CORPORATE GOVERNANCE

SAP sees corporate governance as a process of continuous innovation. Thus, the Supervisory Board was involved in updating SAP’s Principles of Corporate Governance again, principally to reflect the most recent amendments to the German Corporate Governance Code. It also discussed deviations from Code recommendations relating to agreeing individual targets to determine the variable element in the compensation of SAP Executive Board members and to disclosing the Executive Board members’ variable and fixed compensation elements individually in the Notes to the Group Financial Statements. The Supervisory Board discussed and agreed changes that these matters necessitated to the Company’s compliance declaration pursuant to the German Stock Corporation Act, section 161. More generally, the Supervisory Board also discussed international corporate governance standards, changes to them, and the extent to which they could be applied to SAP. Once again, this discussion centered on SAP’s implementation of the Sarbanes-Oxley Act provisions and the applicable New York Stock Exchange corporate governance rules.

SAP’s corporate governance officer monitored, and regularly reported to the Supervisory Board on, the Company’s adherence to the SAP Principles of Corporate Governance.

The German Investor Protection Improvement Act came into force on October 30, 2004. This Act has substantially amended the provisions of German insider trading law as set out in the German Securities Trading Act, notably in as far as they relate to directors’ dealings. The Supervisory Board considered the changes to the law and discussed with the Executive Board the measures that the Company is planning in order to apply the amended law at SAP. The Company’s insider trading compliance officer reported to the Supervisory Board on these matters.

In German stock corporation and commercial law there are special requirements for internal risk management that apply to SAP. SAP’s corporate management has therefore introduced a global risk management system that supports risk planning, identification, analysis, handling, and resolution. The Supervisory Board takes a close interest in the definition of the risk management system and consequently examined its further enhancement in depth.