Report by the Supervisory Board

Cooperation and Control

Dear Shareholders,

As the financial crisis spread in the first half of 2008, SAP was recording more revenue than expected in the first two quarters of the year. This led us to refine our annual revenue and margin outlook guidance at the end of July to the upper end of the ranges we had originally announced. However, when Lehman Brothers collapsed in mid-September, the situation in the financial sector deteriorated unforeseeably, rapidly, and dramatically, with the result that insecure sentiment seriously affected the markets and sources of liquidity dried up globally. The effects were felt by companies of all sizes, in all industries, in all markets. In the final days of the third quarter, it became impossible to conclude already negotiated contracts worth more than €100 million. Customers with liquidity needed their cash to pay their suppliers; those without liquidity could not borrow, or could borrow only on prohibitive terms.

At the beginning of October, SAP had to report third-quarter results that were significantly below our own expectations – and those of the market. In these circumstances, we had to considerably lower our forecast for full-year revenue and severely prune all activities that did not directly generate revenue. The aim was to save some € 200 million from the original cost budget and to forestall the need for more difficult measures such as reducing the number of people who work for us. To achieve this aim, we took steps that were agreed in close consultation between the Supervisory Board and the Executive Board. Immediate, wideranging cost savings were the only way to ensure that no more than slight revision was required to our outlook guidance for operating margin, the key business efficiency indicator.

Despite the difficult environment, 2008 was a successful year for SAP. We achieved double-digit percentage growth of software and software-related service revenue and we increased our segment share compared to other companies selling business software. By promptly introducing cost-saving measures, we also outperformed our profitability targets.

The most important developments in 2008 were the greater market penetration by our software solutions for midsize companies and large enterprises and the integration of the French software company Business Objects S.A., which we acquired at the beginning of the year. We can therefore look back on a year in which, difficult economic conditions notwithstanding, our innovative work ensured that we again made a sustained contribution to our customers’ success.

The SAP Supervisory Board closely monitored the work of the SAP Executive Board. Indepth and cooperative dialog with the Executive Board enables us to efficiently organize and perform our duties. That is why this report starts by explaining the ongoing partnership between the two Boards. The report also focuses on the main topics discussed by the Supervisory Board, the work of its committees, corporate governance at SAP, and the audit of the SAP AG and consolidated financial statements.

Cooperation Between the Executive and Supervisory Boards

Supervisory Board Meetings

The Work of the Supervisory Board Comites