Total compensation expense recorded in connection with stock-based compensation plans for the year 2004 amounts to €37 million (2003: €125 million, 2002: €9 million).

Employee Discounted Stock Purchase Programs
The Company acquires SAP AG common shares and ADRs under various employee stock purchase plans and transfers the shares to employees. Discounts provided to employees through such plans do not exceed 15 % and are treated as a direct reduction of equity.

Stock Appreciation Right (STAR) Plans
In February 2004 and February 2003, the Company granted approximately 3.5 million and 3.8 million stock appreciation rights (“2004 STARs” and “2003 STARs” respectively) to selected employees who are not participants in the LTI 2000 Plan or SAP SOP 2002. The 2004 and 2003 STAR grant values of €134.35 and €84.91, respectively, are based upon the average fair market value of one common share over the 20 business days commencing the day after the announcement of the Company’s preliminary results for the preceding fiscal year. The valuation of the STARs is calculated quarterly, over a period of two years. Each quarterly valuation is weighted as follows in determining the final valuation:

The valuations for the quarterly periods ending December 31 are based on the amount by which the grant price is exceeded by the average fair market value of one common share as quoted on Xetra, the trading system of the Frankfurt Stock Exchange, over the 20 consecutive business days commencing on the day after the announcement of the Company’s preliminary annual results. The other quarterly valuations are based on the amount by which the grant price is exceeded by the average fair market value of one common share quoted on Xetra over the five consecutive business days commencing on the day after the announcement of the Company’s quarterly results. Because each quarterly valuation is measured independently, it is unaffected by any other quarterly valuation.

The cash payout value of each STAR will be calculated quarterly as follows: (i) 100% of the first €50 value appreciation for such quarter; (ii) 50 % of the next €50 value appreciation; and (iii) 25 % of any additional value appreciation. Participants will receive payments with respect to the 2004 STARs as follows: 50 % each on both, March 31, 2006 and January 31, 2007. Under the terms of the 2003 STAR Program, participants were scheduled to receive an initial payment of 50 % on March 31, 2005 and a second installment on January 31, 2006. Participants will receive STAR payments provided that, subject to certain exceptions, they continue to be actively employed by the Company on the payment dates.

As SAP’s STAR Plans are settled in cash rather than by issuing equity instruments a liability is recorded for such plans, based on the current value of the STARs at the reporting date. Compensation expense – including effects of the changes in the value of the STAR – is accrued over the period the employee performs the related service (“vesting period”).

As of December 31, 2004, a STAR provision in the amount of €109 million (€51 million in 2003) is included in Other reserves and accrued liabilities in the consolidated balance sheet (see Note 25). The related STAR expense was reduced by the effects of the STAR hedge – as described in Note 32 – and therefore totaled only €38 million (€36 million in 2003). The STAR provision as of December 31, 2004, as well as the related STAR expense solely result from the 2003 STAR Program. For the STARs granted in February 2004, no compensation expenses were recorded, as the grant price exceeded the fair market value of SAP shares on all relevant measurement dates in 2004. No compensation expenses were recorded in 2002, as the grant price of STARs outstanding in that period exceeded the average fair market value of SAP shares on all relevant measurement dates. Accordingly no accrual was recorded as of December 31, 2002, for the 2002 STAR Program.