I will be presiding over today's meeting. On behalf of the Supervisory Board and the Executive Board, I'd like to bid you our shareholders and shareholders proxies a warm welcome. We're delighted once again so many of you are able to attend. I also welcome our guests and especially the members of the press We'd like to thank for the objective and informed reporting on our company over the past 12 months. As usual, I first need to announce the formalities of this Annual General Meeting of Shareholders.
For the record, all members of the Executive Board and the Supervisory Board are here today. I'd also like to welcome Doctor. Stefan Felmet, not Republic, who will be taking the minutes. Welcome. Today's meeting was called with due notice in accordance with legal requirements and the provisions of the articles of incorporation.
Notice of the meeting was published in the Bundesenzeiger, the German Federal Gazette on Monday, 9th April, 2018. Copy of the notice available for inspection at the speakers table will be annexed to other minutes. All notices required for convening the Annual General meeting of shareholders were properly issued. No motions or candidacies were submitted by shareholders to the company. The official meeting zone includes this main hall of the SAP arena, plus all other rooms and areas in the SAP arena that are accessible to shareholders after passing through security at the entrance.
These include the training hall opposite the entrance area, We will find the catering services as well as the spectator stairs in the 1st floor where there are more catering services. The meeting will be broadcast throughout the official meeting zone via loudspeakers. There's also big screen and the training hall on which you can follow the meeting. There is a terminal at the speakers' table at which you can inspect and register at any time during the meeting. You are allowed to instruct the proxies provided by the company exclusively With respect to voting on the management proposals published in the invitation, you can, however, entrust your vote to another participant.
To do so, detach the attendance card and On your way out hand your completed proxy form to the staff at the door and keep your attendance card. Give your proxy Your ballot card book. If you wish to leave the meeting temporarily or early and do not wish to appoint a proxy to vote on your behalf, Please hand in your attendance card and your voting cards at the exit. As in the previous year, online participation is also possible. Shareholders participating online can follow live webcast of the entire meeting, cast their votes in real time and expect the attendance register.
Shareholders participating via the Internet proxy appointment and instruction system have until the beginning of voting on management's announced proposals to send or amend the appointments and instructions regarding these proposals. All shareholders and proxies who wish to speak or ask questions are kindly asked to report to the speakers' table As soon as possible. Please complete a speaker's request form. Please clearly and Legibly write your name and the number of your ballot card book on the request form. I must insist that every shareholder or When it is your turn to speak, please come to the microphone next to the The entire Annual General Meeting of Shareholders is being publicly broadcast on the Internet.
Only what I'm saying now in the speech of CEO Bill McDermott will be recorded and posted on the Internet after the meeting. As in the previous year, we assume with your approval that we're allowing some television companies to broadcast from the speech of Mr. McDermott. However, we are allowing the TV companies to show sections of his speech only. The entire meeting is also being documented in sound and video for the record.
If a shareholder proxy objects to the recording of his or her speech, we'll not record that speech. At Item 1 of the agenda, for the record, I can report that the 2017 PSA financial statements and the consolidated financial statements, the combined management report for the SAP Group and SAP SE including the compensation report and the also explanatory notes relating to the information provided pursuant to German Commercial Code Sections 289A1 and 315A1. The Supervisory Board and the Executive Board proposal Proposed resolution on the appropriation of retained earnings were available at the website, www.sap.com investors from the time the general meeting of shareholders was called. These documents are also available for inspection in the meeting room. You'll find the documents at the speakers' table at the main hall and at the booth by the entrance to the side hall.
The audit KPMG AG, Wirtschaftsprefungskgesellschaft examined the SAP SAE Financial Statements. The consolidated financial statements at combined SAP S and SAP Group Management Report for fiscal 2017 and issued an unqualified audit opinion. The Supervisory Board reviewed and approved the aforementioned documents. And proof them on Wednesday, 21st February, 2018, the Supervisory Board compiled a written report, which is published on Pages 22 to 31 of the integrated report. The SAP SE Financial Statements for 20 17 with us formally adopted.
This report describes the focus of our work in 2017 in detail the way in which we discharged our function of devising and supervising the S and P Executive Board. Our work is founded on a close and trusting partnership between the supervisory board and the executive board, an efficient distribution of tasks between the supervisory board and its committees And not least on the use of our own software such as the SAP Digital Boardroom, which visualizes all financial personnel and process related information across all company transactions for us in real time whenever we need it. Let me go into more detail about some of the focus areas of our work. Last year, the Supervisory Board reverted considerable time at several meetings to discuss personnel changes on the executive board And the associated restructuring of the Executive Board. In the context of the decision to acquire Iglia will also discuss the company's strategic alignment at length.
Likewise, in our line of focus was executive board compensation, which I'll return to at a moment. I wish to stress that in the light of the slim approval rates For the acts of the supervisory board at the last annual general meeting of shareholders, we also looked at the subject of corporate governance. We took the results of the vote and the attendant criticism very seriously and looked for ways to improve them, win back our shareholders' trust, your trust. We took various steps. First, I approached some of our largest institutional investors in person with a view to collecting and gaining a better understanding of their In response to the criticisms expressed that in order to create greater transparency, We are now reporting more openly and in more detail about our work on the supervisory board.
Further, having initially reduced the number of deviations as SAP declared to the recommendations of the German Corporate Governance Code, We can report that as of February 2018, the company now follows all the recommendations of the code. Ladies and gentlemen, on subjects that are the responsibility The Supervisory Board will continue to maintain an open dialogue with our shareholders and investors. And while obviously I cannot conduct the dialogue with each and every shareholder, it is important to me that we make the subject matter And outcomes of our discussions with institutional investors are transparent to all shareholders. With this in mind, you can read my open letter to investors in the Investor Relations section on the SAP website. It summarizes all the main themes of these discussions with investors in which corporate governance and Executive Board Compensation featured prominently.
I hope I'm speaking on behalf of all Supervisory Board members that the steps we've taken will restore your trust in and support
for the work we do.
Ladies and gentlemen, I would like to turn now to a change in the membership of the Executive Board that the Supervisory Board resolved at its October meeting. The Supervisory Board appointed Christian Klein to the Executive Board with effect of January 1, 2018. As Head of the New Global Business Operations Earlier Christian is responsible for SAP's internal digital transformation and for driving core business process simplification. I'd like to welcome Christian Klein to the meeting and ask him briefly to introduce himself to the shareholders.
Thank you very much, Hasso. New shareholders and shareholder representatives, ladies and gentlemen, well, I'm the new kid on the block here on this podium, but I've been on board at SAP for a very long time. I've been part of this company for 19 years. In 1999, I started working for SAP right after graduating And at that time, in those very early days and in those young days of mine, I wouldn't have imagined introducing myself to you. I was born here in Heidelberg and grew up in the Kreischauer area.
After having a dual student program, I visited various areas of SAP. It all began in customer support. And Gerhard Oswald very early on taught me to always focus on the customers, whatever I do. The years in this support area in Development and Controlling gave me a general and broad overview over SAP. And today, I consider this an incredible benefit in my current role.
In 2011, I then became Chief Financial Officer of our SuccessFactors Cloud Acquisition. Those years gave me very good insights into the processes of a cloud company. In 2014, Luka Mucic then asked me to take over full responsibility for SAP Controlling, focusing on long term financial planning, management and analysis of our company's success. In 2016, Bill McDermott and Luka Mucic then asked me Today, take over the role of Chief Operating Officer of SAP. And since the beginning of this year, it's been my honor to have been part of the SAP Executive Board.
In my role as Chief Operating Officer of SAP, I primarily focus On transforming our business processes and system landscapes. The cloud business massively changes processes at SAP compared to simplify processes for our customers and for our employees to make them continuous and also to simplify them. The point is to establish a dynamic and agile SAP in order to enable sustainable growth and a high degree of scalability, which is the basis for the financial success of SAP. In this context, it is very important to stay in close contact with our customers, employees and partners in order to obtain continuous feedback on our processes and software solutions. In the second step then, it is important to model the business processes within our systems.
And here, once again, we have to make sure that these are end to end processes. And SAP wants SAP is an important slogan also for me, which means using our own software also internally because we, as SAP, always have to be and want to be our first customers, which gives us early on the possibility to explore the possibilities and also the range for improvement in our software. Together with our standard development department and our End customers, we permanently focus on the further development of our software in terms of functions, integration, Innovation and use experience. Today already, innovations such as SAP HANA, the Digital Boardroom or SAP Leonardo deliver a significant added value within SAP. Furthermore, my organization focuses on ensuring product and service quality, portfolio planning and global operation of our cloud infrastructure.
So I'm looking forward to many successful years together with my dear colleagues on the Executive Board. And I would like to thank you, dear shareholders, members of the supervisory board and members of the executive board, most quarterly for the trust you've placed in me. And I hope we will all enjoy a smooth AGM today. Thank you very much.
Thank you, Christian. Ladies and gentlemen, there will also be some changes in the membership of the Supervisory Board. As you all have read in the invitation to today's Annual General Meeting of Shareholders, the Supervisory Board proposes under Item 7 The election of Mr. Eicher Evans, Doctor. Frederic Erotch, Mr.
Gerhard Ostwald and Mr. Stein Green As shareholder representatives on the Supervisory Board, Mr. Evans became a member of the Supervisory Board of SAP SE On the 21st June 2017, following Jim Hagerman and Snares' departure from office in May last year, Evans was appointed as a Board Member by the Manheim Municipal Court for a term ending at the conclusion of today's Annual General Meeting of Shareholders. As she is standing for election by the shareholders for the first time today, I'd like to ask Ayesha to briefly introduce herself.
Dear shareholders and shareholder representatives, Guten Morgen, this is where my German stops and I go back to English. My name is Ayesha Evans. I'm humbled and honored to be on the Supervisory Board of SAP. I work for Intel Corporation. I've been there for 12 years, where I serve as a Senior Vice President as well as the Chief Strategy Officer.
Both of our companies looking forward with things like artificial intelligence, machine learning And the overall digital transformation that is going on in the world and with our customers, it's a great opportunity, and I'm really psyched to be on this board.
Thank you, Ayesha. Ladies and gentlemen, with effect from the conclusion of today's General Meeting of Schroders Professor, Doctor. Wilhelm Hermann has resigned his seat on the Supervisory Board. Professor Hermann has been a member of the Supervisory Board Since it was instituted in 1988, an incredible 30 years. And has been an invaluable source of advice for the company and for me personally throughout this time.
On behalf of every single member of the Supervisory Board, I wish to thank him for all his hard work On the Supervisory Board, the General Compensation, Finance and Investment and People and Organization Committees. Well, miss his experience and expertise greatly. Thank you very much indeed. I'm convinced, however, that we found an excellent successor to Professor Harmon and Doctor. Friederike Roach.
And I'd like now to ask her to briefly introduce herself to the shareholders.
Ladies and gentlemen, dear shareholders and shareholder representatives, my name is Frederico Roch, Group General Counsel of Merck. In the past, it was also called the Head of Legal. And in this function at Merck, I'm in charge of legal and compliance, which also includes the brand department and data protection. I'm 45 years old, married, And I've got 2 little boys. This year's Merrick celebrates its 350th anniversary.
Now I haven't been on board all that time. However, I believe that I have identified part of the success of that company. Over the centuries, Merck retained the capability of permanently reinventing itself. Over the last few years, for example, A traditional pharmaceutical and chemical manufacturer turned into an innovative technology company, And I had the opportunity to closely support that process. This experience and also the know how about Some ways of how to deal with permanent change, that's what I'd like to offer as my contribution to the work of the Supervisory Board of SAP.
Successful work on a supervisory board, in my view, also depends very much on asking the right questions, thus giving an important impetus to the overall company. And doing so, above all, of course, I'm going to focus on my legal know how. I'm an expert in corporate law, especially corporate governance matters. And over the last 2 years, I have been involved in all of the takeovers and transactions of Merck On the legal side, the corporate governance rules, They have grown massively in scope and complexity over the last couple of years. In addition to that abundance of rules and regulations, publicly listed companies not only have to comply With these German rules of the German corporate governance code, they're also facing sometimes conflicting instructions after proxy advisers.
I know the game of brinkmanship, which companies have to undertake in this regard. And therefore, I believe as a member of the Supervisory Board, I can help in how to deal with these challenges. I will also contribute my comprehensive experience in transactions to the SAP Supervisory Board. Not only am I able to assess the legal and commercial risks involved in a certain transaction, I also know which Acquisition goals basically match the fundamental strategy of a company. Furthermore, of course, I'm also well experience in the matters of compliance and data protection.
Now the detailed question that I am dealing with at Merck may differ from those at SAP. However, the fundamental matters and questions will always be the same. And here, once again, I can provide helpful insights on the basis of my experience. My legal expertise is complemented my experience as Head of Internal Audit. That is a function which I also held for a couple of years at Merck.
From those years, I still remember how an effective internal control system, Risk management and an internal audit system have to be set up. However, I can also assess when a system has got certain gaps, which are not obvious, but somewhat hidden. So
Thank you, Doctor. Roch. Professor Anja Feltman will step down from the Supervisory Board on the 31st December 2018. Professor Feltman has been a member of the Supervisory Board in 2012 and she has consistently contributed to her proven expertise to the work of the Board Notably in the Technology and Strategy Committee. Although Professor Feldman is not due to leave this Supervisory Board until the end of the year, We'd like to take the opportunity to thank her now for her many years of support on the Supervisory Board.
We are proposing that Gerhard Oswald be appointed as Professor Feldman's successor on the Supervisory Board with effect from January 1, 2019. I'm delighted that Mr. Oswald has declared willing to stand for election to the Supervisory Board following the 2 year cooling off period prescribed by German company law. As a former member of the Executive Board with many years of experience of SAP, our customers and our markets, He will be an enormous asset to our Supervisory Board. Gerd, could I ask you to briefly introduce yourself?
Thank you, Hasso. Dear shareholders, I started my career at SAP when SAP was still a small Startup company with 30 staff at about 100 customers. Over the years, I've seen SAP grow into the global business it is today, SAP from the start has been An innovative company and very early on addressed the many challenges businesses face. So SAP has always been and remains a pioneer. During my 36 years at the company, I managed many parts of the business.
I've served on the Executive Board for a long time and in many of those positions, I helped shape the development of new technologies new generations of applications. Chief among my responsibilities was looking after our customer base. Through this work, I acquired a deep understanding of requirements. It's always been important to me to be an advocate for the success of every single customer. This is something I would like to contribute to the supervisory board of SAP.
Though I retired from the executive board at the end of 16, I continue to work as an outside consultant to SAP. I speak to customers, partners and employees regularly. I turn their feedback into suggestions for improvements that I pass on to SAP's Executive Board and to Hasso Plattner as a Chairperson of the Supervisory Board. Besides my consulting work for SAP, I've been involved in teaching at a Munich Technical University, which I started in 2015. In May 2015, Professor Kretschmer and I established the initiative for digital transformation research platform at the Technical University of Munich.
Through my teaching work and the research platform, I regularly offer student placements in major companies, So they gain, at the earliest possible stage, insight into the industry and an awareness of the significance of digitalization And the digital transformation, this work always keeps me up to date on the latest technologies and business models. I'm also a mentor and expert advisor to the Center For Innovation and Business Creation at Munich Technical University. This center offers a complete service for start ups As a mentor, I've been able to assist all sorts of businesses to get off the ground. I also mentor women entrepreneurs. I feel a strong connection to SAP, our SAP.
I want to bring To the Supervisory Board, the knowledge and wealth of experience I have gained from my time as an employee and as an executive board member And from my university work, by networking with SAP's customers and partners, universities and employees at SAP, I can contribute a holistic view of the company to help it perform at its best. I would be delighted to receive your vote and your confidence so that
Thank you, Gerd. Professor Klaus Wuho will also resign his seat was effect from the conclusion of today's Annual Meeting of Shareholders. Professor Voucher was elected to the SAP Supervisory Board for the first time in 2,007 and he has made his Professional skills available especially to the audit committee. I would like to thank him for the reliable support Yes, given the supervisory board of SAP over the years. The supervisory board proposes Diane Greene as Professor Buchner's successor.
Ms. Greene is unable unfortunately to attend today's meeting in person, but it's asked to introduce herself to the shareholders via video message.
And I'm so looking forward to joining the SAP Supervisory Board. I apologize for not being there today, but I'm giving a commencement speech at UC Berkeley that was scheduled A very long time ago before I knew about this honor of joining SAP's Board, but I'm Just very excited about it. Let me first tell you a little bit about me. I started my career as an engineer,
as a mechanical engineer,
and then I went back to school and became a computer Mechanical engineer, and then I went back to school and became a computer scientist and then worked in the database industry. I worked for Sybase. I worked for Tandem. Back then was when there was System R2. I remember The admiration I had for SAP back then, in fact, then after that, I went into being an entrepreneur and a friend and I nearly started a company to build around the ecosystem of System R2.
As an entrepreneur, I built company VMware, I co founded and led that company for 10 years. And now I am running Google's Cloud. And What we're seeing everywhere, as you know, is that companies are going through a digital transformation. And I just think there's SAP has this incredible opportunity to take your the 380,000 some customers and help them save costs, but also do things they never could do before with their around their products through using artificial intelligence, machine learning and all the other new tools available and growing all the time. So I really look forward to supporting SAP as a company in any way that I can and drawing on my knowledge from the technology industry.
So thank you very much for this vote of confidence And I look forward to meeting all of you. Thank you.
Thank you, Lehan. The Supervisory Board is convinced that all the candidates standing for election today are worthy and suitable successors to those who are leaving their posts. Ladies and gentlemen, allow me to turn now to the matter of Executive Board Compensation. As I said earlier, the subject is a focal point of the supervisory board's work and of my work as supervisory board chairperson. And as you'll see from the agenda, we're asking you today to approve our Executive Board Compensation System.
The system forms part of our response to the criticism that was leveled at us by the institutional investors. Following the disappointing result of the vote to approve our compensation package at last Annual General Meeting of Shareholders. And given the criticism we received at that meeting about our compensation system and how it is presented in the compensation report, we scrutinized each of the points of criticism individually. Executive Board compensation featured prominently in the discussions I had with institutional investors in Europe and the United States. Our in-depth look at executive board compensation has resulted in a number of changes.
Starting in 2018, the short term variable compensation component, the STI plan will no longer contain a discretionary element And the maximum possible target achievement level in the STR will be lowered from 181.3% to 140%. Also in line with the German corporate governance code, a severance pay cap has been defined and clawback provision written into the executive board members appointment contracts. The investors also criticized the way in which compensation was presented in SAP's compensation report. Complaints about a lack of transparency and insufficient explanation prompted us to redesign our compensation report and present our compensation In a more transparent and understandable way, these are some of the changes we've made. We've disclosed the caps on executive board compensation and how we set them.
We published a vertical pay ratio that compares the total benefits granted to the executive board members with those granted to the executives and all other employees. We've published the target achievement levels for the last 5 years. And finally, we've presented the structure of the peer group index and provided examples to illustrate possible outcomes. We hope that these and other changes will make our compensation system much easier to understand. As I've said, I'll continue to talk to our shareholders and channel their feedback into continuously proving the way we present Executive Board Compensation.
Ladies and gentlemen, the Supervisory Board is convinced that our Executive Board compensation is appropriate. When reviewing executive board compensation, the Supervisory Board primarily considers whether compensation is commensurate with SAP size and global reach, SAP's operational and financial performance And directors' compensation at comparable international companies in the technology industry. The level of compensation has to be internationally competitive to remote committed successful work in a dynamic environment. We can say with confidence that as Europe's largest software company in an industry dominated by U. S.
American competitors, we are highly successful. SAP is the most valuable DAX company. The success of the work our executive board does is reflected in their compensation, which is aligned chiefly to how the share price performs. Thus when the share price goes up the executive board's performance related compensation increase and we the shareholders benefit too. The supervisory board convinced that our Executive Board compensation provides an adequate basis for achieving our goal of making SAP the world leader in the cloud the current leadership team.
We believe the compensation package offers the right incentives, reflects SAP's global orientation and secures the competitiveness of our company. This applies both to the compensation paid for fiscal 2017 And to the new compensation policy that applies in 2018 and thereafter. The compensation system including the latest amendments, which we are presenting to today's Annual General Meeting of Shareholders for approval is described in the compensation report starting on Page Ladies and gentlemen, I will now ask Bill McDermott, our CEO, to address you. His speech will be interpreted into German simultaneously so that everyone can follow. Bill's answers will also be interpreted Into German.
Please Bill.
As you can hear, I'm learning German.
So good.
But things don't go too well.
Thank you for the honor of addressing Today's Annual General Meeting of Shareholders. I speak to you as the world faces Complex challenges. It can be easy in challenging times to become pessimistic. Instead, dear shareholders of SAP, as you saw in the opening video, we offer an optimistic view. SAP Technology addresses the challenges because we view them As the biggest opportunities, consider the following.
SAP has 380,000 customers in nearly every country on earth. They rely on our systems to support 77% of the world's transactions. SAP systems touch €19,000,000,000,000 in consumer transactions. We don't share these figures because we are self important. We share them because with immense power comes significant responsibility.
Our 91,000 employees Plus, more than 2,000,000 partner employees are strongly committed to help the world run better and improve people's lives. We stand on the shoulders of giants. None greater than our founder and chairman, Hasso Plattner. Hasso's guidance has helped SAP become Germany's most valuable company and the world's business software market leader. His vision, intellectual curiosity, His vision, Intellectual curiosity and courage motivate our company every single day.
Please join me in saluting the 1 and only Hasso Platner. We are also securing the future of SAP With our newest executive board member, Christian Klein. Christian, congratulations and welcome once again To the SAP Executive Board, Dear chairman, dear supervisory board members, thank you for your continued support, your leadership, and your counsel. I am grateful. And ladies and gentlemen, please join me in a round of applause to thank The colleagues of SAP for their passion, their talent and their unwavering dedication.
Now, dear shareholders, Let's discuss SAP's past, present and our future. Beginning with the past, Back in 2010, we made bold commitments. 1 was to transform the database market. Today, SAP has more than 20,000 customers growing at record pace on HANA. Independent analysts like Forrester have ranked HANA the number one database in the new database market.
2, we promised to lead the cloud computing era of business applications. And once they become a part of SAP, they grew even faster. We built a new enterprise resource planning system to bring ERP customers to the cloud. More than 8,300 customers are already on this journey with many 1000 more On the horizon, overall, we have 150,000,000 users of our cloud applications, more than any competitor in the business. We said businesses should work together in the global economy.
And SAP was the first to champion business networks. The idea that companies should expand their digital partnerships to seize new opportunities. Today, these spend management networks are addressing 1,000,000,000,000 in market opportunity. As a result of this strategy, we have doubled or tripled the revenues, the profits, the number of customers And the market value of SAP since 2010. That's pretty good.
Our employee engagement, Employees as shareholders, brand value, environmental performance, Diversity and inclusion metrics are all at all time highs. So dear shareholders, the executive board promised to honor your trust by returning you a happy, I'd like to thank you, congratulate you from the bottom of my heart. Congratulations. Well done. Last year, we accelerated SAP's momentum once again.
The numbers I will share with you On non IFRS percentages, these percentages are non IFRS at constant currencies unless I state otherwise. Okay? Our total revenue was €23,500,000,000 up 8%. Cloud and software revenue reached €19,550,000,000 up 8%. Cloud subscriptions and support revenue hit €3,770,000,000 up 28% new cloud bookings, defined as cloud business.
We have signed but not yet collected, grew at 30%. Our operating profit hit a healthy €6,770,000,000 up 4%. IFRS earnings per share was €3.36 an increase of 10%. And even though we don't guide on it, software licenses grew 2% While our competitors steeply declined, 2017 illuminated Several positives about our evolving business model. SAP's fast growing cloud business, Together with solid growth in support revenue, continue to drive more predictable revenue.
We are now at 63% predictable revenue. And we're on track to achieve our target of 70 plus percent of predictable revenue by 2020. We now have a multi billion cloud business growing faster than competition. And as this business grows, The share of renewals increases, the overall cost of sales goes down And margins go up. This is how we deliver the SAP trifecta.
It's good stuff. Thank you. Let's talk about SAP's share price development. If we look to the overall development of the share price in 2017, SAP shares grew 12.8%. That is faster than the DAX.
However, The macro developments in the broader market did impact the share price. Specifically, Tax reforms in the United States were enacted in December. At the time, In the weeks following this development, SAP shares decreased by 17% While US based competitors generally increased, we were also impacted by a particularly strong euro. So while these issues were in fact beyond our control, regaining momentum was within our control. To do it, we needed a strong start in 2018.
And yet again, SAP delivered. In the first quarter, Cloud revenues overtook license revenues for the first time and surpassed €1,000,000,000 And that was on top of a very strong year. Last year, it grew 50%. So it was the toughest comparison and we still grew very strong. On the bottom line, SAP delivered 52% growth In IFRS operating profit, which was up 14%, non IFRS at constant currency.
Now let me spend a moment on the operating profit. As you can see in the Q1 results, this is a big moment for us. We are returning to operating margin expansion for the first time since we began our cloud journey. This is one of the many reasons that momentum in our share price has been reestablished Over the past several weeks, our shareholders should in fact continue to benefit from this positive momentum. In 2017, SAP raised the dividend policy to at least 40% of profit after tax.
The executive board and the supervisory board Proposed to raise the dividend for 2017 by 12% to €1.40 40¢ per share. This represents a dividend payout of approximately €1,670,000,000 and a payout ratio of 41%. You will be asked to vote on this dividend payout and the other topics on the screen behind me in today's meeting. Allow me please to give you a moment to review this list.
Machine learning.
It's wonderful to see happy customers. We also have a happy company. Employees have never been more enthusiastic About working for SAP, our employee engagement scores remained extremely high at 85%. Our leadership trust score, signaling employee confidence in management, increased 4 percentage points last year alone. By investing in professional development, our overall retention rate has improved to 94.6%.
We reduced greenhouse gas emissions to 325 kilotons in 2017, achieving the goal to reduce emissions to our year 2000 level. And guess what? We did this 3 years ahead of schedule. We run a green cloud with data centers 100% powered by wind or solar energy. And overall, we are on track to fulfill our pledge of being fully carbon neutral by 2025.
From a diversity perspective, we met our goal of 25% women in leadership positions. And now we have set a new goal of at least 30% by 2022. Thank you. The overall message from our past and our present, SAP is a strong market leader, and we are only getting stronger. I like that too.
Let's spend some time discussing the large market opportunities where we are well positioned to accelerate growth. I'll summarize it for you this way. SAP will deliver the intelligent enterprise to our customers. So allow me to explain the key priorities of this strategy. 1st, Seriously, how many of you are concerned about how businesses use your personal data?
Raise your hand. Okay. Quite a few of you. I am too. In fact, I have yet to meet a consumer who isn't concerned at some level.
And if consumers are worried, so are businesses. Therefore, the question is, How can SAP help our customers do a better job serving their customers? This market is called customer relationship management or CRM. And here's what we've long known about this market. Competitor CRM solutions only manage data and sales departments.
So even as technology has improved, Competitor CRM solutions haven't really improved that much. As new regulations Like GDPR take effect, competitor CRM solutions don't help businesses comply. And this is why SAP has quietly been preparing a master plan to disrupt the CRM market. We started with a clear operating principle. Businesses need to have a single view of the consumer.
The marketing and sales departments shouldn't keep their own records while the customer service department is in another silo. This is a challenge that only SAP can solve. As we built our plan, we brought together smart acquisitions. Hybris helps businesses engage consumers in any channel on any device. GIGEA helps business protect that sensitive consumer data in the age of GDPR.
Calidus Cloud helps sales professionals focus on the right opportunities from lead to cash. These new additions come together with solutions built by SAP. SAP Cloud for customer Helps companies better manage sales departments. SAP Service Cloud helps business retain happy consumers. And the combination of these assets will provide a seamless front office value chain.
Backed. Backed. And remember this, by the best user experience in the industry. We will call this SAP C4HANA. C for customer.
C for customer. 4th for 4th generation CRM, C4HANA. As with HANA itself, SAP will once again prove we are the last to accept the status quo, And we are the first to change it. This is it. This will be a major moment for SAP.
We are fired up and ready to go, and we are ready to make you proud. Are you excited about C4HANA? Let's go get them. You know right where we're headed. Our second priority is closely related to the first.
While SAP C4 HANA runs the front office, like marketing and sales, SAP's other business applications run the back office. And ladies and gentlemen, History is repeating itself once again. Remember, when SAP delivered integrated applications To enable true end to end business process. As cloud is now maturing, there is a new agenda that's being driven by the CEOs of companies. They want to integrate their complex companies without sacrificing the best functionality.
So yes, integration is back. And for SAP, our completeness of vision will be delivered to our customers in a modular approach. If a customer wants to use A single best of breed application, that's fine. For customers who want End to end common platform, also fine. We will deliver both Best of breed and best of suite.
We call this new cloud experience The SAP Intelligent Suite. Think about a small business, let's say in Berlin, just getting started. To protect their consumer data and sell more products. Over time, as the business grows, they need a sophisticated ERP system to handle financials, SAP S4HANA. They need to build a great team.
SAP Ariba. They need to make it simple for their employees to travel the world. SAP Concur. They need to modernize how they build products to achieve global scale. SAP Digital Supply Chain and Manufacturing.
In cases where these applications work together, the users in Berlin will never need to change applications. The data model, security and user experience are all consistent, enabled by the SAP Cloud Platform. I'm proud to tell you, there's no company in our industry who can integrate the front office to the back office like we can. There is also no company that is doing more with intelligent technologies than SAP. We do not want to substitute people in the workforce with computers.
We believe in the notion of augmented humanity, where technology raises people up To a new level of human performance and to bring this potential to our customers, In the SAP Intelligence Suite will be enhanced by SAP Leonardo Machine Learning. Where it adds value, the same will be true for blockchain and Industry 4.0 Technologies, which are also called the Internet of Things. To illustrate the power of these breakthroughs, Please watch this short video.
We have a pace
All right. Big picture. We believe that integration and intelligence will solidify SAP's market leadership for the next generation. We will win with integration, front office to back office, because we have SAP Cloud Platform to connect SAP and non SAP innovation. We will win with intelligence because we have SAP Leonardo to sense every input and predict Every outcome.
And this is what leads me to the expansion of SAP HANA. What started out as an idea, an incredible invention, For example, full use HANA is the only viable database to enable the benefits of the intelligent enterprise. HANA supports multiple data models, data virtualization and extended capabilities such as graft and geospatial. Hana also represents a broader paradigm shift in data management. Historically, moving the data was the slowest part of already slow legacy database systems.
Now Hana can work with multi source data without ever moving the data, Thereby driving record breaking speed and security. HANA has become The control tower of the intelligent enterprise. Ladies and gentlemen, it is a Hana world By any measure, HANA's ours. And in summary, today we talked about a new strategy for CRM With SAP C4HANA, a new integrated applications experience With SAP Intelligent Suite enabled by SAP Cloud Platform, An expansive new data management agenda with SAP HANA. I'll read you a quote From one industry observer, incidentally, not always a big fan, he said, SAP's product lineup has never been stronger.
SAP has transformed itself to a fast moving and market driven leader. So I guess the question now is really for you. Are you as fired up and as excited as we are? Come on, let's go, SAP. So, dear shareholders, in service to our customers, We're working hard.
We have the best engineers in the business software industry, And they are building next big innovations. We have dedicated sales and services professionals Putting innovation into action. We're focused on supporting 25 distinctly different industries for businesses of all sizes. And on topics like data privacy, We are the 1st company in our industry to be certified by the British Standards Institute As GDPR compliant, our ecosystem is expanding with new partners entering, While the long standing partners steadily grow their SAP practices. And so all this combined should give you enormous confidence in SAP's bright future.
In closing, I'd like to share with you a personal conversation Very similar to the one I had with the top 250 leaders that met at our headquarters in Germany with me a few weeks ago. First, I told the leaders that trust is earned in drops but lost in buckets. Trust is earned one drop at a time, and it comes slow. You make all kinds of deposits in the trust account. And then one wrong thing happens, and it can disappear in buckets.
And it can be very hard to get back. And that's why we need to do things the SAP way, with honor, class and integrity. When we make mistakes, we admit them so we could fix them. You may have heard about the situation in South Africa. Unlike other companies facing similar challenges, SAP responded with transparency.
We removed the individuals whose actions were not consistent with our ethical standards. We strengthened our compliance policies to prevent similar distractions in the future. You know, sometimes customers actually expect more from us. And we must always redouble our focus on their happiness. One example involves the pricing of indirect usage of products.
Customers were not happy with pricing practices Audits to reveal more licensing fees were owed. So SAP led the industry As the first company to introduce a new way with new pricing options, We reformed how we conduct audits. Our customers will never be surprised by anything we do. I also told the leaders in good times or tough times, we must always Find a way. Our will must always find a way.
We must commit ourselves totally with perseverance and discipline to live up to the world's expectations for SAP. And we must take accountability
And
in the end, the true measure of a leader is not what we take from this world. It's what we give it. So let's watch one final video in this regard. Ladies and gentlemen, Here we see the ultimate truth of SAP. It is through the work of our customers that we help the world run better and improve people's lives.
I began today with the world's greatest challenges. We are fearless in the face of those challenges. SAP will be the last to accept the status quo, And SAP will be the first to change it. The headlines say some countries are retreating from the global community. Once again, that's not the SAP way.
We are proud to represent Germany on the world stage. We are honored to advise heads of state on the biggest topics of our time, So our company can make the biggest difference in society. Ladies and gentlemen, this is your SAP. This is where business and technology come together. This is why 91,000 colleagues Stand so proudly behind the motto and the maxim, the best run SAP, Dylan Dunk.
Thank you very much, Bill, I am now calling for speakers to item 1 and all other agenda items, that is, items 2 to 9 in the invitation to the meeting, of which copies are available in the meeting rooms and which also contains the management's proposals. Regarding item number 2 on the agenda concerning the appropriation of retained earnings, please note that the Executive Board and the Supervisory Board have amended their proposal as advised in the meeting invitation to reflect a change in number of shares entitled to dividend. However, the proposed dividend of 1 point €4 per share that qualifies for dividend has not changed. The executive and the supervisory boards therefore now ask The meeting resolved as follows. That the retained earnings of 10,000,000,000,
€29,000,000,819,971,700
from the 'twenty seven fiscal year Report in the financial statements be applied as follows: that a dividend of €1,400,000 be paid out for qualifying non Power Value shares, which makes 1,671,009,829
€0.2
That €0 be appropriated to other revenue growth and that the balance of €8,358,710,142 €0.5 be carried forward to the new account. The text of this amended proposal is also available on the speaker's desk. And I hereby now open a discussion section of the meeting, which I will take as a general debate on all agenda items. And well, as in the previous years, I would now give the floor to Ms. Thank you very much, Mr.
Chairman. Ladies and gentlemen, my name is Jela Benner Heinecher, And I represent the Deutsche Schulzweinigung for Werpapeer Besseldorf DSW. It's tough. After so much enthusiasm coming back and Getting back to the basics because shareholders are interested especially in one thing, namely the share price and the dividend. But of course, the outlook that you presented to us is also relevant to us.
Now we just saw it on the chart on the screen, ladies On the 1st November 2017, the share price of SAP was more than €100 Then there was a temporary disappointing dip of the share price, but the good news is we are back on track. Since the results for the Q1 have been published, the world as of SAP is okay again from the shareholders' point of view. We are back on the route towards success, and The share price today is at more than €96 So here, too, we're on the right track, the right track towards 100 plus. For that reason, ladies and gentlemen, I cannot help but express some words of praise, which are quite abundant this year even. Well, In previous years, I kept complaining a bit at this point about the amount of the dividend.
But even here, we are now toning down our criticism because now the proposed dividend is €1.40 And we've got an overall payout ratio of 41% already. So here again, ladies and gentlemen, We are on the right track, namely towards a payout ratio of 50%. The Q1 of the year, ladies and gentlemen, has restored our faith in the SAP Summer Fairytale 2020. Indeed, the core business was strong. In the cloud business, we've seen fast growth, and the good news is that the margin is now on the rise again as well.
So in operating terms, it's all good news and records. And as we have just heard, SAP S4HANA has really turned into a true success story. And SAP's product diversity is something which not many others can offer. Bill, you've just mentioned the new outlook with SAP Leonardo. The new platform Offering higher connectivity of tools, goods and factories, IoT.
That sounds great. That sounds highly enthusiastic. And I'd like to know when will these products also be available and ready to be sold on the markets? And how and with whom are we going to sell and distribute those products? So who will be our partners in this regard?
Well, partners, as we've learned during the last few years, partners are important. We've got more than 16,000 of them all over the world, and they also include Apple and Google. Since November 2017, SAP has even intensified its partnership with Microsoft, amongst others, in the area of cloud computing. And here, once again, I would like to ask you, Bill, what does this mean specifically? And what do we expect in this regard, for example, in terms of the sales volumes and the profit contribution.
Now we are also Quite optimistic when we hear, ladies and gentlemen, that SAP intends to invest another €2,000,000,000 for the company by the year 2020. And here, once again, I'd like to know What is this funding specifically going to go into? What is your list of priorities for these investments? So you can see, ladies and gentlemen, there are lots of good and positive aspects, but I'm glad to find the one or the other detail where things could even be improved further. And one thing is customer loyalty.
I mean, this is certainly an area where we can catch up, and that's usually measured by the Net Promoter Score. Now the goal you had set for yourselves was to reach a score of 21% to 23% last year. Now what you achieved at the end of the day were 17.8%. So that is something where you unfortunately failed to reach your goals. Now the new goal for 2018, therefore, it's still the old one.
So again, 21% to 23%. Now when it comes to customer loyalty, there's one thing that plays an important role. That's the fee model of SAP. Now in the past, the intransparency of the SAP fees has been the at the focus of much criticism. And that's why it was also Right to tackle this issue and to set up a new pricing model together with our customers.
Therefore, my question to you is, now the price model is up and running. Now what is the impact of this onto customer loyalty? What is the customer's response to this new pricing model? Internal growth, ladies and gentlemen, It's always one thing. And external growth, that is takeovers, that's the second part of it.
Last summer, Mr. Mucches, you said there is no need to take any action and to purchase any further companies. And something similar, we had also heard about sales force. And then there were only smaller takeovers in 2017, GIGA and Abaqus. Mean, that was it.
But ladies and gentlemen, surprise, surprise, in late January, We then heard the announcement of the takeover of the American cloud provider, Kralitis. Now I really would call it a surprise because at US2.4 billion dollars purchasing price, It is it's not peanuts, as some people call it. That price, a price for a company, which as far as I know, doesn't generate any profits, but still we're paying a premium of 28%. However, I've also learned that in this industry, Nothing's for free and nothing's inexpensive and others they pay even much higher prices. Colitis, ladies and gentlemen, That is something which will certainly massively influence the future of SAP.
And for that reason, I'd like to hear about some more details in this regard. Now you had told us that the transaction would be closed in the second or the third quarter, and you already managed to close that deal on the 5th April. So chaperone, Mr. Moochis, that was record speed. Colitis is Latin, and it actually means smart, clever.
I mean that's fitting, isn't it? It's quite appropriate for SAP. It's also appropriate for our region here. So tell us, what exactly did you buy there? It's software for sales management, And that means we are once again on the trails of sales force.
Bill, you've just mentioned yourselves, Your most important goal is to become the number 1 in CRM, customer relationship management. Therefore, my question for you is the following. Now we've bought Kaleidus. Now what's our current market position in CRM? Where do we now stand after having taken over Kaleidus?
And How is our competitor sales force doing? How long is it going to take to integrate Kolitis? And What exactly is the synergy that you want to tap into? If you look at SAP's competitors, ladies and gentlemen, Then we can be satisfied in declaring that we're doing better inorganic growth, Definitely better at least than our competitor sales force. I mean, they keep taking over companies at a constant pace.
They grow through external takeovers, but it's never a real bargain. Larry Ellison also recently said there are no takeover candidates in the market anymore, but now he invested 6,000,000,000 U. S. Dollars to purchase MuleSoft. I mean, that's not a bargain either, isn't it?
And that's why my specific question for you, Mr. Mooch is The CFO is, wouldn't this also have been a good candidate for SAP, Especially as we already held a minority interest in MuleSoft, did we sell it at a good price? Well, wouldn't MuleSoft also have been a good candidate for us? Or would it have been a bit too expensive for us? Well, ladies and gentlemen, digitalization, that's on The agenda of all DAX companies basically, and now we're glad to have a new board member, A board member who is also responsible for digital processes, Christian Klein, he introduced himself.
Congratulations, by the way, on your appointment. Now for us, this sounds a bit surprising. I mean, this is a digital company, and we still need somebody on the board For digitalization, but once again, it seems that we've got to do some catching up. Mr. Klein, At SAP, you are now supposed to streamline and standardize sales processes, Which once again will take us closer to our goal as one SAP as a best run company in the world.
Finally, So my specific question for you is, where do we expect the greatest impact from your work? And how long Is it going to take for us to become the best company in the world, the poster child worldwide? Now back to our agenda, ladies and gentlemen. Let me briefly look back onto last year because We had ended up in a dead end in terms of corporate governance. I remember very well, Professor Plutner, that Investors massively criticized the compensation of the Board, and you did not really understand it.
You said we did everything right, And that's why only 15.9% of yes vote of shareholders voted yes in ratifying the act Of the Board of Management. And I've got to say I'm relieved because I was worried That you might be somewhat resilient in accepting advice. And I'm happy to see that this is absolutely not the case. Quite in contrast, You swept the plate clean, and now you really came up with a strong coup in terms of corporate governance. You really dealt with all of the important issues.
Not only did you revise the system of corporate Compensation. No. Your compensation report has become much more transparent. You also disclosed the peer group. The discretionary leeway for the short term incentive was eliminated.
And you even integrated now clawback provisions in the board contracts. So And that's not the end of the story yet, ladies and gentlemen. When it comes to the supervisory board, as you have just noticed When the candidates introduce themselves, well, we're also experiencing a massive change there. You're rejuvenating the Supervisory Board. You the generation changeover.
And the proposal to elect Mr. Oswald, it's not really a surprise We had expected that. And probably, you have thus already arranged for your succession in good time already. Well, one more thing that was criticized about SAP in the past was diversity. It didn't really work out well with women and their strong positions in the company.
And now once again, Mr. Plutner, you've done it right. We used to have 2 women on the executive board and 6 on the supervisory board. And against this background, ladies and gentlemen, When it comes to item number 7 of the agenda, elections to the Supervisory Board, we are going to support all of the proposals that have been presented. Now I've got to admit gradually, I'm becoming a bit worried.
You're becoming the A You didn't, Mr. Plattner, in terms of corporate governance, something you never wanted to be. But honestly, I think it's great. Today, the board compensation system is also something we're going to vote on. And we, DSW, will also vote yes on this item.
Although with a bit of a grain of salt, that's the total amount of compensation, euros 22,000,000 for 20.17 for the CEO. Now here, I've got to be honest. From my point of view, that still doesn't fit into the overall German landscape. And thus, this might be the only point of criticism we might voice. It doesn't fit into the German landscape in terms of the total And that is not even the maximum compensation that is possible for the CEO.
For the short term incentive, we only achieved 88% with the LTI. We also were below the previous year. Well, that means the potential overall compensation might be much higher. I personally, I don't care. I think Bill McDermott could just earn as much as he can, but still, it has to fit into the overall landscape of our society.
Ladies and gentlemen, ethical behavior, and that's also What the annual report of SAP says, ethical behavior is one of the basic pillars of this company. And you've also touched upon this matter yourself a bill. It's compliance. And here, especially, you referred to the allegations in South Africa. Obviously, that there has been a case of corruption.
Allegedly, about €7,000,000 have been paid to some dubious sources. And apparently, each of these transactions was below the 15% threshold, Which would have required a mandatory approval. You've responded. That's good. But once again, I've got some more specific questions.
What specifically did you change about the compliance system to make sure that a case like the one in South Africa cannot be repeated because there's one thing we mustn't forget, ladies and gentlemen. It's also a massive reputational damage, which SAP has suffered. Well, one thing you didn't mention Well, the problems which we read about in Oman and the United Arab Emirates, there are investigations About violence of anti corruption and embargo regulations since they've been Enacted by Mr. Trump. And here, once again, I'd like to know which consequences have you drawn in these two countries?
How can such cases in these countries be prevented in the first place? Or would it be best not to do any business in those countries in the 1st place? Ladies and gentlemen, 2017, that's been the year of transition, the year of transformation at SAP, And it really brought about the change in our operating margin. And for that reason, We are confident, ladies and gentlemen, after looking at the Q1 numbers, we are confident that now It's all going to pick up massively for the overall year 2018. Now Bill, you said that a market capitalization of €300,000,000,000 That would be a reasonable goal for SAP.
Currently, ladies and gentlemen, our market cap is slightly above €100,000,000,000 which makes us the number 1 within the German DAX 30 Companies. So we're dreaming of tripling our market capitalization, the share price. Now if you break this down onto the share price And if we assume that we currently have got €100 that means we are talking about a share price of €300 Well, and here, I really would like to know, Bill, when will we get there? Is it also going to be 2020? I think you hadn't give us a precise timing, but You can do so now.
If we reach €300 of the share price in 2020, well, then I wouldn't say no to that, ladies and gentlemen. Well, it sounds like a pie in the sky. I often thought so when I was standing here because It's part of our German nature to be somewhat skeptical. And then you're somewhat stunned by the enthusiasm and the excitement, But you cannot escape it really. And I've been up here on this podium for many years, and I've got to tell you, you promised a lot, and you always delivered.
And for that reason, ladies and gentlemen, I believe that the future of SAP, well, it's really the summer fairy tale 2020 coming true. And really, the future looks good as the Q1 numbers have confirmed, and the growth forecast has being raised even further also, thanks to the new company taking over. So I tend to be rather skeptical and cautious, But now I'm almost enthusiastic. So I call upon you, deliver in 2018 as announced, and then we, The shareholders will have nothing to complain about in terms of share price. Thank you very much.
Thank you very much, Ms. Benoit Heinehor. Little note, The market capitalization in euros is €119,000,000,000 So almost €120,000,000,000 That would be would have been more appropriate than just saying slightly above 100%. No, but it's only 20%. And this brings me to the next speaker, Mr.
Markus Kienle from Schutzweinigung der Kappitallenlager. Professor Doctor. Plattner, Mr. McDermott, ladies and gentlemen, Of the management, dear shareholders, my name is Markus Kienle. I'm the member on the Board of the Schulzke Meinschaft Dear Capitan and Lager, Mr.
McDermott, you and your team, once again in the past fiscal year, you achieved the goals that you had communicated. Once again, In terms of IFRS and non IFRS basis, you were able to increase sales and profits. And based upon IFRS, we've got a return of 15.8% after taxes, which is also a slight improvement over the previous year. Well, I'm not going to be as enthusiastic as the previous speaker about the payout ratio because you're staying at 41% as in the previous year. Now ladies and gentlemen, this is still within the overall guidance of 40% to 60% of the shareholders' associations.
Nevertheless, This payout ratio, as I've told you before, is rather below average for such a mature company as SAP. Now In a sustainable manner, we do expect a payout ratio of 50%. That is splitting the profits 50 by 50 between the shareholders and the management, that's something which we would consider appropriate. So when do you intend to reach a payout ratio of at least 50% of the annual profit for the year? Now let me stick to that return on equity.
Now for the minority shareholders, it amounted to 122.58 percent for the previous year, whereas the return on equity for us shareholders only is 15.8%. Now what's the reason for this massive difference in return on equity? Now sales revenues, IFRS and non IFRS based, are very close to each other. However, when you Disclose expenses, there's a major difference. Non IFRS expenditures are 10% below the IFRS expenditures.
Nevertheless, I'd like to clearly point out that the costs have increased stronger than revenues last year. When I asked that question regarding The annual financial statements 2016 responded by saying that this above increase in growth in cost is mainly due to the expansion of the cloud business and that as of 2018, you would already expect a significant improvement of the margin. Now comparing the past fiscal year 2017 to the one of the year before 2016, where we already had suffered a major slump in margins, however, So a further DTE raise of the margin, although the Q1 now seems to promise a recovery, although it's been just 1 quarter Of the year 2018 and the future is still uncertain. So do you still stick to your forecast, namely that in the current fiscal year 2018, we can already expect A significant increase of the margin. And could you please also give us your target margin for the year 2018?
Our society ladies our company, ladies and gentlemen, as the previous speaker has said, is on a competitive, you could say testosterone based growth track. But at some point, one can also ask, when have we reached a balanced state in our business and our business model? And In that balanced state, what would the overall margin then be? The financial result, which has increased by more than 700%, allowed you, based upon IFRS, to increase earnings before tax by 3.35 percent. However, in the annual report regarding the financial statement, you also declare that this was impacted by special effects Such as the sale of equity titles of the Sapphire Investment Fund.
Now What does this mean, equity titles actually? And the effective tax rate has been increased from 25.03 percent to 19.03%. It is 6 percentage points, IFRS based and non IFRS based. Now what do you actually mean by effective tax ratio? What are the main reasons for this Clear reduction of the effective tax ratio.
And what is the effective tax rate that you're expecting in the long run? What is the impact of the U. S. Tax reform on to the effective tax rate? Digitalization And in their continuation then also artificial intelligence is part of the core business.
Actually, I would even say the DNA of our company. Using AI, It seems to be the logic next step in further optimization as part of digitalization. What revenues and profits do you expect in which product areas by using AI? Can you give us specific industries or jobs which are kind of The pioneers and which will most benefit from AI at least in the early stages. Mr.
McDermott, in your letter to the shareholders, you've written that there are also aspects of AI, which are beyond human control. Now that is not really comforting to me. What exactly do you mean? What are those areas. What have you in mind when you're writing this?
AI will be a key driver for the future. And For this reason, the following questions arise. Who has got the responsibility for AI on a board level? And what overall investments do you expect up to the year 2020 for development and further development of artificial intelligence? Professor Doctor.
Plattner, you openly report on 2 compliance issues, which you've handled in a very professional manner, as we've heard. Now one of these issues also has got an external Trade consequence, which is probably inevitable considering the current ups and downs in economic sanctions. Could you please be more specific on that case? And which regime or which rules do you Consider when there are different international rules and regulations and the current proposals of the EU Commission President Juncker has even Fired up that discussion because he said we want to force companies to resist U. S.
Sanctions. Now how exactly he wants to do that, he did not elaborate on. The exit the U. S. A.
Exiting the Iran contract, is that going to impact our business and what specifically is the impact in amounts. Then at last AGM, we also talked about the compensation model. We can clearly say that the complexity, especially in terms of the discretionary decisions, has been reduced. However, the current compensation model
still is
not really simple. I think it can still be improved further if you just compare it to the systems of other DACS companies. In our legal view, it is still unacceptable to implement a variable compensation component based upon just 1 year of performance, and you still have the PSUs and RSUs for the individual compensation component. As far as we know, the RSUs are not success based, But just to kind of give, now how can the sustainable development of the company be promoted on the basis of the RSUs? And you still seem to find pleasure in establishing anachronistic control regulations which are hardly even used anymore in American and British companies.
The current compensation system, of course, also includes as a central element, old age prevention for the board members. Now what is the old age provision level, which is thus insured? If I look at the compensation system and if I understand it properly, Mr. Plutner, then the LTI component is not Paid out on a pro rata basis, but in the year, the divesting period expires. At the same time, you also introduced clawback provisions, which independent area of application do these clawback provisions have in the current compensation system, which is not already covered by the existing legal instruments.
So what additional benefit do we have from the clawback provisions for which specific cases. Now reading the Supervisory Board report, we Can see that you also talked to specific investors about the compensation system, and you reported also on this orally, although in a more general way. These contacts with investors, ladies and gentlemen, are currently considered a progressive tool of corporate governance. Nevertheless, their legality under German corporate law is at least at the dispute. Experts even believe that such contracts are even illegal.
Now the question is, When we talk about the compensation system, that might not be that obvious, that problem. However, especially, There's a problem in terms of insider know how when we talk about strategies, personnel planning, future changes on the executive board, for example. So which specific topics did you discuss with which investors, Doctor. Plattner? And how can you make sure that you don't run the risk of disclosing insider related facts and data.
And please don't tell me what I've heard a few weeks ago at the AGM of another major DAX company, which said, I've been the CEO of a tax company for so many years that I know the inside the law inside out. Now that is wrong and it's also negligible. Now there's a permanent coming and going on the Supervisory Board. Out of the 8 shareholder representatives, 4, that means half of them have resigned before the end of their term, including Mr. Snabe, which is unacceptable from our point of view because he didn't give us any reasons.
Now for which reasons did These 4 candidates now resign early. Out of the 4 candidates proposed, Diane Greene is In charge of the cloud business. And one of the companies of Mr. Oswald has got a consulting contract with Google. So isn't there a kind of conflict of interest with Ms.
Green considering her work for Google? What is your view on this? The consulting contract of Mr. Oswald's company with Google, is that going to be continued once he's been elected to the Supervisory Board? So we felt that it's always been a special criterion of quality of the auditor of this company that this auditor did not render any non audit services only to a very small account.
And we can also only see fees for the year end audit on the bill. However, if you then look take a closer look at the full report and the audit opinion, Then we can also see non audit services. Are these costs that are built there still costs which would be covered by audit? Yes. Here are my recommendations.
We are going to support the proposal for the appropriation of profits and also the ratification of the act of the members of the Board of Management. We are also going to support the proposals for the new candidates. This also Usually, however, a 3 years cooling off period is required, but we still support Mr. Oswald's election, although his cooling period of cooling off period has only been 2 years. This also applies because he was not proposed for Supervisory Board immediately after he left the Executive Board.
But he at least accepted that 2 years cooling off period and then just entered into consulting contract with SAP. In spite of massive improvements, the proposed compensation system will not be supported by our association, the SDK. We still believe that this model is still too complex, and it still contains variable compensation elements with a 1 year vesting period and also change of control clauses. Based upon the current information we have, the proposal of the for the election of the auditor cannot be supported by us yet. If, however, the contradiction that I have identified between the notes and the audit opinion can be reconciled and explained to us, then we're also going to support that proposal.
The reauthorization of buyback own shares is not supported by us because we prefer to pay out higher dividend rather than paying rather than buying back shares. Therefore, we think It is obvious that before buying back own shares, a satisfactory and appropriate payout ratio has to be achieved. And for companies such as SOP, we think that this adequate payout ratio is rather 50% and not 40% or 41%. If, however, and if the buyback of own shares serves the dynamic and flexible capital allocation optimization in terms of Equity, then we also would consider it possible to approve that item. Approving the proposal for rendering The term of the Supervisory Board members more flexible is something we are going to support.
Ladies and gentlemen, it's now our responsibility to get proper explanations from the supervisory and executive board members if any deviation from the regular term is asked for because then we have to see whether this is properly substantiated. Ladies and gentlemen, we'd like to thank all of the employees and the management For the excellent results of the fiscal year 2017, I'd like to ask the management board to pass on our congratulations and gratitude
Thank you, Mr. Kienle. I now have the list of participants of the capital stock of the company of 1,000,000,000 €228,000,000,000 5 €2.32 Divided into just as many shares, 884,000,000, 8 90,559 shares of the same number of also represented here, which is 72.03 percent of the capital stock for 538,106 These 7 shares votes have been requested by mail. They will later on be taken into account when The voting outcome about the proposals of the administration. Hence 885,420 6.
Shares are either present or represented by voting A male which is 72.07 percent of the basic capital. I'd like to invite the 3rd Mr. Henrik Schmitz. Thank you very much. Professor Plutner, I would have joined you on stage had You asked me, but I think it's rather crowded on stage.
So let me stay down here. Mr. McDermott, Professor Plutner, ladies and gentlemen, Gentlemen of the Supervisory Board, Executive Board and shareholders of our SAP. I represent DWS, one of the biggest European fund company. We hold more than 5,000,000 which I'm representing here for the first time also on behalf of our clients.
As a long term oriented responsible investor, We are obliged to act in the best interest of our customers, which includes critical discussions about strategy, major influential factors, incorporate governance with our customer. The last item also is an essential point of contact with the Supervisory Board. And unless or Contrary to change into what Mr. Kinde said, we do so bearing in mind that we are not going to exchange Insider related information, we are professionals enough to know that. We heard about the Development of the business here.
And before we join in the exoneration, I'd like Talk about the aspects. Development of the share price over 3 years, we have an increase by more than 60%. DAX over the same period managed nearly 29%, so we can be satisfied. The past 2017 fiscal year, well, we see plus 12% of the share price compared to the DAX. So they managed to this more room for improvement since the beginning of the first quarter, nearly 3% more is possible but we've heard a lot of positive information about that and we'll keep track of the further share price development.
Dividend Development, The result of the past fiscal year made the administration to propose 1.40 euros for and to adapt the dividend policy for the near future, 40% or even more development we would approve. And that development we have will be just as sustainable And we'll reach the 50% mentioned. A few ideas about the performance. 6% up, increase in revenue, €3,700,000,000 were due to cloud subscription and support revenue, euros 17,800,000,000 software license and support, euros 3,900,000,000 to services. These results reflect a continued robust demand for the SAP developed software for industry.
The HANA platform and the associated products are likely to continue to support this positive trend, But the development of these solutions also means high investments especially high growth in cloud based solutions, which has had a negative impact on margin development. The operating result in 2017 improved by only 2 percent to €6,700,000,000 The operating margin dropped to 28.9%, 2% roughly. We think it's most important for the further share price of the SAP company that the traditional software license business is kept stable and investments Less in class based solutions growth rates of about 30% will be continued and expanded. Stable development of maintenance revenue should be borne in mind. Negative margin development where there was a sign For stabilization in the recent past, there is to be a turn of affairs.
In addition to persistent cost discipline, the revenue mix would be improved to have a positive impact on margin development. And now for governance. We are long term oriented investors. Mechanisms of corporate governance in our mind are major components of our assessment, they are also reflected in our guidelines. We based ourselves not just on national regulation and policies, but also international best practices.
Here the supervisory board plays a decisive role representing our interests as owners. What's relevant in our case is that all supervisory board members realize what their mandate implies. An objective indicator is participation in the meetings of the Supervisory Board and its committees And expanding the governance rules, SAP introduced that point to Improvements in the governance area also include
the
G and O insurance and also the rules of procedure of the civil advisory board are now available On the Internet progress, which I'd like to appraise. The compensation system, Which is now to be discussed for the Executive Board is progress indeed and we welcome the effort made in this respect. Professor Plattner, I'm sure this was quite an effort for all Partly is concerned but I think you can be satisfied with the outcome. We're pleased to note also that critical aspects like the clawback mechanisms Which we as investors now consider relevant demand has been entered into the existing system. In your letter, Professor Plutner, you transparently and understandably answered a number of questions, A kind of transparency that convinces us.
In terms of content, however, there's one point where our opinion differs. The non financial key figures, SAP is a model case making non Financial figures, transparency and including them in corporate governance. Page 243 of the annual report tells us in a convincing SENS. But also the nonfinancial key factors play a role, and They should also be taken into account in the compensation of Executive Board. We must take a decision on this pay system, which must be in the best interest of our clients.
Paid out to make the non financial aspects transparent thing. Prospective planning of successorship, we think is a major contribution to a long term assurance of the success of the company. I'd also like to emphasize the competencies represented in the Supervisory Board. The qualified descriptions of candidates which we heard here today are a good addition to the Supervisory Board adding to its qualification. And we are sure that the Supervisory Board and its Present composition will solve its problems.
Mr. Schibhor had seen on Page 2020 as the financial expert. Now that Mr. Vuchel is going to leave, We need a new member. Would you tell us who will be the member of the audit committee and what candidates of the Supervisory Board would fulfill the qualifications under the German Joint Stock Corporation Act.
And now for independence, this major element about the critical control of management also serves to protect the interests of minority shareholders. Independence of the Supervisory Board and its majority and its members, especially in the control committees and in the chair And on the audit committee, in our opinion, is a basic necessity. For us as TWS also, the Term of mandate is one of the criteria determining independence and members who are more than 10 years members of the Supervisory Board, we feel are no longer independent. We have nothing against these experienced supervisory board being available to the supervisory board as long as 50 plus 1% are independent, we cannot accept what's said on Page 19. Members have been supervisory board members for 4 years, more than 4 years.
Mr. Oswald at the beginning of next year is a former Executive Board member who will become the SEB advisory Board member of SFP. Now let me tell ask what the consultation agreements between Mr. Oswald And SAP contain Mrs. Steinbreen and Connections with Google and others, something we'd like to see critically.
What is the scope of the business relations between Google Cloud and SAP? What The possibilities of Daimlerin to take decisions and business relations with And how will the supervisory board handle any conflicting interests? Let me conclude. I would wish all members of the boards and the staff All the best of success. And thank all staff and Besu also in the past year have contributed to the positive Development of SAP Business.
I'd like to expressly thank all retiring members of the Supervisory Board for their services. Wish all the best to new members. My organization will follow all proposals of the administration. Thank you for your attention and thank you for answering my questions. Which brings us to number 4 on the list, Mr.
Hans Martin Buhlmann of the Vereinigung Institutzenilebrevard and Lege, the floor is yours. Item number 4, I'm Hans Martin Bolman, Chairman of EIB, The Vahnekong Institute in Hilleberg Vert and Lega represent 6,850,887 volts. Well, either the floor is too high or the desk is too low and Maybe I'll fall into a hole in between. I've covered 2 or 3 shareholder meetings in my life With presentations by Executive Board members, some of them had difficulties, others Did not. Mr.
Christian Klein, the way you presented yourself, just standing up here and saying, I've been With the company for nearly 20 years, so I know it all. I think we're very good. We need to improve. We need clients. We must be scalable.
Such a young man full of opportunities. It's fun to see you. Mr. Klein, Should you replace Mr. Plattner once this has been taken, then the Stock price will be past 300, then we'll not have a low dividend of €140,000,000 but a dividend of €14,000,000 which is a good thing.
And then most probably, we'll argue about the quota for male members given the many women We are critical with the quota of bail members. What will be what will come after Hanna, Mr. Chairman? Will there be Hannes, the male version? Are you thinking of something?
Have you prepared anything? Or is HANA still Usable enough and expandable enough will remain modest, the executive board said they even wrote it down, will remain modest. The compensation report, well, I'll be coming back to this. We have brave, courageous dreams, but the margin of SAP was better some time ago. And now comes growth.
If you hadn't done The way with the quarterly result of Q1, the way you did, I would have been phrased, Revenue increases and the margin drops. That's no good. Is it Not agreeable. The executive board said years ago, at the beginning, when I instituted cloud, I have less money but as time goes on earnings will be better. Now the margin dropped and now you want To raise the margin back to yesterday's level, there must be a gap somewhere like here Between this panel and the floor, I've been asked to step on to talk to you.
Actually, the margin automatically would improve. And all you do and you do right should be added on top. 25% growth. Incidentally, others managed that too. They grew by 1 quarter.
There was one whose cloud business improved by more than 1 quarter, 150,000,000 cloud users, hard to imagine. That's every German hand, roughly, just to make it tangible. Ladies and gentlemen, we are receiving a dividend And the dividend policy, it says on Page 10 of the annual report, we would Like to pay our shareholders. Who is we? Well, we are the shareholders who decide on the dividend at the end.
You elaborated, no, Ed, 543 people have worked for this dividend being generated and our gratitude to these staff members should be received by them and should be made plain. The company SFP is the most Value, we're not the most expensive, the most valuable company on the tax. Well, there are some Less successful companies than the decks, the most valuable German company. But There's something to pass by. Alphabet, Apple, Amazon are more expensive.
And why they are more expensive by many orders of magnitude? Are they more valuable? How can SA or could SA be 10 times as valuable to be comparable with others in other countries, other structures? Is that impossible to imagine by you or will it be the outcome of a Chinese investment We have an executive board, which has been changed now. There are 7 of work and then there's the chairman and the person in charge of financial.
Now does every Active executive board member business lines to handle or how has the organization been changed and what is the effect you have in mind? This is not for the executive, but for the Supervisory Board to answer. Somebody asked, I think, Markus, was it, it's a matter of artificial intelligence. Coming back to the margin, artificial intelligence, this is like a machine becoming brighter All on its own, that does not entail any wage costs. By enriching the artificial intelligence, I would become better and better, faster and faster.
It's only true that the software Author who writes that AI must be taken into account, but How do you see this in terms of revenue? And how can you point out AI in terms of product, you can't hold it up for us to see, but you can comment. Item 5, here we'll be coming back to the open hand extended for peace Mr. McDermott. Don't take it personally, But when the double digit amount in 1,000,000 is carried off here, I can understand how it's done.
But how an individual, an amount of so many millions earned in 365 calendar days, if the money you worked well, but Then you said to do good deeds, return part of it to society or to yourself. You said that true greatness is shown not by what you take This is at least what you should abide by. Well, you can't work all by your own. You want to have partners and they cooperate with you to do something nice and something better. Partners not just in Waldorf, They act all over the world, including South Africa, happens.
Now they operate worldwide. What do they do? Are they only selling, applying OEMs? Or could you describe this? It could also have an interaction with the price model that it changes, adapts.
Also partners must stay on the move so that they climb up in the course of their movement, revenue with partners, etcetera. In order for something to be done, you have to invest. You spend a lot of money then you buy computers, set it up somewhere, put another one up in Waldorf, maybe you'd like to move into a Colder region, maybe you need a computer in America because there's somebody who, first of all, wants to have a computer at home. America First. Well, how are you planning?
How are you structuring this In your expenses and in also your earning of money. Well, yes, and you also invested into the environment. You showed characters which I think are cardboard characters. That's no good for the environment. Maybe it's the new kind of stuff made by BASF that will decompose automatically.
Well, I said maybe your wall socket will also Spell out something green. Well, it doesn't really happen. You said in our green cloud, there will only be sun and Wind. And if there is no sun and there is no wind, will then there be no cloud? If the sky is cloudy and the sun doesn't break through or the wind, what then?
You need stability in power supply and this may take more than sun and wind. How will you Arrange for that. Well, whenever Mr. Buhlmann speaks into the market's green speech, Would that be a marketing gimmick, but doubtful with respect to reputation? The world has not become Any easier?
£10,000,000,000 in the years. £1,000,000,000 tax benefit and The benefit, the nice gentlemen watching, €4,000,000,000 revenue in Asia. Asia is quite large. There should be more revenue. There should be planned faster growth than is now the case.
Are we accepted in China? Or will the Chinese come to us soon? We should have a better strategy to balance that out. I think somebody said that the operating result had been worse in 2017 like that hole between my Support and the pulpit. Well, the performance per share improved by 10%.
The other improvement is by 5%. Can you explain the difference? Well, the operating result would also have to be broken down by shares. And all this then associated with the seniority of the cloud business, which must produce a better result automatically. Financial performance was good.
More could be said about it. We want to say it. You bought Calidus Software, Dublin, but it says California, so it seems to be America, Afram. What about this acquisition? What are you doing?
And why did you Enter this into the new organization of 1 SAP. I'm not going to enlarge on this. Why did you invest now And what is the outcome? There's one other worry. Next week, there will be new rules about data protection.
Data protection will be rearranged. Will it make us poorer or richer as SAP? Things that communicate with themselves, the Internet of Things, will it make us richer or poorer From the point of view of data protection, these things, which let me pass by a gas station and while I pass by, I pay my petrol. They know my requirement in advance. How do they know I suffer from migraine to make an offer in order to make me go into a shop and buy something.
This spread of Programmed world, the Internet of Things Leonardo and whatever you call it, you'll have to invest something. How do you calculate This type of investment in particular under the premises of the exaggerated data protection rules will experience as of next week. Mr. Buchra, Timesoft, the Essence, Also, plus to Mr. Hamed, one would have to say 2 more sentences.
You have benefited the company very much. We've discussed it in the past repeatedly. Shareholders must be grateful and are grateful to you. Mr. Plattner, these general meetings are also particularly charming Because of the way you share them and when you have an open dialogue with shareholders, I'm Sir, hearing you talk only to institutional investors, talk to all of them.
We are there. We are the people. Carry on and open a frank dialogue with all of us. I'll make room for that. After having said that, if everybody in this room will build up 1% of their shares, then there will be a good weekend Well, the share price was more than €100, so go on in this way.
Thank you.
Thank you, Mr. Bullman. We will now continue with number 5. And after that, we will I call Anna Dorothea Polze of the Association of German Female Lawyers. Professor Plattner, Mr.
McDermott, ladies and gentlemen, Dear shareholders, male and female, I'm Anna Polser, a member of the German Women Lawyers Association, DJB. And as a lawyer, I practice in Mannheim. The DJB still advocates equal rights and equality for women in all areas of society, which includes careers, the same opportunities for men and women. And our project, shareholders demand equal rights, supports that. We have attended more than 400 AGMs in Germany and extended our project to other European countries.
Implementation of a binding quota for new Supervisory Board members was a real breakthrough. Women now have nearly 30% of the mandates on supervisory boards in Germany, and you are also proposing a by election to fulfill the legal quota of 30%, the shareholders side We'll even have 4 women and 5 men next year. In view of the past where reservations that there might not be enough qualified women. This is quite remarkable. On the executive boards, there are still no or not enough Women, the share of women on the first two management levels below executive board is also low.
Women and men not paid equally for the same kind of work. The necessary development of an Equitable policy of a company means that structural changes are needed. I have the following questions on your policies The first question regards the composition of the executive board. The supervisory board must set a target for the appointment to the executive order. The DJB demands a quota of 40% For executive board members and you decided that in the future, you will have 2 women as before.
Since you're My following questions relate to the first two management levels below the executive board. The executive board Must set a target for the first two management board levels. You have opted for 25% for second and 20% for the 2nd level. And this means that your targets are more ambitious than in the previous year, But why is this share lower on the second level of management? Next question, how many women and how many men were raised to the 1st and second management levels last year.
And please specify in absolute numbers And in percentages, relative to the total number of people working in Germany in your company. On the corporate policy, I have a question. What do you do to make sure that men and women are receive equal pay when they work at the same level? Your report that you introduced this year on the treatment equal treatment of men and women. And you are now submitting a report as we have been able to see.
Our question is, since January 2018, people with more than 200 staff to make sure that they comply with the principles of equality have to provide information. How many companies Of more than 200 employees are there and in how many companies do we have, how many Male and female employees who requested information, who gave that information, the works counsel or the employer? Finally, a question on the introduction of monitoring and audits To make sure that people are paid equally, do you implement are you planning to implement such a process? And if So please specify whether this system will be uniform across the group or will it be specific to each individual company and whether that auditing procedure relates to all groups of employees in those respective companies. I'm sure that for this challenge you have also found or will find an intelligent solution and also maybe set an example Thank you, Anna Dorotea Politzer.
And can we now I would take some of the questions. 1st, by Jelle Bennett Heineacher, and maybe colleagues can answer some more of her Questions. First of all, the priority of the investments in the SAP Group. Yes, of course, We have to continue investing into innovations and into our solution portfolio to be able to maintain our strong position on the market. Some of the main priorities that we have in our portfolio are, of course, still investments into our digital core, into our flagship solution as for HANA, where we're investing into on premise and into the cloud solution.
The application area is our absolute core business, and of course, we will make sure that Through innovation, we will be able to maintain and enhance our leading position in the world. Bill said in his speech also that the SAP cloud platform is important because it is a central integration and innovation platform for SAP, both for our ecosystem, It's of fundamental importance for that ecosystem, but also for our customers for seamless end to end process integration. So Of course, we continue to build up our portfolio in the SAP Cloud Platform. Also SAP Leonardo, The innovation modules around IoT and machine learning, advanced analytics and other areas, blockchain, to name just a few, are also receiving strong investments. And in addition to that, we're also investing into further competitiveness of our cloud line of business solution portfolio, solutions such as SuccessFactors, but also our customer experience area Where are our customers?
We are bundling with GIGI and Calidus our solutions, And we are strengthening our position there also organically and through investments To be able to attack in that area and to challenge the market leaders in those areas, You had a question about customer retention and the Net Promoter Score. There, you had the question how the figures I suppose to develop further, now these metrics, this is a scale from minus 100 to +100 percent In 2017, as you said rightly, we could, of course, report a new Net Promoter but our target of 21% to 23% was not quite achieved. This had to do, among other things, with the fact that within our group, In the case of one acquired company, we had to adapt the metrics, which we did last year. Without that to report in a uniform way and according to our standards. So it was important to us to harmonize those methods even though that did have a negative impact on the Net Promoter Score given.
Now what are we doing to ensure that in the future, our Net Promoter Score will rise. For one thing, of course, we're optimizing our communication with customers. We are working With our customers on commercial models and solutions, as we have presented In the area of pricing, we are also working on relationship management with customers as part of a customer For live program with Jane which Jane and Adeel, with Michael Klein and Meyer, head To make this really seamless and especially with regard to our recurring revenues in the cloud and maintenance business, We are going for very high customer satisfaction, all this based on a very close interaction and dialogue with our customers, which has always been important to us. Then you had a question about Calidus and the premium. Why was it a good acquisition?
For one thing, Calidus is and this is certainly something that's not true for all cloud companies. On non IFRS basis, this is a profitable company. And positive contribution to the operating result with Callidus, which is much more than many companies in that sector can boast. But strategically, it's an ideal acquisition. Why?
Because we know Caladas really well. We have been using the solution internally for sales management and for order management. We also have an established sales partnership with Caladus, so we know that the cultures really go together really well. And we will then have an absolutely seamless solution portfolio in later cash. So Maybe it wasn't really a small tuck in acquisition in terms of size, But in terms of characters, and there's hardly any overlap, very high synergy potential on the solution level.
Now you also asked about the acquisition of MULESOFT through salesforce.com and whether this would have been a candidate for SAP And whether we sold our participation at a high price or whether in municipal assembly, A bit too big for us, too expensive. Well, I can state on this, MooSoft is actually an interesting name because a Moole It's actually something like a donkey or an ass. And we really like racehorses like Callidus At a very high price, seriously, MuleSoft is a company that our Saphyr's venture fund invested into early on. But for many years, we actually had a similar offering in our portfolio of the SAP Cloud Platform. So there was no interest to acquire the SAPPHIRE Ventures team, again,
has had
a very good instinct here and suspected that someone else would need such qualities at some point. So we had a very nice profit from the sale, which had a very nice impact on our financial figures, but we would have acquired a complete overlap, so it wouldn't have made sense. So this candidate was never a real candidate. You asked 2 questions about compliance. For one thing, you asked what we did to prevent a case like South Africa from happening again and how we can prevent damage being done to our image.
Let me say a little bit about our compliance management system. For a long time, we've had a very comprehensive compliance management system, which is based on compliance and Detection and information and despite internal controls and an existing system, We cannot always exclude 100% that individual people circumvent control mechanisms or act fraudulently for their own advantage, and this may, of course, have a severe impact on our reputation and business activities. The root causes of all cases of non ethical or fraudulent behavior have been investigated and compliance processes have been improved to prevent further violations of our codes and standards. In addition to reactive and control measures, We focus on preventive measures as the most effective means to prevent compliance risks or to lower compliance risks, Providing training and setting very clear standards by the executive board to state what We expect in terms of ethical standards from our staff and demanding that they be complied with and to promote such behavior among staff members. We also expect our partners and suppliers to observe our high Standards on integration and sustainability.
I will come back to this in a minute. To make sure that this is done, We have a partner and supplier code of SAP, which specifies this in detail. Now what did we specifically in the case you referred to? For one thing, both in export compliance, and I'll come back to that in a minute, But also in our compliance organization in high risk countries and at headquarters in Waldorf, We have stepped up the control groups and adjusted sales processes. For example, there's a complete ban On provision commission business, and we are updating continuously our code, we are conducting trainings on a regular basis, and we have the compliance and integrity office with a team that ensures that this is adhered to.
Then I wanted to respond to the question On the United Arab Emirates and Oman, You also mentioned corruption. In the United Arab Emirates, We are not following any corruption cases, but possible violations of sanctions and export restrictions. The Iran agreement, which was now terminated by Mr. Trump, means that We have a different situation, but violations can result in high fines or other measures, and we are currently investigating allegations that certain independent SAP partners may have violated SAP Contractor conditions and sold in embargoed countries SAP products that is. These SAP partners probably did not adhere to the strong standards strict standards and embargo Bands, an independent company, which however, SAP has very limited means to prevent activities by non SAP companies violating these standards.
We are still monitoring the situation and try to find ways to improve the situation. We're also Looking at customers who may have been involved in sales to embargoed countries, the Legal Compliance and Integrity offers in collaboration with a law firm is investigating this. In 2017, we voluntarily informed all departments about the measures and we've taken additional measures to block any unlawful acts. We are improving our catalog of measures for export control. And as I said, We are improving, among other things, our export control compliance team with another focus on high risk countries.
We are At the beginning of comprehensive and long investigations and countermeasures and given the complexity and the large number of open questions, the risks can currently not be identified or quantified. Further information you will find under number 23 in the notes to the annual financial statement. Further, one remark. Leonardo is a toolset For customer individual projects, it is not a standard software project or a box with standard software product. It is a supplement to the standard software that we sell to build software based on the most modern software tools we have, be it HANA, be it analytics, be it machine learning or something else.
So this is not these are not ready products. It is possible, however, that products are produced. And if the IP rights between the customers at SAP have been clarified and these can be turned into standard products. It has been mentioned several times in the context of corporate governance, executive board remuneration. Ms.
Heinecker mentioned EUR 21,800,000 remuneration in 2017 for Bill McDermott. Now I must explain what this means. This is the money for 2017 that It is not his income, which consists of a fixed salary and the STI and LTI. That is €13,167,000 and is 800 more than €800,000 less than last year. So why was this inflow so high, that additional amount because the LTI is doubly indexed.
1, in grand years, The LTI grant depends on the commercial success of the year under review and then the LTI is granted in the form of shares. And if the share price rises over the years and Bill McDermott has Shares of from 2012, 2013, 2014, 2016 and after 4 years When they are disbursed and the share price has doubled, then like you, long term, long standing shareholders, Bill McDermott has also made money, but this is not the annual salary of Bill McDermott. It is the money that was accumulated through these long term share program shares. So may I ask the press, when they report about this, to report correctly on it? And maybe you want to contact the responsible department, Luka Mutcic, To actually differentiate, we are happy that the SAP share price has gone up.
And then the Executive Board members who hold shares get a share of that. And the fact that there is this waiting period is something we all thought was right that they don't get the shares right away, but there's I can only contribute because I have personal links with South Africa. My daughter has lived in Cape Town for many years. I've written an open letter where I apologize on behalf of SAP for what happened there, And I promised that from my position on the supervisory board, I would do what I could do that the executive board initiate investigations. These investigations are still ongoing, but it is actually clear what happened there and measures have been taken by SAP
Three questions from Mrs. Jelle Bena Heineken. Beginning with When will SAP Land Auto Products be ready for the market? How and with whom do you plan to partner regarding sales and marketing? Who are your partners?
As Hasso mentioned, Leonardo embeds the intelligent capabilities Into the breadth of the SAP portfolio, this includes intelligent capabilities like machine learning, IoT and Advanced Analytics. Land Auto has actually been in the market since 2017, Though many of its underlying products have been in the market much longer. Leonardo is built, for example, on the SAP Cloud Platform, which is a mature offering and already has thousands of successful customers around the world. Regarding partners, We are cooperating with other leading technology innovators. The idea is to deliver the most comprehensive Our portfolio to our customers.
This includes companies like Google, Nvidia and Amazon Web Services. All of these were announced at SAPPHIRE 2017 and are being leveraged by customers today. We're also working closely with leading systems integrators. These include Deloitte and Accenture, for example. And what they're doing is they're building applications and accelerators on the Leonardo portfolio to deliver differentiating capabilities and additional value to our customers.
The second question, and thank you specifically for this one, We have a dream of a threefold increase in SAP share price. When do you expect to reach this? And do you think the share price will reach €300,000,000,000 in 2020? First of all, you know me and I don't set easy targets and the executive board of SAP Doesn't set easy targets. We're a very, ambitious group of executives.
So Please know that we're fighting hard and working hard for you. While we're not giving a specific time frame, we're certainly charging forward with this in mind. It's probably worth noting, we've done pretty extraordinary things before since 2010. That was the year you might remember Hasso appointed me co CEO of SAP. We have tripled the market cap And obviously outperformed the DAX and the increase has made SAP, we're proud to say Germany's most valuable company.
We're humbled by it, and we know we need to fight hard for it every day. Besides increasing the value of the company, we've also returned €11,000,000,000 to shareholders through buybacks and the dividend, while also increasing the payout ratio. We're in very strong shape as a company. You've heard a lot about The huge opportunities ahead of us today, digitization, artificial intelligence, reinventing CRM, expanding our ambitions with HANA among the focused areas. Your third question, which I also appreciate, Also, if you look back, you will find that when we have always delivered when it really mattered, you said always, and why would it be different this time?
So thank you. And we don't expect it will be different this time. There's clearly the potential to triple the value of this company. There's clearly the potential to do this. While we haven't put a time frame on it, we believe that it is only a matter of time.
Thank
you. Thank
you, Bo. Let me answer 2 questions from Fra Jeler Benahennegger. Your most important target is to achieve the number one position in customer relationship management. Now you acquired Callidus. What's your market position in CRM?
Where do you stand after the acquisition of Callidus? And what about your competitor, salesforce.com. Firstly, we are very excited by the launch of C4HANA. Even before we acquired Callidus, our Customer Experience and Commerce division was growing faster than salesforce.com. Acquiring Callidus and Giga enabled us to strengthen the solution considerably to create excellent business opportunities for SAP.
Sales force revenue was €10,000,000,000 in 2017, making it the largest CRM vendor. But let's not forget that much of its solution and portfolio is now outdated. SAP SAP has an immeasurable advantage in that its entire suite of applications It's integrated and its processes run end to end. From the front office to the back office, connecting seamlessly. What's more, the CRM market is so large that there's plenty of money to be made even if you are not the largest vendor.
And the second question. How long do you think you'll need to integrate Callidus? Where and when do you expect synergies? We expect to be able to integrate Callidus much faster than was the case with any of the other acquisitions because we know Calidus well and have partnered with it for many years. SAP already uses some of Calidar's products, which are adapted to our products.
That makes the technical integration much easier. Callidus will be part of our C4HANA organization rather than a separate entity. So we are aiming to integrate it completely. We expect to complete the integration by the Q1 of 2019. As you expect, we prepared a business case for Callidus that evaluated the benefits.
And at this point, it's a little too early to put a value on those synergies.
All right. I've got 2 more questions by Ms. Jelle Berenheijnach. The first question was about our new pricing model And customer satisfaction about it. On the first hand, it's important to understand that our existing price model, which is based upon the number of SAP users, will not be replaced.
Now in the age of digital transformation, however, It made sense to offer customers a supplementary pricing model. Now we have observed that with new technologies such as IoT or Machine Learning, the number of machine access to SAP ERP systems has increased. With the new complementary processing model, we now offer our customers legal certainty and planning certainty in order to master digital transformation together with SAP. Customer satisfaction, this model was develop together with all SAP user groups all over the world in order to give top priority to customer feedback From the very beginning and for that, I would like to thank all of the SAP user groups for the great collaboration with my team. Your second question was about my role and which effect my work is going to have onto SAP.
Now we've heard this morning already, which great chances in terms of growth and profit SAP has got. Now that presupposes a high customer satisfaction. And what customers expect from SAP are end to end processes. Especially in the cloud, it is of fundamental importance that from the sale of the software all the way up to implementation and use of the software and also renewal of the contract, a uniform SAP experience is what customers have, and that's one of the jobs of my team. The second task is to connect our 90,000 employees in the best way possible to scale and streamline the processes.
And which better way to do it is by using SAP systems. And thus, thousands of customers visiting us in Waldorf every year can thus experience how we set up an intelligent company. And this can then also be a reference for our employees in sales because then customers can see live and on-site which great opportunities arise through the use of SAP software. Thank you very much. Ms.
Benner Heinehage also asked about our alliance with Microsoft and the significance of their partnership with on profit and also profit contribution. As so often in our industry, we are competitors, partners and sometimes customers at the same time, depending on which specific area of business you're looking at. Now we compete with Microsoft in As an e commercial business, where Microsoft offers their dynamic solution. And when it comes to databases, we can also see definitely an overlap. The SQL Server of Microsoft is a relational database, which Currently, it's also widespread in the installed base of SAP.
And it is exactly that one, which is now going to be replaced by SAP HANA, that is by a modern high performing in memory database. The partnership with Microsoft against this background includes 2 areas. On the one hand, Microsoft Prop itself specifically supports the migration of our customer base from the Microsoft SQL Server to the SAP HANA database. And of course, this also boosts our share price. And Microsoft themselves will also integrate our SAP S4HANA suite and thus team up with SAP in this regard.
So, so much for the competitiveness of SAP S4HANA. In exchange, we as SAP make sure that our solutions, if the customer requests so, that our solutions are installed in the computing centers of Microsoft based upon Microsoft Azure. The second aspect, by the way, is also part of our multi cloud strategy, which makes sure that upon our customers' request, The SAP solutions are installed not only in SAP Computing Centers, but also at leading cloud infrastructure providers such as Google, Amazon, Microsoft. In the Asian market, We are also forced to do so by politics. And here, we are currently talking to Alibaba about a potential alliance.
Well, thank you very much, Bernd. Now if I am right, then we have covered all of the questions of Ms. Bena Heinehor. And then I would like to start by answering some of the questions of Mr. Kienle.
On the one hand, there was a question of when do you intend to reach payout ratio of at least 50% of the annual profit for the year. Now let me first start by telling you that we are absolutely convinced that our shareholders should receive their due share in the company's success. And I think over the years, we have moved into a very positive direction, which was always pointing upwards. In the year 2017, our previous dividend policy was updated. And not too long before that, we had already done so.
At that time, we had gone up to 35%. And now we're at least 40% of the net profit for the year after taxes. So this percentage is something we want to maintain according to our current plan for the medium term. However, considering our goals to increase the margin and also to reach an above average profit growth, this still can lead to a further attractive dividend policy in the future. Now let me add some more comments on this.
In terms of dividend payout, of course, we have to thoroughly weigh The ways we want to use our funds. Top priority for our investments is still into organic growth because this will only secure our strength and viability in the market, which is then the basis for future increases in profits because that really ensures the viability of SAP. Secondly, SAP has always been on the cautious side, especially when it comes to financial liabilities. Here, we still pursue the goal of reducing and covering our financial liabilities in the shortest time possible. And that is then followed by paying out of a dividend.
Other liquid assets are used for smaller takeovers. And then, of course, we also want to retain sufficient funds in order to compensate for potential economic fluctuations. Now as a world market leader for business management software, we have to compare ourselves to leading U. S. Groups in terms of the dividend policy.
And in this regard, we definitely can say that our payout ratio and our return obtained by the dividend is above the average. Then you had also asked about the minority shares and the return on equity for shareholders. And You asked why there is a major difference between these returns on equity. Well, the answer is simple. Profit after taxes, which is to be allocated to the minority shareholders, indeed increased from a loss of €13,000,000 to a profit of €38,000,000 in 2017.
And this increase results from the Sapphire Ventures Investment Funds. The Profits are allocated to SAP to a large extent, but not entirely because the management of Sapphire Investment Funds also participates in the profits. And last year, debt fund generated outstanding profits, Which was partly also allocated to their management. You asked whether we still uphold the forecast, namely that in the current fiscal year 2018, We continue to expect a significant increase of the margin. And you also asked us for the target margin that we're aiming for.
Yes, that is correct. And That's also in line with the outlook which we provided in the beginning of the year. And after the Q1, we even increased that outlook. This means that in spite of a slightly negative impact onto the margin resulting from the Callidus takeover, Let me once again underline, it's not an impact on to profit because according to IFRS, Calidus is already profitable, but nevertheless, we still expect an increase of operating non IFRS margin of more than 0.5 percentage points after currency adjustments. And then you had also asked When we are going to reach a balanced state in our company and the cloud focused business?
And you also asked about the overall margin within that balanced state of the company. Now here, we clearly underline that we Backed for the next 4 years, an ongoing continuous improvement of our operating non IFRS margin. Well, that's just typical for the cloud business that in the early phase, you have to go through periods of And then there will be an increase, but that increase will not end in 2018. We now have a possibility for scaling. And in the year 2020, as our medium term targets show, we already expect, Once again, a margin of more than 30%.
But then going beyond 2020, we will expect this to improve even further. Now honestly speaking, I hope that this balanced state of low growth rates in the cloud business is something we are going to reach as late as possible, Certainly not in the next 5 years because here, we believe that double digit growth rates will still be achieved. And as long as this is the case, one can hardly call it a balanced state. And if you reach that kind of balanced state in which hopefully we'll also be able to benefit from massively. So against this background, any forecast about a long term margin development in terms of a kind of annuity would not be really reasonable, which is why I would not even like to give it to you in the 1st place.
Then you also asked about the financial results and its positive development. And here, there was also mention Of a special effect through the sale of equity titles of the Zephyr Investment Fund and Other Questions, What is an equity title? I know this is a bit of a somewhat cumbersome term. Actually, these are just the interests held in publicly listed and not publicly listed companies, which were held by the Zephyr Investment Funds and were sold by them in 2017. Then there was a question about the effective tax rate.
Well, actually, there were 2 questions. Let me first of all, what is the effective tax rate? And what are the main reasons for that significant reduction of the tax rate in 2017? And you also asked Which sustainable tax rate we're expecting in the long run? First of all, the definition.
The effective tax rate is the ratio between the IFRS corporate taxes to be paid and compared to the IFRS profit before taxes. And in 2017, that tax rate was 19.3%, which is clearly below the 25.3% of the previous year. The reduction results, especially from one off positive tax effects in the connection with an internal transfer of copyrights from Onto SAP SE, and it's also due to the tax reform in the U. S, which sometime to some extent, however, was compensated for by deferred tax asset adjustments and changes in the regional distribution of the group profit. Now without these positive one off effects, which we do not expect for this year, we then expect an effective tax rate for 2018 for IFRS and non IFRS between 10% to 7% 28%.
Beyond that year, we kindly ask for your understanding that Considering the massive changes taking place in international taxation and there's also many things happening on the OECD level, For that reason, we kindly ask for your understanding that we cannot make any forecasts in terms of taxes to be paid after 2018. There was a question about the impact of U. S. Tax reform onto the effective tax rate. Now for 2018, We currently do not expect any major impacts onto the effective group tax rate stemming from the U.
S. Tax reform and for 2019 and beyond. We are still in the phase of analysis. And once that analysis has completed, we will disclose those results. Then there was also a question about the compliance Cases.
Now there was a question for more details on these two compliance cases. And you Also asked according to which international regulations we act, if there are differences in the international rules and set of rules in terms of external trade. Now both of these cases are absolutely independent. In the U. S, we are currently examining our business with the public sector.
The results obtained so far confirm that payments have been made to companies with relationships to the Gupta family, which has become somewhat infamous in the U. S. And indications of misbehavior with Gupta Firms and irregularities in the compliance with compliance processes. However, we did not find any indication for payments or tender payments being made to South African government officials So all employees of South African state owned companies which are connected to the Trans and Eskom transactions. However, we are now going back to the year 2020 in examining all of the public contracts we signed.
And in Iran, a leading manager in the region of Middle East and North Africa left the company on 18th November 2017. Other employees in the region are currently suspended. Currently, we are performing a review of our business activities in the region in terms of potential violations of sanctions. And this applies, above all, to 3rd party and partner actions. And apart from that, indeed, we, in terms of export control rules, of course, on the one hand, are obliged to comply with the laws of the Federal Republic of Germany and European Union.
However, as our products typically also include parts of U. S. Intellectual property that is software developed in the U. S. Now for that reason, we are also obliged to comply with U.
S. Export control rules and regulations. And for that reason, in this context, we also collaborate very closely with the U. S. Regulators, such as the SEC, the U.
S. Export Control Board, that is the so called OFEC, the Department of Treasury and also the Department of Justice. And in accordance with the reporting rules, according to Form 20 F of the SEC, we are obliged to do so As a foreign equity issuer at the U. S. Stock Exchange, you asked whether the U.
S. Decision To terminate the Iran agreement impacts our business. That is not the case because, as we've told you before, we do not run any business in Iran, any use of SAP software in Iran would not be permitted and would violate SAP license and end user contracts. Then you also asked about the total investment volume for artificial intelligence. Hasso already briefly touched So upon this, let me once again mention that with that business of artificial We're pursuing an integrated approach.
So we don't want to set up a stand alone system. The Building blocks for artificial intelligence are rather to be integrated into the cloud platform and into our applications, allowing customers using these applications directly benefiting from them. So we want to integrate AI into the end to end product, which means they're also part and parcel of the respective portfolios and do not represent any kind of stand alone business. And that's why we do not separate it also internally in management and balance sheet. Then also the question about auditors' fees and the question of whether What are the audit and non audit services?
Well, the services mentioned in the audit opinion of KPMG, which go beyond the specific audit fees, are listed under the heading of audit related services. However, as always, these services are so insignificant and low that they were rounded down to 0 on the group level and expressed in 1,000,000, and that's why you see a 0 there, but I hope that you still have the trust that we have in our auditors and that we Really have teamed up with a racing horse and not with a mule or rather donkey. Well, then let me continue by answering some more questions by Markus Kinley. He referred to compensation board, and he said you're splitting up the LTI into PSU and RSU. According to our understanding, RSUs are not success based and are just a standard given.
So how can the sustainable development of the company be promoted by the RSUs? The performance share units and retention share units, which are issued in accordance with our LTI plan, they meet different objectives. The retention share unit, which represent a smaller part, well, they aimed for increasing the board members' loyalty with the company. That is, it's a retention tool. And they are paid out only if the board member is still an employee of the company at the time of payout.
And the amount paid out is massively dependent on development of the share price of SAP within 4 years, which means it may increase as it did in the past, and it may also decrease. Of course, we hope that this won't happen. The higher the share price of the SAP share, the higher its value. And this, thus, is the incentive to increase the value of the SAP share, which, of course, is then something which the shareholders benefit from. So that means RSUs are not just a given, but they are also coupled to The long term success of the SAP share price.
Next question. Which independent areas are covered by the clawback rules in your board compensation system, which are not already covered by existing legal instruments. So we've discussed it for a long time. The investors had demand that our board contracts should include an independent legal tool allowing us to claw back any compensation components which have been paid out and which were unjustified. And that means we have now followed up on the demands of the investors, which now gives the company a legal basis for asserting such claims against the Board members.
Then Mr. Kienle also asked, which topics have you discussed with which investors? Now when I talk to investors as a Chairman of the Supervisory Board member, Well, this was about corporate of board compensation, corporate governance and the composition of the Supervisory Board. After the dissatisfactory results of the votes at the last two AGMs, it was important to me to enter into a dialogue with investors who had voiced criticism against our corporate governance and board compensation. During those discussions, above all, I explained our compensation system, and I also heard the criticism brought forward by the investors.
Now as you can see from our invitation for today in our compensation report, some of the criticisms about Board compensation have now been followed up by us. These discussions were held with representatives of various institutional SAP investors from Germany, the U. K, Canada and the U. S. Now as I cannot have such meetings with all investors and shareholders.
At the same time, I've tried to summarize the central elements of these discussions In a transparent manner for all shareholders, and that is the content of the open letter to all shareholders, which you also find in our Investor Relations website, will find out the further details. For which reasons did the supervisory board members leaving the supervisory Board early, do so. Now the reasons for these early departures differ on an individual basis, but no member is forced to disclose any reasons. Jim Hagemann Snabe took over a supervisory board position with another company, and that's why he stepped down early on. I think we have found a very good success with Asia Evans, who was initially appointed by the court and will hopefully be elected by the shareholders today.
And the very same institutional investors or shareholder investors who insisted on the application of the corporate governance rules, they should then not be surprised If Doctor. Harmon, Professor Doctor. Harmon, after 30 years, then resigns from the Supervisory Board, I have been approached several times by these investors or shareholder representatives about the age structure on the SAP Supervisory Board, which in their view was open to criticism, which means I responded to that kind of Criticism and that means we Wish to see a supervisory board composition as proposed under item number 7 of the agenda. Now there was a question about Ms. Green.
Isn't there a conflict of interest with her current employer, Google? Currently, there's no competition between SAP and Google in the business because the cloud offers of Google are mainly directed towards consumers, whereas the focus of SAP in the cloud business is with corporate customers. That is why we do not see any potential conflict of interest for midstream, especially not due to the strategic partnership with SAP and Google in the cloud business. If the relationship between SAP and Google should become a topic on the supervisor world, then there's always the possibility for midstream Not to participate in such specific discussions, which means that we thus could avoid any potential conflicts of interest in the first place. The possibility of conflicts of interest, which we consider to be very low, can thus be handled anytime and in an adequate manner, Which is why, all in all, we do not consider this to be a problem.
Will the consulting contract With Mr. Oswald be continued once he's elected to the Supervisory Board. No, the term of the consulting contract with Oswald Consulting GmbH, The General Manager and Singel shareholders, Mr. Oswald, will end at the end of the 31st December 2018, which is before the start of his term as a supervisory board member of SAP SE. And when he takes over this new office, he will it's not There's no plan for him to continue as a consultant at SAP.
Now there was a question about the old age provision at SAP. Now which old age provision is aimed for with this concept? The old age provision at SAP for the executive board members is based upon annual contributions depending on the seniority of the individual employees and is not derived from old age supply level beforehand. So the higher the seniority of a board member, the higher the entitlement. Taking into account a board membership up to the start of old age, that is the age of 62, German executive board members have an old age provision entitlement between 3% to 14% of their basic compensation.
For the U. S.-based board members, SAP pays contributions into an External old age provision plan. The amount of these contributions of SAP is on the same line as the amounts paid by the Board members themselves. For Bill McDermott, this amounts to €6,200 for Robert Enslin, €1,000 €194,100 and for Jennifer Morgan €8,900 How can you, Mr. Plattner, make sure that in your discussions with investors, Do not run the risk.
Now was there any risk over here? No, just a mobile phone. Now once again, how can you, Mr. Plattner, make sure that in your discussions with investors, do not run the risk of disclosing insider facts or data? Well, as in every discussion, if I may say so, which I have with investors.
Now the representative of Deutsche Asset Management Investment GBH, Mr. Smit has already told you from the point of view of the investors. Of course, in such Meetings with investors, which I participate in as the Chairman of the Supervisory Board, no insider information will be touched upon and disclosed. I mean, This is something which we are not allowed to by law. And rest assured, we always make sure that we go by the law at any time.
Well, that's all I had to say about the questions from Mr. Kinla. Are there any questions left?
From, Mr. Marcus Kinla. In his letter to SAP stakeholders, Mr. McDermott indicates that there will be aspects of artificial intelligence that are capable of operating outside of human control. This does not exactly inspire confidence.
What does mister McDermott mean by that? And how does SAP intend to prevent artificial intelligence from developing A mind of its own in the near future. Our responsibility here is to ensure That the building blocks of artificial intelligence, the algorithms, are as transparent as possible. And that the data used to protect, okay, to train these algorithms is protected. We're therefore working closely with our selected customers on developing our artificial intelligence applications such that we can be sure the systems will operate as they were intended and that the users can communicate easily with them.
What's more, our research team is working on various ways To enhance data protection and privacy. One of these involves what's called federated learning, in which algorithms are trained locally without personal data being passed on to 3rd parties. Our efforts to compile a code of ethics and our cooperation with the International Electrotechnical Commission and the European Union are aimed at advancing approaches like these and having them adopted as standards. 2nd question. Does SAP have a board member who is responsible Specifically for artificial intelligence, the title of the 2017 SAP Integrated Report is intelligent enterprise.
This reflects SAP's belief that artificial intelligence will gradually permeate every aspect of a company's operations in the coming years, and that it must therefore also become an integral part of our entire solution portfolio. This has implications for us at both the development and organizational levels. From the development perspective, we believe that is not sufficient enough to simply hand our customers a set of analytics tools that can be fed with data and then derive recommendations from it. But largely outside of operational processes and based on algorithms that are often only partially transparent. We have to go further and embed AI decision support within business processes and the corresponding applications.
This is something that SAP, with its broad solution portfolio and Renowned market leadership is better equipped to do than any other provider. From the organizational perspective, it is therefore clearly impossible for a single development unit alone to drive this topic in isolation because it touches every single application area at SAP and is something that a large number of employees are already engaged in today. Having said that, Responsibility for driving SAP's machine learning and artificial intelligence capabilities on the development side does, of course, lie within a central unit of focus, And this is headed by our Chief Innovation Officer, Mueller. Reports directly to me, which is further evidence of the importance that SAP attaches to artificial intelligence itself. Thank you.
Before answering further questions, we've got some new requests for the floor. And I now give the floor to Mr. Johannes Niebla. Mr. Niebla, the floor is yours.
Professor Plattner, Mr. McDermott, ladies and gentlemen of the Supervisory Board and Executive Board, ladies and gentlemen. Engineering, I studied at Damshed. So I'm not an expert in economics I have two questions. I regret to admit that this is The first time that I read the invitation to this meeting carefully, and I found that the balance sheet profit It's about 10,000,000,000 and the number of shares entitled to dividend is €1,200,000,000 And in this way, the balance sheet profit per share can be to be around €8 roughly.
But as I recall from the last meeting that 30% to 40% of the profit will be paid out. And then I took the trouble To have a look at the financial report in the Internet, it wasn't easy to find because the link was hidden somewhere in a Communication under the heading of Investor Relations. And then the outcome of my examination was that The result in euro, not watered down, was €3.36 Which is then related to our dividend in a specific way. And if you Read up the documents. There are quite a number of profits, balance sheet, profit, net profit, pretaxprofit, after taxprofit.
And then it came to my mind what the philosopher Walter once said, if You want to talk to me then, you must define your terms and define mine. Hence my question, What is the reason for the different results per share? Wouldn't it make sense in both documents to show the same figures and use the same terminology because To a simple shareholder, it is quite difficult again and again to find the differences. Let me give you one example. Maybe a proposal might be made to the effect that Certain key figures are listed in a table appended to the invitation all shareholders receive when they apply for the admission tickets.
So that maybe as with BASF,
I
appended An example of my case, you'll receive a table of the most important key figures for the Runyon Mill shareholder. If the under alluded result is then multiplied by the number of shares entitled to dividend, You roughly arrive at the values Shown on Page 163, under IFRS That was one question. Question number 2, which I'd rather left to the shareholder representative, but nobody of them has yet raised them. That is The payment of the dividend without capital earnings tax. I'm also a shareholder With the German PCT and at their meeting on the 24th April, the shareholders meeting, I was told that dividend there would be paid out without capital earnings tax and without any deductions So that the dividend would be paid out as the gross amount for the net amount.
That is payments not to the capital stock and the payout in that case would be made without the solidarity bonus and without capital earnings tax. My question now, wouldn't it be possible for SAP to find a similar approach for the benefit of its shareholders. Because in that case, we would receive a higher financial contribution. But of course, I hasten to say that the government is not making any presence, the purchasing value of The share will then be reduced by that amount, assuming we would have paid a share at €100, Dividend €1 paid out without any extra Thanks. Then the purchasing price would only be €99 for tax purposes.
And when selling, we would have to pay an exposed factor tax. For those shareholders who hold their shares for a longer period of time then since 2 1,009, it would not have any impact because the increase in value would not fall under speculation tax. So the question would be whether one couldn't think about this, but of course, It also implies the question whether this could mean any benefits Or could be detrimental to SAP. I cannot judge that. I'd like you to examine whether this would be meaningful for our shareholders.
Thank you very much for your attention. Thank you very much, Mr. Niebler, for these two questions. There's an answer outstanding To Markus Kinley's question about artificial intelligence, Ben Leuchat will answer. That was about the volume with impact on our business when KIE, the artificial intelligence tool, which looks at artificial intelligence and machine learning not detached from our applications.
Unlike IBM are doing with Watson, a separate platform in addition to business processes. We integrate these building blocks into applications through this platform so that our customers can benefit directly of this technology. To us, this is not an intransparent approach. We discussed it with customers and analysts so they know about it. We integrate artificial intelligence and to business processes solutions to make those more attractive, more powerful.
And for this reason, We cannot directly allocate these technologies to the business results. We do see focal points that has pioneers in our portfolio that will benefit, first of all, as a P is for HANA, the P suite and then customer relationship management, which Bill explained In very great detail. So recognizing buying signals and interactions with customers are important applications Wherever there's direct interactions with final customers, here applications with artificial intelligence can provide better Results faster also in finance and accounting in S4HANA. We now Again, for the first time in the Q1, balanced and offset orders, Invoicing and incoming payments, this was processed by artificial intelligence. Intelligence results have been good.
So KI, as you know, standardizable activities, not inspiring to humans. There is more time for creative and analytical jobs. Another area of application is service. When a customer Reports online plus a description of the problem by KI. Okay.
I can automatically propose solutions. The number of hits is very high right now and will not only have a relatively small use of resources for a high number of reports. In 2018, more than 50 such applications are to be marketed. That was it. Next week, we'll start the floor, Mr.
Karl Ernst Feiten. Please come to the microphone. Good afternoon, ladies and gentlemen of the Executive and Supervisory Boards, Shareholders, I'm Karl Ernst Freiten. I'm a minority shareholder. I have three questions about the growth statement Group statement.
In the group statement, it says for 2016 that there are operational expenses of 10,000,000,228,000. In 2017, the operating expenses are 18,584,000 relative to the Return on sale, this means for 2016, 76.7 percent for 2017, 79.2%. So we have an increase by 2.5%. Could you explain what the reason for this increase is? If you could Give me an offhand reply.
Another question is about the tax rate. In the calendar year of 2015, you report earnings tax of 935, Pre tax profit €991,000,000 which would result in a tax rate of 23.4%. In 2016, the earnings tax is 1,229,000 on a profit of 4,863,000 which means a tax rate of 25 point 3%. In 2017, earnings taxes are €970,000 on a profit before taxes of €5,026,000 which means a tax rate of 19.3%. In particular, the decrease of the tax rate between 2016 2017, Could that be explained?
Is that associated with the tax reform in the United States? That would be one explanation because this is in that country, taxes were reduced. My last question is on Page 39 of your annual report. You show pension claim of the CEO for 20 16 of 106,500,000 for 2017, Pension claims only 89.5. So there's a decrease by 17.
Could you please Claim the reasons for that decrease. Normally pension claims do not fall, they tend to increase. Thank you very much. Mr. Chairman, thank you very much.
Then I'd like to invite the next speaker, Mr. Peter Schubert. Mr. McDermott, members of the Executive and Co Advisory Board, co shareholders. I think enough praise has been heaped today.
So I'll just follow suit The footnote is about the dividend. I'd like to recall that SAP was the 1st or most important companies, which a long time ago started to pay dividends. And you advanced on this way and now you arrived at 40%, Which is a good way and I'd be happy if you could continue along that way. And Well, 50 plus percent would be an aim worth following on the long term. For All shareholders, it's interesting to recalculate the prices when We had a general shareholders meeting in Wieslow.
Well, these were returns, which were simply dreams, which has a positive impact on the pensioner's life. I'm happy that you applauded on your own. I could have done it like Bill McDermott, starting by Setting a good example, then you would have followed. But now for my question. You said that You invested or want to invest into Blockchain.
What I'm interested in is What are the industries you're envisaging? What processes? What business models will be influenced or could be influenced by this new technology. It's a Technology which extends into the future. Are you thinking of developing a special banking software?
What are your main points? Or to some of you who don't really know what blockchain means, Perhaps you could help us by explaining. Mr. Klein is smiling at me. He is the youngest member of the board, so he knows probably Most about
it.
But one question in this connection. If that were considerable share of the future activities of SAP, what would be the impact on your computer centers? One here is that this technology requires a lot of computation. That was my question. And by way of conclusion, let me again say, continue to go along the way I described, A company which is characterized by rising profits, rising share prices, as far as I'm concerned, I will rest peacefully and sleep peacefully if things go on like this.
Thank you, Mr. Schumert. And now I'd like to invite Mr. Georges van Lien.
Dear ladies and gentlemen, I don't speak German, but I'll be using my iPhone and Google translate to help me out.
My name is Georg. I know 5 languages, not German. I'll use Google Translator.
Just a moment.
Mr. Swan, just a
moment. Okay. Just a minute, finish just iPhone.
Apologies. Is that The lecture which you prepared in advance and then translated, it's been customary since 1988 So far, I haven't been able to see that you asked No questions were asked by the last speaker. Thank you for your rather Unusual contribution and this brings us to the for the time being last request for the Ladies and gentlemen of the Executive and Supervisory Board, I'm a convinced Two questions. Question number 1 is about Litigation against Oracle in the past, has that litigation been completed? If not, are there other pending lawsuits which still need to be processed And which require the appropriate provisions to be made.
Question number 2, That's about the excellent presentation by Mr. McDermott about the SAP platform. You know better than I do that more and more networking increases the hazard that hackers may intervene. Nowadays, hackers are most Professional just waiting for a gap opening. What have you done in order to protect against these hazards from the outset?
Thank you. Thank you, Mr. T. We'll now deal All the questions by Mr. Henrik Schmitt.
May I start, What is going to be the future staffing of the Audit Committee? What candidates or Supervisory Board members meet the requirements of the Johan Stokke Corporation Act as financial experts under Section 107 For Section 100, there are 5. As you are able to learn from our explanations, Mr. Shipwright, as Chairman of the Audit Committee makes the requirements as a finance expert according to German law and the U. S.
Regulations, which are also applied in the U. S. Mr. Shipwright will continue this role. Mr.
Vohra will leave the company at the end of this meeting. So his position at the Audit Committee is becoming vacant. Provided this Mrs. Och will be elected today. She will replace Mr.
Vohgruvan via the Audit Committee. As you heard, She was the Head of the Internal Audit Department of Merck. So she can add to the power of the Audit Committee. Next question. What is the extent of the consultation contracts between Mr.
Oswald and SAP? Well, there is a contract with Oswald and his company. And In 2017, he received €271,320 The contract expires at the end of this year. How does the supervisory board judges the independence of Mr. Stein Green?
What are the business relations between Google Cloud and SAP? What were the powers of Mrs. Green When she joined SAP's Supervisory Board, what about potential conflicting interests? Well, we answered that, independent. The assessment of the Supervisory Board, all current members are independent in the sense of the Cortex recommendation.
Scope of Business Relations, SAP and Google, have a strategic partnership between 2 companies in Enterprise Cloud, that partnership includes a more pronounced future use of cloud infrastructure By Google? No, of Google, by SAP, by Customers being made available SAP products like SAP S4HANA SAP BW for HANA SAP Business Suite and SAP Business Warehouse on the Google Cloud Platform. I think something has been missing here. Decision is by Mrs. Green.
She is Head of the Google Cloud and then this Capacity, the main partner for SAP in Google with respect to this partnership and this will continue also. Interest, conflicting interests, we've handled that. This was My part of the answers to Mr. Schmidt's questions, I have nothing else. I think This takes care of all questions, at least as far as I can see.
Then Mr. Bullman, I have a number of answers to Some of his questions, there is a contradiction between able to grow and improving the margin or is there not? No. Growth and margin increase are not contradictory. In the start of cloud business last year, We had to make major investments and revenue in the cloud business became economical only over time.
And we saw that Development of the margin suffered from that. But of course, as we said, in the years to come now that The scaling level has been reached, which we need. We want to improve profitability And we reached the low point last year. Now we're expecting continuous increases in margin. And there will be no contradiction between revenue growth and the margin following suit.
Then you asked about the dividend policy, who is Us or we, of course, the general meeting of shareholders decides on the use of profits and the dividend that is. We refer to the fact that the Supervisory Board and Executive Board made proposals till the general meeting. Hence, our report or remark in the annual report, which refers to the SAP SAE and SAP AG boards. Now you asked why Amazon and Apple still more expensive Then SAP, we could be 10 times as valuable. If that weren't true, we'd be the most valuable company in the world.
Is that impossible or would it be the result of a Chinese investment? Well, first of all, we must say that we like The stock position in Germany for quite some time and an improvement in the share price by almost 14% like early last year. We do not have to be afraid of a comparison with Our direct competitors in standard business software, here with a Higher market capitalization than the sales force or dotcom and Workday, our direct competitors. Some companies like Amazon have even higher market capitalization, but you must bear in mind that they work in varying different areas, different scopes. B2C normally like Apple.
But in our direct environment, we have caught up In the past few years also reduced the distance to our main competitor, Oracle. And So indeed, for SAP, we see major growth potential, as Bill McDonald told us. And as I know him, I'm sure that we will have another ambitious goal once we've reached our first goal. And our partners local or global and what do they do? Well, they're doing a lot.
Some of them are local, some are global. So it's Quite a question. We have a broad network of partners, more than 16,000 partner companies, one of our major competitive edges with sales partners helping us to get our solutions offered to small and medium sized enterprises. Then we have technology partnerships, which could try and producing solution compatibilities that is the application of standard interfaces, but could extend to the mutual use of partner technologies, either in our solution portfolio or in those of our partners. This is called OEM partnerships, which also create or add a lot of value.
Then the plastic banks question, well, you're right. We want to become more and more There is internal SAP project about our merchandising projects like these bags, which are to be checked for the environmental compatibility. Your feedback will be added to the project. And in this way, we might Better reach our environmental goals. Then what about data protection?
You said as of Next week, we have to suffer from the data protection regulation. I think it's different, The right to informational self determination. Our customers should feel and could feel safe in their relations with SAP. We think we can now offer a high level of Safety and protection. Over the past 2 years, we have profoundly prepared our organization to The upcoming regulation, Bill said that we are the 1st company in our industry, which was certified According to the new standard, our products underwent a profound revamping and our SAP products meet all provisions under the new basic data protection regulation.
Customer confidence is most important to us, has been for a long time. And hence, we had less expense in this field than other market participants in preparing to review regulation. So let me briefly say that data protect privacy doesn't make us any poorer. We had very clear cut expenses on data for us because our customers have trust in us. So we've had the highest level of data protection for many years you can find in Germany.
So we feel that also In the light of our solution portfolio containing solutions like GYGN, also our customers can benefit from extensive functionality. So it's an excellent business opportunity. You asked for the green cloud, what does it mean? Well, it means that our data centers are 100% supplied electricity from renewal sources. Why is that important?
More and more companies and their business activities want to achieve a maximum of environmental compatibility. If customers can run their operations in our data centers or in this, they can leave their green footprint, which is a factor to some customers. And our main computer centers We have achieved the excellent level of the power usage effectiveness factor of 1.36, which is A major contribution to our vision of helping the world run better. You asked about the operating The result per share had increased. Could we explain the Difference, well, the operating result, non IFRS has clearly increased plus 4% Non IFRS, corrected for currency, you referred to the IFRS result of minus 5%.
Well, there was a negative impact due to currency fluctuations, especially because of the devaluation of the U. S. Dollar. We had a major increase in expenses for share based pay, which was due to the strong share price development over the year. Despite the slight decline in the Nominal IFRS operating result, so correct in assuming with a clear increase in profit after taxes And the result per share of plus 10% each, that was due on the one end to the improvement in the financial result, mainly due to higher income from the sales of our interest in SEK Invest ment funds and the reduction in the effective tax rate from 20 5.3% to 19.3%, which we discussed at length inclusive of the reasons.
And yes, that's mainly to do with the tax reform in the U. S, but also was due to In group transfer of rights and intellectual property to hybrids, One of our former acquisitions from HIBEST to SAP in Germany, that was a positive one off effect. Also asked what will come after HANA. Well, a lot has come after HANA. And I can only recommend to watch the Sapphire event in Orlando, Florida Early in June, either personally or on the Internet, many things will be explained there, which will come after HANA, of which we developed alongside HANA.
And in addition, in many places The world research is being conducted about the more efficient or better Programming, which is our key business that we are working with computers, And if there are any pioneering developments, I'm sure we'll present them. Does every executive board member have a business line for which he or she is responsible. How has the organization that changed? Well, All the organizational changes we communicate in early April to the start. Our strategy for the intelligent corporation or enterprise has meant simplification of the organization aligned to 6 lines of business: Platform Technology, digital core, customer experience, personnel management, manufacturing, logistics network And Leonardo and analytical functions, which is to ensure that SAP has the necessary technical skills in each field adding to the trust of its customers.
The sales organization, Global Customer Operations, G, CEO And the service and support organization, digital business service, DBS, were realigned by means of a central contact to the customer. Anybody anything for Mr. Bullman?
Asia to grow faster. Are Chinese customers hesitant towards SAP? The total revenue of the region in APJ, Asia Pacific Japan grew by 12% at constant currencies, supported by all revenue streams. This growth is significantly above total revenue growth of the entire SAP group That shows plus 8% at constant currency. These numbers prove the success of SAP's products in Asia Pacific Japan and therewith also in China.
Topic acquisition, Calidus Software. Why have you acquired this company? Calades completes the front office suite, customer data, marketing, sales, commerce and service. Callidus Cloud solutions give companies the tools to inspire and empower the sales professional. Intelligently following leads to cash, Compensation and career success.
Through the Callidus acquisition, We have gained 6,000 customers. In non IFRS terms, Colorless is already earning money, And we expect a positive contribution to operating profit in 2018. That is more than many comparable companies in the sector. Because Colorless products fit so well with our portfolio and because we have gotten to know this company over many years, We are working towards a speedy integration, and we will soon have a complete and optimized Solution Portfolio for CRM.
There's a question by Mr. Volman about artificial intelligence. What are the advantages? What products? Well, I answered this in a similar direction as Mr.
Kingly's question. Then Mr. Bullman asked about data protection. The things which make me pass a service station and while I pass, I'm paying for the petrol. So you know in advance what I'll need after 1.
How do they know in advance that I suffer from migraine to Make an offer to me, which means creating sales for them by buying a drug against migraine. It's about data protection. Handling and processing personal data are most important parts of our products and services. The responsibility of SAP is realized. Predicting data, especially all data are taken very seriously.
We've taken internal measures started programs so that our services agreed to existing data protection regulations, especially the new ones of May 25. Maybe additional licenses and rights have to be acquired. For instance, when using special maps, geo data, etcetera, all the use of this data and the right to use these data must be obtained. So it's quite a problem in compliance matters but to SAP it's more an advantage and a drawback. The Chairman, thank you.
Finished? Okay. Mr. Kienle has one or more additional questions. Thank you.
Thank you again. Thank you again also for the quality of the answers, Which should be taken for granted. My question may have not been precise enough. It's about investor contact and compliance. Of course, we assume that you, Mr.
Plutner, with your integrity stand for the fact that You will not pass on anything which you learned as a party on the Internet. What I'm interested in is how do you ensure that within the investor contacts, you can identify information as Investo related, you have a back office which examine your answers in the light of whether this passes on insider information. Now that's not a problem because this is a public event. In a spontaneous contact with investors, you'll have to decide on an ad hoc basis to find out whether it's relevant to an insider. No corporate news or ad hoc statement is published by your company without this having been scammed by the legal department, Maybe even by a special adviser in the field.
I do make sure that information which is insider related It's known as such and then may not be passed on. Well, I'm not going it alone, but we have come to me by our CFO, a persons, plural, responsible for Investor Relations. So I'm not alone and I'm positive that I'm in good hands and protected. If you feel I should not talk to investors then some of the improvements for which I've been praised today wouldn't happen like this. So Rest assured that we do it correctly and carefully and not Stumble into some insider relations trap.
All right. Then let me continue. These are answers Two questions by Doctor. Politzer. The first one was and it referred to the composition of the first two management levels on the Board.
You referred to a women's share of 25% for the 1st management level and 20% for the second one, which means you increased these targets compared to the previous year. Now why do you, however, think that we have still so few women on the 2nd management level? On both management levels, below the Executive Board, on the 8th June 20 17 was set for the current target level. According to that, the women's share between July 2017 July 2022 is to increase to 25% on the 1st management level and to 20% on the 2nd management level. Now earlier, Other targets had applied, namely 17% for the 2nd management level below the Executive Board, which we have already achieved.
The new target for the 2nd management level will then be 20%, which means it's an increase of 3 percentage points, Which for us is certainly an ambitious goal, which we have set ourselves on the basis of the potential we have identified. Then your second question Was about how many men and women do you did you promote to the 1st and second management level? Please specify The number of men and women, absolute numbers and also as a percentage related to the overall number of employees in Germany and the number of men and women employed in Germany in your companies. The answer is as follows. So the 1st management level in the year 2017, 13 men and no women were promoted.
Related to the overall number of employees in Germany, this means that 0.06% of men have been promoted to the 1st management level. Related to the total number of male employees, this results in a relative promotion ratio of 0.09%. On the 2nd management level in the year 2017, we had 7 women and 25 men being promoted to that level. Now related to the overall number of employees in the company, this translates into a promotion ratio of 0.03% of women and 0.1 2% of men. Now if you now compare this to the total number of female employees, you will thus get a relative promotion ratio of 0 point 1% and related to the overall number of Mail Ambrish, this gives a ratio of 0.18%.
Next question.
What do you do to make sure that you pay men and women equally at the same level According to our own wage and salary system, there are certain salary ranges, And that makes sure that system makes sure that all employees working in a certain function are paid within those salary bands or ranges regardless of whether they're men or women. In fall 2016, we carried out a salary analysis focusing on the differences in pay Between men and women and the comparison between genders in the different wage groups All salary groups revealed that in Germany at SAP, men and women are paid equally for the same work. Your next Question related to a new act dated January 2018. Companies with a payroll of more than 200,000,000 according to that law, they have right to obtain information individually and how many companies with more than 200 Employees are there and how many of those companies have employees requested information, who gave that information? We can give you the following answer to that.
Employees in the following companies have a right or I'm entitled to individual information, SAP SE, SAP Deutschland SE and Co KG and Hybris GmbH. In total, we received 533 requests for information. The requests are distributed as follows: SAP SE, 4.22, of which 229 from men and 193 from women. In SAP Deutschland SE and Co KG, we received 105 requests, CIF 70 from men, 35 from women and at high risk GMVH, a total of 6 requests, 3 from men And 6 from women. And the information was given by the employee in all by the employer in all cases.
And the final question was on an audit system to make sure that the And equality law is complied with. Is this implemented? And please specify whether there is an audit or monitoring process for each company individually or if this is Harmonized and does it relate to everybody or only certain groups of employees? The answer is that So far, SAP has not implemented an auditing or monitoring process as meant by that piece of legislation. But it is important to note that all wage components are based on rules subject to co determination and are thereby in conformity with the corresponding regulations.
We've regulated carryout salary and wage analyses, and we'll just do so in the future focusing on the differences in pay between men and Now the question that is then left is From Doctor. Anna Dorothea Polze, the supervisory board has to provide A target for putting women into the executive board, the DJB, Demands 40% for the Supervisory Board and Executive Board. So far, you have 2 people in the Executive Board. And why are you not going for a higher target when you extend the board? Answer, it is the objective of SAP To maintain the current share of 2 women on the Executive Board, this is something the Supervisory Board resolved In April 2017, for the time until 30 June 2022, and Adaptation or change in this target is currently not considered just because the executive board is And made larger.
Then I'll take the Mr. Niebla's question. 1 on the balance sheet, the balance sheet gain, 333,000,000 versus 83,000,000,000, if you relate this to the balance sheet profit And would it not make sense to use the same terminology in both documents? The earnings per share relates to the group earnings of The current business here divided by the weighted average number of shares, the Balance sheet profit or retained earnings of €10,000,000,000 includes, in addition to the current account of SAP SCE, Also, the profit carried forward from previous fiscal years, which is why the amount is higher. The Appropriation or we cannot use the same number in both documents because the resolution on the appropriation of retained earnings relates to SAP SE at the balance sheet key date and the result per share or the earnings per share relates to the result of the current year for the whole SAP group.
We also have an overview of all important metrics of SAP published in the annual report. So when you fold out the first page, you can have a look at the table there. The second item was the question, dividend without capital gains tax and gross fund net, could SAP not do something similar that apparently Deutsche Post are doing? The corporate tax law has provisions on the capital components. And for dividend payments, The profit carried forward for tax purposes is a relevant number.
And we cannot deviate from this. And so SAP does not have a choice. And for SAP, there are no advantages or disadvantages. And that would take me to Mr. Feltens.
Sorry, I wanted to leave you one question. The first two questions were The operating expenditure from 2016 to 2017 to EUR 18,500,000 and where does this increase come from? Yes, according to IFRS, the operating expenditure rose because of the following factors. In 2017, we had an increase in the restructuring expenses, mainly for the reorganization of service business, Very successfully so, by the way. And in 2017 2018, also in the non IFRS result, That resulted in an increase of the service business profit.
Also, the share price development meant that there were no higher expenses for share based remuneration and also a negative impact from currency fluctuations, especially the devaluation of U. S. Dollar. Furthermore, our operating expenditure in 2017, As expected, was impacted by the less profitable, but In the long term, highly attractive cloud business, we talked about this also in 2018. We are seeing the effect of measures there?
And there's a second question. The tax rate went down. Is this because of the tax reform in the United States? We already said yes, this is to do with a positive one off effect as a result of the tax reform in the U. S, But also because there's another one off effect because of IP transfer From Switzerland to Germany, which also had a positive one off tax effect.
Right. And the final question from Mr. Felden. The Chairman of the Executive Board has 106.5 percent Pension accrual and for 2017, only €189,500,000 And can you tell us where For Bill McDermott, the pension claims are U. S.
Dollars, And the reduction is due to currency fluctuations. There was a question from Peter Schubert on blockchain And whether we can explain this and if there are any focal areas. Well, blockchain technology, generally speaking, is that means that transactions are stored in a network on distributed data and secure transaction is exchange is enabled between independent parties. Independent, this is important, not just one company internally, Their central database would still be superior. It has become Sort of a buzzword in the context of cryptocurrencies.
And the question is, are we developing something like this? The answer is no, but the technology does have a potential in the collaboration between companies, also between different industries, where we since we can bring together companies through our networks. So in contrast to A single database is which is owned by 1 organization and is operated according to that organization's Rules, blockchain means that you have a sort of democratization of data. Early this week, we had a customer meeting where 63 customers agreed or signed a co Innovation agreement, the 36 or 63 customers are distributed between different industries, Supply chain management, logistics and manufacturing were the main areas. And here, the requirement was with regard Right.
Then I have one answer to give to Doctor. Thijs' question on litigations. One is against Oracle. And is that concluded? The answer is yes.
And the litigation of our tomorrow and now has ended, generally speaking, not with Oracle, but with other companies. I fear that SAP will probably be involved in litigations at any time, I have one answer to the question by Mr. Tay. The question was the more networking, the more the danger There is for professional hackers who are just trying to find a security leak. And this is a very valid question because more and more business is going to the cloud.
So we are investing large amounts to combat hacker attacks for predictive defense against such attacks from the Internet. This is why customers decide not just for our software solutions, but also for SAP as a partner To counteract those threats, our cybersecurity strategy is very comprehensive and includes the following aspects. We guarantee security of our products, our security software development life cycle stipulates a methodology, we integrate security functions in our applications before release, our software is checked by independent IT security experts, but Also secure application system operation. We provide a security framework for the cloud and for IT operation. This includes system and data access, increasing system security, managing security patches, monitoring security And responding to security issues.
Right. Now we're Almost alone among us. There are no further requests I'm Hans Hermann. I have lived in the Waldorf Wisloh region for more than 40 years. I worked for a bank for 45 years.
And in that capacity, I recommended buying SAP shares to my customers and to my family, And today, I'm happy that, that seemed to have been a good idea. I would like to thank the Executive Board and the Supervisory Board for their good work, but I need To mention something that has not been mentioned sufficiently here. We heard a lot about profits or Net earnings, we heard about remuneration of board members, executive and supervisory boards, But the employees, the staff, they, to me, are also As important and as valuable as the capital, now I belong to a generation That learned that work and capital are equivalent. We are the so called A little while ago, we heard a bit of a bizarre contribution from the gentleman sitting at the front here. That was a bit unusual in presentation.
I regret, although this took some time, that was cut short. I would have liked to Hear more about this. It seems that there is something going wrong. I understood something like Something is going on in the Tech Republic. So there is something going wrong with the staff members there.
Now maybe the Executive Board who is responsible or the Member of the Executive Board, who is in charge of HR, could maybe check this. Thank you very much for your attention. Now a very quick answer. I asked Luca Mucic how about our retention right there, and he says it's one of the best in the world. So we look into this.
It just wasn't the right format, the way in which this was presented. So if there is anything that needs Looking into this is certainly something that the HR manager has to check. Maybe to qualify this a bit, What I said is that SAP has one of the best retention rates in our industry. It is at 95%, so we have a fluctuation rate of 5%, which is very low for our industry. Nonetheless, I need to state this clearly too in our shared service center organizations.
Overall, not just in the Czech Republic and Prague, But also, in the other shared service centers, we generally do have a higher rate of fluctuation than in other areas of the company. This has to do with the fact that we tend to have people who just start to work And after a few years, they changed to other functions. Also, they take on other jobs outside the company. Nevertheless, I can assure you also the gentleman who made those remarks making use of Google Translate that I will personally look into that situation and that in the next months, I will also have a talk to the people there in Prague to see if there are any issues that we need to focus on and maybe change. Yes.
I will repeat the question now. Is there anyone else who wishes to take the floor? Does anyone wish to speak? And Hassle, as HR manager, can I Say something? Thank you for that contribution.
At the time when the Google translator was presenting That prepared speech, I decided with my team that, of course, we're going to look into this. Rest assured that we have a very Trusting relationship with all employee representations, not just in Germany, but also beyond the German borders. And in Czech here, We are currently in a dialogue with the colleagues there also on founding in Works Council. And as we have done before in other locations, in other countries, we will speak and find a solution together. This has always worked in Germany, in Europe, anywhere where There are employee representation bodies, and this will be our line in the future as well.
Thank you. I have no more requests for the floor. One last time, does anyone else wish to speak? That is not the case. I say for the record that no one else wishes to speak.
Am I right in assuming that all questions clear that all questions have been answered. I'm closing the discussion on all agenda items. Has the attendance changed? Well, then I don't need to read it again, do I? Ladies and gentlemen, We will now come to the votes on the management proposals in respect of items 2 to 9 on the agenda.
As last year, we will take all of the votes on the management proposals for items 2 to 9 On the agenda, at a single pass, I will now explain the voting procedure. The vote here in the meeting area will use multi item voting card 1, which you will find near the front of the ballot card block. Online participants will use the multi item voting card 1, which is provided in the form of an online voting card and which you submit by pressing a button. The voting results are determined using the subtraction procedure in which only the no votes and abstentions will be collected and counted. In other words, you only need to submit multi item voting card 1 if you vote no to 1 or more of the management's proposals or if you wish to abstain.
The yes votes are then calculated by subtracting the no votes and the abstentions from the current attendance count. Multi item voting card 1 shows each item by number From item 2 to item 9 including sub items A to D in item 7 for electing the supervisory board members individually. Beside each item and sub item requiring a resolution, there are no and abstain checkboxes. If you wish to vote no On all agenda items and sub items, you do not need to hand in your multi item voting card 1. I now advise all shareholders and proxies in the official meeting zone that voting cards will be collected here and in the main hall only.
Have multi item voting cards, one ready to put in the ballot box. I would like to or is participating online and who does not submit a voting card is voting in favor of all of the management proposals Concerning the items 2 to 9, I would like to inform shareholders who appointed employees of the company as their proxies that the proxies Present will cast your votes by releasing your voting instructions as they have been entered in the IT system. On release, The instructions flow into the vote counting system and are reflected in the results. Some of the In our computer system, votes Sure that attendance counts are accurate. I would kindly ask shareholders and proxies not to leave the official meeting zone And not to end their online participation during voting, I'm now calling for votes on the management's proposals In respect of items 2 to 9 on the agenda.
Item 2 on the agenda. As I explained earlier, the Executive Board and The wording of the management proposals for items 3 to 9 is the same as was published in the announcements In the German Federal Gazette, the Bundesandseiger, on Monday, 9th April 2018, in the interest Of avoiding repetitions, I refer you to this announcement. The wording is also provided in your invitation to this Annual General Meeting of Shareholders. With regard to Agenda Items 34, I expressly draw your attention to the voting exclusion in Section 138 of the German Stock Corporation Act. A simple majority vote is required for the resolutions on items 2 through 7, a 3 fourths majority vote is required for the resolutions on the items 8 and 9.
From this point, shareholders who have appointed proxies in our Internet system cannot give or change voting instructions. I now put the management's proposed resolutions on the items 229 to the vote. All shareholders and proxies present today who wish to vote against any or all of the proposals made by the management for items 2 to 9 or who wish to abstain on any of them, please go to the main hall, raise your hand Shareholders and
Well, now that we've had enough time to collect The voting cards, let me now ask, have all voting cards been collected? Would anybody now would like to have their voting card collected? For the record, I declare that the online participants have now had enough time to send their online multi voting cards. The time for submitting online multi item voting cards will end Have all shareholders and proxies present in the official meeting zone who wish to cast a no vote or an abstention on any of the management proposals been able to submit their multi item Voting cards won yet.
I'm not going to repeat that
question as my script says. I see that they all have, and I'm hereby now closing the voting. I will announce the results of the voting as soon as I have them. You don't want to listen for and wait for the results?
It's my final detail.
Well, sometimes, especially in the soccer match, The goals are scored in the very last second. Now we decided that next year, During this waiting period, we're going to play some music or some video of the company. Well, and if you've got So here we go, ladies and gentlemen. I now have got the results of the votes. The Annual General Meeting of Shareholders has Full details of the voting results can be obtained by all shareholders and shareholder representatives who are interested in that at the speakers' table.
If there are no objections, I would like to state for each resolution simply that the required majority was obtained. Well, now I've got to read out something. I don't get that. Why? What's this?
Now I've got 4 pages to read out to you if you'd like to hear that. Well, that's a Nice improvement, a result of 99.91 percent or here 98%, 19, 96, 99, 99, 99, 96, 98, Well, I'd like to thank The shareholders and shareholder representatives specifically for allowing me not to read out These pages of numbers now, well, and that means there's little left for me to you. We Have now addressed all agenda items. I close the Annual General Meeting of Shareholders. On behalf of the supervisor and executive board, I'd like to thank you very much attending.
I also would like to thank all of the employees of SAP. 1,000 of them are working here. Also on behalf of the shareholders, In particular, I'd like to thank the leading Supervisory Board members. After 30 years, Mr. Harmon, I'm going to miss you.
Maybe you're going to miss something as well. Well, he already threatened to come here as a speaker next year. Well, I really have got to get well prepared for that. Ladies and gentlemen, the meeting is closed. Have a safe journey home.