| þ | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] |
| o | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
| Page | ||||
| 1 | ||||
| 2 | ||||
| 3 | ||||
| 4 | ||||
Schedule: |
||||
| 8 | ||||
| 2005 | 2004 | |||||||
Assets: |
||||||||
Investments, at fair value |
$ | 540,723,334 | $ | 454,365,966 | ||||
Participant loans |
5,208,519 | 4,160,525 | ||||||
Receivables: |
||||||||
Employer contributions |
365,365 | 289,721 | ||||||
Participant contributions |
1,455,086 | 1,107,846 | ||||||
Total receivables |
1,820,451 | 1,397,567 | ||||||
Net assets available for benefits |
$ | 547,752,304 | $ | 459,924,058 | ||||
2
| 2005 | 2004 | |||||||
Additions: |
||||||||
Additions to net assets attributed to: |
||||||||
Investment income: |
||||||||
Net appreciation in fair value of
investments |
$ | 13,833,235 | $ | 34,798,723 | ||||
Interest and dividend income |
22,688,798 | 12,566,501 | ||||||
| 36,522,033 | 47,365,224 | |||||||
Contributions: |
||||||||
Employer |
15,352,261 | 12,991,690 | ||||||
Participant |
64,284,743 | 50,326,913 | ||||||
| 79,637,004 | 63,318,603 | |||||||
Plan merger (Note 1) |
— | 3,582,698 | ||||||
Total additions |
116,159,037 | 114,266,525 | ||||||
Deductions: |
||||||||
Deductions from net assets attributed to: |
||||||||
Benefits paid to participants |
28,306,196 | 22,176,644 | ||||||
Administrative expenses |
24,595 | 14,095 | ||||||
Total deductions |
28,330,791 | 22,190,739 | ||||||
Net increase |
87,828,246 | 92,075,786 | ||||||
Net assets available for benefits: |
||||||||
Beginning of year |
459,924,058 | 367,848,272 | ||||||
End of year |
$ | 547,752,304 | $ | 459,924,058 | ||||
3
| (1) | Description of Plan | |
| The following description of SAP America, Inc. 401(k) Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for a complete description of the Plan’s provisions. |
| (a) | General | ||
| The Plan is a defined contribution plan covering all employees of SAP America, Inc., SAP International, Inc., SAP Labs LLC, SAP Public Services, Inc., SAP Global Marketing, Inc., SAP Government Support and Services, Inc., TomorrowNow, Inc., and SAP Systems Integration America LLC (collectively, the Company or the Companies). There are no minimum age or service requirements for employees to become eligible to participate in the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act (ERISA). The Plan is also subject to certain provisions of the Internal Revenue Code of 1986 (the Code). The Companies are subsidiaries of SAP AG (the Parent Company or SAP). | |||
| The Plan initiated a merger with SAP Systems Integration America LLC, which was effective on January 1, 2004. The fair value of the assets transferred into the Plan on January 1, 2004 totaled $3,582,698. | |||
| (b) | Contributions | ||
| Participants may contribute a portion of their eligible annual compensation, as defined in the Plan, not to exceed $14,000 for 2005 and $13,000 for 2004. The Plan limits eligible compensation to the amount prescribed by Section 401(a)(17) of the Code for purposes of compensation reduction contributions and limits the amount of annual additions to the amount prescribed by Section 415(c) of the Code. Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan currently offers 13 mutual funds, the Parent Company’s ADR Stock Fund and one common collective trust as investment options for participants. The Company matches 50% of the first 6% of eligible compensation that a participant contributes to the Plan. For purposes of employer matching and employer discretionary contributions, the Company limited the eligible compensation to $150,000 in 2005 and 2004. Non-highly compensated employees are permitted to make pre-tax and after-tax contributions of up to 25% of compensation, while highly compensated employees are permitted to make pre-tax and after-tax contributions of up to 15% of compensation. Participants are permitted to make different contribution elections for (a) compensation consisting of bonuses and commissions, and (b) all other wages. The matching employer contribution is invested as directed by the participant. | |||
| Additional employer discretionary contributions may be contributed at the option of the Company and are invested as directed by the participant. Employer discretionary contributions were not made in 2005 or 2004. The employer discretionary contributions are allocated to participants who, with respect to the plan year for which a contribution is made, are employed by the Company on the last day of the plan year, have worked 1,000 hours in that year, and have elected a deferral contribution. The employer discretionary contributions are allocated as an additional matching contribution. | |||
| The applicable dollar limits on pre-tax contributions allow individuals who have reached age 50 by the end of the plan year, and who may no longer make pre-tax contributions because of limitations imposed by the Code or the Plan, to make “catch-up contributions” for that year. Eligible individuals may make “catch-up contributions” up to the lesser of (a) the individual’s compensation for the year less any other deferrals, or (b) $4,000 for 2005 and $3,000 for 2004. |
| 4 | (Continued) |
| (c) | Participant Accounts | ||
| All employer and employee contributions made to the Plan on behalf of a participant will be credited to the account established in that participant’s name. As of each valuation date, each participant’s account, after taking into account any contributions made on behalf of that participant and allocated to their account, is credited with earnings/losses in the proportion that the amount in the participant’s account bears to the total amount in the accounts of all Plan participants. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. All amounts credited to the participant’s account are invested as directed by the participant. All dividends, capital gain distributions, and other earnings received on investment options are specifically credited to a participant’s account and are immediately used to invest in additional shares of those investment options. | |||
| (d) | Vesting | ||
| Participants are vested immediately in their contributions plus actual earnings/losses thereon. Vesting in the employer contribution to their accounts is based on years of service as defined in the Plan. A participant is 50% vested after two years of service and 100% vested after three years of service. | |||
| (e) | Forfeitures | ||
| Forfeitures are first applied to pay administrative expenses and then to offset required employer contributions. For the years ended December 31, 2005 and 2004, forfeitures of $164,661 and $8,521, respectively, were used to pay administrative expenses and to offset required employer contributions. At December 31, 2005 and 2004, forfeited nonvested accounts totaled $516,159 and $251,744, respectively. | |||
| (f) | Participant Loans | ||
| Participants may borrow up to a maximum of $50,000 or 50% of their vested account balance, whichever is less. The loans are secured by the vested balance in the participant’s account with original terms of up to 120 months; however, the majority of the Plan’s outstanding loans are due in 60 monthly installments. The loans bear interest at rates which are commensurate with local prevailing rates as determined quarterly by the Plan Administrator. A maximum of two loans with outstanding balances is permitted at any time. | |||
| (g) | Payment of Benefits | ||
| Upon termination of employment, a participant may elect to receive a distribution equal to the value of the participant’s vested interest in their account in the form of a lump-sum amount, agreed upon installments, or a life annuity with or without a survivor option. Employees (other than 5% owners) who attain the age of 701/2 years will not be required to commence minimum distributions until they terminate employment. Employees who are 5% owners must commence minimum distributions by April 1st of the calendar year after they attain the age of 701/2 years. Employees may elect withdrawals during employment subject to Article 11 of the Plan document. |
| (2) | Summary of Significant Accounting Policies | |
| The following are the significant accounting policies followed by the Plan: |
| (a) | Basis of Accounting | ||
| The accompanying financial statements are prepared on the accrual basis of accounting. |
| 5 | (Continued) |
| (b) | Use of Estimates | ||
| The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. | |||
| (c) | Investment Valuation and Income Recognition | ||
| The Plan’s investments are stated at fair value. Shares of registered investment companies and the SAP ADR Stock Fund are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year-end. Units of the Retirement Savings Trust are valued at net asset value at year-end. Participant loans are valued at cost, which approximates fair value. | |||
| Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest income is accrued when earned. | |||
| (d) | Payment of Benefits | ||
| Benefits are recorded when paid. |
| (3) | Investments | |
| The following presents investments that represent 5% or more of the Plan’s net assets: |
| December 31 | ||||||||
| 2005 | 2004 | |||||||
Vanguard Wellington Fund |
$ | 106,681,185 | $ | 85,911,448 | ||||
Vanguard 500 Index Fund |
76,120,836 | 71,097,720 | ||||||
Vanguard Windsor II Fund |
65,116,845 | 56,482,065 | ||||||
Vanguard Explorer Fund |
46,452,814 | 42,737,316 | ||||||
Vanguard Strategic Equity Fund |
45,226,034 | 34,021,886 | ||||||
Vanguard U.S. Growth Fund |
42,823,844 | 40,180,888 | ||||||
Vanguard Retirement Savings Trust |
40,817,223 | 35,159,172 | ||||||
| 2005 | 2004 | |||||||
Mutual Funds |
$ | 13,599,285 | $ | 34,357,385 | ||||
SAP ADR Stock Fund |
233,950 | 441,338 | ||||||
| $ | 13,833,235 | $ | 34,798,723 | |||||
| (4) | Related-Party Transactions | |
| Certain Plan investments are shares of mutual funds managed by an affiliate of Vanguard Fiduciary Trust Company. Vanguard Fiduciary Trust Company is the Trustee as defined by the Plan (Plan Trustee) and, therefore, these transactions qualify as party-in-interest transactions. All fees for the investment management services are paid by the Company. The Company may be reimbursed for reasonable Plan expenses paid by the Company on behalf of the Plan, provided the Company advises the Plan Trustee of the liability owed to the Company. Additionally, participants can invest in the Parent Company’s ADR Stock Fund. The Parent Company is a related party. |
| 6 | (Continued) |
| (5) | Plan Termination | |
| Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to amend, modify, or terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their employer contributions. | ||
| (6) | Tax Status | |
| On October 16, 2002, the Internal Revenue Service issued a favorable determination letter to the Company indicating that the Plan, as amended and restated as of January 1, 1997, remains in compliance with the applicable provisions of the Code and the regulations thereunder. The Plan has been amended since January 1, 1997; however, the Plan Administrator and the Plan’s counsel believe that the Plan, both in form and in operation, remains in compliance with applicable provisions of the Code and the regulations thereunder. | ||
| (7) | Risks and Uncertainties | |
| The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits. |
7
| Identity of issue, borrower, lessor, or | ||||||||
| similar party | Description of investment | Current value | ||||||
* Vanguard Funds: |
||||||||
Wellington |
Registered Investment Company | $ | 106,681,185 | |||||
500 Index |
Registered Investment Company | 76,120,836 | ||||||
Windsor II |
Registered Investment Company | 65,116,845 | ||||||
Explorer |
Registered Investment Company | 46,452,814 | ||||||
Strategic Equity |
Registered Investment Company | 45,226,034 | ||||||
U.S. Growth |
Registered Investment Company | 42,823,844 | ||||||
International Growth |
Registered Investment Company | 27,276,092 | ||||||
Global Equity |
Registered Investment Company | 25,357,139 | ||||||
Total Bond Market Index |
Registered Investment Company | 21,528,966 | ||||||
LifeStrategy Growth |
Registered Investment Company | 16,832,930 | ||||||
LifeStrategy Moderate Growth |
Registered Investment Company | 9,167,270 | ||||||
LifeStrategy Income |
Registered Investment Company | 5,429,798 | ||||||
LifeStrategy Conservative
Growth |
Registered Investment Company | 4,773,201 | ||||||
* Vanguard Retirement Savings Trust |
Common Collective Trust | 40,817,223 | ||||||
* SAP ADR Stock Fund |
American Depository Receipts | 7,119,157 | ||||||
* Participant loans |
Participant loans bearing interest at rates ranging from 5% to 10.5% due through the year 2015. |
5,208,519 | ||||||
| $ | 545,931,853 | |||||||
8
| Exhibit No. | Description | |
23.1
|
Consent of Independent Registered Public Accounting Firm |
II-1
By: /s/ Pat Pettinati
|
||
Pat Pettinati |
||
Plan Administrator |
II-2