comprehensive engagements and serve as a trusted advisor during delivery of innovative solutions for the SAP partner ecosystem achieve its business goals, SAP provides an extensive array of business support offerings. SAP’s flagship partner program, SAP PartnerEdge, offers a tiered engagement model that provides marketing, sales, and technical enablement, as well as education, deal support, and a variety of other benefits and resources. We provide SAP global partners – a select group of leading global technology, software, and services companies – with dedicated teams that work closely with them to proactively engage in business development and technical initiatives addressing specific market needs. Many of our partners participate in SAP Community Network, an online community that facilitates networking and information sharing for technical professionals. In addition, many participate in the SAP Listens program, which surveys partners for feedback and provides insight into projects we have initiated to address partner issues.

A vibrant partner ecosystem is essential to SAP’s success, and is a key component in our ability to achieve our mission of helping businesses run better and improving the lives of people everywhere.future.

ACQUISITIONS

SAP views acquisitions as investments in people, technologies,Focusing on Organic Growth and growth. In 2013, SAP made the following acquisitions:

Targeting “Fill-in” Technology through Acquisitions

As SAP prepares itself for the new digital economy, we may make acquisitions that advance our strategic goals. In March,2015, SAP acquired Ticket-Web GmbH & Co. KG,Multiposting, a provider of ticketing solutions and niche customer relationship management (CRM)French cloud-computing company with more than 80 employees that provides software for sportsthe automatic posting of jobs and entertainment promoters.internships on the Internet. Multiposting is based in Paris and is a European leader in job posting solutions. With this acquisition, SAP plans to offer customers the best end-to-end cloud recruiting suite on the market, including the ability to efficiently post jobs to a global network of thousands of channels. The acquisition helped SAP enterMultiposting solution will be available as part of the sports and entertainment industry, as we can now offer enhanced solutions that help promoters, venues, and teams market events over the Internet and better manage arenas.

In April, SAP acquired certain assets from KMS Software Company LLC, a provider of Web-basedexisting recruiting offering in our human capital management softwareportfolio as well as in all its current forms – as a stand-alone product, as a Web service, and solutionsthrough import.

Organic growth is the primary driver of our growth strategy. We will invest in the areas of electronic onboarding, off-boarding, forms management, and new-hire engagement.

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In April, SAP acquired Camilion, a provider ofour own product development product lifecycle, and underwriting solutions fortechnology innovation, improving the insurancespeed, number of projects, and innovations brought to market. These solutions allow SAP customers to streamline the managementWe may also acquire targeted and creation of new insurance products, providing insurance brokers and underwriters with simple tools to help speed up transactions and reduce costs.

In April, SAP acquired SmartOps, a provider of inventory and service-level optimization software solutions. This acquisition helps SAP develop real-time supply chain software solutions on the SAP HANA platform. The solutions help customers optimize inventory and service levels, freeing up working capital for innovation and growth.

In August, SAP acquired hybris, one of the leading commerce technology companies. This is an investment in the future of commerce and customer engagement. We continue to combine the omnichannel commerce solutions of hybris with enterprise“fill-in” technology and industry leading in-memory, cloud,software to add to our broad solution offerings and mobile innovations from SAP. Together, these capabilities can help facilitate new levels of customer insight and engagement.

In October, SAP acquired KXEN, a provider of predictive analytics technologyimprove coverage in key strategic markets. By doing so, we strive to best support our customers’ needs for line-of-business users and analysts. The addition of KXEN solutions will provide easy-to-use predictive capabilities for the extensive SAP customer base.simplified operations. We do not anticipate significant acquisitions in 2016 or 2017.

For more information about our acquisitions, see the Notes to the Consolidated Financial Statements section, Note (4).

Investing in the Next Generation of Technology Leaders through Venture Activities

Through investments in venture capital funds managed by Sapphire Ventures (formerly called SAP Ventures,Ventures), which comprises our consolidated investmentinvestments in venture funds, SAP has partnered with renownedsupports investments in entrepreneurs worldwide that aspire to build industry-leading businesses. SAPOver the past 19 years, Sapphire Ventures has supportedinvested in more than 100130 companies on five continents for more than 15 years. Manycontinents. Some of these companies have been acquired by third parties or have become publicly listed companies.

In October, SAP announced its commitmentSapphire Ventures aims to invest US$650 million through a new consolidated investment fund, named SAPin the next generation of global category technology leaders as well as early-stage venture capital funds in enterprise and consumer technology. Specifically, Sapphire Ventures Fund II.

In 2013, SAP made a total commitment of US$1 billion bringing SAP Ventures’ total available

investment pool to more than US$1.4 billion for use over the lifetime of its respective funds. Investments through the funds are currently ongoing and depend on capital calls from the funds. SAP Ventures seeks companies with an established market presence that are growing very fast, andpursues opportunities in which theyit can help fuel their growth by adding expertise, relationships, geographic reach, and capital. It invests globally with a particular focus on emerging companies and early stage funds in Europe, India,Israel, and the United States, as well as in Brazil, China, and China.India.

SAP’s total commitment to Sapphire Ventures is US$1.4 billion for use over the lifetime of its respective funds. Investments through the funds are currently ongoing.

For more information about our consolidated investment funds, see the Notes to the Consolidated Financial Statements section, Note (33).

PARTNER ECOSYSTEM

Working together to extend SAP’s Reach in the Marketplace

SAP proudly works with a network of more than 13,000 partners worldwide that helps companies of all sizes tackle complexity, grow their business, and Run Simple. SAP partners extend our reach in the marketplace and accelerate our Company’s growth, reaching thousands of new companies and millions of users each year. Our partner community plays an

important role in our success, delivering expertise through pioneering solutions to provide our mutual customers tools to succeed in the developing digital and services-based economy.

Partners add tremendous value to both SAP and customers. They sell our software and cloud services, develop complementary software and solutions, and provide a broad portfolio of implementation and professional services that support customers across all geographies and industries.

Last year we saw outstanding growth in SAP’s partnerships. For example, partners were responsible for nearly 90% of new SAP software customers. SAP Business One, one of our core ERP solutions for small and midsize enterprises (SMEs) and sold exclusively through partners, reached its 50,000th customer. Nearly 55% of all SAP S/4HANA software license deals were won by partners and our cloud revenue through partners reported triple-digit growth. Together with our strategic technology and service partners, we created a number of powerful and compelling joint solutions and services that help customers transform and run their businesses simpler.

In the past year, SAP made several transformational moves designed to increase our joint success in the market, including:

SAP SME Solutions: More than 80% of SAP customers are small and midsize enterprises (SMEs), and we support the majority through our partner networks and other channels. To boost our reach, we introduced this SME-specific portfolio marketing approach and a Run Simple advertising and demand generation campaign around our core ERP solutions for SMEs: SAP Business All-in-One, SAP Business ByDesign, and SAP Business One. As growing businesses transform in the digital economy, SAP has equipped partners with these and other tools, solutions, and programs they need to drive more demand in this important market.

SAP Anywhere debut: Late in 2015, we launched SAP Anywhere, a revolutionary cloud solution that allows small businesses to connect with customers anytime, anywhere on any device. It is now available in China and is expected to be introduced in the United Kingdom and the United States in 2016. SAP Anywhere represents a new opportunity for partners. With our commitment to “SAP Anywhere, Everywhere,” our partners can resell a complete cloud-based solution that manages marketing, sales, and e-commerce activities in one complete front-office system using real-time analytics.

SAP PartnerEdge program enhancements: To build stronger relationships and increased business

opportunities, SAP introduced the next generation of its flagship partner program in 2015. Among the improvements, we reduced the number of partner engagement options from more than 30 to just four – Run, Build, Service, and Sell – making it easier for partners to engage with SAP. We streamlined processes and relaunched the SAP PartnerEdge Web site to give partners easier access to resources and real-time visibility into their SAP business.

While reselling, implementation, and services are a large part of our ecosystem’s effort, SAP partner innovation on our technology platforms is also essential to market penetration. Partners develop their own applications and solutions called SAP Solution Extensions, which can then be sold to customers and other partners. These partner-developed solutions are tested, validated, approved, and supported by SAP.

In addition, the SAP PartnerEdge program for Application Development, which grew to more than 1,100 active members in 2015, encourages partners to build complementary solutions on top of our technology platforms – and quickly monetize those solutions through SAP e-commerce channels.

Partners also embed SAP technology within their offerings under an original equipment manufacturer (OEM) licensing agreement, giving customers SAP software functionality backed by partner industry knowledge and expertise.

2015 was a seminal year for our partner managed cloud business, where our partner recruitment and enablement success has expanded the number of customers benefiting from the flexibility, rapid time to value, and pay-as-you-go economics of a managed cloud with enterprise-class SAP solutions.

SAP will continue to drive business growth through partners in 2016, continuing to identify and recruit key partners and develop the innovative programs and initiatives that fuel our mutual success.

CUSTOMERS

Helping Customers Run Simple

When SAP customers Run Simple, it improves their ability ultimately to become best-run businesses that create more sustainable business models – which, in turn, help us ensure our own long-term viability. That is why we strive to provide more than just software and services; we continually engage with our customers at every stage – not only during the sales and implementation phases, but also through the sharing of best practices and innovations.

One example of this strategy is our Customer Engagement Initiative. This program offers customers early insight into certain aspects of our planned innovations, so they can influence new developments. In addition, it offers customers the opportunity to network on topics of mutual interest. These networking opportunities take place at a variety of global events, including the SAPPHIRE NOW, SAP Select, SAP Forum, and SAP TechEd conferences, as well as virtual events.

Customer Focus Reflected in Customer Net Promoter Score

Customer loyalty is one of our four Company-wide strategic objectives, along with growth, profitability, and employee engagement. In 2015, our combined on-premise and cloud Customer NPS is 22.4% (2014: 19.1%). Due to changes in sampling, resulting from ongoing efforts to implement the survey process holistically in recently acquired entities, the 2015 score is not fully comparable with the prior year’s score.

Our goal continues to be to best support our customers’ success and the success of SAP. For example, we are expanding on the insights provided by our surveys through root cause analysis to gain a better understanding of customer problems, why they happened, and what needs to be done to prevent those problems from happening again.

Our combined on-premise and cloud NPS target for 2016 is 25%, 2.6 percentage points above our 2015 achievement.

For more information about the Customer NPS, see the Performance Management System section.

Strong Customer Demand

Our strategy focuses on offering solutions and services to help customers Run Simple today and tomorrow. To do so, we offer a spectrum, from complete suites to applications that are lean, focused, quick to implement, and highly mobile. In 2015, we saw customers embrace this strategy by licensing or subscribing to the full range of SAP software, from comprehensive solutions for large enterprises to the latest mobile apps.

Some examples by region include the following customers:

North America and Latin America (Americas) Region

Adobe, a multinational computer software company, has chosen the SAP Hybris Billing solution as its monetization and billing platform to support a new SaaS business model. Adobe seeks to support fast subscription-revenue growth on a flexible and scalable platform, while significantly reducing time to launch innovative and flexible offers and promotions.

American Airlines, the world’s largest airline, has selected several SAP SuccessFactors solutions, as

well as the SAP HANA Enterprise Cloud service and SAP HANA Cloud Platform. The company’s goal is to enhance service to its employees and reduce operating costs while remaining focused on its core business.

Eastman Kodak, a technology company focused on imaging, selected the SAP S/4HANA suite to help reduce total cost of IT ownership. In addition, Kodak plans to establish an IT infrastructure to position its organization for future growth and innovation.

Hewlett Packard Enterprise Company (HPE) has committed to and invested in implementing one of the largest installations of the SAP S/4HANA Finance solution for their internal foundational platform to support its digital transformation. With SAP S/4HANA, HPE aims to be better able to take advantage of real-time access to operational and financial data with the goal of improving the speed of decision making and operating more efficiently; reducing the time for financial close; and delivering actionable intelligence throughout its business. The aim is to ensure HPE becomes more competitive in the marketplace.

Stara, a leader in agricultural machinery headquartered in Brazil, selected SAP HANA Cloud Portal, as well as SAP Cloud for Customer, SAP SuccessFactors Employee Central, and SAP SuccessFactors Talent Management solutions. Stara expects to simplify its business processes while improving sales efficiency through greater control of critical company information.

Asia Pacific Japan (APJ) Region

Boryung Pharmaceutical, one of the leading pharmaceutical manufacturers in South Korea, selected SAP S/4HANA Finance for its simple user experience, simple business solution, simple data model, and shorter go-live time.

La Trobe University in Australia went live with SAP S/4HANA Finance. As one of the first organizations globally to adopt SAP S/4HANA Finance, La Trobe University aims to benefit from instant insight across financial and operational processes to drive value through planning, analysis, prediction and simulation. They have a term for it; they call it “Brilliant Basics.”

Lenovo Group, a multinational computer technology company, is expanding its HANA footprint by moving data from all systems to the SAP HANA platform.

PetroChina, China’s largest oil producer, has implemented SAP Business Warehouse powered by SAP HANA and SAP BusinessObjects Business Intelligence solutions. Since the system went live in late July, HR reporting performance is three to ten times faster than before, which has empowered HR director-level management to make strategic decisions based on Big Data analysis.

St Barbara, an Australian-based, ASX-listed gold producer and explorer, selected the SAP SuccessFactors Performance & Goals solution. The solution has enabled St Barbara to replace its paper-based performance management process with a cloud-based solution that also supports its offshore locations.

Europe, Middle East, and Africa (EMEA) Region

ArcelorMittal, the world’s leading steel and mining company, selected SAP S/4HANA to streamline business processes, improve productivity, and decrease costs. The company seeks to enhance its position by serving an increasingly strong innovation agenda around the world.

Bosch Group, a leading global supplier of technology and services, has chosen SAP S/4HANA to rebuild its IT infrastructure, seeking a simplified and harmonized landscape that helps them offer connected services to customers.

City Football Group (CFG) is the owner of a number of soccer-related businesses including Manchester City Football Club and New York City Football Club. CFG and its clubs will implement a wide variety of cloud-based solutions powered by SAP HANA with the aim of simplifying their worldwide operations, scaling their business, increasing productivity, and enhancing the fan experience.

E.ON Group has chosen the limited runtime edition of SAP HANA; SAP Mobile Platform; and SAP SuccessFactors HCM Suite. The company, which is splitting into two entities, seeks to streamline its system landscape, replace homegrown software, and reduce its on-premise footprint.

Hydro, a global aluminium company based in Norway, selected SAP S/4HANA to “replatform” and renew its IT system landscape. With the suite, Hydro expects to have access to real time information, thereby running at optimal efficiency and safety, which are key elements of its strategic vision.

Helping Customers Invest

To help companies invest in SAP solutions and associated services and hardware, SAP Payment services offers customers payment plans. SAP Payment services can help preserve liquidity, provide an alternative to credit from customers’ existing banking relationships, and balance their budgetary priorities, while giving them the flexibility to choose their preferred solution.

ENVIRONMENTAL PERFORMANCE: ENERGY CONSUMPTION AND GREENHOUSE GAS EMISSIONS

OverIn 2015, we made significant progress toward our goals for the past several years,reduction of greenhouse gas emissions, taking advantage of the digitalization and green technology trends that are driving transformational changes across the global economy. These trends can have a significant

impact on energy consumption and greenhouse gas emissions. We are applying these trends to our own business and helping our customers apply them to their businesses. For example, by enabling business model transformation, using advances such as smart grids and the Internet of Things, SAP is helping connected digital business networks reduce overall carbon footprints.

Strengthening our “Green Cloud”

We see that energy consumption in data centers is closely related to innovation and customer adoption of our solutions. As we accelerate our shift to the cloud, we have workedtied our business strategy to better understand the connections between our energy consumption, its related cost,environmental strategy by creating a completely “green cloud” at SAP, referring to carbon neutrality, by purchasing 100% renewable electricity certificates and the resultingcompensation by CO2 offsets. In assessing our environmental impact. Todayimpact, we measure and address ourfocus on energy usage throughout SAP, as well as our greenhouse gas emissions across our entire value chain. Since the beginning of 2008, we calculate that energy efficiency initiatives have contributed to a cumulative cost avoidance of €260 million, compared to a business-as-usual extrapolation.

Moreover, to credibly offer solutions that help our customers better manage their use of resources, we must do so ourselves. By addressing the financial and environmental impact of our energy consumption, we have gained valuable insights to create solutions for our customers.

Total Energy Consumed

Because our energy usage drives our emissions, one of the most important measures we look at is our total energy consumed. This includes all energy that SAP produces or purchases – in other words, the energy whose production causes emissions falling into Scopes 1 and 2 of the Greenhouse Gas Protocol. Our total energy consumption increased to 910 gigawatt hours (GWh) in 2013, compared to 860 GWh in 2012. This increase is due to significant growth in our business. In addition, as software usage shifts to the cloud, we are hosting more of our customers’ systems in our data centers, requiring additional servers and facilities that consume more energy.

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As we describe in more detail below, we believe that this shift has the opposite effect for our customers, who can save energy through our shared infrastructure.

As our business grows, we maintain the efficiency gains we have made over the past several years. For example, our total corporate car fleet is not consuming more fuel despite the fact that a significant number of company cars has been added, since the average company car has become more fuel-efficient. So, while our car fleet grew by 6%, we had efficiency gains of 6% across the entire fleet. As a result, our total energy consumption remained steady at 13,900 kilowatt hours (kWh) per employee in 2013.

Reducing Greenhouse Gas Emissions

Our goal is to reduce the net greenhouse gas (GHG) emissions from our operations to levels of the year 2000 by 2020. This target includes all direct and indirect emissions from running our business (Scopes(GHG Protocol Scopes 1 and 2), as well as a limitedselected subset of other indirect (Scope 3) emissions, such as those stemming from business travel.emissions. We do not include all of our Scope 3 emissions in our target because we chosechoose to focus first on those emissions over which we have the most control.direct control or ability to influence. However, as detailed in the Energy and Emissions II section in the SAP Integrated Report 2013 online, we are increasingly addressing both our upstream and downstream emissions to drivesupport a comprehensive carbon strategy for SAP.

Specifically, we are working to reduce our emissions through three primary approaches: increasing our operational efficiency combined with innovative approaches to the way we do things; purchasing high-quality renewable electricity certificates; and investing in high-quality carbon credits.

In addition to our long-term goalcommitment for 2020, we have setderived annual targets. In 2013,targets for our internal operational steering. Despite integrating new acquisitions in 2015, our total net emissions increaseddecreased to 545455 kilotons CO2 (2012: 485 (2014: 500 kilotons). AsThis decrease stems primarily from a result, we missed our annual target to reduce our emissions to 460 kilotons. Just asreduction of business flights and compensation with our increase in energy consumption, our increased emissions reflect the growth of our business. Due to our environmental efforts of the past, however, the overall absolute reduction achieved between the beginning of 2008 and today is 9%. At the same time, the average number of employees increased by almost 26%.

At the same time, we experienced some decrease in efficiency in 2013 as it relates to our emissions. While our overall energy efficiency remained steady, our greenhouse gas emissions increased from 30.0 grams CO2 per euro of total revenue in 2012 to 32.4 grams CO2per euro in 2013. Our carbon emissions per employee also increased by about 5% in 2013, respectively.

One root cause for this development is our change in business model. As our customers increasingly leverage SAP software in the cloud, our leadership in this market means that systems that previously ran at our customers’ sitesemission offsets. We are increasingly running in SAP data centers. In other words,effectively compensating the emissions that used to be caused by our customers running our software have become SAP’s emissions. As a result, our emissions per employee and per euro in revenue increased in 2013.

In 2014, we plan to address these emissions, as well as our overall footprint, by powering all of our data centers and facilities with 100% renewable electricity. This shift will effectively eliminate the emissions caused by our customers’from those customer systems that have moved into our green cloud. Given the large size of our customers’ CO2 footprints and our growth strategy in the cloud, we see significant potential to reduce both our own and our customers’ environmental impact.

Since the beginning of 2008, our focus on carbon emissions has generated a cumulative cost avoidance of

346 million, compared to a business-as-usual scenario. This leads to an avoidance of124 million in the past three years, with39.8 million avoided in 2015 alone.

Investing in Environmental Innovations

We are pursuing new strategies to contend with the ongoing tension between growth in our business and our goal to reduce our emissions. One such approach is the introduction of carbon emission offsets for business flights in 2015. In 2013 alone,addition to avoiding and reducing overall business flights, we began, in the second half of 2015, to offset selected business flights in the United States, as this is the country with the greatest number of business flights. This offset effort resulted in a compensation of 35 kilotons of CO2.

SAP continues to invest in technology that enables virtual collaboration, supporting our efforts to reduce the need for employees to travel. In addition to our TelePresence and video conferencing platforms, new collaboration rooms based on the Skype for Business communications platform bring new features that enable teamwork across borders and time zones. More than 100 collaboration rooms have been installed throughout SAP with more planned for 2016. Because more employees adopt video chat as their preferred method of communication, more than 1,200 meeting spaces have been equipped with 360-degree cameras – giving remote participants a more interactive experience. Skype for Business also enables each employee to video chat from their computer.

To further decrease car-related emissions, we plan to increase the portion of electric vehicles (or alternatives) in our company car fleet from the current 1% to 20% by 2020. At the end of 2015, we have 57 charging stations and 55 pure electric vehicles in our company car fleet at our headquarters in Walldorf, and approximately300 e-cars globally. Our company car initiatives address a dilemma that has grown in recent years. As a result of our business expansion, the number of SAP employees eligible for a company car has increased annually. We want to ensure that we do not undo our efficiency gains with our growing car fleet.

In keeping with our existing policy for office buildings and data centers, all our electric company cars charged at SAP are powered with 100% renewable sources. In Germany, for example, we provide employees with an incentive to switch to electric alternatives by offering a battery subsidy that offsets the costs of using an electric vehicle. We believe that our electric car initiative will play a critical role in helping achieve our 2020 carbon reduction goal.

In 2015, emissions caused by SAP products in use at ourthe sites of more than 253,500 customers’ sites300,000 customers were at least 10almost

15 times larger than SAP’s own footprint, meaning theythese products caused more than 5,800 ktonsapproximately 6,800 kilotons of CO2. By using 100% renewable energy,electricity, we will dramatically broaden the reach of our sustainability efforts and align them with our cloud strategy. We believe this move will not only helpstrategy, reducing the world run better, but contributecarbon emissions of our cloud solutions to achieving our 2020 carbon target.zero.

Efficiency Versus Transformation

Our resultsWe continued to realize the benefits of our investment in 2013 pointthe Livelihoods Fund, a unique investment fund whose returns consist of high-quality carbon credits. Several years ago, we made a commitment to an increasing challenge faced not only by SAP but also by our customers. Companies typically increase their resource consumption when they grow. Under traditional business models, they continuously createinvesting3 million covering a 20-year participation in the fund, which supports the sustainability of agricultural and sell more goods or services. Forrural communities worldwide. Projects of this reason, many companies have focusedfund focus on increasing their efficiency –ecosystem restoration, agriculture, agroforestry, and rural energy. In eastern India, for example, the fund helped communities plant fruit trees to diversify food sources and address the overcultivation of soil. Instead of a prime example is the far better fuel efficiency of passenger cars today compared to decades ago.

Efficiency, however, has its limits. The demands of growth, as we are discovering, often overtake efficiency gains. Extending the example of cars –charitable donation, we have many more cars onmade a long-term investment that brings benefits to society, the road today,environment, and SAP. In 2015, we received carbon credits from the fund, which more than cancels outhelped us to offset our carbon footprint by 23 kilotons.

Another important program in 2015 was the reductionfurther implementation of ISO 14001 in consumption per car. For this reason, andSAP locations throughout the world. This well-accepted environmental management system is now in addition toplace at 32 of our green cloud strategy, we are increasingly focused on another path to sustainable growth – applying technology innovation to transformationslocations worldwide, including our North America headquarters in how business is conducted.

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In the case of SAP, we are seeking to bring about transformations in a range of areas, from incentivizing behavioral change to supporting innovative approaches to conserving resources. TwoGo by SAP, for instance, is a ride-sharing application that turns the daily commute into an economic, social, and environmental opportunity. We began offering TwoGo by SAP to other companies in 2013, supporting their own efforts to reduce the cost of fuel, parking and business trips, enhance employee networks, change behavior, and reduce emissions. For more information on this innovation, see www.twogo.com.

Net Positive Impact

As the example of TwoGo by SAP shows, we ultimately aim to help other organizations with their journey toward change. While we are committed to improving our own environmental performance, we believe that we can make a far greater impact by helping our customers reduce their energy use and emissions. We are increasingly focused on facilitating and measuring this “enabler effect,” which our software supports in both direct and indirect ways. A prime example of the former is a transportation application that enables companies to better manage their freight and routes to reduce fuel consumption. Indirectly, our customers can use our analytics to assess their operations and make adjustments that will save energy, reduce emissions, and lower costs. For example, our software can help determine when equipment needs refurbishment or support manufacturers in negotiating better energy rates during peak times. Through the advanced computing power of SAP HANA, we can now help companies make these adjustments in real time, increasing their efficiency even further.

Based on a study from Global e-Sustainability Initiative (GeSISMARTer2020) assessing the potential effect for the information and communications technology (ICT) industry overallNewtown Square, Pennsylvania, as well as in Palo Alto, San Francisco, Sunnyvale, and Dublin, California, both in the United States; and other countries including Austria, Canada, Czech Republic, France, Germany, Israel, Italy, and South Africa. New sites in Singapore and Switzerland, as well as Rio de Janeiro and São Paulo in Brazil, were certified in 2015. To act more quickly and achieve consistency, we created a template to roll out in other sites, enabling us to efficiently build a large global network where different sites interact and share best practices. Our goal is to continually increase the number of certified locations; we aim for total full-time equivalent (FTE) coverage of 70% by 2018. By end of 2015, SAP had an environmental management system (ISO 14001) in place in 15 countries and 32 single sites. This represents a total FTE coverage of 22.2%.

Measuring our own estimates,Total Energy Consumed

Because our energy usage drives emissions, one of the most important measures for us is total energy consumed. This includes all energy that SAP generates or purchases to run our facilities, data centers, company cars, and corporate jets. Our total energy consumption increased to 965 gigawatt hours (GWh) in 2015, compared to 920 GWh in 2014.

This increase is due to growth in our workforce and business. In addition, as software usage shifts to the

cloud, we are operating more of our customers’ systems in our data centers, as well as other locations where we supplement our servers. This additional cloud operation, along with accompanying servers and facilities, consumes more energy. At the same time, we believe this shift has the opposite effect for our customers that are now able to simplify their technology and save energy through our shared infrastructure. This reduces overall IT-related energy consumption through our highly energy-efficient cloud provisioning.

Optimizing Efficiency in our Data Centers

Data centers are at the heart of how SAP provides solutions contribute to an avoidance of emissions that eclipses the footprintour customers and represents a significant part of our entire value chain, includingtotal greenhouse gas emissions. At the same time, with our downstream emissions (useenergy consumption rising as more of our softwarebusiness moves to the cloud, data centers have become a primary focus of our carbon reduction efforts and the adoption of our technology innovations and solutions towards our customers. We continue to drive efficiency and innovation around buildings, data center operations, and infrastructure. For example, in one of our largest data centers in St. Leon-Rot, Germany, we received an energy efficiency certificate from TÜV Rheinland, a leading provider of technical, safety, and certification services, with an efficiency score of 98.7%. One hundred percent of our energy usage that provides internal and external computation power comes from renewable sources. Our total data center electricity consumption at customers’ sites). Putting such estimatesboth our internal and external sites increased from 179 in tangible terms,2014 to 249 GWh in 2015. In recognition of the total emissions generated by ICT are expectedexemplary actions SAP has taken to reach 1.3 gigatons (Gt)improve our data centers, we were awarded the European Datacentre Sustainability Award in 2015.

Reinforcing our Renewable Electricity Strategy

Our commitment to 100% renewable electricity in all of carbon by 2020. By contrast, ICT hasour internal and external data centers and facilities is one of the potentialmost significant steps toward making our operations more sustainable. In 2015, we mainly focused on wind and, to abate 9.1 Gt CO2a lesser extent, on biomass. While we produce a small amount of renewable electricity through solar panels in that same time period. Similarly,some locations, we estimate that SAP’s downstream emissions will reach 0.0091 Gt CO2by 2020. Global emissions,rely primarily on the purchase of renewable electricity certificates (RECs) to increase the renewable electricity in our energy mix. We procure RECs regionally that add value and drive change in the electricity market, adopting high-quality standards in our procurement guidelines that are aligned with two non-governmental organizations (NGOs). For example, we consider renewable electricity from biomass only if it is disconnected from coal or other hand,fossil power plants and if the biomass itself is not related to deforestation. In addition, we require that power plants must be no more than 10 years old, as we aim to foster new innovation in the production of renewable electricity. Furthermore, SAP is not considering RECs from power plants that are currently supported by governments. As a vintage

expected to reach 55 Gt CO2byrequirement, we define that time – offering enormous potential for ICT as a whole and for SAP to enable reductions.

We will continue developing methodology to estimate this impact so that we can direct our strategy and resources to those areas where we can create the greatest long-term impact.

SEASONALITY

Our business has historically experienced the highest revenuerenewable electricity must be produced in the fourth quarter of eachsame year due primarily to year-end capital purchases by customers. Such factors have resulted in 2013, 2012,or the year before the reporting period will be applied.

In 2015, SAP joined the green initiative RE100 and 2011 first quarter revenue being lower than revenue in the prior year’s fourth quarter. We believe that this trend will continue in the future and that our total revenue will continue to peak in the fourth quarter of each year and decline from that level in the first quarteris now one of the following year. Unlike our on-premise software revenues, our on-premise support revenuesglobal corporations that have signed on to the RE100 initiative. RE100 is led by The Climate Group in partnership with CDP (formerly Carbon Disclosure Project) and cloud subscription and support revenues are less subjectthe goal of the campaign is to seasonality.have 100 of the world’s most influential businesses committed to 100% renewable electricity.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES

We rely on a combination of the protections provided by applicable statutory and common law rights, including trade secret, copyright, patent, and trademark laws, license and non-disclosure agreements, and technical measures to establish and protect our proprietary rights in our products. For further details on risks related to SAP’s intellectual property rights, see “Item 33. Key Information – Risk Factors – Operational Risks.”

We may be dependent in the aggregate on technology that we license from third parties that is embedded into our products or that we resell to our customers. We have licensed and will continue to license numerous third-party software products that we incorporate into and/or distribute with our existing products. We endeavor to protect ourselves in the respective agreements by obtaining certain rights in case such agreements are terminated.

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

We are named as a defendant or plaintiff in various legal proceedings for alleged intellectual property

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infringements. See Note (23) to our Consolidated Financial Statements for a more detailed discussion relating to certain of these legal proceedings.

DESCRIPTION OF PROPERTY

Our principal office is located in Walldorf, Germany, where we own and occupy approximately 430,000 square meters of office and datacenter space including our facilities in neighboring St. Leon-Rot. We also own and lease office space in various other locations in Germany, totaling approximately 120,000 square meters. In approximately 70 countries worldwide, we occupy roughly 1,480,0001,615,000 square meters. The space in most locations other than our principal office in Germany is leased. We also own certain real properties in Newtown Square and Palo Alto (United States); Bangalore (India); Sao Leopoldo (Brazil),; London (UK) and a few other locations in and outside of Germany.

The office and datacenter space we occupy includes approximately 260,000305,000 square meters in the EMEA region, excluding Germany, approximately 390,000410,000 square meters in the region North and Latin America, and approximately 280,000350,000 square meters in the APJ Region.

With the acquisition of hybrisConcur in 2013,2014, we added approximately 18,00050,000 square meters were added to our real estate portfolio. This portfolio is included in the group portfolio disclosed above.

The space is being utilized for various corporate functions including research and development, our data centers, customer support, sales and marketing, consulting, training, administration and messaging. Substantially all our facilities are being fully used or sublet. For a discussion on our non-current assets by geographic region see Note (28) to our Consolidated Financial Statements. Also see, “Item 6. Directors, Senior Management and Employees – Employees,” which discusses the numbers of our employees, in FTE’s, by business area and by geographic region, which may be used to approximate the productive capacity of our workspace in each region.

We believe that our facilities are in good operating condition and adequate for our present usage. We do not have any significant encumbrances on our properties. We do not believe we are subject to any environmental issues that may affect our utilization of any of our material assets. We are

currently undertaking construction activities in various locations to increase our capacity for future expansion of our business. Our significant construction activities are described below, under the heading “Principal Capital Expenditures and Divestitures Currently in Progress.”

Capital Expenditures

Principal Capital Expenditures and Divestitures Currently in Progress

In 2013,2015, we continued with various construction projects and started new construction activities in several locations. The expansion of our data centers is again an important aspect of our investments planned for 2016. We aim to extend our office space and data center capacities to be able to cover future growth. We plan to cover all of these projects in full from operating cash flow. TheOur most important projects are:

In Bangalore, India, we want to add additional capacity of roughly 2,500 employees. We estimate the total cost to be approximately50 million, of which we had paid approximately7 million as at December 31, 2015. We expect to complete the construction of this office building in 2017.

In Ra’anana, Israel, we continued with the construction of a new building. We estimate the total

In Bangalore, India, we want to add additional capacity of roughly 2,500 employees. We estimate the total cost to be approximately €51 million, of which we had paid approximately €2 million as of December 31, 2013. We expect to complete the construction of this office building in 2016.

In Ra’anana, Israel, we commenced construction of a new building. We estimate the total cost of this project to be approximately €50 million, of which we had paid approximately €10 million as of December 31, 2013. We expect to complete the construction of this office building in 2016.

In our research center in Potsdam, Germany, we started with a second construction phase in order to realize additional capacity for at least 100 employees. With the extension of our research center we aim to create the general conditions for further teams contributing innovations to SAP products in miscellaneous fields. We estimate the total cost to be approximately €12 million, of which we had paid approximately €2 million as of December 31, 2013. We expect to complete the construction of this office building in 2015.

In New York City, New York, United States, we started planning the leasehold improvements for our new office space. The project includes the consolidation of our New York City offices for approximately 600 employees. We estimate the total capital expenditures for this project to be approximately €37 million. We expect to complete the leasehold improvements in 2016.

cost of this project to be approximately60 million, of which we had paid approximately25 million as at December 31, 2015. We expect to complete the construction of this office building in 2016.

In our research center in Potsdam, Germany, we started a third construction phase to realize additional capacity for approximately 150 employees. With the extension of our research center, we aim to create the general conditions for further teams contributing innovations to SAP products in miscellaneous fields. We estimate the total cost to be approximately16 million, of which we had paid approximately11 million as at December 31, 2015. We expect to complete the construction of this office building in 2016.

In New York, New York, in the United States, we continued executing the leasehold improvements for our new office space. The project includes the consolidation of our New York City offices for approximately 450 employees. We estimate the total capital expenditures for this project to be approximately34 million, of which we had paid approximately3.5 million as at December 31, 2015. We expect to complete the leasehold improvements in 2016.

In Dubai, United Arab Emirates, we continued with our office consolidation project including an expansion of office space adding additional capacity for 100 employees. We estimate the total cost to be approximately11 million, of which we had paid approximately0.9 million as at December 31, 2015. We expect to complete the leasehold improvements in 2016.

In Walldorf, Germany, we started construction on a new office building for about 700 employees. We estimate the total cost to be approximately71 million, of which we had paid approximately0.5 million as of December 31, 2015. We expect to complete the construction in 2018.

In Walldorf, Germany, we also started construction on a new data center as well as a new power station. We estimate the total cost to be approximately58 million, of which we had paid approximately0.7 million as at December 31, 2015. We expect to complete the construction for both projects in 2017.

In Prague, Czech Republic, we started the expansion of an office building and began an office move. We estimate the total capital expenditures for this project to be approximately19 million. We expect to complete the project in 2016.

In Colorado Springs, Colorado, in the United States, we started construction on a new data center in 2015. We estimate the total cost of this project to be approximately75 million. We expect to complete the construction of this data center in 2017.

 

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In Paris, France, we started an office consolidation project. The project aims to consolidate three office spaces in Paris into one office space. We estimate the total cost of the leasehold improvements to be approximately €24 million. We expect to complete the leasehold improvements in 2014.

In St. Leon-Rot, Germany, we started increasing the capacity of our data center. We estimate the total cost of this project to be approximately €30 million, of which we had paid approximately €14 million as of December 31, 2013. We expect to complete the construction for this project in 2014.

In Newtown Square, Pennsylvania, United States, we also started to increase the capacity of our data center. We estimate the total cost of this project to be approximately €20 million, of which we had paid approximately €2 million as of December 31, 2013. We expect to complete the construction for this project in 2014.

In San Ramon, California, in the United States, we began an office move. We estimate the total cost of this move to be approximately22 million. We expect to complete this project in 2017.

In Shanghai, China, we started an expansion of our office building. We estimate the total cost to be approximately15 million, of which we had paid approximately2 million as at December 31, 2015. We expect to complete the construction in 2016.

For more information about planned capital expenditures, see the Investment Goals section. There were no material divestitures within the reporting period.

Principal Capital Expenditures and Divestitures for the Last Three Years

Our principal capital expenditures for property, plant, and equipment amounted to €553580 million for 2013 (2012: €508in 2015 (2014:666 million; 2011: €3722013:553 million). Principal capital expenditures in 20132015 for property, plant, and equipment increaseddecreased compared to 20122014 mainly due to purchases of computer hardware including data center infrastructure.lower replacement investments in hardware. Furthermore, compared to 2014, SAP did not have material acquisitions in 2015, resulting in fewer additions. The increase from 20112013 to 20122014 was mainly due to increased replacementsthe acquisition of Concur, the replacement and purchasespurchase of computer hardware and vehicles.vehicles acquired in the normal course of business and investments in data centers. Principal capital expenditures for property, plant and equipment for the period from January 1, 20142016 to the date of this report were €7697 million. For a related discussion on our property, plant, and equipment see Note (16) to our Consolidated Financial Statements.

Our capital expenditures for intangible assets such as acquired technologies and customer relationships amounted to €41970 million in 2013 from €1,7942015 compared to1,954 million in 2012 (2011: €1142014 (2013:419 million). Capital expenditures for intangible assets decreased from 2014 to 2015 because we only executed one small acquisition in 2015, while the increase from 2013 to 2014 was due to the acquisitions of Concur and Fieldglass in 2014. Our investments allocated to goodwill decreased to27 million in 2015 from6,072 million in 2014 (2013:842 million). The decrease from 20122014 to 2013 was due primarily to executing only a few smaller

business combinations in 2013, while in 2012 we acquired SuccessFactors and Ariba. Our investments allocated to goodwill amounted to €840 million in 2013 from €4,557 million in 2012 (2011: €170 million). The significant decrease from 2012 to 2013 was again due to the few smaller business combinations in 2013 compared to the acquisition of SuccessFactors and Ariba in 2012. The increase from 2011 to 20122015 in the additionadditions to goodwill and intangible assets was primarily attributable to executing only one small acquisition in 2015 compared to 2014 when we acquired Concur and Fieldglass. These 2014 acquisitions also caused the significant increase from 2013 to 2014 as we executed only a few small business combinationsacquisitions in 2011.2013. For further details on acquisitions and related capital expenditures, see Note (4) and Note (15) to our Consolidated Financial Statements.

For further information regarding the principal markets in which SAP competes,conducts business, including a breakdown of total revenues by category of activity and geographic market for each of the last three years, see “Item 5. Operating and Financial Review and Prospects – Operating Results”Results (IFRS)” of this report.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OVERVIEW

We derive our revenue from fees charged to our customers for (a) licenses to our on-premise software products, (b) the use of our cloud subscription software offerings and (c) support, consulting, development, training, and other services. The majority of our software arrangements include support services, and many also include professional services and other elements.

Depending on the product or service provided we classify our revenues either as (a) software and software-related services revenue or (b) professional services and other service revenue.

For more information on our principal sources of revenue and how the different types of revenue are classified in our income statement refer to Note (3b) to our Consolidated Financial Statements, section Revenue Recognition.

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See “Item 4. Information about SAP – Portfolio of SoftwareProducts, Research & Development, and Services” for a more detailed description of the products and services we offer.

The following discussion is provided to enable a better understanding of our operating results for the periods covered, including:

the factors that we believe impacted our performance in 2013;

our outlook for 2013 compared to our actual performance (non-IFRS);

a discussion of our operating results for 2013 compared to 2012 and for 2012 compared to 2011;

the factors that we believe will impact our performance in 2014; and

our operational targets for 2014 (non-IFRS).

the factors that we believe impacted our performance in 2015;

our outlook for 2015 compared to our actual performance (non-IFRS);

a discussion of our operating results for 2015 compared to 2014 and for 2014 compared to 2013;

the factors that we believe will impact our performance in 2016; and

our operational targets for 2016 (non-IFRS).

The preceding overview should be read in conjunction with the more detailed discussion and analysis of our financial condition and results of operations in this Item 5, “Item 3. Key Information – Risk Factors” and “Item 18. Financial Statements.”

ECONOMY AND THE MARKET

Global Economic Trends

In its most recent monthly report, the European Central Bank (ECB1)(ECB) concludes that the global economy hasgrew gradually and unevenly in 2015. The ECB finds that low oil prices, favorable financing conditions, and improving labor markets helped advanced economies perform better than in previous years. However, growth in emerging markets and developing economies remained fairlyrelatively weak, in 2013, especially in the first half of the year. That is consistent with the view of the International Monetary Fund (IMF), stating that in 2013 gross domestic product (GDP) across the world grew 3% year over year.

The experts also note regional divergence: Accordingaccording to the ECB, growth shifted to the industrialized economies and became established there. In contrast, growth in most of the major emerging economies slowed. Weaker domestic demand, limited scope for government stimulus programs, and tougherECB. It cites tight global financing conditions areand declining commodity prices as the reasons cited by the ECB. Additionally, commodity-exporting countries suffered from the sluggish demand on the international commodity markets.causes.

The economy ofFor the Europe, Middle East, and Africa (EMEA) region, was weak in 2013. Annual GDP inthe ECB reports contrasting developments. According to its calculations, the gross domestic product of the euro area declined 0.4% year over year, accordinggrew 1.5% in 2015. It finds that this recovery was mainly due to the numbers published by the ECB.increasing domestic demand. The ECB reports that weak domestic and export demand slowed down economic activity in the largereconomies of Central and Eastern European countries andwere robust, according to the ECB, while Russia although it perceived a more encouraging trend toward the endwas in significant recession.

The economic performance of the year. In comparison, the Middle East and Africa merely experienced a slight deceleration of growth. However, political instability severely hindered economic growth in some countries in the region, notably Iraq and Libya.

In the global context, the economy of the Americas region proved relatively robust,was also uneven. According to the ECB, notes. Despite tax increases and government spending cuts that came into force in March, year-over-year annual growth in the United States was just short of 2% compared to 2012. Growth was fastereconomy firmed in 2015, and weakened slightly only in the second halfthird quarter. However, a number of the year than in the first as conditions on the residential real estate and labor markets improved, consumer spending rose, and exports increased. The ECB reports continuing recoverycountries in Latin America at only a slightly reduced pace.slipped into recession; notably Brazil, where the downturn was mainly due to political uncertainty.

The contrary development of the industrialized and emerging economies was particularly noticeable inIn the Asia Pacific Japan (APJ) region, accordingJapan’s economy struggled to gain momentum in 2015, the ECB. Japan, with its expansive financial and monetary policy, turnedECB notes. However, the ECB also points to positive GDP growth rates and achieved growth of 2%. Onlya slight recovery in the third quarter was thereand signs of growth at the end of the year. China refocused its economy in 2015, easing its monetary policy and introducing a slight dip, caused by weaker exports. Most emerging economiesnew exchange rate regime in Asia performed clearly more subdued than in recent years,the summer, the ECB reports. In China, for instance, only the third quarter saw a slight accelerationThis increased political uncertainty and economic growth slowed. The ECB writes that business-friendly reforms in growth (to 7.8% year over year)India boosted investment and, after a modest stimulus package.temporary decline in the second quarter, led to an increase in economic growth from mid-year onwards.

The IT Market

WorldwideGrowth in the global IT investment growth was higher than overall global economic growth throughout 2013,market slowed from the second quarter of 2015, U.S. market research firm International Data Corporation (IDC) reports. However, that growth slowed duringIt attributes this development to the course ofcontracting PC market, the year. For this reason IDC corrected its projections downward more than once. The main reason for this was slower growthencroachment on traditional IT business by cloud services, and weak economic performance in the emerging economiescountries such as inBrazil, China, and Russia. For that reason the emerging

1

Unless otherwise indicated, all economic information in this section is based on information from the European Central Bank (ECB).

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economies did not grow as quickly as IDC had expectedlowered its forecast for IT market growth in 2015, and at the beginningend of the year.

In 2013,year it expected the global IT market expanded by a percentage in the middleto have grown 4.9% year over year – still ahead of the single-digit range, which was slightly less thaneconomy as a whole.

However, according to IDC, IT spending did not grow evenly across the segments. It pointed to strong growth in the prior year. Leading the way was thecloud, mobile, devices segment,and Big Data, with growth well into the double-digit range. In fact, IDC revised its forecast for the mobile device segment upward several timesservice providers increasing investment in the course of the year. The software segment also outperformed the overall IT market, IDC reports. The PC segment was sluggish the entire year, especially in the emerging economies, where economic growth flagged. Global spending on serversserver and data storage devices contracted. In contrast,hardware. IDC reports that the globalsmartphone market for IT services expanded by a percentageexpansion, which had been rapid in the low single digits.previous year, slowed significantly in 2015 due to saturation. In 2015, the rate of smartphone market growth was closer to that of the IT market as a whole. Even the tablet market was unable to make up for this loss of momentum, IDC notes.

By contrast, worldwide spending on business software increased significantly, at 6.8% in 2015, according to IDC. The share of investment in cloud, mobile, and Big Data solutions continued to increase. However, according to IDC, this had an adverse effect on services, which grew only 2.8%.

IDC reports that IT spending in the Europe, Middle East, and Africa region (EMEA) increased 1.5% in 2015, and by as much as 5% in Western Europe due to the economic recovery there. In Germany, the EMEA region, the Western EuropeanIT market for IT recorded low but stable growth and has now, in IDC’s view, survived the crisis.grew even more strongly at over 6%. In Russia, though, low oil

prices, depreciation of the ruble, and economic development was completely different, according to the IDC. Over the year, it revised its forecast for growth insanctions had a significant negative impact, IDC reports. It expects the Russian IT market downward by several percentage pointsdeclined 15% in light of the weak Russian economy.2015.

In the Americas region, the IT market followedgrew 4.6% according to IDC. In its view, the relatively robust expansion ofU.S. market remained largely stable. It grew 3% overall, somewhat less than in the global economy. Althoughprevious year, mainly due to the economic policy situation wasweakening market for smartphones and tablets. Software, on the other hand, grew strongly at times volatile7% in the United States, according to IDC. In Brazil, IT investment increased 11% in 2015, though this increase has to be seen in the U.S.context of high inflation. IDC put growth in the Mexican IT market largely met expectations.at almost 13%.

In the Asia Pacific Japan (APJ) region, IDC reports that the IT investmentmarket there grew by a percentagealmost 6% in the middle single-digit range2015. The IT markets in individual countries performed very differently. In Japan, IT spending remained constant year over year. The IT market also proved resilientIn China, growth in Latin America, including Brazil, and even recorded double-digit growth.

In the APJ region, the IT market reflected trendsslowed to 8% (2014: 12%). In India, however, in the overall economy. Notably, the IT market in Japan performed better than IDC had originally expected. At the beginning of the year, IDC forecasted a contraction, but in fact over the full year IT investment increased slightly. On the other hand,2015 IT spending in China grew more slowly than IDC had originally expected. Full-year growth was well below the double-digit percentages of recent years.very strongly at 11%, according to IDC.

Impact on SAP

SAP business was only slightly affected by the relatively weakOnce again, growth in 2013 – especially in the first half of the year – in the overall global

economy and in the IT industry: Despiteindustry was relatively slow in a slower than expected startvolatile market environment in 2015. This confronted SAP with considerable challenges. But our tremendous 2015 results validate our strategy of innovating across the core, the cloud, and business networks to help our customers become true digital enterprises. We once again succeeded in significantly expanding our business and outperformed the year, in 2013 our growth surpassed that of theoverall global economy and ofIT industry in all regions in 2015 with regards to revenue growth.

Our non-IFRS cloud and software revenue increased 12% at constant currencies in 2015. Both our core business and our cloud business contributed substantially to the IT industry.

We owe this success first and foremost to our greater focus on innovation strategy andincrease. Our core business grew with it our investment in three new fields of business: mobile solutions, in-memory computing with SAP HANA, and cloud solutions. The heightened pace of innovation at SAP and the rapid and successful integration of the companies we acquired, have been the decisive factors in our achieving double-digit constant currency growth in non-IFRS software and software-related services revenue.

SAPsupport revenue increasing 6% at constant currencies. This was highly successful in the EMEA region. With double-digit growth in revenue from software and cloud subscriptions, we again increased our market share. Alongside double-digit percentage growth in our home market, Germany, we performed remarkably well in France, Russia, the Middle East, and Africa, achieving high double-digit software revenue growth.

Likewise, our Americas region outperformed the overall economy and the IT market. The double-digit increase in revenue from software and cloud subscriptions in 2013 were mainly driven by a substantial – triple-digit – rise4% year-over-year increase in cloud subscriptionour non-IFRS software revenue in North America and very strongat constant currencies, while our resilient constant currency non-IFRS support revenue grew 7%. Support revenue is a robust feature of our core business in Latin America.model because a maintenance contract generally continues for as long as the customer uses the software. Our cloud business growth was strong as well. Non-IFRS cloud subscriptions and support revenue grew 82% over the year at constant currencies.

For more details about our regional performance, see the Revenue by Region section below.

In the APJ region, the economic environment was very weak at the beginning of the year,2015, we again demonstrated that we are consistently pursuing our strategy for innovation and SAP’s revenue suffered during this time as a result. However, the regional economy turned around toward the end of the year, reflected in double-digit growth for our software and cloud subscription revenue in the fourth quarter – a commendable result in the competitive context. This helped return SAPthat globally we are able to modest single-digit revenue growth for the full year in the APJ region.

The emerging economies, with high double-digit growth, are important growth markets for SAP. Key among them are China as well as the Middle East, Russia, and Brazil, where we achieved strongdouble-digit software and cloud subscription revenue growth rates.

Overall, in 2013 we demonstrated an aptitude for globalgenerate growth that few other companies in the IT industrycompanies can match.

 

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REPORT ON ECONOMIC POSITIONPERFORMANCE AGAINST OUTLOOK FOR 2015 (NON-IFRS)

Performance Against Outlook for 2013 (Non-IFRS)

Our 20132015 operating profit-related internal management goals and published outlook were based on our non-IFRS financial measures. For this reason, in thisthe next section we discuss performance against our outlook referring solely to these non-IFRS financial measures. All discussion in the Operating Results (IFRS) section, however, isonly in terms of measuresnon-IFRS numbers derived from IFRS measures. The subsequent section about IFRS operating results discusses numbers only in accordance withterms of the International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB), and(IFRSs). So the numbers in that section are not explicitlyexpressly identified as IFRS measures.numbers.

We acquired Concur Technologies in December 2014, so Concur results are incorporated in our 2014 results only for December. We acquired Fieldglass in May 2014, so Fieldglass results are incorporated in our 2014 results only from May to December. Similarly, because we acquired hybris in August 2013, hybris results are incorporated in our 2013 results only from August to December.

Guidance for 20132015 (Non-IFRS)

At the beginning of 2013,2015, we have givenprojected, based on the guidancestrong momentum in our cloud business, that our softwarenon-IFRS cloud subscriptions and software-related servicesupport revenue (non-IFRS) for 2013 would increase byend between 11%1.95 billion and 13%2.05 billion at constant currencies (2012: €13,246 million)(2014:1.10 billion). For cloud subscription and support revenue (non-IFRS) we forecasted an increase to €750 million (2012:

€342 million)The upper end of this range represents a growth rate of 86% at constant currencies. ForThe acquired companies Concur and Fieldglass were expected to contribute approximately 50 percentage points to this growth. SAP HANA, we estimated aexpected full-year 2015 non-IFRS cloud and software revenue of €650 million to €750 million.increase by 8% to 10% at constant currencies (2014:14.33 billion). We also expected our full-year operating profit (non-IFRS) for 20132015 to beend between €5.855.6 billion and €5.955.9 billion (2012: €5.21(2014:5.64 billion) at constant currencies. We anticipated an effective tax rate (IFRS) of between 25.5%25.0% and 26.5% (2012: 26.2%26.0% (2014: 24.7%) and an effective tax rate (non-IFRS) of between 27.0%26.5% and 28.0% (2012: 27.5% (2014: 26.1%).

In April, we confirmed the guidance for 2013 that we had published in January 2013. In July 2013, we amended our forecast for revenue growth:

Although the difficult macroeconomic environment, in particular in the Asia Pacific Japan region, and the rapid transition to the cloud have resulted in lower software revenue expectations, we remained committed to double-digit growth with at least 10% growth in non-IFRS software and software-related service revenue at constant currencies in full year 2013 (2012: €13,246 million). We confirmed our predictions for cloud subscription and support revenue and for operating profit, while we adjusted the anticipated effective tax rate to between 24.0% and 25.0% (IFRS) and to between 25.5% and 26.5% (non-IFRS).

 

 

To assist in understanding our 20132015 performance as compared to our 20132015 outlook a reconciliation from our IFRS financial measures to our non-IFRS financial measures is provided below. These IFRS financial measures reconcile to the nearest non-IFRS equivalents as follows:

 

€ millions, except
operating margin

 IFRS
Financial
Measure
  Support
Revenue
Not
Recorded
Under
IFRS
  Acquisition-
Related
Charges
  Share-
Based
Compensation
  Restruc-
turing
  Discon-
tinued
Activities
  Non-IFRS
Financial
Measure
  Currency
Effect
on  the
Non-IFRS
Financial
Measure
  Non-IFRS
Financial
Measure at
Constant
Currency
 

Software and software-related service revenue

  13,950    82    NA    NA    NA    NA    14,032    625    14,657  

Total revenue(1)

  16,815    82    NA    NA    NA    NA    16,897    736    17,633  

Operating profit(1)

  4,479    82    555    327    70    1    5,514    388    5,902  

Operating margin in %

  26.6    0.4    3.3    1.9    0.4    0    32.6    0.8    33.5  
millions, except operating
margin
 IFRS
Financial
Measure
  Recurring
Revenue
not
Recorded
Under
IFRS
  Acqui-
sition-
Related
Charges
  

Share-

Based
Payments

  Restruc-
turing
  Non-IFRS
Financial
Measure
  Currency
Effect on
the Non-
IFRS
Financial
Measure
  Non-IFRS
Financial
Measure
at
Constant
Currency
 

Cloud subscriptions and support

  2,286    10    NA    NA    NA    2,296    297    1,999  

Software licenses and support

  14,928    2    NA    NA    NA    14,930    933    13,997  

Cloud and software

  17,214    11    NA    NA    NA    17,226    1,230    15,996  

Total revenue(1)

  20,793    11    NA    NA    NA    20,805    1,505    19,299  

Operating profit(1)

  4,252    11    738    724    621    6,348    443    5,904  

Operating margin (in %)

  20.5    0    3.5    3.5    3.0    30.5    0.1    30.6  

(1)

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

Actual Performance in 2013 Compared to Guidance 2015

(Non-IFRS)

We achieved or exceeded the amended outlook guidance for revenue and operating profit we published in July.

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at the beginning of the year.

Comparison of Forecast and Results for 20132015

 

Forecast for 2013

Results for 2013

Software and software-related service revenue (non-IFRS, at constant currencies)(1)

at least +10%+11%

Cloud subscription and support revenue (non-IFRS, at constant currencies)

around € 750 million€786 million

Operating profit (non-IFRS, at constant currencies)

€5.85 billion to €5.95 billion

€5.90 billion

Effective tax rate (IFRS)(1)

24.0% to 25.0%24.4%

Effective tax rate (non-IFRS)(1)

25.5% to 26.5%25.9%

SAP HANA software revenue (non-IFRS)

€650 million to €700 million€633 million (at actual currencies) €664 million (at constant currencies)

(1)

Revised forecast (July 2013).

    Forecast for 2015   Results for 2015 

Cloud subscriptions and support revenue

   1.95 billion     2.00 billion  

(non-IFRS, at constant currencies)

   to 2.05  billion       

Cloud and software revenue

   +8%     +12%  

(non-IFRS, at constant currencies)

   to +10%       

Operating profit

   5.6 billion     5.90 billion  

(non-IFRS, at constant currencies)

   to 5.9  billion       

Effective tax rate (IFRS)

   25.0%     23.4%  
    to 26.0%       

Effective tax rate (non-IFRS)

   26.5%     26.1%  
    to 27.5%       

 

Despite ongoing economic uncertainty throughout 2013,2015, our new and existing customers continued to show a strong willingness to invest in our solutions.

At constant currencies, non-IFRS cloud subscriptionsubscriptions and support revenue (non-IFRS) grew from €343 million1.1 billion in 20122014 to €786 million2.0 billion in 2013,2015. That represents an increase of 129% before elimination of82% at constant currencies. The increase includes effects relating to acquisitions not included, or not included in full, in the fact2014 amount. Besides these positive acquisition effects our cloud line of business also continued to benefit from strong organic growth (32% at constant currencies), which surpassed our long-term growth expectations for 2015.

Starting with the reporting for the first quarter of 2015, SAP reports a new cloud related measure called “new cloud bookings.” This measure is an order entry measure that is determined by including all order entry of a given period that meets all of the following conditions:

The revenue from the orders is expected to be classified as cloud subscriptions and support revenue.

It results from purchases by new customers and incremental purchases by existing customers. Consequently, orders to renew existing contracts are not included.

The order amount is contractually committed (that is, variable amounts from pay-per-use and similar arrangements are not included). Consequently, due to their uncommitted pay-per-use nature, transaction-

based fees from SAP Ariba and SAP Fieldglass solutions are not reflected in the new cloud bookings metric.

Amounts are annualized. That is, for contracts with durations of more than one year, the average annual order entry amount is included in the number.

Thus, the new cloud bookings measure is an indicator for our cloud-related sales success in a given period and SuccessFactors numbers are included only for partfuture cloud subscriptions revenue. New cloud bookings increased 100% in 2015 to874 million (2014:436 million). Concur contributed169 million to new cloud bookings. In addition to the strong growth of 2012 because theythe new cloud bookings the combination of our cloud backlog (unbilled future revenue based on existing customer contracts) and deferred cloud revenue that together reflect the committed future cloud subscriptions and support revenue climbed by 53% to4.6 billion (2014:3.0 billion). This committed business will drive cloud growth in 2016 and beyond.

Besides the cloud business also our core on-premise business showed an exceptional growth in 2015. Cloud and software revenue (non-IFRS) was17.2 billion (2014:14.3 billion). On a constant currency basis, the increase was 12% and based on that result significantly above the forecast for 2015.

Our total revenue (non-IFRS) rose 18% in 2015 to20.8 billion (2014:17.6 billion). On a constant currency basis, the increase was 10%.

Operating expenses (non-IFRS) in 2015 were acquired14.5 billion (2014:11.9 billion), an increase of 21%. On a constant currency basis the increase was 12%.

Our expense base in 2015 was impacted by the transformation to a fast-growing cloud business resulting in a significant higher share of more predictable revenue. The gross margins of our cloud offerings made good progress throughout 2015. Our gross margin (Non-IFRS) in our business network segment resulted in ~75% for 2015, already close to our long-term ambition of ~80%. This good result is based on an overall improved profitability as well as related to positive effects of the Concur acquisition. The revenue growth of our private cloud offering was more positive than expected. At the same time, the profitability of our private cloud offering could also be improved further; it is still negative but based on the good progress we saw throughout 2015, we expect break even in the course of 2016. Profitability in our public cloud offering was ~70% for 2015 compared to our long-term ambition of ~80%. Our overall cloud gross margin improved year over year from 64.3% in 2014 to 65.6% in 2015, despite incremental investments in the cloud infrastructure. These investments were necessary so as to be able in future periods to satisfy the increased

customer demand that year. Ofcan be seen in the 129% growth, those effects account for 97 percentage points. Our softwaresignificantly higher cloud backlog as well as the increased cloud bookings.

Efficiency improvements in both our core and software-related services revenue grew 11% at constant currencies to €14,657 million (2012: €13,246 million).

The Europe, Middle East, and Africa (EMEA) region recorded strong single-digit growthour cloud business drove absolute operating profit growth. Non-IFRS operating profit in software and cloud subscription revenue2015 was5.904 billion, an increase of 5% at constant currencies. The Americas region, while rapidly shifting to the cloud, achieved very strong growth of 15% in software and cloud subscriptions at constant currencies. After ending the year with a strong fourth quarter, in 2013 the Asia Pacific Japan (APJ) region achieved a 3% constant-currency increase in full-year revenue from software and cloud subscriptions. As a result, in 2013 SAP’s full-year software and cloud subscription revenue increased 6% (11% at constant currencies) to €5,275 million. The acquisitions of SuccessFactors, Ariba, and hybris contributed 2.8 percentage points to the growth in software and software-related service revenue at constant currencies.

At the beginning of 2013, we forecasted low single-digit percentage growth in professional

services and other service revenue and significant increase in total revenue for the year. Although in the event our professional services and other service revenue (non-IFRS) actually decreased by 3% at constant currencies, the strong growth we achieved in software and software-related service revenue (non-IFRS) helped us attain the overall guidance: Total revenue (non-IFRS) increased 8% at constant currencies to €17,633 million (2012: €16,304 million). Our 2013 outlook guidance for SAP HANA software revenue was €650 million to €700 million (2012: €392 million). Because of adverse currency effects, the revenue we achieved was €633 million (€664 million at constant currencies).

In 2013, we achieved operating profit (non-IFRS) of €5,902 million at constant currencies. Thus, operating profit (non-IFRS) at constant currencies was in the middle of the range that SAP had projected (€5.85 billion to €5.95 billion). Despite again investing significantly in innovation, we were able to increase our operating profit by successfully scalingin 2015 reflects the continued success of our cloud business transformation in combination with the strong top-line growth. In 2015, we had a positive impact from our Company-wide transformation program in the triple-digit million euro range. On the other hand, we had a net increase of more than 2,500 employees in 2015 as we continued to invest in innovation and maintaining operational discipline.growth markets. Thus, constant currency non-IFRS operating profit amounting to5.904 billion slightly exceeded the range (5.6 billion to5.9 billion) we had expected in our outlook.

We achieved an effective tax rate (IFRS) of 24.4%23.4% and an effective tax rate (non-IFRS) of 25.9%26.1%, which is withinbelow the updated rangeoutlook of 24.0%25.0% to 25.0%26.0% (IFRS) and 25.5%26.5% to 26.5%27.5% (non-IFRS) we announced in July 2013.. The reduction mainly results from taxes for prior years.

Operating ResultsOPERATING RESULTS (IFRS)

ThisOperating Results section on operating results (IFRS)section discusses results exclusivelyonly in terms of IFRS measures, so the IFRS financial measuresnumbers are not explicitlyexpressly identified as such.

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Item 5

Our 20132015 Results Compared to Our 20122014 Results (IFRS)

Revenue

Revenue

 

€ millions

  2013   2012   Change in %
2013 vs 2012
 

Software

   4,516     4,658     –3

Cloud subscriptions and support

   696     270     158

Software and cloud subscriptions

   5,212     4,928     6

Support

   8,738     8,237     6

Software and software-related service revenue

   13,950     13,165     6

Consulting

   2,242     2,442     –8

Other services

   623     616     1

Professional services and other service revenue

   2,865     3,058     –6

Total revenue

   16,815     16,223     4
millions  2015   2014   Change in % 2015
vs 2014
 

Cloud subscriptions and support

   2,286     1,087     110%  

Software licenses

   4,835     4,399     10%  

Software support

   10,093     8,829     14%  

Software licenses and support

   14,928     13,228     13%  

Cloud and software

   17,214     14,315     20%  

Services

   3,579     3,245     10%  

Total revenue

   20,793     17,560     18%  

 

Total Revenue

Total revenue increased from €16,22317,560 million in 20122014 to €16,81520,793 million in 2013,2015, representing an increase of €5923,233 million, or 4%18%. This growth reflects an 8%a 10% increase from changes in volumes and pricesnew business and a 5% decrease9% increase from currency effects. The growinggrowth in revenue resultresulted primarily from a €4261,264 million rise in support revenue, a1,199 million increase in cloud subscriptionsubscriptions and

support revenue, software license revenue increased436 million and a €501 million rise in support revenue. Consultingservices revenue declinedgrew by €200 million334 million. Cloud and software revenue by €142 million. Software and software-related service revenue climbed to €13,95017,214 million in 2013,2015, an increase of 6%20%. SoftwareCloud and software-related servicesoftware revenue represented 83% of total revenue in 2013 (2012: 81%2015 (2014: 82%). In 2013, consulting and other serviceService revenue contributed €2,865increased 10% from3,245 million in 2014 to our3,579 million, which was 17% of total revenue, representing a drop of 6% compared to 2012.in 2015.

For more information about the breakdown of total revenue by region and industry, see the Revenue by Region and Industry section below.

Cloud and Software and Software-Related Service Revenue

Software licenses revenue results from the fees earned from the saleselling or license oflicensing software to customers. Revenue from cloud subscriptions and support refers to the income earned from contracts that permit the customer to access specific software solutions hosted by SAP during the term of its

contract with SAP. Support revenue represents fees earned from providing customers with technical support services and unspecified software upgrades, updates, and enhancements.enhancements to customers.

In 2013,Cloud subscriptions and support revenue increased from1,087 million in 2014 to2,286 million in 2015.

Despite a combination of a challenging macroeconomic and political environment and the accelerating industry shift to the cloud, we achieved a436 million increase in software license revenue. This increase, from4,399 million in 2014 to4,835 million in 2015, reflects a 4% increase from new license business and software-related servicea 6% increase from currency effects.

Our customer base continued to expand in 2015. Based on the number of contracts concluded, 13% of the orders we received for software in 2015 were from new customers (2014: 12%). The total value of software orders received increased 16% year-over-year. The total number of software license contracts increased 6% to 57,439 (2014: 54,120 contracts), while the average order value increased by 9%. Of all our software orders received in 2015, 27% were attributable to deals worth more than5 million (2014: 22%), while 40% were attributable to deals worth less than1 million (2014: 44%).

Our stable customer relations and continued investment in new software licenses by customers throughout 2015 and the previous year resulted in an increase in software support revenue from8,829 million in 2014 to10,093 million in 2015. The SAP Enterprise Support offering was the largest contributor to our software support revenue. The1,264 million, or 14%, growth in software support revenue reflects a 7% increase from new support business and an 8% increase from currency effects. This growth is primarily attributable to SAP Product Support for Large Enterprises and SAP

Enterprise Support. The acceptance rate for SAP Enterprise Support among new customers slightly increased to 99% in 2015 (2014: 98%).

Software licenses and software support revenue rose1,700 million, or 13%, from13,228 million in 2014 to14,928 million in 2015. This growth breaks down into a 6% increase from new software licenses and software support business and a 7% increase from currency effects.

Cloud and software revenue grew from €13,16514,315 million in 20122014 to €13,95017,214 million in 2015, an increase of 20%. This reflects a 12% increase from new cloud and software business and a 9% increase from currency effects.

Services Revenue

Services Revenue combines revenue from professional services, premium support services, training services, messaging services and payment services. Professional services primarily relate to the installation and configuration of our cloud subscriptions and on-premise software products. Our premium support offering consists of high-end support services tailored to customer requirements. Messaging services are primarily transmission of electronic text messages from one mobile phone provider to another. Payment services are primarily delivered in connection with our travel and expense management offerings.

Services revenue increased334 million, or 10%, from3,245 million in 2014 to3,579 million in 2015. This increase reflects a 2% increase from new services business and an 8% increase from currency effects.

A solid market demand led to an 8% increase of222 million in consulting revenue and premium support revenue from2,634 million in 2014 to2,856 million in 2015. This increase reflects a 0% increase from new business and an 8% increase from currency effects. Consulting and premium support revenue contributed 80% of the total service revenue (2014: 81%). Consulting and premium support revenue contributed 14% of total revenue in 2015 (2014: 15%).

Revenue from other services increased112 million, or 18%, to723 million in 2015 (2014:611 million). This reflects a 9% increase from new business and a 10% increase from currency changes.

Revenue by Region and Industry

Revenue by Region               
millions  2015   2014   Change in % 2015
vs 2014
 

Germany

   2,771     2,570     8%  

Rest of EMEA

   6,409     5,813     10%  

EMEA

   9,181     8,383     10%  

United States

   6,750     4,898     38%  

Rest of Americas

   1,678     1,591     5%  

Americas

   8,428     6,489     30%  

Japan

   667     600     11%  

Rest of APJ

   2,517     2,088     21%  

APJ

   3,185     2,688     18%  

SAP Group

   20,793     17,560     18%  

Revenue by Industry               
millions  2015   2014   Change in % 2015
vs 2014
 

Energy & Natural Resources

   4,834     4,158     16%  

Discrete Manufacturing

   3,672     3,051     20%  

Consumer

   4,934     4,045     22%  

Public Services

   2,174     1,786     22%  

Financial Services

   1,881     1,697     11%  

Services

   3,298     2,824     17%  

Total revenue

   20,793     17,560     18%  

Revenue by Region

EMEA Region

In 2015, the EMEA region generated9,181 million in revenue, which was 44% of total revenue (2014:8,383 million; 48%). This represents a year-over-year increase of 10%. Revenue in Germany increased 8% to2,771 million in 2015 (2014:2,570 million). Germany contributed 30% (2014: 31%) of all EMEA region revenue. The remaining revenue in the EMEA region was primarily generated in France, Italy, the Netherlands, Russia, Switzerland, and the United Kingdom. Cloud and software revenue generated in the EMEA region in 2015 totaled7,622 million (2014:6,819 million). Cloud and software revenue represented 83% of all revenue in the region in 2015 (2014: 81%). Cloud subscriptions revenue rose 83% to507 million in 2015 (2014:277 million). This growth reflects a 69% increase from new cloud business and a 14% increase from currency effects. Software licenses and software support revenue rose 9%

to7,115 million in 2015 (2014:6,542 million). This growth reflects an 8% increase from new software license and software support business and a 1% increase from currency effects.

Americas Region

In 2015, 41% of our total revenue was generated in the Americas region (2014: 37%). Total revenue in the Americas region increased 30% to8,428 million; revenue generated in the United States increased 38% to6,750 million. This growth reflects a 16% increase from new business and a 22% increase from currency effects. The United States contributed 80% (2014: 75%) of all revenue generated in the Americas region. In the remaining countries of the Americas region, revenue increased 5% to1,678 million. This reflects a 3% increase from new business and a 2% increase from currency effects. This revenue was primarily generated in Brazil, Canada, and Mexico. Cloud and software

revenue generated in the Americas region in 2015 totaled6,929 million (2014:5,276 million). Cloud and software revenue represented 82% of all revenue in the Americas region in 2015 (2014: 81%). Cloud subscriptions revenue rose by 123% to1,579 million in 2015 (2014:709 million); currency effects were 34%, growth in new cloud business was 89%. Software licenses and software support revenue rose 17% to5,350 million in 2015 (2014:4,566 million). This growth reflects a 2% increase from new business; currency effects were 15%.

APJ Region

In 2015, 15% (2014: 15%) of our total revenue was generated in the APJ region, with the strongest revenue growth being achieved in India. Total revenue in the APJ region increased 18% to3,185 million. In Japan, revenue increased 11% to667 million. Revenue from Japan was 21% (2014: 22%) of all revenue generated in the APJ region. The revenue growth in Japan was attributable to a 6% increase from new business and a 5% increase from currency effects. In the remaining countries of the APJ region, revenue increased 21%. Revenue in the remaining countries of the APJ region was generated primarily in Australia, China, and India. Cloud and software revenue in the APJ region totaled

2,663 million in 2015 (2014:2,221 million). That was 84% of all revenue from the region (2014: 83%). Cloud subscriptions revenue grew 98% to200 million in 2015 (2014:101 million). This growth reflects an 82% increase from new cloud business and a 17% increase from currency effects. Software licenses and software support revenue increased 16% to2,463 million in 2015 (2014:2,120 million). This increase reflects an 8% increase from new business and an 8% increase from currency effects.

Revenue by Industry

We allocate our customers to one of our industries at the outset of an initial arrangement. All subsequent revenue from a particular customer is recorded under that industry sector.

In 2015, we achieved above-average growth in the following industry sectors, measured by changes in total revenue: Public Services (2,174 million, at a growth rate of 22%); Consumer (4,934 million, at a growth rate of 22%); and Discrete Manufacturing (3,672 million, at a growth rate of 20%). Revenue from the other industry sectors was Services (3,298 million, at a growth rate of 17%); Energy & Natural Resources (4,834 million, at a growth rate of 16%); and Financial Services (1,881 million, at a growth rate of 11%).

Operating Profit and Operating Margin

Total Operating Expenses                         
millions  2015   % of
total
revenue(1)
   2014   % of
total
revenue(2)
   Change in
% 2015 vs
2014
 

Cost of cloud and software

   3,313     16%     2,557     15%     30%  

Cost of services

   3,313     16%     2,716     15%     22%  

Research and development

   2,845     14%     2,331     13%     22%  

Sales and marketing

   5,401     26%     4,304     25%     25%  

General and administration

   1,048     5%     892     5%     17%  

Restructuring

   621     3%     126     1%     >100%  

TomorrowNow and Versata litigation

   0     0%     309     2%     <100%  

Other operating income/expense, net

   1     0%     4     0%     86%  

Total operating expenses

   16,541      80%     13,230     75%     25%  

(1) Total revenue for 2015: 20,793 million.

(2) Total revenue for 2014: 17,560 million.

Operating Profit and Operating Margin               
millions, except for operating margin  2015   2014   Change in % 2015
vs 2014
 

Operating profit

   4,252     4,331     2%  

Operating margin (in %)

   20.5%     24.7%     4.2pp  

SAP continued to invest in innovation and its cloud business and generated record turnover in 2015. The strong growth in revenue, however, also led to an increase in compensation payments to our employees, while the climbing stock price translated into higher share-based payment expenses. As a result, our operating profit declined slightly by 2% to4,252 million (2014:4,331 million).

In 2015, our operating expenses increased3,311 million or 25% to16,541 million (2014:13,230 million). The main contributors to that increase were our acquisition of Concur in December 2014, our greater investment- and revenue-related cloud subscriptions and support costs, our continued investment in sales activities, and higher restructuring expenses.

The effect of acquisition-related expenses, which were738 million (2014:562 million), of restructuring expenses, which were621 million (2014:126 million), and of a724 million expense for share-based payments (2014:290 million) weighed more heavily on operating profit than in the previous year. The record revenue generated increased the cost of bonus payments, and the improving performance of the share price in 2015 pushed share-based payment expenses higher. Continuing investment in the cloud infrastructure, in sales activities around the world, and in research and development also affected operating profit. Our employee headcount (measured in full-time equivalents, or FTEs) increased by 2,579 year-over-year.

These short-term, negative effects on operating profit largely represent investments in the future and were in part offset by the increase in revenue.

The overall result of these effects on operating profit was a 4.2 percentage point narrowing of our operating margin in 2015 to 20.5% (2014: 24.7 %).

Changes to the individual elements in our cost of revenue were as follows:

Cost of Cloud and Software

Cost of cloud and software consists primarily of customer support costs, cost of developing custom solutions that address customers’ specific business requirements, costs for deploying and operating cloud solutions, amortization expenses relating to intangibles,

and license fees and commissions paid to third parties for databases and the other complementary third-party products sublicensed by us to our customers.

In 2015, the cost of cloud and software increased 30% to3,313 million (2014:2,557 million).

Significant costs included an additional539 million year-over-year to extend our cloud business in response to the sustained strength of customer demand, with an associated increase in the expense of delivering and operating cloud applications, a164 million revenue-related increase in the license fees we pay to third parties, and a74 million rise in the cost of providing custom development projects. These investments contributed to revenue growth. Our margin on cloud subscriptions and support narrowed 0.4 percentage points to 55.3% (2014: 55.8%). This decrease was primarily due to increasing expenses related to the extension of our cloud infrastructure. These expenses represent an investment in our fast-growing cloud business of the future, and were in part already offset by a significant increase in cloud subscriptions and support revenue.

The gross margin on cloud and software, defined as cloud and software profit as a percentage of cloud and software revenue, narrowed to 80.8% in 2015 (2014: 82.1%). This change is driven by the revenue mix effect with a rising cloud subscriptions and support revenue share while both cloud subscriptions and support margin as well as software license and support margin only changed marginally.

Cost of Services

Cost of services consists primarily of the cost of consulting, premium services and training personnel and the cost of bought-in consulting and training resources. This item also includes sales and marketing expenses for our services resulting from sales and marketing efforts where those efforts cannot be clearly distinguished from providing the services.

Although we were able to increase our service revenue by 10% year-over-year to3,579 million in 2015 (2014:3,245 million), our service business continues to be greatly affected as we trend away from classic software licensing and consulting revenue toward more subscription revenue from cloud solutions. We are also

investing in our SAP ONE Service organization. As a result, cost of service rose 22% to3,313 million (2014:2,716 million). Our gross margin on services, defined as services profit as a percentage of services revenue, narrowed to 7.4% (2014: 16.3%).

Research and Development Expense

Our research and development (R&D) expense consists primarily of the personnel cost of our R&D employees, costs incurred for independent contractors we retain to assist in our R&D activities, and amortization of the computer hardware and software we use for our R&D activities.

Due to growing personnel costs because of the 11% increase in our headcount by the end of the year, and the revenue-related year-over-year increase in compensation payments, our R&D expense increased by 22% to2,845 million in 2015 from2,331 million in 2014. R&D expense as a percentage of total revenue increased to 13.7% (2014: 13.3%). For more information, see “Item 4. Information About SAP – Products, Research & Development, and Services.”

Sales and Marketing Expense

Sales and marketing expense consists mainly of personnel costs, direct sales costs, and the cost of marketing our products and services.

Our sales and marketing expense rose 25% from4,304 million in 2014 to5,401 million in 2015. The increase was mainly the result of greater personnel costs as we expanded our global sales force, and of increased expenditure for bonus payments prompted by the strong revenue growth. The ratio of sales and marketing expense to total revenue, expressed as a percentage, increased to 26.0% year-over-year (2014: 24.5%), an increase of 1.5 percentage points.

General and Administration Expense

Our general and administration expense consists mainly of personnel costs to support our finance and administration functions.

General and administration expense increased 17% from892 million in 2014 to1,048 million in 2015. That this expense grew less rapidly than revenue is primarily the result of careful cost management. Consequently, the ratio of general and administration expense to total revenue dropped slightly in 2015 to 5.0% (2014: 5.1%).

Segment Information (Non-IFRS)

In 2015, SAP had two reportable segments: the Applications, Technology, and Services segment; and the SAP Business Network segment. These are the components of SAP that our Executive Board regularly reviews to assess the performance of our Company and to make resource allocation decisions.

Revenue and profit figures for each of our operating segments are calculated in line with our internal management reporting and therefore differ from the corresponding revenue and profit in our Consolidated Statements of Income prepared according to IFRS. For more information about our segment reporting, the activities that our two segments derive their revenues from, financial performance measures, and reconciliation from our internal management reporting to our external IFRS reporting, see the Notes to the Consolidated Financial Statements section, Note (28), and the Performance Management System section.

The financial data presented for 2015 contain all revenues and expenses from Concur and Fieldglass, whereas the prior year’s comparison figures only include their financial data as of their respective acquisition dates. Fieldglass was acquired on May 2, 2014; Concur on December 4, 2014.

Applications, Technology & Services Segment

millions, unless otherwise stated  2015   2014   Change in
%
   Change in %
(Constant
Currency)
 
(Non-IFRS)        

Segment revenue

   19,126     16,871     13%     6%  

Gross margin (in %)

   72%     73%     1pp     1pp  

Cloud subscription and support margin (in %)

   53%     55%     2pp     5pp  

Segment profit

   7,918     7,099     12%     4%  

Segment margin (in %)

   41%     42%     1pp     1pp  

In 2015, the Applications, Technology & Services segment revenue increased 13% (6% at constant currencies) to19,126 million (2014:16,871 million).

This increase was driven mainly by strong growth in software support revenue, which increased 14% (7% at constant currencies) to10,061 million and a 10%

increase in software licenses (5% at constant currencies) to4,836 million. As a consequence of continuous strong demand in the human capital management, customer engagement and commerce, and SAP HANA Enterprise Cloud business, cloud subscriptions and support revenue in the Applications, Technology & Services segment grew 64% (45% at constant currencies) to961 million.

The increase of cloud subscriptions and support revenue and software support revenue results in an increasing revenue share of more predictable revenue streams in this segment of 2 percentage points from 56% in 2014 to 58% in 2015. Software license revenue attributable to this segment increased 10% (5% at constant currencies) to4,835 million (2014:4,381 million).

The segment’s cost of revenue during the same time period increased 17% (9% at constant currencies) to

5,343 million (2014:4,564 million). This increase in expenses was primarily the result of greater investment in expanding our cloud infrastructure and in providing and operating our cloud applications, as well as additional personnel expenses to support the growth of the SAP HANA Enterprise Cloud service. The cloud subscriptions and support margin for the segment, therefore, decreased by 2.2 percentage points to 52.9% (50.4% at constant currencies). Segment gross profit increased 12% in 2015 (5% at constant currencies) to13,784 million (2014:12,307 million), which resulted in a decrease of the segment gross margin from 72.9% to 72.1% (72.1% at constant currencies). Segment profit increased 12% (4% at constant currencies) to7,918 million (2014:7,099 million), while the segment margin decreased by 0.7 percentage points to 41.4% (41.3% at constant currencies).

SAP Business Network Segment

millions, unless otherwise stated

 

(Non-IFRS)

  2015   2014   Change in
%
   Change in %
(Constant
Currency)
 

Segment revenue

   1,614     644     150%     116%  

Gross margin (in %)

   67%     66%     1pp     0pp  

Cloud subscription and support margin (in %)

   75%     75%     0pp     1pp  

Segment profit

   312     105     199%     139%  

Segment margin (in %)

   19%     16%     3pp     2pp  

In 2015, revenue from the SAP Business Network segment, which combines all of our business network solutions, increased 150% (116% at constant currencies) to1,614 million (2014:644 million). Concur and Fieldglass, which were acquired in 2014, together contributed909 million (2014:107 million) to the segment’s revenue. SAP internal analyses show that more than US$740 billion in commerce is conducted on the network annually.

The segment’s cost of revenue increased 144% in 2015 (114% at constant currencies) to530 million (2014: 217 million), of which299 million in expenses are attributable to Concur and SAP Fieldglass (2014: 28 million). The cloud subscriptions and support margin for the segment decreased by 0.4 percentage points to 74.9% (74.5% at constant currencies). The SAP Business Network segment achieved a segment gross profit of1,084 million in 2015 (2014:427 million), an increase of 154% (117% at constant currencies). This resulted in an increase of the segment gross margin from 66.3% to 67.2% (66.5% at constant currencies). Segment profit increased 199% year on year

(139% at constant currencies) to312 million (2014:105 million), resulting in an increase in the segment margin of +3.1 percentage points to 19.4% (18.0% at constant currencies).

Financial Income, Net

Financial income, net, changed to5 million (2014:25 million). Our finance income was241 million (2014: 127 million) and our finance costs were246 million (2014:152 million).

Finance income mainly consists of gains from disposal of equity securities and interest income from loans and receivables, financial assets (cash, cash equivalents, and current investments), and income of derivatives.

Finance costs mainly consist of interest expense on financial liabilities (135 million in 2015 compared to93 million in 2014) due to higher average indebtedness and negative effects from derivatives (72 million in 2015 compared to28 million in 2014). For more information about financing instruments, see the Notes to the Consolidated Financial Statements section, Note (17b).

Income Tax

Our effective tax rate decreased to 23.4% in 2015 (2014: 24.7%). The year-over-year decrease in the effective tax rate mainly resulted from changes in taxes for prior

years. For more information on income taxes, see the Notes to the Consolidated Financial Statements section, Note (10).

Our 2014 Results Compared to Our 2013 Results (IFRS)

Revenue

millions  2014   2013   Change in % 2014
vs 2013
 

Cloud subscriptions and support

   1,087     696     56%  

Software licenses

   4,399     4,516     3%  

Software support

   8,829     8,293     6%  

Software licenses and support

   13,228     12,809     3%  

Cloud and software

   14,315     13,505     6%  

Services

   3,245     3,310     2%  

Total revenue

   17,560     16,815     4%  

Total Revenue

Total revenue increased from16,815 million in 2013 to17,560 million in 2014, representing an increase of 6%746 million, or 4%. This software and software-related service revenue growth reflects an 11%a 5% increase from changes in volumes and prices and a 5%1% decrease from currency effects.

Software The growth in revenue resulted primarily from a391 million increase in cloud subscriptions and cloud subscriptionsupport revenue rose from €4,928and a536 million rise in software support revenue. Services revenue declined65 million and software licenses revenue declined117 million. Cloud and software revenue climbed to14,315 million in 2012 to €5,2122014, an increase of 6%. Cloud and software revenue represented 82% of total revenue in 2014 (2013: 80%). Services revenue declined 2% from3,310 million in 2013 representing an increaseto3,245 million, which was 18% of €284total revenue in 2014.

For more information about the breakdown of total revenue by region and industry, see the Revenue by Region and Industry section below.

Cloud and Software Revenue

Software licenses revenue results from the fees earned from selling or licensing software to customers. Revenue from cloud subscriptions and support refers to the income earned from contracts that permit the customer to access specific software solutions hosted by SAP during the term of its contract with SAP. Software support revenue represents fees earned from providing technical support services and unspecified software upgrades, updates, and enhancements to customers.

Cloud subscriptions and support revenue increased from696 million or 6%. This growth consists of an 11% increase from changes in volumes and prices and a 5% decrease from currency effects.2013 to1,087 million in 2014.

A combination of a challenging macroeconomic and political environment in keyRussia, Ukraine, and some Latin American markets and the accelerating industry shift to the cloud resulted in a 2% increase117 million decline in software licenses revenue. That decline, from changes in volumes and prices. There was also a 5% decrease from currency effects. Overall, software revenue declined €142 million or 3% from €4,6584,516 million in 20122013 to €4,5164,399 million in 2013. In 2013, SAP HANA contributed €633 million to total2014, reflects a 3% decrease in new software revenue.business.

Cloud subscription and support revenue increased from €270 million in 2012 to €696 million in 2013. This increase is largely due to the acquisition of Ariba on October 1, 2012, and to continuing strong growth at SuccessFactors and Ariba in 2013.

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Our customer base continued to expand in 2013.2014. Based on the number of contracts concluded, 16%12% of the orders we received for software in 20132014 were from new customers (2012: 19%(2013: 16%). The total value of software orders received fell 7% year over year.declined 3% year-over-year. The total number of software license contracts signed for new software decreased 6%3% to 54,120 (2013: 55,909 (2012: 59,289 contracts), while the average order value decreasedincreased by 1%. Of all our software orders received in 2014, 22% were attributed to deals worth more than5 million (2013: 24%), while 44% were attributed to deals worth less than1 million (2013: 44%).

Our stable customer base, continued investment in software by new and existing customers throughout 20132014 and the previous year, and the continued success of our premium support offerings resulted in an increase in software support revenue from €8,2378,293 million in 20122013 to €8,7388,829 million in 2013.2014. The SAP Enterprise Support services offering was the largest contributor to our support revenue. The €501536 million, or 6%, growth in software support revenue reflects an 11%8% increase from changes in volumes and pricesnew support business and a 5%1% decrease from currency effects. This growth is primarily attributable to SAP Product Support for Large Enterprises and SAP Enterprise Support, and our premium offerings. Accordingly, theSupport. The acceptance rate for SAP Enterprise Support among new customers rose from 96% in 2012 toremained high at 98% in 2013.

Professional Services and Other Service Revenue2014.

Professional services and other service revenue consists primarily of consulting and other service

revenue. We generate most of our consulting

Software licenses and support revenue from the implementation of our software products. Other service revenue consists mainly of revenue from the messaging services acquired from Sybase and of training revenue from educational services supplied to customers and partners on the use of our software products and related topics.

Professional services and other service revenue decreased from €3,058rose419 million, in 2012 to €2,865or 3%, from12,809 million in 2013 representingto13,228 million in 2014. This growth breaks down into a decline4% increase from new business and a 1% decrease from currency effects.

Cloud and software revenue grew from13,505 million in 2013 to14,315 million in 2014, an increase of €1936%. This reflects a 7% increase from new cloud and software business and a 1% decrease from currency effects.

Services Revenue

Services Revenue combines revenue from professional services, premium support services, training services, messaging services and payment services.

Professional services primarily relate to the installation and configuration of our cloud subscriptions and on-premise software products. Our premium support offering consists of high-end support services tailored to customer requirements. Messaging services are primarily transmission of electronic text messages from one mobile phone provider to another. Payment services are delivered in connection with our travel and expense management offerings.

Services revenue decreased65 million, or 6%.2%, from3,310 million in 2013 to3,245 million in 2014. This decline reflects a 3%1% decrease from changes in volumes and pricesnew services business and a 4%1% decrease from currency effects.

Customers’ cautious buying behavior toward large services projects led to a decline in consulting revenue from €2,442 million in 2012 to €2,242 million in 2013, representing a decrease of €200 million, or 8%. This decline reflects a 5% decrease from changes in volumes and prices and a 4% decrease from currency effects. Consulting revenue contributed 78% of the total consulting and other service revenue (2012: 80%). Consulting revenue contributed 13% of total revenue (2012: 15%).

Revenue from other services increased €7 million, or 1%, to €623 million in 2013 (2012: €616 million). This reflects a 5% increase from changes in volumes and prices and a 4% decrease from currency changes.

 

 

Revenue by Region and Industry

Revenue by Region

 

Revenue by Region            

€ millions

  2013   2012   Change in %
2013 vs 2012
   2014   2013   Change in % 2014
vs 2013
 

Germany

   2,505     2,380     5   2,570     2,513     2%  

Rest of EMEA

   5,381     5,106     5   5,813     5,462     6%  

Total EMEA

   7,885     7,486     5

EMEA

   8,383     7,975     5%  

United States

   4,661     4,461     4   4,898     4,487     9%  

Rest of Americas

   1,705     1,639     4   1,591     1,746     9%  

Total Americas

   6,366     6,100     4

Americas

   6,489     6,233     4%  

Japan

   624     789     –21   600     631     5%  

Rest of APJ

   1,939     1,848     5   2,088     1,975     6%  

APJ

   2,563     2,637     –3   2,688     2,606     3%  

SAP Group

   16,815     16,223     4   17,560     16,815     4%  

 

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Revenue by Industry

Revenue by Industry            

€ millions

  2013   2012   Change in %
2013 vs 2012
   2014   2013   Change in % 2014
vs 2013
 

Energy & Natural Resources

   4,077     3,926     4   4,158     4,077     2%  

Discrete Manufacturing

   2,988     3,110     –4   3,051     2,987     2%  

Consumer

   3,779     3,646     4   4,045     3,778     7%  

Public Services

   1,691     1,614     5   1,786     1,691     6%  

Financial Services

   1,633     1,444     13   1,697     1,633     4%  

Services

   2,649     2,484     7   2,824     2,649     7%  

Total revenue

   16,815     16,223     4   17,560     16,815     4%  

 

Revenue by Region

We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA) region, the Americas region, and the Asia Pacific Japan (APJ) region.

We allocate revenue amounts to each region based on where the customer is located. For more information about revenue by geographic region, see the Notes to the Consolidated Financial Statements section, Note (28).

EMEA Region

In 2013,2014, the EMEA region generated €7,8858,383 million in revenue, which was 47%48% of total revenue (2012: €7,486; 46%(2013:7,975; 47%). This represents a year-over-year increase of 5%. Total revenueRevenue in Germany increased 5%2% to €2,5052,570 million in 2013 (2012: €2,3802014 (2013:2,513 million). Germany contributed 32% (2012:31% (2013: 32%) of all EMEA region revenue. The remaining revenue in the EMEA region was primarily generated in the United Kingdom, France, Switzerland,Italy, the Netherlands, Russia, Switzerland, and Italy. Softwarethe United Kingdom. Cloud and software-related servicesoftware revenue generated in the EMEA region in 20132014 totaled €6,5496,819 million (2012: €6,106(2013:6,428 million). SoftwareCloud and software-related servicesoftware revenue represented 83%81% of totalall revenue in 2013 (2012: 82%the region in 2014 (2013: 81%). SoftwareCloud subscriptions and cloud subscriptionsupport revenue rose by 6%58% to €2,233277 million in 2013 (2012: €2,1072014 (2013:176 million). This growth reflects an 8%a 57% increase from changes in volumes and pricesnew cloud business and a 2%1% increase from currency effects. Software licenses and support revenue rose 5% to6,542 million in 2014 (2013:6,252 million). This growth reflects a 5% increase from new business and a 1% decrease from currency effects.

Americas Region

In 2013, 38%2014, 37% of our total revenue was generated in the Americas region (2012: 38%(2013: 37%). Total revenue in the Americas region increased 4% to €6,3666,489 million; revenue generated in the United States increased 4%9% to €4,6614,898 million. This growth reflects an 8% increase from changes in

volumes and pricesnew business and a 4% decrease1% increase from currency effects. The United States contributed 73% (2012: 73%75% (2013: 72%) of all revenue generated in the Americas region. In the remaining countries of the Americas region, revenue climbed 4%declined 9% to reach €1,7051,591 million. This growth reflects a 13% increase from changes5% decrease in volumes and pricesnew business and a 9%4% decrease from currency effects. This revenue was principally generated in Brazil, Canada, and Mexico. SoftwareCloud and software-related servicesoftware revenue generated in the Americas region in 20132014 totaled €5,1965,276 million (2012: €4,820(2013:4,922 million). TotalCloud and software and software-related service revenue represented 82%81% of all revenue in the Americas region in 2013 (2012:2014 (2013: 79%). SoftwareCloud subscriptions and cloud subscriptionsupport revenue rose by 11%55% to €2,130709 million in 2013 (2012: €1,9202014 (2013:457 million); currency effects were 0%. Software licenses and support revenue rose 2% to4,566 million in 2014 (2013:4,465 million). This growth reflects a 17%3% increase from changes in volumes and prices and a 6% decrease fromnew business; currency effects.effects were almost 0%.

APJ Region

APJ Region

In 2013,2014, 15% (2012: 16%(2013: 15%) of our total revenue was generated in the APJ region, with the strongest revenue growth being achieved in China.Australia. Total revenue in the APJ region decreased byincreased 3% to €2,5632,688 million. In Japan, revenue fell by 21%decreased 5% to €624 million, which represents600 million. Revenue from Japan was 22% (2013: 24% (2012: 30%) of the totalall revenue generated in the APJ region. This dropThe decline in revenue isfrom Japan was attributable in full, to a 2% increase from new business and a 7% decrease from currency effects. In the remaining countries of the APJ region, revenue increased by 5%6%. Revenue in the remaining countries of the APJ region was generated primarily in Australia, China, and India. SoftwareCloud and software-related servicesoftware revenue generated in the APJ region totaled2,221 million in 2013 totaled €2,204 million (2012: €2,2392014 (2013:2,155 million). That was 86%83% of totalall revenue (2012: 85%from the region (2013: 83%). SoftwareCloud subscriptions and cloud subscriptionsupport revenue fell by 6%grew 59% to €849101 million in 2013 (2012: €9012014 (2013:64 million). This growth reflects a 60% increase from new cloud business and a 1% decrease from currency effects. Software licenses and support revenue increased 1% to2,120 million in 2014 (2013:2,092 million). This increase reflects a 4% increase from changes in volumes and pricesnew business and a 10%2% decrease from currency effects.

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Revenue by Industry

With effect from January 2013, we rearranged our industry sectors from nine groups into six so that we could focus better on the requirements of existing and potential customers.

We merged one of our existing industry sectors, process manufacturing – which covers the chemicals and mill products industries – with the energy and natural resources industry sector. We combined our former consumer products and the retail and wholesale distribution industry sector into the consumer sector. The healthcare and life sciences, (medical and pharmaceutical) industries, which were previously grouped together under the healthcare sector, now belong to the public services or consumer industry sectors, respectively. To address the changing needs of our customers, a new industry subgroup was

established, sports and entertainment, which is part of the professional services sector.

We allocate our customers to one of our industries at the outset of an initial arrangement. All subsequent revenue from a particular customer is recorded under that industry sector.

In 2013,2014 we achieved above-average growth in the following industry sectors, measured by changes in total revenue: Financial Services (€1,633 million, at a growth rate of 13%), Services (€2,649(2,824 million, at a growth rate of 7%), Public Services (€1,691; Consumer (4,045 million, at a growth rate of 5%7%),; Public Services (1,786 million, at a growth rate of 6%); and Energy and Natural Resources (€4,077Financial Services (1,697 million, at a growth rate of 4%). The revenueRevenue from the other industry sectors: Consumer €3,779Energy and Natural Resources (4,158 million, which wasat a 4% improvement on the prior year;growth rate of 2%); and Discrete Manufacturing €2,988(3,051 million, which wasat a 4% decline mainly related to APJ and the Americas.growth rate of 2%).

 

Operating Profit and Operating Margin

Total Operating Expenses

€ millions

 2013  % of  total
revenue(1)
  2012  % of  total
revenue(2)
  Change in %
2013 vs 2012
 

Cost of software and software-related services

  –2,597    15%    –2,555    16%    2%  

Cost of professional services and other services

  –2,402    14%    –2,520    16%    –5%  
Research and development  –2,282    14%    –2,261    14%    1%  
Sales and marketing  –4,131    25%    –3,912    24%    6%  
General and administration  –866    5%    –949    6%    –9%  
Restructuring  –70    0%    –8    0%    <100%  
TomorrowNow litigation  0    0%    0    0%    <-100%  
Other operating income/expense, net  12    0%    23    0%    –46%  
Total operating expenses  –12,336    73%    –12,181    75%    1%  

(1)

Total revenue for 2013: € 16,815 million.

(2)

Total revenue for 2012: € 16,223 million.

Operating Profit and Operating Margin

 

€ millions, except for operating margin

 2013   2012   Change in %
2013 vs 2012
 

Operating profit

  4,479     4,041     11%  

Operating margin (in %)

  26.6%     24.9%     1.7pp  
Total Operating Expenses                         
millions  2014   % of
total
revenue(1)
   2013   % of
total
revenue(2)
   Change
in % 2014
vs 2013
 

Cost of cloud and software

   2,557     15%     2,370     14%     8%  

Cost of services

   2,716     15%     2,660     16%     2%  

Research and development

   2,331     13%     2,282     14%     2%  

Sales and marketing

   4,304     25%     4,131     25%     4%  

General and administration

   892     5%     866     5%     3%  

Restructuring

   126     1%     70     0%     80%  

TomorrowNow and Versata litigation

   309     2%     31     0%     <100%  

Other operating income/expense, net

   4     0%     12     0%     65%  

Total operating expenses

   13,230      75%     12,336     73%     7%  

(1) Total revenue for 2014:17,560 million.

(2) Total revenue for 2013:16,815 million.

Operating Profit and Operating Margin               
millions, except for operating margin  2014   2013   Change in
% 2014 vs
2013
 

Operating profit

   4,331     4,479     3%  

Operating margin (in %)

   24.7%     26.6%     2.0pp  

 

In 2013, our operating profit totaled €4,479 million (2012: €4,041 million), a significant year-over-year increase despite adverse currency effects. We invested2014, SAP continued to invest in innovationsinnovation and made substantial advances in the cloud business. In addition and among other influences, negative currency effects and the difficult economic situation in Latin America and Russia affected our cloud businessprofitability. As a result, our operating profit in 2013.2014 was4,331 million, a little less than in the previous year (2013:4,479 million).

In 2013,2014, our operating expenses increased €155894 million or 1%7% to €12,33613,230 million (2012: €12,181(2013:12,336 million). The main contributorsincrease relates primarily to that increase were our greater acquisition-relatedan expense in connection with the TomorrowNow and Versata litigation, restructuring expenses, continuedcosts, continuing investment in our sales activitiesorganization, and the cloud, and highera rise in personnel and infrastructure expenses related to acquisitions.

costs, especially for our cloud business.

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The effect of acquisition-related expenses, which were €555562 million (2012: €537(2013:555 million), andof restructuring expenses, which were €70126 million (2012: €8(2013:70 million), and of a309 million expense relating to the TomorrowNow and Versata litigation weighed more heavily on operating profit was greater than in the priorprevious year. The operating profit for 2013 wasContinuing investment in sales activities around the world and in the cloud also affected by continued investments in global sales activities and cloud computing. The number of SAP employees (expressedoperating profit. Our

employee headcount (measured in full-time equivalents, or FTEs) rose year over year by 2,150 persons, includingincreased 7,834 year-over-year. Acquisitions accounted for more than 1,100 employees from acquired businesses.5,500 of the added FTEs.

Those negative effects on operating profit were in part offset by athe reduced expense forcost of share-based payment, which totaled €327compensation programs totaling290 million in 2013 (2012: €522(2013:327 million) owing to a less steep increase inresulting from the SAPdeclining year-over-year performance of the stock price, and by a reductionsavings in our general and administration expense.costs.

As anThe overall result of these effects on operating profit was a 2.0 percentage point narrowing of our operating margin widened 1.7 percentage pointsin 2014 to 24.7% (2013: 26.6% in 2013 (2012: 24.9%).

The sections that follow discussChanges to the individual elements in our costs by line item.cost of revenue were as follows:

Cost of SoftwareCloud and Software-Related ServicesSoftware

Cost of softwarecloud and software-related servicessoftware consists primarily of customer support costs, cost of developing custom solutions that address customers’ specific business requirements, costs for deploying and operating cloud solutions, amortization expenses relating to intangibles,

and license fees and commissions paid to third parties for databases and the other complementary third-party products sublicensed by us to our customers.

In 2013,2014, the cost of cloud and software increased 8% to2,557 million (2013:2,370 million).

Significant costs included an additional180 million to extend our cloud business, especially outside the United States, with an associated increase in the expense of delivering and software-related services increasedoperating cloud applications, and a modest 2% to €2,59734 million (2012: €2,555 million). The main factors were a €95 million acquisition-related increaserise in the cost of providing and operating our cloud solutions and a €13 million increase in customer support costs.support. They both represent investments that contributed to revenue growth. Our margin on cloud subscriptions and support widened 0.9 percentage points to 55.8% (2013: 54.8%). This improvement in margin was achieved primarily through strong growth in our cloud subscriptions and support revenue despite the increased expense we incurred to extend our cloud infrastructure. At the same time, the license fees we pay to third parties decreased by €6349 million.

The gross margin on our softwarecloud and software-related services,software, defined as softwarecloud and software-related servicessoftware profit as a percentage of softwarecloud and software-related servicessoftware revenue, remained constant year over yearyear-over-year at 82% in 2013 at 81% (2012: 81%2014 (2013: 82%).

Cost of Professional Services and Other Services

Cost of professional services and other services consists primarily of the cost of consulting, premium services and training personnel and the cost of bought-in third-party consulting and training resources. This item also includes sales and marketing expenses for our professional services and other services resulting from sales and marketing efforts where those efforts cannot be clearly distinguished from providing the professional servicesservices.

Our consulting business is being greatly affected as we trend away from classic software licensing and other services.

The growth ofconsulting revenue toward more subscription revenue from cloud solutions. As a result, our cloud business and increased demand for pre-bundled offerings led to a reduction in our professional and other services revenue as well as indecreased while our professional and other services expense. We reduced costs for professional and other services 5%expense increased by 2% from €2,5202,660 million in 20122013 to €2,4022,716 million in 2013.2014. Our gross margin on professional and other services, defined as professional and other services profit as a percentage of professional and other services revenue, narrowed to 16% (2012: 18%(2013: 20%).

Research and Development Expense

Our research and development (R&D) expense consists primarily of the personnel cost of our R&D employees, costs incurred for independent contractors we retain to assist in our R&D activities, and depreciationamortization of the computer hardware and software we use for our R&D activities.

We acquired Ariba and SuccessFactorsAlthough our personnel costs grew because of the 6% increase in our headcount by the courseend of 2012, so in 2012the year, our R&D expense did not include a full year’s Ariba and SuccessFactors R&D. Moreover, the depreciation expense for R&D servers and computer systems was greater in 2013 than in 2012. Nonetheless, our total R&D expense increased only slightly, by 1%2% to €2,2822,331 million (2012: €2,261 million). Therefore, while we continue to increase our innovative capacity ourin

2014 from2,282 million in 2013. R&D expense as a percentage of total revenue was slightly less year over yearyear-over-year at 13.3% (2013: 13.6% (2012: 13.9%). For more information, see the“Item 4. Information About SAP – Products, Research & Development, and Development section.Services.”

Sales and Marketing Expense

Sales and marketing expense consists mainly of personnel costs, and direct sales expense to support our salescosts, and marketing teams in selling andthe cost of marketing our products and services.

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Our sales and marketing expense rose 6%4% from €3,9124,131 million in 20122013 to €4,1314,304 million in 2013.2014. The increase was mainly the result of greater personnel costs as we expanded our global sales force notably for cloud business, and of the reallocation and re-tasking of employees to sales-related work. By increasing our sales force we accelerated our revenue growth. The ratio of sales and marketing expense to total revenue, expressed as a percentage, increaseddecreased slightly to 24.5% year-over-year (2013: 24.6% (2012: 24.1%) because costs grew moreless rapidly than revenue.

General and Administration Expense

Our general and administration expense consists mainly of personnel costs to support our finance and administration functions.

General and administration expense decreased 9%increased 3% from €949866 million in 20122013 to €866892 million in 2013. This resulted mainly from a reduced expense for share-based payment and efficient2014. That this increase was modest compared to the growth in our revenue is primarily the result of careful cost management. Consequently, theThe ratio of

general and administration expense to total revenue decreasedwas unchanged in 2013 to2014 at 5% (2012: 6%).

Results by Segment

We had two divisions in 2013, On-Premise and Cloud, each further divided into operating segments. Our On-Premise division comprises two operating segments: On-Premise Products and On-Premise Services. Our Cloud division also comprises two operating segments: Cloud Applications and Ariba.

The revenue and profit numbers for each of our operating segments relate to our internal management reporting and differ from the revenue and profit numbers presented in our IFRS Consolidated Statements of Income. For more information about our segment reporting and reconciliation from our internal management reporting to our external IFRS reporting, see the Notes to the Consolidated Financial Statements section, Note (28).

€ millions, unless otherwise stated

  2013   2012   Change in %
2013 vs 2012
 

On-Premise Products Segment

      

Total revenue

   13,227     12,881     3  

Cost of revenue

   –2,020     –1,994     1  

Gross profit

   11,207     10,887     3  

Cost of sales and marketing

   –3,447     –3,414     1  

Reportable segment profit/loss

   7,760     7,473     4  

Segment profitability

   59%     58%    

On-Premise Services Segment

      

Total revenue

   2,695     2,967     –9  

Cost of revenue

   –2,134     –2,306     –7  

Gross profit

   562     661     –15  

Cost of sales and marketing

   0     0     0  

Reportable segment profit/loss

   562     661     –15  

Segment profitability

   21%     22%    

Cloud Applications Segment

      

Total revenue

   514     336     53  

Cost of revenue

   –178     –163     9  

Gross profit

   336     173     94  

Cost of sales and marketing

   –328     –231     42  

Reportable segment profit/loss

   8     –59     <–100  

Segment profitability

   2%     –17%    

Ariba Segment

      

Total revenue

   461     120     >100  

Cost of revenue

   –180     –72     >100  

Gross profit

   281     49     >100  

Cost of sales and marketing

   –151     –43     >100  

Reportable segment profit/loss

   130     5     >100  

Segment profitability

   28%     5%    

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On-Premise Division

The On-Premise division derives its revenue primarily from the sale of on-premise software (that is, software designed for installation on the customer’s hardware) and mobile software (that is, software designed for use on mobile devices) as well as services relating to such software.

On-Premise Products Segment

The On-Premise Products segment is primarily engaged in marketing and licensing our on-premise and mobile software products and providing support services for them.

On-Premise Products segment revenue grew 3% from €12,881 million in 2012 to €13,227 million in 2013. This increase reflects a 7% increase from changes in volumes and prices and a 4% decrease from currency effects. The increase resulted principally from growth in support revenue, which more than offset a slight decline in software solution licensing. Software revenue attributable to our On-Premise Product segment declined 3% to €4,517 million (2012: €4,656 million). The decline reflects a 2% increase from changes in volumes and prices and a 5% decrease from currency effects. Support revenue grew 6% to €8,710 million (2012: €8,226 million). This increase reflects a 10% increase from changes in volumes and prices and a 4% decrease from currency effects.

In 2013, cost of revenue increased 1% to €2,020 million (2012: €1,994 million) and sales and marketing costs grew 1% to €3,447 million (2012: €3,414 million). The moderate increase in expenses in theOn-Premise Products segment was the result of greater investment in providing and operating our Cloud solutions in response to growing demand in 2013.

On-Premise Products segment profit rose 4% to €7,760 million (2012: €7,473 million) and the associated segment profitability was 59% (2012: 58%).

On-Premise Services Segment

The On-Premise Services segment performs various professional services, primarily supporting the implementation of our software products and providing education services concerning the use of those software products.

On-Premise Services segment revenue decreased 9% from €2,967 million in 2012 to €2,695 million in 2013. This reduction in revenue reflects a 6% decrease from changes in volumes and prices and a 3% decrease from currency effects. Our cloud business grew more quickly than our business as a whole, and demand for preconfigured solutions increased. As expected, this led to a decrease in both, revenue from consulting and education services and in the expense of providing them.

Accordingly, cost of revenue in the On-Premise Services segment decreased 7% to €2,134 million in 2013 (2012: €2,306 million).

On-Premise Services segment profit declined 15% to €562 million (2012: €661 million). Segment profitability was 21% (2012: 22%).

Cloud Division

Our Cloud division earns revenue by providing software for customers to use in the cloud and by providing services relating to that software.

Driven by the acquisition of SuccessFactors in the first quarter of 2012 and Ariba in the final quarter of 2012, SAP developed a strong cloud momentum that continued in 2013. Our Cloud division revenue run rate reached €1,063 million (end of 2012: €848 million), based on annualized fourth-quarter revenue. The annualized revenue is the overall 2013 fourth-quarter revenue from the Cloud division of €266 million (2012: €212 million), multiplied by four.

The cloud revenue reflects only the portion of customer orders already recognizable in revenue. In contrast, the portion of customer orders already invoiced for that refers to services that have not yet been delivered and is as such not recognizable in revenue is reflected in deferred cloud revenue. Orders placed by the customers, which have not yet been delivered and not yet been invoiced are included in the Backlog performance indicator.

Non-IFRS deferred cloud subscription and support revenue was €447 million on December 31, 2013 (December 31, 2012: €358 million), a year-over-year increase of 25%. Our cloud subscription and support backlog increased 50% to €1,202 million on December 31, 2013 (December 31, 2012: approximately €800 million).

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Cloud Applications Segment

The Cloud Applications segment is primarily engaged in marketing and selling subscriptions to cloud software developed by SAP and SuccessFactors.

In 2013, revenue from the Cloud Applications segment grew 53% to €514 million (2012: €336 million). This increase reflects a 57% increase from changes in volumes and prices and a 4% decrease from currency effects. Greater customer demand for cloud applications led to the steep rise in revenue in 2013.

In 2013, cost of revenue increased 9% to €178 million (2012: €163 million) and sales and marketing costs grew 42% to €328 million (2012: €231 million). These costs rose in the Cloud Applications segment principally as a result of increased business activity in response to greater customer demand for cloud applications in 2013.

Cloud Applications segment profit grew to €8 million (2012: –€59 million loss). Segment profitability was 2% (2012: –17%).

Ariba Segment

The Ariba segment is primarily engaged in marketing and selling subscriptions to cloud software developed by Ariba for its business commerce network. While this segment is named Ariba, it is not identical to the acquired Ariba business because certain SAP activities have been transferred to our Ariba segment.

The numbers for the Ariba segment include the acquired Ariba company numbers as of October 1, 2012, as well as the numbers for those SAP activities that were allocated to the Ariba segment upon its establishment.

In 2013, revenue from the Ariba segment grew 283% to €461 million (2012: €120 million). This increase reflects a 299% increase from changes in volumes and prices and a 16% decrease from currency effects. It results mainly from the fact that only fourth-quarter Ariba revenue is included in the 2012 numbers.

In 2013, cost of revenue increased 151% to €180 million (2012: €72 million) and sales and marketing costs grew 250% to €151 million (2012: €43 million). The expense rise in the Ariba segment is mainly due to the fact that Ariba was acquired in the final quarter of 2012.

Ariba segment profit was €130 million (2012: €5 million). Segment profitability was 28% (2012:(2013: 5%).

Financial Income, Net

Financial income, net, changed to –€66 million (2012: –€72 million). Our finance income was €115 million (2012: €103 million) and our finance costs were €181 million (2012: €175 million).

Finance income mainly consists of interest income from loans and financial assets (cash, cash equivalents, and current investments), which was €37 million in 2013 (2012: €45 million). This decrease is attributable to a lower average liquidity and lower interest rates than in 2012.

Finance costs mainly consist of interest expense on financial liabilities (€131 million in 2013 compared to €130 million in 2012) and remained virtually stable year over year. For more information about these financing instruments, see the Notes to the Consolidated Financial Statements section, Note (17b).

Another factor in financial income, net, in 2013 was the derivatives we utilize to execute our financial risk management strategy. The associated time value effects from derivatives were reflected in interest income of €32 million (2012: €27 million) and interest expenses of €23 million (2012: €28 million).

Income Tax

Our effective tax rate decreased to 24.4% in 2013 (2012: 26.2%). The reason for the year-over-year decrease mainly resulted from prior year taxes. For more information, see the Notes to the Consolidated Financial Statements section, Note (10).

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Our 2012 Results Compared to Our 2011 Results (IFRS)

RevenueSegment Information (Non-IFRS)

Revenue

€ millions

  2012   2011   Change in %
2012 vs 2011
 

Software

   4,658     4,107     13

Cloud subscriptions and support

   270     18     1371

Software and cloud subscriptions

   4,928     4,125     19

Support

   8,237     7,194     15

Software and software-related service revenue

   13,165     11,319     16

Consulting

   2,442     2,341     4

Other services

   616     573     8

Professional services and other service revenue

   3,058     2,914     5

Total revenue

   16,223     14,233     14

Total Revenue

Our revenue increased from €14,233 million in 2011 to €16,223 million in 2012, representing an increase of €1,990 million or 14%. This total revenue growth reflects a 10% increase from changes in volumes and prices and a 4% increase from currency effects. The revenue growth is due primarily to an increase in software revenue of €551 million, an increase in cloud subscriptions and support revenue of €252 million, and an increase in support revenue of €1,043 million. In 2012, software and software-related service revenue totaled €13,165 million as a result of this increase. Software and software-related service revenue represented 81% of total revenue in 2012 (2011: 80%). In 2012, professional services and other service revenue contributed €3,058 million to our total revenue, representing an increase of 5% compared to 2011.

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

Software and Software-Related Service Revenue

Software revenue represents fees earned from the sale or license of software to customers. Cloud subscriptions and support revenue relates to contracts which permit the customer to access specificSAP-hosted software solutions during the contract period. Support revenue represents fees earned from providing customers with technical support services and unspecified software upgrades, updates, and enhancements.

Software and software-related service revenue increased from €11,319 million in 2011 to €13,165 million in 2012, representing an increase of 16%. The software and software-related service revenue growth reflects a 12% increase from changes in volumes and prices and a 4% increase from currency effects.

Software and cloud subscriptions revenue increased from €4,125 million in 2011 to €4,928 million in 2012, representing an increase of €803 million or 19%. This growth consists of a 16% increase from changes in volumes and prices and a 3% increase from currency effects.

Software revenue increased from €4,107 million in 2011 to €4,658 million in 2012, representing an increase of €551 million or 13%. This growth consists of a 10% increase from changes in volumes and prices and a 3% increase from currency effects. SAP HANA contributed €392 million to software revenue in 2012.

Cloud subscriptions and support revenue increased from €18 million in 2011 to €270 million in 2012. This growth is largely due to the acquisitions of SuccessFactors and Ariba.

Our customer base continued to expand in 2012. Based on the number of contracts concluded, 19% of the orders we received for software in 2012 were from new customers (2011: 19%). The total value of software orders received grew 20% year over year. The total number of contracts signed for new software decreased 4% to 59,289 contracts (2011: 61,474 contracts), whereas the average order value went up 25%.

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Our stable customer base and the continued investment in software by new and existing customers throughout 2012 and the previous year resulted in an increase in support revenue from €7,194 million in 2011 to €8,237 million in 2012. The SAP Enterprise Support service was the largest contributor to our support revenue. The €1,043 million or 15% increase in support revenue reflects a 11% increase from changes in volumes and prices and a 4% increase from currency effects. This growth is primarily attributable to our premium offerings and SAP Enterprise Support. According to that, the SAP Enterprise Support acceptance rate for net-new customers increased from 88% in 2011 to 96% in 2012.

Professional Services and Other Service Revenue

Professional services and other service revenue consists primarily of consulting and other service revenue. We generate most of our consulting revenue from the implementation of our software products. Other service revenue consists mainly of revenue from the messaging services acquired from Sybase, as well as training revenue from

providing educational services to customers and partners on the use of our software products and related topics.

Professional services and other service revenue increased from €2,914 million in 2011 to €3,058 million in 2012, representing an increase of €144 million or 5%. This growth reflects a 1% increase from changes in volumes and prices and a 4% increase from currency effects.

Consulting revenue increased from €2,341 million in 2011 to €2,442 million in 2012, representing an increase of €101 million or 4%. The growth resulted entirely from currency effects. Consulting revenue contributed 80% of professional services and other service revenue (2011: 80%). Consulting revenue contributed 15% of total revenue in 2012 (2011: 16%).

Other service revenue increased from €573 million in 2011 to €616 million in 2012, representing an increase of 8%. This growth reflects a 5% increase from changes in volumes and prices and a 3% increase from currency effects. The increase is due mainly to higher revenues from messaging services.

Revenue by Region and Industry

Revenue by Region

€ millions

  2012   2011   Change in %
2012 vs 2011
 

Germany

   2,380     2,347     1

Rest of EMEA

   5,106     4,644     10

Total EMEA

   7,486     6,991     7

United States

   4,461     3,699     21

Rest of Americas

   1,639     1,392     18

Total Americas

   6,100     5,091     20

Japan

   789     652     21

Rest of APJ

   1,848     1,499     23

APJ

   2,637     2,151     23

SAP Group

   16,223     14,233     14

Revenue by Industry

€ millions

  2012   2011   Change in %
2012 vs 2011
 

Energy & Natural Resources

   3,926     3,461     13

Discrete Manufacturing

   3,110     2,617     19

Consumer

   3,646     3,215     13

Public Services

   1,614     1,553     4

Financial Services

   1,444     1,196     21

Services

   2,484     2,190     13

Total revenue

   16,223     14,233     14

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Revenue by Region

We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA) region, the Americas region, and the Asia Pacific Japan (APJ) region. We allocate revenue amounts to each region based on where the customer is located. For more information about revenue by geographic region, see the Notes to the Consolidated Financial Statements section, Note (28).

The EMEA Region

In 2012, the EMEA region generated €7,486 million in revenue (2011: €6,991 million) or 46% of total revenue (2011: 49%). This represents a year-over-year increase of 7%. Total revenue in Germany increased 1% to €2,380 million in 2012 (2011: €2,347 million). Germany contributed 32% (2011: 34%) of all EMEA region revenue. The remaining revenue in the EMEA region was primarily generated in France, Italy, the Netherlands, Russia, Switzerland, and the United Kingdom. Software and software-related service revenue generated in the EMEA region in 2012 totaled €6,106 million (2011: €5,529 million). Software and software-related service revenue represented 82% of total revenue in 2012 (2011: 79%). Software and cloud subscription revenue increased 13% in 2012 to €2,107 million (2011: €1,864 million). This growth reflects a 12% increase from changes in volumes and prices and a 1% increase from currency effects.

The Americas Region

In 2012, 38% of our total revenue was generated in the Americas region (2011: 36%). Total revenue in the Americas region increased 20% to €6,100 million; revenue generated in the United States increased 21% to €4,461 million. This growth reflects a 12% increase from changes in volumes and prices and a 9% increase from currency effects. The United States contributed 73% (2011: 73%) of all Americas region revenue. In the remaining countries of the Americas region, revenue increased 18% to €1,639 million. This growth reflects a 17% increase from changes in volumes and prices and a 1% increase from currency effects. This revenue was principally generated in Brazil, Canada, and Mexico. Software and software-related service revenue generated in the Americas region in 2012 totaled €4,820 million (2011: €3,958 million). Software

and software-related service revenue represented 79% of all revenue in the Americas region in 2012 (2011: 78%). Software and cloud subscription revenue increased 25% in 2012 to €1,920 million (2011: €1,540 million). This growth reflects a 19% increase from changes in volumes and prices and a 6% increase from currency effects.

The APJ Region

In 2012, 16% (2011: 15%) of our total revenue was generated in the APJ region, with Japan recording the largest revenue increase. Total revenue in the APJ region increased 23% to €2,637 million. In Japan, total revenue increased 21% to €789 million in 2012, representing a 30% contribution to all revenue generated across the APJ region (2011: 30%). The revenue rise in Japan reflects a 13% increase due to changes in volumes and prices and an 8% increase from currency effects. In the remaining countries of the APJ region, revenue increased 23%. Revenue in the remaining countries of the APJ region was generated primarily in Australia, China, and India. Software and software-related service revenue generated in the APJ region in 2012 totaled €2,239 million (2011: €1,832 million). In 2012, as in the prior year, software and software-related service revenue represented 85% of all revenue. Software and cloud subscription revenue increased 25% in 2012 to €901 million (2011: €722 million). This growth reflects a 20% increase from changes in volumes and prices and a 5% increase from currency effects.

Revenue by Industry

We allocate our customers to one of our industries at the outset of an initial arrangement. All subsequent revenue from a particular customer is recorded under that industry sector.

To help us better meet the requirements of existing and potential customers, we restructured our industry groups in 2013, and now serve six sectors rather than nine as in 2012. Accordingly we have adjusted our 2012 to 2011 comparison to six industry sectors.

In 2012, we achieved above-average growth in the following sectors, measured by changes in total revenue: Financial Services (€1,444 million, at a growth rate of 21%) and Discrete Manufacturing (€3,110 million, at a growth rate of 19%). Results from the other sectors were as follows: Services (€2,484 million, at a growth rate of 13%); Energy

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and Natural Resources (€3,926 million, at a growth rate of 13%); Consumer (€3,646 million,

at a growth rate of 13%); and Public Services (€1,614 million, at a growth rate of 4%).

Operating Profit and Operating Margin

Total Operating Expenses

€ millions

  2012   % of  total
revenue(1)
   2011   % of  total
revenue(2)
   Change in %
2012 vs 2011
 

Cost of software and software-related services

   –2,555     16%     –2,107     15%     21%  

Cost of professional services and other services

   –2,520     16%     –2,247     16%     12%  

Research and development

   –2,261     14%     –1,935     14%     17%  

Sales and marketing

   –3,912     24%     –3,083     22%     27%  

General and administration

   –949     6%     –715     5%     33%  

Restructuring

   –8     0%     –4     0%     >100%  

TomorrowNow litigation

   0     0%     717     5%     –100%  

Other operating income/expense, net

   23     0%     25     0%     –9%  

Total operating expenses

   –12,181     75%     –9,348     66%     30%  

(1)

Total revenue for 2012: € 16,223 million.

(2)

Total revenue for 2011: € 14,233 million.

Operating Profit and Operating Margin

€ millions, except for operating margin

  2012   2011   Change in %
2012 vs 2011
 

Operating profit

   4,041     4,884     –17%  

Operating margin (in %)

   24.9%     34.3%     –9.4pp  

In 2012, our operating profit totaled €4,041 million (2011: €4,884 million), a significant year-over-year decrease. A year-on-year comparison of operating profit is only possible to a limited extent, because of the release of the TomorrowNow litigation provision in the amount of €717 million in 2011. Increased expenses relating to the share-based payments in the amount of €522 million (2011: €68 million) as well as acquisition-related expenses of €537 million (2011: €448 million) reduced our operating profit in 2012. Share-based payment expenses rose considerably in 2012 as a result of new plans and an increase in the price of SAP stock.

Our operating profit for 2012 was also impacted by continued investments in global sales activities and cloud computing. The number of SAP employees (expressed in full-time equivalents, or FTEs) rose year on year by almost 8,700 persons, including more than 4,800 employees from acquisitions.

All of the above factors caused our operating margin in 2012 to drop 9.4 percentage points to 24.9% (2011: 34.3%).

In 2012, operating expenses increased €2,833 million or 30% to €12,181 million (2011: €9,348 million). This increase is due primarily to acquisition-related expenses, share-based payments, continued investments in sales activities, an increase in personnel costs as a result of acquisitions, and cloud computing activity.

The sections that follow discuss our costs of sales by line item.

Cost of Software and Software-Related Services

Cost of software and software-related services consists primarily of customer support costs, cost of developing custom solutions that address

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customers’ specific business requirements, costs for deploying and operating cloud solutions, amortization of intangible assets, and license fees and commissions paid to third parties for databases and the other complementary third-party products sublicensed by us to our customers.

In 2012, our cost of software and software-related services grew 21% to €2,555 million (2011: €2,107 million). The main cost factors were increased customer support expenses totaling €188 million and an acquisition-related increase in expenses for providing and operating our cloud solutions. The license fees that we pay to third parties also rose in parallel with the increase in software revenue. The margin on our software and software-related services, defined as software and software-related services profit as a percentage of software and software-related services revenue, remained constant year over year in 2012 at 81% (2011: 81%).

Cost of Professional Services and Other Services

Cost of professional services and other services consists primarily of the cost of consulting and training personnel and the cost of bought-in third-party consulting and training resources. This item also includes sales and marketing expenses for our professional services and other services resulting from sales and marketing efforts where those efforts cannot be clearly distinguished from providing the professional services and other services.

Costs for professional and other services rose 12% from €2,247 million in 2011 to €2,520 million in 2012. The margin on our professional and other services, defined as professional and other services profit as a percentage of professional and other services revenue, decreased to 18% in 2012 (2011: 23%). The disproportionately high growth in spending compared to professional services and other service revenue is mainly due to increased costs in a limited number of customer projects.

Research and Development Expense

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

activities, and amortization of the computer hardware and software we use for our R&D activities.

In 2012, R&D costs rose 17% to €2,261 million. This increase primarily resulted from the increase in personnel costs related to the acquisitions of SuccessFactors and Ariba.

In 2012, R&D expense as a percentage of total revenue increased slightly to 13.9% (2011: 13.6%). Total revenue increased at the same rate as R&D expense, resulting in a nearly constant R&D ratio. For more information, see the Research and Development section.

Sales and Marketing Expense

Sales and marketing expense consists mainly of personnel costs and direct sales expense to support our sales and marketing teams in selling and marketing our products and services.

Sales and marketing costs rose 27% from €3,083 million in 2011 to €3,912 million in 2012. The increase was due primarily to the increased personnel costs of our expanded sales teams in new growth markets, among others, and to increased employee headcount as a result of acquisitions. Travel and marketing costs rose as a result of increased business operations. The ratio of sales and marketing costs to total revenue, expressed as a percentage, increased 24% year over year (2011: 22%). This was because expenses grew disproportionately to revenue.

General and Administration Expense

Our general and administration (G&A) expense consists mainly of personnel costs to support our finance and administration functions.

Our G&A expense rose from €715 million in 2011 to €949 million in 2012, representing an increase of 33%. This was due mainly to share-based payments and the increase in personnel costs as a result of the acquisition-related rise in headcount. The ratio of general and administration costs to total revenue in 2012 thus rose 1% year over year to 6%.

Segment Results

Following SAP’s increased focus on the cloud business, in 2012 we changed both the structure of the components that the SAP management

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uses to make decisions about operating matters, and the main profit measure used for the purposes of allocating resources to these components and measuring their performance. The segment information below for earlier periods has been restated2014 and 2013 is presented based on the reportable segments created in 2015 (Applications, Technology & Services segment and the SAP Business Network Segment). These segments are the components of SAP that our Executive Board regularly reviews to conform with these changes. A detailed description of segment information is included in Note (28)assess the performance of our Notescompany and to the Consolidated Financial Statements.make resource allocation decisions.

We have two divisions – On-Premise and Cloud, which are further divided into operating segments. Our On-Premise division is comprised of two operating segments: On-Premise Products and On-Premise Services. Our Cloud division is

comprised of two operating segments: Cloud Applications and Ariba.

Total revenueRevenue and profit figures for each of our operating segments are calculated in line with our internal management reporting and therefore differ from the respectivecorresponding revenue and profit figures classified in our Consolidated Statements of Income because of several differences between our internal management reporting and our external IFRS reporting.prepared according to IFRS. For more information about our segment reporting, the activities that our two segments derive their revenues from, the financial performance measures, and a reconciliation from our internal management reporting to our external IFRS reporting, see the Notes to the Consolidated Financial Statements section, Note (28)., and the Performance Management System section.

 

The financial data presented for 2014 contains the revenue and expenses from Concur and SAP Fieldglass as of their respective acquisition dates. Their financial data is not included in the prior-year amounts, as Concur and SAP Fieldglass were acquired on December 4, 2014, and May 2, 2014, respectively.

 

€ millions, unless otherwise stated

  2012   2011   Change in %
2012 vs 2011
 

On-Premise Products Segment

      

Total revenue

   12,881     11,325     14  

Cost of revenue

   –1,994     –1,762     13  

Gross profit

   10,887     9,564     14  

Cost of sales and marketing

   –3,414     –2,919     17  

Reportable segment profit/loss

   7,473     6,644     12  

Segment profitability

   58%     59%    

On-Premise Services Segment

      

Total revenue

   2,967     2,901     2  

Cost of revenue

   –2,306     –2,201     5  

Gross profit

   661     700     –6  

Cost of sales and marketing

   0     0     0  

Reportable segment profit/loss

   661     700     –6  

Segment profitability

   22%     24%    

Cloud Applications Segment

      

Total revenue

   336     29     >100  

Cost of revenue

   –163     –66     >100  

Gross profit

   173     –37     <-100  

Cost of sales and marketing

   –231     –32     >100  

Reportable segment profit/loss

   –59     –69     –14  

Segment profitability

   –18%     –238%    

Ariba Segment

      

Total revenue

   120     4     >100  

Cost of revenue

   –72     –9     >100  

Gross profit

   49     –5     <-100  

Cost of sales and marketing

   –43     –2     >100  

Reportable segment profit/loss

   5     –7     <-100  

Segment profitability

   4%     –175%    

Applications, Technology & Services Segment

 

                

millions, unless otherwise stated

 

(Non-IFRS)

  2014   2013   Change in
%
   Change in %
(Constant
Currency)
 

Segment revenue

   16,871     16,386     3%     4%  

Gross margin (in %)

   73%     74%     1pp     1pp  

Cloud subscriptions and support margin (in %)

   55%     70%     15pp     15pp  

Segment profit

   7,099     7,056     1%     1%  

Segment margin (in %)

   42%     43%     1pp     1pp  

 

On-Premise DivisionIn 2014, Applications, Technology & Services segment revenue increased 3% (4% at constant currencies) to16,871 million (2013:16,386 million). This increase was mainly driven by strong growth in software support revenue, which increased 6% (8% at constant currencies) to8,806 million, offset by a decrease in software licenses of 3% (3% at constant currencies) to4,381 million. As a consequence of a continuous strong demand in the human capital management, Customer Engagement and Commerce, and SAP HANA Enterprise Cloud lines of business, cloud subscriptions and support revenue in the Applications, Technology & Services segment grew 42% (42% at constant currencies) to585 million (2013: 413 million).

The On-Premise division derives itsincrease of cloud and software revenue primarilydid mainly result from a strong increase in cloud subscriptions and support revenue and software support revenue, whereas software licenses revenue slightly decreased. This overall results in an increase in the salerevenue share of on-premise software (that is, software designed for use on hardwaremore predictable revenue streams in this segment of three percentage points from 53% in 2013 to 56% in 2014. Software licenses revenue attributable to this segment decreased 3% (3% at constant currencies) to4,381 million (2013:4,519 million). This decline was

due to a combination of challenging macroeconomic and political environments in Russia, Ukraine, and some Latin American markets and the customer’s premises)accelerating industry shift to the cloud.

The segment’s cost of revenue during the same time period increased 6% (7% at constant currencies) to4,564 million (2013:4,312 million). This increase in expenses was the result of greater investment in expanding our cloud infrastructure and mobile software (that is, software designedin providing and operating our cloud applications. The cloud subscriptions and support margin for usethe segment, therefore, decreased by 15 percentage points to 55.1% (55.1% at constant currencies). Segment gross profit increased 2% in 2014 (3% at constant currencies) to12,307 million (2013:12,074 million) which resulted in a decrease of the segment gross margin of0.7 percentage points to 72.9% (0.8 percentage points to 72.9% in constant currencies). Segment profit increased 1% year on mobile devices) as well as services relatingyear to such software.7,099 million (2013:7,056 million) and was unchanged on a constant currency basis, resulting in a narrowing of the segment margin by one percentage point to 42.1% (41.9% at constant currencies).

 

 

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SAP Business Network Segment

 

millions, unless otherwise stated

 

(Non-IFRS)

  2014   2013   Change in
%
   Change in %
(Constant
Currency)
 

Segment revenue

   644     460     40%     39%  

Gross margin (in %)

   66%     65%     1pp     1pp  

Cloud subscriptions and support margin (in %)

   75%     76%     0pp     0pp  

Segment profit

   105     99     5%     2%  

Segment margin (in %)

   16%     22%     5pp     6pp  

On-Premise Products Segment

The On-Premise ProductsIn 2014, revenue from the SAP Business Network segment, is primarily engaged in marketing and licensingwhich combines all of our on-premise and mobile software products and providing support services for these software products.

In 2012, revenue in the On-Premise Products segmentbusiness network solutions, increased 14%40% (39% at constant currencies) to €12,881644 million (2011: €11,325(2013:460 million). This growth reflects a 10% increase from changesfigure includes107 million in volumessegment revenue attributable to SAP Fieldglass and pricesConcur, which were acquired in 2014 and a 4% increase from currency effects. are reflected in these results for the first time.

The reason for this growth was the rise in software license sales, which, in turn, led to an increase in support revenue. Software revenue, which is added to revenues in the On-Premise Products segment, rose by 13% to €4,656 million (2011: €4,105 million). This growth reflects a 10% increase from changes in volumes and prices and a 3% increase from currency effects. Support revenue increased by 14% to €8,226 million (2011: €7,220 million). This growth reflects a 10% increase from changes in volumes and prices and a 4% increase from currency effects.

In 2012,segment’s cost of revenue increased 13%36% in 2014 (37% at constant currencies) to €1,994217 million, (2011: €1,762 million)of which28 million in expenses are attributable to Concur and salesSAP Fieldglass. The cloud subscriptions and marketing costs increased by 17% to €3,414 million (2011: €2,919 million). The increased expenses insupport margin for the On-Premise Products segment are the result of increased business operations following the rise in demand in 2012.

The operating segment profit of the On-Premise Products segment rose by 12% to €7,473 million (2011: €6,644 million), representing segment profitability of 58% (2011: 59%).

On-Premise Services Segment

The On-Premise Services segment primarily performs various professional services, mainly implementation services of our software products and educational services on the use of our software products.

In 2012, revenue in the On-Premise Services segment increased 2% to €2,967 million (2011: €2,901 million). This growth reflects a 1% decrease from changes in volumes and prices and a 3% increase from currency effects.

In 2012, cost of revenue in the On-Premise Services segment increased 5% to €2,306 million (2011: €2,201 million). The increased expenses in the On-Premise Services segment are the result

of constant business operations and increased costs in a limited number of customer projects.

The operating segment profit of the On-Premise Services segment decreased by 6%0.5 percentage points to €661 million (2011: €700 million), representing segment profitability of 22% (2011: 24%).

75.2% (Cloud Division

The Cloud division derives its revenues primarily from the sale of cloud software (that is, software designed for delivery through the cloud) and services relating0.4 percentage points to such software.

Driven by the acquisition of SuccessFactors75.3% in the first quarter of 2012, SAP showed a strong cloud momentum in 2012: Derived from the total revenue of SAP’s two Cloud segments (Cloud Applications and Ariba), the annual cloud revenue run rate in the fourth quarter approached €850 million. For the Cloud Applications segment alone, 12-month new and upsell subscription billings increased nineteenfold in the fourth quarter. Even when including SuccessFactors in SAP’s 2011 numbers, the growth is triple digit at 102%. For SuccessFactors on a stand-alone basis, 12-month new and upsell subscription billings grew 95% compared to the previous year.

The annualized revenue run rate is derived from the total revenue of SAP’s two Cloud segments (Cloud Applications and Ariba) in the fourth quarter of 2012 and includes Ariba (before any future growth)constant currencies). The annual run rate is calculated by multiplying the fourth-quarter Cloud division revenue by 4.

The year-over-year growth rateSAP Business Network segment thus achieved a gross profit of427 million in 12-month new and upsell subscription billings relates to SAP’s Cloud Applications business (excluding Ariba). The growth rate is a pro forma growth rate that assumes that the acquisition2014, an increase of SuccessFactors was completed as of January 1, 2011.

Cloud Applications Segment

The Cloud Applications segment is primarily engaged42% (41% at constant currencies) which resulted in marketing and selling subscriptions to the cloud software offerings developed by SAP and SuccessFactors.

In 2012, revenue in the Cloud Applications segment increased to €336 million (2011: €29 million).

In 2012, cost of revenue increased to €163 million (2011: €66 million) and sales and

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marketing costs increased to €231 million (2011: €32 million). The increased expenses in the Cloud Applications segment were largely driven by the acquisition of SuccessFactors in the first quarter of 2012.

The operating segment lossan increase of the Cloud Applications segment decreasedgross margin of 1.0 percentage points to 66.3% (0.7 percentage points to 66.0% in constant currencies). Segment profit increased year-over-year by 14%5% (2% at constant currencies) to –€59105 million (2011: –€69(2013: 99 million), representing segment profitability of –18% (2011: –238%).

Ariba Segment

The Ariba segment primarily markets and sells the cloud software offerings developed by Ariba. While this segment is named Ariba, it is not identical to the acquired Ariba business since certain SAP activities are nowresulting in our Ariba segment. For 2011, the numbers for the Ariba segment reflect the SAP activities that were allocated to the Ariba segment upon its establishment.

In 2012, revenue in the Ariba segment increased to €120 million (2011: €4 million).

In 2012, cost of revenue increased to €72 million (2011: €9 million) and sales and marketing costs increased by 2050% to €43 million (2011: €2 million). The increased expenses in the Ariba segment were largely driven by the acquisition of Ariba at the end of 2012.

The operating segment lossa narrowing of the Ariba segment turned into a segment profit of €5 million (2011: –€7 million), representing segment profitability of 4% (2011: –175%)margin by 5 percentage points to 16.2% (15.8% at constant currencies).

Financial Income, Net

Financial income, net, decreasedchanged to –€7225 million (2011: –€42(2013:66 million). Our finance income was €103127 million (2011: €119(2013:115 million) and our finance costs were €175152 million (2011: €161(2013:181 million).

Finance income mainly consists of interest income from loans, and financial assets (cash, cash equivalents, and current investments), which was €50 million in 2012 (2011: €64 million). and income of derivatives. This decreaseincrease is attributable mainly to a lowerhigher average liquidity and lowerslightly higher interest rates than in 2011.2013.

Finance costs mainly consist of interest expense on financial liabilities (€130(93 million in 20122014 compared to €123131 million in 2011)2013). ThisThe decrease year-over-year increase resultedis mainly due to positive effects from the financial debt incurred in connection with the SuccessFactorsinterest rate derivatives and Ariba acquisitions.due to lower average indebtedness. For more

information about these financing instruments, see the Notes to the Consolidated Financial Statements section, Note (17b).

Another factor in financial income, net, in 2012 was the derivatives we utilize to execute our financial risk management strategy. The associated time value effects from derivatives were reflected in interest income of €27 million (2011: €37 million) and interest expenses of €28 million (2011: €37 million).

Income Tax

Our effective tax rate decreasedincreased slightly to 26.2%24.7% in 2012 (2011: 27.9%2014 (2013: 24.4%). The increased effective tax rate 2011 mainly resulted from the reduction of the TomorrowNow litigation provision. For more information, see the Notes to the Consolidated Financial Statements section, Note (10).

FOREIGN CURRENCY EXCHANGE RATE EXPOSURE

Although our reporting currency is the euro, a significant portion of our business is conducted in currencies other than the euro. Since the Group’s entities usually conduct

their business in their respective functional currencies, our risk of exchange rate fluctuations from ongoing ordinary operations is not considered significant. However, occasionally we generate foreign-currency-denominated receivables, payables, and other monetary items by transacting in a currency other than the functional currency; to mitigate the extent of the associated foreign currency exchange rate risk, the majority of these transactions are hedged as described in Note (25) to our Consolidated Financial Statements. Also see Notes (3) and (24) for additional information on foreign currencies.

Approximately 71% and 72%74% of our total revenue 2013 and 2012, respectively,in 2015 (2014: 71%) was attributable to operations in non-euro participating countries. As a result, those revenuesThat revenue had to be translated into euros for financial reporting purposes. Fluctuations in the exchange value of the euro had an unfavorable impact on our total revenue of €734 million for 2013. Regarding 2012 the euro had a favorable impact of1,504 million on our total revenue of €548 million, while for 2011 the euro had2015, an unfavorable impact of €195 million.143 million on our total revenue for 2014 and an unfavorable impact of734 million on our total revenue for 2013.

The impact of foreign currency exchange rate fluctuations discussed in the preceding paragraph is calculated by translating current period figures in

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local currency to euros at the monthly average exchange rate for the corresponding month in the prior year. Our revenue analysis, included within the “Operating Results,”Results” section of this Item 5, discusses at times increases and decreases due tothe effect of currency effects,movements which are calculated in the same manner.

REPORT ON LIQUIDITY AND CAPITAL RESOURCES

Overview

Global Financial Management

We use global centralized financial management to control liquid assets and monitor exposure to interest rates and currencies. The primary aim of our financial management is to maintain liquidity in the Group at a level that is adequate to meet our obligations. Most SAP companies have their liquidity managed centrally by the Group, so that liquid assets across the Group can be consolidated, monitored, and invested in accordance with Group policy. High levels of liquid assets help keep SAP flexible, sound, and independent. In addition, various credit facilities are currently available for additional liquidity, if required. For more information about these facilities, see the Credit Facilities section.

We manage credit, liquidity, interest rate, equity price, and foreign exchange rate risks on a Group-wide basis. We use selected derivatives exclusively for this purpose and not for speculation, which is defined as entering into a derivative instrument for which we do not have a corresponding underlying transaction. The rules for the use of derivatives and other rules and processes

concerning the management of financial risks are collected in our treasury guideline document, which applies globally to all companies in the Group. For more information about the management of each financial risk and about our risk exposure, see the Notes to the Consolidated Financial Statements section, Notes (24) to (26).

Liquidity Management

Our primary source of cash, cash equivalents, and current investments is funds generated from our business operations. Over the past several years, our principal use of cash has been to support operations and our capital expenditure requirements resulting from our growth, to quickly repay financial debt, to acquire businesses, to pay dividends on our shares, and to buy back SAP shares on the open market. On December 31, 2015, our cash, cash equivalents, and current investments were primarily held in euros and U.S. dollars. We generally invest only in the financial assets of issuers or funds with a minimum credit rating of BBB, and pursue a policy of cautious investment characterized by wide portfolio diversification with a variety of counterparties, predominantly short-term investments, and standard investment instruments. We rarely invest in the financial assets of issuers with a credit rating lower than BBB, and such investments were not material in 2015.

We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating needs and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term. It may also be necessary to enter into

financing transactions when additional funds are required that cannot be wholly sourced from free cash flow (for example, to finance large acquisitions).

To expand our business, we have made acquisitions of businesses, products, and technologies. Depending on our future cash position and future market conditions, we might issue additional debt instruments to fund acquisitions, maintain financial flexibility, and limit repayment risk. Therefore, we continuously monitor funding options available in the capital markets and trends in the availability of funds, as well as the cost of such funding. In recent years, we were able to repay additional debt within a short period of time due to our persistently strong free cash flow. For more information about the financial debt, see the Cash Flows and Liquidity section.

Capital Structure Management

The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor, and customer confidence, and to support the growth of our business. We seek to maintain a capital structure that will allow us to cover our funding requirements through the capital markets at reasonable conditions, and in so doing, ensure a high level of independence, confidence, and financial flexibility.

The long-term credit rating for SAP SE is “A” by Standard and Poor’s and “A2” by Moody’s, both with stable outlook. Since their initial assignment in September 2014, the ratings and outlooks have not changed.

Our general intention is to remain in a position to return liquidity to our shareholders by distributing annual dividends totaling more than 35% of our profit after tax. There are currently no plans for future share buybacks.

Capital Structure

    2015   2014      
     millions   % of Total
equity and
liabilities
    millions   % of Total
equity and
liabilities
   D in % 

Equity

   23,295     56     19,534     51     19  

Current liabilities

   7,867     19     8,574     22     8  

Non-current liabilities

   10,228     25     10,457     27     2  

Liabilities

   18,095     44     19,031     49     5  

Total equity and liabilities

   41,390     100     38,565     100     7  

In 2015, we repaid1,270 million in bank loans that we had taken to finance the Concur acquisition and refinanced another part of this loan through the issuance of a three-tranche Eurobond of1.75 billion in total with maturities of two to ten years. We also repaid a

550 million Eurobond and a US$300 million U.S. private placement tranche at their maturity. Thus, the ratio of total financial debt to total equity and liabilities decreased by 7 percentage points to 22% at the end of 2015 (29% as at December 31, 2014).

Total financial debt consists of current and non-current bank loans, bonds, and private placements. For more information about our financial debt, see the Notes to the Consolidated Financial Statements section, Note (17).

As part of our financing activities in 2016, the Company intends to repay a US$600 million U.S. private placement tranche when it matures and a further substantial portion of our outstanding bank loan.

Total liabilities on December 31, 2015, mainly comprised financial liabilities of9,522 million (of which8,681 million are non-current). Financial liabilities on

December 31, 2015, consisted largely of financial debt, which included amounts in euros (6,994 million) and U.S. dollars (2,202 million). On December 31, 2015, approximately 64% of financial debt was held at variable interest rates, partially swapped from fixed into variable using interest rate swaps. Total liabilities on December 31, 2015, also comprised non-financial liabilities. Most of these non-financial liabilities result from employee-related obligations.

For more information about financial and non-financial liabilities, see the Notes to the Consolidated Financial Statements section, Note (18).

Cash Flows and Liquidity

Group liquidity on December 31, 2015, primarily comprised amounts in euros and U.S. dollars. Current investments are included in other financial assets in the statement of financial position. Financial debts are included within financial liabilities in the statement of financial position.

Group Liquidity of SAP Group

millions  2015   2014   D 

Cash and cash equivalents

   3,411     3,328     83  

Current investments

   148     95     53  

Group liquidity

   3,559     3,423     136  

Current financial debt

   567     2,157     1,590  

Net liquidity 1

   2,992     1,266     1,726  

Non-current financial debt

   8,607     8,936     329  

Net liquidity 2

   5,615      7,670     2,055  

Group liquidity consists of cash and cash equivalents (for example, cash at banks, money market funds, and time deposits with original maturity of three months or less) and current investments (for example, investments with

original maturities of greater than three months and remaining maturities of less than one year) as reported in our Consolidated Financial Statements.

Group Liquidity Development

LOGO

Net liquidity is Group liquidity less total financial debt as defined above.

The increase in Group liquidity compared to 2014 was mainly due to cash inflows from our operations and financing activities in issuing bonds. They were offset by cash outflows for dividend payments and repayments of borrowings.

For information about the impact of cash, cash equivalents, current investments, and our financial liabilities on our income statements, see the analysis of our financial income, net, in the Operating Results (IFRS) section.

Analysis of Consolidated Statements of Cash Flows

millions  Years ended December 31,           
    2015   2014   2013   Change in % 2015
vs. 2014
   Change in % 2014
vs. 2013
 

Net cash flows from operating activities

   3,638     3,499     3,832     4%     9%  

Net cash flows from investing activities

   334     7,240     1,781     95%     >100%  

Net cash flows from financing activities

   3,356     4,298     1,589     <100%     <100%  

Analysis of Consolidated Statements of Cash Flows: 2015 compared to 2014

Net cash provided by operating activities increased 4% year-over-year to3,638 million in 2015 (2014:3,499 million). Payments in connection with the restructuring of204 million to employees and272 million to insurance policies have offset partly the non-recurring effect from litigations in 2014. In 2015, days’ sales outstanding (DSO) for receivables, defined as the average number of days from the raised invoice to cash receipt from the customer, increased six days to 71 days (2014: 65 days).

Cash outflows from investment activities decreased significantly to334 million in 2015 (2014:7,240 million). Cash outflows from purchase of intangible assets and property, plant, and equipment remained stable. Cash outflows in 2014 had resulted mainly from business combinations of Concur and Fieldglass. For more information about current and planned capital expenditures, see the Investment Goals section.

Net cash outflows from financing activities were3,356 million in 2015, compared to net cash inflows of4,298 million in 2014. The 2015 cash outflows had resulted from repayments of1,270 million bank loans,550 million Eurobonds and US$300 million private placements. We refinanced another part of the bank loan through the issuance of a three-tranche Eurobond of1,750 million in total. Cash inflows in 2014 were the result of issuing a2,750 million Eurobond and drawing two tranches (of1,270 million and3,000 million) of a bank loan. Cash outflows in 2014 arose chiefly from repayments of1,086 million borrowings and US$1,160 million convertible bonds that we assumed in connection with our acquisition of Concur.

The dividend payment of1,316 million made in 2015 exceeded the amount of1,194 million in the prior year resulting from the increased dividend paid per share from1.00 to1.10.

Analysis of Consolidated Statements of Cash Flows: 2014 Compared to 2013

Net cash provided by operating activities decreased 9% year-over-year to3,499 million in 2014 (2013:3,832 million). Payments in connection with the TomorrowNow and Versata litigation had a555 million negative effect on net cash provided by operating activities. A61 million increase to1,356 million in our income tax payments also negatively affected net cash provided by operating activities. In 2014, days’ sales outstanding (DSO) for receivables, defined as the average number of days from the raised invoice to cash receipt from the customer, increased three days to 65 days (2013: 62 days).

Cash outflows from investment activities increased significantly to7,240 million in 2014 (2013:1,781 million). The increase resulted principally from the Concur, Fieldglass, and SeeWhy acquisitions. For more information about current and planned capital expenditures, see the Investment Goals section.

Net cash inflows from financing activities were4,298 million in 2014, compared to net cash outflows of1,589 million in 2013. Cash inflows in 2014 were the result of issuing a2,750 bond and drawing two tranches (of1,270 million and3,000 million) of a loan. Cash outflows arose chiefly from repayments of borrowings (1,086 million) and the repayment of convertible bonds that we assumed in connection with our acquisition of Concur (US$1,160 million). The 2013 cash outflows had resulted chiefly from dividends paid and the repayment of a600 million bond.

The dividend payment of1,194 million made in 2014 was greater than that of1,013 million in the prior year because the dividend paid per share increased from0.85 to1.00.

Credit Facilities

Other sources of capital are available to us through various credit facilities, if required.

We are party to a revolving2.0 billion credit facility contract with maturity in November 2020. The credit line may be used for general corporate purposes. A possible future withdrawal is not subject to any financial covenants. Borrowings under the facility bear interest at the Euro Interbank Offered Rate (EURIBOR) or London Interbank Offered Rate (LIBOR) for the respective optional currency plus a margin ranging from 0.3% to 0.525%. We pay a commitment fee of 0.079% per annum on unused amounts of the available credit facility. So far, we have not used and do not currently foresee any need to use, this credit facility.

As at December 31, 2015, SAP SE had additional available credit facilities totaling471 million. Several of our foreign subsidiaries have credit facilities available that allow them to borrow funds at prevailing interest rates. As at December 31, 2015, approximately49 million was available through such arrangements. There were immaterial borrowings outstanding under these credit facilities from our foreign subsidiaries as at December 31, 2015.

OFF-BALANCE SHEET ARRANGEMENTS

Several SAP entities have entered into operating leases for office space, hardware, cars and certain other equipment. These arrangements are sometimes referred to as a form of off-balance sheet financing. Rental expenses under these operating leases are set forth below under “Contractual Obligations.” We do not believe we have forms of material off-balance sheet arrangements that would require disclosure other than those already disclosed.

CONTRACTUAL OBLIGATIONS

The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2015:

Contractual obligations       Payments due by period 
millions  Total   Less than
1 year
   1-3 years   3-5 years   More than
5 years
 

Financial liabilities(1)

   10,127     863     3,759     1,822     3,683  

Derivative financial liabilities(1)

   132     74     29     29     0  

Operating lease obligations(3)

   1,347     294     410     246     396  

Purchase obligations(3)

   872     428     260     118     66  

Capital contribution commitments(3)

   111     111     0     0     0  

Other non-current non-financial liabilities(2)

   331     0     201     36     94  

Total

   12,920     1,770     4,660     2,251     4,239  

(1) For more information on financial liabilities and derivative financial liabilities see Note (24) to our Consolidated Financial Statements.

(2) For more information on other non-current non-financial liabilities see Note (17c) to our Consolidated Financial Statements.

(3) See Note (22) to our Consolidated Financial Statements for additional information about operating lease obligations, purchase obligations, and capital contribution commitments. Our expected contributions to our pension and other post-employment benefit plans are not included in the table above. For more information on these contributions see Note (18a) to our Consolidated Financial Statements.

We expect to meet these contractual obligations with our existing cash, our cash flows from operations and our financing activities. The timing of payments for the above contractual obligations is based on payment schedules for those obligations where set payments exist. For other obligations with no set payment schedules, estimates as to the most likely timing of cash payments have been made. The ultimate timing of these future cash flows may differ from these estimates.

Obligations under Indemnifications and Guarantees

Our software license agreements and our cloud subscription agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party’s intellectual property rights. In addition, we occasionally provide function or performance guarantees in routine consulting contracts and development arrangements. We also generally provide a six to twelve month warranty

on our software. Our warranty liability is included in other provisions. For more information on other provisions see Note (18b) to our Consolidated Financial Statements. For more information on obligations and contingent liabilities refer to Note (3) and Note (22)  in our Consolidated Financial Statements.

RESEARCH AND DEVELOPMENT

For information on our R&D activities see “Item 4. Information about SAP – Products, Research & Development, and Services.” For information on our R&D costs see “Item 5. Operating and Financial Review and Prospects – Operating Results (IFRS)” and for information related to our R&D employees see “Item 6. Directors, Senior Management and Employees – Employees.”

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements are prepared based on the accounting policies described in Note (3) to our Consolidated Financial Statements in this report. The application of such policies requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, revenues and expenses in our Consolidated Financial Statements. We base our judgments, estimates and assumptions on historical and forecast information, as well as regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues and expenses. Actual results could differ from original estimates.

The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, include the following:

revenue recognition;

valuation of trade receivables;

accounting for share-based payments;

accounting for income tax;

accounting for business combinations;

subsequent accounting for goodwill and other intangible assets;

accounting for legal contingencies; and

recognition of internally generated intangible assets from development.

Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. See Note (3c) to our Consolidated Financial Statements for further discussion on our critical accounting estimates and critical accounting policies.

NEW ACCOUNTING STANDARDS NOT YET ADOPTED

See Note (3e) to our Consolidated Financial Statements for our discussion on new accounting standards not yet adopted.

EXPECTED DEVELOPMENTS

Future Trends in the Global Economy

The experts atIn its most recent report, the European Central Bank (ECB2) expect the global economy to expand gradually in response to factors such as more stable credit conditions around the world. The ECB bases this expectation on the assumption that, as in 2013, prospects will improve(ECB) forecasts moderate growth in the industrializedworld economy and it expects that this growth will vary across regions and countries in 2016. It foresees more favorable prospects for advanced economies but will remain subduedthan for emerging markets and developing economies. Geopolitical risks, especially of heightened tensions in some of the emerging economies compared to past years.Middle East, could undermine global economic performance, the ECB warns.

According to these expectations, the outlook inIn the Europe, Middle East, and Africa (EMEA) region, has improved: Thethe ECB expects a slow recoverythe euro-area economy to recover slightly more rapidly in 2016 than in the euro area in 2014previous year. It suggests that low oil prices, increased publicsector spending on assistance for refugees, and 2015, supported by a slight recovery of domestic and export demand. Companies in particular will increase their investments in 2014, encouraged by the very low interest rates and by a high demand for

modernization after several years of restrained investments. The ECB currently expects GDP in the euro area to grow about 1% in 2014 and 1.5% in 2015. That would bring GDP back to first-quarter 2008 “pre-crisis” levels by the end of 2015. The ECB also expects the economies ofits own monetary measures may encourage that acceleration. In Central and Eastern Europe, the ECB expects economic activity to gain traction beginningremain stable but for performance to vary from country to country. The European Union’s structural funds and strong consumer spending may be principal factors behind such growth. In Russia, on the other hand, the economic situation is expected to remain difficult. The ECB expects further cuts in 2014.public spending as a consequence of declining oil revenue.

The ECB is also optimistic aboutECB’s forecasts for 2016 for a number of major countries in the Americas region. It believes the economic upturn inregion are cautious. For the United States, will gradually gain momentum as the residential real-estateECB expects that economic growth may slow following the Federal Reserve’s move on interest rates in December 2015. The ECB expects political uncertainty, a tightening of monetary policy, and labor marketsmore restrictive financing conditions to continue to brighten up. However, it believes uncertainty regarding financial policy will continue, with new legislationweigh on debt capping and public finance under continued discussion.Brazil’s economy.

Future trends inFor the Asia Pacific Japan (APJ) region, the ECB expects that wage increases and low oil prices will improve consumer spending in Japan. Japan’s exports should also pick up. For China, though, the ECB expects that economic growth will continue to slow following the refocusing of its economy. It believes that the prospects for India’s economy are difficult to estimate, according to the ECB. In Japan, a consumption tax rise is duepositive in April 2014. That could cause the economy to pick up in the first quarter, as consumers bring forward spending. As a result, subsequent quarters may see an economic slowdown. It remains to be seen what effect the wide-ranging agenda for reform announced by the Communist Party of China in November 2013 will have. The goal is to set China on a more sustainable path to economic growth. The ECB believes the reforms will strengthen the market and the economy outside the public sector.2016.

 

Economic Trends – Year-Over-Year GDP Growth

 

%

  2012e  2013p   2014p 

World

   3.1    3.0     3.7  

Advanced economies

   1.4    1.3     2.2  

Developing and emerging economies

   4.9    4.7     5.1  

Europe, the Middle East, and Africa (EMEA)

     

Euro area

   –0.7    –0.4     1.0  

Germany

   0.9    0.5     1.6  

Central and Eastern Europe

   1.4    2.5     2.8  

Middle East and North Africa

   4.1    2.4     3.3  

Sub Saharan Africa

   4.8    5.1     6.1  

Americas

     

United States

   2.8    1.9     2.8  

Canada

   1.7    1.7     2.2  

Central and South America, Caribbean

   3.0    2.6     3.0  

Asia-Pacific-Japan (APJ)

     

Japan

   1.4    1.7     1.7  

Asian developing economies

   6.4    6.5     6.7  

China

   7.7    7.7     7.5  

In %  2014e   2015p   2016p 

World

   3.4     3.1     3.4  

Advanced economies

   1.8     1.9     2.1  

Developing and emerging economies

   4.6     4.0     4.3  

Europe, Middle East, and Africa (EMEA)

               

Euro area

   0.9     1.5     1.7  

Germany

   1.6     1.5     1.7  

Central and Eastern Europe

   2.8     3.4     3.1  

Middle East and

North Africa

   2.8     2.5     3.6  

Sub- Saharan Africa

   5.0     3.5     4.0  

Americas

               

United States

   2.4     2.5     2.6  

Canada

   2.5     1.2     1.7  

Central and South America, Caribbean

   1.3     0.3     0.3  

Asia Pacific Japan (APJ)

               

Japan

   0.0     0.6     1.0  

Asian developing economies

   6.8     6.6    ��6.3  

China

   7.3     6.9     6.3  

e = estimate; p = projection

Source: International Monetary Fund (IMF), World Economic Outlook Update January 2014, “Is the Tide Rising?” As2016, Subdued Demand, Diminished Prospects, as of January 21, 2014,19, 2016, p. 2.

2

Unless otherwise indicated, all economic information in this section is based on information from the European Central Bank (ECB).

66


Part I

Item 5

6.

 

IT Market: The Outlook for 20142016

AccordingThe worldwide IT market is at the dawn of a new era, according to International Data Corporation (IDC), aU.S. market research firm basedIDC. It expects IT market growth to decline in a number of emerging economies, notably Brazil, China, and Russia. For a decade, these countries were the driving force in all segments of the global IT market while the advanced economies were already focusing on the transition from traditional technologies to innovations such as cloud and mobile computing. IDC expects that the growth in traditional IT will also slow in the United States, economic recoveryemerging markets and developing economies in 2014the years ahead. It believes that cloud, mobile, and Big Data will leadoffer the main opportunities for growth. In view of that prediction, IDC expects the worldwide IT market to a greater increasegrow just 2.8% in 2016. Hardware spending on IT than occurred in 2013. That increase is expected to continueincrease by about 1%, and software spending by almost 7% (mainly due to be higher than the growth in the overall economy. IDC expects businesses will revert to normal IT upgrade cycles in 2014 as liquidity bottlenecks are resolved by the return of economic stability, so companies in particular will increase investment in IT. In the emerging economies, IDC expects IT markets to recover from the setbacks of the previous year, because basically demand for IT products is highsoftware-as-a-service and conditions are stable.platform-as-a-service solutions).

According to IDC, software sales should again outpace the IT market as a whole in 2014. Spending on PCs and tablets should grow by a percentage in the low single digits: the PC market has bottomed out and the tablet market should see growth well into the double digits. Investments in servers and data storage devices could grow by a percentage in the low single digits again, and IDC forecasts slightly more growth in the IT services market in 2014 than in 2013.

The outlook IDC describes for 2014 inIn the Europe, Middle East, and Africa (EMEA) region, is positive: It believes Western Europe will almost sustain the slightly improvedIDC expects overall IT market growth it achieved at the end of 2013, showing significant positive growth rates for the full year. The IT markets of Central and Eastern Europe, the Middle East, and Africa could see growthto decelerate to 2% in the high single digits, and2016. Notably, the IT market in Western Europe is

expected to grow just 1% to 2% in the coming years. The IT market in Germany is not expected to grow much above these rates either, according to IDC. The institute believes that IT spending in Russia may even approach double-digit growth, IDC says.might recover as early as 2016 and grow 6% as a result of short-term government stimulus measures.

IDC is more cautious aboutexpects the Americas region:region IT spending to increase 3.7% in 2016. It believes 2014the IT market growth in the United States may fall short of the 2013 level as demand for smartphones declines. Despite the uncertainty concerning government policy, IDC predicts IT investment in the United States will grow at a similar rate and that, with 7% growth, the software segment will again be largely stable.the fastest to expand there. For Brazil, IDC believesexpects that the government will pursue a strict program of economic reform in the next few years, which could slow growth in the Latin America IT markets will slowmarket to single digits.

a rate of 3% or 4%. IDC forecasts that the IT market in Mexico will also grow by about 3% annually in the next few years.

In the Asia Pacific Japan (APJ) region, will grow by a percentageIDC believes growth in the middle ofIT market might reach 2.5%. However, growth rates again are expected to vary from country to country. IDC expects the single-digit range. However, it believes theIT market in Japan will decline slightly. In contrast, IDC predictsgrow by about 3% in 2016. It anticipates that China’s IT market

will expand only in the low to middle single-digit percentage range in the years ahead. The IT market in China, which was weak in

India, on the previousother hand, might continue to grow by rates at or above 10% a year, should recover well into double-digit growth in 2014.according to IDC.

 

67


Part I

Item 5

 

Trends in the IT Market – Increased IT Spending Year Over Year

 

%

  2012e  2013p   2014p 

World

     

Total IT

   5.3    4.4     5.1  

Hardware

   6.3    4.8     5.4  

Packaged software

   6.2    5.6     6.2  

Applications

   6.0    5.6     6.0  

IT services

   3.2    3.2     3.9  

Europe, Middle East, and Africa (EMEA)

     

Total IT

   5.2    2.3     4.4  

Packaged software

   4.7    4.6     5.2  

Applications

   4.4    4.5     5.0  

IT services

   1.4    2.0     3.6  

Americas

     

Total IT

   4.2    5.9     4.5  

Packaged software

   6.8    6.0     6.7  

Applications

   6.9    6.2     6.5  

IT services

   4.2    3.7     3.6  

Asia-Pacific-Japan (APJ)

     

Total IT

   6.9    4.6     6.7  

Packaged software

   6.9    5.9     6.4  

Applications

   6.0    5.7     6.4  

IT services

   4.5    4.3     5.1  

Increased IT Spending Year-Over-Year

 

               
In %  2014e   2015p   2016p 

World

               

Total IT

   4.5     4.9     2.8  

Hardware

   5.2     5.5     1.1  

Packaged software

   5.6     6.8     6.8  

Applications

   6.9     7.3     7.1  

IT services

   3.0     2.8     3.0  

Europe, Middle East, and Africa (EMEA)

               

Total IT

   3.9     4.6     2.0  

Packaged software

   4.0     4.8     5.2  

Applications

   4.5     5.4     5.6  

IT services

   2.2     1.9     2.6  

Americas

               

Total IT

   4.2     4.6     3.7  

Packaged software

   6.8     8.4     7.3  

Applications

   8.5     8.9     7.8  

IT services

   2.8     2.8     2.6  

Asia Pacific Japan (APJ)

               

Total IT

   5.9     5.9     2.5  

Packaged software

   4.5     4.9     8.0  

Applications

   5.6     5.1     7.7  

IT services

   5.3     4.6     4.6  

e = estimate, p = projection

Source: IDC Worldwide Black Book Q3 2013Pivot V3.1, 2015

 

Impact on SAP

SAP expects to outperform the global economy and the IT industry again in 2014. Four years2016 in terms of growth momentum underscorerevenue growth.

Our 2015 results validate our leadershipstrategy of innovating across the core, the cloud, and business networks to help our customers become true digital enterprises.

Our innovation cycle for SAP S/4HANA is well underway and the completeness of our vision in the transformation of the industry. We are gaining market share in all regions.cloud has distinguished SAP from both legacy players and point solution providers. We have reinvented the databasebeaten our guidance for 2015 on cloud and developed the next-generation real time in-memory platform SAP HANA. We are managing the transition to the cloud successfully, while growing our core business and expanding oursoftware as well as on operating margin.income.

Thanks to our great progress in strategy and technology since 2010,In 2015, we have increasedtransformed our Company and made it leaner by shifting investments from non-core activities to strategic growth areas enabling us to capture the importance of SAP to our customers. growth opportunities in the market.

We are well-positioned for the future as reflected in the increase of our ambition for 2017.

We plan to expandcontinue to invest in countries in which we expect significant growth, helping us reach our core businessambitious 2016 outlook targets and to accelerate our cloud businesses. medium-term aspirations for 2017 and 2020.

We are therefore confident we can achieve our medium-term targets for 20152017 and 2017,2020, assuming that the economic

environment and IT industry develop as currently forecast.forecasted. Balanced in terms of regions as

well as industries, we are well-positioned with our product offering to offset smaller individual fluctuations in the global economy and IT market.

A comparison of our business outlook with forecasts for the global economy and IT industry shows that with our customer-centered innovation strategy, we can be successful even in a tough economic environment. Ourenvironment and will further strengthen our position as the market and the demandsleader of our customers are changing rapidly. We anticipated these changes early.

We plan to continue to invest in countries in which we expect significant growth, and we aim to expand our market share in those countries. Such countries include Brazil, China, India, Russia, as well as countries in the Middle East and Africa. We therefore expect to see further future growth potential helping us reach our ambitious 2014 outlook targets and medium-term aspirations for 2015 and 2017. For more information, see the Operational Targets for 2014 (Non-IFRS) section.

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Part I

Item 5

Forecast for SAP

Strategy for Profitable Growth

SAP seeks to maintain profitable growth across its portfolio of products and services. Our goal is to expand our addressable market to US$350 billion in 2020, compared to US$110 billion in 2010. Our ability to deliver software-based innovation and value in target growth areas positions us favorably in the enterprise software market.

SAP’s continued growth depends on our ability to deliver innovative solutions and provide significant value to our customers. We continue to improve our research and development effectiveness, creating efficiencies and accelerating innovation cycles to engage more closely with our customers. We are also investing in our go-to-market channels to expand capacity and drive greater volume sales. At the same time, we are expanding our technology partner ecosystem to foster co-innovation as a force multiplier for creating additional business value for our customers.

The success of SAP and our customers depends on our people – whom we consider our most important asset. Our employees spark our innovation, deliver value to our customers, and drive our sustainable growth and profitability. The correlation between our continued business success and our ability to attract, retain, and engage top talent is stronger than ever. We will continue to execute our people strategy to set us apart in vital areas such as workforce diversity and talent management. Our ambitious growth strategy and our ability to innovate depends on creating an environment for our employees that drives them to unleash their full potential.

Go-to-Market Investment Delivers Customer Value

SAP goes to market by region, customer segment, line of business and industry. In each region, we seek to concentrate our sales efforts on the fastest-growing markets with the greatest business and revenue potential. We evolve and invest in our go-to-market coverage model to effectively sell industry-specific solutions while increasing our engagement with customers in line-of-business functions. We continue to provide companies of any size – small, midsize, and large – with tailored offerings that align to their specific budgetary, resource, and deployment requirements.

Greater Volume and Co-Innovation Through an Open Ecosystem

SAP continues to engage an expanding partner ecosystem to increase market coverage, enhance our solutions portfolio, and spur innovation. SAP and its vibrant partner ecosystem offer greater choice and business value through the power of co-innovation, appealing to customers that want to avoid being “locked in” to a single vendor. SAP partners offer customers knowledgeable local delivery of solutions across industries and lines of business. SAP technology partners continue to drive our research agenda, enhance the SAP portfolio, and monetize new technology breakthroughs.

Organic Growth and Targeted Acquisitions

Organic growth remains the primary driver of SAP’s strategy. We will continue to invest in our own product development and technology innovation, improving the speed, number of projects, and innovations brought to market. Our ecosystem strategy enables us to better leverage our innovation by extending it to our partners to drive additional customer value, based on their own domain expertise. We will also continue to acquire targeted, strategic, and “fill-in” technology to add to our broad solution offerings and improve our coverage in key strategic markets to best support our customers’ needs.application software.

Operational Targets for 20142016 (Non-IFRS)

Revenue and Operating Profit Outlook

The Executive Board isWe are providing the following outlook for the full year 2014:

SAP expects full-year 2014 non-IFRS cloud subscription2016:

Based on the continued strong momentum in SAP’s cloud business the Company expects full year 2016 non-IFRS cloud subscriptions and support revenue to be in a range of2.95 billion to3.05 billion at constant currencies (2015:2.30 billion). The upper end of this range represents a growth rate of 33% at constant currencies.

SAP expects full year 2016 non-IFRS cloud and software revenue to increase by 6% to 8% at constant currencies (2015:17.23 billion).

SAP expects full-year 2016 non-IFRS operating profit to be in a range of6.4 billion to6.7 billion at constant currencies (2015:6.35 billion).

We expect our headcount to be in a range of €950 to €1,000 million at constant currencies (2013: €757 million). The upper end of this range represents a growth rate of 32% that isexperience an increase similar to the respective 2013 growth rate after adjusting for acquisitions.

SAP expects full-year 2014 non-IFRS software and software-related service revenue to increase by 6% to 8% at constant currencies (2013: €14,032 million).

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Item 5

SAP expects full-year 2014 non-IFRS operating profit to be in a range of €5.8 billion to €6.0 billion at constant currencies (2013: €5,514 million).2015.

While our full-year 2016 business outlook is at constant currency,currencies, actual currency reported figures are expected to continue to be negatively impacted by currency exchange rate fluctuations. If exchange rates remain at the March 2014 level for the rest of the year, we expect non-IFRS software and software-related service revenue and non-IFRS operating profit growth rates at actual currency to experience a negative currency impact of approximately 5 percentage points and 7 percentage points respectively in the first quarter of 2014 and of approximately 4 percentage points and 5 percentage points respectively in the full year 2014.

We expect that non-IFRS total revenue growth (non-IFRS) will continue to depend largely on the revenue from the On-Premise Products segment. cloud and software.

However, the revenue growth we expect from this segment is below the outlook provided for non-IFRS cloud subscriptionsubscriptions and support revenue. We expect the software license revenue (non-IFRS). In lightin 2016 to be at the same level as in 2015 with SAP gaining market share against our main on-premise license competitors.

We expect that most of the total revenue growth (non-IFRS) will come from the Applications, Technology, and Services segment, equally distributed into software licenses and support revenue growth and cloud subscriptions and support revenue growth. Nevertheless, we anticipate our SAP Business Network segment will outpace the Applications, Technology, and Services segment with a significantly higher total revenue growth rate at which professional serviceslower absolute levels. As such, we expect we will seize a huge market opportunity with continued strong mid- and other service revenue is growing, we do not expect stronglong-term growth in the On-Premise Services segment.potential.

We continuously strive for profit expansion in all our segments, therefore, we expect an increase in both segments’ profits. The vast majority of the profit expansion comes from our Applications, Technology, and Services segment. Overall, in the SAP Business Network segment, operating profit growth is higher than in our On-Premise division, with On-Premise Products segment profit growing faster than On-Premisethe Applications, Technology, and Services segment, profit. We expect only a slight improvement in On-Premise Services segment profit. The Cloud division is expected to continue with increasingly positive segment profit in 2014.but at significantly lower volume.

In light of the rate at which cloud subscriptions are growing in our cloudAcross all segments we expect strong revenue growthour 2016 non-IFRS cloud subscriptions and support gross margin to be at least stable or to slightly increase compared to 2015. For SAP’s managed-cloud offerings, we still expect negative margins in those segments.

We present the following reconciliation from our 2013 IFRS software and cloud subscription revenue, IFRS software and software-related service revenue, IFRS total revenue, and IFRS operating profit2016 which by 2017 are expected to the non-IFRS equivalents to facilitate comparison between IFRS financial measures and the non-IFRS financial measures in our 2014 outlook:break even.

Reconciliations of IFRS to Non-IFRS Financial Measures for 2013

€ millions, unless otherwise stated

  IFRS Financial
Measure
   Recurring
Revenue Not
Recorded
Under IFRS
   Adjustments
Operating(1)
   Discontinued
Activities(3)
   Non-IFRS
Financial
Measure
 

Cloud subscriptions and support

   696     61     n.a.     n.a.     757  

Software and cloud subscription revenue

   5,212     63     n.a.     n.a.     5,275  

Software and software-related service revenue

   13,950     82     n.a.     n.a.     14,032  

Total revenue(2)

   16,815     82     n.a.     n.a.     16,897  

Total operating expenses

   –12,336     0     953     0    11,383  

Operating profit(2)

   4,479     82     953     0     5,514  

(1)

Included in operating expenses are acquisition-related charges, share-based payment expenses, and restructuring charges.

(2)

These financial measures are the numerator or the denominator in the calculation of our IFRS and non-IFRS operating margin, and are included in this table for transparency.

(3)

The discontinued activities include the results of our discontinued TomorrowNow business.

The following table shows the estimates of the items that represent the differences between our non-IFRS financial measures and our IFRS financial measures.

Non-IFRS Measures

 

millions

  Estimated
Amounts
for 2014
2016
   Actual
Amounts
for 20132015
 

Deferred revenue write-downRevenue adjustments

   <20     82

Discontinued activities

<10111  

Share-based payment expenses

   470590 to 510630     327724  

Acquisition-related charges

   520690 to 560740     555738  

Restructuring charges

   5040 to 15060     70621  

 

70We do not expect any Company-wide restructuring programs in 2016.


Part I

Item 5

The companyCompany expects a full-year 20142016 effective tax rate (IFRS) of 26.0%22.5% to 27.0% (2013: 24.4%23.5% (2015: 23.4%) and an effective tax rate (non-IFRS) of 27.5%24.5% to 28.5% (2013: 25.9%25.5% (2015: 26.1%).

Goals for Liquidity and Finance

On December 31, 2013, our2015, we had a negative net liquidity was negative, but we have additional liquidity reserves.liquidity. We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating financing needs also in 20142016 and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term.

In 2016, we expect a positive development of our operating cash flow mainly due to lower restructuring related payments.

We intend to effectrepay a substantial planned reduction of our financial debt in 2014 and, at the time of this report, we expect to make repayments of €586US$600 million over the year. We will consider issuing new debt, such as bonds or U.S. private placements, on an as-needed basis only and if market conditionsplacement when it matures in June. Additionally, we are advantageous. planning to further repay our outstanding1.25 billion bank loan.

By the time of this report, we have no concrete plans for future share buybacks.

Based on this planning, at this point in time we expect we will noticeably reduce our net debt in 2016 and gradually return to a positive net liquidity in subsequent years.

Investment Goals

Excepting acquisitions, ourOur planned capital expenditures for 20142016 and 20152017, other than from business combinations, mainly comprise the construction activities described earlier in this report.“Item 4. Information About SAP – Description of Property – Capital Expenditures”. We expect investments from these activities of approximately €194450 million during the next threetwo years. These investments can be covered in full by operating cash flow.

SAP does not plan any significant acquisitions in 2016 and 2017 but will rather focus on organic growth.

Proposed Dividend

We planintend to continue our dividend policy in 2017 as well, which is that the payout ratio should beto pay a dividend totaling more than 30%.35% of the prior year’s profit after tax.

Premises on Which Our Outlook Is Based

In preparing our outlook guidance, we have taken into account all events known to us at the time we prepared this report that could influence SAP’s business going forward.

Among the premises on which this outlook is based are those presented concerning the economyeconomic development and on the assumption that there will be no effects from a major acquisition.acquisitions in 2016 and 2017.

Medium-Term ProspectsCash Flows and Liquidity

WithGroup liquidity on December 31, 2015, primarily comprised amounts in euros and U.S. dollars. Current investments are included in other financial assets in the statement of financial position. Financial debts are included within financial liabilities in the statement of financial position.

Group Liquidity of SAP HANAGroup

millions  2015   2014   D 

Cash and cash equivalents

   3,411     3,328     83  

Current investments

   148     95     53  

Group liquidity

   3,559     3,423     136  

Current financial debt

   567     2,157     1,590  

Net liquidity 1

   2,992     1,266     1,726  

Non-current financial debt

   8,607     8,936     329  

Net liquidity 2

   5,615      7,670     2,055  

Group liquidity consists of cash and cash equivalents (for example, cash at banks, money market funds, and time deposits with original maturity of three months or less) and current investments (for example, investments with

original maturities of greater than three months and remaining maturities of less than one year) as reported in our Consolidated Financial Statements.

Group Liquidity Development

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Net liquidity is Group liquidity less total financial debt as defined above.

The increase in Group liquidity compared to 2014 was mainly due to cash inflows from our operations and financing activities in issuing bonds. They were offset by cash outflows for dividend payments and repayments of borrowings.

For information about the impact of cash, cash equivalents, current investments, and our financial liabilities on our income statements, see the analysis of our financial income, net, in the Operating Results (IFRS) section.

Analysis of Consolidated Statements of Cash Flows

millions  Years ended December 31,           
    2015   2014   2013   Change in % 2015
vs. 2014
   Change in % 2014
vs. 2013
 

Net cash flows from operating activities

   3,638     3,499     3,832     4%     9%  

Net cash flows from investing activities

   334     7,240     1,781     95%     >100%  

Net cash flows from financing activities

   3,356     4,298     1,589     <100%     <100%  

Analysis of Consolidated Statements of Cash Flows: 2015 compared to 2014

Net cash provided by operating activities increased 4% year-over-year to3,638 million in 2015 (2014:3,499 million). Payments in connection with the restructuring of204 million to employees and272 million to insurance policies have offset partly the non-recurring effect from litigations in 2014. In 2015, days’ sales outstanding (DSO) for receivables, defined as the single platformaverage number of days from the raised invoice to cash receipt from the customer, increased six days to 71 days (2014: 65 days).

Cash outflows from investment activities decreased significantly to334 million in 2015 (2014:7,240 million). Cash outflows from purchase of intangible assets and property, plant, and equipment remained stable. Cash outflows in 2014 had resulted mainly from business combinations of Concur and Fieldglass. For more information about current and planned capital expenditures, see the Investment Goals section.

Net cash outflows from financing activities were3,356 million in 2015, compared to net cash inflows of4,298 million in 2014. The 2015 cash outflows had resulted from repayments of1,270 million bank loans,550 million Eurobonds and US$300 million private placements. We refinanced another part of the bank loan through the issuance of a three-tranche Eurobond of1,750 million in total. Cash inflows in 2014 were the result of issuing a2,750 million Eurobond and drawing two tranches (of1,270 million and3,000 million) of a bank loan. Cash outflows in 2014 arose chiefly from repayments of1,086 million borrowings and US$1,160 million convertible bonds that we assumed in connection with our acquisition of Concur.

The dividend payment of1,316 million made in 2015 exceeded the amount of1,194 million in the prior year resulting from the increased dividend paid per share from1.00 to1.10.

Analysis of Consolidated Statements of Cash Flows: 2014 Compared to 2013

Net cash provided by operating activities decreased 9% year-over-year to3,499 million in 2014 (2013:3,832 million). Payments in connection with the TomorrowNow and Versata litigation had a555 million negative effect on net cash provided by operating activities. A61 million increase to1,356 million in our income tax payments also negatively affected net cash provided by operating activities. In 2014, days’ sales outstanding (DSO) for receivables, defined as the average number of days from the raised invoice to cash receipt from the customer, increased three days to 65 days (2013: 62 days).

Cash outflows from investment activities increased significantly to7,240 million in 2014 (2013:1,781 million). The increase resulted principally from the Concur, Fieldglass, and SeeWhy acquisitions. For more information about current and planned capital expenditures, see the Investment Goals section.

Net cash inflows from financing activities were4,298 million in 2014, compared to net cash outflows of1,589 million in 2013. Cash inflows in 2014 were the result of issuing a2,750 bond and drawing two tranches (of1,270 million and3,000 million) of a loan. Cash outflows arose chiefly from repayments of borrowings (1,086 million) and the repayment of convertible bonds that we assumed in connection with our acquisition of Concur (US$1,160 million). The 2013 cash outflows had resulted chiefly from dividends paid and the repayment of a600 million bond.

The dividend payment of1,194 million made in 2014 was greater than that of1,013 million in the prior year because the dividend paid per share increased from0.85 to1.00.

Credit Facilities

Other sources of capital are available to us through various credit facilities, if required.

We are party to a revolving2.0 billion credit facility contract with maturity in November 2020. The credit line may be used for general corporate purposes. A possible future withdrawal is not subject to any financial covenants. Borrowings under the facility bear interest at the Euro Interbank Offered Rate (EURIBOR) or London Interbank Offered Rate (LIBOR) for the respective optional currency plus a margin ranging from 0.3% to 0.525%. We pay a commitment fee of 0.079% per annum on unused amounts of the available credit facility. So far, we have not used and do not currently foresee any need to use, this credit facility.

As at December 31, 2015, SAP SE had additional available credit facilities totaling471 million. Several of our foreign subsidiaries have credit facilities available that allow them to borrow funds at prevailing interest rates. As at December 31, 2015, approximately49 million was available through such arrangements. There were immaterial borrowings outstanding under these credit facilities from our foreign subsidiaries as at December 31, 2015.

OFF-BALANCE SHEET ARRANGEMENTS

Several SAP entities have entered into operating leases for office space, hardware, cars and certain other equipment. These arrangements are sometimes referred to as a form of off-balance sheet financing. Rental expenses under these operating leases are set forth below under “Contractual Obligations.” We do not believe we have forms of material off-balance sheet arrangements that would require disclosure other than those already disclosed.

CONTRACTUAL OBLIGATIONS

The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2015:

Contractual obligations       Payments due by period 
millions  Total   Less than
1 year
   1-3 years   3-5 years   More than
5 years
 

Financial liabilities(1)

   10,127     863     3,759     1,822     3,683  

Derivative financial liabilities(1)

   132     74     29     29     0  

Operating lease obligations(3)

   1,347     294     410     246     396  

Purchase obligations(3)

   872     428     260     118     66  

Capital contribution commitments(3)

   111     111     0     0     0  

Other non-current non-financial liabilities(2)

   331     0     201     36     94  

Total

   12,920     1,770     4,660     2,251     4,239  

(1) For more information on financial liabilities and derivative financial liabilities see Note (24) to our Consolidated Financial Statements.

(2) For more information on other non-current non-financial liabilities see Note (17c) to our Consolidated Financial Statements.

(3) See Note (22) to our Consolidated Financial Statements for additional information about operating lease obligations, purchase obligations, and capital contribution commitments. Our expected contributions to our pension and other post-employment benefit plans are not included in the table above. For more information on these contributions see Note (18a) to our Consolidated Financial Statements.

We expect to meet these contractual obligations with our existing cash, our cash flows from operations and our financing activities. The timing of payments for the above contractual obligations is based on payment schedules for those obligations where set payments exist. For other obligations with no set payment schedules, estimates as to the most likely timing of cash payments have been made. The ultimate timing of these future cash flows may differ from these estimates.

Obligations under Indemnifications and Guarantees

Our software license agreements and our cloud subscription agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party’s intellectual property rights. In addition, we occasionally provide function or performance guarantees in routine consulting contracts and development arrangements. We also generally provide a six to twelve month warranty

on our software. Our warranty liability is included in other provisions. For more information on other provisions see Note (18b) to our Consolidated Financial Statements. For more information on obligations and contingent liabilities refer to Note (3) and Note (22)  in our Consolidated Financial Statements.

RESEARCH AND DEVELOPMENT

For information on our R&D activities see “Item 4. Information about SAP – Products, Research & Development, and Services.” For information on our R&D costs see “Item 5. Operating and Financial Review and Prospects – Operating Results (IFRS)” and for information related to our R&D employees see “Item 6. Directors, Senior Management and Employees – Employees.”

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements are prepared based on the accounting policies described in Note (3) to our Consolidated Financial Statements in this report. The application of such policies requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, revenues and expenses in our Consolidated Financial Statements. We base our judgments, estimates and assumptions on historical and forecast information, as well as regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues and expenses. Actual results could differ from original estimates.

The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, include the following:

revenue recognition;

valuation of trade receivables;

accounting for share-based payments;

accounting for income tax;

accounting for business combinations;

subsequent accounting for goodwill and other intangible assets;

accounting for legal contingencies; and

recognition of internally generated intangible assets from development.

Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. See Note (3c) to our Consolidated Financial Statements for further discussion on our critical accounting estimates and critical accounting policies.

NEW ACCOUNTING STANDARDS NOT YET ADOPTED

See Note (3e) to our Consolidated Financial Statements for our entire solution portfolio, delivered on-premisediscussion on new accounting standards not yet adopted.

EXPECTED DEVELOPMENTS

Future Trends in the Global Economy

In its most recent report, the European Central Bank (ECB) forecasts moderate growth in the world economy and it expects that this growth will vary across regions and countries in 2016. It foresees more favorable prospects for advanced economies than for emerging markets and developing economies. Geopolitical risks, especially of heightened tensions in the Middle East, could undermine global economic performance, the ECB warns.

In the Europe, Middle East, and Africa (EMEA) region, the ECB expects the euro-area economy to recover slightly more rapidly in 2016 than in the previous year. It suggests that low oil prices, increased publicsector spending on assistance for refugees, and its own monetary measures may encourage that acceleration. In Central and Eastern Europe, the ECB expects economic activity to remain stable but for performance to vary from country to country. The European Union’s structural funds and strong consumer spending may be principal factors behind such growth. In Russia, on the other hand, the economic situation is expected to remain difficult. The ECB expects further cuts in public spending as a consequence of declining oil revenue.

The ECB’s forecasts for 2016 for a number of major countries in the Americas region are cautious. For the United States, the ECB expects that economic growth may slow following the Federal Reserve’s move on interest rates in December 2015. The ECB expects political uncertainty, a tightening of monetary policy, and more restrictive financing conditions to continue to weigh on Brazil’s economy.

For the Asia Pacific Japan (APJ) region, the ECB expects that wage increases and low oil prices will improve consumer spending in Japan. Japan’s exports should also pick up. For China, though, the ECB expects that economic growth will continue to slow following the refocusing of its economy. It believes that the prospects for India’s economy are positive in 2016.

Economic Trends – Year-Over-Year GDP Growth

In %  2014e   2015p   2016p 

World

   3.4     3.1     3.4  

Advanced economies

   1.8     1.9     2.1  

Developing and emerging economies

   4.6     4.0     4.3  

Europe, Middle East, and Africa (EMEA)

               

Euro area

   0.9     1.5     1.7  

Germany

   1.6     1.5     1.7  

Central and Eastern Europe

   2.8     3.4     3.1  

Middle East and

North Africa

   2.8     2.5     3.6  

Sub- Saharan Africa

   5.0     3.5     4.0  

Americas

               

United States

   2.4     2.5     2.6  

Canada

   2.5     1.2     1.7  

Central and South America, Caribbean

   1.3     0.3     0.3  

Asia Pacific Japan (APJ)

               

Japan

   0.0     0.6     1.0  

Asian developing economies

   6.8     6.6    ��6.3  

China

   7.3     6.9     6.3  

e = estimate; p = projection

Source: International Monetary Fund (IMF), World Economic Outlook Update January 2016, Subdued Demand, Diminished Prospects, as of January 19, 2016, p. 6.

IT Market: The Outlook for 2016

The worldwide IT market is at the dawn of a new era, according to U.S. market research firm IDC. It expects IT market growth to decline in a number of emerging economies, notably Brazil, China, and Russia. For a decade, these countries were the driving force in all segments of the global IT market while the advanced economies were already focusing on the transition from traditional technologies to innovations such as cloud and mobile computing. IDC expects that the growth in traditional IT will also slow in the emerging markets and developing economies in the years ahead. It believes that cloud, mobile, and Big Data will offer the main opportunities for growth. In view of that prediction, IDC expects the worldwide IT market to grow just 2.8% in 2016. Hardware spending is expected to increase by about 1%, and software spending by almost 7% (mainly due to software-as-a-service and platform-as-a-service solutions).

In the Europe, Middle East, and Africa (EMEA) region, IDC expects overall IT market growth to decelerate to 2% in 2016. Notably, the IT market in Western Europe is

expected to grow just 1% to 2% in the coming years. The IT market in Germany is not expected to grow much above these rates either, according to IDC. The institute believes that IT spending in Russia might recover as early as 2016 and grow 6% as a result of short-term government stimulus measures.

IDC expects the Americas region IT spending to increase 3.7% in 2016. It believes the IT market in the United States will grow at a similar rate and that, with 7% growth, the software segment will again be the fastest to expand there. For Brazil, IDC expects that the government will pursue a strict program of economic reform in the next few years, which could slow growth in the IT market to a rate of 3% or 4%. IDC forecasts that the IT market in Mexico will also grow by about 3% annually in the next few years.

In the Asia Pacific Japan (APJ) region, IDC believes growth in the IT market might reach 2.5%. However, growth rates again are expected to vary from country to country. IDC expects the IT market in Japan will grow by about 3% in 2016. It anticipates that China’s IT market

will expand only in the low to middle single-digit percentage range in the years ahead. The IT market in

India, on the other hand, might continue to grow by rates at or above 10% a year, according to IDC.

Trends in the IT Market –

Increased IT Spending Year-Over-Year

 

               
In %  2014e   2015p   2016p 

World

               

Total IT

   4.5     4.9     2.8  

Hardware

   5.2     5.5     1.1  

Packaged software

   5.6     6.8     6.8  

Applications

   6.9     7.3     7.1  

IT services

   3.0     2.8     3.0  

Europe, Middle East, and Africa (EMEA)

               

Total IT

   3.9     4.6     2.0  

Packaged software

   4.0     4.8     5.2  

Applications

   4.5     5.4     5.6  

IT services

   2.2     1.9     2.6  

Americas

               

Total IT

   4.2     4.6     3.7  

Packaged software

   6.8     8.4     7.3  

Applications

   8.5     8.9     7.8  

IT services

   2.8     2.8     2.6  

Asia Pacific Japan (APJ)

               

Total IT

   5.9     5.9     2.5  

Packaged software

   4.5     4.9     8.0  

Applications

   5.6     5.1     7.7  

IT services

   5.3     4.6     4.6  

e = estimate, p = projection

Source: IDC Worldwide Black Book Pivot V3.1, 2015

Impact on SAP

SAP expects to outperform the global economy and the IT industry again in 2016 in terms of revenue growth.

Our 2015 results validate our strategy of innovating across the core, the cloud, and business networks to help our customers become true digital enterprises.

Our innovation cycle for SAP S/4HANA is well underway and the completeness of our vision in the cloud has distinguished SAP will drive simplicityfrom both legacy players and business outcomespoint solution providers. We have beaten our guidance for our customers.

We expect our business, our revenue,2015 on cloud and our profit to grow, assuming there is a sustained recovery in the global economy. Our strategic objectives are focusedsoftware as well as on the following financial and non-financial indicators: revenue, margin, customer loyalty, and employee engagement.operating income.

We expect the combination of a stable, highly-profitable core and fast-growing cloud business to deliver continued growth and margin expansion. We continue to strive to increase our total revenue to more than €20 billion by 2015 and revenue from our cloud business, including cloud-related professional services, to approximately €2 billion by 2015.

Looking beyondIn 2015, we introduced new 2017 targets. We now aimhave transformed our Company and made it leaner by shifting investments from non-core activities to increase total revenuestrategic growth areas enabling us to at least €22 billion and revenue from our cloud business to €3.0 to €3.5 billion by 2017. We have retained our non-IFRS operating margin goal of 35%. To capture the growth opportunities in the cloud,market.

We are well-positioned for the future as reflected in the increase of our ambition for 2017.

We plan to continue to invest in countries in which we now expect this targetsignificant growth, helping us reach our ambitious 2016 outlook targets and medium-term aspirations for 2017 and 2020.

We are confident we can achieve our medium-term targets for 2017 and 2020, assuming that the economic

environment and IT industry develop as currently forecasted. Balanced in terms of regions as well as industries, we are well-positioned with our product offering to offset smaller individual fluctuations in the global economy and IT market.

A comparison of our business outlook with forecasts for the global economy and IT industry shows that we can be successful even in a tough economic environment and will further strengthen our position as the market leader of enterprise application software.

Operational Targets for 2016 (Non-IFRS)

Revenue and Operating Profit Outlook

We are providing the following outlook for the full-year 2016:

Based on the continued strong momentum in SAP’s cloud business the Company expects full year 2016 non-IFRS cloud subscriptions and support revenue to be in a range of2.95 billion to3.05 billion at constant currencies (2015:2.30 billion). The upper end of this range represents a growth rate of 33% at constant currencies.

SAP expects full year 2016 non-IFRS cloud and software revenue to increase by 6% to 8% at constant currencies (2015:17.23 billion).

SAP expects full-year 2016 non-IFRS operating profit to be in a range of6.4 billion to6.7 billion at constant currencies (2015:6.35 billion).

We expect our headcount to experience an increase similar to the increase in 2015.

While our full-year 2016 business outlook is at constant currencies, actual currency reported figures are expected to continue to be reachedimpacted by currency exchange rate fluctuations.

We expect that non-IFRS total revenue will continue to depend largely on the revenue from cloud and software.

However, the revenue growth we expect from this is below the outlook provided for non-IFRS cloud subscriptions and support revenue. We expect the software license revenue in 2016 to be at the same level as in 2015 with SAP gaining market share against our main on-premise license competitors.

We expect that most of the total revenue growth (non-IFRS) will come from the Applications, Technology, and Services segment, equally distributed into software licenses and support revenue growth and cloud subscriptions and support revenue growth. Nevertheless, we anticipate our SAP Business Network segment will outpace the Applications, Technology, and Services segment with a significantly higher total revenue growth rate at lower absolute levels. As such, we expect we will seize a huge market opportunity with continued strong mid- and long-term growth potential.

We continuously strive for profit expansion in all our segments, therefore, we expect an increase in both segments’ profits. The vast majority of the profit expansion comes from our Applications, Technology, and Services segment. Overall, in the SAP Business Network segment, operating profit growth is higher than in the Applications, Technology, and Services segment, but at significantly lower volume.

Across all segments we expect our 2016 non-IFRS cloud subscriptions and support gross margin to be at least stable or to slightly increase compared to 2015. For SAP’s managed-cloud offerings, we still expect negative margins in 2016 which by 2017 rather than in 2015 as previously stated. We anticipateare expected to break even.

The following table shows the fast-growing cloud business along with growth in support revenue will drive a higher proportionestimates of more predictable, recurring revenue in the future.

In addition toitems that represent the differences between our non-IFRS financial goals, we also focus on two non-financial targets: Customer loyaltymeasures and employee engagement. We believe it is essential that our employees are engaged, drive our success, and support our strategy. Therefore, we plan to increase our employee engagement index score to 82% by 2015 (2013: 77%). Further, our customers’ satisfaction with the solutions we offer is very important to us. We want our customers to not only be satisfied, but also see us as a trusted partner for innovation. We measure this customer loyalty metric using the Net Promoter Score (NPS). For 2014, we have set a target for increasing the NPS by four percentage points (2013: 12.1%).

SAP’s vision to help the world run better and improve people’s lives comes to life in product innovation that drives business value for ourIFRS financial measures.

 

 

71Non-IFRS Measures


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Item 5

millionsEstimated
Amounts
for 2016
Actual
Amounts
for 2015

Revenue adjustments

< 2011

Share-based payment expenses

590 to 630724

Acquisition-related charges

690 to 740738

Restructuring

40 to 60621

 

customers. By delivering on our product roadmap, SAP is powering a market-wide transformation in how people and organizations work together and run better. Building on a track record of innovation, SAP is again at the forefront of a major shift in the IT sector, away from commoditized hardware and lower value services, toward renewed investment in differentiating IT through business software and services that drive simplicity, efficiency, and a more sustainable business transformation.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Global Financial Management

We use global centralized financial management to control liquid assets and monitor exposure to interest rates and currencies. The primary aim of our financial management is to maintain liquidity in the Group at a level that is adequate to meet our obligations. Most SAP companies have their liquidity managed centrally by the Group, so that liquid assets across the Group can be consolidated, monitored, and invested in accordance with Group policy. High levels of liquid assets help keep SAP flexible, sound, and independent. In addition, various credit facilities are currently available for additional liquidity, if required. For more information about these facilities, see the Credit Facilities section.

We manage credit, liquidity, interest rate, equity price, and foreign exchange rate risks on a Group-wide basis. We use selected derivatives exclusively for this purpose and not for speculation, which is defined as entering into a derivative instrument for which we do not have a corresponding underlying transaction. The rules for the use of derivatives and other rules and processes concerning the management of financial risks are collectedexpect any Company-wide restructuring programs in our treasury guideline document, which applies globally to all companies in the Group. For more information about the management of each financial risk and about our risk exposure, see the Notes to the Consolidated Financial Statements section, Notes (24) to (26).

Liquidity Management

Our primary source of cash, cash equivalents, and current investments is funds generated from our business operations. Over the past several years, our principal use of cash has been to support2016.

operationsThe Company expects a full-year 2016 effective tax rate (IFRS) of 22.5% to 23.5% (2015: 23.4%) and our capital expenditure requirements resulting from our growth,an effective tax rate (non-IFRS) of 24.5% to acquire businesses, to pay dividends on our shares,25.5% (2015: 26.1%).

Goals for Liquidity and to buy back SAP shares on the open market. Finance

On December 31, 2013, our cash, cash equivalents, and current investments were primarily held in euros and U.S. dollars. We generally invest only in the financial assets of issuers or funds with2015, we had a minimum credit rating of BBB, and pursue a policy of cautious investment characterized by wide portfolio diversification with a variety of counterparties, predominantly short-term investments, and standard investment instruments. We rarely invest in the financial assets of issuers with a credit rating lower than BBB, and such investments were not material in 2013.

In 2013, SAP signed a new revolving credit facility contract. The size of the facility was increased from €1.5 billion to €2.0 billion to support the company’s growth – for more information see the Credit Facilities section.negative net liquidity. We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating financing needs also in 2016 and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term. It may also be necessary to enter into financing transactions when additional funds are required that cannot be wholly sourced from free

In 2016, we expect a positive development of our operating cash flow (for example,mainly due to finance large acquisitions).lower restructuring related payments.

The persistently strong free cash flowWe intend to repay a US$600 million U.S. private placement when it matures in June. Additionally, we are planning to further repay our outstanding1.25 billion bank loan.

By the time of recent years enabled us to pay back additional debts within a short period of time. Furthermore, a balanced maturity profile prevents repayment peaks from occurring in any particular year.

To expand our business,this report, we have made acquisitions of businesses, products, and technologies. Depending on ourno concrete plans for future cash position and future market conditions, we might issue additional debt instruments to fund acquisitions, maintain financial flexibility, and limit repayment risk. Therefore, we continuously monitor funding options available in the capital markets and trends in the availability of funds, as well as the cost of such funding. For more information about the financial debt, see the Cash Flows and Liquidity section.

Capital Structure Management

The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor, and customer

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confidence, and to support the growth of our business. We seek to maintain a capital structure that will allow us to cover our funding requirements through the capital markets at reasonable conditions, and in so doing, ensure a high level of independence, confidence, and financial flexibility.share buybacks.

Based on this planning, at this point in time we expect we will noticeably reduce our strong corporate financial profilenet debt in 2016 and gradually return to a positive net liquidity in subsequent years.

Investment Goals

Our planned capital expenditures for 2016 and 2017, other than from business combinations, mainly comprise the construction activities described in “Item 4. Information About SAP – Description of Property – Capital Expenditures”. We expect investments from these activities of approximately450 million during the next two years. These investments can be covered in full by operating cash flow.

SAP does not plan any significant acquisitions in 2016 and 2017 but will rather focus on organic growth.

Proposed Dividend

We intend to continue our excellent capital market reputation,dividend policy in 2017 as well, which is to pay a dividend totaling more than 35% of the prior year’s profit after tax.

Premises on Which Our Outlook Is Based

In preparing our outlook guidance, we have so far successfully executed external financing transactions without an external rating. However,

taken into account all events known to us at the time we will continue to closely monitor our financing situation to determine whether not having an external rating continues to be appropriate.prepared this report that could influence SAP’s business going forward.

Our general intentionAmong the premises on which this outlook is to remain in a position to return excess liquidity to our shareholders by distributing annual dividends and repurchasing shares. The amount of future dividendsbased are those presented concerning economic development and the extent of future repurchases of sharesassumption that there will be balanced with our effort to continue to maintain an adequate liquidity position.

Capital Structure

    2013   2012   % Change 
    € millions   % of Total
equity and
liabilities
   € millions   % of Total
equity and
liabilities
   

Equity

   16,048     59     14,133     54     14  

Current liabilities

   6,347     23     6,546     25     –3  

Non-current liabilities

   4,699     17     5,627     21     –16  

Liabilities

   11,046     41     12,173     46     –9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity and liabilities

   27,094     100     26,306     100     3  

Our financing activities improved our debt ratio (defined as the ratio of total liabilities to total equityno effects from major acquisitions in 2016 and liabilities, expressed as a percentage) to 41% at the end of 2013 (as compared to 46% at the end of 2012). The ratio of total financial debt to total equity and liabilities decreased by 3% to 16% at the end of 2013 (19% as at December 31, 2012). Total financial debt consists of current and non-current bonds and private placements. For more information about our financial debt, see the Notes to the Consolidated Financial Statements section, Note (17).2017.

As part of our financing activities in 2014, the Company intends to repay a €500 million Eurobond and an €86 million German promissory note when they both mature in April 2014.

Total liabilities on December 31, 2013, mainly comprised financial liabilities of €4,506 million (of which €3,758 million are non-current). Financial liabilities on December 31, 2013, consisted largely of financial debt, which included amounts in euros (€2,386 million) and U.S. dollars (€1,922 million). On December 31, 2013, 100% of financial debt was held at fixed interest rates, of which 56% were swapped into variable interest rates using interest rate swaps. For more information about financial liabilities, see the Notes to the Consolidated Financial Statements section, Note (17).

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Cash Flows and Liquidity

Group liquidity on December 31, 2013,2015, primarily comprised amounts in euros (€1,056 million) and U.S. dollars (€884 million).dollars. Current investments are included in other financial assets in the statement of financial position. Financial debts are included within financial liabilities in the statement of financial position.

Group Liquidity of SAP Group

 

€ millions

  2013   2012   Change   2015   2014   D 

Cash and cash equivalents

   2,748     2,477     271     3,411     3,328     83  

Current investments

   93     15     78     148     95     53  
  

 

   

 

   

 

 

Group liquidity

   2,841     2,492     349     3,559     3,423     136  

Current financial debt

   586     600     –14     567     2,157     1,590  
  

 

   

 

   

 

 

Net liquidity 1

   2,255     1,892     363     2,992     1,266     1,726  

Non-current financial debt

   3,722     4,394     –672     8,607     8,936     329  
  

 

   

 

   

 

 

Net liquidity 2

   –1,467     –2,502     1,035     5,615      7,670     2,055  
  

 

   

 

   

 

 

 

Group liquidity consists of cash and cash equivalents (for example, cash at banks, money market funds, and time deposits with original maturity of three months or less) and current investments (for example, investments with

original maturities of greater than three months and remaining maturities of less than one year) as reported in our IFRS Consolidated Financial Statements.

 

 

LOGOGroup Liquidity Development

 

LOGO

Net liquidity is Group liquidity less total financial debt as defined above.

The increase in Group liquidity from 2012compared to 2014 was mainly due to positive cash inflows from our operations whichand financing activities in issuing bonds. They were partly offset by cash outflows for acquisitions (such as hybris), dividend payments and repaymentrepayments of an issued Eurobond.borrowings.

For information about the impact of cash, cash equivalents, current investments, and our financial liabilities on our income statements, see the analysis of our financial income, net, in the Operating Results (IFRS) section.

 

 

Analysis of Consolidated Statements of Cash Flows

 

  Years ended December 31,  Change in %
2013 vs. 2012
  Change in %
2012 vs. 2011
 

€ millions

 2013  2012  2011   

Net cash flows from operating activities

  3,832    3,822    3,775    0    1  

Net cash flows from investing activities

  –1,781    –5,964    –1,226    –70    >100  

Net cash flows from financing activities

  –1,589    –194    –1,176    >100    –84  

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millions  Years ended December 31,           
    2015   2014   2013   Change in % 2015
vs. 2014
   Change in % 2014
vs. 2013
 

Net cash flows from operating activities

   3,638     3,499     3,832     4%     9%  

Net cash flows from investing activities

   334     7,240     1,781     95%     >100%  

Net cash flows from financing activities

   3,356     4,298     1,589     <100%     <100%  

 

Analysis of Consolidated Statements of Cash Flow: 2013Flows: 2015 compared to 20122014

Net cash provided by operating activities remained stableincreased 4% year-over-year to3,638 million in 2013 (€3,832 million) compared to the prior year (2012: €3,8222015 (2014:3,499 million). Increased income tax paymentsPayments in connection with the restructuring of €193204 million to €1,295employees and272 million to insurance policies have offset partly the non-recurring effect from litigations in 2013 burdened net cash flows from operating activities.2014. In addition,2015, days’ sales outstanding (DSO) for receivables, defined as the average number of days from the raised invoice to cash receipt from the customer, was 62increased six days a three-day increase compared to 2012 (5971 days (2014: 65 days).

Cash outflows from investment activities totaled €1,781decreased significantly to334 million in 2013, much decreased2015 (2014:7,240 million). Cash outflows from the 2012 figurepurchase of €5,964 million that were attributedintangible assets and property, plant, and equipment remained stable. Cash outflows in 2014 had resulted mainly tofrom business combinations of SuccessFactorsConcur and Ariba. In 2013, cash outflows were mainly driven by the acquisitions of consolidated companies (especially hybris) as well, for which we paid €1,160 million in total.Fieldglass. For more information about current and planned capital expenditures, see the Assets and Investment Goals sections.section.

Cash outflows from financing activities totaled €1,589 million in 2013, compared to €194 million in 2012. In 2013, cash outflows were mainly driven by dividends paid and a repayment of an issued €600 million Eurobond. In addition, we took out a short-term bank loan in the amount of €1,000 million to finance the acquisition of hybris that were fully offset by repayments in the same amount and year. In the previous year,Net cash outflows from financing activities were mainly driven by3,356 million in 2015, compared to net cash inflows of4,298 million in 2014. The 2015 cash outflows had resulted from repayments of1,270 million bank loans,550 million Eurobonds and US$300 million private placements. We refinanced another part of the bank loan through the issuance of a three-tranche Eurobond tranche (€600 million)of1,750 million in total. Cash inflows in 2014 were the result of issuing a2,750 million Eurobond and severaldrawing two tranches (€611(of1,270 million and3,000 million) of the promissory notesa bank loan. Cash outflows in 2014 arose chiefly from repayments of1,086 million borrowings and US$1,160 million convertible bonds that we issuedassumed in 2009 and dividends paid. This was almost fully compensated by a successfully placed Eurobond transaction totaling €1.3 billion and a U.S. private placement transactionconnection with our acquisition of US$1.4 billion.

The decrease of total dividends paid in 2013 to €1,013 million (2012: €1,310 million) was due to a decrease in dividend paid to €0.85 per share compared to €1.10 per share in the previous year, of which €0.35 per share was an extraordinary payout to celebrate our 40th anniversary in 2012.Concur.

The dividend payment of1,316 million made in 2015 exceeded the amount of1,194 million in the prior year resulting from the increased dividend paid per share from1.00 to1.10.

Analysis of Consolidated Statements of Cash Flow: 2012Flows: 2014 Compared to 20112013

Net cash provided by operating activities increased slightly by €47 million or 1%decreased 9% year-over-year to €3,8223,499 million in 2012 (2011: €3,7752014 (2013:3,832 million). Payments in connection with the TomorrowNow and Versata litigation had a555 million negative effect on net cash provided by operating activities. A61 million increase to1,356 million in our income tax payments also negatively affected net cash provided by operating activities. In 2012,2014, days’ sales outstanding (DSO) for receivables, defined as the average number of days from the raised invoice to cash receipt from the customer, was 59increased three days a one-day decrease compared to 2011 (6065 days (2013: 62 days).

Cash outflows from investment activities totaled €5,964increased significantly to7,240 million in 2012, much increased2014 (2013:1,781 million). The increase resulted principally from the 2011 figure of €1,226 million. In 2012,Concur, Fieldglass, and SeeWhy acquisitions. For more information about current and planned capital expenditures, see the Investment Goals section.

Net cash outflows were mainly driven by acquisitions of consolidated companies such as SuccessFactors and Ariba, for which we paid €6,094 million in total. In contrast, the 2011 figure was mainly driven by investments in time deposits and German government bonds.

Cash outflowsinflows from financing activities totaled €194were4,298 million in 2012,2014, compared to €1,176net cash outflows of1,589 million in 2011. In 2012, cash2013. Cash inflows in 2014 were mainly driven bythe result of issuing a successfully placed two-tranche Eurobond transaction totaling €1.3 billion2,750 bond and drawing two tranches (of1,270 million and3,000 million) of a U.S. private placement transaction of US$1.4 billion consisting of several tranches. This was partly offset byloan. Cash outflows arose chiefly from repayments of a Eurobond tranche (€600borrowings (1,086 million) and several tranches (€611 million)the repayment of the promissory notesconvertible bonds that we issued in 2009. In 2011, cash outflows were driven mainly by repayments of a credit facility we drew onassumed in connection with our acquisition of Sybase.

Concur (US$1,160 million). The increase in total2013 cash outflows had resulted chiefly from dividends paid to €1,310and the repayment of a600 million bond.

The dividend payment of1,194 million made in 2014 was due to an increasegreater than that of1,013 million in the prior year because the dividend from €0.60paid per share in 2011increased from0.85 to €1.10 per share in 2012, of which €0.35 per share was an extraordinary payout to celebrate our 40th anniversary in the reporting year (total dividend payout in 2011: €713 million). In 2012, we repurchased shares in the amount of €53 million (2011: €246 million) in connection with our share-based payments.1.00.

Credit Facilities

Other sources of capital are available to us through various credit facilities, if required.

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By signingWe are party to a newrevolving2.0 billion credit facility contract of €2.0 billion, SAP refinanced its existing credit facility of €1.5 billion that would have expiredwith maturity in December 2015. The revolving credit facility was early refinanced due to favorable market conditions with a tenor of five years plus two one year extension options.November 2020. The credit line may be used for general corporate purposes. A possible future withdrawal is not boundsubject to any financial covenants. Borrowings under the facility bear interest at the euro interbank offered rateEuro Interbank Offered Rate (EURIBOR) or London interbank offered rateInterbank Offered Rate (LIBOR) for the respective optional currency plus a margin ranging from 0.3% to 0.525% (2012: 0.45% to 0.75%). We pay a commitment fee of 0.079% (2012: 0.1575%) per annum on unused amounts of the available credit facility. So far, we have not used and do not currently foresee any need to use, this credit facility.

As at December 31, 2013,2015, SAP AGSE had additional available credit facilities totaling €487471 million. As at December 31, 2013, there were no borrowings outstanding under these credit facilities. Several of our foreign subsidiaries have credit facilities

available that allow them to borrow funds in their local currencies at prevailing interest rates, generally to the extent SAP AG has guaranteed such amounts.rates. As at December 31, 2013,2015, approximately €3649 million was available through such arrangements. There were noimmaterial borrowings outstanding under these credit facilities from any of our foreign subsidiaries as at December 31, 2013.2015.

OFF-BALANCE SHEET ARRANGEMENTS

Several SAP entities have entered into operating leases for office space, hardware, cars and certain other equipment. These arrangements are sometimes referred to as a form of off-balance sheet financing. Rental expenses under these operating leases are set forth below under “Contractual Obligations.” We do not believe we do not have forms of material off-balance sheet arrangements that would require disclosure other than those already disclosed.

 

 

CONTRACTUAL OBLIGATIONS

The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2013:2015:

 

Contractual obligations

      Payments due by period        Payments due by period 

€ millions

  Total   Less
than
1 year
   1-3 years   3-5 years   More
than
5 years
   Total   Less than
1 year
   1-3 years   3-5 years   More than
5 years
 

Financial liabilities(1)

   4,881     731     1,376     1,044     1,730     10,127     863     3,759     1,822     3,683  

Derivative financial liabilities(1)

   181     76     –8     29     84     132     74     29     29     0  

Other non-current non-financial liabilties(2)

   112     0     24     4     83  

Operating lease obligations(3)

   1,204     235     354     207     408     1,347     294     410     246     396  

Purchase obligations(3)

   504     282     123     63     36     872     428     260     118     66  
  

 

   

 

   

 

   

 

   

 

 

Capital contribution commitments(3)

   111     111     0     0     0  

Other non-current non-financial liabilities(2)

   331     0     201     36     94  

Total

   6,882     1,324     1,869     1,347     2,341     12,920     1,770     4,660     2,251     4,239  
  

 

   

 

   

 

   

 

   

 

 

(1) For more information on financial liabilities and derivative financial liabilities see Note (24) to our Consolidated Financial Statements.

(1)

For more information on financial liabilities and derivative financial liabilities see Note (24)

(2) For more information on other non-current non-financial liabilities see Note (17c) to our Consolidated Financial Statements.

(3) See Note (22) to our Consolidated Financial Statements for additional information about operating lease obligations, purchase obligations, and capital contribution commitments. Our expected contributions to our pension and other post-employment benefit plans are not included in the table above. For more information on these contributions see Note (18a) to our Consolidated Financial Statements.

(2)

For more information on other non-current non-financial liabilities see Note (17c) to our Consolidated Financial Statements.

(3)

See Note (22) to our Consolidated Financial Statements for additional information about operating lease and purchase obligations. Our expected contributions to our pension and other post employment benefit plans are not included in the table above. For more information on these contributions see Note (18a) to our Consolidated Financial Statements.

 

We expect to meet these contractual obligations with our existing cash, our cash flows from operations and our financing activities. The timing of payments for the above contractual obligations is based on payment schedules for those obligations where set payments exist. For other

obligations with no set payment schedules, estimates as to the most likely timing of cash payments have been made. The ultimate timing of these future cash flows may differ from these estimates.

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Obligations under Indemnifications and Guarantees

Our software license agreements and our cloud subscription agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party’s intellectual property rights. In addition, we occasionally provide function or performance guarantees in routine consulting contracts and development arrangements. We also generally provide a six to twelve month warranty

on our software. Our warranty liability is included in other provisions. For more information on other provisions see Note (18b) to our Consolidated Financial Statements. For more information on obligations and contingent liabilities refer to Note (3) and Note (22)  in our Consolidated Financial Statements.

RESEARCH AND DEVELOPMENT

For information on our R&D activities see “Item 4. Information about SAP – Products, Research & Development, and Development.Services.” For information on our R&D costs see “Item 5. Operating and Financial Review and Prospects – Operating Results”Results (IFRS)” and for information related to our R&D employees see “Item 6. Directors, Senior Management and Employees – Employees.”

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements are prepared based on the accounting policies described in Note (3) to our Consolidated Financial Statements in this report. The application of such policies requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, revenues and expenses in our Consolidated Financial Statements. We base our judgments, estimates and assumptions on historical and forecast information, as well as regional and industry economic conditions in

which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues and expenses. Actual results could differ from original estimates.

The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, include the following:

revenue recognition;

valuation of trade receivables;

accounting for share-based payments;

accounting for income tax;

accounting for business combinations;

subsequent accounting for goodwill and other intangible assets;

accounting for legal contingencies; and

recognition of internally generated intangible assets from development.

revenue recognition;

valuation of trade receivables;

accounting for share-based payment;

accounting for income tax;

accounting for business combinations;

subsequent accounting for goodwill and other intangibles;

accounting for legal contingencies; and

recognition of internally generated intangible assets from development.

Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. See Note (3c) to our Consolidated Financial Statements for further discussion on our critical accounting estimates and critical accounting policies.

NEW ACCOUNTING STANDARDS NOT YET ADOPTED

See Note (3e) to our Consolidated Financial Statements for our discussion on new accounting standards not yet adopted.

EXPECTED DEVELOPMENTS

Future Trends in the Global Economy

In its most recent report, the European Central Bank (ECB) forecasts moderate growth in the world economy and it expects that this growth will vary across regions and countries in 2016. It foresees more favorable prospects for advanced economies than for emerging markets and developing economies. Geopolitical risks, especially of heightened tensions in the Middle East, could undermine global economic performance, the ECB warns.

In the Europe, Middle East, and Africa (EMEA) region, the ECB expects the euro-area economy to recover slightly more rapidly in 2016 than in the previous year. It suggests that low oil prices, increased publicsector spending on assistance for refugees, and its own monetary measures may encourage that acceleration. In Central and Eastern Europe, the ECB expects economic activity to remain stable but for performance to vary from country to country. The European Union’s structural funds and strong consumer spending may be principal factors behind such growth. In Russia, on the other hand, the economic situation is expected to remain difficult. The ECB expects further cuts in public spending as a consequence of declining oil revenue.

The ECB’s forecasts for 2016 for a number of major countries in the Americas region are cautious. For the United States, the ECB expects that economic growth may slow following the Federal Reserve’s move on interest rates in December 2015. The ECB expects political uncertainty, a tightening of monetary policy, and more restrictive financing conditions to continue to weigh on Brazil’s economy.

For the Asia Pacific Japan (APJ) region, the ECB expects that wage increases and low oil prices will improve consumer spending in Japan. Japan’s exports should also pick up. For China, though, the ECB expects that economic growth will continue to slow following the refocusing of its economy. It believes that the prospects for India’s economy are positive in 2016.

Economic Trends – Year-Over-Year GDP Growth

In %  2014e   2015p   2016p 

World

   3.4     3.1     3.4  

Advanced economies

   1.8     1.9     2.1  

Developing and emerging economies

   4.6     4.0     4.3  

Europe, Middle East, and Africa (EMEA)

               

Euro area

   0.9     1.5     1.7  

Germany

   1.6     1.5     1.7  

Central and Eastern Europe

   2.8     3.4     3.1  

Middle East and

North Africa

   2.8     2.5     3.6  

Sub- Saharan Africa

   5.0     3.5     4.0  

Americas

               

United States

   2.4     2.5     2.6  

Canada

   2.5     1.2     1.7  

Central and South America, Caribbean

   1.3     0.3     0.3  

Asia Pacific Japan (APJ)

               

Japan

   0.0     0.6     1.0  

Asian developing economies

   6.8     6.6    ��6.3  

China

   7.3     6.9     6.3  

e = estimate; p = projection

Source: International Monetary Fund (IMF), World Economic Outlook Update January 2016, Subdued Demand, Diminished Prospects, as of January 19, 2016, p. 6.

IT Market: The Outlook for 2016

The worldwide IT market is at the dawn of a new era, according to U.S. market research firm IDC. It expects IT market growth to decline in a number of emerging economies, notably Brazil, China, and Russia. For a decade, these countries were the driving force in all segments of the global IT market while the advanced economies were already focusing on the transition from traditional technologies to innovations such as cloud and mobile computing. IDC expects that the growth in traditional IT will also slow in the emerging markets and developing economies in the years ahead. It believes that cloud, mobile, and Big Data will offer the main opportunities for growth. In view of that prediction, IDC expects the worldwide IT market to grow just 2.8% in 2016. Hardware spending is expected to increase by about 1%, and software spending by almost 7% (mainly due to software-as-a-service and platform-as-a-service solutions).

In the Europe, Middle East, and Africa (EMEA) region, IDC expects overall IT market growth to decelerate to 2% in 2016. Notably, the IT market in Western Europe is

expected to grow just 1% to 2% in the coming years. The IT market in Germany is not expected to grow much above these rates either, according to IDC. The institute believes that IT spending in Russia might recover as early as 2016 and grow 6% as a result of short-term government stimulus measures.

IDC expects the Americas region IT spending to increase 3.7% in 2016. It believes the IT market in the United States will grow at a similar rate and that, with 7% growth, the software segment will again be the fastest to expand there. For Brazil, IDC expects that the government will pursue a strict program of economic reform in the next few years, which could slow growth in the IT market to a rate of 3% or 4%. IDC forecasts that the IT market in Mexico will also grow by about 3% annually in the next few years.

In the Asia Pacific Japan (APJ) region, IDC believes growth in the IT market might reach 2.5%. However, growth rates again are expected to vary from country to country. IDC expects the IT market in Japan will grow by about 3% in 2016. It anticipates that China’s IT market

will expand only in the low to middle single-digit percentage range in the years ahead. The IT market in

India, on the other hand, might continue to grow by rates at or above 10% a year, according to IDC.

 

 

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Trends in the IT Market –

 

Increased IT Spending Year-Over-Year

 

               
In %  2014e   2015p   2016p 

World

               

Total IT

   4.5     4.9     2.8  

Hardware

   5.2     5.5     1.1  

Packaged software

   5.6     6.8     6.8  

Applications

   6.9     7.3     7.1  

IT services

   3.0     2.8     3.0  

Europe, Middle East, and Africa (EMEA)

               

Total IT

   3.9     4.6     2.0  

Packaged software

   4.0     4.8     5.2  

Applications

   4.5     5.4     5.6  

IT services

   2.2     1.9     2.6  

Americas

               

Total IT

   4.2     4.6     3.7  

Packaged software

   6.8     8.4     7.3  

Applications

   8.5     8.9     7.8  

IT services

   2.8     2.8     2.6  

Asia Pacific Japan (APJ)

               

Total IT

   5.9     5.9     2.5  

Packaged software

   4.5     4.9     8.0  

Applications

   5.6     5.1     7.7  

IT services

   5.3     4.6     4.6  

e = estimate, p = projection

Source: IDC Worldwide Black Book Pivot V3.1, 2015

Impact on SAP

SAP expects to outperform the global economy and the IT industry again in 2016 in terms of revenue growth.

Our 2015 results validate our strategy of innovating across the core, the cloud, and business networks to help our customers become true digital enterprises.

Our innovation cycle for SAP S/4HANA is well underway and the completeness of our vision in the cloud has distinguished SAP from both legacy players and point solution providers. We have beaten our guidance for 2015 on cloud and software as well as on operating income.

In 2015, we have transformed our Company and made it leaner by shifting investments from non-core activities to strategic growth areas enabling us to capture the growth opportunities in the market.

We are well-positioned for the future as reflected in the increase of our ambition for 2017.

We plan to continue to invest in countries in which we expect significant growth, helping us reach our ambitious 2016 outlook targets and medium-term aspirations for 2017 and 2020.

We are confident we can achieve our medium-term targets for 2017 and 2020, assuming that the economic

environment and IT industry develop as currently forecasted. Balanced in terms of regions as well as industries, we are well-positioned with our product offering to offset smaller individual fluctuations in the global economy and IT market.

A comparison of our business outlook with forecasts for the global economy and IT industry shows that we can be successful even in a tough economic environment and will further strengthen our position as the market leader of enterprise application software.

Operational Targets for 2016 (Non-IFRS)

Revenue and Operating Profit Outlook

We are providing the following outlook for the full-year 2016:

Based on the continued strong momentum in SAP’s cloud business the Company expects full year 2016 non-IFRS cloud subscriptions and support revenue to be in a range of2.95 billion to3.05 billion at constant currencies (2015:2.30 billion). The upper end of this range represents a growth rate of 33% at constant currencies.

SAP expects full year 2016 non-IFRS cloud and software revenue to increase by 6% to 8% at constant currencies (2015:17.23 billion).

SAP expects full-year 2016 non-IFRS operating profit to be in a range of6.4 billion to6.7 billion at constant currencies (2015:6.35 billion).

We expect our headcount to experience an increase similar to the increase in 2015.

While our full-year 2016 business outlook is at constant currencies, actual currency reported figures are expected to continue to be impacted by currency exchange rate fluctuations.

We expect that non-IFRS total revenue will continue to depend largely on the revenue from cloud and software.

However, the revenue growth we expect from this is below the outlook provided for non-IFRS cloud subscriptions and support revenue. We expect the software license revenue in 2016 to be at the same level as in 2015 with SAP gaining market share against our main on-premise license competitors.

We expect that most of the total revenue growth (non-IFRS) will come from the Applications, Technology, and Services segment, equally distributed into software licenses and support revenue growth and cloud subscriptions and support revenue growth. Nevertheless, we anticipate our SAP Business Network segment will outpace the Applications, Technology, and Services segment with a significantly higher total revenue growth rate at lower absolute levels. As such, we expect we will seize a huge market opportunity with continued strong mid- and long-term growth potential.

We continuously strive for profit expansion in all our segments, therefore, we expect an increase in both segments’ profits. The vast majority of the profit expansion comes from our Applications, Technology, and Services segment. Overall, in the SAP Business Network segment, operating profit growth is higher than in the Applications, Technology, and Services segment, but at significantly lower volume.

Across all segments we expect our 2016 non-IFRS cloud subscriptions and support gross margin to be at least stable or to slightly increase compared to 2015. For SAP’s managed-cloud offerings, we still expect negative margins in 2016 which by 2017 are expected to break even.

The following table shows the estimates of the items that represent the differences between our non-IFRS financial measures and our IFRS financial measures.

Non-IFRS Measures

millionsEstimated
Amounts
for 2016
Actual
Amounts
for 2015

Revenue adjustments

< 2011

Share-based payment expenses

590 to 630724

Acquisition-related charges

690 to 740738

Restructuring

40 to 60621

We do not expect any Company-wide restructuring programs in 2016.

The Company expects a full-year 2016 effective tax rate (IFRS) of 22.5% to 23.5% (2015: 23.4%) and an effective tax rate (non-IFRS) of 24.5% to 25.5% (2015: 26.1%).

Goals for Liquidity and Finance

On December 31, 2015, we had a negative net liquidity. We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating financing needs also in 2016 and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term.

In 2016, we expect a positive development of our operating cash flow mainly due to lower restructuring related payments.

We intend to repay a US$600 million U.S. private placement when it matures in June. Additionally, we are planning to further repay our outstanding1.25 billion bank loan.

By the time of this report, we have no concrete plans for future share buybacks.

Based on this planning, at this point in time we expect we will noticeably reduce our net debt in 2016 and gradually return to a positive net liquidity in subsequent years.

Investment Goals

Our planned capital expenditures for 2016 and 2017, other than from business combinations, mainly comprise the construction activities described in “Item 4. Information About SAP – Description of Property – Capital Expenditures”. We expect investments from these activities of approximately450 million during the next two years. These investments can be covered in full by operating cash flow.

SAP does not plan any significant acquisitions in 2016 and 2017 but will rather focus on organic growth.

Proposed Dividend

We intend to continue our dividend policy in 2017 as well, which is to pay a dividend totaling more than 35% of the prior year’s profit after tax.

Premises on Which Our Outlook Is Based

In preparing our outlook guidance, we have taken into account all events known to us at the time we prepared this report that could influence SAP’s business going forward.

Among the premises on which this outlook is based are those presented concerning economic development and the assumption that there will be no effects from major acquisitions in 2016 and 2017.

Medium-Term Prospects

In this section, all discussion of the medium-term prospects is based exclusively on non-IFRS measures.

We expect to grow our more predictable revenue business while steadily increasing operating profit. Our strategic objectives are focused primarily on the following financial and non-financial objectives: growth, profitability, customer loyalty, and employee engagement.

We are raising our 2017 ambition compared to our outlook previously communicated in 2015 to reflect both the current exchange rate environment and our excellent business momentum.

Assuming a stable exchange rate environment going forward, SAP now expects non-IFRS cloud subscriptions and support revenue in a range of3.8 billion to4.0 billion in 2017. The upper end of this range represents a 2015 to 2017 compound annual growth rate (CAGR) of 32%. Non-IFRS total revenue is expected to be in a range of23.0 billion to23.5 billion in 2017. We now expect our 2017 non-IFRS operating profit to be in a range of6.7 billion to7.0 billion.

We continue to anticipate that the fast-growing cloud business along with growth in support revenue will drive a higher share of more predictable revenue. Given the current software license revenue momentum, we now expect the total of cloud subscriptions and support revenue and software support revenue to be in a range of 63% to 65% of total revenue in 2017.

By 2017, we continue to expect the rapidly growing cloud subscriptions and support revenue to be close to software license revenue and they are expected to exceed software license revenue in 2018. At that time, SAP expects to reach a scale in its cloud business that will clear the way for accelerated operating profit expansion.

In 2015, we communicated our long term, high-level ambitions for the year 2020. We are not adjusting this long-term ambition at this time. Thus, we continue to strive for reaching the following by 2020:

7.5 billion to8.0 billion non-IFRS cloud subscriptions and support revenue

26 billion to28 billion non-IFRS total revenue

8.0 billion to9.0 billion non-IFRS operating profit

70% to 75% share of more predictable revenue (defined as the total of cloud subscriptions and support revenue and software support revenue)

By 2020, we expect our business network offering to generate the largest portion of the cloud subscriptions and support revenue. The share of this portion of revenue is expected to be followed by our public cloud offerings. Both of these offerings are expected to each generate, in 2020, cloud subscriptions and support revenues that are significantly higher than the cloud subscriptions and support revenue generated from our private cloud offerings.

We also strive for significantly improving, over the next few years, the profitability of our cloud business. We expect that the flat or slightly increasing cloud subscriptions and support margin development in 2016 will be followed by further margin increases in the following years until we reach our envisioned long-term cloud subscriptions and support margin targets in 2020. These will continue to increase at different rates: We expect the gross margin from our public cloud to reach approximately 80% (2015: approximately 70%) in 2020. Likewise, we expect our business network gross margin to reach approximately 80% (2015: approximately 75%) in 2020. The gross margin for our private cloud is expected to break even in 2016 and reach about 40% in 2020.

In a mature state of our cloud business, we expect that approximately 80% of the cloud subscription business will be generated from existing contracts and their renewals and approximately 20% from new business. This is compared to approximately 60% from existing contracts and renewals and 40% from new business in the fast-growth phase of our cloud business.

We also communicated in 2015 that we aim at further improving the profitability of our on-premise software

business. It is our target, from that point in time, to grow, until 2020, our gross profit from software licenses and support by a compound annual growth rate of approximately 3%, leading to an improvement in the software licenses and support gross margin of approximately 2 percentage points.

Non-Financial Goals 2016

In addition to our financial goals, we also focus on two non-financial targets: customer loyalty and employee engagement.

We believe it is essential that our employees are engaged, drive our success, and support our strategy. We remain committed to achieving an 82% employee engagement score in 2016 (2015: 81%).

Further, our customers’ satisfaction with the solutions we offer is very important to us. We want our customers not only to be satisfied, but also to see us as a trusted partner for innovation. We measure this customer loyalty metric using the Customer Net Promoter Score (NPS). For 2016, we aim to achieve a Customer NPS of 25% (2015: 22.4%).

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

SUPERVISORY BOARD

The current members of the Supervisory Board of SAP AG,SE, each member’s principal occupation, 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

 Year
First
Elected
   Year
Term
Expires
 

Prof. Dr. h.c. mult. Hasso Plattner, Chairman(1)(2)(5)(6)(7)(10)(11)

 

 

70

  

 

Chairman of the Supervisory Board

  2003     2017  

Pekka Ala-Pietilä(1)(6)(7)(10)

  57   Chairman of the Board of Directors, SolidiumOy  2002     2017  

Prof. Anja Feldmann(1)(6)(11)

  48   Professor at the Electrical Engineering and Computer Science Faculty at the Technische Universität Berlin  2012     2017  

Prof. Dr. Wilhelm Haarmann(1)(2)(4)(10)(11)

  63   Attorney at Law, Certified Public Auditor and Certified Tax Advisor; Linklaters LLP, Rechtsanwälte, Notare, Steuerberater  1988     2017  

Bernard Liautaud(1)(2)(6)(7)

  51   General Partner, Balderton Capital  2008     2017  

Dr. h.c. Hartmut Mehdorn(1)(4)(5)(11)

  71   CEO of FBB, Flughafen Berlin-Brandenburg GmbH  1998     2017  

Dr. Erhard Schipporeit(1)(3)(9)(10)

  65   Independent Management Consultant  2005     2017  

Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer(1)(3)(6)

 

 

69

  

 

Managing Director of Dr. Klaus Wucherer Innovations- und Technologieberatung GmbH

 

 

2007

  

  

 

2017

  

Christiane Kuntz-Mayr, Vice Chairperson(2)(5)(8)(10)(11)

 

 

51

  

 

Employee, Deputy Chairperson of the Works Council of SAP AG

 

 

2009

  

  

 

2017

  

Panagiotis Bissiritsas(2)(4)(8)

  45   Employee, Support Expert  2007     2017  

Margret Klein-Magar(2)(6)(8)(10)

  49   Employee, Vice President Head of People Principles  2012     2017  

Lars Lamadé(2)(8)(10)(11)

  42   Employee, Project Manager OPD COO  2002     2017  

Dr. Kurt Reiner(4)(6)(8)

  55   Employee, Development Expert  2012     2017 ��

Mario Rosa-Bian(5)(8)(11)

  57   Employee, Project Principal Consultant  2012     2017  

Stefan Schulz(3)6)(8)(11)

  44   Employee, Vice President, IP at HANA Enterprise Cloud  2002     2017  

Inga Wiele(3)(6)(8)

  43   Employee, Senior Internal Strategic Consultant  2012     2017  

(1)

Elected by SAP AG’s shareholders on May 23, 2012.

(2)

Member of the General and Compensation Committee.

(3)

Member of the Audit Committee.

(4)

Member of the Finance and Investment Committee.

(5)

Member of the Mediation Committee.

(6)

Member of the Technology and Strategy Committee.

(7)

Member of the Nomination Committee.

(8)

Elected by SAP AG’s employees on April 25, 2012.

(9)

Audit Committee financial expert.

(10)

Member of the Special Committee.

(11)

Member of the People and Organization Committee

Name  Age   Principal Occupation  Year
First
Elected
   Year
Term
Expires
 
Prof. Dr. h.c. mult. Hasso Plattner, Chairman(1)(2)(5)(6)(9)(10)��  72    Chairman of the Supervisory Board   2003     2019  

Pekka Ala-Pietilä(1)(4)(5)(6)(9)

   59    Chairman of the Board of Directors, Solidium Oy   2002     2019  

Prof. Anja Feldmann(1)(5)(10)

   50    Professor at the Electrical Engineering and Computer Science Faculty at the Technische Universität Berlin   2012     2019  

Prof. Dr. Wilhelm Haarmann(1)(2)(4)(9)(10)

   65    Attorney at Law, Certified Public Auditor and Certified Tax Advisor; Linklaters LLP, Rechtsanwälte, Notare, Steuerberater   1988     2019  

Prof. Dr. Gesche Joost(1)(5)(10)

   41    Professor for Design Research and Head of the Design Research Lab, University of Arts Berlin   2015     2016  

Bernard Liautaud(1)(2)(5)(6)

   53    General Partner, Balderton Capital   2008     2019  

Dr. Erhard Schipporeit(1)(3)(8)(9)

   67    Independent Management Consultant   2005     2019  

Jim Hagemann Snabe(1)(2)(4)

   49    Supervisory Board Member   2014     2019  

Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer(1)(3)

   71    Managing Director of Dr. Klaus Wucherer Innovations- und Technologieberatung GmbH   2007     2019  
Margret Klein-Magar, Vice Chairperson(2)(4)(5)(7)   51    Employee, Vice President Head of People Principles   2012     2019  

Panagiotis Bissiritsas(3)(4)(5)(7)

   47    Employee, Support Expert   2007     2019  

Martin Duffek(3)(7)(10)

   40    Employee, Product Manager   2015     2019  

Andreas Hahn(2)(5)(7)

   45    Employee, Product Expert, Industry Standards & Open Source   2015     2019  

Lars Lamadé(2)(7)(9)(10)

   44    Employee, Head of Customer & Events GSS COO   2002     2019  

Christine Regitz(5)(7)(10)

   50    Employee, Vice President User Experience, Chief Product Expert   2015     2019  

Robert Schuschnig-Fowler(7)(10)

   56    Employee, Account Manager, Senior Support Engineer   2015     2019  

Dr. Sebastian Sick(2)(4)(7)(9)

   43    Head of Company Law Unit, Hans Boeckler Foundation   2015     2019  

Pierre Thiollet(5)(7)

   54    Employee, Webmaster   2015     2019  

 

78


(1) Elected by SAP SE’s shareholders on May 20, 2015.

Part I(2) Member of the General and Compensation Committee.

(3) Member of the Audit Committee.

Item(4) Member of the Finance and Investment Committee.

(5) Member of the Technology and Strategy Committee.

(6) Member of the Nomination Committee.

(7) Appointed by the SAP SE Works Council Europe on May 6, 2015.

(8) Audit Committee financial expert.

(9) Member of the Special Committee.

(10) Member of the People and Organization Committee

For detailed information on the Supervisory Board committees and their tasks, including the Audit Committee and the General and Compensation Committee, please refer to “Item 10 Additional Information – Corporate Governance.”

Pursuant to the German Co-determination ActArticles of 1976 (Mitbestimmungsgesetz),Incorporation of SAP SE and the Agreement on the Involvement of Employees in SAP SE, members of the Supervisory Board of SAP AGSE consist of eightnine representatives of the shareholders and eightnine representatives of the European employees. Of the eight employeeThe current nine employees’ representatives two must be nominatedwere appointed by the trade unions. The elected employees must be at least 18 years of age and must have been in the employment of SAP AG or one of its German subsidiaries for at least one year. They must also fulfill the other qualifications for election codified in Section 8 of the GermanSE Works Council Constitution Act. These qualifications include, among other things, not having been declared ineligible or debarred from holding public office by a court.Europe on May 6, 2015.

Certain current members of the Supervisory Board of SAP AGSE were members of supervisory boards and comparable governing bodies of enterprises other than SAP AGSE in Germany and other countries as of December 31, 2013.2015. See Note (29) to our Consolidated Financial Statements for more detail. Apart from pension obligations towardsfor employees, SAP AGSE has not entered into contracts with any member of the Supervisory Board that provide for benefits upon a termination of the employment or service of the member.

EXECUTIVE BOARD

The current members of the Executive Board, the year in which each member was first appointed and the year in which the term of each expires, respectively, are as follows:

 

Name

  Year First
Appointed
   Year Current
Term Expires
 

Bill McDermott, Co-CEO

   2008     2017  

Jim Hagemann Snabe, Co-CEO

   2008     2014  

Dr. Werner Brandt

   2001     2014  

Gerhard Oswald

   1996     2016  

Dr. Vishal Sikka

   2010     2017  
Name  Year First
Appointed
   Year Current
Term
Expires
 

Bill McDermott, CEO

   2008     2021  

Robert Enslin

   2014     2021  

Michael Kleinemeier

   2015     2018  

Bernd Leukert

   2014     2021  

Luka Mucic

   2014     2021  

Gerhard Oswald

   1996     2016  

The following changes occurred in the Executive Board in 2013:

2015:

In May 2013, Lars Dalgaard stepped down fromOn October 8, 2015, the SAP Supervisory Board appointed Michael Kleinemeier to the SAP Executive Board.

In June 2013, Luisa Deplazes Delgado stepped down from the Executive Board.Board, effective November 1, 2015.

A description of the management responsibilities and backgrounds of the current members of the Executive Board are as follows:

Bill McDermott, Co-CEOCEO (Vorstandssprecher), 5254 years old, holds a master’s degree in business administration from Northwestern University’s Kellogg School of Management.administration. He joined SAP in 2002 and became a member of its Executive Board on July 1, 2008. On February 7, 2010 he

became Co-CEO alongside Jim Hagemann Snabe. AsSnabe and when Jim Hagemann Snabe will concludeconcluded his current role as Co-CEO in May 2014, Bill is scheduled to becomeMcDermott became sole CEO. As CEO at that time. Besides the duties as Co-CEO, he is responsibleleading SAP with organizational responsibility for strategy, governance, business development, corporate development, salescommunications, marketing and ecosystem activities, communications,internal audit. In addition he assumed responsibility for human resources and marketing.is the Labor Relations Director. With the acquisition of Concur, he is also responsible for SAP’s Business Network. He represents SAP as a member of the European Roundtable of Chief Executive Officers, the U.S. Business Council and the World Economic Forum. Prior to joining SAP, he served as a global executive in several technology companies.

Jim Hagemann Snabe, Co-CEORobert Enslin, (Vorstandssprecher), 4853 years old, holds a master degreediplomas in operational research.data science as well as computer science and data management. He joined SAP in 19901992 and became a member of the Executive Board on July 1, 2008. On February 7, 2010 he became Co-CEO alongside Bill McDermott. Besides the duties as Co-CEO, he is responsible for strategy, governance, business development, corporate development, communications, and marketing. In July 2013, the SAP Supervisory Board agreed to propose that Jim Hagemann Snabe be elected to the Supervisory Board at the SAP Annual General Meeting of Shareholders in May 2014. He will conclude his current roleis president of Global Customer Operations and is responsible for global sales, industry & line of business (LoB) solutions sales, services sales, sales operations as co-CEO and member ofwell as the Global Customer Office. Before joining SAP, Executive Board uponRobert Enslin spent 11 years in various roles in the conclusion of the Annual General Meeting of Shareholders in May 2014.IT industry.

Werner BrandtMichael Kleinemeier,, 60 59 years old, business administration graduate. Werner Brandtholds a degree in commercial management from the University of Paderborn. He first joined SAP in early 2001 as the Chief Financial Officer1989 and became a member of the Executive Board in November 2015. He leads the Global Service & Support organization including global consulting delivery, all global and regional support and premium engagement functions, maintenance go-to-market, global user groups, and mobile services.

Bernd Leukert, 48 years old, holds a master’s degree in business administration with an emphasis on engineering and information technology. He joined SAP in 1994 and became a member of the Executive Board in May 2014. As SAP’s Chief Technology Officer he will retire endis responsible for the board area Products & Innovation including the global development organization, innovation & cloud delivery, product strategy, development services, and SAP Global Security. In addition, Bernd Leukert heads strategic innovation initiatives at SAP and is responsible for leading design and user experience for SAP.

Luka Mucic, 44 years old, holds master’s degrees in law and business administration. He joined SAP in 1996 and became Chief Financial Officer (CFO), Chief Operating Officer (COO) and a member of Junethe Executive Board in July 2014. He is responsible for finance and administration including investor relations and data protection and privacy. In addition, he assumed responsibilityas the company’s COO, Luka Mucic is responsible for human resources and is the Labor Relations Director. Prior to joining SAP, Werner Brandt was CFO and memberProcess Office of the Executive Board of Fresenius Medical Care AG since 1999. In this role, he was also responsiblecompany and for labor relations. Before joining Fresenius Medical Care AG, Werner Brandt headed the finance function of the European operations of Baxter International Inc.Business Innovation & IT.

 

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Gerhard Oswald,, 60 62 years old, economics graduate. Gerhard Oswald joined SAP in 1981 and became a member of the Executive Board in 1996. He is responsible for the Board Area Scale,board area Product Quality & SupportEnablement covering SAP Active Global Support, Solutionquality governance & Knowledge Packaging, Quality Governancevalidation, scale, enablement & Production as well as joint leadership of SAP Labs Network with Vishal Sikka. In addition Gerhard is responsible for the Cloudtransformation, logistics services, and Infrastructure Delivery and operations of the new SAP Cloud powered by HANA.

Vishal Sikka, 46 years old, holds a PH. D. degree in computer science from Stanford University. He joined SAP in 2002 and became a member of its Executive Board on February 7, 2010. Vishal leads SAP’s products and innovation organization, with global responsibility for development and delivery of SAP’s entire product portfolio including Applications, Analytics, Cloud, Database & Technology and Mobile. Vishal is also responsible for leading design and user experience for SAP and is responsible for driving all innovation globally. He leads the development and delivery of SAP’s breakthrough in-memory platform, SAP HANA, which serves as the foundation and platform for SAP’s solution portfolio as well as the company’s broader ecosystem of customers, partners and developers. Before joining the Executive Board, he was the first Chief Technology Officer at SAP. Before joining SAP, he was responsible for platform technologies at Peregrine Systems, and prior to that he founded and led two start-ups – Bodha, Inc. and IBrain Software, and did research on Artificial Intelligence, Data and Information Management and Programming Models at Stanford University and Xerox Palo Alto Labs.special tasks.

The members of the Executive Board of SAP AGSE as of December 31, 20132015 that are members on other supervisory boards and comparable governing bodies of enterprises, other than SAP, in Germany and other countries, are set forth in Note (29) to our Consolidated Financial Statements. SAP AGSE has not entered into contracts with any member of the Executive Board that provide for benefits upon a termination of the employment of service of the member, apart from pensions, benefits payable in the event of an early termination of service, and abstention compensation for the postcontractual noncompete period.

To our knowledge, there are no family relationships among the Supervisory Board and Executive Board members.

COMPENSATION REPORT

Compensation for Executive and Supervisory Board Members

This compensation report outlines the criteria that we applied for the year 20132015 to determine compensation for Executive Board and Supervisory Board members, discloses the amount of compensation paid, and describes the compensation systems. It also contains information about Executive Board members’ share-based payment plans for Executive Board members, shares held by Executive Board and Supervisory Board members, and the directors’ dealings required to be disclosed in accordance with the German Securities Trading Act.

Compensation for Executive Board Members

Compensation System for 20132015

The compensation for 2015 for Executive Board members’ compensation for 2013members is intended to reflect SAP’s company size and global presence as well as our economic and financial standing. The compensation level is internationally competitive to reward committed, successful work in a dynamic business environment.

The Executive Board compensation package is performance-based. In 2013, it hadIt has three elements:

A fixed annual salary element

A variable short-term incentive (STI) element to reward performance in the plan year

A variable long-term incentive (LTI) element tied to the price of SAP shares to reward performance over multiple years

A fixed annual salary

A variable short-term incentive (STI) plan to reward performance in the plan year

A Restricted Share Unit-based long-term incentive (LTI) plan tied to the price of SAP shares (RSU Milestone Plan 2015)

The Supervisory Board setsets a compensation target for the sum of the fixed and the variable elements. It reviews, and if appropriate, revises, this compensation target every year. The review takes into account SAP’s business performance and the compensation paid to board members at comparable companies on the international stage. The amount of variable compensation depends on SAP’s performance against performance targets that the Supervisory Board sets for each plan year. The performance targets are key performance indicator (KPI) values aligned to the SAP budget for the plan year.

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Part I

Item 6

The following criteria apply to the elements of Executive Board compensation for 2013:2015:

The fixed annual salary element is paid as a monthly salary.

The variable STI element was determined under the STI 2015 plan. Under this plan, the STI compensation depends on the SAP Group’s performance against the predefined target values for three KPIs: non-IFRS constant currency cloud and software growth; non-IFRS constant currency operating margin increase; and non-IFRS constant currency new and upsell bookings. In addition, the STI 2015 plan provides for a discretionary element that allows the Supervisory Board, after the end of the fiscal year 2015, to address not only an Executive Board member’s individual performance, but also SAP’s performance in terms of market position, innovative power, customer satisfaction, employee satisfaction, attractiveness as an employer and the performance in our Business Network Group.

The fixed element is paid as a monthly salary.

The variable compensation under the STI 2013 plan depends on the SAP Group’s performance against the KPI target values for non-IFRS constant currency software revenue growth and non-IFRS constant currency operating margin increase as well as non-IFRS constant currency new and upsell billings. In addition, the STI element has a discretionary component that allows the Supervisory Board, after the end of the period in question, to address not only an Executive Board member’s individual performance, but also SAP’s performance in terms of market position, innovative power, customer satisfaction, employee satisfaction, and attractiveness as an employer. Moreover, if there has been any extraordinary and unforeseeable event, the Supervisory Board can, at its reasonable discretion, retroactively adjust payouts up or down in the interest of SAP. For 2014, this discretion was applied.

On February 13, 2014,18, 2016, the Supervisory Board assessed SAP’s performance against the agreed targets and determined the amount of compensation payable under the STI payable.2015 plan. The STI 2015 plan pays out after the Annual General Meeting of Shareholders in May 2014.2016.

The long-term incentive element is called the RSU Milestone Plan 2015. “RSU” stands for “restricted share unit.” This four-year plan focuses on the SAP share price and on certain objectives derived from our Company strategy for the years through 2015. For each of the four years, the members of the Executive Board are allocated a certain number of SAP RSUs for the respective year based on a budget amount that was granted to each Executive Board member in 2012 already for the years 2012 through 2015. The number of RSUs allocated to each member for a given year is his or her

The variable LTI element was determined under the RSU Milestone Plan 2015. “RSU” stands for “restricted share unit.” This originally four-year plan was established in 2012 and focuses on the SAP share price and on certain objectives derived from our Company strategy for the years through 2015. For each of the four years, the members of the Executive Board are allocated a certain number of RSUs for the respective year based on a budget amount that was granted to each Executive Board member in 2012 already for each of the years 2012 through 2015. The number of RSUs allocated to each member for a given year is their target amount (an amount in euros) for that year divided by the SAP share price over a reference period (defined in the RSU Milestone Plan 2015 terms) at the beginning of the year in question.

The number of RSUs an Executive Board member actually earns in respect of a given year depends on Company performance against the objectives for that year (a year is a “performance period” in the plan). The objectives derive from SAP’s strategy for the period to 2015. The plan objectives relate to two key performance indicators (KPIs): our

that year divided by the SAP share price over a reference period (defined in the RSU Milestone Plan 2015 terms) at the beginning of the respective year. The number of RSUs an Executive Board member actually earns in respect of a given year depends on the Company performance against the objectives for that year (a year is a “performance period” in the plan). The objectives derive from SAP’s strategy for the period to 2015. The plan objectives relate to two KPIs: non-IFRS total revenue and our non-IFRS operating profit. The KPI targets have already been set for the entire life of the RSU Milestone Plan 2015 for the years 2012 to 2015 and will merely be adjusted for the effects of key acquisitions.

After the end of each fiscal year, the Supervisory Board assesses the Company’s performance against the objectives set for that year and determines the number of RSUs to be finally allocated to (and which then vest in)and vested in each Executive Board member. ThereNo RSUs vest if minimum performance levels of 60%, predefined for each of the two KPIs, are objective-based performance hurdles to clear each year before any RSUs can vest.not achieved. There is also a cap:cap. Normally, the quantity of vested RSUs a member can attain in respect of a plan year is capped at 150% of his or hertheir initial RSU allocation for that year.

The Company strategy underlying the RSU Milestone Plan 2015 focuses on where SAP aimsaimed to be by the end of 2015, so the plan givesgave greater weight to performance against the KPI targets for 2015 (the final year of the plan) than against the targets for 2012 through 2014. AfterDue to the end of 2015,adjustment factor, the number of vested RSUs a member of the Executive Board actually receives for that year is revised. In circumstances where the targets for the individual years are not achieved but the 2015 targets are achieved, the outcome of this revision would be that a member would receive as many vested RSUsreceived for 2015 as would make up for any that he or she did not receive in the earlier years by reason of failurehas been revised according to achieve targets. On the other hand, if the Company underachieves against the 2015 objectives, Executive Board members may in a worst case scenario lose all of the vested RSUs allocated to them for 2015.plan terms.

All vested RSUs are subject to a three-year holding period. The holding period commences at the end of the year for which the RSUs were allocated. The amount an RSU eventually pays out depends on the SAP share price at the end of the holding period. A member who leaves the Executive Board before the end of the plan retains his or hertheir vested RSUs for completed plan years but does not retain any allocated but unvested RSUs for the year during which he or she leaves.they leave. If a member leaves the Executive Board before the beginning of the subsequent year, no RSUs are finally allocated.

Each vested RSU entitles its holder to a (gross) payout corresponding to the price of one SAP

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share after the end of the three-year holding period. The applicable share price is measured over a reference period defined in the RSU Milestone Plan 2015 terms.

Subject to the requirements in the German Stock Corporation Act, section 87 (1), the Supervisory Board is entitled to revise the STI and the LTI in extraordinary and unforeseeable circumstances.

For the terms and details of the RSU Milestone Plan 2015, see the Notes to Consolidated Financial Statements section, Note (27). The number of RSUs to be issued initially to each member of the Executive Board in 2013 by way of long-term incentiveunder the RSU Milestone Plan 2015 for 2015 was decided by the Supervisory Board on February 14, 2013.

An additional long-term incentive plan (LTI HANA) has been dedicated12, 2015. The number of RSUs allocated finally to Vishal Sikka to align his remuneration to his new expanded role with regard to SAP HANA. The LTI HANAeach member of the Executive Board under the RSU Milestone Plan 2015 for 2015 was determined by the years 2013 to 2015 consists of three annual compensation components with an assessment period of three years that will be cash-settled after this period. The LTI HANA is linked to KPIs specific to SAP HANA.Supervisory Board on February 18, 2016.

 

The contracts of Executive Board members Bill McDermott Lars Dalgaard, and Vishal SikkaRobert Enslin require that compensation payments are made in U.S. dollars. The contracts include clauses that determine the exchange rates for the translation of euro-denominated compensation into U.S. dollars.

In 2010 and 2011,Changes to Compensation System in 2016

As the RSU Milestone Plan 2015 expired at the end of 2015, the Supervisory Board developed a new LTI 2016 plan for the Executive Board effective January 1, 2016 with the first grant occurring in March 2016. The purpose of the LTI 2016 is to reflect the operating profit target achievement, to ensure long-term retention of our Executive Board members were granted a variable medium-term incentive (MTI) planand to reward performancea share price outperformance by SAP as compared to a group of its peers (Peer Group).

The LTI 2016 is an annual revolving remuneration element that is linked to the price of the SAP share. A grant amount determined by the Supervisory Board is converted into virtual shares, referred to as Share Units, by dividing the grant amount by the price of the SAP share (calculated on the basis of a defined average value). The grant amount is determined by the Supervisory Board in its discretion for each financial year at a level of between 80% and 120% of the plan year andcontractual target amount; taking into account the two subsequent years. The variable compensation underachievement of the MTI 2011 grantedoperating profit targets set for the fiscal year 2011preceding financial year.

The Share Units granted comprise 40% Retention Share Units (RSUs) and 60% Performance Share Units (PSUs). Both types of Share Units have a vesting period of four years. Each share unit that finally vests entitles its holder to a (gross) payout corresponding to the price of one SAP share after the end of the four-year holding period, but capped at three times the SAP share price applied for the conversion of the grant amount into Share Units.

The number of PSUs, that finally vests depends on the Group’s performance of the SAP share. If the increase of price of the SAP share over the three years 2011four-year vesting period of the PSUs exceeds the increase of a defined Peer Group Index over the same period, the number of PSUs will be increased by a percentage equal to 2013 against the KPI target values for software and software-related service revenue growth and earnings peroutperformance expressed as percentage points. This percentage will be doubled if, in addition to the outperformance over the Peer Group Index, the price of the SAP share (both of which are non-IFRS, constant currency values). In addition, the MTI element has a discretionary component that is assessed by the Supervisory Board at the end of the planvesting period of the PSUs is higher than the price at the start of this period. The closenumber of vested PSUs a member can attain in respect of a plan year is capped at 150% of their initial PSU allocation for that year. Conversely, if the increase of price of the fiscal year 2013 representsSAP share over the endfour-year vesting period of the plan period forPSUs underperforms the MTI 2011, and thereforePeer Group Index, the corresponding entitlement under the MTI 2011 is included in the compensation for the fiscal year 2013. The paymentnumber of PSUs will be due afterreduced by a percentage equal to the Annual General Meetingunderperformance expressed as percentage points. No PSUs vest if the underperformance exceeds 50%.

Amount of Shareholders in May 2014.Compensation for 2015

We present separately Executive Board compensation disclosures under three different compensation disclosure approaches:

Compensation disclosures under a management view that follows the requirements of sections 314 and 315 of the German Commercial Code (Handelsgesetzbuch, or “HGB”) as specified in the German Accounting Standards (“GAS 17”) except that it allocates share-based compensation to the periods to which this compensation economically belongs

Compensation disclosures fully in accordance the requirements of sections 314 and 315 of the HGB as specified in GAS 17

Compensation disclosures in accordance with the recommendations of the German Corporate Governance Code (“Code”)

 

 

I. Executive Board Members’ Compensation – Management View

Executive Board Members’ Compensation for 20132015 – Management View

 

€ thousands

 Fixed Elements  Performance-
Related Element
  Compensation
for 2013(1)
 
         Short-Term and
Medium-Term
Incentive Elements
  Long-Term
Incentive
Element
    
   Salary  Other(1)  STI  MTI 2011  Share-Based
Payment
(RSU Milestone
Plan 2015)(2)
    

Bill McDermott (co-CEO)

  1,150.0    1,570.5    1,737.2    1,011.1    4,143.5    9,612.3  

Jim Hagemann Snabe (co-CEO)

  1,150.0    6,082.9    1,737.2    1,011.1        9,981.2  

Dr. Werner Brandt

  700.0    29.0    1,051.5    611.0    1,486.4    3,877.9  

Lars Dalgaard
(until May 31, 2013)
(3)

  291.7    203.3    469.1            964.1  

Luisa Deplazes Delgado
(until June 30, 2013)
(3)

  350.0    26.1    421.0            797.1  

Gerhard Oswald

  700.0    17.0    1,051.5    611.0    1,486.4    3,865.9  

Dr. Vishal Sikka

  700.0    383.6    1,051.5    611.0    1,486.4    4,232.5  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  5,041.7    8,312.4    7,519.0    3,855.2    8,602.7    33,331.0  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
thousands       Fixed Elements        Performance-
Related Element
   Compensation
for 2015
 
            Short-Term
Incentive
Element
   Long-Term
Incentive
Element
     
    Salary   Other1)   STI   Share-Based
Payment (RSU
Milestone Plan
2015)2)
      

Bill McDermott (CEO)

   1,150.0     1,258.0     2,743.5     4,127.5     9,279.0  

Robert Enslin

   700.0     103.3     1,660.5     1,480.6     3,944.4  

Michael Kleinemeier (from November 1, 2015)

   116.7     0     277.5     315.0     709.2  

Bernd Leukert

   700.0     11.7     1,660.5     1,480.6     3,852.8  

Luka Mucic

   700.0     12.1     1,660.5     1,480.6     3,853.2  

Gerhard Oswald

   700.0     22.4     1,660.5     1,480.6     3,863.5  

Total

   4,066.7     1,407.5     9,663.0     10,364.9     25,502.1  

Executive Board Members’ Compensation for 2014 – Management View

 

(1)

Insurance contributions, benefits in kind, expenses for maintenance of two households, relocation costs, non-recurring payments, use of aircraft, tax, cash disbursement of long-term incentive element, discrete payments arising through application of the fixed exchange-rate clause. The effects from the application of the fixed exchange-rate clause are disclosed under “Other” (in the prior year under the different compensation components). Further, these amounts are shown in the year of payment rather than in the year of entitlement of the underlying compensation. The amount for Jim Hagemann Snabe under “Other” includes the fixed payments for the 2012 and 2013 RSUs according to the description below.

thousands       Fixed Elements        

Performance-

Related Element

   Compensation
for 20141)
 
             Short-Term
Incentive
Elements
   Long-Term
Incentive Element
     
    Salary   Other1)   STI   Share-Based
Payment (RSU
Milestone Plan
2015)2)
      

Bill McDermott (CEO)

   1,150.0     861.4     2,036.7     4,040.5     8,088.6  
Jim Hagemann Snabe (co-CEO and member until May 21, 2014)   448.8     2,647.1               3,095.9  

Dr. Werner Brandt (until June 30, 2014)

   350.0     1,418.8               1,768.8  

Robert Enslin (from May 4, 2014)

   462.9     121.0     817.3     939.4     2,340.6  

Bernd Leukert (from May 4, 2014)

   462.9     12.2     817.3     939.4     2,231.8  

Luka Mucic (from July 1, 2014)

   350.0     4.3     621.4     729.0     1,704.7  

Gerhard Oswald

   700.0     22.0     1,232.7     1,449.4     3,404.1  

Dr. Vishal Sikka (until May 4, 2014)

   291.7     1,367.5               1,659.2  

Total

   4,216.3     6,454.3     5,525.4     8,097.7     24,293.7  

 

82


Part I

Item 6

1) Insurance contributions, benefits in kind, expenses for maintenance of two households, non-recurring payments, use of aircraft, tax, cash disbursement of short-term and long-term incentive elements, and discrete payments arising through application of the fixed exchange-rate clause.

(2)

Compensation attributable to Executive Board members for 2013 including the 20132) Compensation attributable to Executive Board members for the respective year, including the respective year’s plan tranche of LTI 2015 based on the grant value at time of grant.

(3)

Salary and STI for 2013 are pro rata temporis amounts until the end of the respective term. The RSUs allocated for 2013 are forfeited upon the end of their contract.

In 2012, the Executive Board members already received the LTI grants for the years 2012 to 2015, which are dependent on their uninterrupted tenure as Executive Board members in the years in question. Although these allocations are tied to the respective years and thus – from an economic perspective – represent compensation for the Executive Board members in the respective years, for the purpose of disclosure in the Compensation Report the grants had to be included in the total compensation for Executive Board members for the year in which the grants were allocated (in 2012) pursuant to section 314 of the German Commercial Code (HGB). The share-based payment amounts in the table above disclose the LTI grants for the year 2013 that were already granted in 2012 and included in the total compensation for 2012. Consequently they are excluded from the total Executive Board compensation for 2013 (see second next paragraph) calculated as required under section 314 of the German Commercial Code.

Jim Hagemann Snabe resigned his seat on the Executive Board with effect from May 21, 2014 (Annual General Meeting of Shareholders). The SAP Supervisory Board will propose that he be elected to the SAP Supervisory Board by the SAP shareholders on the same day. Mr. Snabe’s termination agreement provides as follows: To replace the payout for 2012 RSUs under the RSU Milestone Plan that on allocation in 2012 were valued €4,318,400 based on a stock price of €45.26, he will be paid €6,485,800 gross based on a stock price of €52.96 (that is, the mean of

the 2012 and 2013 reference prices) discounted at 2% because of early payment. Of that amount, €4,318,400, which was already allocated in 2012 and which was the grant value at time of grant, was already included in 2012 compensation. The difference of €2,167,400 is included in the total compensation for 2013 (see below). The RSUs allocated for 2013 were converted into a fixed payment of €3,768,300 (gross amount) based on a share price of €58.69, a target achievement of 92,97%, and it is discounted at an interest rate of 2% over the period to the original contractual disbursement date. This amount will be paid out after the close of the Annual General Meeting of Shareholders in May 2014.

To compensate for his 2014 RSUs, Mr. Snabe will receive a prorated payment of €1,700,000 in respect of the period he serves in 2014. This amount will also be paid out after the close of the Annual General Meeting of Shareholders in May 2014.

Including allocations for 2014 and 2015 to Gerhard Oswald (€1,574,800 each) that were allocated in 2013 in line with the extension of his Executive Board contract, the total Executive Board compensation calculated as required under section 314 of the German Commercial Code amounts to €24,109,600, thereof: Bill McDermott €5,468,800, Jim Hagemann Snabe €6,212,900, Werner Brandt €2,391,500, Lars Dalgaard €964,100, Luisa Deplazes Delgado €797,100, Gerhard Oswald €5,529,100, and Vishal Sikka €2,746,100.

grant.

The share-based payment amounts included in 2013the 2015 and 2014 compensation result from the following RSUs under the RSU Milestone Plan 2015.

Share-Based Payment Under RSU Milestone Plan 2015 (Grants for 2015)

 

   Grants for 2013 
   Quantity   Total Grant Value
at Time of Grant(1)
 
       € thousands 

Bill McDermott (co-CEO)

   73,289     4,143.5  

Jim Hagemann Snabe (co-CEO)(2)

          

Dr. Werner Brandt

   26,290     1,486.4  

Lars Dalgaard (until May 31, 2013)(2)

          

Luisa Deplazes Delgado (until June 30, 2013)(2)

          

Gerhard Oswald

   26,290     1,486.4  

Dr. Vishal Sikka

   26,290     1,486.4  
  

 

 

   

 

 

 

Total

   152,159     8,602.7  
  

 

 

   

 

 

 
    Grants for 2015 
   Quantity   Grant Value
per Unit at
Time of Grant
   Total Grant
Value at Time
of Grant
 
            thousands 

Bill McDermott (CEO)

   77,099     53.53     4,128  

Robert Enslin

   27,656     53.53     1,481  

Michael Kleinemeier (from November 1, 2015)

   4,622     68.16     315  

Bernd Leukert

   27,656     53.53     1,481  

Luka Mucic

   27,656     53.53     1,481  

Gerhard Oswald

   27,656     53.53     1,481  

Total

   192,345          10,365  

Share-Based Payment Under RSU Milestone Plan 2015 (Grants for 2014)

 

83


Part I

Item 6

    Grants for 2014 
   Quantity   Grant Value
per Unit at
Time of Grant
   Total Grant
Value at Time
of Grant
 
             thousands 

Bill McDermott (CEO)

   76,374     52.90     4,040.50  

Dr. Werner Brandt (until June 30, 2014)1)

               

Robert Enslin (from May 4, 2014)

   18,164     51.72     939.40  

Bernd Leukert (from May 4, 2014)

   18,164     51.72     939.40  

Luka Mucic (from July 1, 2014)

   13,811     52.78     729.00  

Gerhard Oswald

   27,396     52.90     1,449.40  

Dr. Vishal Sikka (until May 4, 2014)1)

               

Total

   153,909          8,097.70  

 

 

(1)

The grant value of each RSU allocated in 2013 was €56.54.

(2)

The allocations for Jim Hagemann Snabe (73,289 RSUs) were converted into a fixed payment. The allocations for Lars Dalgaard (26,290 RSUs) and Luisa Deplazes Delgado (21,562 RSUs) forfeited upon the end of their contract.1) The allocations for Werner Brandt (27,396 RSUs), and Vishal Sikka (27,396 RSUs) were forfeited at the end of their contracts. Consequently, they are not disclosed in the table above.

Total Executive Board Payment in 2012

 

€ thousands

 Fixed Elements  Performance-
Related Element
  Compensation
for 2012(1)
 
         Short-Term and
Medium-Term
Incentive Elements
  Long-Term
Incentive
Element
    
   Salary  Other(2)  STI  MTI 2010  Share-Based
Payment
(RSU Milestone
Plan  2015)(1),(3)
    

Bill McDermott (co-CEO)

  1,150.0    699.6    1,545.7    1,067.6    4,318.4    8,781.3  

Jim Hagemann Snabe (co-CEO)

  1,150.0    163.8    1,545.7    1,067.6    4,318.4    8,245.5  

Dr. Werner Brandt

  700.0    26.7    935.5    645.1    1,549.1    3,856.4  

Lars Dalgaard
(from April 12, 2012)

  503.6    0    674.8    0    1,156.2    2,334.6  

Luisa Deplazes Delgado
(from September 1, 2012)

  233.3    96.4    193.9    0    414.4    938.0  

Gerhard Oswald

  700.0    16.5    935.5    645.1    1,549.1    3,846.2  

Dr. Vishal Sikka

  700.0    143.9    935.5    577.9    1,549.1    3,906.4  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  5,136.9    1,146.9    6,766.6    4,003.3    14,854.7    31,908.4  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

II. Executive Board Members’ Compensation According to HGB and GAS 17

Under the compensation disclosure rules of the German HGB and GAS 17, share-based compensation awards are to be included in the compensation of the year of grant, even if the awards are tied to future years. Accordingly, and in contrast to, the compensation amounts disclosed under the management view above, the Executive Board compensation amounts determined under HGB and GAS 17 for 2014 and 2015:

(1)

Compensation attributableExclude the share-based compensation awards granted to Executive Board members in 2012 for financial yearthe years 2014 and 2015 as these were already included in the 2012 compensation

Include in full the grants for 2014 and 2015 made to Executive Board members appointed in 2014, that is, also including the 2012 tranche of LTIgrant for 2015 based on

Include the grant value at time of grant.for 2015 made to Michael Kleinemeier who was appointed to the Executive Board in 2015

(2)

Insurance contributions, benefits in kind, expenses for maintenance of two households, relocation costs, non-recurring payments, use of aircraft, tax, discrete payments arising through application of the fixed exchange-rate clause. The disclosure of payments arising through application of the fixed exchange-rate clause was adaptedIncluding RSU Milestone Plan 2015 awards for 2015 granted in 2015 to Michael Kleinemeier (263,200) upon his appointment to the disclosure for 2013.

(3)

Fair value at the time of grant.

In 2012, in addition to the LTI grant for 2012, Executive Board members already received the LTI grants for the years 2013 to 2015, which are dependent on their uninterrupted tenure as Executive Board members in the years in question. Although these allocations are tied to the respective years and thus – from an economic perspective – represent compensation for the Executive Board, members in the respective years, for the purpose of disclosure in the Compensation Report the grants must be included in the total Executive Board compensation for Executive Board members for the year in which the grants were allocated pursuant to section 314 of the German Commercial Code. Vesting of a plan tranche is dependent on the respective Executive Board member’s continuous service for the Company in the respective fiscal year. In 2012, the contracts of Werner Brandt and Gerhard Oswald were set to expire in mid-2014, while the contracts of Lars Dalgaard and Luisa Deplazes Delgado were set to expire in mid-2015. As a result, the LTI allocations

for the years 2014 to 2015 (for Werner Brandt and Gerhard Oswald) and the LTI allocations for the year 2015 (for Lars Dalgaard and Luisa Deplazes Delgado) had not yet been allocated with legally binding force in 2012.

In 2012, additional grants for Executive Board members for future years were €4,390,000 for eachco-CEO and €1,574,800 for each regular Executive Board member, in each of 2013, 2014, and 2015 (except Luisa Deplazes Delgado, who was supposed to receive €1,291,600 for the year 2013). The total compensation for 2012 pursuant tocalculated as required under section 314 of the German Commercial Code amounts to15,400,400, thereof: Bill McDermott5,151,500; Robert Enslin2,463,800; Michael Kleinemeier657,400; Bernd Leukert2,372,200; Luka Mucic2,372,600; and Gerhard Oswald2,382,900.

Including RSU Milestone Plan 2015 awards for 2014 and 2015 granted in 2014 to Robert Enslin (1,574,800 for each of the two years); Bernd Leukert (2014:

1,280,000; 2015:1,574,800); and Luka Mucic (2014:1,141,000; 2015:1,574,800) upon their appointment to the Executive Board, the total Executive Board compensation for 2014 calculated as required under section 314 of the German Commercial Code amounts to23,216,200, thereof: Bill McDermott4,048,100; Jim Hagemann Snabe1,395,900; Werner Brandt1,768,800; Robert Enslin4,550,800; Bernd Leukert4,147,200; Luka Mucic3,691,500; Gerhard Oswald1,954,700; and Vishal Sikka1,659,200.

All amounts as determined under HGB and GAS 17, other words, including this additionalthan share-based compensation, are identical to the amounts disclosed under the management view above.

III. Executive Board Members’ Compensation According to the Code

Pursuant to the recommendations of the Code, the value of benefits granted for the year under review as well as the long-termallocation, that is the amounts disbursed for the year under review, are disclosed below based on the reference tables recommended in the Code.

In contrast to the disclosure rules stipulated in the German HGB and GAS 17, the Code includes the service cost according to IAS 19 in the Executive Board compensation tranches granted but not yet earned, amountedand requires the additional disclosure of the target value for the one-year variable compensation and the maximum and minimum compensation amounts achievable for the variable compensation elements. However, due to €72,138,400, thereof: Bill McDermott €21,951,300, Jim Hagemann Snabe €21,415,500, Werner Brandt €5,431,200, Lars Dalgaard €5,484,200, Luisa Deplazes Delgado €3,804,400, Gerhard Oswald €5,421,000, and Vishal Sikka €8,630,800.

84


Part I

Item 6

Share-Based Payment Underthe payouts under the RSU Milestone Plan 2015 not being capped, there is no disclosure to be made for the maximum variable compensation amount achievable (marked as “NA” in the table below).

German Corporate Governance Code (Benefits Granted in 2014 and 2015)

 

   Grants for 2012 
   Quantity   Grant Value per
Unit at Time of
Grant
   Total Grant Value
at Time of Grant
 
          € thousands 

Bill McDermott (co-CEO)

   95,414     45.26     4,318.4  

Jim Hagemann Snabe (co-CEO)

   95,414     45.26     4,318.4  

Dr. Werner Brandt

   34,226     45.26     1,549.1  

Lars Dalgaard (from April 12, 2012)

   24,594     47.01     1,156.2  

Luisa Deplazes Delgado (from September 1, 2012)

   8,332     49.73     414.4  

Gerhard Oswald

   34,226     45.26     1,549.1  

Dr. Vishal Sikka

   34,226     45.26     1,549.1  
  

 

 

     

 

 

 

Total

   326,432       14,854.7  
  

 

 

     

 

 

 
Benefits Granted 

Bill McDermott

CEO

  

Robert Enslin

Member of the
Executive Board

  

Michael Kleinemeier

Member of the
Executive Board

(from November 1, 2015)

 
   20151)  2015
(Min)
  2015
(Max)
  20141)  20151)  2015
(Min)
  2015
(Max)
  20141)  2015  2015
(Min)
  2015
(Max)
  2014 

Fixed compensation

  1,150.0    1,150.0    1,150.0    1,150.0    700.0    700.0    700.0    462.9    116.7    116.7    116.7      

Fringe benefits2)

  1,258.0    1,258.0    1,258.0    861.4    103.3    103.3    103.3    121.0    0    0    0      

Total

  2,408.0    2,408.0    2,408.0    2,011.4    803.3    803.3    803.3    583.9    116.7    116.7    116.7      
One-year variable compensation  1,860.0    0    3,371.3    1,860.0    1,125.8    0    2,040.5    746.4    188.1    0    340.9      
Multiyear variable compensation                                                

RSU Milestone Plan 2015

      0    NA            0    NA    939.4    315.0    0    NA      

Total

  4,268.0    2,408.0    NA    3,871.4    1,929.1    803.3    NA    2,269.7    619.8    116.7    NA      

Service cost

  682.4    682.4    682.4    646.8    308.0    308.0    308.0    148.1    0    0    0      

Total

  4,950.4    3,090.4    NA    4,518.2    2,237.1    1,111.3    NA    2,417.8    619.8    116.7    NA      

German Corporate Governance Code (Benefits Granted in 2014 and 2015)

 

Benefits Granted 

Bernd Leukert

Member of the Executive
Board

  

Luka Mucic

Member of the Executive
Board

  

Gerhard Oswald

Member of the Executive
Board

 
 2015  2015
(Min)
  2015
(Max)
  2014  2015  2015
(Min)
  2015
(Max)
  2014  2015  2015
(Min)
  2015
(Max)
  2014 

Fixed compensation

  700.0    700.0    700.0    462.9    700.0    700.0    700.0    350.0    700.0    700.0    700.0    700.0  

Fringe benefits2)

  11.7    11.7    11.7    12.2    12.1    12.1    12.1    4.3    22.4    22.4    22.4    22.0  

Total

  711.7    711.7    711.7    475.1    712.1    712.1    712.1    354.3    722.4    722.4    722.4    722.0  
One-year variable compensation  1,125.8    0    2,040.5    746.4    1,125.8    0    2,040.5    567.5    1,125.8    0    2,040.5    1,125.8  
Multiyear variable compensation                                                

RSU Milestone Plan 2015

      0    NA    939.4        0    NA    729.0        0    NA    1,449.4  

Total

  1,837.5    711.7    NA    2,160.9    1,837.9    712.1    NA    1,650.8    1,848.2    722.4    NA    3,297.2  

Service cost

  0    0    0    0    0    0    0    0    0    0    0    0  

Total

  1,837.5    711.7    NA    2,160.9    1,837.9    712.1    NA    1,650.8    1,848.2    722.4    NA    3,297.2  

1) The value of the fixed and one-year variable elements is subject to a contractual exchange-rate clause applied at the end of the year, so the amounts actually paid may be greater.

2) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft, tax and discrete payments arising through application of the fixed exchange-rate clause.

The total Executive Board compensation granted according to the Code amounted to13,330,900 (2014: 23,302,200).

German Corporate Governance Code (Allocation)

Allocation  Bill McDermott
CEO
   Robert Enslin
Member of the
Executive Board
   Michael Kleinemeier
Member of the
Executive Board
(from November 1, 2015)
 
  2015  2014   2015   2014   2015   2014 

Fixed compensation

   1,150.0    1,150.0     700.0     462.9     116.7       

Fringe benefits1)

   1,258.0    861.4     103.3     121.0     0       

Total

   2,408.0    2,011.4     803.3     583.9     116.7       

One-year variable compensation

   2,036.7    1,737.2     817.3                 

Multi-year variable compensation

                             

RSU Milestone Plan 2015

                             

MTI

       1,011.1                      

SAP SOP 2011

                             

SAP SOP 2010

                             

SAP SOP 2009

       378.7                      

Other

                             

Total

   4,444.7    5,138.4     1,620.6     583.9     116.7       

Service cost

   682.4    646.9     308.0     148.1     0       

Total

   5,127.1    5,785.3     1,928.6     732.0     116.7       

German Corporate Governance Code (Allocation)

Allocation  

Bernd Leukert

Member of the Executive
Board

   

Luka Mucic

Member of the
Executive Board

   

Gerhard Oswald

Member of the
Executive Board

 
  2015  2014   2015   2014   2015   2014 

Fixed compensation

   700.0    462.9     700.0     350.0     700.0     700.0  

Fringe benefits1)

   11.7    12.2     12.1     4.3     22.4     22.0  

Total

   711.7    475.1     712.1     354.3     722.4     722.0  

One-year variable compensation

   817.3         621.4          1,232.7     1,051.5  

Multi-year variable compensation

                             

RSU Milestone Plan 2015

                             

MTI

                           611.0  

SAP SOP 2011

                      1,126.7       

SAP SOP 2010

                           1,590.9  

SAP SOP 2009

                             

Other

                             

Total

   1,529.0    475.1     1,333.5     354.3     3,081.8     3,975.4  

Service cost

   0    0     0     0     0     0  

Total

   1,529.0    475.1     1,333.5     354.3     3,081.8     3,975.4  

1) Insurance contributions, benefits in kind, expenses for maintenance of two households, use of aircraft, tax and discrete payments arising through application of the fixed exchange-rate clause.

The total Executive Board compensation allocated according to the Code amounted to13,116,700 (2014:32,687,400).

End-of-Service Benefits

Regular End-of-Service Undertakings

Retirement Pension Plan

The following retirement pension agreements apply to the individual members of the Executive Board:

 

Werner Brandt, Luisa Deplazes Delgado (who stepped down on June 30, 2013)

Michael Kleinemeier, Bernd Leukert, Luka Mucic, and Gerhard Oswald receive a retirement pension when they reach the retirement age of 60 (62 for Board Members appointed after January 1, 2012) and retire from their Executive Board seat, or a disability pension if, before reaching the regular retirement age, they become subject to occupational disability or permanent incapacity. A surviving dependent’s pension is paid on the death of a former member of the Executive Board. The disability pension is 100% of the vested retirement pension entitlement and is payable until the beneficiary’s 60th birthday, after which it is replaced by a retirement pension. The surviving dependent’s pension is 60% of the retirement pension or vested disability pension entitlement at death. Entitlements are enforceable against SAP SE. Current pension payments are reviewed annually for adjustments and, if applicable, increased according to the surplus in the pension liability insurance. If service is ended before the retirement age of 60 (62 for Board Members appointed after January 1, 2012), and Gerhard Oswald receive a retirement pension when they reach the retirement age of 60 and vacate their Executive Board seat, or a disability pension if, before reaching the regular retirement age, they become subject to occupational disability or permanent incapacity. A surviving dependent’s pension is paid on the death of a former member of the Executive Board. The disability pension is 100% of the vested retirement pension entitlement and is payable until the beneficiary’s 60th birthday, after which it is replaced by a retirement pension. The surviving dependent’s pension is 60% of the retirement pension or vested disability pension entitlement at death. Entitlements are enforceable against SAP AG. Current pension payments are reviewed annually for adjustments and, if applicable, increased according to the surplus in the pension liability insurance. If service is ended before the retirement age of 60 is reached, pension entitlement is reduced in proportion as the actual length of service stands in relation to the maximum possible length of service. The applied retirement pension plan is contributory. The contribution is 4% of applicable compensation up to the applicable income threshold plus 14% of applicable compensation above the

The applied retirement pension plan is contributory. The contribution is 4% of

applicable compensation up to the applicable income threshold plus 14% of applicable compensation above the applicable income threshold. For this purpose, applicable compensation is 180% of annual base salary. The applicable income threshold is the statutory annual income threshold for the state pension plan in Germany (West), as amended from time to time.

Originally, Gerhard Oswald was under a performance-based retirement plan. This plan was discontinued when SAP introduced a contributory retirement pension plan in 2000. His pension benefits are derived from any accrued entitlements on December 31, 1999, under performance-based pension agreements and a salary-linked contribution for the period commencing January 1, 2000. Gerhard Oswald’s rights to retirement pension benefits will increase by further annual contributions because he will remain a member of the Executive Board after his 60th birthday until his retirement on December 31, 2016.

Werner Brandt’s rights to retirement pension benefits will increase by further contributions as he will remain a member of the Executive Board after his 60th birthday until his retirement on June 30, 2014.

Bill McDermott has rights to future benefits under the portion of the SAP America pension plan classified as “Non-Qualified Retirement Plan” according to the U.S. Employee Retirement Income Security Act (ERISA). The “Non-Qualified” pension plan of SAP America is a cash balance plan that on retirement provides either monthly pension payments or a lump sum. The pension becomes available from the

85


Part I

Item 6

  

applicable income threshold. For this purpose, applicable compensation is 180% of annual base salary. The applicable income threshold is the statutory annual income threshold for the state pension plan in Germany (West), as amended from time to time. Originally, Gerhard Oswald was under a performance-based retirement plan. This plan was discontinued when SAP introduced a contributory retirement pension plan in 2000. His pension benefits are derived from any accrued entitlements on December 31, 1999, under performance-based pension agreements and a salary-linked contribution for the period commencing January 1, 2000. Gerhard Oswald’s rights to retirement pension benefits will increase by further annual contributions because he remains a member of the Executive Board after his 60th birthday until his scheduled retirement on December 31, 2016.

Bill McDermott has rights to future benefits under the portion of the pension plan for SAP America classified as “Non-Qualified Retirement Plan” according to the U.S. Employee Retirement Income Security Act (ERISA). The “Non-Qualified” pension plan of SAP America is a cash balance plan that on retirement provides either monthly pension payments or a lump sum. The pension becomes available from the beneficiary’s 65th birthday. Subject to certain conditions, the plan also provides earlier payment or invalidity benefits. The “Non-Qualified” pension plan closed with effect from January 1, 2009. Interest continues to be paid on the earned rights to benefits within this plan.

SAP made contributions to a third-party pension plan for Bill McDermott (2015:682,400; 2014:646,800) and Vishal Sikka.Robert Enslin (2015:308,000; 2014:148,100). SAP’s contributions are based on payments by Bill McDermott’sMcDermott and Vishal Sikka’s paymentsRobert Enslin into this pension plan. In 2013, SAP paid contributions for Bill McDermott totaling €698,400 (2012: €1,053,600) and for Vishal Sikka totaling €153,900 (2012: €215,300).

Instead of paying for entitlements under the pension plan for Executive Board members, SAP pays equivalent amounts to a non-SAP pension plan for Jim Hagemann Snabe. In 2013, SAP paid contributions totaling €282,900 (2012: €283,400).

Lars Dalgaard has no entitlements under the pension plan for Executive Board members. SAP made no retirement pension plan contributions to a third-party pension plan with respect to Lars Dalgaard in 2013.

 

 

Total ProjectedDefined Benefit Obligation (PBO)Obligations (DBO) and the Total Accruals for Pension Obligations to Executive Board Members

 

€ thousands

 Bill
Mc Dermott

(co-CEO)(1)
  Dr. Werner
Brandt
  Luisa Deplazes
Delgado (until
June 30,
2013)
  Gerhard
Oswald
  Dr.  Vishal
Sikka(1)
  Total 

PBO January 1, 2012

  1,139.5    1,499.7    NA    4,485.5    53.1    7,177.8  

Less plan assets market value January 1, 2012

  56.6    1,131.0    NA    3,811.2    48.5    5,047.3  

Accrued January 1, 2012

  1,082.9    368.7    NA    674.3    4.6    2,130.5  

PBO change in 2012

  –64.4    541.8    55.1    1,231.3   53.1    1,710.7  

Plan assets change in 2012

  –56.6    217.0    48.3    383.3   48.5    543.5  

PBO December 31, 2012

  1,075.1    2,041.5    55.1    5,716.8    0    8,888.5  

Less plan assets market value December 31, 2012

  0    1,348.0    48.3    4,194.5    0    5,590.8  

Accrued December 31, 2012

  1,075.1    693.5    6.8    1,522.3    0    3,297.7  

PBO change in 2013

  –32.4    96.0    25.2    99.7    0    188.5  

Plan assets change in 2013

  0    226.2    76.5    456.8    0    759.5  

PBO December 31, 2013

  1,042.7    2,137.5    80.3    5,816.5    0    9,077.0  

Less plan assets market value December 31, 2013

  0    1,574.2    124.8    4,651.3    0    6,350.3  

Accrued December 31, 2013

  1,042.7    563.3    –44.5    1,165.2    0    2,726.7  
 thousands 

Bill McDermott

(CEO)

  

Michael
Kleinemeier

(from November 1,
2015)1)

  Bernd  Leukert1)  Luka  Mucic1)  Gerhard Oswald  Total 

DBO January 1, 2014

  1,042.7                5,816.5    6,859.2  

Less plan assets market value January 1, 2014

                  4,651.3    4,651.3  
Accrued January 1, 2014  1,042.7                1,165.2    2,207.9  

DBO change in 2014

  169.8        123.2    102.8    1,404.9    1,800.7  

Plan assets change in 2014

          94.6    67.8    341.1    503.5  

DBO December 31, 2014

  1,212.5        123.2    102.8    7,221.4    8,659.9  

Less plan assets market value December 31, 2014

          94.6    67.8    4,992.4    5,154.8  
Accrued December 31, 2014  1,212.5        28.6    35.0    2,229.0    3,505.1  

DBO change in 2015

  170.0    29.7    129.2    129.9    171.2    287.6  

Plan assets change in 2015

      25.4    145.6    138.0    356.9    665.9  

DBO December 31, 2015

  1,382.5    29.7    252.4    232.7    7,050.2    8,947.5  

Less plan assets market value December 31, 2015

      25.4    240.2    205.8    5,349.3    5,820.7  
Accrued December 31, 2015  1,382.5    4.3    12.2    26.9    1,700.9    3,126.8  

 

(1)

1) The values shown here only reflect the pension entitlements that Michael Kleinemeier, Bernd Leukert and Luka Mucic will receive from the retirement pension plan for Executive Board members.

Prior to May 18, 2012, the qualified portion of the SAP America pension plan was terminated and account balances transferred to third-party pension accounts.

The table below shows the annual pension entitlement of each member of the Executive Board on reaching the scheduled retirement age 60(60 for Executive Board members initially appointed before 2012 and 62 for Executive Board members initially appointed after January 1, 2012) based on entitlements from SAP under performance-based and salary-linked plans vested on December 31, 2013.2015.

Annual Pension Entitlement

 

€ thousands

  Vested on
December 31,
2013
  Vested on
December 31,
2012
 

Bill McDermott (co-CEO)(1)

   88.4    78.1  

Dr. Werner Brandt

   89.8(2)   88.2  

Luisa Deplazes Delgado (until June 30, 2013)(3)

   5.8    2.3  

Gerhard Oswald

   267.9(4)   259.9(5) 

(1)

The rights shown here for Bill McDermott refer solely to rights under the SAP America pension plan.

thousands  Vested on
December 31,
2015
   Vested on
December 31,
2014
 

Bill McDermott (CEO)1)

   106.9     94.0  

Michael Kleinemeier (from November 1, 2015)

   0.7       

Bernd Leukert

   8.8     3.5  

Luka Mucic

   7.8     2.6  

Gerhard Oswald2)

   302.5     279.4  

 

86


1) The rights shown here for Bill McDermott refer solely to rights under the pension plan for SAP America.

Part I

Item 62) Due to the extension of Gerhard Oswald’s contract beyond June 30, 2014, these values represent the retirement pension entitlement that he would receive after his current Executive Board contract expires on December 31, 2016, based on the entitlements vested on December 31, 2015 (December 31, 2014).

(2)

Due to the last extension of Werner Brandt’s contract beyond his 60th birthday, this value represents the retirement pension entitlement that he would receive after his current Executive Board contract expires on June 30, 2014, based on the entitlements vested on December 31, 2013.

(3)

Due to changes in tax regulations in Germany, for commitments after January 1, 2012, the minimum age to receive pension payments increased to age 62. The value shown for Luisa Deplazes Delgado for 2013 represents the retirement pension entitlement that she would receive at the age of 62 based on the entitlements vested by the end of her contract.

(4)

Due to the most recent extension of Gerhard Oswald’s contract beyond June 30, 2014, this value represents the retirement pension entitlement that he would receive after his current Executive Board contract expires on December 31, 2016, based on the entitlements vested on December 31, 2013.

(5)

Due to the last extension of Gerhard Oswald’s contract beyond his 60th birthday, this value represents the retirement pension entitlement that he would receive after his current Executive Board contract expires on June 30, 2014, based on the entitlements vested on December 31, 2012.

These are vested entitlements. To the extent that members continue to serve on the Executive Board and that therefore more contributions are made for them in the future, pensions actually payable at the scheduled retirement age of 60 will be higher than the amounts shown in the table.

Postcontractual Non-Compete Provisions

During the agreed 12-month postcontractual non-compete period, each Executive Board member receives abstention payments corresponding to 50% of his or herthe final average contractual compensation as agreed in the respective contract on an individual basis. Any other occupational income generated by the Executive Board member will be deducted from histheir compensation in

accordance with section 74c of the German Commercial Code.

The following table presents the net present values of the postcontractual non-compete abstention payments. The net present values in the table reflect the discounted present value of the amounts that would be paid in the fictitious scenario in which the Executive Board members leave SAP at the end of their respective current contract terms and their final average contractual compensation prior to their departure equals the compensation in 2013.2015. Actual postcontractual non-compete payments will likely differ from these amounts depending on the time of departure and the compensation levels and target achievements at the time of departure.

 

 

Net Present Values of the Postcontractual Non-Compete Abstention Payments

 

thousands

  Contract Term
Expires
  Net Present Value
Value of
Postcontractual
Non-Compete
Abstention
Payment1)
 

Bill McDermott (co-CEO)(CEO)

  June 30, 2017   4,534.14,627.7  

Dr. Werner BrandtRobert Enslin

  June 30, 20142017   1,933.31,967.2

Michael Kleinemeier

(from November 1, 2015)

October 31, 2018349.6

Bernd Leukert

June 30, 20171,921.5

Luka Mucic

June 30, 20171,921.7  

Gerhard Oswald

  December 31, 2016   1,846.3

Dr. Vishal Sikka

December 31, 20171,958.9

1,928.9
  

Total

     10,272.612,716.6

  

 

After his resignation as a member of the Executive Board, Jim Hagemann Snabe will receive monthly abstention compensation over a period of twelve

months for the postcontractual non-compete period totaling €3,015,500 (gross).

 

87


Part I

Item 6

1) For the purpose of this calculation, the following discount rates have been applied: Bill McDermott 0.18% (2014: 0.46%); Robert Enslin 0.18% (2014: 0.46%); Michael Kleinemeier 0.50%; Bernd Leukert 0.18% (2014: 0.46%); Luka Mucic 0.18% (2014: 0.46%); Gerhard Oswald 0.15% (2014: 0.38%).

 

Early End-of-Service Undertakings

Severance Payments

The standard contract for all Executive Board members provides that on termination before full term (for example, where the member’s appointment is revoked, where the member becomes occupationally disabled, or in connection with a change of control), SAP AGSE will pay to the member the outstanding part of the compensation target for the entire remainder of the term, appropriately discounted for early payment. A member has no claim to that payment if he or she hasthey have not served SAP as a member of itsthe Executive Board for at least one year or if he or she leavesthey leave SAP AGSE for reasons for which he or she isthey are responsible. Upon the appointment of Robert Enslin, Bernd Leukert, Luka Mucic, and Michael Kleinemeier to the Executive Board, the Supervisory Board abstained from the waiting period of one year due to their previous membership to the Global Managing Board.

If an Executive Board member’s appointment to the Executive Board expires or ceases to exist because of, or as a consequence of, change or restructuring, or due to a change of control, SAP AGSE and each Executive Board member has the right to terminate the employment contract within eight weeks of the occurrence by giving six months’ notice. A change of control is deemed to occur when a third party is required to make a mandatory takeover offer to the shareholders of SAP AGSE under the German Securities Acquisition and Takeover Act, when SAP AGSE merges with another company and becomes the subsumed entity, or when a control or profit transfer agreement is concluded with SAP AGSE as the dependent company. An Executive Board member’s contract can also be terminated before full term if his or hertheir appointment as an SAP AG Executive Board member of SAP SE is revoked in connection with a change of control.

Postcontractual Non-Compete Provisions

Abstention compensation for the postcontractual non-compete period as described above is also payable on early contract termination.

Permanent Disability

In case of permanent disability, the contract will end at the end of the quarter in which the permanent inability to work was determined. The Executive Board member receives the monthly basic salary for a further 12 months starting from the date the permanent disability is determined.

Payments to Executive Board Members Retiring in 2013

Luisa Deplazes Delgado resigned from her position as Executive Board member with effect from June 30, 2013, with the approval of the Supervisory Board. Lars Dalgaard resigned from his position as Executive Board member with effect from May 31, 2013, with the approval of the Supervisory Board. The postcontractual non-compete provision in both contracts has been canceled without compensation.

Payments to Former Executive Board Members

In 2013,2015, we paid pension benefits of €1,387,0001,580,000 to Executive Board members who had retired before January 1, 2013 (2012: €1,360,000)2015 (2014:1,425,000). At the end of the year, the PBODBO for former Executive Board members was €29,181,000 (2012: €30,551,000)32,758,000 (2014:33,764,000). Plan assets of €26,015,00026,716,000 are available to servicemeet these obligations (2012: €26,054,000)(2014:25,584,000).

Executive Board Members’ Holdings of Long-Term Incentives

Members of the Executive Board hold or held share-based payment rights throughout the year share-based payment rights under the RSU Milestone Plan 2015 and the SAP SOP 2010 (which were granted in previous years). For information about the terms and details of these programs, see the Notes to the Consolidated Financial Statements section, Note (27).

88


Part I

Item 6

RSU Milestone Plan 2015

The table below shows Executive Board members’ holdings, on December 31, 2013,2015, of restricted share unitsRSUs issued to them under the RSU Milestone Plan 2015. The plan is a cash-settled long-term incentive scheme with a payout subsequent to a performance period of one year and an additional holding period of three years. The RSU Milestone Plan 2015 consists of four plan tranches to be issued with respect to the calendar years 2012 through 2015.

RSU Milestone Plan 2015 (2015 Tranche)

 

Quantity of RSUs

  Holding on
January 1,
2013
   Grants in
2013
   Performance-
Related
Adjustment
   Exercised
Units
   Forfeited
Units
   Holding on
December 31,
2013
 

Bill McDermott (co-CEO)

   127,425     73,289     –5,152               195,562  

Jim Hagemann Snabe(co-CEO)(1)

   127,425     73,289     –5,152     195,562            

Dr. Werner Brandt

   45,709     26,290     –1,848               70,151  

Lars Dalgaard
(until May 31, 2013)

   32,845     26,290               26,290     32,845  

Luisa Deplazes Delgado
(until June 30, 2013)

   11,127     21,562               21,562     11,127  

Gerhard Oswald

   45,709     26,290     –1,848               70,151  

Dr. Vishal Sikka

   45,709     26,290     –1,848               70,151  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   435,950     273,300     –15,849     195,562     47,852     449,987  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Quantity of RSUs Holding on
January 1,
2015
  Grants in 2015  Performance-
Related
Adjustment
  Exercised
Units
  Forfeited Units  Holding on
December 31,
2015
 

Bill McDermott (CEO)

  255,050    77,099    36,568            368,717  

Robert Enslin

  14,148    27,656    12,329            54,133  

Michael Kleinemeier (from November 1, 2015)

  0    4,622    599            5,221  

Bernd Leukert

  14,148    27,656    13,922            55,726  

Luka Mucic

  10,757    27,656    13,474            51,887  

Gerhard Oswald

  91,490    27,656    13,117            132,263  

Total

  385,593    192,345    90,009    0    0    667,947  

 

(1)

According to the termination agreement with Jim Hagemann Snabe, the 2012 and 2013 grants will be paid out after the close of the Annual General Meeting of Shareholders on May 21, 2014 based on a fixed share price of €52.96 for the 2012 grants and €58.69

The holding of RSUs on December 31, 2015, which were issued and not forfeited in 2015, reflects the number of RSUs multiplied by the total target achievement. The total target achievement consists of the addition of the target achievement of the financial KPIs of 112.96% and the adjustment factor based on individual plan

participation. The RSUs allocated in 2012 have a remaining term of 0.08 years; the RSUs allocated in 2013 have a remaining term of 1.08 years; the RSUs allocated in 2014 have a remaining term of 2.08 years; and the RSUs allocated in 2015 have a remaining term of 3.08 years.

RSU Milestone Plan 2015 (2014 Tranche)

Quantity of RSUs Holding on
January 1,
2014
  Grants in 2014  Performance-
Related
Adjustment
  Exercised
Units
  Forfeited Units  Holding on
December 31,
2014
 

Bill McDermott (CEO)

  195,562    76,374    16,886            255,050  

Dr. Werner Brandt (until June 30, 2014)

  70,151    27,396            27,396    70,151  

Gerhard Oswald

  70,151    27,396    6,057            91,490  

Dr. Vishal Sikka (until May 4, 2014)1)

  70,151    27,396        70,151    27,396      

Robert Enslin (from May 4, 2014)

  0    18,164    4,016            14,148  

Bernd Leukert (from May 4, 2014)

  0    18,164    4,016            14,148  

Luka Mucic (from July 1, 2014)

  0    13,811    3,054            10,757  

Total

  406,014    208,701    34,029     70,151    54,792    455,743  

1) According to the termination agreement with Vishal Sikka, the 2012 grants will be paid out after the close of the Annual General Meeting of Shareholders in 2016, based on a fixed share price of52.96. The 2013 grants will be paid out after the close of the Annual General Meeting of Shareholders in 2017 based on a fixed share price of58.69.

The holding of RSUs on December 31, 2014, which were issued and not forfeited in 2014, reflects the number of RSUs multiplied by the 77.89% target achievement.

RSU Milestone Plan 2015 (2013 Tranche)

Quantity of RSUs  Holding on
January 1,
2013
   Grants in 2013   Performance-
Related
Adjustment
   Exercised
Units
   Forfeited Units   Holding on
December 31,
2013
 

Bill McDermott (co-CEO)

   127,425     73,289     5,152               195,562  
Jim Hagemann Snabe (co-CEO)1)   127,425     73,289     5,152     195,562            

Dr. Werner Brandt

   45,709     26,290     1,848               70,151  

Gerhard Oswald

   45,709     26,290     1,848               70,151  

Dr. Vishal Sikka

   45,709     26,290     1,848               70,151  

Total

   391,977     225,448     15,849      195,562     0     406,014  

1) According to the termination agreement with Jim Hagemann Snabe, the 2012 and 2013 grants were paid out after the close of the Annual General Meeting of Shareholders on May 21, 2014, based on a fixed share price of52.96 for the 2012 grants and58.69 for the 2013 grants.

The holding of RSUs on December 31, 2013, thatwhich were issued and not forfeited in 2013, reflects the number of RSUs multiplied by the 92.97% target achievement. The RSUs allocated in 2012 have a remaining term of 2.08 years, the RSUs allocated in 2013 have a remaining term of 3.08 years.

RSU Milestone Plan 2015 (2012 Tranche)

 

Quantity of RSUs

  Holding on
January 1,
2012
   Grants in
2012
   Performance-
Related
Adjustment
   Exercised
Units
   Forfeited
Units
   Holding on
December 31,
2012
   Holding on
January 1,
2012
   Grants in 2012   Performance-
Related
Adjustment
   Exercised
Units
   Forfeited Units   Holding on
December 31,
2012
 

Bill McDermott (co-CEO)

        95,414     32,011               127,425          95,414     32,011               127,425  

Jim Hagemann Snabe(co-CEO)

        95,414     32,011               127,425          95,414     32,011               127,425  

Dr. Werner Brandt

        34,226     11,483               45,709          34,226     11,483               45,709  

Lars Dalgaard
(from April 12, 2012)

        24,594     8,251               32,845  

Luisa Deplazes Delgado
(from September 1, 2012)

       –     8,332     2,795         –         –     11,127  

Gerhard Oswald

        34,226     11,483               45,709          34,226     11,483               45,709  

Dr. Vishal Sikka

        34,226     11,483               45,709          34,226     11,483               45,709  
  

 

   

 

   

 

   

 

   

 

   

 

 

Total

        326,432     109,518               435,950          293,506     98,471               391,977  
  

 

   

 

   

 

   

 

   

 

   

 

 

The holding on December 31, 2012, reflects the number of RSUs issued in 2012 multiplied by the 133.55% target achievement.

89


Part I

Item 6

SAP SOP 2010

The table below shows Executive Board members’ holdings, on December 31, 2013,2015, of virtual share options issued to them under the SAP SOP 2010 since its inception. The strike price for an option is 115% of the base price. The issued options have a term of seven years and can only be exercised on specified dates after the vesting period. The options issued in 2010 arewere exercisable beginning in September 2014 and the options issued in 2011 arewere exercisable beginning in June 2015.

SAP SOP 2010 Virtual Share Options

 

  Year
Granted
  Holding on
January 1, 2013
  Strike
Price
per
Option
  Rights
Exercised
in 2013
  Price on
Exercise
Date
  Exerci-
sable
Rights of
Retired
Members
of the
Executive
Board
  Forfeited
Rights
  Holding on
December 31, 2013
 
     Quantity
of
Options
  Remaining
Term in
Years
    Quantity
of
Options
    Quantity
of
Options
  Quantity
of
Options
  Quantity
of
Options
  Remaining
Term in
Years
 

Bill McDermott(co-CEO)

  2010    135,714    4.69    40.80                    135,714    3.69  
  2011    112,426    5.44    48.33                    112,426    4.44  

Jim Hagemann Snabe (co-CEO)

  2010    135,714    4.69    40.80                    135,714    3.69  
  2011    112,426    5.44    48.33                    112,426    4.44  

Dr. Werner Brandt

  2010    82,428    4.69    40.80                    82,428    3.69  
  2011    68,284    5.44    48.33                    68,284    4.44  

Gerhard Oswald

  2010    82,428    4.69    40.80                    82,428    3.69  
  2011    68,284    5.44    48.33        –        –        –        –    68,284    4.44  

Dr. Vishal Sikka

  2010    82,428    4.69    40.80                    82,428    3.69  
  2011    68,284    5.44    48.33                    68,284    4.44  
  

 

 

    

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Total

   948,416                      948,416   
  

 

 

    

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  
   Year
Granted
  Holding on
January 1,
2015
  Strike Price
per Option
  Rights
Exercised
in 2015
  Price on
Exercise
Date
  Forfeited
Rights
  Holding on
December 31,
2015
 
       Quantity of
Options
  Remaining
Term in
Years
    Quantity of
Options
    Quantity of
Options
  Quantity of
Options
  Remaining
Term in
Years
 

Bill McDermott

(CEO)

  2010    135,714    2.69    40.80                135,714    1.69  
   2011    112,426    3.44    48.33                112,426    2.44  

Gerhard Oswald

  2010    0            0                  
   2011    68,284        48.33    68,284    64.83              

Total

      316,424            68,284            248,140      

Total Expense for Share-Based Payment

In the report year and the prior year, totalTotal expense for the share-based payment plans of Executive Board members was recordedrecognized as follows.

Total Expense for Share-Based Payment

 

€ thousands

  2013   2012 

Bill McDermott (co-CEO)

   –1,529.7     16,239.0  

Jim Hagemann Snabe (co-CEO)

   –2,967.0     16,239.0  

Dr. Werner Brandt

   1,042.9     4,998.1  

Lars Dalgaard (until May 31, 2013)

   –2,264.2     4,239.6  

Luisa Deplazes Delgado (until June 30, 2013)

   –2,126.4     2,795.6  

Gerhard Oswald

   –376.0     6,417.0  

Dr. Vishal Sikka

   –376.0     6,500.3  
  

 

 

   

 

 

 

Total

   –8,596.4     57,428.6  
  

 

 

   

 

 

 
thousands  2015   2014 

Bill McDermott (CEO)

   12,291.1     5,063.8  

Robert Enslin

   1,851.2     1,833.5  

Michael Kleinemeier (from November 1, 2015)

   364.7       

Bernd Leukert

   2,208.6     1,759.7  

Luka Mucic

   2,148.5     1,577.2  

Gerhard Oswald

   3,445.6     1,891.1  

Total

   22,309.7     12,125.3  

The expense is recognized in accordance with IFRS 2 “Share-Based Payments”. Because the RSU Milestone Plan 2015 tranches for 2014 to 2015 were allocated at the beginning(Share-Based Payments) and consists exclusively of 2012, we are required to recognize them in part in 2013 even though these future tranches depend on the achievement of specific financial targets in future periods.obligations arising from Executive Board activities.

90


Part I

Item 6

Shareholdings and Transactions of Executive Board Members

No member of the Executive Board holds more than 1% of the ordinary shares of SAP AG.SE. Members of the

Executive Board held a total of

30,201 45,309 SAP shares on December 31, 2013 (2012: 35,2712015 (2014: 36,426 shares).

The table below shows transactions by Executive Board members and persons closely associated with them notified to SAP pursuant to the German Securities Trading Act, section 15a, in 2013.2015.

 

 

Transactions in SAP Shares

 

    Transaction Date Transaction  Quantity   Unit Price 

Dr. Werner BrandtBill McDermott (CEO)

June 10, 2013Share purchase   800August 11, 2015    €58.5900
November 26, 2013Share sale11,000€60.9000

Gerhard Oswald

June 11, 2013Share purchase815€57.5260

Jim Hagemann Snabe (co-CEO)

July 22, 2013Share purchase1,815€55.2038

Bill McDermott (co-CEO)

July 23, 2013 Purchase of ADRs    1,5002,000     US$72.840071.5845  

Dr. Vishal SikkaRobert Enslin

  September 11, 2013August 26, 2015 Purchase of ADRs    1,0001,145     US$72.580066.3099  

Bernd Leukert

May 7, 2015Share sale1,59566.2364
August 13, 2015Share purchase83063.7290

Luka Mucic

May 20, 2015Share purchase70068.9990

Gerhard Oswald

July 22, 2015Share purchase93066.7100

 

Executive Board: Other Information

We did not grant any compensation advance or credit to, or enter into any commitment for the benefit of, any member of our Executive Board in 20132015 or the previous year.

As far as the law permits, SAP AGSE and its affiliated companies in Germany and elsewhere indemnify and hold harmless their respective directors and officers against and from the claims of third parties. To this end, we maintain directors’ and officers’ (D&O) group liability insurance. The policy is annual and is renewed from year to year. The insurance covers the personal liability of the insured group for financial loss caused by its managerial acts and omissions. The current D&O policy includes an individual deductible for Executive Board members of SAP AGSE as required by section 93 (2) of the German Stock Corporation Act.

Compensation for Supervisory Board Members

Compensation System

Supervisory Board members’ compensation is governed by our Articles of Incorporation, section 16. By resolution of our May 20, 2015, Annual General Meeting of Shareholders the section was changed from the compensation with fixed and performance-related components to a fixed compensation plus fixed amounts for membership in and chairing of committees.

Each member of the Supervisory Board receives, in addition to the reimbursement of his or hertheir expenses, an annual basic compensation composed of fixed elements and a variable element.165,000. The variable element depends on the dividend paid by SAP on its shares.

The fixed element is €100,000 for the chairperson €70,000 forreceives275,000 and the deputy chairperson and €50,000 for other members. 220,000.

For membership of the Audit Committee, Supervisory Board members receive additional fixed annual remuneration

compensation of €15,000,16,500, and for membership of any other Supervisory Board committee €10,000,11,000, provided that the committee concerned has met in the year. The chairperson of the Audit Committee receives €25,000,27,500, and the chairpersons of the other committees receive €20,000.22,000. The fixed remuneration is payable after the end of the year.

The variable compensation element is €10,000 for the chairperson, €8,000 for the deputy chairperson, and €6,000 for the other members of the Supervisory Board for each €0.01 by which the dividend distributed per share exceeds €0.40. The variable remuneration is payable after the end of the Annual General Meeting of Shareholders that resolves on the dividend for the relevant year.

However, the aggregate compensation excluding compensation for committee memberships must not exceed €250,000 for the chairperson, €200,000 for the deputy chairperson, and €150,000 for other members of the Supervisory Board.

Any members of the Supervisory Board having served for less than the entire year receive one-twelfth of the annual remuneration for each month of service commenced. This also applies to the increased compensation of the chairperson and the deputy chairpersonchairperson(s) and to the remuneration for the chairperson and the members of a committee.

 

 

91


Part I

Item 6

Amount of Compensation

Subject to the resolution on the appropriation of retained earnings by the Annual General Meeting of Shareholders on May 21, 2014, the compensation paid to Supervisory Board members in respect of 2013 will be as set out in the table below.

Supervisory Board Members’ Compensation in 20132015

 

 2013 2012 

€ thousands

 Fixed
Compensation
 Compensation
for
Committee
Work
 Variable
Compensation
 Total Fixed
Compensation
 Compensation
for
Committee
Work
 Variable
Compensation
 Total        2015          2014 
 Fixed
Compen-
sation
 

Compen-
sation for
Commit-

tee Work

 Total Fixed
Compen-
sation
 

Compen-
sation for
Commit-

tee Work

 Variable
Compen-
sation
 Total 

Prof. Dr. h.c. mult. Hasso Plattner (chairperson)

  100.0    81.7    150.0    331.7    100.0    60.0    150.0    310.0    275.0    66.0    341.0    100.0    100.0    150.0    350.0  

Christiane Kuntz-Mayr (deputy chairperson)

  70.0    10.8    130.0    210.8    67.5    10.0    128.3    205.8  
Margret Klein-Magar (deputy chairperson from May 20, 2015)  215.4    29.3    244.8    50.0    30.0    100.0    180.0  

Pekka Ala-Pietilä

  50.0    30.0    100.0    180.0    50.0    20.0    100.0    170.0    165.0    27.5    192.5    50.0    30.0    100.0    180.0  

Panagiotis Bissiritsas

  50.0    20.0    100.0    170.0    50.0    24.2    100.0    174.2    165.0    32.1    197.1    50.0    20.0    100.0    170.0  
Catherine Bordelon (until May 20, 2015)  68.8    0    68.8    25.0    5.0    50.0    80.0  

Martin Duffek (from May 20, 2015)

  110.0    18.3    128.3    NA    NA    NA    NA  

Prof. Anja Feldmann

  50.0    10.8    100.0    160.8    33.3    6.7    66.7    106.7    165.0    22.0    187.0    50.0    20.0    100.0    170.0  

Prof. Dr. Wilhelm Haarmann

  50.0    40.8    100.0    190.8    50.0    30.0    100.0    180.0    165.0    44.0    209.0    50.0    50.0    100.0    200.0  

Margret Klein-Magar

  50.0    20.0    100.0    170.0    33.3    6.7    66.7    106.7  

Andreas Hahn (from May 20, 2015)

  110.0    14.7    124.7    NA    NA    NA    NA  
Christiane Kuntz-Mayr (deputy chairperson and member until May 20, 2015)  91.7    9.2    100.8    70.0    20.8    130.0    220.8  
Prof. Dr. Gesche Joost (from May 28, 2015)  110.0    11.0    121.0    NA    NA    NA    NA  

Lars Lamadé

  50.0    20.8    100.0    170.8    62.5    10.0    120.8    193.3    165.0    22.0    187.0    50.0    30.0    100.0    180.0  
Steffen Leskovar (until May 20, 2015)  68.8    11.5    80.2    25.0    12.5    50.0    87.5  

Bernard Liautaud

  50.0    30.0    100.0    180.0    50.0    16.7    100.0    166.7    165.0    22.0    187.0    50.0    30.0    100.0    180.0  

Dr. h. c. Hartmut Mehdorn

  50.0    10.8    100.0    160.8    50.0    10.0    100.0    160.0  

Dr. Kurt Reiner

  50.0    20.0    100.0    170.0    33.3    13.3    66.7    113.3  

Mario Rosa-Bian

  50.0    9.2    100.0    159.2    33.3    6.7    66.7    106.7  
Dr. h. c. Hartmut Mehdorn (until May 15, 2015)  68.8    9.2    77.9    50.0    20.0    100.0    170.0  

Christine Regitz (from May 20, 2015)

  110.0    14.7    124.7    NA    NA    NA    NA  

Dr. Kurt Reiner (until May 20, 2015)

  68.8    9.2    77.9    50.0    20.0    100.0    170.0  

Mario Rosa-Bian (until May 20, 2015)

  68.8    9.2    77.9    50.0    15.0    100.0    165.0  

Dr. Erhard Schipporeit

  50.0    35.0    100.0    185.0    50.0    25.0    100.0    175.0    165.0    27.5    192.5    50.0    35.0    100.0    185.0  

Stefan Schulz

  50.0    25.8    100.0    175.8    50.0    24.2    100.0    174.2  

Inga Wiele

  50.0    25.0    100.0    175.0    33.3    16.7    66.7    116.7  

Stefan Schulz (until May 20, 2015)

  68.8    11.5    80.2    50.0    30.8    100.0    180.8  
Robert Schuschnig-Fowler (from May 20, 2015)  110.0    7.3    117.3    NA    NA    NA    NA  
Dr. Sebastian Sick (from May 20, 2015)  110.0    14.7    124.7    NA    NA    NA    NA  

Jim Hagemann Snabe

  165.0    22.0    187.0    25.0    10.0    50.0    85.0  

Pierre Thiollet (from May 20, 2015)

  110.0    7.3    117.3    NA    NA    NA    NA  

Inga Wiele (until July 6 , 2014)

  NA    NA    NA    29.2    14.6    58.3    102.1  

Prof. Dr.-Ing. Dr.-Ing. E.h. Klaus Wucherer

  50.0    25.0    100.0    175.0    50.0    20.0    100.0    170.0    165.0    16.5    181.5    50.0    20.8    100.0    170.8  

Compensation for former Supervisory Board Members

  NA    NA    NA    NA    104.0    39.7    208.5    352.2  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

  870.0    415.8    1,680.0    2,965.8    900.8    339.6    1,740.8    2,981.3    3,249.6    478.5    3,728.1    924.2    514.5    1,788.3    3,227.0  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

In addition, we reimburse members of the Supervisory Board for their expenses and the value-added tax payable on their compensation.

TheIn total, compensationwe received services from members of allthe Supervisory Board members in 2013 for work for SAP excluding compensation relating to the office of Supervisory Board member was €1,176,200 (2012: €1,083,500). Those amounts are composed entirely of remuneration received by(including services from employee representatives on the Supervisory Board relating toin their positioncapacity as SAP employees in 2013 and 2012, respectively.

Supervisory Board member Wilhelm Haarmann practiced as a partnerof SAP) in the law firm HAARMANN Partnerschaftsgesellschaft in Frankfurt am Main, Germany, until February 2013. In February 2013, he was elected a partner inamount of1,282,800 (2014:2,295,000). This amount includes fees paid to Linklaters LLP in Frankfurt am Main, Germany.Germany (which Supervisory Board member Wilhelm Haarmann occasionally advises SAP on particular projects, tax matters, and questionsis a partner of) of law. Before Mr. Haarmann joined Linklaters LLP, SAP had already received consulting services from Linklaters and will continue to do so. In 2013, the fees for such services totaled €327,500 (2012: €9,400)224,500 (2014:1,001,700).

92


Part I

Item 6

Long-Term Incentives for the Supervisory Board

We do not offer members share options or other share-based payment for their Supervisory Board work. Any share options or other share-based payment received by employee-elected members relate to their position as SAP employees and not to their work on the Supervisory Board.

Shareholdings and Transactions of Supervisory Board Members

Supervisory Board chairperson Hasso Plattner and the companies he controlled held 119,300,88290,248,789 SAP shares on December 31, 20132015 (December 31, 2012: 121,348,8072014: 107,442,743 SAP shares), representing 9.711% (2012: 9.878%7.346% (2014: 8.746%) of SAP’s share capital. No other member of the Supervisory Board held more than 1% of the SAP AGSE share capital at the end of 20132015 or of the previous year. Members of the Supervisory Board held a total of 119,316,44490,262,686 SAP shares on December 31, 20132015 (December 31, 2012: 121,363,8582014: 107,467,372 SAP shares).

The table below shows transactions by Supervisory Board members and persons closely associated with them notified to SAP pursuant to the German Securities Trading Act, section 15a, in 2013:2015:

Transactions in SAP Shares

 

   Transaction Date  Transaction   Quantity  Unit Price in € 

Christian Wiele

  August 23, 2013   Share sale     116    57.2600  

Inga Wiele

  August 26, 2013   Share sale     92    57.3500  

Margret Klein-Magar

  August 26, 2013   Share sale     132    57.0400  

Mario Rosa-Bian

  August 27, 2013   Share sale     130    57.3500  

Hasso Plattner

  October 24, 2013   Share sale      (1)    (1) 
    Transaction Date  Transaction  Quantity   Unit Price 

Andreas Hahn

  May 28, 2015  Share purchase   12    57.3600  
  June 2, 2015  Share sale   100    67.4170  
  August 5, 2015  Share sale   115    66.2200  
   October 28, 2015  Share sale   38    70.0100  

Margret Klein-Magar

  May 7, 2015  Share sale   120    66.2364  

Hasso Plattner

  December 18, 2015  Share purchase   2,444,816    72.9300  

Hasso Plattner GmbH & Co. Beteiligungs-KG

  December 23, 2015  Compensation in kind (granting party)   87,803,973     1) 

HP Vermögensverwaltungs GmbH & Co. KG

  December 23, 2015  Compensation in kind (receiving party)   87,803,973     1) 

Sabine Plattner GmbH & Co. Beteiligungs-KG

  November 25, 2015  Share sale   480,000     2) 

Riitta Schuschnig-Fowler

  December 8, 2015  Share sale   50    72.4500  

Robert Schuschnig-Fowler

  December 8, 2015  Share sale   35    72.6500  

Ingrid van Skyhawk

  May 28, 2015  Share purchase   11    57.3600  
  June 2, 2015  Share sale   75    67.4170  
  August 4, 2015  Share sale   122    65.6800  
   November 18, 2015  Share sale   90    73.7700  

 

(1)

The notifying party (Hasso Plattner GmbH & Co. Beteiligungs-KG) concluded a contract with a bank acting as commission agent for the monthly sale of SAP shares with a fair value of €10,000,000 per month. The sale will be carried out at the bank’s own discretion in the stock market or over the counter, during December 2013 through November 2014. With this transaction a program running since November 2012 will be continued (see notification on November 30, 2012). Price: Targeted is the volume-weighted average (stock market) price of the SAP share on the relevant day of sale. Number of items: Total amount traded divided by the relevant sale price of the sold shares.

 

1) Compensation in kind of 87,803,973 shares, hypothetical volume of the transaction6,299,935,062.75.

2) The notifying party concluded a contract with a bank acting as commission agent for the sale of 10,000 SAP shares per week. The sale will be carried out at the bank’s own discretion in the stock market or over the counter in the months December 2015 through November 2016.

Supervisory Board: Other Information

We did not grant any compensation advance or credit to, or enter into any commitment for the benefit of, any member of our Supervisory Board in 20132015 or the previous year.

Hasso Plattner, the chairperson of the Supervisory Board, entered into a consulting contract with SAP after he joined the Supervisory Board in May 2003. The contract does not provide for any

compensation. The only cost we incurred under the contract was the reimbursement of expenses.

As far as the law permits, we indemnify Supervisory Board members against, and hold them harmless from, claims brought by third parties. To this end, we maintain directors’ and officers’ (D&O) group liability insurance. The current D&O policy does not include an individual deductible for Supervisory Board members as envisaged in the German Corporate Governance Code.

93


Part I

Item 6

EMPLOYEES

Headcount

Note (7) to our Consolidated Financial Statements presents the number of employees, measured infull-time equivalents by functional area and by geographic region.

On December 31, 2013,2015, we had 66,57276,986 full-time equivalent (FTE) employees worldwide (December 31, 2012: 64,422)2014: 74,406). This represents an increase in headcount of 2,1502,579 FTEs in comparison to 2012. Of the overall headcount increase in 2013, 1,111 resulted from acquisitions.2014. The average number of employees in 20132015 was 65,409 (2012: 61,134)75,180 (2014: 68,343).

We define the FTE headcount as the number of people we would employ if we only employed people on full-time employment contracts. Students employed part-time and certain individuals who are employed by SAP but who, for various reasons, are not currently working, are excluded from our figures. Also, temporary employees are not included in the above figures. The number of such temporary employees is not material.

On December 31, 2013,2015, the largest number of SAP employees (47%(44%) were employed in the EMEAEurope, Middle East, and Africa (EMEA) region (including 26%23% in Germany and 21% in other countries inof the region), while 29% were employed in the AmericasNorth America and Latin America (Americas) region (including 20%21% in the United States and 9%8% in other countries inof the region) and 24%27% in the APJAsia Pacific Japan (APJ) region.

Our worldwide headcount in the field of cloud and software and software-related services grew 7%decreased less than 1% to 11,26114,991 FTEs (2012: 10,551)(2014: 15,074). Cloud operations and support accounted for most of the increase. Professional services and other servicesServices counted 14,62915,085 FTEs at the end of 20132015 – an increase of 3% (2012: 14,259)(2014: 14,639). MostOur R&D

headcount saw a year-over-year increase of this increase was in consulting. A shift in the focus of our industry solutions led11% to some movement of employees from research and development to sales20,938 FTEs (2014: 18,908). Sales and marketing resulting in aheadcount grew by 1% headcount decrease to 17,804 FTEs (2012: 18,012) in research and development and a 6% headcount increase to 15,824 FTEs (2012: 14,899) in sales and marketing. Mainly as a result of our acquisition of hybris, general and administration headcount rose 7% to 4,56618,206 FTEs at the end of the year (2012: 4,286)(2014: 17,969). General and administration headcount stayed constant at 5,024 FTEs at the end of the year (2014: 5,023). Our infrastructure employees who provide IT and facility management services, numbered 2,4882,743 FTEs – an increasea decrease of 3% (2012: 2,415) that mainly resulted from our

acquisitions and investments in our company IT.2% (2014: 2,794).

In the Americas region, headcount (FTEs) increased by 445,95, or 2%less than 1%; in the EMEA region, the increase was 1,236,566, or 4%2%; and in the APJ region, it was 469,1,919, or 3%10%.

Our personnel expense per employee decreasedincreased to approximately €114,000135,000 in 2013 (2012:2015 (2014: approximately €119,000)115,000). The decreaseThis rise in expense is primarily relatedattributable to foreign exchange effects asan increase in salaries, employee-related restructuring expenses, share-based payments, and a significant rise in the majority of our employees is located outside of the eurozone and paidshare price in local currency.2015. The personnel expense per employee is defined as the personnel expense divided by the average number of employees. For more information about employee compensation and a detailed overview of the number of people SAP employed,we employ, see the Notes to the Consolidated Financial Statements section, Note (7).

Employee Relations and Labor UnionsRelations

On a worldwide basis, we believe that our employee and labor relations are excellent.

On a corporate level employees of SAP in Europe are represented by the SAP SE Works Council (WoC) (Europe). By law and agreement with SAP the SAP SE WoC (Europe) is entitled to receive information on transnational matters and to consult with the Executive Board or a representative thereof. The SAP SE WoC (Europe) was established in November 2014 as a result of the legal transformation of SAP AG into SAP SE. The SAP SE WoC (Europe) replaced the European Works Council which was dissolved following the conversion.

On the legal entity level, the SAP AGSE works council (Germany) represents the employees of SAP AG with 39 members; theSE. The employees of SAP Deutschland AGSE & Co. KG (SAP Germany) are represented by a separate works council with 31 members. For different areas of co-determination the entity-level works councils have elected committees. By law the works councils are entitled to consultation and, in some areas, toco-determination rights concerning labor conditions at SAP AG and SAP Germany.council. Other employee representatives include the group works council currently having seven members (members of the works councils of SAP AGSE and SAP Germany), the representatives of severely disabled persons in all entities and on group level (Germany) and the spokespersons committee as the representation of the executives.

Employees of SAP France, S.A.SAP France Holding and SAP Labs France S.A.SAS are subject to a collective bargaining agreement. Each of SAP France, S.A.,SAP France Holding, SAP Labs France S.A.SAS, Multiposting SAS France and b-process France are represented by a French works council. A French works council is responsible for protecting the employees’ collective interests by ensuring that management considers the interests of employees in making decisions on behalf of the company. A French works council is entitled to certain company information and to consult with management on matters that are expected to have an impact on

94


Part I

Item 6, 7

company structure or on the employees it represents. The union negotiatesrepresented unions negotiate agreements with SAP France S.A. and SAP Labs France S.A. Some negotiations are compulsory under law. The staff representatives are obligated to present all individual or collective complaints regarding salary, policies or agreements between the employees and the company in question.SAS.

In addition, the employees of our subsidiariesvarious other SAP Espanaentities, including SAP España – Sistemas, Aplicaciones y Productos en la Informática, S.A., SAP Belgium N.V.NV/SA., SAP Nederland B.V., SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A., Concur (France) SAS, SAP Brasil Ltda, SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o.(Slovenia), SAP Romania SRL, SAP Argentina S.A. and SAP Italia S.p.A.Svenska Aktiebolag (Sweden), are also represented by works councils. Each of SAP (UK) Limited and SAP Ireland Limited has ancouncils, worker representatives, employee consultation forum which represents the employees’ interests. Furthermore, thereforums and/or unions. In addition, some of these employees are workers representatives in Slovenia at SAP Systems, Applications and Products for Data Processing Ltd.

In September 2012 the SAP European Works Council (EWC) was established and held its constituent meeting. The EWC represents all employees of SAP within the European Union. By law and agreement with SAP the EWC is entitled to receive information and consult on transnational matters.

Employees of SAP Brazil and SAP Labs Brazil are represented by a specific union related to Technology companies and subject to a collective bargaining agreement.

For Argentina, there is a legal requirement under which all employees have to be affiliated to the Union indicated by the government. However, for the IT Industry, as of 2014, no Union had completed all registration procedures with the Ministry of Labor and the IT Chamber, to be recognized by the Government as the Industry Union.

SHARE OWNERSHIP

Beneficial Ownership of Shares

The ordinary shares beneficially owned by the persons listed in Item 6. Directors, Senior Management and Employees – Compensation Report” isare disclosed in “Item 7. Major Shareholders and Related-Party Transactions – Major Shareholders.”

SHARE-BASED COMPENSATION PLANS

Share-Based Compensation

We maintain certain share-based compensation plans. The share-based compensation from these plans result from cash-settled and equity-settled awards issued to employees. For more information on our share-based compensation plans refer to “Item 6. Directory,Directors, Senior Management and Employees Compensation Report” and Note (27) to our Consolidated Financial Statements.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

The share capital of SAP AGSE consists of ordinary shares, which are issued only in bearer form. Accordingly, SAP AGSE generally cannot determine the identity of its shareholders or how many shares a particular shareholder owns. SAP’s ordinary shares are traded in the United States by means of ADRs. Each ADR currently represents one SAP AGSE ordinary share. On March 7, 2014,11, 2016, based on information provided by the Depositary there were 54,741,21541,751,316 ADRs held of record by 1,028917 registered holders. The ordinary shares underlying such ADRs represented 4.46%3.40% of the then-outstanding ordinary shares (including treasury stock). Because SAP’s ordinary shares are issued in bearer form only, we are unable to determine the number of ordinary shares directly held by persons with U.S. addresses.

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The following table sets forth certain information regarding the beneficial ownership of the ordinary shares to the extent known to SAP as of March 7, 201411, 2016 of: (i) each person or group known by SAP AGSE to own beneficially 5% or more of the outstanding ordinary shares; and (ii) the beneficial ownership of all members of the Supervisory Board and all members of the Executive Board,

individually and as a group, in each case as reported to SAP AGSE by such persons. There was, as far as we are able to tell given the nature of our shares, no significant change in the percentage ownership held by any major shareholder during the past three years. None of the major shareholders have special voting rights.

 

 

   Ordinary Shares
Beneficially Owned
 

Major Shareholders

  Number   % of
Outstanding
 

Dietmar Hopp, collectively(1)

   65,273,200     5.313

Hasso Plattner, Chairperson Supervisory Board, collectively(2)

   118,787,272     9.669

Klaus Tschira, collectively (3)

   92,079,595     7.495

Executive Board Members as a group (5 persons)

   30,201     0.002

Supervisory Board Members as a group (16 persons)

   118,802,834     9.671

Executive Board Members and Supervisory Board Members as a group (21 persons)(4)

   118,833,035     9.673

Options and convertible bonds that are vested and exercisable within 60 days of March 7, 2014, held by Executive Board Members and Supervisory Board Members, collectively

   0     NA  

BlackRock, Inc.(5)

   NA     >5
    

Ordinary Shares

Beneficially Owned

 
Major Shareholders  Number   

% of

Outstanding

 

Dietmar Hopp, collectively(1)

   65,273,200     5.313

Hasso Plattner, Chairperson Supervisory Board, collectively(2)

   90,248,789     7.346

Joint heirs of Klaus Tschira, collectively (3)

   88,149,595     7.175

Executive Board Members as a group (6 persons)

   45,309     0.004

Supervisory Board Members as a group (18 persons)

   90,262,818     7.347

Executive Board Members and Supervisory Board Members as a group (24 persons)(4)

   90,308,127     7.351
Options and convertible bonds that are vested and exercisable within 60 days of March 11, 2016, held by Executive Board Members and Supervisory Board Members, collectively   0     NA  

BlackRock, Inc.(5)

   NA     >5

 

(1)

Represents 65,273,200 ordinary shares beneficially owned by Dietmar Hopp, including 3,404,000 ordinary shares 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 61,869,200 ordinary shares owned by Dietmar Hopp Stiftung, GmbH. Mr. Hopp exercises voting and dispositive powers of the ordinary shares held by such entities. The foregoing information is based solely on a Schedule 13G filed by Dietmar Hopp and Dietmar Hopp Stiftung, GmbH on February 14, 2014.

 

(2)

Includes Hasso Plattner Förderstiftung GmbH and Hasso Plattner GmbH & Co. Beteiligungs-KG in which Hasso Plattner exercises sole voting and dispositive power.

(1) Represents 65,273,200 ordinary shares beneficially owned by Dietmar Hopp, including 3,404,000 ordinary shares 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 61,869,200 ordinary shares owned by Dietmar Hopp Stiftung, GmbH. Mr. Hopp exercises voting and dispositive powers of the ordinary shares held by such entities. The foregoing information is based solely on a Schedule 13G filed by Dietmar Hopp and Dietmar Hopp Stiftung, GmbH on February 15, 2016.

(3)

Includes Klaus Tschira Stiftung gGmbH and Dr. h. c. Tschira Beteiligungs GmbH & Co. KG in which Klaus Tschira exercises sole voting and dispositive power.

(2) Includes HP Vermögensverwaltungs GmbH & Co. KG in which Hasso Plattner exercises sole voting and dispositive power.

(4)

We believe each of the other members of the Supervisory Board and the Executive Board beneficially owns less than 1% of SAP AG’s ordinary shares as of March 7, 2014.

(3) Includes Klaus Tschira Stiftung gGmbH and Dr. h. c. Tschira Beteiligungs GmbH & Co. KG in which the joint heirs of Klaus Tschira exercise sole voting and dispositive power.

(5)

(4) We believe each of the other members of the Supervisory Board and the Executive Board beneficially owns less than 1% of SAP SE’s ordinary shares as of March 11, 2016.

(5)As required under German law, BlackRock, Inc. informed SAP that they own more than 5% of SAP’s outstanding ordinary shares. BlackRock, Inc. is not required to provide SAP with the number of shares owned and has not provided such information.

We at present have no knowledge about any arrangements, the operation of which may at a subsequent date result in a change in control of the company.

 

RELATED-PARTY TRANSACTIONS

For further information on related-party transactions see Note (30) to our Consolidated Financial Statements.

ITEM 8. FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

See “Item 18. Financial Statements” and pagesF-1 through F-105.F-73.

OTHER FINANCIAL INFORMATION

Legal Proceedings

We are subject to a variety of legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including claims and lawsuits involving businesses we have acquired.

In 2010, we recorded a provision of US$1.3 billion for the TomorrowNow litigation. When the trial judge set aside the 2010 verdict and offered Oracle a remittitur of US$272 million, we subsequently reduced the provisionRefer to

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US$272 million. Oracle did not accept the remittitur; rather, Oracle opted for a second trial. Prior to the second trial, the parties stipulated to a final judgment of US$306 million with each party reserving all appeal rights. Consequently, we increased the provision to US$306 million. Since then, both parties have filed their respective notice of appeal. On appeal, Oracle is seeking three forms of relief: (1) reinstatement of the November 2010 $1.3 billion verdict; (2) as a first alternative, a new trial at which Oracle may again seek hypothetical license damages (based in part on evidence of alleged saved development costs) plus SAP’s alleged infringer’s profits without any deduction of expenses (Oracle does not put a number on its claim for the requested new trial); and (3) as a second alternative, increase of the remittitur (alternative to new trial) to $408.7 million (vs. the $272 million Oracle had previously rejected). SAP has dismissed its cross-appeal. A hearing on Oracle’s appeal is scheduled for May 13, 2014.

In April 2007, Versata Software, Inc. (Versata) instituted patent infringement litigation in the United States District Court for the Eastern District of Texas against SAP. Trial in the litigation ultimately resulted in an infringement determination and past damages verdict of approximately US$390 million. The judgment also resulted in an injunction against SAP that Versata has since abandoned. During the pendency of the appeals process, SAP challenged at the U.S. Patent and Trademark Office (PTO) the patentability of the infringed claims of Versata patent and prevailed in invalidating those claims. That PTO decision is now being appealed by Versata. The litigation regarding damages has returned to the trial court where SAP has sought dismissal of the judgment based on the PTO decision, and alternatively has sought to stay the litigation pending the outcome of appeal regarding the PTO decision. Versata has opposed SAP’s requests in the trial court and has sought an order requiring payment of the judgment, which SAP has opposed.

Although the outcome of such proceedings and claims cannot be predicted with certainty,

management does not believe that the outcome of all other matters currently pending against us has had or will have a material adverse effect on our business, financial position, profit or cash flows. Any litigation, however, involves potential risk and potentially significant litigation costs, and therefore there can be no assurance that any litigation which is now pending or which may arise in the future will not have such a material adverse effect on our business, financial position, profit, cash flows or reputation.

See a detailed discussion of our legal proceedings in Note (23) to our Consolidated Financial Statements.Statements for a detailed discussion of our material legal proceedings.

Dividend Policy

For more information on dividend policy see the disclosure in “Item 3. Key Information Dividends”.

Significant Changes

Not applicable.We are in the process of preparing the consolidation of intellectual property rights from hybris AG to SAP SE. For more information about this transfer, see Note (32).

The Supervisory Board of SAP SE appointed Stefan Ries and Steve Singh to the SAP Executive Board, with effect from April 1, 2016.

Stefan Ries will continue his role as Chief Human Resources Officer and also take on the role of SAP Labor Relations Director. Steve Singh will continue to lead the SAP Business Network Group.

The Global Managing Board will be dissolved on March 31, 2016.

ITEM 9. THE OFFER AND LISTING

GENERAL

Our ordinary shares are officially listed on the Frankfurt Stock Exchange, the Berlin Stock Exchange and the Stuttgart Stock Exchange. The principal trading market for the ordinary shares is Xetra, the electronic dealing platform of Deutsche Boerse AG.

ADRs representing SAP AGSE ordinary shares are listed on the New York Stock Exchange (NYSE) under the symbol “SAP,” and currently each ADR represents one ordinary share.

 

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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 for the ordinary shares on the Xetra trading System of the Frankfurt Stock Exchange together with the closing highs and lows of the DAX, and the high and low closing sales prices for the ADRs on the NYSE (information is provided by Reuters):

 

  Price per
Ordinary Share
in €
   DAX(1)
in points
   Price per ADR
in US$
   Price per
Ordinary
Share in 
   

DAX(1)

in points

   

Price per ADR

in US$

 
  High   Low   High   Low   High   Low   High   Low   High   Low   High   Low 

Annual Highs and Lows

                              

2009

   35.26     25.00     6,011.55     3,666.41     52.37     31.69  

2010

   38.40     31.12     7,077.99     5,434.34     54.08     41.59  

2011

   45.90     34.26     7,527.64     5,072.33     68.31     48.39     45.90     34.26     7,527.64     5,072.33     68.31     48.39  

2012

   61.43     41.45     7,672.10     5,969.40     81.21     53.25     61.43     41.45     7,672.10     5,969.40     81.21     53.25  

2013

   64.80     52.20     9,589.39     7,459.96     87.14     70.27     64.80     52.20     9,589.39     7,459.96     87.14     70.27  

2014

   62.55     50.90     10,087.12     8,571.95     85.45     64.14  

2015

   74.85     54.53     12,374.73     9,427.64     80.91     63.37  

Quarterly Highs and Lows

                              

2012

            

2014

                  

First Quarter

   54.51     41.45     7,157.82     6,017.23     72.31     53.25     62.55     54.31     9,742.96     9,017.79     85.45     74.87  

Second Quarter

   53.21     44.16     7,056.65     5,969.40     70.97     55.24     59.15     54.41     10,028.80     9,173.71     81.77     74.21  

Third Quarter

   56.69     44.71     7,451.62     6,387.57     72.90     55.50     61.12     56.53     10,029.43     9,009.32     82.30     72.16  

Fourth Quarter

   61.43     52.86     7,672.10     6,950.53     81.21     69.05     58.73     50.90     10,087.12   �� 8,571.95     71.70     64.14  

2013

            

2015

                  

First Quarter

   64.80     57.82     8,058.37     7,581.18     84.58     77.38     67.60     54.53     12,167.72     9,469.66     73.53     63.56  

Second Quarter

   64.05     54.42     8,530.89     7,459.96     83.11     71.45     70.72     62.60     12,374.73     10,944.97     77.27     70.23  

Third Quarter

   57.80     53.42     8,694.18     7,806.00     76.94     70.27     68.77     55.89     11,735.72     9,427.64     74.60     63.37  

Fourth Quarter

   62.31     52.20     9,589.39     8,516.69     87.14     70.94     74.85     57.12     11,382.23     9,509.25     80.91     64.16  

Monthly Highs and Lows

                              

2013

            

2015

                  

July

   57.80     54.50     8,379.11     7,806.00     76.00     70.77     68.77     61.29     11,735.72     10,676.78     74.60     68.26  

August

   57.80     55.82     8,438.12     8,103.15     76.94     73.82     66.79     56.90     11,636.30     9,648.43     73.08     65.47  

September

   56.11     53.42     8,694.18     8,180.71     75.29     70.27     59.83     55.89     10,317.84     9,427.64     67.07     63.37  

October

   57.89     52.20     9,033.92     8,516.69     79.79     70.94     71.88     57.12     10,850.14     9,509.25     78.71     64.16  

November

   61.60     57.60     9,405.30     9,007.83     83.38     77.78     74.85     72.33     11,382.23     10,708.40     80.22     77.96  

December

   62.31     58.54     9,589.39     9,006.46     87.14     80.91     74.75     69.40     11,261.24     10,139.34     80.91     77.21  

2014

            

2016

                  

January

   62.55     56.47     9,742.96     9,306.48     85.45     76.42     74.25     70.58     10,310.10     9,391.64     80.36     76.90  

February

   58.52     55.28     9,708.94     9,116.32     80.29     75.03     73.19     64.90     9,757.88     8,752.87     79.70     73.68  

March (through March 7, 2014)

   57.65     56.37     9,589.15     9,350.75     79.27     77.74  

March (through March 11, 2016)

   71.17     68.62     9,831.13     9,498.15     78.65     76.34  

 

(1) The DAX is a continuously updated, capital-weighted performance index of 30 German blue chip companies. In principle, the shares included in the DAX are selected on the basis of their stock exchange turnover and the issuer’s free-float market capitalization. Adjustments to the DAX are made for capital changes, subscription rights and dividends.

(1)

The DAX is a continuously updated, capital-weighted performance index of 30 German blue chip companies. In principle, the shares included in the DAX are selected on the basis of their stock exchange turnover and the issuer’s free-float market capitalization. Adjustments to the DAX are made for capital changes, subscription rights and dividends.

On March 7, 2014,11, 2016, the closing sales price per ordinary share on the Frankfurt Stock Exchange (Xetra Trading System) was €56.3769.97 and the closing sales price per ADR on the NYSE was US $78.19,$78.65, as reported by Reuters.

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ITEM 10. ADDITIONAL INFORMATION

ARTICLES OF INCORPORATION

Organization and Register

SAP AGSE is a stock corporationEuropean Company (Societas Europaea, or “SE”) organized in the Federal Republic of Germany under German and European law, including Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (the “SE Regulation”), the German Act on the Implementation of Council Regulation No. 2157/2001 of October 8, 2001 on the Statute for a European Company (Gesetz zur Ausführung der Verordnung (EG) Nr. 2157/2001 des Rates vom 8. Oktober 2001 über das Statut der Europäischen Gesellschaft (SE) – SE-Ausführungsgesetz; “SE-AG”) of December 22, 2004, and the German Stock Corporation Act (Aktiengesetz). SAP AGSE is registered in the Commercial Register (Handelsregister) at the Lower Court of Mannheim, Germany, under the entry number “HRB 350269.719915.” SAP AGSE publishes its official notices in the Federal Gazette (www.bundesanzeiger.de).

Objects and Purposes

SAP’s Articles of Incorporation state that our objects involve, directly or indirectly, the development, production and marketing of products and the provision of services in the field of information technology, including:

developing and marketing integrated product and service solutions for e-commerce;

developing software for information technology and the licensing of its use to others;

organization and deployment consulting, as well as user training, for e-commerce and other software solutions;

selling, leasing, renting and arranging the procurement and provision of all other forms of use of information technology systems and related equipment; and

making capital investments in enterprises active in the field of information technology to promote the opening and advancement of international markets in the field of information technology.

developing and marketing integrated product and service solutions for e-commerce;

developing software for information technology and the licensing of its use to others;

organization and deployment consulting, as well as user training, for e-commerce and other software solutions;

selling, leasing, renting and arranging the procurement and provision of all other forms of use of information technology systems and related equipment; and

making capital investments in enterprises active in the field of information technology to promote the opening and advancement of international markets in the field of information technology.

SAP is authorized to act in all the business areas listed above and to delegate such activities to affiliated entities within the meaning of the German Stock Corporation Act; in particular SAP is authorized to delegate its business in whole or in part to such entities. SAP AGSE is authorized to establish branch offices in Germany and other countries, as well as to form, acquire or invest in other companies of the same or related kind and to enter

into collaboration and joint venture agreements. SAP is further authorized to invest in

enterprises of all kinds principally for investment purposes. SAP is authorized to dispose of investments, to consolidate the management of enterprises in which it participates, to enter into affiliation agreements with such entities, or to limit its activities to manage its shareholdings.

CORPORATE GOVERNANCE

Introduction

SAP AG,SE, as a German stock corporation,European Company with a two-tier board system, is governed by three separate bodies: the Supervisory Board, the Executive Board and the Annual General Meeting of Shareholders. Their rules are defined by European and German law, by the Agreement on the Involvement of Employees in SAP SE (“Employee Involvement Agreement”, or “EIA”), by the German Corporate Governance Code and by SAP’s Articles of Incorporation (Satzung) and are summarized below. See “Item 16G. Differences in Corporate Governance Practices” for additional information on our corporate governance practices.

The Supervisory Board

The Supervisory Board appoints and removes the members of the Executive Board and oversees and advises the management of the corporation. At regular intervals it meets to discuss current business as well as business development and planning. The SAP Executive Board must consult with the Supervisory Board concerning the corporate strategy, which is developed by the Executive Board. The Supervisory Board maintains a listTypes of transactions for which the Executive Board requires the Supervisory Board’s consent are listed in the Articles of Incorporation; in addition, the Supervisory Board has specified further types of transactions that require its consent. Accordingly, the Supervisory Board must also approve the annual budget of SAP upon submission by the Executive Board and certain subsequent deviations from the approved budget. The Supervisory Board is also responsible for representing SAP AGSE in transactions between SAP AGSE and Executive Board members.

The Supervisory Board, based on a recommendation by its Audit Committee, provides its proposal for the election of the external independent auditor to the Annual General Meeting of Shareholders. The Supervisory Board is also responsible for monitoring the auditor’s independence, a task it has delegated to its audit committee.

The German Co-determination ActPursuant to Article 40 (3) sentence 1 of 1976 (Mitbestimmungsgesetz) requiresthe SE Regulation, the number of members of the supervisory board and the rules for determining this number are to be laid down in the articles of incorporation. Furthermore, pursuant to Section 17 (1) SE-AG, the size of supervisory boards of corporations with more than 2,000 employees to consist of an equal number of representatives of the shareholders andcompanies which, like SAP SE, have a capital stock exceeding 10,000,000, is limited

 

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representatives of the employees. The minimum total number of supervisory board members, and thus the minimum number of shareholder representatives and employee representatives, is legally fixed and depends onto 21 members. Moreover, the number of employees employedmembers must be divisible by three. In line with these provisions as well as the corporation and its German subsidiaries. OurEIA, the Articles of Incorporation of SAP SE provide that the Supervisory Board currentlyshall be composed of 18 members. Furthermore, it is provided in the EIA that the shareholders of SAP SE have the possibility to reduce the size of the Supervisory Board in the future (i.e. at the earliest in the Annual General Meeting of Shareholders in 2018, with effect from the Annual General Meeting of Shareholders in 2019) to 12 members.

The current Supervisory Board of SAP SE consists of sixteeneighteen members, of which eightnine members have beenwere elected by SAP AG’sSE’s shareholders at the Annual General Meeting of Shareholders in 2014, and eightnine members which have been electedwere appointed by the employeesSAP SE Works Council Europe in 2015. The term of office of all eighteen members will end upon the conclusion of the GermanAnnual General Meeting of Shareholders in 2015.

The procedure for the appointment of the employees’ representatives on the Supervisory Board of SAP entities (i.e. entitiesSE is governed by the EIA. In accordance with the EIA, the nine seats on the first Supervisory Board reserved for employees’ representatives were allocated as follows: the first six seats were allocated to Germany, the seventh seat was allocated to France, the eighth seat was also allocated to Germany, and the ninth seat was allocated to a European country not represented by the first eight seats, as determined by the SAP SE Works Council Europe. The employees’ representatives for the first six seats allocated to Germany were determined by direct vote by all SAP employees with their principal place of employment in Germany. The employees’ representative for the seventh seat allocated to France was determined according to the applicable provisions of French law on the election or appointment of employees’ representatives on a supervisory board. With regard to the eighth and ninth seat, members of the SAP Group having their registered office in Germany).SE Works Council Europe from Germany and Slovakia were appointed by the SE Works Council as employees’ representatives.

Any Supervisory Board member elected by the shareholders at the Annual General Meeting of Shareholders may be removed by three-quarters of the votes cast at the Annual General Meeting of Shareholders. Any Supervisory Board member elected byappointed in accordance with the employeesEIA may be removed by three quartersthe SAP SE Works Council Europe upon application by the body that nominated the respective employees’ representative for appointment by the SE Works Council or, in case the employees’ representative was directly elected, the majority of the votes cast by the employees of the German SAP entities.entitled to vote.

The Supervisory Board elects a chairperson and aone or two deputy chairpersonchairperson(s) among its members by a majority of the votes cast. Only a shareholders’

representative may be elected as chairperson of the Supervisory Board. When electing the chairperson of the Supervisory Board, the oldest member in terms of age of the shareholders’ representatives on the Supervisory Board will chair the meeting and, in the event of a tied vote, will have the casting vote.

Unless otherwise mandatorily prescribed by law or the Articles of Incorporation, resolutions of the Supervisory Board are adopted by simple majority of the votes cast. In the event of a tie, the vote of its members. If such majority is not reached on the first vote, the chairperson will be chosen solely byand, in the members elected byevent that the shareholders andchairperson does not participate in passing the resolution, the vote of the deputy chairperson, provided that he or she is a shareholders’ representative, will be chosen solely by the members elected by the employees. Unless otherwise provided by law, the Supervisory Board acts by simple majority. In the case of any deadlock the chairperson has the deciding vote.decisive (casting vote).

The members of the Supervisory Board cannot be elected or appointed, as the case may be, for a term longer than approximately fivesix years. TheOther than for the employees’ representatives on the first Supervisory Board of SAP SE, the term expires at the close of the Annual General Meeting of Shareholders giving its formal approval of the acts of the Supervisory Board and the Executive Board infor the fourth fiscal year following the year in which the Supervisory Board was elected unless the Annual General Meeting of Shareholders specifies a shorter term of office when electing individual members of the Supervisory Board or the entire Supervisory Board.members commenced. Re-election is possible. Our Supervisory Board normally meets four times a year. The compensation of the members of the Supervisory Board is set in the Articles of Incorporation.

As stipulated in the German Corporate Governance Code (GCGC), an adequate number of our Supervisory Board members are independent. To be considered for appointment to the Supervisory Board and for as long as they serve, members must comply with certain criteria

concerning independence, conflicts of interest and multiple memberships of management, supervisory and other governing bodies. They must be loyal to SAP in their conduct and must not accept any position in companies that are in competition with SAP. Members are subject to insider trading prohibitions and the respective directors’ dealing rules of the German Securities Trading Act. A member of the Supervisory Board may not vote on matters relating to certain contractual agreements between such member and SAP AG.SE. Further, as the compensation of the Supervisory Board members is set in the Articles of Incorporation, Supervisory Board members are unable to vote on their own compensation, with the exception that they are able to exercise voting rights in a General Meeting of Shareholders in connection with a resolution amending the Articles of Incorporation.

The Supervisory Board may appoint committees from among its members and may, to the extent permitted by law, entrust such committees with the authority to make decisions on behalf of the Supervisory Board. Currently the Supervisory Board maintains the following committees:

The Audit Committee

The focus of the Audit Committee (Prüfungsausschuss) is the oversight of SAP’s external financial reporting as well as SAP’s risk management, internal controls (including internal controls over the effectiveness of the financial reporting process), corporate audit and compliance matters. According to German Law SAP’s Audit Committee includes at least one independent member with specialist expertise in the fields of financial reporting or auditing. Among the tasks of the Audit Committee are the discussion of SAP’s quarterly and year end financial reporting prepared under German and U.S. regulations, including this report. The Audit Committee proposes the appointment of the external independent auditor to the Supervisory Board, determines focus audit areas, discusses critical accounting policies and estimates with and reviews the audit reports issued and audit issues identified by the auditor. The audit committee also negotiates the audit fees with the auditor and monitors the auditor’s independence and quality. SAP’s Corporate Audit, SAP’s GlobalOffice of Legal Compliance Officeand Integrity and SAP’s Risk Management Office report upon request or at the occurrence of certain findings, but in any case at least once a year (Global(Office of Legal Compliance Officeand Integrity and Risk Management Office) or twice a year (Corporate Audit), directly to the Audit Committee.

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The Audit Committee has established procedures regarding the prior approval of all audit and non-audit services provided by our external independent auditor. See “Item 16C. Principal Accountant Fees and Services” for details. Furthermore the Audit Committee monitors the effectiveness of our internal risk management and other monitoring processes that are or need to be established.

The Supervisory Board has determined Erhard Schipporeit to be an audit committee financial expert as defined by the regulations of the SEC issued under Section 407 of the Sarbanes-Oxley Act as well as an independent financial expert as defined by the German Stock Corporation Act. See “Item 16A. Audit Committee Financial Expert” for details. He is also the chairperson of the Audit Committee.

The General and Compensation Committee

The General and Compensation Committee (Präsidial- und Personalausschuss) coordinates the work of the Supervisory Board, prepares its meetings and deals with corporate governance issues. In addition, it carries out the preparatory work necessary for the personnel decisions made by the Supervisory Board, notably those concerning compensation for the Executive Board members and the conclusion, amendment and termination of the Executive Board members’ contracts of appointment.

The German Stock Corporation Act prohibits the Compensation Committee from deciding on the

compensation of the Executive Board members on behalf of the Supervisory Board and requires that such decision is made by the entire Supervisory Board. This Act also provides the General Meeting of Shareholders with the right to vote on the system for the compensation of Executive Board members, such vote, however, not being legally binding for the Supervisory Board.

The Finance and Investment Committee

The Finance and Investment Committee (Finanz- und Investitionsausschuss) addresses general financing issues. Furthermore, it regularly discusses acquisitions of intellectual property and companies, venture capital investments and other investments with the Executive Board and reports to the Supervisory Board on such investments. It

is also responsible for the approval of such investments if the individual investment amount exceeds certain specified limits.

The Mediation Committee

Required by the German Co-determination Act of 1976 (Mitbestimmungsgesetz), the Mediation Committee (Vermittlungsausschuss) convenes only if the two-thirds majority required for appointing/revoking the appointment of Executive Board members is not attained. This committee has never held a meeting in SAP AG’s history.

The Technology and Strategy Committee

The Technology and Strategy Committee (Technologie- und(Technologie-und Strategieausschuss) monitors technology transactions and provides the Supervisory Board with in-depth technical advice.

The Nomination Committee

The Nomination Committee (Nominierungsausschuss) is exclusively composed of shareholder representatives and is responsible for identifying suitable candidates for membership of the Supervisory Board for recommendation to the Annual General Meeting of Shareholders.

The Special Committee

The Special Committee (Sonderausschuss) is tasked with coordinating and managing the Supervisory Board’s external legal advisors concerned with the investigation and analysisdeliberates on matters arising out of the facts in connection with the legal action brought by Oracle Corporation.substantial exceptional risks, such as major litigations.

The People and Organization Committee

The People and Organization Committee (Ausschuss für Mitarbeiter- und Organisationsangelegenheiten) deliberates and advises the Executive and Supervisory Board on key personnel matters and major organizational changes below the Executive Board and Global Managing Board level as well as equal opportunities for women at SAP.

The duties procedures and committeesprocedures of the Supervisory Board and its committees are specified in their respective

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bylaws, rules of procedure, if any, which reflect the requirements of European and German law, including the SE Regulation and the German Stock Corporation Act, the Articles of Incorporation and the recommendations of the GCGC.

According to the provisions of the Sarbanes-Oxley Act, SAP does not grant loans to the members of the Executive Board or the Supervisory Board.

The Executive Board

The Executive Board manages the Company’s business, is responsible for preparing its strategy and represents it in dealings with third parties. The Executive Board reports regularly to the Supervisory Board about SAP operations and business strategies and prepares special reports upon request. A person may not serve on the Executive Board and on the Supervisory Board at the same time.

The Executive Board and the Supervisory Board must cooperate closely for the benefit of the Company. Without being asked, theThe Executive Board mustis required to provide to the Supervisory Board regular, prompt and comprehensive information about all of the essential issues affecting the SAP Group’s business progress and its potential business risks. Furthermore, the Executive Board must maintain regular contact with the chairperson of the Supervisory Board and vice versa. The Executive Board must inform the chairperson of the Supervisory Board promptly about exceptional events that are of significance to SAP’s business. The Supervisory Board chairperson must inform the Supervisory Board accordingly and shall, if required, convene an extraordinary meeting of the Supervisory Board.

Pursuant to the Articles of Incorporation, the Executive Board must consist of at least two members. SAP AG’sSE’s Executive Board is currently comprised of fivesix members. Any two members of the Executive Board jointly or one member of the Executive Board and the holder of a special power of attorney (Prokurist) jointly may legally represent SAP AG.SE. The Supervisory Board appoints each member of the Executive Board for a maximum term of five years, with the possibility of re-appointment. Under certain circumstances, a member of the Executive Board may be removed by the Supervisory Board prior to the expiration of that member’s term. A member of the Executive Board may not vote on matters relating to certain contractual agreements between such member and SAP AG,SE, and may be liable to SAP AGSE if such member has a material interest in any contractual agreement between SAP and a third party which

was not previously disclosed to and approved by the Supervisory Board. Further, as the compensation of the Executive Board members is set by the Supervisory Board, Executive Board members are unable to vote on their own compensation, with the exception that they are able to exercise voting rights in a General Meeting of Shareholders resolving a non-binding vote on the system for the compensation of Executive Board members.

Under German law SAP AG’sSE’s Supervisory Board members and Executive Board members have a duty of loyalty and care towards SAP AG.SE. They must exercise the standard of care of a prudent and diligent businessman and bear the burden of proving they did so if their actions

are contested. Both bodies must consider the interest of SAP AGSE shareholders and our employees and, to some extent, the common good. Those who violate their duties may be held jointly and severally liable for any resulting damages, unless they acted pursuant to a lawful resolution of the Annual General Meeting of Shareholders.

SAP has implemented a Code of Business Conduct for employees (see “Item 16B. Code of Ethics” for details). The employee code is equally applicable to managers and members of the Executive Board. Its rules are observed as well by members of the Supervisory board as applicable.

Under German law the Executive Board of SAP AGSE has to assess all major risks for the SAP Group. In addition, all measures taken by management to reduce and handle the risks have to be documented. Therefore, SAP’s management has adopted suitable measures such as implementing an enterprise-wide risk monitoring system to ensure that adverse developments endangering the corporate standing are recognized at a reasonably early point in time.

The GlobalOffice of Legal Compliance Office, an extension of SAP’s Global Legal Department,and Integrity was created by the SAP Executive Board in 2006 to oversee and coordinate legal and regulatory policy compliance at SAP. Effective March 1, 2007, the Company appointed aThe Chief Global Compliance Officer whoheading the Office of Legal Compliance and Integrity directly reports to the General Counsel,CFO of SAP SE and also has direct communication channels and reporting obligations to the Executive Board and the Audit Committee of the Supervisory Board. The GlobalOffice of Legal Compliance Officeand Integrity manages a network of more than 100 local subsidiary Compliance Officers who act as the point of contact for local questions or issues under the SAP Code of Business Conduct for employees. The GlobalOffice of Legal Compliance

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Office and Integrity provides training and communication to SAP employees to raise awareness and understanding of legal and regulatory compliance policies. Employee help lines are also supported in each region where questions can be raised or questionable conduct can be reported without fear of retaliation.

Pursuant to Sec. 289a of the German Commercial Code (Handelsgesetzbuch) the Executive Board of publicly listed companies like SAP AG are required to issue a corporate governance statement (Erklärung zur Unternehmensführung) every year together with its annual financial statements. Companies are free to include the corporate governance statement in their management report or publish the statement on their website. SAP has chosen to publish the statement on its website under (www.sap.com/corporate-en/investors/governance/index.epx). As stipulated by law the statement comprises the declaration of implementation with the recommendations of the GCGC pursuant to Sec. 161 of the German Stock Corporation Act, relevant disclosures of the company’s corporate governance practices such as ethical, work and welfare standards, and a description of the Executive Board and Supervisory Board’s rules of procedure as well as information on the composition and rules of procedure of their sub-committees.

The Global Managing Board

In May 2012, SAP created a Global Managing Board in addition to the SAP Executive Board, which retains ultimate responsibility for overseeing and deciding on the activities of the company. The Global Managing Board allows SAP to appoint a broader range of global leaders to help steer the organization. The Global Managing Board has advisory and decision-supporting functions for the Executive Board and comprises all Executive Board members as well as Robert Enslin, Bernd LeukertHelen Arnold, Quentin Clark, Stefan Ries and Luka Mucic.Steve Singh.

The Annual General Meeting of Shareholders

Shareholders of the Company exercise their voting rights at shareholders’ meetings. The Executive Board calls the Annual General Meeting of Shareholders, which must take place within the first eightsix months of each fiscal year. The Supervisory Board or the Executive Board may call an extraordinary meeting of the shareholders if the interests of the stock corporation so require.

Additionally, shareholders of SAP AGSE holding in the aggregate a minimum of 5% of SAP AG’sSE’s issued share capital may call an extraordinary meeting of the shareholders. Shareholders as of the record date are entitled to attend and participate in shareholders’ meetings if they have provided timely notice of their intention to attend the meeting.

At the Annual General Meeting of Shareholders, the shareholders are asked, among other things, to formally approve the actions taken by the Executive Board and the Supervisory Board in the preceding fiscal year, to approve the appropriation of the corporation’s distributable profits and to appoint an external independent auditor. Shareholder representatives of the Supervisory Board are generally elected at the Annual General Meeting of Shareholders for a term of approximately five years. Shareholders may also be asked to grant authorization to repurchase treasury shares, to resolve on measures to raise or reduce the capital of the Company or to ratify amendments of our Articles of Incorporation. The Annual General Meeting of Shareholders can make management decisions only if requested to do so by the Executive Board.

CHANGE IN CONTROL

There are no provisions in the Articles of Incorporation of SAP AGSE that would have an effect of delaying, deferring or preventing a change in control of SAP AGSE and that would only operate with respect to a merger, acquisition or corporate restructuring involving it or any of its subsidiaries.

According to the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz) a bidder seeking control of a company with its corporate seat in Germany or another state of the European Economic Area (EEA) and its shares being traded on an EEA stock exchange must publish an advance notice of its decision to make a tender offer, submit an offer statement to the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) for review, and obtain certification from a qualified financial institution that adequate financing is in place to complete the offer. The offer statement must be published upon approval by the Federal Financial Supervisory Authority or expiry of a certain time period without such publication being prohibited by the Federal Financial Supervisory

Authority. Once a shareholder has acquired shares representing at least 30% of the voting rights in

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an EEA-listed company, it must make an offer for all remaining shares. The Securities Acquisition and Takeover Act requires the executive board of the target company to refrain from taking any measures that may frustrate the success of the takeover offer. However, the target executive board is permitted to take any action that a prudent and diligent management of a company that is not the target of a takeover bid would also take. Moreover, the target executive board may search for other bidders and, with the prior approval of the supervisory board, may take other defensive measures, provided that both boards act within the parameters of their general authority under the German Stock Corporation Act. An executive board may also adopt specific defensive measures if such measures have been approved by the supervisory board and were specifically authorized by the general shareholders’ meeting no earlier than 18 months in advance of such measures by a resolution of at least 75% of the shares represented.

Under the European Takeover Directive of 2004 member states had to choose whether EU restrictions on defensive measures apply to companies that are registered in their territory. Germany decided to opt out and to retain its current restrictions on a board implementing defensive measures (as described above). As required by the Directive if a country decides to opt out the German Securities Acquisition and Takeover Act grants companies the option of voluntarily applying the European standard by a change of the Articles of Incorporation (opt-in). SAP AGSE has not made use of this option.

CHANGE IN SHARE CAPITAL

Under German law, the capital stock may be increased in consideration of contributions in cash or in kind, or by establishing authorized capital or contingent capital or by an increase of the company’s capital reserves. Authorized capital provides the Executive Board with the flexibility to issue new shares for a period of up to five years. The Executive Board must obtain the approval of the Supervisory Board before issuing new shares with regard to the authorized capital. Contingent capital allows the issuance of new shares for specified purposes, including stock option plans for Executive Board members or employees and the issuance of shares upon conversion of convertible bonds and exercise of stock options. By law, the Executive Board may only issue new shares with regard to the contingent capital for the specified purposes. Capital increases require

an approval by at least 75% of the share capital represented and by the simple majority of thevalid votes cast at the General Meeting of Shareholders in which the increase is proposed, and requires an amendment to the Articles of Incorporation.

The share capital may be reduced by an amendment to the Articles of Incorporation approved by at least 75% of the share capital represented and by the simple majority of thevalid votes cast at the General Meeting of Shareholders. In addition, the Executive Board of SAP AGSE is allowed to authorize a reduction of the company’s capital stock by canceling a defined number of repurchased treasury shares if this repurchasing and the subsequent reduction have already been approved by the General Meeting of Shareholders.

The Articles of Incorporation do not contain conditions regarding changes in the share capital that are more stringent than those provided by applicable European and German law.

RIGHTS ACCOMPANYING OUR SHARES

There are no limitations imposed by German law or the Articles of Incorporation of SAP AGSE on the rights to own securities, including the rights of non-residents or foreign holders to hold the ADRs or ordinary shares, to exercise voting rights or to receive dividends or other payments on such shares.

According to the German stock corporation law, the rights of shareholders cannot be amended without shareholders’ consent. The Articles of Incorporation do not provide more stringent conditions regarding changes of the rights of shareholders than those provided by applicable European and German law.

Voting Rights

Each ordinary SAP AGSE share represents one vote. Cumulative voting is not permitted under applicable European and German law. A corporation’s articles of incorporation may stipulate a majority necessary to pass a shareholders’ resolution differing from the majority provided by law, unless the law does not mandatorily requirerequires a certain majority. Section 21 (1) of SAP AG’sSE’s Articles of Incorporation provides that resolutions may be passed at the General Meeting of Shareholders by the majority as provided by law. This means that resolutions may be passed bywith a majority of 50% plus one vote of

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valid votes cast, (simple majority), unless a larger majority is prescribed by law or the law provides or requires a higher majority.Articles of Incorporation. SAP SE’s Articles of Incorporation as well as applicable European and German law requiresrequire that the following matters, among others, be approved by at least 75% of the share capital represented and by the simple majority of thevalid votes cast at the General Meeting of Shareholders in which the matter is proposed:

changing the corporate purpose of the company set out in the Articles of Incorporation;

capital increases and capital decreases;

excluding preemptive rights of shareholders to subscribe for new shares or for treasury shares;

dissolution;

a merger into, or a consolidation with, another company;

a transfer of all or virtually all of the assets;

changing the corporate purpose of the company set out in the articles of incorporation;

capital increases and capital decreases;

excluding preemptive rights of shareholders to subscribe for new shares or for treasury shares;

dissolution;

a merger into, or a consolidation with, another company;

a transfer of all or virtually all of the assets; and

a change of corporate form.

Section 21 (3) of SAP AG’s Articles of Incorporation provides that, if at an election no candidate receives a simple majority of votes during the first ballot in an election, a second, deciding ballot shall be conducted between the candidates who received the largest number of votes. If the second ballot is tied, the election shall be determined by drawing lots.

a change of corporate form, including re-conversion into a German stock corporation;

a transfer of the registered seat to another EU member state; and

any other amendment to the Articles of Incorporation (pursuant to section 21 (2) sentence 1 of the Articles of Incorporation). For any amendments of the Articles of Incorporation which require a simple majority for stock corporations established under German law, however, section 21 (2) sentence 2 of SAP SE’s Articles of Incorporation provides that the simple majority of the valid votes cast is sufficient if at least half of the subscribed capital is represented or, in the absence of such quorum, the majority prescribed by law (i.e. two thirds of the votes cast, pursuant to sec. 59 of the SE Regulation) is sufficient.

Dividend Rights

See “Item 3. Key Information – Dividends.”

Preemptive Rights

Shareholders have preemptive rights to subscribe (Bezugsrecht) for any issue of additional shares in proportion to their shareholdings in the issued capital. The preemptive rights may be excluded under certain circumstances by a shareholders’ resolution (approved by at least 75% of the share capital represented and by the simple majority of thevalid votes cast at the General Meeting of Shareholders) or by the Executive Board authorized by such shareholders’ resolutions and subject to the consent of the Supervisory Board.

Liquidation

If SAP AGSE were to be liquidated, any liquidation proceeds remaining after all of our liabilities were

paid would be distributed to our shareholders in proportion to their shareholdings.

Disclosure of Shareholdings

SAP AG’sSE’s Articles of Incorporation do not require shareholders to disclose their share holdings. The German Securities Trading Act (Wertpapierhandelsgesetz), however, requires holders of voting securities of SAP AGSE to notify SAP AGSE and the Federal Financial Supervisory Authority of the number orof shares they hold if that number reaches, exceeds or falls below specified thresholds. These thresholds are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of the corporation’s outstanding voting rights. In respect of certificates representing shares, the notification requirement shall apply exclusively to the holder of the certificates. In addition, the German Securities Trading Act also obliges anyone who holds, directly or indirectly, financial instruments that convey an unconditional entitlement to acquire under a legally binding agreement, shares in SAP AG,SE, to notify SAP AGSE and the Federal Financial Supervisory Authority if the thresholds mentioned above have been reached, exceeded or fallen

below, with the exception of the 3% threshold. This notification obligation also exists for the holder of a financial instrument which merely de facto enables its holder or a third party to acquire shares in SAP AG,SE, subject to the thresholds mentioned in the preceding sentence. In connection with this notification obligation positions in voting rights and other financial instruments have to be aggregated.

Exchange Controls and Other Limitations Affecting Security Holders

The euro is a fully convertible currency. At the present time, Germany does not restrict the export or import of capital, except for investments in certain areas in accordance with applicable resolutions adopted by the United Nations and the European Union. However, for statistical purposes only, every individual or corporation residing in Germany (“Resident”) must report to the German Central Bank (Deutsche Bundesbank), subject only to certain immaterial exceptions, any payment received from or made to an individual or a corporation residing outside of Germany(“Non-Resident”) if such payment exceeds €12,50012,500 (or the equivalent in a foreign currency). In addition, German Residents (except for individuals and certain financial institutions) must

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report any accounts payable to or receivable from Non-Residents if such payables or receivables, in the aggregate, exceed €55 million (or the equivalent in a foreign currency) at the end of any calendar month. Furthermore, companies resident in Germany with accounts payable to or receivable from Non-Residents in excess of €500500 million have to report any payables or receivables to/from Non-Residents arising from derivative instruments at the end of each calendar quarter. Residents are also required to report annually to the German Central Bank any shares or voting rights of 10% or more which they hold directly or indirectly in non-resident corporations with total assets of more than €33 million. Corporations residing in Germany with assets in excess of €33 million must report annually to the German Central Bank any shares or voting rights of 10% or more held directly or indirectly by aNon-Resident.

TAXATION

General

The following discussion is a summary of certain material German tax and U.S. federal income tax consequences of the acquisition, ownership and disposition of our ADRs or ordinary shares to a U.S. Holder. In general, a U.S. Holder (as hereinafter defined) is any beneficial owner of our ADRs or ordinary shares that (i) is a citizen or resident of the U.S. or a corporation organized under the laws of the U.S. or any political subdivision thereof, an estate whose income is subject to U.S. federal income tax regardless of its source or a trust, if a U.S. court can exercise primary supervision over its administration and one or more U.S. persons are authorized to control all substantial

decisions of the trust; (ii) is not a resident of Germany for purposes of the income tax treaty between the U.S. and Germany (Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and to certain other Taxes, as amended by the Protocol of June 1, 2006 and as published in the German Federal Law Gazette 2008 vol. II pp. 611/851; the “Treaty”); (iii) owns the ADRs or ordinary shares as capital assets; (iv) does not hold the ADRs or ordinary shares as part of the business property of a permanent establishment or a fixed base in Germany; and (v) is fully entitled to the benefits under the Treaty with respect to income and gain derived in connection with the ADRs or ordinary shares.

THE FOLLOWING IS NOT A COMPREHENSIVE DISCUSSION OF ALL GERMAN TAX AND U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT FOR U.S. HOLDERS OF OUR ADRs OR ORDINARY SHARES. THEREFORE, U.S. HOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE OVERALL GERMAN TAX AND U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR ADRs OR ORDINARY SHARES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE EFFECT OF ANY STATE, LOCAL OR OTHER FOREIGN OR DOMESTIC LAWS.

German Taxation

The summary set out below is based on German tax laws, interpretations thereof and applicable tax treaties to which Germany is a party and that are in force at the date of this report; it is subject to any changes in such authority occurring after that date, potentially with retroactive effect, that could result in German tax consequences different from those discussed below. This discussion is also based, in part, on representations of the Depositary and assumes that each obligation of the Deposit Agreement and any related agreements will be performed in accordance with its terms. For additional information on the Depository and the fees associated with SAP’s ADR program see “Item 12. Description of Securities Other Than Equity Securities – American Depository Shares.”

For purposes of applying German tax law and the applicable tax treaties to which Germany is a party, a holder of ADRs will generally be treated as owning the ordinary shares represented thereby.

German Taxation of Dividends

Under German income tax law, the full amount of dividends distributed by aan incorporated company is generally subject to German withholding tax at a

domestic rate of 25% plus a solidarity surtax of 5.5% thereon (effectively 1.375% of dividends before withholding tax), resulting in an aggregate withholding tax rate from dividends of 26.375%. Non-resident corporate shareholders will generally be entitled to a refund in the amount of two-fifths of the withholding tax (including solidarity surtax). This does not preclude a further reduction or refund of withholding tax, if any, available under a relevant tax treaty.

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Generally, for many non-resident shareholders the withholding tax rate is currently reduced under applicable income tax treaties. Rates and refund procedures may vary according to the applicable treaty. To reduce the withholding tax to the applicable treaty tax rate a non-resident shareholder must apply for a refund of withholding taxes paid. Claims for refund, if any, are made on a special German claim for refund form, which must be filed with the German Federal Tax Office (Bundeszentralamt für Steuern, D-53221 Bonn, Germany; http://www.bzst.de). The relevant forms can be obtained from the German Federal Tax Office or from German embassies and consulates. For details, such non-resident shareholders are urged to consult their own tax advisors. Special rules apply for the refund to U.S. Holders (we refer to the below section “Refund Procedures for U.S. Holders”).

Refund Procedures for U.S. Holders

Under the Treaty, a partial refund of the 25% withholding tax equal to 10% of the gross amount of the dividend and a full refund of the solidarity surtax can be obtained by a U.S. Holder. Thus, for each US$100 of gross dividends paid by SAP AGSE to a U.S. Holder, the dividends (which are dependent on the euro/dollar exchange rate at the time of payment) will be initially subject to a German withholding tax of US$26.375, of which US$11.375 may be refunded under the Treaty. As a result, a U.S. Holder effectively would receive a total dividend of US$85 (provided the euro/dollar exchange rate at the time of payment of the dividend is the same as at the time of refund, otherwise the effective dividend may be higher or lower). Further relief of German withholding tax under the Treaty may be available for corporate U.S. Holders owning at least 10% of the voting stock of SAP or U.S. Holders qualifying as pension fund within the meaning of the Treaty, subject to further requirements being met.

To claim the refund of amounts withheld in excess of the Treaty rate, a U.S. Holder must submit (either directly or, as described below, through the Data Medium Procedure participant) a claim for refund to the German tax authorities, with, in the case of a direct claim, the original bank voucher (or certified copy thereof) issued by the paying entity documenting the tax withheld, within four years from the end of the calendar year in which the dividend is received. Claims for refund are made on a

special German claim for refund form, which must be filed with the German Federal Tax Office (Bundeszentralamt für Steuern,D-53221 Bonn, Germany). The German claim for refund form may be obtained from the German tax authorities at the same address where applications are filed, from the Embassy of the Federal Republic of Germany, 2300 M Street4645 Reservoir Road NW,

Washington, DC 20037,20007, or can be downloaded from the homepage of the German Federal Tax Office (http://www.bzst.de).

U.S. Holders must also submit to the German tax authorities a certification of their U.S. residency status (IRS Form 6166). This certification can be obtained from the Internal Revenue Service by filing a request for certification (generally on an IRS Form 8802, which will 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 advisors regarding how to obtain an IRS Form 6166.

An IT-supported quick-refund procedure is available for dividends received (the “Data Medium Procedure – DMP”). If the U.S. Holder’s bank or broker elects to participate in the DMP, it will perform administrative functions necessary to claim the Treaty refund for the beneficiaries. The refund beneficiaries must confirm to the DMP participant that they meet the conditions of the Treaty provisions and that they authorize the DMP participant to file applications and receive notices and payments on their behalf. Further each refund beneficiary must confirm that (i) it is the beneficial owner of the dividends received; (ii) it is resident in the U.S. in the meaning of the Treaty; (iii) it does not have its domicile, residence or place of management in Germany; (iv) the dividends received do not form part of a permanent establishment or fixed base in Germany; and (v) it commits, due to its participation in the DMP, not to claim separately for refund.

The beneficiaries also must provide an IRS Form 6166 certification with the DMP participant. The DMP participant is required to keep these documents in its files and prepare and file a combined claim for refund with the German tax authorities by electronic media. The combined claim provides evidence of a U.S. Holder’s personal data including its U.S. Tax Identification Number.

The German tax authorities reserve the right to audit the entitlement to tax refunds for several years following their payment pursuant to the Treaty in individual cases. The DMP participant must assist with the audit by providing the necessary details or by forwarding the queries to the respective refund beneficiaries.

The German tax authorities will issue refunds denominated in euros. In the case of shares held through banks or brokers participating in the

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Depository, the refunds will be issued to the Depository, which will convert the refunds to dollars. The resulting amounts will be paid to banks or brokers for the account of the U.S. Holders.

German Taxation of Capital Gains

Under German income tax law, a capital gain derived from the sale or other disposition of ADRs or ordinary shares by a non-resident shareholder is subject to income tax in Germany only if such non-resident shareholder has held, directly or indirectly, ADRs or ordinary shares representing 1% or more of the registered share capital of a company at any time during the five-year period immediately preceding the sale or other disposition.

However, a U.S. Holder of ADRs or ordinary shares that qualifies for benefits under the Treaty is not subject to German income or corporate income tax on the capital gain derived from the sale or other disposition of ADRs or ordinary shares.

German Gift and Inheritance Tax

Generally, a transfer of ADRs or ordinary shares by a shareholder at death or by way of gift will be subject to German gift or inheritance tax, respectively, if (i) the decedent or donor, or the heir, donee or other transferee is resident in Germany at the time of the transfer, or with respect to German citizens who are not resident in Germany, if the decedent or donor, or the heir, donee or other transferee has not been continuously outside of Germany for a period of more than five years; (ii) the ADRs or ordinary shares are part of the business property of a permanent establishment or a fixed base in Germany; or (iii) the ADRs or ordinary shares subject to such transfer form part of a portfolio that represents 10% or more of the registered share capital of the Company and has been held, directly or indirectly, by the decedent or donor, respectively, at the time of the transfer, actually or constructively together with related parties.

However, the right of the German government to impose gift or inheritance tax on a non-resident shareholder may be limited by an applicable estate tax treaty. In the case of a U.S. Holder, a transfer of ADRs or ordinary shares by a U.S. Holder at death or by way of gift generally will not be subject to German gift or inheritance tax by

reason of the estate tax treaty between the U.S. and Germany (Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation with respect to Estate, Gift and Inheritance Taxes, German Federal Law Gazette 1982 vol. II page 847,846, as amended 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 as the decedent or donor, or the heir, donee or other transferee was not domiciled in Germany for purposes of the Estate Tax Treaty at the time the gift was made, or at the time of the decedent’s death, and the ADRs or ordinary shares were not held in connection with a permanent establishment or a fixed base in Germany. In general, the Estate Tax Treaty provides a credit against the U.S. federal gift or estate tax liability for the amount of gift or inheritance tax paid in Germany, subject to certain limitations, in a case where the ADRs or ordinary shares are subject to German gift or inheritance tax and U.S. federal gift or estate tax.

Other German Taxes

There are currently no German net worth, transfer, stamp or other similar taxes that would apply to a U.S. Holder on the acquisition, ownership, sale or other disposition of our ADRs or ordinary shares.

U.S. Taxation

The following discussion applies to U.S. Holders only if the ADRs and ordinary shares are held as capital assets for tax purposes. It does not address tax considerations applicable to U.S. Holders that may be subject to special tax rules, such as dealers or traders in securities, financial institutions, insurance companies, tax-exempt entities, regulated investment companies, U.S. Holders that hold ordinary shares or ADRs as a part of a straddle, conversion transaction or other arrangement involving more than one position, U.S. Holders that own (or are deemed for U.S. tax purposes to own) 10% or more of the total combined voting power of all classes of voting stock of SAP AG,SE, U.S. Holders that have a principal place of business or “tax home” outside the United States or U.S. Holders whose “functional currency” is not the dollar and U.S. Holders that hold ADRs or ordinary shares through partnerships or other pass-through entities.

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The summary set out below is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the Treaty and regulations, rulings and judicial decisions thereunder at the date of this report. Any such authority may be repealed, revoked or modified, potentially with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. No assurance can be given that the conclusions set out below would be sustained by a court if challenged by the IRS. The discussion below is based, in part, on representations of the Depositary, and assumes that each obligation in the Deposit Agreement and any related agreements will be performed in accordance with its terms.

For U.S. federal income tax purposes, a U.S. Holder of ADRs will be considered to own the ordinary shares represented thereby. Accordingly, unless the context otherwise requires, all references in this section to ordinary shares are deemed to refer likewise to ADRs representing an ownership interest in ordinary shares.

U.S. Taxation of Dividends

Subject to the discussion below under “Passive Foreign Investment Company Considerations”, distributions made by SAP AGSE with respect to ordinary shares (other than distributions in liquidation and certain distributions in redemption of stock), including the amount of German tax deemed to have been withheld in respect of such distributions, will generally be taxed to U.S. Holders as ordinary dividend income.

As discussed above, a U.S. Holder may obtain a refund of German withholding tax under the Treaty to the extent that the German withholding tax exceeds 15% of the dividend distributed. Thus, for each US$100 of gross dividends paid by SAP AGSE to a U.S. Holder, the dividends (which are dependent on the euro/dollar exchange rate at the time of payment) will be initially subject to German withholding tax of US$25 plus US$1.375 solidarity surtax, and the U.S. Holder will receive US$73.625. A U.S. Holder who obtains the Treaty refund will receive from the German tax authorities an additional amount in euro that would be equal to US$11.375. For U.S. tax purposes, such U.S. Holder will be considered to have received a total distribution of US$100, which will be deemed to have been subject to German withholding tax of US$15 (15% of US$100) resulting in the net receipt of US$85 (provided the euro/dollar

exchange rate at the time of payment of the dividend is the same as at the time of refund, otherwise the effective dividend may be higher or lower).

In the case of a distribution in euro, the amount of the distribution generally will equal the dollar value of the euro distributed (determined by reference to the spot currency exchange rate on the date of receipt of the distribution, or receipt by the Depositary in the case of a distribution on ADRs), regardless of whether the holder in fact converts the euro into dollars, and the U.S. Holder will not realize any separate foreign currency gain or loss (except to the extent that such gain or loss arises on the actual disposition of foreign currency received). However, a U.S. Holder may be required to recognize foreign currency gain or loss on the receipt of a refund in respect of German withholding tax to the extent the U.S. dollar value of the refund differs from the U.S. dollar equivalent of that amount on the date of receipt of the underlying dividend.

Dividends paid by SAP AGSE generally will constitute “portfolio income” for purposes of the limitations on the

use of passive activity losses (and, therefore, generally may not be offset by passive activity losses) and as “investment income” for purposes of the limitation on the deduction of investment interest expense. Dividends paid by SAP AGSE will not be eligible for the dividends received deduction generally allowed to U.S. corporations under Section 243 of the Code. Dividends paid by SAP AGSE to an individual are treated as “qualified dividends” subject to capital gains rates, i.e. at a maximum rate of 20%, if SAP AGSE was not in the prior year and, is not in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). Based on our audited financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income taxes with respect to our 20132015 tax year. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for the 20142016 tax year. With the enactment of The Health Care and Education Reconciliation Act of 2010, for tax years beginning after December 31, 2012, certain US holders who are individuals, trusts, or estates, must pay a Medicare tax at a rate of 3.8% on the lesser of (i) net investment income such as dividends and (ii) the excess of modified adjusted gross income over the statutory thresholds.

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U.S. Taxation of Capital Gains

In general, assuming that SAP AGSE at no time is a PFIC, upon a sale or exchange of ordinary shares to a person other than SAP AG,SE, a U.S. Holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale or exchange and the U.S. Holder’s adjusted tax basis in the ordinary shares. Such gain or loss will be a capital gain or loss and will be considered a long-term capital gain (taxable at a reduced rate for individuals) if the ordinary shares were held for more than one year. Capital gains may also be subject to the Medicare tax at a rate of 3.8%. The deductibility of capital losses is subject to significant limitations. Upon a sale of ordinary shares to SAP AG,SE, a U.S. Holder may recognize a capital gain or loss or, alternatively, may be considered to have received a distribution with respect to the ordinary shares, in each case depending upon the application to such sale of the rules of Section 302 of the Code.

Deposit and withdrawal of ordinary shares in exchange for ADRs by a U.S. Holder will not result in its realization of gain or loss for U.S. federal income tax purposes.

U.S. Information Reporting and Backup Withholding

Dividend payments made to holders and proceeds paid from the sale of shares or ADRs are subject to information reporting to the Internal Revenue Service and will be subject to backup withholding taxes (currently

(currently imposed at a 28% rate) unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number on a properly completed IRS Form W-9 and certifies that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of its non-U.S. status in connection with payments received within the United States or through a U.S.-related financial intermediary.

Backup withholding is not an additional tax and any amounts withheld as backup withholding may be credited against a holder’s U.S. federal income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.

Shareholders may be subject to other U.S. information reporting requirements and should consult their own tax advisors for application of these reporting requirements to their own facts and circumstances.

U.S. Foreign Tax Credit

In general, in computing its U.S. federal income tax liability, a U.S. Holder may elect for each taxable year to claim a deduction or, subject to the limitations on foreign tax credits generally, a credit for foreign income taxes paid or accrued by it. For U.S. foreign tax credit purposes, subject to the applicable limitations under the foreign tax credit rules, German tax withheld from dividends paid to a U.S. Holder, up to the 15% provided under the Treaty, will be eligible for credit against the U.S. Holder’s federal income tax liability or, if the U.S. Holder has elected to deduct such taxes, may be deducted in computing taxable income.

For U.S. foreign tax credit purposes, dividends paid by SAP AGSE generally will be treated as foreign-source income and as “passive category income” (or in the case of certain holders, as “general category income”). Gains or losses realized by a U.S. Holder on the sale or exchange of ordinary shares generally will be treated as U.S.-source gain or loss.

Passive Foreign Investment Company Considerations

Special and adverse U.S. tax rules apply to a U.S. Holder that holds an interest in a passive foreign investment company (PFIC). Based on current projections concerning the composition of SAP AG’sSE’s income and assets, SAP AGSE does not believe that it will be treated as a PFIC for its current or future taxable years. However,

because this conclusion is based on our current projections and expectations as to its future business activity, SAP AGSE can provide no assurance that it will not be treated as a PFIC in respect of its current or any future taxable years.

MATERIAL CONTRACTS

Ariba,Concur Technologies, Inc.

Pursuant to the Agreement and Plan of Merger dated as of May 22, 2012September 18, 2014 by and among Ariba,Concur Technologies, Inc., SAP America, Inc. and Angel Expansion Corporation, (the “Merger Agreement”)Congress Acquisition Corp., on

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October 1, 2012 December 4, 2014 SAP America acquired Ariba,Concur, the leading cloud-based business commerce network,leader in the multi-billion travel and expense management software industry, for US$45.00129.00 per share representingwhich represents an enterprise value of approximately US$4.38.3 billion. The acquisition combines Ariba’s successful buyer-seller collaboration network with SAP’s broad customer base and deep business process expertise to create new models for business-to-business collaboration in the cloud. The transaction was funded primarily from SAP’s free cash and a €2.4EUR 7.0 billion term loancredit facility.

The preceding description is a summary of the Merger Agreement and is qualified in its entirety by the Merger Agreement which is incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC by Ariba, Inc. on May 22, 2012.

See “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Disclosures”, for information on our credit facilities.

DOCUMENTS ON DISPLAY

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and furnish other information as a foreign private issuer with the SEC. These materials, including this report and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The SEC also maintains a Web site at www.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC. This report as well as some of the other information submitted by us to the SEC may be accessed through this Web site. In addition, information about us is available at our Web site:www.sap.com.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various financial risks, such as market risks, including changes in foreign currency exchange rates, interest rates and equity prices, as well as credit risk and liquidity risk. We manage these risks on a Group-wide basis. Selected derivatives are exclusively used for this purpose and not for speculation, which is defined as entering into derivative instruments without a corresponding underlying transaction. Financial

risk management is done centrally. See Notes (24), (25) and (26) to our Consolidated Financial Statements for our quantitative and qualitative disclosures about market risk.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

AMERICAN DEPOSITARY SHARES

Fees and Charges Payable by ADR Holders

Deutsche Bank Trust Company Americas is the Depositary for SAP AG’sSE’s ADR program. ADR holders may be required to pay the following charges:

 

taxes and other governmental charges;

taxes and other governmental charges;

registration fees as may be in effect from time to time for the registration of transfers of SAP ordinary shares on any applicable register to the Depositary or its nominee or the custodian or its nominee in connection with deposits or withdrawals under the Deposit Agreement;

applicable air courier, cable, telex and facsimile expenses of the Depositary;

expenses incurred by the Depositary in the conversion of foreign currency;

US $5.00 or less per 100 ADSs (or portion thereof) to the Depositary for the execution and delivery of ADRs (including in connection with the depositing of SAP ordinary shares or the exercising of rights) and the surrender of ADRs as well as for the distribution of other securities;

a maximum aggregate service fee of US $3.00 per 100 ADSs (or portion thereof) per calendar year to the Depositary for the services performed by the Depositary in administering the ADR program, including for processing any cash dividends and other cash distributions; and

US $5.00 or less per 100 ADSs (or portion thereof) to the Depositary for distribution of securities other than SAP ordinary shares or rights.

These fees may at any time and from time to time for the registration of transfers ofbe changed by agreement between SAP ordinary shares on any applicable register to the Depositary or its nominee or the custodian or its nominee in connection with deposits or withdrawals under the Deposit Agreement;

applicable air courier, cable, telex and facsimile expenses of the Depositary;

expenses incurred by the Depositary in the conversion of foreign currency;

$5.00 or less per 100 ADSs (or portion thereof) to the Depositary for the execution and delivery of ADRs (including in connection with the depositing of SAP ordinary shares or the exercising of rights)SE and the surrender of ADRs as well as for the distribution of other securities;

a maximum aggregate service fee of U.S. $2.00 per 100 ADSs (or portion thereof) per calendar year to the Depositary for the services performed by the Depositary in administering the ADR program, including for processing any cash dividends and other cash distributions; and

$5.00 or less per 100 ADSs (or portion thereof) to the Depositary for distribution of securities other than SAP ordinary shares or rights.

Depositary. These charges are described more fully in Section 5.9 of the Amended and Restated Deposit

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Agreement dated as of November 25, 2009, as amended by Amendment No. 1 dated as of March 18, 2016 and as may be further amended from time to time, incorporated by reference as ExhibitExhibits 4.1.1 and 4.1.2 to our 2010 Annual Report on Form 20-F filed with the Commission on March 18, 2011.this report.

Applicable service fees are either deducted from any cash dividends or other cash distributions or charged separately to holders in a manner determined by the Depositary, depending on whether ADSs are registered in the name of investors (whether certificated or in book-entry form) or held in brokerage and custodian accounts (via DTC). In the case of distributions of securities other

than SAP ordinary shares or rights, the Depositary charges the applicable ADS record date holder concurrent with the distribution. In the case of ADSs registered in the name of the investor, whether certificated or in book entry form, the Depositary sends invoices to the applicable record date ADS holders. For ADSs held in brokerage and custodian accounts via DTC, the Depositary may, if permitted by the settlement systems provided by DTC, collect the fees through those settlement systems from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in such case may in turn charge their clients’ accounts the amount of the service fees paid to the Depositary.

In the event of a refusal to pay applicable fees, the Depositary may refuse the requested services until payment is received or may set off the amount of the service from any distribution to be made to the ADR holder, all in accordance with the Deposit Agreement.

If any taxes or other governmental charges are payable by the holders and/or beneficial owners of ADSs to the Depositary, the Depositary, the custodian or SAP may withhold or deduct from any distributions made in respect of the deposited SAP ordinary share and may sell for the account of the holder and/or beneficial owner any or all of the deposited ordinary shares and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, with the holder and the beneficial owner thereof remaining fully liable for any deficiency.

Fees and Other Payments Payable by the Depositary to SAP

TheIn connection with the ADR program, the Depositary has agreed to make certain payments to SAP as reimbursement for expenses incurred by SAP in connection with itsand waive certain costs of providing ADR administrative and reporting services, including reporting of ADR program activity, distribution of information to investors, managing the ADR program, including ADR processing activities and in support of SAP’s ongoingcorporate actions, ADR broker desk services and ADR investor relations activities related to the ADR program.services, including production of investor targeting, peer analysis, shareholder identification reports and market perception studies. For the year ended December 31, 2013,period beginning November 25, 2014 and ending November 24, 2015, the Depositary has made direct and indirect payments to SAP in an aggregate amount of US $2,662,202 for investor relations activities$1,287,940.78 related to the ADR program, includingprogram. In 2015, the productionDepositary agreed to reimburse up to US $25,000 in legal fees associated with the cost of annual reports and Form 20-F filings, 2013 NYSE listing fees, road shows, productionrenewal of investor targeting, peer analysis, shareholder identification reports and perception studies, postage for mailing annual and interim reports and other communications tothe ADR holders and participation in retail investor activities, broker conferences, SAP sponsored analyst events and capital markets days.program.

 

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures of SAP that are designed to ensure that information required to be disclosed by SAP in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by SAP in the reports that it files or submits under the Exchange Act is accumulated and communicated to SAP management, including SAP’s principal executive and financial officers (i.e. SAP’s co-chiefchief executive officers (Co-CEOs)officer (CEO) and chief financial officer (CFO)), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. SAP’s management evaluated, with the participation of SAP’s Co-CEOsCEO and CFO the effectiveness of SAP’s disclosure controls and procedures as of December 31, 2013.2015. The evaluation was led by SAP’s Global Governance Risk & Compliance function, including dedicated “SOX Champions” in all of SAP’s major entities and business units with the participation of process owners, SAP’s key corporate senior management, senior management of each business group, and as indicated above under the supervision of SAP’s Co-CEOsCEO and CFO. Based on the foregoing, SAP’s management, including SAP’s Co-CEOsCEO and CFO, concluded that as of December  31, 2013,2015, SAP’s disclosure controls and procedures were effective.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of SAP is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. SAP’s internal control over financial reporting is a process designed under the supervision of SAP’s Co-CEOsCEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in

accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

SAP’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013.2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control – Integrated Framework.Framework (2013).

Based on the assessment under these criteria, SAP management has concluded that, as of December 31, 2013,2015, the Company’s internal control over financial reporting was effective.

KPMG, our independent registered public accounting firm, has issued its attestation report on the effectiveness of SAP’s internal control over financial reporting, which is included in Item 18. Financial Statements, “Report of Independent Registered Public Accounting Firm.”

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM  16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our Supervisory Board has determined that Erhard Schipporeit is an “audit committee

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financial expert”, as defined by the regulations of the Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 and meeting the requirements of Item 16A. He is “independent”, as such term is defined in Rule 10A-3 under the Exchange Act.

ITEM 16B. CODE OF ETHICS

In 2003, SAP adopted a Code of Business Conduct that applies to all employees (including all personnel in the accounting and controlling departments), managers and the members of SAP’s Executive Board (including our CEOsCEO and CFO). Our Code of Business Conduct constitutes a “code of ethics” as defined in Item 16.B of Form 20-F. Our Code of Business Conduct sets standards for all dealings with customers, partners, competitors and suppliers and includes, among others, regulations with regard to confidentiality, loyalty, preventing conflicts of interest, preventing bribery, and avoiding anti-competitive practices. International differences in culture, language, and legal and social systems make the adoption of uniform Codes of

Business Conduct across an entire global company challenging. As a result, SAP has set forth a master code containing minimum standards. In turn, each company within the SAP Group has been required to adopt a similar code that meets at least these minimum standards, but may also include additional or more stringent rules of conduct. Newly acquired companies also are required to meet the minimum standards set forth in the Code of Business Conduct. Effective February 2012, SAP amended its Code of Business Conduct to address certain changes in bribery laws, and to update the intellectual property and non-retaliation provisions. We have made our amended Code of Business Conduct publicly available by posting the full text on our Web site under http://www.sap.com/corporate-en/investors/governance/policies-statutes.epx.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES, AUDIT RELATED FEES, TAX FEES AND ALL OTHER FEES

Refer to Note (31) to our Consolidated Financial Statements for information on fees billedcharged by our independent registered public accounting firm, KPMG, for audit services and other professional services.

AUDIT COMMITTEE’SPRE-APPROVAL POLICIES AND PROCEDURES

As required under German law, our shareholders appoint our external independent auditors to audit our financial statements, based on a proposal that is legally required to be submitted by the Supervisory Board. The Supervisory Board’s proposal is based on a proposal by the Audit Committee. See also the description in “Item 10. Additional Information – Corporate Governance.”

In 2002 our Audit Committee adopted a policy with regard to the pre-approval of audit and non-audit services to be provided by our external independent auditors. This policy, which is designed to assure that such engagements do not impair the independence of our auditors, was amended and expanded in 2003, 2007 and 2009 (changes in 2009 only related to information requirements). The policy requires prior approval of the Audit Committee for all services to be provided by our external independent auditors for any entity of the SAP Group. With regard to non-audit services the policy distinguishes among three categories of services:

 

(i) “Prohibited services:” This category includes services that our external independent auditors must not be engaged to perform. These are services that are not permitted by applicable law or that would be inconsistent with maintaining the auditors’ independence.

(i) “Prohibited services:” This category includes services that our external independent auditors must not be engaged to perform. These are services that are not permitted by applicable law or that would be inconsistent with maintaining the auditors’ independence.

(ii) “Services requiring universal approval:” Services of this category may be provided by our external independent auditors up to a certain aggregate amount in fees per year that is determined by the Audit Committee.

(iii) “Services requiring individual approval:” Services of this category may only be provided by our external independent auditors if they have been individually (specifically) pre-approved by the Audit Committee or an Audit Committee member who is authorized by the Audit Committee to make such approvals.

(ii) “Services requiring universal approval:” Services of this category may be provided by our external independent auditors up to a certain aggregate amount in fees per year that is determined by the Audit Committee.

(iii) “Services requiring individual approval:” Services of this category may only be provided by our external independent auditors if they have been individually (specifically) pre-approved by the Audit Committee or an Audit Committee member who is authorized by the Audit Committee to make such approvals.

Our Chief Accounting Officer or individuals empowered by him review all individual requests to engage our external independent auditors as a service provider in accordance with this policy and determines the category to which the requested service belongs. All requests for engagements with expected fees over a specified limit are additionally reviewed by our CFO. Based on the

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determination of the category the request is (i) declined if it is a “prohibited service,” (ii) approved if it is a “service requiring universal approval” and the maximum aggregate amount fixed by the Audit Committee has not been reached or (iii) forwarded to the Audit Committee for individual approval if the “service requires individual approval” or is a “service requiring universal approval” and the maximum aggregate amount fixed by the Audit Committee has been exceeded.

Our Audit Committee’s pre-approval policies also include information requirements to ensure the Audit Committee is kept aware of the volume of engagements involving our external independent auditors that were not individually pre-approved by the Audit Committee itself.

Substantially all of the work performed to audit our Consolidated Financial Statements was performed by our principal accountant’s full-time, permanent employees.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Rule 10A-3 of the Exchange Act requires that all members of our audit committee be independent, subject to certain exceptions. In accordance with German law, the Audit Committee consists of both employee and shareholder elected members. Rule 10A-3 provides an exception for an employee of a foreign private issuer such as SAP who is not an executive officer of that issuer and who is elected to the supervisory board or audit committee of that issuer pursuant to the issuer’s governing law. In this case, the employee is exempt from the independence requirements of Rule 10A-3 and is permitted to sit on the audit committee.

We rely on this exemption. Our Audit Committee includes two members who are non-executive employees of SAP AG, Inga Wielerepresentatives, Panagiotis Bissiritsas and Stefan Schulz,Martin Duffek , who were namedappointed to our Supervisory Board pursuant to the German Co-determination ActAgreement on the Involvement of Employees in SAP SE (see “Item 6. Directors, Senior Management and Employees.” for details). We believe that the reliance on this exemption does not materially adversely affect the ability of our Audit Committee to act independently and to satisfy the other requirements of Rule 10A-3.

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

In 2013 there were no purchases made by us or on our behalf or on behalf of affiliates of SAP of SAP shares or SAP ADRs. The total number of SAP shares that SAP could purchase under existing repurchase programs was 88,054,869 per December 31, 2013.

At the Annual General Meeting of Shareholders on June 4, 2013, the Executive Board was authorized to acquire, on or before June 3, 2018, up to 120 million shares of SAP. The authorization from June 4, 2013 replaced the authorization from June 8, 2010.

Both authorizations wereThe authorization is subject to the provision that the shares to be purchased, together with any other shares already acquired and held by SAP, do not account for more than 10% of SAP’s capital stock.

In 2015 there were no purchases made by us or on our behalf or on behalf of affiliates of SAP of SAP shares or SAP ADRs. The total number of SAP shares that SAP could purchase under existing repurchase programs was 92,299,388 as of December 31, 2015.

ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES

The following summarizes the principal ways in which our corporate governance practices differ from the New York Stock Exchange (NYSE) corporate governance rules applicable to U.S. domestic issuers (the NYSE Rules).

INTRODUCTION

SAP is incorporated under the laws of the European Union and Germany, with securities publicly traded on markets in Germany, including the Frankfurt Exchange and in the United States on the NYSE.

The NYSE Rules permit foreign private issuers to follow applicable home country corporate governance practices in lieu of the NYSE corporate governance standards, subject to certain exceptions. Foreign private issuers electing to follow home country corporate governance

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rules are required to disclose the principal differences in their corporate governance practices from those required under the NYSE Rules. This Item 16G

summarizes the principal ways in which SAP’s corporate governance practices differ from the NYSE Rules applicable to domestic issuers.

LEGAL FRAMEWORK

The primary sourcesources of law relating to the corporate governance of a European Company are the Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (the “SE Regulation”), the German stock corporation isAct on the Implementation of Council Regulation No. 2157/2001 of October 8, 2001 on the Statute for a European Company (Gesetz zur Ausführung der Verordnung (EG) Nr. 2157/2001 des Rates vom 8. Oktober 2001 über das Statut der Europäischen Gesellschaft (SE) – SE-Ausführungsgesetz; “SE-AG”) of December 22, 2004, and the German Stock Corporation Act (Aktiengesetz). Additionally, the Securities Trading Act (Wertpapierhandelsgesetz), the German Securities Purchase and Take Over Act (Wertpapiererwerbs- und Übernahmegesetz), the Stock Exchange Admission Regulations, the German Commercial Code (Handelsgesetzbuch) and certain other German statutes contain corporate governance rules applicable to SAP. In addition to these mandatory rules, the German Corporate Governance Code (“GCGC”) summarizes the mandatory statutory corporate governance principles found in the German Stock Corporation Act and other provisions of German law. Further, the GCGC contains supplemental recommendations and suggestions for standards on responsible corporate governance intended to reflect generally accepted best practices.

The German Stock Corporation Act requires the executive and the supervisory board of publicly listed companies like SAP to declare annually that the recommendations set forth in the GCGC have been and are being complied with or which of the recommendations have not been or are not being complied with and why not. SAP has disclosed and reasoned deviations from a few of the GCGC recommendations in its Declaration of Implementation on a yearly basis since 2003. Declarations from 20082007 forward are available on the SAP website (www.sap.com/(http://www.sap.com/corporate-en/investors/governance/policies-statutes.epx).

SIGNIFICANT DIFFERENCES

We believe the following to be the significant differences between applicable European and German corporate governance practices, as SAP has implemented them, and those applicable to domestic companies under the NYSE Rules.

GERMAN STOCK CORPORATIONS ARE REQUIRED TO HAVESAP SE IS A EUROPEAN COMPANY WITH A TWO-TIER BOARD SYSTEM

SAP is governed by three separate bodies: (i) the Supervisory Board, which counsels, supervises and

controls the Executive Board; (ii) the Executive Board, which is responsible for the management of SAP; and (iii) the General Meeting of Shareholders. The rules applicable to these governing bodies are defined by European and German law and by SAP’s Articles of Incorporation. This corporate structure differs from the unitary board of directors established by the relevant laws of all U.S. states and the NYSE Rules. Under the SE Regulation and the German Stock Corporation Act, the Supervisory Board and Executive Board are separate and no individual may be a member of both boards. See “Item 10. Additional Information Corporate Governance” for additional information on the corporate structure.

DIRECTOR INDEPENDENCE RULES

The NYSE Rules require that a majority of the members of the board of directors of a listed issuer and each member of its nominating, corporate governance, compensation and audit committee be “independent.” As a foreign private issuer, SAP is not subject to the NYSE board, compensation committee and corporate governance committee independence requirements but instead can elect to follow its home country rules. With respect to the audit committee, SAP is required to satisfy Rule 10A-3 of the Exchange Act, which provides certain exemptions from the audit committee independence requirements in the case of employee board representatives. The NYSE Rules stipulate that no director qualifies as “independent” unless the board of directors has made an affirmative determination that the director has no material direct or indirect relationship with the listed company. However, under the NYSE Rules a director may still be deemed independent even if the director or a member of a director’s immediate family has received during a 12 month period within the prior three years up to $120,000 in direct compensation. In addition, a director may also be deemed independent even if a member of the director’s immediate family works for the company’s auditor in a non-partner capacity and not on the company’s audit. By contrast, the GCGC requires that the Supervisory Board ensure that proposed candidates are persons with the

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necessary knowledge, competencies and applicable experience. Additionally, the Supervisory Board is required to implement and adhere to concrete director independence criteria, including a consideration of the total number of independent Supervisory Board members as defined in Section 5.4.2 of the Code. According to this definition, a Supervisory Board member will not be considered independent in particular if s/he has personal or business relations with the company, its executive bodies, a controlling shareholder or an enterprise associated with any of the preceding persons and entities which could cause a substantial and sustained conflict of interest. The members of the Supervisory Board must have enough time to perform

their board duties and must carry out their duties carefully and in good faith. For as long as they serve, they must comply with the criteria that are enumerated in relation to the selection of candidates for the Supervisory Board concerning independence, conflict of interest and multiple memberships of management, supervisory and other governing bodies. They must be loyal to SAP in their conduct and they must not accept appointment in companies that are in competition with SAP. Supervisory Board members must disclose any planned non-ordinary course business transactions with SAP to the Supervisory Board promptly. The Supervisory Board members cannot carry out such transactions before the Supervisory Board has given its permission. The Supervisory Board may grant its permission for any such transaction only if the transaction is based on terms and conditions that are standard for the type of transaction in question and if the transaction is not contrary to SAP’s interest. SAP complies with these GCGC director independence requirements.

Applicable European and German corporate law requires that for publicly listed stock corporations at least one member of the Supervisory Board who has expert knowledge in the areas of financial accounting orand audit of financial statements must be independent. Mr. Erhard Schipporeit who is the Chairman of SAP’s Audit Committee meets these requirements. However, applicable European and German corporate law and the GCGC do not require the Supervisory Board to make an affirmative determination for each individual member that is independent or that a majority of Supervisory Board members or the members of a specific committee are independent.

The NYSE independence requirements are closely linked with risks specific to unitary boards of directors that are customary for U.S. companies.

In contrast, the two-tier board structure requires a strict separation of the executive board and supervisory board. In addition, the supervisory board of a European Company formed by conversion from a large German stock corporations iscorporation which was subject to the principle of employee codetermination as outlined in the German Co-Determination Act of 1976 (Mitbestimmungsgesetz). is subject to at least the same level of employee participation which formerly existed in the German stock corporation that was converted to an SE. The terms of employee participation with regard to the Supervisory Board of SAP SE are, among others, set out in the Agreement on the Involvement of Employees in SAP SE. As a result, the Supervisory Board of SAP AGSE consists of 1618 members, of which eight have beennine are representatives of SAP SE’s shareholders elected by SAP AG’s shareholders at the Annual General Meeting and eightnine members have beenare representatives of the European employees. Only a shareholders’ representative may be elected by employees of SAP AG and its German subsidiaries. Typically, theas chairperson of the supervisory boardSupervisory Board. In case

of a tied vote, the vote of the chairperson and, in the event that the chairperson does not participate in passing the resolution, the vote of the deputy chairperson, provided that he or she is a shareholder representative. In case of a tie vote, the supervisory board chairperson may cast theshareholders’ representative, will be decisive tie-breaking vote.(casting vote). This board structure creates a different system of checks and balances, including employee participation, and cannot be directly compared with a unitary board system.

AUDIT COMMITTEE INDEPENDENCE

As a foreign private issuer, the NYSE Rules require SAP to establish an Audit Committee that satisfies the requirements of Rule 10A-3 of the Exchange Act with respect to audit committee independence. SAP is in compliance with these requirements. The Chairman of SAP’s Audit Committee and Prof. Dr. Klaus Wucherer meet the independence requirements of Rule 10A-3 of the Exchange Act. The other two Audit Committee members, Inga WielePanagiotis Bissiritsas and Stefan Schulz,Martin Duffek, are employee representatives who are eligible for the exemption provided by Rule 10 A-3 (b) (1) (iv) (C) (see “Item 16D Exemptions from the listing standards for audit committees” for details).

The Audit Committee independence requirements are similar to the Board independence requirements under applicable European and German corporate law and the GCGC. See the section above under “Director Independence Rules.” Nonetheless, SAP meets the NYSE Rules on audit committee independence applicable to foreign private issuers.

RULES ON NON-MANAGEMENT BOARD MEETINGS ARE DIFFERENT

Section 303 A.03 of the NYSE Rules stipulates that the non-management board of each listed issuer must meet at regularly scheduled executive

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sessions without the management. Under applicable European and German corporate law and the GCGC the Supervisory Board is entitled but not required to exclude Executive Board members from its meetings. The Supervisory Board exercises this right generally during its meetings.

RULES ON ESTABLISHING COMMITTEES DIFFER

Pursuant to Section 303 A.04 and 303 A.05 of the NYSE Rules listed companies are required to set up a Nominating/Corporate Governance Committee and a Compensation Committee, each composed entirely of independent directors and having a written charter specifying the committee’s purpose and responsibilities. In addition, each committee’s performance must be reviewed annually. With one exception,Applicable European and German corporate law does not mandate the creation of specific supervisory board committees. Required by the German Co-Determination Act of 1976 (Mitbestimmungsgesetz), the Mediation Committee (Vermittlungsausschuss) convenes only if the 2/3 majority required for appointing/revoking the appointment of Executive Board Members is not attained. This committee has never been convened in SAP’s history. In addition, theThe GCGC recommends that the Supervisory Board establish an Audit Committee and a Nomination Committee. In addition to the legally required Mediation Committee, SAP has the following committees, which are in compliance with the GCGC: General and Compensation Committee, Audit Committee, Strategy and Technology Committee,

Finance and Investment Committee, Nomination Committee, Special Committee and People and Organization Committee (See “Item 10. Additional Information — Corporate Governance” for more information).

RULES ON SHAREHOLDERS’ COMPULSORY APPROVAL ARE DIFFERENT

Section 312 of the NYSE Rules requires U.S. companies to seek shareholder approval of all equity-compensation plans, including certain material revisions thereto (subject to certain exemptions as described in the rules), issuances of common stock, including convertible stock, if the common stock has, or will have upon issuance, voting power of or in excess of 20% of the then outstanding common stock, and issuances of common stock if they trigger a change of control.

According to applicable European law, the German Stock Corporation Act and other applicable German laws, shareholder approval is required for a broad range of matters, such as amendments to the articles of association, certain significant corporate transactions (including inter-company agreements and material restructurings), the offering of stock options and similar equity compensation to its Executive Board members or its employees by a way of a conditional capital increase or by using treasury shares (including significant aspects of such an equity compensation plan as well as the exercise thresholds), the issuance of new shares, the authorization to purchase the corporation’s own shares, and other essential issues, such as transfers of all, or substantially all, of the assets of the stock corporation, including shareholdings in subsidiaries.

SPECIFIC PRINCIPLES OF CORPORATE GOVERNANCE

Under the NYSE Rules Section 303A.09 listed companies must adopt and disclose corporate guidelines. Since October 2007, SAP has applied, with few exceptions, the recommended corporate governance standards of the GCGC rather than company-specific principles of corporate governance. The GCGC recommendations differ from the NYSE Standards primarily as outlined in this Item 16G.

SPECIFIC CODE OF BUSINESS CONDUCT

NYSE Rules Section 303 A.10 requires listed companies to adopt and disclose a code of business conduct and ethics for directors, officers and employees, and to disclose promptly any waivers of the code for directors or executive officers. Although not required under applicable European and German law, SAP has adopted a Code of Business Conduct, which is equally applicable to employees, managers and members of the Executive Board. SAP complies with the requirement to disclose the Code of Business Conduct and any waivers of the code with respect to directors and executive officers. See “Item 16B. Code of Ethics” for details.

 

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Part III

Item 17, 18, 19

PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

The ConsolidateConsolidated Financial Statements are included herein on pages F-1 through F-105.F-73.

The following are filed as part of this report:

 

Report of Independent Registered Public Accounting Firm.

Report of Independent Registered Public Accounting Firm.

Consolidated Financial Statements

Consolidated Income Statements for the years ended December 31, 2013, 2012,2015, 2014, and 2011.2013.

Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 20122015, 2014 and 2011.2013.

Consolidated Statements of Financial Position as of December 31, 20132015 and 2012.2014.

Consolidated Statements of Changes in Equity for the years ended December 31, 2013, 20122015, 2014 and 2011.2013.

Consolidated Statements of Cash Flows for the years ended December 31, 2013, 20122015, 2014 and 2011.2013.

Notes to the Consolidated Financial Statements.

ITEM 19. EXHIBITS

The following documents are filed as exhibits to this report:

 

ITEM 19. EXHIBITS

The following documents are filed
1Articles of Incorporation (Satzung) of SAP SE, effective as exhibits to this report:

of May 20, 2015 (English translation).
1Articles of Incorporation (Satzung) of SAP AG, as amended effective November 20, 2012
2.1Form of global share certificate for ordinary shares (English translation).(1)
2.1

Form of global share certificate for ordinary shares (English translation).(2)

Certain instruments which define rights of holders of long-term debt of SAP AG and its subsidiaries are not being filed because the total amount of securities authorized under each such instrument does not exceed 10% of the total consolidated assets of SAP AG and its subsidiaries. SAP AG

Certain instruments which define rights of holders of long-term debt of SAP SE and its subsidiaries are not being filed because the total amount of securities authorized under each such instrument does not exceed 10% of the total consolidated assets of SAP SE and its subsidiaries. SAP SE and its subsidiaries hereby agree to furnish a copy of each such instrument to the Securities and Exchange Commission upon request.

4.1.2Amended 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 to time of American Depositary Receipts issued thereunder, including the form of American Depositary Receipts.(3)
4.1.1Amended and Restated Deposit Agreement dated as of November 25, 2009, by and among SAP SE, Deutsche Bank Trust Company Americas as Depositary, and all owners and holders from time to time of American Depositary Receipts issued thereunder.(2)
4.1.2

Amendment No. 1 dated March 18, 2016 to the Amended and Restated Deposit Agreement, by and among SAP SE, Deutsche Bank Trust Company Americas as Depositary, and all owners and holders from time to time of American Depositary Receipts issued thereunder, including the form of American Depositary Receipt.(3)

4.9Agreement and Plan of Merger dated May 22, 2012 by and among Ariba, Inc., SAP America, Inc. and Angel Expansion Corporation
4.9

Agreement and Plan of Merger dated as of September 18, 2014 by and among Concur Technologies, Inc., SAP America, Inc. and Congress Acquisition Corp.(4)

8For a list of our subsidiaries see Note (33) to our Consolidated Financial Statements in “Item 18. Financial Statements”.
12.1Certification of Bill McDermott, Co-Chief
12.1Certification of Bill McDermott, Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a).
12.2Certification of Jim Hagemann Snabe, Co-Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a).
12.3Certification of Werner Brandt,
12.2Certification of Luka Mucic, Chief Financial Officer, required by Rule 13a-14(a) orRule 15d-14(a).
13.1Certification of Bill McDermott, Co-Chief
13.1Certification of Bill McDermott, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2Certification 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.

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Item 19

13.3Certification of Werner Brandt,
13.2Certification of Luka Mucic, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15Consent of Independent Registered Public Accounting Firm.

 

(1)

Incorporated by reference to Exhibit 1 of SAP AG’s Annual Report on Form 20-F filed on March 22, 2013.

 

(2)

Incorporated by reference to Exhibit 2.1 of SAP AG’s Annual Report on Form 20-F filed on March 22, 2006.

(1) Incorporated by reference to Exhibit 2.1 to SAP SE’s 2014 Annual Report on Form 20-F filed with the SEC on March 20, 2015.

(2) Incorporated by reference to Exhibit 99.(a)(2) of Post Effective Amendment #1 to SAP SE’s Registration Statement on Form F-6 filed on November 25, 2009.

(3) Incorporated by reference to Exhibit 99.(a)(2) of Post Effective Amendment #2 to SAP SE’s Registration Statement on Form F-6 filed on March 18, 2016.

(4) Incorporated by reference to Exhibit 2.1 to Concur Technologies, Inc.’s Current Report on Form 8-K filed on September 19, 2014.

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this report on its behalf.

 

SAP SE
(Registrant)
(3)

Incorporated by reference to Exhibit 99(A) of Post Effective Amendment #1 to SAP AG’s Registration Statement on Form F-6 filed on November 25, 2009.

(4)

Incorporated by reference to Exhibit 2.1 to Ariba, Inc.’s Current Report on Form 8-K filed on May 22, 2012.

 

120By: /s/ BILL MCDERMOTT


SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and 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 McDermott

Title: Co-Chief

Name: Bill McDermott
Title: Chief Executive Officer

Dated: March 29, 2016

By: /s/ LUKA MUCIC

Dated: March 20, 2014

Name: Luka Mucic
Title: Chief Financial Officer
By: /s/  JIM HAGEMANN SNABE

Name: Jim Hagemann Snabe

Title: Co-Chief Executive Officer

Dated: March 20, 2014

By: /s/  WERNER BRANDT

Name: Dr. Werner Brandt

Title: Chief Financial Officer

Dated: March 20, 2014

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SAP AG

Dated: March 29, 2016

SAP SE AND SUBSIDIARIES

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Page    

Report of Independent Registered Public Accounting Firm

Page

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Financial Statements:

Consolidated Income Statements of SAP Group for the years ended December 31,

F-2

Consolidated Financial Statements:

Consolidated Income Statements for the years ended 2015, 2014 and 2013 2012 and 2011

   F-3  

Consolidated Statements of Comprehensive Income of SAP Group for the years ended December  31, 2013, 2012 and 2011

F-4

Consolidated Statements of Financial Position of SAP Group as at December 31, 2013 and 2012

F-5

Consolidated Statements of Changes in Equity of SAP Group as at December 31, 2013, 2012 and 2011

F-6

Consolidated Statements of Cash Flows of SAP Group for the years ended December  31, 2013, 2012 and 2011

F-7

Notes to the Consolidated Financial Statements

F-8 to F-105

F-1


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 and subsidiaries (“SAP” or “the Company”) as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2013. We also have audited SAP’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). SAP’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and 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 Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition 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 or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SAP AG and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). Also in our opinion, SAP AG maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the COSO.

/s/  KPMG AG
Wirtschaftsprüfungsgesellschaft

Mannheim, Germany

February 20, 2014

F-2


SAP AG AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENTS OF SAP GROUP

for the years ended December 31,

  Notes  (Unaudited)
2013(1)
  2013  2012  2011 
     US$       
     millions, unless otherwise stated 

Software

   6,223    4,516    4,658    4,107  

Cloud subscriptions and support

   959    696    270    18  

Software and cloud subscriptions

   7,182    5,212    4,928    4,125  

Support

   12,040    8,738    8,237    7,194  

Software and software-related service revenue

   19,221    13,950    13,165    11,319  

Consulting

   3,089    2,242    2,442    2,341  

Other services

   859    623    616    573  

Professional services and other service revenue

   3,948    2,865    3,058    2,914  

Total revenue

  (5  23,169    16,815    16,223    14,233  

Cost of software and software-related services

   –3,579    –2,597    –2,555    –2,107  

Cost of professional services and other services

   –3,309    –2,402    –2,520    –2,247  

Total cost of revenue

   –6,888    –4,999    –5,075    –4,354  

Gross profit

   16,281    11,816    11,147    9,879  

Research and development

   –3,145    –2,282    –2,261    –1,935  

Sales and marketing

   –5,692    –4,131    –3,912    –3,083  

General and administration

   –1,193    –866    –949    –715  

Restructuring

  (18  –97    –70    –8    –4  

TomorrowNow litigation

  (23  0    0    0    717  

Other operating income/expense, net

  (6  17    12    23    25  

Total operating expenses

   –16,998    –12,336    –12,181    –9,348  

Operating profit

   6,171    4,479    4,041    4,884  

Other non-operating income/expense, net

  (8  –23    –17    –173    –75  

Finance income

   158    115    103    119  

Finance costs

   –249    –181    –175    –161  

Financial income, net

  (9  –92    –66    –72    –42  

Profit before tax

   6,057    4,396    3,796    4,767  

Income tax TomorrowNow litigation

   0    0    0    –281  

Other income tax expense

   –1,476    –1,071    –993    –1,049  

Income tax expense

  (10  –1,475    –1,071    –993    –1,331  

Profit after tax

   4,581    3,325    2,803    3,437  

Profit attributable to non-controlling interests

   –1    –1    0    1  

Profit attributable to owners of parent

   4,583    3,326    2,803    3,435  

Earnings per share, basic (in €)

  (11  3.84    2.79    2.35    2.89  

Earnings per share, diluted (in €)

  (11  3.83    2.78    2.35    2.89  

(1)

The 2013 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.3779 to €1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2013.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-3


SAP AG AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF SAP GROUP

for the years ended December 31,

   Notes  2013   2012   2011 
   € millions 

Profit after tax

    3,325     2,803     3,437  

Items that will not be reclassified to profit or loss

       

Remeasurements on defined benefit pension plans

   (18  16     –12     –17  

Income tax relating to items that will not be reclassified

   (10  –3     4     5  

Other comprehensive income after tax for items that will not be reclassified to profit or loss

    13     –8     –12  

Items that will be reclassified subsequently to profit or loss

   (20     

Exchange differences

    –576     –214     106  

Available-for-sale financial assets

   (26  60     13     –7  

Cash flow hedges

   (25  0     63     –1  

Income tax relating to items that will be reclassified

   (10  –8     –20     7  

Other comprehensive income after tax for items that will be reclassified to profit or loss

    –524     –157     105  

Other comprehensive income net of tax

    –511     –165     93  

Total comprehensive income

    2,814     2,638     3,530  

    attributable to owners of parent

    2,815     2,638     3,528  

    attributable to non-controlling interests

    –1     0     1  

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-4


SAP AG AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION OF SAP GROUP

as at December 31,

   Notes  (Unaudited)
2013(1)
   2013   2012 
      US$       
   millions 

Cash and cash equivalents

    3,786     2,748     2,477  

Other financial assets

   (12  346     251     154  

Trade and other receivables

   (13  5,326     3,865     3,917  

Other non-financial assets

   (14  477     346     294  

Tax assets

    195     142     85  

Total current assets

    10,131     7,352     6,928  

Goodwill

   (15  18,861     13,688     13,192  

Intangible assets

   (15  4,074     2,956     3,234  

Property, plant, and equipment

   (16  2,508     1,820     1,708  

Other financial assets

   (12  837     607     509  

Trade and other receivables

   (13  135     98     88  

Other non-financial assets

   (14  147     107     68  

Tax assets

    236     172     170  

Deferred tax assets

   (10  405     294     408  

Total non-current assets

    27,202     19,741     19,378  

Total assets

    37,332     27,094     26,306  

Trade and other payables

   (17  1,171     850     870  

Tax liabilities

    597     433     440  

Financial liabilities

   (17  1,031     748     802  

Other non-financial liabilities

   (17  3,118     2,263     2,204  

Provision TomorrowNow litigation

   (23  307     223     234  

Other provisions

    582     422     609  

Provisions

   (18  889     645     843  

Deferred income

   (19  1,941     1,408     1,386  

Total current liabilities

    8,746     6,347     6,546  

Trade and other payables

   (17  61     45     63  

Tax liabilities

    438     318     388  

Financial liabilities

   (17  5,179     3,758     4,446  

Other non-financial liabilities

   (17  154     112     98  

Provisions

   (18  382     277     347  

Deferred tax liabilities

   (10  158     115     223  

Deferred income

   (19  102     74     62  

Total non-current liabilities

    6,474     4,699     5,627  

Total liabilities

    15,220     11,046     12,173  

Issued capital

    1,693     1,229     1,229  

Share premium

    759     551     492  

Retained earnings

    22,401     16,258     13,934  

Other components of equity

    –989     –718     –194  

Treasury shares

    –1,764     –1,280     –1,337  

Equity attributable to owners of parent

    22,102     16,040     14,125  

Non-controlling interests

    12     8     8  

Total equity

   (20  22,112     16,048     14,133  

Total equity and liabilities

    37,332     27,094     26,306  

(1)

The 2013 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.3779 to €1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2013.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-5


SAP AG AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY OF SAP GROUP

as at December 31,

  Equity Attributable to Owners of Parent       
  Issued
Capital
  Share
Premium
  Retained
Earnings
  Other Components of Equity  Treasury
Shares
  Total  Non-
Controlling
Interests
  Total
Equity
 
     Exchange
Differences
  Available-
for-Sale
Financial
Assets
  Cash
Flow
Hedges
     
              € millions                

Note reference

  (20  (20  (20  
 
Statement of
Comprehensive Income
  
  
  (20   

January 1, 2011 prior to IAS 19 (revised) adoption

  1,227    337    9,767    –131    16    –27    –1,382    9,807    17    9,824  

Cumulated difference from the retrospective adoption of IAS 19 (revised)

    –11        –11     –11  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

January 1, 2011 after IAS 19 (revised) adoption

  1,227    337    9,756    –131    16    –27    –1,382    9,796    17    9,813  

Profit after tax

    3,435        3,435    1    3,437  

Other comprehensive income

    –12    112    –7    0     93     93  

Comprehensive income

    3,423    112    –7    0     3,528    1    3,530  

Share-based payments

   9         9     9  

Dividends

    –713        –713     –713  

Issuance of shares under share-based payments

  1    46         47     47  

Purchase of treasury shares

        –246    –246     –246  

Reissuance of treasury shares under share-based payments

   27        251    278     278  

Change in non-controlling interests

    –19        –19    –10    –29  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2011

  1,228    419    12,448    –19    9    –27    –1,377    12,681    8    12,689  

Profit after tax

    2,803        2,803     2,803  

Other comprehensive income

    –8    –217    13    47     –165     –165  

Comprehensive income

    2,795    –217    13    47     2,638     2,638  

Share-based payments

   41         41     41  

Dividends

    –1,310        –1,310     –1,310  

Issuance of shares under share-based payments

  1    14         15     15  

Purchase of treasury shares

        –53    –53     –53  

Reissuance of treasury shares under share-based payments

   18        93    111     111  

Other

    2        2     2  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2012

  1,229    492    13,934    –236    22    20    –1,337    14,125    8    14,133  

Profit after tax

    3,326        3,326    –1    3,325  

Other comprehensive income

    13    –584    60    0     –511     –511  

Comprehensive income

    3,339    –584    60    0     2,815    –1    2,814  

Share-based payments

   30         30     30  

Dividends

    –1,013        –1,013     –1,013  

Reissuance of treasury shares under share-based payments

   29        57    86     86  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2013

  1,229    551    16,258    –820    82    20    –1,280    16,040    8    16,048  

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-6


SAP AG AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS OF SAP GROUP

for the years ended December 31,

  Notes  (Unaudited)
2013(1)
  2013  2012  2011 
     US$       
     millions 

Profit after tax

   4,582    3,325    2,803    3,437  

Adjustments to reconcile profit after tax to net cash flows provided by operating activities:

     

Depreciation and amortization

  (15),(16  1,310    951    863    724  

Income tax expense

  (10  1,476    1,071    993    1,331  

Financial income, net

  (9  91    66    72    42  

Decrease/increase in sales and bad debt allowances on trade receivables

   58    42    –25  �� –18  

Other adjustments for non-cash items

   79    57    31    14  

Decrease/increase in trade and other receivables

   –152    –110    –298    –426  

Decrease/increase in other assets

   –181    –131    –23    –39  

Decrease/increase in trade payables, provisions, and other liabilities

   –243    –176    420    –404  

Decrease/increase in deferred income

   172    125    154    121  

Cash outflows due to TomorrowNow litigation

  (23  –1    –1    7    –52  

Interest paid

   –219    –159    –165    –139  

Interest received

   92    67    92    92  

Income taxes paid, net of refunds

   –1,784    –1,295    –1,102    –908  

Net cash flows from operating activities

   5,280    3,832    3,822    3,775  

Business combinations, net of cash and cash equivalents acquired

  (4  –1,598    –1,160    –6,094    –188  

Purchase of intangible assets and property, plant, and equipment

   –780    –566    –541    –445  

Proceeds from sales of intangible assets or property, plant, and equipment

   76    55    39    55  

Purchase of equity or debt instruments of other entities

   –2,110    –1,531    –1,022    –2,046  

Proceeds from sales of equity or debt instruments of other entities

   1,958    1,421    1,654    1,398  

Net cash flows from investing activities

   –2,454    –1,781    –5,964    –1,226  

Purchase of non-controlling interests

   0    0    0    –28  

Dividends paid

  (21  –1,396    –1,013    –1,310    –713  

Purchase of treasury shares

  (21  0    0    –53    –246  

Proceeds from reissuance of treasury shares

   68    49    90    251  

Proceeds from issuing shares (share-based payments)

   0    0    15    46  

Proceeds from borrowings

   1,378    1,000    5,778    519  

Repayments of borrowings

   –2,239    –1,625    –4,714    –1,005  

Net cash flows from financing activities

   –2,189    –1,589    –194    –1,176  

Effect of foreign currency exchange rates on cash and cash equivalents

   –263    –191    –152    74  

Net decrease/increase in cash and cash equivalents

   373    271    –2,488    1,447  

Cash and cash equivalents at the beginning of the period

  (21  3,413    2,477    4,965    3,518  

Cash and cash equivalents at the end of the period

  (21  3,786    2,748    2,477    
4,965
  

(1)

The 2013 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.3779 to €1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2013.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

F-7


SAP AG AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1)General Information about Consolidated Financial Statements

The accompanying Consolidated Financial Statements of SAP AG and its subsidiaries (collectively, “we,” “us,” “our,” “SAP,” “Group,” and “Company”) have been prepared in accordance with International Financial Reporting Standards (IFRS). The designation “IFRS” includes all standards issued by the International Accounting Standards Board (IASB) and related interpretations issued by the IFRS Interpretations Committee (IFRIC).

We have applied all standards and interpretations that were effective on and endorsed by the European Union (EU) as at December 31, 2013. There were no standards or interpretations impacting our Consolidated Financial Statements for the years ended December 31, 2013, 2012,

2015, 2014 and 2011, that were effective but not yet endorsed. Therefore our 2013

F-4

Consolidated Statements of Financial Position as of December 31, 2015 and 2014

F-5

Consolidated Statements comply with both IFRS as issued byof Changes in Equity for the IASByears ended December 31, 2015, 2014 and with IFRS as endorsed by2013

F-6

Consolidated Statements of Cash Flows for the EU.years ended December 31, 2015, 2014 and 2013

F-7

Our Executive Board approvedNotes to the Consolidated Financial Statements on February 20, 2014, for submission

F-8 to our Supervisory Board.

All amounts included in the Consolidated Financial Statements are reported in millions of euros (€ millions) except where otherwise stated. Due to rounding, numbers presented throughout this document may not add up precisely to the totals we provide and percentages may not precisely reflect the absolute figures.

F-73

(2)Scope of Consolidation

The Consolidated Financial Statements include SAP AG and all subsidiaries of SAP AG.

The following table summarizes the changes in the number of entities

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Supervisory Board of SAP SE:

We have audited the accompanying consolidated statements of financial position of SAP SE and subsidiaries (“SAP” or “the Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2015. We also have audited SAP’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). SAP’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and 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 Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition 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 or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SAP SE and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). Also in our opinion, SAP SE maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

/s/KPMG AG

Wirtschaftsprüfungsgesellschaft

Mannheim, Germany

February 25, 2016

SAP SE AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENTS OF SAP GROUP

for the years ended December 31,

millions, unless otherwise stated  Notes  

(Unaudited)

2015(1)

US$

   

2015

   

2014

   

2013

 

Cloud subscriptions and support

      2,482     2,286     1,087     696  

Software licenses

      5,250     4,835     4,399     4,516  

Software support

      10,960     10,093     8,829     8,293  

Software licenses and support

      16,210     14,928     13,228     12,809  

Cloud and software

      18,693     17,214     14,315     13,505  

Services

      3,887     3,579     3,245     3,310  

Total revenue

  (5)   22,579     20,793     17,560     16,815  

Cost of cloud subscriptions and support

      1,109     1,022     481     314  

Cost of software licenses and support

      2,488     2,291     2,076     2,056  

Cost of cloud and software

      3,597     3,313     2,557     2,370  

Cost of services

      3,598     3,313     2,716     2,660  

Total cost of revenue

      7,195      6,626      5,272     5,031  

Gross profit

      15,384     14,167     12,288     11,784  

Research and development

      3,090     2,845     2,331     2,282  

Sales and marketing

      5,865     5,401     4,304     4,131  

General and administration

      1,138     1,048     892     866  

Restructuring

  (6)   675     621     126     70  

TomorrowNow and Versata litigation

  (23)   0     0     309     31  

Other operating income/expense, net

      1     1     4     12  

Total operating expenses

      17,962      16,541      13,230     12,336  

Operating profit

      4,618     4,252     4,331     4,479  

Other non-operating income/expense, net

  (8)   278      256      49     17  

Finance income

      262     241     127     115  

Finance costs

      267     246     152     181  

Financial income, net

  (9)   5      5      25     66  

Profit before tax

      4,334     3,991     4,355     4,396  

Income tax TomorrowNow and Versata litigation

      0     0     86     8  

Other income tax expense

      1,016     935     1,161     1,063  

Income tax expense

  (10)   1,016     935     1,075     1,071  

Profit after tax

      3,318     3,056     3,280     3,325  

Attributable to owners of parent

      3,327     3,064     3,280     3,326  

Attributable to non-controlling interests

      9     8     0     1  
Earnings per share, basic (in)  (11)   2.78     2.56     2.75     2.79  

Earnings per share, diluted (in)

  (11)   2.78     2.56     2.74     2.78  

(1) The 2015 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.0859 to1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2015.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

SAP SE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF SAP GROUP

for the years ended December 31,

millions  Notes  2015   2014   2013 

Profit after tax

      3,056     3,280     3,325  

Items that will not be reclassified to profit or loss

                  

Remeasurements on defined benefit pension plans

  (18)   19     30     16  

Income tax relating to items that will not be reclassified

  (10)   2     7     3  
Other comprehensive income after tax for items that will not be reclassified to profit or loss      17      23     13  

Items that will be reclassified subsequently to profit or loss

  (20)               

Exchange differences

      1,845     1,161     576  

Available-for-sale financial assets

  (26)   128     128     60  

Cash flow hedges

  (25)   15     38     0  

Income tax relating to items that will be reclassified

  (10)   10     31     8  
Other comprehensive income after tax for items that will be reclassified to profit or loss      1,997     1,282     524  

Other comprehensive income net of tax

      1,980     1,259     511  

Total comprehensive income

      5,036     4,539     2,814  

Attributable to owners of parent

      5,044     4,539     2,815  

Attributable to non-controlling interests

      8     0     1  

The accompanying Notes are an integral part of these Consolidated Financial Statements.

SAP SE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION OF SAP GROUP

as at December 31,

millions  Notes  

(Unaudited)

2015(1)

US$

   

2015

   

2014

 

Cash and cash equivalents

      3,704     3,411     3,328  

Other financial assets

  (12)   381     351     678  

Trade and other receivables

  (13)   5,728     5,275     4,342  

Other non-financial assets

  (14)   508     468     435  

Tax assets

      255     235     215  

Total current assets

      10,576     9,739     8,999  

Goodwill

  (15)   24,638     22,689     21,000  

Intangible assets

  (15)   4,647     4,280     4,604  

Property, plant, and equipment

  (16)   2,380     2,192     2,102  

Other financial assets

  (12)   1,450     1,336     1,021  

Trade and other receivables

  (13)   95     87     100  

Other non-financial assets

  (14)   361     332     164  

Tax assets

      306     282     231  

Deferred tax assets

  (10)   492     453     343  

Total non-current assets

      34,370     31,651     29,566  

Total assets

      44,945     41,390     38,565  

Trade and other payables

  (17)   1,181     1,088     1,032  

Tax liabilities

      250     230     339  

Financial liabilities

  (17)   913     841     2,561  

Other non-financial liabilities

  (17)   3,700     3,407     2,811  

Provisions

  (18)   325     299     150  

Deferred income

  (19)   2,173     2,001     1,680  

Total current liabilities

      8,543     7,867     8,574  

Trade and other payables

  (17)   88     81     55  

Tax liabilities

      437     402     371  

Financial liabilities

  (17)   9,427     8,681     8,980  

Other non-financial liabilities

  (17)   359     331     219  

Provisions

  (18)   195     180     151  

Deferred tax liabilities

  (10)   486     448     603  

Deferred income

  (19)   115     106     78  

Total non-current liabilities

      11,107     10,228     10,457  

Total liabilities

      19,650     18,095     19,031  

Issued capital

      1,334     1,229     1,229  

Share premium

      606     558     614  

Retained earnings

      21,766     20,044     18,317  

Other components of equity

      2,781     2,561     564  

Treasury shares

      –1,221     –1,124     –1,224  

Equity attributable to owners of parent

      25,266     23,267     19,499  

Non-controlling interests

      30     28     34  

Total equity

  (20)   25,296     23,295     19,534  

Total equity and liabilities

      44,945     41,390     38,565  

(1) The 2015 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.0859 to1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2015.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

SAP SE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY OF SAP GROUP

as at December 31,

millions Equity Attributable to Owners of Parent  

Non-

Controlling
Interests

  

Total
Equity

 
  Issued
Capital
  Share
Premium
  Retained
Earnings
  Other Components of Equity  Treasury
Shares
  

Total

   
      Exchange
Differences
  

Available-
for-Sale
Financial
Assets

 

  Cash Flow
Hedges
     

Notes

  (20)    (20)    (20)    
 
Statement of Comprehensive
Income
  
  
  (20)              

January 1, 2013

 

  1,229    492    13,934    236    22    20    1,337    14,125    8    14,133  

Profit after tax

 

          3,326                    3,326    1    3,325  

Other comprehensive income

 

          13    584    60            511        511  

Comprehensive income

 

          3,339    584    60            2,815    1    2,814  

Share-based payments

 

      30                        30        30  

Dividends

 

          1,013                    1,013        1,013  

Reissuance of treasury shares under share-based payments

 

      29                    57    86        86  

Other changes

 

          2                    2    1    1  

December 31, 2013

 

  1,229    551    16,258    820    82    20    1,280    16,040    8    16,048  

Profit after tax

 

          3,280                    3,280        3,280  

Other comprehensive income

 

          23    1,182    128    28        1,259        1,259  

Comprehensive income

 

          3,257    1,182    128    28        4,539        4,539  

Share-based payments

 

      34                        34        34  

Dividends

 

          1,194                    1,194        1,194  

Reissuance of treasury shares under share-based payments

 

      29                    56    85        85  

Additions from business combinations

 

                                  26    26  

Other changes

 

          4                    4        4  

December 31, 2014

 

  1,229    614    18,317    362    211    8     1,224     19,499    34    19,534  

Profit after tax

 

          3,064                    3,064    8    3,056  

Other comprehensive income

 

          17    1,861    125    11        1,980        1,980  

Comprehensive income

 

          3,047    1,861    125    11        5,044    8     5,036  

Share-based payments

 

      136                        136        136  

Dividends

 

          1,316                    1,316        1,316  

Reissuance of treasury shares under share-based payments

 

      80                    100    180        180  

Other changes

 

          4                    4    2    2  

December 31, 2015

 

  1,229    558    20,044    2,223    336    3    1,124     23,267    28    23,295  

The accompanying Notes are an integral part of these Consolidated Financial Statements.

SAP SE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS OF SAP GROUP

for the years ended December 31,

millions  Notes   

(Unaudited)

2015(1)

US$

   

2015

   

2014

   

2013

 
Profit after tax        3,318     3,056     3,280     3,325  
Adjustments to reconcile profit after taxes to net cash provided by operating activities:                         

Depreciation and amortization

   (15),(16)     1,400     1,289     1,010     951  

Income tax expense

   (10)     1,016     935     1,075     1,071  

Financial income, net

   (9)     5     5     25     66  

Decrease/increase in sales and bad debt allowances on trade receivables

        49     45     47     42  

Other adjustments for non-cash items

        2     2     70     62  

Decrease/increase in trade and other receivables

        917     844     286     110  

Decrease/increase in other assets

        340     313     329     136  

Decrease/increase in trade payables, provisions, and other liabilities

        823     757     573     176  

Decrease/increase in deferred income

        236     218     16     125  
Cash outflows due to TomorrowNow and Versata litigation   (23)     0     0     555     1  
Interest paid        187     172     130     159  
Interest received        89     82     59     67  
Income taxes paid, net of refunds        1,541     1,420     1,356     1,295  
Net cash flows from operating activities        3,950     3,638     3,499     3,832  

Business combinations, net of cash and cash equivalents acquired

        43     39     6,360     1,160  

Cash receipts from derivative financial instruments related to business combinations

        289     266     111     0  
Total cash flows for business combinations, net of cash and cash equivalents acquired   (4)     246     226     6,472     1,160  
Purchase of intangible assets and property, plant, and equipment        691     636     737     566  
Proceeds from sales of intangible assets or property, plant, and equipment        73     68     46     55  
Purchase of equity or debt instruments of other entities        2,032     1,871     910     1,531  
Proceeds from sales of equity or debt instruments of other entities        2,041     1,880     833     1,421  
Net cash flows from investing activities        362      334      7,240     1,781  
Dividends paid   (20)     1,430     1,316     1,194     1,013  
Proceeds from reissuance of treasury shares        70     64     51     49  
Proceeds from borrowings        1,899     1,748     7,503     1,000  
Repayments of borrowings        4,183     3,852     2,062     1,625  
Net cash flows from financing activities        3,644      3,356      4,298     1,589  
Effect of foreign currency rates on cash and cash equivalents        146     135     23     191  
Net decrease/increase in cash and cash equivalents        90     83     580     271  
Cash and cash equivalents at the beginning of the period   (20)     3,614     3,328     2,748     2,477  
Cash and cash equivalents at the end of the period   (20)     3,704     3,411     3,328     2,748  

(1) The 2015 figures have been translated solely for the convenience of the reader at an exchange rate of US$1.0859 to1.00, the Noon Buying Rate certified by the Federal Reserve Bank of New York on December 31, 2015.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

SAP SE AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL INFORMATION ABOUT CONSOLIDATED FINANCIAL STATEMENTS

The accompanying Consolidated Financial Statements of SAP SE and its subsidiaries (collectively, “we,” “us,” “our,” “SAP,” “Group,” and “Company”) have been prepared in accordance with International Financial Reporting Standards (IFRS).

We have applied all standards and interpretations that were effective on and endorsed by the European Union (EU) as at December 31, 2015. There were no standards or interpretations impacting our Consolidated Financial Statements for the years ended December 31, 2015, 2014, and 2013, that were effective but not yet endorsed. Therefore, our Consolidated Financial Statements comply with both IFRS as issued by the International Accounting Standards Board (IASB) and with IFRS as endorsed by the EU.

Our Executive Board approved the Consolidated Financial Statements on February 25, 2016, for submission to our Supervisory Board.

All amounts included in the Consolidated Financial Statements are reported in millions of euros ( millions) except where otherwise stated. Due to rounding, numbers presented throughout this document may not add up precisely to the totals we provide and percentages may not precisely reflect the absolute figures.

(2) SCOPE OF CONSOLIDATION

Entities Consolidated in the Financial Statements

 

   German   Foreign     Total 

December 31, 2011

   23     176       199  

Additions

   4     92       96  

Disposals

   –5     –23       –28  

December 31, 2012

   22     245       267  

Additions

   1     24       25  

Disposals

   –1     –19       –20  

December 31, 2013

   22     250       272  
Total

December 31, 2013

272

Additions

58

Disposals

43

December 31, 2014

287

Additions

8

Disposals

40

December 31, 2015

255

The additions relate to legal entities added in connection with acquisitions and foundations. The disposals are mainly due to mergers and liquidations of legal entities.

 

The additions relate to legal entities added in connection with acquisitions and foundations. The disposals are due to sales, mergers and liquidations of legal entities.

In August 2013, we acquired hybris AG, which may affect comparability of our 2013 Consolidated Financial Statements with our 2012 and 2011 Consolidated Financial Statements. For more information about our business combinations and the effect on our Consolidated Financial Statements, see Note (4).

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of Significant Accounting Policies

(3a)Bases of Measurement

(3a) Bases of Measurement

The Consolidated Financial Statements have been prepared on the historical cost basis except for the following:

Derivative financial instruments, available-for-sale financial assets, and liabilities for cash-settled share-based payments are measured at fair value.

Monetary assets and liabilities denominated in foreign currencies are translated at period-end exchange rates.

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Post-employment benefits are measured according to IAS 19 (Employee Benefits) as described in Note (18a).

Where applicable, information about the methods and assumptions used in determining the respective measurement bases is disclosed in the Notes specific to that asset or liability.

(3b)

(3b) Relevant Accounting Policies

Reclassifications

We modified and simplified the presentation of our services revenue in our income statement starting with the first quarter of 2015 to align our financial reporting with the change in our services business under the ONE Service approach. Under this approach, we combine premium support services and professional services in a way that no longer allows us to separate premium support revenues from professional services revenues or to separate their related cost of services.

Consequently, we have combined the revenue from premium support services with the revenue from professional services and other services in a new services revenue line item. Previously, revenues from premium support services were classified as support revenues (2014:539 million, 2013:445 million) and related costs were classified as cost of software and software-related services (2014:337 million, 2013:259 million). Simultaneously with this change, we simplified and clarified the labeling of several income statement line items. This includes renaming the previous revenue subtotal labeled software and support (which included premium support revenues) to software licenses and support (which no longer includes premium support revenues). The previous revenue subtotal labeled software and software-related service revenue is renamed cloud and software and accordingly no longer includes premium support revenue. All of these changes have been applied retrospectively.

Relevant Accounting Policies

Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method as at the closing date, which is the date on which we obtain control of the acquiree. The consideration transferred in an acquisition is measured at the fair value of the assets transferred and liabilities incurred at the date of transfer of control. Settlements of pre-existing relationships are not included in the consideration transferred. Such amounts are recognized in profit and loss. Identifiable assets acquired and liabilities assumed in a business combination (including contingent consideration) are measured at their acquisition date fair values. Changes in contingent consideration classified as a liability at the acquisition date are recognized in profit and loss unless they related to facts that existed at the measurement date that we become aware of during the measurement period. We decide on a transaction-by-transaction basis whether to measure the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are accounted as expense in the periods in which the costs are incurred and the services are received, with the expense being classified as general and administration expense.

The excess of the consideration transferred in a business combination over the fair value of the identifiable net assets acquired is recorded as goodwill.

With respect to at-equity investments, the carrying amount of goodwill is included in the carrying amount of the investment.

The two other revenue line items cloud subscriptions and support and total revenue are not affected by any of these changes and remain unaltered.

Business Combinations and Goodwill

We decide on a transaction-by-transaction basis whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are accounted as expense in the periods in which the costs are incurred and the services are received, with the expense being classified as general and administration expense.

Foreign Currencies

AssetsIncome and liabilitiesexpenses and operating cash flows of our foreign subsidiaries that use a functional currency other than the euro are translated at the closing rate at the date of the Statement of Financial Position. Income and expenses are translated at average rates of foreign exchange (FX) computed on a monthly basis. AllExchange differences resulting exchange differencesfrom foreign currency transactions are recognized in other comprehensive income. Exchange differences from monetary items denominated in foreign currency transactions that are part of a long-term investment (that is, settlement is neither planned nor likely to occur in the foreseeable future) are also included in other comprehensive income. When a foreign operation is disposed of, liquidated, or abandoned, the foreign currency translation adjustments applicable to that entity are reclassified from other comprehensive income to profit or loss.

On initial recognition, foreign currency transactions are recorded in the respective functional currencies of Group entities by applying to the foreign currency amount the exchange rate at the date of the transaction. Monetary assets and liabilities that are denominated in foreign currencies are remeasured at the period-end closing rate. Resulting exchange differences are recognized, in the period in which they arise, in other non-operating expense.income/expense, net.

Operating cash flows of foreign subsidiaries are translated into euros using average rates of exchange computed on a monthly basis. Investing and financing cash flows of foreign subsidiaries are translated into euros using the exchange rates in effect at the time of the respective transaction. The effect of exchange rate changes on cash is reported in a separate line item in the Consolidated Statements of Cash Flows.

Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition are treated as assets and liabilities of the foreign operation and translated at the respective closing rates.

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The exchange rates of key currencies affecting the Company were as follows:

Exchange Rates

 

      Closing Rate as at December 31   Annual Average Exchange Rate 
Equivalent to €1      2013   2012   2013   2012   2011 
Equivalent to1  

Middle Rate

as at December 31

   Annual Average Exchange Rate 
     2015   2014   2015   2014   2013 

U.S. dollar

   USD     1.3791     1.3194     1.3301     1.2862     1.3863     USD     1.0887     1.2141     1.1071     1.3198     1.3301  

Pound sterling

   GBP     0.8337     0.8161     0.8482     0.8104     0.8656     GBP     0.7340     0.7789     0.7255     0.8037     0.8482  

Japanese yen

   JPY     144.72     113.61     130.21     103.05     110.17     JPY     131.07     145.23     134.12     140.61     130.21  

Swiss franc

   CHF     1.2276     1.2072     1.2302     1.2055     1.2299     CHF     1.0835     1.2024     1.0688     1.2132     1.2302  

Canadian dollar

   CAD     1.4671     1.3137     1.3710     1.2843     1.3739     CAD     1.5116     1.4063     1.4227     1.4645     1.3710  

Australian dollar

   AUD     1.5423     1.2712     1.3944     1.2419     1.3436     AUD     1.4897     1.4829     1.4753     1.4650     1.3944  

 

Revenue Recognition

Classes of Revenue

We derive our revenue from fees charged to our customers for (a) the use of our hosted cloud offerings, (b) licenses to our on-premise software products, (b) the use of our hosted cloud subscription software offerings and (c) standardized and premium support services, consulting, customer-specific on-premise software development agreements, training, and other services. The majority of our

Cloud and software arrangements include support services, and many also include professional services and other elements.

Software and software-related service revenue, as shownpresented in our Consolidated Income Statements, is the sum of our software revenue, our support revenue and our cloud subscriptions and support revenue. Professional servicesrevenue, our software licenses revenue, and other serviceour software support revenue.

Revenue from cloud subscriptions and support represents fees earned from providing customers with:

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Software-as-a-Service (SaaS), that is, a right to use software functionality in a cloud-based-infrastructure (hosting) provided by SAP, where the customer does not have the right to terminate the hosting contract and take possession of the software to run it on the customer’s own IT infrastructure or by a third-party hosting provider without significant penalty, or

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Platform-as-a-Service (PaaS), that is, access to a cloud-based infrastructure to develop, run, and manage applications, or

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Infrastructure-as-a-Service (IaaS), that is, hosting services for software hosted by SAP, where the customer has the right to terminate the hosting contract and take possession of the software at any time without significant penalty and related application management services, or

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Additional premium cloud subscription support beyond the regular support that is embedded in the basic cloud subscription fees, or

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Business Network Services, that is, connecting companies in a cloud-based-environment to perform business processes between the connected companies.

Software licenses revenue represents fees earned from the sale or license of software to customers for use on the customer’s premises, in other words, where the customer has the right to take possession of the software for installation on the customer’s premises (on-premise software). Software licenses revenue includes revenue from both the sale of our standard software products and customer-specific on-premise software development agreements.

Software support revenue represents fees earned from providing customers with standardized support services which comprise unspecified future software updates, upgrades, enhancements, and technical product support services for on-premise software

products. We do not sell separately technical product support or unspecified software upgrades, updates, and enhancements. Accordingly, we do not distinguish within software support revenue or within cost of software support the amounts attributable to technical support services and unspecified software upgrades, updates, and enhancements.

Services revenue as shownpresented in our Consolidated Income Statements represents fees earned from providing customers with:

Professional services, that is, consulting services that primarily relate to the installation and configuration of our cloud subscriptions and on-premise software products,

Premium support services, that is, high-end support services tailored to customer requirements,

Training services,

Messaging services (primarly transmission of electronic text messages from one mobile phone provider to another), and

Payment services in connection with our travel and expense management offerings.

We account for out-of-pocket expenses invoiced by SAP and reimbursed by customers as cloud subscriptions and support, software support, or services revenue, depending on the sumnature of our consultingthe service for which the out-of-pocket expenses were incurred.

Timing of Revenue Recognition

We do not start recognizing revenue from customer arrangements before evidence of an arrangement exists and the amount of revenue and other service revenue. Other service revenue as shown in our Consolidated Income Statements mainly consistsassociated costs can be measured reliably and collection of revenue from training services, messaging services, and SAP marketing events. Revenue information by segment and geographic regionthe related receivable is disclosed in Note (28).

probable. If, for any of our product or service offerings, we determine at the outset of an arrangement that the amount of revenue cannot be measured reliably, we conclude that the inflow of economic benefits associated with the transaction is not probable, and we defer revenue recognition until the arrangement fee becomes due and payable by the customer. If, at the outset of an arrangement, we determine that collectability is not probable, we conclude that the inflow of economic benefits associated with the transaction is not probable, and we defer revenue recognition until the earlier of when collectability becomes probable or payment is received. If collectability becomes not probable before all revenue from an arrangement is recognized, we recognize revenue only to the extent of the fees that are successfully collected unless collectability becomes probable again. If a customer is specifically identified as a bad debtor,

we stop recognizing revenue from the customer except to the extent of the fees that have already been collected.

We accountIn general, we invoice fees for out-of-pocket expenses invoiced by SAPstandard software upon contract closure and reimbursed by customers as support,delivery. Periodical fixed fees for cloud subscription services and software support services are mostly invoiced yearly or quarterly in advance. Fees based on actual transaction volumes for

cloud subscriptions and fees charged for non-periodical services are invoiced as the services are delivered.

Cloud subscriptions and support consulting, or other service revenue depending onis recognized as the nature of the serviceservices are performed. Where a periodical fixed fee is agreed for which the out-of-pocket expenses were incurred.

Software revenue represents fees earned from the sale or license of software to customers for use on the customer’s premises, in other words, where the customer has the right to take possession ofcontinuously access and use a cloud offering for a certain term, the softwarefee is recognized ratably over the term covered by the fixed fee. Fees that are based on actual transaction volumes are recognized as the transactions occur.

In general, our cloud subscriptions and support contracts include certain set-up activities. If these set-up activities have stand-alone value, they are accounted for installation onas distinct deliverables with the customer’s premises (on-premise software). respective revenue being classified as service revenue and recognized as the set-up activity is performed. If we conclude that such set-up activities are not distinct deliverables, we do not account for them separately.

Revenue from the sale of perpetual licenses of our standard on-premise software products is recognized in line withupon delivery of the requirements for selling goods stated in IAS 18 (Revenue)software, that is, when evidence of an arrangement exists, deliverythe customer has occurred, the risks and rewards of ownership have been transferredaccess to the customer, the amount of revenue and associated costs can be measured reliably, and collection of the related receivable is probable. The fee of the sale is recognized net of returns and allowances, trade discounts, and volume rebates.

We usually sell or license on-premise software on a perpetual basis.software. Occasionally, we license on-premise software for a specified period of time. Revenue from short-term time-based licenses, which usually include support services during the license period, is recognized ratably over the license term. Revenue from multi-year time-based licenses that include support services, whether separately priced or not, is recognized ratably over the license term unless a substantive support service renewal rate exists; if this is the case, the amount allocated to the delivered software is recognized as software licenses revenue based on the residual method once the basic criteria described above have been met.

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In general, our on-premise software license agreements do not include neither acceptance-testing provisions.provisions nor rights to return the software. If an arrangement allows for customer acceptance-testing of the software, we defer revenue until the earlier of customer acceptance or when the acceptance right lapses. If an arrangement allows for returning the software, we defer recognition of software revenue until the right to return expires.

We usually recognize revenue from on-premise software arrangements involving resellers on evidence of sell-through by the reseller to the end-customer, because the inflow of the economic benefits associated with the arrangements to us is not probable before sell-through has occurred.

Sometimes we enter intoSoftware licenses revenue from customer-specific on-premise software development agreements. We recognize softwareagreements that qualify for revenue in connection with these arrangementsrecognition by reference to the stage of completion of the contract activity is recognized using

the percentage-of-completion method based on contract costs incurred to date as a percentage of total estimated contract costs required to complete the development work. If we do not have a sufficient basis to reasonably measure the progress of completion or to estimate the total contract revenue and costs, revenue is recognized only to the extent of the contract costs incurred for which we believe recoverability to be probable. When it becomes probable that total contract costs exceed total contract revenue in an arrangement, the expected losses are recognized immediately as an expense based on the costs attributable to the contract.

On-premise software subscription contracts combine software and support service elements, as under these contracts the customer is provided with current software products, rights to receive unspecified future software products, and rights to product support during the on-premise software subscription term. CustomersTypically, customers pay a periodic fee for a defined subscription term, and we recognize such fees ratably over the term of the arrangement beginning with the delivery of the first product. Revenue from on-premise software subscription contracts is allocated to the software licenses revenue and software support revenue line items in our Consolidated Income Statements.

On-premise software rental contracts also combine software and support service elements. Under such contracts the customer is provided with current software products and product support, but not with the right to receive unspecified future software products. Customers pay a periodic fee over the rental term. We recognize fees from software rental contracts ratably over the term of the arrangement. Revenue from rental contracts is allocated to the software revenue and support revenue line items in our Consolidated Income Statements.

Support revenue represents fees earned from providing customers with unspecified future software updates, upgrades, and enhancements, and technical product support services for on-premise software products. We recognize support revenue based on our performance under the support arrangements. Under our majorstandardized support services, our performance obligation is to stand ready to provide technical product support and to provide unspecified updates, upgrades, and enhancements on a when-and-if-available basis. For these support servicesConsequently, we recognize support revenue ratably over the term of the support arrangement.

We do not sell separately technical product support or unspecified software upgrades, updates, and enhancements. Accordingly, we do not distinguish within software and software-related servicerecognize services revenue or within cost of software and software-related services the amounts attributable to technical support services and unspecified software upgrades, updates, and enhancements.

Revenue from cloud subscriptions and support represents fees earned from providing customers with:

The right to use software in a cloud-based-infrastructure (hosting) provided by SAP, where the customer does not have the right to terminate the hosting contract and take possession of the software to run it on the customer’s own IT infrastructure or by a third party hosting provider without significant penalty, or

Additional premium support beyond the standard support which is included in SAP’s basic cloud subscription fees, or

Hosting services and related application management services for software hosted by SAP, where the customer has the right to terminate the hosting contract and take possession of the software without significant penalty.

Cloud subscription and support revenue is recognized as the services are performed. Where a fixed fee is agreed for the right to continuously access and use a cloud offering for a certain term, the fee is recognized ratably over the term covered by the fixed fee. Fees that are based on actual transaction volumes are recognized as the transactions occur.

Revenue from consulting primarily represents fees earned from providing customers with consulting services which primarily relate to the installation and configuration of our software products and cloud offerings.rendered. Usually, our consultingprofessional services contracts

F-11


and premium support services contracts do not involve significant production, modification, or customization of software and the related revenue is recognized as the services are provided using the percentage-of-completion method of accounting as outlined above.

Revenue from other services represents fees earned from providing customers with training services, application management services for software not hosted by SAP,accounting. For messaging services, SAP marketing events, and referral services.

Training services provide educational services to customers and partners regardingwe measure the useprogress of our software products. We recognize training revenue and application management services as the services are rendered.

Messaging services primarily comprise the transmission of electronic text messages from one mobile phone provider to another. We recognize revenue from message servicesservice rendering based uponon the number of messages successfully processed and delivered. Revenue fromdelivered except for fixed-price messaging arrangements, for which revenue is recognized ratably over the contractual term of the arrangement.

Revenue from marketing events hosted by SAP, for which SAP sells tickets to its customers,our training services is recognized when the marketing eventcustomer consumes the respective classroom training. For on-demand training services, whereby our performance obligation is completed.

Referral services comprise referring customers to partners. We recognize revenue from referral services upon providingstand ready and provide the referral.

The majority of our arrangements contain multiple elements. We account for software, support, cloud subscription, consulting and other service deliverables as separate units of account and allocate revenue based on fair value. Fair value is determined by establishing either company-specific objective evidence, or an estimated stand-alone selling price.

The revenue amounts allocatedcustomer with access to the individual elements aretraining courses and learning content services, revenue is recognized whenratably over the revenue recognition criteria described above have been met for the respective element.

We generally determine the fair value of each element based on its company-specific objective evidence of fair value, which is the price charged when that element is sold separately or, for elements not yet sold separately, the price established by our management if it is probable that the price will not change before the element is sold separately.

We derive the company-specific objective evidence of fair value for our support services from the rates charged to renew the support services annually after an initial period. Such renewal rates generally represent a fixed percentagecontractual term of the discounted software license fee charged to the customer. The majorityarrangement.

Measurement of our customers renew their annual support service contracts at these rates.Revenue

Where company-specific objective evidence of fair value or third-party evidence of selling price cannot be established for deliverables, we determine the fair value of the respective element by estimating its stand-alone selling price. This is generally the case for our cloud subscription offerings.

Estimated stand-alone selling price (ESP) for our cloud subscription offerings is determined based on the rates agreed with the individual customers to apply if and when the subscription arrangement renews. We determine ESP by considering multiple factors which include, but are not limited to, the following: i) substantive renewal rates contained within an arrangement for cloud subscription deliverables; ii) gross margin objectives and internal costs for services; and iii) pricing practices, market conditions, and competitive landscape.

We apply the residual method of revenue recognition when company-specific objective evidence of fair value or estimated stand-alone selling price exists for all of the undelivered elements in the arrangement, but does not exist for one or more delivered elements. This is generally the case in multiple element arrangements involving on-premise software and services related to on-premise software where company-specific objective evidence of fair value or estimated stand-alone selling price exists for all the services in the arrangement (for example, support services, consulting services, cloud subscription services), but does not exist for the on-premise software. Under the residual method, revenue is allocated to all undelivered elements in the amount of their respective fair values and the remaining amount of the arrangement fee is allocated to the delivered element. With this policy we have considered the guidance provided by FASB ASC Subtopic 985-605, Software Revenue Recognition (FASB ASC 985-605), where applicable, as authorized by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8).

In multiple element arrangements where company-specific objective evidence of fair value or an

F-12


estimated stand-alone selling price exists for all elements, revenue is allocated to the elements based on their relative fair values (relative fair value method).

Our consideration of whether on-premise software, cloud subscriptions, consulting or other services are to be accounted for separately or as one combined element of the arrangement depends on:

Whether the arrangement involves significant production, modification, or customization of the software or cloud subscription, and

Whether the services are not available from third-party vendors and are therefore deemed essential to the software.

If neither of the above is the case, revenue for the on-premise software or cloud subscription element, and the other elements, are recognized separately. In contrast, if one or both of the above applies, the respective elements of the arrangement are combined and accounted for as a single unit of account, and the portion of the arrangement fee allocated to this single unit of account is recognized using the percentage-of-completion method, as outlined above, or over the cloud subscription term, if applicable, depending on which service term is longer.

We consider FASB ASC 985-605 in our accounting for options that entitle the customer to purchase, in the future, additional on-premise software. We allocate revenue to future incrementalnet of returns and allowances, trade discounts, whenever customers are granted the right to license additional on-premise software at a higher discount than the one given within the initial software license arrangement, or to purchase or renew services at rates below the fair values established for these services.and volume rebates.

Our contributions to resellers that allow our resellers to execute qualified and approved marketing activities are recognized as an offset to revenue, unless we obtain a separate identifiable benefit for the contribution and the fair value of thethat benefit is reasonably estimable.

Multiple-Element Arrangements

We combine two or more customer contracts with the same customer and account for the contracts as a single contract if the contracts are negotiated as a package or otherwise linked. Thus, the majority of our contracts that contain cloud offerings or on-premise software also include other goods or services (multiple-element arrangements).

We account for the different goods and services promised under our customer contracts as separate units of account (distinct deliverables) unless:

The contract involves significant production, modification, or customization of the cloud subscription or on-premise software; and

The services are not available from third-party vendors and are therefore deemed essential to the cloud subscription or on-premise software.

Goods and services that do not qualify as distinct deliverables are combined into one unit of account (combined deliverables).

The portion of the transaction fee allocated to one distinct deliverable is recognized in revenue separately under the policies applicable to the respective deliverable. For combined deliverables consisting of cloud offerings or on-premise software and other services, the allocated portion of the transaction fee is recognized using the percentage-of-completion method, as outlined above, or over the cloud subscription term, if applicable, depending on which service term is longer.

We allocate the total transaction fee of a customer contract to the distinct deliverables under the contract based on their fair values. The allocation is done relative to the distinct deliverables’ individual fair values unless the residual method is applied as outlined below. Fair value is determined by company-specific objective evidence of fair value which is the price charged consistently when that element is sold separately or, for elements not yet sold separately, the price established by our management if it is probable that the price will not change before the element is sold separately. Where company-specific objective evidence of fair value and third-party evidence of selling price cannot be established due to lacking stand-alone sales or lacking pricing consistency, we determine the fair value of a distinct deliverable by estimating its stand-alone selling price. Company-specific objective evidence of fair value and estimated stand-alone selling prices (ESP) for our major products and services are determined as follows:

We derive the company-specific objective evidence of fair value for our renewable support services from the rates charged to renew the support services annually after an initial period. Such renewal rates generally represent a fixed percentage of the discounted

software license fee charged to the customer. The majority of our customers renew their annual support service contracts at these rates.

Company-specific objective evidence of fair value for our professional services is derived from our consistently priced historic sales.

Company-specific objective evidence of fair value can generally not be established for our cloud subscriptions. ESP for these offerings is determined based on the rates agreed with the individual customers to apply if and when the subscription arrangement renews. We determine ESP by considering multiple factors which include, but are not limited to, the following:

Substantive renewal rates stipulated in the cloud arrangement; and

Gross margin expectations and expected internal costs of the respective cloud business model.

For our on-premise software offerings, company-specific objective evidence of fair value can generally not be established and representative stand-alone selling prices are not discernible from past transactions. We therefore apply the residual method to multiple-element arrangements that include on-premise software. Under this method, the transaction fee is allocated to all undelivered elements in the amount of their respective fair values and the remaining amount of the arrangement fee is allocated to the delivered element. With this policy, we have considered the guidance provided by FASB ASC Subtopic 985-605 (Software Revenue Recognition), where applicable, as authorized by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors).

We also consider FASB ASC 985-605 in our accounting for options that entitle the customer to purchase, in the future, additional on-premise software or services. We allocate revenue to future incremental discounts whenever customers are granted a material right, that is, the right to license additional on-premise software at a higher discount than the one given within the initial software license arrangement, or to purchase or renew services at rates below the fair values established for these services. We also consider whether future purchase options included in arrangements for cloud subscription deliverables constitute a material right.

Cost of SoftwareCloud and Software-Related ServicesSoftware

Cost of softwarecloud and software-related servicessoftware includes the costcosts incurred in producing the goods and providing the services that generate softwarecloud and software-related servicesoftware revenue. Consequently, this line item primarily includes primarily

employee expenses relating to these services, amortization of acquired intangibles, fees for third-party licenses, shipping, ramp-up cost, and ramp-up cost.depreciation of our property, plant, and equipment.

Cost of Professional Services and Other Services

Cost of professional services and other services includes the costcosts incurred in providing the services that generate professional service and other service revenue including messaging revenues. The item also includes sales and marketing expenses related to our professional services and other services that result from sales and marketing efforts that cannot be clearly separated from providing the services.

Research and Development

Research and development includes the costs incurred by activities related to the development of software solutions (new products, updates, and enhancements) including resource and hardware costs for the development systems.

Development activities involve the application of research findings or other knowledge to a plan or design of new or substantially improved software products before the start of commercial use. Development expenditures are capitalized only if all of the following criteria are met:

The development cost can be measured reliably.

The product is technically and commercially feasible.

Future economic benefits are probable.

We intend to complete development and market the product.

We have determined that the conditions for recognizing internally generated intangible assets from our software development activities are not met until shortly before the products are available for sale. Development costs incurred after the recognition criteria are met have not been material. Consequently, all research and development costs are expensed as incurred.

Sales and Marketing

Sales and marketing includes costs incurred for the selling and marketing activities related to our software solutions, software-related service portfolio, and cloud business.solutions.

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General and Administration

General and administration includes costs related to finance and administrative functions, human resources, and general management as long as they are not directly attributable to one of the other operating expense line items.

LeasesAccounting for Uncertainties in Income Taxes

We are a lessee of property, plant, and equipment, mainly buildings, hardware, and vehicles, under operating leases that do not transfer to us the substantive risks and rewards of ownership. Rent expense on operating leases is recognized on a straight-line basis over the life of the lease including renewal terms if, at inception of the lease, renewal is reasonably assured.

Some of our operating leases contain lessee incentives, such as up-front payments of costs or free or reduced periods of rent. The incentives are amortized over the life of the lease and the rent expense is recognized on a straight-line basis over the life of the lease. The same applies to contractually-agreed future increases of rents.

Income Tax

Deferred taxes are accounted for under the liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the Consolidated Statements of Financial Position and their respective tax bases and on the carryforwards of unused tax losses and unused tax credits. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses, and unused tax credits can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in profit or loss, unless related to items recognized in other comprehensive income or directly in equity, in the period of (substantive) enactment.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer

probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax assets to be utilized.

We have aligned the presentation of prior period comparative amounts for tax assets and tax liabilities with themeasure current period presentation by offsetting certain current tax assets against certain current tax liabilities and certain deferred tax assets against certain deferred tax liabilities which were not offset previously. The impact of this offsetting on the comparative amounts was to decrease both, current tax assets and current tax liabilities as of December 31, 2012, by €70 million and to decrease both, deferred tax assets and deferred tax liabilities asand assets for uncertainties in income taxes based on our best estimate of December 31, 2012, by €353 million. Management concludedthe most likely amount payable to or recoverable from the tax authorities, assuming that these adjustments were immaterialthe tax authorities will examine the amounts reported to the consolidated financial statements.them and have full knowledge of all relevant information.

Share-Based Payments

Share-based payments cover cash-settled and equity-settled awards issued to our employees. The fair values of both equity-settled and cash-settled awardsrespective expenses are initially measured at grant date using an option-pricing model.

The fair value of equity-settled awards is not subsequently remeasured. The grant date fair value of equity-settled awards is recognized as personnel expenseemployee benefits expenses and classified in profit or loss overour Consolidated Income Statements according to the period in whichactivities that the employees become unconditionally entitled toowning the rights, with a corresponding increase in share premium. The amount recognized as an expense is adjusted to reflect the actual number of equity-settled awards that ultimately vest. perform.

We grant our employees discounts on certain share-based payments.payment awards. Since those discounts are not dependent on future services to be provided by our employees, the discount is recognized as an expense when the rights are granted.

For the share-based payments that are settled by paying cash rather than by issuing equity instruments, a provision is recorded for the rights granted reflecting the vested portion of the fair value of the rights at the end of each reporting period. Personnel expense is recognized over the period the beneficiaries are expected to perform the related service (vesting period), with a corresponding increase in provisions. Cash-settled awards are remeasured to fair value at the end of each reporting date until the award is settled. Any changes in the fair value of the provision are recognized as personnel expense in profit or loss. The amount of unrecognized compensation

 

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expense is dependent on the future price of our ordinary shares which we cannot reasonably predict.

Where we hedge our exposure to cash-settled awards, changes in the fair value of the respective hedging instruments are also recognized as personnel expenseemployee benefits expenses in profit or loss. The fair values for hedged programsof hedging instruments are based on market data reflecting current market expectations.

For more information about our share-based payments, see Note (27).

Other Components of Equity

Other components of equity include:

Exchange differences arising from the translation of the financial statements of our foreign operations as well as the exchange differences from intercompany long-term monetary items for which settlement is neither planned nor likely to occur in the foreseeable future

Unrealized gains and losses on available-for-sale financial assets

Gains and losses on cash-flow hedges comprising the net change in fair value of the effective portion of the respective cash-flow hedges that have not yet impacted profit or loss

Treasury Shares

Treasury shares are recorded at acquisition cost and are presented as a deduction from total equity. Gains and losses on the subsequent reissuance of treasury shares are credited or charged to share premium on an after-tax basis. On cancellation of treasury shares, any excess of their carrying amount over the calculated par value is charged to retained earnings.

Earnings per Share

We present basic and diluted earnings per share (EPS). Basic earnings per share is determined by dividing profit after tax attributable to equity holders of SAP AG by the weighted average number of ordinary shares outstanding during the respective year. Diluted earnings per share reflect the potential dilution assuming the conversion of all dilutive potential ordinary shares.

Financial Assets

Our financial assets comprise cash and cash equivalents (highly liquid investments with original maturities of three months or less), loans and receivables, acquired equity and debt investments, and derivative financial instruments (derivatives) with positive fair values.

These assets are recognized and measured in accordance with IAS 39 (Financial Instruments: Recognition and Measurement). Accordingly, financial assets are recognized in the Consolidated Statements of Financial Position if we have a contractual right to receive cash or other financial assets from another entity. Regular way purchases or sales of financial assets are recorded at the trade date. Financial assets are initially recognized at fair value plus, in the case ofonly classified as financial assets not at fair value through profit or loss, directly attributable transaction costs. Interest-free or below-market-rate loans and receivables are initially measured at the present value of the expected future cash flows. The subsequent measurement depends on the classification of our financial assets to the following categories according to IAS 39:

Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are neither quoted in an active market nor intended to be sold in the near term. This category comprises trade receivables, receivables and loans included in other financial assets, and cash and cash equivalents. We carry loans and receivables at amortized cost less impairment losses. For further information on trade receivables, see the Trade and Other Receivables section.

Available-for-sale financial assets: Available-for-sale financial assets are non-derivative financial assets that are not assigned to either of the two other categories and mainly include equity investments and debt investments. Available-for-sale financial assets are measured at fair value, with changes in fair value being reported net of tax in other comprehensive income. Fair value changes are not recognized in profit or loss until the assets are sold or impaired.

Financial assets at fair value through profit or loss: Financial assets at fair value through profit or loss comprise only those financial assets thatif they are held for trading, as we do not designate financial assets at fair value through profit or loss on initial recognition. This category solely

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contains embedded and freestanding derivatives with positive fair values. Except where hedge accounting is applied, all changes in the fair value of financial assets in this category are immediately recognized in profit or loss. For more information about derivatives, see the Derivatives section.

All other financial assets not accounted for at fair value through profit or loss are assessed for impairment at each reporting date orclassified as loans and receivables if we become awaredo not designate them as available-for-sale financial assets.

Regular way purchases and sales of financial assets are recorded as at the trade date.

Among the other impairment indicators in IAS 39 (Financial Instruments: Recognition and Measurement), for an investment in an equity security, objective evidence of impairment as a result of one or more events that indicate that the carrying amount of the asset may not be recoverable. Objective evidence includes but is not limited to a significant (more than 20%) or prolonged (a period of more than nine months) decline of thein its fair value below its carrying amount, a high probability of insolvency, or a material breach of contract by the issuer such as a significant delay or a shortfall in payments due.value. Impairment losses in the amount of the difference between an asset’s carrying amount and the present value of the expected future cash flows or current fair value, respectively,on financial assets are recognized in financial income, net. For available-for-sale financial assets, suchwhich are non-derivative financial assets that are not assigned to loans and receivables or financial assets at fair value through profit or loss, impairment losses directly reduce an asset’s carrying amount, while impairments on loans and receivables are recorded using allowance accounts. Such allowance accounts are always presented together with the accounts containing the asset’s cost in other financial assets. Account balances are charged off against the respective allowance after all collection efforts have been exhausted and the likelihood of recovery is considered remote. Impairment losses are reversed if the reason for the original impairment loss no longer exists. No such reversals are made for available-for-sale equity investments.

Income/expenses and gains/losses on financial assets consist of impairment losses and reversals, interest income and expenses, dividends, and gains and losses from the disposal of such assets. Dividend income is recognized when earned. Interest income is recognized based on the effective interest method. Neither dividend nor interest income is included in net gains/losses at the time of disposal of an asset. Financial assets are derecognized when contractual rights to receive cash flows from the financial assets expire or the financial assets are transferred together with all material risks and benefits.

Derivatives

We account for derivatives and hedging activities in accordance with IAS 39 at fair value.

Derivatives WithoutNot Designated Hedge Relationshipas Hedging Instruments

Many transactions constitute economic hedges, and therefore contribute effectively to the securing of financial risks but do not qualify for hedge accounting under IAS 39. For the hedging ofTo hedge currency risks inherent in foreign currencyforeign-currency denominated and recognized monetary assets and liabilities, we do not designate our held-for-trading derivative financial instruments as accounting hedges, asbecause the profits and losses from the underlying transactions are recognized in profit or loss in the same periods as the profits or losses from the derivatives.

Embedded Derivatives

WeIn addition, we occasionally have contracts that require payment streams in currencies other than the functional currency of either party to the contract. Such embeddedcontain foreign currency embedded derivatives are separated from the host contract andto be accounted for separately if the following are met:separately.

The economic characteristics and risks of the host contract and the embedded derivative are not closely related.

A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative.

The combined instrument is not measured at fair value through profit or loss.

Derivatives with Designated Hedge Relationshipas Hedging Instruments

We designateuse derivatives in respect ofto hedge foreign currency risk or interest rateinterest-rate risk and designate them as cash flow or fair value hedges in a hedging relationship that qualifiesif they qualify for hedge accounting under IAS 39 and carry them at their fair value. At inception, we designate and document the hedge relationship, including the nature of the risk, the identification of the hedged item, the hedging instrument, and how we will assess the hedge effectiveness. Furthermore, at inception and on an ongoing basis we measure and document whether the derivatives are highly effective in offsetting the changes in the fair values or cash flows of the hedged item attributable to the hedged risk. The accounting for changes in fair value of the hedging instrument depends on the type of the hedge and the effectiveness of the hedging relationship.39. For more information about our hedges, see Note (25)(24).

a) Cash Flow Hedge

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a)Cash Flow Hedge

In general, we apply cash flow hedge accounting to the foreign currency risk of highly probable forecasted transactions and interest rateinterest-rate risk on variable rate financial liabilities.

The effective portion of changes in the fair value of the derivative instrument determined to be an effective hedge is recognized in other comprehensive income and presented within other components of equity from cash flow hedges. With regard to foreign currency risk, thishedge accounting relates to the spot price and the intrinsic values of the derivatives designated and qualifying as cash flow hedges, while gains and losses on the interest element and on those time values excluded from the hedging relationship as well as the ineffective portion of gains or losses are recognized in profit or loss. We subsequently reclassify the effective portion of gains or losses from other comprehensive income to profit or loss when the hedged transaction affects profit or loss.as they occur.

If the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss recognized in other comprehensive income at that time remains in other comprehensive income until the forecasted transaction is ultimately recognized in profit or loss. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss existing in other comprehensive income at that time is immediately transferred to profit or loss.b) Fair Value Hedge

b)Fair Value Hedge

We apply fair value hedge accounting for hedging certain of our fixed rate financial liabilities.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk (basis adjustment). The change in the fair value of the derivatives and the change in the hedged item attributable to the hedged risk are recognized in profit or loss in the line item relating to the hedged item.

If the hedge no longer meets the criteria for hedge accounting, the basis adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized over the period to maturity.

Valuation and Testing of Effectiveness

The effectiveness of the hedging relationship 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 for the forecasted transactions and the spot element of the forward exchange rate contract or intrinsic value of the currency options, respectively. For interest rateinterest-rate swaps, we also apply the critical terms match as the notional amounts, currencies, maturities, basis of the variable legs or fixed legs, respectively, reset dates, and the dates of the interest and principal payments are identical for the debt instrument and the corresponding interest rateinterest-rate swaps. Therefore, over the life of the hedging instrument, the changes in the designated components of the hedging instrument will offset the impact of fluctuations of the underlying hedged items.

The method of retrospectively testing effectiveness depends on the type of the hedge as described further below:

a) Cash Flow Hedge

a)Cash Flow Hedge

Retrospectively, effectiveness is tested on a cumulative basis applying the dollar offset method by using the hypothetical derivative method. Under this approach, the change in fair value of a constructed hypothetical derivative with terms reflecting the relevant terms of the

hedged item is compared to the change in the fair value of the hedging instrument employing its relevant terms. The hedge is deemed highly effective if the results are within the range 80% to 125%.

b) Fair Value Hedge

b)Fair Value Hedge

Retrospectively, effectiveness is tested using statistical methods in the form of a regression analysis by which the validity and extent of the relationship between the change in value of the hedged items as the independent variable and the fair value change of the derivatives as the dependent variable is determined. The hedge is deemed highly effective if the determination coefficient between the hedged items and the hedging instruments exceeds 0.8 and the slope coefficient lies within a range of –0.8 to –1.25.

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Trade and Other Receivables

Trade receivables are recorded at invoiced amounts less sales allowances and allowances for doubtful accounts. We record these allowances based on a specific review of all significant outstanding invoices. When analyzing the recoverability of our trade receivables, we consider the following factors:

First, we consider the financial solvency of specific customers and record an allowance for specific customer balances when we believe it is probable that we will not collect the amount due according to the contractual terms of the arrangement.

Second, we evaluate homogenous portfolios of trade receivables according to their default risk primarily based on the age of the receivable and historical loss experience, but also taking into consideration general market factors that might impact our trade receivable portfolio. We record a general bad debt allowance to record impairment losses for a portfolio of trade receivables when we believe that the age of the receivables indicates that it is probable that a loss has occurred and we will not collect some or all of the amounts due.

First, we consider the financial solvency of specific customers and record an allowance for specific customer balances when we believe it is probable that we will not collect the amount due according to the contractual terms of the arrangement.

Second, we evaluate homogenous portfolios of trade receivables according to their default risk primarily based on the age of the receivable and historical loss experience, but also taking into consideration general market factors that might impact our trade receivable portfolio. We record a general bad debt allowance to record impairment losses for a portfolio of trade receivables when we believe that the age of the receivables indicates that it is probable that a loss has occurred and we will not collect some or all of the amounts due.

Account balances are written off, that is, charged off against the allowance after all collection efforts have been exhausted and the likelihood of recovery is considered remote.

In our Consolidated Income Statements, expenses from recording bad debt allowances for a portfolio of trade receivables are classified as other operating income, net, whereas expenses from recording bad debt allowances for specific customer balances are classified as cost of softwarecloud and software-related servicessoftware or cost of professional services and other services, depending on the transaction from which the respective trade receivable results. Sales allowances are recorded as an offset to the respective revenue item.

Included in trade receivables are unbilled receivables related to fixed-fee and time-and-material consulting arrangements for contract work performed to date.

Other Non-Financial Assets

Other non-financial assets are recorded at amortized cost. We recognize as an asset the direct and incremental cost incurred when obtaining a customer cloud subscription contract. We amortize these assets on a straight line basis over the period of providing the cloud subscriptions to which approximates fair value due to their short-term nature.the assets relate.

Intangible Assets

We classify intangible assets according to their nature and use in our operation. Software and database licenses consist primarily of technology for internal use, whereas acquired technology consists primarily of purchased software to be incorporated into our product offerings and in-process research and development. Customer relationship and other intangibles consist primarily of customer contracts and acquired trademark licenses.

All our purchased intangible assets other than goodwill have finite useful lives. They are initially measured at acquisition cost and subsequently amortized either based on expected usageconsumption of economic benefits or on a straight-line basis over their estimated useful lives ranging from two to 1620 years.

We recognizeAmortization for acquired in-process research and development projects as an intangible asset separate from goodwill if a project meets the definition of an asset. Amortization for these intangible assets starts when the projects are complete and the developed software is taken to the market. We typically amortize these intangibles over five to seven years.

Amortization expenses of intangible assets are classified as cost of softwarecloud and software-related services,software, cost of professional services and other services, research and development, sales and marketing, and general and administration, depending on their use.the use of the respective intangible assets.

Property, Plant, and Equipment

Property, plant, and equipment are carried at acquisition cost plus the fair value of related asset retirement costs if any and if reasonably estimable, and less accumulated depreciation. Interest incurred during the construction of qualifying assets is capitalized and amortized over the related assets’ estimated useful lives.

Property, plant, and equipment are depreciated over their expected useful lives, generally using the straight-line method.

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Useful Lives of Property, Plant, and Equipment

 

Useful Lives of  Property,
Plant, and Equipment

Buildings

  25 to 50 years

Leasehold improvements

  Based on the term of the lease contract

Information technology equipment

  3 to 5 years

Office furniture

  4 to 20 years

Automobiles

  4 to 5 years

Leasehold improvements are depreciated using the straight-line method over the shorter of the term of the lease or the useful life of the asset. If a renewal option exists, the term used reflects the additional time covered by the option if exercise is reasonably assured when the leasehold improvement is first put into operation.

Impairment of Goodwill and Non-Current Assets

We test goodwill for impairment at least annually and when events occur or changes in circumstances indicate that the recoverable amount of a cash-generating unit to which goodwill has been allocated is less than its carrying value.

The recoverable amount of goodwill is estimated each year at the same time. Theannual goodwill impairment test is performed at the level of our operating segments since there are no lower levels in SAP at which goodwill is monitored for internal management purposes.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the operating segments that are expected to benefit from the synergies of the combination. If the carrying amount of the operating segment to which the goodwill is allocated exceeds the recoverable amount, an impairment loss on goodwill allocated to this operating segment is recognized. The recoverable amount is the higher of the operating segment’s fair value less costs of disposal and its value in use. Fair value less costs of disposal is the price that would be received to sell an asset or cash generating unit or paid to transfer a liability in an orderly transaction between market participants at the measurement date, less the cost of disposal. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. Impairment losses on goodwill are not reversed in future periods.

We review non-current assets, such as property, plant, equipment, and intangible assets for impairment whenever events or changes in

circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Intangible assets not yet available for use are tested for impairment annually.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. If assets do not generate cash inflows that are largely independent of those from other assets or groups of assets, the impairment test is not performed at an individual asset level; instead, it is performed at the level of the cash-generating unit (CGU) to which the asset belongs.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. The recoverable amount of an asset or its CGU is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of thesame time value of money and the risks specific to the asset.for all operating segments.

Impairment losses are presented in other operating income,income/expense, net in profit or loss.

Contingent Assets

We carry insurance policies to, among other things, offset the expenses associated with defending against litigation matters as well as other risks. We recognize the respective reimbursements in profit or loss when it is virtually certain that the reimbursement will be received and retained by us.

Liabilities

Financial Liabilities

Financial liabilities include trade and other payables, bank loans, issued bonds, private placements, and other financial liabilities whichthat comprise derivative and non-derivative financial liabilities.

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Financial liabilities They are recognized and measured in accordance with IAS 39. Accordingly, they are recognized in the Consolidated Financial Statements if we have a contractual obligation to transfer cash or another financial asset to another party. Financial liabilities are initially recognized at fair value. In the case ofclassified as financial liabilities not measuredat amortized cost and at fair value through profit or loss, the initial measurement includes directly attributable transaction costs. If material, financial liabilities are discounted to present value based on prevailing market rates adjusted for credit risk, with the discount being recognized over time as interest expense.loss. The subsequent measurement depends on the allocation of financial liabilities to the following categories according to IAS 39:

Financial liabilities at fair value through profit or losslatter include only comprise those financial liabilities that are held for trading, as we do not designate financial liabilities at fair value through profit or lossloss.

Customer funding liabilities are funds we draw from and make payments on initial recognition. This category solely contains embeddedon behalf of our customers for customers’ employee expense reimbursements, related credit card payments, and other derivatives with negative fair values, except where hedge accounting is applied. All changesvendor payments. We present these funds in the fair valuecash and cash equivalents and record our obligation to make these expense reimbursements and payments on behalf of financial liabilities in this category are immediately recognized in profit or loss. For more information about derivatives, see the Derivatives section.our customers as customer funding liabilities.

Financial liabilities at amortized cost include all non-derivative financial liabilities which are measured at amortized cost using the effective interest method.

Expenses and gains/losses on financial liabilities mainly consist of interest expense, and gains and losses from the disposal of such liabilities. Interest expensewhich is recognized based on the effective interest method.

Financial liabilitiesProvisions

The employee-related provisions include, amongst others, long-term employee benefits. They are derecognized when the contractual obligation is discharged, canceled, or has expired.

Non-Financial Liabilities

Other non-financial liabilities with fixed or determinable payments that are not quoted in an active market are mainly the result of obligations to employees and fiscal authoritiessecured by pledged reinsurance coverage and are generally measured at amortized cost.

Provisions

Provisions are recorded when all ofoffset against the following conditions are met:

It is more likely than not that we have a legal or constructive obligation to third parties as a result of a past event.

The amount can be reasonably estimated.

It is probable that there will be an outflow of future economic benefits to settle the obligation, while there may be uncertainty about the timing orsettlement amount of the future expenditure required in the settlement.secured commitment.

We regularly adjust provisions as further information becomes available or circumstances change. Non-current provisions are reported at the present value of their expected settlement amounts as at the reporting date. Discount rates are regularly adjusted to current market interest rates.

A provision for restructuring is recognized when we have approved a detailed and formal restructuring plan and the restructuring has commenced or has been announced.

Post-Employment Benefits

We measureThe discount rates used in measuring our pension-benefitpost-employment benefit assets and liabilities are derived from rates available on high-quality corporate bonds and other post-employment benefits based on actuarial computations usinggovernment bonds for which the projected-unit-credit method in accordance with IAS 19.timing and amounts of payments match the timing and the amounts of our projected pension payments. The assumptions used to calculate pension liabilities and costs are disclosed in Note (18a). As a result of the actuarial calculation for each plan, we recognize an asset or liability for the overfunded or underfunded status of the respective defined benefit plan. We classify a portion of the liability as current (determined on a plan-by-plan basis) if the amount by which the actuarial present value of benefits included in the benefit obligation payable within the next 12 months exceeds the fair value of plan assets. Remeasurements of the defined benefit obligation (DBO) or plan assets resulting from demographic and financial data different than originally assumed and from changes in assumptions can result in actuarial gains and losses. We recognize all such remeasurements immediately in retained earnings through other comprehensive income. They will not be reclassified to profit or loss in subsequent periods. Net interest expense and other expenses related to defined benefit plans are recognized in employee expenses.

SAP’s pension benefits are classified as defined contribution plans if the payment to a separate fund relieves SAP of all obligations from the pension plan. Obligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss when paid or due.

Certain ofSince our foreign subsidiaries are required to provide termination indemnity benefits to their employees regardless of the reason for

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termination (retirement, voluntary, or involuntary). We treat these plans asdomestic defined benefit pension plans ifprimarily consist of an employee-financed post-retirement plan that is fully financed with qualifying insurance policies, current service cost may become a credit as a result of adjusting the substancedefined benefit

liability’s carrying amount to the fair value of the post-employmentqualifying plan is a pension-type arrangement. Most of these arrangements provide the employee with a one-time payout based on compensation levels, age, and years ofassets. Such adjustments are recorded in service on termination independent of the reason (retirement, voluntary, or involuntary).cost.

Deferred Income

Deferred income is recognized as software revenue, support revenue, cloud subscriptionsubscriptions and support revenue, consultingsoftware licenses revenue, software support revenue, or other serviceservices revenue, depending on the reasonsreason for the deferral, once the basic applicable revenue recognition criteria have been met. These criteria are met, for example, when the related services are performed or when the discounts that relate to a material right granted in a purchase option are used.applied.

(3c) Management Judgments and Sources of Estimation Uncertainty

(3c)Management Judgments and Sources of Estimation Uncertainty

The preparation of the Consolidated Financial Statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent assets and liabilities.

We base our judgments, estimates, and assumptions on historical and forecast information, as well as on regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues, and expenses. Actual results could differ from original estimates.

The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, include the following:

Revenue recognition

Valuation of trade receivables

Accounting for share-based payments

Accounting for income tax

Accounting for business combinations

Subsequent accounting for goodwill and other intangibles

Accounting for legal contingencies

Recognition of internally generated intangible assets from development

Revenue recognition

Valuation of trade receivables

Accounting for share-based payments

Accounting for income tax

Accounting for business combinations

Subsequent accounting for goodwill and other intangible assets

Accounting for legal contingencies

Recognition of internally generated intangible assets from development

Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board.

Revenue Recognition

As described in the Revenue Recognition section of Note (3b), we do not recognize revenue before persuasive evidence of an arrangement exists, delivery has occurred, the risks and rewards of ownership have been transferred to the customer, the

amount of revenue can be measured reliably and collection of the related receivable is probable. The determination of whether the amount of revenue can be measured reliably or whether the fees are collectible is inherently judgmental, as it requires estimates as to whether and to what extent subsequent concessions may be granted to customers and whether the customer is expected to pay the contractual fees. The timing and amount of revenue recognition can vary depending on what assessments have been made.

The application of the percentage-of-completion method requires us to make estimates about total revenue, total cost to complete the project, and the stage of completion. The assumptions, estimates, and uncertainties inherent in determining the stage of completion affect the timing and amounts of revenue recognized.

In most ofthe accounting for our revenue-generatingmultiple-element arrangements, we sell to the customer more than one product solution or service. Additionally, we have ongoing relationships with many of our customers and often enter into several transactions with the same customer within close proximity in time. We therefore have to determine the following:

Which contracts with the same customer are to be accounted for as one single contract

Which deliverables under one contract are distinct and thus to be accounted for separately

How to allocate the total arrangement fee to the deliverables of one contract

Which arrangementsThe determination of whether different contracts with the same customer are to be accounted for as one arrangement

Which deliverables under one arrangement are to be accounted for separately

How to allocate the total arrangement fee to the individual elements of one arrangement

The determination of whether different arrangements with the same customer are to be accounted for as one arrangementcontract is highly judgmental, as it requires us to evaluate whether the arrangementscontracts are negotiated together or linked in any other way. The timing and amount of revenue recognition can vary depending on whether two arrangementscontracts are accounted for separately or as one arrangement.single contract.

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Under ana multiple-element arrangement including on-premise software, or a cloud subscription, or on-premise software, and other deliverables, we do not account for the cloud subscription, or on-premise software, or cloud subscription, and the other deliverables separately if one of the other deliverables (such as consulting services) is deemed to be essential to the functionality of the cloud subscription or on-premise software, or cloud subscription.software. The determination whether an undelivered element is essential to the functionality of the delivered element requires the use of judgment. The timing and amount of revenue recognition can vary depending on how that judgment is exercised, because revenue may be recognized over a longer service term.

We also do not account separately for different deliverables under an arrangement if we have no basis forIn the area of allocating the overall arrangementtransaction fee to the different elements ofdeliverables under the arrangement. However, we believe that such allocation basis exists if we can either demonstrate for each undelivered element of the arrangement a company-specific fair value, or, where such company-specific fair value cannot be established, if we can reasonably estimate stand-alone selling prices, as further defined in the Revenue Recognition section of Note (3b). Judgmentrespective customer contract, judgment is required in the determination of an appropriate fair value measurement which may impact the timing and amount of revenue recognized depending on the following:

Whether an appropriate measurement of fair value can be demonstrated for undelivered elements.

The approaches used to establish fair value.

Whether an appropriate measurement of fair value can be demonstrated for undelivered elements

The approaches used to establish fair value

Additionally, our revenue for on-premise software contracts would be significantly different if we applied a revenue allocation policy other than the residual method.

Revenue from consulting, other services, and customer-specific on-premise software development projects is determined by applying the percentage-of-completion method. The percentage-of-completion method requires us to make estimates about total revenue, total cost to complete the project, and the stage of completion. The assumptions, estimates, and uncertainties inherent in determining the stage of completion affect the timing and amounts of revenue recognized and expenses reported. If we do not have a sufficient basis to measure the progress of completion or to estimate the total contract revenue and costs, revenue recognition is limited to the amount of contract costs incurred. The

determination of whether a sufficient basis to measure the progress of completion exists is judgmental. Changes in estimates of progress towards completion and of contract revenue and contract costs are accounted for as cumulative catch-up adjustments to the reported revenue for the applicable contract.

Valuation of Trade Receivables

As described in the Trade and Other Receivables section in Note (3b), we account for impairments of trade receivables by recording sales allowances and allowances for doubtful accounts on an individual receivable basis and on a portfolio basis. The assessment of whether a receivable is collectible is inherently judgmental and requires the use of assumptions about customer defaults that could change significantly. Judgment is required when we evaluate available information about a particular customer’s financial situation to determine whether it is probable that a credit loss will occur and the amount of such loss is reasonably estimable and thus an allowance for that specific account is necessary. Basing the general allowance for the remaining receivables on our historical loss experience, too, is highly judgmental, as history may not be indicative of future development, particularly in the global economic circumstances resulting from the recent global financial crisis.development. Changes in our estimates about the allowance for doubtful accounts could materially impact the reported assets and expenses, in our financial statements, and our profit could be adversely affected if actual credit losses exceed our estimates.

Accounting for Share-Based Payments

We use certain assumptions in estimating the fair values for our share-based payments, including expected future share price volatility and expected option life (which represents our estimate of the average amount of time remaining until the options are exercised or expire unexercised). In addition, the final payout for these plans also depends on our share price at the respective exercise dates. AllChanges to these assumptions may significantly impactand outcomes that differ from these assumptions could require material adjustments to the fair value determination and thus thecarrying amount and timing of our share-based payment expense. Furthermore, the fair values of the options granted under our 2009 Plan (SOP PP) are dependent on our performance against the Technology Peer Group Index (TechPGI) since the respective grant date, the volatility and the expected correlation between the market price of this index, and our share price.liabilities we have recognized for these share-based payments.

 

F-22


For the purpose of determining the estimated fair value of our stock options, we believe expected volatility is the most sensitive assumption. Regarding future payout under theour cash-settled plans, the price of SAP’s sharesSAP stock will be the most relevant factor. The fair values of the Restricted Share Units (RSUs’) granted under our Employee Participation Plan (EPP) and Long-Term Incentive Plan (LTI) 2015 depend on SAP’s share price directly after the announcement of the preliminary fourth quarter and full-year results for the last financial year of the respective performance period under the EPP (three-year holding period under the LTI 2015), and thus may be significantly above or below the budgeted amounts. With respect to our plan granted in 2009 (SOP PP), we believe that future payout will be significantly impacted not only by our share price but also by the requirement to outperform the TechPGI. Changes in these factors could significantly affect the estimated fair values as calculated by the option-pricing model, and the future payout. For more information about these plans, see Note (27).

Accounting for Income Tax

We conduct operations and earn income in numerous foreign countries and are subject to changing tax laws in multiple jurisdictions within the countries in which we operate. Our ordinary business activities also include transactions where the ultimate tax outcome is uncertain, such as those involving revenue sharing and cost reimbursement arrangements between SAP Group entities. In addition, the amount of income tax we pay is generally subject to ongoing audits by domestic and foreign tax authorities. As a result, judgment is necessary in determining our worldwide income tax provisions. We have made reasonablemake our estimates about the ultimate resolution of our tax uncertainties based on current tax laws and our interpretation thereof. Such judgment can have aChanges to the assumptions underlying these estimates and outcomes that differ from these assumptions could require material effect onadjustments to the carrying amount of our income tax expense, income tax provision, and profit after tax.provisions.

The carrying amount ofassessment whether a deferred tax asset is reviewed atimpaired requires management judgment, as we need to estimate future taxable profits to determine whether the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or allutilization of the deferred tax assets to be utilized. This assessment requires management judgment, estimates, and assumptions.asset is probable. In evaluating our ability to utilize our deferred tax assets, we consider all available positive and negative evidence, including the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are recoverable. Our judgment regarding future taxable income is based

on expectations ofassumptions about future market conditions and other factsfuture profits of SAP. Changes to these assumptions and circumstances. Any adverse change to the underlying facts or our estimates andoutcomes that differ from these assumptions could require that we reducematerial adjustments to the carrying amount of our net deferred tax assets.

For more information about our income tax, see Note (10).

Accounting for Business Combinations

In our accounting for business combinations, judgment is required in determining whether an intangible asset is identifiable, and should be recorded separately from goodwill. Additionally, estimating the acquisition-dateacquisition date fair values of the identifiable assets acquired and liabilities assumed involves considerable management judgment. The necessary measurements are based on information available aton the acquisition date and are based on

expectations and assumptions that have been deemed reasonable by management. These judgments, estimates, and assumptions can materially affect our financial position and profit for several reasons, among which areincluding the following:

Fair values assigned to assets subject to depreciation and amortization affect the amounts of depreciation and amortization to be recorded in operating profit in the periods following the acquisition.

Subsequent negative changes in the estimated fair values of assets may result in additional expense from impairment charges.

Subsequent changes in the estimated fair values of liabilities and provisions may result in additional expense (if increasing the estimated fair value) or additional income (if decreasing the estimated fair value).

Fair values assigned to assets subject to depreciation and amortization affect the amounts of depreciation and amortization to be recorded in operating profit in the periods following the acquisition.

Subsequent negative changes in the estimated fair values of assets may result in additional expense from impairment charges.

Subsequent changes in the estimated fair values of liabilities and provisions may result in additional expense (if increasing the estimated fair value) or additional income (if decreasing the estimated fair value).

Subsequent Accounting for Goodwill and Other IntangiblesIntangible Assets

As described in the Intangible Assets section in Note (3b), all of our intangible assets other than goodwill have finite useful lives. Consequently, the depreciable amount of the intangible assets is allocatedamortized on a systematic basis over their useful lives. Judgment is required in determining the following:

The useful life of an intangible asset, as this determination is based on our estimates regarding the period over which the intangible asset is expected to produce economic benefits to us.

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The amortization method, as IFRS requires the straight-line method to be used unless we can reliably determine the pattern in which the asset’s future economic benefits are expected to be consumed by us.

The useful life of an intangible asset, as this determination is based on our estimates regarding the period over which the intangible asset is expected to produce economic benefits to us

The amortization method, as IFRS requires the straight-line method to be used unless we can reliably determine the pattern in which the asset’s future economic benefits are expected to be consumed by us

Both the amortization period and the amortization method have an impact on the amortization expense that is recorded in each period.

In making impairment assessments for our intangible assets and goodwill, the outcome of these tests is highly dependent on management’s latest estimates and assumptions regarding future cash flow projections and economic risks, which are complex and require significant judgment and assumptions about future developments. They can be affected by a variety of factors, including changes in our business strategy, our internal forecasts, and an estimate of our weighted-average cost of capital. Due to these factors, actual cash flowsThese judgments impact the carrying amounts of our intangible assets and values could vary significantly fromgoodwill as well as the forecasted future cash flows and related values derived using the discounted cash flow method. Although we believe the assumptions and estimates we have madeamounts of impairment charges recognized in the past have been reasonable and appropriate, different assumptions and estimates could materially affect our financial position and profit.profit or loss.

The resultsoutcome of goodwill impairment tests and thus the carrying amounts of our recognized goodwill may depend on the allocation of goodwill to our operating

segments. This allocation is judgmentalinvolves judgment as it is based on our estimates regarding which operating segments are expected to benefit from the synergies of the business combination.

We recognized no impairment losses on Additionally, judgment is required in the determination of our operating segments. Changes to the assumptions underlying our goodwill and no significant impairment losses ontests could require material adjustments to the carrying amount of our intangible assets during 2013. Although we do not currently have an indication of any significant impairment, there can be no assurance that impairment losses will not occur in the future.recognized goodwill. For more information about the goodwill allocation and impairment testing, see Note (15).

Accounting for Legal Contingencies

As described in Note (23), we are currently involved in various claims and legal proceedings. We review the status of each significant matter not less frequently than each quarter and assess our potential financial and business exposures related to such matters. Significant judgment is required in the determination of whether a provision is to be recorded and what the appropriate amount for such provision should be. Notably, judgment is required in the following:

Determining whether an obligation exists

Determining the probability of outflow of economic benefits

Determining whether the amount of an obligation is reliably estimable

Estimating the amount of the expenditure required to settle the present obligation

Determining whether an obligation exists

Determining the probability of outflow of economic benefits

Determining whether the amount of an obligation is reliably estimable

Estimating the amount of the expenditure required to settle the present obligation

Due to uncertainties relating to these matters, provisions are based on the best information available at the time.

At the end of each reporting period, we reassess the potential obligations related to our pending claims and litigation and adjust our respective provisions to reflect the current best estimate. In addition, we monitor and evaluate new information that we receive after the end of the respective reporting period but before the Consolidated Financial Statements are authorized for issue to determine whether this provides additional information regarding conditions that existed at the end of the reporting period. Such revisionsChanges to the estimates and assumptions underlying our accounting for legal contingencies and outcomes that differ from these estimates and assumptions could require material adjustments to the carrying amounts of the potential obligations could have a material impact on our financial position and profit.respective provisions recorded as well as additional provisions. For furthermore information about this case,legal contingencies, see Notes (18b) and (23).

Recognition of Internally Generated Intangible Assets from Development

Under IAS 38, internally generated intangible assets from the development phase are recognized if certain conditions are met. These conditions include the technical feasibility, intention to complete, the ability to use or sell the asset under development, and the demonstration of how the asset will generate probable future economic benefits. The cost of a recognized internally generated intangible asset comprises all directly attributable cost necessary to make the asset capable of being used as intended by management. In contrast, all expenditures arising from the research phase are expensed as incurred.

We believe that determining whether internally generated intangible assets from development are to be recognized as intangible assets requires significant judgment, particularly in the following areas:

Determining whether activities should be considered research activities or development activities.

Determining whether the conditions for recognizing an intangible asset are met requires

F-24


 

Determining whether activities should be considered research activities or development activities.

Determining whether the conditions for recognizing an intangible asset are met requires assumptions about future market conditions, customer demand, and other developments.

The term “technical feasibility” is not defined in IFRS, and therefore determining whether the completion of an asset is technically feasible requires judgment and a company-specific approach.

Determining the future ability to use or sell the intangible asset arising from the development and the determination of the probability of future benefits from sale or use.

Determining whether a cost is directly or indirectly attributable to an intangible asset and whether a cost is necessary for completing a development.

These judgments impact the completiontotal amount of an asset is technically feasible requires judgment and a company-specific approach.

Determining the future ability to use or sell the intangible asset arising from the development and the determination of the probability of future benefits from sale or use.

Determining whether a cost is directly or indirectly attributable to an intangible asset and whether a cost is necessary for completing a development.

We have determined that the conditions for recognizing internally generated intangible assets fromthat we present in our softwarebalance sheet as well as the timing of recognizing development activities are not met until shortly beforeexpenses in profit or loss.

(3d) New Accounting Standards Adopted in the developed products are available for sale. This assessment is monitored by us on a regular basis.Current Period

(3d)New Accounting Standards Adopted in the Current Period

The followingNo new accounting standards and amendments to standards have been adopted in fiscal year 2013:

Amendments to IFRS 7 (Financial Instruments: Disclosures) – Offsetting financial assets and financial liabilities, which require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. The amendments did not result in an2015 had a material impact on the Company’sour Consolidated Financial Statements.

(3e) New Accounting Standards Not Yet Adopted

IFRS 10 (Consolidated Financial Statements), IFRS 11 (Joint Arrangements), and IFRS 12 (Disclosure of Interests in Other Entities) including amendments to the transition guidance for IFRS 10-12 issued in June 2012, which provide a single consolidation model that identifies control as the basis for consolidation for all types of entities, establish principles for the financial reporting by parties to a joint arrangement, and combine, enhance and replace the disclosure requirements for subsidiaries, joint arrangements, associates and structured entities. The adoption of this new set of standards (we adopted the new standards earlier than required by the European Union) did

not result in a change in the financial position of the Group. However, additional qualitative and quantitative disclosure has been added, for example, with respect to consolidated structured entities.

IFRS 13 (Fair Value Measurement), which defines fair value, sets out in a single IFRS a framework for measuring fair value, and requires disclosures about fair value measurements. The adoption of the standard has resulted in additional disclosures, for example, relating to risks associated with financial instruments and to the valuation techniques used for the valuation of the financial instruments.

Amendments to IAS 1 (Presentation of Financial Statements), which aim to improve and align the presentation of items of other comprehensive income in financial statements prepared in accordance with IFRS and U.S. GAAP. Since SAP had already made appropriate changes in the Consolidated Statements of Comprehensive Income in prior years, the adoption of the standard did not result in any changes to the Consolidated Financial Statements.

Amendments to IAS 19, which aim to improve the understanding of how defined benefit plans affect an entity’s financial position, financial performance, and cash flows. The retrospective application of the revised IAS 19 in accordance with the transitional provisions set out in IAS 19.173 (as revised in 2011) resulted in the netting of items in the Consolidated Statements of Financial Position (mandatory netting of plan assets with time credits and semiretirement obligations now classified as other long-term employee benefits), reclassifications of certain employee benefit liabilities from short-term benefits to long-term benefits and consequential remeasurement of these liabilities. These changes, which are immaterial both individually and in the aggregate, resulted in amounts of adjustments for the following balance sheet line items as of December 31, 2012: decrease of non-current other financial assets by €124 million, increase of deferred tax assets by €18 million (thus reducing total assets by €106 million), increase of current other non-financial liabilities by €68 million, decrease of current and non-current other provisions by €93 million and €45 million respectively, increase of deferred tax liabilities by €3 million (thus reducing total liabilities by €67 million) and a reduction of retained earnings by €39 million. The impacts on our income statements were inconsequential in all periods presented. The standard also resulted in

F-25


additional disclosures (for example, a sensitivity analysis for changes in defined benefit obligations, additional components considered in actuarial assumptions, etc.), for more information see Note (18a).

Amendments to IAS 36 (Impairment of Assets), which aim to remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36 and expand the disclosures on recoverable amounts of assets or cash-generating units when they are based on fair value less costs of disposals. SAP has early-adopted these new amendments to IAS 36.

(3e)New Accounting Standards Not Yet Adopted

The standards and interpretations (relevant to the Group) that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group

intends to adopt these standards, if applicable, when they become effective:

IFRS 9 (Financial Instruments) and subsequent amendments to IFRS 7 and IFRS 9, which will be applicable in fiscal year 2017 at the earliest (the final mandatory effective date is expected to be determined after the final guidance has been issued). The new guidance is expected to impact the classification and measurement of financial assets. We have not yet completed the determination of the impact on our Consolidated Financial Statements.

Amendments to IAS 32 (Financial Instruments: Presentation) – Offsetting financial assets and financial liabilities, which become mandatory for the Group’s 2014 Consolidated Financial Statements, aim to eliminate inconsistencies when applying the offsetting criteria and include some clarifications. The amendments will not have a material impact on our Consolidated Financial Statements.

(4)Business Combinations

In 2013, we concluded the following business combinations:

Acquired Businesses

 

SectorOn May 28, 2014, the IASB issued IFRS 15 (Revenue from Contracts with Customers). The standard becomes effective in fiscal year 2018 with earlier application permitted. We have not yet completed the determination of the impact on our Consolidated Financial Statements, and whether the overall impact will be material, but we expect the standard - for some of our contracts and business models - to impact the timing of recognizing revenue and the revenue classification. IFRS 15 includes a cohesive set of disclosure requirements which we expect to lead to additional and amended disclosures. The standard foresees two possible transition methods for the adoption of the new guidance. We have not finally decided yet which of these two methods we intend to apply.

Acquisition
Type
 

Acquired Voting
Interest

Acquisition Date

Ticket-Web GmbH & Co. KG, Wildau, Germany

Solution providerOn July 24, 2014, the IASB issued the fourth and final version of ticketing & customer relationship managementAsset DealNAMarch 4, 2013

KMS Software Company LLC.IFRS 9 (Financial Instruments), Los Angeles, California, USA

Providerwhich will be applicable in fiscal year 2018 with earlier application permitted. The new guidance is expected to mainly impact the classification and measurement of employee onboarding solutionsAsset DealNAApril 1, 2013

Camilion Solutions, Inc., Toronto, Canada

Solutions forfinancial assets and will result in additional disclosures. We have not yet completed the insurance industryShare Deal100%April 2, 2013

SmartOps Corporation, Pittsburgh, Pennsylvania, USA

Providerdetermination of inventory and service-level optimization software solutionsShare Deal100%April 12, 2013

hybris AG, Rotkreuz, Switzerlandthe impact on our Consolidated Financial Statements.

Provider of independent commerce technology (B2B and B2C)Share Deal100%August 1, 2013

KXEN Inc., San Francisco, California, USA

Provider of predictive analytics technology for line of business users and analystsShare Deal100%October 1, 2013

We acquire businesses in specific areas of strategic interest to us.

Acquisition of hybris

On August 1, 2013, following satisfaction of applicable regulatory and other approvals, we acquired 100% of the shares of hybris AG.

 

F-26


hybris is a recognized leader in independent commerce technology (B2B and B2C). We expect this acquisition to combine hybris’s omnichannel commerce solution with SAP’s enterprise

technology and in-memory, cloud, and mobile innovations and help facilitate new levels of customer insight and engagement.

Financial Impact of Our Acquisitions as of the Acquisition Date

The following table summarizes the values of identifiable assets acquired and liabilities assumed, as of the acquisition date.

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed

€ millions  Total   Thereof
hybris
 

Cash and cash equivalents

   16     10  

Other financial assets

   1     1  

Trade and other receivables

   40     30  

Other non-financial assets

   5     4  

Property, plant, and equipment

   8     7  

Intangible assets

   376     332  

Thereof acquired technology

   192     167  

Thereof customer relationship and other intangibles

   182     164  

Customer relationship

   156     144  

Trade name

   11     10  

Other intangible assets

   15     10  

Thereof software and database licenses

   2     1  

Current and deferred tax assets

   21     13  

Total identifiable assets

   467     397  

Trade accounts payable

   13     10  

Loans and borrowings

   25     24  

Current and deferred tax liabilities

   83     67  

Provisions and other non-financial liabilities

   34     30  

Thereof legal and litigation related liabilities

   1     1  

Deferred revenue

   16     14  

Total identifiable liabilities

   171     145  

Total identifiable net assets

   296     252  

Goodwill

   840     780  

Total consideration transferred in cash

   1,136     1,032  

The goodwill arising from the acquisitions consists largely of the synergies and the know-how and technical skills of the acquired businesses’ workforces.

hybris goodwill is attributed to expected synergies from the acquisition particularly sourcing from the customers’ transformations from channel-centric to omnichannel business. By combining hybris commerce solutions with SAP products, we expect to enable our customers – across all devices, delivery channels and touchpoints – to provide

new levels of real-time customer interaction and customer engagement.

The initial accounting for the business combinations entered into in 2013 is incomplete because we are still obtaining the information necessary to identify and measure contingent liabilities and tax related assets and liabilities of the acquired businesses. Accordingly, the respective amounts recognized in our financial statements for these items are regarded provisional as of December 31, 2013.

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The acquisition-related costs incurred totaled €10 million for our 2013 business combinations,

all of which were recognized in general and administration expense.

Impact of Business Combinations on Our Financial Statements

The amounts of revenue and profit or loss of the hybris business acquired in 2013 since the acquisition date included in the consolidated income statements for the reporting period are as follows:

Impact of hybris on SAP’s Financials

€ millions Contribution

On January 13, 2016, the IASB issued IFRS 16 (Leases). The standard becomes effective in fiscal year 2019 with earlier application permitted for those companies that also apply IFRS 15. The new standard is a major revision of hybris

lease accounting; whereas the accounting by lessors remains substantially unchanged, the lease accounting by lessees will change significantly as all leases (the majority of which were “off balance” in the past as they were operating leases) need to be recognized on a company’s balance sheet as assets and liabilities. We have not yet completed the determination of the impact on our Consolidated Financial Statements.

Revenue

 70

Profit after taxOn January 29, 2016, the IASB published amendments to IAS 7 (Statement of Cash Flows). The standard becomes effective in fiscal year 2017 with earlier application permitted. The aim of the amendments is to improve the information provided to users of financial statements about an entity’s financing activities and will most likely result in additional disclosures. We have not yet completed the determination of the impact on our Consolidated Financial Statements.

–11

Had hybris been consolidated as of January 1, 2013, our estimated pro forma revenue for the reporting period would have been €16,865 million, and pro forma profit after tax would have been €3,282 million.(4) BUSINESS COMBINATIONS

These amounts were calculated after applying the Company’s accounting policies and after adjusting the results for hybris to reflect, for example:In 2015, we did not conclude any significant business combinations.

Additional depreciation and amortization that would have been charged assuming the fair value adjustment to property, plant, and equipment and intangible assets had been applied from January 1, 2013

The impact of fair value adjustments on deferred revenue on a full-year basis

The borrowing costs on the funding levels and debt/equity position of the Company after the business combination

Employee benefits

Related tax effects

These pro forma numbers have been prepared for comparative purposes only. The pro forma revenue and profit numbers are not necessarily indicative of either the results of operations that would have actually occurred had the acquisition been in effect at the beginning of the respective periods or of future results.

Prior yearPrior-year acquisitions are described in theour 2014 Consolidated Financial Statements inStatements.

We have retrospectively adjusted the 2012 Annual Report.provisional amounts recognized as at the dates of these acquisitions to reflect new information obtained about facts and circumstances that existed on the respective acquisition dates. For more information about significant adjustments, see Notes (10) and (15).

(5) REVENUE

(5)Revenue

For detailed information about our revenue recognition policies, see Note (3).

For revenue information by segment and geographic region, see Note (28).

Revenue from construction-typeconstruction contracts (contract revenue) is mainly included in software revenue and consultingservices revenue depending on the type of project.contract. In 2015, contract revenue of292 million was recognized for all our construction contracts (2014:285 million, 2013:261 million). The status of our construction projectscontracts in progress at the end of the reporting period accounted for under IAS 11 (Construction Contracts) was as follows:

Construction ProjectsContracts in Progress

 

€ millions  2013   2012   2011 

Revenue recognized in the respective year

   194     196     172  

Aggregate cost recognized (multi-year)

   221     255     229  

Recognized result (+ profit/– loss; multi-year)

   87     2     14  

Advance payments received

   1     3     5  

Gross amounts due from customers

   3     7     20  

Gross amounts due to customers

   69     15     44  

Loss provisions

   3     34     27  
millions  2015   2014   2013 
Aggregate cost recognized(multi-year)   294     201     221  

Recognized result

(+ profit/– loss;

multi-year)

   20     92     87  

(6) RESTRUCTURING

 

millions  2015   2014   2013 
Employee-related restructuring expenses   610     119     57  
Onerous contract-related restructuring expenses   11     7     13  

Restructuring expenses

   621     126     70  

F-28To further drive our transition from an on-premise software vendor to a cloud company, we have carried out additional organizational changes as part of a new restructuring plan, which is intended to minimize cost-intensive and low-growth business activities worldwide. In addition, more redundancies resulted from the integration of our acquired companies.


(6)Other Operating Income/Expense, Net
Restructuring provisions primarily include personnel costs that result from severance payments for employee terminations and onerous contract costs. Prior-year restructuring provisions relate to restructuring activities incurred in connection with the organizational changes triggered by our new cloud and simplification strategy and the integration of employees of our acquisitions. For more information, see Note (18b).

Other operating income/expense, net, was

If not presented separately in our income statement, restructuring expenses would break down by functional area as follows:

Other Operating Income/Expense, NetRestructuring Expenses by Functional Area

 

€ millions  2013   2012   2011 

Miscellaneous other operating expenses

   –6     –3     –3  

Gain/loss on disposals of non-current assets

   0     –5     18  

Miscellaneous other operating income

   19     31     10  

Other operating income/expense, net

   12     23     25  

(7)Employee Benefits Expense and Headcount
millions  2015   2014   2013 

Cost of cloud and software

   80     9     12  

Cost of services

   218     24     14  

Research and development

   156     24     0  

Sales and marketing

   147     41     29  

General and administration

   20     28     15  

Restructuring expenses

   621     126     70  

Employee Benefits Expense(7) EMPLOYEE BENEFITS EXPENSE AND HEADCOUNT

Employee benefits expense comprises the following:

Employee Benefits Expense

 

€ millions  2013   2012   2011   2015   2014   2013 

Salaries

   5,997     5,726     4,938     7,483     6,319     5,997  

Social security expense

   857     777     642     1,067     916     857  

Share-based payment expense

   724     290     327  

Pension expense

   212     190     168     258     211     212  

Share-based payment expense

   327     522     68  

Termination benefits

   39     65     65  

Employee-related restructuring expense

   57     6     0     610     119     57  

Termination benefits outside of

restructuring plans

   28     22     39  

Employee benefits expense

   7,489     7,286     5,880     10,170     7,877     7,489  

Pension expense includes the amounts recorded for our defined benefit and defined contribution plans as described in Note (18a). Expenses for local state pension plans are included in social security expense.

F-29


NumberThe number of Employees

On December 31, 2013,employees in the breakdown of our full-time equivalent employee numbersfollowing table is broken down by function in SAP and by region was as follows:the regions EMEA (Europe, Middle East, and Africa), Americas (North America and Latin America), and APJ (Asia Pacific Japan).

Number of Employees

 

  December 31, 2013  December 31, 2012  December 31, 2011 
Full-time equivalents EMEA1)  Americas  Asia
Pacific
Japan
  Total  EMEA1)  Americas  Asia
Pacific
Japan
  Total  EMEA1)  Americas  Asia
Pacific
Japan
  Total 

Software and software-related services

  4,859    2,861    3,541    11,261    4,559    2,628    3,364    10,551    4,068    2,079    2,816    8,963  

Professional services and other services

  7,177    4,406    3,047    14,629    7,020    4,399    2,840    14,259    6,808    3,963    2,497    13,268  

Research and development

  8,806    3,630    5,367    17,804    8,952    3,672    5,388    18,012    8,713    3,028    4,120    15,861  

Sales and marketing

  6,346    6,437    3,041    15,824    5,697    6,220    2,982    14,899    4,856    4,581    2,343    11,780  

General and administration

  2,424    1,445    697    4,566    2,243    1,383    660    4,286    2,073    1,120    542    3,735  

Infrastructure

  1,380    790    318    2,488    1,286    821    308    2,415    1,182    702    274    2,158  

SAP Group (December 31)

  30,993    19,568    16,011    66,572    29,757    19,123    15,542    64,422    27,700    15,473    12,592    55,765  

Thereof acquisitions

  511    571    29    1,111    791    2,987    1,038    4,816    264    49    90    403  

SAP Group (months’ end average)

  30,238    19,418    15,752    65,409    29,009    17,619    14,506    61,134    27,296    15,010    12,040    54,346  

Full-time

equivalents

 December 31, 2015  December 31, 2014  December 31, 2013 
 EMEA  Americas  APJ  Total  EMEA  Americas  APJ  Total  EMEA  Americas  APJ  Total 
Cloud and software  6,095    3,920    4,976    14,991    5,953    3,983    5,138    15,074    4,859    2,861    3,541    11,261  

Services

  6,980    4,264    3,841    15,085    7,291    4,304    3,044    14,639    7,177    4,406    3,047    14,629  
Research and development  9,676    4,233    7,029    20,938    9,049    3,974    5,885    18,908    8,806    3,630    5,367    17,804  
Sales and
marketing
  7,186    7,314    3,706    18,206    7,069    7,288    3,611    17,969    6,346    6,437    3,041    15,824  
General and administration  2,434    1,653    937    5,024    2,436    1,643    944    5,023    2,424    1,445    697    4,566  

Infrastructure

  1,535    783    425    2,743    1,542    879    373    2,794    1,380    790    318    2,488  

SAP Group

(December 31)

  33,906    22,166    20,914    76,986    33,340    22,071    18,995    74,406    30,993    19,568    16,011    66,572  

Thereof

acquisitions

  73    0    0    73    814    2,890    1,831    5,535    511    571    29    1,111  

SAP Group

(months’ end

average)

  33,561    21,832    19,788    75,180    31,821    19,797    16,725    68,343    30,238    19,418    15,752    65,409  

1)

Europe, Middle East, Africa

Allocation of Share-Based Payment Expense

The allocation of expense for share-based payments, net of the effects from hedging these instruments, to the various operating expense items is as follows:

Share-Based Payments

 

€ millions  2013   2012   2011   2015   2014   2013 

Cost of software and software-related services

   40     42     5  

Cost of professional services and other services

   61     104     11  

Cost of cloud and software

   74     28     35  

Cost of services

   126     53     66  

Research and development

   90     125     16     166     71     90  

Sales and marketing

   96     123     15     247     76     96  

General and administration

   40     127     21     113     62     40  

 

Share-based payments

   327     522     68     724     290     327  

Thereof cash-settled share-based payments

   240     450     33     637     193     240  

Thereof equity-settled share-based payments

   87     72     35     87     96     87  

For more information about our share-based payments, see Note (27).

F-30


(8)Other Non-Operating Income/Expense, Net

Other non-operating income/expense, net was as follows:

Other Non-Operating Income/Expense, Net(8) OTHER NON-OPERATING INCOME/EXPENSE, NET

 

€ millions 2013  2012  2011 

Foreign currency exchange gain/loss, net

  4    –154    –58  

Thereof from financial assets/liabilities at fair value through profit or loss

  –75    –102    44  

Thereof from available for sale financial assets

  0    –2    0  

Thereof from loans and receivables

  184    –32    –177  

Thereof from financial liabilities at amortized cost

  –105    –20    79  

Thereof from non-financial assets/liabilities

  0    2    –4  

Miscellaneous other non-operating income

  1    4    2  

Miscellaneous other non-operating expense

  –22    –23    –19  

Other non-operating income/expense, net

  –17    –173    –75  

(9)Financial Income, Net

Financial Income, net was as follows:

millions  2015   2014   2013 
Foreign currency exchange gain/loss, net   230     71     4  

Thereof from financial assets/liabilities at fair value through profit or loss

   12     83     75  

Thereof from available for sale financial assets

   1     0     0  

Thereof from loans and receivables

   213     219     184  

Thereof from financial liabilities at amortized cost

   2     226     105  

Thereof from non-financial assets/liabilities

   3     13     0  

Miscellaneous income

   1     3     1  

Miscellaneous expense

   27     25     22  
Other non-operating
income/expense, net
   256      49     17  

Financial Income, Net(9) FINANCIAL INCOME, NET

 

€ millions 2013  2012  2011 

Finance income

   

Interest income from

   

available-for-sale financial assets (debt)

  0    1    2  

loans and receivables

  37    45    58  

derivatives

  32    27    37  

Gains on

   

available-for-sale financial assets (debt)

  0    0    1  

available-for-sale financial assets (equity)

  46    30    12  

Share of result of associates

  0    0    9  

Finance income

  115    103    119  

Finance cost

   

Interest expense from

   

financial liabilities at amortized cost

  –131    –130    –123  

derivatives

  –23    –28    –37  

TomorrowNow litigation

  0    –1    8  

Losses on

   

available-for-sale financial assets (equity)

  –2    –1    0  

Impairment losses from

   

available-for-sale financial assets (equity)

  –11    –7    –2  

Fee expenses

  –14    –8    –7  

Finance cost

  –181    –175    –161  

Financial income, net

  –66    –72    –42  

millions  2015   2014   2013 

Finance income

   241     127     115  

Thereof available-for-sale financial assets (equity)

   176     30     46  

Finance costs

   246      152     181  

Thereof interest expense from financial liabilities at amortized cost

   135     93     131  

Thereof interest expense from derivatives

   72     28     23  

Financial income, net

   5      25     66  

F-31


(10) INCOME TAXIncome Tax

Income tax expense for the years ended December 31 is attributable to the following regions:

Tax Expense According to Region

 

€ millions  2013   2012   2011 

Current tax expense

      

Germany

   836     700     635  

Foreign

   326     506     521  

Total current tax expense

   1,162     1,206     1,156  

Deferred tax expense/income

      

Germany

   51     –11     –14  

Foreign

   –142     –202     189  

Total deferred tax expense/income

   –91     –213     175  

Total income tax expense

   1,071     993     1,331  

Income tax expense for the years ended December 31 comprised the following components:

millions 2015  2014  2013 

Current tax expense

            

Germany

  859    770    836  

Foreign

  408    422    326  

Total current tax expense

  1,267    1,192    1,162  

Deferred tax expense/income

            

Germany

  74    84    51  

Foreign

  258    201    142  

Total deferred tax income

  332     117    91  

Total income tax expense

  935    1,075    1,071  

Major Components of Tax Expense

 

€ millions  2013   2012   2011  2015 2014 2013 

Current tax expense/income

            

Tax expense for current year

   1,249     1,173     1,152    1,278    1,168    1,249  

Taxes for prior years

   –87     33     4    11    24    87  

Total current tax expense

   1,162     1,206     1,156    1,267    1,192    1,162  

Deferred tax expense/income

            

Origination and reversal of temporary differences

   –168     –266     164    428    126    168  

Unused tax losses, research and development tax credits and foreign tax credits

   77     53     11  

Total deferred tax expense/income

   –91     –213     175  
Unused tax losses, research and development tax credits, and foreign tax credits  96    9    77  

Total deferred tax income

  332     117    91  

Total income tax expense

   1,071     993     1,331    935    1,075    1,071  

Profit before tax for the years ended December 31 consisted of the following:

Profit Before Tax

 

€ millions  2013   2012   2011 

Germany

   3,126     2,460     2,316  

Foreign

   1,270     1,336     2,451  

Total

   4,396     3,796     4,767  

F-32


millions  2015   2014   2013 

Germany

   3,161     3,338     3,126  

Foreign

   830     1,017     1,270  

Total

   3,991     4,355     4,396  

The following table reconciles the expected income tax expense computed by applying our combined German tax rate of 26.41% (2012: 26.47%26.4% (2014: 26.4%; 2011: 26.34%2013: 26.4%) to the actual income tax expense. Our 20132015 combined German tax rate includes a corporate income tax rate of 15.00% (2012: 15.00%15.0% (2014: 15.0%; 2011: 15.00%2013: 15.0%), plus a solidarity surcharge of 5.5% (2012:(2014: 5.5%; 2011:2013: 5.5%) thereon, and trade taxes of 10.58% (2012: 10.64%10.6% (2014: 10.6%; 2011: 10.51%2013: 10.6%).

Relationship Between Tax Expense and Profit Before Tax

 

€ millions, unless otherwise stated  2013   2012   2011 

Profit before tax

   4,396     3,796     4,767  

Tax expense at applicable tax rate of 26.41% (2012: 26.47%; 2011: 26.34%)

   1,161     1,005     1,256  

Tax effect of:

      

Foreign tax rates

   –116     –114     79  

Non-deductible expenses

   158     111     89  

Tax exempt income

   –146     –169     –149  

Withholding taxes

   87     71     93  

Research and development and foreign tax credits

   –41     –29     –33  

Prior-year taxes

   –113     15     –25  

Reassessment of deferred tax assets, research and development tax credits, and foreign tax credits

   60     31     0  

Other

   21     72     21  

Total income tax expense

   1,071     993     1,331  

Effective tax rate (in %)

   24.4     26.2     27.9  

€105 million of the prior-year tax income recognized in the current reporting period relate to assets acquired or liabilities assumed in business combinations of previous reporting periods.

F-33


Deferred tax assets and liabilities on a gross basis as at December 31 are attributable to the following items:

millions, unless otherwise
stated
  2015   2014   2013 

Profit before tax

   3,991     4,355     4,396  
Tax expense at applicable tax rate of 26.4% (2014: 26.4%; 2013: 26.4%)   1,055     1,151     1,161  

Tax effect of:

               

Foreign tax rates

   126     117     116  

Non-deductible expenses

   61     63     158  

Tax exempt income

   103     86     146  

Withholding taxes

   115     111     87  

Research and development and foreign tax credits

   31     41     41  

Prior-year taxes

   55     10     113  

Reassessment of deferred tax assets, research and development tax credits, and foreign tax credits

   43     41     60  

Other

   24     37     21  

Total income tax expense

   935     1,075     1,071  

Effective tax rate (in %)

   23.4     24.7     24.4  

Recognized Deferred Tax Assets and Liabilities

 

€ millions  2013   2012   2015   2014 

Deferred tax assets

          

Intangible assets

   87     117     99     104  

Property, plant, and equipment

   18     35     24     18  

Other financial assets

   7     2     15     12  

Trade and other receivables

   38     67     64     53  

Carryforwards of unused tax losses

   521     641  

Pension provisions

   78     76     98     87  

Share-based payments

   105     122     163     107  

Other provisions and obligations

   305     305     431     403  

Deferred income

   48     46     104     76  

Carryforwards of unused tax losses

   621     752  

Research and development and foreign tax credits

   65     37     187     85  

Other

   121     120     149     172  

Deferred tax assets

   1,393     1,568  

Total deferred tax assets

   1,955     1,869  

Deferred tax liabilities

              

Intangible assets

   696     844     1,234     1,241  

Property, plant, and equipment

   52     55     62     51  

Other financial assets

   367     382     389     623  

Trade and other receivables

   26     23     93     69  

Pension provisions

   6     4     5     4  

Share-based payments

   1     2     4     3  

Other provisions and obligations

   21     17     112     118  

Deferred income

   6     20     40     11  

Other

   39     36     11     9  

Deferred tax liabilities

   1,214     1,383  

Deferred tax assets/liabilities, net

   179     185  

Total deferred tax liabilities

   1,950     2,129  
Total deferred tax assets/liabilities, net   5     260  

We retrospectively adjusted the provisional amounts recognized for deferred tax assets and liabilities related to the 2012 Ariba2014 business combinationcombinations by a corresponding decreaseincrease in goodwill in the amount of €82102 million. The

adjustment reflects adjustments reflect new information obtained about facts and circumstances as of the acquisition date, mainly about the valuation of the carrying amount of investments in subsidiaries and the utilization of carryforwards of unused tax losses.

 

F-34


Deferred tax assets have not been recognized in respect of the following items for the years ended December 31:

Items Not Resulting in a Deferred Tax Asset

 

€ millions  2013   2012   2011   2015   2014   2013 

Unused tax losses

               

Not expiring

   68     49     38     279     140     68  

Expiring in the following year

   43     6     10     95     63     43  

Expiring after the following year

   525     517     93     704     672     525  

Total unused tax losses

   636     572     141     1,078     875     636  

Deductible temporary differences

   178     202     30     122     96     178  

Unused research and development and foreign tax credits

               

Not expiring

   25     32     17     34     32     25  

Expiring in the following year

   1     0     0     0     0     1  

Expiring after the following year

   1     36     3     20     22     1  

Total unused tax credits

   27     68     20     54     54     27  

421429 million (2012: €367(2014:441 million; 2011: €342013:421 million) of the unused tax losses relate to U.S. state tax loss carryforwards. As described above, prior-year numbers for unused tax losses related to the 2012 Ariba2014 business combinationcombinations were adjusted, resulting in a decrease in the amount of €743235 million.

In 2015, subsidiaries that suffered a tax loss in either the current or the preceding period recognized deferred tax assets in excess of deferred tax liabilities amounting to129 million (2014:73 million, 2013:61 million), because it is probable that sufficient future taxable profit will be available to allow the benefit of the deferred tax assets to be utilized.

We have not recognized a deferred tax liability on approximately €7.079.95 billion (2012: €5.84(2014:8.87 billion)

for undistributed profits of our subsidiaries, because we are in a position to control the timing of the reversal of the temporary difference and it is probable that such differences will not reverse in the foreseeable future.

The proposed dividend payment of €1.001.15 per share for the year ended December 31, 2013,2015, will not have any effects on the income tax of SAP AG.

Total income tax including the items charged or credited directly to share premium and other comprehensive income for the years ended December 31 consists of the following:SE.

Total Income Tax

 

€ millions  2013   2012   2011 

Income tax recorded in profit

   1,071     993     1,331  

Income tax recorded in share premium

   –5     –4     –10  

Income tax recorded in other comprehensive income that will not be reclassified to profit and loss

      

Actuarial gains/losses on defined benefit pension plans

   3     –4     –5  

Income tax recorded in other comprehensive income that will be reclassified to profit and loss

      

Gains/losses on cash flow hedges

   0     17     –1  

Currency effects

   8     3     –6  

Total

   1,077     1,005     1,309  

millions 2015  2014  2013 

Income tax recorded in profit

  935    1,075    1,071  
Income tax recorded in share premium  14    3    5  
Income tax recorded in other comprehensive income that will not be reclassified to profit and loss            

Remeasurements on defined benefit pension plans

  2    7    3  
Income tax recorded in other comprehensive income that will be reclassified to profit and loss            

Available-for-sale financial assets

  2    0    0  

Cash flow hedges

  4    10    0  

Exchange differences

  16    21    8  

Total

  909    1,034    1,077  

F-35


The income tax recorded in share premium relates to our equity-settled share-based payment.

We are subject to ongoing tax audits by domestic and foreign tax authorities. As a result of the tax audit of SAP AG and its German subsidiaries for the years 2003 through 2006,Currently, we are mainly in dispute with the German and the Brazilian tax authoritiesauthorities. The German dispute is in respect of intercompany financing matters. We strongly disagree withmatters and certain secured capital investments, while the tax authorities’ position and intend to vigorously contest it. Currently,Brazilian dispute is in respect of license fee deductibility. In all cases, we expect that we will need to initiate litigation to prevail. WeFor all of these matters, we have not recorded a provision for this matter as we believe that the tax authorities’ claim hasclaims have no merit and that no adjustment is warranted. If, contrary to our view, the German tax authorities

were to prevail in their arguments before the court, we would expect to have an additional tax expense (including related interest expense) for the tax audit period 2003 through 2006expenses and for the following years 2007 through 2013penalties) of approximately €1681,045 million in total.

(11)Earnings per Share

Restricted shares (the bonus shares in the Share Matching Plan discussed in Note (27) below) granted to employees under our share-based payments are included in the diluted earnings per share calculations to the extent they have a dilutive effect.

 

Earnings per share for the years ended December 31 was calculated as follows:

Earnings per Share(11) EARNINGS PER SHARE

 

€ millions, unless otherwise stated  2013   2012   2011 

Profit attributable to equity holders of SAP AG

   3,326     2,803     3,435  

Issued ordinary shares

   1,229     1,229     1,227  

Effect of treasury shares

   –35     –37     –38  

Weighted average shares outstanding, basic1)

   1,193     1,192     1,189  

Dilutive effect of share-based payments1)

   2     1     1  

Weighted average shares outstanding, diluted1)

   1,195     1,193     1,190  

Earnings per share, basic, attributable to equity holders of SAP AG (in €)

   2.79     2.35     2.89  

Earnings per share, diluted, attributable to equity holders of SAP AG (in €)

   2.78     2.35     2.89  
millions, unless otherwise stated 2015  2014  2013 

Profit attributable to equity holders of SAP SE

  3,064    3,280    3,326  

Issued ordinary shares1)

  1,229    1,229    1,229  

Effect of treasury shares1)

  –32    –34    –35  

Weighted average shares outstanding, basic1)

  1,197    1,195    1,193  

Dilutive effect of share-based payments1)

  2    3    2  

Weighted average shares outstanding, diluted1)

  1,198    1,197    1,195  
Earnings per share, basic, attributable to equity holders of SAP SE (in )  2.56    2.75    2.79  
Earnings per share, diluted, attributable to equity holders of SAP SE (in )  2.56    2.74    2.78  

(1)

1)Number of shares in millions

(12)Other Financial Assets

Other financial assets as at December 31 were as follows:

Other Financial Assets(12) OTHER FINANCIAL ASSETS

 

  2013   2012 
millions 2015 2014 
  Current   Non-Current   Total   Current   Non-Current   Total  Current Non-Current Total Current Non-Current Total 

Loans and other financial receivables

   90     243     333     35     208     243    195    243    437    173    286    459  

Debt investments

   38     0     38     15     14     29    26    0    26    40    0    40  

Equity investments

   0     322     322     0     201     201    1    881    882    1    596    597  

Available-for-sale financial assets

   38     322     360     15     215     230    27    881    908    41    596    637  

Derivatives

   123     6     129     104     40     144    129    154    283    464    90    554  

Investments in associates

   0     36     36     0     46     46    0    58    58    0    49    49  

Total

   251     607     858     154     509     663    351    1,336    1,687    678    1,021    1,699  

 

Loans and Other Financial Receivables

Loans and other financial receivables mainly consist of time deposits, investments in pension

assets for which the corresponding liability is included in employee-related obligations (see Note (18b)), other receivables, and loans to employees and third parties. The majority of our loans and other financial receivables are concentrated in the United States.

F-36


As at December 31, 2013,2015, there were no loans and other financial receivables past due but not impaired. We have no indications of impairments of loans and other financial receivables that are not past due and not impaired as at the reporting date. For general information onabout financial risk and the nature of risk, see Note (24).

Available-for-Sale Financial Assets

Our available-for-sale financial assets consist of debt investments in bonds of mainly financial and non-financial corporations and municipalities and equity investments in listed and unlisted securities.

These available-for-sale financial assets are denominatedsecurities, mainly held in the following currencies:U.S. dollars.

Currencies of Available-for-Sale Financial Assets

€ millions  2013   2012 

Euros

   51     36  

U.S. dollars

   305     185  

Other

   4     9  

Total

   360     230  

For more information onabout fair value measurement with regard to our equity investments, see Note (26).

Derivatives

Detailed information about our derivative financial instruments is presented in Note (25).

 

(13)Trade and Other Receivables

Trade and other receivables were as follows:

Trade and Other Receivables(13) TRADE AND OTHER RECEIVABLES

 

  2013   2012 
millions 2015 2014 
  Current   Non-Current   Total   Current   Non-Current   Total  Current Non-
Current
 Total Current Non-
Current
 Total 

Trade receivables, net

   3,802     14     3,816     3,837     0     3,837    5,198    2    5,199    4,253    2    4,255  

Other receivables

   63     84     147     80     88     168    77    86    163    89    99    188  

Total

   3,865     98     3,963     3,917     88     4,005    5,275    87    5,362    4,342    100    4,443  

The carrying amounts of our trade receivables as at December 31 are as follows:

Carrying Amounts of Trade Receivables

 

€ millions  2013   2012  2015 2014 

Gross carrying amount

   3,954     3,943    5,428    4,440  

Sales allowances charged to revenue

   –96     –73    153    134  

Allowance for doubtful accounts charged to expense

   –42     –33    75    52  

Carrying amount trade receivables, net

   3,816     3,837    5,199    4,255  

The changes in the allowance for doubtful accounts charged to expense were immaterial in all periods presented.

Concentrations of credit risks are limited due to our large customer base and its distribution across many different industries and countries worldwide.

F-37


The aging of trade receivables as at December 31 was:

Aging of Trade Receivables

 

€ millions  2013   2012 

Not past due and not individually impaired

   3,055     3,068  

Past due but not individually impaired

    

Past due 1-30 days

   330     368  

Past due 31-120 days

   258     246  

Past due 121-365 days

   120     90  

Past due over 365 days

   13     14  

Total past due but not individually impaired

   721     718  

Individually impaired, net of allowances

   40     51  

Carrying amount of trade receivables, net

   3,816     3,837  

We believe that the recorded sales and bad debt allowances adequately provide for the credit risk inherent in trade receivables.

millions 2015  2014 
Not past due and not individually
impaired
  3,918    3,362  
Past due but not individually impaired        

Past due 1 to 30 days

  473    345  

Past due 31 to 120 days

  428    339  

Past due 121 to 365 days

  257    118  

Past due over 365 days

  38    16  
Total past due but not individually impaired  1,196    818  

Individually impaired, net of allowances

  85    75  
Carrying amount of trade receivables, net  5,199    4,255  

For more information about financial risk and how we manage it, see Notes (24) and (25).

 

(14)Other Non-Financial Assets

Other Non-Financial Assets(14) OTHER NON-FINANCIAL ASSETS

 

  2013   2012 
millions 2015   2014 
  Current   Non-Current   Total   Current   Non-Current   Total  Current Non-Current Total   Current   Non-Current   Total 

Prepaid expenses

   179     57     236     149     68     217    232    83    315     212     66     277  

Other tax assets

   92     0     92     74     0     74    113    0    113     101     0     101  

Capitalized contract cost

   55     50     105     56     0     56    77    250    327     90     99     188  

Advance payments

   17     0     17     11     0     11  

Miscellaneous other assets

   3     0     3     4     0     4    46    0    46     33     0     33  

Total

   346     107     453     294     68     362    468    332    800     435     164     599  

Prepaid expenses primarily consist of prepayments for operating leases, support services, and software royalties that will be recognized as an expense in future periods.royalties.

F-38


(15)Goodwill and Intangible Assets

Goodwill and Intangible Assets(15) GOODWILL AND INTANGIBLE ASSETS

 

€ millions  Goodwill   Software and
Database
Licenses
   Acquired
Technology/
IPRD
   Customer
Relationship
and Other
Intangibles
   Total   Goodwill��  Software and
Database
Licenses
   Acquired
Technology/
IPRD
   Customer
Relationship and
Other
Intangibles
   Total 

Historical cost

                         

January 1, 2012

   8,808     489     1,267     1,930     12,494  

January 1, 2014

   13,785     558     1,929     3,036     19,308  

Foreign currency exchange differences

   –77     –2     –3     –27     –109     1,242     13     160     297     1,712  

Additions from business combinations

   4,557     4     578     1,152     6,291     6,072     14     540     1,312     7,938  

Other additions

   0     60     0     0     60     0     86     0     2     88  

Retirements/disposals

   0     –18     –64     –1     –83     0     4     42     3     49  

 

December 31, 2012

   13,288     533     1,778     3,054     18,653  

 

December 31, 2014

   21,099     667     2,587     4,644     28,997  

Foreign currency exchange differences

   –345     –2     –40     –95     –482     1,666     15     204     379     2,264  

Additions from business combinations

   840     2     192     182     1,216     27     0     6     5     38  

Other additions

   0     43     0     0     43     0     53     0     6     59  

Retirements/disposals

   0     –18     –1     –105     –124     0     8     1     1     10  

 

December 31, 2013

   13,783     558     1,929     3,036     19,306  

December 31, 2015

   22,792     727     2,796     5,033     31,348  

                

Accumulated amortization

                         

January 1, 2012

   97     295     692     675     1,759  

January 1, 2014

   95     367     1,071     1,129     2,662  

Foreign currency exchange differences

   –1     –3     –6     –8     –18     4     7     73     81     165  

Additions amortization

   0     57     192     316     565     0     78     255     282     615  

Retirements/disposals

   0     –14     –64     –1     –79     0     4     42     3     49  

Transfers

   0     0     29     –29     0  

 

December 31, 2012

   96     335     843     953     2,227  

 

December 31, 2014

   99     448     1,357     1,489     3,393  

Foreign currency exchange differences

   –1     –2     –20     –22     –45     4     10     84     89     187 ��

Additions amortization

   0     51     249     303     603     0     76     372     361     809  

Retirements/disposals

   0     –17     –1     –105     –123     0     8     1     1     10  

December 31, 2015

   103     526     1,812     1,938     4,379  

                

December 31, 2013

   95     367     1,071     1,129     2,662  

 

Carrying value December 31, 2012

   13,192     198     935     2,101     16,426  

 

Carrying value December 31, 2013

   13,688     191     858     1,907     16,644  

Carrying amount

               

December 31, 2014

   21,000     219     1,230     3,155     25,604  

December 31, 2015

   22,689     201     984     3,095     26,969  

The additions, other than from business combinations, to software and database licenses in 20132015 and 20122014 were individually acquired from third parties and include cross-license agreements and patents.

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We carry the following significant intangible assets:

Significant Intangible Assets

 

    Carrying Amount
in € Millions
   Remaining Useful
Life in Years
 
    2013   2012   

Business Objects – Customer Relationships: Maintenance

   150     181     8-11  

Sybase – Acquired Technologies

   225     330     1-3  

Sybase – Customer Relationships: Maintenance

   466     581     9  

Sybase – Customer Relationships: Messaging and License

   66     109     1-7  

SuccessFactors – Acquired Technologies

   206     260     6  

SuccessFactors – Customer Relationships: Subscription

   383     404     13  

Ariba – Acquired Technologies

   186     238     7  

Ariba – Customer Relationships

   480     508     12-14  

hybris – Acquired Technologies

   159     0     7  

hybris – Customer Relationships

   137     0     4-14  

Total significant intangible assets

   2,458     2,611    
millions, unless otherwise stated  Carrying Amount   

Remaining
Useful Life

(in years)

 
  2015   2014   

Business Objects – Customer relationships: Maintenance

   104     126     6 to 9  

Sybase – Acquired technologies

   80     149     approx. 1  

Sybase – Customer relationships: Maintenance

   363     418     8  

SuccessFactors – Acquired technologies

   149     184     4  

SuccessFactors – Customer relationships: Subscription

   395     402     10  

Ariba – Acquired technologies

   137     166     5  

Ariba – Customer relationships

   525     516     10 to 12  

hybris – Acquired technologies

   100     128     5  

hybris – Customer relationships

   127     136     2 to 12  

Fieldglass – Acquired technologies

   89     96     7  

Concur – Acquired technologies

   387     445     6  

Concur – Customer relationships

   1,299     1,233     15 to 19  

Total significant intangible assets

   3,755     3,999       

Goodwill Impairment Testing

SAP had two operating segments in 2015 (in 2014, we had a single operating segment). The carrying amount of goodwill has been allocated for impairment testing purposes to the SAP’s operating segments at December 31, 2013, and 2012, as follows:segments.

Goodwill by Operating Segment

 

€ millions  On-Premise
Products
   On-Premise
Services
   Cloud
Applications
   Ariba   Total   Applications,
Technology &
Services
   SAP Business
Network
   Single Segment
(2014)
   Unallocated   Total 
   7,462     1,122     2,167     2,523     13,274  

Adjustments

   0     0     0     –82     –82  

January 1, 2013

   7,462     1,122     2,167     2,441     13,192  

January 1, 2015, prior to adjustment

   0     0     15,412     5,533     20,945  

Adjustment

   0     0     31     86     55  

January 1, 2015, after adjustment

   0     0     15,381     5,619     21,000  
Reallocation due to changes in segment composition   14,401     6,599     15,381     5,619     0  

Additions from business combinations

   726     85     27     2     840     27     0     0     0     27  

Foreign currency exchange differences

   –105     –12     –126     –100     –344     1,070     592     0     0     1,662  

December 31, 2013

   8,083     1,195     2,067     2,343     13,688  

December 31, 2015

   15,497     7,191     0     0     22,689  

Prior year

The amount unallocated on January 1, 2015, relates to the goodwill from the acquisition of Concur in December 2014.

Prior-year goodwill amounts have been adjusted by €8255 million relating mainly to tax and non-controlling interest adjustments. For more information, see Note (10).

F-40


Goodwill Impairment Testing

The key assumptions on which management based its cash flow projections for the period covered by the underlying business plans are as follows:

Key Assumptions in Cash Flow Projections

 

Key assumptionAssumption  Basis for determining values assignedDetermining Values Assigned to
key assumption
Key Assumption

Budgeted revenue growth

  Revenue growth rate achieved in the current fiscal year, increasedadjusted for an expected increase in SAP’s addressable cloud, mobility, and database markets; expected growth in the established categories of applications and analytics.analytics markets. Values assigned reflect our past experience and our expectations regarding an increase in the addressable market.markets.

Budgeted operating margin

  Operating margin budgeted for a given budget period equals the operating margin achieved in the current fiscal year, increased forby expected efficiency improvements.gains. Values assigned reflect past experience, except for efficiency improvements.gains.

Pre-tax discount rates

  Our estimated cash flow projections are discounted to present value by means of theusing pre-tax discount rates. Pre-tax discount rates are based on the weighted average cost of capital (WACC) approach. The WACC takes into account both debt and equity and reflects specific risks relating to the relevant segment by applying individual beta factors.

Terminal growth rate

  Our estimated cash flow projections for periods beyond the business plan were extrapolated using the segment-specific terminal growth rates. These growth rates do not exceed the long-term average growth rates for the markets in which our segments operate.

 

On-Premise Products and On-Premise Services

The recoverable amounts of the On-Premise Products and On-Premise Services segments have

been determined based on value-in-use calculations. The calculations use cash flow projections based on actual operating results and a Company-wide three-year business plan approved by management.

The key assumptions are set out below:

Key Assumptions

 

  On-Premise Products   On-Premise Services 
Percent  2013   2012   2013   2012  Applications,
Technology &
Services
 SAP Business
Network
 

Pre-tax discount rates

   11.6     11.5     11.7     10.7  
Budgeted revenue growth (average of the budgeted period)  4.5    16.2  

Pre-tax discount rate

  11.7    13.0  

Terminal growth rate

   3.0     2.9     0.9     2.1    3.0    3.0  

Applications, Technology & Services

The recoverable amounts of the segment have been determined based on value-in-use calculations. The calculations use cash flow projections based on actual operating results and a group-wide five-year business plan approved by management.

We believe that any reasonably possible change in any of the above key assumptions would not cause the carrying amount of our On-Premise

Product segment or our On-PremiseApplications, Technology & Services segment to exceed their respectivethe recoverable amounts. Even an increase in discount rate of up

F-41


to five percentage points (pp) or a reduction of estimated cash flows of up to 30% would not result in any additional impairment requirement for our On-Premise Product segment or On-Premise Services segments.amount.

Cloud Applications and AribaSAP Business Network

The recoverable amounts of the Cloud Application and Ariba segmentssegment have been determined based uponon fair valuesvalue less costs of disposal.disposal calculations. The fair value measurement was categorized as a level 3

fair value based on the inputs used in the valuation technique. The cash flow projections are based on actual operating results and specific estimates covering a 12-year period.ten-year period and the terminal growth rate thereafter. The calculations use cash flow projections based on actual operating results

and a group-wide five-year business plan approved by management. The projected results were determined based on management’s estimates and are consistent with the assumptions that a market participant would make. Both segments operateThe segment operates in a relatively immature area with significant growth rates projected for the near future. TheyWe therefore requirehave a longer and more detailed planning period relative tothan one would apply in a more mature segments.segment.

The key assumptions (that a market participant would make) are set out below:

Key Assumptions

   Cloud Applications   Ariba 
Percent  2013   2013 

Budgeted revenue growth (average of the budgeted period)

   14.5     14.5  

Pre-tax discount rates

   13.6     14.2  

Terminal growth rate

   3.5     3.5  

We are using a target operating margin of 36% and 34%, respectively,33% for the Cloud Applications segment and the Ariba segment at the end of the budgeted period as a key assumption, which is within the range of expectations of market participants (for example, industry analysts).

The recoverable amounts for the Cloud Applications segment and the Ariba segment exceed the carrying amounts by €608 million (2012: €281 million) and €153 million (2012: €0 million) respectively.

In the prior year, for the Cloud Applications segment, a value-in-use calculation was used based on an eight-year business plan with

budgeted revenue growth rates in a range of 14% to 51% (with higher growth rates expected in the earlier years). The pre-tax discount rate applied was 13.1% and the terminal growth rate was 3.4%. The recoverable amount forexceeds the Ariba segment was estimated using the market approach in the prior year, which represented the best estimate of fair value because of the close proximity of the transaction date to year-end. Given available market data supporting revenue and operating margin growth rates exceeding terminal value growth rates for a period longer than five years, we believe that the most appropriate valuation technique for both segments should be based upon fair value less cost of disposals in the current year.

carrying amount by1,764 million.

The following table shows amounts by which the key assumptions would need to change individually for the recoverable amount to be equal to the carrying amount:

Sensitivity to Change in Assumptions

 

   Cloud Applications  Ariba 
    2013  2013 

Budgeted revenue growth (average of the budgeted period)

   –1.7pp   –0.5pp 

Pre-tax discount rates

   +1.4pp   +0.4pp 

Terminal growth rate

   –2.7pp   –0.6pp 

Percentage pointsSAP Business
Network
Budgeted revenue growth (average of the budgeted period)2.1

Pre-tax discount rate

1.4

Terminal growth rate

1.7

The recoverable amount for the Cloud ApplicationsSAP Business Network segment would equal the carrying amount if an operatinga margin of only 27% werewas achieved from 2022, and the recoverable amount for the Ariba

segment would equal the carrying amount if an operating margin of only 31% were achieved from 2024.by 2022.

 

F-42


(16)Property, Plant, and Equipment

Property, Plant, and Equipment(16) PROPERTY, PLANT, AND EQUIPMENT

 

€ millions Land and
Buildings
  

Other Property,

Plant, and

Equipment

  

Advance Payments

and Construction in
Progress

  Total 

Historical cost

    

January 1, 2012

  1,360    1,551    7    2,918  

Foreign currency exchange differences

  –12    –16    –1    –29  

Additions from business combinations

  13    22    1    36  

Other additions

  55    397    20    472  

Retirements/disposals

  –44    –236    –5    –285  

Transfers

  1    3    –4    0  

 

 

December 31, 2012

  1,373    1,721    18    3,112  

 

 

Foreign currency exchange differences

  –34    –48    –3    –85  

Additions from business combinations

  1    7    0    8  

Other additions

  65    430    50    545  

Retirements/disposals

  –15    –201    –6    –222  

Transfers

  12    3    –15    0  

 

 

December 31, 2013

  1,402    1,912    44    3,358  

 

 

Accumulated depreciation

    

January 1, 2012

  460    907    0    1,367  

Foreign currency exchange differences

  –5    –12    0    –17  

Additions depreciation

  56    243    0    299  

Retirements/disposals

  –42    –203    0    –245  

 

 

December 31, 2012

  469    935    0    1,404  

 

 

Foreign currency exchange differences

  –15    –31    0    –46  

Additions depreciation

  59    289    0    348  

Retirements/disposals

  –14    –154    0    –168  

 

 

December 31, 2013

  499    1,039    0    1,538  

 

 

Carrying value

    

 

 

December 31, 2012

  904    786    18    1,708  

 

 

December 31, 2013

  903    873    44    1,820  

 

 
millions  Land and
Buildings
   Other Property,
Plant, and
Equipment
   Advance
Payments and
Construction in
Progress
   Total 

Carrying amount

                    

December 31, 2014

   1,010     1,050     42     2,102  

December 31, 2015

   1,053     1,073     66     2,192  

The

Total additions (other than from business combinations) amounted to580 million (2014:629 million) and disposals in other property, plant, and equipment relate primarily to the replacement and purchase of computer hardware and vehicles acquired in the normal course of business.business and investments in data centers.

(17) TRADE AND OTHER PAYABLES, FINANCIAL LIABILITIES, AND OTHER NON-FINANCIAL LIABILITIES

 

(17)Trade and Other Payables, Financial Liabilities, and Other Non-Financial Liabilities

(17a)Trade and Other Payables

Trade and other payables as at December 31 were as follows:

(17a) Trade and Other Payables

 

  2013   2012 
€ millions Current  Non-Current  Total   Current  Non-Current  Total 

Trade payables

  640    0    640     684    0    684  

Advance payments received

  80    0    80     81    0    81  

Miscellaneous other liabilities

  130    45    175     105    63    168  

Trade and other payables

  850    45    895     870    63    933  

millions  2015   2014 
  Current   Non-
Current
   Total   Current   Non-
Current
   Total 

Trade payables

   893     0     893     782     0     782  

Advance payments received

   110     0     110     112     0     112  

Miscellaneous other liabilities

   85     81     166     138     55     193  

Trade and other payables

   1,088     81     1,169     1,032     55     1,087  

 

F-43


Miscellaneous other liabilities mainly include mainly deferral amounts for free rent periods and liabilities related to government grants.

 

(17b)Financial Liabilities

Financial liabilities as at December 31 were as follows:

(17b) Financial Liabilities

 

millions 2015 2014 
 Nominal Volume Carrying Amount Nominal Volume Carrying Amount 
 2013 2013 2012 2012  Current Non-
Current
 Current Non-
Current
 Total Current Non-
Current
 Current Non-
Current
 Total 
 Nominal volume Carrying amount Nominal volume Carrying amount 
€ millions Current Non-
Current
 Current Non-
Current
 Total Current Non-
Current
 Current Non-
Current
 Total 

Bonds

  500    1,800    500    1,791    2,291    600    2,300    600    2,287    2,887    0    5,750    0    5,733    5,733    631    4,000    631    3,998    4,629  

Private placement transactions

  86    1,922    86    1,891    1,977    0    2,094    0    2,088    2,088    551    1,607    551    1,651    2,202    247    1,936    247    1,948    2,195  

Financial Debt

  586    3,722    586    3,682    4,268    600    4,394    600    4,375    4,975  

Bank loans

  16    1,250    16    1,245    1,261    1,279    3,000    1,277    2,985    4,261  

Financial debt

  567    8,607    567    8,628    9,195    2,157    8,936    2,155    8,931    11,086  

Derivatives

  NA    NA    70    58    128    NA    NA    287    46    333  

Other financial liabilities

  NA    NA    162    76    238    NA    NA    202    71    273    NA    NA    204    5    199    NA    NA    119    4    123  

Financial liabilities

    748    3,758    4,506      802    4,446    5,248     841    8,681    9,522    2,561    8,980    11,542  

Financial liabilities are unsecured, except for the retention of title and similar rights customary in our industry. Effective interest rates on our financial debt (including the effects from interest rateinterest-rate swaps) were 1.30% in 2015, 1.77% in 2014, and 2.48% in 2013, 2.87% in 2012, and 2.98% in 2011.2013.

For an analysis of the contractual cash flows of our financial liabilities based on maturity, see Note (24). For information onabout the risk associated with our financial liabilities, see Note (25). For information onabout fair values, see Note (26).

 

 

Bonds

As at December 31, we had outstanding bonds with the following terms:

Bonds

 Maturity Issue Price Coupon Rate Effective
Interest Rate
 Nominal Volume
(in € millions)
 Balance on
12/31/2013
(in € millions)
 Balance on
12/31/2012
(in € millions)
  2015 2014 

Eurobond 1 – 2010

  2014    99.755  2.50% (fix)    2.64  500    500    499  
Maturity Issue Price   Coupon Rate Effective
Interest Rate
 

Nominal
Volume

(in respective
currency in
millions)

 

Carrying
Amount

(in  millions)

 

Carrying
Amount

(in   millions)

 
  2017    99.780  3.50% (fix)    3.58  500    499    498    2017    99.780%    3.50% (fix)  3.59%    500    488    490  

Eurobond 4 – 2010

  2013    99.857  2.25% (fix)    2.38  600    0    600  

Eurobond 5 – 2012

  2015    99.791  1.00% (fix)    1.17  550    547    547    2015    NA    NA  NA    0    0    549  

Eurobond 6 – 2012

  2019    99.307  2.125% (fix)    2.27  750    745    743    2019    99.307%    2.125% (fix)  2.29%    750    774    778  

 

Eurobond 7 – 2014

  2018    100.000%    0.208% (var.)  0.23%    750    749    748  

Eurobond 8 – 2014

  2023    99.478%    1.125% (fix)  1.24%    1,000    993    992  

Eurobond 9 – 2014

  2027    99.284%    1.75% (fix)  1.86%    1,000    989    990  

Eurobond 10 – 2015

  2017    100.000%    0.127% (var.)  0.14%    500    499    0  

Eurobond 11 – 2015

  2020    100.000%    0.259% (var.)  0.23%    650    648    0  

Eurobond 12 – 2015

  2025    99.264%    1.00% (fix)  1.13%    600    593    0  

Eurobonds

      5,733    4,547  

Other bonds

      0    82  

Bonds

       2,291    2,887        5,733    4,629  

 

InSince September 2012, we arrangedhave used a debt issuance program with an initial renewable term of 12 months. The program enables us to issue bonds in a number of tranches in different currencies up to atranches. Currently, the total volume of €2.4 billion. In November 2012, we issued bondsavailable under the program as shown in(including the amounts issued) is8 billion.

table above. In September 2013, our debt issuance program was extended by 12 months and the volume was increased to €4 billion, allAll of which is available for new bond issuances.

All our Eurobonds are listed for trading on the Luxembourg Stock Exchange.

 

F-44


Private Placement Transactions

Our private placement transactions have the following terms:

Private Placements

   2015  2014 
 Maturity  Coupon Rate  Effective
Interest Rate
  

Nominal Volume

(in respective
currency in
millions)

  

Carrying
Amount

(in  millions)

  

Carrying
Amount

(in   millions)

 

U.S. private placements

                        

Tranche 1 – 2010

  2015    NA    NA    US$0    0    247  

Tranche 2 – 2010

  2017    2.95% (fix)    3.03%    US$200    180    161  

Tranche 3 – 2011

  2016    2.77% (fix)    2.82%    US$600    551    494  

Tranche 4 – 2011

  2018    3.43% (fix)    3.50%    US$150    135    121  

Tranche 5 – 2012

  2017    2.13% (fix)    2.16%    US$242.5    221    197  

Tranche 6 – 2012

  2020    2.82% (fix)    2.86%    US$290    271    238  

Tranche 7 – 2012

  2022    3.18% (fix)    3.22%    US$444.5    426    372  

Tranche 8 – 2012

  2024    3.33% (fix)    3.37%    US$323    318    277  

Tranche 9 – 2012

  2027    3.53% (fix)    3.57%    US$100    100    88  

Private placements

                  2,202    2,195  

 

    Maturity   Coupon Rate   Effective
Interest Rate
   Nominal Volume
(in respective
currency in
millions)
   Balance on
12/31/2013
(in € millions)
   Balance on
12/31/2012
(in € millions)
 

German promissory note

            

Tranche 3 – 2009

   2014     4.92% (fix)     4.98%     €86     86     86  

U.S. private placements

            

Tranche 1 – 2010

   2015     2.34% (fix)     2.40%     US$ 300     216     227  

Tranche 2 – 2010

   2017     2.95% (fix)     3.03%     US$ 200     145     151  

Tranche 3 – 2011

   2016     2.77% (fix)     2.82%     US$ 600     434     454  

Tranche 4 – 2011

   2018     3.43% (fix)     3.50%     US$ 150     108     113  

Tranche 5 – 2012

   2017     2.13% (fix)     2.16%     US$ 242.5     175     183  

Tranche 6 – 2012

   2020     2.82% (fix)     2.86%     US$ 290     206     219  

Tranche 7 – 2012

   2022     3.18% (fix)     3.22%     US$ 444.5     313     336  

Tranche 8 – 2012

   2024     3.33% (fix)     3.37%     US$ 323     225     244  

Tranche 9 – 2012

   2027     3.53% (fix)     3.57%     US$ 100     69     75  

 

 

Private placements

           1,977     2,088  

The U.S. private placement notes were issued by one of our subsidiaries that has the U.S. dollar as its functional currency.

Bank Loans

   2015  2014 
 Maturity  Coupon Rate  Effective
Interest Rate
  

Nominal Volume

(in respective
currency in
millions)

  Carrying
Amount
(in 
 millions)
  

Carrying
Amount

(in   millions)

 

Concur term loan – Facility A

  2015    NA    NA    0    0    1,268  

Concur term loan – Facility B

  2017    0.45% (var.)    0.93%    1,250    1,245    2,984  

Other loans

              INR 1026    16    9  

Bank loans

                  1,261    4,261  

Other Financial Liabilities

Our current other financial liabilities mainly comprise derivative liabilities and liabilities for accrued interest.interest and customer funding liabilities amounting to90 million (2014:58 million).

(17c) Other Non-Financial Liabilities

Other non-financial liabilities as at December 31 were as follows:

Other Non-Financial Liabilities

 

  2013   2012 
€ millions  Current   Non-Current   Total   Current   Non-Current   Total   2015   2014 
millions Current   Non-Current   Total   Current   Non-Current   Total 
   1,775     112     1,887     1,768     98     1,866     2,255     126     2,381     1,979     122     2,101  

Share-based payment liabilities

   555     205     760     289     97     386  

Other taxes

   488     0     488     436     0     436     597     0     597     543     0     543  

Other non-financial liabilities

   2,263     112     2,375     2,204     98     2,302     3,407     331     3,738     2,811     219     3,030  

Other employee-related liabilities mainly relate to vacation accruals, bonus and sales commission accruals, as well as employee-related social security obligations.

For more information about our share-based payments, see Note (27).

Other taxes mainly comprise mainly payroll tax liabilities and value-added tax liabilities.

 

F-45


(18)Provisions

Provisions as at December 31 were as follows:

Provisions(18) PROVISIONS

 

  2013   2012 
millions  2015   2014 
  Current   Non-Current   Total   Current   Non-Current   Total  Current   

Non-

Current

   Total   Current   

Non-

Current

   Total 

Pension plans and similar obligations (see Note (18a))

   2     62     64     3     69     72     0     117     117     2     86     88  

Other provisions (see Note (18b))

   643     215     858     840     278     1,118     299     63     362     148     65     213  

Total

   645     277     922     843     347     1,190     299     180     479     150     151     301  

 

(18a)

(18a) Pension Plans and Similar Obligations

We maintain several defined benefit and defined contribution pension plans for our employees in Germany and at foreign subsidiaries, which provide for old age, disability, and survivors’ benefits. Similar Obligations

Defined Benefit Plans

The measurement dates for theour domestic and foreign benefit plans are December 31. Individual benefit plans have also been established for members of our Executive Board. Furthermore, in certain countries we provide termination indemnity benefits to employees regardless of the cause for termination. These types of benefits are typically defined by law in these foreign countries.

Our domestic defined benefit pension plans provide participants with pension benefits that are based on the length of service and compensation of employees.

There is also a domestic employee-financed pension plan which SAP funds through the purchase of qualifying insurance policies and where SAP guarantees a minimum return on

investment which is equivalent to the return guaranteed by the insurer. Even though the risk that SAP would be liable for a return that cannot be met by the insurance company is very remote, these employee-financed plans do not qualify as defined contribution plans under IFRS and consequently, the pension liabilities and the respective insurance policies are included in domestic plan assets and plan liabilities respectively.

Foreign defined benefit pension plans provide participants with pension benefits that are based on compensation levels, age, and length of service.

The pension plan in Switzerland accounted for €189 million of defined benefit obligation and €194 million of the plan assets. This plan consists of three benefits namely retirement benefits, disability benefits and spouse pension. These obligations are based on salary and age of the employees. Both employer and employee make contributions to the plan. Statutory minimum funding obligations exist.

 

 

The following table shows the present value of the nature of the benefits provided by the defined benefit obligations:

Nature of the Benefits

   Domestic
Plans
   Foreign
Plans
   Other
Post-Employment
Plans
   Total 
€ millions  2013   2013   2013   2013 

Present value of defined benefit obligation

        

Benefits based on final salary

        

Annuity

   14     2     0     16  

Lump sum

   0     5     25     30  

Benefits not based on final salary

        

Annuity

   40     189     1     230  

Lump sum

   574     35     8     617  

Total

   628     231     34     893  

F-46


The following table shows the change in present values of the defined benefit obligations (DBOs) and the fair value of the plan assets with a reconciliation of the funded status to net amounts:

Change in the Present Value of the DBODefined Benefit Obligations (DBO) and the Fair Value of the Plan Assets

 

  Domestic
Plans
  Foreign
Plans
  Other Post-
Employment Plans
  Total 
€ millions 2013  2012  2013  2012  2013  2012  2013  2012 

Change in benefit obligation

        

Benefit obligation at beginning of year

  597    462    220    453    32    23    850    938  

Current service cost

  7    –2    15    15    3    3    25    16  

Interest expense

  19    21    4    8    1    1    24    30  

Employee contributions

  28    26    5    5    0    0    33    31  

Remeasurements loss (+)/gain (–)

  –17    94    1    0    –1    6    –17    100  

Benefits paid

  –5    –5    –4    –3    –1    –2    –10    –10  

Acquisitions/divestitures

  0    0    1    0    2    1    3    1  

Curtailments/settlements

  0    0    0    –257    0    0    0    –257  

Past service cost

  0    0    1    0    0    0    1    0  

Foreign currency exchange rate changes

  0    0    –12    –1    –2    0    –14    –1  

Benefit obligation at year-end

  628    597    231    220    34    32    893    850  

Thereof fully or partially funded plans

  628    597    196    180    20    19    844    796  

Thereof unfunded plans

  0    0    35    40    14    13    49    54  

Change in plan assets

        

Fair value of plan assets at beginning of year

  589    461    181    387    9    6    779    854  

Interest income

  20    22    4    7    1    1    25    30  

Employer contributions

  1    1    14    31    4    4    19    36  

Employee contributions

  28    26    5    5    0    0    33    31  

Benefits paid

  –5    –5    –4    –3    –1    –1    –10    –9  

Acquisitions/divestitures

  0    0    1    0    0    0    1    0  

Curtailments/settlements

  0    0    0    –257    0    0    0    –257  

Remeasurements loss (–)/gain (+)

  –10    84    5    8    0    0    –5    92  

Foreign currency exchange rate changes

  0    0    –3    3    –2    0    –5    3  

Fair value of plan assets at year-end

  623    589    201    181    11    9    835    779  

Reconciliation of net defined benefit liability (asset)

        

Net defined benefit liability (asset) at beginning of year

  8    1    39    66    23    17    70    84  

Current service cost

  7    –2    15    15    3    3    25    16  

Interest expense (income)

  –1    –1    0    1    0    0    –1    0  

Employer contributions

  –1    –1    –14    –31    –4    –4    –19    –36  

Employee contributions

  0    0    0    0    0    0    0    0  

Remeasurements loss (+)/gain (–)

  –7    10    –4    –8    –1    6    –12    8  

Benefits paid

  0    0    0    0    0    –1    0    –1  

Acquisitions/divestitures

  0    0    0    0    2    1    2    1  

Past service cost

  0    0    1    0    0    0    1    0  

Foreign currency exchange rate changes

  0    0    –9    –4    0    0    –9    –4  
millions Domestic Plans  Foreign Plans  Other Post-
Employment Plans
  Total 
 2015  2014  2015  2014  2015  2014  2015  2014 

Present value of the DBO

  724    780    333    276    82    46    1,139    1,102  

Thereof fully or partially funded plans

  724    780    293    239    61    26    1,078    1,045  

Thereof unfunded plans

  0    0    40    37    21    20    61    57  

Fair value of the plan assets

  716    767    265    234    42    13    1,023    1,014  

Net defined benefit liability (asset)

  8    13    69    42    40    33    117    88  
Amounts recognized in the Consolidated Statement of Financial Position:                                

Non-current other financial assets

  0    0    0    0    0    0    0    0  

Current provisions

  0    0    0    2    0    0    0    2  

Non-current provisions

  8    13    69    40    40    33    117    86  

Total

  8     13    69     42    40     33    117     88  

664 million (2014:714 million) of the present value of the DBO of our domestic plans relate to plans that provide for lump sum payments not based on final salary, and287 million (2014:234 million) of the present value of the DBO of our foreign plans relate to plans that provide for annuity payments not based on final salary.

 

F-47


  Domestic
Plans
  Foreign
Plans
  Other Post-
Employment Plans
  Total 
€ millions 2013  2012  2013  2012  2013  2012  2013  2012 

Net defined benefit liability (asset) at year-end

  5    8    30    39    23    23    58    71  

Amounts recognized in the Consolidated Statement of Financial Position:

        

Non-current pension assets

  0    0    6    1    0    0    6    1  

Accrued benefit liability (current)

  0    0    –2    –3    0    0    –2    –3  

Accrued benefit liability (non-current)

  –5    –8    –34    –37    –23    –23    –62    –69  

Total

  –5    –8    –30    –39    –23    –23    –58    –71  

The following weighted average assumptions were used for the actuarial valuation of our domestic and foreign pension liabilities as well as other post-employment benefit obligations as at the respective measurement date:

Actuarial Assumptions for Defined Benefit Liabilities

 

  Domestic Plans   Foreign Plans   Other Post-
Employment Plans
 
Percent  Domestic Plans   Foreign Plans   Other Post-Employment Plans 
  2013   2012   2011   2013   2012   2011   2013   2012   2011  2015   2014   2013   2015   2014   2013   2015   2014   2013 

Discount rate

   3.6     3.3     4.6     2.1     1.9     3.2     5.2     4.8     5.5     2.7     2.2     3.6     0.7     1.1     2.1     4.0     4.2     5.2  

Future salary increases

   2.5     2.5     2.5     1.7     1.8     0.8     4.7     4.2     3.9     2.5     2.5     2.5     1.7     1.7     1.7     6.3     3.8     4.7  

Future pension increases

   2.0     2.0     2.0     0.0     0.0     0.0     0.0     0.0     0.0     2.0     2.0     2.0     0     0     0     0.0     0     0.0  

Employee turnover

   2.0     2.0     2.0     9.9     9.5     4.2     2.5     2.3     2.3  ��  2.0     2.0     2.0     10.3     10.1     9.9     8.7     1.3     2.5  

Inflation

   0.0     0.0     0.0     1.3     1.3     0.5     1.1     1.1     1.2     2.0     0     0     1.4     1.3     1.3     1.0     1.3     1.1  

 

The assumed discount rates are derived from rates available on high-quality corporate bonds and government bonds for which the timing and amounts of payments match the timing and the amounts of our projected pension payments.

The sensitivity analysis table shows how the present value of all defined benefit obligations

would have been influenced by reasonable possible changes to above actuarial assumptions. The sensitivity analysis table presented below considers change in one actuarial assumption at a time, holding all other actuarial

assumptions constant. A reasonable possible change in actuarial assumptions of 50 basis points in either direction, except for the discount rate assumption, would not materially influence the present value of all defined benefit obligations.

 

 

Sensitivity Analysis

 

    Domestic Plans   Foreign Plans   Other Post-
Employment
Plans
   Total 
€ millions  2013   2013   2013   2013 

Present value of all defined benefit obligations if:

        

Discount rate was 50 basis points higher

   585     217     32     834  

Discount rate was 50 basis points lower

   675     246     36     957  

Expected rate of future salary increases was 50 basis points higher

   628     233     36     897  

Expected rate of future salary increases was 50 basis points lower

   628     228     32     888  

Expected rate of future pension increases was 50 basis points higher

   632     236     34     902  

Expected rate of future pension increases was 50 basis points lower

   625     226     34     885  

Expected inflation was 50 basis points higher

   628     233     36     897  

Expected inflation was 50 basis points lower

   628     229     32     889  

F-48


The components of total expense of defined benefit pension plans for the years 2013, 2012, and 2011 recognized in operating expense were as follows:

millions Domestic Plans  Foreign Plans  Other Post-
Employment Plans
  Total 
 2015  2014  2013  2015  2014  2013  2015  2014  2013  2015  2014  2013 
Present value of all defined benefit obligations if:                                                
Discount rate was 50 basis points higher  678    725    585    311    259    217    79    44    32    1,068    1,028    834  
Discount rate was 50 basis points lower  775    840    675    359    296    246    87    49    36    1,221    1,185    957  

Total Expense of Defined Benefit Pension Plans

 

   Domestic Plans  Foreign Plans  Other Post-
Employment Plans
  Total 
€ millions 2013  2012  2011  2013  2012  2011  2013  2012  2011  2013  2012  2011 

Current service cost

  7    –2    –1    15    15    18    3    3    3    25    16    20  

Interest expense

  19    21    20    4    8    13    1    1    1    24    30    34  

Interest income

  –20    –22    –21    –4    –7    –12    –1    –1    0    –25    –30    –33  

Past service cost

  0    0    0    1    0    –2    0    0    0    1    0    –2  

Total expense

  6    –3    –2    16    16    17    4    3    4    26    16    19  

Actual return on plan assets

  10    106    28    9    15    5    1    1    0    20    122    33  

Due to the fact that our domestic defined benefit pension plans primarily consist of an employee-financed post-retirement plan that is fully financed with qualifying insurance policies, current service

cost may turn into a credit as a result of adjusting the defined benefit liability’s carrying amount to the fair value of the qualifying plan assets. Such adjustments are recorded in service cost.

millions Domestic Plans  Foreign Plans  Other Post-
Employment Plans
  Total 
 2015  2014  2013  2015  2014  2013  2015  2014  2013  2015  2014  2013 

Current service cost

  10    3    7    21    16    15    9    6    3    40    25    25  

Interest expense

  17    22    19    3    5    4    3    2    1    23    29    24  

Interest income

  17    23    20    3    5    4    2    1    1    22    29    25  

Past service cost

  0    0    0    0    0    1    0    0    0    0    0    1  

Total expense

  10    3    6    21    16    16    10    7    4    41    26    26  

Actual return on plan assets

  76    133    10    0    10    9    2    1    1    74    144    20  

We have recognized the following amounts as remeasurements for our defined benefit pension plans:

Remeasurements on Defined Benefit Pension Plans

   Domestic Plans  Foreign Plans  Other Post-
Employment Plans
  Total 
€ millions 2013  2012  2011  2013  2012  2011  2013  2012  2011  2013  2012  2011 

Beginning balance of remeasurements on defined benefit plans (gains (–) and losses (+))

  10    0    –4    –12    101    87    5    0    0    3    101    83  

Remeasurements on defined benefit obligations:

            

Actuarial gains (–) and losses (+) arising from change in demographic assumptions

  0    0    0    3    0    5    0    0    0    3    0    5  

Actuarial gains (–) and losses (+) arising from change in financial assumptions

  –28    106    14    –6    5    5    0    0    0    –34    111    19  

Actuarial gains (–) and losses (+) arising from experience adjustments

  11    –12    –3    6    –5    –9    0    5    0    17    –12    –12  

Remeasurements on plan assets:

            

Actuarial gains (–) and losses (+) arising from experience adjustments

  10    –84    –7    –5    –3    12    0    0    0    5    –87    5  

Settlement

  0    0    0    0    –110    0    0    0    0    0    –110    0  

Foreign currency exchange rate changes

  0    0    0    –2    0    0    –1    0    0    –3    0    0  

Ending balance of remeasurements

on defined benefit plans (gains (–) and losses (+))

  2    10    0    –17    –12    101    3    5    0    –12    3    101  

F-49


For the determination of the total expense for the years 2013, 2012, and 2011, the projection of the defined benefit obligation and the fair value of the plan assets as at December 31, 2013, 2012, and 2011, the following principal actuarial assumptions (expressed as weighted averages for our foreign and post-employment benefit plans) were used:

Actuarial Assumptions for Total Expense

  Domestic Plans  Foreign Plans  Other Post-
Employment Plans
 
Percent 2013  2012  2011  2013  2012  2011  2013  2012  2011 

Discount rate

  3.3    4.6    4.9    2.0    2.2    3.3    4.8    5.6    5.8  

Future salary increases

  2.5    2.5    2.5    1.7    1.8    1.3    4.2    3.9    3.4  

Future pension increases

  2.0    2.0    2.0    0.0    0.0    0.0    0.0    0.0    0.0  

Employee turnover

  2.0    2.0    2.0    9.8    10.2    4.2    2.0    1.9    2.0  

Inflation

  0.0    0.0    0.0    1.3    1.3    0.5    1.1    1.1    1.2  

Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance policies.

Our investment strategies for foreign benefit plans vary according to the conditions in the country in which the respective benefit plans are situated. Generally, a long-term investment horizon has been adopted for all major foreign benefit plans. Although our policy is to invest in a

risk-diversified portfolio consisting of a mix of assets, both the defined benefit obligation and plan assets can fluctuate overtimeover time, which exposes the Group to actuarial and market (investment) risks. Depending on the statutory requirements in each country, it might be necessary to reduce theany underfunding by addition of liquid assets. To minimize these actuarial and market fluctuations, SAP reviews relevant financial factors for appropriateness and reasonableness and makes modifications to eliminate certain effects when considered necessary. Our plan asset allocation as at December 31, 2013, and December 31, 2012, was as follows:

Plan Asset Allocation

 

  2013   2012 
millions  2015   2014 
  Quoted in
an Active
Market
   Not
Quoted in
an Active
Market
   Quoted in
an Active
Market
   Not
Quoted in
an Active
Market
  Quoted in an
Active Market
   Not Quoted in
an Active Market
   Quoted in an
Active Market
   Not Quoted in
an Active Market
 

Asset category

                    

Equity investments

   48     0     42     0     93     0     75     0  

Corporate bonds

   65     0     63     0     101     0     60     0  

Government bonds

   5     0     1     0  

Real estate

   33     0     29     0     43     0     31     0  

Insurance policies

   9     623     8     589     0     736     0     780  

Cash and cash equivalents

   34     0     31     0     9     0     41     0  

Others

   23     0     17     0     36     0     27     0  

Total

   212     623     190     589     287     736     234     780  

 

Our expected contribution in 2014 is €1 million for2016 to our domestic defined benefit pension plans and €15 million for foreign defined benefit pension plans all of which is expected to be paid in cash.

immaterial. The weighted duration of our defined benefit plans amounted to 1514 years as at December 31, 2013,2015, and 14 years as at December 31, 2012.2014.

Total future benefit payments from our defined benefit plans as at December 31, 2015, are expected to be1,432 million (2014:1,409 million). Eighty-three percent of this amount has maturities of over five years.

 

 

F-50


The table below presents the maturity analysis of the benefit payments:

Maturity Analysis

 

  Domestic Plans   Foreign Plans   Other Post-
Employment
Plans
 
€ millions  2013   2013   2013   Domestic Plans   Foreign Plans   Other Post-Employment
Plans
 
millions  2015     2014     2015     2014     2015     2014  
   8     20     1     19     10     26     23     2     2  

Between 1-2 years

   9     36     2  

Between 2-5 years

   58     53     5  

Between 1 and 2 years

   18     17     43     40     2     2  

Between 2 and 5 years

   65     56     63     58     8     6  

Over 5 years

   989     205     64     935     983     223     195     28     17  

Total

   1,064     314     72     1,037     1,066     355     316     40     27  

Defined Contribution Plan/Plans/State Plans

We also maintain domestic and foreign defined contribution plans. Amounts contributed by us under such plans are based on a percentage of the employees’ salaries or the amount of contributions made by employees. Furthermore, in Germany and some other countries we make contributions to public pension plans that are operated by national or local government or a similar institution. The expenses of defined contribution plans and state plans for the years 2013, 2012, and 2011, were as follows:

Total Expense of Defined Contribution Plans and State Plans

 

€ millions  2013   2012   2011   2015   2014   2013 

Defined contribution plans

   182     173     151     218     188     182  

State plans

   316     296     244     429     360     316  

 

Total expense

   498     469     395     647     548     498  

 

(18b)Other Provisions

Changes in other provisions over the reporting year were as follows:

(18b) Other Provisions

 

€ millions Balance
1/1/2013
  Addition  Additions
from
business
combinations
  Utili-
zation
  Release  Currency
Impact
  Balance
12/31/2013
 

Employee-related provisions

       

Provisions for share-based payments

  579    293    0    –360    –54    –13    445  

Other employee-related provisions

  87    58    0    –80    –11    –2    52  

Customer-related provisions

  74    83    0    –83    –36    –2    36  

Litigation-related provisions

       

TomorrowNow litigation

  234    0    0    –1    0    –10    223  

Other litigation-related provisions

  55    6    1    –11    –36    –3    12  

Restructuring provisions

  12    74    0    –49    –4    0    33  

Onerous contract provisions (other than from customer contracts)

  53    3    0    –22    0    –1    33  

Other provisions

  24    6    0    –3    –1    –2    24  

 

 

Total other provisions

  1,118    523    1    –609    –142    –33    858  

Thereof current

  840         643  

Thereof non-current

  278         215  

millions  

1/1/

2015

  Addition   Accretion   Utilization   Release   

Currency

Impact

   

12/31/

2015

 

Employee-related provisions

   47    59     0     46     3     1     58  

Customer-related provisions

   39    91     0     71     1     3     61  
Intellectual property-related provisions   12    5     0     1     6     1     11  

Restructuring provisions

   60    638     0     496     17     1     184  
Onerous contract provisions (other than from customer contracts)   24    1     2     13     1     2     15  

Other provisions

   31    3     0     0     2     1     33  

Total other provisions

   213    797     2     627      30      7     362  

Thereof current

   148                             299  

Thereof non-current

   65                             63  

 

F-51Intellectual property-related provisions relate to litigation matters. Customer-related provisions relate primarily to disputes with individual customers. Both classes of provision are described in Note (23).


For more information about our share-based payments,restructuring plans, see Note (27)(6).

OtherThe cash outflows associated with employee-related provisions primarily comprise obligations for time credits, severance payments, jubilee expenses, and semiretirement. While most of these employee-related provisions can be claimed within the next 12 months, we do not expect the related cash flows within this time period.

Customer-related provisions include performance obligations, as well as expected contract losses from contracts with customers. The associated cash outflowsrestructuring costs are substantially short-term in nature. In 2015, employees received, under certain restructuring activities, credits to their working time accounts which will allow them to discontinue work earlier than their retirement date. These obligations are classified as employee-related provisions rather than restructuring provisions.

Litigation-related

Onerous contract and other provisions relate primarily to the litigation matters described in Note (23). They include the expenses related to the provision established for the related litigation as well as any related legal fees incurred to datecomprise facility-related and expected to be incurred in the future. We have established provisions taking into account the facts of each case.supplier-related provisions. The timing of thethese cash outflows associated with legal claims cannot be reasonably determined in all cases. For more information, see Note (3c).

Restructuring provisions comprise various restructuring activities that occurred in 2013 and 2012.

During 2012 and 2013, we implemented organizational changes in sales and go-to-market in EMEA and North America. We made other changes to integrate Sybase employees into our global finance and administration organization and to integrate the business activities of Crossgate. In line with our new cloud integration strategy, we

set up a plan to cover all cloud-business related organizational changes. The cash outflows for these restructuring programs are typically short-term in nature.

Non-customer contract-related onerous contract provisions have been recorded in connection with unused lease space and unfavorable acquired facility lease terms. The utilization of onerous leases dependsis dependent on the termsremaining term of the underlying lease and of the supplier contract.

Other provisions comprise warranty obligations and decommissioning, restoration, and similar liabilities associated with leased facilities. The related outflow for warranty obligations is short-term in nature. The associated cash outflows for decommissioning, restoration, and similar liabilities, which are typically long-term in nature, are generally expected to occur at the dates we exit the facilities to which they relate.(19) DEFERRED INCOME

(19)Deferred Income

Deferred income consists mainly of prepayments made by our customers for support services, cloud subscriptions and professionalsupport; software support and services; fees from multiple elementmultiple-element arrangements allocated to undelivered elements; and amounts recorded in purchase accounting at fair value for obligations to perform under acquired support contracts in connection with acquisitions.

On December 31, 2013, current deferred income included a total of €443 million in deferred revenue (December 31, 2012: €317 million), which in future will be recognized as revenue from cloud subscriptions and support.

 

 

F-52
millions 2015  2014 
 Current  

Non-

Current

  Total  Current  

Non-

Current

  Total 

Deferred Income

  2,001    106    2,107    1,680    78    1,758  

Thereof deferred revenue from cloud subscriptions and support

  957    0    957    689    0    689  


(20)Total Equity

(20) TOTAL EQUITY

Issued Capital

As at December 31, 2013,2015, SAP AGSE had issued 1,228,504,232 no-par value bearer shares (December 31, 2012:2014: 1,228,504,232) with a calculated nominal value of €11 per share. All the shares issued are fully paid. The following table shows the changes in the number and the value of issued shares and treasury shares in millions.

Change in Issued Capital and Treasury Shares

 

   Number of Shares
in Millions
   Value in € Millions 
    Issued
Capital
   Treasury
Shares
   Issued
Capital
   Treasury
Shares
 

January 1, 2011

   1,227     –39     1,227     –1,382  

Issuing shares under share-based payments

   1     0     1     0  

Purchase of treasury shares

   0     –6     0     –246  

Reissuance of treasury shares under share-based payments

   0     7     0     251  

 

 

December 31, 2011

   1,228     –38     1,228     –1,377  

Issuing shares under share-based payments

   1     0     1     0  

Purchase of treasury shares

   0     –1     0     –53  

Reissuance of treasury shares under share-based payments

   0     2     0     93  

 

 

December 31, 2012

   1,229     –37     1,229     –1,337  

Reissuance of treasury shares under share-based payments

   0     2     0     57  

December 31, 2013

   1,229     –35     1,229     –1,280  
    Shares (in millions)   Value (in  millions) 
  Issued
Capital
   Treasury
Shares
   Issued
Capital
   Treasury
Shares
 

January 1, 2013

   1,229     37     1,229     1,337  

Reissuance of treasury shares under share-based payments

   0     2     0     57  

December 31, 2013

   1,229     35     1,229     1,280  

Reissuance of treasury shares under share-based payments

   0     2     0     56  

December 31, 2014

   1,229     33     1,229     1,224  

Reissuance of treasury shares under share-based payments

   0     2     0     100  

December 31, 2015

   1,229     31      1,229     1,124   

 

Authorized Shares

The Articles of Incorporation authorize the Executive Board to increase the issued capital:capital by:

Up to a total amount of €250 million by issuing new no-par value bearer shares against contributions in cash until June 7, 2015 (Authorized Capital I). The issuance is subject to the statutory subscription rights of existing shareholders.

Up to a total amount of €250 million by issuing new no-par value bearer shares against contributions in cash or in kind until June 7, 2015 (Authorized Capital II). Subject to the consent of the Supervisory Board, the Executive Board is authorized to exclude the shareholders’ statutory subscription rights in certain cases.

Up to a total amount of approximately €30 million by issuing new no-par value bearer shares against contributions in cash or in kind until June 7, 2015 (Authorized Capital III). The new shares may only be used to grant shares to employees of SAP AG and its subsidiaries (employee shares). The shareholders’ subscription rights are excluded.

Up to a total amount of250 million by issuing new no-par value bearer shares against contributions in cash until May 19, 2020 (Authorized Capital I). The issuance is subject to the statutory subscription rights of existing shareholders.

Up to a total amount of250 million by issuing new no-par value bearer shares against contributions in cash or in kind until May 19, 2020 (Authorized Capital II). Subject to the consent of the Supervisory Board, the Executive Board is authorized to exclude the shareholders’ statutory subscription rights in certain cases.

Contingent Shares

SAP AG’sSE’s share capital is subject to a contingent capital increase which may be effected only to the extent that the holders or creditors of convertible bonds or stock options issued or guaranteed by SAP AGSE or any of its directly or indirectly controlled subsidiaries under certain share-based payments exercise their conversion or subscription rights, and no other methods for servicing these rights are used. As at December 31, 2013, €1002015,100 million, representing 100 million shares, was still available for issuance (2012: €100(2014:100 million).

Share Premium

Share premium represents all capital contributed to SAP with the proceeds resulting from the issuance of issued capital in excess of their calculated par value. Share premium arises mainly from issuance of issued capital, treasury shares transactions, and share-based payments.

F-53


Retained Earnings

Retained earnings contain prior years’ undistributed profit after tax and unrecognized

pension costs. Unrecognized pension costs comprise remeasurements relating to defined benefit pension plans and similar obligations.

Other Comprehensive Income

The component of other comprehensive income before tax that will be reclassified to profit or loss in the future includes the following items:

Items Recognized in Other Comprehensive Income that will beThat Will Be Reclassified to Profit or Loss Before Tax

 

€ millions  2013   2012   2011   2015   2014   2013 

Gains (losses) on exchange differences

   –576     –214     106     1,845     1,161     576  

Gains (losses) on remeasuring available-for-sale financial assets

   79     33     –6     181     130     79  

Reclassification adjustments on available-for-sale financial assets

   –19     –20     –1     53     2     19  

 

Available-for-sale financial assets

   60     13     –7     128     128     60  

Gains (losses) on cash flow hedges

   78     21     –23  

Reclassification adjustments on cash flow hedges

   –78     42     22  

 

Cash flow hedges

   0     63     –1  
Gains (losses) on cash-flow hedges   59     41     78  
Reclassification adjustments on cash-flow hedges   74     3     78  

Cash-flow hedges

   15     38     0  

Treasury Shares

By resolution of SAP AG’sSE’s General Meeting of Shareholders held on June 4, 2013, the authorization granted by the General Meeting of Shareholders of June 8, 2010, regarding the acquisition of treasury shares was revoked to the extent it had not been exercised at that time, and replaced by a new authorization of the Executive Board of SAP AGSE to acquire, on or before June 3, 2018, shares of SAP AGSE representing a pro rata amount of capital stock of up to €120120 million in aggregate, provided that the shares purchased under the authorization, together with any other shares in the Company previously acquired and held by, or attributable to, SAP AGSE do not account for more than 10% of SAP AG’sSE’s issued share capital. Although treasury shares are legally considered outstanding, there are no dividend or voting rights associated with shares held in treasury. We may redeem or resell shares held in treasury, or we may use treasury shares for the purpose of servicing option or conversion rights under the Company’s share-based payment plans. Also, we may use shares held in treasury as consideration in connection with mergers with, or acquisitions of, other companies.

Miscellaneous

Under the German Stock Corporation Act (Aktiengesetz), theDividends

The total amount of dividends

dividend available for distribution to SAP AG’sSE shareholders is based on the profits of SAP AGSE as

reported in its statutory financial statements which are prepared under the accounting rules in the German Commercial Code (Handelsgesetzbuch)(Handelsgesetzbuch). For the year ended December 31, 2013,2015, the Executive Board of SAP AG intends to propose that a dividend of €1.001.15 per share (that is, an estimated total dividend of €1,1941,378 million), to be paid from the profits of SAP AG.SE.

Dividends per share for 20122014 and 20112013 were €0.851.10 and €1.101.00 respectively and were paid in the succeeding year.

(21) ADDITIONAL CAPITAL DISCLOSURES

(21)Additional Capital Disclosures

Capital Structure Management

The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor, and customer confidence, and to support the growth of our business. We seek to maintain a capital structure that will allow us to cover our funding requirements through the capital markets at reasonable conditions, and in so doing, ensure a high level of independence, confidence, and financial flexibility.

Based on our strong corporate financial profileSAP SE’s long-term credit rating is “A” by Standard and our excellent capital market reputation, wePoor’s and “A2” by Moody’s, both with stable outlook. Since their initial assignment in September 2014, the ratings and outlooks have

F-54


so far successfully executed external financing transactions without an external rating. However, we will continue to closely monitor our financing

situation to determine whether not having an external rating continues to be appropriate.changed.

 

 

Capital Structure

 

  2013   2012   Change (in %)   2015   2014   D in % 
  € millions   

% of

Total equity and
liabilities

   € millions   

% of

Total equity and
liabilities

     millions   

% of

Total equity and
liabilities

    millions   

% of

Total equity and
liabilities

      

Equity

   16,048     59     14,133     54     14     23,295     56     19,534     51     19  

Current liabilities

   6,347     23     6,546     25     –3     7,867     19     8,574     22     8  

Non-current liabilities

   4,699     17     5,627     21     –16     10,228     25     10,457     27     2  

Liabilities

   11,046     41     12,173     46     –9     18,095     44     19,031     49     5  

Total equity and liabilities

   27,094     100     26,306     100     3     41,390     100     38,565     100     7  

 

Our financing activities improved our debt ratio (defined asIn 2015, we repaid1,270 million in bank loans that we had taken to finance the ratioConcur acquisition and refinanced another part of this loan through the issuance of a three-tranche Eurobond of1.75 billion in total liabilitieswith maturities of two to total equity10 years. We also repaid a550 million Eurobond and liabilities, expressed as a percentage) to 41%US$300 million U.S. private placement tranche at their maturity. Thus, the end of 2013 (as compared to 46% at the end of 2012). The ratio of total financial debt to total equity and liabilities decreased by 3%seven percentage points to 16%22% at the end of 2013 (19%2015 (29% as at December 31, 2012)2014).

Total financial debt consists

of current and non-current bank loans, bonds, orand private placements. For more information about our financial debt, see Note (17).

Looking ahead toAs part of our financing activities in 2014,2016, the Company intends to repay a €500US$600 million EurobondU.S. private placement tranche when it matures and an €86 million German promissory note when they both mature in April.a further substantial portion of our outstanding bank loans.

 

While we continuously monitor thesethe ratios continuously,presented in and below the table above, we actively manage our main focus is on the managementliquidity and structure of our net liquidity position as outlined in the following table:financial indebtedness:

Group Liquidity of SAP Group

 

€ millions  2013   2012   Change 

Cash and cash equivalents

   2,748     2,477     271  

Current investments

   93     15     78  

Group liquidity

   2,841     2,492     349  

Current financial debt

   586     600     –14  

Net liquidity 1

   2,255     1,892     363  

Non-current financial debt

   3,722     4,394     –672  

Net liquidity 2

   –1,467     –2,502     1,035  

Net liquidity 1 is group liquidity minus current financial debt. In 2013 we paid back a €600 million Eurobond, which was almost fully compensated by reclassifications of €586 million from non-current financial debt to current financial debt due to changes in the respective maturity profile.

Net liquidity 2 is net liquidity 1 minus non-current financial debt.

Improvements of our net liquidity ratios since December 31, 2012 are mainly due to positive cash inflows from our operations, which were partly offset by cash outflows for acquisitions (such as hybris) and dividend payments.

We intend to reduce our financial debt as and when the debt falls due. We will consider issuing new debt, such as bonds or U.S. private placements, on an as-needed basis only and if market conditions are advantageous.

millions  2015   2014   D 
Cash and cash equivalents   3,411     3,328     83  
Current investments   148     95     53  
Group liquidity   3,559     3,423     136  
Current financial debt   567     2,157     1,590  
Net liquidity 1   2,992     1,266     1,726  
Non-current financial debt   8,607     8,936     329  

Net liquidity 2

   5,615      7,670     2,055  

Distribution Policy

Our general intention is to remain in a position to return excess liquidity to our shareholders by distributing annual dividends and repurchasing shares. The amounttotaling more than 35% of our profit after tax. There are currently no plans for future dividends and the extent of future repurchases of shares will be balanced with our effort to continue to maintain an adequate liquidity position.

share buybacks.

F-55


In 2013,2015, we were able to distribute €1,013distributed1,316 million in dividends from our 20122014 profit (as compared(compared to €1,3101,194 million in 20122014 and €7131,013 million in 20112013 related to 20112013 and 20102012 profit, respectively), representing €0.851.10 per share. Aside from the distributed dividend, in 2013, 2012, and 2011 we also returned €0 million, €53 million, and €246 million respectively to our shareholders by repurchasing our own shares.

As a result of our equity-settled share-based payments transactions (as described in Note (27)), we have commitments to grant SAP shares to employees. We intend to meet these commitments by reissuing treasury shares or issuing ordinary shares. For more information about contingent capital, see Note (20).

(22)Other Financial Commitments and Contingent Liabilities

Other Financial Commitments

Our other financial commitments as at December 31, 2013, and 2012, were as follows:

Other Financial Commitments(22) OTHER FINANCIAL COMMITMENTS

 

€ millions  2013   2012 

Operating leases

   1,204     923  

Contractual obligations for acquisition of property, plant, and equipment and intangible assets

   80     66  

Other purchase obligations

   424     522  

Purchase obligations

   504     588  

 

 

Total

   1,708     1,511  

millions  2015   2014 

Operating leases

   1,347     1,332  
Contractual obligations for acquisition of property, plant, and equipment and intangible assets   162     111  

Other purchase obligations

   710     748  

Purchase obligations

   872     859  

Capital contribution commitments

   111     77  

Total

   2,330     2,268  

Our operating leases relate primarily to the lease of office space, hardware, and cars,vehicles, with remaining non-cancelable lease terms between less than one and 3533 years. On a limited scale, the operating lease contracts include escalation clauses (based, for example, on the consumer price index) and renewal options. The contractual obligations for acquisition of property, plant, and

equipment and intangible assets relate primarily to the construction of new and existing facilities and to the purchase of hardware, software, patents, office equipment, and vehicle purchase obligations.vehicles. The remaining obligations relate mainly to marketing, consulting, maintenance, license agreements, and other third-party agreements. Historically, the majority of such purchase obligations have been realized.

SAP invests and holds interests in other entities. As of December 31, 2015, total commitments to make such equity investments amounted to197 million (2014:123 million) of which86 million had been drawn (2014:46 million). By investing in such equity investments, we are exposed to the risks inherent in the business segments in which these entities operate. Our maximum exposure to loss is the amount invested plus unavoidable future capital contributions.

 

 

Commitments under operating leasing contracts and purchase obligations as at December 31, 2013, were as follows:

Other Financial Commitments

€ millions  Operating Leases   Purchase Obligations   December 31, 2015 

Due 2014

   235     282  

Due 2015–2018

   561     186  
millions Operating Leases   Purchase Obligations   Capital Contribution
Commitments
 
   294     428     111  

Due 2017 to 2020

   657     378     0  

Due thereafter

   408     36     396     66     0  

 

Total

   1,204     504     1,347     872     111  

 

Our rental and operating lease expenses were €273386 million, €277291 million, and €241273 million for the years 2015, 2014, and 2013, 2012, and 2011, respectively.

Contingent Liabilities

In the normal course of business, we usually indemnify our customers against liabilities arising

from a claim that our software products infringe a third party’s patent, copyright, trade secret, or other proprietary rights. In addition, we occasionally grant function or performance guarantees in routine consulting contracts or development arrangements. Also, our software license agreements generally include a clause guaranteeing that the software substantially conforms to the specifications as described in

 

F-56


applicable documentation for a period of six to 12 months from delivery. Our product and service warranty liability, which is measured based on historical experience and evaluation, is included in other provisions (see Note (18b)).(23) LITIGATION AND CLAIMS

For contingent liabilities related to litigation matters, see Note (23).

(23)Litigation and Claims

We are subject to a variety of claims and lawsuits that arise from time to time in the ordinary course of our business, including proceedings and claims that relate to companies we have acquired, claims that relate to customers demanding indemnification for proceedings initiated against them based on their use of SAP software, and claims that relate to customers’customers being dissatisfied with the products and services that we have delivered to them. We will continue to vigorously defend against all claims and lawsuits against us. We record a provision for such matters when it is probable that we have a present obligation that results from a past event, is reliably estimable, and the settlement of which is probable to require an outflow of resources embodying economic benefits. For the TomorrowNow litigation, we have recorded a provision of US$306 million (US$306 million on December 31, 2012, US$272 million on December 31, 2011, US$1.3 billion on December 31, 2010). We currently believe that resolving all otherthe claims and lawsuits against us,pending as of December 31, 2015, will neither individually ornor in the aggregate did not and will not have a material adverse effect on our business, financial position, profit, or cash flows. Consequently, the provisions currently recorded for these other claims and lawsuits as of December 31, 2015, are neither individually nor in the aggregate material to SAP.

However, the outcome of litigation and other claims or lawsuits is intrinsically subject to considerable uncertainty. Management’s view of the litigation may also change in the future. Actual outcomes of litigation and other claims or lawsuits may differ from the assessments made by management in prior periods, which could result in a material impact on our business, financial position, profit, cash flows, or reputation. Most of the litigationslawsuits and claims are of a very individual nature and claims are either not quantified by the claimants or claim amounts quantified are, based on historical evidence, not expected to be a good proxy for the expenditure that would be required to settle the case concerned. The specifics of the jurisdictions where most of the claims are located further impair the predictability of the outcome of the cases. Therefore, it is not practicable to

reliably estimate the financial effect that these litigationslawsuits and claims would have if SAP were to incur expenditure for these cases.

For more information about the provisions recorded for litigation, see Note (18b).

Among the claims and lawsuits are the following:following classes:

Intellectual PropertyProperty-Related Litigation and Claims

In March 2007, United States-based Oracle CorporationIntellectual property-related litigation and certainclaims are cases in which third parties have threatened or initiated litigation claiming that SAP violates one or more intellectual property rights that they possess. Such intellectual property rights may include patents, copyrights, and other similar rights.

The carrying amount of its subsidiaries (Oracle) institutedthe provisions recognized for intellectual property-related litigation and claims and the change in the carrying amount in the reporting period are disclosed in Note (18b). The expected timing of any resulting outflows of economic benefits from these lawsuits and claims is uncertain and not estimable as it depends generally on the duration of the legal proceedings inand settlement negotiations required to resolve them. Uncertainties about the United States against TomorrowNow, Inc., its parent company SAP America, Inc. and SAP America’s parent company SAP AG (SAP). Oracle filed several amended complaints between 2007 and 2009. As amended,amounts result

primarily from the lawsuit alleges copyright infringement, violationsunpredictability of the Federal Computer Fraudoutcomes of legal disputes in several jurisdictions. For more information, see Note (3c).

Contingent liabilities exist from intellectual property-related litigation and Abuse Actclaims for which no provision has been recognized. Generally, it is not practicable to estimate the financial impact of these contingent liabilities due to the uncertainties around the litigation and claims, as outlined above. The total amounts claimed by plaintiffs in those intellectual property-related lawsuits or claims in which a claim has been quantified were not material to us as of December 31, 2015 and 2014. Based on our past experience, most of the intellectual property-related litigation and claims tend to be either dismissed in court or settled out of court for amounts significantly below the originally claimed amounts and not material to our consolidated financial statements. Only a few cases (specifically the TomorrowNow and the California Computer Data Access and Fraud Act, unfair competition, intentional and negligent interference with prospective economic advantage, and civil conspiracy. The lawsuit alleges that SAP unlawfully copied and misappropriated proprietary, copyrighted software products and other confidential materials developed by Oracle to service its own customers. The lawsuit sought injunctive relief and monetary damages, including punitive damages, alleged by Oracle to beVersata litigation) ultimately resulted in the billions of U.S. dollars. The trial was helda significant cash outflow in November 2010. Prior to trial, SAP AG, SAP America and TomorrowNow stipulated to liability for certain claims and SAP agreed to pay Oracle US$120 million for attorneys’ fees. After the trial, the jury returned a damages verdict of US$1.3 billion. The judgment, which was issued on February 3, 2011, additionally provided for prejudgment interest of US$15 million. The judgment amount is also subject to post-judgment interest, which accrues from the time judgment is entered.2014.

The jury based its verdict on the theoryindividual cases of a hypothetical license, that is, the value of what TomorrowNow would have paid if it had negotiated with Oracle a license for the copyrights infringed by TomorrowNow. Beforeintellectual property-related litigation and during the course of the trial, various damages amounts had been presented by the parties to the litigation. They included the following:

a)Before the trial, Oracle had requested damages in excess of US$3.5 billion based on alleged “saved acquisition costs,” the court dismissed that damage claim based on a pretrial motion, but Oracle has the right to appeal that dismissal.

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b)During the trial, Oracle’s damages experts presented an amount of US$408 million based on lost profits and disgorgement of infringer’s profit.

c)During the trial, members of Oracle management presented, as part of their testimonies, amounts of up to US$5 billion. Oracle’s damages expert presented a damages estimate of “at least” US$1.655 billion under a hypothetical license theory. Oracle’s counsel asked the jury to award “somewhere between US$1.65 and US$3 billion.”

d)During the trial, the damages expert for TomorrowNow and SAP presented an amount of US$28 million based on lost profits and infringer’s profits or, alternatively, US$40.6 million based on a hypothetical license theory. Counsel for SAP and TomorrowNow asked the jury to award US$28 million.

We believed both before and during the trial and continue to believe that the hypothetical license theory is not an appropriate basis for calculating the damages. Instead, we believe that damages should be based on lost profits and infringer’s profits. As such, SAP filed post-trial motions asking the judge to overturn the judgment. A hearing on the post-trial motions was held in July 2011. On September 1, 2011, the trial judge issued an order which set aside the jury verdict and vacated that part of the judgment awarding US$1.3 billion in damages. The trial judge also gave Oracle the choice of accepting reduced damages of US$272 million or having a new trial based on lost profits and infringer’s profits. Oracle filed a motion seeking an early appeal from the ruling vacating the jury’s damages award, which was denied by the judge. Consequently, Oracle elected to proceed with a new trial. In lieu of a new trial, the parties stipulated to a judgment of US$306 million while each preserving all rights for appeal. Both parties have filed their respective notice of appeal. On appeal, Oracle is seeking three forms of relief: (1) reinstatement of the November 2010 US$1.3 billion verdict; (2) as a first alternative, a new trial at which Oracle may again seek hypothetical license damages (based in part on evidence of alleged saved development costs) plus SAP’s alleged infringer’s profits without any deduction of expenses (Oracle does not put a number on its claim for the requested new trial); and (3) as a second alternative, increase of the remittitur (alternative to new trial) to US$408.7 million (versus the US$272 million Oracle had previously rejected). SAP has dismissed its cross-appeal. The hearing is tentatively scheduled for May 13, 2014, though this is subject to change.

Additionally, in June 2007, SAP became aware that the United States Department of Justice (U.S. DOJ) had opened an investigation concerning related issues and had issued subpoenas to SAP and TomorrowNow. The DOJ investigation has been resolved by way of a plea agreement which includes TomorrowNow pleading guilty to 11 counts of violations of the Computer Fraud and Abuse Act, one count of criminal copyright infringement, the payment of a US$20 million fine and three years’ probation. No charges were brought against SAP AG or subsidiaries thereof other than TomorrowNow.claims are:

In April 2007, United States-based Versata Software, Inc. (formerly Trilogy Software, Inc.) (Versata) instituted legal proceedings in the United States District Court for the Eastern District of Texas against SAP. Versata alleged that SAP’s products infringe one or more of the claims in each of five patents held by Versata. In its complaint, Versata sought unspecified monetary damages and permanent injunctive relief. The first trial was held in August 2009. The jury returned a verdict in favor of2014, after numerous legal proceedings (for details, see our Annual Report 2014 on Form 20–F, Notes to the Consolidated Financial Statements section, Note (24)), Versata and awardedSAP entered into a Patent License and Settlement Agreement (the “Agreement”) to settle the patent litigation between the companies. Under the terms of the Agreement, Versata US$138.6 million for past damages. In January 2011, the court vacated the jury’s damages award and ordered a new trial on damages. The retrial was heldhas licensed to SAP certain patents in May 2011. The jury returned a verdict in favor of Versata and awarded Versata US$345 million for past damages. In September 2011, the judge denied SAP’s post-trial motions with the exception of reducing the damages verdict by US$16 million to approximately US$329 million. The judge also ordered approximately US$60 million in pre-judgment interest. Additionally, the judge granted Versata’s requestexchange for a broad injunction which prohibits SAP from 1) selling products in the United States with the infringing functionality, 2) providing maintenance to or accepting maintenance revenue from existing customers in the United States until such customers disable the infringing functionality and verify such disablement, and 3) licensing additional users to existing customers in the United States until such customers disable the infringing functionality and verify such disablement. Finally, the judge stayed the injunction pending the outcome of an appeal.

Both parties appealed to the U.S. Court of Appeals for the Federal Circuit. The appeal hearing occurred in February 2013one-time cash payment and a decision was issued on May 1, 2013.potential additional contingent payment. Such contingent payment is not material to SAP. The three-judge panel ruled in Versata’s favor on infringementAgreement also provides for general releases, indemnification for its violation, and damages, leaving both fully intact. The past damages verdict currently stands at approximately US$390 million. Regardingdismisses the injunction, the court ruled that the injunction was too broad,

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stating that SAP should be able to provide maintenance or additional seats for prior customers of the infringing products, so long as the maintenance or the additional seat does not involve, or allow access to, the “enjoined capability” where enjoined capability is defined as the capability to execute a pricing procedure using hierarchical access of customer and product data. SAP filed a petition seeking rehearing by the three-judge panel that issued this decision and/or by the entire appeals court. The appeals court requested that Versata respond to SAP’s petition no later than July 29, 2013. In August 2013, the appeals court denied SAP’s request for rehearing and issued its mandate passing jurisdiction to the district court.

Separately, SAP filed a petitionexisting litigation with the United States Patent and Trademark Office (USPTO) challenging the validity of the asserted Versata patent. In January 2013, the USPTO granted SAP’s request to reconsider the validity of Versata’s patent and instituted the relevant procedure (transitional post grant review). A decision was issued in June 2013 rendering all challenged patent claims (including all the patent claims SAP was found to have infringed) unpatentable. Versata filed with the USPTO a request seeking reconsideration of the decision on six different grounds. The USPTO invited SAP to file an opposition responding to two of the six grounds. On September 13, 2013, the USPTO denied Versata’s request for reconsideration.

In June 2013, following the determination of unpatentability, SAP filed a request with the appeals court to stay the litigation pending review of the USPTO decision. That request was denied in early July 2013.

In December 2013, SAP filed with the United States Supreme Court a petition for a writ of certiorari to review the decisions of the appeals court. That petition was denied in January 2014. Immediately thereafter, Versata requested that the District Court dismiss its remaining claims for injunctive and equitable relief. The District Court granted that request and deemed the previously entered judgment final. On that same day, SAP requested that the District Court vacate the judgment or stay the litigation, based on the USPTO decision declaring Versata’s patent claims unpatentable. That request is pending.

In August 2007, United States-based elcommerce.com, Inc. (elcommerce) instituted legal proceedings in the United States against SAP. elcommerce alleged that SAP’s products infringe one or more of the claims in one patent

held by elcommerce. In its complaint, elcommerce sought unspecified monetary damages and permanent injunctive relief. The court in East Texas granted SAP’s request to transfer the litigation from East Texas to Pennsylvania. Subsequent to the Markman ruling by the court, the parties agreed to the entry of final judgment regarding non-infringement by SAP. elcommerce has appealed the court’s Markman ruling. The hearing for the appeal was held in May 2012, and we are awaiting the court’s decision. SAP also filed a reexamination request with the USPTO to invalidate elcommerce’s patent. On September 23, 2013, the USPTO issued a decision invalidating the patent. elcommerce has sought rehearing from the USPTO.prejudice.

In February 2010, United States-based TecSec, Inc. (TecSec) instituted legal proceedings in the United States against SAP Sybase, IBM,(including its subsidiary Sybase) and many other defendants. TecSec alleged that SAP’s and Sybase’s products infringe one or more of the claims in five patents held by TecSec. In its complaint, TecSec seeks unspecified monetary damages and permanent injunctive relief. The lawsuit is proceeding but only with respect to one defendant. The trial for SAP (including its subsidiary Sybase) has not yet been scheduled. The legal proceedings have been stayed against all defendants pending the outcome of an appeal by TecSec. The appeal hearing occurred in March 2013. The appellate court issued its decision in October 2013. That decision did not end the litigation and therefore we expectscheduled – the lawsuit to resume at the district court in the coming months.for SAP (including its subsidiary Sybase) remains stayed.

In April 2010, SAP instituted legal proceedings (a Declaratory Judgmentdeclaratory judgment action) in the United States against Wellogix, Inc. and Wellogix Technology Licensing, LLC (Wellogix). The lawsuit seeks a declaratory judgment that five patents owned by Wellogix are invalid and/or not infringed by SAP. The trial has not yet been scheduled. The legal proceedings have been stayed pending the outcome of six reexaminations filed with the USPTO.United States Patent and Trademark Office (USPTO). In September 2013, the USPTO issued a decision on four of the six reexaminations, invalidating every claim of each of the four patents. SAP is awaiting a decision on the two remaining reexamination requests.

Other Litigation

In April 2008, South African-based Systems Applications Consultants (PTY) Limited (Securinfo) instituted legal proceedings in South Africaresponse to SAP’s patent Declaratory Judgment action, Wellogix has re-asserted trade secret misappropriation claims against SAP. Securinfo allegesSAP (which had previously been raised and abandoned). The court granted SAP’s motion for an early dispositive decision on the trade secret claims; Wellogix’s appeal of that SAP has caused one of its subsidiaries to breach a software distribution agreement with Securinfo.decision is pending. In its complaint, Securinfo seeks damages of approximately

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€610 million plus interest. In September 2009,February 2015, SAP filed a motiondeclaratory judgment action in Frankfurt/Main, Germany, asking the German court to dismissrule that SAP did not misappropriate any Wellogix trade secrets.

Customer-Related Litigation and Claims

Customer-related litigation and claims include cases in which was rejected. A trial datewe indemnify our customers against liabilities arising from a claim that our products infringe a third party’s patent, copyright, trade secret, or other proprietary rights. Occasionally, consulting or software implementation projects result in disputes with customers. Where customers are dissatisfied with the products and services that we have delivered to them in routine consulting contracts or development arrangements, we may grant functions or performance guarantees.

The carrying amount of the provisions recorded for customer-related litigation and claims and the development of the carrying amount in the reporting period are disclosed in Note (18b). The expected timing or amounts of any resulting outflows of economic benefits from these lawsuits and claims is uncertain and not estimable as they generally depend on the duration of the legal proceedings and settlement negotiations required to resolve the litigation and claims and the unpredictability of the outcomes of legal disputes in several jurisdictions. For more information, see Note (3c).

Contingent liabilities exist from customer-related litigation and claims for which was scheduled for June 2011no provision has been postponed.

In November 2012, SAP filed a motionrecognized. Generally, it is not practicable to dismiss based on a procedural aspectestimate the financial impact of the case. The court followed SAP’s argument and dismissed the claim by Securinfo. Securinfo appealed against this decision on December 19, 2012.

In March 2013, the court dismissed Securinfo’s appeal. Securinfo appealed against this decisionthese contingent liabilities due to the Supreme Court of South Africa. The Supreme Court granted leave to appeal to the full bench of the court which had originally dismissed Securinfo’s appeals. Securinfo has applied for an appeal hearing date. The court has not yet provided a date.uncertainties around these lawsuits and claims outlined above.

Non-Income Tax-Related Litigation and Claims

We are subject to ongoing audits by domestic and foreign tax authorities. Along with many other companies operating in Brazil, we are involved in various proceedings with Brazilian authorities regarding assessments and litigation matters on non-income taxes on intercompany royalty payments and intercompany services. The total potential amount related to these matters for all applicable years is approximately €7675 million. We have not recorded a provision for these matters, as we believe that we will prevail on these matters.prevail.

For more information about income tax risk-relatedtax-related litigation, see Note (10).

(24) FINANCIAL RISK FACTORS

(24)Financial Risk Factors

We are exposed to various financial risks, such as market risks (including foreign currency exchange rate risk, interest rateinterest-rate risk, and equity price risk), credit risk, and liquidity risk.

Market Risk

a) Foreign Currency Exchange Rate Risk

Foreign currency exchange rate risk is the risk of loss due to adverse changes in foreign currency exchange rates. Under IFRS, foreign currency exchange rate risks arise on account of monetary financial instruments denominated in currencies other than the functional currency where the non-functional currency is the respective risk variable; translation risksAs we are not taken into consideration.

As a globally active enterprise, weworldwide, our ordinary operations are subject to risks associated with fluctuations in foreign currencies with regard to our ordinary operations.

currencies. Since the Group’s entities mainly conduct their operating business in their own functional currencies, our risk of exchange rate fluctuations from ongoing ordinary operations is not considered significant. However, we occasionally we generate foreign currency-denominated receivables, payables, and other monetary items by transacting in a currency other than the functional currency. To mitigate the extent of the associated foreign currency exchange rate risk, the majority of these transactions are hedged as described in Note (25).

In rare circumstances, transacting in a currency other than the functional currency also leads to embedded foreign currency derivatives being separated and measured at fair value through profit or loss.

In addition, the Intellectual Propertyintellectual property (IP) holders in the SAP Group are exposed to risks associated with forecasted intercompany cash flows in foreign currencies. These cash flows arise out of royalty payments from subsidiaries to the respective IP holder. The royalties are linked to the subsidiaries’ external revenue. This arrangement leads to a concentration of the foreign currency exchange rate risk with the IP holders, as the royalties are mostly denominated in the subsidiaries’ local currencies, while the functional currency of the IP holders with the highest royalty volume is the euro. The highest foreign currency exchange rate exposure of this kind relates to the

currencies of subsidiaries with significant operations, for example the U.S. dollar, the pound sterling, the Japanese yen, the Swiss franc, the Brazilian real, and the Australian dollar.

Generally, we are not exposed to any significant foreign currency exchange rate risk with regard to our investing and financing activities, as such activities are normally conducted in the functional currency of the investing or borrowing entity. However, we were exposed to a cash

flow risk from the consideration to be paid in U.S. dollars for the acquisition of hybrisConcur and Fieldglass in 2013 and of SuccessFactors and Ariba, Inc. in 20122014, as the funds were provided through our free cash and acquisition term loans, both mostly generated in euros. For more information, see Note (25).

b) Interest RateInterest-Rate Risk

Interest rate risks result from changes in market interest rates, which can cause changes in the fair values of fixed rate instruments and in the interest to be paid or received for variable rate instruments. We are exposed to interest rateinterest-rate risk as a result of our investing and financing activities mainly in euros and U.S. dollars.dollars as follows:

 

 

millions  2015   2014 
  Cash Flow Risk   Fair Value Risk   Cash Flow Risk   Fair Value Risk 

Investing activities

   3,078     480     2,445     1,003  

Financing activities

   3,157     6,038     5,009     6,077  

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As at December 31, 2013, our liquidity was mainly invested in time deposits and bonds with fixed yields, and money market instruments with variable yields, held as cash equivalents and current and non-current investments. Since the fixed yield time deposits held at year-end have short maturities, they do not expose us to a substantial fair value interest rate risk. However, a fair value interest rate exposure arises from the bonds classified as available for sale. Also, we are exposed to a cash flow risk from our cash held at banks spread across the world and the variable yield money market funds, mainly held in the United States.

As at December 31, 2013, we were exposed to an interest rate risk from our financing activities (for more information about the individual instruments, see Note (17b)) as all our issued bonds, the U.S. private placement notes, and the remaining tranche of the German promissory notes pay fixed interest leading to a fair value risk.

c) Equity Price Risk

Equity price risk is the risk of loss due to adverse changes in equity markets. We are exposed to suchequity price risk with regard to our investments in listed equity securities (2013: €83(2015:320 million; 2012: €522014:209 million) and our share-based payments (for the exposure from these plans, see Note (27)).

Credit Risk

Credit risk is the risk of economic loss of principal or financial rewards stemming from a counterparty’s failure to repay or service debt according to the contractual obligations.

To reduce the credit risk in investments, we arrangedarrange to receive rights to collateral for certain

investing activities in the full amount of the investment volume, which we would be allowed to make use of only in the case of default of the counterparty to the investment.

With In the exceptionabsence of these transactions, we have not executedother significant agreements to reduce our overall credit risk exposure, such as master netting arrangements. Therefore, the total amounts recognized as cash and cash equivalents, current investments, loans and other financial receivables, trade receivables, and derivative financial assets represent our maximum exposure to credit risks, except for the agreements mentioned above.

Liquidity Risk

Liquidity risk results from the potential inability to meet financial obligations, such as payments to suppliers or employees. A maturityThe table below is an analysis that providesof the remaining contractual maturities of all our financial liabilities held at December 31, 2013, is shown in the table below.2015. Financial liabilities shown in the table below for which repayment can be requested by the contract partner at any time are assigned to the earliest possible period. Variable interest payments were calculated using the lastlatest relevant interest rate fixed as at December 31, 2013.2015. As we generally settle our derivative contracts gross, we show the pay and receive legs separately for all our currency and interest rateinterest-rate derivatives, whether or not the fair value of the derivative is negative.negative, except for the derivative forward contracts entered into in connection with the acquisition of Concur, where we bought and sold US$8.5 billion because we settled those net. The cash outflows for the currency derivatives are translated using the applicable forward rate.

TheFor more information about the cash flows for unrecognized but contractually agreed financial commitments, are shown insee Note (22).

 

 

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Contractual Maturities of Non-Derivative Financial Liabilities

millions  Carrying
Amount
   Contractual Cash Flows 
  12/31/2015   2016   2017   2018   2019   2020   Thereafter 

Trade payables

   893     893     0     0     0     0     0  

Financial liabilities

   9,395     863     2,778     980     836     986     3,683  

Total of non-derivative financial liabilities

   10,288      1,756     2,778     980     836     986     3,683  

millions  Carrying
Amount
   Contractual Cash Flows 
  12/31/2014   2015   2016   2017   2018   2019   Thereafter 

Trade payables

   782     782     0     0     0     0     0  

Financial liabilities

   11,209     2,377     625     3,976     958     827     3,262  

Total of non-derivative financial liabilities

   11,990      3,159     625     3,976     958     827     3,262  

Contractual Maturities of Derivative Financial Liabilities and Financial Assets

 

  Carrying Amount   Contractual Cash Flows 
€ millions  12/31/2013   2014   2015   2016   2017   2018   Thereafter  Carrying
Amount
   Contractual Cash Flows Carrying
Amount
   Contractual Cash Flows 

Non-derivative financial liabilities

              

Trade payables

   –640     –640     0     0     0     0     0  

Financial liabilities

   –4,336     –731     –863     –513     –891     –153     –1,730  

Total of non-derivative financial liabilities

   –4,976     –1,371     –863     –513     –891     –153     –1,730  

Derivative financial liabilities and assets

              
millions 12/31/2015   2016 Thereafter 12/31/2014   2015 Thereafter 
                      

Currency derivatives without designated hedge relationship

   –144              

Currency derivatives not designated as

hedging instruments

  –117         –310       

Cash outflows

     –1,975     –9     –9     –8     –8     –15       –2,896    –58       –4,110    –44  

Cash inflows

     1,885     0     0     0     0     0       2,834    0       3,836    0  

Currency derivatives with designated hedge relationship

   –3              

Currency derivatives designated as hedging instruments

  –10         –22       

Cash outflows

     –178     0     0     0     0     0       –489    0       –487    0  

Cash inflows

     174     0     0     0     0     0       475    0       464    0  

Interest rate derivatives with designated hedge relationship

   –23              

Interest-rate derivatives designated as

hedging instruments

  0         –1       

Cash outflows

     –12     –17     –27     –39     –37     –192       0    0       –7    –24  

Cash inflows

      30     35     35     35     28     123       0    0       9    19  

Total of derivative financial liabilities

   –170     –76     9     –1     –12     –17     –84    –128     –76    –58    –333     –295    –49  

Derivative financial assets

                            

Currency derivatives without designated hedge relationship

   26              

Currency derivatives not designated as

hedging instruments

  69         411       

Cash outflows

     –2,544     0     0     0     0     0       –3,010    0       –1,236    0  

Cash inflows

     2,569     0     0     0     0     0       3,073    0       1,656    0  

Currency derivatives with designated hedge relationship

   30              

Currency derivatives designated as hedging instruments

  14         10       

Cash outflows

     –391     0     0     0     0     0       –266    0       –162    0  

Cash inflows

     419     0     0     0     0     0       275    0       163    0  

Interest rate derivatives with designated hedge relationship

   5              

Interest-rate derivatives designated as

hedging instruments

  100         77       

Cash outflows

     –12     –25     –29     –36     –21     –24       –43    –225       –34    –293  

Cash inflows

      19     33     33     33     16     16       77    300       62    313  

Total of derivative financial assets

   61     60     8     4     –3     –5     –8    183     106    75    498     449    20  

Total of derivative financial liabilities and assets

   –109     –16     17     3     –15     –22     –92    55     30    17    165     154    –29  

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Contractual Maturities of Financial Liabilities and Financial Assets(25) FINANCIAL RISK MANAGEMENT

   Carrying Amount   Contractual Cash Flows 
€ millions  12/31/2012   2013   2014   2015   2016   2017   Thereafter 

Non-derivative financial liabilities

              

Trade payables

   –684     –684     0     0     0  ��  0     0  

Financial liabilities

   –5,051     –757     –705     –874     –534     –904     –1,922  

Total of non-derivative financial liabilities

   –5,735     –1,441     –705     –874     –534     –904     –1,922  

Derivative financial liabilities and assets

              

Derivative financial liabilities

              

Currency derivatives without designated hedge relationship

   –195              

Cash outflows

     –2,996     –10     –10     –10     –9     –26  

Cash inflows

     2,875     0     0     0     0     0  

Currency derivatives with designated hedge relationship

   –2              

Cash outflows

     –157     0     0     0     0     0  

Cash inflows

     154     0     0     0     0     0  

Interest rate derivatives with designated hedge relationship

   0              

Cash outflows

     0     0     0     0     0     0  

Cash inflows

        0     0     0     0     0     0  

Total of derivative financial liabilities

   –197     –124     –10     –10     –10     –9     –26  

Derivative financial assets

              

Currency derivatives without designated hedge relationship

   46              

Cash outflows

     –2,690     0     0     0     0     0  

Cash inflows

     2,735     0     0     0     0     0  

Currency derivatives with designated hedge relationship

   29              

Cash outflows

     –460     0     0     0     0     0  

Cash inflows

     485     0     0     0     0     0  

Interest rate derivatives with designated hedge relationship

   0              

Cash outflows

     0     0     0     0     0     0  

Cash inflows

        0     0     0     0     0     0  

Total of derivative financial assets

   75     70     0     0     0     0     0  

Total of derivative financial liabilities and assets

   –122     –54     –10     –10     –10     –9     –26  

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The change in our non-derivative financial liabilities which is due to scheduled repayments will lead to an overall decrease in cash outflows compared to the end of 2012. For more information, see Note (17b).

(25)Financial Risk Management

We manage market risks (including foreign currency exchange rate risk, interest rateinterest-rate risk, and equity price risk), credit risk, and liquidity risk on a Group-wide basis through our global treasury department. Our risk management and hedging strategy is set by our treasury guideline and other internal guidelines, and is subject to continuous internal risk analysis. Derivative financial instruments are only purchased to reduce risks and not for speculation, which is defined as entering into derivative instruments without a corresponding underlying transaction.

In the following sections we provide details on the management of each respective financial risk and our related risk exposure. In the sensitivity analyses that show the effects of hypothetical changes of relevant risk variables on profit or other comprehensive income, we determine the periodic effects by relating the hypothetical changes in the risk variables to the balance of financial instruments at the reporting date.

Foreign Currency Exchange Rate Risk Management

We continually monitor our exposure to currency fluctuation risks based on monetary items and forecasted transactions and pursue a Group-wide strategy to manage foreign currency exchange rate risk, using derivative financial instruments, primarily foreign exchange forward contracts, as appropriate, with the primary aim of reducing profit or loss volatility.

Currency Hedges WithoutNot Designated Hedge Relationshipas Hedging Instruments

The foreign exchange forward contracts we enter into to offset exposure relating to foreign currencyforeign-currency denominated monetary assets and liabilities are not designated as being in a hedge accounting relationship, because the realized currency gains and losses from the underlying items are recognized in profit or loss in the same periods as the gains and losses from the derivatives.seeNote (3a).

Currency hedges without anot designated hedge relationshipas hedging instruments also include foreign currency

derivatives embedded in non-derivative host contracts that are separated and accounted for as derivatives according to the requirements of IAS 39.39 (Financial Instruments: Recognition and Measurement).

In addition, during 20122014 we held foreign exchange forward contracts and foreign currency options and deal-contingent forward contracts to partially hedge the cash flow risk from the consideration paid in U.S. dollars for the acquisitionsacquisition of SuccessFactors and Ariba.Concur.

Currency Hedges with Designated Hedge Relationshipas Hedging Instruments (Cash Flow Hedges)

We enter into derivative financial instruments, primarily foreign exchange forward contracts, to hedge significant

forecasted cash flows (royalties) from foreign subsidiaries denominated in foreign currencies with a defined set of hedge ratios and a hedge horizon of up to 12 months. Specifically, we exclude the interest component and only designate the spot rate of the foreign exchange forward contracts as the hedging instrument to offset anticipated cash flows relating to the subsidiaries with significant operations, including the United States, the United Kingdom, Japan, Switzerland, and Australia.operations. We generally use foreign exchange derivatives that have maturities of 12 months or less, which may be rolled over to provide continuous coverage until the applicable royalties are received.

In 2013, net gains totaling €57 million (2012: net gains of €17 million; 2011: net losses of €14 million) resulting from the change in the component of the derivatives designated as hedging instruments were recorded in other comprehensive income.

For the years ended December 31, 20132015 and 2012,2014, no previously highly probable transaction designated as a hedged item in a foreign currency cash flow hedge relationship ceased to be probable. Therefore, we did not discontinue any of our cash flow hedge relationships. Also, we identified no ineffectiveness in all years reported. In 2013, we reclassified net gains of €57 million (2012: net losses of €24 million; 2011: net losses of €13 million) from other comprehensive income to profit or loss due to the hedged items affecting income. Generally, the cash flows of the hedged forecasted transactions are expected to occur and to be recognized in profit or loss monthly within a time frame of 12 months from the date of the statement of financial position. It is estimated that €20 million of the net gains recognized in other comprehensive income in 2013, will be reclassified from other comprehensive income to profit or loss during fiscal year 2014.

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Foreign Currency Exchange Rate Exposure

In line with our internal risk reporting process, we use the cash flow-at-risk method to quantify our risk positions with regard to our forecasted intercompany transactions and value-at-risk for our foreign currencyforeign-currency denominated financial instruments. In order not to provide two different methodologies, we have opted to disclose our risk exposure based on a sensitivity analysis considering the following:

Since the SAP Group’s entities generally operate in their functional currencies, the majority of our non-derivative monetary financial instruments, such as cash and cash equivalents, trade receivables, trade payables, loans to employees and third parties, bank liabilities, and other financial liabilities, are denominated in the respective entities’ functional currency. Thus, a foreign currency exchange rate risk in these transactions is nearly non-existent. In exceptional cases and limited economic environments, operating and financing transactions are denominated in currencies other than the functional currency, leading to a foreign currency exchange rate risk for the related monetary instruments. Where we hedge against currency impacts on cash flows, these foreign currency-denominated financial instruments are economically converted into the functional currency by the use of forward exchange contracts or options. Therefore, fluctuations in foreign currency exchange rates neither have a significant impact on profit nor on other comprehensive income with regard to our non-derivative monetary financial instruments.

The SAP Group’s entities generally operate in their functional currencies. In exceptional cases and limited economic environments, operating transactions are denominated in currencies other than the functional currency, leading to a foreign currency exchange rate risk for the related monetary instruments. Where material, this foreign currency exchange rate risk is hedged. Therefore, fluctuations in foreign currency exchange rates neither have a significant impact on profit nor on other comprehensive income with regard to our non-derivative monetary financial instruments and related income or expenses.

Our free-standing derivatives designed for hedging foreign currency exchange rate risks almost completely balance the changes in the fair values of the hedged item attributable to exchange rate movements in the Consolidated Income Statements in the same period. As a consequence, the hedged items and the hedging instruments are not exposed to foreign currency exchange rate risks, and thereby have no effect on profit.

Income or expenses recorded in connection with the non-derivative monetary financial instruments discussed above are mainly recognized in the relevant entity’s functional currency. Therefore, fluctuations in foreign currency exchange rates neither have a significant impact on profit nor on other comprehensive income in this regard.

Our free-standing derivatives designed for hedging foreign-currency exchange rate risks almost completely balance the changes in the fair values of the hedged item attributable to exchange rate movements in the Consolidated Income Statements in the same period. As a consequence, the hedged items and the hedging instruments are not exposed to foreign currency exchange rate risks, and thereby have no effect on profit.

Consequently, we are only exposed to significant foreign currency exchange rate fluctuations with regard to:to the following:

Derivatives held within a designated cash flow hedge relationship (excluding the interest element, which is not part of the assigned cash flow hedge relationships) affecting other comprehensive income

Foreign currency embedded derivatives affecting other non-operating expense, net.

We calculate our sensitivity on an upward/downward shift of +/–25% of the assigned cash flow hedge relationships)

Foreign currency embedded derivatives

The foreign currency options held as atexchange rate between euro and Brazil real and +/–10% of the foreign currency exchange rate between euro and all other major currencies (2014: upward shift for Swiss franc +20%, all other major currencies +10%, downward shift for all major currencies –10%; 2013: upward/downward shift of +/–10% for all major currencies). If on December 31, 2011, in connection with2015, 2014, and 2013, the acquisition of SuccessFactors.

Where we doforeign currency exchange rates had been higher/lower as described above, this would not have had a significant exposure towards a single currency, we disclose our sensitivity to our major foreign currencies (as described in Note (24)) in total.material effect on other non-operating expense, net and other comprehensive income.

Foreign Currency Sensitivity

   Effects on Other
Non-Operating Expense, Net
   Effects on Other
Comprehensive Income
 
€ millions  2013   2012   2011   2013   2012   2011 

Derivatives held within a designated cash flow hedge relationship

            

All major currencies –10%

         57     60     70  

All major currencies +10%

         –57     –60     –70  

Embedded derivatives

            

Swiss franc –10%

   32     38     41        

Swiss franc +10%

   –32     –38     –41        

other currencies –10%

   3     3     0        

other currencies +10%

   –3     –3     0        

Freestanding foreign currency options related to SuccessFactors acquisition

            

U.S. dollar –10%

   0     0     6        

U.S. dollar +10%

   0     0     –50        

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Our foreign currency exposure as at December 31 (and if year-end exposure is not representative, also our average/high/low exposure) was as follows:

Foreign Currency Exposure

 

€ billions  2013   2012   2015   2014 

Year-end exposure towards all our major currencies

   0.9     1.0  
Year-end exposure toward all our major currencies   1.0     1.0  

Average exposure

   1.0     2.4     1.1     2.7  

Highest exposure

   1.1     3.7     1.2     7.7  

Lowest exposure

   0.9     1.0     1.0     1.0  

During 2013,2015, our sensitivity to foreign currency exchange rate fluctuations remained fairly stabledecreased compared to the year ended December 31, 2012.2014, mainly due to the hedging transactions for the acquisition of Concur in 2014.

Interest RateInterest-Rate Risk Management

The aim of our interest rateinterest-rate risk management is to reduce profit or loss volatility and optimize our interest result by creating a balanced structure of fixed and variable cash flows. We therefore manage interest rateinterest-rate risks by adding interest rate-relatedinterest-rate-related derivative instruments to a given portfolio of investments and debt financing.

As at December 31, 2013, a cash flow interest rate risk existed with regard to our cash at banks of €1.2 billion and our investing activities in money market instruments with variable yields in the amount of €487 million. A fair value interest rate risk arises from the fixed yield bonds classifiedDerivatives Designated as available-for-sale and accounted for at fair value as well as the fixed rate financing transactions held at amortized cost.

100% (2012: 100%) of our total interest-bearing financial liabilities outstanding as at December 31, 2013, had a fixed interest rate whereas 40% (2012: 29%) of our interest-bearing cash, cash equivalents, time deposits, and available-for-sale financial assets had a fixed interest rate.

Derivatives with Designated Hedge RelationshipHedging Instruments (Fair Value Hedges)

The majority of our investments are based on variable rates and/or short maturities (2015: 87%; 2014: 71%) while allmost of our financing transactions are based on

fixed rates and long maturities.maturities (2015: 66%; 2014: 55%). To match the interest-rate risk from our financing transactions to our investments, we use receiver interest rateinterest-rate swaps to convert certain of our fixed rate financial liabilities to floating, and by this means secure the fair value of the swapped financing transactions. The desired fix-floating mix of our net debt is set by the Treasury Committee. Interest rateIncluding interest-rate swaps, included, 44% (2012: 100%36% (2014: 30%) of our total interest-bearing financial liabilities outstanding as at December 31, 2013,2015, had a fixed interest rate.

None of the fair value adjustment from the receiver swaps, the basis adjustment on the underlying hedged items held in fair value hedge relationships, and the difference between the two recognized in Financial Income,financial income, net is material in any of the years presented.

Interest RateInterest-Rate Exposure

A sensitivity analysis is provided to show the impact of our interest rateinterest-rate risk exposure on profit or loss and equity in accordance with IFRS 7, considering the following:

Changes in interest rates only affect the accounting for non-derivative fixed rate financial instruments if they are recognized at fair value. Therefore, such interest rate changes do not change the carrying amounts of our non-derivative financial liabilities as we account for them at amortized cost. On December 31 of each year-end reported, we had fixed rate bonds classified as available-for-sale as described in Note (24). We therefore consider interest rate changes relating to the fair value measurement of such fixed rate non-derivative financial assets classified as available-for-sale in the equity-related sensitivity calculation.

Income or expenses recorded in connection with non-derivative financial instruments with variable interest rates are subject to interest rate risk if they are not hedged items in an effective hedge relationship. Thus, we take into consideration interest rate changes relating to our variable rate financing and our investments in money market instruments in the profit-related sensitivity calculation.

Due to the designation of interest rate payer swaps in a cash flow hedge relationship, the

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Changes in interest rate changesrates only affect the respectiveaccounting for non-derivative fixed rate financial instruments if they are recognized at fair value. Therefore, such interest-rate changes do not change the carrying amounts recordedof our non-derivative fixed rate financial liabilities as we account for them at amortized cost. Investments in other comprehensive income. The movements related to the interestfixed rate swaps’ variable legfinancial assets classified as available-for-sale were not reflected in the sensitivity calculation, as they offset the variable interestmaterial at each year end reported. Thus, we do not consider any fixed rate payments for the German private placement (SSD). We therefore only considered interest rate sensitivity in discounting the interest rate swaps’ fixed leg cash flowsinstruments in the equity-related sensitivity calculation.

Income or expenses recorded in connection with non-derivative financial instruments with variable interest rates are subject to interest-rate risk if they are not hedged items in an effective hedge relationship. Thus, we take into consideration interest-rate changes relating to our variable rate financing and our investments in money market instruments in the profit-related sensitivity calculation.

The designation of interest rateinterest-rate receiver swaps in a fair value hedge relationship leads to interest rateinterest-rate changes affecting Financial Income,financial income, net. The fair value movements related to the interest rateinterest-rate swaps are not reflected in the sensitivity calculation, as they offset the fixed interest rateinterest-rate payments for the bonds and private placements as hedged items. However, changes in market interest rates affect the amount of interest payments from the interest rateinterest-rate swap. As a consequence, theythose effects of market interest rates on interest payments are included in the in the profit-related sensitivity calculation.

Due to the current low interest rate leveldifferent interest-rate expectations for the U.S. dollar and the euro area, we base our sensitivity analyses on a yield curve upward shift of +100/–20+50 basis

points for the U.S. dollar/euro area (2014: +100/+50 basis points to avoid negative interest rates.for the U.S. dollar/euro area; 2013: +100 bps) and a yield curve downward shift of –50 basis points for both the U.S. dollar/euro area (2014: –50 bps; 2013: –20 bps).

If, on December 31, 2013, 2012,2015, 2014, and 2011,2013, interest rates had been 100 basis points higher (20 basis points lower),higher/lower as described above, this would not have had a material effect on the following:

The gains/losses on available-for-sale financial assets in other comprehensive income

Finance income, net for our variable interest rateinterest-rate investments and would have had the following effects on financial debtincome, net.

The effective portion of the interest rate cash flow hedge in other comprehensive income

The variable interest payments from the receiver swaps.

 

 

Interest-Rate Sensitivity

millions  Effects on Financial Income, Net 
  2015   2014   2013 

Derivatives held within a designated fair value hedge relationship

               

Interest rates +100 bps in U.S. dollar area/+50 bps in euro area

(2014: +100 bps in U.S. dollar area/+50 bps in euro area; 2013: +100 bps in

U.S. dollar/euro area)

   –105     –116     –24  

Interest rates –50 bps in U.S. dollar/euro area

(2014: –50 bps in U.S. dollar/euro area; 2013: –20 bps in U.S. dollar/euro area)

   62     70     5  

Variable rate financing

               

Interest rates +50 bps in euro area

   –39     –65     0  

Interest rates –50 bps in euro area

   19     65     0  

Our interest rateinterest-rate exposure as at December 31 (and if year-end exposure is not representative, also our average/high/low exposure) was as follows:

Interest rate risk exposureInterest-Rate Risk Exposure

 

€ billion  2013   2012 
  Year-End   Average   High   Low   Year-End   Average   High   Low 

Fair value interest rate risk

                

From investments

   0.04     0.06     0.13     0.04     0.03     0.10     0.30     0  

Cash flow interest rate risk

                

From investments (incl. cash)

   1.73     2.23     2.71     1.73     1.80     2.41     3.03     1.80  

From financing

   0     0.31     1.00     0     0     1.10     3.20     0  

From interest rate swaps

   2.39     0.60     2.40     0     0     0     0     0  
billion  2015   2014 
  Year-End   Average   High   Low   Year-End   Average   High   Low 

Fair value interest-rate risk

                                        

From investments

   0.03     0.05     0.07     0.03     0.04     0.05     0.08     0.04  

Cash flow interest-rate risk

                                        

From investments (including cash)

   3.08     3.09     3.37     2.62     2.45     2.48     2.74     2.13  

From financing

   3.16     3.73     4.63     3.16     5.03     0.75     5.03     0  

From interest-rate swaps

   2.69     2.67     2.74     2.64     2.55     2.44     2.55     2.39  

 

Equity Price Risk Management

Our investments in equity instruments with quoted market prices in active markets (2013: €83(2015:320 million; 2012: €522014:209 million) are monitored based on the current market value that is affected by the fluctuations in the volatile stock markets worldwide. An assumed 20% increase (decrease) in equity prices as at December 31, 2013 (2012)2015 (2014), would not have a material impact on the value of our investments in marketable equity securities and the corresponding entries in other comprehensive income.

We are exposed to equity price risk with regard to our share-based payments. In order to reduce

resulting profit or loss volatility, we hedge certain cash flow

exposures associated with these plans through the purchase of derivative instruments, but do not establish a designated hedge relationship. In our sensitivity analysis we include the underlying share-based payments and the hedging instruments. Thus, we base the calculation on our net exposure to equity prices as we believe taking only the derivative instrument into account would not properly reflect our equity price risk exposure. An assumed 20% increase (decrease) in equity prices as at December 31, 2013,2015, would have increased (decreased) our share-based payment expenses by €126200 million (€90(198 million) (2012:(2014: increased by €139158 million (decreased by €11780 million); 2011:2013: increased by €27126 million (decreased by €2590 million)).

 

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Credit Risk Management

To mitigate the credit risk from our investing activities and derivative financial assets, we conduct all our activities only with approved major financial institutions and issuers that carry high external ratings, as required by our internal treasury guideline. Among its stipulations, the guideline requires that we invest only in assets from issuers with a minimum rating of at least BBB.“BBB flat”. We only make investments in issuers with a lower rating in exceptional cases. Such investments were not material in 2013.2015. The weighted average rating of our financial assets is in the range AA+ to A–.A. We pursue a policy of cautious investments characterized by predominantly current investments, standard investment instruments, as well as a wide portfolio diversification by doing business with a variety of counterparties.

To further reduce our credit risk, we require collateral for certain investments in the full amount of the investment volume which we would be allowed to make use of in the case of default of the counterparty to the investment. As such collateral, we only accept bonds of non-financial corporations with at least investment grade rating level.

In addition, the concentration of credit risk that exists when counterparties are involved in similar activities by instrument, sector, or geographic area is further mitigated by diversification of counterparties throughout the world and adherence to an internal limit system for each counterparty. This internal limit system stipulates that the business volume with individual counterparties is restricted to a defined limit, which depends on the lowest official long-term credit rating available by at least one of the major rating agencies, the Tier 1 capital of the respective financial institution, or participation in the German Depositors’ Guarantee Fund or similar protection schemes. We continuously monitor strict compliance with these counterparty limits. As the premium for credit default swaps mainly depends on market participants’ assessments of the creditworthiness of a debtor, we also closely observe the development of credit default swap spreads in the market to evaluate probable risk developments to timely react to changes if these should manifest.

The default risk of our trade receivables is managed separately, mainly based on assessing the creditworthiness of customers through external ratings and our historicalpast experience with respective customers.

the customers concerned. Outstanding receivables are continuously monitored locally. Credit risks are accounted for through individual and portfolio allowances. For more information, see Note (3). The impact of default on our trade receivables from individual customers is mitigated by our large customer base and its distribution across many different industries, company sizes, and countries worldwide. For more information about our trade receivables, see Note (13). For information about the maximum exposure to credit risk, see Note (24).

Liquidity Risk Management

Our liquidity is managed by our global treasury department with the primary aim of maintaining liquidity at a level that is adequate to meet our financial obligations.

OurGenerally, our primary source of liquidity is funds generated from our business operations, which have historically been the primary source of the liquid funds needed to maintain our investing and financing strategy.operations. The majority of our subsidiaries pool their cash surplus to our global treasury department, which then arranges to fund other subsidiaries’ requirements or invest any net surplus in the market, seekingmarket. With this strategy we seek to optimize yields, while ensuring liquidity, by investing only with counterparties and issuers of high credit quality, as explained above. Hence, high levels of liquid assets and marketable securities provide a strategic reserve, helping keep SAP flexible, sound, and independent.

Apart from effective working capital and cash management, we have reduced the liquidity risk inherent in managing our day-to-day operations and meeting our financing responsibilities by arranging an adequate volume of available credit facilities with various financial institutions on which we can draw if necessary.

In order to retain high financial flexibility, on November 13, 2013, SAP AGSE entered into a €2.02.0 billion syndicated credit facility agreement with an initial term of five years ending in December 2018, effectively replacingplus two one-year extension options. In 2015, the €1.5 billion creditoriginal term of this facility from 2010.was extended for an additional period of one year to November 2020. The use of the facility is not restricted by any financial covenants. Borrowings under the facility bear interest of EURIBOR or LIBOR for the respective currency plus a margin of 22.5 basis points. We are also required to pay a commitment fee of 7.88 basis points per annum on the unused available credit. We have never drawn on the facility.

Additionally, as at December 31, 2013,2015, and 2012,2014, SAP AGSE had available lines of credit totaling

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487471 million and €489471 million, respectively. As at December 31, 2013,2015, and 2012,2014, there were no borrowings outstanding under these lines of credit. As at December 31, 2013, and 2012, certain subsidiaries had lines of credit available that allowed them to borrow in local currencies at prevailing interest rates up to €36 million and €48 million, respectively. There were no borrowings outstanding under these credit facilities from any of our foreign subsidiaries as at December 31, 2013, and 2012.

(26)Additional Fair Value Disclosures on Financial Instruments

(26) ADDITIONAL FAIR VALUE DISCLOSURES ON FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

We use various types of financial instrumentsinstrument in the ordinary course of business, which are grouped into the following categories:classified as either: loans and receivables (L&R), available-for-sale (AFS), held-for-trading (HFT), andor amortized cost (AC).

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The table below shows the carrying amounts and fair values of For those financial assets and liabilities by category of financial instrument as well as by category of IAS 39. Where financial assets and liabilities are shown asinstruments measured at fair value this is doneor for which fair value must be disclosed, we have categorized the financial instruments into a three-level fair value hierarchy depending on the inputs used to determine fair value and their significance for the valuation techniques.

Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy

millions Category  December 31, 2015 
     Carrying
Amount
  Measurement
Categories
  Fair Value 
           At
Amortized
Cost
  At Fair
Value
  Level 1  Level 2  Level 3  Total 

Assets

                                

Cash and cash equivalents1)

  L&R    3,411    3,411                      

Trade and other receivables

      5,362                          

Trade receivables1)

  L&R    5,199    5,199                      

Other receivables2)

      163                          

Other financial assets

      1,687                          

Available-for-sale financial assets

                                

Debt investments

  AFS    26        26    26            26  

Equity investments

  AFS    882        882    299    21    562    882  

Investments in associates2)

      58                          

Loans and other financial receivables

                                

Financial instruments related to employee benefit plans2)

      121                          

Other loans and other financial receivables

  L&R    316    316            316        316  

Derivative assets

                                

Designated as hedging instrument

                                

FX forward contracts

      14        14        14        14  

Interest-rate swaps

      100        100        100        100  

Not designated as hedging instrument

                                

FX forward contracts

  HFT    69        69        69        69  

Call options for share-based payments

  HFT    94        94        94        94  

Call option on equity shares

  HFT    6        6            6    6  

Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy

millions Category  December 31, 2015 
     Carrying
Amount
  Measurement
Categories
  Fair Value 
           At
Amortized
Cost
  At Fair
Value
  Level 1  Level 2  Level 3  Total 

Liabilities

                                

Trade and other payables

      –1,169                          

Trade payables1)

  AC    –893    –893                      

Other payables2)

      –276                          

Financial liabilities

      –9,522                          

Non-derivative financial liabilities

                                

Loans

  AC    –1,261    –1,261            –1,261        –1,261  

Bonds

  AC    –5,733    –5,733        –5,825            –5,825  

Private placements

  AC    –2,202    –2,202            –2,288        –2,288  

Other non-derivative financial liabilities

  AC    –199    –199            –199        –199  

Derivatives

                                

Designated as hedging instrument

                                

FX forward contracts

      –10        –10        –10        –10  

Interest-rate swaps

      0        0        0        0  

Not designated as hedging instrument

                                

FX forward contracts

  HFT    –117        –117        –117        –117  

Total financial instruments, net

      –232    –1,361    1,064    –5,500    –3,261    568    –8,192  

Fair Values of Financial Instruments and Classification Within the Fair Value Hierarchy

millions Category  December 31, 2014 
  Carrying
Amount
  Measurement Categories  Fair Value 
   

At

Amortized
Cost

  At Fair
Value
  Level 1  Level 2  Level 3  Total 
Assets                                
Cash and cash equivalents1)  L&R    3,328    3,328                      
Trade and other receivables      4,443                          

Trade receivables1)

  L&R    4,255    4,255                      

Other receivables2)

      188                          
Other financial assets      1,699                          

Available-for-sale financial assets

                                

Debt investments

  AFS    40        40    40            40  

Equity investments

  AFS    597        597    108    101    388    597  

Investments in associates2)

      49                          

Loans and other financial receivables

                                

Financial instruments related to employee benefit plans2)

      136                          

Other loans and other financial receivables

  L&R    324    324            324        324  

Derivative assets

                                

Designated as hedging instrument

                                

FX forward contracts

      10        10        10        10  

Interest-rate swaps

      77        77        77        77  

Not designated as hedging instrument

                                

FX forward contracts

  HFT    411        411        411        411  

Call options for share-based payments

  HFT    43        43        43        43  

Call option on equity shares

  HFT    13        13            13    13  
Liabilities                                
Trade and other payables      1,087                          

Trade payables1)

  AC    782    782                      

Other payables2)

      305                          
Financial liabilities      11,542                          

Non-derivative financial liabilities

                                

Loans

  AC    4,261    4,261            4,261        4,261  

Bonds

  AC    4,629    4,629        4,811            4,811  

Private placements

  AC    2,195    2,195            2,301        2,301  

Other non-derivative financial liabilities

  AC    123    123            123        123  

Derivatives

                                

Designated as hedging instrument

                                

FX forward contracts

      22        22        22        22  

Interest-rate swaps

      1        1        1        1  

Not designated as hedging instrument

                                

FX forward contracts

  HFT    310        310        310        310  
Total financial instruments, net      3,159     4,084     858    4,663    6,053    400    10,315  

1) We do not separately disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a recurring basis.reasonable approximation of their fair values.

2) Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or advance payments), the carrying amounts of non-financial assets or liabilities are shown in the column headed “Not in Scope of IFRS 7” to allow a reconciliation to the corresponding line items in the Consolidated Statements of Financial Position. The carrying amounts and fair values of our financial instruments as at December 31 were as follows:

Fair Values of Financial Instruments Classified According to IAS 39

 

€ millions

   2013  2012 
   Book
Value
12/31
/2013
  Measurement
Categories
  Fair
Value
12/31
/2013
  Not in
Scope of
IFRS 7
  Book
Value
12/31
/2012
  Measurement
Categories
  Fair
Value
12/31
/2012
  Not in
Scope of
IFRS 7
 
 Category  At
Amortized
Cost
  At
Cost
  At
Fair
Value
     At
Amortized
Cost
  At
Cost
  At
Fair
Value
   

Assets

             

Cash and cash equivalents

 L&R  2,748    2,748      2,748     2,477    2,477      2,477   

Trade receivables

 L&R  3,963    3,816      3,816    147    4,005    3,837      3,837    168  

Other financial assets

   858         663       

Debt investments

 L&R/AFS     38    38        29    29   

Equity investments

 AFS/–    0    322    322    36      149    52    52    46  

Other non-derivative financial assets

 L&R   214      214    119     159      159    84  

Derivative assets

             

With hedging relationship

      35    35        29    29   

Without hedging relationship

 HFT     94    94        115    115   

Liabilities

             

Trade payables

 AC  –895    –640      –640    –255    –933    –684      –684    –249  

Financial liabilities

   –4,506         –5,248       

Non-derivative financial liabilities

 AC   –4,336      –4,439      –5,051      –5,228   

Derivatives

             

With hedging relationship

      –26    –26        –2    –2   

Without hedging relationship

 HFT     –144    –144        –195    –195   

Total financial instruments, net

   2,168    1,802    0    319    2,018    47    964    738    149    28    589    49  

Aggregation according to IAS 39

             

Financial assets

             

At fair value through profit or loss

 HFT  94      94    94     115      115    115   

Available-for-sale

 AFS  360     0    360    360     230     149    81    81   

Loans and receivables

 L&R  6,925    6,778      6,778    147    6,641    6,473      6,473    168  

Financial liabilities

             

At fair value through profit or loss

 HFT  –144      –144    –144     –195      –195    –195   

At amortized cost

 AC  –5,231    –4,976      –5,079    –255    –5,984    –5,735      –5,912    –249  

Outside scope of IAS 39

             

Financial instruments related to employee benefit plans

   119        119    84        84  

Investment in associates

   36        36    46        46  

Derivatives with hedging relationship

   9      9    9     27      27    27   

Total financial instruments, net

   2,168    1,802    0    319    2,018    47    964    738    149    28    589    49  

millions  Category   December 31, 2015 
    Carrying Amount   At Amortized Cost   At Fair Value 

Financial assets

                    

At fair value through profit or loss

   HFT     169          169  

Available-for-sale

   AFS     908          908  

Loans and receivables

   L&R     8,926     8,926       

Financial liabilities

                    

At fair value through profit or loss

   HFT     117          117  

At amortized cost

   AC     10,288     10,288       

 

millions  Category   December 31, 2014 
    Carrying Amount   At Amortized Cost   At Fair Value 

Financial assets

                    

At fair value through profit or loss

   HFT     467          467  

Available-for-sale

   AFS     637          637  

Loans and receivables

   L&R     7,906     7,906       

Financial liabilities

                    

At fair value through profit or loss

   HFT     310          310  

At amortized cost

   AC     11,991     11,991       

F-70


Determination of Fair Values

IFRS 13 defines fair value asIt is our policy that transfers between the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accordingly, best evidence of fair value provides quoted prices in an active market. Where market prices are not readily available, valuation techniques have to be used to establish fair value.

Depending on the inputs used for determining fair value and their significance for the valuation techniques, we have categorized our financial instruments at fair value into a three-level fair value hierarchy as mandated by IFRS 13.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value for one single instrument may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significantare deemed to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.have occurred

The levels of the fair value hierarchy, its application to our financial assets and liabilities, and the respective determination of fair value are described below – differentiating between those that are measured at fair value and those that are measured at cost or amortized cost where fair value is only disclosed:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than those that can be observed, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

It is our policy to recognize transfers at the beginning of the period of the event or change in circumstances that caused the transfer. A description of the valuation techniques and the inputs used in the fair value measurement is given below:

 

 

F-71


Financial Instruments Measured at Fair Value on a Recurring Basis

 

Type  Fair
Value
Hierarchy
Type
 Fair Value
Hierarchy

Determination of Fair

Value/
Valuation Technique

 Significant
Unobservable
Inputs
 Interrelationship
Between Significant
Unobservable Inputs
and Fair Value
Measurement

Other financial assets

   

Debt investments

 Level 1 Quoted prices in an active market NA NA

Listed equity investments

 Level 1 Quoted prices in an active market NA NA

Listed equity investments with sale restriction

 Level 2 Quoted prices in an active market deducting a discount for the disposal restriction derived from the premium for a respective put option. NA NA

TypeFair Value
Hierarchy

Determination of Fair

Value/Valuation Technique

Significant
Unobservable
Inputs
Interrelationship
Between Significant
Unobservable Inputs
and Fair Value
Measurement
Unlisted equity investments

 Level 3 Market approach. Comparable company valuation using revenue multiples derived from companies comparable to the investee. 

•    Peer companies used (revenue multiples range from 2.3-8.5)2.7 to 8.3)

•    Revenues of investeesinvestees;

•    Discounts for lack of marketability(20%-30% (10% to 30%)

 

The estimated fair value would increase (decrease) if:

•    theThe revenue multiples were higher (lower)

•    theThe investees’ revenues were higher (lower)

•    theThe liquidity discounts were lower (higher).

Unlisted equity investments

  Level 3 Market approach. Venture capital method evaluating a variety of quantitative and qualitative factors likesuch as actual and forecasted results, cash position, recent or planned transactions, and market comparable companies. NA NA

Unlisted equity investments

  Level 3 Discounted cash flow.

•    Revenue growth rate (6%-9%)

•    Weighted average cost of capital (13.3%)

The estimated fair value would increase (decrease) if:

•    the revenue growth was higher (lower)

•    the weighted average cost of capital was lower (higher)

Unlisted equity investments

Level 3 Last financing round valuations NA NA

Unlisted equity investments

  Level 3 Liquidation preferences NA NA

Private equity funds

  Level 3 Net asset value/Fair market value as reported by the respective funds NA NA
Call options for share-based payment plansLevel 2

Interest rateMonte-Carlo Model.

Calculated considering risk-free interest rates, the remaining term of the derivatives, the dividend yields, the stock price, and the volatility of our share.

NANA
Call option on equity sharesLevel 3Market approach. Company valuation using EBITDA multiples based on actual results derived from the investee.

EBITDA multiples used

EBITDA of the investee

The estimated fair value would increase (decrease) if:

The EBITDA multiples were higher (lower)

The investees’ EBITDA were higher (lower)

Other financial assets/Financial liabilities

FX forward contractsLevel 2

Discounted cash flow using Par-Method.

Expected future cash flows based on forward exchange rates are discounted over the respective remaining term of the contracts using the respective deposit interest rates and spot rates.

NANA
Interest-rate swaps

 Level 2 

Discounted cash flow.

Expected future cash flows are estimated based on forward interest rates from observable yield curves and contract interest rates, discounted at a rate that reflects the credit risk of the counterparty.

 NA NA

Call options for share-based payments plans

Level 2

Monte Carlo Model.

Calculated considering risk-free interest rates, the remaining term of the derivatives, the dividend yields, the stock price, and the volatility of our share.

NANA

F-72


TypeFair
Value
Hierarchy
Determination of Fair Value/
Valuation Technique
Significant
Unobservable
Inputs
Interrelationship
Between Significant
Unobservable Inputs
and Fair Value
Measurement

Other financial assets/Financial liabilities

Foreign exchange (FX) forward contracts

Level 2

Discounted cash flow usingPar-Method.

Expected future cash flows based on forward exchange rates are discounted over the respective remaining term of the contracts using the respective deposit interest rates and spot rates.

NANA

Financial Instruments notNot Measured at Fair Value

 

Type  Fair
Value
Hierarchy
Type
  Fair Value HierarchyDetermination of Fair Value/Valuation
Technique

Financial liabilities

Fixed rate bonds (financial liabilities)

  Level 1  Quoted prices in an active market

Fixed rate private placements/loans (financial liabilities)

  Level 2  

Discounted cash flows.

Future cash outflows for fixed interest and principal are discounted over the respective term of the respective contracts using the respective market interest rates as of the reporting date.

 

For cash and cash equivalents, trade receivable, other non-derivative financial assets/liabilities accounts payable and variable rate financial debt, it

is assumed that their carrying value reasonably approximates their fair values.

F-73


The following table allocates those financial assets and liabilities that are measured at fair value in accordance with IAS 39 either through profit or loss or other comprehensive income or for which fair value must be disclosed in accordance with IFRS 7 as at December 31, 2013, to the three levels of the fair value hierarchy according to IFRS 13.

Classification of Financial Instruments

  2013  2012 
€ millions Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 

Financial assets

        

Corporate bonds

  29    0    0    29    27    0    0    27  

Government securities

  2    0    0    2    0    0    0    0  

Municipal bonds

  7    0    0    7    2    0    0    2  

Debt investments

  38    0    0    38    29    0    0    29  

Software industry

  52    31    239    322    52    0    0    52  

Equity investments

  52    31    239    322    52    0    0    52  

Available-for-sale financial assets

  90    31    239    360    81    0    0    81  

FX forward contracts

  0    56    0    56    0    76    0    76  

Interest rate swaps

  0    5    0    5    0    0    0    0  

Call options for share-based payments

  0    68    0    68    0    68    0    68  

Derivative financial assets

  0    129    0    129    0    144    0    144  
                                 

Total

  90    160    239    489    81    144    0    225  
                                 

Financial liabilities

        

FX forward contracts

  0    147    0    147    0    197    0    197  

Interest rate swaps

  0    23    0    23    0    0    0    0  

Derivative financial liabilities

  0    170    0    170    0    197    0    197  
                                 

Total

  0    170    0    170    0    197    0    197  
                                 

Transfers between LevelBetween Levels 1 and 2

Transfers of available-for-sale equity investments from Level 2 to Level 1 which occurred because disposal restrictions lapsed and deducting a

discount for such restriction was no longer necessary were not material in

all years presented, while transfers from Level 1 to Level 2 did not occur at all.

F-74


Level 3 disclosuresDisclosures

The following table shows the reconciliation from the opening to the closing balances for our unlisted equity investments and call options on equity shares classified as Level 3 fair values:

Reconciliation of Level 3 Fair Values

 

2013
€ millionsUnlisted Equity
Investments and
Private Equity
Funds

Opening balance

0

Transfers

into Level 3

162

out of Level 3

–30

Purchases

79

Sales

–16

Gains/losses

included in financial income, net in profit and loss

7

included in available-for-sale financial assets in other comprehensive income

46

included in exchange differences in other comprehensive income

–9

Closing balance

239

Change in unrealized gains/losses in profit and loss for investments held at
the end of the reporting period

0
millions  2015   2014 
    Unlisted Equity Investments and
Call Options on Equity Shares
   Unlisted Equity Investments 
January 1   400     239  
Transfers          

Into Level 3

   12     0  

Out of Level 3

   80     29  
Purchases   170     141  
Sales   22     36  
Gains/losses          

Included in financial income, net in profit and loss

   9     27  

Included in available-for-sale financial assets in other comprehensive income

   34     21  

Included in exchange differences in other comprehensive income

   45     37  
December 31   568     400  
Change in unrealized gains/losses in profit and loss for investments held at the end of the reporting period   0     0  

 

The transfers into and out of Level 3 relate to unlisted equity investments.

Changing the unobservable inputs to reflect reasonably possible alternative assumptions would not have a material impact on the fair values of our unlisted equity investments held as available-for-sale as of the reporting date.

(27) SHARE-BASED PAYMENTS

(27)Share-Based Payments

SAP has granted awards under various cash-settled and equity-settled share-based payments to its directors and employees. Most of these awards are described in detail below. SAP has other share-based payments,payment plans not described below, which are individually and in aggregate, immaterial to our Consolidated Financial Statements.

a) Cash-Settled Share-Based Payments

a)

Cash-Settled Share-Based Payments

SAP’s cash-settled share-based payments include the following programs: Employee Participation Plan (EPP) andLong-Term Incentive Plan (LTI Plan for the Global Managing Board) 2015, SOP Performance Plan 2009 (SOP PP), Stock Option Plan 2010 (SOP

2010 (2010–20132015 tranches)), Restricted Stock Unit Plan 2013 (RSU 2013), acquired SFSF Rights (former SuccessFactors awards assumed in connection with the SuccessFactors acquisition in 2012), acquired Ariba Rights (former Ariba awards assumed in connection with the Ariba acquisition in 2012)(2013–2015 tranches)).

F-75


As at December 31, 2013,2015, the valuation of our outstanding cash-settled plans was based on the following parameters and assumptions:

Fair Value and Parameters Used at Year-End 2013Year End 2015 for Cash-Settled Plans

 

   LTI Plan
2015
(2012/2013
Tranche)
  EPP 2015
(2013
Tranche)
  RSU 2013  SOP PP  

SOP 2010

(2010–2013
Tranche)

  SFSF Rights  Ariba Rights 

Option pricing model used

  Other1)   Other1)   Other1)   
 
Monte-
Carlo
 
  
  
 
Monte-
Carlo
 
  
  NA    NA  

Range of grant dates

  2/7/2012    3/20/2013    1/16/2013    5/6/2009    9/9/2010    2/21/2012    10/1/2012  
  7/1/2013     12/16/2013     9/13/2013    

Quantity of awards issued (in thousands)

  661    2,087    1,559    10,321    26,341    4,534    4,091  

Weighted average fair value as at December 31, 2013

  €59.80    €62.31    €61.55    €0.74    €15.71    €29.00    €32.63  

Weighted average intrinsic value as at December 31, 2013

  €62.31    €62.31    €63.19    €0.00    €10.98    €29.00    €32.63  

Expected remaining life as at December 31, 2013 (in years)

  2.4    0.1    1.2    0.2    3.3    0.8    0.7  

Risk-free interest rate (depending on maturity)

  
 
0.26% to
0.46%
  
  
  0.01%    
 
0.01% to
0.44%
  
  
  0.02%    
 
0.08% to
0.92%
  
  
  NA    NA  

Expected volatility SAP shares

  NA    NA    NA    19.7%    
 
21.3 % to
27.6%
  
  
  NA    NA  

Expected dividend yield SAP shares

  1.67%    NA    1.65%    1.67%    1.67%    NA    NA  

Share price of reference index

  NA    NA    NA    €230.94    NA    NA    NA  

Expected volatility reference index

  NA    NA    NA    10.6%    NA    NA    NA  

Expected dividend yield reference index

  NA    NA    NA    2.15%    NA    NA    NA  

Expected correlation SAP share/reference index

  NA    NA    NA    17.4%    NA    NA    NA  
   LTI Plan 2015 (2012
– 2015 tranches)
  EPP 2015 (2015
tranche)
  

SOP 2010

(2010 – 2015
tranches)

  

RSU

(2013 – 2015
tranches)

 
Weighted average fair value as at 12/31/2015  71.45    73.38    16.06    71.90  
Information how fair value was measured at measurement date                

Option pricing model used

  Other1)    Other1)    Monte-Carlo    Other1)  

Share price

  73.38    73.24  

Risk-free interest rate (depending on maturity)

  

 

0.25%  to

0.39%

  

  

  NA    

 

0.03% to

0.38%

  

  

  

 

0.16%  to

0.39%

  

  

Expected volatility SAP shares

  NA    NA    
 
22.0% to
41.9%
  
  
  NA  

Expected dividend yield SAP shares

  1.56%    NA    1.56%    1.56%  
Weighted average remaining life of options outstanding as at 12/31/2015 (in years)  1.7    0.1    3.4    1.2  

1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date.

 

1)

For these awards the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date.

As at December 31, 2012,2014, the valuation of our outstanding cash-settled plans was based on the following parameters and assumptions:

Fair Value and Parameters Used at Year-End 2012Year End 2014 for Cash-Settled Plans

 

   LTI Plan
2015 (2012
Tranche)
  EPP 2015
(2012
Tranche)
  SOP PP  

SOP 2010

(2010–2012
Tranche)

  SFSF Rights  Ariba Rights 

Option pricing model used

  Other1)   Other1)   
 
Monte-
Carlo
 
  
  
 
Monte-
Carlo
 
  
  NA    NA  

Range of grant dates

  2/7/2012    4/5/2012    5/6/2009    9/9/2010    2/21/2012    10/1/2012  
  9/1/2012      6/8/2012    

Quantity of awards issued (in thousands)

  349    2,752    10,321    18,920    4,534    4,091  

Weighted average fair value as at December 31, 2012

  €57.79    €60.69    €7.36    €17.06    €30.32    €34.11  

Weighted average intrinsic value as at December 31, 2012

  €60.69    €60.69    €4.76    €14.79    €30.32    €34.11  

Expected remaining life as at December 31, 2012 (in years)

  3.1    0.1    1.2    4.1    1.3    1.1  

Risk-free interest rate (depending on maturity)

  0.06%    0.00%    –0.04%    
 
0.03% to
0.41%
  
  
  NA    NA  

Expected volatility SAP shares

  NA    NA    19.8%    
 
25.8% to
29.6%
  
  
  NA    NA  

Expected dividend yield SAP shares

  1.55%    NA    1.55%    1.55%    NA    NA  

Share price of reference index

  NA    NA    €192.95    NA    NA    NA  

Expected volatility reference index

  NA    NA    5.5%    NA    NA    NA  

Expected dividend yield reference index

  NA    NA    1.39%    NA    NA    NA  

Expected correlation SAP share/reference index

  NA    NA    42.1%    NA    NA    NA  
   LTI Plan 2015 (2012
– 2014 tranches)
  EPP 2015 (2014
tranche)
  

SOP 2010

(2010 – 2014
tranches)

  

RSU

(2013 – 2014
tranches)

 
Weighted average fair value as at 12/31/2014  56.40    58.26    10.17    54.09  
Information how fair value was measured at measurement date                

Option pricing model used

  Other1)    Other1)    Monte-Carlo    Other1)  

Share price

 

 

58.26

  

  57.37  

Risk-free interest rate (depending on maturity)

  0.1%    NA    
 
0.1% to
0.02%
  
  
  

 

0.1%  to

0.01%

  

  

Expected volatility SAP shares

  NA    NA    
 
19.9% to
23.4 %
  
  
  NA  

Expected dividend yield SAP shares

  1.74%    NA    1.74%    1.76%  
Weighted average remaining life of options outstanding as at 12/31/2014 (in years)  1.8    0.1    3.5    1.1  

1)

For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date.

F-76


Expected volatility of the SAP share price is based on a mixtureblend of implied volatility from traded options with corresponding lifetimes and exercise prices as well as historical volatility with the same expected life as the options granted. For the SOP PP valuation, the expected volatility of the Technology Peer Group Index (ISIN DE000A0YKR94) (TechPGI) is based on the

historical volatility derived from the index price history.

Expected remaining life of the options reflects both the contractual term and the expected, or historical, exercise behavior. The risk-free interest rate is derived from German government bonds with a similar duration. Dividend yield is based on expectations ofexpected future dividends.

 

 

The number of awards under our cash-settled plans developed as follows in the years ended December 31, 2013, 2012, and 2011:

Changes in Numbers of Outstanding Awards Under Our Cash-Settled Plans

 

thousands LTI Plan
2015
(2012/2013
Tranche)
  

EPP 2015

(2012/2013
Tranche)

  RSU 2013  SOP PP  

SOP 2010

(2010–2013
Tranche)

  SFSF
Rights
  Ariba
Rights
 

Outstanding as at 12/31/2010

  NA    NA    NA    9,575    5,373    NA    NA  

Granted in 2011

  NA    NA    NA    0    5,192    NA    NA  

Exercised in 2011

  NA    NA    NA    0    0    NA    NA  

Expired in 2011

  NA    NA    NA    0    0    NA    NA  

Forfeited in 2011

  NA    NA    NA    –632    –515    NA    NA  
  

Outstanding as at 12/31/2011

  NA    NA    NA    8,943    10,050    NA    NA  
  

Granted in 2012

  349    2,752    NA    0    8,331    4,534    4,091  

Adjustment based upon KPI target achievement in 2012

  117    880    NA    NA    NA    NA    NA  

Exercised in 2012

  0    0    NA    –3,294    0    –1,826    –1,587  

Expired in 2012

  0    0    NA    0    0    0    0  

Forfeited in 2012

  0    –130    NA    –805    –954    –305    –144  
  

Outstanding as at 12/31/2012

  466    3,502    NA    4,844    17,427    2,403    2,360  
  

Granted in 2013

  311    2,087    1,559    0    7,421    NA    NA  

Adjustment based upon KPI target achievement in 2013

  –18    –139    0    NA    NA    NA    NA  

Exercised in 2013

  –196    –3,495    0    –992    –2,215    –797    –1,362  

Expired in 2013

  0    –7    0    0    0    0    0  

Forfeited in 2013

  –48    –103    –96    –385    –967    –531    –90  
                             

Outstanding as at 12/31/2013

  515    1,845    1,463    3,467    21,666    1,075    908  
                             

Additional information

       

Awards exercisable as at 12/31/2011

  NA    NA    NA    8,943    0    NA    NA  

Awards exercisable as at 12/31/2012

  0    0    NA    4,844    0    0    0  
  

Awards exercisable as at 12/31/2013

  0    0    0    3,467    1,609    0    0  
  

Aggregate intrinsic value of vested awards (in € millions), as at 12/31/2011

  NA    NA    NA    0    0    NA    NA  

Aggregate intrinsic value of vested awards (in € millions), as at 12/31/2012

  28    213    NA    23    0    3    3  
  

Aggregate intrinsic value of vested awards (in € millions), as at 12/31/2013

  43    115    0    0    37    0    0  
  
thousands LTI Plan 2015
(2012 – 2015
tranches)
  

EPP 2015

(2013 – 2015
tranches)

  

SOP 2010

(2010 – 2015
tranches)

  

RSU

(2013 – 2015
tranches)

 

Outstanding as at 12/31/2013

  515    1,845    21,666    1,427  

Granted in 2014

  242    2,177    8,965    2,001  

Adjustment based upon KPI target achievement in 2014

  41    458    NA    88  

Exercised in 2014

  70    1,845    2,730    734  

Forfeited in 2014

  55    104    1,619    378  

Outstanding as at 12/31/2014

  591    1,615    26,282    2,228  

Granted in 2015

  277    2,605    10,866    5,125  

Adjustment based upon KPI target achievement in 2015

  109    495    NA    109  

Exercised in 2015

  0    1,614    6,585    1,337  

Forfeited in 2015

  0    131    1,436    548  

Outstanding as at 12/31/2015

  977    2,970    29,127    5,577  
                 

Outstanding awards exercisable as at

                

12/31/2014

  0    0    3,313    0  

12/31/2015

  0    0    4,120    0  
                 

Total carrying amount (in millions) of liabilities as at

                

12/31/2014

  45    94    167    56  

12/31/2015

  74    205    283    166  
                 

Total intrinsic value of vested awards (in millions) as at

                

12/31/2014

  38    94    49    0  

12/31/2015

  76    218    110    0  
                 
Weighted average share price (in) for share options exercised in                

2014

  54.96    57.48    56.65    56.62  

2015

  NA    56.94    66.20    65.83  
                 

Total expense (in millions) recognized in

                

2013

  11    118    83    34  

2014

  13    82    29    58  

2015

  28    200    187    193  

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thousands LTI Plan
2015
(2012/2013
Tranche)
  

EPP 2015

(2012/2013
Tranche)

  RSU 2013  SOP PP  

SOP 2010

(2010–2013
Tranche)

  SFSF
Rights
  Ariba
Rights
 

Weighted average share price (in €) for share options exercised in 2011

  NA    NA    NA    NA    NA    NA    NA  

Weighted average share price (in €) for share options exercised in 2012

  NA    NA    NA    60.40    NA    30.32    34.11  
  

Weighted average share price (in €) for share options exercised in 2013

  54.96    59.90    NA    61.38    55.47    29.00    32.63  
  

Provision as at 12/31/2012
(in € millions)

  53    212    NA    36    137    39    51  
  

Provision as at 12/31/2013 (in € millions)

  41    115    32    3    183    20    24  

 

 

Expense recognized in 2011 (in € millions)

  NA    NA    NA    –8    28    NA    NA  

Expense recognized in 2012 (in € millions)

  53    216    NA    20    74    38    21  
  

Expense recognized in 2013 (in € millions)

  –11    118    34    –28    83    10    21  

 

 

Cash-settled plans granted to SAP employees (except for employees of SFSFa.1) Employee Participation Plan (EPP) and Ariba)Long-Term Incentive Plan (LTI Plan) 2015

a.1)Employee Participation Plan (EPP) and Long-Term Incentive Plan (LTI Plan) 2015

SAP implemented two new share-based payments in 2012: an Employee Participation Plan (EPP) 2015 for employees and a Long-Term Incentive (LTI) Plan 2015 for members of the Global Managing Board.

The plans are focused on SAP’s share price and the achievement of two financial key performance indicators (KPIs): non-IFRS total revenue andnon-IFRS operating profit, which are derived from the Company’s 2015 financial KPIs. Under these plans, virtual shares, called restricted share units (RSUs), are granted to participants. Participants are paid out in cash based on the number of RSUs that vest.

The RSUs were granted and allocated at the beginning of each year through 2015, with EPP 2015 RSUs subject to annual Executive Board approval. Participants in the LTI Plan 2015 have already been granted a budget for the years 2012 to 2015 (2013 to 2015(2015 for new plan participants joining in 2013)2015). All participants in the LTI Plan 2015 are members of the Global Managing Board.

The RSU allocation process will taketook place at the beginning of each year based on SAP’s share price after the publication of its preliminary annual results for the last financial year prior to the performance period.

At the end of the given year, the number of RSUs that finally vest with plan participants depends on SAP’s actual performance for the given year, and might be higher or lower than the number of RSUs originally granted. If performance against both KPI targets reaches at least the defined 80%60% (80% for 2012 and 2013 tranches) threshold, the RSUs vest. Depending on performance, the vesting can reach a maximum of 150% of the budgeted amount. If performance against either or both of those KPI targets does not reach the defined threshold of 80%60% (80% for 2012 and 2013 tranches), no RSUs vest and RSUs granted for that year will be forfeited. The adjustment to the threshold of those performance indicators was made to reflect our updated expectations due to the accelerated shift to the cloud. For the year 2013,2015, the RSUs granted at the beginning of the year vested with 92.97% (2012: 133.55%112.96% (2014: 77.89%) achievement of the KPI targets.targets for the LTI Plan. For the EPP, the Executive Board set the achievement of the KPI targets at 120.00% (2014: 77.89%).

Under the EPP 2015, the RSUs are paid out in the first quarter of the year after the one-year performance period, whereas the RSUs for members of the Global Managing Board under the LTI Plan 2015 are subject to a three-year-holdingthree-year holding period before payout, which occurs starting in 2016.

The plans includeLTI Plan 2015 includes a “look-back” provision, due to the fact that these plans arethis plan is based on reaching certain KPI levelstargets in 2015. IfThe number of RSUs vested under the 2015 tranche was adjusted to reflect the overall achievement infor 2015 is higher or lower than

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represented by the number of RSUs vested from the 2012 to 2014 the number of RSUs granted in 2015 can increase or decrease accordingly.tranches. However, RSUs that were already fully vested in prior years cannot be forfeited. For the EPP, the application of the “look-back”-provision is subject to approval by the Executive Board in 2015.did not forfeit.

The final financial effect of each tranche of the EPP 2015 and the LTI Plan 2015 will depend on the number of vested RSUs and the SAP share price, which is set directly after the announcement of the preliminary fourth quarter and full-year results for the last financial year under the EPP 2015 (of the respective three-year holding period under the LTI Plan 2015), and thus may be significantly above or below the budgeted amounts.

a.2)SOP Performance Plan 2009 (SOP PP)

Under the SOP Performancea.2) SAP Stock Option Plan 2009, we granted to top executives and top performers cash-based virtual stock options, the value of which depends on the multi-year performance of the SAP share relative to an industry-specific share price index, the TechPGI.2010 (SOP 2010 (2010–2015 Tranches))

The future payout at the exercise date will be based on the outperformance of the SAP share price over the TechPGI. Exercise is only possible if the SAP share price has outperformed the TechPGI. For that purpose, the SOP PP 2009 agreement defines the initial value of the TechPGI (€97.54) as well as the SAP initial exercise price (€28.00 per share). After a vesting period of two years, the plan provides for 4 predetermined exercise dates every calendar year until the rights lapse five years after the grant date. The latest possible exercise day for eligible employees will be in March 2014.

Monetary benefits are capped at 110% of the grant price (€30.80). The dynamic exercise price at valuation date is €66.29.

a.3)SAP Stock Option Plan 2010 (SOP 2010 (2010–2013 Tranches))

Under the SAP Stock Option Plan 2010, we granted members of the Senior Leadership Team / Team/Global Executives, SAP’s Top Rewards (employees with an exceptional rating / rating/high potentials) between 2010 and 20132015 and only in

2010 and 2011 members of the Executive Board cash-based virtual stock options, the value of which depends on the multi-year performance of the SAP share.

The grant-base value is based on the average fair market value of one ordinary share over the five business days prior to the Executive Board resolution date.

The virtual stock options granted under the SOP 2010 give the employees the right to receive a certain amount of money by exercising the options under the terms and conditions of this plan. After a three-year vesting period (four years for members of the Executive Board), the plan provides for 11 predetermined exercise dates every calendar year (one date per month except in April) until the rights lapse six years after the grant date (seven years for members of the Executive Board). Employees can exercise their virtual stock options only if they are employed by SAP; if they leave the Company, they forfeit them. Executive Board members’ options arenon-forfeitable once granted – if the service agreement ends in the grant year, the number of options is reducedpro rata temporis.temporis. Any options not exercised at the end of their term expire.

The exercise price is 110% of the grant base value (115% for members of the Executive Board) which is €39.03 (€39.03 (40.80)  for the 2010 tranche, €46.23 (€46.23 (48.33) for the 2011 tranche, €49.2849.28 for the 2012 tranche, and €59.8559.85 for the 2013 tranche,60.96 for the 2014 tranche, and72.18 for the 2015 tranche.

Monetary benefits will be capped at 100% of the exercise price (150% for members of the Executive Board).

Cash-settled plans granted to employees of SFSF and Aribaa.3) Restricted Stock Unit Plan (RSU Plan (2013–2015 tranches))

a.4)Restricted Stock Unit Plan 2013 (RSU 2013)

We maintain share-based payment plans that allow for the issuance of restricted stock units (RSU) to retain and motivate executives and certain employees of the SuccessFactors and Ariba businesses, which we acquired in 2012.employees.

Under the RSU 2013 Plan, we granted a certain number of RSUs throughoutbetween 2013 and 2015 representing a contingent right to receive a cash payment determined by the market value of the same number of SAP AGSE shares (or SAP SE American DepositoryDepositary Receipts on the New York Stock ExchangeExchange) and the number

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of RSUs that ultimately vest. Granted RSUs will vest in different tranches, either:

Over a one-to-three year service period only, or

Over a one-to-three year service period and upon meeting certain key performance indicators (KPIs).

Over a one-to-three year service period only, or

Over a one-to-three year service period and upon meeting certain key performance indicators (KPIs).

The number of RSUs that could vest for SuccessFactors employees under the 2015 tranche with performance-based grants was mostly contingent upon a weighted achievement of the following performance milestones for the fiscal year ended on December 31, 2013 related to:2015:

Specific indicators of cloud subscriptions and support revenue (80%) and

Profit contribution of such specific indicators of cloud subscriptions and support revenue (20%).

Non-IFRS total revenue (50%); and

Non-IFRS operating profit (50%).

Depending on performance, the number of RSUs vesting could have ranged between 80%50% and 140%150% of the number initially granted. Performance against the KPI targets was set at 100%112.96% (2014: 90.27%) in fiscal year 2013.

The number of RSUs that could vest for Ariba employees under the performance-based grants was contingent upon achievement of performance milestones for the fiscal year ended December 31, 2013 related to specific indicators of growth in cloud subscriptions and support revenue. The KPI targets included a minimum threshold for at least 50% vesting. If performance against the KPI targets had not exceeded the minimum threshold, no RSUs would have vested. Additionally, the number of RSUs that can vest is capped at 200% of the number originally granted. Performance against the KPI targets was 100% in fiscal year 2013.2015.

The RSUs are paid out in cash upon vesting.

a.5)SuccessFactors Cash-Settled Awards Replacing Pre-Acquisition SuccessFactors Awards (SFSF Rights)

In conjunction with the acquisition of SuccessFactors in 2012, under the terms of the acquisition agreement, SAP exchanged unvested Restricted Stock Awards (RSAs), Restricted Stock Units (RSUs), and Performance Stock Units (PSUs) held by employees of SuccessFactors forcash-settled share-based payment awards of SAP (SFSF Rights).

RSAs, RSUs, and PSUs unvested at the closing of the acquisition were converted into the right to receive, at the originally agreed vesting dates, an amount in cash equal to the number of RSAs and RSUs held at the vesting date multiplied by US$40.00 per share.

There were 4.5 million unvested RSAs, RSUs, and PSUs at the acquisition date, representing a fair value of €128 million after considering forfeitures dependent on grant dates and remaining vesting periods. Of the total fair value, €59 million was allocated to consideration transferred and €68 million was allocated to future services to be provided and will be recognized as post-acquisition compensation expense as the awards vest over the remainder of the original vesting terms – the remaining vesting period for such SuccessFactors Rights are in a range of up to four years from the acquisition date. From January 1, 2013, to December 31, 2013, 0.8 million SFSF Rights vested. The unrecognized expense related to SFSF Rights was €11 million as at December 31, 2013, and will be recognized over a remaining vesting period of up to 2.0 years.

a.6)Ariba Cash-Settled Awards Replacing Pre-Acquisition Ariba Awards (Ariba Rights)

The terms of the acquisition agreement under which SAP acquired Ariba in 2012 required SAP to exchange unvested Restricted Stock Awards (RSAs) and Restricted Stock Units (RSUs) held by employees of Ariba for cash-settled share-based payment awards of SAP (Ariba Rights).

RSAs and RSUs unvested at the closing of the acquisition were converted into the right to receive an amount in cash equal to the number of RSAs and RSUs held at the vesting date multiplied by US$45.00 per share in accordance with the respective vesting terms.

There were 4.1 million unvested RSAs and RSUs at the acquisition date, representing a fair value of €138 million after considering forfeitures dependent on grant dates and remaining vesting periods. Of the total fair value, €86 million was allocated to consideration transferred and €52 million was allocated to future services to be provided and will be recognized as post-acquisition compensation expense as the awards vest over the remainder of the vesting terms – the remaining vesting period for such Ariba Rights are in a range of up to 3.5 years at acquisition date (in accordance with the originally agreed vesting dates). From January 1, 2013, to December 31,

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2013, 1.4 million Ariba Rights vested. The unrecognized expense related to Ariba Rights was €7 million as at December 31, 2013, and will be recognized over a remaining vesting period of up to 1.75 years.

b)Equity-Settled Share-Based Payments

Equity-settled plans include primarily theb) Equity-Settled Share-Based Payments: Share Matching Plan (SMP).

Under the Share Matching Plan (SMP) implemented in 2010, SAP offers its employees the opportunity to purchase SAP AGSE shares at a discount of 40%. The number of SAP shares an

eligible employee may purchase through the SMP is limited to a percentage of the employee’s annual base salary. After athree-year holding period, such plan participants will receive one (in 2012: five) free matching share of SAP for every three SAP shares acquired.

The terms for the members of the Senior Leadership Team / Team/Global Executives are slightly different than those for the other employees. They do not receive a discount when purchasing the shares. However, after a three-year holding period, they receive two (in 2012: five) free matching SAP shares for every three SAP shares acquired. This plan is not open to members of the SAP Executive Board.

The following table shows the parameters and assumptions used at grant date to determine the fair value of free matching shares, as well as the quantity of shares purchased and free matching shares granted through this program in 2013, 2012,2015, 2014, and 2011:2013:

Fair Value and Parameters at Grant Date for SMP

 

   2013  2012  2011 

Grant date

  9/4/2013    6/6/2012    6/8/2011  

Share price at grant date

  €54.20    €45.43    €41.73  

Purchase price set by the Executive Board

  €56.20    €48.23    €44.07  

Risk-free interest rate

  0.43%    0.12%    1.95%  

Expected dividend yield of SAP shares

  1.92%    2.13%    1.70%  

Expected life of free matching shares (in years)

  3.0    3.0    3.0  

Free matching share fair value at grant date

  €51.09    €42.54    €39.69  

Number of shares purchased (in thousands)

  1,559    1,926    1,334  

Free matching shares granted (in thousands)

  573    3,210    481  
    2015   2014   2013 

Grant date

   6/5/2015     6/4/2014     9/4/2013  

Fair value of granted awards

   62.98     52.49     51.09  

Information how fair value was measured at grant date

               

Option pricing model used

        Other1)       

Share price

   66.31     55.61     54.20  

Risk-free interest rate

   0.08%     0.13%     0.43%  

Expected dividend yield

   1.67%     1.87%     1.92%  
Weighted average remaining contractual life of awards outstanding at year end (in years)   1.5     0.9     1.6  

Number of investment shares purchased (in thousands)

   1,492     1,550     1,559  

The following table shows1) For these awards, the breakdownfair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the expense recognized for this programrespective award from the prevailing share price as of the valuation date.

Changes in 2013, 2012, and 2011 and the unrecognized expense at year-end in € millions:Numbers of Outstanding Awards Under SMP

thousands

SMP

Outstanding as at 12/31/2013

3,986

Granted in 2014

568

Exercised in 2014

432

Forfeited in 2014

187

Outstanding as at 12/31/2014

3,935

Granted in 2015

551

Exercised in 2015

2,808

Forfeited in 2015

78

Outstanding as at 12/31/2015

1,600

Recognized and Unrecognized Expense at Year-EndYear End for SMP

 

€ millions, unless otherwise stated  2013   2012   2011 
millions  2015   2014   2013 

Expense recognized relating to discount

   32     34     22     36     35     32  

Expense recognized relating to vesting of free matching shares

   51     34     9     44     54     51  

 

Total expense relating to SMP

   83     68     31     80     89     83  

 

Unrecognized expense as at December 31

   80     107     22  

Average remaining vesting period (in years) as at December 31

   1.6     2.2     2.2  

(28) SEGMENT AND GEOGRAPHIC INFORMATION

General Information

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(28)SegmentOn December 4, 2014, we completed our acquisition of Concur and Geographic Information

GeneralInformation

Our internal reporting system produces reports in which businessthe first quarter of 2015 we announced our intention to combine all SAP network offerings (that is, predominantly the activities are presented in a variety of ways, for example, by line of business, geography, and areas of responsibility of the individual Board members. Based on these reports,purchased Concur business and the network activities of the Ariba and Fieldglass businesses acquired earlier) and launch the SAP Business Network, a network of networks which covers sourcing, procurement, and travel and expenses.

The SAP Business Network qualifies as an operating segment and as a reportable segment under IFRS 8.

Since fiscal year 2015 SAP thus has two reportable segments that are regularly reviewed by our Executive Board, which is responsible for assessing the performance of various company componentsour Company and for making resource allocation decisions as our Chief Operating Decision Maker (CODM), evaluates business activities in a number of different ways.

: the Applications, Technology & Services segment and the SAP hasBusiness Network segment. These two divisions – On-Premise and Cloud, which are further divided into operating segments. Our On-Premise division is comprised of two operating segments: On-Premise Products and On-Premise Services, and our Cloud division is comprised of two operating segments: Cloud Applications and Ariba. All operating segments are reportable segments.

On August 1, 2013, SAP acquired hybris AG. Since the majority of hybris’ activities are currently delivered in an on-premise model, the majority of hybris’ activities are correspondingly reflected in the On-Premise segments.

The most important factors we uselargely organized and managed separately according to identify operating segments are distinctions among ourtheir product and service offerings, notably:notably whether the products and services relate to our business network activities or cover other areas of our business.

Between divisions, the software delivery model (software to be installed on the customer’s hardware (on-premise software), as distinct from software for delivery in the cloud)

Within the On-Premise division, the types of services offered

Within the Cloud division, the fields in which the cloud applications are used

The On-Premise divisionApplications, Technology & Services segment derives its revenuesrevenue primarily from the sale of on-premise software (that is, software designed for use on hardware on the customer’s premises), mobile software (that is, software designed for use on mobile devices),licenses, subscriptions to our cloud applications, and related services relating to such software. Within theOn-Premise division, the On-Premise Products segment is primarily engaged in marketing and licensing our on-premise and mobile software products and providing(mainly support services for these software products. The On-Premise Services segment primarily performsand various professional services mainlyand premium support services, as well as implementation services of our software products and educationaleducation services on the use of our software products.products).

The Cloud divisionSAP Business Network segment emerged from combining all SAP network offerings into one network of networks that covers temporary workforce sourcing, other procurement, and end-to-end travel and business travel expense management. The SAP Business Network segment derives its revenues primarilymainly from transaction fees charged for the saleuse of cloud software (that is, software designed for delivery through the cloud)SAP’s cloud-based collaborative business network and from services relating to such softwarethe SAP Business Network (including support services,cloud applications, professional services, and educationaleducation services). Within the Cloud division,SAP Business Network segment, we mainly market and sell the Cloud Applications segment is primarily engaged in marketing and selling subscriptions to the cloud software offerings developed by SAP and SuccessFactors. The Ariba segment primarily markets and sells the cloud software offerings developed by Ariba, Fieldglass, and derives revenue from its cloud-based collaborative business network.Concur.

Our Concur and Fieldglass acquisitions are included in the segment information since their respective acquisition dates (December 4, 2014, for Concur and May 2, 2014, for Fieldglass).

 

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Information About Profit or Loss, Assets, and Liabilities

Operating Segments Revenue and Profit or LossResults of Segments

 

  On-Premise Division  Cloud Division  Total 
€ millions 

On-Premise

Products

  

On-Premise

Services

  

Division

Total

  

Cloud

Applications

  Ariba  

Division

Total

  

2013

       

Software

  4,517    0    4,517    1    0    1    4,518  

Cloud subscriptions and support

  0    0    0    412    344    757    757  

Software and cloud subscriptions

  4,517    0    4,517    413    345    758    5,275  

Support

  8,710    0    8,710    16    30    46    8,756  

Software and software-related service revenue

  13,227    0    13,227    429    375    804    14,032  

Professional services and other service revenue

  0    2,695    2,695    85    85    170    2,865  

Total revenue

  13,227    2,695    15,923    514    461    975    16,897  

Cost of revenue

  –2,020    –2,134    –4,154    –178    –180    –358    –4,512  

Gross profit

  11,207    562    11,769    336    281    617    12,385  

Cost of sales and marketing

  –3,447    0    –3,447    –328    –151    –479    –3,926  

Reportable segment profit/loss

  7,760    562    8,322    8    130    138    8,460  

2012

       

Software

  4,656    0    4,656    2    0    2    4,658  

Cloud subscriptions and support

  0    0    0    257    86    343    343  

Software and cloud subscriptions

  4,656    0    4,656    259    86    345    5,001  

Support

  8,226    0    8,226    10    10    20    8,246  

Software and software-related service revenue

  12,881    0    12,881    269    96    365    13,246  

Professional services and other service revenue

  0    2,967    2,967    67    25    91    3,058  

Total revenue

  12,881    2,967    15,848    336    120    456    16,304  

Cost of revenue

  –1,994    –2,306    –4,300    –163    –72    –234    –4,533  

Gross profit

  10,887    661    11,549    173    49    222    11,771  

Cost of sales and marketing

  –3,414    0    –3,414    –231    –43    –275    –3,689  

Reportable segment profit/loss

  7,473    661    8,134    –59    5    –53    8,082  

2011

       

Software

  4,105    0    4,105    0    2    2    4,107  

Cloud subscriptions and support

  0    0    0    18    0    18    18  

Software and cloud subscriptions

  4,105    0    4,105    18    2    20    4,125  

Support

  7,220    0    7,220    0    0    1    7,220  

Software and software-related service revenue

  11,325    0    11,325    18    2    20    11,346  

Professional services and other service revenue

  0    2,901    2,901    12    1    13    2,914  

Total revenue

  11,325    2,901    14,226    29    4    33    14,260  

Cost of revenue

  –1,762    –2,201    –3,963    –66    –9    –75    –4,038  

Gross profit

  9,564    700    10,264    –37    –5    –42    10,222  

Cost of sales and marketing

  –2,919    0    –2,919    –32    –2    –34    –2,954  

Reportable segment profit/loss

  6,644    700    7,344    –69    –7    –76    7,268  
millions Applications, Technology & Services  SAP Business Network  Total Reportable Segments 
  2015  2014  2015  2014  2015  2014 
   Actual
Currency
  Constant
Currency
  Actual
Currency
  Actual
Currency
  Constant
Currency
  Actual
Currency
  Actual
Currency
  Constant
Currency
  Actual
Currency
 

Cloud subscriptions and support

  961    849    585    1,337    1,151    515    2,297    2,000    1,101  

Software licenses

  4,835    4,580    4,381    1    1    0    4,834    4,579    4,381  

Software support

  10,061    9,388    8,806    31    26    29    10,092    9,414    8,835  

Software licenses and support

  14,896    13,968    13,187    30    25    28    14,926    13,993    13,216  

Cloud and software

  15,856    14,817    13,772    1,367    1,176    544    17,223    15,993    14,316  

Services

  3,270    3,035    3,099    247    213    101    3,517    3,248    3,199  
Total segment revenue  19,126    17,852    16,871    1,614    1,389    644    20,740    19,241    17,515  

Cost of cloud subscriptions and support

  452    421    263    336    293    128    788    715    390  

Cost of software licenses and support

  1,994    1,831    1,823    1    1    3    1,994    1,831    1,826  

Cost of cloud and software

  2,446    2,252    2,085    337    294    131    2,783    2,546    2,216  

Cost of services

  2,897    2,735    2,479    193    171    87    3,090    2,905    2,565  

Total cost of revenue

  5,343     4,987     4,564    530     465     217    5,873     5,451     4,781  

Segment gross profit

  13,784    12,865    12,307    1,084    924    427    14,868    13,790    12,734  
Total segment expenses  5,865     5,484     5,207    771     675     322    6,637     6,158     5,530  

Segment profit

  7,918    7,382    7,099    312    250    105    8,231    7,631    7,204  

Revenue and Results of Segments

millions Applications, Technology & Services  SAP Business Network  Total Reportable Segments 
 2014  2013  2014  2013  2014  2013 
   Actual
Currency
  Constant
Currency
  Actual
Currency
  Actual
Currency
  Constant
Currency
  Actual
Currency
  Actual
Currency
  Constant
Currency
  Actual
Currency
 

Cloud subscriptions and support

  585    585    413    515    512    344    1,101    1,097    757  

Software licenses

  4,381    4,381    4,519    0    0    0    4,381    4,381    4,519  

Software support

  8,806    8,915    8,280    29    29    30    8,835    8,943    8,310  

Software licenses and support

  13,187    13,296    12,799    28    28    31    13,216    13,324    12,829  
Cloud and software  13,772    13,881    13,211    544    541    375    14,316    14,422    13,586  
Services  3,099    3,136    3,175    101    101    85    3,199    3,236    3,259  
Total segment revenue  16,871    17,017    16,386    644    641    460    17,515    17,658    16,846  

Cost of cloud subscriptions and support

  263    263    124    128    127    84    390    389    208  

Cost of software licenses and support

  1,823    1,839    1,741    3    3    8    1,826    1,842    1,749  

Cost of cloud and software

  2,085    2,102    1,865    131    130    91    2,216    2,232    1,956  

Cost of services

  2,479    2,518    2,447    87    88    68    2,565    2,606    2,516  

Total cost of revenue

  4,564     4,619     4,312    217     218     160    4,781     4,837     4,472  
Segment gross profit  12,307    12,397    12,074    427    423    300    12,734    12,820    12,374  
Total segment expenses  5,207     5,269     5,018    322     322     201    5,530     5,591     5,218  
Segment profit  7,099    7,128    7,056    105    101    99    7,204    7,229    7,155  

Segment asset/liability information is not regularly provided to our CODM. Goodwill by operating segment is disclosed in Note (15).

F-83


Measurement and Presentation

Our management reporting system reports our intersegment services as cost reductions and does not track them as internal revenue. Intersegment services mainly represent utilization of human resources of one segment by another segment on a project-by-project basis. Intersegment services are charged based on internal cost rates including certain indirect overhead costs, excluding a profit margin.

Most of our depreciation and amortization expense affecting operating segment profits is allocated to the segments as part of broader infrastructure allocations and is thus not tracked separately on the operating segment level. Depreciation and amortization expense that is directly allocated to the operating segments is immaterial in all operating segments presented.

TheOur management reporting system produces a variety of reports that differ by the currency exchange rates used in the accounting for foreign-currency transactions and operations. Reports based on actual currencies use the same currency rates as are used in our financial

statements. Reports based on constant currencies report revenues and expenses using the average exchange rates from the previous year’s corresponding period.

We use an operating profit indicator to measure the performance of our operating segments. However, the accounting policies applied in the measurementsmeasurement of the operating segments’ revenuessegment revenue and profitsprofit differ as follows from the IFRS accounting principles describedused to determine the operating profit measure in Note (3) as follows:our income statement:

The measurements of the operating segments revenuessegment revenue and profits generally attribute revenue to the segment based on the nature of the business regardless of revenue classification in our income statement. Thus, for example, the Cloud Applications segment’s revenue mayresults include certain amounts classified as software revenue in our Consolidated Income Statements.

The measurements of the operating segments’ revenues and profits includes the recurring revenues that would have been reflectedrecorded by acquired entities had itthey remained a stand-alone entityentities but which are not reflectedrecorded as revenue under IFRS as a result of purchasedue to fair value accounting for customer contracts in effect at the time of an acquisition.

The measurementsexpenses measured exclude:

Acquisition-related charges

¡

Amortization expense and impairment charges for intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development)

¡

Settlements of pre-existing relationships in connection with a business combination

¡

Acquisition-related third-party costs

Expenses from the TomorrowNow litigation and the Versata litigation

Share-based payment expenses

Restructuring expenses

Certain corporate-level activities are not allocated to our segments, including finance, accounting, legal, human resources, and marketing. They are disclosed in the operating segments’ profits excludes share-based payment expense, and restructuring costs as well as research and development expense and general and administration expense at segment level. These expenses are managed and reviewed at the Group level only.

The measurements of the operating segments’ profits exclude the following acquisition-related charges:

Amortization expense/impairment charges of intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property

Expenses from purchased in-process research and development

Restructuringreconciliation under other expenses and settlements of pre-existing relationshipsother revenue respectively.

Acquisition-related third-party costs that are requiredThe segment information for prior periods has been restated to be expensed

The measurements of the operating segments’ profits excludes results of the discontinued operations that qualify as such under IFRS in all respects except if they do not represent a major line of business. For all periods presented this relates exclusivelyconform to the operations of TomorrowNow.

Cost of revenue for our On-Premise Services segment also includes sales and marketing expenses related to professional services and other services that result from sales and marketing efforts that cannot be clearly separated from providing the services. For this reason, no sales and marketing expenses as such have been allocated to this segment.new two-segment structure.

 

 

F-84


Reconciliation of RevenuesRevenue and Segment Results

 

€ millions  2013   2012   2011 

Total revenues for reportable segments

   16,897     16,304     14,260  

Adjustment recurring software revenues

   –2     0     0  

Adjustment recurring cloud subscriptions and support revenues

   –61     –73     0  

Adjustment recurring support revenues

   –19     –9     –27  

Adjustment recurring revenues

   –82     –81     –27  

 

 

Total revenue

   16,815     16,223     14,233  

 

 

Total profit for reportable segments

   8,460     8,082     7,268  

Adjustment recurring revenues

   –82     –81     –27  

Research and development expense

   –2,162     –2,132     –1,894  

General and administration expense

   –796     –784     –685  

Other operating income/expense, net

   12     23     25  

Restructuring

   –70     –8     –4  

Share-based payments

   –327     –522     –68  

TomorrowNow litigation / Loss from discontinued operations

   0     0     717  

Acquisition-related charges

   –555     –537     –448  

 

 

Operating profit

   4,479     4,041     4,884  

 

 

Other non-operating income/expense, net

   –17     –173     –75  

Financial income, net

   –66     –72     –42  

 

 

Profit before tax

   4,396     3,796     4,767  

 

 
millions  2015   2014   2013 
  

Actual

Currency

   

Constant

Currency

   

Actual

Currency

   

Constant

Currency

   

Actual

Currency

 

Total segment revenue for reportable segments

   20,740     19,241     17,515     17,658     16,846  

Other revenue

   64     58     64     65     51  

Adjustment for currency impact

   0     1,505     0     142     0  

Adjustment of revenue under fair value accounting

   11     11     19     19     82  

Total revenue

   20,793     20,793     17,560     17,560     16,815  
                          

Total segment profit for reportable segments

   8,231     7,631     7,204     7,229     7,155  

Other revenue

   64     58     64     65     51  

Other expenses

   1,947     1,786     1,631     1,665     1,725  

Adjustment for currency impact

   0     443     0     9     0  

Adjustment for

                         

Revenue under fair value accounting

   11     11     19     19     82  

Acquisition-related charges

   738     738     562     562     555  

Share-based payment expenses

   724     724     290     290     327  

Restructuring

   621     621     126     126     70  

TomorrowNow and Versata litigation

   0     0     309     309     31  

Operating profit

   4,252     4,252     4,331     4,331     4,479  

Other non-operating income/expense, net

   256     256     49     49     17  

Financial income, net

   5     5     25     25     66  

Profit before tax

   3,991     3,991     4,355     4,355     4,396  

Geographic Information

We have aligned our revenue by region disclosures with the changes made to the structure of our income statement as outlined in Note (3b).

The research and development expense and general and administration expense presentedamounts for revenue by region in the reconciliation differ fromfollowing tables are based on the corresponding expenseslocation of customers. The regions in the consolidated income statement because the portions of share-based payments-related expenses, restructuring expenses,following table are broken down into EMEA (Europe, Middle East, and acquisition-related expenses that are included in the researchAfrica), Americas (North America and development line item respectively the generalLatin America) and administration expense line item in the income statement, are presented as separate items in the reconciliation.APJ (Asia Pacific Japan).

Geographic Information

The tables below show the geographical breakdown of revenue according to specific criteria:

The management view is the geographic revenue breakdown that the SAP Executive Board, SAP’s chief operating decision-maker, uses primarily when reviewing revenue by sales destination. Under this view, the software

revenue from a software contract is attributed to the country in which the contract was negotiated. Such reporting presumes that the software contract was negotiated in the country in which the customer is domiciled. The only circumstances in which this presumption is not applied is where there is objective evidence that all contract negotiations took place in a country other than the domicile of the legal entity contracting on the customer’s behalf. Software revenue from a given software contract is always attributed to a single geographical region; in other words, the software revenue is not split between geographical regions. Because cloud subscriptions and support revenue is earned largely from contracts that were negotiated in various periods in the past, it is allocated without exception to the country in which the customer is domiciled.

In the presentation by customer location, all revenue is attributed to the country in which the customer is domiciled.

 

 

F-85


Revenue by Region

Revenue by Region – Management View

Software Revenue by Region

 

€ millions  2013   2012   2011 

EMEA

   2,095     2,005     1,852  

Americas

   1,620     1,774     1,534  

APJ

   802     879     722  

SAP Group

   4,516     4,658     4,107  

Software Revenue by Location of Negotiation and Cloud Subscription Revenue by Region

millions  

Cloud Subscriptions

and Support Revenue

   Cloud and Software Revenue 
  2015   2014   2013   2015   2014   2013 

EMEA

   507     277     176     7,622     6,819     6,616  

Americas

   1,579     709     457     6,929     5,276     5,097  

APJ

   200     101     64     2,663     2,221     2,237  

SAP Group

   2,286     1,087     696     17,214     14,315     13,950  

 

€ millions  2013   2012   2011 

EMEA

   2,212     2,071     1,865  

Americas

   2,164     1,961     1,539  

APJ

   837     896     722  

SAP Group

   5,212     4,928     4,125  

Revenue by Region – Location of Customers

Software Revenue by Region

€ millions  2013   2012   2011 

EMEA

   2,116     2,041     1,851  

Americas

   1,586     1,733     1,534  

APJ

   814     884     722  

SAP Group

   4,516     4,658     4,107  

Cloud Subscriptions and Support Revenue by Region

€ millions  2013   2012   2011 

EMEA

   117     66     13  

Americas

   544     187     5  

APJ

   35     17     0  

SAP Group

   696     270     18  

Software and Cloud Subscription Revenue by Region

€ millions  2013   2012   2011 

EMEA

   2,233     2,107     1,864  

Americas

   2,130     1,920     1,540  

APJ

   849     901     722  

SAP Group

   5,212     4,928     4,125  

F-86


Software and Software-Related Service Revenue by Region

€ millions  2013   2012   2011 

Germany

   1,984     1,821     1,726  

Rest of EMEA

   4,566     4,285     3,803  

 

 

Total EMEA

   6,549     6,106     5,529  

 

 

United States

   3,788     3,537     2,870  

Rest of Americas

   1,408     1,283     1,088  

 

 

Total Americas

   5,196     4,820     3,958  

 

 

Japan

   556     699     579  

Rest of APJ

   1,647     1,540     1,253  

 

 

APJ

   2,204     2,239     1,832  

 

 

SAP Group

   13,950     13,165     11,319  

 

 

Total Revenue by Region

 

€ millions  2013   2012   2011   2015   2014   2013 

Germany

   2,505     2,380     2,347     2,771     2,570     2,513  

Rest of EMEA

   5,381     5,106     4,644     6,409     5,813     5,462  

 

Total EMEA

   7,885     7,486     6,991  

 

EMEA

   9,181     8,383     7,975  

United States

   4,661     4,461     3,699     6,750     4,898     4,487  

Rest of Americas

   1,705     1,639     1,392     1,678     1,591     1,746  

 

Total Americas

   6,366     6,100     5,091  

 

Americas

   8,428     6,489     6,233  

Japan

   624     789     652     667     600     631  

Rest of APJ

   1,939     1,848     1,499     2,517     2,088     1,975  

 

APJ

   2,563     2,637     2,151     3,185     2,688     2,606  

 

SAP Group

   16,815     16,223     14,233     20,793     17,560     16,815  

 

Non-Current Assets by Region

 

€ millions  2013   2012 

Germany

   2,337     2,318  

France

   2,112     2,120  

Rest of EMEA

   4,161     3,251  

 

 

EMEA

   8,610     7,689  

 

 

United States

   9,823     10,395  

Rest of Americas

   123     97  

 

 

Americas

   9,946     10,492  

 

 

Japan

   19     22  

Rest of APJ

   204     216  

 

 

APJ

   223     238  

 

 

SAP Group

   18,779     18,418  

 

 

millions  2015   2014 

Germany

   2,395     2,399  

The Netherlands

   2,843     2,917  

France

   2,175     2,116  

Rest of EMEA

   2,557     2,477  

EMEA

   9,969     9,909  

United States

   19,124     17,568  

Rest of Americas

   139     152  

Americas

   19,264     17,720  

APJ

   599     518  

SAP Group

   29,832     28,147  

F-87


Non-current assets as presented in theThe table above follow the requirements of IFRS 8 for a geographical breakdown ofshows non-current assets excluding financial instruments, deferred tax assets, post-employment benefits, and rights arising under insurance contracts.

For information about the breakdown of our full-time equivalent employee numbersworkforce by region, see Note (7).

 

(29)Board of Directors

Executive BoardMemberships on supervisory boards and other
comparable governing bodies of enterprises, other than
subsidiaries of SAP on December 31, 2013

Bill McDermott

Co-Chief Executive Officer

Strategy, Governance, Business Development, Corporate Development,

Sales and Ecosystem Activities

Communications and Marketing

Board of Directors, ANSYS, Inc., Canonsburg, Pennsylvania, United States

Board of Directors, Under Armour, Inc., Baltimore, Maryland, United States

Jim Hagemann Snabe

Co-Chief Executive Officer

Strategy, Governance, Business Development, Corporate Development,

Communications and Marketing

Board of Directors, Bang & Olufsen a/s, Stuer, Denmark

Board of Directors, The Danske Bank Group, Copenhagen, Denmark (from March 18, 2013)

Supervisory Board, Siemens AG, Munich, Germany (from October 1, 2013)

Dr. Werner Brandt

Chief Financial Officer, Labor Relations Director

Finance and Administration including Investor Relations and Data Protection & Privacy

Human Resources

Supervisory Board, Deutsche Lufthansa AG, Frankfurt am Main, Germany

Supervisory Board, QIAGEN N.V., Venlo, the Netherlands

Supervisory Board, RWE AG, Essen, Germany (from April 18, 2013)

Gerhard Oswald

Board Area Scale Quality & Support

SAP Active Global Support, SAP HANA Enterprise Cloud, Cloud Delivery,

Quality Governance & Production, Solution & Knowledge Packaging,

SAP Labs Network (joint leadership with Vishal Sikka)

Dr. Vishal Sikka

Products & Innovation

Global Product Development including SAP HANA, Custom Development,

Design & User Experience, Global Research,

SAP Labs Network (joint leadership with Gerhard Oswald)

Board Members Who Left During 2013

Lars Dalgaard (until May 31, 2013)(29) BOARD OF DIRECTORS

Luisa Deplazes Delgado (until June 30, 2013)Executive Board

Memberships on supervisory boards and other comparable governing bodies of enterprises, other than subsidiaries of SAP on December 31, 2015

 

F-88


Supervisory BoardMemberships on supervisory boards and other
comparable governing bodies of enterprises, other than
subsidiaries of SAP on December 31, 2013

Prof. Dr. h. c. mult. Hasso Plattner2), 4), 5), 7), 8), 9)

Chairman

Board of Directors, Bramasol, Inc., San Francisco, California, USA (until July 1, 2013)

Supervisory Board, Oligo Lichttechnik GmbH, Hennef, Germany

Christiane Kuntz-Mayr1), 4), 5), 9)

Deputy Chairperson

Deputy Chairperson of the Works Council at SAP AG

Pekka Ala-Pietilä5), 7), 8)

Chairman of the Board of Directors, Solidium Oy, Helsinki, Finland

Board of Directors, Pöyry Plc, Vantaa, Finland

Chairman of the Board of Directors, CVON Group Limited, London, UK

Board of Directors, CVON Limited, London, UK

Chairman of the Board of Directors, CVON Innovation Services Oy, Turku, Finland

Board of Directors, CVON Future Limited, London, UK

Chairman of the Board of Directors, Blyk International Ltd., London, UK

Chairman of the Board of Directors, Huhtamäki Oyj, Espoo, Finland

Panagiotis Bissiritsas1), 2), 6)

Support Expert

Prof. Anja Feldmann5), 9)

Professor at the Electrical Engineering and Computer Science Faculty at the Technische Universität Berlin

Prof. Dr. Wilhelm Haarmann2), 6), 8), 9)

Attorney-at-law, certified public auditor, certified tax advisor

Linklaters LLP, Rechtsanwälte, Notare, Steuerberater, Frankfurt am Main, Germany

Chairman of the Supervisory Board, CinemaxX AG, Hamburg, Germany

Margret Klein-Magar1), 2), 5), 8)

Vice President, Head of People Principles

Lars Lamadé1), 2), 8), 9)

Project Manager OPD COO

Deputy Chairman of the Supervisory Board, Rhein-Neckar-Loewen GmbH, Kronau, Germany

Bernard Liautaud2), 5), 7)

General Partner Balderton Capital, London, UK

Board of Directors, nlyte Software Ltd., London, UK

Board of Directors, Talend SA, Suresnes, France

Board of Directors, Cap Gemini, Paris, France (until October 8, 2013)

Board of Directors, Quickbridge (UK) Ltd., London, UK

Board of Directors, SCYTL Secure Electronic Voting SA, Barcelona, Spain

Board of Directors, Abiquo Group Inc., Redwood City, California,Bill McDermott

Chief Executive Officer, Labor Relations Director

Strategy, Governance, Business Development,

Corporate Development,

Communications and Marketing, Human Resources,

Business Network

Board of Directors, ANSYS, Inc., Canonsburg, PA, United States

Board of Directors, Under Armour, Inc., Baltimore, MD, United States

Board of Directors, Vestiaire Collective SA, Levallois-Perret, France

Board of Directors, Dashlane, Inc., New York, New York, United States

Board of Directors, Recorded Future, Inc., Cambridge, Massachusetts, United States

Board of Directors, eWise Group, Inc., Redwood City, California, United States

Board of Directors, Qubit Digital Ltd., London, UK

 

F-89


Supervisory BoardMemberships on supervisory boards and other
comparable governing bodies of enterprises, other than
subsidiaries of SAP on December 31, 2013

Dr. h. c. Hartmut Mehdorn4), 6), 9)Robert Enslin

Global Customer Operations

Global Sales, Industry & LoB Solutions Sales, Services Sales, Sales Operations, Global Customer Office

Michael Kleinemeier (from November 1, 2015)

Global Service & Support

Global Consulting Delivery, Global and Regional Support and Premium Engagement Functions, MaintenanceGo-to-Market, Global User Groups, Mobile Services

Bernd Leukert

Chief Technology Officer

Products & Innovation

Global Development Organization, Innovation & Cloud Delivery, Product Strategy, Development Services, SAP Global Security

Supervisory Board, DFKI (Deutsches Forschungszentrum für Künstliche Intelligenz GmbH), Kaiserslautern, Germany (from October 13, 2015)

Luka Mucic

Chief Financial Officer, Chief Operating Officer

Global Finance and Administration including Investor Relations and Data Protection & Privacy, Process Office, Business Innovation & IT

Gerhard Oswald

Product Quality & Enablement

Quality Governance & Validation, Scale, Enablement & Transformation, Logistics Services

Supervisory Board

Memberships on supervisory boards and other comparable governing bodies of enterprises, other than subsidiaries of SAP on December 31, 2015

Prof. Dr. h.c. mult. Hasso Plattner 2), 4), 6), 7), 8)

Chairman

Margret Klein-Magar 1), 2), 4)

Deputy Chairperson

Vice President, Head of SAP Alumni Relations

Chairperson of the Spokespersons’ Committee of Senior Managers of SAP SE

Pekka Ala-Pietilä 4), 5), 6), 7)

Chairman of the Board of Directors, Huhtamäki Oyj, Espoo, Finland

Chairman of the Board of Directors, Solidium Oy, Helsinki, Finland (until April 22, 2015)

Board of Directors, Pöyry Plc, Vantaa, Finland

Chairman of the Board of Directors, CVON Group Limited, London, United Kingdom

Board of Directors, CVON Limited, London, United Kingdom

Chairman of the Board of Directors, CVON Innovation Services Oy, Turku, Finland

Board of Directors, CVON Future Limited, London, United Kingdom

Chairman of the Board of Directors, Blyk International Ltd., London, United Kingdom

Board of Directors, Sanoma Corporation, Helsinki, Finland

Panagiotis Bissiritsas 1), 3), 4), 5)

Support Expert

Martin Duffek (from May 20, 2015)1), 3), 8)

Product Manager

Prof. Anja Feldmann 4), 8)

Professor at the Electrical Engineering and Computer Science Faculty at the Technische Universität Berlin

Prof. Dr. Wilhelm Haarmann 2), 5), 7), 8)

Attorney-at-law, certified public auditor, certified tax advisor

Linklaters LLP, Rechtsanwälte, Notare, Steuerberater, Frankfurt am Main, Germany

Supervisory Board, Celesio AG, Stuttgart, Germany (until March 1, 2015)

Andreas Hahn (from May 20, 2015)1), 2), 4)

Product Expert, Industry Standards & Open Source

Prof. Dr. Gesche Joost (from May 28, 2015)4), 8)

Professor for Design Research and Head of the Design Research Lab, University of Arts Berlin

Lars Lamadé 1), 2), 7), 8)

Head of Customer & Events GSS COO

Managing Director, Rhein Neckar-Loewen GmbH, Kronau, Germany

Bernard Liautaud 2), 4), 6)

General Partner Balderton Capital, London, United Kingdom

Board of Directors, nlyte Software Ltd., London, United Kingdom

Board of Directors, Talend SA, Suresnes, France

Board of Directors, Wonga Group Ltd., London, United Kingdom

Board of Directors, SCYTL Secure Electronic Voting SA, Barcelona, Spain

Board of Directors, Vestiaire Collective SA, Levallois-Perret, France

Board of Directors, Dashlane, Inc., New York, NY, United States

Board of Directors, Recorded Future, Inc., Cambridge, MA, United States

Board of Directors, eWise Group, Inc., Redwood City, CA, United States

Board of Directors, Qubit Digital Ltd., London, United Kingdom

Board of Directors, Stanford University, Stanford, CA, United States

Board of Directors, Citymapper Ltd., London, United Kingdom

Board of Directors, Sunrise Atelier, Inc., New York, NY, United States (until February 11, 2015)

Board of Directors, Opbeat Inc., San Francisco, CA, United States

Christine Regitz (from May 20, 2015)1), 4), 8)

Vice President User Experience

Chief Product Expert

Dr. Erhard Schipporeit 3), 7)

Independent Management Consultant

Supervisory Board, Talanx AG, Hanover, Germany

Supervisory Board, Deutsche Börse AG, Frankfurt am Main, Germany

Supervisory Board, HDI V.a.G., Hanover, Germany

Supervisory Board, Hannover Rückversicherung SE, Hanover, Germany

Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany

Supervisory Board, BDO AG, Hamburg, Germany

Board of Directors, Fidelity Funds SICAV, Luxembourg

Supervisory Board, Rocket Internet AG, Berlin, Germany (until June 23, 2015)

Robert Schuschnig-Fowler (from May 20, 2015)1), 8)

Account Manager, Senior Support Engineer

Dr. Sebastian Sick (from May 20, 2015)1), 2), 5), 7)

Head of Company Law Unit, Hans Böckler Foundation

Supervisory Board, Georgsmarienhütte GmbH, Georgsmarienhütte, Germany

Jim Hagemann Snabe 2), 5)

Supervisory Board Member

Board of Directors, Bang & Olufsen A/S, Struer, Denmark

Board of Directors, Danske Bank A/S, Copenhagen, Denmark

Supervisory Board, Allianz SE, Munich, Germany

Supervisory Board, Siemens AG, Munich, Germany

Pierre Thiollet (from May 20, 2015)1), 4)

Webmaster

Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer 3)

Managing Director of Dr. Klaus Wucherer Innovations- und Technologieberatung GmbH, Erlangen, Germany

Deputy Chairman of the Supervisory Board, HEITEC AG, Erlangen, Germany

Supervisory Board, Dürr AG, Bietigheim-Bissingen, Germany (until December 31, 2015)

Deputy Chairman of the Supervisory Board, LEONI AG, Nuremberg, Germany

Chairman of the Supervisory Board, Festo AG & Co. KG, Esslingen, Germany

Supervisory Board Members Who Left During 2015

Catherine Bordelon (until May 20, 2015)

Christiane Kuntz-Mayr (until May 20, 2015)

Steffen Leskovar (until May 20, 2015)

Dr. h. c. Hartmut Mehdorn (until May 15, 2015)

Dr. Kurt Reiner (until May 20, 2015)

Mario Rosa-Bian (until May 20, 2015)

Stefan Schulz (until May 20, 2015)

CEO of FBB, Flughafen Berlin-Brandenburg GmbH, Berlin, Germany

Board of Directors, Air Berlin PLC & Co. Luftverkehrs KG, Berlin (until January 7, 2013)

Advisory Board, Fiege-Gruppe, Greven, Germany

Board of Directors, RZD – Russian Railways, Moscow, Russia

Dr. Kurt Reiner1), 5), 6)

Development Expert

Mario Rosa-Bian1), 4), 9)

Project Principal Consultant

Dr. Erhard Schipporeit3), 8)

Independent Management Consultant

Supervisory Board, Talanx AG, Hanover, Germany

Supervisory Board, Deutsche Börse AG, Frankfurt am Main, Germany

Supervisory Board, HDI V.a.G., Hanover, Germany

Supervisory Board, Hannover Rückversicherung SE, Hanover, Germany

Supervisory Board, Fuchs Petrolub SE, Mannheim, Germany

Supervisory Board, BDO AG, Hamburg, Germany

Board of Directors, TUI Travel PLC, London, UK

Board of Directors, Fidelity Funds SICAV, Luxembourg

Stefan Schulz1), 3), 5), 9)

Vice President, IP at HANA Enterprise Cloud

Supervisory Board, ORTEC International Beheer B.V., Zoetermeer, the Netherlands (from June 17, 2013)

Inga Wiele1), 3), 5)

Senior Internal Strategic Consultant

Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer3), 5)

Managing Director of Dr. Klaus Wucherer Innovations- und Technologieberatung GmbH, Erlangen, Germany

Deputy Chairman of the Supervisory Board, HEITEC AG, Erlangen, Germany

Supervisory Board, Dürr AG, Bietigheim-Bissingen, Germany

Supervisory Board, LEONI AG, Nuremberg, Germany

Chairman of the Supervisory Board, Festo AG & Co. KG, Esslingen, Germany

Information as at December 31, 20132015

 

1)

Elected by the employees

 

2)

Member of the Company’s General and Compensation Committee

 

3)

Member of the Company’s Audit Committee

 

4)Member of the Company’s Mediation Committee

5)

Member of the Company’s Technology and Strategy Committee

 

6)5)

Member of the Company’s Finance and Investment Committee

 

7)6)

Member of the Company’s Nomination Committee

 

8)7)

Member of the Company’s Special Committee

 

9)8)

Member of the Company’s People and Organization Committee

F-90


TheAllocating the fair value of the share-based payments to the respective years they are economically linked to the total compensation of the Executive Board members for the years 2013, 2012,2015, 2014, and 20112013 was as follows:

Executive Board Compensation

 

€ thousands  2013   2012   2011    2015     2014     2013  

Short-term employee benefits

   24,728     17,054     20,197     15,137     16,196     24,728  

Share-based payment1)

   8,603     14,855     4,016     10,365     8,098     8,603  

 

Subtotal1)

   33,331     31,909     24,213     25,502     24,294     33,331  

 

Post-employment benefits

   1,324     3,263     1,547     1,278     3,249     1,324  

thereof defined-benefit

   189     1,711     696  

thereof defined-contribution

   1,135     1,552     850  

Termination benefits

   0     0     4,125  

Other long-term benefits

   0     0     4,031  

 

Thereof defined-benefit

   288     2,276     189  

Thereof defined-contribution

   990     973     1,135  

Total1)

   34,655     35,172     33,915     26,780     27,543     34,655  

1) Portion of total executive compensation allocated to the respective year based on management view

1)Portion of total executive compensation allocated to the respective year

The share-based payment amounts disclosed above are based on the grant date fair value of the restricted share units (RSUs) issued to Executive Board members during the year.

The Executive Board members already received, in 2012, the LTI grants for the years 2012 to 2015 subject to continuous service as member of the Executive Board in the respective years. Although these grants are linked to and thus, economically, compensation for the Executive Board members in the respective years, section 314 of

the German Commercial Code (HGB) requires them to be included in the total compensation number for the year of grant. DueUpon his appointment to the contract extension for Gerhard OswaldExecutive Board in 2013, an additional2015, Michael Kleinemeier received a grant was triggered during 2013, which relatesrelated to the allocations of 2014 and 2015. Vesting of the LTI grants is dependent on the respective Executive Board member’s continuous service for the Company.

The share-based payment as defined in section 314 of the German Commercial Code (HGB) amounts to €3,150 thousands (2012: €55,085 thousands)263,200 and 4,622 RSUs respectively (2014:8,720,200) based on the allocation for 2015 for Michael Kleinemeier, which was granted in 2015 in line with his appointment to the Executive Board. The prior-year amount includes the allocations for 2014 and 2015 for Gerhard OswaldRobert Enslin, Bernd Leukert and Luka Mucic, which were granted in 20132014 in line with their appointment to the extensionExecutive Board.

Considering the grant date fair value of his Executive Board contract. Including thisthe RSUs allocated during the year instead of the economically allocated amount of share-based payments in the subtotal Executive Board compensationtable above, the sum of short-term employee benefits and share-based payment amounts to €24,110 thousands (2012: €72,138 thousands)15,400,400 (2014:23,216,200) and the total Executive Board compensation amounts to €25,434 thousands (2012: €75,401 thousands)16,678,400 (2014:26,464,700). These amounts differ from the amounts shown in the table above, since the amounts in the table above are based on the LTI tranches that were allocated to each of the respective years, rather than are based on the grant date as defined under section 314 of the German Commercial Code (HGB).

Share-Based Payment for Executive Board Members

 

  2013   2012   2011   2015   2014   2013 

Number of RSUs granted

   152,159     326,432     0     192,345     153,909     152,159  

Number of stock options granted

   0     0     475,227     0     0     0  

Total expense in € thousands

   –8,596     57,429     4,420     22,310     11,133     8,596  

In the table above, the share-based payment expense is the amount recorded in profit or loss under IFRS 2 in the respective period.

F-91


The projecteddefined benefit obligation (PBO)(DBO) for pensions to Executive Board members and the annual pension entitlement of the members of the Executive Board on reaching age 60 based on entitlements from performance-based and salary-linked plans were as follows:

Retirement Pension Plan for Executive Board Members

 

€ thousands  2013   2012   2011   2015   2014   2013 

PBO December 31

   9,077     8,889     7,291  

DBO December 31

   8,948     11,273     9,077  

Annual pension entitlement

   452     429     437     427     475     452  

Subject to the adoption of the dividend resolution by the shareholders at the Annual General Meeting of Shareholders on May 21, 2014, the

The total annual compensation of the Supervisory Board members for 20132015 is as follows:

Supervisory Board Compensation

 

€ thousands  2013   2012   2011 

Total compensation

   2,966     2,981     3,028  

thereof fixed compensation

   870     901     874  

thereof committee remuneration

   416     340     465  

thereof variable compensation

   1,680     1,741     1,688  

thousands  2015   2014   2013 

Total compensation

   3,728     3,227     2,966  

Thereof fixed compensation

   3,250     924     870  

Thereof committee remuneration

   479     515     416  

Thereof variable compensation

   NA     1,788     1,680  

The Supervisory Board members do not receive any share-based payment for their services. As far as members who are employee representatives on the Supervisory Board receive share-based payment, such compensation is for their services as employees only and is unrelated to their status as members of the Supervisory Board.

The total compensation of all Supervisory Board members in 2013 for work for SAP excluding compensation relating to the office of Supervisory Board member was €1,176 thousands (2012: €1,084 thousands; 2011: €1,688 thousands).

During the fiscal year 2013, payments to and PBO for former Executive Board members were as follows:

Payments to / PBOto/DBO for Former Executive Board Members

 

€ thousands  2013   2012   2011 

Pension benefits

   1,387     1,360     1,346  

PBO

   29,181     30,551     25,267  

thousands  2015   2014   2013 

Payments

   1,580     3,462     1,387  

DBO December 31

   32,758     33,764     29,181  

SAP did not grant any compensation advance or credit to, or enter into any commitment for the

benefit of, any member of the Executive Board or Supervisory Board in 2013, 2012,2015, 2014, or 2011.

On December 31, 2013, the shareholdings of SAP’s board members were as follows:2013.

Shareholdings of Executive and Supervisory Board Members

 

Number of SAP shares  2013   2012   2011  2015 2014 2013 

Executive Board

   30,201     35,271     20,569    45,309    36,426    30,201  

Supervisory Board

   119,316,444     121,363,858     121,524,139    90,262,686    107,467,372    119,316,444  

(30) RELATED PARTY TRANSACTIONS

F-92


(30)Related Party Transactions

Certain Executive Board and Supervisory Board members of SAP AGSE currently hold, or held within the last year, positions of significant responsibility with other entities, as presented inNote (29). We have relationships with certain of these entities in the ordinary course of business, whereby we buy and sell a wide variety of products, assets and services at prices believed to be consistent with those negotiated at arm’s length between unrelated parties.

Companies controlled by Hasso Plattner, chairman of our Supervisory Board and Chief Software Advisor of

SAP, engaged in the following transactions with SAP: providing consulting services to SAP, selling a piece of land to SAP, receiving sport sponsoring from SAP, making purchases of SAP products and services. In the prior year, this also included purchasing an entity through an asset deal from a company indirectly held by him.

Christiane Kuntz-Mayr, vice chairperson and member of the SAP Supervisory Board actsuntil May 20, 2015, acted as a managermanaging director of family & kids @ work gemeinnützige UG (“family & kids @ work”). Family & kids @ work is supported financially by SAP.

Wilhelm Haarmann practicedpractices as a partner in the law firm HAARMANN PartnerschaftsgesellschaftLinklaters LLP in Frankfurt am Main, Germany, until February 2013. In February 2013, he became a partner in Linklaters LLP.Germany. SAP occasionally purchased and purchases legal and similar services from bothLinklaters.

Occasionally, members of these firms.the Executive Board of SAP SE obtain services from SAP for which they pay a consideration believed to be consistent with those negotiated at arm’s length between unrelated parties.

All amounts related to the above mentionedabovementioned transactions were immaterial to SAP in all periods presented.

In total, we sold products and services to companies controlled by members of the Supervisory Board in the amount of1 million (2014:4 million), we bought products and services from such companies in the amount of7 million (2014:1 million), and we provided sponsoring and other financial support to such companies in the amount of5 million (2014:7 million). Outstanding balances at year end from transactions with such companies were0 million (2014:2 million) for amounts owed to such companies and0 million (2014:1 million) for amounts owed by such companies. All these balances are unsecured and interest free and settlement is expected to occur in cash. Commitments (the longest of which is for 10 years) made by us to purchase further goods or services from these companies and to provide further sponsoring and other financial support amount to11 million as at December 31, 2015 (2014:13 million).

In total, we sold services to members of the Executive Board and the Supervisory Board in the amount of2 million (2014:0 million) and we received services from members of the Supervisory Board (including services from employee representatives on the Supervisory Board in their capacity as employees of SAP) in the amount of1 million (2014:2 million). Amounts owed to Supervisory Board members from these transactions were0 million as at December 31, 2015 (2014:0 million). All these balances are unsecured and interest free and settlement is expected to occur in cash.

For information about the compensation of our Executive Board and Supervisory Board members, see Note (29).

 

(31) PRINCIPAL ACCOUNTANT FEES AND SERVICES

(31)Principal Accountant Fees and Services

At the Annual General Meeting of Shareholders held on June 4, 2013,May 20, 2015, our shareholders elected KPMG AG Wirtschaftsprüfungsgesellschaft as SAP’s

independent auditor for 2013.2015. KPMG AG Wirtschaftsprüfungsgesellschaft and other firms in the global KPMG network charged the following fees to SAP for audit and other professional services related to 20132015 and the previous years:

Fees for Audit and Other Professional Services

 

  2013   2012   2011 
€ millions  KPMG AG
(Germany)
   Foreign
KPMG
Firms
   Total   KPMG AG
(Germany)
   Foreign
KPMG
Firms
   Total   KPMG AG
(Germany)
   Foreign
KPMG
Firms
   Total  2015 2014 2013 
 KPMG AG
(Germany)
 Foreign
KPMG
Firms
 Total KPMG AG
(Germany)
 Foreign
KPMG
Firms
 Total KPMG AG
(Germany)
 Foreign
KPMG
Firms
 Total 

Audit fees

   2     7     9     2     8     10     2     7     9    3    6    9    2    6    8    2    7    9  

Audit-related fees

   1     0     1     2     0     2     0     0     0    0    0    0    0    0    0    1    0    1  

Tax fees

   0     0     0     0     0     0     0     0     0    0    0    0    0    0    0    0    0    0  

All other fees

   0     0     0     0     0     0     0     0     0    0    0    0    0    0    0    0    0    0  

Total

   3     7     10     4     8     12     2     7     9    3    6    9    2    6    8    3    7    10  

 

Audit fees are the aggregate fees charged by KPMG for the audit ofauditing our Consolidated Financial Statements as well as audits ofconsolidated financial statements and the statutory financial statements of SAP AGSE and its subsidiaries. Audit-related fees are fees charged by KPMG for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported

under audit fees. Tax fees are fees for professional services rendered by KPMG for tax advice on transfer pricing, restructuring, and tax compliance on current, past, or contemplated transactions. The allAll other fees category includes other support services, such as training and advisory services on issues unrelated to accounting and taxes.

(32) EVENTS AFTER THE REPORTING PERIOD

(32)Subsequent Events

No events that have occurred sinceAfter December 31, 2013, have2015, the following change took place:

We are in the process of preparing the consolidation of intellectual property rights held by SAP’s group company hybris AG at the level of SAP SE in Germany. Based on deviating applicable tax rates, the Group expects an overall positive income tax effect in a material impact on the Company’s Consolidated Financial Statements.range between approximately180 million and220 million in 2016.

(33) SUBSIDIARIES AND OTHER EQUITY INVESTMENTS

Subsidiaries

 

F-93
Name and Location of Company Owner-
ship
  Total Revenue
in 20151)
  Profit/ Loss (-)
after Tax for
20151)
  Total Equity as
at  12/31/20151)
  Number of
Employees as
at 12/31/20152)
  

Foot-

note

 
   %   thousands   thousands   thousands         

Major Subsidiaries

                        
Ariba, Inc., Palo Alto, CA, United States  100.0    642,877    145,271    3,697,333    1,425      
Concur Technologies, Inc., Bellevue, WA, United States  100.0    638,122    18,115    6,552,341    2,741      
LLC SAP CIS, Moscow, Russia  100.0    356,480    18,607    42,319    659      
SAP (Beijing) Software System Co., Ltd., Beijing, China  100.0    759,818    83,167    94,864    4,562      
SAP (Schweiz) AG, Biel, Switzerland  100.0    751,860    45,934    44,193    611      
SAP (UK) Limited, Feltham, United Kingdom  100.0    1,132,753    16,073    15,358    1,511    10) 
SAP America, Inc., Newtown Square, PA, United States  100.0    4,559,147    402,385    14,709,940    6,114      
SAP Asia Pte Ltd, Singapore, Singapore  100.0    386,585    35,614    34,567    1,020      
SAP Australia Pty Ltd, Sydney, Australia  100.0    631,863    7,537    187,392    1,064      
SAP Brasil Ltda, São Paulo, Brazil  100.0    527,180    15,176    17,826    1,481      
SAP Canada, Inc., Toronto, Canada  100.0    669,947    22,740    455,322    2,598      
SAP Deutschland SE & Co. KG, Walldorf, Germany  100.0    3,477,774    466,454    1,258,713    4,505    7), 9)  
SAP France, Levallois Perret, France  100.0    1,095,886    218,454    1,582,376    1,427      
SAP India Private Limited, Bangalore, India  100.0    488,794    53,742    254,822    1,800      
SAP Industries, Inc., Newtown Square, PA, United States  100.0    601,898    40,492    538,411    385      
SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A., Vimercate, Italy  100.0    464,458    20,554    337,584    601      
SAP Japan Co., Ltd., Tokyo, Japan  100.0    681,109    30,866    515,703    994      
SAP Labs India Private Limited, Bangalore, India  100.0    285,633    26,359    28,703    5,947      
SAP Labs, LLC, Palo Alto, CA, United States  100.0    582,128    10,367    314,276    1,924      
SAP Nederland B.V., ‘s-Hertogenbosch, the Netherlands  100.0    494,173    21,096    17,016    504    11) 
SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland  100.0    114,647    6,430    41,152    1,131      
SuccessFactors, Inc., South San Francisco, CA, United States  100.0    714,646    21,254    3,152,160    1,104      
Sybase, Inc., Dublin, CA, United States  100.0    597,125    390,137    5,897,666    677      


Name and Location of CompanyOwner-
ship
Foot-
note
%

(33)Other Subsidiaries3)

“SAP Kazakhstan” LLP, Almaty, Kazakhstan100.0
110405, Inc., Newtown Square, PA, United States100.0
Ambin Properties (Proprietary) Limited, Johannesburg, South Africa100.0
Ariba Czech s.r.o., Prague, Czech Republic100.0
Ariba India Private Limited, Gurgaon, India100.0
Ariba International Holdings, Inc., Wilmington, DE, United States100.0
Ariba International Singapore Pte Ltd, Singapore, Singapore100.0
Ariba International, Inc., Wilmington, DE, United States100.0
Ariba Investment Company, Inc., Wilmington, DE, United States100.0
Ariba Slovak Republic s.r.o., Košice, Slovakia100.0
Ariba Software Technology Services (Shanghai) Co., Ltd., Shanghai, China100.0
Ariba Technologies India Private Limited, Bangalore, India100.0
Ariba Technologies Netherlands B.V.,
‘s-Hertogenbosch, the Netherlands
100.0Subsidiaries, Associates, and Other Equity Investments

As at December 31, 2013 Ownership3)  Total
Revenue in
20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

I. Fully Consolidated Subsidiaries

     

GERMANY

     

Ariba Deutschland GmbH, Frankfurt am Main

  100.0    4,280    103    1,202    22  

hybris GmbH, Munich5)

  100.0    26,330    3,007    32,234    217  

OutlookSoft Deutschland GmbH, Walldorf

  100.0        0    3      

SAP Beteiligungs GmbH, Walldorf

  100.0    3    3    53      

SAP Business Compliance Services GmbH, Siegen

  100.0    4,797    363    1,089    38  

SAP Deutschland AG & Co. KG, Walldorf8),10)

  100.0    3,050,364    516,247    1,321,646    4,716  

SAP Dritte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf9),10)

  100.0        –20,479    541,342      

SAP Erste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf9),10)

  100.0        –3    804,844      

SAP Foreign Holdings GmbH, Walldorf

  100.0        –193    88      

SAP Fünfte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf10)

  100.0        2,849    2,325,861      

SAP Hosting Beteiligungs GmbH, St. Leon-Rot

  100.0        0    26      

SAP Portals Europe GmbH, Walldorf

  100.0        –8    124,191      

SAP Portals Holding Beteiligungs GmbH, Walldorf

  100.0        –46    930,081      

SAP Projektverwaltungs- und Beteiligungs GmbH, Walldorf9),10)

  100.0        –949    323,875      

SAP Puerto Rico GmbH, Walldorf

  100.0    34,127    –2,779    –5,773    20  

SAP Retail Solutions Beteiligungsgesellschaft mbH, Walldorf

  100.0        –4,339    9,516      

SAP Sechste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf10)

  100.0        0    25      

SAP Ventures Investment GmbH, Walldorf

  100.0        1    58,030      

SAP Vierte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf

  100.0        0    24      

SAP Zweite Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf9),10)

  100.0        –101,699    –126,334      

SuccessFactors Germany GmbH, Garching

  100.0    17,663    306    812    78  

TechniData GmbH, Markdorf

  100.0    117    639    29,703      

F-94


As at December 31, 2013 Ownership3)  Total
Revenue
in 20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

REST OF EUROPE, MIDDLE EAST, AFRICA

     

Ambin Properties (Proprietary) Limited, Johannesburg, South Africa

  100.0        261    1,306      

Ariba Belgium N.V., Heverlee, Belgium

  100.0    1,653    68    1,405    8  

Ariba Czech s.r.o., Prague, Czech Republic

  100.0    8,294    210    1,666    158  

Ariba France, SAS, Paris, France

  100.0    11,228    602    3,436    53  

Ariba Iberia, S.L., Madrid, Spain

  100.0    1,778    74    716    12  

Ariba International Sweden AB, Stockholm, Sweden

  100.0    2,025    86    340    7  

Ariba Italia SRL, Rome, Italy

  100.0    1,589    12    –726    10  

Ariba Middle East & North AfricaFZ-LLC, Dubai, United Arab Emirates

  100.0    550    31    53    2  

Ariba Slovak Republic s.r.o., Kosice, Slovakia

  100.0    1,601    62    396    36  

Ariba Switzerland GmbH, Zurich, Switzerland

  100.0    1,039    49    1,059    6  

Ariba Technologies Ireland Ltd., Dublin, Ireland

  100.0    986    41    –56    11  

Ariba Technologies Netherlands B.V., Amsterdam, the Netherlands

  100.0    1,262    70    6,228    5  

Ariba UK Limited, Egham, United Kingdom11)

  100.0    14,567    604    6,400    63  

b-process, Paris, France

  100.0    12,538    –1,204    –4,556    46  

Business Objects (UK) Limited, London, United Kingdom11)

  100.0        –29,936    319      

Business Objects Holding B.V.,’s-Hertogenbosch, the Netherlands

  100.0        59    4,284      

Business Objects Software Limited, Dublin, Ireland

  100.0    902,168    499,289    4,774,388    245  

Christie Partners Holding C.V., Rotterdam, the Netherlands

  100.0        –2    –21,828      

Crossgate UK Ltd., Slough, United Kingdom11)

  100.0                  

Crystal Decisions (Ireland) Limited, Dublin, Ireland

  100.0        0    44,543      

Crystal Decisions Holdings Limited, Dublin, Ireland

  100.0        –4    77,725      

Crystal Decisions UK Limited, London, United Kingdom11)

  100.0        0    2,206      

Epista Software A/S, Copenhagen, Denmark

  100.0    3,040    871    5,849    12  

EssCubed Procurement Pty. Ltd., Johannesburg, South Africa

  100.0    –13    3    –786      

hybris AG, Rotkreuz, Switzerland5)

  100.0    51,536    –22,800    1,057,690    24  

hybris Austria GmbH, Vienna, Austria5)

  100.0    718    –116    –167    4  

hybris France SAS, Levallois-Perret, France5)

  100.0    5,418    –1,048    1,506    24  

hybris Netherlands BV, Amsterdam, the Netherlands5)

  100.0    1,575    –121    5,750    9  

hybris Software AB, Västerås, Sweden5)

  100.0    1,239    –598    8,716    9  

F-95


As at December 31, 2013 Ownership3)  Total
Revenue
in 20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

hybris Sp.z.o.o., Gliwice, Poland5)

  100.0    2,870    576    540    121  

hybris UK Ltd., London, United Kingdom5)

  100.0    11,281    –31    20,878    60  

Joe D Partners C.V., Utrecht, the Netherlands

  100.0    160,869    3,084    454,937      

KXEN Ltd., London, United Kingdom5)

  100.0    34    –200    –1,247    3  

KXEN SAS, Suresnes, France5)

  100.0    1,170    –443    –530    42  

Limited Liability Company “SAP Labs”, Moscow, Russia

  100.0    9,616    38    976    114  

Limited Liability Company “SAP CIS”, Moscow, Russia

  100.0    445,093    14,227    81,046    834  

Limited Liability Company SAP Kazakhstan, Almaty, Kazakhstan

  100.0    20,234    –1,122    3,814    23  

Limited Liability Company SAP Ukraine, Kiev, Ukraine

  100.0    35,415    –1,012    –3,669    96  

Merlin Systems Oy, Espoo, Finland

  100.0    9,967    230    3,300    31  

NL Quotaholder 1 B.V., Amsterdam, the Netherlands

  100.0                  

NL Quotaholder 2 B.V., Amsterdam, the Netherlands

  100.0                  

OOO hybris Software, Moscow, Russia5)

  100.0    290    11    193    4  

Plateau Systems UK Ltd., Guildford, United Kingdom

  100.0        –6    –7,163      

Quadrem Africa Pty. Ltd., Johannesburg, South Africa4)

  100.0    1,026    –236    –747    99  

Quadrem Netherlands B.V., Amsterdam, the Netherlands

  100.0    35,580    –2,479    51,819    4  

Quadrem Overseas Cooperatief U.A., Amsterdam, the Netherlands

  100.0                  

SAP Nederland B.V.,’s-Hertogenbosch, the Netherlands

  100.0    461,938    30,690    444,768    447  

SAP – NOVABASE, A.C.E., Porto Salvo, Portugal

  66.7                  

SAP (Schweiz) AG, Biel, Switzerland

  100.0    646,567    84,175    189,327    615  

SAP (UK) Limited, Feltham, United Kingdom

  100.0    817,002    71,681    53,687    1,266  

SAP Belgium NV/SA, Brussels, Belgium

  100.0    205,283    5,751    125,761    248  

SAP Bulgaria EOOD, Sofia, Bulgaria

  100.0    2,991    349    1,228    1  

SAP Business Services Center Europe s.r.o., Prague, Czech Republic

  100.0    28,629    428    7,408    454  

SAP Business Services Center Nederland B.V., Utrecht, the Netherlands

  100.0    226,727    7,581    47,565    20  

SAP Commercial Services Ltd., Valletta, Malta

  100.0        0    –17      

SAP ČR, spol. s r.o., Prague, Czech Republic

  100.0    77,415    4,342    12,912    255  

SAP Cyprus Ltd, Nicosia, Cyprus

  100.0    3,045    –191    –2,274    2  

SAP d.o.o., Zagreb, Croatia

  100.0    7,251    194    –574    13  

SAP Danmark A/S, Copenhagen, Denmark

  100.0    165,362    12,769    22,120    164  

SAP East Africa Limited, Nairobi, Kenya5)

  100.0        6    2,502      

F-96


As at December 31, 2013 Ownership3)  Total
Revenue
in 20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

SAP Egypt LLC, Cairo, Egypt

  100.0    10,362    –3,475    –10,554    57  

SAP EMEA Inside Sales S.L., Barcelona, Spain

  100.0    14,020    285    3,119    97  

SAP España – Sistemas, Aplicaciones y Productos en la Informática, S.A., Madrid, Spain

  100.0    257,656    14,090    224,996    407  

SAP Estonia OÜ, Tallinn, Estonia

  100.0    2,216    –67    289    1  

SAP Finland Oy, Espoo, Finland

  100.0    114,921    6,413    63,879    109  

SAP France Holding, Paris, France

  100.0    873    36,109    5,169,074    3  

SAP France, Paris, France

  100.0    866,137    173,827    1,508,230    1,413  

SAP Hellas S.A., Athens, Greece

  100.0    27,699    1,191    11,208    51  

SAP Holdings (UK) Limited, Feltham, United Kingdom5)

  100.0        –15,993    731,275      

SAP Hungary Rendszerek, Alkalmazások és Termékek az Adatfeldolgozásban Informatikai Kft., Budapest, Hungary

  100.0    45,664    1,462    15,049    411  

SAP Ireland Limited, Dublin, Ireland

  100.0    702    41    9,725      

SAP Ireland US-Financial Services Ltd., Dublin, Ireland

  100.0    200    353,089    4,766,140    3  

SAP Israel Ltd., Ra’anana, Israel

  100.0    36,288    1,843    3,516    56  

SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A., Milan, Italy

  100.0    372,780    16,071    297,860    537  

SAP Labs Bulgaria EOOD, Sofia, Bulgaria

  100.0    24,595    775    4,947    475  

SAP Labs Finland Oy, Espoo, Finland

  100.0    6,515    160    41,517    45  

SAP Labs France SAS, Mougins, France

  100.0    57,194    2,861    18,638    350  

SAP Labs Israel Ltd., Ra’anana, Israel

  100.0    52,368    2,021    17,495    338  

SAP Latvia SIA, Riga, Latvia

  100.0    2,229    38    –185    3  

SAP Malta Investments Ltd., Valletta, Malta

  100.0        0    –17      

SAP Middle East and North Africa L.L.C., Dubai, United Arab Emirates6)

  49.0    167,892    –36,717    –55,309    337  

SAP Nederland Holding B.V.,’s-Hertogenbosch, the Netherlands

  100.0        2    521,916      

SAP Norge AS, Lysaker, Norway

  100.0    89,951    3,523    22,322    89  

SAP Österreich GmbH, Vienna, Austria

  100.0    192,649    19,746    25,229    347  

SAP Polska Sp. z o.o., Warsaw, Poland

  100.0    63,228    3,985    22,358    107  

SAP Portals Israel Ltd., Ra’anana, Israel

  100.0    61,812    21,101    75,890    214  

SAP Portugal – Sistemas, Aplicações e Produtos Informáticos, Sociedade Unipessoal, Lda., Porto Salvo, Portugal

  100.0    70,026    7,327    18,136    207  

SAP Public Services Hungary Kft., Budapest, Hungary

  100.0    4,284    549    1,306    7  

F-97


As at December 31, 2013 Ownership3)  Total
Revenue
in 20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

SAP Romania SRL, Bucharest, Romania

  100.0    27,044    2,298    5,311    270  

SAP Saudi Arabia Software Services Ltd, Riyadh, Kingdom of Saudi Arabia

  100.0    44,426    3,561    37,416    50  

SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom of Saudi Arabia

  75.0    36,862    –25,350    –24,698    81  

SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland

  100.0    80,598    2,899    34,430    884  

SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o., Ljubljana, Slovenia

  100.0    13,920    844    3,561    22  

SAP Slovensko s.r.o., Bratislava, Slovakia

  100.0    37,036    2,532    15,373    180  

SAP Svenska Aktiebolag, Stockholm, Sweden

  100.0    166,507    7,525    15,933    154  

SAP Training and Development Institute FZCO, Dubai, United Arab Emirates

  100.0    4,532    –254    –437    36  

SAP Türkiye Yazilim Üretim ve Ticaret A.S., Istanbul, Turkey

  100.0    78,245    –10,007    10,138    155  

SAP UAB (Lithuania), Vilnius, Lithuania

  100.0    2,491    106    –58    3  

SAPV (Mauritius), Ebene, Mauritius7)

  0        258    22,932      

SAP West Balkans d.o.o., Belgrade, Serbia

  100.0    16,177    2,389    7,595    29  

SuccessFactors (UK) Limited, London, United Kingdom

  100.0    20,662    1,610    2,255    100  

SuccessFactors Denmark ApS, Copenhagen, Denmark

  100.0    1,687    171    279    4  

SuccessFactors France SAS, Paris, France

  100.0    9,109    290    573    45  

SuccessFactors Ireland Limited, Dublin, Ireland

  100.0    773    32    77    6  

SuccessFactors Italy SRL, Milan, Italy

  100.0    1,507    44    71    5  

SuccessFactors Netherlands B.V., Amsterdam, the Netherlands

  100.0    5,071    359    16,926    22  

SuccessFactors Schweiz GmbH, Zurich, Switzerland

  100.0    3,620    –257    –388    7  

Sybase (UK) Limited, Maidenhead, United Kingdom11)

  100.0    0    –4    327      

Sybase France SARL, Paris, France

  100.0    46,272    4,754    12,919      

Sybase Iberia S.L., Madrid, Spain

  100.0        2    65,920      

Sybase South Africa (Proprietary) Limited, Johannesburg, South Africa

  89.5        38    75  ��   

Syclo International Limited, Leatherhead, United Kingdom11)

  100.0    510    977    0      

Systems Applications Products Africa Region (Proprietary) Limited, Johannesburg, South Africa

  100.0    81,563    10,920    23,403    39  

F-98


As at December 31, 2013 Ownership3)  Total
Revenue
in 20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

Systems Applications Products Africa (Proprietary) Limited, Johannesburg, South Africa

  100.0        3,146    62,455      

Systems Applications Products Nigeria Limited, Abuja, Nigeria

  100.0    16,604    –907    2,953    43  

Systems Applications Products South Africa (Proprietary) Limited, Johannesburg, South Africa

  89.5    227,424    –12,240    –5,707    455  

The Infohrm Group Ltd., London, United Kingdom

  100.0    88    223    –245      

TomorrowNow (UK) Limited, Feltham, United Kingdom11)

  100.0        0    0      

TomorrowNow Nederland B.V., Amsterdam, the Netherlands

  100.0        –9    –3,301      

AMERICAS

     

110405, Inc., Newtown Square, Pennsylvania, USA

  100.0        0    15,150      

Alliente, Inc., Pittsburgh, Pennsylvania, USA

  100.0                  

Ariba Canada, Inc., Mississauga, Canada

  100.0    3,094    129    1,214    21  

Ariba Holdings, Inc., Grand Cayman, Cayman Islands

  100.0                  

Ariba, Inc., Sunnyvale, California, USA

  100.0    299,460    –92,369    3,093,731    1,245  

Ariba International Holdings, Inc., Wilmington, Delaware, USA

  100.0                  

Ariba International, Inc., Wilmington, Delaware, USA

  100.0    7,405    301    –1,722    43  

Ariba Investment Company, Inc., Wilmington, Delaware, USA

  100.0        2,638    210,474      

Business Objects Argentina S.R.L., Buenos Aires, Argentina

  100.0        0    49      

Business Objects Option LLC, Wilmington, Delaware, USA

  100.0    –33    2,032    63,668      

Camilion Solutions, Inc., Markham, Canada5)

  100.0    9,364    –3,017    31,701    114  

Cube Tree LLC, San Mateo, California, USA

  100.0    505    492    680      

Extended Systems, Inc., Boise, Idaho, USA

  99.0        32    16,513      

Financial Fusion, Inc., Concord, Massachusetts, USA

  100.0                  

FreeMarkets International Holdings Inc. de Mexico, de S. de R.L. de C.V., Mexico City, Mexico

  100.0            –60      

FreeMarkets Ltda., São Paulo, Brazil

  100.0    52    –376    –464      

hybris Canada, Inc., Montréal, Canada5)

  100.0    13,492    723    254    244  

hybris Software Brasil Ltda., Morumbi, Brazil5)

  100.0    23    –389    –821    4  

hybris (US) Corp., Wilmington, Delaware, USA5)

  100.0    28,138    1,400    25,043    125  

F-99


As at December 31, 2013 Ownership3)  Total
Revenue in
20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

iAnywhere Solutions, Inc., Dublin, California, USA

  99.0    75,212    36,253    172,933    43  

Inxight Federal Systems Group, Inc., Wilmington, Delaware, USA

  100.0        0    66      

Jam Acquisition II LLC, San Mateo, California, USA

  100.0    200    200    178      

Jobs2Web, Inc., Minnetonka, Minnesota, USA

  100.0    2,897    2,637    2,482      

KXEN, Inc., San Francisco, California USA5)

  100.0    531    –651    21,199    11  

Plateau Systems LLC, Arlington, Virginia, USA

  100.0    4,564    3,972    5,603      

Quadrem Brazil Ltda., Rio de Janeiro, Brazil

  100.0    23,672    2,001    7,370    175  

Quadrem Canada Ltd., Mississauga, Canada

  100.0    923    102    506    8  

Quadrem Chile Ltda., Santiago de Chile, Chile

  100.0    13,566    –677    1,732    187  

Quadrem Colombia SAS, Bogotá, Colombia

  100.0    240    –26    –33    3  

Quadrem International Ltd., Hamilton, Bermuda

  100.0        826    69,569      

Quadrem Mexico S. de R. de C.V., Mexico City, Mexico

  100.0    360    2    –38    3  

Quadrem Peru S.A.C., Lima, Peru

  100.0    2,803    –1,346    –2,105    89  

Quadrem U.S., Inc., Plano, Texas, USA

  100.0                  

SAP America, Inc., Newtown Square, Pennsylvania, USA

  100.0    3,530,473    114,589    4,992,376    5,819  

SAP Andina y del Caribe C.A., Caracas, Venezuela

  100.0    14,481    –53,041    –35,312    26  

SAP Argentina S.A., Buenos Aires, Argentina

  100.0    172,462    –14,424    4,773    618  

SAP Brasil Ltda, São Paulo, Brazil

  100.0    553,602    –12,986    43,000    1,441  

SAP Canada, Inc., Toronto, Canada

  100.0    708,115    50,265    470,548    2,201  

SAP Chile Limitada, Santiago, Chile

  100.0        1,015    13,618      

SAP Colombia SAS, Bogotá, Colombia

  100.0    129,544    –5,209    –15,589    216  

SAP Costa Rica, S.A., San José, Costa Rica

  100.0    14,550    –4,394    –4,404    13  

SAP Financial, Inc., Toronto, Canada

  100.0        25,202    6,738      

SAP Global Marketing, Inc., New York, New York, USA

  100.0    276,915    1,148    24,311    543  

SAP HANA Real Time Fund, Wilmington, Delaware, USA7)

  0        –904    –1,292      

SAP Industries, Inc., Newtown Square, Pennsylvania, USA

  100.0    468,227    40,420    396,489    446  

SAP International, Inc., Miami, Florida, USA

  100.0    29,221    –3,806    8,615    65  

SAP International PANAMA S.A., Panama City, Panama5)

  100.0    234    –30    334    2  

SAP Investments, Inc., Wilmington, Delaware, USA

  100.0        25,169    666,458      

SAP LABS, LLC, Palo Alto, California, USA

  100.0    545,498    10,662    221,018    2,184  

F-100


As at December 31, 2013 Ownership3)  Total
Revenue
in 20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

SAP México S.A. de C.V., Mexico City, Mexico

  100.0    306,180    8,737    –18,242    569  

SAP National Security Services, Inc., Newtown Square, Pennsylvania, USA

  100.0    178,593    35,723    173,364    268  

SAP PERU S.A.C., Lima, Peru

  100.0    29,648    –3,248    4,846    55  

SAP Public Services, Inc., Washington, D.C., USA

  100.0    288,791    13,780    256,245    202  

SAP Technologies Inc., Palo Alto, California, USA

  100.0                  

SAP Ventures Fund I, L.P., Wilmington, Delaware, USA7)

  0        31,690    110,261      

SAP Ventures Fund II, L.P., Wilmington, Delaware, USA5), 7)

  0        –2,630    –2,584      

SuccessFactors, Inc., San Mateo, California, USA

  100.0    413,455    –173,389    2,406,889    1,373  

SuccessFactors Brasil Consultoria e Assistência em Vendas Limitada, São Paulo, Brazil

  100.0    6,571    –332    –272    28  

SuccessFactors Canada Inc., Ottawa, Canada

  100.0    8,564    254    580    33  

SuccessFactors Cayman, Ltd., Grand Cayman, Cayman Islands

  100.0            208      

SuccessFactors de México, S. de R.L. de C.V., Mexico City, Mexico

  100.0    4,175    138    155    19  

SuccessFactors International Holdings, LLC, San Mateo, California, USA

  100.0            102      

SuccessFactors International Services, Inc., San Mateo, California, USA

  100.0    3,486    168    286    7  

SuccessFactors Middle East Holdings, LLC, San Mateo, California, USA

  100.0                  

Surplus Record, Inc., Chicago, Illinois, USA

  100.0    3,006    755    7,757      

Sybase 365 LLC, Dublin, California, USA

  100.0    101,570    1,192    57,218    116  

Sybase 365 Ltd., Tortola, British Virgin Islands

  100.0        0    –908      

Sybase Argentina S.A., Buenos Aires, Argentina

  100.0        –112    703      

Sybase Global LLC, Dublin, California, USA

  100.0            7,064      

Sybase Intl Holdings LLC, Dublin, California, USA

  100.0        0    11,346      

Sybase, Inc., Dublin, California, USA

  100.0    547,633    252,904    4,375,352    1,031  

The Inforhrm Group, Inc., Washington, Columbia, USA

  100.0    34    –6    –24      

TomorrowNow, Inc., Bryan, Texas, USA

  100.0        –1,454    –179,441    3  

YouCalc, Inc., San Mateo, California, USA

  100.0                  

ASIA PACIFIC JAPAN

     

Ariba (China) Limited, Hong Kong, China

  100.0                  

Ariba Australia Pty Ltd., Sydney, Australia

  100.0        –21    –1      

F-101


As at December 31, 2013 Ownership3)  Total
Revenue
in 20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

Ariba India Pvt. Ltd., Gurgaon, India

  100.0    4,707    708    2,299    42  

Ariba International Singapore Pte. Ltd., Singapore, Singapore

  100.0    4,125    63    –4,894    19  

Ariba Software Technology Services (Shanghai) Co. Ltd., Shanghai, China

  100.0    828    10    592    2  

Ariba Technologies India Pvt. Ltd., Bangalore, India

  100.0    18,948    1,716    6,233    561  

Beijing Zhang Zhong Hu Dong Information Technology Co. Ltd., Beijing, China6)

  0    1,032    –2    849    7  

Business Objects Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia

  100.0        –2    238      

Business Objects Software (Shanghai) Co. Ltd., Shanghai, China

  100.0    6,746    354    7,846    84  

hybris Australia Pty Limited, Surry Hills, Australia5)

  100.0    2,638    199    232    18  

hybris Hong Kong Ltd., Hong Kong, China5)

  100.0    1,579    528    510    8  

hybris Japan K.K., Tokyo, Japan5)

  100.0    972    195    –111    7  

hybris Korea Ltd., Seoul, South Korea5)

  100.0    545    –1,148    –292    3  

Nihon Ariba K.K., Tokyo, Japan

  100.0    2,332    136    1,426    13  

Plateau Systems Australia Ltd, Brisbane, Australia

  100.0            –710      

Plateau Systems Pte. Ltd., Singapore, Singapore

  100.0            –469      

PT SAP Indonesia, Jakarta, Indonesia

  99.0    50,527    3,289    2,690    55  

PT Sybase 365 Indonesia, Jakarta, Indonesia

  100.0    0    –44    278      

Quadrem Asia Pte. Ltd., Singapore, Singapore

  100.0    63    7    119      

Quadrem Australia Pty Ltd., Brisbane, Australia

  100.0    3,754    315    971    21  

Quadrem China Ltd., Hong Kong, China

  100.0            13      

Right Hemisphere Ltd., Auckland, New Zealand

  100.0    1,538    1,647    5,739      

Ruan Lian Technologies (Beijing) Co. Ltd., Beijing, China

  100.0    81    7    –921    1  

SAP (Beijing) Software System Co. Ltd., Beijing, China

  100.0    544,297    –10,691    24,902    3,697  

SAP Asia Pte Ltd, Singapore, Singapore

  100.0    360,926    7,880    84,461    1,023  

SAP Asia (Vietnam) Co. Ltd., Ho Chi Minh City, Vietnam

  100.0    1,449    24    538    42  

SAP Australia Pty Ltd, Sydney, Australia

  100.0    479,267    25,552    243,608    770  

SAP Hong Kong Co. Limited, Hong Kong, China

  100.0    55,271    –905    –1,276    87  

SAP India (Holding) Pte Ltd, Singapore, Singapore

  100.0        –7    275      

SAP India Private Limited, Bangalore, India

  100.0    383,854    36,544    212,004    1,892  

SAP Japan Co. Ltd., Tokyo, Japan

  100.0    620,435    32,575    412,555    1,050  

SAP Korea Ltd., Seoul, South Korea

  100.0    202,190    7,879    25,871    313  

F-102


As at December 31, 2013 Ownership3)  Total
Revenue
in 20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

SAP Labs India Private Limited, Bangalore, India

  100.0    184,569    3,010    711    4,632  

SAP Labs Korea, Inc., Seoul, South Korea

  100.0    13,968    439    17,388    125  

SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia

  100.0    92,273    4,885    25,849    117  

SAP New Zealand Limited, Auckland, New Zealand

  100.0    73,758    6,272    41,068    97  

SAP Philippines, Inc., Makati, Philippines

  100.0    34,754    –705    1,816    44  

SAP SYSTEMS, APPLICATIONS AND PRODUCTS IN DATA PROCESSING (THAILAND) LTD., Bangkok, Thailand4)

  100.0    68,015    –275    11,303    60  

SAP Taiwan Co. Ltd., Taipei, Taiwan

  100.0    59,114    4,723    34,776    84  

Shanghai SuccessFactors Software Technology Co., Ltd., Shanghai, China

  100.0    11,418    288    1,038    166  

SuccessFactors (Philippines), Inc., Pasig City, Philippines

  100.0    2,100    –60    56    82  

SuccessFactors Asia Pacific Limited, Hong Kong, China

  100.0    5    0    212      

SuccessFactors Australia Holdings Pty Ltd., Brisbane, Australia

  100.0        –4,795    9,592      

SuccessFactors Australia Pty Limited, Brisbane, Australia

  100.0    20,413    2,475    36,112    94  

SuccessFactors Business Solutions India Private Limited, Bangalore, India

  100.0    7,798    353    636    167  

SuccessFactors Hong Kong Limited, Hong Kong, China

  100.0    2,755    105    184    11  

SuccessFactors Japan K.K., Tokyo, Japan

  100.0    3,001    –143    –15    14  

SuccessFactors Korea Ltd., Seoul, South Korea

  100.0    23    1    35      

SuccessFactors Singapore Pte. Ltd., Singapore, Singapore

  100.0    3,150    141    217    11  

Sybase Australia Pty Ltd, Sydney, Australia

  100.0        –17,015    107      

Sybase Hong Kong Ltd, Hong Kong, China

  100.0        74    422      

Sybase India Ltd., Mumbai, India

  100.0        –9    2,112      

Sybase Philippines, Inc., Makati City, Philippines

  100.0        15    –8      

Sybase Software (China) Co. Ltd., Beijing, China

  100.0    33,119    1,026    17,265    331  

Sybase Software (India) Private Ltd, Mumbai, India

  100.0    17,269    1,110    8,382    219  

TomorrowNow Australia Pty Ltd, Sydney, Australia

  100.0        –1          

TomorrowNow Singapore Pte Ltd, Singapore, Singapore

  100.0        –7          

II. INVESTMENTS IN ASSOCIATES

     

Alteryx, Inc., Irvine, California, USA

  15.42    21,168    –4,781    –728    171  

China DataCom Corporation Limited, Guangzhou, China

  28.30    47,689    4,456    37,361    1,049  

F-103


As at December 31, 2013 Ownership3)  Total
Revenue
in
20131)
  Profit/Loss (-)
after Tax for
20131)
  Total Equity
as at
12/31/20131)
  Number of
Employees as
at 12/31/20132)
 
Name and Location of Company %  €(000)  €(000)  €(000)    

Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands12)

  5.35    497    –822    285,845      

Original1 GmbH, Frankfurt am Main, Germany13)

  40.00                  

Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil

  17.00    23,033    1,063    12,655      

1) 

These figures are based on our local IFRS financial statements prior to eliminations resulting from consolidation and therefore do not reflect the contribution of these companies included in the Consolidated Financial Statements. The translation of the equity into Group currency is based on period-end closing exchange rates, and on average exchange rates for revenue and net income/loss.

11

2))
Beijing Zhang Zhong Hu Dong Information Technology Co., Ltd., Beijing, China0 

As at December 31, 2013, including managing directors, in FTE.

5

3))
b-process, Paris, France100.0
Business Objects (UK) Limited, London, United Kingdom100.0
Business Objects Holding B.V.,
‘s-Hertogenbosch, the Netherlands
100.0 

No changes in ownership percentage unless otherwise specified in11

)
Business Objects Option LLC, Wilmington, DE, United States100.0
Business Objects Software (Shanghai) Co., Ltd., Shanghai, China100.0
Business Objects Software Limited, Dublin, Ireland100.0
Christie Partners Holding C.V., Utrecht, the footnotes.

Netherlands
100.0
ClearTrip Inc. (Mauritius), Ebene, Mauritius54.2
ClearTrip Inc., George Town, Cayman Islands54.2
Cleartrip MEA FZ LLC, Dubai, United Arab Emirates54.2

Name and Location of CompanyOwner-
ship
Foot-
note
%
ClearTrip Private Limited, Mumbai, India54.2
CNQR Operations Mexico S. de. R.L. de. C.V., San Pedro Garza Garcia, Mexico100.0
Concur (Austria) GmbH, Vienna, Austria100.0
Concur (Canada), Inc., Toronto, Canada100.0
Concur (France) SAS, Paris, France100.0
Concur (Germany) GmbH, Frankfurt am Main, Germany100.0
Concur (Italy) S.r.l., Milan, Italy100.0
Concur (Japan) Ltd., Bunkyo-ku, Japan75.0
Concur (New Zealand) Limited, Wellington, New Zealand100.0
Concur (Philippines) Inc., Makati City, Philippines100.0
Concur (Switzerland) GmbH, Zurich, Switzerland100.0
Concur Czech (s.r.o.), Prague, Czech Republic100.0
Concur Denmark ApS, Frederiksberg, Denmark100.0
Concur Holdings (France) SAS, Paris, France100.0
Concur Holdings (Netherlands) B.V., Amsterdam, the Netherlands100.04) 

During11

)
Concur Holdings (US) LLC, Wilmington, DE, United States100.0
Concur International Holdings (Netherlands) CV, Amsterdam, the year 2013, SAP’s ownershipNetherlands100.0
Concur Technologies (Australia) Pty. Limited, Sydney, Australia100.0
Concur Technologies (Hong Kong) Limited, Hong Kong, China100.0
Concur Technologies (India) Private Limited, Bangalore, India100.0
Concur Technologies (Singapore) Pte Ltd, Singapore, Singapore100.0
Concur Technologies (UK) Limited, London, United Kingdom100.010)
ConTgo Consulting Limited, London, United Kingdom100.010)
ConTgo Limited, London, United Kingdom100.010)
ConTgo MTA Limited, London, United Kingdom100.010)
ConTgo Pty. Ltd., Sydney, Australia100.0
Crossgate UK Limited, Slough, United Kingdom100.0

Name and Location of the following subsidiary changed:CompanyOwner-
ship
Foot-
note
%
Crystal Decisions (Ireland) Limited, Dublin, Ireland100.0
Crystal Decisions Holdings Limited, Dublin, Ireland100.0
Crystal Decisions UK Limited, London, United Kingdom100.0
EssCubed Procurement Pty. Ltd., Johannesburg, South Africa100.0
Extended Systems, Inc., Dublin, CA, United States100.0
Fieldglass AsiaPac PTY Ltd, Brisbane, Australia100.0
Fieldglass Europe Limited, London, United Kingdom100.010)
Financial Fusion, Inc., Dublin, CA, United States100.0
FreeMarkets International Holdings Inc. de Mexico, de S. de R.L. de C.V., Mexico City, Mexico100.0
FreeMarkets Ltda., São Paulo, Brazil100.0
Gelco Information Network, Inc., Minneapolis, MN, United States100.0
GlobalExpense (Consulting) Limited, London, United Kingdom100.0
GlobalExpense (UK) Limited, London, United Kingdom100.010)
H-G Holdings, Inc., Wilmington, DE, United States100.0
H-G Intermediate Holdings, Inc., Wilmington, DE, United States100.0
hybris (US) Corp., Wilmington, DE, United States100.0
hybris AG, Zug, Switzerland100.0
hybris Australia Pty Limited, Surry Hills, Australia100.0
hybris GmbH, Munich, Germany100.09)
hybris Hong Kong Limited, Hong Kong, China100.0
hybris UK Limited, London, United Kingdom100.010)
Inxight Federal Systems Group, Inc., Wilmington, DE, United States100.0
KXEN Limited, Feltham, United Kingdom100.0
LLC “SAP Labs”, Moscow, Russia100.0
LLC “SAP Ukraine”, Kiev, Ukraine100.0
Merlin Systems Oy, Espoo, Finland100.0
Multiposting SAS, Paris, France100.04)
Multiposting Sp.z o.o., Warsaw, Poland100.04)
Name and Location of CompanyOwner-
ship
Foot-
note
%
Nihon Ariba K.K., Tokyo, Japan100.0
OutlookSoft Deutschland GmbH, Walldorf, Germany100.0
Plateau Systems Australia Ltd, Brisbane, Australia100.0
Plateau Systems LLC, South
San Francisco, CA, United States
100.0
PT SAP SYSTEMS, APPLICATIONS AND PRODUCTS IN DATA PROCESSING (THAILAND) LTD., Bangkok, Thailand (2012: 49%); Indonesia, Jakarta, Indonesia99.0
PT Sybase 365 Indonesia, Jakarta, Indonesia100.0
Quadrem Africa Pty. Ltd., Johannesburg, South Africa (2012: 49%).

5)

Consolidated for the first time in 2013.

6)

Agreements with the other shareholders provide that SAP AG fully controls the entity.

7)

SAP AG does not hold any ownership interests in four structured entities, SAPV (Mauritius), SAP HANA Real Time Fund, SAP Ventures Fund I, L.P. and SAP Ventures Fund II, L.P. However, based on the terms of limited partnership agreements under which these entities were established, SAP AG is exposed to the majority of the returns related to their operations and has the current ability to direct these entities’ activities that affect these returns, in accordance with IFRS 10. Accordingly, the results of operations are included in SAP’s consolidated financial statements.

8)100.0

Entity whose personally liable partner is SAP AG.

9)

Entity with profit and loss transfer agreement.

10)

Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from applying certain legal requirements to their statutory stand-alone financial statements including the requirement to prepare notes to the financial statements and a review of operations, the requirement of independent audit and the requirement of public disclosure.

11)

Pursuant to sections 479A to 479C of the UK Companies Act 2006 the subsidiaries are exempt from having their financial statements audited on the basis that SAP AG has provided a guarantee of these subsidiaries’ liabilities in respect of their financial year ended 31 December 2013.

12)

Greater Pacific Capital (Cayman) is part of a fund-of-funds concept acting as one of the feeder-funds to the partnership. There are neither financial statements for the year ended December 31, 2013 nor budget or forecast available hence the information provided is based on the audited financial statements for the year ended December 31, 2012.

13)

Original1 GmbH is in liquidation and it has not been deregistered from the commercial register yet.

F-104


As at December 31, 2013

Name and Location of Company  

Quadrem Australia Pty Ltd., Brisbane, Australia

100.0
Quadrem Brazil Ltda., Rio de Janeiro, Brazil100.0
Quadrem Chile Ltda., Santiago de Chile, Chile100.0
Quadrem Colombia SAS, Bogotá, Colombia100.0
Quadrem International Ltd., Hamilton, Bermuda100.0
Quadrem Netherlands B.V., Amsterdam, the Netherlands100.0III. OTHER EQUITY INVESTMENTS
(ownership
11)
Quadrem Overseas Cooperatief U.A., Amsterdam, the Netherlands100.0
Quadrem Peru S.A.C., Lima, Peru100.0
Ruan Lian Technologies (Beijing) Co., Ltd., Beijing, China100.0
San Borja Partricipadoes LTDA, São Paulo, Brazil100.0
SAP Andina y del Caribe, C.A., Caracas, Venezuela100.0
SAP Argentina S.A., Buenos Aires, Argentina100.0
SAP Asia (Vietnam) Co., Ltd., Ho Chi Minh City, Vietnam100.0
SAP Azerbaijan LLC, Baku, Azerbaijan100.04)
SAP Belgium NV/SA, Brussels, Belgium100.0
SAP Beteiligungs GmbH, Walldorf, Germany100.0
SAP Bulgaria EOOD, Sofia, Bulgaria100.0
SAP Business Compliance Services GmbH, Siegen, Germany100.0
SAP Business Services Center Europe s.r.o., Prague, Czech Republic100.0
SAP Business Services Center Nederland B.V., ‘s-Hertogenbosch, the Netherlands100.011)
SAP Chile Limitada, Santiago, Chile100.0

Name and Location of 5% or more)CompanyOwner-
ship
Foot-
note
%
SAP China Co., Ltd., Shanghai, China100.04)
SAP China Holding Co., Ltd., Beijing, China100.04)
SAP Colombia SAS., Bogotá, Colombia100.0
SAP Commercial Services Ltd., Valletta, Malta100.0
SAP Costa Rica, S.A., San José, Costa Rica100.0
SAP ČR, spol. s r.o., Prague, Czech Republic100.0
SAP Cyprus Ltd, Nicosia, Cyprus100.0
SAP d.o.o., Zagreb, Croatia100.0
SAP Danmark A/S, Copenhagen, Denmark100.0
SAP Dritte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany100.08), 9)
SAP East Africa Limited, Nairobi, Kenya100.0
SAP Egypt LLC, Cairo, Egypt100.0
SAP EMEA Inside Sales S.L., Barcelona, Spain100.0
SAP Erste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany100.08), 9)
SAP España – Sistemas, Aplicaciones y Productos en la Informática, S.A., Madrid, Spain100.0
SAP Estonia OÜ, Tallinn, Estonia100.0
SAP Financial, Inc., Toronto, Canada100.0
SAP Finland Oy, Espoo, Finland100.0
SAP Foreign Holdings GmbH, Walldorf, Germany100.0
SAP France Holding, Levallois Perret, France100.0
SAP Fünfte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany100.09)
SAP Global Marketing, Inc., New York, NY, United States100.0
SAP Hellas S.A., Athens, Greece100.0
SAP Holdings (UK) Limited, Feltham, United Kingdom100.010)
SAP Hong Kong Co., Ltd., Hong Kong, China100.0
SAP Hosting Beteiligungs GmbH, St. Leon-Rot, Germany100.0
SAP Hungary Rendszerek, Alkalmazások és Termékek az Adatfeldolgozásban Informatikai Kft., Budapest, Hungary100.0
Name and Location of CompanyOwner-
ship
Foot-
note
%
SAP India (Holding) Pte Ltd, Singapore, Singapore100.0
SAP International Panama, S.A., Panama City, Panama100.0
SAP International, Inc., Miami, FL, United States100.0
SAP Investments, Inc., Wilmington, DE, United States100.0
SAP Ireland Limited, Dublin, Ireland100.0
SAP Ireland-US Financial Services Ltd., Dublin, Ireland100.0
SAP Israel Ltd., Ra’anana, Israel100.0
SAP Korea Ltd., Seoul, South Korea100.0
SAP Labs Bulgaria EOOD, Sofia, Bulgaria100.0
SAP Labs Finland Oy, Espoo, Finland100.0
SAP Labs France SAS, Mougins, France100.0
SAP Labs Israel Ltd., Ra’anana, Israel100.0
SAP Labs Korea, Inc., Seoul, South Korea100.0
SAP Latvia SIA, Riga, Latvia100.0
SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia100.0
SAP Malta Investments Ltd., Valletta, Malta100.0
SAP México S.A. de C.V., Mexico City, Mexico100.0
SAP Middle East and North Africa L.L.C., Dubai, United Arab Emirates49.05)
SAP National Security Services, Inc., Newtown Square, PA, United States100.0
SAP Nederland Holding B.V., ‘s-Hertogenbosch, the Netherlands100.011)
SAP New Zealand Limited, Auckland, New Zealand100.0
SAP Norge AS, Lysaker, Norway100.0
SAP North West Africa Ltd, Casablanca, Morocco100.04)
SAP Österreich GmbH, Vienna, Austria100.0
SAP PERU S.A.C., Lima, Peru100.0
SAP Philippines, Inc., Makati, Philippines100.0
SAP Polska Sp. z o.o., Warsaw, Poland100.0
SAP Portals Europe GmbH, Walldorf, Germany100.0
SAP Portals Holding Beteiligungs GmbH, Walldorf, Germany100.0
SAP Portals Israel Ltd., Ra’anana, Israel100.0

Name and Location of CompanyOwner-
ship
Foot-
note
%
SAP Portugal – Sistemas, Aplicações e Produtos Informáticos, Sociedade Unipessoal, Lda., Porto Salvo, Portugal100.0
SAP Projektverwaltungs- und Beteiligungs GmbH, Walldorf, Germany100.08)
SAP Public Services Hungary Kft., Budapest, Hungary100.0
SAP Public Services, Inc., Washington, DC, United States100.0
SAP Puerto Rico GmbH, Walldorf, Germany100.09)
SAP Retail Solutions Beteiligungsgesellschaft mbH, Walldorf, Germany100.0
SAP Romania SRL, Bucharest, Romania100.0
SAP Saudi Arabia Software Services Ltd, Riyadh, Kingdom of Saudi Arabia100.0
SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom of Saudi Arabia75.0
SAP Sechste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany100.09)
SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o., Ljubljana, Slovenia100.0
SAP Slovensko s.r.o., Bratislava, Slovakia100.0
SAP Software and Services LLC, Doha, Qatar49.04), 5)
SAP Svenska Aktiebolag, Stockholm, Sweden100.0
SAP Systems, Applications and Products in Data Processing (Thailand) Ltd., Bangkok, Thailand100.0
SAP Taiwan Co., Ltd., Taipei, Taiwan100.0
SAP Technologies Inc., Palo Alto, CA, United States100.0
SAP Training and Development Institute FZCO, Dubai, United Arab Emirates100.0
SAP Türkiye Yazilim Üretim ve Ticaret A.Ş., Istanbul, Turkey100.0
SAP UAB, Vilnius, Lithuania100.0
SAP Ventures Investment GmbH, Walldorf, Germany100.09)
SAP Vierte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany100.0
SAP West Balkans d.o.o., Belgrade, Serbia100.0
Name and Location of CompanyOwner-
ship
Foot-
note
%
SAP Zweite Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf, Germany100.08), 9)
Sapphire SAP HANA Fund of Funds, L.P., Wilmington, DE, United States06)
Sapphire Ventures Fund I, L.P., Wilmington, DE, United States06)
Sapphire Ventures Fund II, L.P., Wilmington, DE, United States06)
SAPV (Mauritius), Ebene, Mauritius06)
SAS Financière Multiposting, Paris, France100.04)
SeeWhy (UK) Limited, Windsor, United Kingdom100.010)
Shanghai SuccessFactors Software Technology Co., Ltd., Shanghai, China100.0
SuccessFactors (Philippines), Inc., Pasig City, Philippines100.0
SuccessFactors (UK) Limited, London, United Kingdom100.010)
SuccessFactors Asia Pacific Limited, Hong Kong, China100.0
SuccessFactors Australia Holdings Pty Ltd, Brisbane, Australia100.0
SuccessFactors Australia Pty Limited, Brisbane, Australia100.0
SuccessFactors Cayman, Ltd., Grand Cayman, Cayman Islands100.0
SuccessFactors Hong Kong Limited, Hong Kong, China100.0
SuccessFactors International Holdings, LLC, San Mateo, CA, United States100.0
Sybase (UK) Limited, Maidenhead, United Kingdom100.0
Sybase 365 Ltd., Tortola, British Virgin Islands100.0
Sybase 365, LLC, Dublin, CA, United States100.0
Sybase Angola, LDA, Luanda, Angola100.0
Sybase Iberia S.L., Madrid, Spain100.0
Sybase India Ltd., Mumbai, India100.0
Sybase International Holdings Corporation, LLC, Dublin, CA, United States100.0
Sybase Philippines, Inc., Makati City, Philippines100.0
Sybase Software (China) Co., Ltd., Beijing, China100.0

Name and Location of CompanyOwner-
ship
Foot-
note
%
Sybase Software (India) Private Ltd., Mumbai, India100.0
Syclo International Limited, Leeds, United Kingdom100.0
Systems Applications Products Africa (Proprietary) Limited, Johannesburg, South Africa100.0
Systems Applications Products Africa Region (Proprietary) Limited, Johannesburg, South Africa100.0
Systems Applications Products Nigeria Limited, Victoria Island, Nigeria100.0
Systems Applications Products South Africa (Proprietary) Limited, Johannesburg, South Africa89.5
TechniData GmbH, Markdorf, Germany100.0
Technology Licensing Company, LLC, Atlanta, GA, United States100.0
TomorrowNow, Inc., Bryan, TX, United States100.0
Travel Technology, LLC, Atlanta, GA, United States100.0
TripIt LLC, Wilmington, DE, United States100.0
TRX Data Service, Inc., Glen Allen, VA, United States100.0
TRX Europe Limited, London, United Kingdom100.010)
TRX Fulfillment Services, LLC, Atlanta, GA, United States100.0
TRX Germany GmbH, Berlin, Germany100.0
TRX Luxembourg, S.a.r.l., Luxembourg City, Luxembourg100.0
TRX Technologies India Private Limited, Raman Nagar, India100.0
TRX Technology Services, L.P., Atlanta, GA, United States100.0
TRX UK Limited, London, United Kingdom100.010)

TRX, Inc., Atlanta, GA, United States

  100.0

1) These figures are based on our local IFRS financial statements prior to eliminations resulting from consolidation and therefore do not reflect the contribution of these companies included in the Consolidated Financial Statements. The translation of the equity into Group currency is based on period-end closing exchange rates, and on average exchange rates for revenue and net income/loss.

2) As at December 31, 2015, including managing directors, in FTE.

3) Figures for profit/loss after tax and total equity pursuant to HGB, section 285 and section 313 are not disclosed if they are of minor significance for a fair presentation of the profitability, liquidity, capital resources and financial position of SAP SE, pursuant to HGB, section 313 (2) sentence 3 no. 4 and section 286 (3) sentence 1 no. 1.

4) Consolidated for the first time in 2015.

5) Agreements with the other shareholders provide that SAP SE fully controls the entity.

6) SAP SE does not hold any ownership interests in four structured entities, SAPV (Mauritius), Sapphire SAP HANA Fund of Funds, L.P., Sapphire Ventures Fund I, L.P. and Sapphire Ventures Fund II, L.P. However, based on the terms of limited partnership agreements under which these entities were established, SAP SE is exposed to the majority of the returns related to their operations and has the current ability to direct these entities’ activities that affect these returns, in accordance with IFRS 10 (Consolidated Financial Statements). Accordingly, the results of operations are included in SAP’s consolidated financial statements.

7) Entity whose personally liable partner is SAP SE.

8) Entity with profit and loss transfer agreement.

9) Pursuant to HGB, section 264 (3) or section 264b, the subsidiary is exempt from applying certain legal requirements to their statutory stand-alone financial statements including the requirement to prepare notes to the financial statements and a review of operations, the requirement of independent audit and the requirement of public disclosure.

10) Pursuant to sections 479A to 479C of the UK Companies Act 2006, the entity is exempt from having its financial statements audited on the basis that SAP SE has provided a guarantee of the entity’s liabilities in respect of its financial year ended 31 December 2015.

11) Pursuant to article 2:403 of the Dutch Civil Code, the entity is exempt from applying certain legal requirements to their statutory stand-alone financial statements including the requirement to prepare the financial statements, the requirement of independent audit and the requirement of public disclosure on the basis that SAP SE has provided a guarantee of the entity’s liabilities in respect of its financial year ended 31 December 2015.

Other Equity Investments

Name and Location of CompanyOwner-
ship
%
Joint Arrangements and Investments in Associates
China DataCom Corporation Limited, Guangzhou, China28.30

Convercent, Inc., Denver, CO, United States

44.16
Evature Technologies (2009) Ltd., Ramat Gan, Israel30.46
Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands5.35
Nor1, Inc., Santa Clara, CA, United States18.64
Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil17.00

SAP - NOVABASE, A.C.E., Porto Salvo, Portugal

66.66

StayNTouch Inc., Bethesda, MD, United States

37.40
Visage Mobile Inc., San Francisco, CA, United States40.60

Yapta, Inc., Seattle, WA , United States

46.49

Name and Location of Company

Equity Investments with Ownership of at Least 5%

Alchemist Accelerator Fund I LLC,
San Francisco, California, USACA,

United States

Name and Location of Company

All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil

Alteryx, Inc., Irvine, CA, United States

Amplify Partners II L.P., Cambridge, MA, United States

Amplify Partners L.P.,
Cambridge, Massachusetts, USAMA, United States

AP Opportunity Fund, LLC, Menlo Park, CA, United States

ArisGlobal Holdings LLC,
Stamford, Connecticut, USACT, United States

Connectiva Systems,Char Software, Inc., New York,
New York, USABoston, MA, United States

Convercent,Costanoa Venture Capital II L.P., Palo Alto, CA,

United States

Costanoa Venture Capital QZ, LLC, Palo Alto, CA,

United States

Cyphort, Inc., Denver, Colorado, USASanta Clara, CA, United States

Data Collective II L.P., San Francisco, California, USACA, United States

Data Collective III L.P., San Francisco, CA, United States

EIT ICT Labs GmbH, Berlin, Germany

Five 9, Inc.FeedZai S.A., San Ramon, California, USALisbon, Portugal

Follow Analytics, Inc., San Francisco, California, USACA, United States

GK Software AG, Schöneck, Germany

IDG Ventures USA III, L.P., San Francisco, CA, United States

InnovationLab GmbH, Heidelberg, Germany

Integral Ad Science, Inc., New York, NY, United States

iTAC Software AG, Dernbach, Germany

iYogi Holdings Pvt. Ltd., Port Louis, Mauritius

JasperSoft Corporation,Jibe, Inc., New York, NY, United States

Kaltura, Inc., New York, NY, United States

Krux Digital, Inc., San Francisco, California, USACA, United States

Lavante, Inc., San JoséJose, CA, United States

Local Globe VII, L.P., California, USASt. Peter Port, Guernsey, Channel Islands

Looker Data Sciences, Inc., Santa Cruz, CA, United States

Name and Location of Company

MuleSoft, Inc., San Francisco, California, USACA, United States

MVP Strategic Partnership Fund GmbH & Co. KG, Grünwald, Germany

Narrative Science, Inc., Chicago, Illinois, USAIL, United States

Notation Capital, L.P., Brooklyn, NY, United States

On Deck Capital, Inc., New York, New York, USANY, United States

Onventis GmbH, Stuttgart, GermanyOpenX Software Limited, Pasadena, CA, United States

Patent Quality, Inc., Bellevue, Washington, USAWA, United States

PayScale, Inc., Seattle, Washington, USA

Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany

Point Nine Capital Fund III GmbH & Co. KG, Berlin, Germany

Post for Systems, Cairo, Egypt

PubNub, Inc., San Francisco, CA, United States

Realize Corporation, Tokyo, Japan

Retail Solutions, Inc. (legal name: T3C, Inc.), Mountain View, California, USA

Return Path, Inc., New York, New York, USANY, United States

RIB Software AG, Stuttgart, GermanyRome2rio Pty. Ltd., Albert Park, Australia

Scytl, S.A., Barcelona, Spain

Smart City Planning, Inc., Tokyo, Japan

Socrata, Inc., Seattle, WA, United States

Storm Ventures V, L.P., Menlo Park, CA, United States

SV Angel IV L.P., San Francisco, California, USACA, United States

T3C Inc., Mountain View, CA, United States

TableNow, Inc., San Francisco, CA, United States

Technologie- und Gründerzentrum Walldorf Stiftung GmbH, Walldorf, Germany

The Currency Cloud Group Limited, London, United Kingdom

The SAVO Group Ltd., Chicago, Illinois, USAIL, United States

Ticketfly,TidalScale, Inc., San Francisco, California, USASanta Clara, CA, United States

Vendavo, Inc.Upfront V, L.P., Mountain View, California, USASanta Monica, CA, United States

 

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