FINANCES

Cash Flow and Liquidity

Operating Cash Flow Grows 12%

Although our profit after income taxes for 2008 was slightly lower than for the previous year, we increased cash flows from operating activities 12% to € 2,158 million (2007: € 1,932 million) through efficient management of working capital.

We used € 3,769 million net cash in investing activities, significantly more than in the previous year (2007: € 1,391 million). The principal reason for this increase was payment of the purchase price for Business Objects.

Net cash provided by financing activities accounted for € 1,281 million in 2008, compared to a net cash outflow in the previous year of € 1,287 million. Financing the acquisition of Business Objects gave rise to an increase in financial liabilities in 2008, also the primary source of € 2,288 million net cash inflow. The dividend distributed in 2008 was € 594 million, an increase of 7% compared to the previous year (2007: € 556 million). Our € 487 million outflow for the purchase of treasury stock was 52% less than in the previous year (2007: € 1,005 million).

Group Liquidity Declines 40%

Cash and cash equivalents decreased 21% to stand at € 1,277 million at the end of the year (2007: € 1,608 million). Restricted cash decreased from € 550 million at the end of the previous year to € 3 million on December 31, 2008. The large amount at the end of the previous year was associated with financing the acquisition of Business Objects. Our Group liquidity – comprising cash and equivalents, restricted cash, short-term investments, and certain investments (amounting in 2008 to € 382 million and in 2007 to € 598 million) that U.S. GAAP defines as short-term but IFRS defines as long-term – totaled € 1,662 million (2007: € 2,756 million). The decrease compared to December 31, 2007, is associated with the large amount of cash used for acquisitions, payment of dividend, and our continuing stock buy-back program. To protect our liquidity, from the fourth quarter of 2008 we ceased buying back stock.

We have various sources of loan capital:

• To finance the acquisition of Business Objects, we entered into an agreement for a credit facility that was originally for € 5 billion and is repayable by December 31, 2009 (amount outstanding on December 31, 2008: € 2.3 billion). We did not draw the full € 5 billion available under the facility because we paid part of the purchase price from available cash.
• To increase financial flexibility, in November 2004 we obtained a € 1 billion syndicated credit facility through an international group of banks. We already had other lines of credit in place; the new line was arranged to provide additional financial flexibility. As in the previous year, we did not draw on this facility during the year.
• At the end of 2008, the other, bilateral lines of credit available to SAP AG totaled approximately € 597 million (2007: € 599 million). We did not draw on these facilities during 2008 or 2007. Several subsidiaries in the SAP Group had credit lines in their local currency. These totaled € 52 million (2007: € 44 million), for which SAP AG was guarantor. At the end of the year, the subsidiaries had drawn € 21 million under these facilities (2007: € 27 million).

We do not currently have a credit rating with any of the rating agencies. Our debt ratio is low, at 48% (2007: 36%), and we do not believe any change in credit conditions that might be obtained with a rating would have a substantial effect on our financial situation. Our liabilities comprised 87% current liabilities (2007: 86%) and 13% non-current liabilities (2007: 14%). Current liabilities comprised, among others, 9% accounts payable (2007: 22%), 11% deferred income (2007: 15%), and 70% financial and other liabilities (2007: 46%). The financial and other liabilities comprised, among others, 57% bank loans (2007: 1%) and 29% other employee- related liabilities (2007: 73%).

Financial Management

Centralization

We use global centralized financial management to control liquid assets, interest, 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 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 and marketable securities provide a strategic reserve, helping keep SAP flexible, sound, and independent. The € 1 billion syndicated credit facility and other, bilateral lines of credit are available for additional liquidity if required.