RUN BETTER 2010 ANNUAL REPORT Run Better Run 2010 ANNU 2010 A L REPO L R T The Best-Run Businesses Run SAP® Successful companies know how to recognize opportunity – and seize it. Companies today need real-time access to information to remain agile and make well-informed business decisions in an everchanging and complex environ- ment. That is why organizations of all sizes and across all industries rely on SAP. Our solutions and services help 109,000 companies in 120 countries anticipate market demands better, respond flexibly, and innovate quickly. Our solutions are available and accessible when and where our customers need them – on premise, on demand, or on device. SAP helps customers turn change into opportunity and simply run their businesses better. 2 Best-Run Businesses Run Freer – Commonwealth Bank of Australia Run Speedier – eBay Inc. Run Juicier – Sambazon Run Leaner – Sinopec Run Edgier – WMF 13 T o Our Shareholders L etter from the Co-CEOs Executive Board Investor Relations Corporate Governance Report Report by the Supervisory Board Compensation Report Declaration of the Executive Board Independent Auditor’s Report 65 Management Report The SAP Group of Companies Portfolio of Software and Services Customers Research and Development Partner Ecosystem Acquisitions Employees Changes in Management Financial Measures Cited in This Review Economic Conditions Assets, Finances, and Operating Results Sustainability Assets, Financial Position, and Income of SAP AG Overall Financial Position Corporate Governance Information Concerning Takeovers Risk Report Events after the Reporting Period Outlook 165 Financial Statements Consolidated Income Statements Consolidated Statements of Comprehensive Income Consolidated Statements of Financial Position Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements Management’s Annual Report on Internal Control over Financial Reporting in the Consolidated Financial Statements 275 Additional Information Five-Year Summary Glossary Addresses Publications for Shareholders Financial Calendar Publication Details 1 RUN FREER With over 1,000 branches and 4,000 ATMs nationwide, the Commonwealth Bank of Australia (CBA) needed a powerful core banking platform. SAP for Banking gives CBA the freedom to deliver transac- tions, products, and services – anytime, anywhere. Wider reach CBA is Australia’s number-one provider of integrated financial services. To maintain that lead, CBA stays incredibly close to each of its customers every day. It does that with the largest financial services distri- bution network in the country. And thanks to the national rollout of the new deposit account functionality, CBA delivers the most points of access of any of the bank’s nearest competitors. Greater speed To keep its network moving and growing, CBA runs it across an incredibly powerful SAP core banking platform. SAP for Banking, SAP Deposits Management, and – in the near future – SAP Loans Manage- ment applications help keep transactions flowing quickly, safely, and securely. And that helps CBA stay connected to each of its customers – wherever they happen to be. Learn more: www.sapannualreport.com/2010/en/cba 2 Best-Run Businesses Commonwealth Bank 3 RUN SPEEDIER eBay Inc. wanted to use its PayPal platform to pay suppliers faster and cut transaction costs. The SAP Custom Development team helped eBay Inc. integrate PayPal into its SAP ERP Financials application. Now, eBay Inc. pays its bills faster than you can say “the check’s in the mail.” Global transactions Founded in 1995, eBay Inc. is a global e-commerce and payments leader. Its flagship brand is eBay, the world’s largest online marketplace, where practically anyone can buy or sell practically anything at any time. In 2002, the company acquired PayPal, which is the leader in global online payments. With PayPal, any person or business can securely, quickly, and easily send and receive payments using just an e-mail address. Faster payments As it turns out, what’s good for eBay Inc.’s customers is also great for eBay Inc. That’s why the company decided to pay its own suppliers using PayPal. And it asked SAP to help make it happen. The SAP Custom Development team helped eBay to be both agile and innovative by adding PayPal as a new payment type within its existing SAP ERP Financials application. Up and running in six weeks, it allows the company to pay any invoice in a second. Now, eBay Inc. enjoys more early payment discounts and lower transaction costs. And for eBay Inc. vendors, there’s no longer a check in the mail – just money in the bank. Learn more: www.sapannualreport.com/2010/en/ebay 4 Best-Run Businesses eBay 5 RUN JUICIER Amazon superfood company Sambazon needed a better way to keep up with its explosive 50 % growth. SAP Business ByDesign helps the young start-up tame its business transactions, supply chain, and finances to keep profits flowing. Explosive growth Sambazon makes delicious, organic superfood products using unique blends of Brazilian fruits and botani- cals including açaí, a palm fruit from the Amazon rain forest. The rapidly growing company is just over 10 years old. But it already sells its delicious juices, sorbets, and frozen smoothie packs in 10,000 health- food stores, grocery stores, and juice bars across the United States. Sustainable business To cut business risk, boost product procurement, and ensure product availability, Sambazon runs SAP Business ByDesign. It helps Sambazon increase transparency and streamline its business operations. And with its first bottom line under control, Sambazon is now free to focus on the triple bottom line: Providing over 10,000 local family farmers with an economic alternative to logging – and protecting 6,769 km2 of Amazon rain forest. Learn more: www.sapannualreport.com/2010/en/sambazon 6 Best-Run Businesses Sambazon 7 RUN LEANER After its successful transformation into an integrated, publicly traded upstream and downstream oil and gas company, China Petroleum and Chemical Corporation (Sinopec) needed to unify its far-flung internal processes under a single roof. SAP gives Sinopec a unified overview of its domestic and export trading operations – and a global perspective for its business. Better oversight With 300,000 employees, Sinopec is one of China’s largest energy companies. The petrochemical giant touches every point along the oil and gas supply chain – from exploration and development to sales and distribution. Since Sinopec restructured and became a publicly traded company, it has climbed from number 23 on the Fortune 500 rankings in 2006 to number 7 in 2010. Best practices SAP ERP applications and business intelligence software are helping reshape Sinopec into an industry leader. Thanks to standardized business processes and better management visibility, it is achieving operational excellence. And that means that the company’s business information, like oil and gas, can flow full speed ahead. Learn more: www.sapannualreport.com/2010/en/sinopec 8 Best-Run Businesses Sinopec 9 RUN EDGIER The premium knife-, cook-, and tableware manufacturer WMF wanted to deliver cutting-edge products to its customers quicker than ever. SAP CRM 7.0 gives WMF deeper insights and better business pro- cesses to do just that. Sharper insights Founded in 1853, WMF (Württembergische Metallwarenfabrik AG) is a legendary German manufacturer and designer of precision cutlery, cookware, tableware, and coffee machines. With 6,000 employees and a turnover of €900 million, the company’s branded products are revered worldwide for their superior design, quality, and function. Faster results WMF is a master at bringing innovation into the world’s kitchens and dining rooms. And with SAP CRM 7.0, the company is maintaining a clear competitive advantage. That is because SAP applications give WMF a more consistent view of customers and better business processes. Taken together, they give WMF the necessary insight to create incredibly personalized customer experiences. And that’s a recipe for global success. Learn more: www.sapannualreport.com/2010/en/wmf 10 Best-Run Businesses WMF 11 800 mn PTRODUC SAFETY SOLUTIONS FROM SAP HELP 800 MILLION CONSUmers LIVE safer AND HealtHIER. 12 13 T 13 T o Our Shareholders o O 14 L etter from the Co-CEOs ur Shar 16 Executive Board 18 Investor Relations eholders 23 Corporate Governance Report 28 Report by the Supervisory Board 40 Compensation Report 60 Declaration of the Executive Board 61 Independent Auditor’s Report 13 Letter from the Co-CEOs Run Better Dear Shareholders, Customers, Partners, and Colleagues, We started 2010 with the goal of making SAP a growth company again. We decided to concentrate on delivering superior value to our customers and we refocused our strategy on innovation. We started with an ambitious vision: to make the world run better. We then centered everything on our mission to make our customers best-run businesses. This strategy allows us to both strengthen leadership in our traditional business and to double our addressable market by investing in new innovations that will change the game for our customers. As we look back at 2010, our efforts to refine and accelerate our strategy, combined with excellent execution, produced solid results – capped off by our best fourth quarter ever. We saw broad-based, double-digit increases in software and software-related service (SSRS) revenue in all regions. High growth markets, the BRIC countries in particular, saw 70 % year-over-year gains in software revenue. Full-year non-IFRS SSRS revenue increased appro- ximately 20 % (13 % at constant currencies) and exceeded our company guidance. We added 15,000 new custom- ers during the year, including 5,800 small and midsize companies. Just as important, we met our guidance for full year 2010 non-IFRS operating margin at constant currencies. Our innovation strategy includes a focus on new game-changing technologies such as in-memory computing, mobile computing, and cloud computing. We delivered important innovations in all three categories.