Annual Reports

  • 20-F (Jul 6, 2010)
  • 10-K (Jun 3, 2010)
  • 10-K (Apr 9, 2010)
  • 10-K (Apr 8, 2010)
  • 10-K (Apr 7, 2010)
  • 10-K (Apr 6, 2010)

 
Quarterly Reports

 
8-K

 
Other

Volkswagen 20-F 2009
e20vf
Table of Contents

As filed with the Securities and Exchange Commission on December 4, 2009
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
  o   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
  þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2009.
OR
  o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to           
OR
  o   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report           
Commission file number: 1-15174
 
Wittelsbacherplatz 2
D-80333 Munich
Federal Republic of Germany
Telephone: +49 (89) 636-00
 
Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
     
Title of each class   Name of each exchange on which registered
American Depositary Shares, each representing one
   
Common Share, no par value
  New York Stock Exchange
Common Shares, no par value*
  New York Stock Exchange
Listed, not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.
 
 
  Securities registered or to be registered pursuant to Section 12(g) of the Act: None
 
 
  Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 
 
  The number of outstanding shares of each of the issuer’s classes of capital or common stock as of September 30, 2009: 866,425,760 common shares, no par value.
 
 
  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes  o     No  þ
 
 
 
  If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes  o     No  þ
 
 
  Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  þ     No  o     Not applicable  o
 
 
  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  o     No  o
 
 
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
         
U.S. GAAP  o
  International Financial Reporting Standards as issued   Other  o
    by the International Accounting Standards Board  þ    
  If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17  o   Item 18  o
  If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o     No  þ
 


Table of Contents

 
 
                 
        Page
 
      Identity of directors, senior management and advisers     1  
      Offer statistics and expected timetable     1  
      Key information     1  
       
    1  
       
    3  
       
    3  
       
    4  
      Information on the Company     11  
       
    11  
       
    12  
       
    13  
       
    14  
       
    15  
       
    28  
       
    29  
       
    30  
       
    31  
       
    31  
      Unresolved staff comments     40  
      Operating and financial review and prospects     40  
       
    40  
       
    41  
       
    52  
       
    70  
       
    82  
       
    94  
       
    96  
       
    98  
       
    98  
      Directors, senior management and employees     104  
       
    104  
       
    108  
       
    123  
       
    125  
      Major shareholders and related party transactions     128  
       
    128  
       
    128  
      Financial information     129  
      The offer and listing     129  
       
    129  


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        Page
 
       
    130  
       
    131  
      Additional information     132  
       
    132  
       
    132  
       
    132  
       
    136  
       
    136  
       
    137  
       
    140  
       
    140  
       
    141  
       
    141  
       
    141  
       
    142  
       
    146  
      Quantitative and qualitative disclosure about market risk     146  
      Description of securities other than equity securities     146  
 
PART II
      Defaults, dividend arrearages and delinquencies     147  
      Material modifications to the rights of security holders and use of proceeds     147  
      Controls and procedures     147  
       
    147  
       
    147  
       
    148  
       
    149  
      Audit committee financial expert     149  
      Code of ethics     149  
      Principal accountant fees and services     149  
       
    150  
       
    150  
       
    151  
      Exemptions from the listing standards for audit committees     151  
      Purchases of equity securities by the issuer and affiliated purchasers     152  
      Change in registrant’s certifying accountant     152  
      Corporate governance     153  
 
PART III
      Financial statements     F-1  
       
    F-2  
      Exhibits     III-1  
 Exhibit 1.1
 Exhibit 8.1
 Exhibit 12.1
 Exhibit 12.2
 Exhibit 13.1
 Exhibit 13.2
 Exhibit 15.1
 Exhibit 15.2
 Exhibit 15.3


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This Form 20-F contains forward-looking statements and information – that is, statements related to future, not past, events. These statements may be identified by words such as “expects,” “looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “project” or words of similar meaning. Such statements are based on the current expectations and certain assumptions of Siemens’ management, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’ control, affect Siemens’ operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For Siemens, particular uncertainties arise, among others, from changes in general economic and business conditions (including margin developments in major business areas and recessionary trends); the possibility that customers may delay the conversion of booked orders into revenue or that prices will decline as a result of continued adverse market conditions to a greater extent than currently anticipated by Siemens’ management; developments in the financial markets, including fluctuations in interest and exchange rates, commodity and equity prices, debt prices (credit spreads) and financial assets generally; continued volatility and a further deterioration of the capital markets; a worsening in the conditions of the credit business and, in particular, additional uncertainties arising out of the subprime, financial market and liquidity crises; future financial performance of major industries that Siemens serves, including, without limitation, the Sectors Industry, Energy and Healthcare; the challenges of integrating major acquisitions and implementing joint ventures and other significant portfolio measures; the introduction of competing products or technologies by other companies; a lack of acceptance of new products or services by customers targeted by Siemens; changes in business strategy; the outcome of pending investigations and legal proceedings and actions resulting from the findings of these investigations; the potential impact of such investigations and proceedings on Siemens’ ongoing business including its relationships with governments and other customers; the potential impact of such matters on Siemens’ financial statements; as well as various other factors. More detailed information about certain of the risk factors affecting Siemens is contained throughout this report and in Siemens’ other filings with the SEC, which are available on the Siemens website, www.siemens.com, and on the SEC’s website, www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed, sought, estimated or projected. Siemens does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.
 
In this Form 20-F, references to “we,” “us,” “our,” “Company,” “Siemens” or “Siemens AG” are to Siemens Aktiengesellschaft and, unless the context otherwise requires, to its consolidated subsidiaries. Throughout this annual report, whenever a reference is made to our Company’s website, such reference does not incorporate information from the website by reference into this annual report.


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ITEM 1:  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
Not applicable.
 
ITEM 2:  OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not applicable.
 
ITEM 3:  KEY INFORMATION
 
 
The accompanying Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU). The financial statements are also in accordance with IFRS as issued by the IASB. Certain pronouncements have been early adopted, see “Notes to Consolidated Financial Statements.” Until fiscal year end 2006, our primary financial reporting was prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP).
 
We have presented the selected financial data below as of and for each of the years in the five-year period ended September 30, 2009 in accordance with IFRS. For fiscal years 2009, 2008 and 2007, we present our Consolidated Financial Statements prepared in accordance with IFRS. In addition, we published our first IFRS Consolidated Financial Statements for fiscal years 2006 and 2005 as supplemental information in December 2006. The IFRS selected financial data set forth below should be read in conjunction with, and are qualified in their entirety by reference to, the Consolidated Financial Statements and the Notes thereto presented elsewhere in this document.
 
We have also presented the selected financial data below as of and for each of the years in the three-year period ended September 30, 2007 in accordance with U.S. GAAP. For fiscal years 2009 and 2008, Siemens is not required to prepare and present financial data in accordance with U.S. GAAP. For fiscal years 2007 to 2005, the selected financial data has been derived from a reconciliation of our IFRS Consolidated Financial Statements to U.S. GAAP.


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Income statement data
 
                                         
    Year ended September 30,  
    2009(1)     2008(1)     2007(1)     2006(1)     2005(1)  
    (in millions of €, except per share data)  
 
Amounts in accordance with IFRS:
                                       
Revenue
    76,651       77,327       72,448       66,487       55,781  
Income from continuing operations before income taxes
    3,891       2,874       5,101       3,418       3,594  
Income from continuing operations
    2,457       1,859       3,909       2,642       2,813  
Income (loss) from discontinued operations, net of income taxes
    40       4,027       129       703       (237 )
Net income
    2,497       5,886       4,038       3,345       2,576  
Basic earnings per share
                                       
Income from continuing operations
    2.60       1.91       4.13       2.78       2.96  
Income (loss) from discontinued operations
    0.05       4.50       0.11       0.74       (0.25 )
Net income
    2.65       6.41       4.24       3.52       2.71  
Diluted earnings per share
                                       
Income from continuing operations
    2.58       1.90       3.99       2.77       2.85  
Income (loss) from discontinued operations
    0.05       4.49       0.11       0.74       (0.23 )
Net income
    2.63       6.39       4.10       3.51       2.62  
 
                                         
    Year ended September 30,  
    2009(1)     2008(1)     2007(1)     2006(1)     2005(1)  
    (in millions of €, except per share data)  
 
Amounts in accordance with U.S. GAAP:
                                       
Net sales
    N/A       N/A       78,890       77,559       66,089  
Income from continuing operations before income taxes
    N/A       N/A       3,250       3,728       3,549  
Income from continuing operations, net of income taxes
    N/A       N/A       2,064       2,650       2,543  
Income (loss) from discontinued operations, net of income taxes
    N/A       N/A       353       393       (379 )
Net income
    N/A       N/A       2,417       3,043       2,164  
Basic earnings per share
                                       
Income from continuing operations
    N/A       N/A       2.30       2.97       2.85  
Income (loss) from discontinued operations
    N/A       N/A       0.39       0.45       (0.42 )
Net income
    N/A       N/A       2.69       3.42       2.43  
Diluted earnings per share
                                       
Income from continuing operations
    N/A       N/A       2.29       2.85       2.74  
Income (loss) from discontinued operations
    N/A       N/A       0.39       0.42       (0.41 )
Net income
    N/A       N/A       2.68       3.27       2.33  


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Balance sheet data
 
                                         
    At September 30,  
    2009     2008     2007     2006     2005  
    (in millions of €)  
 
Amounts in accordance with IFRS:
                                       
Total assets
    94,926       94,463       91,555       87,528       81,579  
Long-term debt
    18,940       14,260       9,860       13,122       8,040  
Total equity
    27,287       27,380       29,627       25,895       23,791  
Common stock
    2,743       2,743       2,743       2,673       2,673  
                                         
Amounts in accordance with U.S. GAAP:
                                       
Total assets
    N/A       N/A       93,470       90,770       85,884  
Long-term debt
    N/A       N/A       9,853       13,399       8,436  
Shareholders’ equity
    N/A       N/A       30,379       28,926       26,632  
Common stock
    N/A       N/A       2,743       2,673       2,673  
 
 
(1)  Under IFRS, the historical results of the former segments Communications (Com) and Siemens VDO Automotive (SV) are reported as discontinued operations in the Company’s Consolidated Statements of Income for all periods presented and the assets and liabilities were classified on the balance sheet as held for disposal. For further information see “Notes to Consolidated Financial Statements.”
 
The number of shares outstanding at September 30, 2009, 2008, 2007, 2006 and 2005 was 866,425,760; 861,557,756; 914,203,038; 891,086,826 and 891,076,457, respectively.
 
 
The following table sets forth in euros and in U.S. dollars the dividend paid per share for the years ended September 30, 2005, 2006, 2007, 2008 and the proposed dividend per share for the year ended September 30, 2009. Owners of our shares who are United States residents should be aware that they will be subject to German withholding tax on dividends received. See Item 10: “Additional information — Taxation.”
 
                 
    Dividend paid
 
    per share  
Year ended September 30,   Euro     U.S. dollar  
 
2005
    1.35       1.65  
2006
    1.45       1.88  
2007
    1.60       2.36  
2008
    1.60       2.11  
2009
    1.60 (1)      
 
 
(1)  Proposed by the Managing Board and the Supervisory Board; to be approved by the shareholders at the shareholders’ annual meeting on January 26, 2010.
 
 
We publish our Consolidated Financial Statements in euros. As used in this document, “euro” or “€” means the single unified currency that was introduced in the Federal Republic of Germany on January 1, 1999. “U.S. dollar,” “U.S.$,” “USD” or “$” means the lawful currency of the United States of America. The currency translations made in the case of dividends we have paid have been made at the noon buying rate at the date of the Annual Shareholders’ Meeting at which the dividends were approved. As used in this document, the term “noon buying rate” refers to the rate of exchange for euro, expressed in U.S. dollar per euro, as announced by the Federal Reserve Bank of New York for customs purposes as the rate in The City of New York for cable transfers in foreign currencies.


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In order that you may ascertain how the trends in our financial results might have appeared had they been expressed in U.S. dollars, the table below shows the average noon buying rates in The City of New York for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York for U.S. dollar per euro for our fiscal years. The average is computed using the noon buying rate on the last business day of each month during the period indicated.
 
         
Fiscal year ended September 30,   Average  
 
2005
    1.2727  
2006
    1.2361  
2007
    1.3420  
2008
    1.5067  
2009
    1.3556  
 
The following table shows the noon buying rates for euro in U.S. dollars for the last six months and for November, 2009 up to and including November 25, 2009.
 
                 
2009   High     Low  
 
May
    1.4126       1.3267  
June
    1.4270       1.3784  
July
    1.4279       1.3852  
August
    1.4416       1.4075  
September
    1.4795       1.4235  
October
    1.5029       1.4532  
November (through November 25)
    1.5085       1.4658  
 
On November 25, 2009, the noon buying rate was U.S.$1.5085 per €1.00.
 
Our shares are traded on the Frankfurt Stock Exchange in euro. Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar equivalent of the euro price of the shares on the Frankfurt Stock Exchange and, as a result, are likely to affect the market price of the American Depositary Shares (ADS) on the New York Stock Exchange. We will declare any cash dividends in euro and exchange rate fluctuations will affect the U.S. dollar amounts received by holders of ADSs on conversion of cash dividends on the shares represented by the ADSs.
 
 
Our business, financial condition and results of operations could suffer material adverse effects due to any of the following risks. We have described below all the risks that we consider material, but those risks are not the only ones we face. Additional risks not known to us or that we currently consider immaterial may also impair our business operations.
 
 
Our business is affected by the uncertainties of economic and political conditions, in particular by the current global macroeconomic downturn and financial crisis:  Our business environment is influenced by conditions in the domestic and global economies. In fiscal 2009, the global economic situation took a significant turn for the worse leading to a decline in consumer and business confidence, increased unemployment and reduced levels of capital expenditure, resulting in lower demand and more challenging market environments across our Sectors. Our Industry Sector was especially affected by weaker demand due to the adverse macroeconomic and financing conditions. In recent months, certain indices and economic data began to show first signs of improvement and stabilization in the macroeconomic environment. However, there can be no assurance that these improvements will be broad-based and sustainable, and how they will affect the markets relevant for us. In general, due to the significant proportion of longer-cycle businesses in our Sectors and the importance of long-term contracts for Siemens, there is usually a time lag between the development of macroeconomic conditions and their impact on our financial results. If the improvements will be temporary or the global economic downturn continues or worsens and


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we are not successful in adapting our production and cost structure to the current market environment there can be no assurance that we will not experience further adverse effects that may be material to our revenues, results of operations, financial condition and ability to access capital. For example, in addition to a general decline in demand, the current tightening of credit in the financial markets may make it more difficult for our customers to obtain financing and as a result they may modify, delay or cancel plans to purchase our products and services or to execute transactions. Further, prices may decline as a result of continued adverse market conditions to a greater extent than currently anticipated. In addition, contracted payment terms, especially regarding the level of advance payments by our customers relating to long-term projects, may become less favorable under the current conditions, which could negatively impact our cash flows. Additionally, if customers are not successful in generating sufficient revenue or securing access to the capital markets they may not be able to pay, or may delay payment of, the amounts they owe us, which may adversely affect our financial position and results of operations.
 
Numerous other factors, such as fluctuations of energy and raw material prices as well as global political conflicts, including in the Middle East and other regions, continue to impact macroeconomic parameters and the international capital and credit markets. The uncertainty of economic and political conditions, which is reinforced by the current developments of the global economic situation, can have a material adverse impact on our investments, financial condition or results of operations and can also make our budgeting and forecasting more difficult.
 
Our Sectors and Cross-Sector Businesses are affected by market conditions. For example, our Industry Sector is vulnerable to unfavorable market conditions in certain segments of the automotive, manufacturing and construction industries. Our Healthcare Sector, in turn, is dependent on developments and regulations in the healthcare systems around the world, particularly including ongoing healthcare reform efforts in the U.S. Finally, our Energy Sector is exposed to the development of global energy demand and is considerably affected by regulations related to energy and environmental policies.
 
We operate in highly competitive markets, which are subject to price pressures and rapid changes:  The worldwide markets for our products and solutions are highly competitive in terms of pricing, product and service quality, development and introduction time, customer service and financing terms. In many of our businesses, we face downward price pressure and we are or could be exposed to market downturns or slower growth, which may increase in times of declining investment activities and consumer demand similar to the current economic conditions. We face strong competitors, some of which are larger and may have greater resources in a given business area, as well as competitors from emerging markets, which may have a better cost structure. Some industries in which we operate are undergoing consolidation, which may result in stronger competitors and a change in our relative market position. Specific competitors might be more effective and faster in capturing available market opportunities, which in turn may negatively impact our market share. These factors alone or in combination may negatively impact our financial condition or results of operations.
 
Our businesses must keep pace with technological changes and develop new products and services to remain competitive:  The markets in which our businesses operate experience rapid and significant changes due to the introduction of innovative technologies. To meet our customers’ needs in these areas we must continuously design new, and update existing products and services and invest in and develop new technologies. Introducing new products and technologies requires a significant commitment to research and development, which in return requires considerable financial resources that may not always result in success. Our sales and profits may suffer if we invest in technologies that do not operate as expected or are not accepted in the marketplace as anticipated or if our products or systems are not introduced to the market in a timely manner or as they become obsolete. Furthermore, in some of our markets, the need to develop and introduce new products rapidly in order to capture available opportunities may lead to quality problems. Our operating results depend to a significant extent on our ability to anticipate and adapt to changes in markets and to reduce the costs of producing high-quality new and existing products. Any inability to do so could have a material adverse effect on our financial condition or results of operations.
 
Our financial results and cash flows may be adversely affected by continued strategic reorientations and cost-cutting initiatives:  We are in the process of strategic reorientation and constantly perform cost-cutting initiatives, including headcount reduction, for example, within our global program for reducing marketing, selling


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and general administrative expenses (global SG&A program) or for the ongoing capacity adjustment measures and structural initiatives, including measures in the Industry Sector. Capacity adjustments through consolidation of business activities and manufacturing facilities, and the streamlining of product portfolios are also part of these cost reduction efforts. These measures may negatively impact our results of operations and cash flows. Any future contribution of these measures to our profitability will be influenced by the actual savings achieved and by our ability to sustain these ongoing efforts.
 
Our financial results and cash flows may be adversely affected by portfolio measures:  Our strategy includes divesting our interests in some business areas and strengthening others through portfolio measures, including mergers and acquisitions.
 
With respect to dispositions, we may not be able to divest some of our activities as planned, and the divestitures we do carry out could have a negative impact on our results of operations, our cash flow and, potentially, our reputation.
 
Mergers and acquisitions are inherently risky because of difficulties that may arise when integrating people, operations, technologies and products. There can be no assurance that any of the businesses we acquire can be integrated successfully and as timely as originally planned or that they will perform well once integrated. In addition, we may incur significant acquisition, administrative and other costs in connection with these transactions, including costs related to integration of acquired businesses. Furthermore, portfolio measures may result in additional financing needs and adversely affect our financial leverage and our debt-to-equity ratio. Acquisitions may also lead to substantial increases in intangible assets, including goodwill. Our balance sheet reflects a significant amount of intangible assets, including goodwill. Among our businesses, the largest amount of goodwill is allocated to the Divisions Diagnostics and Imaging & IT of the Healthcare Sector, and Industry Automation of the Industry Sector. Among these Divisions, Diagnostics has the highest amount of goodwill and the lowest excess of the recoverable amount over the carrying amount, estimated at €2.284 billion based on the annual impairment test in fiscal 2009. If we were to encounter adverse business developments including negative effects on our revenues, profits or on cash, or adverse effects from an increase in the weighted average cost of capital (WACC) or from foreign exchange rate risk or otherwise perform worse than expected at acquisition, then these intangible assets, including goodwill allocated to the Divisions Diagnostics, Building Technologies, or other Divisions, might have to be written down and could materially and adversely affect our results of operations. The likelihood of such adverse business developments increases in times of difficult macroeconomic conditions, such as experienced under the current global macroeconomic and financial crisis.
 
We may be adversely affected by our equity interests and strategic alliances:  Our strategy includes strengthening our business interests through joint ventures, associated companies and strategic alliances. Certain of our investments are accounted for using the equity method, including, among others, Nokia Siemens Networks B.V. (NSN), Enterprise Networks Holdings B.V. (EN) and BSH Bosch und Siemens Hausgeräte GmbH (BSH). Any factors negatively influencing the profitability of our equity investments, including negative effects on revenues, profits or on cash, could have an adverse effect on our equity pick-up related to these equity interests or may result in a write-down of these investments. In addition, our financial position and results of operations could also be adversely affected in connection with loans, guarantees or non-compliance with financial covenants related to these equity investments. Furthermore, such investments are inherently risky as we may not be able to sufficiently influence business decisions taken by our equity investments and strategic alliances that may have a negative effect on our business. In addition, joint ventures bear the risk of difficulties that may arise when integrating people, operations, technologies and products. Strategic alliances may also pose risks for us because we compete in some business areas with companies with which we have strategic alliances.
 
 
Our financial results and cash flows may be adversely affected by cost overruns or additional payment obligations related to the management of our long-term, fixed price or turn-key projects:  We perform a portion of our business, especially large projects, under long-term contracts that are awarded on a competitive bidding basis. Some of these contracts are inherently risky because we may assume substantially all of the risks associated with


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completing the project and the post-completion warranty obligations. For example, we face the risk that we must satisfy technical requirements of a project even though we may not have gained experience with those requirements before we win the project. The profit margins realized on such fixed-priced contracts may vary from original estimates as a result of changes in costs and productivity over their term. We sometimes bear the risk of unanticipated project modifications, shortage of key personnel, quality problems, financial difficulties of our customers, cost overruns or contractual penalties caused by unexpected technological problems, unforeseen developments at the project sites, performance problems with our suppliers, subcontractors and consortium partners or other logistical difficulties. Certain of our multi-year contracts also contain demanding installation and maintenance requirements, in addition to other performance criteria relating to timing, unit cost requirements and compliance with government regulations, which, if not satisfied, could subject us to substantial contractual penalties, damages, non-payment and contract termination. There can be no assurance that all of our fixed-priced contracts can be completed profitably. For additional information, see Item 5: “Operating and financial review and prospects—Critical accounting estimates.”
 
We may face interruption of our supply chain, including the inability of third parties to deliver parts, components and services on time, and could be subject to rising raw material prices:  Our financial performance depends in part on a reliable and effective supply chain management for components, sub-assembles and other materials. Capacity constraints and market shortage resulting from an ineffective supply chain management may lead to delays and additional cost. We rely on third parties to supply us with parts, components and services. Using third parties to manufacture, assemble and test our products reduces our control over manufacturing yields, quality assurance, product delivery schedules and costs. The third parties that supply us with parts and components also have other customers and may not have sufficient capacity to meet all of their customers’ needs, including ours, during periods of excess demand. Component supply delays can affect the performance of our Sectors. Although we work closely with our suppliers to avoid supply-related problems, there can be no assurance that we will not encounter supply problems in the future or that we will be able to replace a supplier that is not able to meet our demand. This risk is particularly evident in businesses with a very limited number of suppliers. Shortages and delays could materially harm our business. Unanticipated increases in the price of components due to market shortages or other reasons could also adversely affect the performance of our Sectors.
 
Our Sectors purchase raw materials, including copper, steel, aluminum and oil, which exposes them to fluctuations in energy and raw material prices. In recent times, commodities have been subject to volatile markets, and such volatility is expected to continue. If we are not able to compensate for or pass on our increased costs to customers, price increases could have a material adverse impact on our financial results. In contrast, in times of falling commodity prices, we may not fully profit from such price decreases as we attempt to reduce the risk of rising commodity prices by several means, such as long-term contracting or physical and financial hedging. In addition to price pressure that we may face from our customers expecting to benefit from falling commodity prices, this could also adversely affect our financial results.
 
We may face operational failures and quality problems in our value chain processes:  Our value chain comprises all steps, from research and development to production, marketing, sales and services. Operational failures in our value chain processes could result in quality problems or potential product, labor safety, regulatory or environmental risks. Such risks are particularly present in relation to our production facilities, which are located all over the world and have a high degree of organizational and technological complexity. From time to time, some of the products we sell might have quality issues resulting from the design or manufacture of such products or from the software integrated into them. Such operational failures or quality issues could have a material adverse effect on our financial condition or results of operations.
 
We are dependent upon hiring and retaining highly qualified management and technical personnel:  Competition for highly qualified management and technical personnel remains intense in the industries and regions in which our Sectors and Cross-Sector Businesses operate. In many of our business areas, we intend to extend our business activities, for which we will need highly skilled employees. Our future success depends in part on our continued ability to hire, assimilate and retain engineers and other qualified personnel. There can be no assurance that we will continue to be successful in attracting and retaining highly qualified employees and key personnel in the future, and any inability to do so could have a material adverse effect on our business.


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We are exposed to currency risks and interest rate risks:  We are exposed to fluctuations in exchange rates, especially between the U.S. dollar and the euro, because a high percentage of our business volume is conducted in the U.S. and as exports from Europe. As a result, a strong euro in relation to the U.S. dollar and other currencies can have a material impact on our other revenues and results. Certain currency risks as well as interest rate risks are hedged on a Company-wide basis using derivative financial instruments. Depending on the development of foreign currency exchange rates, our hedging activities can have significant effects on our cash flow. Our Sectors and Cross-Sector Businesses engage in currency hedging activities which sometimes do not qualify for hedge accounting. In addition, our Corporate Treasury has interest rate hedging activities which also do not qualify for hedge accounting, and are subject to changes in interest rates. Accordingly, exchange rate and interest rate fluctuations may influence our financial results and lead to earnings volatility. A strengthening of the euro (particularly against the U.S. dollar) may also change our competitive position, as many of our competitors may benefit from having a substantial portion of their costs based in weaker currencies, enabling them to offer their products at lower prices. For more information regarding currency risks, interest rate risks, hedging activities and other market risks, please see “Notes to Consolidated Financial Statements.”
 
We are exposed to volatile credit spreads:  Regarding our Corporate Treasury activities, widening credit spreads due to uncertainty and risk aversion in the financial markets might lead to changing fair market values of our existing trade receivables and derivative financial instruments. In addition, we also see a risk of increasing refinancing costs if the recent stabilization and improvement in the global financial markets does not persist. Furthermore, costs for buying protection on credit default risks could increase due to a potential increase of counterparty risks.
 
Our future financing via Corporate Treasury may be affected by the uncertainties of economic conditions and the development of capital and bank markets:  Our Corporate Treasury is responsible for the financing of the Company and our Sectors and Cross-Sector Businesses. A negative development in the capital markets could increase our cost of debt capital. The developments in the subprime mortgage market in the U.S. and the worldwide financial market crisis have had a global impact on the capital markets with subsequent losses and worsening liquidity of many financial institutions. The decision of several governments to pump fresh liquidity into the market and to support the banking sector results in immense available liquidity in the capital markets. But this liquidity could only be available for well rated companies and at significantly higher credit spreads as a financial crisis could lead to a higher degree of risk awareness among investors. These developments could also influence our future possibilities of obtaining debt financing. Regarding our Corporate Treasury activities, deteriorating credit quality and/or default of counterparties may adversely affect our results.
 
Further downgrades of our ratings may increase our cost of capital and could negatively affect our businesses:  Our financial condition, results of operations and cash flows are influenced significantly by the actual and expected performance of the Sectors and Cross-Sector Businesses, as well as the Company’s portfolio measures. An actual or expected negative development of our results of operations or cash flows or an increase in our net debt position may result in the deterioration of our credit rating. In June 2009, Standard & Poor’s changed its long-term credit rating for Siemens from “AA-” to “A+”. Further downgrades by rating agencies may increase our cost of capital, may reduce our potential investor base and may negatively affect our businesses.
 
Our financing activities subject us to various risks, including credit, interest rate and foreign exchange risk:  We provide our customers various forms of direct and indirect financing in connection with large projects such as those undertaken by our Energy Sector. We finance a large number of smaller customer orders, for example the leasing of medical equipment, in part through Siemens Financial Services (SFS). SFS also incurs credit risk by financing third-party equipment or by taking direct or indirect participations in financings, such as syndicated loans. We partially take a security interest in the assets we finance or receive additional collateral. We may lose money if the credit quality of our customers deteriorates or if they default on their payment obligation to us, if the value of the assets that we have taken a security interest in or additional collateral declines, if interest rates or foreign exchange rates fluctuate, or if the projects in which we invest are unsuccessful. Potential adverse changes in economic conditions could cause a further decline in the fair market values of financial assets and customer default rates to


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increase substantially and asset and collateral values to decline, resulting in losses which could have a negative effect on our financial condition or results of operations.
 
Our financial condition and results of operations may be adversely affected by several parameters influencing the funded status of our pension benefit plans:  The funded status of our pension plans may be affected by an increase or decrease in the defined benefit obligation (DBO), as well as by an increase or decrease in the value of plan assets. Pensions are accounted for in accordance with actuarial valuations, which rely on statistical and other factors in order to anticipate future events. These factors include key pension plan valuation assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases and pension progression. Assumptions may differ from actual developments due to changing market and economic conditions, thereby resulting in an increase or decrease in the DBO. Significant movements in financial markets or a change in the portfolio mix of invested assets can result in corresponding increases or decreases in the value of plan assets, particularly equity securities, or in a change of the expected rate of return on plan assets. Also, changes in pension plan assumptions can affect net periodic pension cost. For example, a change in discount rates or in the expected return on plan assets assumptions may result in changes in the net periodic benefit cost in the following financial year. In order to comply with local pension regulations in selected foreign countries we may face a risk of increasing cash outflows to reduce an underfunding of our pension plans in these countries, if any. The underfunding of Siemens’ principal pension plans as of September 30, 2009 amounted to €4.0 billion, compared to an underfunding of €2.5 billion at the end of fiscal 2008. The increase in underfunding was primarily due to a decrease in the discount rate assumption at September 30, 2009, which increased the DBO. This negative effect on the funded status was only partly compensated by the actual return on plan assets, which significantly exceeded the expected return. Both factors, discount rate and actual return, are being significantly influenced by the conditions in the global financial markets. For additional information, see Item 5: “Operating and financial review and prospects—Critical accounting estimates” and “Notes to Consolidated Financial Statements.”
 
 
Public prosecutors and other government authorities in jurisdictions around the world are conducting investigations of our Company and certain of our current and former employees regarding allegations of public corruption and other illegal acts. The results of these and any future investigations may have a material adverse effect on the development of future business opportunities, our financial results and condition, the price of our shares and American depository shares (ADSs) and our reputation:  Public prosecutors and other government authorities in jurisdictions around the world are investigating allegations of corruption at a number of our former business Groups and regional companies. In addition to ongoing investigations, there could be additional investigations launched in the future by governmental authorities in these or other jurisdictions and existing investigations may be expanded. As a result, governmental authorities may take action against us or some of our employees. These actions could include further criminal and civil fines as well as penalties, sanctions, injunctions against future conduct, profit disgorgements, disqualifications from directly and indirectly engaging in certain types of business, the loss of business licenses or permits or other restrictions. In addition to monetary and other penalties, further monitors could be appointed to review future business practices with the goal of ensuring compliance with applicable laws and we may otherwise be required to further modify our business practices and compliance programs. Tax authorities may also impose certain remedies, including potential tax penalties. Depending on the development of the investigations, we may be required to accrue material amounts for such penalties, damages, profit disgorgement or other possible actions that may be taken by various governmental authorities. Any of the foregoing could have a material adverse effect on our business, financial results and condition, the price of our shares and ADSs and our reputation.
 
Additionally, we engage in a substantial amount of business with governments and government-owned enterprises around the world. We also participate in a number of projects funded by government agencies and non-governmental organizations such as multilateral development banks. If we or our subsidiaries are found to have engaged in certain illegal acts or are found not to have taken effective steps to address the allegations or findings of corruption in our business, this may impair our ability to participate in business with governments or non-governmental organizations and may result in formal exclusions from such business, which may have a material


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adverse effect on our business. For example, legislation of member states of the European Union could in certain cases result in mandatory or discretionary exclusion from public contracts in case of a conviction for bribery and certain other offences or for other reasons. As described in more detail in Item 4: “Information on the Company—Legal proceedings,” we or our subsidiaries have in the past been excluded from government contracting as a result of findings of corruption or other misconduct. Conviction for illegal behavior or exclusion from participating in contracting with governments or non-governmental organizations in one jurisdiction may lead to exclusion in other jurisdictions or by other non-governmental organizations. Even if we are not formally excluded from participating in government business, government agencies or non-governmental organizations may informally exclude us from tendering for or participating in certain contracts. From time to time, we have received requests for information from government customers and non-governmental organizations regarding the investigations described above and our response to those investigations. We expect to receive more such requests in the future.
 
In addition, our involvement in existing and potential corruption proceedings could damage our reputation and have an adverse impact on our ability to compete for business from both public and private sector customers. The investigations could also impair our relationship with business partners on whom we depend and our ability to obtain new business partners. They may also adversely affect our ability to pursue strategic projects and transactions which could be important to our business, such as strategic alliances, joint ventures or other business combinations. Current or possible future investigations could result in the cancellation of certain of our existing contracts, and the commencement of significant third-party litigation, including by our competitors.
 
Many of the governmental investigations are at this time still ongoing and we cannot predict when they will be completed or what their outcome will be, including the potential effect that their results or the reactions of third parties thereto may have on our business. Future developments in these investigations, responding to the requests of governmental authorities and cooperating with them, especially if we are not able to resolve the investigations in a timely manner, could divert management’s attention and resources from other issues facing our business. Management has implemented a remediation plan to address corruption and compliance risk in our business. If this remediation plan is unsuccessful, we would continue to be exposed to the risks described above.
 
We are subject to regulatory risks associated with our international operations:  Protectionist trade policies and changes in the political and regulatory environment in the markets in which we operate such as foreign exchange import and export controls, tariffs and other trade barriers and price or exchange controls could affect our business in several national markets, impact our sales and profitability and make the repatriation of profits difficult, and could lead to penalties, sanctions and reputational damages if we are not compliant with those regulations. In addition, the uncertainty of the legal environment in some regions could limit our ability to enforce our rights. Furthermore, as a globally operating organization, we also conduct business with customers in countries subject to export controls, embargos or other forms of trade restrictions imposed by U.S., the European Union or other countries or organizations. Future interpretations or developments of sanctions regimes could lead to a curtailment of existing and/or planned business activities and the possibility of reputational harm. We expect that sales to emerging markets will continue to account for an increasing portion of our total sales, as our business naturally evolves and as developing nations and regions around the world increase their demand for our offering. Emerging market operations present several risks, including civil disturbances, health concerns, cultural differences such as employment and business practices, volatility in gross domestic product, economic and governmental instability, the potential for nationalization of private assets and the imposition of exchange controls. In particular, the Asian markets are important for our long-term growth strategy, and our sizeable operations in China are influenced by a legal system that is still developing and is subject to change. Our growth strategy could be limited by governments supporting local industries. The demand for many of the products of our Sectors and Cross-Sector Businesses, particularly those that derive their revenue from large projects, can be affected by expectations of future demand, prices and gross domestic product in the markets in which those Sectors and Cross-Sector Businesses operate. If any of these risks or similar risks associated with our international operations were to materialize, our results of operations and financial condition could be materially adversely affected.
 
Our business could suffer as a result of current or future litigation:  We are subject to numerous risks relating to legal, governmental and regulatory proceedings to which we are currently a party or to which we may become a party in the future. We routinely become subject to legal, governmental and regulatory investigations and


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proceedings involving, among other things, allegations of improper delivery of goods or services, product liability, product defects, quality problems, intellectual property infringement, non-compliance with tax regulations and/or alleged or suspected violations of applicable laws. In addition, we may face claims in connection with the circumstances that led to the corruption proceedings described above. For additional information with respect to specific proceedings, see Item 4: “Information on the Company—Legal proceedings.” There can be no assurance that the results of these or any other proceedings will not materially harm our business, reputation or brand. Moreover, even if we ultimately prevail on the merits in any such proceedings, we may have to incur substantial legal fees and other costs defending ourselves against the underlying allegations. We record a provision for legal risks when (1) we have a present obligation as a result of a past event; (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (3) a reliable estimate can be made of the amount of the obligation. In addition, we maintain liability insurance for certain legal risks at levels our management believes are appropriate and consistent with industry practice. Our insurance policy, however, does not protect us against reputational damage. Moreover, we may incur losses relating to legal proceedings beyond the limits, or outside the coverage, of such insurance. Finally, there can be no assurance that we will be able to maintain adequate insurance coverage on commercially reasonable terms in the future. Each of these risks may have a material adverse effect on our results of operations or financial condition and our provisions for legal proceedings-related losses may not be sufficient to cover our ultimate loss or expenditure.
 
Examinations by tax authorities and changes in tax regulations could result in lower earnings and cash flows:  We operate in approximately 190 countries and therefore are subject to different tax regulations. Changes in tax law could result in higher tax expense and payments. Furthermore, this could materially impact our tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities. In addition, the uncertainty of tax environment in some regions could limit our ability to enforce our rights. As a globally operating organization, we conduct business in countries subject to complex tax rules, which may be interpreted in different ways. Future interpretations or developments of tax regimes may affect our tax liability, return on investments and business operations. We are regularly examined by tax authorities in various jurisdictions.
 
We are subject to environmental and other government regulations:  Some of the industries in which we operate are highly regulated. Current and future environmental and other government regulations or changes thereto, may result in significant increases in our operating or product costs. We could also face liability for damage or remediation for environmental contamination at the facilities we design or operate. For further information, see Item 4: “Information on the Company—Environmental matters” and “Notes to Consolidated Financial Statements.” We establish provisions for environmental risks when (1) we have a present obligation as a result of a past event; (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (3) a reliable estimate can be made of the amount of the obligation. With regard to certain environmental risks, we maintain liability insurance at levels that our management believes are appropriate and consistent with industry practice. We may incur environmental losses beyond the limits, or outside the coverage, of such insurance, and such losses may have a material adverse effect on the results of our operations or financial condition and our provisions for environmental remediation may not be sufficient to cover the ultimate losses or expenditures.
 
ITEM 4:  INFORMATION ON THE COMPANY
 
 
Siemens traces its origins to 1847. Beginning with advances in telegraph technology, the Company quickly expanded its product line and geographic scope and was already a multi-national business by the end of the 19th century. The Company formed a partnership under the name Siemens & Halske in 1847, reorganized as a limited partnership in 1889 and as a stock corporation in 1897. The Company moved its headquarters from Berlin to Munich in 1949, and assumed its current name as Siemens Aktiengesellschaft, a stock corporation under the Federal laws of Germany, in 1966. The address of our principal executive offices is Wittelsbacherplatz 2, D-80333 Munich, Germany; telephone number +49 (89) 636 00.
 
During fiscal 2009, Siemens employed an average of 413,650 people and operated in approximately 190 countries worldwide. In fiscal 2009, we had revenue of €76.651 billion. Our balanced business portfolio is based on


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leadership in electronics and electrical engineering. Following our strategy to benefit from global megatrends, Siemens’ operations are focused on three Sectors. These Sectors are Industry, Energy and Healthcare. We have combined the expertise in these three Sectors with a commitment to original research and development (R&D) to build strong global market positions. The Industry Sector’s portfolio ranges from industry automation and drives products and services to building, lighting and mobility solutions and services as well as system integration and solutions for plant business. The Energy Sector offers a wide spectrum of products, services and solutions for the generation, transmission and distribution of power and for the extraction, conversion and transport of oil and gas. The Healthcare Sector develops, manufactures and markets diagnostic and therapeutic systems, devices and consumables, as well as information technology systems for clinical and administrative purposes. Besides these activities, Siemens IT Solutions and Services as well as Siemens Financial Services (SFS) support Sector activities as business partners (Cross-Sector Businesses) while continuing to build up their own business with external customers. Equity Investments includes investments accounted for by the equity method or at cost, and available-for-sale financial assets that are not allocated to a Sector or Cross Sector Business by reason of strategic fit. Our businesses operate under a range of regional and economic conditions. In internationally-oriented long-cycle industries, for example, customers have multi-year planning and implementation horizons that tend to be independent of short-term economic trends. Our activities in these areas include primarily the Energy Sector and the mobility solutions business among others within the Industry Sector. The Healthcare Sector’s business activities are relatively unaffected by short-term economic trends but are dependent on regulatory and policy developments around the world. In fields with more industry-specific cycles, customers tend to have shorter horizons for their spending decisions and greater sensitivity to current economic conditions. Our activities in these areas include automation and drives as well as lighting operations within the Industry Sector. Our businesses, especially the Healthcare Sector are also influenced by technological change and the rate of acceptance of new technologies.
 
As a globally operating organization, we also conduct business with customers in Iran, Syria and Cuba. The U.S. Department of State designates these countries as state sponsors of terrorism and subjects them to export controls. Our activities with customers in these states are insignificant relative to our size (less than 1% of our revenue in fiscal 2009) and do not, in our view, represent either individually or in aggregate a material investment risk. We actively employ systems and procedures for compliance with applicable export control programs, including those in the United States, the European Union and Germany.
 
 
Our “Fit42010” program, which we initiated in fiscal 2007, has been continued in fiscal 2009. The overall objectives of Fit42010, defined as Performance targets, are to achieve profitable growth and to increase the value of the Company. Drivers of Performance are Portfolio, People Excellence, Corporate Responsibility and Operational Excellence.
 
Performance—sets goals based on normal business cycles for Siemens to further enhance our competitiveness and our Company value by defining targets for capital efficiency, growth, cash conversion, capital structure and reduction of marketing, selling and general administrative expenses for the Company as well as margin ranges for our Sectors and their Divisions and our Cross-Sector Businesses.
 
Portfolio—involves reaching or holding leading positions in all our businesses with the focus on our three Sectors, Industry, Energy and Healthcare, where we intend to round out our portfolio with new products and technologies by organic growth as well as acquisitions.
 
People Excellence—means achieving and maintaining a high-performance culture. We are committed to systematically developing global diverse top talents, especially emerging leaders and technical, subject matter experts. People Excellence entails fostering outstanding knowledge and unique skills in every individual and developing the capability to work in high-performance teams across organizational boundaries.
 
Corporate Responsibility—comprises our commitment to the society. This includes Corporate Governance, Compliance, Climate Protection, and Corporate Citizenship. Corporate Governance is the basis of all our decision-making and monitoring processes. With our Compliance system, we are seeking to set high standards for integrity and transparency. With binding rules and guidelines, we intend to ensure that our employees and managers always


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conduct themselves in a legal and ethical manner in relation to each other and to our business partners. Climate Protection is an obligation to society but also a business opportunity with significant growth rates. Siemens is developing technological innovations that help save energy and limit greenhouse gas emissions. Furthermore we conduct an energy efficiency program for our production facilities worldwide. Within Corporate Citizenship, the global rollout of both Siemens-wide citizenship programs, Siemens Generation21 in the field of education and Siemens Caring Hands for social assistance services, was continued. At the end of fiscal 2008 Siemens established a globally acting foundation located in Munich, Germany (Siemens Stiftung) with an endowment of €390 million to enhance the sustainability and visibility of its corporate citizenship activities. The Siemens Stiftung focuses primarily on technology, education, charitable programs, the arts and culture and began operations as an independent entity in fiscal 2009. Siemens transferred its Siemens Generation21 and Siemens Caring Hands programs to the foundation. A further goal of our corporate citizenship activities is to implement projects that foster social and business benefits by more strongly integrating Siemens’ specific expertise—for example by providing support for infrastructure deficiencies.
 
Operational Excellence—focuses on Open innovations and Global supply chain management.  Open innovations have been a hallmark of Siemens since its inception, and our commitment to innovation remains strong, with increasing R&D expenses in fiscal 2009 compared to fiscal 2008. With Global supply chain management, Siemens intends to expand its global market presence and market penetration, especially in fast growing regions like Asia and to close the gap between Siemens and its most profitable competitors through a global value chain network for different functions such as R&D, product development, sourcing or production. With our Supply Chain Management initiative we intend to boost efficiency in sourcing and the supply chain throughout our Company.
 
 
Since fiscal 2007, we have completed the following significant transactions to optimize our business portfolio for sustainable profitability and growth:
 
 
  •  Acquisition of various entities in fiscal 2009, which were neither material individually nor in aggregate.
 
  •  Sector Healthcare’s, Diagnostics division, acquired Dade Behring at the beginning of November 2007 to further expand Healthcare’s position in the growing laboratory diagnostics market;
 
  •  Acquisition of three entities in fiscal 2008, which were not significant individually: BJC, Spain, a supplier of switches and socket-outlets at sector Industry, Building Technologies division; Innotec GmbH, a leading software provider for lifecycle management solutions at Sector Industry’s Industry Automation division; and the rolling mill technology specialist Morgan Construction Co., USA, at Sector Industry, Industry Solutions division;
 
  •  At Sector Industry, the Industry Automation division acquired U.S.-based UGS Corp. (UGS), one of the leading providers of product lifecycle management (PLM) software and services for manufacturers, in May 2007;
 
  •  Sector Healthcare’s acquisition of the diagnostics division of Bayer Aktiengesellschaft in January 2007, enabling Healthcare’s Diagnostics division to expand its position in the molecular diagnostics market;
 
Dispositions and discontinued operations
 
  •  In January 2009, Siemens announced its intent to sell and classified its 34% interest in the joint venture Areva NP S.A.S., held by the Energy Sector, as held for disposal;
 
  •  The sale of Siemens’ 50% stake in Fujitsu Siemens Computers (Holding) BV (FSC), held by the segment Equity Investment, closed at the beginning of April 2009.


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  •  At the beginning of October 2008, Siemens completed the transfer of an 80.2% stake in Siemens Home and Office Communication Devices GmbH & Co. KG (SHC), reported in Other Operations.
 
  •  By the end of September 2008, the Siemens enterprise networks business, reported in discontinued operations and formerly part of Com, was brought into the joint venture Enterprise Networks Holdings BV, the Netherlands. In exchange, Siemens received a 49% stake in Enterprise Networks Holdings BV, while the remaining 51% are held by The Gores Group, USA, which contributed two entities—Enterasys and SER Solutions—to the joint venture. Commencing with closing of the transaction, Siemens accounts its remaining equity interest under the equity method;
 
  •  The sale of Siemens VDO Automotive (SV), reported as discontinued operations, to Continental AG, Hanover, Germany, closed at the beginning of December 2007;
 
  •  In April 2007, Siemens contributed its carrier-related operations reported as discontinued operation and Nokia Corporation (Nokia), Finland contributed its Networks Business Group into Nokia Siemens Networks BV, the Netherlands (NSN), in exchange for shares in NSN. Siemens and Nokia each own an economic share of approximately 50% of NSN. Beginning in April 2007, Siemens accounts its remaining interest in NSN under the equity method;
 
For a detailed discussion of our acquisitions, dispositions and discontinued operations, see Notes to Consolidated Financial Statements.
 
 
In addition to measures of financial performance calculated in accordance with IFRS, we used the metrics Revenue growth, ROCE and Free cash flow, amongst others, as performance indicators with a focus on growth, capital efficiency and cash generation. Through and including fiscal 2008, we also used economic value added (EVA) as a measure for the performance of each of our former Groups and through and including fiscal 2007 also of our Company as a whole.
 
The measures and targets for Revenue growth, ROCE, EVA and Free cash flow are defined as follows:
 
  •  Our target for Revenue growth is defined as organic revenue growth rate. It is calculated by subtracting currency translation effects and portfolio effects from the relevant actual year-over-year revenue growth rate. The currency translation effect is calculated by adjusting year-over-year revenue development for the currency exchange rate difference between the current and the prior-year period. The portfolio effect is calculated by adjusting year-over-year revenue development for revenue effects from acquisitions and dispositions.
 
  •  ROCE is defined as Income from continuing operations (before interest) divided by average capital employed. Income from continuing operations (before interest) is defined as Income from continuing operations (as presented in the Consolidated Financial Statements) excluding Other interest income (expense), net (as presented in the Notes to Consolidated Financial Statements) and excluding taxes on Other interest income (expense), net. Capital employed is defined as Total equity plus Long-term debt plus Short-term debt and current maturities of long-term debt minus Cash and cash equivalents, each as presented in the Consolidated Financial Statements, plus Liabilities associated with assets classified as held for disposal minus Assets classified as held for disposal, both relating to discontinued operations and as presented in the Notes to Consolidated Financial Statements.
 
  •  EVA compares the net operating profit after tax of a former Group to the costs of capital for the average capital employed in the business of that Group.
 
  •  Free cash flow presented in the Notes to Consolidated Financial Statements is defined as net cash provided by (used in) operating activities (continuing operations), less Additions to intangible assets and property, plant and equipment (continuing operations).


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For a definition of Revenue growth and Free cash flow, and a reconciliation to the most directly comparable IFRS financial measure, see Item 5: “Operating and financial review and prospects—Supplemental financial measures.”
 
Other companies that use Revenue growth, ROCE, EVA or Free cash flow may define and calculate these measures differently.
 
 
Our financial reporting comprises six reportable segments. These segments consist of:
 
  •  three Sectors, Industry, Energy and Healthcare, which are reported along with fourteen Divisions which comprise the Divisions, Industry Automation, Drive Technologies, Building Technologies, OSRAM, Industry Solutions and Mobility, belonging to the Industry Sector, the Divisions, Fossil Power Generation, Renewable Energy, Oil & Gas, Power Transmission and Power Distribution, belonging to the Energy Sector and the Divisions, Imaging & IT, Workflow & Solutions and Diagnostics, belonging to the Healthcare Sector,
 
  •  Equity Investments and
 
  •  two Cross-Sector Businesses, Siemens IT Solutions and Services and Siemens Financial Services.
 
The following figure shows Siemens’ reporting structure:
 
(CHART)


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The Industry Sector offers a complete spectrum of products, services and solutions for the efficient use of resources and energy and improvements of productivity in industry and infrastructure. Its integrated technologies and holistic solutions address primarily industrial customers, such as process and manufacturing industries, and infrastructure customers, especially in the areas of transport, buildings and utilities. The portfolio spans industry automation and drives products and services, building, lighting and mobility solutions and services, and system integration and solutions for plant businesses. The Sector consists of six Divisions: Industry Automation, Drive Technologies, Mobility, Industry Solutions, Building Technologies and OSRAM.
 
The following table provides key financial data concerning the Industry Sector.
 
         
    Year ended
 
    September 30, 2009  
 
Total revenue
    €35.043 billion  
External revenue
    €33.915 billion  
External revenue as percentage of Siemens revenue
    44.25%       
Sector profit
    €2.701 billion  
 
The following chart provides a geographic breakdown of the Industry Sector’s external revenue in fiscal 2009.
 
(CHART)
 
The Industry Automation Division offers automation systems such as programmable logic controllers and process control systems, low-voltage switchgear such as circuit protection and distribution products, sensors such as process instrumentation and analytics and industrial software such as product lifecycle management and manufacturing execution systems software. The Division’s portfolio ranges from standard products and systems for the manufacturing, processing and construction industries to solutions for entire industrial vertical markets, including automation solutions for entire automobile production facilities and chemical plants. At the beginning of fiscal 2010, the Division’s low-voltage switchgear business has been transferred to the Building Technologies Division.
 
The Drive Technologies Division offers integrated technologies that cover a wide range of drive applications with electrical components such as standard motors and drives for conveyor belts, pumps and compressors, heavy duty motors and drives for rolling steel mills, compressors for oil and gas pipelines and mechanical components such as gears for wind turbines and cement mills. Drive Technologies offers products such as automation systems and services for production machinery and machine tools. The Division’s portfolio includes standard products as well as industry-specific control and drive solutions for wind power, metal forming, printing and electronic manufacturing as well as solutions for manufacturers of glass, wood, plastic, ceramic, textile and packaging equipment and crane systems. In 2009, the Division’s surface mount technology placement systems (electronics assembly systems) business was transferred to Other Operations.
 
The Building Technologies Division offers products, services and solutions for commercial, industrial, public and residential buildings, including building automation, comfort, building safety and security, and building operations. In addition, the Division offers energy solutions, aiming to improve a building’s energy cost, reliability and performance while minimizing its impact on the environment. The Division’s broad range of offerings includes heating and ventilation controls, security systems and devices such as intruder detection, video surveillance and building access control, fire safety solutions such as fire detection, protection alarm systems and non-water based fire extinguishing, and electrical installation equipment for buildings such as low-voltage switchgear, sockets and


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circuit breakers. As mentioned above, the low-voltage switchgear business has been transferred from the Industry Automation Division to Building Technologies beginning of fiscal 2010.
 
OSRAM supplies lighting solutions for all aspects of life and living environments, providing its customers with an extensive product portfolio of lamps such as incandescent, halogen, compact fluorescent, fluorescent, high-intensity discharge and Xenon lamps, opto-electronic semiconductor light sources such as light emitting diodes (LEDs), organic LEDs, high power laser diodes, LED systems and LED luminaires, relevant electronic equipment such as electronic ballasts and lighting control and management systems as well as precision material and components. These products are used in applications in households, industrial and commercial applications, and public spaces and infrastructure.
 
The Industry Solutions Division is Siemens’ systems integrator and solutions provider for industrial plant businesses, covering planning, construction, operation and maintenance over a plant’s entire lifecycle. With its water processing and raw material processing systems, the Division helps to increase the productivity and competitiveness of enterprises in various industries and to meet the need for environmentally compatible solutions. Its processes and systems are applied in the iron and steel production, pulp and paper, cement, marine and mining industries. We also offer equipment for the treatment of potable water and wastewater such as membranes and lab water/high purity water systems, treatment and outsourcing solutions for industrial wastewater, electrical and automation solutions for municipal wastewater and water transport as well as water treatment services. Siemens intends a carve-out of Industry Solutions’ electronic design and manufacturing services business in fiscal 2010.
 
The Mobility Division’s goal is to network distinct transportation systems with one another to move people and goods efficiently. The Division combines Siemens’ products, solutions and services in operating systems for rail transportation such as central control systems, interlockings and automated train controls, for road traffic including traffic detection, information and guidance, for airport logistics including cargo tracking and baggage handling, for postal automation including letter parcel sorting, and for rail electrification, as well as rail vehicles for mass transit, regional, long-distance transportation, and locomotives. At the beginning of fiscal 2010, the Division closed the sale of its airfield lighting business.
 
The Industry Sector’s principal customers are industrial and infrastructure customers in a broad range of markets, including construction and real estate, transportation and logistics, metals and mining, machinery, utilities and automotive. The Sector is active globally, including in emerging markets, especially those in the Asia-Pacific region, which management believes have significant growth potential. Apart from the Siemens Brand, the Sector markets some parts of its portfolio under different brand names (such as OSRAM and Sylvania for lighting products or Flender for gears), depending on geography and technology.
 
The Sector sells its products primarily through dedicated personnel in Siemens’ worldwide network of regional sales units. In addition, it uses original equipment manufacturers, solution providers, installers, general contractors, third-party distributors and independent agents. Its small project businesses (e.g., the businesses of its Building Technologies Division) have a decentralized business organization with a local branch network to deliver solutions to their customers directly.
 
The large size of some of the Sector’s projects (especially in the Mobility Division and in parts of the Industry Solutions and Building Technologies Divisions) occasionally exposes it to risks related to technical performance or specific customers or countries. In the past, the Sector has experienced significant losses on individual projects in connection with such risks. For additional information on these risks, see Item 3: “Key information—Risk factors.”
 
The Sector has manufacturing locations especially throughout North and South America, Western and Eastern Europe, and Asia, allowing it to stay close to its major customers and keep shipping charges low. In recent years, material costs have been negatively affected by significant price volatility for metals, energy and other raw materials. The Sector continues to work on reducing the use of hazardous materials (e.g., mercury or lead) and to replace them in its products and processes. Sustainable products, such as energy-saving lamps and LEDs, coking coal free iron production processes (COREX), energy efficient motors, and energy management play a major role in its innovation strategy.


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Average product lifetimes in the Sector’s product businesses tend to be short (typically ranging from one to five years from introduction) and are even shorter where software and electronics play an important role. The lifecycles in the solutions businesses tend to be longer, as the Sector supports its customers with significant service through the whole life of their infrastructures.
 
No single competitor has a broad business portfolio similar to that of the Industry Sector. The Sector’s principal competitors with broad portfolios are multinational companies such as ABB, Alstom, Bombardier, Emerson, General Electric, Honeywell, Johnson Controls, Philips, Schneider Electric and Tyco. In the industries in which the Sector is active consolidation is occurring on several levels. In particular, suppliers of automation solutions have supplemented their activities with actuator or sensor technology, while suppliers of components and products have supplemented their portfolio with adjacent products for their sales channels.
 
The main competitors of the Industry Automation Division are ABB, Schneider Electric, Rockwell and Emerson Electric. Within its product lifecycle management business the Division also competes with among others Dassault Systemes and PTC. Competitors of the Drive Technologies Division include companies with broad business portfolios such as ABB, Emerson and Mitsubishi Electric but also specialist companies such as Fanuc, SEW and Baldor. For the Building Technologies Division, the main global competitors of its solutions businesses are large system integrators such as Tyco, Honeywell, Johnson Controls, UTC and Bosch as well as Schneider Electric in some markets. The security business is also facing increased competition from information technology (IT) integrators due to the convergence of physical and IT security. The main competitors of the Division’s products business are large multi-national suppliers such as GE, Johnson Controls, Honeywell, Bosch and Schneider Electric. It also faces competition from niche competitors and from new entrants, such as utility companies and consulting firms, exploiting the fragmented energy efficiency market. Competitors of the Industry Solutions Division vary by business area and region. They range from large, diversified multinational to small, highly specialized local companies. The Division’s main international competitors include ABB, General Electric, SMS, Danieli and Veolia. In the worldwide lighting market, as a result of acquisitions and consolidations over the last decades, OSRAM, Philips and General Electric are the key players in traditional lighting. In addition, there are several new entrants, especially in China. Within its LED business, the Division competes with among others Nichia, Philips and Cree. The Mobility Division competes in its industry globally with a relatively small number of large companies and with numerous small to midsized competitors who are either active on a regional level or specialize within narrow product spectrums. Mobility’s principal competitors are Alstom and Bombardier.
 
Moreover, the Sector’s Divisions compete with many specialized or local companies, particularly in the European, Chinese and Indian markets. Asian competitors are generally focused on large-scale production and cost cutting. European competitors are focused on high quality lifecycle service. Nevertheless, most major competitors have established global bases for their businesses. In addition, competition in the field has become increasingly focused on technological improvements and price. Intense competition, budget constraints and rapid technical progress within the industry place significant downward pressure on prices. In addition, competitors continuously shift their production to low-cost countries.
 
 
The Energy Sector offers a wide spectrum of products, services and solutions for the generation, transmission and distribution of power, and the extraction, conversion and transport of oil and gas. It primarily addresses the needs of energy providers, but also serves industrial companies, particularly in the oil and gas industry. The Sector consists of six Divisions: Fossil Power Generation, Renewable Energy, Oil and Gas, Energy Service, Power Transmission and Power Distribution. Financial results of the Energy Service Division are reflected in the Fossil Power Generation Division and the Oil & Gas Division and are therefore not reported separately.


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The following table provides key financial data concerning the Energy Sector.
 
         
    Year ended
 
    September 30, 2009  
 
Total revenue
    €25.793 billion  
External revenue
    €25.405 billion  
External revenue as percentage of Siemens revenue
    33.14%       
Sector profit
    €3.315 billion  
 
The following chart provides a geographic breakdown of the Energy Sector’s external revenue in fiscal 2009.
 
(CHART)
 
The Fossil Power Generation Division offers high-efficiency products and solutions for fossil-based power generation. The offering extends from gas and steam turbines and generators to complete turnkey power plants. The Division concentrates on gas and steam turbines and turbo generators in the larger power range, with an emphasis on combined-cycle gas and steam power plants. It also develops process instrumentation and control systems for all types of power plants and for use in power generation, including information technology solutions providing management applications from the plant to the enterprise level and is working on the development and production of systems based on emerging technologies such as integrated gasification and carbon capture and storage. During fiscal 2009 the Division finalized trial operations on the world’s largest and most powerful gas turbine in Irsching near Ingolstadt, Germany, which is expected to commence commercial operations in 2011. Fossil Power Generation has stakes in other companies such as our minority stakes in Areva NP in the nuclear power sector and the Russian power plant supplier Power Machines. The Division is also represented in a number of joint ventures in China, including an increasing share in Shanghai Electric Power Generation Equipment. In January 2009, Siemens announced that it will terminate the Shareholders Agreement of the joint venture Areva NP, and sell its 34% interest in Areva NP to the majority shareholder Areva S.A. under the terms of a put agreement. The required approval of antitrust authorities has been obtained in October 2009. For additional information, see “—Legal proceedings.”
 
The Renewable Energy Division provides solutions for the production of electricity out of renewable energy sources, including wind and photovoltaic. In the rapidly growing global wind power market, the Division builds wind turbines from 2.3 MW to 3.6 MW with rotor diameters spanning 82 to 120 meters for on- and offshore applications, provides services to off- and onshore wind farms and, in coordination with other Divisions within the Energy Sector ensures the efficient linking of wind farms to power grids. As part of its globalization strategy, the Division is making considerable investments in the United States and Asia. In addition to its wind and solar power business, Siemens holds a minority stake in a joint venture in hydropower generation, Voith Hydro Power Generation, which is accounted for using the equity method. During the first quarter of fiscal 2010, we acquired Solel Solar Systems Ltd. to strengthen Renewable Energy’s position in the solar thermal power market.
 
The Oil & Gas Division supplies products and solutions for the production transport and processing of oil, gas and water, which are used in the oil and gas industries as well as other industries. The portfolio includes steam and gas turbines in the small and medium range as well as process turbocompressors, generators, power generation and distribution solutions, process and automation technology and integrated IT solutions. The Division’s activities encompass design, engineering and supply.
 
The Energy Service Division offers comprehensive services, including parts and components, for complete power plants and rotating machines such as gas and steam turbines, generators and compressors. It provides these services using advanced plant diagnostics and systems engineering. The Division also offers power plant


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maintenance and operation services and emissions control services and systems. All financial results relating to the Division are reflected in the Fossil Power Generation Division and the Oil & Gas Division and are therefore not reported separately.
 
The Power Transmission Division covers high-voltage transmission solutions, power transformers, high-voltage switching products and systems, and innovative alternating and direct current transmission systems. The Division supplies energy utilities and large industrial power users with equipment, systems and services used to process and transmit electrical power from the source, typically a power plant, to various points along the power transmission network. In the power transmission process, electricity generated by a power plant is transformed to a high voltage that can be transported efficiently over long distances along overhead lines or underground or subsea cables. This voltage step-up occurs at or near the site of the power plant, and requires transformation, control, transmission, switching and protection systems. High-voltage power then passes through one or more substations, which use distribution switchgear to control the amounts delivered, circuit breakers and surge arresters to protect against transmission hazards and transformers to reduce the voltage to a medium level for safe distribution in populated areas. Since October 2007, the Division has secured key components through a joint venture with Infineon Technologies in Germany for design, manufacturing and sale of high performance semiconductors.
 
The Power Distribution Division combines medium-voltage components, systems and solutions, power automation solutions and products as well as services for power equipment and transmission and distribution networks. The Division supplies energy utilities and large industrial power users with equipment, systems and services used to process and distribute power via a distribution grid to the low voltage grid and the end user, respectively. Metering systems measure and record the locations and amounts of power transmitted.
 
The Power Transmission and Power Distribution Divisions together provide customers with turnkey transmission systems and distribution substations, discrete products and equipment for integration by the Sector’s customers into larger systems, information technology systems and consulting services relating to the design, and construction of power transmission and distribution networks. These include power systems control equipment and information technology systems, transformers, high voltage products and power equipment for both alternating and direct current transmission systems; protection and substation control systems; and medium voltage equipment, including circuit breakers and distribution switchgear systems and components.
 
In addition to equipment and systems, the Power Transmission and Power Distribution Divisions offer a growing range of services and integrated solutions for various stages in the power transmission and distribution process. They provide analytical and consulting services, as well as equipment and systems in the power quality field that are designed to improve the availability and reliability of power transmitted by analyzing and reducing the causes of power fluctuations and failures. Power quality systems and services have become increasingly important with the growing use of sensitive computerized, electronic and other equipment requiring continuous power with very little fluctuation in voltage or frequency. As a leading international supplier of intelligent power networks, or smart grids, which use digital technology to improve power reliability, unite large, centralized generation units with small, decentralized ones and achieve cost and energy savings, the Power Transmission and Power Distribution Divisions are responding to and anticipating these market trends. The Sector continues to strengthen its smart grid portfolio across the entire energy conversion chain and aims to capture a significant portion of the market, which it expects to grow in coming years due to climate change and rising energy demands as well as liberalized energy markets and economic stimulus programs.
 
The Energy Sector distributes its products and services through its own dedicated sales force, supported by Siemens’s worldwide network of regional companies. Additional sales channels include joint ventures and license partners, especially in markets requiring a high degree of local knowledge.
 
Overall, the Sector’s principal customers are large power utilities and independent power producers and power distributors, construction engineering firms and developers. Due to ongoing deregulation in the power industry, its customer base continues to diversify from one formerly composed almost exclusively of power utilities responsible for all stages of power generation, transmission and distribution to one that includes an increasing number of independent system operators and power distributors supplying services at different points of the power generation, transmission and distribution network. Because certain significant areas of the Sector’s business, such as power


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plant construction, involve working on medium- or longer-term projects for customers who may not require the Sector’s services again in the short term, the Sector’s most significant customers tend to vary significantly from year to year.
 
The Energy Sector’s business activities vary widely in size from component delivery and comparatively small projects to turnkey contracts for the construction of new power plants with contract values of more than €0.5 billion each. The large size of some of the Sector’s projects occasionally exposes it to risks related to technical performance, a customer or a country. In the past, the Sector has experienced significant losses on individual projects in connection with such risks. For additional information about our long-term contracts, see Item 3: “Key information—Risk factors.” Moreover, the Sector generates an increasing proportion of its revenue from oil and gas activities and industrial customers in the developing world. While this region represents a growth market for power generation, transmission and distribution products and systems, the Sector’s activities in that region expose it to risks associated with economic, financial and political disruptions that could result in lower demand or affect customers’ abilities to pay.
 
The Sector’s competitors vary by Division. The Fossil Power Generation Division’s market consists of a relatively small number of companies, some with very strong positions in their domestic markets. Its principal competitors in gas turbines are General Electric, ALSTOM Power and Mitsubishi Heavy Industries, whereas its main competitors in steam turbines are ALSTOM Power, Toshiba and General Electric. In China, manufacturers are mainly focused on their large home market, but have recently begun to transform from local to international suppliers. The Division aims to participate in this growth through a Chinese joint venture. In instrumentation and controls, ABB is the Division’s principal competitor. The principal competitors of the Renewable Energy Division in the growing wind turbine market are Vestas, General Electric, Gamesa and Enercon with smaller and low-cost competitors, especially from China, increasingly challenging the dominant players’ large market share. The Division’s main competitors in the solar market are integrators like Solon, Conergy and Sunpower. In addition, module manufacturers such as First Solar have also begun to enter this market segment. The Oil and Gas Division faces a relatively small number of competitors, some with very strong market positions. Its principal competitors vary by product; in automation and controls, they are ABB, Honeywell and General Electric whereas in compressors and steam and gas turbines, they are General Electric, Solar, MAN Turbo and Dresser Rand. The primary competitors of the Power Transmission and Power Distribution Divisions are a small group of large, multinational companies offering a wide variety of products, systems and services. The Power Transmission Division’s key global competitors are ABB, Areva and, to some extent, General Electric. Further competition comes from regional and niche manufacturers, such as Toshiba, China XD, Crompton Greaves or TBEA, and, increasingly, local competitors in low-cost countries such as China and India. The Power Distribution Division holds a leading position in its markets. Its key competitors are ABB, Schneider and Areva, as well as regional competitors in certain markets such as China and India where local competitors have lately also begun to venture into export markets. Increasing international competition from local and regional competitors in low-cost countries is one of the reasons why the Power Transmission and Power Distribution Divisions have entered into several joint ventures in China, which is the Sector’s largest single power transmission and distribution market.
 
 
The Healthcare Sector offers customers a comprehensive portfolio of medical solutions across the value-added chain—ranging from medical imaging to in-vitro diagnostics to interventional systems and clinical information technology systems—all from a single source. In addition, the Sector provides technical maintenance, professional and consulting services, and, together with Siemens Financial Services, financing to assist customers in purchasing the Sector’s products.


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The following table provides key financial data concerning the Healthcare Sector.
 
         
    Year ended
    September 30, 2009
 
Total revenue
    €11.927 billion  
External revenue
    €11.864 billion  
External revenue as percentage of Siemens revenue
    15.48%       
Sector profit
    €1.450 billion  
 
The following chart provides a geographic breakdown of the Healthcare Sector’s external revenue in fiscal 2009.
 
(CHART)
 
The Imaging & IT Division comprises medical imaging systems, including x-ray, computed tomography, magnetic resonance, molecular imaging and ultrasound, which are used to generate morphological and functional images of the human body. This information is used both for diagnostic purposes and in preparation for potential treatment, including interventional and minimally invasive procedures. The Division also offers computer-based systems, workstations and software, enabling healthcare professionals to retrieve, process and store the patient’s imaging information. In addition, the Division offers hospital information systems, which allow to digitally store, retrieve and transmit all relevant clinical and administrative information, and which are used to facilitate and optimize clinical workflows by our customers. The Division is also active in computer based decisions support systems and knowledge-based technologies for assisting doctors with the diagnosis of diseases.
 
The Workflow & Solutions Division provides integrated solutions for areas such as cardiology, oncology, women’s health, urology, surgery and audiology. The portfolio includes oncology care systems, including linear accelerator and particle therapy technologies used in cancer treatments, x-ray imaging systems for mammography and surgery applications as well as urology systems, and audiology products (hearing aids) and related products and supplies. The Division also provides product related services for the Sector’s imaging and therapeutic equipment and consulting services. In fiscal 2009, the Division ceased to acquire new particle therapy projects but will focus on existing projects and further develop the underlying technology.
 
The Diagnostics Division offers products and services in the area of in-vitro diagnostics. In-vitro diagnostics is based on the analysis of bodily fluids such as blood or urine, and supplies vital information for the detection and management of disease as well as an individual patient’s risk assessment. The Division’s portfolio represents a comprehensive range of diagnostic testing systems and consumables, including clinical chemistry and immunodiagnostics, molecular diagnostics (i.e., testing for nucleic acids), hematology, hemostasis, microbiology, point-of-care testing and clinical laboratory automation solutions. We entered the in-vitro diagnostics business through the acquisitions of Diagnostic Products Corporation (DPC), the Diagnostics Division of Bayer AG, and the acquisition of Dade Behring, Inc. and continued the integration of these acquisitions in fiscal 2009.
 
The customers of the Healthcare Sector include healthcare providers such as hospital groups and individual hospitals, group and individual medical practices, reference and physician office laboratories and outpatient clinics. The Sector sells the majority of its products and services through in-house sales staff supported by dedicated product specialists. In some countries, it also uses dealers, particularly for the sale of low-end products (such as low-end ultrasound and x-ray equipment). In-vitro diagnostics products and services are primarily sold through the Sector’s dedicated diagnostics sales force, but in some regions dealers are used. A small portion of the Sector’s sales


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revenue derives from the delivery of products and components to competitors on an original equipment manufacturer (OEM) basis. The Sector’s products are serviced primarily by its own dedicated personnel.
 
In certain parts of the world, especially the United States, the Healthcare Sector faces market risks in connection with ongoing health care reform efforts. In fiscal 2009, these risks were compounded by the global economic downturn, which has constrained the ability of the Sector’s customers to finance the purchase of new equipment.
 
The Healthcare Sector has research and development and OEM cooperation agreements with various companies, including Bruker in the field of magnetic resonance imaging, Toshiba in the field of ultrasound and magnetic resonance imaging, Matsushita for low- and mid-range ultrasound systems, Jeol in the field of in-vitro diagnostics, and Partners Health Systems in the emerging field of personalized medicine. The Healthcare Sector provides electromedical systems incl. patient monitoring and anesthesia systems through a joint venture with Dräger AG in Lübeck, Germany, in which Siemens holds a 25% stake. Dräger has announced that it is considering purchasing Siemens’ shares in the joint venture. The Sector is also party to several other joint ventures, including with Philips and Thales to manufacture flat panel detectors for medical imaging.
 
The Healthcare Sector’s principal competitors in medical imaging are General Electric, Philips, Toshiba, Hitachi and Hologic. Other competitors include McKesson and Cerner for healthcare information technology systems, Sonova (formerly Phonak), William Demant and GN Resound for audiology (hearing aids), Elekta and Varian Medical for oncology care systems, and Roche, Abbott and Beckman Coulter for in-vitro diagnostics. The trend toward consolidation in the Sector’s industry continues. Competition among the leading companies in the field is strong, including with respect to price.
 
 
In general, the segment Equity Investments comprises equity stakes held by Siemens that are accounted for by the equity method, at cost or as current available-for-sale financial assets and which are not allocated to a Sector, a Cross-Sector Business, SRE, Pensions or Corporate Treasury for strategic reasons.
 
The main investments within Equity Investments are:
 
  •  Nokia Siemens Networks B.V. (NSN): NSN began operations in the third quarter of fiscal 2007 and includes the carrier-related operations of Siemens and the Networks Business Group of Nokia. NSN is a leading supplier in the telecommunications infrastructure industry.
 
  •  BSH Bosch und Siemens Hausgeräte GmbH (BSH): BSH is a leading manufacturer of household appliances, offering an extensive range of innovative products tailored to customer needs and global megatrends alike. BSH was founded as a joint venture in 1967 between Robert Bosch GmbH and Siemens.
 
  •  A 49% stake in Enterprise Networks Holdings B.V. (EN), Netherlands, a provider of open communications, network and security solutions to enterprise customers.
 
  •  A 49% stake in Krauss-Maffei Wegmann GmbH & Co. KG, which holds a leading position in the defense technology market.
 
  •  A 50% stake in ELIN GmbH & Co. KG (ELIN), Austria, a provider of technical building equipment and installation services. Prior to the beginning of fiscal 2009, ELIN was called Siemens Elin Buildings & Infrastructure GmbH & Co. KG.
 
  •  At the beginning of fiscal 2009, we closed the sale of Siemens Home and Office Communication Devices GmbH & Co. KG (SHC) to ARQUES Invest Potenzial GmbH, Germany, which was renamed as Gigaset Communications GmbH (GC). In fiscal 2008, SHC was wholly owned by Siemens and reported within Other Operations. During the fourth quarter of fiscal 2008, Siemens acquired a stake of 19.8% in ARQUES Value Development GmbH, which owns all shares of GC. Our stake in ARQUES Value Development GmbH is reported within Equity Investments as of September 30, 2008. GC focuses on cordless phones and broadband and home entertainment devices.


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In the third quarter of fiscal 2009 we sold our shares in Fujitsu Siemens Computers (Holding) B.V. (FSC) to Fujitsu Limited, and, accordingly, FSC ceased to be an investment held within Equity Investments.
 
For additional information on investments held in Equity Investments, see Item 5: “Operating and financial review and prospects—Fiscal 2009 compared to fiscal 2008—Segment information analysis—Equity Investments,” Item 7: “Major shareholders and related party transactions—Related party transactions,” as well as “Notes to Consolidated Financial Statements.”
 
 
Siemens IT Solutions and Services designs, builds and operates both discrete and large-scale information and communications systems. As a Siemens Cross-Sector Business, Siemens IT Solutions and Services offers comprehensive information technology and communications solutions from a single source both to third parties and to other Siemens entities and their customers. While mainly performing operations related services, it also creates solutions for customers by drawing on its management consulting resources to redesign customer processes, on its professional services to integrate, upgrade, build and install information technology systems and on its operational capabilities to run these systems on an ongoing basis. Siemens intends to organize the activities of Siemens IT Solutions and Services in separate legal entities.
 
The following table provides key financial data concerning Siemens IT Solutions and Services.
 
         
    Year ended
    September 30, 2009
 
Total revenue
    €4.686 billion  
External revenue
    €3.580 billion  
External revenue as percentage of Siemens revenue
    4.67%       
Profit
    €90 million  
 
The following chart provides a geographic breakdown of Siemens IT Solutions and Services’ external revenue in fiscal 2009.
 
(CHART)
 
In its current form, Siemens IT Solutions and Services offers its solutions and services to external customers in the following areas:
 
  •  Industry-Energy-Healthcare, which includes the automotive, discrete manufacturing, mobility and process industries as well as the energy and healthcare markets;
 
  •  Public sector, which includes defense & intelligence, public security, employment services and public administration; and
 
  •  Service industries, which includes customers in telecommunications and internet services, media, and financial and consulting services.
 
On a combined basis, Siemens is the largest customer of Siemens IT Solutions and Services, accounting for 24% of total revenue in fiscal 2009.


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The types of services we offer include:
 
  •  project-oriented consulting, design and implementation services, such as selecting, adapting and introducing new solutions to support business processes, as well as integration of systems and enterprise applications;
 
  •  outsourcing services (full-scale IT operations spanning hosting, call center, network and desktop services) as well as operation of selected business processes (e.g. financial services back-office operations);
 
  •  software development such as design and implementation of software solutions for external customers. In fiscal 2009, Siemens reorganized its software engineering business and transferred Siemens IT Solutions and Services’ software programming capabilities for the three Sectors Industry, Energy and Healthcare to Corporate Technology, creating a central software house.
 
Siemens IT Solutions and Services’ solutions and services are designed to support its customers in the following areas:
 
  •  customer relationship management, to assist businesses in aligning their organizations to better serve the needs and requirements of their customers;
 
  •  business information management, to improve our customers’ business processes, including services and solutions for business information, document and product data management;
 
  •  supply chain management, to facilitate the efficient interplay of all of a business’ operational processes with those of its suppliers;
 
  •  enterprise resource management, to optimize a customer’s internal management and production processes;
 
  •  e-commerce systems and solutions in a range of industries, to allow customers to offer a variety of Internet-based services through design and implementation of software for communications and transactions applications; and
 
  •  environmental solutions, designed to reduce the environmental impact of customers’ business processes, products and services, including solutions designed to prevent pollution and to optimize energy consumption and utilization.
 
At the beginning of fiscal 2010, Siemens IT Solutions and Services completed the acquisition of a 60% stake in Energy4U GmbH, Elbtal, Germany, a specialist in IT consulting services for utilities.
 
Most of Siemens IT Solutions and Services’ consulting and design services involve information technology and communications systems that Siemens also builds and operates itself. At the same time, Siemens IT Solutions and Services also designs and builds systems and provides services using the software of several companies with which it has established relationships, such as Microsoft, SAP and Fujitsu. In fiscal 2009, Siemens sold its shares in the Fujitsu Siemens Computers joint venture to Fujitsu. The former joint venture has since been renamed into Fujitsu Technology Solutions and remains an important partner of Siemens IT Solutions and Services in the delivery of on-site services.
 
The largest external customers of Siemens IT Solutions and Services in fiscal 2009 included BBC, BWI Informationstechnik, National Savings & Investments and Nokia Siemens Networks (NSN).
 
Siemens IT Solutions and Services has its own sales force and operates worldwide in more than 40 countries.
 
Because Siemens IT Solutions and Services routinely enters into large-scale and sometimes long-term projects, it occasionally gets exposed to risks related to technical performance or specific customers or countries. Therefore, risks associated with long-term outsourcing contracts remain a management priority at Siemens IT Solutions and Services. For additional information on these risks, see Item 3: “Key information—Risk factors.”
 
Siemens IT Solutions and Services’ competitors vary by region and type of service. A few of them are global, full-service IT providers such as IBM’s Global Services division, Accenture, CSC and HP Services. One of Siemens IT Solutions and Services’ competitors with a more narrow focus on specific regions or customers is T-Systems, a


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unit of Deutsche Telekom, which is based in Germany. As a service business, Siemens IT Solutions and Services requires a strong local presences and the ability to build close customer relationships and provide customized solutions while achieving economies of scale and successfully managing risks in large projects.
 
The IT services market is expected to recover in 2010 but continues to be highly competitive and fragmented; in fiscal 2009, industry-wide growth slowed as a result of the global financial crisis but Gartner, Inc. expects growth to return to pre-crisis growth rates in the years after 2010. Ongoing commoditization of the IT services industry and the entry of new players such as Indian companies into the European market keep price pressure and the need for cost reduction at a high level.
 
 
As a Siemens Cross-Sector Business, Siemens Financial Services (SFS) provides a variety of financial services and products both to third parties and to other Siemens entities and their customers. We are comprised of five business units, which can be classified as either capital businesses (consisting of the Commercial Finance Europe/APAC business unit (COFEA), the Commercial Finance U.S. business unit (COFUS) and the Equity component of the Equity & Project Finance business unit) or fee businesses (consisting of the Treasury and Investment Management business unit, the Insurance business unit and the Project and Export Finance component of the Equity & Project Finance business unit). The capital businesses support Siemens sales with leasing and lending programs and offer a broad range of financial solutions, including direct financing, to vendors and their business customers. Our finance products include finance leases, operating leases, hire purchases and rental contracts as well as structured loans. The capital businesses also make equity investments, mainly in infrastructure projects where Siemens acts as the principal supplier. The fee businesses support and advise Siemens in matters concerning financial risk and investment management and provide an important contribution to Siemens by arranging financing for Siemens projects. Most of SFS’ fee business is generated internally (i.e. with other Siemens entities as the customer). SFS’ capital business is originated from Siemens as well as third party customers and is focused around Energy, Industry and Healthcare as areas with Siemens domain expertise.
 
In its transactions with Siemens and third parties, SFS acts in accordance with banking industry standards in the international financial markets.
 
The following table provides key financial data concerning SFS.
 
             
    Year ended September 30, 2009
 
Total assets
    €11.704     billion
Total assets as percentage of Siemens assets
    12.33     %
Income before income taxes
    €304     million
 
COFEA and COFUS offer a comprehensive range of asset finance, leasing, rental and related financing solutions to organizations of all sizes to finance equipment purchased from Siemens or third-party providers or to finance growth and working capital needs. COFEA and COFUS leverage technical expertise and long-term relationships with other Siemens entities to create integrated financial solutions that complement the Siemens portfolio across the Healthcare, Industry and Energy Sectors and Siemens IT Solutions and Services.
 
Services are provided through a network of COFEA and COFUS companies, located in 16 countries throughout Europe, Asia Pacific and North America, comprising regulated, partially or non-regulated entities. Refinancing of SFS COFEA/COFUS entities is mainly conducted by Siemens treasury units.
 
COFEA products comprise finance and operating leases, hire purchases, rentals, structured loans and very limited forfaiting. Structured solutions range from senior secured corporate loans and structured investment financing to infrastructure and project financing and acquisition, leveraged buyouts (LBO) and growth financing, typically as syndicated loans. SFS COFUS provides similar products in asset financing with a strong focus on senior secured lending and, to a lesser extent, other debt instruments to the Energy Sector, for big ticket leasing for


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transportation and manufacturing assets in the Industry Sector and for a growing portfolio in acquisition financing. COFUS’ asset-based lending solutions are mainly secured by receivables and inventory.
 
COFEA serves Siemens and other domestic and international manufacturers and vendors to allow a risk-balanced portfolio based on a locally adopted mix of end customers. In addition to the vendor channel, the business unit mainly serves clients through direct origination, private equity and project sponsors as well as through the syndication market. It delivers financing solutions tailored to customers’ sales objectives, distribution channels and processes and supports them through its local field sales presence in the regions Europe and APAC.
 
The Equity Investments and Project Finance business unit encompasses equity investments in infrastructure projects and small and medium-sized companies as well as the provision of advisory and other services to other Siemens entities. The business unit invests in equity of a broad range of infrastructure projects. In doing so, it concentrates entirely on projects with a meaningful role for Siemens technology. Its investment focus is on power projects (thermal and renewable), medical projects and other infrastructure projects such as airports or railways.
 
In addition, the business unit conducts equity investments in small and medium-sized companies (venture and growth capital) to fund leading-edge technologies and systems, making Siemens and its customers more competitive by expanding and improving the products and services offered by Siemens. Energy, healthcare, and industry, the core domains of Siemens’ technological expertise, are investment focal points. The business unit also offers customers advisory, analytical and selection services related to investments in private equity funds and manages a venture and growth capital fund-of-funds for institutional investors called Siemens Global Innovation Partners.
 
In its advisory role, the business unit also supports Siemens Sectors as well as operating companies and consortia in which Siemens participates on project and sales financing transactions. To that end it is assisted by centers of competence, which provide advice on complex financing topics, including public-private partnerships as well as forfaiting and export and investment guarantees. The business unit cooperates with a global network of financial institutions at both national and international levels and maintains contacts at special international financing institutions like development banks and export credit agencies, e.g. Euler Hermes, Coface, Sace and USExim and Japanese Trading Houses. Other services provided are centered on the issuance and administration of bonds, guarantees, letters of credit and other sureties from banks for Siemens.
 
The Treasury and Investment Management business unit consists of a treasury function and an investment function. The treasury function is mandated by Corporate Treasury to provide treasury services to all Siemens entities. These activities comprise cash management and payment (including inter-company payments) services using group-wide tools with central controls to ensure compliance with internal and external guidelines and requirements as well as all external Siemens financing activities (especially capital market financing). In addition, it pools and manages centralized Siemens’ interest rate and currency risk exposure and uses derivative financial instruments in transactions with external financial institutions to offset such pooled exposures. For more information on the use of derivatives to hedge risk, see Item 11: “Quantitative and qualitative disclosure about market risk.” The treasury function also offers treasury consulting services and cash management systems to third-party customers. It is furthermore in the process of monitoring and warehousing all of Siemens’ Corporate Treasury short term trade accounts receivable (tenor of up to 365 days) under the roof of Siemens Credit Warehouse. The objective of monitoring and warehousing the group’s trade receivables is to centralize risk management as well as provide the means for receivables-backed financing.
 
The investment management function manages pension assets for Siemens as well as external institutional clients and mutual funds. It operates in Germany and Austria through its companies Siemens Kapitalanlagegesellschaft mbH (SKAG) and Innovest Kapitalanlage AG.
 
The Insurance business unit acts as insurance broker for Siemens and external customers, providing both industrial insurance and private finance solutions. In the area of industrial insurance solutions, the business unit supports Siemens and non-affiliated companies as a competent partner in all insurance related matters, including claims management as well as risk transfer to insurance and financial markets. It also acts as broker of Siemens-financed insurances for employees on business trips and foreign assignments. In the area of private finance solutions, the unit offers a wide range of products in the areas of insurance, asset management, pensions and home loan banking for staff at Siemens and non-affiliated companies. In fiscal year 2009 RISICOM Rückversicherung


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AG was integrated into the Insurance business unit. Through RISICOM, SFS provides reinsurance solutions as integral part of Siemens’ risk financing program.
 
In its capital business (leasing, loans, receivables financing, asset-based lending, equity investments), SFS originates business from external customers through the Siemens Sectors, while its fee business is mainly sourced internally from other Siemens entities. SFS works with internal and external vendors to generate equipment business but also has some direct business via its own sales force. In certain cases, it uses financial intermediaries for business origination, mainly on secondary markets. Insurance services are also offered over the internet.
 
SFS’ main sources of risk are associated with external customers’ credit and its own equity portfolio. As effects of the global financial market crisis spillover into the real economy, SFS faces unfavorable developments in credit markets that especially affect COFEA and COFUS. In response, SFS increased reserve levels.
 
Most of SFS’ services are geared towards Europe and North America. However, SFS is also present in select Asian countries, especially China, to support Siemens regional companies with financial services. SFS’ competition mainly includes commercial finance operations of banks, independent commercial finance companies, captive finance companies and asset management companies. International competitors include General Electric Commercial Finance, CIT Group, Société General Equipment Finance, BNP Paribas Equipment Finance and De Lage Landen. Particularly in the commercial finance business, competition consists of many local institutions and therefore varies from country to country. In the wake of the recent credit crisis, SFS’ relationship with Siemens represents a key advantage vis-à-vis the competition with respect to funding. At the same time, SFS, like other financial institutions, may be negatively affected by the expected tightening of the regulatory framework applicable to financial institutions.
 
 
The following tables show the division of our employees by segments and geographic region as of September 30 for each of the years shown. Part-time employees are included on a proportionate basis.
 
Employees by segments(1)
                         
    As of September 30,  
    2009     2008     2007  
    (in thousands)  
 
Industry
    207       220       207  
Energy
    85       83       73  
Healthcare
    48       49       43  
Siemens IT Solutions and Services
    35       41       40  
Siemens Financial Services
    2       2       2  
Other(2)
    28       32       33  
                         
Total
    405       427       398  
                         
 
 
(1)  Continuing operations.
 
(2)  Includes employees in corporate functions and services and business units not allocated to any Sector or Cross-Sector Businesses.


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Employees by geographic regions(1)
                         
    As of September 30,  
    2009     2008     2007  
    (in thousands)  
 
Europe, C.I.S., Africa, Middle East
    243       256       242  
therein Germany
    128       132       126  
Americas
    91       98       92  
therein U.S. 
    64       69       66  
Asia, Australia
    71       73       64  
therein China
    31       32       24  
therein India
    17       17       17  
                         
Total
    405       427       398  
                         
 
 
(1)  Continuing operations.
 
A significant percentage of our manufacturing employees, especially in Germany, are covered by collective bargaining agreements determining working hours and other conditions of employment, and are represented by works councils. Works councils have numerous rights to notification and of codetermination in personnel, social and economic matters. Under the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG), works councils are required to be notified in advance of any proposed employee termination, they must confirm hiring and relocations and similar matters, and they have a right to codetermine social matters such as work schedules and rules of conduct. Management considers its relations with the works councils to be good.
 
During the last three years, we have not experienced any major labor disputes resulting in work stoppages.
 
 
In each of the jurisdictions in which we operate, Siemens is subject to national and local environmental and health and safety laws and regulations that affect our operations, facilities, products and, in particular, our former nuclear power generation business. These laws and regulations impose limitations on the discharge of pollutants into the air, soil and water and establish standards for the treatment, storage and disposal of solid and hazardous waste. Whenever necessary, remediation and clean up measures are implemented and budgeted accordingly. Because of our commitment to protecting and conserving the environment and because we recognize that leadership in environmental protection is an important competitive factor in the marketplace, we have incurred significant costs to comply with these laws and regulations and we expect to continue to incur significant compliance costs in the future.
 
In 1994, we closed a site in Hanau, Germany, which we had used for the production of uranium and mixed-oxide fuel elements. A smaller related site in Karlstein, where we operated a nuclear research and service center, was closed in 1989. We are in the process of cleaning up both facilities in accordance with the German Atomic Energy Act. We have developed a plan to decommission the facilities that involves the following steps: clean-out, decontamination and disassembly of equipment and installations, decontamination of the facilities and buildings, sorting of radioactive materials and intermediate and final storage of radioactive waste. This process will be supported by ongoing engineering studies and radioactive sampling under the supervision of German federal and state authorities. The German Atomic Energy Act requires that radioactive waste be transported to a government-developed storage facility, which, in our case, we do not expect to be available until 2030. We expect that the process of decontamination, disassembly and sorting of radioactive waste will continue until 2015. We will be responsible for storing the material until the government-developed storage facility is available. With respect to the Hanau facility, the process of setting up intermediate storage for radioactive waste has neared completion; on September 21, 2006 we received official notification from the competent authorities that the Hanau facility has been released from the scope of application of the German Atomic Energy Act and that its further use is unrestricted under that Act. However, the State of Hessen still requires us to monitor the ground water until uranium levels consistently meet targets set by the State. The ultimate costs of this project will depend, in part, on where the


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government-developed storage facility is located and when it becomes available. We have set up a provision with respect to this matter, which at September 30, 2009, stood at €780 million. This provision is based on a number of significant estimates and assumptions as to the ultimate costs of this project. From today’s perspective, we consider this amount to be adequate to cover the present value of the costs associated with this project. For additional information, see “Notes to Consolidated Financial Statements.”
 
Some of our products are subject to the Directive 2002/95/EC of the European Parliament and of the Council on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the RoHS Directive). The RoHS Directive bans the use of certain hazardous substances in electrical and electronic equipment. We are in compliance with the RoHS Directive. Now that we have divested several companies/former business units in the field of communication technologies that were highly affected by the RoHS Directive, the directive is not expected to have a significant impact on Siemens going forward. The current review of the RoHS Directive and of Directive 2002/96/EC of the European Parliament and of the Council on waste electrical and electronic equipment (the WEEE Directive) by the EU Commission will lead inter alia to changes in the scope of that Directive (e.g. inclusion of medical equipment after 01.01.2014). However, as the review process is still ongoing and varying drafts are currently suggested from the European Parliament, the European Council and the European Commission, the overall impact of the directives on Siemens and any future financial obligations is as yet not possible.
 
Restrictions on the use of certain substances comparable to those of the RoHS Directive and of the WEEE Directive are under discussion in several other countries, such as the U.S., Australia, Argentina, China and South Korea.
 
We are also subject to the Regulation (EC) No 1907/2006 of the European Parliament and of the Council concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), which entered into force in part on June 1, 2007. In the near future we do not expect any additional risks resulting from REACH because the next measures taken by the European Commission under REACH are expected to be limited to the imposition of further information obligations. We will take the necessary measures to comply with these future obligations.
 
In Germany the proposed Environmental Code (Umweltgesetzbuch) has failed to pass the German legislature. Therefore we do not expect new rules concerning an integrated permit for industrial installations. Currently, such installations are regulated by the German Immissions Protection Law (Bundes-Immissionsschutzgesetz).
 
The experience of the last two years has shown that neither the Directive 2004/35/CE of the European Parliament and of the Council on environmental liability with regard to the prevention and remediation of environmental damage nor the applicable remediation measures, for which the directive requires remediation for damage to protected species and natural habitats, have yet had any impact on Siemens. Nevertheless we still have insurance coverage which is available in the market for these risks.
 
It is our policy to comply with environmental requirements and to provide workplaces for employees that are safe, environmentally sound, and that do not adversely affect the health or environment of their communities. Compliance with environmental requirements is also a focus of the environmental audits we conduct. In remediation of the results of recent environmental audits, additional cost for the implementation and operation of R&D, production and modified logistic processes may occur over the next three years. Taking such remediation measures into account, we believe that we are in substantial compliance with all environmental and health and safety laws and regulations. However, there is a risk that we may incur expenditures significantly in excess of our expectations to cover environmental liabilities, to maintain compliance with current or future environmental and health and safety laws and regulations and/or to undertake any necessary remediation.
 
 
Siemens and its consolidated subsidiaries have, as of September 30, 2009, approximately 236 production and manufacturing facilities (more than 50% production space ratio) throughout the world. Approximately 99 of these are located in the region Europe, C.I.S., Africa, Middle East, therein approximately 50 in Germany, and approximately 97 are located in the region Americas, therein approximately 81 in the United States. We also


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have 40 facilities in the region Asia, Australia. Siemens also owns or leases other properties including office buildings, warehouses, research and development facilities and sales offices in approximately 190 countries.
 
Siemens’ principal executive offices are located in Munich, Germany.
 
None of our properties that are under the responsibility of Siemens Real Estate in Germany are subject to mortgages and other security interests granted to secure indebtedness to financial institutions.
 
We believe that our current facilities are in good condition and adequate to meet the requirements of our present and foreseeable future operations.
 
 
Siemens has several thousand patents and licenses covering its products and services worldwide. Research and development is a priority throughout Siemens on a Sector, Cross-Sector Business and Division basis. For a discussion of the main focus of the current research and development efforts of each Sector, see Item 5: “Operating and financial review and prospects—Business and operating environment—Research and development.” Siemens also owns thousands of registered trademarks worldwide. Neither the Company, nor any Sector or Cross-Sector Business or Division is dependent on any single patent, license or trademark or any group of related patents, licenses or trademarks.
 
Legal proceedings
 
Public corruption proceedings
 
Governmental and related proceedings
 
Public prosecutors and other government authorities in jurisdictions around the world are conducting investigations of Siemens and certain of our current and former employees regarding allegations of public corruption, including criminal breaches of fiduciary duty including embezzlement, as well as bribery, money laundering and tax evasion, among others. These investigations involve allegations of corruption at a number of Siemens’ business units.
 
On December 15, 2008, Siemens announced that legal proceedings against it arising from allegations of bribing public officials were concluded on the same day in Munich, Germany, and in Washington, DC.
 
The Munich public prosecutor announced the termination of legal proceedings alleging the failure of the former Managing Board of Siemens AG to fulfill its supervisory duties. Siemens agreed to pay a fine of €395 million. The payment of the fine marks the conclusion of this legal proceeding against the Company by the Munich public prosecutor. The investigations of former members of the Managing Board, employees of the Company and other individuals remain unaffected by this resolution.
 
In Washington, DC, Siemens pleaded guilty in federal court to criminal charges of knowingly circumventing and failing to maintain adequate internal controls and failing to comply with the books and records provisions of the U.S. Foreign Corrupt Practices Act (FCPA). In related cases, three Siemens foreign subsidiaries, Siemens S.A. (Argentina), Siemens Bangladesh Ltd. and Siemens S.A. (Venezuela), pleaded guilty to individual counts of conspiracy to violate the FCPA. In connection with these pleas, Siemens and the three subsidiaries agreed to pay a fine of U.S.$450 million to resolve the charges of the United States Department of Justice (DOJ). At the same time, Siemens settled a civil action against it brought by the U.S. Securities and Exchange Commission (SEC) for violations of the FCPA. Without admitting or denying the allegations of the SEC complaint, Siemens agreed to the entry of a court judgment permanently restraining and enjoining Siemens from violations of the FCPA and to the disgorgement of profits in the amount of U.S.$350 million.
 
The agreement reflects the U.S. prosecutors’ express recognition of Siemens’ extraordinary cooperation as well as Siemens’ new and comprehensive compliance program and extensive remediation efforts. Based on these


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facts, the lead agency for U.S. federal government contracts, the Defense Logistics Agency (DLA), issued a formal determination that Siemens remains a responsible contractor for U.S. government business.
 
Under the terms of the plea and settlement agreements reached in the United States, Siemens has engaged Dr. Theo Waigel, former German federal minister of finance, as compliance monitor to evaluate and report, for a period of up to four years, on the Company’s progress in implementing and operating its new compliance program.
 
In the fourth quarter of fiscal 2008, the Company accrued a provision in the amount of approximately €1 billion in connection with the discussions with the Munich public prosecutor, the SEC and DOJ for the purpose of resolving their respective investigations. Cash outflows relating to the fines and disgorgements referred to above during the first quarter of fiscal 2009 amounted to €1.008 billion.
 
As previously reported, in October 2007, the Munich public prosecutor terminated a similar investigation relating to Siemens’ former Communications Group. Siemens paid €201 million in connection with the termination of this investigation. This brings the total amount paid to authorities in Germany in connection with these legal proceedings to €596 million.
 
As previously reported, the public prosecutor in Wuppertal, Germany is conducting an investigation against Siemens employees regarding allegations that they participated in bribery related to the awarding of an EU contract for the refurbishment of a power plant in Serbia in 2002.
 
As previously reported, Siemens Zrt. Hungary and certain of its employees are being investigated by Hungarian authorities in connection with allegations concerning suspicious payments in connection with consulting agreements with a variety of shell corporations and bribery relating to the awarding of a contract for the delivery of communication equipment to the Hungarian Armed Forces.
 
As previously reported, the Vienna, Austria public prosecutor is conducting an investigation into payments between 1999 and 2006 relating to Siemens AG Austria and its subsidiary Siemens VAI Metal Technologies GmbH & Co. for which valid consideration could not be identified.
 
As previously reported, authorities in Russia are conducting an investigation into alleged misappropriation of public funds in connection with the award of contracts to Siemens for the delivery of medical equipment to public authorities in Yekaterinburg in the years 2003 to 2005.
 
As previously reported, in August 2007, the Nuremberg-Fuerth prosecutor began an investigation into possible violations of law in connection with the United Nations Oil-for-Food Programme. In December 2008, the prosecutor discontinued the investigation with respect to all persons accused.
 
As previously reported, the Sao Paulo, Brazil, Public Prosecutor’s Office is conducting an investigation against Siemens relating to the use of business consultants and suspicious payments in connection with the former Transportation Systems Group in or after 2000.
 
As previously reported, in October 2008, U.S. authorities conducted a search at the premises of Siemens Building Technologies Inc. in Cleveland, Ohio in connection with a previously ongoing investigation into activities with Cuyahoga County government agencies.
 
On March 9, 2009, Siemens received a decision by the Vendor Review Committee of the United Nations Secretariat Procurement Division (UNPD) suspending Siemens from the UNPD vendor database for a minimum period of six months. The suspension applies to contracts with the UN Secretariat and stems from Siemens’ guilty plea in December 2008 to violations of the U.S. FCPA. Siemens does not expect a significant impact on its business, results of operations or financial condition from this decision. The review of the decision by the UNPD is pending. In the meantime, the suspension remains effective.
 
In April 2009, the Company received a “Notice of Commencement of Administrative Proceedings and Recommendations of the Evaluation and Suspension Officer” from the World Bank, which comprises the International Bank for Reconstruction and Development as well as the International Development Association, in connection with allegations of sanctionable practices during the period 2004-2006 relating to a World Bank-financed project in Russia. On July 2, 2009, the Company entered into a global settlement agreement with the


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International Bank for Reconstruction and Development, the International Development Association, the International Finance Corporation and the Multilateral Investment Guarantee Agency (collectively, the “World Bank Group”) to resolve World Bank Group investigations involving allegations of corruption by Siemens. In the agreement, Siemens voluntarily undertakes to refrain from bidding in connection with any project, program, or other investment financed or guaranteed by the World Bank Group (“Bank Group Projects”) for a period of two years, commencing on January 1, 2009 and ending on December 31, 2010. Siemens is not prohibited by the voluntary restraint from continuing work on existing contracts under Bank Group Projects or concluded in connection with World Bank Group corporate procurement provided such contracts were signed by Siemens and all other parties thereto prior to January 1, 2009. The agreement provides for exemptions to the voluntary restraint in exceptional circumstances upon approval of the World Bank Group. Siemens must also withdraw all pending bids, including proposals for consulting contracts in connection with Bank Group Projects and World Bank Group corporate procurement where the World Bank Group has not provided its approval prior to July 2, 2009. Furthermore, Siemens is also required to voluntarily disclose to the World Bank Group any potential misconduct in connection with any Bank Group Projects. Finally, Siemens will pay U.S.$100 million to agreed anti-corruption organizations over a period of not more than 15 years. In fiscal 2009, the Company took a charge to Other operating expense to accrue a provision in the amount of €53 million.
 
In November 2009, Siemens Russia OOO and all its controlled subsidiaries were, in a separate proceeding before the World Bank Group, debarred for four years from participating in Bank Group Projects. Siemens Russia OOO will not contest the debarment.
 
As previously reported, the Norwegian anti-corruption unit, Oekokrim, conducted an investigation against Siemens AS Norway and two of its former employees related to payments made for golf trips in 2003 and 2004, which were attended by members of the Norwegian Department of Defense. On July 3, 2009, the trial court in Oslo, Norway, found the two former employees not guilty. Oekokrim stated on July 16, 2009, that the proceedings against Siemens AS Norway have also been discontinued.
 
As previously reported, the public prosecutor in Milan, Italy, had filed charges against a current and a former employee of Siemens S.p.A., Siemens S.p.A., and one of its subsidiaries in November 2007, alleging that the two individuals made illegal payments to employees of the state-owned gas and power group ENI. Charges were also filed against other individuals and companies not affiliated with Siemens. The two individuals, Siemens S.p.A., and its subsidiary entered into a “patteggiamento” (plea bargaining agreement without the recognition of any guilt or responsibility) with the Milan prosecutor which was confirmed by the Milan court on April 27, 2009. Under the terms of the patteggiamento, Siemens S.p.A. and the subsidiary were each fined €40,000 and ordered to disgorge profits in the amount of €315,562 and €502,370, respectively. The individuals accepted suspended prison sentences. Once the decision becomes final and non-appealable, the proceedings will be effectively over.
 
As previously reported the Argentinean Anti-Corruption Authority is conducting an investigation into corruption of government officials in connection with the award of a contract to Siemens in 1998 for the development and operation of a system for the production of identity cards, border control, collection of data and voters’ registers. Searches were executed at the premises of Siemens Argentina and Siemens IT Services S.A. in Buenos Aires in August 2008 and in February 2009. The Company is cooperating with the Argentinean Authorities. The Argentinean investigative judge also requested repeatedly judicial assistance from the Munich prosecutor and the federal court in New York.
 
On August 17, 2009, the Anti-Corruption Commission of Bangladesh filed criminal charges against two current and one former employee of Siemens Bangladesh’s Healthcare business. It is alleged that the employees colluded with employees of a public hospital to overcharge for the delivery of medical equipment in the period before 2007.
 
The Company remains subject to corruption-related investigations in several jurisdictions around the world. As a result, additional criminal or civil sanctions could be brought against the Company itself or against certain of its employees in connection with possible violations of law. In addition, the scope of pending investigations may be expanded and new investigations commenced in connection with allegations of bribery and other illegal acts. The Company’s operating activities, financial results and reputation may also be negatively affected, particularly due to imposed penalties, fines, disgorgements, compensatory damages, third-party litigation, including by competitors,


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the formal or informal exclusion from public tenders or the loss of business licenses or permits. Additional expenses and provisions, which could be material, may need to be recorded in the future for penalties, fines, damages or other charges in connection with the investigations.
 
As previously reported, the Company investigates evidence of bank accounts at various locations, as well as the amount of the funds. Certain funds have been frozen by authorities. During fiscal 2009, the Company recorded an amount of €23 million in Other operating income from the recovery of funds from certain such accounts.
 
In November 2009, a subsidiary of Siemens AG voluntarily self-reported possible violations of South African anticorruption regulations in the period before 2007 to the responsible South African authorities.
 
 
As already disclosed by the Company in press releases, Siemens AG is asserting claims for damages against former members of the Managing and Supervisory Board. The Company bases its claims on breaches of organizational and supervisory duties in view of the accusations of illegal business practices that occurred in the course of international business transactions in the years 2003 to 2006 and the resulting financial burdens for the Company. Siemens gave the respective former members of its Managing and Supervisory Board the opportunity to declare their willingness to reach a settlement until mid-November 2009. On December 2, 2009 Siemens reached a settlement with nine out of eleven former members of the Managing and Supervisory Board. As requested by law, the settlements between the Company and individual board members are subject to approval by the Annual Shareholders’ Meeting. Furthermore, the Company reached a settlement agreement with its directors and officers (D&O) insurers regarding claims in connection with the D&O insurance of up to €100 million. These settlements will be submitted to Siemens AG’s shareholders for approval at the next Annual Shareholders’ Meeting on January 26, 2010. As previously announced by the Company, in the event that individual former members of the Managing and/or Supervisory Board are not willing to agree on a settlement and/or the Annual Shareholders’ Meeting does not approve individual settlements, the Company will pursue legitimate claims—if necessary in court —against former members of the Managing and Supervisory Board.
 
As previously reported, an alleged holder of Siemens American Depositary Shares filed a derivative lawsuit in February 2007 with the Supreme Court of the State of New York against certain current and former members of Siemens’ Managing and Supervisory Boards as well as against Siemens as a nominal defendant, seeking various forms of relief relating to the allegations of corruption and related violations at Siemens. The alleged holder of Siemens American Depository Shares voluntarily withdrew the derivative action in September 2009.
 
As previously disclosed, in June 2008, the Republic of Iraq filed an action requesting unspecified damages against 93 named defendants with the United States District Court for the Southern District of New York on the basis of findings made in the “Report of the Independent Inquiry Committee into the United Nations Oil-for-Food Programme.” Siemens S.A.S. France, Siemens A.S. Turkey and Osram Middle East FZE, Dubai are among the 93 named defendants. During the second quarter of fiscal 2009, process was served upon Siemens S.A.S. France and Siemens A.S. Turkey.
 
As previously reported, Siemens had filed a request for arbitration against the Republic of Argentina (Argentina) with the International Center for Settlement of Investment Disputes (ICSID) of the World Bank. Siemens claimed that Argentina had unlawfully terminated its contract with Siemens for the development and operation of a system for the production of identity cards, border control, collection of data and voters’ registers (DNI project) and thereby violated the Bilateral Investment Protection Treaty between Argentina and Germany (BIT). Siemens sought damages for expropriation and violation of the BIT of approximately U.S.$500 million. Argentina disputed jurisdiction of the ICSID arbitration tribunal and argued in favor of jurisdiction of the Argentine administrative courts. The arbitration tribunal rendered a decision on August 4, 2004, finding that it had jurisdiction over Siemens’ claims and that Siemens was entitled to present its claims. A hearing on the merits of the case took place before the ICSID arbitration tribunal in Washington in October 2005. A unanimous decision on the merits was rendered by the ICSID arbitration tribunal on February 6, 2007, awarding Siemens compensation in the amount of U.S.$217.8 million on account of the value of its investment and consequential damages, plus compound interest thereon at a rate of 2.66% since May 18, 2001. The tribunal also ruled that Argentina is obligated to indemnify


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Siemens against any claims of subcontractors in relation to the project (amounting to approximately U.S.$44 million) and, furthermore, that Argentina would be obligated to pay Siemens the full amount of the contract performance bond (U.S.$20 million) in the event this bond was not returned within the time period set by the tribunal (which period subsequently elapsed without delivery). On June 4, 2007, Argentina filed an application for the annulment and stay of enforcement of the award with the ICSID, alleging serious procedural irregularities with respect to the DNI project. An ad hoc committee was formed to consider Argentina’s application. On June 6, 2008, Argentina filed an application for a reversal of the ICSID’s decision and a stay of enforcement of the arbitral award with the ICSID alleging the discovery of new, previously unknown facts that would have decisively affected the award. Argentina relied on information reported in the media alleging bribery by Siemens, which it argued makes the BIT inapplicable. The application for a reversal of the decision was registered by the ICSID on June 9, 2008 and forwarded to the three members of the ICSID arbitration tribunal, as it had been constituted originally. The application for reversal could have resulted in a stay with respect to Argentina’s application for annulment pending before the ad hoc committee. On September 12, 2008, the arbitral tribunal issued its initial procedural order requiring that Argentina substantiate the application by February 13, 2009. The tribunal would have decided on admitting a counterclaim once Argentina would have filed the application together with the substantiation. On August 12, 2009, Argentina and Siemens reached an agreement to settle the dispute and mutually discontinue any and all civil proceedings in the case (the application for reversal pending before the ICSID and the related annulment proceeding) without acknowledging any issue of fact or law. No payment was made by either party.
 
As previously reported, the Company has been approached by a competitor to discuss claims it believes it has against the Company. The alleged claims relate to allegedly improper payments by the Company in connection with the procurement of public and private contracts. The Company has not received sufficient information to evaluate whether any basis exists for such claims.
 
 
As previously reported, in June 2007, the Turkish Antitrust Agency confirmed its earlier decision to impose a fine in an amount equivalent to €6 million on Siemens A.S. Turkey based on alleged antitrust violations in the traffic lights market. Siemens A.S. Turkey has appealed this decision and this appeal is still pending.
 
As previously reported, in February 2007, the Norwegian Competition Authority launched an investigation into possible antitrust violations involving Norwegian companies active in the field of fire security, including Siemens Building Technologies AS. In December 2008, the Norwegian Competition Authority issued a final decision that Siemens Building Technologies AS had not violated antitrust regulations.
 
As previously reported, in February 2007, the French Competition Authority launched an investigation into possible antitrust violations involving several companies active in the field of suburban trains, including Siemens Transportation Systems S.A.S. in Paris, and the offices were searched. Siemens is cooperating with the French Competition Authority.
 
As previously reported, in February 2007, the European Commission launched an investigation into possible antitrust violations involving European producers of power transformers, including Siemens AG and VA Technologie AG (VA Tech), which Siemens acquired in July 2005. The German Antitrust Authority (Bundeskartellamt) has become involved in the proceeding and is responsible for investigating those allegations that relate to the German market. Power transformers are electrical equipment used as major components in electric transmission systems in order to adapt voltages. The Company is cooperating in the ongoing investigation with the European Commission and the German Antitrust Authority. In November 2008, the European Commission finalized its investigation and forwarded its statement of objections to the involved companies. On October 7, 2009, the European Commission imposed fines totaling €67.644 million on seven companies with regard to a territorial market sharing agreement related to Japan and Europe. Siemens was not fined because it had voluntarily disclosed this aspect of the case to the authorities. The German Antitrust Authority continues its investigation with regard to the German market.
 
As previously reported, in April 2007, Siemens AG and VA Tech filed actions before the European Court of First Instance in Luxemburg against the decisions of the European Commission dated January 24, 2007, to fine Siemens and VA Tech for alleged antitrust violations in the European Market of high-voltage gas-insulated


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switchgear between 1988 and 2004. Gas-insulated switchgear is electrical equipment used as a major component for turnkey power substations. The fine imposed on Siemens amounted to €396.6 million and was paid by the Company in 2007. The fine imposed on VA Tech, which Siemens AG acquired in July 2005, amounted to €22.1 million. VA Tech was declared jointly liable with Schneider Electric for a separate fine of €4.5 million. The European Court of First Instance has not yet issued a decision. In addition to the proceedings mentioned in this document, authorities in Brazil, the Czech Republic, New Zealand and Slovakia are conducting investigations into comparable possible antitrust violations.
 
As previously reported, on October 25, 2007, upon the Company’s appeal, a Hungarian competition court reduced administrative fines imposed on Siemens AG for alleged antitrust violations in the market of high-voltage gas-insulated switchgear from €0.320 million to €0.120 million and from €0.640 million to €0.110 million regarding VA Tech. The Company and the Competition Authority both appealed the decision. In November 2008, the Court of Appeal confirmed the reduction of the fines. On December 5, 2008, the Competition Authority filed an extraordinary challenge with the Supreme Court.
 
In November 2008, a claim was filed by National Grid Electricity Transmission Plc. (National Grid) with the High Court of England and Wales in connection with the January 24, 2007 decision of the European Commission regarding alleged antitrust violations in the high-voltage gas-insulated switchgear market. Twenty-one companies have been named as defendants, including Siemens AG and various Siemens affiliates. National Grid asserts claims in the aggregate amount of approximately £249 million for damages and compound interest. Siemens believes National Grid’s claim to be without merit. The European Commission’s decision has been appealed to the European Court of First Instance. On June 12, 2009, the High Court granted a stay, of the proceedings pending before it, until three months after the outcome of the appeal to the European Court of First Instance and any subsequent appeals to the European Court of Justice. On June 26, 2009 the Siemens defendants filed their answers to the complaint and requested National Grid’s claim to be rejected. A case management conference is scheduled for December 14, 2009.
 
As previously reported, the South African Competition Commission investigated alleged antitrust violations in the market of high-voltage gas-isolated switchgear. In May 2009, the Company was notified that the Competition Commission will not pursue the prosecution of this matter.
 
As previously reported, a suit and motion for approval of a class action was filed in Israel in December 2007 to commence a class action based on the fines imposed by the European Commission for alleged antitrust violations in the high-voltage gas-insulated switchgear market. Thirteen companies were named as defendants in the suit and motion, among them Siemens AG Germany, Siemens AG Austria and Siemens Israel Ltd. The class action alleged damages to electricity consumers in Israel in the amount of approximately €575 million related to higher electricity prices claimed to have been paid because of the alleged antitrust violations. At a hearing on December 11, 2008, the plaintiff requested to withdraw from the action and from the motion to certify the action as a class action. The court approved the request and dismissed the action and the motion to certify.
 
In September 2009, the Commerce Commission of New Zealand has opened an investigation into violations of antitrust law in the area of flexible current transmission systems. Siemens is cooperating with the Commission.
 
In September 2009, the DOJ has opened an investigation into violations of antitrust law in the area of high voltage direct current transmission systems and flexible current transmission systems. Siemens is cooperating with the DOJ.
 
Other proceedings
 
Pursuant to an agreement dated June 6, 2005, the Company sold its mobile devices business to Qisda Corp. (formerly named BenQ Corp.), a Taiwanese company. As previously reported, a dispute arose in 2006 between the Company and Qisda concerning the calculation of the purchase price. From September 2006 onwards, several subsidiaries in different countries used by Qisda for purposes of the acquisition of various business assets from the Company filed for insolvency protection and failed to fulfill their obligations under various contracts transferred to them by the Company under the 2005 agreement. On December 8, 2006, the Company initiated arbitration proceedings against Qisda requesting a declaratory award that certain allegations made by Qisda in relation to the purchase price calculation are unjustified. The Company further requested an order that Qisda perform its obligations and/or the obligations of its local subsidiaries assumed in connection with the acquisition or, in the


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alternative, that Qisda indemnify the Company for any losses. The Company’s request for arbitration was filed with the International Chamber of Commerce in Paris (ICC). The seat of arbitration is Zurich, Switzerland. In March 2007, Qisda raised a counterclaim alleging that the Company made misrepresentations in connection with the sale of the mobile devices business and asserted claims for the adjustment of the purchase price. In November 2007, the Company expanded its claims that Qisda indemnify the Company in relation to any losses suffered as a result of Qisda’s failure to perform its obligations and/or the obligations of its locally incorporated subsidiaries. Qisda amended its counterclaim in March 2008 by (i) changing its request for declaratory relief with regard to the alleged misrepresentations to a request for substantial damages, and (ii) raising further claims for substantial damages and declaratory relief. The parties have resolved their disputes relating to Qisda Corp.’s purchase of the mobile device business. Upon joint request of the parties, the ICC issued an Award by Consent in March 2009.
 
On November 25, 2008, Siemens announced that the Company and the insolvency administration of BenQ Mobile GmbH & Co. OHG had reached a settlement after constructive discussions that began in 2006. In the settlement agreement, Siemens agreed to a gross payment of €300 million, which was paid in December 2008. However, the settlement is expected to result in a net payment of approximately €255 million after taking into account Siemens’ claims as creditor. Since Siemens had made a sufficient provision for the expected settlement, the settlement does not have a material negative impact on Siemens’ results of operations for fiscal 2009.
 
As reported, the Company is member of a supplier consortium contracted by Teollisuuden Voima Oyj (TVO) for the construction of the nuclear power plant “Olkiluoto 3” in Finland. The Company’s share in the contract price payable to the supplier consortium is approximately 27%. The other member of the supplier consortium is a further consortium consisting of Areva NP S.A.S. and its wholly-owned affiliate Areva NP GmbH. The agreed completion date for the nuclear power plant was April 30, 2009. The supplier consortium announced in January 2009 that it expected the project to be delayed by 38 months in total. Now, there are discussions about further delays due to new requirements imposed by the approval authorities. Since the reasons for the delay are disputed, the supplier consortium filed a request for arbitration against TVO in December 2008. The supplier consortium has demanded an extension of the construction time and the payment of approximately €1 billion in outstanding down payments, as well as additional compensation. In its response to the request for arbitration, TVO rejected the demand for an extension of time and made counterclaims for damages relating to the delay, and interest on purportedly prematurely made down payments. Based on a delay of 38 months, TVO estimates that its total counterclaims against the supplier consortium amount to up to €1.4 billion.
 
In early 2009 Siemens terminated its joint venture with Areva S.A. (Areva). Thereafter Siemens entered into negotiations with the State Atomic Energy Corporation Rosatom (Rosatom) with a view to forming a new partnership active in the construction of nuclear power plants, in which it would be a minority shareholder. In April 2009, Areva filed a request for arbitration with the ICC against Siemens. Areva seeks an order enjoining Siemens from pursuing such negotiations with Rosatom, a declaration that Siemens is in material breach of its contractual obligations, a reduction of the price payable to Siemens for its stake in the Areva NP S.A.S. joint venture and damages in an amount to be ascertained. Siemens filed its answer in June 2009, primarily seeking a dismissal of Areva’s claims and a price increase. The arbitral tribunal has been constituted and the main proceedings have commenced. On November 17, 2009, the arbitral tribunal issued an interim order which imposes certain provisional restrictions on Siemens with respect to the negotiation process and the planned partnership with Rosatom; the order does not preclude Siemens from continuing its discussions with Rosatom during the arbitration.
 
As previously reported, a Mexican governmental control authority had barred Siemens S.A. de C.V. Mexico (Siemens Mexico) from bidding on public contracts for a period of three years and nine months beginning November 30, 2005. This proceeding arose from allegations that Siemens Mexico did not disclose alleged minor tax discrepancies when it was signing a public contract in 2002. Upon several appeals by Siemens Mexico, the execution of the debarment was stayed, the debarment subsequently reduced to a period of four months, and in June 2009 the Company was finally informed by the relevant administrative court that the debarment was completely annulled.
 
In July 2008, Mr. Abolfath Mahvi filed a request for arbitration with the ICC seeking an award of damages against Siemens in the amount of DM150 million (or the equivalent in euro, which is approximately €77 million) plus interest. Mr. Mahvi’s claim is based on a contract concluded in 1974 between a company that was then a subsidiary of Siemens and two other companies, one domiciled in the Bermudas and the other in Liberia. Mr. Mahvi


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alleges that he is the successor in interest to the Bermudan and Liberian companies and that the companies assisted Siemens with the acquisition of a power plant project in Bushehr, Iran. Siemens believes Mr. Mahvi’s claim to be without merit, particularly because the contract on which Mr. Mahvi bases his claim had already been the subject of a previous ICC arbitration that resulted in the dismissal of the claims against Siemens. In his statement of claim Mr. Mahvi specified his alleged claims and now claims from Siemens the payment of DM150 million (or the equivalent in euro, which is approximately €77 million) or, alternatively, €35.460 million, or €27.837 million plus interest, payment of 5% commission of any further payments received by Siemens in excess of DM5.74 billion arising out of any agreement covered by the contract with Mr. Mahvi as well as €5 million for “moral damages.”
 
In July 2008, Hellenic Telecommunications Organization Société Anonyme (OTE) filed a lawsuit against Siemens with the district court of Munich, Germany, seeking to compel Siemens to disclose the outcome of its internal investigations with respect to OTE. OTE seeks to obtain information with respect to allegations of undue influence and/or acts of bribery in connection with contracts concluded between Siemens and OTE from 1992 to 2006. On September 25, 2008, Siemens was served with the complaint by the district court. Siemens responded to the complaint, requesting that the lawsuit be dismissed. In May 2009, OTE was granted access to the prosecutor’s files in Greece, which presumably satisfied the disclosure claim raised by OTE. However, OTE may attempt to use information it has obtained to support its claims for damages against Siemens and/or Siemens A.E. (the Greek subsidiary of Siemens).
 
Siemens A.E. entered into a subcontract agreement with Science Applications International Corporation, Delaware, USA, (SAIC) in May of 2003 to deliver and install significant portions of security surveillance equipment as part of a “C4I” project in preparation for the 2004 Olympic Games in Athens, Greece. Siemens A.E. fulfilled its obligations pursuant to the subcontractor contract from 2003 to 2008. In the course of the final acceptance of the completed system in November of 2008, representatives of the Greek government claimed that the C4I System was defective and claimed compensation in the double-digit million euro range. The Greek government has withheld an additional double-digit million euro amount due pending formal final acceptance. Siemens A.E. and SAIC are contesting these claims as unfounded. An arbitration proceeding has been initiated by SAIC. The resolution of this dispute has been complicated by bribery and fraud allegations pending in Greece with respect to Siemens A.E., which have resulted in extensive negative media coverage concerning the C4I system.
 
The current proceedings conducted by the public prosecutor and criminal courts in Greece against former members of Siemens A.E. based on bribery and fraud allegations and the outcome of these proceedings might have a negative impact on pending civil legal proceedings as well as the future business activities of Siemens A.E. in Greece.
 
Along with the regular tax audit for the 2004 to 2007 tax years, the Greek tax authorities have started to re-audit Siemens A.E.’s books for the 1997 to 2003 tax years, which had already been closed. The tax audits could require Siemens A.E. to pay additional taxes. Due to the complexity of the subject matter, however, we are currently not in a position to predict the outcome of this audit or the amounts of any potential additional liabilities.
 
In December 2008, the Polish Agency of Internal Security (AWB) remanded into custody an employee of Siemens Healthcare Poland, in connection with an investigation regarding a public tender issued by the hospital of Wroclaw in 2008. According to the AWB, the Siemens employee and the deputy hospital director are accused of having manipulated the tender procedure.
 
In April 2009, the Defense Criminal Investigative Service of the U.S. Department of Defense conducted a search at the premises of Siemens Medical Solutions USA, Inc. in Malvern, Pennsylvania, in connection with an investigation relating to a Siemens contract with the U.S. Department of Defense for the provision of medical equipment.
 
In June 2009, the Vienna prosecutor searched the offices of an employee of Siemens AG Austria in connection with alleged overpricing by a subcontractor for an IT project with the Austrian federal data center (“Bundesrechenzentrum”). The prosecutor informed Siemens that the company is being regarded as a victim.
 
In June 2009, the Company and two of its subsidiaries voluntarily self-reported, among others, possible violations of U.S. Export Administration Regulations to the responsible U.S. authorities.


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In addition to the investigations and legal proceedings described above, Siemens AG and its subsidiaries have been named as defendants in various other legal actions and proceedings arising in connection with their activities as a global diversified group. Some of these pending proceedings have been previously disclosed. Some of the legal actions include claims or potential claims for punitive damages or claims for indeterminate amounts of damages. Siemens is from time to time also involved in regulatory investigations beyond those described above. Siemens is cooperating with the relevant authorities in several jurisdictions and, where appropriate, conducts internal investigations regarding potential wrongdoing with the assistance of in-house and external counsel. Given the number of legal actions and other proceedings to which Siemens is subject, some may result in adverse decisions. Siemens contests actions and proceedings when it considers it appropriate. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases in which claimants seek indeterminate damages, Siemens may not be able to predict what the eventual loss or range of loss related to such matters will be. The final resolution of the matters discussed in this paragraph could have a material effect on Siemens’ business, results of operations and financial condition for any reporting period in which an adverse decision is rendered. However, Siemens does not currently expect its business, results of operations and financial condition to be materially affected by the additional legal matters not separately discussed in this paragraph.


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ITEM 4A:  UNRESOLVED STAFF COMMENTS
 
Not applicable.
 
ITEM 5:  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
 
This Form 20-F contains forward-looking statements and information—that is, statements related to future, not past, events. These statements may be identified by words such as “expects,” “looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “project” or words of similar meaning. Such statements are based on the current expectations and certain assumptions of Siemens’ management, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’ control, affect Siemens’ operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For Siemens, particular uncertainties arise, among others, from changes in general economic and business conditions (including margin developments in major business areas and recessionary trends); the possibility that customers may delay the conversion of booked orders into revenue or that prices will decline as a result of continued adverse market conditions to a greater extent than currently anticipated by Siemens’ management; developments in the financial markets, including fluctuations in interest and exchange rates, commodity and equity prices, debt prices (credit spreads) and financial assets generally; continued volatility and a further deterioration of the capital markets; a worsening in the conditions of the credit business and, in particular, additional uncertainties arising out of the subprime, financial market and liquidity crises; future financial performance of major industries that Siemens serves, including, without limitation, the Sectors Industry, Energy and Healthcare; the challenges of integrating major acquisitions and implementing joint ventures and other significant portfolio measures; the introduction of competing products or technologies by other companies; a lack of acceptance of new products or services by customers targeted by Siemens; changes in business strategy; the outcome of pending investigations and legal proceedings and actions resulting from the findings of these investigations; the potential impact of such investigations and proceedings on Siemens’ ongoing business including its relationships with governments and other customers; the potential impact of such matters on Siemens’ financial statements; as well as various other factors. More detailed information about certain of the risk factors affecting Siemens is contained throughout this report and in Siemens’ other filings with the SEC, which are available on the Siemens website, www.siemens.com, and on the SEC’s website, www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed, sought, estimated or projected. Siemens does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.
 
The following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related Notes prepared in accordance with IFRS as described in “Notes to Consolidated Financial Statements” as of, and for the years ended, September 30, 2009, 2008 and 2007.
 
In this report, we present a number of supplemental financial measures that are or may be “non-GAAP financial measures” as defined in the rules of the SEC. For a definition of these financial measures, most directly comparable IFRS financial measures, the usefulness of Siemens’ supplemental financial measures as well as limitations associated with these measures and reconciliations to the most comparable IFRS financial measures, see “—Supplemental financial measures.”


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Business and operating environment
 
 
We are a globally operating, integrated technology company with core activities in the fields of industry, energy and healthcare, and we occupy leading market positions worldwide in the majority of our businesses. We can look back on a successful history spanning more than 160 years, with groundbreaking and revolutionary innovations such as the invention of the dynamo, the first commercial light bulb, the first electric streetcar, the construction of the first public power plant, and the first images of the inside of the human body. We have more than 400,000 employees and business activities in around 190 countries, and reported consolidated revenue of €76.651 billion in fiscal 2009. Our production capacity is distributed across more than 230 production and manufacturing facilities worldwide. In addition, we have office buildings, warehouses, research and development facilities and sales offices in almost every country in the world.
 
Siemens comprises Siemens AG as the parent company and a total of approximately 1,300 legal entities, including minority investments. Our Company is incorporated in Germany, with our corporate headquarters situated in Munich. Siemens operates under the leadership of its Managing Board, which comprises the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of Siemens as well as the heads of selected corporate functions and the CEOs of the three Sectors. A clear management principle, the so-called CEO principle, has been put into practice at all levels of our operations—in our Sectors, Divisions and Business Units as well as our regional Clusters. This principle establishes clear, direct lines of responsibility and consequently accelerates our decision-making processes.
 
Our business activities focus on our three Sectors, Industry, Energy and Healthcare, which form three of our reportable segments. In addition to our three Sectors, we have three additional reportable segments: Equity Investments and our two Cross-Sector Businesses Siemens IT Solutions and Services and Siemens Financial Services (SFS).
 
(COMPANY LOGO)
 
Our Industry Sector offers a complete spectrum of products, services and solutions for the efficient use of resources and energy and improvements of productivity in industry and infrastructure. Its integrated technologies and holistic solutions address primarily industrial customers, such as process and manufacturing industries, and infrastructure customers, especially in the areas of transport, buildings and utilities. The portfolio spans industry automation and drives products and services, building, lighting and mobility solutions and services, and system integration and solutions for plant businesses. Our Industry Sector comprises the six Divisions, Industry Automation, Drive Technologies, Building Technologies, OSRAM, Industry Solutions and Mobility. Many of the


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business activities of Industry Automation, Drive Technologies and OSRAM are characterized by relatively short business cycles and as such are influenced by prevailing economic conditions. In contrast, the longer-cycle business activities of the Mobility Division are less strongly affected by short-term trends. The Industry Sector currently has around 207,000 employees, and in fiscal 2009 reported external revenue of €33.915 billion. Of this figure, 57% was attributable to the region comprising Europe, the Commonwealth of Independent States (C.I.S.), Africa and the Middle East, 24% to the Americas, and 19% to Asia, Australia. The largest single national market for the Industry Sector is Germany, with 20% of external revenue for the Sector during fiscal 2009.
 
Our Energy Sector offers a wide spectrum of products, services and solutions for the generation, transmission and distribution of power, and the extraction, conversion and transport of oil and gas. It primarily addresses the needs of energy providers, but also serves industrial companies, particularly in the oil and gas industry. Our Energy Sector is made up of the six Divisions, Fossil Power Generation, Renewable Energy, Oil & Gas, Energy Service, Power Transmission and Power Distribution. Financial results relating to the Energy Service Division are reported in the Divisions Fossil Power Generation and Oil & Gas. Many of the business activities of our Energy Sector are characterized by relatively long-term projects and as such are relatively independent of short-term economic conditions. The Energy Sector has around 85,000 employees and reported external revenue of €25.405 billion for fiscal 2009. Thereof, 58% was attributable to Europe, C.I.S., Africa, Middle East, 26% to the Americas, and 16% to Asia, Australia. The United States (U.S.) was the largest single national market for Energy in fiscal 2009, accounting for 16% of external revenue for the Sector.
 
Our Healthcare Sector offers customers a comprehensive portfolio of medical solutions across the value-added chain—ranging from medical imaging to in-vitro diagnostics to interventional systems and clinical information technology systems—all from a single source. In addition, the Sector provides technical maintenance, professional and consulting services, and, together with SFS, financing to assist customers in purchasing the Sector’s products. Our Healthcare Sector is composed of the three Divisions, Imaging & IT, Workflow & Solutions and Diagnostics. The Sector’s business activities are relatively unaffected by short-term economic trends but are dependent on regulatory and policy developments around the world, particularly including ongoing healthcare reform efforts in the U.S. The Healthcare Sector currently has around 48,000 employees, and in fiscal 2009 reported external revenues of €11.864 billion. Of this figure, 40% was attributable to the region comprising Europe, C.I.S., Africa and the Middle East, 43% to the Americas, and 17% to Asia, Australia. By far the largest single national market for Healthcare is the U.S., with 38% of external revenue for the Sector during fiscal 2009.
 
In general, Equity Investments comprises equity stakes held by Siemens that are accounted for by the equity method, at cost or as current available-for-sale financial assets and which are not allocated to a Sector, a Cross-Sector Business, Siemens Real Estate (SRE), Pensions or Corporate Treasury for strategic reasons. Major components of Equity Investments include our 50% stakes in Nokia Siemens Networks B.V. (NSN) and BSH Bosch und Siemens Hausgeräte GmbH (BSH), our 49% stake in Enterprise Networks Holdings B.V. (EN), and our 49% stake in Krauss-Maffei Wegmann GmbH & Co. KG (KMW).
 
Siemens IT Solutions and Services designs, builds and operates both discrete and large scale information and communications systems and offers comprehensive information technology and communications solutions from a single source both to third parties and to other Siemens entities. Siemens IT Solutions and Services currently has around 35,000 employees and reported external revenue of €3.580 billion for fiscal 2009. Siemens Financial Services is an international provider of financial solutions in the business-to-business area. SFS supports Siemens as well as third parties in the three industry areas of industry, energy, and healthcare. SFS finances infrastructure, equipment and working capital and supports and advises Siemens concerning financial risk and investment management. By integrating financing expertise and industrial know-how, SFS creates value for its customers and helps them strengthen their competitiveness. SFS has around 2,000 employees.
 
Within Management’s discussion and analysis, the following financial performance measures are provided for our three Sectors, our Cross-Sector Business Siemens IT Solutions and Services and for 14 Divisions of our Sectors: new orders, revenue, profit and profit margin. For Equity Investments we report profit, and for SFS we report profit and total assets within Management’s discussion and analysis. In addition, further information including free cash flow is reported for each reportable segment in the “Notes to Consolidated Financial Statements.” For information


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related to the definition of these performance measures and to the reconciliation of segment performance measures to the consolidated financial statements, see “Notes to Consolidated Financial Statements.”
 
On a geographic basis, Siemens is subdivided into 17 regional Clusters, which are in turn assigned to one of our three reporting regions, each of which is the responsibility of one member of the Managing Board. We report financial performance measures for these three regions:
 
(CHART)
 
In addition, we report financial information at group level for certain major countries within each region, including Germany (within the region Europe, C.I.S., Africa, Middle East), the U.S. (within the region Americas), and China and India (within the region Asia, Australia).
 
 
Global megatrends are long-term processes that will drive global demand in coming decades. We at Siemens view demographic change, urbanization, climate change and globalization as megatrends that will have an impact on all humanity and leave their mark on global developments. We therefore have aligned our strategy and business activities with these trends. In our three Sectors, Industry, Energy and Healthcare, we have forward-looking products and solutions with which we can deal with climate change, contribute to improved healthcare for an aging population, and shape infrastructures and mobility in urban areas in an energy-efficient and thus environmentally friendly way.
 
Demographic change includes a number of trends, one of the most important ones being the increasing average age of the population of many countries, particularly industrialized nations. This trend is important to Siemens because we provide a wide range of products and solutions for preventative healthcare and early diagnosis of disease—two essential requirements for living longer, healthier lives.
 
Urbanization refers to the growing number of large, densely populated cities around the world. This includes both established metropolitan centers in industrialized nations and fast-rising urban centers in emerging economies. Urbanization is driven by a number of forces, including immigration from rural areas and population growth in urban areas. This megatrend is important to Siemens because we provide products and solutions for manufacturing, urban transit, building construction, power distribution and hospitals, among others.
 
Climate change embraces many trends, including but not limited to increasing the efficiency of power generation from fossil fuels; generating energy from renewable sources such as wind; increasing the efficiency and performance of electrical grids; increasing the energy efficiency of transportation and industrial processes; reducing the energy needs of buildings; and reducing emissions from all of the above.
 
Globalization refers to the increasing interconnection of national economies as well as the growing importance of multinational enterprises. Globalization is important to Siemens because we operate in approximately 190 countries with common solutions, technologies, logistics, information systems, and business processes across all regions. This global network enables us to help simplify the process of globalizing almost any business for our customers.


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Strategy
 
 
Our corporate strategy is derived from our vision:
 
Siemens will pioneer
 
  •  energy efficiency,
 
  •  industrial productivity,
 
  •  affordable and personalized healthcare,
 
  •  and intelligent infrastructure solutions
 
based on market and technology leadership.
 
Our strategic goal is sustainable, profitable growth. To achieve this goal we seek to maintain a leading position in regional and technological markets in which major global developments—the aforementioned megatrends—generate strong long-term demand for our products and solutions. Accordingly, Siemens has taken steps in recent years to align its portfolio squarely with the four megatrends of demographic change, urbanization, climate change and globalization. The focus on our Sectors Industry, Energy and Healthcare gives us a solid structural platform on which to build and sustain an excellent position in attractive and long-lived growth markets. The majority of our businesses already enjoy leading positions in terms of market share and technology leadership and accordingly have the necessary strength to grow profitably and sustainably in a competitive global market.
 
We are implementing this corporate strategy through our Fit42010 program, which aims to exploit the potential of our integrated technology company in line with our values—to be responsible, excellent and innovative —and our clear focus on the customer. Fit42010 further details our objective of sustainable, profitable growth by defining ambitious targets for growth, profitability and liquidity. We set these targets based on normal business cycles, unlike the current global recessionary conditions and the adverse effects of the financial crisis.
 
Fit42010 divides the potential harbored by Siemens as an integrated technology company into four categories: Portfolio, People Excellence, Operational Excellence and Corporate Responsibility. We have carefully targeted our Portfolio at attractive markets by means of stringent resource allocation and a clear focus on the three Sectors (see “—The Siemens Group—Organization and basis of presentation”). We deliver outstanding value for our customers because, within the context of People Excellence, our standard is to employ the best workers worldwide—which is of course necessary to a high-performance culture. Diversity in our management is a key component of our corporate strategy and a fundamental prerequisite for our Company’s long-term success. Our goal is to fill every position at Siemens with the most qualified employee—irrespective of factors like nationality, age, gender, background or religion. Open innovations—opening up a business to bring in the expertise of a wide range of internal and external experts in different areas from around the world—helps to ensure that we continue to constantly develop and refine our cutting-edge technology. Open innovations forms part of the Operational Excellence element of Fit42010, as does Global supply chain management, which is intended to boost efficiency in sourcing and the supply chain throughout our Company (see “—Important corporate programs and initiatives—Supply Chain Management initiative”). The Corporate Responsibility element, finally, has seen us introduce a uniform compliance program worldwide, with systems and processes to ensure proper conduct, and continues to highlight both our commitment to society and our acknowledgement of the enormous significance of climate protection.
 
 
Our Industry Sector is a global market and technology leader in industrial and infrastructure process automation. The Sector aims to make customers more competitive by automating the entire lifecycle of customer investments. Its innovative and environmentally-friendly products, systems, services and solutions are designed specifically to increase the productivity and flexibility of its customers and to help them make more efficient use of resources and energy. Our Industry Sector relies on common technology platforms (such as Totally Integrated


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Automation, or TIA) that are developed into business-specific applications by the Divisions. This approach is intended to enable the Divisions to achieve profitable above-average growth.
 
Our Energy Sector is the only company in the world capable of improving efficiency throughout the entire chain of energy conversion, from the extraction of oil & gas via power generation to the transmission and distribution of electric energy. As an integrated technology company, the Sector occupies a leading position in its industry in terms of technology and continues to set industry standards. Our Energy Sector aims to grow profitably and at a faster than average rate to achieve a market-leading position in every single business area.
 
The strategy pursued by our Healthcare Sector focuses on increasing efficiency in healthcare by improving the quality while reducing cost at the same time. The Sector strives to continuously enhance its leading position in the market by consistently focusing on customer requirements and an innovation strategy for its products, services and solutions to meet these needs. Our Healthcare Sector is working on building up its presence in the growth markets of the future throughout the value chain and on continuously improving its own cost position. The Sector has a clear focus on profitable growth and aims for a steady expansion of its market share. Its integrated approach combining medical imaging, laboratory diagnostics and the IT systems required for modern healthcare addresses the entire medical supply chain—from prevention and early detection to diagnosis, and on to treatment and aftercare.
 
As a leading international IT service provider, Siemens IT Solutions and Services has the capacity to meet all needs from a single source. Its portfolio ranges from consulting via system integration to the comprehensive management of IT infrastructures, as well as software development. Its expertise, which extends well beyond straightforward IT requirements, provides the basis for successful, highly complex IT projects that help customers all over the world to permanently retain and improve their competitive edge. SFS pursues a three-part strategy, comprising the management of the financial risks to which Siemens is exposed, the tailoring of financing solutions for Siemens customers to support our Company’s business activities, and the provision of finance for other companies, primarily in the three industry areas of industry, energy and healthcare. By leveraging its financing expertise and industrial know-how, SFS creates value for its customers and helps them strengthen their competitiveness.
 
Important corporate programs and initiatives
 
 
Our environmental portfolio provides a compelling demonstration of the way we have aligned our business activities with the aforementioned megatrends, in this case climate change. It contains technologies that make a direct and verifiable contribution to the environment and to climate protection. The elements of the portfolio fall into three main groups: products and solutions with exceptional energy efficiency, such as combined cycle power plants, energy-saving light bulbs and intelligent building technologies; systems and components for renewable forms of energy, such as grid access for wind turbines and steam turbines for solar power; and environmental technologies in fields such as water technologies and air pollution control.
 
With our environmental portfolio we intend to help our customers to reduce their carbon dioxide footprint, cut their energy costs and improve their profitability through an increase in their productivity. Our new increased target by 2011 is to reduce our customers’ annual carbon dioxide emissions by approximately 300 million metric tons through the Siemens products and solutions installed at our customers from the beginning of fiscal 2002 and still in use. The products and solutions installed until fiscal 2009 are already reducing carbon dioxide emissions by approximately 210 million metric tons a year.
 
Equally important is the fact that the environmental portfolio also enables us to claim a share of attractive markets with better than average growth potential. We have set ourselves ambitious revenue targets for the environmental portfolio. Despite the continuous challenges from macroeconomic and financing conditions, our goal is to generate €25 billion in revenue from products and solutions for environmental and climate protection by fiscal 2011. Including newly incorporated products and solutions and a strong performance of our environmental portfolio in fiscal 2009, revenues from this portfolio in the current year amounted to €23.0 billion and were above


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the comparable revenues of €20.7 billion in fiscal 2008. This means that our environmental portfolio already accounts for about 30% of our total sales.
 
There is no standard system that applies across companies for compiling and calculating revenues generated from products and solutions for environmental and climate protection and the quantity of reduced carbon dioxide emissions attributable to such products and solutions. Accordingly, revenues from our environmental portfolio and the reduction of our customers’ annual carbon dioxide emissions may not be comparable with similar information reported by other companies. We subject revenues from our environmental portfolio and the reduction of our customers’ annual carbon dioxide emissions to internal documentation and review requirements which are, however, different from those underlying our financial information. We may change our policies for recognizing revenues from our environmental portfolio and the reduction of our customers’ annual carbon dioxide emissions in the future without previous notice.
 
After the first external review of data and processes of our environmental portfolio in fiscal 2007, we again commissioned an independent accounting firm to conclude on our environmental portfolio for fiscal 2008. Such review is different from an audit as it was performed for our consolidated financial statements. The outcome of the review was favourable and the independent accounting firm recorded the results, in particular the details relating to total revenues generated by the environmental portfolio and the quantity of reduced carbon dioxide emissions attributable to it, in an Independent Assurance Report. We intend to continue this practice and will subject the environmental portfolio data and processes for fiscal 2009 to a similar external review.
 
 
The global program for the reduction of marketing, selling and general administrative (SG&A) expenses we launched in fiscal 2008 was targeted at improving the efficiency of the selling and administration processes in our corporate functions, our Sectors, Divisions and Cross-Sector Businesses as well as our regional Clusters. The program played an important role in helping us to substantially improve our competitive position on the cost side over the course of fiscal 2009, despite the difficult environment created by the global financial and economic crisis. As we have already achieved our SG&A cost-cutting target for fiscal 2010 a year ahead of schedule, we successfully completed our global SG&A program at the end of fiscal 2009.
 
We reduced our SG&A expenses by €1.2 billion in the current fiscal year from the level of fiscal 2007, despite major acquisitions during and between the periods under review and severance charges related to SG&A reduction in fiscal 2009. SG&A expenses in the current fiscal year amounted to 14.2% of revenue, compared to 16.7% in fiscal 2007. A reduction in expenditures for IT infrastructure and external consultants as well as job reductions in administration and sales functions accounted for part of this improvement. Our pooling and process simplification initiatives across numerous administrative activities in the Sectors and regional Clusters also made a significant impact in 2009, as did our sales channel optimization efforts. Effects due to lower demand caused by the economic downturn also contributed to reduced SG&A expenses. Going forward, our primary objective will be to sustain the achieved cost savings after the completion of our global SG&A program.
 
The job reduction measures under the SG&A program, which provided for around 12,600 job cuts worldwide, primarily in administration, have also been completed during fiscal 2009. The restructuring expenses associated with these job cuts were largely accounted for in fiscal 2008, when we incurred expenses in the amount of €1.081 billion. Within Segment information, the restructuring expenses for job reduction measures under the SG&A program and related to the program were recognized under Corporate items.
 
 
In fiscal 2009, we have launched a Supply Chain Management initiative with the objective of working with our suppliers to establish a leading global procurement network, push the development of technologies, and accelerate innovation cycles. The initiative is intended to generate substantial and sustainable improvements in profitability for the Siemens Group by optimizing our supply chain management and to better manage our supplier-related risk.


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One of the key levers for achieving the potential savings is to integrate procurement activities across our Sectors. By bundling and focusing our purchasing volume throughout Siemens, we expect to obtain lower prices through bulk purchasing.
 
A second central component of our Supply Chain Management initiative is global value sourcing, which entails the development of a competitive global supply network and joint product development and innovations with our key suppliers. In addition, we want to increase the share of sourcing in emerging countries in the medium term, in order to achieve a better regional balance between revenue volume and procurement volume.
 
A further measure is to intensify our cooperation with those suppliers who contribute most to our value creation. This measure implies that we intend to significantly reduce the number of our suppliers.
 
We have set clear and ambitious targets for our Supply Chain Management initiative: by fiscal 2010, we intend to increase the share of cross-Sector managed procurement volume by 60% over fiscal 2008 levels; and in the medium term, we seek to increase the share of sourcing from emerging markets to 25% of the Group’s total volume, and reduce our total number of suppliers by 20%.
 
 
In order to reduce complexity within the structure of our group, to optimize synergies and to strengthen governance and transparency, we have started a program aimed at reducing the number of legal entities, including minority investments, to fewer than 1,000 by 2010. Due to significant M&A activities targeted at enhancing and optimizing our portfolio, the number of legal entities had substantially increased in recent years.
 
The reduction will be achieved primarily by integrating legal entities into existing Siemens regional companies. Streamlining actions within our portfolio will also contribute to the goal. At the end of fiscal 2009, we successfully reduced the number of legal entities to approximately 1,300. This compares to approximately 1,600 legal entities at the end of the prior year and approximately 1,800 legal entities at the end of fiscal 2007. For fiscal 2010, we have set an additional reduction target of 300 legal entities.
 
 
(FLOW CHART)
 
It is our aim to continue to strengthen our innovation capability. Therefore Siemens increased research and development (R&D) spending in fiscal 2009 by 3.1% year-over-year, to €3.900 billion.
 
The Industry Sector invested €1.8 billion with an R&D intensity of 5.2%, the Energy Sector invested €0.8 billion with an R&D intensity of €3.0% and the Healthcare Sector invested €1.1 billion with an R&D intensity of 9.1%. Our corporate R&D organization, Corporate Technology (CT), and Siemens IT Solutions and Services also invested in R&D activities.
 
Siemens also benefited from public funding for R&D project work in fiscal 2009. As in the prior year, Siemens participated in more than 1,000 cooperation projects in 2009, both domestically and internationally. This includes direct cooperation with universities, research institutes and other industrial companies as well as participation in


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joint programs backed by public support such as from the European Union or the German Federal Ministry of Education and Research (BMBF).
 
(FLOW CHART)
 
We employ 12,700 employees engaged in R&D in Germany, and 19,100 employees engaged in R&D in about 30 other countries including the U.S., China, India, Austria, Slovakia, the U.K., Sweden, Denmark, Switzerland and Croatia.
 
Siemens’ patent portfolio consists of more than 56,000 patents worldwide, an increase from 55,000 patents a year earlier. According to statistics for patent applications in calendar 2008, Siemens ranked second in Germany, second in Europe and twelfth in the U.S. For calendar 2007, Siemens was second in Germany, third in Europe and eleventh in the U.S.
 
The following R&D priorities were set in fiscal 2009: (1) safeguarding the Company’s long-term prospects, (2) increasing the Company’s competitive edge in technology and (3) optimizing the allocation of R&D resources.
 
CT works closely with the R&D teams in the Sectors and Divisions. CT, which has more than 5,000 employees, is tightly networked to facilitate efficient collaboration between its various sites around the world and with the rest of the Company. Its principal research operations are in the U.S., the U.K., Germany, Austria, the Slovak Republic, Russia, India, China and Singapore.
 
Within our Sectors the R&D efforts are focused on the next generation of products and solutions and preparing for successful market launches. CT’s researchers and developers, in contrast, look further ahead and focus on identifying the fundamental technologies that will be required for the next-succeeding generation. The strong links they maintain with global research establishments and their close working relationships with those parts of the company most familiar with products and customers help to ensure that important technical and social trends are recognized, analyzed at an early stage and created. CT is committed to the principles of Open innovations and accordingly makes sure the Company continually receives a flow of information with long-term value from the science and engineering disciplines.
 
CT covers a wide range of global technology fields including materials, microsystems, production methods, software, engineering, power, sensors, automation, medical informatics and imaging, information and communication, raw material extraction and processing, and off-grid energy. Our so-called SMART products (meaning Simple, Maintenance-friendly, Affordable, Reliable and Timely to market) incorporate new technologies in a form that enables them to compete effectively in price-sensitive markets, such as in rural regions and areas with poorly developed infrastructure. These inexpensive products are tailored to the specific requirements of their target markets and are particularly reliable and easy to use and maintain. CT and the Sectors have SMART solutions under development in fields including healthcare and decentralized power generation, and a number are already successfully in place.
 
Solutions capable of strengthening and advancing our environmental portfolio are a strong point of Siemens’ R&D initiatives. Key objectives in this context include increasing efficiency in power generation, be it renewable or conventional; low-loss power transmission; the development of smart power grids; and the efficient use of energy in transport, industrial production, buildings and lighting. Siemens’ researchers and developers are investigating every aspect of e-mobility, from the technology of electric vehicles themselves to integrating them into future smart grids. In addition, they continue to develop improved systems for preventing water and air pollution as well as new solutions for purifying drinking water, some of which use novel membrane technologies.
 
A priority for the Industry Sector is integrating product planning and production processes into product lifecycle management IT systems. The goal is to slash time to market by up to 50% by speeding up these processes


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at every point of the value chain. Advances in automation technology and, above all, in software will play a vital role here. Other leading priorities for the Industry Sector include increasing energy efficiency, reducing resource consumption and cutting emissions. This goes for improvements in building systems technologies, the development of higher-performance lighting solutions, for example using LEDs, as well as better solutions for buildings and transportation, ranging from energy-saving engines to the “Complete Mobility” approach, which involves fully integrating different modes of transport with each other in order to bring people and goods to their destination even faster, more efficiently and in even greater comfort.
 
The focal point of R&D activities in the Energy Sector is developing more efficient methods for the generation, transmission and distribution of power. In this regard, converting existing power grids to smart grids plays a key role. Smart networks are essential for sustainable power systems and for effectively integrating ever-increasing power supplies from renewable resources as well as future electric vehicles into the energy mix. Optimized solutions for solar thermal power plants are also part of the R&D mission at Energy, along with floating wind turbines for use far offshore, using new materials in turbine blades to improve power plant efficiency, innovative techniques for reducing losses in electricity transmission, and technologies to capture greenhouse gases such as carbon dioxide from the flue gas of fossil-fuel-fired power stations.
 
Mindful of the growing and ageing global population, the Healthcare Sector is committed to offering high quality healthcare solutions at an affordable price and its R&D activities are consequently focused primarily on innovations that will help it to meet the associated customer requirements more effectively. Foremost here is combining the various imaging techniques, which are making it possible to obtain ever more detailed three-dimensional pictures of the body faster and with less risk for the patient, with laboratory diagnostics and information technology in order to create much better and more coordinated workflows. Information from the various diagnostic methods enables practitioners not only to detect disease more accurately and at an earlier stage, but also to match treatment more closely to individual patient needs, for example by allowing them to monitor the efficacy of medication more precisely and bring to bear the full evaluative and analytical capabilities of modern computers.


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Economic environment
 
 
Fiscal year 2009 was marked by the most serious global economic crisis since the end of the Second World War. According to IHS Global Insight, gross domestic product (GDP) began to shrink in the fourth quarter of calendar year 2008, that is during the first quarter of our fiscal year 2009, compared with the same quarter of the previous year. In the two subsequent quarters this trend intensified, with negative growth rates exceeding minus 3%. In the third quarter of calendar year 2009 the contraction began to soften, with a negative growth rate of slightly above 2%. Only for the last quarter of calendar year 2009 do forecasts predict a modest improvement on the already poor levels of the preceding year. Overall, IHS Global Insight anticipates a reduction of 2.1% in global economic output for calendar year 2009. The world economy was still registered 2% growth in calendar year 2008.
 
(FLOW CHART)
 
From a regional perspective, the sharpest GDP downturn in 2009, at minus 3.6%, was recorded in the region Europe, Commonwealth of Independent States (C.I.S.), Africa, Middle East, the largest of Siemens’ three reporting regions. In the previous year, this region grew by 1.9%. Germany’s GDP, which was up by 1.3% in 2008, is provisionally set to contract by 4.8% during 2009. The decline in exports and falling machinery and equipment spending had a particular impact here, whereas private consumption, underpinned by state-run programs such as short-time working benefits and auto scrappage schemes, held up. The economic crisis has had a particularly severe effect on a number of countries in Central and Eastern Europe, as well as Russia, which suffered as a result of both the crisis in the financial markets and lower raw material prices. In the wake of lower commodity prices, but also in part due to the crisis in real estate, growth in the Middle East, which was still running at 6.1% in 2008, virtually came to a standstill in 2009.
 
In the Americas region, IHS Global Insight expects that a growth rate of 1.2% during calendar year 2008 will be followed by a 2.4% fall in GDP in 2009. The U.S., where growth had already fallen back to just 0.4% during the preceding year, is provisionally set to register a decline in GDP of 2.5% for the current calendar year. There are, nevertheless, a number of indicators pointing to economic improvement: The housing market is stabilizing, demand for investment goods and exports is up, and industrial production is starting to increase once more in a number of sectors of the economy. Essentially, this return to more positive development has been spurred on by a state-sponsored economic stimulus program and the rescue measures taken in the banking sector, which have markedly eased the situation in the financial markets.
 
Asia, Australia is the only region that continued to grow, albeit modestly, even in the midst of the global economic crisis. For this region IHS Global Insight is projecting a 0.8% growth in GDP in 2009, compared with a figure of 3.6% during the previous year. Meanwhile China’s growth continues almost unabated, with lower exports largely offset by the state’s economic stimulus packages. For calendar year 2009 IHS Global Insight forecasts that


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China will grow by 8.1%, against 9% in 2008. India, too, is still growing significantly faster than the region as a whole. Both private consumption and capital spending continue to provide positive impetus for growth. In 2009 India’s GDP is set to grow by a provisional figure of 5.6%, after a 6.1% increase during calendar year 2008.
 
For Siemens, as a supplier of plant and infrastructure equipment, the course of gross fixed investment, as a component of GDP, is of major importance. Its development is particularly vulnerable to cyclical fluctuations in the economy. IHS Global Insight anticipates that after growth of 1.8% in 2008, gross fixed investment will decline by 6.4% during 2009. The two regions generating our highest sales figures, Europe, C.I.S., Africa and Middle East, and the Americas, have been particularly severely impacted here. In the Europe, C.I.S., Africa, Middle East region, the gross fixed investment figure will fall by a provisional 10.9% year on year in 2009, while the Americas region is expected to record a decline by as much as 11.5% during 2009. Only the Asia, Australia region is expected to have bucked the trend in 2009, registering a 3.4% increase in gross fixed investment over the previous year’s level.
 
IHS Global Insight expects the value added manufacturing, in which Siemens operates, to decline by 9.3% in 2009 compared to 2008.
 
The estimates and projections presented above for GDP and gross fixed investments are based upon a report dated October 14, 2009 prepared by IHS Global Insight, the estimates and projections presented above for value added manufacturing are based upon the recent report prepared by IHS Global Insight in November 2009.
 
The estimates and projection have not been independently verified by Siemens.
 
We are also dependent on the development of raw material prices. Key materials to which we have significant cost exposure include copper, various grades and formats of steel, and aluminum. In addition, within stainless steel we have considerable exposure related to nickel and chrome alloy materials.
 
Copper has been a highly speculative base metal in recent years. In July 2008, copper traded on the London metal exchange (LME) at U.S.$8,985 per metric ton, the highest price for the year. The financial crisis in the autumn of 2008 led to a correction in copper prices as demand fell and financial institutions pulled out of speculative positions. On December 24, 2008, copper traded on the LME at U.S.$2,770 per metric ton—a reduction of nearly 70% within less than six months. The price has rebounded since then, and at the end of fiscal 2009 copper traded around U.S.$6,100 per metric ton.
 
Steel markets were in a tight supply/demand balance up to mid-2008, with the highest price levels in July of that year. The melt-down of demand from the economic downturn brought global steel prices down by approximately 55% compared to the levels reached in July 2008 as measured by the CRUspi steel price index. Since the second calendar quarter of 2009, steel prices have slowly recovered due to reductions in supply and restocking on the demand side, and the CRUspi had risen by 23% at the end of fiscal 2009 compared to the beginning of January 2009.
 
Aluminum traded on the LME at a year high of U.S.$3,292 per metric ton in July of 2008. Prices came slowly down to U.S.$1,253 per metric ton in February of 2009 due to weaker demand and a substantial increase in inventories. Prices have been rising since then, reaching U.S.$1,852 per metric ton at the end of fiscal 2009, due to an improving supply/demand balance as well as increasing production costs for the energy-intensive material.
 
Our main exposure to the prices of copper and related products, and to steel and stainless steel, is in the Industry and Energy Sectors. Our main price exposure to aluminum is in Industry. Additionally Siemens is generally exposed to energy prices, both direct (electricity, gas, oil) and indirect (energy used in the manufacturing processes of suppliers).
 
Siemens uses several options in order to reduce the risk in project or product business, such as long-term contracting with suppliers, physical and financial hedging and price escalation clauses with customers.
 
 
According to market surveys by IHS Global Insight as of September 2009, capital expenditures within nearly all of the main branches served by our Sectors and Siemens IT Solutions and Services declined in calendar year


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2009 compared to 2008. For comparison, all the branches increased their level of capital investment in 2008 by double-digit or high single-digit percentage rates compared to the prior year.
 
Within the markets served predominantly by our Industry Sector, capital expenditures in the oil and gas industry are expected to show the sharpest contraction in 2009 with a decline of more than 20% compared to the prior year. The automotive industry is also expected to reduce capital investment significantly, resulting in an expected decline of about 16% compared to the prior year. Weaker overall demand, rising inventories and excess capacities will be only partially offset by scrapping schemes in Western Europe and the U.S. The construction and real estate industries are expected to reduce capital expenditure in 2009 by about 14%. Market contraction is driven by recession and the financial market crisis in mature economies and also in several emerging countries. For the electrical and electronics as well as the pulp and paper industries, the decline in capital expenditures in 2009 is estimated at about 10%. The reduction in investments in the transportation and infrastructure industry and the wholesale and retail businesses is expected to be about 8% compared to the prior year. Other important branches served mainly by Industry include the chemicals industry, the metals and mining markets, the food and beverage industry weakened by a fall in consumer confidence, and the transport equipment industry. All are expected to reduce capital expenditures by about 7% compared to 2008. For the transportation services and the post and logistics businesses, the decline in investments in 2009 is estimated at about 6%. Investments in the machine building industry are expected to decline in nearly all countries of the world. These declines are expected to be offset by strong growth in China, which claims the world’s largest machine-building industry.
 
Our Energy Sector is also exposed to the adverse conditions in certain markets described above for Industry, including the chemicals, post and logistics, wholesale and retail, transportation services and oil and gas industries. In addition, Energy is affected by an expected decline in investments of about 7% in the utilities markets, where the situation of the customers worsened together with deteriorating macroeconomic conditions in the first half of 2009.
 
Capital expenditures within the international healthcare markets, served by our Healthcare Sector, are expected to decline by about 12% in 2009 compared to 2008. Capital expenditures have declined in nearly all countries, with the strongest decreases coming in some of our most important markets including the U.S. and Germany. The only country reporting a significant increase in healthcare capital expenditures in 2009 is China.
 
The public sector, a major customer of offerings from our Siemens IT Solutions and Services business, is expected to reduce its capital investment by about 8% compared to the prior year, despite government spending for stimulus programs. A similar decline is expected in the finance businesses.
 
Fiscal 2009 compared to fiscal 2008
 
 
Siemens delivered a resilient performance in fiscal 2009. Operating in a contracting global economy struggling with the aftermath of a major financial crisis, we had the competitive strength to generate revenue within 1% of the fiscal 2008 level. The many streamlining initiatives we launched in fiscal 2008, particularly including our global SG&A reduction program, increased our operating efficiency and helped us surpass our mid-year outlook for Total Sectors profit. New orders declined 16% year-over-year, as our overall market environment included deep downturns in major world markets for industrial production, customer postponements of major energy infrastructure projects and growing uncertainty in the healthcare equipment market. The order decrease year-over-year includes our own divestment of non-strategic businesses, and as recessionary conditions began to ease toward the end of fiscal 2009 we were well positioned to deliver our typically strong year-end quarter.
 
Income from continuing operations and Net income were strongly influenced by negative impacts related to our stake in NSN. Equity investment losses related to NSN totaled €543 million during the year, and at the end of the fiscal year we took an impairment of €1.634 billion on our stake in NSN based on a review of its prospects in coming years. These impacts, reported within our Equity Investments segment, were only partly offset by a gain on the sale of our share of Fujitsu Siemens Computers (Holding) B.V. (FSC).
 
Revenue remained stable year-over-year, at €76.651 billion. On an organic basis, excluding the net effect of currency translation and portfolio transactions, revenue was unchanged. The Energy and Healthcare Sectors


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competed successfully in challenging markets, delivering higher revenue year-over-year. This growth was offset by a revenue decline in the Industry Sector resulting from recession-driven downturns in important markets such as factory automation, machine-building, automotive, construction and process industries as well as divestments of non-strategic businesses. On a geographic basis, revenue grew in the Americas and in Asia, Australia but declined in Siemens’ largest reporting region which comprises Europe, the Commonwealth of Independent States (C.I.S.), Africa, and the Middle East.
 
(FLOW CHART)
 
Orders came in 16% lower, at €78.991 billion. On an organic basis, orders were down 14% year-over-year. Orders in the Industry Sector declined due to the market conditions mentioned above, while orders in Energy were lower due in part to customer postponements of large infrastructure projects. Orders were stable in Healthcare. While orders declined in all three of Siemens’ reporting regions, the Asia, Australia region saw the smallest drop-off in demand compared to fiscal 2008, at 6%. The Sectors’ combined book-to-bill ratio for fiscal 2009 was 1.04 and the combined order backlog at the end of the year stood at €81.2 billion.
 
(FLOW CHART)
 
Total Sectors profit rose to €7.466 billion. Total Sectors profit—a measure of the combined profit from our three Sectors—climbed 13% from €6.606 billion in the prior year, driven by substantial profit turnarounds at the Fossil Power Generation and Mobility Divisions. A year earlier, these Divisions posted losses and took a combined total of more than €1 billion in project charges. At the Sector level, the Energy and Healthcare Sectors increased their profit in fiscal 2009, on higher earnings at all Divisions within Energy and at Healthcare’s two large Divisions, Imaging & IT and Diagnostics. Industry’s profit declined year-over-year despite the improvement at Mobility, as especially lower revenue and related factors reduced profit at the other Divisions in the Sector.
 
Income from continuing operations rose to €2.457 billion. Basic earnings per share (EPS) rose to €2.60. A year earlier, income from continuing operations was €1.859 billion and basic EPS from continuing operations was €1.91. Both periods included substantial negative profit impacts outside the Sectors. The current year was burdened by impairment charges and other losses related to NSN within our Equity Investments segment totaling €2.177 billion. A year earlier, the loss related to NSN within Equity Investments was €119 million. Fiscal


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2008 also included €1.081 billion (pre-tax) in charges for severance under our global SG&A program, a provision of approximately €1 billion (pre-tax) related to legal proceedings in the U.S. and Germany that were resolved during fiscal 2009, and a one-time endowment of €390 million (pre-tax) related to the establishment of the Siemens Stiftung (foundation) in Germany.  Expenses for outside advisors engaged in connection with investigations into alleged violations of anti-corruption laws and related matters as well as remediation activities fell to €95 million in fiscal 2009 from €430 million a year earlier.
 
Net income was €2.497 billion compared to €5.886 billion in fiscal 2008. Basic EPS was €2.65 compared to €6.41 in fiscal 2008. The difference is due to discontinued operations, which contributed €40 million to net income in fiscal 2009 compared to €4.027 billion a year earlier. Fiscal 2008 income from discontinued operations included a divestment gain and operating results related to Siemens VDO Automotive (SV) totaling approximately €5.5 billion, partly offset by a loss of approximately €1.0 billion associated with a transfer of 51% of Siemens Enterprise Communications (SEN) into a joint venture.
 
(FLOW CHART)
 
Free cash flow from continuing operations was €3.786 billion. A year earlier, free cash flow from continuing operations was €5.739 billion. The decline year-over-year includes lower billings in excess as well as a substantial decrease in trade payables compared to a year earlier. In addition, fiscal 2009 included substantial cash outflows corresponding to charges to income taken in fiscal 2008, particularly including those mentioned above for Income from continuing operations and Total Sectors profit. Among these outflows were severance payments of €796 million for the global SG&A program and other personnel-related restructuring measures, €1.008 billion paid to authorities in the U.S. and Germany following resolution of legal proceedings, and substantial cash outflows stemming from project charges at Fossil Power Generation, Mobility and Siemens IT Solutions and Services. The NSN impairment mentioned above had no cash impact.
 
(FLOW CHART)


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Dividend. The Siemens Managing Board and Supervisory Board have proposed a dividend of €1.60 per share. The prior-year dividend was also €1.60 per share.
 
(FLOW CHART)
 
 
The following discussion presents selected information for Siemens for the fiscal year ended September 30, 2009:
 
Order situation and revenue
 
In fiscal 2009, revenue declined 1% year-over-year, to €76.651 billion, while orders came in at €78.991 billion, down 16% from the prior-year period. This resulted in a book-to-bill ratio of 1.03. On an organic basis, excluding the net effect of currency translation and portfolio transactions, revenue came in level with the prior year, while orders decreased 14%. Within the full-year trend, we saw order intake declining in the second half of fiscal 2009 compared to the first half due to the trends in the global macroeconomic and financing environment described in the section “Business and operating environment—Economic environment,” while revenue development was significantly stabilized by our strong order backlog. Accordingly, our book-to-bill ratio fell from 1.12 in the first six months to 0.94 in the second half of fiscal 2009. The total order backlog for our three Sectors was €81.2 billion as of September 30, 2009, slightly down from €83.1 billion a year earlier, due primarily to negative currency translation effects. Out of the current backlog, orders of €36 billion are expected to be converted into revenue during fiscal 2010, orders of €17 billion during 2011, and the remainder in the periods thereafter.
 
                                                 
    New Orders (location of customer)  
    Year ended
    % Change
       
    September 30,     vs. previous year     therein  
    2009     2008     Actual     Adjusted(1)     Currency     Portfolio  
    (in millions of €)                          
 
Europe, C.I.S.(2), Africa, Middle East
    45,696       55,229       (17)%       (13)%       (2)%       (2)%  
therein Germany
    12,307       14,434       (15)%       (13)%       0%       (2)%  
Americas
    19,935       24,010       (17)%       (21)%       5%       (1)%  
therein U.S. 
    14,691       17,437       (16)%       (23)%       8%       (1)%  
Asia, Australia
    13,360       14,256       (6)%       (9)%       3%       0%  
therein China
    5,525       5,446       1%       (7)%       8%       0%  
therein India
    2,309       2,268       2%       7%       (5)%       0%  
                                                 
Siemens
    78,991       93,495       (16)%       (14)%       0%       (2)%  
                                                 
 
 
(1)  Excluding currency translation and portfolio effects.
 
(2)  Commonwealth of Independent States.
 
Orders related to external customers decreased 16% in fiscal 2009, driven by sharp declines in Industry and to a lesser extent in Energy. In the Industry Sector—our largest Sector — order intake decreased more than 20% compared to the high level of the prior year. All Industry Divisions reported lower orders, led by declines at Drive


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Technologies, Industry Solutions and Industry Automation. Due in part to customer postponements of potential new projects, the Energy Sector saw orders fall 10% from the high level of fiscal 2008, driven primarily by lower demand at Oil & Gas, Power Transmission and Fossil Power Generation. In contrast, order intake increased at Renewable Energy, as the Division continued to win large contracts for offshore wind-farm projects. Orders rose modestly in Healthcare, benefiting from positive currency translation effects from the U.S. In addition, orders at Other Operations declined significantly in the current period due primarily to substantial dispositions and other streamlining actions.
 
In the region Europe, C.I.S., Africa, Middle East — our largest reporting region—orders declined 17%, including sharply lower order intake in Industry on decreases in all Divisions. In most cases the declines were driven by macroeconomic conditions. Lower order intake at Mobility in the region was due to lower volume from major orders compared to the prior fiscal year, which included Siemens’ largest-ever rolling stock order, a €1.4 billion contract for more than 300 trains from the Belgian state railway system. Higher demand at Renewable Energy, driven by a number of large orders in the current period, limited the drop in order intake in the Energy Sector in Europe, C.I.S., Africa, Middle East to 4%. Healthcare orders came in near the level of the prior fiscal year in this region. In Germany, major contract wins at Mobility and Renewable Energy softened the impact of a broad-based decline in other Divisions and streamlining actions at Other Operations. In the Americas, orders decreased 17% despite strong positive currency translation effects from the U.S. Within the region, the contraction of order intake was strongest in Energy, due mainly to a lower volume from major orders at Renewable Energy compared to fiscal 2008. Orders in Industry also declined by double digits, due in part to higher volume from large orders at Mobility in the prior-year period. Healthcare orders came in just below the prior-year level. In Asia, Australia, orders decreased 6%, as a higher order intake in Healthcare was more than offset by declines in Industry and Energy, particularly at Industry Solutions, Drive Technologies, Oil & Gas and Power Distribution. Order intake in China rose 1% compared to the prior-year period, including a number of major contract wins at Mobility as well as significant positive currency translation effects. In India, lower demand in Industry was offset by a higher volume from major orders at Power Transmission and Fossil Power Generation in fiscal 2009.
 
                                                 
    Revenue (location of customer)  
                % Change
             
    Year ended September 30,     vs. previous year     therein  
    2009     2008     Actual     Adjusted(1)     Currency     Portfolio  
    (in millions of €)                          
 
Europe, C.I.S.(2), Africa, Middle East
    43,288       44,895       (4)%       1%       (2)%       (3)%  
therein Germany
    11,525       12,797       (10)%       (8)%       0%       (2)%  
Americas
    20,754       20,107       3%       (3)%       7%       (1)%  
therein U.S. 
    15,684       14,847       6%       (4)%       11%       (1)%  
Asia, Australia
    12,609       12,325       2%       (1)%       3%       0%  
therein China
    5,218       4,878       7%       (1)%       8%       0%  
therein India
    1,680       1,885       (11)%       (7)%       (5)%       1%  
                                                 
Siemens
    76,651       77,327       (1)%       0%       1%       (2)%  
                                                 
 
 
(1)  Excluding currency translation and portfolio effects.
 
(2)  Commonwealth of Independent States.
 
Revenue related to external customers declined 1% in fiscal 2009, as lower revenue in Industry and streamlining actions within Other Operations offset increases in Energy and Healthcare. The Industry Sector reported a revenue decrease of 7% on lower sales in five of its six Divisions, led by double-digit declines at Industry Automation, Drive Technologies and OSRAM. In contrast, revenue at Mobility rose 10% on increases in all regions. Fossil Power Generation and Renewable Energy were the primary drivers for a 14% revenue increase in Energy, as the Sector executed projects in its substantial order backlog. Healthcare revenue rose 7% compared to fiscal 2008, due primarily to growth at Imaging & IT and Diagnostics as well as substantial positive currency translation effects.


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In Europe, C.I.S., Africa, Middle East, revenue declined 4% year-over-year, held back by negative currency translation and portfolio effects, the latter due mainly to streamlining of Other Operations. Revenue in the region rose by double digits in Energy and at a lower rate in Healthcare, and decreased in the Industry Sector. Revenue in Germany declined 10% in fiscal 2009, due primarily to lower demand in the Industry Sector, particularly in its short-cycle businesses, and streamlining actions within Other Operations. In the Americas, revenue rose 3% due to significant positive currency translation effects from the U.S. Revenue growth in the region was strongest in the Energy Sector, including double-digit increases at Renewable Energy, Fossil Power Generation and Power Transmission. Healthcare also reported higher revenues in the Americas, while Industry came in below the level of fiscal 2008, driven by declines at OSRAM, Industry Automation and Industry Solutions. Asia, Australia saw a 2% expansion in revenue on growth in Healthcare and Energy. Revenue in Industry in this region declined 2% compared to the prior-year level. Revenue growth in China was due primarily to positive currency translation effects. Revenue declined in India driven by lower sales at Drive Technologies and Oil & Gas.
 
(FLOW CHART)
 
 
                         
    Year ended
   
    September 30,    
        2009           2008          % Change
    (in millions of €)    
 
Gross profit on revenue
    20,710       21,043       (2 )%
as percentage of revenue
    27.0 %     27.2 %        
 
Gross profit for fiscal 2009 decreased 2% compared to the prior-year period, as a strong gross profit increase in the Energy Sector was more than offset by other factors, including substantially lower gross profit in Industry and a sharp drop at Other Operations due to the streamlining actions. Higher gross profit in the Energy Sector was due primarily to Fossil Power Generation where gross profit in the prior year was reduced by substantial project charges, and also included volume-driven growth in gross profit at the majority of Divisions. Lower gross profit in Industry was due primarily to volume-driven declines at Industry Automation, Drive Technologies and OSRAM as well as substantial severance charges in the current fiscal year. For comparison, in fiscal 2008 gross profit in Industry was held back by project charges at Mobility and charges related to structural initiatives at Mobility and OSRAM. Gross profit in Healthcare rose modestly year-over-year, despite further charges of €169 million related to particle therapy contracts. For comparison, in the prior year gross profit in Healthcare was held back by substantial costs associated primarily with refocusing of certain business activities at Imaging & IT and charges related to particle therapy contracts at Workflow & Solutions. In combination, these factors led to a slight decline in gross profit margin for Siemens overall, which came in at 27.0% compared to 27.2% a year earlier.
 


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    Year ended
       
    September 30,        
    2009     2008     % Change  
    (in millions of €)        
 
Research and development expenses
    (3,900 )     (3,784 )     3 %
as percentage of revenue
    5.1 %     4.9 %      
Marketing, selling and general administrative expenses
    (10,896 )     (13,586 )     (20 )%
as percentage of revenue
    14.2 %     17.6 %      
Other operating income
    1,065       1,047       2 %
Other operating expense
    (632 )     (2,228 )     (72 )%
Income (loss) from investments accounted for using the equity method, net
    (1,946 )     260        
Financial income (expense), net
    (510 )     122        
 
R&D expenses increased to €3.900 billion, or 5.1% of revenue, from €3.784 billion, or 4.9% of revenue a year earlier, due primarily to higher outlays in Energy. SG&A expenses declined substantially to €10.896 billion, or 14.2% of revenue, from €13.586 billion, or 17.6% of revenue in the prior-year period, including lower expenses in all Sectors. The change year-over-year also includes substantial expenses in the prior year related to our global SG&A program, as the majority of the €1.081 billion in severance charges related to this program were recorded as SG&A expenses in fiscal 2008. During fiscal 2009, we already achieved the annual savings target under our global SG&A program originally set for fiscal 2010, despite additional severance charges recorded in the current period. For further information regarding the program successfully completed at the end of the fiscal year, see “Business and operating environment—Strategy—Important corporate programs and initiatives—Global SG&A program.”
 
Other operating income for fiscal 2009 was €1.065 billion, compared to €1.047 billion in the prior year. The current year included a gain of €327 million on the sale of our stake in Fujitsu Siemens Computers (Holding) B.V. (FSC). In addition, gains from sales of real estate were also slightly higher year-over-year, including a gain of €224 million from the sale of residential real estate holdings. For comparison, the prior year included a pre-tax net gain of €131 million on the sale of the wireless modules business at Industry Automation and a €130 million pre-tax net gain on the sale of the Global Tungsten & Powders unit at OSRAM. In addition, fiscal 2008 benefited from the release of an accrual of €38 million related to Italian electrical utility Enel.
 
Other operating expense came in substantially below the level of the prior-year period. The difference year-over-year is due primarily to a provision of approximately €1 billion in fiscal 2008 related to legal proceedings in the U.S. and Germany that were resolved during fiscal 2009. The prior year also included a one-time endowment of €390 million coinciding with the establishment of the Siemens Stiftung (foundation). Expenses for outside advisors engaged in connection with investigations into alleged violations of anti-corruption laws and related matters as well as remediation activities fell sharply year-over-year, to €95 million from €430 million a year earlier. Impairments of goodwill were also lower in the current period, as the prior year included a goodwill impairment of €70 million related to a building and infrastructure business, 50% of which was divested in fiscal 2008. In contrast, fiscal 2009 included a charge of €53 million related to a global settlement agreement with the World Bank Group, valuation allowances on loans and expenses related to the divestment of an industrial manufacturing unit in Austria, which was included in Other Operations.
 
Income from investments accounted for using the equity method, net was a negative €1.946 billion, down from a positive €260 million in the prior-year period. The difference was due primarily to an equity investment loss of €2.177 billion in the current fiscal year related to NSN, compared to a loss of €119 million a year earlier. This equity investment loss in fiscal 2009 includes an impairment of €1.634 billion on our stake in NSN recorded in the fourth quarter, as well as a loss of €543 million, including our share in restructuring and integration costs as well as a significant impairment of deferred tax assets at NSN. The current period also included an equity investment loss of €171 million related to EN. In addition, equity investment income related to our stakes in BSH and KMW was €195 million in fiscal 2009, down from €242 million a year earlier.
 
Financial income (expense), net decreased to a negative €510 million in fiscal 2009, down from a positive €122 million a year earlier. This change is due mainly to Income (expense) from pension plans and similar commitments, net, which swung from a positive €136 million in the prior year to a negative €227 million in fiscal

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2009, due to lower expected return on plan assets and higher interest cost. The current period also includes higher expenses related to the interest component from measuring provisions as well as higher expenses for allowances and write-offs of finance receivables.
 
                         
    Year ended
       
    September 30,        
    2009     2008     % Change  
    (in millions of €)        
 
Income from continuing operations before income taxes
    3,891       2,874       35 %
Income taxes
    (1,434 )     (1,015 )     41 %
as percentage of income from continuing operations before income taxes
    37 %     35 %      
Income from continuing operations
    2,457       1,859       32 %
Income from discontinued operations, net of income taxes
    40       4,027       (99 )%
Net income
    2,497       5,886       (58 )%
Net income attributable to minority interest
    205       161        
Net income attributable to shareholders of Siemens AG
    2,292       5,725       (60 )%
 
Income from continuing operations before income taxes was €3.891 billion for the current fiscal year, compared to €2.874 billion a year earlier. The change year-over-year was due to the factors mentioned above, primarily the broad-based reduction in SG&A expenses and the provision accrued in fiscal 2008 for legal and regulatory matters, partly offset by our fiscal 2009 equity investment loss related to NSN and a negative swing in Financial income. The effective tax rate on income from continuing operations was 37% in fiscal 2009, up from 35% in the prior year. The current-year rate was adversely affected by the significant negative swing in Income (loss) from investments accounted for using the equity method, net, primarily due to NSN, partly offset by the tax-free gain on the sale of our stake in FSC. For comparison, the tax rate in the prior year was adversely affected by the provision for legal and regulatory matters mentioned above. As a result, income from continuing operations after taxes was €2.457 billion, up from €1.859 billion in fiscal 2008.
 
Discontinued operations include former Com activities as well as SV, which was sold to Continental AG in the first quarter of fiscal 2008. The former Com activities include the enterprise networks business, 51% of which was divested during the fourth quarter of fiscal 2008; telecommunications carrier activities transferred into NSN in the third quarter of fiscal 2007; and the mobile devices business sold to BenQ Corporation in fiscal 2005. Income from discontinued operations in fiscal 2009 was €40 million, compared to €4.027 billion a year earlier. The difference is due mainly to €5.5 billion in the prior-year period related to SV, including operating results along with a substantial gain on the sale of the business. This positive contribution in fiscal 2008 was partly offset by negative effects related to former Com activities amounting to €1.433 billion, including a preliminary loss related to the divestment of the enterprise networks business of approximately €1.0 billion and severance charges and impairments of long-lived assets at the enterprise networks business. For additional information regarding discontinued operations, see “Notes to Consolidated Financial Statements.”
 
Net income for Siemens in fiscal 2009 was €2.497 billion, compared to €5.886 billion a year earlier, with the difference due primarily to discontinued operations as discussed above. Net income attributable to shareholders of Siemens AG was €2.292 billion, down from €5.725 billion in the prior-year period.


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Segment information analysis
 
Sectors
 
 
                                                       
    Year ended
               
    September 30,       % Change     therein  
    2009       2008       Actual     Adjusted(1)     Currency       Portfolio  
    (in millions of €)                              
 
Sector
                                                     
Profit
    2,701         3,947         (32) %                          
Profit margin
    7.7   %     10.5   %                                  
New orders
    33,284         42,374         (21) %     (22) %     1   %     0 %
Total revenue
    35,043         37,653         (7) %     (8) %     1   %     0 %
External revenue
    33,915         36,526         (7) %                          
Therein:
                                                     
Europe, C.I.S.(2), Africa, Middle East
    19,243         21,301         (10) %                          
Therein Germany
    6,636         7,434         (11) %                          
Americas
    8,323         8,763         (5) %                          
Asia, Australia
    6,349         6,462         (2) %                          
 
 
(1)  Excluding currency translation and portfolio effects.
 
(2)  Commonwealth of Independent States.
 
Industry faced severe challenges from the worldwide economic downturn in fiscal 2009, including significant slowdowns in major markets such as factory automation, machine-building, automotive, construction, and various process industries. Shorter-cycle manufacturing-related markets were the first to show demand declines from the recession, with corresponding adverse affects for the Industry Automation, Drive Technologies and OSRAM Divisions. By the end of fiscal 2009, the recession’s effects began to reach Industry’s longer-cycle businesses as well, with the exception of Mobility. The Sector’s order backlog had a stabilizing effect, yet revenue for Industry overall was 7% lower year-over-year. Orders declined 21% on reduced customer demand at all Divisions particularly including Drive Technologies, Industry Solutions and Industry Automation. On a geographic basis, both orders and revenue declined in all regions, with the sharpest drops coming in the Sector’s largest region, Europe, C.I.S., Africa, Middle East. Industry’s order backlog was €27.8 billion at the end of fiscal 2009, down from €31.7 billion a year earlier. Out of the current backlog, orders of €13 billion are expected to be converted into revenue during fiscal 2010, orders of €6 billion during 2011, and the remainder in the periods thereafter.
 
Falling revenue and corresponding adverse effects on capacity utilization and revenue mix took Industry’s profit down by a third compared to fiscal 2008. Mobility was the only Division that improved profit and profitability year-over-year. Industry initiated cost-cutting programs, capacity adjustment measures and structural initiatives aimed at restoring profitable growth. In the fourth quarter of fiscal 2009, these efforts entailed €173 million in net charges for severance and an additional €40 million at OSRAM for major impairments and inventory write-downs. In the prior year, gains from the sale of businesses partially offset project related charges at Mobility as well as structural initiatives at OSRAM and Mobility.
 


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    New Orders  
    Year ended
             
    September 30,     % Change     therein  
    2009     2008     Actual     Adjusted(1)     Currency     Portfolio  
    (in millions of €)                          
 
Divisions
                                               
Industry Automation
    6,766       8,945       (24 )%     (23 )%     1%       (2 )%
Drive Technologies
    6,511       9,425       (31 )%     (32 )%     1%       0 %
Building Technologies
    5,884       6,333       (7 )%     (10 )%     2%       1 %
OSRAM
    4,036       4,624       (13 )%     (13 )%     2%       (2 )%
Industry Solutions
    6,101       8,415       (27 )%     (28 )%     0%       1 %
Mobility
    6,766       7,842       (14 )%     (14 )%     0%       0 %
 
 
(1)  Excluding currency translation and portfolio effects.
 
                                                 
    Revenue  
    Year ended
             
    September 30,     % Change     therein  
    2009     2008     Actual     Adjusted(1)     Currency     Portfolio  
    (in millions of €)                          
 
Divisions
                                               
Industry Automation
    7,039       8,699       (19 )%     (18 )%     1 %     (2 )%
Drive Technologies
    7,526       8,434       (11 )%     (12 )%     1 %     0 %
Building Technologies
    5,934       5,984       (1 )%     (4 )%     2 %     1 %
OSRAM
    4,036       4,624       (13 )%     (13 )%     2 %     (2 )%
Industry Solutions
    6,804       7,106       (4 )%     (6 )%     1 %     1 %
Mobility
    6,442       5,841       10 %     11 %     (1 )%     0 %
 
 
(1)  Excluding currency translation and portfolio effects.
 
                                         
    Profit     Profit margin  
    Year ended
          Year ended
 
    September 30,           September 30,  
    2009     2008     % Change     2009     2008  
    (in millions of €)                    
 
Divisions
                                       
Industry Automation
    639       1,606       (60 )%     9.1 %     18.5%  
Drive Technologies
    836       1,279       (35 )%     11.1 %     15.2%  
Building Technologies
    382       466       (18 )%     6.4 %     7.8%  
OSRAM
    89       401       (78 )%     2.2 %     8.7%  
Industry Solutions
    360       439       (18 )%     5.3 %     6.2%  
Mobility
    390       (230 )           6.1 %     (3.9)%  
 
A deep downturn of Industry Automation’s large factory automation markets in fiscal 2009 took the Division’s revenue and orders down 19% and 24%, respectively, compared to the prior year. All three regions reported double-digit percentage declines, with the strongest decrease in Europe, C.I.S., Africa, Middle East. Despite successful cost-cutting efforts, profit fell 60% compared to the strong prior year, burdened by lower capacity utilization and a less favorable business mix. In the fourth quarter, the Division took net severance charges of €24 million for capacity adjustment measures. Profit in the prior year benefited from a pre-tax net gain on a Divisional level of €125 million from the sale of Industry Automation’s wireless modules business as well as a gain of €38 million from the sale of another business. Both periods under review included purchase price accounting (PPA) effects from the acquisition of UGS Corp., acquired in fiscal 2007. PPA effects were €138 million in fiscal 2009 and €145 million a year earlier. Prior year profit also included integration costs of €17 million. Effective with the beginning of fiscal 2010, the Division’s low-voltage switchgear business is transferred to the Building Technologies Division.

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Drive Technologies was strongly affected by a downturn in the machine building industry in fiscal 2009. At the end of the current fiscal year, delayed effects of the economic downturn also began to reach the long-cycle businesses of the Division. As a result, orders declined 31% from the prior-year level and revenue was down 11%, with the strongest declines in Europe, C.I.S., Africa, Middle East. Lower capacity utilization, a less favorable product mix and net severance charges of €30 million in the fourth quarter combined to reduce profit 35% compared to the strong fiscal 2008. Both periods included margin impacts related to the Division’s purchase of Flender Holding GmbH in fiscal 2005. PPA effects in fiscal 2009 were €36 million and are expected to remain at this level in the next fiscal year, while PPA effects in the prior year were €38 million. Following a strategic review, the electronics assembly systems business, for which Siemens initiated a carve-out during fiscal 2008, was classified as held for disposal and management responsibility was transferred from Drive Technologies to Other Operations during fiscal 2009. The presentation of prior-year financial information has been reclassified accordingly.
 
Building Technologies kept revenue in fiscal 2009 stable compared to the prior year, as the Division nearly offset a decline in Europe, C.I.S., Africa, Middle East with higher revenue in the Americas year-over-year. New orders declined 7% compared to fiscal 2008, due to a general slowdown in the commercial construction markets, particularly in Europe, C.I.S., Africa, Middle East and the Americas. Reduced economies of scale and a less favorable business mix, combined with €26 million in net charges for severance programs in the fourth quarter, reduced profit by 18% year-over-year. As mentioned above, the low-voltage switchgear business has been transferred from the Industry Automation Division to Building Technologies beginning of fiscal 2010.
 
In fiscal 2009, revenue at OSRAM decreased 13% compared to the prior year on lower revenue in all its businesses. On a geographic basis, the strongest declines came from Europe, C.I.S., Africa, Middle East and the Americas. Lower capacity utilization sharply reduced profit in the current period. Profit in both periods included charges related to structural initiatives. While charges in the current period comprised €18 million in net severance charges and €40 million for major impairments and inventory write-downs taken in the fourth quarter, impacts including severance charges and impairments in the prior-year period were offset by a €130 million net gain on the sale of the Division’s Global Tungsten & Powders unit.
 
While order intake in fiscal 2009 at Industry Solutions declined sharply compared to the prior-year, the Division’s order backlog had a stabilizing effect on revenue and profit. The strongest order declines came in Europe, C.I.S., Africa, Middle East and Asia, Australia. Revenue came in 4% lower than in fiscal 2008, including higher revenue in Asia, Australia. Profit in the current period declined 18%, as the Division took net severance charges of €69 million in the fourth quarter. Prior-year profit benefited from a €30 million gain on the sale of the Division’s hydrocarbon service business. Siemens intends to carve out Industry Solutions’ electronic design and manufacturing business in fiscal 2010.
 
Mobility increased fiscal 2009 revenue 10% compared to the prior year, including higher revenue in all regions. Orders were 14% lower than a year earlier, when Mobility took in its largest-ever rolling stock order for more than 300 trains worth €1.4 billion. On a geographic basis, orders declined in Europe, C.I.S., Africa, Middle East, which included the large order just mentioned for the prior year, and the Americas. Demand in Asia, Australia increased sharply year-over-year, including a particularly large train order in China. Mobility delivered fiscal 2009 profit of €390 million compared to a loss of €230 million a year earlier. This change stemmed in part from execution of the Division’s “Mobility in Motion” program. A year earlier this program resulted in costs of €151 million, primarily for severance charges and impairments. Profit in the prior year was also burdened by charges of €209 million related to major projects in the second quarter, provisions related primarily to projects in the rail automation business, and further charges of €32 million for the Combino railcar business. At the beginning of fiscal 2010, Mobility sold its airfield lighting business.


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    Year ended
               
    September 30,       % Change     therein  
    2009       2008       Actual     Adjusted(1)     Currency       Portfolio  
    (in millions of €)                              
 
Sector
                                                     
Profit
    3,315         1,434         131 %                          
Profit margin
    12.9   %     6.4   %                                  
New orders
    30,076         33,428         (10) %     (9) %     (1 ) %     0 %
Total revenue
    25,793         22,577         14 %     14 %     0   %     0 %
External revenue
    25,405         22,191         14 %                          
Therein:
                                                     
Europe, C.I.S.(2), Africa, Middle East
    14,715         12,722         16 %                          
Therein Germany
    1,905         1,890         1 %                          
Americas
    6,552         5,643         16 %                          
Asia, Australia
    4,138         3,826         8 %                          
 
 
(1)  Excluding currency translation and portfolio effects.
 
(2)  Commonwealth of Independent States.
 
The Energy Sector turned in a strong performance in fiscal 2009, with all Divisions delivering strong profit increases compared to the prior year. Sector profit improved to €3.315 billion from €1.434 billion a year earlier, making Energy the top profit contributor among the Sectors. Profit growth year-over-year included a strong profit rebound at Fossil Power Generation. For comparison, the Division’s prior-year results were burdened by €559 million in second-quarter project charges as well as additional project charges totaling more than €300 million taken in the first and fourth quarters of fiscal 2008. Sector profit in the current fiscal year also rose on substantially lower SG&A expenses at Power Transmission, Power Distribution, Oil & Gas and Fossil Power Generation.
 
Energy produced revenue growth of 14% in fiscal 2009 by executing projects in its substantial order backlog. Led by Fossil Power Generation and Renewable Energy, all Energy Divisions contributed revenue increases year-over-year. Due in part to customer postponements of potential new projects against the background of the global macroeconomic and financial crisis, order intake decreased 10% from a high basis of comparison a year earlier. Within fiscal 2009, Energy saw its longer-cycle businesses become increasingly affected by deteriorating macroeconomic conditions. On a book-to-bill ratio of 1.17, the Sector’s order backlog rose to €47.1 billion at the end of fiscal 2009, up from €44.6 billion a year earlier. Out of the current backlog, orders of €20 billion are expected to be converted into revenue during fiscal 2010, orders of €10 billion during 2011, and the remainder in the periods thereafter. On a geographic basis, revenue grew in all three regions, with the strongest increases in Europe, C.I.S., Africa, Middle East and in the Americas. Order intake declined across the three regions, with the strongest contraction in the Americas.
 
                                                       
    New Orders  
    Year ended
               
    September 30,       % Change     therein  
    2009       2008       Actual     Adjusted(1)     Currency       Portfolio  
    (in millions of €)                              
 
Divisions
                                                     
Fossil Power Generation
    12,135         12,993         (7) %     (8) %     1   %     0 %
Renewable Energy
    4,823         4,434         9 %     16 %     (7 ) %     0 %
Oil & Gas
    4,450         5,630         (21) %     (18) %     (2 ) %     (1) %
Power Transmission
    6,324         7,290         (13) %     (12) %     (1 ) %     0 %
Power Distribution
    3,018         3,578         (16) %     (14) %     (2 ) %     0 %
 
 
(1)  Excluding currency translation and portfolio effects.
 


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    Revenue  
    Year ended
               
    September 30,       % Change     therein  
    2009       2008       Actual     Adjusted(1)     Currency       Portfolio  
    (in millions of €)                              
 
Divisions
                                                     
Fossil Power Generation
    9,802         8,171         20 %     18 %     2   %     0 %
Renewable Energy
    2,935         2,092         40 %     39 %     1   %     0 %
Oil & Gas
    4,276         4,038         6 %     10 %     (3 ) %     (1) %
Power Transmission
    6,172         5,497         12 %     12 %     0   %     0 %
Power Distribution
    3,284         3,211         2 %     4 %     (2 ) %     0 %
 
 
(1)  Excluding currency translation and portfolio effects.
 
                                         
    Profit     Profit margin  
    Year ended
          Year ended
 
    September 30,           September 30,  
    2009     2008     % Change     2009     2008  
    (in millions of €)                    
 
Divisions
                                       
Fossil Power Generation
    1,275       (89 )           13.0 %     (1.1 )%
Renewable Energy
    382       242       58 %     13.0 %     11.6 %
Oil & Gas
    499       351       42 %     11.7 %     8.7 %
Power Transmission
    725       565       28 %     11.7 %     10.3 %
Power Distribution
    435       369       18 %     13.2 %     11.5 %
 
Fossil Power Generation led all Siemens Divisions with €1.275 billion in profit for fiscal 2009, combining higher revenue with economies of scale, improved project execution and an improved revenue mix, including a higher contribution from the products business. The loss of €89 million in the prior year included the substantial project charges mentioned above for the Sector, particularly charges of €344 million related to a technologically advanced project in Olkiluoto, Finland. In addition, fiscal 2008 included negative equity investment income of €26 million related to Energy’s equity stake in Areva NP S.A.S., which was also substantially affected by the project in Finland. Since the second quarter of fiscal 2009, this equity stake is accounted for as held for disposal, following the Energy Sector’s announced intention to exit the Areva NP S.A.S. joint venture. Revenue at Fossil Power Generation rose 20% on higher sales in all regions, led by increases in the Europe, C.I.S., Africa, Middle East region and the Americas. Due to adverse macroeconomic and financing conditions, the Division’s orders came in below the prior-year level. The decline was driven by substantially lower demand in Europe, C.I.S., Africa, Middle East, including lower volume from major orders.
 
Profit at Renewable Energy climbed to €382 million from €242 million in fiscal 2008, driven by economies of scale on a 40% increase in revenue. Orders in the Division came in above the prior-year level, as higher order intake in Europe, C.I.S., Africa, Middle East more than offset lower demand in the Americas region, where the Division took in a higher volume from major orders in the prior-year period. Order development in both regions was significantly influenced by large offshore wind-farm projects with long lead times between order intake and revenue recognition. In the first quarter of fiscal 2010, Renewable Energy completed the acquisition of 100% of Solel Solar Systems, a solar thermal power technology company, to strengthen its position in the expanding market of solar thermal power. The acquisition costs (cash and debt free), amount to approximately €280 million in cash consideration.
 
Oil & Gas brought in €499 million in profits in fiscal 2009, up from €351 million a year earlier, including higher contributions from all business units. Revenue increased 6% year-over-year on growth in the Americas and in Europe, C.I.S., Africa, Middle East, as the Division converted orders from its backlog into current business. In contrast, order intake slowed substantially in the current period, as customers delayed new projects.
 
Power Transmission posted profit of €725 million in fiscal 2009, up 28% from the prior year on revenue increases in all three regions. Due to customer postponements of potential new projects, the Division reported a double-digit decline in orders compared to the strong prior year.

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Power Distribution grew profit 18%, to €435 million. Order intake fell 16% on lower year-over-year orders in all four quarters, due primarily to weaker demand among the Division’s industrial customers. Revenue at Power Distribution came in just above the prior-year level, as growth in the first two quarters was nearly offset by lower year-over-year sales in the second half of fiscal 2009.
 
 
                                                       
    Year ended
               
    September 30,       % Change     therein  
    2009       2008       Actual     Adjusted(1)     Currency       Portfolio  
    (in millions of €)                              
 
Sector
                                                     
Profit
    1,450         1,225         18 %                          
Profit margin
    12.2   %     11.0   %                                  
New orders
    11,950         11,779         1 %     (3) %     3   %     1 %
Total revenue
    11,927         11,170         7 %     2 %     4   %     1 %
External revenue
    11,864         11,116         7 %                          
Therein:
                                                     
Europe, C.I.S.(2), Africa, Middle East
    4,724         4,537         4 %                          
Therein Germany
    1,072         980         9 %                          
Americas
    5,153         4,861         6 %                          
Asia, Australia
    1,986         1,718         16 %                          
 
 
(1)  Excluding currency translation and portfolio effects.
 
(2)  Commonwealth of Independent States.
 
The market environment for the Healthcare Sector included the contraction in healthcare equipment spending mentioned earlier (see “Business and operating environment—Economic environment—Market development”) as well as reduced availability of credit for financing equipment purchases and uncertainty created by healthcare reform efforts and budget deficits in developed nations. Against this backdrop, Healthcare increased revenue and orders 7% and 1%, respectively. On an organic basis, particularly excluding strong positive currency translation effects, revenue rose 2% and orders came in 3% lower than a year earlier. On a geographic basis, revenue grew in all three regions, including a 16% rise in Asia, Australia. Orders rose even faster in Asia, Australia, offsetting modest declines in other regions. Healthcare’s book-to-bill ratio was just above 1 for fiscal 2009, and its order backlog at the end of the year stood at €6.3 billion compared to €6.8 billion a year earlier. Of the Sector’s current backlog, orders of €3 billion are expected to be converted into revenue during fiscal 2010, orders of €1 billion during fiscal 2011, and the remainder in the periods thereafter.
 
Healthcare posted Sector profit of €1.450 billion in fiscal 2009, up 18% from the prior-year level. This increase was in part due to progress with integration of acquisitions in the Diagnostics Division. PPA effects and integration costs at Diagnostics fell to €248 million, equivalent to 2.0 percentage points of Sector profit margin in fiscal 2009. A year earlier Diagnostics recorded a total of €344 million in PPA and integration costs, equivalent to 3.1 percentage points of Sector profit margin. The difference year-over-year is due to lower integration costs. Both years under review include negative profit impacts, totaling €169 million in charges at Workflow & Solutions in the current year and €174 million in costs and charges at Workflow & Solutions and Imaging & IT in the prior year.
 


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    New Orders  
    Year ended
             
    September 30,     % Change     therein  
    2009     2008     Actual     Adjusted(1)     Currency     Portfolio  
    (in millions of €)                          
 
Divisions
                                               
Imaging & IT
    7,143       7,243       (1 )%     (5 )%     4%       0%  
Workflow & Solutions
    1,553       1,653       (6 )%     (8 )%     2%       0%  
Diagnostics
    3,479       3,195       9 %     1 %     4%       4%  
 
 
(1)  Excluding currency translation and portfolio effects.
 
                                                 
    Revenue  
    Year ended
             
    September 30,     % Change     therein  
    2009     2008     Actual     Adjusted(1)     Currency     Portfolio  
    (in millions of €)                          
 
Divisions
                                               
Imaging & IT
    7,152       6,811       5 %     1 %     4%       0%  
Workflow & Solutions
    1,515       1,490       2 %     (1 )%     2%       1%  
Diagnostics
    3,490       3,185       10 %     2 %     4%       4%  
 
 
(1)  Excluding currency translation and portfolio effects.
 
                                         
    Profit     Profit margin  
    Year ended
          Year ended
 
    September 30,           September 30,  
    2009     2008     % Change     2009     2008  
    (in millions of €)                    
 
Divisions
                                       
Imaging & IT
    1,161       899       29 %     16.2 %     13.2 %
Workflow & Solutions
    (53 )     66             (3.5 )%     4.4 %
Diagnostics
    338       248       36 %     9.7 %     7.8 %
 
Imaging & IT contributed a profit of €1.161 billion in fiscal 2009, up 29% from the prior-year level on a more favorable product mix that included significant contributions from new products introduced in the current year. Fiscal 2008 profit was held back by €90 million of the negative profit impacts mentioned above for the Sector, consisting primarily of severance charges, impairments and related costs following the review of certain business activities. Revenue and order development matched the general development for Healthcare overall, with revenue rising and orders coming in close to the prior-year level on particular strength in Asia, Australia and positive currency translation effects.
 
Workflow & Solutions posted a loss of €53 million, including the charges of €169 million mentioned above related to significant technical development challenges and delays associated with particle therapy contracts. In fiscal 2008, the Division delivered a profit of €66 million despite €81 million of the negative profit impacts, mainly related to the particle therapy contracts mentioned above for the Sector. Fiscal 2009 revenue was up 2%. Orders came in below the prior-year level.
 
Profit at Diagnostics was €338 million, up 36% from the prior-year level. The increase was driven by higher revenue and the reduction in integration costs mentioned above. PPA effects were €181 million and integration costs were €67 million in fiscal 2009, reducing the Division’s profit margin by 7.1 percentage points. A year earlier, PPA effects were €176 million (including €7 million of inventory step-up charges) and integration costs were €168 million, reducing Diagnostics’ profit margin by 10.8 percentage points. Fiscal 2009 revenue and orders rose 10% and 9%, respectively, from prior-year levels, benefiting strongly from positive currency translation and portfolio effects.

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Equity Investments includes investments accounted for using the equity method or at cost and available-for-sale financial assets not allocated to a Sector or Cross-Sector Business for strategic reasons. As of September 30, 2009, the reportable segment Equity Investments mainly comprised our investments in NSN, BSH, our stake in EN and our investment in KMW.
 
In fiscal 2009, Equity Investments recorded a loss of €1.851 billion compared to a profit of €95 million a year earlier. The major factor in this decline was NSN that has been tested for impairment. The main triggering events were NSN’s loss of market share as well as a decrease in the product business operations resulting in significantly adjusted financial forecasts of future cash flows of NSN. As a result, we took an impairment of €1.634 billion on our investment in NSN at the end of fiscal 2009. Furthermore, NSN took restructuring charges and integration costs of €507 million as well as an additional charge of €432 million to tax expense to provide a valuation allowance on NSN’s deferred tax assets during the current period. These factors led to an equity investment loss related to our stake in NSN of €2.177 billion in fiscal 2009. In the prior-year period, NSN incurred restructuring charges and integration costs of €480 million. The equity investment loss related to our stake in NSN was €119 million in fiscal 2008. In fiscal 2009, EN incurred an operating loss and took restructuring charges. As a result, we incurred a loss of €171 million from our investment in EN. The increasing equity investment loss from our investment in NSN and the loss from our stake in EN were only partly offset by a gain of €327 million from the sale of our stake in FSC in the current period. In fiscal 2009, equity investment income related to our stakes in BSH and KMW was €195 million, down from €242 million a year earlier. We expect profit from Equity Investments to remain volatile including due to effects stemming from NSN’s announced measures to reduce operating expenses and production overheads in the coming two years.
 
Cross-Sector Businesses
 
 
                                                       
    Year ended
               
    September 30,       % Change     therein  
    2009       2008       Actual     Adjusted(1)     Currency       Portfolio  
    (in millions of €)                              
 
Profit
    90         144         (38) %                          
Profit margin
    1.9   %     2.7   %                                  
New orders
    4,501         5,272         (15) %     (10) %     (2 ) %     (3) %
Total revenue
    4,686         5,325         (12) %     (8) %     (1 ) %     (3) %
External revenue
    3,580         3,845         (7) %                          
Therein:
                                                     
Europe, C.I.S.(2), Africa, Middle East
    3,129         3,326         (6) %                          
Therein Germany
    1,307         1,451         (10) %                          
Americas
    399         430         (7) %                          
Asia, Australia
    52         89         (42) %                          
 
 
(1)  Excluding currency translation and portfolio effects.
 
(2)  Commonwealth of Independent States.
 
Orders and revenue for Siemens IT Solutions and Services declined by 15% and 12% year-over-year, respectively, due to increasingly challenging external markets in the course of the fiscal year and streamlined internal business with Siemens. Profit for fiscal 2009 was €90 million compared to €144 million a year earlier. Profit development in the current period was impacted by the factors mentioned for volume, as well as measures to reduce IT costs for Siemens and €22 million in net severance charges during the fourth quarter. Both periods included charges related to large projects in the UK. Those charges were significantly higher in the prior-year period when they resulted in a net negative effect on profit of €76 million.


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    Year ended
   
    September 30,    
    2009   2008   % Change
    (in millions of €)    
 
Income before income taxes
    304       286       6 %
Total assets
    11,704       11,328       3 %
 
In fiscal 2009, profit (defined as income before income taxes) at SFS increased to €304 million compared to €286 million in the prior year. The current period included higher interest results as well as higher results from internal services and the equity business including the reversal of an impairment on an investment of €51 million, posted in a previous year. These higher results were partly offset by an increase in loss reserves in the commercial finance business. Total assets rose slightly, to €11.704 billion.
 
The following table provides further information on the capital structure of SFS as of September 30, 2009 and 2008:
 
                 
    September 30,  
    2009     2008  
    (in millions of €)  
 
Allocated equity
    1,243       1,113  
Total debt
    9,521       9,359  
Therein intragroup financing
    9,455       9,233  
Therein debt from external sources
    66       126  
Debt to equity ratio
    7.66       8.41  
Cash and cash equivalents
    136       28  
 
Both Moody’s and Standard & Poor’s view SFS as a captive finance company. These ratings agencies generally recognize and accept higher levels of debt attributable to captive finance subsidiaries in determining long-term and short-term credit ratings.
 
The allocated equity for SFS is primarily determined and influenced by the size and quality of its portfolio of commercial finance assets (primarily leases and loans) and equity investments. This allocation is designed to cover the risks of the underlying business and is oriented at common credit risk management standards in banking. The actual risk profile of the SFS portfolio is evaluated and controlled monthly and is reflected in the quarterly (commercial finance) and annual (equity investments) adjustments of allocated equity.
 
 
Reconciliation to Consolidated Financial Statements includes Other Operations, SRE and various categories of items which are not allocated to the Sectors and Cross-Sector Businesses because Management has determined that such items are not indicative of the Sectors’ and Cross-Sector Businesses’ respective performance. Beginning with the first quarter of fiscal 2010, segment information will include a new line item, Centrally managed portfolio activities, mainly comprising centrally managed activities intended for divestment or closure as well as activities remaining from previously divested businesses. The electronics assembly systems business will be included in Centrally managed portfolio activities.
 
 
Other Operations consist primarily of operating business activities not allocated to a Sector or Cross-Sector Business which are to be integrated into a Siemens Sector or Cross-Sector Business, divested, moved to a joint venture, or closed. Siemens completed these streamlining actions by the end of fiscal 2009 and therefore will discontinue reporting Other Operations in future periods.
 
For fiscal 2009, the result of Other Operations was a negative €372 million, compared to a negative €453 million a year earlier. Costs related to the streamlining of Other Operations in the prior-year period included


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a total of €271 million related to the divestment of Siemens Home and Office Communication Devices (SHC), the divestment of a 50% stake in a building and infrastructure business, including a goodwill impairment of €70 million, and the closure of a regional payphone unit in Europe, primarily for severance. Within this total, the divestment of SHC resulted in costs of €124 million primarily associated with impairments of assets and a loss on the sale. In addition, the SHC transaction involved costs of €21 million in fiscal 2008 related mainly to carve-out activities. The electronics assembly systems business recorded a loss of €201 million in fiscal 2009, consisting of operating losses as well as charges related to severance expenses and impairments. A year earlier, this business incurred losses of €86 million, including severance charges. In addition, the current period included a loss related to the divestment of an industrial manufacturing unit in Austria, as well as higher net expenses related to other businesses divested in the current and prior periods.
 
Sales for Other Operations in fiscal 2009 were €836 million, down from €2.902 billion a year earlier, due primarily to the streamlining actions mentioned above, including the divestment of SHC, and with the prior-year period also including higher revenue related to the electronics assembly systems business.
 
 
Income before income taxes at SRE was €341 million in fiscal 2009, compared to €356 million in the prior year. Gains from sales of real estate were slightly higher in the current period, including a gain of €224 million from the sale of residential real estate holdings. SRE intends to continue real estate disposals in coming quarters, depending on market conditions.
 
In the second half of fiscal 2009, Siemens initiated a multi-year program to improve the efficiency of its real estate management by bundling the entire portfolio within SRE by 2011. The program is expected to generate even greater efficiency increases than originally anticipated, including approximately €250 million in cost savings annually by 2011 and €400 million in annual savings from 2014 onward. During implementation, the real estate bundling program will entail costs associated with reducing vacancy and consolidating locations. In fiscal 2009 these costs totaled €44 million. Assets with a book value of €614 million were transferred to SRE during the year.
 
 
In fiscal 2009, Corporate items and pensions totaled a negative €1.714 billion compared to a negative €3.860 billion a year earlier. The main factor in the change was Corporate items, which declined from a negative €3.966 billion to a negative €1.342 billion. Corporate items in the prior-year period included €1.081 billion in charges related to the global SG&A program, a provision of approximately €1 billion related to legal proceedings in the U.S. and Germany that were resolved during fiscal 2009 and a one-time endowment of €390 million to the Siemens Stiftung (foundation). Another major factor contributing to this change was lower expenses for outside advisors engaged in connection with investigations into alleged violations of anti-corruption laws and related matters as well as remediation activities, which declined to €95 million from €430 million a year earlier. Fiscal 2008 also included expenses of €128 million related to a regional sales organization in Germany, including an impairment, as well as a €32 million donation to the Siemens Foundation in the U.S. These factors were partly offset by the release of an accrual of €38 million following reversal of a previous judgment related to Italian electrical utility Enel. For comparison, Corporate items in fiscal 2009 included net charges of €235 million related to the global SG&A program and other personnel-related restructuring measures. The current year also included higher interest-related net expenses associated with a major asset retirement obligation, including a negative effect from the measurement of this obligation, partly offset by a positive effect from related hedging activities not qualifying for hedge accounting. In addition, fiscal 2009 included a positive effect related to shifting an employment bonus program from cash-based to share-based payment, as well as a charge of €53 million related to a global settlement agreement with the World Bank Group.
 
Centrally carried pension expense swung to a negative €372 million in fiscal 2009 from a positive €106 million in the prior-year period. This change was due primarily to higher benefit costs related to our principal pension plans. In addition, centrally carried pension expense in the current period also includes increased insurance costs of €106 million related to our mandatory membership in the Pensionssicherungsverein (PSV), the German pension insurance association.


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In fiscal 2009, income before income taxes from Eliminations, Corporate Treasury and other reconciling items was a negative €373 million compared to a negative €300 million in the prior year period. The current period included higher negative results from interest rate hedging activities not qualifying for hedge accounting. These negative results were partly compensated by reduced counter-party risks. In the fourth quarter a year earlier charges of €50 million were posted related to counter-party risks, principally involving banks affected adversely by developments in the international financial markets.
 
Fiscal 2008 compared to fiscal 2007
 
 
The following discussion presents selected information for Siemens for the fiscal year ended September 30, 2008:
 
Order situation and revenue
 
Orders were €93.495 billion, up 11% from the prior-year period, while revenue rose 7% year-over-year, to €77.327 billion. This resulted in a book-to-bill ratio of 1.21 for fiscal 2008. On an organic basis, excluding the net effect of currency translation and portfolio transactions, orders increased 13% year-over-year and revenue rose 9%. Within the full-year growth trend, we saw signs of slowing demand in the latter half of the year as commercial credit continued to tighten on a global basis and economic growth slowed or stopped in numerous regional and industrial markets important to Siemens. In particular, some Divisions reported lower orders in the second half of the fiscal year or in the fourth quarter compared to the same period a year earlier.
 
                                                 
    New Orders (location of customer)  
          % Change
       
    Year ended September 30,     vs. previous year     therein  
    2008     2007     Actual     Adjusted(1)     Currency     Portfolio  
    (in millions of €)                          
 
Europe, C.I.S.(2), Africa, Middle East
    55,229       48,078       15%       16%       (3 )%     2%  
therein Germany
    14,434       13,562       6%       5%       0 %     1%  
Americas
    24,010       22,831       5%       11%       (11 )%     5%  
therein U.S. 
    17,437       16,662       5%       14%       (15 )%     6%  
Asia, Australia
    14,256       13,007       10%       11%       (4 )%     3%  
therein China
    5,446       4,871       12%       13%       (3 )%     2%  
therein India
    2,268       2,015       13%       17%       (8 )%     4%  
Siemens
    93,495       83,916       11%       13%       (5 )%     3%  
 
 
(1)  Excluding currency translation and portfolio effects.
 
(2)  Commonwealth of Independent States.
 
Order growth related to external customers in fiscal 2008 included double-digit increases in all three Sectors. The Industry Sector—Siemens’ largest Sector—increased orders by 10% compared to fiscal 2007, with the strongest growth coming at Mobility and Industry Automation. Order growth at Mobility included Siemens’ largest-ever rolling stock order, a €1.4 billion contract for more than 300 trains from the Belgian state railway system. Two of the larger Divisions of the Industry Sector, Industry Automation and Drive Technologies, saw their book-to-bill ratios slide to 0.98 and 1.04, respectively, in the second half of the fiscal year, compared to 1.08 and 1.22, respectively, in the first half-year. In the Energy Sector, orders rose 17% on growth in all Divisions. Renewable Energy contributed both the largest absolute increase and greatest percentage increase compared to the prior year, driven by large wind power orders in the U.S. and the U.K. This Division also reported an expected drop in fourth-quarter orders compared to the same quarter a year earlier. The Healthcare Sector recorded order growth of 15%, which benefited from substantial new volume at Diagnostics due to its first-quarter consolidation of Dade Behring.


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The Europe, C.I.S., Africa, Middle East region recorded order growth of 15%, including double-digit increases in all three Sectors and a higher level of large orders compared to the prior year. These include the major orders noted above as well as a large contract win for Energy in Germany. This latter order helped lift orders in Germany 6% for the year. In the Americas, reported orders of €24.010 billion were 5% higher than in the prior year, highlighted by the Renewable Energy order mentioned above. New volume from acquisitions, primarily in the U.S., only partly offset strong negative currency translation effects in fiscal 2008. Excluding these effects, organic order growth in the Americas was 11% year-over-year. Healthcare saw solid order growth in the region due mainly to the Dade Behring acquisition, while orders at Industry declined compared to a year earlier. In contrast, Industry led growth in Asia, Australia, where orders climbed 10% year-over-year. Healthcare also achieved double-digit growth in the region as well, again benefiting from Dade Behring. Energy posted a higher level of large orders in the region in fiscal 2007, resulting in a decline in fiscal 2008.
 
                                                 
    Revenue (location of customer)  
                % Change              
    Year ended September 30,     vs. previous year     therein  
    2008     2007     Actual     Adjusted(1)     Currency     Portfolio  
    (in millions of €)                          
 
Europe, C.I.S.(2), Africa, Middle East
    44,895       42,425       6%       6%       (2 )%     2%  
therein Germany
    12,797       12,594       2%       1%       0 %     1%  
Americas
    20,107       19,321       4%       9%       (11 )%     6%  
therein U.S. 
    14,847       14,832       0%       7%       (14 )%     7%  
Asia, Australia
    12,325       10,702       15%       16%       (5 )%     4%  
therein China
    4,878       4,146       18%       18%       (2 )%     2%  
therein India
    1,885       1,676       12%       13%       (9 )%     8%  
Siemens
    77,327       72,448       7%       9%       (5 )%     3%  
 
 
(1)  Excluding currency translation and portfolio effects.
 
(2)  Commonwealth of Independent States.
 
Revenue related to external customers for Siemens in fiscal 2008 rose 7% year-over-year, on double-digit growth in Healthcare and Energy. Industry delivered 6% revenue growth, including double-digit increases at Industry Automation and Drive Technologies which more than offset declines at Mobility, Building Technologies and OSRAM. The Energy Sector recorded 12% growth in revenue, with increases in all Divisions including a 53% surge at Renewable Energy. Revenue was up 13% in Healthcare, which benefited substantially from Dade Behring.
 
In the Europe, C.I.S., Africa, Middle East region, revenue grew 6% year-over-year, on double-digit increases in Healthcare and Energy and 5% growth in Industry. Within the region, revenue in Germany rose 2%, including growth in all three Sectors. The Americas region posted a 4% increase on 16% growth in Energy and 6% growth in Healthcare. Revenue in Industry declined 1% compared to the prior-year level. Negative currency translation effects took 14 percentage points from reported growth in the U.S. On an organic basis, revenues rose 7% in the U.S. and 9% for the Americas overall. Asia, Australia saw 15% expansion in revenue, including double-digit growth in Industry and Healthcare and 8% expansion in Energy. Revenue in China and India climbed 18% and 12%, respectively, compared to the prior year, primarily on high double-digit growth in Industry.
 
 
                         
    Year ended
       
    September 30,        
    2008     2007     % Change  
    (in millions of €)        
 
Gross profit on revenue
    21,043       20,876       1 %
as percentage of revenue
    27.2 %     28.8 %        


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Gross profit for fiscal 2008 increased 1% year-over-year, well under the rate of revenue growth. The slower growth in gross profit was due to a number of factors, chief among them a total of more than €1 billion in project charges at Fossil Power Generation and Mobility. Gross profit growth was also held back by expenses in connection with the Mobility in Motion restructuring program, primarily including severance charges and asset impairments. In combination, the factors just mentioned contributed to a decline in gross profit margin, which came in at 27.2% for fiscal 2008 compared to 28.8% a year earlier.