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Trust unites us
Annual Report 2012

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Company Report 2012

What sets our integrated technology company apart
Introduction – page 1

Proximity

How Bangalore’s new airport is driving progress across an entire region
Global presence – page 8

Ideas

How our Biograph mMR scanner is enhancing patient care
Technology and innovation – page 20

Strength

How efficient technologies are shaping the future of energy
Portfolio management – page 34

Networking

How intelligent IT solutions are creating unimagined value
Cross-business activities – page 54

Diversity

How our employees’ wealth of experience is inspiring us
Employees and management culture – page 66

How our strategy is pointing the way to the future
One Siemens – page 78

COVER PHOTO – James D. Palasek and Amber Sherman, two of the 370,000 Siemens employees working together in our global network of trust. To learn more, please see: SPECIAL REPORT: DIVERSIT Y, PAGES 66-75

When a new international airport is being planned, when a doctor recommends a treatment to a patient, when political leaders and society want to ensure reliable energy supplies for the future, when a company wants to offer tailor-made service solutions, when the development of innovative products demands the creativity, experience and dedication of a wide range of experts, that’s when tough decisions have to be made – far-reaching decisions based on a strong sense of responsibility. The success of our integrated technology company rests not only on our technological excellence, power of innovation and financial strength but also on our commitment to responsibility – a commitment that’s made us a strong partner of trust to people all around the world for 165 years. Trust unites us – Building strong partnerships for 165 years

Company Report 2012

Trust unites us – Building strong partnerships for 165 years
Ever sincesets our Company was founded, we’ve stood for What our integrated technotechnology company apart quality, reliability and international logical excellence, Introduction – page 1 focus. Coupling innovative concepts and visionary ideas with a willingness to take calculable entrepreneurial risks in order to attain long-term success, our founder, Werner von Proximity How Bangalore’s new airport is Siemens, put us on track for achievement – as the following driving progress across an entire region milestones from our history attest. Global presence – page 8 www.SIEmEnS.COm/HISTORY Ideas

How our Biograph mMR scanner is enhancing patient care
Technology and innovation – page 20

Strength 1872 How efficient technologies are shaping the future of
Portfolio management – page 34

Siemens establishes a pension fund for employees energy their families. and

Networking

How intelligent IT solutions are creating unimagined value
Cross-business activities – page 54

1870 After only two years of construction,
Siemens begins operation of the Indo-European telegraph line.

How our employees’ Siemens discovers 1866 Werner von wealth the inspiring principle. 1848 Siemens & Halske wins the contractof experience isdynamo-electric us

Diversity

to build a telegraph line from Berlin Employees and management culture – page 66 to Frankfurt am Main – the longest communications link on the European continent.

1847 Werner von Siemens and

Johann Georg Halske establish Telegraphen-Bauanstalt von Siemens & Halske in Berlin.

1850 Siemens’ first sales office

outside Germany is opened in London.

How our strategy is pointing the way to the future
One Siemens – page 78

1855 Siemens’ first subsidiary outside

Germany is established in St. Petersburg by Carl von Siemens.

COVER PHOTO – James D. Palasek and Amber Sherman, 2

two of the 370,000 Siemens employees working together in our global network of trust. To learn more, please see: SPECIAL REPORT: DIVERSIT Y, PAGES 66-75

1972 Siemens supplies important

electrotechnical equipment for the Olympic Games in Munich.

1925 The Irish Free State commissions
Siemens to electrify the entire country.

1938 Siemens scientists formulate the

barrier layer theory, the springboard for modern semiconductor physics.

2008 Siemens introduces its

Environmental Portfolio.

1932 Siemens-Reiniger-Werke is established to

bring all of Siemens’ businesses in the area of medical engineering under one roof.

1966 In response to new technological developments

and structural changes on the world market, Siemens combines its competencies and activities in a new organization: Siemens AG.

1879 The world’s first electric railway with an external power source is showcased in Berlin.

1951 Construction is begun on a 300-mega-

watt steam power plant in San Nicolás, Argentina – marking Siemens’ return to the world markets following World War II.

2001 The Siemens share is

listed on the New York Stock Exchange.

1903 Siemens-Schuckertwerke is

founded to conduct Siemens’ electrical engineering business.

1959 Siemens launches the SIMATIC 1897 To broaden its financial base, control system, enabling it to capture a leading position in automation technology. Siemens & Halske is reorganized as a publicly listed company.

2011 In Irsching, Germany,

Siemens sets a world record for combined cycle power plant efficiency.

1983 In Germany, Siemens installs a

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MAGNETOM scanner, the world’s first magnetic resonance imaging system.

Company Report 2012

What sets us apart – What we stand for
PeopleWhat over the world place their trust in Siemens because, all sets our integrated technology company apart as an integrated technology company, we’re poised to seize Introduction – page 1 competitive advantages even in a challenging business environment. Siemens stands for:

Proximity

How Bangalore’s new airport is driving progress across an entire region
Global presence – page 8

Ideas

How our Biograph mMR scanner is enhancing patient care
Technology and innovation – page 20

Proximity

With activities in some 190 countries, we’re close to our customers worldwide. The construction of Bengaluru International Airport is a prime example. Siemens employees are on site, providing the airport’s operators with products and solutions from a single source. Our global presence – coupled with development, procurement and production activities at customer locations all over the world – makes How efficient technologies are us a strong local partner and is strengthening our position on tomorshaping the future of energy row’s growth markets.

Strength

Portfolio management – page 34

PAGE 8

Networking

How intelligent IT solutions are creating unimagined value
Cross-business activities – page 54

Diversity

How our employees’ wealth of experience is inspiring us
Employees and management culture – page 66
The integrated technology company

Ideas
How our strategy is pointing Our research activities also span the globe. To create the the way to the and innovations of tomorrow, the experts at technologies future
One Siemens – pagetechnology company cooperate across organour integrated 78

izational as well as regional boundaries, working closely with customers, universities, research facilities and industry partners worldwide. The Biograph mMR scanner – developed in collaboration with Tübingen University Hospital in Germany – is just one example of how our pioneering ideas are benefiting people everywhere.

COVER PHOTO – James D. Palasek and Amber Sherman, PAGE 20 4

two of the 370,000 Siemens employees working together in our global network of trust. To learn more, please see: SPECIAL REPORT: DIVERSIT Y, PAGES 66-75

Strength
As a company with a solid financial basis and an outstanding competitive position, we practice intensive portfolio management, focusing our portfolio and investments on attractive markets with high growth potential. The successful test of our new six-megawatt wind turbines in Østerild, Denmark and our strong partnership with the German utility EnBW Energie Baden-Württemberg AG show how this strategy is paying off: thanks to timely investments in offshore wind turbines and combined cycle power plants, we’re already profiting from the transition to a new energy system. Both technologies are part of our groundbreaking Environmental Portfolio.
PAGE 34

Networking
In all areas of Company-wide relevance, we foster continuous knowledge exchange across our entire organization. Our service business is a good example of how our cross-business activities are creating value. The IT-supported services we’re providing for machine tool manufacturer Schwäbische Werkzeugmaschinen, for instance, not only improve processes; they also strengthen customer loyalty. Other crossbusiness activities bundle our expertise in procurement and foster the development of our employees.
PAGE 54

Diversity
We offer our highly qualified, international workforce a wide range of opportunities for further education and professional development. Our Company-wide training and continuing education programs – coupled with measures to make our teams more diverse – are strengthening our employees and our management culture and enabling us to rigorously leverage the power of Siemens across our entire organization. A specialized software platform allows us to effectively and successfully coordinate diverse teams across continents and time zones. We also conduct entry-level programs for university graduates and run a Company-wide idea management program that enables us to benefit from our employees’ suggestions.
PAGE 66
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Company Report 2012

What sets our integrated technology company apart
Introduction – page 1

Proximity

How Bangalore’s new airport is driving progress across an entire region
Global presence – page 8

Ideas We invite you to take a look at the five special
How our Biograph mMR scanner is enhancing patient care
Technology and innovation – page 20

reports that follow. In them, our partners, customers and employees talk about how they view their day-to-day cooperation with us and how this cooperation is deepening their Strength trust in Siemens.

How efficient technologies are shaping the future of energy

Portfolio management – page 34 The reports provide a look behind the scenes at how we’re leveraging the potential of our integrated technology company and turning it Networking into reality every day. How intelligent IT solutions

are creating unimagined value
Cross-business activities – page 54

Proximity, page 8

Diversity Ideas, page 20
The integrated technology company

How our employees’ wealth Strength, page 34 of experience is inspiring us

Networking, page 54 Employees and management culture – page 66 Diversity, page 66

How our strategy is pointing the way to the future
One Siemens – page 78

COVER PHOTO – James D. Palasek and Amber Sherman, 6

two of the 370,000 Siemens employees working together in our global network of trust. To learn more, please see: SPECIAL REPORT: DIVERSIT Y, PAGES 66-75

“Progress requires a high-performance infrastructure.”
Home to nearly 8.5 million people, Bangalore is India’s third-largest metropolitan area. Called the Silicon Valley of India due to the many IT, aerospace and biotech companies located in and around it, the city owes its success to an advanced infrastructure that’s also driving progress across the entire state of Karnataka, which has a population of more than 60 million. Bengaluru International Airport, which was built with the help of an innovative public-private partnership initiated and supported by Siemens, is part of this impressive infrastructure development. Close, trust-based collaboration ensured the huge project’s success. As Managing Director of the international airports in Bangalore and Mumbai, G.V. Sanjay Reddy is ideally positioned to understand the subcontinent’s infrastructure requirements. In the report that follows, he talks about his experiences.

Trust through proximity

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Proximity ideas, page 20 The integrated technology company Strength, page 34 Networking, page 54 Diversity, page 66

The challenge for Bangalore

Population growth of roughly 50 % between 2001 and 2011
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Above – Bangalore’s growth continues unabated. To meet the needs of its booming population – which already totals about 8.5 million – the indian metropolis needs a high-performance infrastructure.

Aerospace industry

India’s third-largest city
The challenge for Bangalore

High levels of air pollution

8.5 million inhabitants in 2011
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Overburdened transportation infrastructure

“Our vision: Bangalore – The Gateway to South India” G.V. Sanjay Reddy has a vision: to make Bangalore – or, as the local people call it, Bengaluru – the Gateway to South india. And he and his company, the indian conglomerate GVK, are doing everything in their power to make that vision a reality. in 2011, GVK acquired a majority stake in Bangalore international Airport Limited (BiAL), the company that owns and operates Bengaluru international Airport. For Reddy, Vice Chairman of GVK and managing Director of the airport, this transaction was much more than just a business venture. “Our plans are very ambitious and far-reaching,” he says. “in building and operating the airport, we have the interests and expectations of the city and the entire region before our eyes.” The potential is endless. india is one of the world’s fastest-growing countries. Since 2004, its economy has expanded at an annual rate of over 8%. And the Bangalore area has been one of the big winners. immigrants have poured in from other parts of india and from all around the world. many of the newcomers, who now account for more than half of the city ’s population, are highly qualified iT experts employed at the national and international computer and high-tech companies that have made Bangalore what it is today: a center of the country’s software industry and the Silicon Valley of india. Between 2001 and 2011, the population of the metropolitan area grew almost 50%. Home to some 8.5 million people, Bangalore is now india’s third-largest city after mumbai and Delhi and one of the country’s key business and commercial centers. To find sustainable solutions to the challenges facing the booming conurbation, the local infrastructure will have to be substantially expanded. G.V. Sanjay Reddy ’s predecessors had to start virtually from scratch. At the turn of the millennium, political leaders in Karnataka realized that economic growth required a highly efficient infrastructure. However, the public funds available for its expansion were not sufficient. And the government needed a strong partner. Having already demonstrated in projects worldwide how innovative transportation solutions, efficient power supply and advanced healthcare facilities can create an environment in which economic growth benefits all of a region’s inhabitants, Siemens filled the bill.

Siemens Corporate Technology established its first research center in Bangalore in 2004. Today, experts at the center are conducting research in areas like software technology and decentralized energy systems.

IT location

India’s Silicon Valley

Right – As Vice Chairman of the indian conglomerate GVK, G.V. Sanjay Reddy is managing Director of the international airports in mumbai and Bangalore.

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“Public-private partnerships – The formula for India’s success” Bengaluru International Airport is a prime example of how Siemens provides financing as well as technological solutions for future-oriented infrastructure developments. The project was launched in the early 1990s, when a publicprivate partnership was first proposed. G.V. Sanjay Reddy is convinced that cooperative efforts of this kind – partnerships in which governments and private companies work hand-in-hand to implement projects that benefit entire communities – are “the formula for India’s success.” Why? There are two reasons, Reddy explains. The first is financing: “The Indian government doesn’t have the ability to fund the huge infrastructure deficit that we have in India,” he says. “Over the next five years, the government expects that India will need around $1 trillion worth of infrastructure investment. And the public sector does not have the capability to invest that amount.” Therefore, the Indian government is relying increasingly on private investment. And the second reason why publicprivate partnerships are so important is that they offer major advantages for private companies: “The private sector has the ability,” says Reddy, “to benchmark to the global best practices and find the best solution.” In the case of Bengaluru International Airport, for example, that solution was Siemens. Siemens paved the way for the public project’s private financing and also subsequently invested in BIAL, with Siemens Project Ventures (SPV), a business unit of Financial Services (SFS), acquiring a 40% stake in the new airport company. Other investors included Larson & Toubro Ltd., India’s largest engineering and construction company, and Unique Zurich Airport, a Swiss airport operator, each of whom acquired a 17% stake. To ensure that the state would also have a say in the running of this strategically vital infrastructure project, the remaining 26% was split between the government of Karnataka and India’s federal government. “And this still applies today,” says G.V. Sanjay Reddy, “because under Indian law, its 26% stake gives the government a minority veto.” BIAL has primary entrepreneurial responsibility for the entire airport. To enable the company to recoup its investment, the Indian government has granted it long-term rights to collect airline and passenger fees.

Siemens has been active in India since 1867. Today, the Company has some 17,700 employees in the country.

Bengaluru International Airport
Public-private partnership

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Left/Right – its international airport is helping make Bangalore the Gateway to South india. All key airport data is collected in the airport’s control tower.

About 12 million passengers in fiscal 2010 / 2011
Sharply increasing passenger numbers

India’s most advanced

major airport
Innovative infrastructure solutions

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Above – Countless planes take off from Bengaluru international Airport every day, linking South india with cities throughout the world.

July 2004
Contract signed by the Indian government and the airport operator

May 2008

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July 2005
Construction begun

Official opening

New runway ready for takeoff in record time After years of preparation, work on Bengaluru international Airport proceeded very quickly. Construction began 35 kilometers north of the city center in July 2005. Only 33 months later, in may 2008, the first commercial flight took off from the new runway. Project implementation was smooth and rapid because Asia’s most advanced airport had selected a complete, customized technology solution from Siemens. For the project, Siemens fully leveraged its unique strengths as an integrated technology company. As in other major projects, we demonstrated locally the entire scope of our international expertise. For example, all sub-solutions were internally coordinated in advance. in line with the Siemens One approach, a key account management team advised the project company every step of the way. We tackled the challenge head-on, delivering electrical systems on a turnkey basis, supplying energy for the airport buildings, installing customized iT solutions and providing suitable mobility solutions – all in record time. The service package covered everything from planning and delivery to installation and commissioning. And, as G.V. Sanjay Reddy recalls, our involvement didn’t end when the airport opened: “Siemens was very active in implementing the project from the beginning. The Company is solutions-oriented and views its tasks from a 360-degree perspective. That makes Siemens a strong, reliable and trustworthy partner.”

Our Company-wide Siemens One approach enables us to offer complete, customized solutions – systematically and across business areas – for hotels, hospitals and airports, for instance. The idea behind Siemens One is simple: at an integrated technology company, the whole is greater than the sum of its parts.

G.V. Sanjay Reddy, Managing Director of Bangalore International Airport Limited

“In Siemens, we’ve found a strong, reliable and trustworthy partner. The company’s technology leadership – coupled with its strong focus on sustainability – has made its input into the project invaluable.”
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Increasing passenger numbers make expansion necessary In 2008, when the first flights took off from the new Bengaluru International Airport, Bangalore had about seven million inhabitants. Today, it has a population of nearly 8.5 million. And as the city has grown, so has its airport. In BIAL’s fiscal year 2010/2011, around twelve million travelers passed through the terminal – an increase of almost 12% over the year before. The original plans at the end of the 1990s were based on a figure of only 3.7 million passengers a year. An expansion is necessary, and we’re involved in this project too. The single-source infrastructure solutions for which we’re responsible include the provision of security and electrical systems – from design to commissioning. As planned, we’re scaling back our own financial commitment in view of the airport’s successful business development. In fiscal 2012, we announced the sale of a 14% stake in BIAL to G.V. Sanjay Reddy’s GVK Power & Infrastructure Limited. However, we continue to hold a substantial 26% stake in the airport operator. G.V. Sanjay Reddy is looking to the future. Throughout the continued expansion of Bengaluru International Airport, he intends to keep the focus on sustainability. “We as a company – and Siemens as well – have put a lot of emphasis on sustainability,” he notes. “For us, receiving the prestigious Golden Peacock Environment Award in 2012 is both a distinction and an incentive. It honors our joint activities in the past and sets a new benchmark for the future. We want to continue our efforts to maintain an environmental balance and minimize adverse environmental impacts. And it’s here that Siemens is making a very valuable contribution.” www.siemens.com/ar/proximity www.siemens.com/ar/proximity-movie

aBove – Thanks to innovative Siemens technologies, passengers can check in very quickly at Bengaluru International Airport.

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Single-Source infraStructure SolutionS from SiemenS
Key account management Financing solutions Power supply Building technologies IT systems Security systems

Overall project management

Power distribution systems

Fire detection and alarm systems Services
Siemens infrastructure solutions

Our intelligent infrastructure solutions are proving their value worldwide. The construction of Bengaluru International Airport is just one of many projects that have enabled us to impressively demonstrate our capabilities as an integrated technology company. In particular, our cross-Sector Key Account Management Program – as is usual in large-scale projects of this type – provides support for managers on site, from the initial planning phase to servicing and maintenance. Tapping the full extent of our knowhow, our Key Account Managers combine solutions from a wide range of Siemens Sectors and Divisions to create integrated, end-to-end solutions tailored to specific requirements – thus saving customers valuable time and ensuring outstanding customer support around the globe. We’ve bundled our extensive infrastructure portfolio in our Infrastructure & Cities Sector, which supplies integrated products, solutions and services from a single source – from mobility and logistics solutions to intelligent power distribution systems to highly efficient building technologies. Financial Services (SFS) is an international provider of financing solutions. With its financial and industry knowhow, SFS helps make infrastructure projects like Bengaluru International Airport a reality.

Not only do we have the necessary technologies in our portfolio; we also have decades of experience acquired in bringing hundreds of major projects worldwide to successful completion.
At the heart of our solutions for Bengaluru International Airport are our IT solutions, which network all the applications of the airport’s IT landscape and link independent IT solutions from different suppliers to create a structured, flexible whole. All participants profit from a simplified data exchange with optimized, accelerated processes. Bengaluru International’s surveillance and alarm management systems are equipped with a Siemens danger management system, which bundles all the information provided by security and fire protection subsystems in a central control room. These subsystems include an access control system with 105 readers, an audio and voice evacuation system with 650 loudspeakers, a fire detection system with 1,800 smoke, heat and flame detectors, an intrusion protection system with 100 detectors and a video surveillance system with 60 cameras.

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Active worldwide – At home around the globe
To be a strong and reliable local partner to our customers worldwide – this is our aspiration. Siemens employees are working around the clock, in all the world’s time zones and on every continent to provide trailblazing products and solutions tailored to individual customer requirements. This dedication has been our formula for success for 165 years.

As a local supplier with a global presence, we’re a trusted partner everywhere we do business. Our ten largest Regional Companies alone employ people from some 140 different countries – experts working for the benefit of our partners, customers and shareholders worldwide. Local commitment creates trust and lays the basis for longterm customer relationships. That’s why we’ve maintained local development, procurement and manufacturing activities in many countries for decades. In addition to our more than 290 production facilities worldwide, we have office buildings, warehouses, R&D centers and sales offices in virtually every country in the world. Over the years, we’ve captured outstanding competitive positions in the industrialized countries. Now, through a wide range of measures, we want to further strengthen these positions and expand our activities in the booming markets of the emerging countries. Long-term customer relationships have been the hallmark of our business for 165 years. To support major customers, we’ve set up a Company-wide Key Account Management Program that enables us to tailor our products, solutions and services to local customer requirements and regional structures while ensuring that our Key Account Managers continuously expand and reinforce our customer relationships on a long-term basis. These managers, whose performance is measured in terms of

customer-specific growth, report to our cross-Company Market Development Boards and Vertical Market Management teams, which are focused, in turn, on the requirements of individual vertical markets. Staffed by experts from many different business units, these organizations leverage our entire portfolio to provide a comprehensive range of industry-specific, singlesource offerings for customers in the automobile, IT and power generation industries, for instance.

With 370,000 employees around the globe, we provide targeted and tailored solutions to customers worldwide on a local basis – giving us a virtually unparalleled competitive advantage.
Worldwide responsibility for revenue and profit generation has been assigned to our individual operating units. This decentralization of business responsibility benefits customers of all sizes – particularly the small and medium-sized businesses and organizations that comprise the largest part of our customer base – by enabling us to provide locally based support everywhere in the world. Our extensive international sales team, which is managed by our Regional Clusters and Regional Companies, ensures the implementation of business-specific sales strategies. For large-scale projects around the globe, direct customer support is provided via our headquarters units.

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€ 11.072 billion in revenue (14% of total worldwide) 119,000 employees (32% of total worldwide)
3

2

€ 39.909 billion in revenue (51% of total worldwide) 222,000 employees (60% of total worldwide) 90 major R&D facilities (48% of total worldwide)
2 3 4

4

44 major R&D facilities (23% of total worldwide)

Europe, C.I.S.,1 Africa, Middle East therein: Germany

Americas

€ 22.864 billion in revenue (29% of total worldwide) 84,000 employees (23% of total worldwide) 70 major R&D facilities (37% of total worldwide)
4 3

2

Asia, Australia

€ 15.523 billion in revenue (20% of total worldwide)
1 Commonwealth of Independent States 2 By customer location 3 As of September 30, 2012 4 15 employees or more

2

63,000 employees (17% of total worldwide) 28 major R&D facilities (15% of total worldwide)
3

4

As part of Siemens’ Executive Relationship Program, our 100 most important customers are personally supported by members of Siemens’ Managing Board. To determine if this program is actually meeting our customers’ expectations, we conduct annual surveys. For us, the results of these surveys are crucial since we want to strengthen our customers’ trust – everywhere in the world. To gear our activities even more closely to the needs of our customers and markets worldwide, we’re breaking new ground with innovative projects like our new urban sustainability centers. These centers provide a common platform where our experts can work together with scientists, urban planners and city officials to develop the infrastructure solutions of tomorrow. Our first sustainability center, the Crystal, opened its doors in London in 2012. Two more centers – one in Shanghai and another in New York – are set to follow. A strong worldwide presence coupled with the power of a global technology company – that’s what’s made us successful and the strong local partner that we are today – around the world and around the clock.
COMBINED MANAGEMENT REPORT, PAGES 63-64 SIEMENS AT A GLANCE, PAGES 6-7 www.SIEMENS.COM/wORLDwIDE

Global presence is the basis of our competitiveness. Active in some 190 countries, our Energy, Healthcare, Industry and Infrastructure & Cities Sectors occupy leading market and technology positions worldwide.

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Proximity: page 8

Ideas
The integrated technology company Strength: page 34 Integration: page 54 Diversity: page 66

“My son has new hope.”
Fifteen-year-old Christian from the town of Beuren in southwest Germany has been diagnosed with cancer. In the summer of 2011, doctors discovered a tumor in his pancreas. A combination of chemotherapy and radiation has given him new hope. Our new Biograph mMR played a major role in Christian’s treatment. The combination of magnetic resonance imaging (MRI) and positron emission tomography (PET) technology enabled doctors at Tübingen University Hospital to observe the tumor’s shape and metabolism in detail and obtain vital information during the course of his therapy.

Trust based on ideas

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LEFT – A relaxed young man looking toward the future with confidence: Christian is again living life to the full. RIGHT – A summer’s day back home in Beuren. After a year of worry, the family is once again enjoying life together.

Christian’s mother

“This experience has brought us closer together. We’ve become very caring and gentle with one another.”
Certainty is the key factor. The therapy has been effective. “Luckily, the tumor’s gone,” says Christian. Finally, life can return to normal. Now, it’s out of the hospital and back to school. “What I want is to finish school and start an apprenticeship.” A joyful prospect a year after the big shock of the summer of 2011. At first, Christian felt ill. Then his eyes and face turned yellow. The diagnosis at Reutlingen Hospital: an advanced pancreatic tumor obstructing the bile duct. Christian’s mother remembers the fateful day: “I can’t describe it: tears, anger, rage, sadness – I couldn’t control my feelings.” Examination with the Biograph mMR scanner The specialists in Tübingen launched their attack on the tumor immediately. “I had chemotherapy for the first four months, then radiation, and then chemotherapy for four more months,” reports Christian. “After every second treatment, they stuck me into the tube to see how well the chemotherapy was working.” The tube, as Christian calls the Siemens Biograph mMR, is an innovative combination of MRI and PET technology that helps physicians monitor the impact of chemotherapy treatments. The system can simultaneously display structures in the body and their metabolic activity.

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Confidence

Solidarity

July 9, 2012
A summer’s day

10: 34 a. m. –– Having ice cream in Beuren

Family

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July 10, 2012
Examination
2 : 02 p.m. –– Preliminary discussion at Tübingen University Hospital

Successful therapy

Trust Diagnosis

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The question now is: does Christian’s pancreas still contain tumor cells? And if so, how active are they? In their examinations, the Tübingen cancer specialists never lose sight of Christian’s particular situation. “Children aren’t just small versions of adults. That means we have to consider a wide range of factors when evaluating their symptoms and determining the length of their examinations,” says Christian’s doctor, Professor Dr. Jürgen Schäfer. For Christian, the past year has been an anxious one, full of uncertainty. “I often wondered if the tumor was getting larger or smaller,” he says. “If it was smaller, that was good, of course, and a sign the chemo was working. That motivated me to keep fighting.” But he wasn’t going to give up anyway. After the first shock, Christian promised himself he’d stay optimistic no matter what. Fortunately, the examination results boosted his confidence. The images from the Biograph mMR showed the radiologist both how the tumor’s size had changed during treatment and how its metabolism was developing – key indicators of its activity. Today, the young patient has a very important appointment: together with his mother and sister, he’s come to Tübingen University Hospital to find out if his cancer treatment has been effective. In his patterned hospital gown, Christian lies down on a table in the examining room before entering the Biograph mMR scanner once again.

FAR LEFT – Professor Dr. Jürgen Schäfer and Christian discuss the upcoming examination in the Siemens Biograph mMR. It will show if the tumor is still active. LEFT – Christian with his mother and sister on the way to the examination at Tübingen University Hospital.

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Christian

“I feel I’m well looked after in Tübingen. The doctors are very honest with me. And I think that’s good – because I want to know exactly what’s happening and why I’m doing all these things.”
The examination is over in half an hour. And a few days later, after a detailed evaluation of the images, Professor Dr. Schäfer has good news for his young patient. “Right now, it looks very good,” reports the head of pediatric radiology in the Department for Diagnostic and Interventional Radiology. “The functional and metabolic findings show that the therapy has been successful. The tumor is no longer showing increased metabolic activity.” Greater certainty thanks to excellent imaging At the last examination, small remnants of malignant tissue were still visible. But it’s now clear that they’re completely inactive. “This is exactly why we’re so happy to have this combination of morphological and functional findings,” says Professor Dr. Schäfer. “Since morphologically a very small remnant was still visible. But it’s no longer functioning, thank God.” The doctors in Tübingen have been working with the Biograph mMR since March 2011. For Christian’s mother, it was clear from the beginning that she wanted to exploit this diagnostic opportunity for her son. “The doctors told us there was a new imaging system they could use to examine Christian,” she recalls. “I agreed immediately – and now I know for sure that the therapy’s worked.”

LEFT – Christian prepares for an examination in the Siemens Biograph mMR. BELOW – An assistant inserts a tube for the PET imaging tracer. RIGHT – Christian on the table just before entering the magnetic field of the molecular MR scanner.

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Certainty Magnetic field Contrast agent

July 10, 2012

Monitoring

4 : 17 p.m. –– Biograph mMR examination

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Professor Dr. Claus Claussen, Tübingen University Hospital

“Our cooperation with Siemens is based on enormous trust, which has grown continually over the years.”
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Professor Dr. Claus Claussen is head of the Radiology Clinic at Tübingen University Hospital. Professor Dr. Claussen discusses the prospects for the innovative technology below.
Professor Dr. Claussen, Tübingen University Hospital has been using the Siemens Biograph mMR since March 2011. In your experience, which applications is the system most suitable for? PROFEssOR DR. CLAussEn: There are currently three fields of application for the Biograph mMR. About 90 % of the applications relate to oncology, where we can identify what stage a tumor is in and monitor the course of treatment. The other fields are neurological diagnostics – in particular, neurodegenerative disease – and metabolic changes near the heart muscle. The Biograph mMR provides simultaneous, detailed images of the changes and processes taking place in living organisms. This is a tremendous advance. The simultaneous acquisition of MR and PET offers precise morphological and functional insights into the human body and makes it possible to pinpoint even the smallest pathological changes – for example, in the liver, the brain and bone marrow. How long had you been dreaming about combining MRI and PET in this way?
PROFEssOR DR. CLAussEn: Computed tomography became well established in the 1970s,

and ever since we’ve been dreaming of visualizing anatomical structures and forms in combination with their functions. Dynamic computed tomography, which involves injecting contrast agents, was developed in the early 1980s. This enabled us to monitor blood flow in organs and tumors. Positron emission tomography (PET) made it possible to obtain images of specific metabolic activities in the body but afforded very poor spatial resolution. Results improved when CT and PET technologies were combined in PET-CT scanners. Then, about ten years ago, the enhanced contrast achieved in images of soft tissue by using MRI technology awakened hopes of further improvement – and today we have the Biograph mMR. What is the special technical challenge of the Biograph mMR? PROFEssOR DR. CLAussEn: The strong magnetic field of the magnetic resonance imaging systems interfered with the operation of conventional PET detectors. That’s why new detectors had to be developed for use with magnetic resonance imaging systems. At our lab for preclinical imaging, Professor Dr. Bernd Pichler performed very important preparatory work before we and Siemens tried out and tested this new technology in a first combined MRI and PET head scanner. This example highlights how important it is for an industrial company like Siemens, which is geared to research and development, to leverage its customers’ potential and pursue open innovation through joint research projects.

LEFT – Professor Dr. Claussen (left) and Professor Dr. Schäfer (right) at Tübingen University Hospital LEFT ABOvE – Professor Dr. Claussen is head of the Radiology Clinic at Tübingen University Hospital. RIGHT ABOvE – The images of Christian generated by the Biograph mMR show no tumor activity in the pancreas. RIGHT – Professor Dr. Schäfer evaluates the images of Christian’s body produced by the Biograph mMR.

Tübingen University Hospital and Siemens have been cooperating for many years to develop innovative imaging technologies. How would you describe this partnership? PROFEssOR DR. CLAussEn: It’s based on enormous trust, which has continually grown over the years. We were one of the first university hospitals to conclude a cooperation agreement with Siemens. Since then, we’ve tested many new Siemens products. The experts were very skeptical at first about the leading-edge molecular MR process, but Siemens was convinced that the new technology would succeed, and that conviction is paying off. Which patients profit most from the Biograph mMR? PROFEssOR DR. CLAussEn: Above all, this new system benefits children and young people since radiation exposure during imaging is substantially lower than with conventional exam methods. This is an enormous advantage since we have to monitor the effectiveness of medications frequently, particularly with young patients1, who are especially sensitive to radiation. What new insights do you expect to gain for research? PROFEssOR DR. CLAussEn: It’s still too soon to foresee the full potential of this hybrid MRI and PET technology. We have new therapy options and can now determine much earlier which therapies are effective – in terms of treatment quality, this definitely represents a big step forward. But it will certainly be years before we can measure this innovation’s full impact on healthcare. If you could make a wish, what would you want from Siemens for the next generation of diagnostic imaging systems? PROFEssOR DR. CLAussEn: Of course there are always things you can wish for – otherwise, we’d stop dreaming. The ability to visualize functional and physiological processes in living organisms is already an important advance. This was unimaginable just 20 years ago. However, we’re still just at the beginning, and that’s why I’d like the reliability of diagnostics to increase even more in the future. But the first step has already been taken. And that’s a major milestone for imaging and healthcare in general.

We’re inviting more than 100 radiologists, nuclear medicine experts and physicists from around the world to a meeting in December 2012 to discuss their experiences with the Biograph mMR.

LEFT – The Siemens Biograph mMR is prepared for the next exam.

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Innovative strength

innovation in imaging siemens’ biograph mmr
The two imaging technologies complement one another perfectly: magnetic resonance imaging (MRI) provides millimeter-precise images of the body’s organs, while positron emission tomography (PET) displays, above all, the metabolic activity of cells. The Siemens Biograph mMR is the world’s first device to combine MRI and PET imaging in an integrated system – enabling clinicians to simultaneously capture data on organ function and metabolism as well as any changes in organs in a single scan.

60-centimeter-wide opening

Integrated MRI body coil

Biograph mMR

Integrated PET detector

MRI gradient coil

Magnet with a field strength of three tesla

A pioneering achievement in medical imaging, the Biograph mMR combines two previously separate technologies in a single system.
For patients, this means diagnoses in less time and with less radiation exposure. Instead of having to perform several separate scans, clinicians can now acquire all images in a single process – thus shortening patient waiting times. The integration of MRI and PET technologies also reduces the amount of radiation that patients are exposed to, compared to conventional imaging technologies. Until now, two separate devices were required for these examinations because the operation of conventional PET detectors is impaired by the strong magnetic fields generated by MRI scanners. Previously, the images generated had to be superimposed using special software. This second step reduced precision since patients – and thus organ positions – often shifted between scans. The Siemens Biograph mMR features new PET detectors whose operation is not disturbed by the MRI’s strong magnetic field. That’s why the innovative system can capture all data simultaneously, recording even the smallest details and functional processes. Healthcare facilities also profit from the Siemens Biograph mMR: the system streamlines processes and cuts costs for floor space and operation by eliminating the need for a second system. And that’s to the advantage of a growing number of patients around the world.
WWW.sIEmEns.COm/AR/IDEAs WWW.sIEmEns.COm/AR/IDEAs-mOvIE WWW.sIEmEns.COm/BIOGRAPHmmR
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1 MR scanning has not been established as safe for imaging fetuses and infants less than two years of age. The responsible physician must evaluate the benefits of the MR examination compared to those of other imaging procedures. The statements by Siemens’ customers described herein are based on results that were achieved in the customer’s unique setting. Since there is no “typical” hospital and many variables exist there can be no guarantee that other customers will achieve the same results.

For us, progress means placing trust in people with a pioneering spirit
For 165 years, we’ve been providing answers to the challenges of our day – in the areas of healthcare, energy, industry and infrastructure. Few companies have more researchers and developers working to create innovative products and solutions worldwide. In a record number of research partnerships, our R&D employees are shaping technological progress more actively and openly than ever before.

Never completely satisfied, always looking for better solutions, taking personal responsibility for progress and blazing new trails in technology – this strategy has made us the powerhouse in electronics and electrical engineering that we are today. The latest figures confirm our power of innovation. Our R&D employees are now reporting more than twice as many inventions per day as in 2001. In fiscal 2012, we filed 8,900 invention reports, some 5% more than a year earlier. During the same period, we increased the number of our patent first filings by about 7% to 4,600, making us once again a leader in the worldwide patent statistics and No. 1 in Europe. Our innovations impact many areas of life – transportation, industry and healthcare, for instance. Today, people all around the world rely on trains, metros and light-rail systems from Siemens to provide them with safe, ecofriendly transport to and from their homes and places of work. In industry, our product lifecycle management (PLM) software is making it possible to develop, simulate and test products in the virtual world and to model entire production processes before a single screw is manufactured in the real world. In hospitals, our innovative liver fibrosis test is enabling doctors to examine patients suffering from chronic liver disease without having to conduct time-consuming, potentially dangerous biopsies. And last but not least, innovations from Siemens are helping shape the future of energy.

Corporate Technology (CT), our central research department, has overall responsibility for our strategic and cross-unit research activities. More than 7,000 CT experts cooperate across team and national boundaries to ensure that we maintain our technology leadership. Products with major profit potential on the world’s innovation-driven growth markets are developed and then incorporated into our day-to-day business operations. Our key research focuses today include electric mobility, sustainable urban development and next-generation biotechnology.

In fiscal 2012, we invested some €4.2 billion in research and development.
We’ve introduced a policy of open innovation. In more than 1,000 research partnerships, we’re facilitating targeted information exchange and cooperation with leading international universities and research institutes worldwide. Technology and innovation – for us, that means securing our technological basis, helping shape the future with innovative solutions and strengthening our integrated technology company. The pioneering spirit of our employees is making us strong – every day and all around the world. combined management report, pages 98-101 siemens at a glance, pages 8-11 www.siemens.com/innovation

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Siemens’ position in the 2011 patent statistics

No.

1

European Patent Office

No.

U. S. Patent and Trademark Office

10

No.

3

German Patent and Trade Mark Office

Patent applications: In 2011, we were No. 1 in patent applications at the European Patent Office and No. 3 at the German Patent and Trade Mark Office – where we were among the most active patent applicants. According to U.S. Patent and Trademark Office (USPTO) statistics, as published by the Intellectual Property Owners Association (IPO), we were No. 10 in the U.S. in the number of patents granted.

Major R&D facilities by region in fiscal 2012

Invention reports, patent first filings and R&D employees (approximate) in fiscal 2012

Revenue from Siemens’ Environmental Portfolio in fiscal 2012

29,500
37% Americas
R&D employees

€78.3 billion

Total Siemens revenue

48%

Europe, C.I.S., Middle East therein Germany (23%)

8,900
Invention reports

4,600
Patent first filings

€33.2 billion

Revenue from Siemens’ Environmental Portfolio

15%

Asia, Australia

R&D employees: In fiscal 2012, Siemens had roughly 29,500 R&D employees working at some 188 locations in more than 30 countries worldwide to create and develop new solutions in the areas of energy, industry, infrastructure and healthcare.

Inventions and patents: In fiscal 2012, Siemens reported around 8,900 inventions and submitted about 4,600 patent first filings – an average of some 40 inventions and roughly 21 patents on each of the 220 workdays in the year. These inventions and patents were generated by all our Sectors as well as Corporate Technology, our central research department.

Siemens’ Environmental Portfolio: In fiscal 2012, our Environmental Portfolio, which features a large number of innovations, generated revenue of €33.2 billion and enabled our customers to cut their CO2 emissions by 332 million tons – an amount equal to about 41% of the CO2 emissions generated in Germany in 2010.

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“We care deeply about the future of energy.”
Jens Hald Jensen believes the time has come to create a new energy system. Why? Because he’s convinced that the transition to a sus­ tainable energy infrastructure can stop climate change. And because he wants to pass on to future generations a world worth living in. Jensen, a Siemens employee who’s project manager at the test center for wind turbines in the Danish town of Østerild, is working every day to make our energy supply a little bit greener – one step at a time. Making a successful transition to a new energy system will require implementing a complex puzzle of measures. As an integrated technol­ ogy company, we offer a virtually unrivaled portfolio of products and solutions spanning the entire Power Matrix. On the following pages, Jens Hald Jensen describes how he’s taking personal responsibility to help shape the future of energy. And in an interview with Dr. Hans­Josef Zimmer, Chief Technology Officer for our key customer EnBW Energie Baden­Württemberg AG, you’ll learn how one of Germany’s major utility companies views that future.

Creating trust through strength

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Proximity, page 8 Ideas, page 20 The integrated technology company

Strength
Networking, page 54 Diversity, page 66

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Top – a logistical tour de force was required just to transport the siemens B75 rotor blades 320 kilometers from the Danish port of esbjerg to Østerild. LefT – Clear instructions for the team: siemens engineer Jens hald Jensen (left) oversees the assembly of the wind turbine with the longest rotor blade currently in operation worldwide. CenTer – the housing – or “nacelle” – for the generating components of the siemens sWt 6.0 gearless wind turbine is 15 meters long and 6.5 meters wide.

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Jens Hald Jensen, project manager at the wind turbine test center in Østerild, Denmark

“These rotor blades have a very special magic for me. I saw them while they were still on the ground, I was there when they were raised up, and now I’m watching them rotate and produce energy – it’s simply magical.”
“at 75 meters in length, the new rotor blades have nearly the wingspan of an airbus a380.” When Jens hald Jensen talks about his work, he makes generous use of superlatives. and today is a very fitting occasion for them: on this gorgeous august day, the siemens engineer is supervising the assembly of the world’s largest wind turbine rotor. sporting a white hardhat and neon-yellow safety vest, Jensen stands in the middle of a test center in the Danish town of Østerild, where we’re testing our latest products before they are commissioned on site. the test subjects arrived several days ago: our sWt 6.0 wind turbine, which has a capacity of six megawatts, and our B75 rotor blades, which, at 75 meters in length, are the longest blades of their kind currently in operation wordwide. and although Jens hald Jensen has worked in the wind industry ever since earning his university degree, he sees this test as the highlight of his career to date. “it’s simply incredible to stand here between these gigantic rotor blades – just look at these unbelievable dimensions,” exclaims the engineer from the Danish town of Brande. “it really is a technical tour de force to be able to manufacture something this imposing in one piece.” More than just an impressive rotor For decades, Jensen has dreamed of an energy infrastructure that relies more heavily on renewable sources such as wind. “the wind delivers an unbelievable amount of energy around the clock, especially offshore,” says the engineer enthusiastically. “the transition to a new energy system is offering us the opportunity to help shape the future of energy – and that’s where i feel a very personal responsibility to future generations.” it’s no wonder that Jensen is excited about combining the sWt 6.0 turbine with the B75 rotor blade: a single turbine will be able to supply green energy to 6,000 european households – emissionfree and without the use of fossil fuels. and the first customers are already lining up to make large-scale use of the new technology: plans call for installing 300 sWt 6.0 turbines with a total capacity of 1,800 megawatts off the coast of the uK between 2014 and 2017.

transitioning to a new energy system will require implementing diverse measures that need to fit together like the pieces of a puzzle. our engineers are continually developing and honing a wide variety of solutions that promise to drive this transition.

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Years of offshore experience once the turbines and rotor blades have successfully completed the test phase, two giant cranes lift the housing for the sWt 6.0’s generating components into the air. under Jensen’s watchful eye, the housing – or the “nacelle” – is moved in slow motion to the top of the 120-meter tower. the culmination of more than 20 years of experience in offshore projects, the sWt 6.0 is remarkable not only for its output but also for its new drive technology, which is entirely gearless. such innovations have enabled our engineers to reduce the number of components by about 50%. the streamlined design facilitates maintenance while also cutting down on weight: the sWt 6.0 is by far the lightest wind turbine in its class. and this, in turn, lowers costs for the foundation and the tower – making wind energy more competitive and moving us a step closer to Jensen’s vision of a greener energy future.

BeLow – once installed, the gigantic rotor will sweep an area equivalent to two-and-a-half soccer fields. an enormous amount of space is also required for unloading the rotor blades and mounting them on the hub (pictured on the left).

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Dr. Michael Süß, member of the Managing Board of Siemens AG and CEO of the Energy Sector

“The transition to a new energy system is Germany’s project of the century. It’s the right strategy, and it’s feasible. But we still have a long way to go in order to make it happen. The greatest challenges are the tight schedule and the required expansion of the power grid. The world is watching closely to see how Germany tackles these challenges.”

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The largest single-cast fiberglass component But Jens hald Jensen has no time for visions today. Because once the turbine is assembled, it’s time to hoist up the three giant rotor blades with steel cables. “this is the biggest rotor blade we’ve ever installed,” notes Jensen. “it’s a monumental challenge to hoist up the blades – which have a total rotor diameter of 154 meters – and attach them to the turbine.” each rotor blade looks a bit like a beached whale, and people standing beside it look as small as they would next to one of the giant creatures of the sea. after all, the B75 is the largest single-cast fiberglass component ever constructed. and it’s innovations like this one that Jensen always finds exciting. “our intense involvement in this field demonstrates very clearly that we intend to be pioneers in shaping the future of energy,” he says during a break. “the products shown here in Østerild underscore our commitment to leadership.” Our technologies are bringing the future of energy closer siemens offers its customers not only wind power installations but also a broad portfolio of other products and solutions that will facilitate the transition to a new energy infrastructure: long-distance low-loss high-voltage direct-current transmission systems, components for the smart grid of the future, gas turbines with record efficiencies, and high-efficiency electric motors that cut energy consumption. only an integrated technology company with a broad portfolio can provide such a complete range of offerings – thus strengthening public confidence that the transition to a new energy system can indeed be achieved. Because rebuilding our energy infrastructure will require much more than “just” phasing out nuclear energy. Many individual innovations along the entire energy chain will have to fit together perfectly like the pieces of a puzzle in order to make tomorrow’s energy supply both reliable and sustainable. and it’s here that our environmental Portfolio is equipping us to play a key role. in Østerild, we’ve just taken another step forward. after hours of exacting work, two crane operators and a handful of our technicians have attached the three rotor blades to the wind turbine. Jens hald Jensen looks up with rapt attention, captivated by the imposing sight. “these rotor blades have a very special magic for me,” he says pensively. “i saw them while they were still on the ground, i was there when they were raised up, and now i’m watching them rotate and produce energy – it’s simply magical.” nothing more stands in the way of the exhaustive testing that will follow in the weeks ahead. But for now, Jensen has called it a day. “We did it!” he exclaims, making no attempt to hide his feelings. “We’ve just installed one of the world’s largest wind turbine rotors – now that’s something you just have to be proud of.”

thanks to an innovative production process that eliminates the use of adhesive joints, the rotor blades are 20% lighter than their conventionally manufactured counterparts – reducing operating costs and making wind energy more attractive.

80 or meters per second

290 km/h

Maximum rotational speed

Dr. Felix Ferlemann, CEO, Siemens Wind Power

“Every second that the rotor, which has a total diameter of 154 meters, operates at a wind speed of ten meters per second, it captures the energy of 200 metric tons of air.”
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LefT – a job well done: after two huge cranes have positioned the rotor – which has a total diameter of 154 meters – specialists connect it directly to the generator shaft. ABove – smiles all around following the successful assembly of the wind turbine: Dr. Felix Ferlemann, Ceo of siemens Wind Power (center), and Jens hald Jensen, project manager in Østerild (back right), share a proud moment with colleagues.

41

Dr. Hans-Josef Zimmer, Chief Technology Officer, EnBW

“Renewables will be a vital pillar of our future energy supply. As an energy company, we need strong, reliable partners for the challenges ahead.”

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“Building a new energy system is a huge challenge.”
Providing energy for the future will require innovative solutions and strong partnerships. Siemens and the energy company Energie Baden-Württemberg AG (EnBW) have been cooperating closely for years. Dr. Hans-Josef Zimmer, Chief Technology Officer of EnBW, talks about the steps that must be taken to usher in a new energy era.
Dr. Zimmer, the future of energy is currently a hot topic in Germany. What stance is EnBW taking? Dr. Zimmer: Building a new energy system is a huge challenge for Germany. And as one of the country’s largest energy companies, we’re tackling it headon. In terms of our strategy, this means we’re continuing to safeguard our position as a low-carbon energy producer. In addition to supplying power from highly efficient conventional plants, we intend to double the amount of power we generate from renewable energies by 2020. We already have a relatively large share of hydropower-based renewables in our portfolio. By 2020, we want to further expand our installed capacity from renewables by about 3,000 megawatts. One step in this direction is certainly the EnBW Baltic 1 wind farm, Germany’s first commercial offshore wind installation. Your company partnered with us on its construction in 2011. How did the idea for this project develop, and what conclusions have you drawn from the operation of the wind farm? Dr. Zimmer: We on EnBW’s executive board decided in fiscal 2007/2008 that we wanted to invest more heavily in renewable energies. Complementing our traditionally strong involvement in hydropower, we’ve defined wind energy as a further focus. Following extensive analyses, we concluded that wind turbines and wind farms, both onshore and offshore, could be particularly profitable. That’s why in 2008 we bought four licenses for offshore installations – two in the Baltic Sea and two in the North Sea – and now we’re in the process of developing these projects. The EnBW Baltic 1 wind farm has 21 wind turbines from Siemens and a total capacity of up to 48.3 megawatts. We’re very satisfied with its current performance. Availability is very good, and we achieved quite gratifying overall results the first year. How’s the partnership with Siemens worked out? Dr. Zimmer: When planning and implementing projects of this magnitude, we need reliable partners who keep their promises. Since the very beginning of the EnBW Baltic 1 project, the cooperation with our colleagues at Siemens has been characterized by great trust. And this trust is also based on our experience in other major projects on which we have partnered. EnBW Baltic 1 is quite far from your home region in southwestern Germany. How is the electricity generated there distributed throughout the country? Dr. Zimmer: Our wind farm in the Baltic feeds directly into the 50-hertz grid. From there, the energy is further distributed within Germany via an extensive interconnected grid. If we build more wind farms on the coast and offshore, where there’s lots of wind, we’ll have to transport large amounts of energy to the southern part of the country. By 2030, offshore wind farms operating off Germany’s coasts are expected to be supplying 25,000 megawatts of electricity. That’s why we’ll also need low-loss high-voltage direct-current (HVDC) transmission in the future. The grid development plan prepared by our

With revenue of more than €18 billion in 2011 and some 20,000 employees, enBW is one of the largest energy companies in germany and in europe.

Dr. hans-Josef Zimmer (54), Chief technology officer of enBW, is a mechanical engineer who has been employed at enBW for 23 years. he’s installed a solar-thermal system at his own home to provide heat and hot water. Zimmer was also one of enBW’s first customers to opt for a smart electricity meter – which quickly showed him that power consumption can be slashed by switching devices off rather than operating them in standby mode.

43

subsidiary Transnet BW and three other grid operators foresees HVDC transmission lines along several corridors. However, I’m assuming the approval process will take a very long time. There are also technical challenges to be mastered – because, even though HVDC lines have already been installed in countries like China and India, that doesn’t mean such routes can be planned and implemented overnight in Germany. On the contrary, the process will take several years. But we must address this challenge if we want to succeed in restructuring the energy system. In our view, highly efficient power plants like our combined cycle plants are another factor that can facilitate the transition to a new energy infrastructure: Stadtwerke Düsseldorf, a municipal utility in which EnBW holds a majority stake, plans to build just such a plant at the Lausward site in Düsseldorf. As with the EnBW Baltic 1 and 2 projects, Siemens will be the supplier. What criteria played a role in your investment decision? Dr. Zimmer: Combined cycle power plants of the type supplied by Siemens are highly efficient systems that generate low-carbon power. They have faststart capability and are highly flexible in terms of startup and shutdown – which makes them particularly suitable for an energy market moving toward fluctuating renewable energies. Of course, in addition to boasting high efficiency and rapid startup, every new plant must also be economically viable. Another concern is reducing energy consumption, in other words, saving electricity. What can an energy company like EnBW contribute here? Dr. Zimmer: A couple years ago, our slogan was “Empowered to cut consumption.“ Now you could, of course, say that a utility company should be happy if its customers use lots of energy. But quite the opposite is true: we want to help our customers conserve energy and boost energy efficiency. For years, we’ve been offering tailored solutions that make our customers’ operations more energy-efficient. One thing is clear to us: at EnBW, we can be competitive only if we provide our industry customers with energy that is so affordable that they can keep their production in Germany. Smart grids are one option for flattening consumption peaks. To what extent is EnBW involved here? Dr. Zimmer: We’ve been testing smart grids in trial communities for several years now. We’re also analyzing how our customers can benefit from intelligent electricity meters. We want to help our private, business and industry customers consume less energy. For example, appliances and equipment that require a lot of energy should be operated at night, when electricity is less expensive, rather during the day, when demand is high. That sounds like a business field with lots of potential for EnBW. How can Siemens provide support here? Dr. Zimmer: Siemens is a technology leader in many fields. Since the entire development process for the production, distribution and consumption of energy is extremely complex, system providers like Siemens have major market opportunities. In your view, what factors are most crucial for the successful transition to a new energy system? Dr. Zimmer: We need a wide range of technical solutions to make the new system a success. In addition, a very stable legal framework for marketing renewables must be in place. We also need to expand the grid so that energy from the generation centers, which in the future will be in northern Germany, can be transported to the consumption centers in the south. We’ll need a greater number of highly flexible power plants, such as the combined cycle plants I’ve already mentioned. In addition – and this is very important –
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ABove – enBW has commissioned germany’s first commercial offshore wind farm, the enBW Baltic 1 project, using wind turbines from siemens. Comprising 21 turbines with a total capacity of 48.3 megawatts, the installation is located in the Baltic sea, about 16 kilometers north of the german town of Zingst on the Darß peninsula.

we’ll need a public consensus to implement all of these things. Grid expansion will entail installing hundreds of kilometers of transmission lines all across Germany. And the construction of additional pumped-storage hydropower plants to store energy temporarily will also have an impact on the environment. We have to convince people and make it clear that the transition to a new energy system cannot be accomplished from one day to the next but will require a great deal of patience, money and effort. In which of these fields do you anticipate major advances? Dr. Zimmer: We need highly efficient plants, but it will take time to develop them. After all, Siemens didn’t develop its high-efficiency combined cycle plants overnight. And we’ll also need time to install HVDC transmission lines and smart grids throughout Germany. Until that happens, coal-fired plants will also be a component of the evolving energy system. While such power plants will still be necessary as a backup for many decades to come, they’ll be more efficient than before, delivering the same output while consuming much less fuel. Now you’ve brought up the topic of the energy mix. How will the energy mix at EnBW look ten years from now? Dr. Zimmer: While EnBW will also still be operating conventional plants in ten years, we intend – compared to today – to double the share of renewables by 2020, expanding their capacity by about 3,000 megawatts. Renewable energy sources include offshore wind, onshore wind, photovoltaics, biogas and water. To obtain an economically viable mix, all types of renewable energies will have to be combined. That’s how the restructuring of the energy system will succeed. What do you expect of Siemens in this context? Dr. Zimmer: We expect that Siemens will always be at the cutting edge of technology and that we can count on Siemens as a technology leader who provides us with efficient solutions – solutions that make sense from both an economic and an environmental perspective. We value Siemens’ power of innovation. And we value the trust that we have in Siemens, which has evolved over many decades, just like the plants that we built together and are successfully operating today. We expect Siemens to continue pursuing this strategy and to offer us the best solutions on the market. And we at EnBW wish Siemens every success in this endeavor. www.siemens.Com/Ar/sTrengTh www.siemens.Com/Ar/sTrengTh-movie

LefT – Plans are far advanced for the construction of the world’s most efficient natural gas power plant – an order placed by stadtwerke Düsseldorf, a municipal utility in which enBW holds a majority stake. here enBW Chief technology officer hans-Josef Zimmer examines up-to-date project planning information from siemens. the plant is expected to begin supplying ecofriendly electricity and district heating in 2016.

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The fuTure of energy – A complex puzzle of meAsures
Electricity for

1,500

households

Two

600-kW turbines 2008

Tidal current power plant

In operation since

hours / days

24 / 365

Making renewables competitive

Security of

strangford, ireLand Northern Ireland’s Strangford Lough is home to the world’s supply first commercial tidal current power plant. Smart grids Since November 2008, two turbines have been produc­ ing a combined output of 1.2 megawatts – enough electricity to meet the needs of 1,500 households. To date, the installation has fed more than five giga­ watt­hours of electrical energy into the grid, making it the world’s largest tidal turbine project. Further tidal farms are now in the planning phase: the eight­mega­ watt Kyle Rhea project in Scotland and the ten­mega­ watt Anglesey Skerries project in Wales.

Renewables

Conventional power plants

Efficient energy use

Power superhighways

Overall natural gas fuel utilization rate of

85%

Combined cycle power plant

Electrical output of

595 MW >61%



Boosting the efficiency of conventional power plants

Electrical efficiency

H2 düsseLdorf, germany We’re building a record­breaking combined cycle power plant in Düsseldorf, Germany. Boasting an electrical out­ put megawatts, the facility will set a Financing of 595a single power plant in combinednew world Energy storage record for cycle opera­ tion. With a net efficiency of more than 61%, it will also surpass the previous world record of 60.75%. And the plant will set a third record as well: never before has it been possible to extract 300 megawatts of thermal energy from a single combined cycle plant for use in a district heating system.

Demand management

46 49

Western link HVDC

Ensuring a reliable power supply

Smart grids: Making power grids more intelligent

The foremost aim of all the measures that are Fifteen years ago, there were only a few hundred bringing about sustainable change in the energy energy producers in Germany. In the future, there system must be to ensure the reliable availability of will be thousands, generating power from solar, wind energy – at all times and at prices that are afford­ and biomass installations and residential cogenera­ able for all. Blackouts must be avoided, and the tion units. Energy consumers are increasingly becom­ international competitiveness of industry must not ing producers too – “prosumers.” This development, be endangered by excessive energy costs. That’s coupled with the growing use of fluctuating renew­ Connected load of approximately why the various measures comprising the pieces of ables, is making smart grids indispensable. Using the energy puzzle require careful planning and sensors, variable network components and self­organ­ implementation. Only if these measures find broad izing software modules, smart grids maintain a public acceptance and fit together perfectly will the balance between production and consumption. We’re restructuring of the energy system be a success and testing these grids in Germany’s Allgäu region, where the solutions deployed succeed on international private producers are generating over three times markets. as much electricity and use. Saving electricityas theyusing

5,000 kW I E2

If half of Germany’s energy is to come from re­ newable sources by 2030 (and some 80% by 2050), then these must be competitive without being subsidized. For wind power in particular, this goal hunterston / connah’s Quay, united Kingdom will soon be reality. We’re currently pushing inno­ We’re building the first submarine direct­current grid vations that are expected to make electricity from connection in as economical as energy from coal.kilo­ wind power the Irish Sea. With a voltage of 600 volts,innovations range from scimitar­shaped rotor Our this link will surpass the previous record of 500 kilovolts. The low­loss high­voltage direct­current blades and gearless turbines to adaptive software (HVDC) transmission system will connect Hunterston, that optimally adjusts wind loads, automated near Glasgow on Scotland’s western coast, with production processes and the longest rotor blades Connah’s Quay, in northwestern England. The link, currently in operation worldwide for the most which willoffshore wind turbines on the market. efficient have a capacity of 2,200 megawatts, is scheduled to go into operation at the end of 2015.

Making renewables Building low-loss competitive power superhighways

Efficiency class

it more efficiently
Electric motors for a brick factory

Boosting the 500,000 kWhefficiency of conventional power plants in annual savings

Saving electricity and using it more efficiently

Building low-loss power superhighways
Renewable resources, like wind on the high seas and sun in warm regions, are best harvested where they’re most abundant. And that’s why long­distance transmission networks must be expanded – across national borders and via underground cables and highly efficient power superhighways based on high­voltage direct­current (HVDC) transmission technology. An HVDC line we installed in China is showing how a link based on this technology can transport 5,000 megawatts – the output of five large power plants – across a distance of 1,400 kilo­ meters with a loss of only about 5%. With conven­ tional alternating­current power lines, losses would be two to three times higher. And HVDC transmis­ sion technology can also be used offshore: an HVDC link is now transporting green electricity from the Spanish mainland to Mallorca.

aLfonsine, itaLy When the wind subsides or clouds cover the sun, The cleanest energy is always the energy that’s not fluctuations in power output must be offset fast – used. Industry offers considerable potential for Italy’s most advanced brick­making plant, located for example, by using combined cycle power plants. of Alfonsine, showcases – for pumps and drives, for in the town savings. Electric motors the potential of In less than 30 minutes, such plants can be energy­efficient technologies. Thanks to our highly of indus­ gener­ example – account for nearly two­thirds Cost amortization ating enough power for a city the size of Berlin. As asynchronous motors, the amount of power trial power consumption. Our energy­saving motors efficient after only six months the world’s most efficient model – from Siemens – and intelligent controls slash power consumption consumed by the factory’s electric drives – 170 motors shows, combined cycle plants can reach anwith a total capacity of 1,065 kilowatts are in opera­ under two effi­ by up to 60% and pay for themselves in ciency of almost 61% when converting natural gas the drying In the area – has been slashed by years. line alone of transportation, electric motors – tion on into electricity, and waste heat can be used500,000 kilowatt­hours. Investment – are aboutamor­ times as for in buses, trains and cars costs were three heating. In many countries, coal will remain a key tized within efficient as combustion engines. In buildings, which a short time. The result? Not only have pillar of power generation for years to come. Coal­ consume 40% of the power required worldwide, costs been cut; the plant’s environmental footprint has fired plants can also be made much cleaneralso been reduced. and substantial savings can be achieved by using insu­ more efficient. What’s more, CO2 can be separated lation, heat pumps, intelligent building techno­ from waste gas, stored underground or used for logies and efficient lighting systems. Household industrial purposes. Researchers are working on appliances also harbor huge savings potential. converting CO2 into methane and the raw materials Today’s advanced models use less than half the needed to produce biofuels and bioplastics. power needed by their predecessors in the 1990s.

Balancing supply and demand
Often, it doesn’t matter if the power for a refriger­ ated warehouse or an air conditioning system is shut off briefly – just as it’s hardly noticeable if an elevator is moving a little more slowly than usual. These are just a few of the many possibilities for cutting energy consumption. Such demand man­ agement eases the burden on power grids. Our researchers are now developing building automation Balancing supply systems that adapt energy consumption to price and demand fluctuations in real time, flattening demand peaks.

Offering intelligent for retailers financing solutions

Energy management

If companies, towns and cities are to cut their When the weather changes, so does the output of Electricity bills cut by energy consumption even when budgets are tight, wind and solar installations. That’s why facilities that they’ll need intelligent financing solutions. One can store excess energy for hours or even weeks are proven approach is our energy­saving performance indispensable. One promising technology is electro­ Option: adjust consumption to changing market prices contracting – a combination of consulting, instal­ lysis, which uses surplus energy to produce hydro­ Siemens RCS lation and financing services. Customers are not gen, an energy carrier that can be fed into the natural Perceived improvement grid, stored in subterranean caverns, reconverted required to make any upfront investment; project gas of indoor climate costs are amortized with the energy savings achieved. into electricity and used in industrial processes or Using this model, we’ve upgraded more than fuel­cell vehicles. Batteries in buildings and electric 4,500 facilities worldwide – generating savings of cars can also act as intermediate energy storage roughly €1 billion. devices. We’re conducting research in all these fields.

15% - 30%

Developing and expanding energy storage facilities

irving, texas, u.s. With more than 1,000 stores in North America, Michaels is the largest supplier of arts and crafts mer­ chandise in the U.S. Energy is the company’s second­ highest line­item expense, after labor costs. With this in mind, Michaels has equipped nearly all its stores with our RCS energy management platform. Intelligent sensors and software operate on a real­time basis to monitor and regulate heating, cooling, lighting and humidity – resulting in energy savings of some 25%.

47 50

our soluTions – shAping The fuTure of energy
We’re convinced that the transition to a new energy system will succeed. It will unleash a wave of innovation and create an exemplary energy infrastructure. Our technologies are making it possible to increase the share of renewables in the energy mix and slash greenhouse gas emissions. To make the transition a success, a variety of measures will have to be implemented – measures that fit together like the pieces of a puzzle. Here are some examples of how our technologies are already shaping the future of energy. www.siemens.com/future-of-energy 6 5 hydropower plants

cogeneration modules

Virtual power plant

1

wind turbine assembly

Smart grids: Making power grids more intelligent

Can be virtually expanded at any time

Current capacity

20 MW

munich, germany We’ve partnered with Stadtwerke München, Munich’s municipal utility, to develop and implement a so­called virtual power plant in which a number of small­scale, decentralized power generation installations are net­ worked and operated as a single system. In the first stage, cogeneration plants with a total output of eight mega­ watts were virtually combined with renewable­energy generating units with a capacity of 12 megawatts. The main aim of the virtual power plant is to improve the reliability of planning and forecasting for the decentralized power generation systems in the area served by Stadt­ werke München. Operation is more efficient and economi­ cal than when the individual units are deployed separately. What’s more, the virtual power plant can serve as a key element of a smart grid, maximizing the benefits for both the operators of the decentralized energy installations and the power suppliers. The core component of this virtual interconnection is our Decentralized Energy Management System (DEMS), which is enabling the Munich utility not only to optimize the deployment and operation of decen­ tralized power generation facilities and power loads but also to create value through enhanced marketing scope.

24 / 365 hours / days

Ensuring a reliable power supply

Better forecasts for electricity production Grid forecast software

Laufenburg, switzerLand Our self­learning software system is stabilizing the power grid operated by Swissgrid in Laufenburg, Switzerland. The program can forecast the electrical output of renewable energy sources over a 72­hour period with more than 90% accuracy. This information helps grid operators calculate power demand in their networks and achieve the greatest possible precision when determining the amount of additional electricity to be ordered in advance.
48

~90%

predictive accuracy over a 72­hour period

~€ 200,000

in annual savings

Electricity for

1,500

households

Two

600-kW turbines 2008

Tidal current power plant

In operation since

Making renewables competitive

strangford, ireLand Northern Ireland’s Strangford Lough is home to the world’s first commercial tidal current power plant. Since November 2008, two turbines have been produc­ ing a combined output of 1.2 megawatts – enough electricity to meet the needs of 1,500 households. To date, the installation has fed more than five giga­ watt­hours of electrical energy into the grid, making it the world’s largest tidal turbine project. Further tidal farms are now in the planning phase: the eight­mega­ watt Kyle Rhea project in Scotland and the ten­mega­ watt Anglesey Skerries project in Wales.

Overall natural gas fuel utilization rate of

85%

Combined cycle power plant

Electrical output of

595 MW >61%

Boosting the efficiency of conventional power plants

Electrical efficiency

düsseLdorf, germany We’re building a record­breaking combined cycle power plant in Düsseldorf, Germany. Boasting an electrical out­ put of 595 megawatts, the facility will set a new world record for a single power plant in combined cycle opera­ tion. With a net efficiency of more than 61%, it will also surpass the previous world record of 60.75%. And the plant will set a third record as well: never before has it been possible to extract 300 megawatts of thermal energy from a single combined cycle plant for use in a district heating system.

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Western link HVDC

Building low-loss power superhighways

Connected load of approximately

5,000 kW I E2
Saving electricity and using it more efficiently
Electric motors for a brick factory

hunterston / connah’s Quay, united Kingdom We’re building the first submarine direct­current grid connection in the Irish Sea. With a voltage of 600 kilo­ volts, this link will surpass the previous record of 500 kilovolts. The low­loss high­voltage direct­current (HVDC) transmission system will connect Hunterston, near Glasgow on Scotland’s western coast, with Connah’s Quay, in northwestern England. The link, which will have a capacity of 2,200 megawatts, is scheduled to go into operation at the end of 2015.

Efficiency class

500,000 kWh in annual savings Cost amortization after only six months

aLfonsine, itaLy Italy’s most advanced brick­making plant, located in the town of Alfonsine, showcases the potential of energy­efficient technologies. Thanks to our highly efficient asynchronous motors, the amount of power consumed by the factory’s electric drives – 170 motors with a total capacity of 1,065 kilowatts are in opera­ tion on the drying line alone – has been slashed by 500,000 kilowatt­hours. Investment costs were amor­ tized within a short time. The result? Not only have costs been cut; the plant’s environmental footprint has also been reduced.

Energy management for retailers

Electricity bills cut by

15% - 30%

Siemens RCS

Option: adjust consumption to changing market prices Perceived improvement of indoor climate

Balancing supply and demand

irving, texas, u.s. With more than 1,000 stores in North America, Michaels is the largest supplier of arts and crafts mer­ chandise in the U.S. Energy is the company’s second­ highest line­item expense, after labor costs. With this in mind, Michaels has equipped nearly all its stores with our RCS energy management platform. Intelligent sensors and software operate on a real­time basis to monitor and regulate heating, cooling, lighting and humidity – resulting in energy savings of some 25%.

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Length

420 km

Voltage

600 kV

Output connection

2,200 MW 2015

Energy performance contracting

Project completion

6,300 MWh / year 1,000 tons / year
Self­financing energy­saving performance contract CO2 emissions cut by

Energy savings of

Offering intelligent financing solutions

2012
European Energy Service Award

veLLinge, sweden The town of Vellinge, in southern Sweden, has imple­ mented a self­financing energy modernization project for its municipal properties. Thanks to our advanced building technology systems, energy consumption and costs for the town’s administrative buildings, schools, retirement homes and public swimming pools have been slashed. Under our energy­saving performance contracting model, we covered all upfront costs. The community of Vellinge will pay for the modernization through contractually guaranteed energy cost savings within the next few years.

Hydrogen as storage medium Technology under development

H2
Electrolyzers

Storing wind and solar power in the form of hydrogen

Developing and expanding energy storage facilities

For example, using hydrogen to power fuel­cell vehicles

erLangen, germany It’s a promising solution for storing electricity generated by wind and solar power: electrolysis is used to split water into oxygen and hydrogen. The hydrogen is then stored and later used to power vehicles and turbines or for applications in industrial processes. A test unit with a peak power rating of 0.3 megawatts produces two to six kilograms of hydrogen an hour. When electricity from renewable sources is used for electrolysis, hydrogen production is virtually climate­neutral. The next gen­ eration of electrolyzers, which will have a rated power of two megawatts, is expected to be ready for use in the medium term. Researchers are aiming to develop an electrolyzer that has up to a triple­digit­megawatt maximum power rating and can accommodate the surplus energy generated by a large wind farm.

51

A strong portfolio – Geared to tomorrow’s growth markets
The world is being transformed: the parameters of daily life and economic activity are changing faster than ever before. This development is providing us with tremendous opportunities to continually improve our position in growth markets worldwide. Intensive portfolio management is enabling our innovation-driven Company to identify new business fields early on and capture leading market positions.

We can generate sustainable growth only if we focus on attractive future markets. That’s why we practice intensive, systematic portfolio management. All our business activities have the same ambitious goal: we want to capture a No. 1 or No. 2 position in all our markets – because that’s the only way to generate profitable growth and increase our Company’s value in the long term. A look at our past confirms that we’ve always been particularly successful when we’ve been a market and technology leader. And we want our pioneering achievements to continue driving our business success in the future. With this in mind, we’re continually adapting our portfolio to major global trends through both organic growth and acquisitions, for which we apply strict criteria. Our policy of intensive portfolio management is enabling us to move into attractive future markets quickly and capture leading competitive positions. In the IT field for example, we’re already one of the largest software companies in Europe – a position we’re steadily expanding through targeted acquisitions. In 2012, for instance, we acquired RuggedCom Inc. of Canada, a leading supplier of communications and network solutions for industry. This acquisition is strengthening our position in the areas of industrial Ethernet and industrial routers and switches.

Over the last few years, we’ve introduced a large number of energy-efficient, low-carbon solutions that enable customers to slash their CO2 emissions and, by reducing their energy costs, increase their competitiveness.

Our future-oriented portfolio strategy is strengthening our Company’s profile and sharpening our focus on innovation-driven growth markets.
These solutions are part of our Environmental Portfolio which, like our activities in the IT field, is one of our strategic growth drivers. In fiscal 2012, we generated revenue of €33.2 billion with Portfolio offerings, an amount equal to around 42% of our total sales. Here, too, we’ve set ambitious targets: we want to achieve revenue of €40.0 billion with our green technologies by the end of fiscal 2014. And this target remains unchanged, although our planned disposals of OSRAM, our Water Technologies Business Unit and our solar business will make its achievement considerably more challenging. We’re already one of the world’s largest suppliers of ecofriendly technologies. By rigorously pushing the development of these technologies, we’re making a major contribution to sustainable climate and environmental protection while ensuring our long-term

52

Centralized power generation from renewable and fossil sources

Offshore technology

Decentralized power generation from renewable and fossil sources

>–>–>–>–>–>–>–>–>–>–>–>–>–>–>–>–>–>

>–>–>–>–>–>–>–>–>–>–>–>–>–>–>–>–>–>

Gas turbine power plants

Onshore wind power

Coal

Steam power plants

Solar-thermal >–>–>–>–>

Photovoltaics

Biomass

Micro hydropower

>–>–>–>–>–>–>–>–>

>–>–>–>–>–>–>–>–>

––<

––––––––

Natural gas

Combined cycle power plants

Power transmission

Power transmission and distribution

––––––––

>–>–>–>–>–>–>–>–>

Industry

>– >– >–> –> –>– >– > – >

>–>–>–>–>–>–>–>–>

>

>–>–>–>–>–>–>–>–>

Power distribution

Trade and commerce

Oil

Hydropower

Hydrogen storage

Battery storage

Electric mobility

Small-scale photovoltaics

Residential

Fossil resources

Power consumption

Pumped storage power plants

Trade and manufacturing

Micro wind power

Storage

Prosumers

business success. Our commitment to sustainable development is also being recognized by external observers: at the end of fiscal 2012, Siemens was named Supersector Leader in the Industrial Goods and Services category of the Dow Jones Sustainable Index (DJSI) for the first time. We also won the top spot for sustainability in the Diversified Industrials category. As a technology leader, we’re helping shape the future of energy. The conventional energy chain – comprising the generation, conversion, distribution and effective use of power – is evolving into a multi-layered system with many new participants. Power generation is becoming more decentralized, with energy increasingly coming from renewable sources. At the same time, more power is being used by new consumers, for example, in the area of electric mobility. Our portfolio offers innovative and sustainable solutions for key areas of this new Power Matrix – solutions that will be vital to a successful transition to a new energy system. IT, our Environmental Portfolio, our contribution to the future of energy: these are just three examples of how we’re actively gearing our portfolio to attractive growth markets while equipping our Company for market leadership and sustainable growth.
Combined management RepoRt, pages 63-64 www.siemens.Com/poRtfolio

The businesses and markets associated with the energy system are a key focus of our portfolio management activities. Looking to the future, the role of decentralized power generation will continue to grow – as will the complexity of the power grid. The linear energy chain is currently evolving into a many-layered system with a large number of new participants – we call it the Power Matrix. This transformation is opening up huge new market opportunities for us. With our innovative products and solutions, we’re already supplying key elements of the Power Matrix.

53

Everyone’s a winner

Creating trust through networking

Downtime is every manufacturer’s nightmare – particularly when delivery schedules are tight. To minimize it, we’ve joined forces with customers to develop ePS Network Services – an IT-supported service offering that maximizes transparency in manufacturing processes and creates added value. With ePS, everyone’s a winner – as the network linking a German manufacturer of highly specialized machine tools with its Dutch partners illustrates. In the following report, Johannes Zuckschwerdt and Ton de Bruine talk about their experience with ePS.

54

Proximity, page 8 ideas, page 20 the integrated technology company strength, page 34

Networking
Diversity, page 66

55

No problems overnight Checking his machines first thing in the morning, Johannes Zuckschwerdt finds everything running smoothly: no error reports in the last few hours. Zuckschwerdt is responsible for developing new services at the medium-sized company schwäbische werkzeugmaschinen (sw). headquartered in southwestern germany, sw specializes in producing top-quality multi-spindle machining centers and manufacturing systems – primarily for customers in the automobile, hydraulics and aviation industries. specially designed for series production, these machining centers and manufacturing systems enable customers to process, for example, the cast parts from which components like the high-precision hydraulic valve blocks installed in virtually all of today’s cars worldwide are manufactured. around-the-clock operation with minimal downtime is vital for optimal large-scale production. availability and world-class service are the key factors in sw’s success. wherever the machines are – in Mexico, Brazil or China – Zuckschwerdt and his colleagues can monitor their operation precisely – thanks to siemens’ remote ePs network services, which permanently link sw’s machines to their developers in germany via an encrypted internet connection. experts can now work proactively. “we can see early on when a part needs changing,” says Peter siegel, initiator of online services at sw. the company ’s specialists access the machines’ centrally-stored status information, initiate analyses and isolate problems online to forestall expensive failures. and this is just one side of the coin: sw also uses the collected data to help customers run their machines more efficiently. ten years ago, siegel was searching for ways to expand sw’s services, improve customer support and intensify customer loyalty worldwide. then, in 2002, he met Jochen heinz from siemens. heinz had the solution siegel was looking for. “siemens’ ePs network services were market-ready at that point,” heinz explains. “we’ve continued developing them with partners like sw ever since.”

headquartered in southwestern germany, schwäbische werkzeugmaschinen has around 300 employees and produces highly specialized machine tools for customers in europe and around the world.

Lifecycle management
Collecting and analyzing machine data enables users to enhance machine productivity.

around-the-clock monitoring

diagnoStic ServiceS

Scheduled maintenance

– lays the basis for reliable production processes – detects faults early on and prevents machine downtime – systematically manages improvements

– optimize capacity utilization – accelerate fault processing – enable in-depth error diagnoses

– optimizes maintenance processes – schedules preventive and status-oriented maintenance procedures – reduces machine failures – increases machine uptime – improves capacity utilization – prevents costly unplanned repairs

56

Quickly spotting a chance to move to the forefront of it-supported services, Peter siegel put his trust in siemens. “Close collaboration was an obvious choice since siemens had already been a reliable partner for years,” he recalls. “we’ve been outfitting most of our machine tools with siemens controls for more than 20 years. For example, we’re currently using siMoDriVe and sinaMiCs converters and sinuMerik control systems.” Competitive advantages thanks to Siemens technology siemens’ online services provide sw with a key competitive edge – beyond maintenance and servicing. “using a machine’s diagnostic data, we can show customers how to increase their output by improving their processes, for example,” explains siegel. the payoff is closer customer relationships, increased revenue and valuable ideas for new machine development. and siemens profits too: “ePs enables us to support our customers and our customers’ customers,” says Jochen heinz. the result: new business opportunities for everyone concerned. left – sw equips most of its machine tools with our sinuMerik control systems, which operate perfectly with ePs network services. BeloW – Jochen heinz from siemens (left) and Peter siegel from sw have been refining ePs network services for many years.

57

aBove – ePs network services are mobile: whether at the company or on the road, Johannes Zuckschwerdt can access sw machine status data worldwide via tablet computer.

Mexico
Johannes Zuckschwerdt, head of new services development at Schwäbische Werkzeugmaschinen

9,285 km

“As a highly specialized medium-sized company, we can’t maintain a local presence worldwide. But with Siemens’ outstanding online services, we can still keep very close to our customers.”
58

Siemens’ IT-supported services its partnership with siemens is enabling schwäbische werkzeugmaschinen to offer services worldwide. “as a highly specialized medium-sized company with around 300 employees, we obviously can’t provide local customer support in every country,” explains Johannes Zuckschwerdt. “But we don’t need to. thanks to ePs network services, we can support customers in China, the u.s. and everywhere else directly from our headquarters in germany.” online diagnostic analysis saves time and money – especially in the very rare cases in which machines break down. in the past when this happened, a specialist would have to be dispatched to the customer to conduct detailed on-site diagnostics. today, things are easier – instead of travelling halfway around the world, sw experts can analyze failures online. using log files, causes can be pinpointed and customers provided with precise instructions for remedying defects. “this is how we boost reliability for our customers and help them maintain production around the clock,” notes Zuckschwerdt. the idea is actually very simple. But putting it into practice required an intensive exchange of knowledge and a large measure of trust. “engaging in joint development with siemens, we’ve naturally had to share sensitive data about products and services,” says Zuckschwerdt. “however, this hasn’t been a problem for us. we’ve been working with siemens for a long time. so we’ve built a very close relationship based on trust. that’s the only way to create innovative products that benefit both partners.”

Norway
2 1,25

Schwäbische Werkzeugmaschinen schwäbische werkzeugmaschinen (sw) supplies customers in 29 countries with innovative machining centers, which are networked with the company ’s headquarters in southwestern germany via siemens’ it-supported services.

km
8,968 km

China

11,2

km

7,5

62

87

km

Indonesia Brazil

59

Ton de Bruine, General Director of Brinks Metaalbewerking B. V.

“We have great trust in Schwäbische Werkzeugmaschinen’s online services and the Siemens technology that backs them up. They’re making our processes more reliable and our cost calculations more accurate.”

Netherlands

650

km

SW customer in the Netherlands headquartered in Vriezenveen in the netherlands, Brinks Metaalbewerking B.V. produces and supplies components for carmakers and leading manufacturers of agricultural machinery.

Brinks specializes in the machining of metals: high-precision and high-volume drilling, milling and thread cutting. For these operations alone, the company uses 17 machines from schwäbische werkzeugmachinen.

Value-creating services siemens’ it-supported services also create value for sw’s customers. Brinks Metaalbewerking B. V., located in the Dutch town of Vriezenveen, is a prime example. the company’s 150 employees produce parts mainly for the car industry. Via systems suppliers, numerous top-of-the-line carmakers source components like valve blocks for convertible top controls and active spring systems from Brinks. Leading manufacturers of agricultural machinery are also on Brinks’ customer list. operating around the clock, sw’s machines in Vriezenveen manufacture tens of thousands of identical components in series production – components that Brinks’ customers want at the right time and in the right quantities for their assembly lines. top quality is essential. “if one of our machines shuts down unexpectedly, we immediately have problems meeting our delivery deadlines,” says company owner ton de Bruine. “Because our production lines run 24 hours a day, there’s little extra machine capacity to compensate for any breakdowns that may occur.”

60

far left – thanks to ePs network services, Brinks employees can count on a smooth production process. left – Brinks’ owner ton de Bruine – shown here with valve blocks used in active spring systems for automobiles – is proud of his company’s products.

so there’s no room for error. that’s why Brinks has been using sw’s online services for several years now. “it’s not just that sw provides us with immediate support from germany in the event of an acute problem,” explains de Bruine. “the company also helps us improve the scheduling of servicing and maintenance for our machines across their entire lifecycles.” thanks to the detailed information that these services provide about the condition of spindles, axles and other key machine components, Brinks employees always know exactly when parts need replacing. Planned downtime instead of unexpected failures – that means no missed delivery deadlines. “working closely with Johannes Zuckschwerdt over the last few years, we’ve learned to value the many possibilities that ePs offers,” says ton de Bruine. and even though he’s not a computer freak himself and doesn’t even have a PC on his desk, de Bruine doesn’t intend to dispense with the tried and tested services in the future. “we’re equipping all our machines with this system.” the issue of data security also played a key role in his decision. “i’m 100% sure that our data is in good hands with siemens and schwäbische werkzeugmaschinen.”
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left – Peter siegel (left) still has lots of ideas for sw’s online services. and Jochen heinz, his long-time siemens partner, is happy to hear them. aBove – still uncommon today, but probably standard tomorrow: tablet computer access to machine tool status data.

Secure and reliable processes create trust other sw customers are also on board. “around 90% of our customers now rely on ePs network services,” reports Peter siegel, who’s now reaping the benefits of his early commitment to the innovative services. “with ePs, we can keep a close eye on machine status data and provide optimal customer support. the online services have proven to be a decisive factor in generating long-term customer loyalty over the past few years, helping us build up a solid customer base.” so it’s no wonder that sw intends to further enhance its competiveness in the areas of customer support, consulting and, above all, proactive services that help manufacturers keep their production lines running smoothly. Jochen heinz, siegel’s siemens partner for many years, sees huge potential in online equipment monitoring. “using the system with machine tools has taught us which algorithms, architectures and business models we need,” he says, summing up his experience. “Precise, online equipment monitoring is important for many siemens customers. in the fields of industry, infrastructure, energy and healthcare, there are already a large number of similar applications that are making machines and systems more productive and more reliable.”
WWW.SiemenS.com/ar/netWorking WWW.SiemenS.com/ar/netWorking-movie
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CREATING VAluE wITh SIEmENS ePS NETwoRk SERVICES
Costs are a decisive factor across the entire lifecycle. Machine downtime and unplanned maintenance are much-feared cost drivers in manufacturing. Consequently, more and more industrial companies are basing their investment decisions on total operating costs. And it’s not just procurement and consumption costs that they’re taking into account. They’re also considering machine availability and productivity. Companies with technologically advanced and optimally organized maintenance and production processes have a clear competitive edge. That’s why Siemens provides its customers with comprehensive industry services like ePS Network Services.

The data provided by ePS Network Services enable companies to calculate machine operating costs for complete lifecycles.

cuStomer

siemens ePs network services

manufacturer

Online platform with maximum data security. Offering customers an advanced status monitoring system, our ePS Network Services provide manufacturers with the information they need to improve service and maintenance processes worldwide and increase machine productivity and uptime. Service processes are managed via an underlying online platform. A multilevel access protection system and high-availability servers maximize data security and availability. Siemens’ ePS Network Services comprise: > ePS Diagnostic Services, which enable manufacturers to monitor the status of their equipment worldwide. Machines automatically report their diagnostic and measurement data to the ePS server at regular intervals. Supported by appropriate algorithms and automatic features, manufacturers can identify and analyze the causes of faults more quickly. > ePS Condition Monitoring, which closely monitors machine status and wear. Potential faults can be detected at an early stage so that service personal have time to take appropriate action. Key parameters can be monitored online. When threshold values are exceeded, specialists are automatically notified by e-mail or text message. Complete machine overviews facilitate preventive and status-oriented maintenance. Maintenance schedules can be optimized to increase system availability and productivity. Everyone’s a winner. Our innovative IT-supported services benefit machine operators as well as machine manufacturers. By making machine utilization more effective, enhancing competitiveness and enabling companies to tap lucrative new business fields, these services create value all along the value chain – for our customers and for our Company.

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Many areas, one goal – Optimal knowledge transfer Company-wide
By ensuring a continuous transfer of knowledge and information in all areas that concern Siemens as a whole, our cross-business activities are playing a vital role in our drive to unleash the full potential of our integrated technology company. Our commitment to expanding our service offerings via innovative IT solutions is just one example of how knowledge transfer is benefiting us and our customers.

We talk to each other. We learn from each other. And all of us get a little better every day thanks to our wide range of cross-business activities, initiatives and programs that address topics relevant for our entire organization. Our search for the talented individuals we’ll need to conquer the markets of tomorrow is one of our key cross-business activities. To assess our employees’ expertise and potential, we use transparent, uniform criteria across all our Sectors and Divisions and in all our businesses worldwide. Siemens’ Learning Campus (LC) – a Company-wide organization that fosters lifelong learning and personal development – is where it all begins. Our Divisions contribute their knowhow, and LC ensures that best practices are communicated to our people around the globe. Every year, more than 100,000 Siemens employees participate in seminars, training programs, workshops and global e-learning initiatives, accelerating knowledge transfer within the Company and making us that much smarter. Our commitment to education is also receiving external recognition. In fiscal 2012, for example, we were again awarded the highest possible number of points in the Human Capital Development category of the Dow Jones Sustainability Index (DJSI) – the third time we’ve received this distinction. Siemens Leadership Excellence is our continuing education program for managers. Here – as well as in the related Siemens Leadership Framework – we apply Company-wide standards

that help us foster the development of our future top managers in an individual, targeted manner, while motivating them to work toward our common goals.

Continuous knowledge transfer and information exchange are making a vital contribution to our Company’s success.
One of our goals is to expand our businesses in the emerging countries, where the demand for economical products and solutions has not yet been completely met. For these countries, we’ve launched our SMART (simple, maintenancefriendly, affordable, reliable and timely-to-market) initiative to develop new, entry-level products tailored to local requirements – for the benefit of our entire Company. In the emerging markets, SMART has made our Healthcare Sector, for example, the leading supplier of entry-level imaging systems. In China, we’re the market leader in intelligent rail signaling systems – posting annual growth of some 25% over the last five years. As part of our Company-wide top+ initiative, we provide our business units with methods and tools for implementing the SMART initiative and systematically improving their businesses. The top+ initiative also entails organizing cross-Sector and cross-Division knowledge transfer and awarding prizes for outstanding projects.

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top+
Cross-business activities
Energy Healthcare

Services

Leadership Framework

Industry

Infrastructure & Cities

smart Learning Campus Supply chain management

Our responsibility doesn’t end when we complete a sale. With both conventional product services and new, trailblazing service offerings, we want to further increase customer loyalty. As a key component of our growth strategy, services generate reliable revenue with less capital intensity than other business activities. We’re rigorously exploiting our strengths as an integrated technology company in order to expand our innovative services. We’re also exploiting our Company-wide expertise in the area of procurement. We’ve established a uniform system of supply chain management to realize synergies, cut costs, guarantee high quality, ensure on-time delivery, provide efficient logistics and better utilize our suppliers’ power of innovation. The system – which includes on-site reviews of supplier operations and an energy efficiency program for suppliers – is also helping us achieve our ambitious sustainability goals by minimizing sustainability-related risks and enabling us to actively leverage opportunities in our supply chain. Company-wide cooperation across organizational boundaries creates a vast range of opportunities: close collaboration generates the trust we need to power our integrated technology company faster and more effectively into the future.
COMBINED MANAGEMENT REPORT, PAGES 101-102 AND 126-127

Cross-business activities: To optimally leverage the potential of our integrated technology company, we ensure that knowhow is continuously shared Company-wide in all areas that concern our organization as a whole. A few examples of our many cross-business activities are highlighted in the illustration above.

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Proximity, page 8 Ideas, page 20 The integrated technology company Strength, page 34 Networking, page 54

Diversity

Creating trust through diversity

Partnering across borders
Diversity provides inspiration, unleashes creative potential and expands horizons – all of which makes it vital to our success. That’s because people from different cultural and educational backgrounds approach problems completely differently – and when working together as a team, they often find the best solutions. Of course, it’s all the better when people find it easy to engage in dialogue across borders, languages and cultures. At Siemens, our Teamcenter software solution is promoting international cooperation at many company locations. What are the aims of Teamcenter? To better leverage the opportunities presented by diversity, increase work efficiency, develop the best solutions and bring them to market faster. Allen Wang, James D. Palasek, Tesha Best and Christian Mellenthin (left to right) experience what this means in practice every day. Thanks to Teamcenter, they can work closely with colleagues around the world without leaving their offices in the U.S. city of Tucker, Georgia. Read on to learn how this software platform is making them feel even more closely integrated into the Siemens family.

teamcenter

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Background following assignments in the german cities of erlangen and Nuremberg as well as in the vietnamese capital of hanoi, amber Sherman began managing Siemens key accounts in South Carolina, georgia, florida and the Caribbean in 2012. Sherman holds a master’s of international business in marketing degree from the university of erlangen and georgia State university in atlanta. She’s especially proud to be working with major customers, for example, at the u.S. manufacturing plants of renowned european carmakers. What Sherman particularly appreciates about Siemens is the opportunity to collaborate on successful projects with colleagues in other countries.

Amber Sherman, Customer care

Atlanta, Georgia, U.S.

teamcenter – Process chain a sample process chain illustrates how an international project is completed using teamcenter. Since the software has not yet been fully implemented at Siemens Ce, some steps are still in the test phase.

negotiating the order – atlanta amber Sherman consults with an industry customer in florida about a cabinet that will house the controls for the electric motors at a production plant. the special challenge: only very little space is available.

On the ground in key markets worldwide “It doesn’t matter where at Siemens you work or what culture you call home: we all share the same goals. that’s probably the best thing you can learn at the Company.” James d. Palasek speaks from experience. the engineer from tucker, georgia has worked at Siemens for twelve years, partnering closely with colleagues in Mexico, germany, China and India. his specialty is developing components and modules for control cabinets. here – as in all our business fields – we’re aiming to achieve a leading position in all our markets worldwide. but only very few components are truly universal: technical regulations, industry standards and even climate conditions vary too much from place to place. that’s why we have developers working close to our customers, on site in key markets. and that includes tucker, georgia, one of the 15 worldwide locations of Control Components and Systems engineering (Ce).

Siemens Control Components and Systems engineering (Ce) is a business unit in the Industry automation (Ia) division of Siemens’ Industry Sector. Ce specializes in products for industrial control systems, industry-specific products and systems based on industry platforms, and related services.

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Jayne Beck, Technical order processing Background degrees in general engineering from the university of Illinois and business administration from North Central College in Naperville, Illinois, make Jayne beck uniquely qualified to navigate the intersection of business and technology. the enthusiastic teamcenter user has worked at Siemens for 24 years and is proud of her employer – especially since her colleagues around the world are intensely committed to generating customer satisfaction.

West Chicago, Illinois, U.S.

Planning the technology – West chicago Jayne beck configures control cabinets. upon determining that our 3Sb3 series does not have a suitable pushbutton with safety certification for the u.S. market, beck uses teamcenter to make inquiries at the product management center in fürth, germany.

teamcenter

but like the employees at the other facilities, James d. Palasek is active beyond the borders of his home market. “our colleagues in germany help us market our u.S. products in europe, for example. by the same token, we reciprocate when they want to bring products developed for europe to the u.S. market.” Teamcenter – Collaborative software helmut Staufer from Ce’s product management center in fürth, germany goes even further: “New and redesigned products should work in lots of markets or must be easily adaptable. I’m continually discussing this issue with our international developers – by web conference, phone and e-mail.” In this context, optimizing the pushbuttons of our SIrIuS series for various markets is just one of many examples. Xu huihui, a development engineer in Suzhou,

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Background helmut Staufer is an electrical engineer who joined Siemens in 2010. he’s been responsible for control and signal devices at Ce’s global product management center since 2011. Staufer’s earlier assignments included a six-month stint in Suzhou, China, where he was inspired by the optimism and curiosity of his Chinese colleagues and also pleased by their keen interest in european soccer.

Helmut Staufer, Product management

Fürth, Germany

clarifying availaBility – fürth helmut Staufer looks into Jayne beck’s inquiry. and what does he find? Siemens produces a suitable pushbutton in China, but it lacks the ul safety certification that’s required in the u.S. via teamcenter, he asks his colleagues in Suzhou if it would be possible to obtain ul certification for the pushbutton. Jayne beck will automatically be kept up-to-date on any new developments. teamcenter ProPosing a solution – suzhou Xu huihui uses teamcenter to call up the inquiry on his screen – including product data, blueprints and 3d views. he concludes that the pushbutton would meet all u.S. specifications if a different material were used and passes this information on to helmut Staufer and Jayne beck.

near Shanghai in China, who’s been charged with this task, uses teamcenter to consult with Staufer and colleagues in different countries. teamcenter’s benefits immediately won over the eager networkers in fürth, tucker, Suzhou and elsewhere. Xu huihui is thrilled: “With teamcenter, I can work with anyone, anywhere, anytime, using a single platform. there’s no better way to share information, blueprints, Cad data and 3d views.” at Siemens in West Chicago, Illinois, u.S., Jayne beck has been using teamcenter from the very beginning. What she appreciates most are the uniform processes: “our development teams used to work with lots of different software solutions. that made data transfer much more difficult. Now teamcenter gives us a single platform for sharing product and design data and managing the entire product lifecycle – from the initial idea to the design, manufacture and ongoing development of our products.”

to learn more, please see:

teamcenter: turBo drive for teamWork, Page 75

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Background
Xu huihui was already testing software for Siemens when he was a student at yancheng Institute of technology. after earning a bachelor’s degree in mechanical design, manufacture and automation, he joined Siemens in Suzhou in 2008. following various assignments in the field of It, Xu is currently working in development. his experience here is that teamcenter is very easy to learn and is substantially improving international collaboration.

Suzhou, China
Xu Huihui, Development (left) lu guomin, local teamcenter coordinator (right)

looking at the Bottom line – fürth helmut Staufer brings in the responsible product manager, and they come to the conclusion that it would make good business sense to produce and certify the pushbutton for the u.S. market. Staufer then gives the green light for production to begin.

ordering PrototyPes – West chicago Jayne beck uses product data and 3d views to virtually install the pushbutton in the control cabinet. once the customer’s order confirmation has been received, beck uses teamcenter to order prototypes from Suzhou for u.S. safety certification testing, which she assigns to the Siemens test lab in tucker.

Benefits across the board – for employees and customers What are the advantages of using teamcenter? Streamlined workflows, no more reduplicated processes and even faster solutions. and something that wasn’t a primary objective but may just be teamcenter’s greatest benefit: a feeling of belonging that keeps on growing, transcending national and cultural boundaries. every day, all around the world, employees at Ce and many other Industry Sector units are experiencing how teamcenter improves collaboration among women and men with different skills, knowhow and qualifications – and enables them to get to know one another better. Jayne beck values diverse teams for yet another reason: “our customers, like our employees, come from a wide range of cultural backgrounds. all around the globe, we have colleagues who are especially good at putting themselves in our customers’ shoes. and their knowledge and insights equip us to develop better products and solutions.”

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Background
Wang yan Qin earned a master’s degree from hefei university of technology before joining Siemens in Suzhou in 2007. her responsibilities include vetting and evaluating suppliers and monitoring the quality of the components they supply. Wang yan Qin is very interested in other cultures. Since visiting germany, she raves about potato dumplings, even though they taste much different from the dumplings she’s familiar with from home.

Suzhou, China

lu guomin, local teamcenter coordinator (foreground), Xu huihui, develoPment (Background)

Wang Yan Qin, Supplier quality management (left)

checking the material – suzhou In teamcenter, Wang yan Qin has all the details at her fingertips. She determines that the material is suitable for the u.S. market. further review shows that the material can be processed problem-free using the equipment and machinery at our facility in Suzhou. Wang changes the status of the part in teamcenter to “approved.”

Working out the details – suzhou Xu huihui finalizes the design drawing and product description for the pushbutton. however, through the teamcenter data pool, he discovers that the material intended for use has not yet been approved for production at Siemens. Xu huihui uses teamcenter to initiate approval of the material by Wang yan Qin.

Embracing diversity as an opportunity at Siemens, our unwavering commitment to diversity is firmly anchored in our corporate strategy. for a company that’s active in some 190 countries and generates more than two-thirds of its revenues outside its home market, diversity is more than simply a business necessity. our people see diversity as offering great opportunities for their professional and personal development. “Working with colleagues around the world expands my horizons and changes my perspective. I can learn a lot at Siemens,” says Xu huihui’s colleague Wang yan Qin. helmut Staufer draws particular inspiration from working with his Chinese counterparts: “they’re always very optimistic, positive and committed to their work.” James d. Palasek also feels a very personal gain: “I learn a lot about other cultures and their working style and can apply these insights to my own work.” today, countless employees throughout our Company are passionate and motivated about networking and learning from one another in their day-to-day work.

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James D. Palasek, Development and certification (left) Background after several assignments at Siemens in the u.S. and Mexico, James d. Palasek currently heads a team of developers at Ce in tucker, georgia. Palasek holds a bachelor’s degree in industrial technology and engineering from Iowa State university and has been with Siemens since 2000. he’s always delighted when he encounters colleagues in europe who’ve read his favorite book, the cult classic The Hitchhiker’s Guide to the Galaxy. a few years ago, Palasek still had to send data and blueprints to China manually. today, teamcenter does the job automatically.

Tucker, Georgia, U.S.

teamcenter

checking ul conformity – tucker the pushbutton prototypes have arrived. James d. Palasek tests them for ul conformity on the basis of the specifications stored in teamcenter. after the prototypes pass muster, Palasek saves the official ul certification for the u.S. market in teamcenter. manufacturing PrototyPes – suzhou Xu huihui is immediately notified via teamcenter that the new material has been granted internal approval. he then requests that prototypes be manufactured in Suzhou and sent to tucker.

The global Siemens family despite all the differences in cultural and educational background, the members of the extended Siemens family have many things in common. helmut Staufer enjoys having a brief personal conversation with his colleagues before every web conference. and James d. Palasek has even gotten swept up in european soccer fever: “I root for the german team, unless they happen to be playing against the united States.” Close collaboration strengthens the feeling of being part of the global Siemens family. amber Sherman from Industry Sales in atlanta experienced a sense of community at her international posts: “Wherever Siemens takes me today, I find that we basically speak the same language.” and that language isn’t german, english or Chinese. Philipp bierschneider, who is responsible for implementing teamcenter at Ce, comes from amberg, germany, but has experienced the language of the Siemens family at locations around the world: “My colleagues are really friendly and very helpful. We work not so much on an organization-to-organization basis but more hand-in-hand and person-to-person.”
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Background as soon as she finished her bachelor’s degree in mechanical and electrical engineering at Northwestern university in evanston, Illinois, Jinglu Wen started gaining hands-on experience at Siemens in West Chicago, where her job involves constructing various 3d models and modules. Jinglu uses teamcenter to discuss the results of her work with experienced colleagues around the world – and she’s very gratified to receive their strong support.

Jinglu Wen, Development (right)

West Chicago, Illinois, U.S.

ordering the Product – West chicago via teamcenter, Jayne beck is also notified of the ul certification for the u.S. market. She orders the necessary number of redesigned pushbuttons directly in Suzhou and sends the control cabinet blueprints to production.

adding the Product – fürth helmut Staufer learns through teamcenter that the pushbutton now meets all requirements for the u.S. market. Staufer adds the button, together with all the relevant data and 3d views, to the global database of Siemens products. effective immediately, the new product can be officially ordered anywhere in the world.

team

cente

r

comPleting the Project – West chicago once the control cabinet has been shipped, Jayne beck closes her inquiry. together with her colleagues around the world, she will always have online access to all the details of the project through teamcenter. this will make it possible to respond quickly to requests for service, spare parts and follow-up orders, which in turn will increase customer satisfaction.

Brigitte Ederer, Member of the Managing Board of Siemens AG, Head of Corporate Human Resources and Labor Director

“The diversity of our people – with their wide range of backgrounds and skills – fosters the wealth of ideas at our company and strengthens our power of innovation.”
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TeamcenTer – The Turbocharger for Teamwork
Reach the customer twice as fast. Produce and bring to market while the competition is still in the planning phase. Put innovation on the fast track. And all this with 280,000 product variants, 60,000 employees and production facilities around the world. This is the ambitious vision of our Drive Technologies and Industry Automation Divisions. Integrate Enable Collaborate (IEC) is what we call our program for greater speed and maximum efficiency. The goal for the years ahead is to bring new products to market much faster, in some cases even twice as fast as in the past. This will require perfect teamwork: developers, product managers, designers, production planners and many other specialists will have to work as one. And they’ll have to enrich the data pool with their product and process knowhow – whether in the area of computeraided design (CAD), office applications (such as word processing) or computer-aided manufacturing (CAM). This is the only way to make all information available anywhere, anytime – including everything from the initial idea for a product to production planning, user instructions and service feedback. The cycle ends when development of the next product generation begins.

Project management Portfolio management requirements management Idea management Customer experience / feedback from the field

Cad mechanics, e.g. NX®

Cad electronics

Software development

teaMCeNter

Simulation

Product data management digital production

tools and systems from external suppliers

documentation management

teamcenter makes it possible to store and process all the development and production process data for our products in a single central location that’s accessible worldwide. the system’s unique open architecture enables users to work with various specialized development tools, even those of other companies.

Teamcenter is the name of the Siemens software that makes smart product lifecycle management (PLM) across borders and time zones a reality. Some seven million users around the world are already working with Teamcenter or other products from Siemens PLM Software in Plano, Texas, U.S. – including nearly all major automotive manufacturers. It comes as no surprise that we’re also deploying this successful software platform in-house. Roughly 20,000 employees at our Drive Technologies and Industry Automation Divisions will soon be using Teamcenter at 90 locations in 15 countries. The IEC program is unique in its size, its complexity and its broad range of applications. That’s why Teamcenter developers are eagerly awaiting feedback from those who are introducing and using the software. This feedback will be taken into account when developing the next generation of Teamcenter. And our interest is actually twofold, because at Siemens we don’t just sell our products and solutions; we use them.
WWW.siemens.com/ar/diversity WWW.siemens.com/ar/diversity-movie WWW.siemens.com/teamcenter
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Employees – The source of our strength
We’re mastering the major challenges of our time, continuously breaking new ground and making technology history. But these achievements are only possible because we have outstanding employees who – through their expertise, abilities and dedication – have made our Company the global powerhouse that it is today. That’s why lifelong learning, continuous personal development and the fostering of diversity and employee commitment are the foundations of our employee and management culture.

Siemens is only as strong as its employees. We expect outstanding performance from our people. In return, we support them in unleashing their full potential. Our employees’ creativity and pioneering spirit are the source of our strength. To build on this foundation and grow even further, we have to attract and retain the best minds in the world. By providing them with additional opportunities to increase their expertise, we also create an atmosphere of trust and constructive cooperation that enables us to break down professional, linguistic and national barriers throughout our organization. To outperform our competitors in the global battle for talent, we’re partnering with the most prestigious universities in the world’s most important markets. Our Siemens Graduate Program, for example, provides top university graduates with an ideal springboard for launching their professional careers. We give these young talents – and all Siemens employees – the chance to continuously develop their capabilities, master new challenges and assume ever-greater responsibility. As part of our educational offerings, we’ve set up uniform Core Leaning Programs worldwide to make cooperation within our integrated technology company even more effective by enhancing employee knowhow in key areas like project management, software development, procurement and human resources. Our central intranet education portal alone offers

our global workforce more than 1,000 business-oriented courses and programs. Our employees are as diverse as the customers we serve – all around the world. People from some 140 different countries work at our ten largest Regional Companies alone. Our employees’ diverse languages, cultures and religions are a source of great strength. Multi-cultural teams with a broad range of expertise and perspectives promote the wealth of ideas within our Company and enhance our power of innovation.

With their wide array of skills, experience and qualifications, our people give us a decisive competitive edge in the global arena.
To foster diversity throughout our organization, we’ve launched our Diversity Initiative, which bundles targeted measures and projects for ensuring and further enhancing diversity at all levels of our Company. Examples include our global network of about 160 Siemens Diversity Ambassadors, who identify diversity issues Company-wide, and our Global Leadership Organization of Women (GLOW). To help our employees better understand one another, we’ve also established intercultural training programs and initiatives aimed at eliminating unconscious prejudices.

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Siemens employees worldwide in fiscal 2012

Siemens employee shareholders in fiscal 2012

Expenditure for continuing education in fiscal 2012

23%
Americas

127,000

17%

employees

Asia, Australia

60%

1/3

€283 million total of all employees

€693 per employee

Europe, Commonwealth of Independent States, Africa, Middle East

Worldwide presence: We’re active in all regions of the world. And our workforce reflects it. The number of Siemens employees outside Europe has grown continuously in recent fiscal years.

Employee shareholders: We’re proud that roughly 127,000 Siemens employees took part in employee share programs in fiscal 2012. This is a clear sign of our employees’ trust in our values, our vision and, in short, the future of our Company.

Continuing education: We provide employees at all levels of our Company with an opportunity to unleash their full potential. In fiscal 2012, we again increased our total expenditure for continuing education as well as our educational outlays for each individual employee.

To leverage our employees’ wealth of ideas for the benefit of our entire organization, we’ve launched the Ideas, Impulses, Initiatives (3i) Program – a Company-wide idea management initiative. And it’s paying off: we’ve put over 500,000 employee suggestions into practice over the last five years – achieving savings of more than €1.1 billion. But we want to do even better. That’s why we conduct worldwide surveys every year to measure employee satisfaction and pinpoint areas for further improvement. We take the survey findings very seriously since we know that only highly motivated employees who identify with our Company can achieve the excellent results we need to remain successful. Our employees’ commitment, expertise and performance are one of our greatest strengths.
FINANCIAL REPORT, PAGES 107-109 SIEMENS SUSTAINABILITY REPORT, PAGES 70-73 www.SIEMENS.COM/EMPLOYEES

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One Siemens – Our path to sustainable value creation
As an integrated technology company, we have a strong setup. One Siemens – which defines metrics for revenue growth, capital efficiency, profitability and the optimi­ zation of our capital structure – is the framework for our Company’s sustainable development. www.siemens.com/one-siemens Framework for sustainable value creation
To increase our revenue, use our capital more efficiently and more profitably and optimize our capital structure – these are our goals. Goals that we’ve further defined with the clear metrics of our One Siemens framework. Taken together, these metrics comprise a balanced system that provides the basis for generating a sustainable increase in value. We have three concrete objectives. First, we want our revenue growth to outpace that of our key competitors. Second, we want our growth to be capital efficient. That’s why we’ve defined an ambitious target corridor for return on capital employed. At the Sector level, we want to continuously achieve top margins compared to our competitors across industry cycles. And third, we’ve set a target for our capital structure that will enable us to achieve sustainable, strongly based profitability.
To learn more, please see:

comBineD mAnAGemenT RePoRT, PAGes 64-65

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Use the power of Siemens Focus on innovation-driven growth markets

Get closer to our customers

Revenue growth Growth > most relevant competitors

Capital structure Adjusted industrial net debt / EBITDA

Capital efficiency / Profitability Return on capital employed / top margins throughout business cycles

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Focus on innovationdriven growth markets

Strengthen our portfolio Be a pioneer in technologydriven markets Provide a leading environmental portfolio

Focus on innovation-driven growth markets
Our pioneering spirit is a basis of our success. Our activities are focused on inno­ vation­driven markets – markets with long­term growth potential. To play a leading role in these markets, we’re continuously strengthening our portfolio and further expanding our Environmental Portfolio.
To learn more, please see:

www.siemens.com/ one-siemens

Be a pioneer in technology-driven markets We’ve been delivering innovative engineering achievements for 165 years, continuously tapping new markets and occupying new growth fields. To enhance this special strength, we’re concentrating on innovation- and technology-driven growth markets – on markets with potential for our future core business. We’re strengthening our power of innovation by leveraging synergies worldwide and increasingly utilizing external expertise. We’ve opened our lab doors to universities, research institutes and industry partners. More than 1,000 cooperative research projects a year enable us to respond quickly to the new requirements of local and global markets. Strengthen our portfolio Only by keeping our portfolio focused on attractive future-oriented markets can we achieve profitable long-term growth. That’s why we practice intensive, systematic portfolio management. The cornerstone of our portfolio policy is the principle that our businesses must capture and maintain No. 1 or No. 2 positions in their respective markets. The prerequisites for profitability and growth, these leading positions enable us to sustainably increase Siemens’ value. As the history of our Company proves, we’ve always been successful when we’ve been at the forefront of technological innovation. Size alone is not enough to ensure long-term success. This is the guiding principle of all significant changes in our portfolio. Provide a leading environmental portfolio Our Environmental Portfolio, which bundles products and solutions that contribute to environmental and climate protection, has captured an outstanding position on the technology market worldwide and is one of our strategic growth drivers. In fiscal 2012, the Portfolio generated revenue of €33.2 billion and made a substantial contribution to climate protection. At the same time, our ecofriendly products and solutions enabled customers worldwide to slash their CO2 emissions by 332 million tons – an amount equal to some 41% of the CO2 emissions generated in Germany in 2010.

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Get closer to our customers

Expand our service business Grow in emerging markets Intensify our customer focus

Get closer to our customers
To learn more, please see:

www.siemens.com/ one-siemens

We want to be close to our markets and a strong local partner to our customers throughout the world. That’s why – besides playing a leading role in the industrial countries – we’re also successfully developing and producing more and more inno­ vative products and solutions in the emerging countries. The professionalization and expansion of our service offerings is another of our strategic aims since innovative services harbor a wealth of new business opportunities and intensify customer loyalty.

Grow in emerging markets The so-called BRIC countries (Brazil, Russia, India and China) and the up-and-coming nations of Asia, South America and the Middle East are achieving high levels of economic growth, in which we intend to participate. Over the past few years, we’ve achieved strong growth in the emerging countries. The demand for economical products and solutions tailored to local customer requirements is particularly strong in these countries. To meet this challenge, we’ve launched our SMART (simple, maintenance-friendly, affordable, reliable and timely-to-market) initiative, which offers new products targeted for the entrylevel segment. Expand our service business To get closer to our customers – for us, this means providing outstanding services that increase customer value. With our comprehensive service offerings, we want to achieve the kind of long-lasting customer satisfaction that makes us the first choice for follow-up investment. It’s not only our sales organization that nurtures close relationships with our customers and fosters their loyalty: above all, it’s our local service employees, who – in some instances building on relationships that go back decades – have detailed knowledge of our customers’ needs and requirements. For these reasons, we want to consistently expand our service business in order to leverage additional potential for profitable growth. Intensify our customer focus Our customers expect comprehensive, single-source consulting that’s geared to their individual needs. And it’s our goal and obligation to meet this expectation everywhere in the world. For us, a strong customer focus doesn’t just mean having an in-depth understanding of our customers’ unique requirements; it also means providing them with customized solutions. Successful customer support requires excellent employees, an efficient setup and effective methods. Only when these three factors have been fully integrated to form a unified whole can we expand our strategic partnerships and create value for our customers.

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Use the power of Siemens Empower our diverse and engaged people worldwide Encourage lifelong learning and Stand for development integrity

Use the power of Siemens
To rank among the best, you have to excel – in everything you do. And that means you need an outstanding team. At Siemens, we have extraordinarily dedicated em­ ployees. And we go to great lengths to continuously expand their knowledge while promoting equal opportunity and nurturing cooperation among men and women from different countries and cultural backgrounds. Our clear and unambiguous commitment to integrity guides us in our ongoing pursuit of business success. Our actions are governed by binding principles to which we expect our customers, suppliers and employees to adhere.
To learn more, please see:

www.siemens.com/ one-siemens

Encourage lifelong learning and development One of our greatest strengths is our outstanding workforce. Our employees’ expertise, skills and dedication have made Siemens the company it is today. Building on this foundation, we’re aiming to grow even further. And one means to achieving this strategic end quickly and effectively is continuous learning, which not only enhances our people’s knowhow but also directly fosters their pioneering spirit, initiative and willingness to assume increasing responsibility. All around the world, we give our people at all levels the chance to fully develop their potential. Empower our diverse and engaged people worldwide Siemens is a global powerhouse with a highly diverse workforce. People from some 140 countries work at our ten largest Regional Companies alone. That’s why we take a systematic approach to diversity. Multifaceted teams of employees with a broad range of skills, experience and qualifications promote the wealth of ideas at our Company and strengthen our power of innovation. To find out how we can further boost workforce motivation, we regularly conduct employee surveys worldwide in 40 languages. The survey input is systematically applied to enhance our processes. Stand for integrity We’re committed to fair competition. In our efforts to succeed on the world’s markets, we aim to comply with all applicable laws and regulations. Ethical business conduct is a non-negotiable component of our corporate culture. We’ve formulated transparent and binding principles of behavior and taken a clear and unmistakable position in the battle against corruption. We also fulfill our responsibilities to society, the environment and our employees. For us, occupational safety, health management and the conservation of natural resources are all part of ethical business conduct.

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We will emerge from the current economic crisis with renewed strength. Supported by our new Company­wide program to reduce costs, increase productivity, enhance efficiency and improve our processes and market access, One Siemens – our framework for sustainable value creation – is pointing the way forward. As an integrated technology company, we have a virtually unparalleled position in our global markets – a position that’s made us a true partner of trust to our customers, our shareholders and our employees worldwide. Trust unites us – Building strong partnerships for 165 years

Financial Report 2012

Trust unites us – Building strong partnerships for 165 years

key figures fiscal 2012 1, 2 in millions of €, except where otherwise stated FY 2012 FY 2011 Actual % Change Adjusted 3

new orders – continuing operations
FY 2012 FY 2011 76,913 85,166 (13)% 3

Volume
Continuing operations New orders Revenue

76,913 78,296

85,166 73,275

(10)% 7%

(13)% 3%

reVenue – continuing operations
FY 2012 FY 2011 78,296 73,275 3% 3

income from continuing operations
FY 2012 FY 2011 5,184 7,376 (30)%

earnings
Total Sectors Adjusted EBITDA Total Sectors Profit in % of revenue (Total Sectors)

FY 2012

FY 2011

% Change

9,471 7,543 9.5% 9,788 5,184 5.77 4,590 5.09

10,404 9,442 12.8% 10,701 7,376 8.23 6,321 7.04

(9)% (20)%

Basic earnings per share (in €) – continuing operations 4
FY 2012 FY 2011 5.77 8.23 (30)%

Continuing operations Adjusted EBITDA Income from continuing operations Basic earnings per share (in €) 4 Continuing and discontinued operations Net income Basic earnings per share (in €) 4 (27)% (28)% (9)% (30)% (30)%

roce (adjusted) – continuing operations
FY 2012 FY 2011 17.0% 25.3%

capital efficiency
Continuing operations Return on capital employed (ROCE) (adjusted)

FY 2012

FY 2011

17.0%

25.3%

Target corridor: 15 – 20%

free cash flow – continuing operations
FY 2012 FY 2011 4,790 5,918 (19)%

cash performance
Continuing operations Free cash flow Cash conversion rate Continuing and discontinued operations Free cash flow Cash conversion rate

FY 2012

FY 2011

4,790 0.92 4,562 0.99

5,918 0.80 5,150 0.81

adjusted industrial net deBt / adjusted eBitda – continuing operations 5
FY 2012 FY 2011 0.24 (0.14)

liquidity and capital structure
Cash and cash equivalents Total equity (Shareholders of Siemens AG) Net debt Adjusted industrial net debt

September 30, 2012

September 30, 2011

10,891 30,733 9,292 2,396

12,468 31,530 4,995 (1,534)

Target corridor: 0.5 – 1.0

September 30, 2012

September 30, 2011 Continuing operations Total 6

employees (in thousands)
Employees Germany Outside Germany

Continuing operations

Total

6

370 119 250

410 130 280

359 116 243

402 127 275

1

New orders; Adjusted or organic growth rates of revenue and new orders; Total Sectors Profit; ROCE (adjusted); Free cash flow and cash conversion rate; Adjusted EBITDA; Net debt and adjusted industrial net debt are or may be non-GAAP financial measures. Definitions of these supplemental financial measures, a discussion of the most directly comparable IFRS financial measures, information regarding the usefulness of Siemens’ supplemental financial measures, the limitations associated with these measures and reconciliations to the most comparable IFRS financial measures are available on our Investor Relations website under www.siemens.com/nongaap October 1, 2011 – September 30, 2012.

3 4

Adjusted for portfolio and currency translation effects. Basic earnings per share – attributable to shareholders of Siemens AG. For fiscal 2012 and 2011 weighted average shares outstanding (basic) (in thousands) amounted to 876,053 and 873,098 shares, respectively. Calculated by dividing adjusted industrial net debt as of September 30, 2012 and 2011 by adjusted EBITDA. Continuing and discontinued operations.

5 6

2

segment information (as of september 30, 2012)
Energy
Revenue Profit

€ 27.537 billion € 2.159 billion

Healthcare

Revenue

Profit

€ 13.642 billion € 1.815 billion

Our Energy Sector offers a wide spectrum of products, services and solutions for the generation and transmission 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 Healthcare Sector offers customers a comprehensive portfolio of medical solutions across the treatment 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 Financial Services (SFS), financing to assist customers in purchasing the Sector’s products.

Industry

Revenue

Profit

€ 20.508 billion € 2.467 billion

Infrastructure & Cities

Revenue

Profit

€ 17.585 billion € 1.102 billion

Our Industry Sector offers a broad spectrum of products, services and solutions for the efficient use of resources and energy and improvements of productivity and flexibility in industry. Its integrated technologies and holistic solutions address primarily industrial customers, such as process and manufacturing industries. The portfolio spans industry automation, industrial software and drives products and services, system integration and solutions for industrial plant businesses. After the close of fiscal 2012, the Sector decided to dispose of its business with mechanical, biological and chemical treatment and processing of water.

Our Infrastructure & Cities Sector offers a wide range of sustainable technologies for metropolitan centers and urban infrastructures worldwide, such as integrated mobility solutions, building and security systems, power distribution equipment, smart grid applications and low- and medium-voltage products.

Equity Investments

Profit

€ (549) million

Financial Services

Profit Total assets

€ 479 million € 17.405 billion

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 are not allocated to a Sector, SFS, Centrally managed portfolio activities, Siemens Real Estate (SRE), Corporate items or Corporate Treasury for strategic reasons. Our main investments within Equity Investments are our stake of approximately 50.0% in Nokia Siemens Networks B.V. (NSN), our 50.0% stake in BSH Bosch und Siemens Hausgeräte GmbH (BSH) as well as our 49.0% stake in Enterprise Networks Holdings B.V. (EN).

Financial Services (SFS) provides a variety of financial services and products both to third parties and to other Siemens entities and their customers. SFS has three strategic pillars: supporting Siemens’ Sectors with financing solutions for their customers, manage financial risks of Siemens and offering third-party financing services and products.

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Contents to our shArehoLders A.1 LetterFinanCial RepoRt

A.1 A.2 A.3 A.4

1 10 18 12

Dear shareholders,
B.
B.1 B.2

Letter to our Shareholders Managing Board of Siemens AG Report of the Supervisory Board The Siemens share / Investor relations

Corporate Governance
22 28

Fiscal 2012 was not an easy year for us. Even though we achieved one of our best results ever – despite B.3 B.4 the difficult economic environment worldwide – we B.5 didn’t fully attain our goals of outperforming the market and our competitors.
29 31 44

Corporate Governance Report Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) Compliance Report Compensation Report (part of the Combined Management Report) Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

C.
C.1 C.2

Combined Management Report
50 64

Business and economic environment Financial performance measures the initiative will enable us to make effective, concrete adjustments in our operations – changes 69 C.3 Results of operations we’ll have to make if we’re to continue generating profitable growth of the kind we’ve achieved 82 C.4 Financial position in last few years. position C.5the93 Net assets 95 C.6 Overall assessment of the economic position 96 C.7 my colleagues on the Managing Board and myself, the trust that you’ve placed in our Company Subsequent events For 97 C.8 Sustainability is an invaluable source of support. Your commitment creates trust, and trust unites us all: you, our 111 C.9 Report on expected developments and shareholders; our 370,000 employees worldwide; our customers in the industrial countries and associated material opportunities and risks emerging Compensation Report, business, Governance and the scientific community; and, above C.10 129 markets; our partners in Corporate government statement pursuant to Section the of the German Commercial Code, all, the countless people around289a globe who use Siemens products and solutions every day. Takeover-relevant information and explanatory report C.11 130 Siemens AG (Discussion on basis of German Commercial Code) Our strength – Customer proximity C.12 134 Notes and forward-looking statements

To move forward, we’ve launched a new Company-wide program. Presented in November 2012,

This year, our Annual Report highlights the ways in which we’re creating trust by partnering closely with our customers worldwide and developing innovative technologies that meet the needs of people D. with different interests, from different cultures and with different aims and requirements. In five

Consolidated Financial Statements
137 138 139 140 142 232

136 D.1 Consolidated to show you Income special reports, we’d likeStatements of how our products and solutions are improving the lives of

people everywhere.
D.3 D.4 D.5 D.6 D.7

D.2

Consolidated Statements of Comprehensive Income Consolidated Statements of Financial Position Consolidated Statements of Cash Flow Consolidated Statements of Changes in Equity Notes to Consolidated Financial Statements Supervisory Board and Managing Board

E.
E.1 E.2 E.3 E.4 E.5 E.6 E.7 E.8 E.9

Additional Information
240 241 243 244 246 248 250 251 252

Responsibility statement Independent Auditors’ Report Statement of the Managing Board Five-year summary Glossary Index Further information and information resources Financial calendar Company structure

7 1

Contents Financial Report

A.

To our Shareholders

Our first report takes us to Bangalore, India, where explosive growth is pushing the local infrastructure to its limits. In planning a new airport for the booming South Asian metropolis and its surrounding region, the operators selected Siemens to supply a complete tailor-made solution and provide longterm technical support. This close partnership is a sign of enormous trust, since it entails tremendous responsibility: the reliable operation of such vital infrastructure facilities is indispensible for the Bangalore region’s further economic development. From India, we move on to the town of Beuren in southern Germany, where our technology has helped give a young cancer patient new hope. In a long-term partnership, our engineers cooperated with doctors at Tübingen University Hospital to develop the Biograph mMR scanner, which enables physicians to monitor the impact of cancer therapies while minimizing radiation exposure. To the relief of 15-year-old Christian and his family, the Biograph mMR showed that his treatment had been successful. And we’re very pleased to report that – after a year of uncertainty – the young man is back in school and again leading a normal life. A third report provides impressive evidence of how our IT-based services are uniting people all around the world. Johannes Zuckschwerdt is responsible for developing new services for a manufacturer of highly specialized machine tools in southwestern Germany. His customer, Ton de Bruine, heads a company that produces metal components in the Netherlands. Thanks to our ePS Network Services, Zuckschwerdt can monitor the operation of de Bruine’s machines remotely, via an encrypted online server. By notifying his customer when machine parts need to be replaced and indicating how workflows can be improved and production increased, Zuckschwerdt saves de Bruine time and money while helping him meet tight deadlines and enhance the efficiency of his production processes. In a fourth report, you’ll meet Jens Hald Jensen, head of the project team that’s assembling and testing six-megawatt wind turbines in the Danish town of Østerild. These powerful turbines are just one of the innovative products and solutions we’re creating to help shape the future of energy and tap the opportunities that Germany ’s transition to a new energy system will provide in many other countries worldwide. We want to pass on to our children a world that’s as healthy, bountiful and beautiful as the one we’ve inherited. And we’re convinced that we’ll reach this goal if business leaders and government policymakers work together to tackle the challenges ahead, taking a balanced, targeted approach to achieving a reliable, clean and affordable energy supply. I urge you to take a look at all five special reports. They ’ll provide you with an inside look at our day-to-

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Website day operations and at the ways we’re leveraging our strengths as an integrated technology company, www.siemens.com/annual-report increasing our customers’ competitiveness, reinforcing our own business success and improving the

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lives of people worldwide through our investments in research and development – investments that totaled €4.2 billion in fiscal 2012.

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Key figures / Segment information

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Contents FinanCial RepoRt

A.1 A.2 A.3 A.4

1 10 12 18

Letter to our Shareholders Managing Board of Siemens AG Report of the Supervisory Board The Siemens share / Investor relations

B.
B.1 B.2

Corporate Governance
22 28

B.3 B.4 B.5

29 31 44

Corporate Governance Report Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) Compliance Report Compensation Report (part of the Combined Management Report) Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

C.
C.1 C.2 C.3 C.4 C.5 C.6 C.7 C.8 C.9 C.10

Combined Management Report
50 64 69 82 93 95 96 97 111 129

C.11 C.12

130 134

Business and economic environment Financial performance measures Results of operations Financial position Net assets position Overall assessment of the economic position Subsequent events Sustainability Report on expected developments and associated material opportunities and risks Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report Siemens AG (Discussion on basis of German Commercial Code) Notes and forward-looking statements
Peter Löscher President and CEO of Siemens AG

D.
D.1 D.2 D.3 D.4 D.5 D.6 D.7

Consolidated Financial Statements
136 137 138 139 140 142 232

Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Financial Position Consolidated Statements of Cash Flow Consolidated Statements of Changes in Equity Notes to Consolidated Financial Statements Supervisory Board and Managing Board

E.
E.1 E.2 E.3 E.4 E.5 E.6 E.7 E.8 E.9

Additional Information
240 241 243 244 246 248 250 251 252

Responsibility statement Independent Auditors’ Report Statement of the Managing Board Five-year summary Glossary Index Further information and information resources Financial calendar Company structure

7 3

Contents Financial Report

A.

To our Shareholders

Our goal – Excellence
We’re closely connected with people everywhere – with workers in factories, with the operators and users of infrastructure facilities, with engineers in laboratories and research centers. And it’s because we’re so closely connected with people in so many different regions and environments that we’re also able to precisely gauge their needs and their technology requirements. We know, for instance, that customers across the board are increasingly demanding tailor-made IT applications and software solutions. And we’re the ideal partner to provide these solutions, since we have the necessary industry expertise and products – in areas ranging from power plant controls and building management systems to healthcare solutions and manufacturing technologies. NASA, the U.S. space agency, utilized IT of this kind to develop the Mars rover Curiosity, whose fascinating images are yet further testimony to our engineering excellence. We know the challenges posed by the restructuring of the world’s energy supply. And we know the challenges facing today ’s city planners. To address these urban challenges, we’ve been showcasing future-oriented solutions for the world’s fast-growing cities at the Crystal, our urban development center in London, since September 2012. As a company that’s been internationally oriented since its founding, we also know the world’s new high-growth markets: the BRIC countries and the so-called second-wave countries like South Africa, Indonesia and Turkey. We’ve been active in all four BRIC countries for more than 100 years. In Russia and South Africa, we’ve had operations for over 150 years. Long-term partnerships like these build trust and create opportunities to promote sustainable development on a local basis while generating profitable growth for our Company. All four of our Sectors are exploiting these opportunities worldwide by continuing to sharpen their focus on the megatrends of our globalized age – climate change, demographic change and urbanization. Our Healthcare Sector has also profited from the rigorous implementation of Agenda 2013, the efficiencyboosting program we launched in November 2011. All in all, Siemens is well positioned to seize the opportunities of the future – as we demonstrated again in fiscal 2012. Continuing a decade of substantially improved performance, we posted a 7% increase in revenue and generated €5.2 billion in income from continuing operations, one of our largest profits ever. I would like to thank Siemens employees around the world for their commitment and their contribution to this success. As fiscal 2012 also confirmed, our earnings per share have considerably increased over the last decade as well: still just €2.92 in 2002, they now total more than €5. And thanks to our tradition of foresighted financial policies, we can be sure that our operations will continue to have a very stable basis in the future. But fiscal 2012 makes clear that we haven’t always adapted flexibly enough to changes in our markets

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although we increased our revenue, we didn’t meet the targets we’d set for profitability relative to our

competitors. Our review of fiscal 2012 shows that we’re good –Mobile application can be. Looking to the future, but not as good as we this means we’ll have to intensify our efforts in order to outpace our competitors once again and www.siemens.com/ar-moBile achieve the results The world of that we as Siemens employees and you as our shareholders have a right to expect of our Company. Siemens’ Annual Report

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Contents FinanCial RepoRt

10 A.2 Managing Board of Siemens strong financial basis that’s always been our hallmark and enhance our productivity, maintain theAG

A.3 Report challenges of our markets better12 adapt to the of the Supervisory Board and the global economy. A.4
18

The Siemens share / Investor relations

And that’s why we’ve launched Siemens 2014, a Company-wide program that will help us recapture a leading competitive position within the next two years and thus continue to pursue our One Siemens B. 22 targets. Siemens 2014 Governance Report One Siemens system, drive its implementation and reinforce B.1 Corporate will strengthen the
B.2 strategy for achieving profitable growth and generating annual revenue of up to €100 billion. It Corporate Governance statement pursuant to our 28

Corporate Governance

Section 289a of the German Commercial Code (part of the Combined Management Report) to 29 B.3achieve record results in fiscal 2011. Compliance Report 31 B.4 Compensation Report (part of the Combined Management Report) Our goal is to raise our total Sectors profit from the latest figure of 9.5% to 12% by increasing our gross 44 B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and productivity by about €6 billion. 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

will also keep us on the same track for success that we’ve followed in recent years and that enabled us

To help us reach these targets, Siemens 2014 will apply five levers:

C. > First, we want to cut costs. To this end, we’re optimizing our procurement operations, improving
C.1 C.2

Combined Management Report
50 64

Business and economic environment Financial performance measures project management. 69 C.3 Results of operations > 82 C.4Second, we want to continuously strengthen our core business activities by, among other things, Financial position 93 C.5making targeted acquisitions in key areas and scrutinizing our less profitable businesses to ensure Net assets position 95 C.6that they Overall assessment of the economic position don’t burden our long-term performance. 96 C.7Third, weSubsequent events sales setup and optimize our local market access worldwide while mak> want to refine our 97 C.8 Sustainability ing our organization more flexible and adjusting operations to regional conditions and potential. 111 C.9 Report on expected developments and > Fourth, we want to simplify our internal processes and regulations in order to provide our business associated material opportunities and risks units C.10 129with greater leeway for independent entrepreneurial action and partnering with customers. Compensation Report, Corporate Governance statement pursuant substantially reducing the number of CompanyFor example, we’re to Section 289a of the German Commercial Code,and Sector-wide regulations for Takeover-relevant information and explanatory report our global and regional businesses. C.11 130 Siemens AG (Discussion on basis of German Commercial Code) > And fifth, we’re streamlining our global support infrastructure by eliminating redundant functions C.12 134 Notes and forward-looking statements

our global capacities and activities and enhancing the quality and efficiency of our processes and

and duplicate processes.

D. Our capital – Trust
D.2
137

Consolidated Financial Statements
138

136 D.1 Consolidated Statements of Income The measures we’ve defined have been very carefully considered. We’ve made no secret of our Company ’s

Consolidated Statements of Comprehensive Income Consolidated Statements of Financial Position responsibilities and taken steps to ensure that Siemens 2014 will be rigorously executed. Some meas139 D.4 Consolidated Statements of Cash Flow ures have already been taken. For example, we’ve decided to tighten the focus of our portfolio 140 D.5 Consolidated Statements of Changes in Equity in the142 of renewable energies, Financial Statements technologies business, which is highly fragarea Notes to Consolidated to exit from the water D.6 232 D.7 Supervisory Board and Managing position in the area of vertical IT through the purchase mented by region, and to reinforce our marketBoard

weaknesses, and we’ve set transparent goals. To boost our competitiveness, we’ve assigned clear
D.3

of LMS International NV, a leading supplier of industry software for lifecycle management. As these moves demonstrate, the new Company-wide program is already having an impact and strengthening E. the trust that our customers, the capital markets and you, our shareholders, have placed in us. 240 E.1 Responsibility statement Over the next two years, we’ll keepReport 241 E.2 Independent Auditors’ you regularly informed of the steps we’re taking to implement it.
E.3 E.4 E.5 E.6 E.7 E.8 E.9
243 244 246 248 250 251 252

Additional Information

Statement of the Managing Board Five-year summary Glossary Index Further information and information resources Financial calendar Company structure

7 5

Contents Financial Report

We A. aren’t anticipating any substantial boost from economic developments worldwide – at least not in 1 A.1 fiscal 2013. For this reason, it’s all the more important that we ourselves take effective action to Letter to our Shareholders

To our Shareholders

With your interests in mind, we’re proposing that OSRAM be publicly listed via a spinoff. We’re convinced that OSRAM Licht AG will be an attractive company for investors since, as an independent entity, it will operate even more successfully than before. The share buyback program that we finalized at the beginning of November 2012 was also in your interest. In the course of the buyback, we repurchased Company shares with a total value of €2.9 billion. We financed the program primarily through bonds, and the interest rates we paid were the lowest to date on the European capital market – yet further proof of the great trust that our Company enjoys within the business community and beyond. The unchanged dividend proposal of €3.00 that the Managing Board and the Supervisory Board will make to the 2013 Annual Shareholders’ Meeting is also a sign of trust and continuity. We want you to profit from the positive developments at our Company – and we want you to continue placing your trust in us. Because Siemens is and will remain a strong company – for our customers worldwide, for our employees, for our partners in the business and scientific communities, for our stakeholders in society and particularly for you, our shareholders. I’m looking forward to the challenges of the year ahead and to our continuing dialogue.

Peter Löscher President and CEO of Siemens AG

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Contents FinanCial RepoRt

A.1 A.2 A.3 A.4

1 10 12 18

Letter to our Shareholders Managing Board of Siemens AG Report of the Supervisory Board The Siemens share / Investor relations

B.
B.1 B.2

Corporate Governance
22 28

B.3 B.4 B.5

29 31 44

Corporate Governance Report Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) Compliance Report Compensation Report (part of the Combined Management Report) Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

C.
C.1 C.2 C.3 C.4 C.5 C.6 C.7 C.8 C.9 C.10

Combined Management Report
50 64 69 82 93 95 96 97 111 129

C.11 C.12

130 134

Business and economic environment Financial performance measures Results of operations Financial position Net assets position Overall assessment of the economic position Subsequent events Sustainability Report on expected developments and associated material opportunities and risks Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report Siemens AG (Discussion on basis of German Commercial Code) Notes and forward-looking statements

D.
D.1 D.2 D.3 D.4 D.5 D.6 D.7

Consolidated Financial Statements
136 137 138 139 140 142 232

Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Financial Position Consolidated Statements of Cash Flow Consolidated Statements of Changes in Equity Notes to Consolidated Financial Statements Supervisory Board and Managing Board

E.
E.1 E.2 E.3 E.4 E.5 E.6 E.7 E.8 E.9

Additional Information
240 241 243 244 246 248 250 251 252

Responsibility statement Independent Auditors’ Report Statement of the Managing Board Five-year summary Glossary Index Further information and information resources Financial calendar Company structure

7

Contents Financial Report

A.

To our Shareholders

In September 2012, we opened our flagship sustainability center, the Crystal, in the heart of the London Docklands – a district that’s a pioneer in urban renewal. The Crystal, London’s newest landmark, is home to an exhibition show­ casing infrastructure solutions that are already making our cities more sustainable, environmentally friendly and livable. The moment you enter the Crystal, with its futuristic architecture and construction, you’ll see why this iconic structure is one of the most sustainable buildings in the world. Thanks to green technologies from our Environmental Portfolio, the Crystal meets the highest environmental standards, raising the bar for sustainable building.

Website Join us at the Crystal. Talk to our experts about the options and opportu­ PDF version www.siemens.com/annual-report nities for sustainable city development. Explore some fascinating urban www.siemens.com/ar-pdf for yourself what the future holds for the world’s projects. And see

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Managing Board of Siemens AG

Hermann Requardt Healthcare

Michael Süß Energy

10

Barbara Kux Corporate Supply Chain Management, Corporate Sustainability, Global Shared Services

Peter Y. Solmssen Corporate Legal and Compliance, Americas

Peter Löscher – President and Chief Executive Officer Corporate Communications and Government Affairs, Corporate Development

Joe Kaeser Corporate Finance and Controlling, Financial Services, Siemens Real Estate, Equity Investments

Brigitte Ederer Corporate Human Resources, Europe, Commonwealth of Independent States

Klaus Helmrich Technology, Corporate Technology

Siegfried Russwurm Industry, Corporate Information Technology, Africa, Middle East

Roland Busch Infrastructure & Cities, Asia, Australia

11

A.3 RepoRt of the supeRvisoRy boARd

Dear shareholders,
Despite a difficult economic environment and special burdens in the project business, Siemens’ overall performance in fiscal 2012 was respectable.
In fiscal 2012, the Supervisory Board performed the duties assigned to it by law, the Siemens Articles of Association and the Bylaws for the Supervisory Board. We regularly advised the Managing Board on the management of the Company and monitored the Managing Board’s activities. We were directly involved in all major decisions regarding the Company. In written and oral reports, the Managing Board regularly provided us with timely and comprehensive information on Company planning and business operations as well as on the strategic development and current state of the Company. Deviations from business plans were explained to us in detail. The Managing Board coordinated with us the Company ’s strategic orientation. On the basis of reports submitted by the Managing Board, we considered in detail all business transactions of major significance to the Company. The proposals made by the Managing Board were approved after detailed examination and consultation. We held a total of six regular meetings. In my capacity as Chairman of the Supervisory Board, I was in regular contact with the Managing Board between Supervisory Board meetings and was kept up-to-date on current developments in the Company ’s business situation and on key business transactions. At separate strategy meetings, I discussed with the Managing Board the perspectives and future orientation of the Company ’s individual businesses.

Work in the Supervisory Board committees
To ensure the efficiency of its work, the Supervisory Board has a total of six standing committees, which prepare the proposals for the Supervisory Board as well as the issues to be dealt with at the Board’s plenary meetings. Where legally permissible, the Supervisory Board’s decision-making powers are also delegated to these committees. The chairpersons of the committees report to the Supervisory Board on the committees’ work at the subsequent Board meetings. The composition of the individual Supervisory Board committees and the number of committee meetings and decisions are shown in chapter
D.7 SuperviSory BoarD anD Managing BoarD, pageS 234-235 below.

The Chairman’s Committee met six times in fiscal 2012. It also voted on five proposals using a notional, or written, voting process. Between meetings, I discussed topics of particular importance to the Company with the members of the Chairman’s Committee. The Committee dealt with corporategovernance-related matters, including the Declaration of Conformity with the German Corporate Governance Code, with the preparation of decisions concerning Managing Board compensation, with the assumption by Managing Board members of positions in other companies and institutions, and

12

Dr. Gerhard Cromme Chairman

13

with a variety of personnel-related topics. The Committee endorsed a decision by the Managing Board to issue warrant bonds with a value of up to US$5 billion and amended the Articles of Association after the Company ’s capital stock had been reduced as a result of the Managing Board’s decision to retire treasury stock that had been acquired as part of a share buyback program. The Mediation Committee was not required to meet in fiscal 2012. The Finance and Investment Committee met three times. It also voted on five proposals using a notional, or written, voting process. The focuses of its meetings included the preparation of the decision regarding the budget for fiscal 2012, the further development of the Company ’s mediumterm strategy, the Company ’s pension system and the approval of Company investment projects. The Audit Committee met six times. In the presence of the independent auditors, the President and Chief Executive Officer, the Chief Financial Officer and the General Counsel, the Committee discussed the financial statements and the Combined Management Report for Siemens AG and Siemens worldwide, the proposal for the appropriation of net income and the Annual Report on Form 20-F for the U.S. Securities and Exchange Commission (SEC). In addition, the Audit Committee made a recommendation to the Supervisory Board regarding the Supervisory Board’s proposal to the Annual Shareholders’ Meeting concerning the election of the independent auditors. The Audit Committee also gave in-depth consideration to the appointment of the independent auditors for fiscal 2012, to monitoring the auditors’ independence and qualifications as well as the additional services they perform, to determining their fee and to the audit reviews of the Company ’s quarterly financial reports and the half-year financial report. In addition, the Audit Committee dealt with the Company ’s financial reporting process and risk management system and with the effectiveness, resources and findings of the internal audit as well as with reports concerning potential and pending legal disputes. The Audit Committee also focused on Company compliance with the provisions of Section 404 of the Sarbanes-Oxley Act (SOA) and on the internal audit of the effectiveness of our internal controls, regulatory compliance and the integrity of our financial reporting. The Compliance Committee met five times in fiscal 2012. At its meetings, which were generally attended by Dr. Theodor Waigel in his capacity as Monitor, the Committee discussed primarily the quarterly reports and the annual report submitted by the Chief Compliance Officer and the Chief Counsel Compliance. The Committee also concerned itself with the preparation of the communications measures to be implemented in connection with the conclusion of the Monitorship. The Nominating Committee met six times in fiscal 2012 in order to prepare the election of the Supervisory Board’s shareholder representatives by the Annual Shareholders’ Meeting of Siemens AG on January 23, 2013. When preparing the list of candidates to be proposed to the Supervisory Board, the Nominating Committee took into account the requirements of the German Stock Corporation Act, the German Corporate Governance Code and the Bylaws for the Supervisory Board as well as the goals that the Supervisory Board had set for its own composition. The Nominating Committee considered, in particular, the character, integrity, commitment, professionalism and independence of the individuals recommended for nomination. With a view to the Company ’s international orientation, the Nominating Committee attached particular importance to ensuring that a sufficient number of members had extensive international experience. It also endeavored to ensure that the participation of women was appropriate and that at least six shareholder representatives on the Supervisory Board

14

were independent in the meaning of Section 5.4.2 of the German Corporate Governance Code. The Nominating Committee recommended that the Supervisory Board propose to the Annual Shareholders’ Meeting on January 23, 2013 that Dr. Gerhard Cromme, Dr. Josef Ackermann, Gerd von Brandenstein, Michael Diekmann, Dr. Hans Michael Gaul, Prof. Dr. Peter Gruss and Dr. Nicola Leibinger-Kammüller be reelected and that Gérard Mestrallet, Güler Sabancı and Werner Wenning be elected for the first time to serve as shareholder representatives on the Supervisory Board. At an election held on September 25, 2012 in accordance with the provisions of the German Codetermination Act, the following individuals were elected to serve as employee representatives on the Supervisory Board, effective the end of the Annual Shareholders’ Meeting on January 23, 2013: Berthold Huber, Lothar Adler, Bettina Haller, Hans-Jürgen Hartung, Robert Kensbock, Harald Kern, Jürgen Kerner, Dr. Rainer Sieg, Birgit Steinborn and Sibylle Wankel.

Topics at the plenary meetings of the Supervisory Board
Regular topics of discussion at the Supervisory Board’s plenary meetings were revenue, profit and employment development at Siemens AG, at the Sectors and at Siemens worldwide as well as the Company ’s financial position, profitability and major investment and divestment projects. The Managing Board reported to us regularly and comprehensively on Company planning and on the Company ’s strategic development, business operations and current situation. At our meeting on November 9, 2011, we discussed the key financial figures for fiscal 2011 and approved the budget for 2012. We also determined the compensation of Managing Board members for fiscal 2011 on the basis of their achievement of performance-related targets. The appropriateness of this compensation was confirmed by an independent compensation consultant. At our meeting on November 30, 2011, we primarily discussed the financial statements and the Combined Management Report for Siemens AG and Siemens worldwide as of September 30, 2011 as well as the agenda for the Annual Shareholders’ Meeting on January 24, 2012. We also discussed the Annual Report for 2011 – in particular, the “Corporate Governance report” included therein – and established the targets for Managing Board compensation in fiscal 2012. At our meeting on January 23, 2012, the Managing Board reported on the Company ’s business and financial position following the conclusion of the first quarter. We also conducted by-elections for the Audit Committee and the Finance and Investment Committee. At our meeting on April 24, 2012, the Managing Board reported on the Company ’s business and financial position following the conclusion of the second quarter of fiscal 2012. In addition, the Energy Sector reported on the situation in its business. We also discussed profit protection measures with the Managing Board. At our meeting on July 25, 2012, we discussed the Company ’s business and financial position following the conclusion of the third quarter and decided to approve the Managing Board’s plan to acquire Siemens shares in order to retire them, offer them for purchase to employees, members of the governing bodies of Affiliated Companies and members of the Managing Board and / or use them to service convertible bonds or warrant bonds. In addition, we concerned ourselves with the new version of the German Corporate Governance Code of May 15, 2012. The Healthcare Sector also reported on the situation in its business.

15

At our meeting on September 19, 2012, the Managing Board provided us with an overview of the current state of the Company. On the occasion of the opening of an information and dialogue center for urban development in London, the Infrastructure & Cities Sector reported on the situation in its business. In addition, the Regional Company reported on business development in the UK. We were also provided with an overview of the activities of Siemens Corporate Technology and approved the acquisition of LMS International NV, Leuven (Belgium). LMS International NV is a leading provider of industry software for the testing and mechatronic simulation of complex products.

Corporate Governance Code
The Supervisory Board concerned itself with the provisions of and amendments to the German Corporate Governance Code. At our meeting on July 25, 2012, we discussed the amendments to the German Corporate Governance Code contained in the new version of May 15, 2012. At our subsequent meeting on September 19, 2012, the Bylaws for the Supervisory Board were amended to take into account the requirements of the new version of the Code. In addition, we adjusted the concrete goals for the Supervisory Board’s composition – which are set out in chapter
B.1 Corporate governanCe report, pageS 22-25

below – in order to take those requirements into account and determined that, in our estimation, the Super visory Board had an appropriate number of independent members. Information on corporate governance at the Company and a detailed report on the level and structure of the compensation paid to the members of the Supervisory and Managing Boards is provided in chapter
B.4 CoMpenSation report, pageS 31-43 below. At their meetings on September 10 and 19, 2012, respectively, the Managing

Board and the Supervisory Board approved the issuance of an unqualified Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act (Aktiengesetz), stating that the Company complies with all the recommendations of the German Corporate Governance Code in the version of May 15, 2012 and will continue to do so in the future. The exception mentioned in the Declaration of Conformity of October 1, 2011 – namely, that the current compensation rules for the Supervisory Board do not stipulate a performance-related compensation component – no longer applies since the new version of the Code no longer includes a recommendation regarding the performance-related compensation of supervisory board members. Siemens’ Declaration of Conformity with the German Corporate Governance Code is permanently available to shareholders on the Company ’s website.

Detailed discussion of the financial statements
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft audited the Annual Financial Statements of Siemens AG, the Consolidated Financial Statements of Siemens worldwide and the Combined Management Report for Siemens AG and Siemens worldwide for the fiscal year ended September 30, 2012 in accordance with the requirements of the German Commercial Code (HGB) and approved them without reservation. The Annual Financial Statements of Siemens AG and the Combined Management Report for Siemens AG and Siemens worldwide were prepared in accordance with the requirements of German commercial law. The Consolidated Financial Statements of Siemens worldwide were prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), and with the additional requirements set out in Section 315a (1) of the German Commercial Code (HGB). The financial statements also comply with the IFRS, as issued by the International Accounting Standards Board (IASB). The independent auditors conducted their audit in accordance with Section 317 of the HGB and in compliance with the generally accepted German standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW) and with the International Standards on Auditing (ISA). The above-mentioned documents as well as the Managing Board’s proposal for the appropriation of net income were submitted to us by the Managing Board in a

16

timely manner. The Audit Committee discussed the Managing Board’s proposal for the appropriation of net income in detail at its meeting on November 6, 2012. The Committee discussed the Annual Financial Statements of Siemens AG, the Consolidated Financial Statements of Siemens worldwide and the Combined Management Report in detail at its meeting on November 27, 2012. The audit reports prepared by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft were distributed to all members of the Supervisory Board and comprehensively reviewed at our meeting on November 28, 2012 in the presence of the independent auditors, who reported on the main findings of their audit. The independent auditors also reported that there were no major weaknesses in the Company ’s internal audit or risk management systems. At this meeting, the Managing Board explained the financial statements of Siemens AG and Siemens worldwide as well as the Company ’s risk management system. The independent auditors also discussed the scope, focal points and costs of the audit. We concur with the results of the audit. Following the definitive findings of the examination by the Audit Committee and our own examination, we have no objections. The Managing Board prepared the Annual Financial Statements of Siemens AG and the Consolidated Financial Statements of Siemens worldwide. We adopted the Annual Financial Statements and approved the Consolidated Financial Statements. We endorse the Managing Board’s proposal that the net income available for distribution be used to pay out a dividend of €3.00 per share entitled to a dividend and that the amount of net income attributable to shares of stock not entitled to receive a dividend for fiscal 2012 be carried forward.

Changes in the composition of the Supervisory and Managing Boards
Dieter Scheitor resigned from the Supervisory Board, effective the end of the regular Annual Shareholders’ Meeting on January 24, 2012. Effective January 25, 2012, Jürgen Kerner was appointed to the Supervisory Board by court order. At the Supervisory Board meeting on January 23, 2012, Mr. Kerner was elected to succeed Mr. Scheitor as employee representative on the Audit Committee and the Finance and Investment Committee, effective January 25, 2012. The Supervisory Board would like to thank Mr. Scheitor for his many years of loyal support. There were no changes in the composition of the Managing Board in fiscal 2012. The Supervisory Board would like to thank the members of the Managing Board as well as the employees and the employee representatives of all Siemens companies for their work.

For the Supervisory Board

Dr. Gerhard Cromme Chairman Berlin and Munich, November 28, 2012

17

A.4 the siemens shAre / investor relAtions change in the vaLue of an inveStment in SiemenS ShareS in fiScaL 2012 (with dividends reinvested; indexed) in % 140 130 120 110 100 90 80 70 September 30, 2011 September 30, 2012

Siemens

DAX®

MSCI World

The Siemens share price developed positively over the course of fiscal 2012. However, the markets were volatile during this period due to ongoing uncertainty in the eurozone. After increasing at the beginning of the fiscal year, stock markets in general and the Siemens share price in particular declined for several months. Then, in June 2012, a positive stock market trend began. This trend continued until the end of fiscal 2012. In August 2012, the Company launched a share buyback program. From the start of the buyback program until the end of the fiscal year, the Siemens share price gained more than 13%. In the last few years, we have increased our dividend several times – in some cases substantially – from €1.60 per share in fiscal 2009 to €3.00 per share in fiscal 2011. In line with the dividend policy of the One Siemens framework, we intend for our shareholders to profit significantly from Siemens’ financial success again this year. As a result, the Managing Board and Supervisory Board will propose a dividend payment of €3.00 per share for fiscal 2012, representing a payout ratio of 56%. Siemens AG continues to have a very sound financial basis. In an environment in which the ratings of many countries have come under pressure, the Company continues to enjoy good investment-grade credit ratings. In the course of the abovementioned share buyback program, we repurchased shares up to the end of November 2012 with a value of about €2.9 billion. In September 2012, the Company also retired some 33.2 million of its own shares, thereby reducing its capital stock from about 914 million shares to 881 million.

The markets subsequently recovered steadily from this trough, again reaching their previous high for the year toward the end of fiscal 2012. Over the entire fiscal year, Siemens stock performed comparatively well in this market environment, closing at €77.61 per share on September 30, 2012. For shareholders who reinvested their dividends, this amounted to a gain of 18.6% (fiscal 2011: a loss of 9.5%) compared to the closing price a year earlier. The Siemens share performed somewhat more weakly than the leading international index, MSCI World (which rose 21.6%), and remained noticeably behind the leading index of the German stock market, the DAX (which advanced 31.2%).
Long-term performance of SiemenS ShareS compared with Leading indiceS (AverAge AnnuAl performAnce with dividends reinvested)
Ten-year period Siemens DAX® MSCI World FY 2003 – FY 2012 11.3% 10.1% 8.0%

A.4.1 Stock markets – Siemens share price increases
Reflecting economic developments, the stock market environment was characterized by continuously increasing share prices during the first four months of fiscal 2012 (October 1, 2011 to January 31, 2012). These gains were then lost in the following months, with prices bottoming out in June 2012.

A long-term comparison illustrates the strength of the Siemens share: the assets of an investor who acquired Siemens stock worth €1,000 at the beginning of fiscal 2003 and reinvested the dividends in additional Siemens shares would have increased to €2,911 by the end of fiscal 2012. This annual return of 11.3% is noticeably above the corresponding results for the DAX 30 (+10.1%) and MSCI World (+8.0%).

A.4.2 Stable dividend proposed
At the Annual Shareholders’ Meeting, the Managing Board and the Supervisory Board will propose a dividend payment of €3.00. After the substantial dividend increases in fiscal 2010

1

A. A.1 A.2 A.3 A.4

To our Shareholders Letter to our Shareholders Managing Board of Siemens AG Report of the Supervisory Board The Siemens share / Investor relations

21

B.

Corporate Governance

49

C.

Combined Management Report

18
1 10 12 18

dividend
Fiscal year FY 2012 FY 2011 FY 2010 FY 2009 FY 2008

Dividend per share (in €) Dividend yield (in %) 2 Ex-dividend date Net income (in millions of €) Total dividend payout (in millions of €) Payout ratio (in %) 4
1 2 To be proposed to the Annual Shareholders’ Meeting Dividend payout / Siemens share price on day of Annual Shareholders’ Meeting; for fiscal 2012: dividend payout / Siemens share price at fiscal year-end

3.001 3.9 Jan. 24, 2013 4,590 2,5283 56
3 4

3.00 3.9 Jan. 25, 2012 6,321 2,629 41

2.70 2.9 Jan. 26, 2011 4,068 2,356 58

1.60 2.4 Jan. 27, 2010 2,497 1,388 56

1.60 3.6 Jan. 28, 2009 5,886 1,380 23

Based on currently estimated number of shares entitled to dividend payment Excluding non-cash items in fiscal 2009 and fiscal 2010 (NSN and DX impairment charges), the payout ratio equaled 34% in fiscal 2009 and 46% in fiscal 2010

and fiscal 2011, this proposal reflects our earnings position in fiscal 2012 and is in strict accordance with our payout policy. Representing a payout ratio of 56%, this proposal continues our tradition of paying attractive dividends to our investors.

A.4.4 Shareholder structure
With some 740,000 shareholders, Siemens AG is one of the world’s largest publicly owned companies. An analysis of our shareholder structure conducted in August 2012 showed that shareholders in Germany hold the largest percentage of our share capital, about 30% of all outstanding shares. Shareholders in the U.S. hold roughly 16% and shareholders in the U.K., around 9%, while investors in France and Switzerland hold 8% and 6%, respectively. Some 59% of Siemens’ outstanding shares are currently held by institutional investors, about 20% by private shareholders and around 6% by members of the Siemens family.

A.4.3 Share buyback program and reduction of capital stock
In August 2012, against the backdrop of favorable capital market conditions, Siemens optimized its capital structure and initiated a buyback of Company stock with a value of approximately €2.9 billion. Under this program, which was finalized on November 7, 2012, a total of about 38 million shares were acquired at an average price of €76.90 per share. The repurchased shares can be used to cancel and reduce capital stock, to issue shares to employees, the board members of Affiliated Companies and members of the Managing Board and to service convertible bonds and warrant bonds. The share buyback was financed through long-term debt. In addition to the share buyback program, the Company also retired approximately 33.2 million of its own shares in September 2012, thereby reducing its capital stock from about 914 million shares to 881 million.

A.4.5 Credit ratings
Siemens AG has good, investment-grade credit ratings: “Aa3/P-1/outlook stable” from Moody’s Investors Service and “A+/A-1+/outlook stable” from Standard & Poor’s are very positive ratings – particularly when compared to those of our competitors in the industry segment. Our solid financial position gives us unrestricted access to the international financial and capital markets.

inveStor type and regionaL diStribution
Institutional investors: 59% 1 Siemens family members: 6% 2 Germany: 30% Switzerland: 6% France: 8% Rest of Europe: 7% U.K.: 9% Rest of world: 9%

Private investors: 20%

Unidentified investors: 15%

U.S.: 16%
2

Unidentified: 15%

1 This figure includes a 5.02% stake in Siemens’ capital stock held by BlackRock Holdco 2, Inc., Wilmington, U.S., a 5.01% stake in Siemens’ capital stock held by BlackRock, Inc., New York, U.S., and a 3.04% stake in Siemens’ capital stock held by the State of Qatar, Doha, Qatar (represented by the DIC Company Limited, George Town, Grand Cayman), as reported to us by these organizations.

This figure includes a 1.30% stake in Siemens capital stock for which the von SiemensVermögensverwaltung GmbH exercises voting rights under powers of attorney and a 3.03% stake held by the Werner von Siemens Stiftung, Zug, Switzerland, as reported to us by the Stiftung.

135 D.

Consolidated Financial Statements

239 E.

Additional Information

19

At the end of fiscal 2012, the net debt of Siemens AG was €9,292 million, with cash and cash equivalents of €10,891 million. For further information on our credit ratings and financial obligations, please see note 28 to the conSoLidated financiaL StatementS, pageS 190-191. credit ratingS
September 30, 2012 Moody’s Investors Service Standard & Poor’s September 30, 2011 Moody’s Investors Service Standard & Poor’s

Stock market information (in €, unless otherwise indicAted)
FY 2012 1 FY 2011 1

Stock price range (Xetra closing price) High Low Fiscal year-end Number of shares issued (September 30, in millions) Market capitalization (in millions of €) 2 Basic earnings per share (from continuing operations) 3 Diluted earnings per share (from continuing operations) 3 Dividend per share
1 2 3 4 Fiscal year from October 1 to September 30 On the basis of outstanding shares Regarding activities classified as discontinued operations, prior periods are presented on a comparable basis. To be proposed to the Annual Shareholders’ Meeting

79.71 63.06 77.61 881 66,455 5.77 5.71 3.004

99.38 64.45 68.12 914 59,554 8.23 8.14 3.00

Long-term debt Short-term debt

Aa3 P -1

A+ A -1+

A1 P -1

A+ A -1+

A.4.6 Siemens on the capital market
We take our responsibility to maintain an intensive dialogue with the capital market very seriously. Cultivating close contacts with our shareholders, we keep them informed of all major developments throughout Siemens. As part of our investor relations work, we provide information on the Company’s development in quarterly, semiannual and annual reports. Our CEO and CFO also maintain close contact with investors through roadshows and conferences. In addition, Siemens holds Sector Capital Market Days, at which the management of our Sectors informs investors and analysts about the Sectors’ business strategies and market environments. We also provide extensive information online. Quarterly, semiannual and annual reports, analyst presentations, press releases and our financial calendar for the current year (please see financiaL caLendar, page 251), which includes all major publication dates as well as the date of the Annual Shareholders’ Meeting, are available at www.SiemenS.com/inveStorS A.4.7 Profit-sharing culture/ Stock-based compensation programs
Siemens has set itself the goal of more intensively fostering a profit-sharing culture at the Company and encouraging employees to become shareholders. That’s why we offer various share-based payment programs to our employees. In fiscal 2012, 5,225,138 Siemens shares were issued to service these programs, namely, the Stock Awards program, the Share Matching Program (including the Base Share Program, the Share Matching Plan and the Monthly Investment Plan) and the Jubilee Program. Non-vested and outstanding grants under the various plans will result in additional share issuances to employees in the future. For more detailed information on sharebased payment, please see note 33 to the conSoLidated financiaL StatementS, pageS 208-211. Our Company-wide Share Ownership Guidelines specify that the members of the Managing Board and roughly 550 senior executives must hold an interest in Siemens equal in value to between 50% and 300% of their base compensation for the period in which they hold office. For further information on our employee share programs, please see note 33 to the conSoLidated financiaL StatementS, pageS 208-211.

20

B. Corporate Governance
22 B.1
22 B.1.1 25 B.1.2 26 B.1.3 26 B.1.4

Corporate Governance Report
Management and control structure Purchase or sale of the Company’s shares Shareholder relations Significant differences between Siemens’ corporate governance and NYSE Corporate Governance Standards

28 B.2

Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) Compliance Report

29 B.3

29 B.3.1 Our compliance priorities 29 B.3.2 Integrity dialogue – Communication between managers and employees 30 B.3.3 Compliance risk assessments at business units 30 B.3.4 Collective action – Supporting business success through fair competition

31 B.4
31 B.4.1

Compensation Report (part of the Combined Management Report)

Remuneration of members of the Managing Board 42 B.4.2 Remuneration of members of the Supervisory Board 43 B.4.3 Other

44 B.5

Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

B. Corporate Governance

B.1 Corporate GovernanCe report
Good corporate governance is the basis for our decision-making and control processes and comprises responsible, valuebased management and monitoring focused on long-term success, goal-oriented and efficient cooperation between our Managing and Supervisory Boards, respect for the interests of our shareholders and employees, transparency and responsibility in all our entrepreneurial decisions and an appropriate risk management system. Siemens AG fully complies with all recommendations of the German Corporate Governance Code (Code) in the version of May 15, 2012. The Managing Board and the Supervisory Board of Siemens AG have discussed compliance with the Code’s recommendations in detail. Based on their deliberations, the boards have approved the annual Declaration of Conformity as of October 1, 2012. This document is posted on our website and available on page 28. Siemens voluntarily complies with the Code’s non-binding suggestions, with the following exception: > In fiscal 2011, the Supervisory Board decided to appoint Dr. Roland Busch, Klaus Helmrich and Dr. Michael Süß to the Managing Board, each for a term of five years, and therefore to no longer follow the suggestion set out in Section 5.1.2 para. 2 sentence 1 of the Code, according to which the maximum possible appointment period of five years should not be the rule for first-time appointments to a managing board. Our listing on the New York Stock Exchange (NYSE) subjects us to a number of provisions under U.S. securities laws (including the Sarbanes-Oxley Act (SOA) as well as to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and the NYSE. To facilitate our compliance with the SOA, we have, among other things, a Disclosure Committee in place, comprising the heads of a number of our Corporate Units. This committee is responsible for reviewing certain financial and non-financial information and advising our Managing Board in its decisions regarding disclosure. We also have procedures in place that require the members of the management of our Sectors, Divisions, Financial Services, Cross-Sector Services, Regional Clusters and certain Corporate Units – supported by certifications provided by the management of entities under their direction – to confirm to us the correctness of the financial data that they have reported to Siemens’ corporate headquarters and the effectiveness of the related control systems. Their confirmation provides a basis for our CEO and CFO to certify our financial statements to the SEC. Consistent with the requirements of the SOA, we have procedures for handling accounting complaints in place as well as a Code of Ethics for Financial Matters. This Code of Ethics for Financial Matters was last updated in 2010.

B.1.1 Management and control structure
B.1.1.1 SUpeRVISORY BOaRD
Siemens AG is subject to German corporate law. It has a twotier board structure, consisting of a Managing Board and a Supervisory Board. As required by the German Codetermination Act (Mitbestimmungsgesetz), the Company ’s shareholders and its employees each select one-half of the Super visory Board’s members. The term of office of the current members of the Supervisory Board will expire at the close of the Annual Shareholders’ Meeting 2013. The Supervisory Board first defined the objectives for its composition in fiscal 2010. At its meeting on September 19, 2012, it modified these objectives in order to bring them into line with Section 5.4.1 of the amended Code of May 15, 2012 and reapproved them as follows: > The composition of the Supervisory Board of Siemens AG shall be such that qualified control and advising for the Managing Board is ensured. The candidates proposed for election to the Supervisory Board shall have the expertise, skills and professional experience necessary to carry out the functions of a Supervisory Board member in a multinational company and safeguard the reputation of Siemens in public. In particular, care shall be taken in regard to the personality, integrity, commitment, professionalism and independence of the individuals proposed for election. The goal is to ensure that, in the Supervisory Board, as a group, all knowhow and experience is available that is considered essential in view of Siemens’ activities. > Taking the Company ’s international orientation into account, care shall also be taken to ensure that the Supervisory Board has an adequate number of members with extensive international experience. The goal for the next Supervisory Board election in 2013 is to make sure that the present considerable share of Supervisory Board members with international background is maintained. > In its election proposals, the Supervisory Board shall also pay particular attention to the appropriate participation of women. Qualified women shall already be included in the initial process of selecting potential candidates for new elections or for the filling of Supervisory Board positions that have become vacant and shall be considered, as appropriate, in nominations. There are currently four women on our Supervisory Board. Our goal is, at the minimum, to maintain

1

A.

To our Shareholders

21 22 28

B.

Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

22
B.1 Corporate Governance Report B.2 Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) B.3 Compliance Report

29

and, if possible, to increase this number at the next Supervisory Board election in 2013. It is also intended that a woman join the Nominating Committee following this Supervisory Board election. > An adequate number of independent members shall belong to the Supervisory Board. Material and not only temporary conflicts of interest, such as organizational functions or advisory capacities with major competitors of the company, shall be avoided. Under the presumption that the mere exercise of Supervisory Board duties as an employee representative gives no cause to doubt the compliance with the independence criteria pursuant to Section 5.4.2 of the Code, the Supervisory Board shall have a minimum of sixteen members who are independent in the meaning of the Code. In any case, the Supervisory Board shall be composed in such a way that a number of at least six independent shareholder representatives in the meaning of Section 5.4.2 of the Code is achieved. In addition, the Supervisory Board members shall have sufficient time to be able to devote the necessary regularity and diligence to their mandate. > The age limitation established in the Bylaws of the Supervisory Board will be taken into consideration. In addition, no more than two former members of the Managing Board of Siemens AG shall belong to the Supervisory Board. The status of implementation of these objectives can be summarized as follows: On September 25, 2012, three women were elected, pursuant to the German Codetermination Act’s provisions regarding the election of employee representatives to a supervisory board,to serve as employee representatives on Siemens’ Supervisory Board. Their terms of office will begin at the close of the Annual Shareholders‘ Meeting on January 23, 2013. In fiscal 2012, the Nominating Committee met six times in order to prepare the election of the Supervisory Board’s shareholder representatives by the Annual Shareholders’ Meeting 2013. In proposing candidates to the Supervisory Board, the Nominating Committee took into account not only the requirements of the German Stock Corporation Act, the Code and the Bylaws for the Supervisory Board but also the Supervisory Board’s objectives for its composition. On the basis of the Nominating Committee’s the Supervisory Board will propose that the Annual Shareholders’ Meeting 2013 elect as shareholder representatives on the Supervisory Board several candidates who are currently engaged in international activities and/or have many years of international experience. The candidates will include two women, one of whom is intended to join the Nominating Committee following the Supervisory Board election. Some Supervisory Board members hold – or have held in the past year – high-ranking positions at other companies with

which Siemens does business. Nevertheless, transactions between Siemens and such companies are carried out on an arm’s length basis. We believe that these transactions do not compromise the independence of the Supervisory Board members in question. The Supervisory Board oversees and advises the Managing Board in its management of the Company ’s business. At regular intervals, the Supervisory Board discusses business development, planning, strategy and implementation. It reviews the Annual Financial Statements of Siemens AG, the Consolidated Financial Statements of Siemens worldwide, Management Reports of these financial statements and the proposal for the appropriation of net income. It also discusses Siemens’ quarterly and half-yearly reports and approves the Annual Financial Statements of Siemens AG as well as the Consolidated Financial Statements of Siemens worldwide, taking into account both the audit reports issued by the independent auditors thereon and the results of the review conducted by the Audit Committee. In addition, the Supervisory Board concerns itself with the Company ’s adherence to the statutory provisions, official regulations and internal Company policies (compliance). It also appoints the members of the Managing Board and determines each member’s duties. Important Managing Board decisions – such as those regarding major acquisitions, divestments and financial measures – require Supervisory Board approval, unless the Bylaws for the Supervisory Board specify that such authority be delegated to the Finance and Investment Committee of the Supervisory Board. In the Bylaws for the Managing Board, the Supervisory Board has established the rules that govern the work of the Managing Board – in particular, the rules regarding the allocation of duties among individual Managing Board members, the matters reserved for the Managing Board as a whole and the quorum required for Managing Board decisions. The Supervisory Board currently has six committees whose duties, responsibilities and procedures fulfill the requirements of the German Stock Corporation Act and the Code, reflect applicable SOA requirements and incorporate applicable NYSE rules as well as certain NYSE rules, with which Siemens AG complies voluntarily. Each committee’s chairperson provides the Supervisory Board with regular reports regarding the activities of his or her committee. The Chairman’s Committee, which comprises the Chairman and Deputy Chairmen of the Supervisory Board as well as one further employee representative elected by the Supervisory Board, performs the collective tasks of a “nominating, compensation and corporate governance committee” to the extent that such tasks are not performed by the Nominating Commit-

49

C.

Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

23

tee and German law does not require that such tasks be performed by the full Supervisory Board. In particular, the Chairman’s Committee makes proposals regarding the appointment and dismissal of Managing Board members, handles contracts with members of the Managing Board, prepares the determination of Managing Board compensation and the review of the Managing Board compensation system to be conducted at the Supervisory Board’s plenary meetings. In preparing recommendations on the appointment of Managing Board members, the Chairman’s Committee takes into account a candidate’s professional qualifications, international experience and leadership qualities, the board’s long-range plans for succession as well as the board’s diversity and, in particular, the appropriate consideration of women. The Chairman’s Committee concerns itself with questions regarding the Company ’s corporate governance and prepares the resolution regarding the Declaration of Conformity with the Code to be approved by the Supervisory Board. Furthermore, the Chairman’s Committee submits recommendations to the Supervisory Board regarding the composition of Supervisory Board committees and decides whether to approve business transactions with Managing Board members and parties related to them. The Audit Committee comprises the Chairman of the Supervisory Board, two of the Supervisory Board’s shareholder representatives and three of the Supervisory Board’s employee representatives. According to German law, the Audit Committee must include at least one independent Supervisory Board member with knowledge and experience in the application of accounting principles or the auditing of financial statements. The Chairman of the Audit Committee, Dr. Hans Michael Gaul, fulfills these German statutory requirements. The Supervisory Board has designated Dr. Hans Michael Gaul – in addition to Dr. Gerhard Cromme – as an “audit committee financial expert,” as defined by the SOA and the regulations of the SEC. The Audit Committee oversees the accounting process. It also prepares the Supervisory Board’s recommendation to the Annual Shareholders’ Meeting concerning the election of the independent auditors and submits the corresponding proposal to the full Supervisory Board. Furthermore, in addition to the work performed by the independent auditors, the Audit Committee discusses the Company ’s financial statements prepared quarterly, half-yearly and annually by the Managing Board. On the basis of the independent auditors’ report on the annual financial statements, the Audit Committee makes, after its own review, recommendations to the Supervisory Board regarding the approval of the Annual Financial Statements of Siemens AG and the Consolidated Financial Statements of Siemens worldwide. It concerns itself with the Company ’s risk monitoring system and oversees the effectiveness of the internal control system as this relates, in particular, to financial reporting,

the risk management system and the internal audit system. The Internal Audit Department reports regularly to the Audit Committee. The Audit Committee awards the audit contract to the independent auditors elected by the Annual Shareholders’ Meeting and monitors the independent audit of the financial statements – including, in particular, the auditor’s independence, professional expertise and services – and performs other functions assigned to it under the SOA. The Compliance Committee comprises the Chairman of the Supervisory Board, two of the Supervisory Board’s shareholder representatives and three of the Supervisory Board’s employee representatives. The Compliance Committee concerns itself, in particular, with the Company ’s adherence to the statutory provisions, official regulations and internal Company policies. The Nominating Committee, which comprises the Chairman of the Supervisory Board and two of the Supervisory Board’s shareholder representatives, is responsible for making recommendations to the Supervisory Board’s shareholder representatives regarding the shareholder candidates to be proposed for election to the Supervisory Board by the Annual Shareholders’ Meeting. In preparing these recommendations, the objectives specified by the Supervisory Board regarding its composition are to be taken into account as well as the required knowledge, abilities and experience of the proposed candidates; attention shall also to be paid to independence, diversity and, in particular, the appropriate participation of women. The Mediation Committee, which comprises the Chairman of the Supervisory Board, the First Deputy Chairman (who is elected in accordance with the German Codetermination Act), one of the Supervisory Board’s shareholder representatives and one of the Supervisory Board’s employee representatives, submits proposals to the Supervisory Board in the event that the Supervisory Board cannot reach the two-thirds majority required for the appointment or dismissal of a Managing Board member. The Finance and Investment Committee comprises the Chairman of the Supervisory Board, three of the Supervisory Board’s shareholder representatives and four of the Supervisory Board’s employee representatives. Based on the Company ’s overall strategy, which is the focus of an annual strategy meeting of the Supervisory Board, the Committee prepares the discussions and resolutions of the Supervisory Board regarding questions relating to the Company ’s financial situation and structure as well as its fixed assets and financial investments. In addition, the Finance and Investment Committee has been authorized by the Supervisory Board to decide on the approval of transactions and measures that require Supervisory Board

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approval and have a value of less than €600 million. The Finance and Investment Committee also exercises the right of the Supervisory Board pursuant to Section 32 of the German Codetermination Act to make decisions regarding the exercise of ownership rights resulting from interests in other companies. Section 32 para 1 sentence 2 of the German Codetermination Act stipulates that decisions made by the Finance and Investment Committee require only the votes of the shareholder representatives. The composition of the Supervisory Board and its committees is presented in chapter D.7 SUpeRVISORY BOaRD anD managIng BOaRD On pageS 232-235. Information on the work of this body is provided in the Report of the Supervisory Board on pageS 12-17. The compensation paid to the members of the Supervisory Board is explained in the Compensation Report on pageS 42-43.

the Managing Board and oversees the utilization of authorized capital in connection with the issuance of employee stock and the implementation of certain capital measures. It also determines the scope and conditions of the share-based compensation components and / or programs for employees and managers (with the exception of the Managing Board). The composition of the Managing Board and its committee is presented in chapter D.7 SUpeRVISORY BOaRD anD managIng BOaRD On pageS 236-238 of this Annual Report. Information on the compensation paid to the members of the Managing Board is provided in the Compensation Report on pageS 35-41.

B.1.1.3 SHaRe OWneRSHIp
As of October 12, 2012, the Managing Board’s current members held a total of 293,808 (2011: 248,137) Siemens shares representing 0.03 (2011: 0.03)% of the capital stock of Siemens AG, which totaled 881,000,000 (2011: 914,203,421) shares. As of the same day, the Supervisory Board’s current members of the Supervisory Board held Siemens shares representing less than 0.01 (2011: less than 0.01)% of the capital stock of Siemens AG, which totaled 881,000,000 (2011: 914,203,421) shares. These figures do not include the 11,454,464 (2011: 11,715,342) shares, or 1.30 (2011: 1.28)% of the capital stock of Siemens AG, which totaled 881,000,000 (2011: 914,203,421) shares, over which the von Siemens-Vermögensverwaltung GmbH (vSV), a German limited liability company, has voting control under powers of attorney based on an agreement between – among others – members of the Siemens family, including Gerd von Brandenstein, and vSV. These shares are voted together by vSV based on proposals by the family partnership established by the Siemens family or by one of its committees. Gerd von Brandenstein is the current chairman of the executive committee and has a deciding vote in cases of deadlock.

B.1.1.2 managIng BOaRD
As the Company ’s top management body, the Managing Board is committed to serving the interests of the Company and achieving sustainable growth in Company value. The members of the Managing Board are jointly responsible for the entire management of the Company and decide on the basic issues of business policy and corporate strategy as well as on the Company ’s annual and multi-year plans. The Managing Board prepares the Company ’s quarterly and half-yearly reports, the Annual Financial Statements of Siemens AG and the Consolidated Financial Statements of Siemens worldwide. In addition, the Managing Board must ensure that the Company adheres to the statutory provisions, official regulations and internal Company policies (compliance) and works to achieve compliance with these provisions and policies within the Siemens group. Further comprehensive information on the compliance program and related activities in fiscal 2012 is available on pageS 29-30 (Compliance Report) and pageS 109-111. The Managing Board and the Supervisory Board cooperate closely for the benefit of the Company. The Managing Board informs the Supervisory Board regularly, comprehensively and without delay on all issues of importance to the Company with regard to strategy, planning, business development, financial position, earnings, compliance and risks. When filling managerial positions at the Company, the Managing Board takes diversity into consideration and, in particular, aims for an appropriate consideration of women. The Bylaws for the Managing Board provide for the establishment of committees to deal with specific tasks. Currently, there is one Managing Board committee, the Equity and Employee Stock Committee. This committee comprises three members of

B.1.2 Purchase or sale of the Company ’s shares
Pursuant to §15a of the German Securities Trading Act (WpHG), members of the Managing Board and the Supervisory Board are legally required to disclose the purchase or sale of shares of Siemens AG or of financial instruments based thereon if the total value of such transactions entered into by a board member or any closely associated person reaches or exceeds €5,000 in any calendar year. All transactions reported to Siemens AG in accordance with this requirement have been duly published and can be found on the Company ’s website
WWW.SIemenS.cOm/DIRectORS-DealIngS

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B.1.3 Shareholder relations
Siemens AG reports to shareholders on its business development, financial position and earnings on a regular basis four times a year. An ordinary Annual Shareholders’ Meeting, at which we also report on business development, normally takes place within the first four months of each fiscal year. The Managing Board facilitates shareholder participation in this meeting through electronic communications – in particular the Internet – and enables shareholders who are unable to attend the meeting to vote by proxy. Furthermore, shareholders may exercise their right to vote in writing or by means of electronic communications (voting by mail). The Managing Board may enable shareholders to participate in the Annual Shareholders’ Meeting without the need to be present at the venue and without a proxy and to exercise some or all of their rights fully or partially by means of electronic communications. The reports, documents and information required by law, including the Annual Report, may be downloaded from our website. The same applies to the agenda for the Annual Shareholders’ Meeting and to possible counterproposals or shareholders’ nominations, if any, that are required to be disclosed. The Annual Shareholders’ Meeting decides, among other things, on the appropriation of net income, the ratification of the acts of the Managing and Supervisory Boards, and the appointment of the independent auditors. Amendments to the Articles of Association and measures that change the Company ’s capital stock are approved at the Annual Shareholders’ Meeting and are implemented by the Managing Board. Shareholders may submit proposals regarding the proposals of the Managing and Supervisory Boards and may contest decisions of the Annual Shareholders’ Meeting. Shareholders owning Siemens stock with an aggregate notional value of €100,000 or more may also demand the appointment of special auditors to examine specific issues. As part of our investor relations activities, we inform our investors comprehensively about developments within the Company. For communication purposes, Siemens makes extensive use of the Internet. We publish quarterly, half-yearly and annual reports, earnings releases, ad hoc announcements, analyst presentations and press releases as well as the financial calendar for the current year, which contains the publication dates of significant financial communications and the date of the Annual Shareholders’ Meeting, at WWW.SIemenS.cOm/InVeStORS. Details of our investor relations activities are provided on page 20 of this Annual Report.

B.1.3.1 cORpORate gOVeRnance gUIDelIneS
Our Articles of Association, the Bylaws for the Supervisory Board and for its most important committees, the Bylaws for the Managing Board, all our Declarations of Conformity with the Code and a variety of other corporate-governance-related documents are posted on our website at WWW.SIemenS.cOm/ cORpORate-gOVeRnance B.1.4 Significant differences between Siemens’ corporate governance and NYSE Corporate Governance Standards
Companies listed on the NYSE are subject to the Corporate Governance Standards of Section 303A (NYSE Standards) of the NYSE Listed Company Manual. Under the NYSE Standards, Siemens AG, as a foreign private issuer, is permitted to follow its home-country corporate governance practices in lieu of the NYSE Standards, except that it must comply with the NYSE Standards in having an audit committee whose members are independent within the meaning of the SOA as well as with certain NYSE notification obligations. In addition, the NYSE Standards require that foreign private issuers disclose any significant differences between their own corporate governance practices and those that the NYSE Standards require of U.S. domestic companies. As a company incorporated in Germany, Siemens AG must comply in the first instance with the German Stock Corporation Act and the German Codetermination Act and voluntarily follows the recommendations of the German Corporate Governance Code as set out on pageS 22-25 above. Furthermore, Siemens complies with all binding rules and regulations of the markets on which its securities are listed, such as the NYSE, and also voluntarily complies with many of the NYSE requirements that by their terms apply only to U.S. domestic issuers. The significant differences between our governance practices and those of domestic U.S. NYSE issuers are as follows:

B.1.4.1 tWO-tIeR BOaRD StRUctURe
The German Stock Corporation Act requires Siemens AG to have a two-tier board structure, consisting of a Managing Board and a Supervisory Board. The two-tier structure is characterized by a strict separation of management and supervision. The roles and responsibilities of each of the two boards are clearly defined by law. The composition of the Supervisory

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Board is determined in accordance with the German Codetermination Act, which stipulates that one-half of the required 20 Super visory Board members are to be elected by our employees in Germany. The Chairman of the Supervisory Board is entitled to cast a deciding vote when the Supervisory Board is unable to reach a decision in two separate rounds of voting.

B.1.4.2 InDepenDence
In contrast to the NYSE Standards, which require a board of directors to affirmatively determine the independence of the individual directors with reference to specific tests of independence, German law does not require the Supervisory Board to make such affirmative findings on an individual basis. German law requires an audit committee to include at least one independent supervisory board member with knowledge and experience in the application of accounting principles or the auditing of financial statements. In addition, the Bylaws for Siemens’ Supervisory Board contain several provisions to help ensure the independence of our Supervisory Board’s advice and supervision. Furthermore, the members of our Supervisory and Managing Boards are strictly independent of one another: a member of one board is legally prohibited from being concurrently active on the other. Our Supervisory Board members have independent decision-making authority and are legally prohibited from following any direction or instruction. Moreover, they may not enter into consulting, service or certain other contracts with Siemens, unless approved by the Supervisory Board. We also use the independence criteria of the Code as guiding principles.

The Audit Committee of Siemens AG is subject to the requirements of the SOA and the U.S. Securities Exchange Act of 1934, as these apply to a foreign private issuer, and performs – in cooperation with the Compliance Committee – functions similar to those assigned to an audit committee by the NYSE Standards. Nevertheless, German law prohibits delegating certain responsibilities – such as the selection of independent auditors (who, under German law, must be elected at the shareholders’ meeting) – to a committee. The Supervisory Board of Siemens AG also has a Finance and Investment Committee and a Mediation Committee, the latter of which is required under German law. Neither of these committees is required by the NYSE Standards.

B.1.4.4 SHaReHOlDeR appROVal OF eQUItY cOmpenSatIOn planS; StOcK RepURcHaSeS
The NYSE Standards generally require that the domestic, i.e. U.S. companies listed on the NYSE obtain shareholder approval of all equity compensation plans (including stock option plans) and of any material revisions to such plans. Under German law, the creation of authorized or contingent capital in order to issue shares requires approval by our shareholders. Shareholders must also approve of the key points of a stock option plan as part of a decision regarding the creation of contingent capital or the authorization to repurchase and use Siemens shares for servicing a stock option plan. Under German law, share buybacks generally require prior shareholder authorization. Such authorization was last given at our Annual Shareholders’ Meeting on January 25, 2011, and this matter will, as a general rule, be voted upon at the expiration of each authorization.

B.1.4.3 cOmmItteeS
In contrast to the NYSE Standards, which require the creation of several specific board committees, composed of independent directors and operating pursuant to written charters that define their tasks and responsibilities, the Supervisory Board of Siemens AG has assigned many of the functions of a nominating, compensation and corporate governance committee to its Chairman’s Committee and has delegated part of the remaining functions to its Nominating Committee. Nevertheless, certain responsibilities – for example, the determination of the compensation of the members of the Managing Board – have not been delegated to a committee because German law requires that these functions be performed by the full Supervisory Board. The Audit Committee, the Chairman’s Committee and the Compliance Committee have written bylaws – adopted by the Supervisory Board – that define their respective tasks and responsibilities. The NYSE Standards were taken into consideration in drawing up these bylaws.

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B.2 Corporate GovernanCe statement pursuant to seCtion 289a of the German CommerCial Code
The Corporate Governance statement pursuant to Section 289a of the German Commercial Code (Handelsgesetzbuch) is an integral part of the Combined Management Report. In accor­ dance with Section 317 para. 2 sentence 3 of the German Com­ mercial Code, the disclosures made within the scope of Section 289a of the German Commercial Code are not subject to the audit by the auditors. Managing Board, each for a term of five years, and therefore to no longer follow the suggestion set out in Section 5.1.2 para. 2 sentence 1 of the Code, according to which the maximum pos­ sible appointment period of five years should not be the rule for first­time appointments to a Managing Board. The Code can be downloaded from the Internet at: www.siemens.com/289a. Further Corporate Governance Practices applied beyond legal requirements are contained in our Business Conduct Guidelines.

Declaration of conformity with the German corporate Governance coDe
The Managing Board and the Supervisory Board of Siemens AG approved the following Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act as of October 1, 2012: “Declaration of Conformity by the Managing Board and the Supervisory Board of Siemens Aktiengesellschaft with the German Corporate Governance Code Siemens AG fully complies and will continue to comply with the recommendations of the German Corporate Governance Code (‘Code’) in the version of May 15, 2012, published by the Federal Ministry of Justice in the official section of the elec­ tronic Federal Gazette (‘elektronischer Bundesanzeiger’). Since making its last Declaration of Conformity dated October 1, 2011, Siemens AG has complied with the recommendations of the Code in the prior version of May 26, 2010, with the exception stated and explained therein (that, contrary to the provisions of Section 5.4.6 para. 2 sentence 1 of the Code in the prior version of May 26, 2010, the rules for the compensation of the Super­ visory Board members contain no performance­related compen­ sation components since, in our view, a purely fixed compensa­ tion reinforces the independence of the Supervisory Board). The deviation no longer applies, because the recommendation for performance­related compensation for Supervisory Board mem­ bers is no longer included in the new version of the Code. Berlin and Munich, October 1, 2012 Siemens Aktiengesellschaft The Managing Board The Supervisory Board“

Our Company’s values and Business Conduct Guidelines
In the 165 years of its existence, our Company has built an ex­ cellent reputation around the world. Technical performance, innovation, quality reliability, and international engagement have made Siemens one of the leading companies in electron­ ics and electrical engineering. It is top performance with the highest ethics that has made Siemens strong. This is what the Company should continue to stand for in the future. The Business Conduct Guidelines provide the ethical and legal framework within which we want to maintain successful activi­ ties. They contain the basic principles and rules for our conduct within our Company and in relation to our external partners and the general public. They set out how we meet our ethical and legal responsibility as a company and give expression to our cor­ porate values of being “Responsible – Excellent – Innovative.” The Business Conduct Guidelines can be downloaded from the Internet on: www.siemens.com/289a.

operation of the manaGinG BoarD, the supervisory BoarD, anD composition anD operation of their committees
The composition of the committees of the Managing and Super­ visory Boards is given under chapter D.7 supervisory BoarD anD manaGinG BoarD on paGes 232-238, respectively of the An­ nual Report, as is a description of the composition of the Man­ aging Board and the Supervisory Board. The compositions can be accessed via the Internet on: www.siemens.com/289a. A general description of the functions and operation of the Managing Board and the Supervisory Board can be found under the heading “Management and control structure” under chap­ ter B.1.1 corporate Governance report on paGes 22-25 and on: www.siemens.com/289a. Further details regarding the operation of the Managing and Supervisory Boards can be de­ rived from the description of the committees as well as from the bylaws for the corporate bodies concerned. These docu­ ments can be found at: www.siemens.com/289a.

information on corporate Governance practices
Suggestions of the Code
Siemens voluntarily complies with the Code’s non­binding suggestions, with the following exception: In fiscal 2011, the Supervisory Board decided to appoint Dr. Roland Busch, Klaus Helmrich and Dr. Michael Süß to the

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B.3 ComplianCe report
For Siemens, promoting integrity means acting in accordance with our values – responsible, excellent and innovative – wherever we do business. A key element of integrity is compliance, which means for us: adherence to the law and to our own internal regulations. We have zero tolerance for corruption and violations of the principles of fair competition. Preventing misconduct before it occurs is our primary goal. When we can’t prevent wrongdoing in individual cases, we investigate and take rigorous disciplinary action irrespective of the people involved or their positions. Our Business Conduct Guidelines describe how we fulfill our compliance-related responsibilities. They’re also an expression of our values and lay the foundation for our own internal regulations. For us, compliance is not just a program but the way we do business and uphold integrity at our Company. Our compliance system instills a permanent awareness of these responsibilities in all our managers and employees. We actively support the ratification and enactment of the United Nations Convention against Corruption, which provides important guidance for our entire organization. We’ve revised our compliance priorities for fiscal 2013: > > > > Stand for integrity Committed to business Manage risk and assurance Focus on efficiency

The following topics will also be the focus of our activities in fiscal 2013.

B.3.2 Integrity dialogue – Communication between managers and employees
We keep managers and employees in areas with high risk profiles up to date on the latest compliance requirements. This is an established and key element of our preventive measures. For us, strengthening our managers’ personal responsibility for compliance is vital. That’s why we strive to ensure their commitment to our compliance goals and help them foster integrity visibly and energetically. The principle is simple. First, Compliance Officers train the top managers in their respective units. These managers then train their immediate subordinates, who, in turn, train those under them. This compliance training is integrated into already scheduled meetings and personal discussions and, thus, increases the importance of dialogue between managers and their teams. Business units select the training materials from a catalogue of modules that’s available Company-wide and supplement these with specific compliance-related topics relevant for their own businesses.

B.3.1 Our compliance priorities
In fiscal 2011, we focused our compliance activities on four priorities that provide the basis for the ongoing development of our compliance system. This approach has proven its worth. Our compliance priorities take into account and fulfill the continuously evolving requirements in the field of compliance – requirements that are the result of our own compliance work, on the one hand, and of changing market conditions, on the other.

The SiemenS ComplianCe SySTem
Management responsibility

Prevent
> Compliance risk management > Policies and procedures > Training and communication > Advice and support > Integration in personnel processes > Collective action

Detect
> Whistleblowing channels “Tell us” and ombudsman > Compliance controls > Monitoring and compliance reviews > Compliance audits > Compliance investigations

Respond
> Consequences for misconduct > Remediation > Global case tracking

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We’ll begin introducing our integrity dialogues Company-wide in fiscal 2013. Compliance Officers will support managers throughout the process. They’ll also support the business units in selecting the employees for whom participation in compliance training programs and integrity dialogues is obligatory. Managers will select participants on the basis of Company-wide regulations, taking into account, among other things, the results of compliance risk assessments (CRAs) – a process that will enhance both management responsibility for compliance and the business-specific and risk-related orientation and efficiency of our entire compliance system.

B.3.4 Collective action – Supporting business success through fair competition
Siemens promotes ethical business practices and fair competition beyond Company boundaries – this, too, is one of our key compliance priorities. Going it alone can have only a limited impact in the fight against corruption. If real progress is to be made, as many stakeholders as possible must act in concert. That’s why we’ve joined forces with other organizations to combat corruption and promote ethical markets through collective action and through the Siemens Integrity Initiative. Now that we’ve established collective action throughout the Company and involved a large number of our business units engaging with numerous partners in its implementation, we plan to focus our collective action activities in fiscal 2013 on our particular business requirements more intensively than in the past. There are many ways to do this. For example, future CRAs can increase the emphasis on defining collective action measures such as fair competition partnerships between bidders for large contracts or the voluntary self-commitment of industry federations to compliance standards that reduce compliance-related risks. As in the other areas described, close and trust-based cooperation between Compliance Officers, sales personnel and managers will play a key role here in identifying appropriate measures. The further development of our compliance system entails continuously adapting it to the evolving requirements in the field of compliance. Our overall aim remains unchanged: we want to anchor compliance permanently throughout our global Company in order to ensure that we continue making sound business decisions based on clear principles of integrity. To learn more, please see:
ChapTer C.8.10. of The Combined managemenT reporT www.SiemenS.Com/ComplianCe

B.3.3 Compliance risk assessments at business units
Initiating effective measures to detect and minimize compliance-related risks in business operations at an early stage is the heart of a successful compliance system. Our assessment and monitoring processes are being further improved by our CRAs. In use since the beginning of fiscal 2012, the CRA process improves the links between compliance and business operations at Siemens. Every year, the CEOs of our business units meet with other key managers and the relevant Compliance Officers to systematically determine the compliance-related risks at their respective units. The compliance-related risks identified in the process are then assessed and measures for reducing them defined. The resulting analyses are incorporated into the Companywide compliance risk analysis, which covers the material compliance-related risks for Siemens as a whole. The accurate assessment of compliance-related risks depends on close and trust-based cooperation between the managers and specialists at our business units, on the one hand, and our Compliance Officers, on the other.

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B.4 Compensation report
The Compensation report outlines the principles underlying the determination of the total compensation of the members of the Managing Board of Siemens AG, and sets out the structure and level of the remuneration of the Managing Board members. It also describes the policies governing, and levels of, the compensation paid to Supervisory Board members. This section is based on the recommendations of the German Corporate Governance Code and includes disclosures in accordance with the requirements of the German Commercial Code (HGB), German Accounting Standards (DRS), and International Financial Reporting Standards (IFRS). The Compensation Report is an integral part of the Combined Management Report. of that aim, a substantial portion of their total remuneration is linked to the performance of Siemens stock. A further aim is for their remuneration to be commensurate with the Company’s size and economic position. Exceptional achievements are to be rewarded adequately, while falling short of goals is intended to result in an appreciable reduction in remuneration. The Managing Board’s compensation is also structured so as to be attractive in comparison to that of competitors, with a view to attracting outstanding managers to our Company and keeping them with us for the long term. The system and levels for the remuneration of the Managing Board are determined and reviewed regularly by the Supervisory Board, based on proposals from the Chairman’s Committee. The Supervisory Board reviews remuneration levels annually to ensure that they are appropriate. In that process, the economic situation and the results of the Company as well as the performance of the individual Managing Board members are taken into account. In addition, the Supervisory Board considers the adequacy of remuneration in comparison with standard practice at similar companies and with the compensation structure valid elsewhere in the Company. The remuneration system that has been used for the Managing Board members since fiscal 2011 was approved by a large majority at the Annual Shareholders’ Meeting on January 25, 2011.

B.4.1 Remuneration of members of the Managing Board
B.4.1.1 REMUNERATION SYSTEM
The remuneration system for the Managing Board at Siemens is intended to provide an incentive for successful corporate management with an emphasis on sustainability. Members of the Managing Board are expected to make a long-term commitment to and on behalf of the Company, and may benefit from any sustained increase in the Company’s value. In the interest
REMUNERATION SYSTEM fOR MANAgINg BOARd MEMBERS
Compensation Long-term compensation (target parameter: stock price compared to 5 competitors) Variability: 0 – 200%

Granted in

Timing
Restriction period and period for target measurement: 4 years

Stock-based compensation

Long-term compensation (target parameter: Ø earnings per share) Variability: 0 – 200%

Stock Awards (forfeitable grants of stock)

Performance period: 3 years, including year of compensation; subsequent restriction period: 4 years

Bonus (target parameters: revenue growth (organic), ROCE (adjusted), free cash flow) Variability: 0 – 200%

Bonus Awards (non-forfeitable grants of stock)

Performance period: Year of compensation; subsequent waiting period: 4 years Performance period: Year of compensation

Cash compensation

Cash Base compensation including other compensation

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Share Ownership Guidelines Obligation to hold shares for duration of membership in Managing Board

Non-performance-based components Performance-based components Performance-based components with deferred payout

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In fiscal 2012, the remuneration system for the Managing Board had the following components:

Non-performance-based components
Base compensation Base compensation is paid as a monthly salary. It is reviewed regularly, and revised if appropriate. The base compensation of President and CEO Peter Löscher was set at the time of his appointment on July 1, 2007, and has remained essentially unchanged since then. It is €2,000,000 per year. The base compensation of the other members of the Managing Board has been €900,000 per year since October 1, 2010. Other compensation Other compensation includes costs, or the cash equivalent, of non-monetary benefits and perquisites, such as provision of a Company car, contributions toward the cost of insurance, reimbursement of fees for legal advice, tax advice and accommodation and moving expenses, including a gross-up for any taxes that have to be borne in this regard, as well as costs relating to preventive medical examinations.

The bonus is paid half in cash, and half in the form of non-forfeitable stock commitments (Bonus Awards). After a four-year waiting period, the beneficiary will receive one share of Siemens stock for each Bonus Award. Instead of the transfer of Siemens stock, an equivalent cash settlement may be effected.

Long-term stock-based compensation Long-term stock-based compensation consists of a grant of forfeitable stock commitments (Stock Awards). The beneficiaries will receive one free share of Siemens stock for each Stock Award after a restriction period. Beginning with fiscal 2011, the restriction period for Stock Awards ends at the close of the second day after publication of the operating results for the fourth calendar year after the date of the award.
In the event of extraordinary unforeseen developments that have an impact on the stock price, the Supervisory Board may decide to reduce the number of promised Stock Awards retroactively, or it may decide that in lieu of a transfer of Siemens Stock only a cash settlement in a defined and limited amount will be paid, or it may decide to postpone transfers of Siemens Stock for payable Stock Awards until the developments have ceased to have an impact on the stock price. In the event of a 100% target attainment, the annual target amount for the monetary value of the Stock Awards commitment will be €2.5 million for the President and CEO, and €1 million for each of the other members of the Managing Board. Beginning with fiscal 2011, the Supervisory Board has the option of increasing, on an individual basis, the target amount for a member of the Managing Board who has been reappointed by as much as 75% above the amount of €1 million, for one fiscal year at a time. This option enables the Supervisory Board to take account of the Managing Board member’s individual accomplishments and experience as well as the scope and demands of his or her function. This rule does not apply to the President and CEO. The foundation for the performance-based component of longterm stock-based compensation is One Siemens, our target system for sustainably enhancing corporate value. The allocation rules for long-term stock-based compensation take this focus into account as follows: > On the one hand, half of the annual target amount for the annual Stock Awards is linked to the average basic earnings per share (EPS) for the last three completed fiscal years (from continuing and discontinued operations). In principle, the target value is the average basic earnings per share (from continuing and discontinued operations) from the past three fiscal years completed prior to the year of compensation. At the end of each fiscal year, the Supervisory Board decides on

Performance-based components
Variable compensation component (bonus) The variable compensation component (bonus) is based on the Company ’s business performance in the past fiscal year. The targets for the variable compensation component are derived from One Siemens, our target system for sustainably enhancing corporate value. On the basis of this target system, the Supervisory Board at the beginning of each fiscal year defines specific targets for several parameters. These target parameters – in addition to other factors – also apply to senior executives, with a view to establishing a consistent target system throughout the Company.
For a 100% target attainment (target amount) the amount of the bonus equals the amount of base compensation. The bonus is subject to a ceiling (cap) of 200%. If targets are substantially missed, the variable component may potentially not be paid at all. The Supervisory Board is entitled to revise the amount resulting from attaining targets, by as much as 20% upward or downward, at its duty-bound discretion (pflichtgemäßes Ermessen); the adjusted amount of the bonus paid can be as much as 240% of the target amount. In choosing the factors to be considered in deciding on possible revisions of the bonus payouts (± 20%), the Supervisory Board takes account of incentives for sustainable corporate management. The revision option may also be exercised in recognition of Managing Board members’ individual achievements.

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To our Shareholders

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Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

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B.1 Corporate Governance Report B.2 Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) B.3 Compliance Report

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a figure that represents that year’s target attainment, which may lie between 0% and 200% (cap). This target attainment will then determine the actual monetary value of the award and the resulting number of Stock Awards. > On the other hand, the development of the performance of Siemens’ stock compared to its competitors is to have a direct effect on compensation. For this purpose, with respect to the other half of the annual target amount for the Stock Awards, the Supervisory Board will first grant a number of Stock Awards equivalent to the monetary value of half the target amount on the date of the award. The Supervisory Board will also decide on a target system (target value for 100% and target curve) for the performance of Siemens stock relative to the stock of competitors (at present ABB, General Electric, Philips, Rockwell, Schneider). The reference period for measuring the target will be the same as the four-year restriction period for the Stock Awards. After this restriction period expires, the Supervisory Board will determine how much better or worse Siemens stock has performed relative to the stock of its competitors. This determination will yield a target attainment of between 0% and 200% (cap). If target attainment is above 100%, an additional cash payment corresponding to the outperformance is effected. If target attainment is less than 100%, a number of Stock Awards equivalent to the shortfall from the target will expire without replacement. With regard to the further terms of the Stock Awards, the same general principles apply for the Managing Board and for senior executives; these principles are discussed in more detail in NOTE 33 IN d.6 NOTES TO CONSOlIdATEd fINANCIAl STATEMENTS. That note also includes further information about the stockbased employee investment plans.

If the value of the accrued holdings declines below the minimum to be evidenced from time to time because the market price of Siemens stock has fluctuated, the member of the Managing Board must acquire additional shares.

Pension benefit commitments
The members of the Managing Board, like all Siemens AG employees, are included in the Siemens Defined Contribution Benefit Plan (BSAV). Under the BSAV, members of the Managing Board receive contributions that are credited to their personal pension account. The amount of the annual contributions is based on a predetermined percentage which refers to the base compensation and the target amount for the bonus. This percentage is decided annually by the Supervisory Board; it was set most recently at 28%. The non-forfeitability of pension benefit commitments is in compliance with the provisions of the German Company Pensions Act (Betriebsrentengesetz). Special contributions may be granted to Managing Board members on the basis of individual decisions of the Supervisory Board. In the case of new appointments of members of the Managing Board from outside the Company, these contributions may be defined as non-forfeitable from their inception. If a member of the Managing Board had earned a pension benefit entitlement from the Company before the BSAV was introduced, a portion of his contributions went toward financing this prior commitment. Members of the Managing Board are entitled to benefits under the BSAV on reaching the age of 60, at the earliest. They may choose to have their accrued pension benefit balance paid out as a pension, as a lump sum, or in a maximum of twelve annual installments. If the pension option is chosen, a decision must be made as to whether it should include pensions for surviving dependents. If a member of the Managing Board dies while receiving a pension, benefits will be paid to the member’s surviving dependents if the member has chosen such benefits. The Company will then provide a limited-term pension to surviving children until they reach age 27, or age 25 in the case of commitments made on or after January 1, 2007. Benefits from the retirement benefit system that was in place before the BSAV was introduced are normally granted as pension benefits with a surviving dependents’ pension. In this case as well, a payout in installments or a lump sum may be chosen instead of pension payments. Members of the Managing Board who were employed by the Company on or before September 30, 1983, are entitled to transition payments for the first six months after retirement, equal to the difference between their final base compensation and the retirement benefits payable under the corporate pension plan.

Share Ownership Guidelines
The Siemens Share Ownership Guidelines are an integral part of the remuneration system for the Managing Board and senior management. These guidelines require the members of the Managing Board – after a certain buildup phase – to hold Siemens stock worth a multiple of their base compensation (300% for the President and CEO, 200% for the other members of the Managing Board) during their term of office on the Managing Board. The determining figure in this context is the average base compensation that the relevant member of the Managing Board has drawn over the four years of the buildup phase. Accordingly, changes that have been made to base compensation in the meantime are included. Non-forfeitable stock awards (Bonus Awards) are taken into account in determining compliance with the Share Ownership Guidelines. Evidence that this obligation has been met must first be provided after the buildup phase, and updated annually thereafter.

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Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

33

Commitments in connection with termination of Managing Board membership
Managing Board contracts provide for a compensatory payment if membership on the Managing Board is terminated prematurely by mutual agreement, without serious cause. The amount of this payment must not exceed the value of two years’ compensation (cap). The amount of the compensatory payment is calculated on the basis of the base compensation and the variable components of compensation actually received for the last fiscal year before termination. The compensatory payment is payable in the month when the member leaves the Managing Board. In addition, a one-time exceptional contribution is made to the BSAV. The amount of this contribution is based on the BSAV contribution that the Board member received for the previous year, together with the remaining term of the appointment, but is limited to not more than two years’ contributions (cap). The above benefits are not paid if an amicable termination of the member’s activity on the Managing Board is agreed upon at the member’s request, or if there is serious cause for the Company to terminate the employment relationship. In the event of a change of control that results in a substantial change in the position of the Managing Board member (e.g., due to a change in corporate strategy or a change in the Managing Board member’s duties and responsibilities), the member of the Managing Board has the right to terminate his or her contract with the Company for good cause. A change of control exists if one or more shareholders acting jointly or in concert acquire a majority of the voting rights in Siemens AG and exercise a controlling influence, or if Siemens AG becomes a dependent enterprise as a result of entering into an intercompany agreement within the meaning of Section 291 of the German Stock Corporation Act, or if Siemens AG is to be merged into an existing corporation or other entity. If this right of termination is exercised, the Managing Board member is entitled to a severance payment in the amount of not more than two years’ compensation. The calculation of the annual compensation includes not only the base compensation and the target amount for the bonus, but also the target amount for the Stock Awards, in each case based on the most recent completed fiscal year prior to termination of the contract. The stock-based components for which a firm commitment already exists will remain unaffected. There is no entitlement to a severance pay-

ment if the Managing Board member receives benefits from third parties in connection with a change of control. Moreover, there is no right to terminate if the change of control occurs within a period of twelve months prior to a Managing Board member’s retirement. Additionally, compensatory or severance payments cover nonmonetary benefits by including an amount of 5% of the total compensation or severance amount. Compensatory or severance payments will be reduced by 15% as a lump-sum allowance for discounted values and for income earned elsewhere. However, this reduction will apply only to the portion of the compensatory or severance payment that was calculated without taking account of the first six months of the remaining term of the Managing Board member’s contract. If a member leaves the Managing Board, the variable component (bonus) is determined pro rata temporis after the end of the fiscal year in which the appointment was terminated and settled in cash at the usual payout or transfer date, as the case may be. If the employment contract is terminated in the course of an appointment period, the non-forfeitable stock awards (Bonus Awards) for which the waiting period is still in progress will remain in effect without restriction. If the employment agreement is terminated because of retirement, disability or death, a Managing Board member’s Bonus Awards will be settled in cash as of the date of departure from the Board. By contrast, stock commitments that were made as long-term variable compensation (Stock Awards) and for which the restriction period is still in progress will expire without replacement if the employment agreement is terminated in the course of an appointment period. The same applies if the employment agreement is not extended after the end of an appointment period, either at the Board member’s request or because there is serious cause that would have entitled the Company to revoke the appointment or terminate the contract. However, once granted, Stock Awards do not expire if the employment agreement is terminated because of retirement, disability, or death, or in connection with a spin-off, the transfer of an operation, or a change of activity within the corporate group. In this case, the Stock Awards will remain in effect upon termination of the employment agreement and will be honored on expiration of the restriction period.

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Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

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B.1 Corporate Governance Report B.2 Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) B.3 Compliance Report

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B.4.1.2 REMUNERATION Of THE MEMBERS Of THE MANAgINg BOARd fOR fISCAl 2012
On the basis of our One Siemens target system, at the beginning of the fiscal year the Supervisory Board set the targets and weighting for the unchanged parameters compared to the previous year: organic revenue growth, return on capital employed (ROCE) adjusted, and free cash flow, in each case on the basis of continuing operations, together with earnings per share (EPS) on the basis of continuing and discontinued operations. The definition of these parameters and their weighting acknowledges a sustainable enhancement of corporate value. An internal review of the appropriateness of the Managing Board’s compensation for fiscal 2012 has confirmed that the remuneration of the Managing Board resulting from the target attainment for fiscal 2012 is to be considered appropriate. Following the decision on determining the achievement of the targets set at the beginning of the fiscal year, the Supervisory Board decided at its meeting on November 7, 2012, to set the variable compensation component (bonus), the Stock Awards to be granted and the pension benefit contributions as follows:

Variable compensation component (bonus) In setting the targets for the variable compensation (bonus) at the beginning of fiscal 2012, the Supervisory Board took into account that the Company focuses on a sustainable appreciation of value:
> The primary focus of the decision was capital-efficient growth; consequently, for fiscal 2012 more importance was attributed to the target parameters of organic revenue growth and return on capital employed (ROCE) adjusted. > For ROCE adjusted, the target value from the prior year remained unchanged. > The target for free cash flow was increased noticeably compared to the prior year. As a consequence, the following targets were set and attained with respect to the variable compensation component:

Target parameter

Weight

100% of target

Actual 2012 figure

Target attainment

Revenue growth (organic) 1 ROCE adjusted 1 Free cash flow 1 Total target attainment
1 Continuing operations

40 % 40% 20%

1% 16.1% €3,600 million

3% 17.0% €4,790 million

146.40% 123.75% 139.67% 135.99%

The values measured for target attainment were not adjusted. The Supervisory Board decided, exercising its duty-bound discretion (pflichtgemäßes Ermessen), to individually adjust the bonus payout amounts resulting from target attainment upward or downward for single Managing Board members with business responsibility for Sector portfolios. In its decision, the Supervisory Board reflected the attained performance of the Sectors.

Long-term stock-based compensation For half of the annual target amount for the Stock Awards, an average basic EPS (from continuing and discontinued operations) of €5.54 was determined for fiscal years 2010 through 2012, yielding a target attainment of 154%.

For the other half of the annual target amount for the Stock Awards, the Supervisory Board approved a number of Stock Awards equivalent to the monetary value of half the target amount on the award date. The amount by which these stock commitments must be adjusted – or an additional cash payment must be made – after the end of the restriction period will depend on the performance of Siemens stock compared to the stock of five competitors (ABB, General Electric, Philips, Rockwell, Schneider) over the coming four years, and will therefore not be determined until after the end of fiscal 2016. The number of stock commitments (Bonus Awards and Stock Awards) granted was based on the closing price of Siemens stock in Xetra trading on the date of commitment less the present value of dividends expected during the holding period, because beneficiaries are not entitled to receive dividends. This figure for determining the number of commitments amounted to €64.93 (prior year: €57.70).

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Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

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Total compensation On the basis of the Supervisory Board decisions described above, Managing Board compensation for fiscal 2012 totaled €39.61 million, which is at the same level as in the previous year (2011: €39.61 million). Of this total amount, €17.45 million (2011: €18.94 million) was attributable to the cash compensation components and €22.16 million (2011: €20.68 million) to stock-based compensation. Thus, more than half of the compensation was paid in the form of stock-based instruments with waiting or restriction periods of four years and therefore on a deferred basis.
The fair values of the granted stock-based compensation component shown in the following table do not represent a cash inflow for Managing Board members for fiscal 2012. They rep-

resent the notional value of the Bonus Awards and Stock Awards granted in fiscal 2012 as calculated on the basis of reporting standards. The transfer of one share per award will not take place until the expiration of the four-year waiting or restriction period, or in other words, not until November 2016. The number of Stock Awards linked to the performance of the price of Siemens stock will be adjusted after the end of the restriction period, on the basis of the actual target attainment. Accordingly, the value of the actual shares transferred may be higher or lower than shown here, also depending on the stock price in effect at the time of transfer. The following compensation was determined for each of the members of the Managing Board for fiscal 2012 (individualized disclosure):

Non-performance-based components without long-term incentive effect non-stock-based Base compensation Other compensation 1 Variable compensation component (bonus) – Cash component FY 2012 FY 2011 FY 2012

FY 2012

FY 2011

FY 2012

FY 2011

(Amounts in number of units or €)

Shares

Fair value 4

Managing Board members serving as of September 30, 2012 Peter Löscher Dr. Roland Busch 6, 7 Brigitte Ederer Klaus Helmrich 7 Joe Kaeser 8 Barbara Kux Prof. Dr. Hermann Requardt 6 Prof. Dr. Siegfried Russwurm Peter Y. Solmssen 9 Dr. Michael Süß 7 Former members of the Managing Board Wolfgang Dehen 10 Total
1

2,000,000 900,000 900,000 900,000 900,000 900,000 900,000 900,000 900,000 900,000

2,000,000 450,000 900,000 450,000 900,000 900,000 900,000 900,000 900,000 450,000

30,720 49,771 27,697 76,961 72,935 33,960 64,132 42,146 33,498 49,089

29,594 88,726 54,651 35,318 72,411 168,176 62,565 41,303 64,720 13,751

1,359,900 550,760 611,955 611,955 611,955 611,955 673,151 611,955 611,955 611,955

1,973,800 444,105 888,210 444,105 888,210 888,210 888,210 888,210 888,210 444,105

20,945 8,483 9,425 9,425 9,425 9,425 10,368 9,425 9,425 9,425

1,359,959 550,801 611,965 611,965 611,965 611,965 673,194 611,965 611,965 611,965

– 10,100,000

450,000 9,200,000

– 480,909

25,046 656,261

– 6,867,496

444,105 9,079,480

– 105,771

– 6,867,709

Other compensation includes costs, or the cash equivalent, of non-monetary benefits and perquisites, such as provision of Company cars in the amount of €257,855 (2011: €212,641) contributions toward the cost of insurance in the amount of €87,429 (2011: €72,964), reimbursement of fees for legal advice, tax advice and accommodation and moving expenses, including any taxes that have been assumed in this regard as well as costs connected with preventive medical examinations, in the amount of €135,625 (2011: €370,656). The expenses recognized for stock-based compensation (Bonus Awards and Stock Awards) and for the Share Matching Plan for members of the Managing Board in accordance with IFRS in fiscal 2012 and 2011 amounted to €15,995,543 and €15,193,559, respectively. The following amounts pertained to the members of the Managing Board in fiscal 2012: Peter Löscher €3,757,710 (2011: €4,042,438), Dr. Roland Busch €735,167 (2011: €285,356), Brigitte Ederer €950,250 (2011: €766,761), Klaus Helmrich €735,167 (2011: €285,356),

Joe Kaeser €1,781,626 (2011: €1,770,429 ), Barbara Kux €1,493,576 (2011: €1,290,005), Prof. Dr. Hermann Requardt €1,605,244 (2011: €1,741,299), Prof. Dr. Siegfried Russwurm €1,571,872 (2011: €1,701,676), Peter Y. Solmssen €1,566,372 (2011: €1,696,632) and Dr. Michael Süß €735,167 (2011: €285,356). The corresponding expenses for the former Board member Wolfgang Dehen amounted to €1,063,392 (2011: €1,328,251). 3 The total compensation reflects the current fair value of stock-based compensation components. On the basis of the current monetary values of stock-based compensation components, total compensation amounted to €39,874,058 (2011: €39,250,929). 4 For Bonus Awards as well as Stock Awards, whose target attainment depends on EPS for the past three fiscal years, the fair value on the award date is equivalent to the respective monetary values.

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Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

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B.1 Corporate Governance Report B.2 Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) B.3 Compliance Report

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Performance-based components with long-term incentive effect stock-based Variable compensation component (bonus) Bonus Awards2 FY 2011 Target attainment depending on EPS for past three fiscal years Shares Fair value 4 Shares Fair value 4 FY 2012 Target attainment depending on future stock performance Shares Fair value 5 Target attainment depending on EPS for past three fiscal years Shares Fair value 4 Stock Awards 2 Total compensation 3

FY 2011 Target attainment depending on future stock performance Shares Fair value 5

FY 2012

FY 2011

34,208 7,697 15,394 7,697 15,394 15,394 15,394 15,394 15,394 7,697

1,973,802 444,117 888,234 444,117 888,234 888,234 888,234 888,234 888,234 444,117

29,648 11,859 11,859 11,859 20,754 11,859 11,859 11,859 11,859 11,859

1,925,045 770,005 770,005 770,005 1,347,557 770,005 770,005 770,005 770,005 770,005

19,252 7,701 7,701 7,701 13,477 7,701 7,701 7,701 7,701 7,701

1,195,549 478,232 478,232 478,232 836,922 478,232 478,232 478,232 478,232 478,232

24,697 4,940 9,879 4,940 9,879 9,879 9,879 9,879 9,879 4,940

1,425,017 285,038 570,018 285,038 570,018 570,018 570,018 570,018 570,018 285,038

21,664 4,333 8,666 4,333 8,666 8,666 8,666 8,666 8,666 4,333

1,336,014 267,215 534,430 267,215 534,430 534,430 534,430 534,430 534,430 267,215

7,871,173 3,299,569 3,399,854 3,449,118 4,381,334 3,406,117 3,558,714 3,414,303 3,405,655 3,421,246

8,738,227 1,979,201 3,835,543 1,925,793 3,853,303 3,949,068 3,843,457 3,822,195 3,845,612 1,904,226

7,697 157,360
5

444,117 9,079,674

– 145,274

– 9,432,642

– 94,337

– 5,858,327

4,940 103,731

285,038 5,985,277

4,333 90,992

267,215 5,611,454



1,915,521

39,607,083 39,612,146

The monetary values reflecting a target attainment of 100% amount to €6,125,302 (2011: €5,250,237). For the individual members of the Managing Board, that value was: Peter Löscher €1,250,032 (2011: €1,250,013), Dr. Roland Busch €500,026 (2011: €250,014), Brigitte Ederer €500,026 (2011: €500,028), Klaus Helmrich €500,026 (2011: €250,014), Joe Kaeser €875,062 (2011: €500,028), Barbara Kux €500,026 (2011: €500,028), Prof. Dr. Hermann Requardt €500,026 (2011: €500,028), Prof. Dr. Siegfried Russwurm €500,026 (2011: €500,028), Peter Y. Solmssen €500,026 (2011: €500,028) and Dr. Michael Süß €500,026 (2011: €250,014). The corresponding monetary value for the former Board member Wolfgang Dehen amounted to €0 (2011: €250,014). The Supervisory Board adjusted the bonus payout amounts resulting from target attainment individually as follows: Dr. Roland Busch by 10% downward, equivalent to €122,391 and Prof. Dr. Hermann Requardt by 10% upward, equivalent to €122,391.

7 Dr. Roland Busch, Klaus Helmrich and Dr. Michael Süß were elected full members of the Managing Board effective April 1, 2011. 8 The Supervisory Board increased the annual target amount for the monetary value of the Stock Awards commitment for Joe Kaeser for fiscal 2012 by 75% to €1,750,000.

9 Peter Y. Solmssen will be reimbursed for relocation expenses incurred by him upon termination of his membership on the Managing Board of Siemens AG. 10 Wolfgang Dehen resigned from the Managing Board effective March 31, 2011. Due to rounding, numbers presented may not add up precisely to totals provided.

6

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Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

37

Pension benefit commitments For fiscal 2012, the members of the Managing Board were granted contributions under the BSAV totaling €5.7 million (2011: €5.2 million), based on the resolution of the Supervisory Board dated November 7, 2012. Of this amount, €0.1 million (2011: €0.1 million) related to funding of pension commitments earned prior to transfer to the BSAV and the remaining €5.6 million (2011: €5.1 million) to contributions to their personal pension accounts.

The contributions under the BSAV are added to the personal pension accounts each January following the close of the fiscal year, with value date on January 1. Until the beneficiary ‘s time of retirement, the pension account is credited with an annual interest payment (guaranteed interest), currently 1.75%, on January 1 of each year. The following table shows individualized details of the contributions (additions) under the BSAV for fiscal 2012 as well as the defined benefit obligations for the pension commitments:

Total contributions 1 for (Amounts in €) FY 2012 FY 2011

Defined benefit obligation 2 for all pension commitments excluding deferred compensation 3 FY 2012 FY 2011

Managing Board members serving as of September 30, 2012 Peter Löscher Dr. Roland Busch 4 Brigitte Ederer Klaus Helmrich 4 Joe Kaeser Barbara Kux Prof. Dr. Hermann Requardt Prof. Dr. Siegfried Russwurm Peter Y. Solmssen Dr. Michael Süß 4 Former members of the Managing Board Wolfgang Dehen 5 Total
1

1,120,000 504,000 504,000 504,000 504,000 504,000 504,000 504,000 504,000 504,000

1,120,000 252,000 504,000 252,000 504,000 504,000 504,000 504,000 504,000 252,000

14,717,3952 1,446,910 1,102,958 1,723,759 4,388,859 2,201,9632 4,433,581 2,893,761 14,862,4702 1,789,619

13,047,0842 833,494 606,730 1,098,440 3,351,837 1,651,8732 3,498,238 2,204,829 13,689,0502 1,253,272

– 5,656,000

252,000 5,152,000

2,374,826 51,936,101

2,166,086 43,400,933

The expenses (service costs) recognized in accordance with IFRS in fiscal 2012 for Managing Board members’ entitlements under the BSAV in fiscal 2012 came to €6,152,011 (2011: €4,521,763). The following amounts pertained to the members of the Managing Board in fiscal 2012: Peter Löscher €1,235,653 (2011: €1,237,034), Dr. Roland Busch €547,713 (2011: €48,829), Brigitte Ederer €552,904 (2011: €479,838), Klaus Helmrich €547,675 (2011: €69,807), Joe Kaeser €530,970 (2011: €457,947), Barbara Kux €552,800 (2011: €479,082), Prof. Dr. Hermann Requardt €526,202 (2011: €452,475), Prof. Dr. Siegfried Russwurm €546,850 (2011: €472,594), Peter Y. Solmssen €553,236 (2011: €480,280) and Dr. Michael Süß €558,008 (2011: €120,802), in addition to €0 (2011: €223,075) for former Managing Board member Wolfgang Dehen. The defined benefit obligations reflect one-time special contributions of €19,358,000 for new appointments from outside the Company, including €8,500,000 for Peter Löscher, €10,518,000 for Peter Y. Solmssen and €340,000 for Barbara Kux. The defined benefit

obligations under all pension commitments, including deferred compensation, to Managing Board members serving as of September 30, 2011 came to €47.0 million, in addition to €2.2 million for former Managing Board member Wolfgang Dehen. 3 Deferred compensation totals €7,543,061 (2011: €5,814,318), including €269,147 for Klaus Helmrich (2011: €234,828), €2,755,189 for Joe Kaeser (2011: €2,396,726), €3,280,486 for Barbara Kux (2011: €2,096,825) and €1,238,239 for Prof. Dr. Hermann Requardt (2011: €1,085,939). Dr. Roland Busch, Klaus Helmrich and Dr. Michael Süß were elected full members of the Managing Board effective April 1, 2011. Wolfgang Dehen resigned from the Managing Board effective March 31, 2011.

4 5

2

Due to rounding, numbers presented may not add up precisely to totals provided.

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Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

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Former members of the Managing Board and their surviving dependents received emoluments within the meaning of Section 314 para. 1 No. 6 b of the HGB totaling €15.8 million (2011: €15.0 million) in fiscal 2012, but no Stock Awards (2011: no Stock Awards). The defined benefit obligation (DBO) of all pension commitments to former members of the Managing Board and their surviving dependents as of September 30, 2012, amounted to €181.6 million (2011: €161.9 million). This amount is included in NOTE 23 IN d.6 NOTES TO CONSOlIdATEd fINANCIAl STATEMENTS.

B.4.1.3 AddITIONAl INfORMATION ON STOCK-BASEd COMPENSATION INSTRUMENTS IN fISCAl 2012
This section provides information concerning the Stock Awards and stock options held by members of the Managing Board that were components of stock-based compensation in fiscal 2012 and prior years, and also about the Managing Board members’ entitlements to matching shares under the Siemens Share Matching Plan.

Other No loans or advances from the Company are provided to members of the Managing Board.

Stock Commitments The following table shows the changes in the stock commitments (Bonus Awards and Stock Awards) held by Managing Board members in fiscal 2012:

Balance at beginning of fiscal 2012

Granted during fiscal year 1

Vested during fiscal year

Forfeited during fiscal year

Balance at end of fiscal 2012 2

Forfeitable commitments of Stock Awards Nonforfeitable commitments of Bonus Awards Nonforfeitable commitments of Bonus Awards (Target attainment depending on EPS for past three fiscal years) (Target attainment depending on future stock performance) Commitments of Bonus Awards and Stock Awards Nonforfeitable commitments of Bonus Awards

(Amounts in number of units)

Forfeitable commitments of Stock Awards

Commitments of Stock Awards

Forfeitable commitments of Stock Awards

Managing Board members serving as of September 30, 2012 Peter Löscher Dr. Roland Busch 3 Brigitte Ederer Klaus Helmrich 3 Joe Kaeser Barbara Kux Prof. Dr. Hermann Requardt Prof. Dr. Siegfried Russwurm Peter Y. Solmssen Dr. Michael Süß 3 Former members of the Managing Board Wolfgang Dehen 4 Total – – 57,673 514,315 7,697 157,360 4,940 108,645
3 4

– – – – – – – – – –

144,180 8,042 12,422 11,816 57,673 29,055 57,673 57,673 57,673 20,435

34,208 7,697 15,394 7,697 15,394 15,394 15,394 15,394 15,394 7,697

24,697 6,076 9,879 6,540 9,879 9,879 9,879 9,879 9,879 7,118

21,664 5,330 8,666 5,737 8,666 8,666 8,666 8,666 8,666 6,244

66,402 2,958 4,179 4,257 26,561 – 26,561 26,561 26,561 8,884

– – – – – – – – – –

34,208 7,697 15,394 7,697 15,394 15,394 15,394 15,394 15,394 7,697

124,139 16,490 26,788 19,836 49,657 47,600 49,657 49,657 49,657 24,913

4,333 95,304

26,561 219,485

– –

7,697 157,360

40,385 498,779

1 The weighted average fair value as of the grant-date for fiscal 2012 was €58.75 per granted share. 2 Amounts do not include stock committments (Bonus Awards and Stock Awards) granted in November 2012 for fiscal 2012. For details, see PAgES 36-37. However, these amounts may include Stock Awards received as compensation by the Managing Board member before joining the Managing Board.

Dr. Roland Busch, Klaus Helmrich and Dr. Michael Süß were elected full members of the Managing Board effective April 1, 2011. Wolfgang Dehen resigned from the Managing Board effective March 31, 2011. Because he changed positions within the Corporate group, his awards remain in effect under the applicable guidelines.

49

C.

Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

39

Stock options The authorization to issue stock options expired in December 2006. On completion of a two-year vesting period, plan participants were entitled to exercise their subscription rights within a three-year period. Allowing for the vesting period, the last options were exercised in fiscal 2011. Any options still unexercised expired that same year. Consequently no options were outstanding either as of September 30, 2012, or in the prior year.

Shares from the Share Matching Plan In fiscal 2011, the members of the Managing Board were entitled for the last time to participate in the Siemens Share Matching Plan, and under the plan were entitled to invest up to 50% of the annual gross amount of their variable cash compensation component (bonus) determined for fiscal 2010 in Siemens shares. After expiration of a vesting period of approximately three years, plan participants will receive one free matching share of Siemens stock for every three Siemens shares acquired and continuously held under the plan, provided the participants were employed without interruption at Siemens AG or a Siemens company until the end of the vesting period. The following table shows the development of the matching share entitlements of the individual members of the Managing Board in fiscal 2012.

Balance at beginning of fiscal 20121 (Amounts in number of units) Entitlement to matching shares

Due during fiscal year Entitlement to matching shares

Forfeited during fiscal year Entitlement to matching shares

Balance at end of fiscal 2012 1, 2 Entitlement to matching shares

Managing Board members serving as of September 30, 2012 Peter Löscher Dr. Roland Busch 3 Brigitte Ederer Klaus Helmrich 3 Joe Kaeser Barbara Kux Prof. Dr. Hermann Requardt Prof. Dr. Siegfried Russwurm Peter Y. Solmssen Dr. Michael Süß 3 Former members of the Managing Board Wolfgang Dehen 4 Total
1 2

– 868 560 1,131 7,661 698 5,641 5,459 6,051 –

– 802 560 1,128 3,855 – 3,228 4,926 6,051 –

– – – – – – – – – –

– 66 – 3 3,806 698 2,413 533 – –

5,845 33,914

4,140 24,690

– –

1,705 9,224

Amounts may include entitlements acquired before the member joined the Managing Board. The entitlements of the Managing Board members serving in fiscal 2012 had the following fair values: Peter Löscher €0 (2011: €0), Dr. Roland Busch €3,464 (2011: €21,039), Brigitte Ederer €0 (2011: €11,958), Klaus Helmrich €527 (2011: €25,059), Joe Kaeser €222,277 (2011: €305,003), Barbara Kux €33,282 (2011: €33,282), Prof. Dr. Hermann Requardt €140,823 (2011: €210,169), Prof. Dr. Siegfried Russwurm €25,487 (2011: €131,068), Peter Y. Solmssen €0 (2011: €129,588) and Dr. Michael Süß €0 (2011: €0). The entitlement of former Managing Board member Wolfgang Dehen has the following

fair value: €80,815 (2011: €169,623). The above fair values also take into account that the shares acquired under the Base Share Program as part of the Share Matching Plan were provided with a Company subsidy (for additional information on the Base Share Program see NOTE 33 IN d.6 Of THE NOTES TO CONSOlIdATEd fINANCIAl STATEMENTS). 3 Dr. Roland Busch, Klaus Helmrich and Dr. Michael Süß were elected full members of the Managing Board effective April 1, 2011. 4 Wolfgang Dehen resigned from the Managing Board effective March 31, 2011. Because he changed positions within the Corporate Group, his entitlements remain in effect under the applicable guidelines.

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Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

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B.1 Corporate Governance Report B.2 Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) B.3 Compliance Report

29

Share Ownership Guidelines Different deadlines apply for the individual members of the Managing Board to provide their first-time proof of compliance with the Siemens Share Ownership Guidelines, depending on the date when the member was appointed to the Managing Board. The following table shows the number of Siemens

shares held by Managing Board members as of the deadline in March 2012 for showing compliance with the Share Ownership Guidelines, and the number of Siemens shares to be held permanently with a view to future deadlines.

Obligation under Share Ownership Guidelines (Amounts in number of units or €) Required value 1 Required number of shares 2 Proven number of shares 3

Managing Board members required to show proof as of March 9, 2012 Peter Löscher Joe Kaeser Prof. Dr. Hermann Requardt Prof. Dr. Siegfried Russwurm Peter Y. Solmssen Total
1 The amount of the obligation is based on a member’s average base compensation for the four years prior to each review of his or her achievement of the targets defined by the Share Ownership Guidelines. 2 3

5,961,250 1,645,000 1,645,000 1,645,000 1,645,000 12,541,250

81,874 22,593 22,593 22,593 22,593 172,246

144,419 58,170 48,093 49,197 50,522 350,401

Based on the average XETRA opening price of €72.81 for the fourth quarter of 2011 (October – December) As per March 9, 2012 (date of proof), including 2011 Bonus Awards

The following table shows the proof-of-compliance obligations of the other Managing Board members in view of the Share Ownership Guidelines:

Obligation under Share Ownership Guidelines (Amounts in number of units or €) Required value 1 Required number of shares 2 Due date for initial measurement of adherence

Managing Board members required to show proof in subsequent years Dr. Roland Busch Brigitte Ederer Klaus Helmrich Barbara Kux Dr. Michael Süß Total
1 The amount of the obligation is based on a member’s average base compensation for the four years prior to each review of his or her achievement of the targets defined by the Share Ownership Guidelines. The amount shown here is based on average base compensation since the member’s initial appointment. 2

1,800,000 1,800,000 1,800,000 1,705,000 1,800,000 8,905,000

24,722 24,722 24,722 23,417 24,722 122,305

March 2016 March 2015 March 2016 March 2013 March 2016

Based on the average XETRA opening price of €72.81 for the fourth quarter of 2011 (October – December)

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Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

41

B.4.2 Remuneration of members of the Supervisory Board
The current remuneration policies for the Supervisory Board were authorized at the Annual Shareholders’ Meeting held on January 25, 2011. Details are set out in Section 17 of the Articles of Association of Siemens AG. The remuneration of the Supervisory Board consists entirely of fixed compensation. The remuneration of the members of the Supervisory Board reflects the responsibilities and scope of work of the Supervisory Board members. The Chairman and deputy chairmen of the Supervisory Board, as well as the Chairmen and members of the Audit Committee and the Chairman’s Committee, and – to a lesser degree – the Compliance Committee and the Finance and Investment Committee, receive additional compensation. According to current rules, members of the Supervisory Board receive an annual base compensation of €140,000; the Chairman of the Supervisory Board receives a base compensation of €280,000, and each of the deputy chairmen receives €220,000. The members of the Supervisory Board committees receive the following additional fixed compensation for their work on those committees: The Chairman of the Audit Committee receives €160,000, and each of the other members receives €80,000; the Chairman of the Chairman’s Committee receives €120,000, and each of the other members receives €80,000; the Chairman of the Finance and Investment Committee receives €80,000, and each of the other members receives €40,000; the Chairman of the Compliance Committee receives

€80,000, and each of the other members receives €40,000. However, no additional compensation is paid for work on the Compliance Committee if a member of that committee is already entitled to compensation for work on the Audit Committee. If a Supervisory Board member does not attend a meeting of the Supervisory Board, one third of the aggregate compensation due to that member is reduced by the percentage of Supervisory Board meetings not attended by the member in relation to the total number of Supervisory Board meetings held during the fiscal year. In addition, the members of the Supervisory Board are entitled to receive a meeting attendance fee of €1,500 for each meeting of the Supervisory Board and its committees that they attend. The members of the Supervisory Board are reimbursed for out-of-pocket expenses incurred in connection with their duties and for any value-added tax to be paid on their remuneration. For the performance of his duties, the Chairman of the Supervisory Board is furthermore entitled to an office with secretarial support and use of the Siemens carpool service. No loans or advances from the Company are provided to members of the Supervisory Board. The following compensation was determined for each of the members of the Supervisory Board for fiscal 2012 (individualized disclosure):

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Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

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B.1 Corporate Governance Report B.2 Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) B.3 Compliance Report

29

FY 2012 Base compensation Additional compensation for committee work1 Base compensation Additional compensation for committee work

FY 2011

(Amounts in €)

Total

Total

Supervisory Board members serving as of September 30, 2012 Dr. Gerhard Cromme Berthold Huber 2 Dr. Josef Ackermann Lothar Adler 2 Jean-Louis Beffa Gerd von Brandenstein Michael Diekmann Dr. Hans Michael Gaul Prof. Dr. Peter Gruss Bettina Haller 2 Hans-Jürgen Hartung 2 Harald Kern 2 Jürgen Kerner 2, 3 Dr. Nicola Leibinger-Kammüller Werner Mönius 2 Håkan Samuelsson Dr. Rainer Sieg Birgit Steinborn 2 Lord Iain Vallance of Tummel Sibylle Wankel 2 Former Supervisory Board members Dieter Scheitor 2, 3 Total
1

280,000 220,000 207,778 140,000 132,222 140,000 140,000 140,000 140,000 140,000 140,000 140,000 105,000 132,222 140,000 140,000 140,000 140,000 140,000 140,000

280,000 80,000 75,556 160,000 37,778 40,000 – 160,000 – 80,000 – – 90,000 – 40,000 40,000 – 120,000 80,000 40,000

560,000 300,000 283,333 300,000 170,000 180,000 140,000 300,000 140,000 220,000 140,000 140,000 195,000 132,222 180,000 180,000 140,000 260,000 220,000 180,000

280,000 210,833 210,833 140,000 140,000 134,167 134,167 140,000 128,333 140,000 140,000 140,000 – 128,333 140,000 128,333 140,000 140,000 140,000 140,000

280,000 76,667 76,667 160,000 40,000 38,333 – 160,000 – 80,000 – – – – 40,000 36,667 – 120,000 80,000 40,000

560,000 287,500 287,500 300,000 180,000 172,500 134,167 300,000 128,333 220,000 140,000 140,000 – 128,333 180,000 165,000 140,000 260,000 220,000 180,000

46,667 3,083,889

40,000 1,363,333
3

86,667 4,447,2224

140,000 3,034,999

120,000 1,348,334

260,000 4,383,3334

Dr. Gerhard Cromme as Chairman of the Supervisory Board and of the Chairman’s Committee, the Compliance Committee, and the Finance and Investment Committee, as well as a member of the Audit Committee; Berthold Huber as Deputy Chairman of the Supervisory Board and member of the Chairman’s Committee; Dr. Josef Ackermann as Deputy Chairman of the Supervisory Board and member of the Chairman’s Committee; Lothar Adler as member of the Chairman’s Committee, the Compliance Committee and the Finance and Investment Committee; Jean-Louis Beffa as member of the Finance and Investment Committee; Gerd von Brandenstein as member of the Finance and Investment Committee; Dr. Hans Michael Gaul as Chairman of the Audit Committee and member of the Compliance Committee; Bettina Haller as member of the Audit Committee and the Compliance Committee; Jürgen Kerner as member of the Audit Committee and the Finance and Investment Committee; Werner Mönius as member of the Finance and Investment Committee; Håkan Samuelsson as member of the Finance and Investment Committee; Dieter Scheitor as member of the Audit Committee and the Finance and Investment Committee; Birgit Steinborn as member of the Audit Committee and the Finance and Investment Committee; Lord Iain Vallance of Tummel as member of the Audit Committee and the Compliance Committee; and Sibylle Wankel as member of the Compliance Committee, each received an additional fixed compensation for their committee work. Both the employee representatives on the Supervisory Board who represent the employees pursuant to Section 3 para. 1 No. 1 of the German Codetermination Act (Mitbestimmungsgesetz, MitbestG) and the representatives of the trade unions on the Supervisory Board declared their readiness to transfer their compensation to the Hans Boeckler Foundation, in accordance with the guidelines of the Confederation of German Trade Unions (DGB).

Jürgen Kerner succeeded Dieter Scheitor on the Supervisory Board by court-ordered appointment as of the end of the day of the Annual Shareholders’ Meeting on January 24, 2012. In addition, the members of the Supervisory Board are entitled to receive a meeting attendance fee of €1,500 (2011: €1,500) for each meeting of the Supervisory Board and its committees that they attend. In fiscal 2012, Dr. Gerhard Cromme received meeting fees of €48,000 (2011: €46,500), Dr. Hans Michael Gaul received meeting fees of €34,500 (2011: €30,000), Lothar Adler received meeting fees of €30,000 (2011: €34,500), Bettina Haller received meeting fees of €25,500 (2011: €30,000), Lord Iain Vallance of Tummel received meeting fees of €25,500 (2011: €28,500), Dr. Josef Ackermann received meeting fees of €22,500 (2011: €19,500), Birgit Steinborn received meeting fees of €22,500 (2011: €30,000), Berthold Huber received meeting fees of €18,000 (2011: €19,500), Sibylle Wankel received meeting fees of €16,500 (2011: €18,000), Gerd von Brandenstein received meeting fees of €13,500 (2011: €16,500), Werner Mönius received meeting fees of €13,500 (2011: €18,000), Håkan Samuelsson received meeting fees of €13,500 (2011: €13,500), Jürgen Kerner received meeting fees of €12,000 (2011: €0), Dieter Scheitor received meeting fees of €10,500 (2011: €30,000), Jean-Louis Beffa received meeting fees of €9,000 (2011: €16,500), Michael Diekmann received meeting fees of €9,000 (2011: €10,500), Prof. Dr. Peter Gruss received meeting fees of €9,000 (2011: €9,000), Hans-Jürgen Hartung received meeting fees of €9,000 (2011: €12,000), Harald Kern received meeting fees of €9,000 (2011: €12,000), Dr. Rainer Sieg received meeting fees of €9,000 (2011: €12,000) and Dr. Nicola Leibinger-Kammüller received meeting fees of €7,500 (2011: €9,000).

4

2

Due to rounding, numbers presented may not add up precisely to totals provided.

B.4.3 Other
The Company provides a group insurance policy for board and committee members and certain employees of the Siemens organization that is taken out for one year and renewed annually. The insurance covers the personal liability of the insured in the case of a financial loss associated with employment functions. The insurance policy for fiscal 2012 includes a deductible for the members of the Managing Board and the Supervisory Board in compliance with the requirements of the German Stock Corporation Act and the German Corporate Governance Code.

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Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

43

B.5 Takeover-relevanT InformaTIon (pursuanT To secTIons 289 para. 4 and 315 para. 4 of The German commercIal code) and explanaTory reporT
The Takeover-Relevant Information pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code (Handelsgesetzbuch) and Explanatory Report are part of the Combined Management Report. of charge for each three shares provided. The right to receive matching shares forfeits, if the underlying shares are sold, transferred, hedged on, pledged or hypothecated in any way during the vesting period. The von Siemens-Vermögensverwaltung GmbH (vSV) has, on a sustained basis, powers of attorney allowing it to vote, as of October 12, 2012, 11,454,464 shares on behalf of members of the Siemens family, whereby aforementioned shares constitute a part of the overall number of shares held by members of the Siemens family. The vSV is a German limited liability company and party to an agreement with, among others, members of the Siemens family (family agreement). In order to bundle and represent their interests, the members of the Siemens family established a family partnership. This family partnership makes proposals to the vSV with respect to the exercise of the voting rights at Shareholders’ Meetings of the Company, which are taken into account by the vSV when acting within the bounds of its professional discretion. Pursuant to the family agreement, the shares under powers of attorney are voted by the vSV collectively.

B.5.1 Composition of common stock
As of September 30, 2012, the Company ’s common stock totaled €2.643 billion (2011: €2.743 billion) divided into 881 million (2011: 914,203,421) registered shares with no par value and a notional value of €3.00 per share. The shares are fully paid in. In accordance with Section 4 para. 3 of the Company ’s Articles of Association, the right of shareholders to have their ownership interests evidenced by document is excluded, unless such evidence is required under the regulations of a stock exchange on which the shares are listed. Collective share certificates may be issued. Pursuant to Section 67 para. 2 of the German Stock Corporation Act (Aktiengesetz), only those persons recorded in the Company ’s stock register will be recognized as shareholders of the Company. For purposes of recording the shares in the Company ’s stock register, shareholders are required to submit to the Company the number of shares held by them and their e-mail address if they have one and, in the case of individuals, their name, address and date of birth, or in the case of legal entities, their company name, business address and registered offices. All shares confer the same rights and obligations. At the Annual Shareholders’ Meeting, each share of stock has one vote and accounts for the shareholders’ proportionate share in the Company ’s net income. Excepted from this rule are treasury shares held by the Company, which do not entitle the Company to any rights. The shareholders’ rights and obligations are governed by the provisions of the German Stock Corporation Act, in particular by Sections 12, 53a et seq., 118 et seq. and 186 of this German Stock Corporation Act.

B.5.3 Equity interests exceeding 10% of voting rights
We are not aware of, nor have we been notified of, any shareholder directly or indirectly holding 10% or more of the voting rights.

B.5.4 Shares with special rights conferring powers of control
There are no shares with special rights conferring powers of control.

B.5.2 Restrictions on voting rights or transfer of shares
Shares issued to employees worldwide under the stock scheme implemented since the beginning of fiscal 2009, in particular the Share Matching Plan, are freely transferable. However, participants are required to own and hold the shares issued to them under the rules of the Plan for a vesting period of about three years, during which the participants have to have been continuously employed by Siemens AG or another Siemens company, in order to receive one matching share free

B.5.5 System of control of any employee share scheme where the control rights are not exercised directly by the employees
Shares of stock issued by Siemens AG to employees under its employee stock scheme are transferred directly to the employees. The beneficiary employees who hold shares of employee stock may exercise their control rights in the same way as any other shareholder directly in accordance with applicable laws and the Articles of Association.

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Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

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B.1 Corporate Governance Report B.2 Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) B.3 Compliance Report

29

B.5.6 Legislation and provisions of the articles of association applicable to the appointment and removal of members of the Managing Board and governing amendment to the Articles of Association
The appointment and removal of members of the Managing Board is subject to the provisions of Sections 84 and 85 of the German Stock Corporation Act and Section 31 of the German Codetermination Act (Mitbestimmungsgesetz). According to these provisions, members of the Managing Board are appointed by the Supervisory Board for a maximum term of five years. They may be reappointed or have their term of office extended for one or more terms of up to a maximum of five years each. Pursuant to Section 31 para. 2 of the German Codetermination Act, a majority of at least two thirds of the members of the Supervisory Board is required to appoint members of the Managing Board. If such majority is not achieved, the Mediation Committee shall give, within one month after the first round of voting, a recommendation for the appointments to the Managing Board. The Supervisory Board will then appoint the members of the Managing Board with the votes of the majority of its members. If such appointment fails as well, the Chairman of the Supervisory Board shall have two votes in a new round of voting. According to Section 8 para. 1 of the Articles of Association, the Managing Board is comprised of several members, the number of which is determined by the Supervisory Board. Pursuant to Section 84 of the German Stock Corporation Act and Section 9 of the Articles of Association, the Supervisory Board may appoint a President of the Managing Board as well as a Vice President. If a required member of the Managing Board has not been appointed, the necessary appointment shall be made, in urgent cases, by a competent court upon motion by any party concerned, in accordance with Section 85 of the German Stock Corporation Act. Pursuant to Section 84 para. 3 of the German Stock Corporation Act, the Supervisory Board may revoke the appointment of an individual as member of the Managing Board or as President of the Managing Board for good cause. According to Section 179 of the German Stock Corporation Act, any amendment to the Articles of Association requires a resolution of the Annual Shareholders’ Meeting. The authority to adopt purely formal amendments to the Articles of Association was transferred to the Supervisory Board under Section 13 para. 2 of the Articles of Association. In addition, by resolution of the Annual Shareholders’ Meetings on January 27, 2009 and January 25, 2011, the Supervisory Board has been authorized to amend Section 4 of the Articles of Association in accordance

with the utilization of the Authorized Capital 2009 and the Authorized Capital 2011, and after expiration of the then-applicable authorization period. Resolutions of the Annual Shareholders’ Meeting require a simple majority vote, unless a greater majority is required by law. Pursuant to Section 179 para. 2 of the German Stock Corporation Act, amendments to the Articles of Association require a majority of at least three-fourth of the capital stock represented at the voting round, unless another capital majority is prescribed by the Articles of Association.

B.5.7 Powers of the Managing Board to issue and repurchase shares
The Managing Board is authorized to increase, with the approval of the Supervisory Board, the capital stock until January 26, 2014 by up to €520.8 million through the issuance of up to 173.6 million registered shares of no par value against cash contributions and/or contributions in kind (Authorized Capital 2009). The Managing Board is authorized to exclude, with the approval of the Supervisory Board, preemptive rights of shareholders in the event of capital increases against contributions in kind. In addition, preemptive rights of shareholders may be excluded in the event of capital increases against cash contributions, (1) to make use of any fractional amounts, (2) in order to grant holders of conversion or option rights issued by the Company or any of its subsidiaries, as protection against the effects of dilution, preemptive rights to subscribe for new shares, and (3) if the issue price of the new shares is not significantly lower than their stock market price and the total of the shares issued in accordance with Section 186 para. 3 sentence 4 of the German Stock Corporation Act (against cash contributions not significantly below the stock market price, with shareholders’ subscription rights excluded) together with other shares issued or disposed of by direct or mutatis mutandis application of this statutory regulation during the effective period of this authorization until the date of using this authorization does not exceed 10% of the capital stock at that point in time. Furthermore, the Managing Board is authorized to increase, with the approval of the Supervisory Board, the capital stock until January 24, 2016 by up to €90 million through the issuance of up to 30 million registered shares of no par value against contributions in cash (Authorized Capital 2011). Preemptive rights of existing shareholders are excluded. The new shares shall be issued under the condition that they are offered exclusively to employees of Siemens AG and its subsidiaries. The new shares may also be issued to a suitable bank that assumes the obligation to use these shares for the sole purpose

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Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

45

of granting them to employees of Siemens AG and any of its consolidated subsidiaries. To the extent permitted by law, employee shares may also be issued in such a manner that the contribution to be paid on such shares is covered by that part of the annual net income which the Managing Board and the Supervisory Board may allocate to other retained earnings under Section 58 para. 2 of the German Stock Corporation Act. As of September 30, 2012, the total unissued authorized capital of Siemens AG therefore consisted of €610.8 million nominal that may be issued in installments with varying terms by issuance of up to 203.6 million registered shares of no par value. For details, please refer to Section 4 of the Articles of Association. By resolution of the Annual Shareholders’ Meeting of January 26, 2010, the Managing Board was authorized until January 25, 2015 to issue bonds in an aggregate principal amount of up to €15 billion with conversion rights or with warrants attached, or a combination of these instruments, entitling the holders to subscribe to up to 200 million new registered shares of Siemens AG of no par value, representing a pro rata amount of up to €600 million of the capital stock. The bonds under this authorization are to be issued against cash or non-cash contributions. Besides, by resolution of the Annual Shareholders’ Meeting of January 25, 2011, the Managing Board was authorized until January 24, 2016 to issue bearer or registered bonds in an aggregate principal amount of up to €15 billion with conversion rights or with bearer or registered warrants attached or a combination of these instruments, entitling the holders to subscribe to up to 90 million new registered shares of Siemens AG of no par value, representing a pro rata amount of up to €270 million of the capital stock. The bonds under this authorization are to be issued against cash contributions. For further details of the authorizations please refer to the respective resolutions of the Annual Shareholders’ Meetings. In particular, the bonds are, as a matter of principle, to be offered to shareholders for subscription, including the possibility of issuing them to banks with the obligation that they must be offered to shareholders for subscription. However, the Managing Board is authorized to exclude shareholders’ subscription rights with the approval of the Supervisory Board (1) provided that the issue price of the bonds is not significantly lower than their theoretical market price computed in accordance with generally accepted actuarial methods, (2) to the extent the exclusion is necessary with regard to fractional amounts resulting from the subscription ratio, (3) in order to grant holders of conversion or option rights or conversion or option obligations on Siemens shares subscription rights as compensation against the effects of dilution, and (4) to the extent that bonds were issued against non-cash contributions, in particular within the

context of business combinations or when acquiring companies or interests therein. In order to grant shares of stock to holders of convertible bonds or warrant bonds issued until January 25, 2015 by the Company or any of its consolidated subsidiaries in accordance with the authorization of the Managing Board adopted by the Annual Shareholders’ Meeting on January 26, 2010, the capital stock was conditionally increased by €600 million through the issuance of up to 200 million no-par value shares registered in the names of the holders (Conditional Capital 2010). In order to grant shares of stock to holders or creditors of convertible bonds or warrant bonds issued until January 24, 2016 by the Company or any of its consolidated subsidiaries in accordance with the authorization of the Managing Board adopted by the Annual Shareholders’ Meeting on January 25, 2011, the capital stock was conditionally increased by €270 million through the issuance of up to 90 million no-par value shares registered in the names of the holders (Conditional Capital 2011). The total of the shares to be issued on the basis of bond issues under these authorizations pursuant to Section 186 para. 3 sentence 4 of the German Stock Corporation Act, in combination with other shares issued or sold by direct or mutatis mutandis application of this statutory regulation during the effective period of these authorizations, does not exceed 10% of the capital stock at the date of using these authorization. This limit also includes shares of stock issued up to this point in time against non-cash contributions, under exclusion of shareholders’ subscription rights, on the basis of the Authorized Capital 2009. In addition, the issue of convertible bonds and/or warrant bonds pursuant to both authorizations shall be limited to convertible bonds and/or warrant bonds that entitle or oblige to subscribe to a maximum number of 200 million Siemens shares representing a pro rata amount of €600 million of the capital stock while both authorizations are simultaneously effective. In February 2012 Siemens issued bonds with warrant units with a volume of US$3 billion. The bonds with warrant units with a minimum per-unit denomination of US$250,000 were offered exclusively to institutional investors outside the U.S. Pre-emptive rights of Siemens shareholders were excluded. The bonds issued by Siemens Financieringsmaatschappij N.V. are guaranteed by Siemens AG and complemented with warrants issued by Siemens AG. The warrants entitle their holders to receive Siemens shares against payment of the exercise price in Euros. At issuance, the warrants resulted in option rights relating to a total of about 21.7 million Siemens shares. The terms and conditions of the warrants enable Siemens to service exercised option rights also by delivering treasury stock as well as to buy back the warrants. The bonds with warrant units were issued in two tranches with maturities of

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Corporate Governance 31 44 B.4 Compensation Report (part of the Combined Management Report) B.5 Takeover-relevant information (pursuant to Sections 289 para. 4 and 315 para. 4 of the German Commercial Code) and explanatory report (part of the Combined Management Report)

46
B.1 Corporate Governance Report B.2 Corporate Governance statement pursuant to Section 289a of the German Commercial Code (part of the Combined Management Report) B.3 Compliance Report

29

5.5 and 7.5 years, respectively. The maturities refer to both the bonds and the related warrants. After issuance, the warrants can be detached from the bonds, the option period commenced on March 28, 2012. The bonds with warrant units, the bonds detached from warrants and the warrants detached are listed by Deutsche Bank AG in the Open Market segment of the Frankfurt Stock Exchange (Freiverkehr). On January 25, 2011, the Annual Shareholders’ Meeting authorized the Company to acquire until January 24, 2016 up to 10% of its 914,203,421 shares of stock existing at the date of adopting the resolution or – if this value is lower – as of the date on which the authorization is exercised. The aggregate of shares of stock of Siemens AG repurchased under this authorization and any other Siemens shares previously acquired and still held in treasury by the Company or attributable to the Company pursuant to Sections 71d and 71e of the German Stock Corporation Act, may at no time exceed 10% of the then existing capital stock. Any repurchase of Siemens shares shall be accomplished at the discretion of the Managing Board either (1) by acquisition over the stock exchange or (2) through a public share repurchase offer. The Managing Board is additionally authorized, with the approval of the Supervisory Board, to complete the repurchase of Siemens shares in accordance with the authorization described above, with the use of certain equity derivatives (put options, call options, forward purchases and by using a combination of these derivatives). In exercising this authorization, all stock repurchases based on the equity derivatives are limited to a maximum volume of 5% of the capital stock of 914,203,421 shares existing at the date of adopting the resolution at the Annual Shareholders’ Meeting. An equity derivative’s term of maturity must, in each case, not exceed 18 months and must be chosen in such a way that the repurchase of Siemens shares upon exercise of the equity derivative will take place no later than January 24, 2016. Besides selling them over the stock exchange or through a public sales offer to all shareholders, the Managing Board was authorized by resolution of the Annual Shareholders’ Meeting on January 25, 2011 to also use Siemens shares repurchased on the basis of this or any previously given authorization as follows: such Siemens shares may be (1) retired; (2) offered for purchase to individuals currently or formerly employed by the Company or any of its consolidated subsidiaries as well as to board members of any of the Company ’s consolidated subsidiaries, or awarded and / or transferred to such individuals with a vesting period of at least two years, provided that the employment relationship or board membership existed at the time of the offer or award commitment; (3) offered and transferred, with the approval of the Supervisory Board, to third

parties against non-cash contributions, particularly in connection with business combinations or the acquisition of companies, businesses, parts of businesses or interests therein; (4) sold, with the approval of the Supervisory Board, to third parties against payment in cash if the price at which such Siemens shares are sold is not significantly lower than the market price of Siemens stock at the time of selling, or (5) used to meet obligations or rights to acquire Siemens shares arising from, or in connection with, convertible bonds or warrant bonds issued by the Company or any of its consolidated subsidiaries. The aggregate volume of shares used under the authorization pursuant to (4) and (5) by mutatis mutandis application of the provisions of Section 186 para. 3sentence 4 of the German Stock Corporation Act together with other shares issued or sold by direct or mutatis mutandis application of this statutory regulation during the effective period of this authorization until the date of using this authorization must not exceed 10% of the capital stock at that point in time. Furthermore, the Supervisory Board was authorized by resolution of the Annual Shareholders’ Meeting on January 25, 2011 to use shares acquired on the basis of this or any previously given authorization to meet obligations or rights to acquire Siemens shares that were or will be agreed with members of the Managing Board of Siemens AG within the framework of rules governing Managing Board compensation. In particular, repurchased shares may be offered for acquisition, or awarded and / or transferred subject to a restriction period, by the Supervisory Board to the members of the Managing Board, provided that Managing Board membership existed at the time of the offer or award commitment. In August 2012, Siemens announced a share buy back amounting to up to €3 billion, using the authorization given by the Annual Shareholders’ Meeting on January 25, 2011. The shares repurchased may be used for the purposes of cancellation and reduction of capital stock, issuance to employees, board members of affiliated companies and members of the Managing Board as well as to meet obligations arising under and in connection with convertible bonds and warrant bonds. The share buy back was completed on November 7, 2012, after repurchasing 37,949,286 shares, the total consideration paid for the shares amounting to about €2,9 billion (excluding incidental transaction charges). Additionally, the Managing Board decided to cancel 33,203,421 treasury shares, which reduced the common stock from 914,203,421 to 881 million shares. As of September 30, 2012, the Company held 24,725,674 (2011: 39,952,074) shares of stock in treasury. For further information on the authorized and conditional capitals and on the treasury stock of the Company as of September 30, 2012 see note 26 in D.6 notes to ConsoliDateD FinanCial statements.

49

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Combined Management Report

135 D.

Consolidated Financial Statements

239 E.

Additional Information

47

B.5.8 Significant agreements which take effect, alter or terminate upon a change of control of the Company following a takeover bid
Siemens AG maintains two lines of credit in an amount of €4 billion and an amount of US$4 billion respectively which provide its lenders with a right of termination in the event that (1) Siemens AG becomes a subsidiary of another company or (2) a person or a group of persons acting in concert acquires effective control over Siemens AG by being able to exercise decisive influence over its activities (Art. 3(2) of Council Regulation (EC) 139/2004). In addition, Siemens AG has a bilateral credit line at its disposal in the amount of €450 million which may be terminated by the lender if major changes in Siemens AG’s corporate legal situation occur that jeopardize the orderly repayment of the credit. Framework agreements concluded by Siemens AG under International Swaps and Derivatives Association Inc. documentation (ISDA Agreements) grant the counterparty a right of termination upon the occurrence of the following events: (i) the Company consolidates with, merges into, or transfers at least substantially all its assets to a third party and (1) the resulting entity ’s creditworthiness is materially weaker than the Company ’s immediately prior to such event, or (2) the resulting entity fails to simultaneously assume the Company ’s obligations under the ISDA Agreement; or (ii) additionally some ISDA Agreements grant the counterparty a right of termination upon a third party acquiring the beneficial ownership of equity securities having the power to elect a majority of the Company ’s Supervisory Board or otherwise acquiring the power to control the Company ’s material policy-making decisions and the creditworthiness of the Company is materially weaker than it was immediately prior to such event. In either situation, ISDA Agreements are designed such that upon termination all outstanding payment claims documented under them are to be netted. In February 2012 Siemens issued bonds with warrant units with a volume of US$3 billion. In case of a “Change of Control”, the terms and conditions of these warrants enable their holders to receive a higher number of Siemens shares in accordance with an adjusted strike price if they exercise their option rights within a certain period of time after the Change of Control. This period of time shall end either (1) not less than 30 days and no more than 60 days after publication of the notice of the issuer regarding the Change of Control, as deter-

mined by the issuer or (2) 30 days after the Change of Control becomes first publicly known. The strike price adjustment decreases depending on the remaining term of the warrants and is determined in detail in the terms and conditions of the warrants. In this context, a Change of Control occurs if a person or persons acting in concert, respectively, acquires or acquire control of the Company.

B.5.9 Compensation agreements with members of the Managing Board or employees in the event of a takeover bid
In the event of a change of control – that is if one or several shareholders acting jointly or in concert acquire a majority of the voting rights in Siemens AG and exercise a controlling influence, or if Siemens AG becomes a dependent enterprise as a result of entering into an intercompany agreement within the meaning of Section 291 of the German Stock Corporation Act, or if Siemens AG is to be merged into another company – any member of the Managing Board has the right to terminate the contract of employment if such change of control results in a substantial change in position (for example due to a change in corporate strategy or a change in the Managing Board member’s duties and responsibilities). If this right of termination is exercised, the Managing Board member is entitled to a severance payment in the amount of not more than two years’ compensation. The calculation of the annual compensation includes not only the base compensation and the target amount for the bonus, but also the target amount for the Stock Awards. This calculation will be based on the last contractual year before the termination of the contract. Additionally, the severance payments cover non-monetary benefits by paying an amount of 5% of the compensation or severance total. Furthermore, compensatory or severance payments will be reduced 15% as a lump-sum allowance for discounted values and for income earned elsewhere. However, this reduction will apply only to the portion of the compensatory or severance payment that was calculated without taking account of the first six months of the remaining term of the Managing Board member’s contract. The stock-based compensation components for which a firm commitment already exists remain unaffected. No severance payments are made to the extent the Managing Board member receives benefits from third parties on the occasion of, or in connection with, a change of control. A right of termination does not exist if the change of control occurs within a period of twelve months prior to a Managing Board member’s retirement.

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C. Combined Management Report
50 C.1
50 C.1.1 58 C.1.2 63 C.1.3

Business and economic environment
The Siemens Group Economic environment Strategy

64 C.2
64 64 65 65 C.2.1 C.2.2 C.2.3 C.2.4

Financial performance measures
Revenue growth Capital efficiency and profitability Capital structure Dividend 66 C.2.5 Additional measures 66 C.2.6 Additional information for financial performance measures

69 C.3

Results of operations
80 C.3.3 Reconciliation to adjusted EBITDA (continuing operations)

69 C.3.1 Results of Siemens 72 C.3.2 Segment information analysis

82 C.4
82 C.4.1

Financial position
84 C.4.3 Cash flows 86 C.4.4 Capital resources and requirements

Principles and objectives of financial management 83 C.4.2 Capital structure

93 C.5 95 C.6 96 C.7 97 C.8
97 98 101 102 103 103 C.8.1 C.8.2 C.8.3 C.8.4 C.8.5 C.8.6

Net assets position Overall assessment of the economic position Subsequent events Sustainability
Sustainability at Siemens Research and development Supply chain management Production Quality management Distribution and customer relations 104 106 107 109 111 C.8.7 C.8.8 C.8.9 C.8.10 C.8.11 Environmental Portfolio Environmental performance Employees Compliance Corporate citizenship

111 C.9
111 116 118 126 C.9.1 C.9.2 C.9.3 C.9.4

Report on expected developments and associated material opportunities and risks
Report on expected developments Risk management Risks Opportunities 127 C.9.5 Significant characteristics of the accounting-related internal control and risk management system

129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-Relevant Information and Explanatory Report 130 C.11 Siemens AG (Discussion on basis of German commercial code)
130 C.11.1 Business and economic environment 130 C.11.2 Results of operations 132 C.11.3 Net assets and financial position 133 C.11.4 Employees 133 C.11.5 Risks and opportunities 133 C.11.6 Outlook

134 C.12 Notes and forward-looking statements

Due to rounding, numbers presented throughout this Combined Management Report may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

C. Combined Management Report

C.1 Business and eConomiC environment
C.1.1 The Siemens Group
C.1.1.1 OrganizatiOn and basis Of presentatiOn
We are a globally operating, integrated technology company with core activities in the fields of energy, healthcare, industry, and infrastructure, and we occupy leading market positions worldwide in the majority of our businesses. We can look back on a successful history spanning 165 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. On a continuing basis, we have around 370,000 employees as of September 30, 2012 and business activities in approximately 190 countries and reported consolidated revenue of €78.296 billion in fiscal 2012. We operate in excess of 290 major production and manufacturing plants worldwide. In addition, we have office buildings, warehouses, research and development facilities or sales offices in almost every country in the world. Siemens comprises Siemens AG, a stock corporation under the Federal laws of Germany, as the parent company and a total of about 1,000 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) as well as the heads of selected corporate functions and the CEOs of the Sectors. Our fundamental organizational principles are: > the CEO principle, > the end-to-end business responsibility of the Sectors, Divisions and Business Units, and > the unrestricted right of selected corporate functions to issue instructions in relation to a function to the extent legally permissible. The Siemens Managing Board is the sole management body and has overall business responsibility in accordance with the German Stock Corporation Act (Aktiengesetz). At all other organizational levels within our Company, management responsibility is assigned to individuals who make decisions and assume personal responsibility (CEO principle). This principle establishes clear and direct responsibilities and fosters efficient decision-making. Our Sectors, Divisions, Business Units and Financial Services (SFS) are “global entrepreneurs” and have end-to-end business responsibility worldwide, including with regard to their operating results. They therefore have “right of way” over the regional units (Clusters and Countries) in business matters. The Clusters and Countries are responsible for the local customer relationship management and for implementing the business strategies of the Sectors and SFS as well as the requirements set by the corporate functions. In addition to their particular authority to issue binding company-wide guidelines and to their monitoring and coordinating responsibilities, the heads of selected corporate functions (Finance and Controlling, Legal and Compliance, Human Resources and Supply Chain Management, for example) have an unrestricted right to issue instructions in relation to a function across all parts of the Company to the extent legally permissible. Below the Managing Board, Siemens is structured organizationally into Sectors, SFS which acts as business partner for the Sectors and also conducts its own business with external customers, Cross-Sector Services that support other Siemens units, Corporate Units with specific corporate functions, and regional Clusters. The Sectors are principally broken down into Divisions and these in turn into Business Units. During fiscal 2011, we initiated a change in the organizational structure of our Sectors which became effective October 1, 2011. Beginning with fiscal 2012, we formed a fourth Sector, Infrastructure & Cities, in addition to our existing three Sectors, Energy, Healthcare and Industry, in order to benefit from the growth of urban centers and the demand for infrastructure solutions. The Infrastructure & Cities Sector comprises the activities of the former Industry Sector’s Divisions Building Technologies and Mobility and the former Energy Sector’s activities of the Power Distribution Division, including Smart Grid applications. Results for prior years are presented on a comparable basis. Following this change in the organizational structure, our business activities focus on four Sectors, Energy, Healthcare, Industry and Infrastructure & Cities. These Sectors form four of our reportable segments. In addition to our four Sectors, we have two additional reportable segments: Equity Investments and SFS.

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Combined Management Report Business and economic environment Financial performance measures Results of operations Financial position Net assets position 95 96 97 111 C.6 C.7 C.8 C.9 Overall assessment of the economic position Subsequent events Sustainability Report on expected developments and associated material opportunities and risks

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basis Of presentatiOn as Of september 30, 2012
Reporting structure

Energy Sector Fossil Power Generation Wind Power Oil & Gas Power Transmission

Healthcare Sector Diagnostics

Industry Sector Industry Automation Drive Technologies

Infrastructure & Cities Sector Transportation & Logistics Power Grid Solutions & Products Building Technologies

Equity Investments

Financial Services

Reconciliation to Consolidated Financial Statements

Centrally managed portfolio activities

Siemens Real Estate

Corporate items and pensions

Eliminations, Corporate Treasury and other reconciling items

Within this combined management report, we provide financial measures for our four Sectors and for two Businesses, each combining two Divisions within a Sector as well as for eight Divisions of our Sectors. These financial measures include: new orders, revenue, profit and profit margin. Divisions within a Sector may do business with each other, leading to corresponding new orders and revenue. Such orders and revenues are only eliminated on a Sector level. Furthermore, our reportable segments may do business with each other, leading to corresponding new order and revenue. Such orders and revenues are eliminated on the Siemens level within Eliminations, Corporate Treasury and other reconciling items and are not included in new orders and revenue with external customers (external orders and external revenue, respectively) reported in this document. Free cash flow and further information is reported for each reportable segment in the Notes to Consolidated Financial Statements. For information related to the definition of these financial measures and to the reconciliation of segment financial measures to the Consolidated Financial Statements, see C.12 nOte 36 in d.6 nOtes and fOrward-lOOking statements and nOtes tO COnsOlidated finanCial statements.

On a geographic basis, Siemens is subdivided into 14 Regional Clusters, which are in turn assigned to one of our three reporting regions. We report financial measures for these three regions: regiOnal struCture as Of september 30, 2012
Regional structure

Europe, C.I.S.1, Africa, Middle East

Americas

Asia, Australia

1

Commonwealth of Independent States.

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).

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

51

C.1.1.2 business desCriptiOn
Energy
The Energy Sector offers a wide spectrum of products, services and solutions for the generation and transmission 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. External revenue of the Sector was €27.302 billion in fiscal 2012, representing 35% of Siemens revenue. The following chart provides a geographic breakdown of the Sector’s external revenue in fiscal 2012. revenue share in % (loCation of Customer)
Asia, Australia: 19%

NEM B.V. business, a specialist in heat recovery steam generators for combined-cycle power plants. To further expand its global gas turbine manufacturing network, Fossil Power Generation launched a subsidiary, Siemens Gas Turbine Technologies Holding B.V. in fiscal 2012. The Division has a 65% stake in the subsidiary. As part of the transaction, Fossil Power Generation completed the sale of its 25% interest in OAO Power Machines, Russia. The Division is represented in a number of joint ventures in China, including Shanghai Electric Power Generation Equipment in which Fossil Power Generation holds a stake of 40%. The Wind Power Division manufactures wind turbines with a power rating ranging from 2.3 megawatts to 6.0 megawatts and rotor diameters spanning 82 to 154 meters for on- and offshore applications. It also provides services to off- and onshore wind farms. The Division holds a 49% equity stake in a joint venture with Dong Energy A/S, A2Sea A/S, a supplier of installation services for the construction of offshore wind-farms. In fiscal 2012, the Division entered into agreements for two joint ventures with Shanghai Electric Group (SEG) for the production and sales of wind turbines in China. The Oil & Gas Division supplies highly efficient small and medium gas and steam turbines for industrial power generation and mechanical drives as well as turbo compressors for a broad range of applications to the oil and gas industries, the process industry and other industries. The Oil & Gas Division further offers a variety of automation and electrical products, systems and solutions for field, production and management levels, enterprise intelligence solutions for safe and reliable operation, planning, scheduling and life-cycle services, including feasibility studies, as well as design and performance enhancement programs. In addition, the Division offers a broad range of water treatment, (re-)injection and management systems for onshore installations and for fixed and floating facilities offshore. Recent acquisitions, including all of the shares of five entities constituting the Connectors & Measurements business of Expro Holdings UK 3 Ltd., help the Division to strategically expand its range of products, solutions and consulting services for subsea activities. The Energy Service Division offers comprehensive services, including parts and components, for complete power plants including on- and offshore wind farms as well as 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 maintenance and operation services and emissions control services and systems. Financial results relating to the Energy Service Division are reflected in the Fossil Power Generation Division, the Oil & Gas Division and the Wind Power Division and are therefore not reported separately.

Europe, C.I.S.1, Africa, Middle East: 51% therein Germany: 7%

Americas: 30% therein U.S.: 20%

1 Commonwealth of Independent States.

At the end of fiscal 2012, the Energy Sector comprised the following five Divisions: Fossil Power Generation; Wind Power; Oil & Gas; Power Transmission and Energy Service. In the fourth quarter of fiscal 2012, Siemens decided to divest its solar thermal business and photovoltaic business (solar business). Following the decision the solar thermal and photovoltaic businesses are reported as discontinued operations for all periods covered in this annual report. Energy formed a new Sector-led unit, Hydro & Storage. This unit comprises the Sector’s hydro power generation activities including its minority stake in Voith Hydro Holding GmbH & Co. KG as well as its energy storage devices. 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, including control systems, in the larger power range, with an emphasis on combined-cycle (gas and steam) power plants, heat recovery steam generators, steam power plants and conventional islands for nuclear power plants. It also develops solutions for 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. In fiscal 2012, the Division acquired the

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The Power Transmission Division covers high-voltage transmission solutions, power and distribution transformers, highvoltage switching and non-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. The Division is working with joint ventures in China with different partners and has a joint venture with Infineon Technologies in Germany for design, manufacturing and sale of high performance semiconductors. The Energy Sector distributes its products and services through its own dedicated sales force, supported by Siemens’ 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. Because certain significant areas of the Sector’s business, such as power 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. The Sector has experienced, and may continue to experience significant losses on individual projects in connection with such risks. Moreover, the Sector generates an increasing portion 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, and transmission 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. While the Sector historically competed primarily with large industrial companies from western countries, emerging market competitors have become more and more important, as they are increasingly expanding their operations beyond the borders of their home markets. 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 Alstom, General Electric and Mitsubishi Heavy Industries, whereas its main competitors in steam turbines are Alstom, Bharat Heavy Electricals Limited, General Electric and Toshiba. 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 growth through a Chinese joint venture. Korean engineering and procurement companies offer a large product and solutions range and establish themselves as onestop-shops which offer customer solutions out of one hand. In instrumentation and controls, ABB and Emerson Electric are the Division’s principal competitors. The principal competitors in the market served by the Wind Power Division are Enercon, Gamesa, General Electric, Goldwind, Sinovel, Suzlon and Vestas. The competitive situation differs between the market segments. In the market for onshore wind-farms, competition is widely dispersed, without any one company holding a dominant share of the market. In contrast, there are only a few major players in the market for technologically more complex offshore wind-farms. Overall, the industry currently suffers from overcapacity and is largely regarded as being in an early stage of consolidation. The principal competitors of the Oil & Gas Division vary by product; in automation and electrical equipment, they are ABB and Honeywell above all, whereas in compressors and steam and gas turbines, they are Dresser Rand, General Electric, MAN Diesel & Turbo and Solar Turbines. Overall, competition in the markets served by the Oil & Gas Division is characterized by a relatively small number of companies, some with a very strong position in the markets and some with a regional focus, playing key roles. The primary competitors of the Power Transmission Division are a small group of large, multinational companies offering a wide variety of products, systems and services. Its key global competitors are ABB and Alstom. Further competition comes from emerging countries, regional and niche manufacturers, such as XD from China, Crompton Greaves from India, HHI from Korea and Mitsubishi Electric from Japan. Power Transmission Division entered into several joint ventures in China, which is the Sector’s largest national power transmission market.

Healthcare
The Healthcare Sector offers customers a comprehensive portfolio of medical solutions across the treatment 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 Financial Services (SFS), financing to assist customers in purchasing the Sector’s products.

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

53

External revenue of the Sector was €13.600 billion in fiscal 2012, representing 17% of Siemens revenue. The following chart provides a geographic breakdown of the Sector’s external revenue in fiscal 2012. revenue share in % (loCation of Customer)
Asia, Australia: 24%

tic testing systems and consumables, including clinical chemistry and immunodiagnostics, molecular diagnostics (i.e., testing for nucleic acids), hematology, hemostasis, microbiology, pointof-care testing and clinical laboratory automation solutions. The Sector’s Operational Unit Customer Solutions manages the sales and service organization as well as the Business Unit covering hospital information systems. Audiology Solutions provides hearing aids and is a sector-led Business Unit. 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, which is grouped in its Customer Solutions Operational Unit, 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). A small portion of the Sector’s 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. As a large part of Healthcare’s revenue stems from recurring business, the Sector’s business activities are to a certain extent resilient to short-term economic trends but are dependent on regulatory and policy developments around the world. The Healthcare Sector faces market risks in connection with ongoing health care reform efforts. In the U.S., a health care reform was enacted in the spring of 2010. In particular in connection with this reform, it is currently expected that an excise tax will be charged on certain medical devices from 2013 onwards. Siemens believes that this tax will impact all businesses except of Audiology. The Healthcare Sector’s principal competitors in medical imaging are General Electric, Philips, Toshiba, Hitachi and Hologic. Other competitors include Roche, Abbott and Danaher for invitro diagnostics, McKesson and Cerner for healthcare information technology systems and Sonova, GN Resound, William Demant and Starkey for audiology (hearing aids). 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 fiscal 2012, the Healthcare Sector launched Agenda 2013, a global initiative to grow its innovative capacity and make itself more competitive. Agenda 2013 is the Sector’s proactive response to the challenges emerging from a changing market environment. To meet these challenges, Agenda 2013 includes measures targeting innovation, regional presence, competitive-

Europe, C.I.S.1, Africa, Middle East: 34% therein Germany: 8%

Americas: 42% therein U.S.: 35%

1

Commonwealth of Independent States.

The Healthcare Sector comprises the following three Divisions, one Operational Unit and one separate sector-led Business Unit. In addition to the financial results for the Sector, financial results are also reported externally for the Diagnostics Division. The Imaging & Therapy Systems Division provides a broad range of medical devices for diagnostic imaging and for therapy solutions. Imaging equipment includes computer tomographs, magnetic resonance imaging equipment, and positron emission tomography. Siemens is a market leader in this field. Therapy solutions mainly comprise angiography systems, particle therapy systems, and minimally invasive procedures. These systems are closely linked with imaging equipment, in particular in the area of therapy planning. The Division leverages synergies between imaging equipment and therapy solutions in order to strengthen its leading position in these markets. Starting in fiscal 2011, the Division shifted the focus of certain particle therapy projects primarily to research. In fiscal 2012, the Sector restructured its radiation oncology business and stopped the sales of linear accelerators as of January 1, 2012. The Clinical Products Division mainly comprises the business with ultrasound and X-ray equipment including mammography. In addition to providing innovative high-end solutions, the Clinical Products Division focuses on the development of costefficient, less complex equipment that meets essential customer requirements, particularly in emerging economies. The Clinical Products Division also comprises the internal supplier Components and Vacuum Technology which also provides components to the Imaging & Therapy Systems Division. 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 product portfolio represents a comprehensive range of diagnos-

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ness, and human resource development. These include focused investments in product development and expanded sales activities in growth markets. Agenda 2013 also encompasses a realignment of the radiation therapy business unit that includes rightsizing measures. In addition, Agenda 2013 includes a program to improve the cost position in the Diagnostics Division.

Industry
The Industry Sector offers a broad spectrum of products, services and solutions for the efficient use of resources and energy and improvements of productivity and flexibility in industry. Its integrated technologies and holistic solutions address primarily industrial customers, such as process and manufacturing industries. The portfolio spans industry automation, industrial software and drives products and services, system integration and solutions for industrial plant businesses. After the close of fiscal 2012, the Sector decided to dispose of its business of mechanical, biological and chemical treatment and processing of water. External revenue of the Sector was €18.872 billion in fiscal 2012, representing 24% of Siemens revenue. The following chart provides a geographic breakdown of the Industry Sector’s external revenue in fiscal 2012. revenue share in % (loCation of Customer)
Asia, Australia: 25% Europe, C.I.S.1, Africa, Middle East: 52% therein Germany: 24%

fiscal 2012 comprised equipment and related services for industrial process water, industrial and municipal wastewater treatment such as water purification systems, clarification systems and systems and solutions for water recycling and reuse. As noted above, Industry has decided to divest its business of mechanical, biological and chemical treatment and processing of water. The Division will continue to offer efficient solutions for the control, management and instrumentation of water processes. In fiscal 2012, Industry Automation completed the acquisitions of RuggedCom Inc., a provider of robust, industrial-quality ethernet communication products and network solutions as well as several other acquisitions to enhance its offerings for industrial software. After the close of fiscal 2012, the Division announced the acquisition of LMS International, a provider of mechatronic simulation software that expands and complements the Division’s product lifecycle management portfolio. 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. With its e-Car business, the Division develops motors and inverters for electric cars for the automotive industry. 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 addition, the Division offers integrated drive and automation solutions especially for the marine and shipbuilding, minerals and pulp and paper industries, including related services over the lifecycle of the solutions. The Customer Services Division offers a comprehensive portfolio of services and supports industrial customers in their efforts to increase their productivity. The portfolio includes productrelated services which seek to enhance reliability, profitability, efficiency and environmental compatibility of industrial plants. The Sector-led Metals Technologies Business Unit offers engineering and plant-building services for the iron and steel industry, as well as for the rolling sector of the aluminum and non-ferrous industries. The Business Unit provides technologies, solutions, and services for metallurgical plants, integrated steelworks and minimills. Its vertically integrated supply capability includes mechanical equipment, drives, motors, electrics, automation, mechatronics, technological packages and all environmental systems.

Americas: 23% therein U.S.: 15%

1 Commonwealth of Independent States.

The Industry Sector consists of the three Divisions Industry Automation, Drive Technologies and Customer Services as well as the sector-led Metals Technologies Business Unit. Financial results relating to the Customer Services Division are reflected in the Industry Automation Division, the Drive Technologies Division and the Metals Technologies Business Unit and are therefore not reported separately. The Industry Automation Division offers automation systems such as programmable logic controllers and process control systems, 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. Furthermore, the Division’s offerings in

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The Industry Sector’s principal customers are industrial customers in a broad range of markets, including transportation and logistics, metals and mining, machinery, utilities and automotive. The Sector is active globally, including in emerging markets, especially those in the Asia, Australia region, which Sector management believes have a long-term growth potential. Apart from the Siemens brand, the Sector markets some parts of its portfolio under different brand names (such as Flender for gears or Winergy for wind turbine components), 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. The large size of some of the Sector’s projects 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
C.9 repOrt On expeCted develOpments and assOCiated material, OppOrtunities and risks.

Technologies that serve customers in process industries as well as in the energy and infrastructure sector. The competitors of our Industry Sector can be grouped into multinational companies that offer a relatively broad portfolio and companies that are active only in certain of the geographic or product markets served by the Industry Sector. The Sector’s principal competitors with broad portfolios are multinational companies such as ABB, Emerson Electric and Schneider Electric. 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 complementary products for their sales channels. 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 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 Electric and Mitsubishi Electric but also specialist companies such as Fanuc and SEW. The main competitors of our Metals Technologies Business Unit are Danieli and SMS.

The Sector has manufacturing locations worldwide, 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 increases for metals, energy and other raw materials. The Sector continues to work on reducing the use of hazardous materials (e.g., lead) and to replace them in its products and processes. Sustainable products and processes, such as coking coal free iron production processes (COREX), energy efficient motors and energy management play a major role in its innovation strategy. 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 services through the whole life of their infrastructures. The timing and extent to which a Division of the Industry Sector is affected by economic cycles depends largely on the kind of business activities it conducts. Business activities that tend to react very quickly to changes in the overall economic environment include many of the business activities of Industry Automation and those business activities of Drive Technologies that serve customers in the manufacturing industries. Business activities that are generally affected later by the changes in the overall economic environment include those business activities of Drive

Infrastructure & Cities
The Infrastructure & Cities Sector offers a wide range of sustainable technologies for metropolitan centers and urban infrastructures worldwide, such as integrated mobility solutions, building and security systems, power distribution equipment, smart grid applications and low- and medium-voltage products. revenue share in % (loCation of Customer)
Asia, Australia: 14%

Europe, C.I.S.1, Africa, Middle East: 60% therein Germany: 17%

Americas: 26% therein U.S.: 19%

1

Commonwealth of Independent States.

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External revenue of the Sector was €16.731 billion in fiscal 2012, representing 21% of Siemens revenue. The following chart provides a geographic breakdown of the Infrastructure & Cities Sector’s external revenue in fiscal 2012. The Sector consists of five Divisions: Rail Systems; Mobility and Logistics; Low and Medium Voltage; Smart Grid; and Building Technologies. Financial results of the Rail Systems and the Mobility and Logistics Divisions are reported together in the Transportation & Logistics Business. Financial results of the Divisions Low and Medium Voltage and Smart Grid are reported together in the Power Grid Solutions & Products Business. The Rail Systems Division comprises Siemens’ rail vehicle business. The Division’s activities consist mainly of the businesses relating to rail vehicles for mass transit, regional and long-distance transportation, driverless systems, locomotives for passengers or rail freight, traction systems, bogies and onboard power supplies. The Mobility and Logistics Division primarily provides products, solutions (including IT 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 and for postal automation including letter and parcel sorting. The Low and Medium Voltage Division supplies electrical grid operators and large industrial electricity consumers with medium- and low-voltage equipment. Furthermore, the Division provides systems and services for the distribution of electrical power from high-voltage transmission grid access to medium or low-voltage grids directing the electrical energy to end consumers and their access points. The Smart Grid Division provides energy automation solutions, smart grid applications, transmission and distribution services, applications for electromobility solutions and rail infrastructure electrification solutions for mainline and mass transit applications. In fiscal 2012, the Division acquired the U.S.-based company eMeter in order to position the Division to expand its energy information and meter data management solutions. 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 comfort and the environment. The Division’s offerings include 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. The Infrastructure & Cities Sector also holds the Atos S.A. (AtoS) shares and the convertible bond, which Siemens received following the sale of Siemens IT Solutions and Services to AtoS. The Infrastructure & Cities Sector distributes its products and services through its own dedicated sales force, supported by Siemens’ worldwide network of regional companies. In addition, the Divisions of the Sector use, to varying degrees, thirdparty distributors, panel builders, original equipment manufacturers, value added partners, installers and general contractors. Overall, the Sector’s principal customers are railway operators, public utilities, industrial and infrastructure customers, electrical grid operators, construction and real estate customers and manufacturers of heating, ventilation and air-conditioning solutions. The timing and extent to which a Division of the Infrastructure & Cities Sector is affected by economic cycles depends largely on the kind of business activities it conducts. Business activities that tend to react very quickly to changes in the overall economic environment include Low and Medium Voltage. Divisions where business activities are generally affected later by the changes in the overall economic environment include Smart Grid and Building Technologies. The development of markets served by our Rail Systems Division and Mobility and Logistics Division is primarily driven by public spending. Customers of these Divisions usually have multiyear planning and implementation horizons. They therefore tend to be independent of short-term economic trends. The Sector is globally active in a broad range of markets, including construction and real estate, transportation and logistics and utilities. The Sector’s activities include emerging markets, e.g., those in the Asia, Australia region. While the Sector believes that these markets offer significant growth potential, 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. Some markets, such as those served by our Divisions Rail Systems, Mobility and Logistics and Smart Grid, are significantly influenced by public spending. The large size of some of the Sector’s projects (especially in the following Divisions: Rail Systems, Mobility and Logistics and in parts of Building Technologies) 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 C.9 repOrt On expeCted develOpments and assOCiated OppOrtunities and risks.

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The Sector’s principal competitors are multinational companies such as ABB, Alstom, Ansaldo, Bombardier, General Electric, Honeywell, Johnson Controls, Schneider Electric and Tyco. The Sector’s competitors vary by Division. The main competitors of the Rail Systems Division and the Mobility and Logistics Division are Alstom, Ansaldo, Bombardier and General Electric. The primary competitors of the Low and Medium Voltage Division are ABB, General Electric, Honeywell and Schneider Electric. The principal competitors of the Smart Grid Division are ABB, Alstom, General Electric, and Schneider Electric. The main competitors of the Building Technologies Division are Honeywell, Johnson Controls, Schneider Electric and Tyco. Infrastructure & Cities also faces competition from niche competitors and from new entrants, such as utility companies and consulting firms, exploiting the fragmented energy efficiency market. The Sector’s solution businesses also compete with engineering, procurement and construction (ECP) providers while competitors in the service field often include small local players.

SFS conducts its business through seven Business Units: Commercial Finance; Project and Structured Finance Energy; Project-, Structured and Leveraged Finance Healthcare; Project- and Structured Finance Infrastructure and Cities & Industry; Treasury; Financing Services & Investment Management and Insurance. In addition, one Business Segment (Venture Capital) is directly assigned to SFS’ CEO. The SFS functions Trade Finance Advisory and Corporate Pensions provide advisory and assistance services to the entire Siemens Company. In addition, SFS host a number of functions to support its own business. In its transactions with Siemens and third parties, SFS acts consistently with banking industry standards in the international financial markets that are both applicable and mandatory for these transactions. In December 2010, the Siemens Bank GmbH was granted a license by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) to engage in banking business. In particular, the license covers engaging in loan, guarantee business and deposit taking. Siemens Bank GmbH was established to support the operational businesses of Siemens’ Sectors by providing financing solutions and the license enables the bank to gain access to the deposit and refinancing facilities of the European Central Bank. SFS’ competition mainly includes commercial finance operations of banks, independent commercial finance companies, captive finance companies and asset management companies. International competitors include BNP Paribas Equipment Finance, De Lage Landen, General Electric Commercial Finance, Macquarie and Société Générale Equipment Finance. Particularly in the commercial finance business, SFS’ competitors are often local financial institutions and competition therefore varies from country to country.

Equity Investments
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 are not allocated to a Sector, SFS, Centrally managed portfolio activities, Siemens Real Estate (SRE), Corporate items or Corporate Treasury for strategic reasons. Our main investments within Equity Investments are our stake of approximately 50.0% in Nokia Siemens Networks B.V. (NSN), our 50.0% stake in BSH Bosch und Siemens Hausgeräte GmbH (BSH) as well as our 49.0% stake in Enterprise Networks Holdings B.V. (EN).

Financial Services
Financial Services (SFS) provides a variety of financial services and products both to third parties and to other Siemens entities and their customers. SFS has three strategic pillars: supporting Siemens Sectors with financing solutions for their customers, manage financial risks of Siemens and offering thirdparty financing services and products. To better achieve this goal, Financial Services intends to grow its business in a profitable, controlled manner. SFS’ business can be divided into capital business and fee business. The capital businesses support activities for Siemens’ sales as well as third party vendors and customers and consist of leasing, loans, asset-based lending and equity investments (both in infrastructure projects and corporate venture capital). The fee businesses comprise support and advisory activities concerning financial risk and investment management, project & export financing, and arranging of project financing for Siemens’ projects, treasury & financing services, pension asset / investment management, insurance brokerage as well as re-insurance of Siemens risks.

C.1.2 Economic environment
C.1.2.1 wOrldwide eCOnOmiC envirOnment
Growth in the global economy continues to slow down in 2012, with real global gross domestic product (GDP) expected to rise by only 2.5% compared to 3.0% in 2011. Above all, the unstable economic situation in Europe burdens economic activity worldwide. Concerns about the stability of the banking sector, the sovereign debt crisis and the fragile economy continue to hamper private-sector investment and consumer spending. Moreover, austerity policies to cut government deficits and bring down debt levels in Europe have led to a significant reduction of government spending. In addition, the U.S. economy remains sluggish and growth in emerging markets has cooled down due to spillover effects from advanced economies and various country-specific factors.

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wOrld real gdp grOwth (in % Compared to prior year) 1
2008 2009 2010 4.2 3.0 1.6 2.5 2011 2012 2

(2.0)

1 According to IHS Global Insight as of October 15, 2012; growth rates provided by calendar year. 2 Estimate for calendar year 2012.

From a regional perspective, the slowdown is sharpest in Europe, with economic growth coming to a standstill in 2012. Restrictive fiscal policies, rising unemployment, large capital outflows to northern countries and the sovereign debt crisis have all deepened the contraction in the southern periphery economies. This in turn increasingly hampers growth in the core northern countries such as Germany. On top of that, the uncertain economic situation in Europe keeps consumer spending and private-sector investments on a low level. Gross fixed investment, one way in which gross domestic product is used, is expected to decline by 2.1% in 2012 compared to 2011. To foster the stability of the Eurozone, European governments have taken important measures. The establishment of the permanent European Stability Mechanism (ESM) as a substitute for the temporary European Financial Stability Facility is aimed at ensuring the financial solvency of the Eurozone countries. Moreover, in order to bring down government bond yields and to ensure the functioning of monetary operations in every country of the monetary union, the European Central Bank (ECB) has declared its willingness to buy sovereign bonds on the secondary market without limit if a country meets the criteria of the ESM. This announcement calmed financial markets and reduced yields of Italian and Spanish bonds, making refinancing cheaper for these countries. Economic development in the Middle East is still affected by severe geopolitical tensions involving Iran and ongoing violence and unrest in Yemen and Syria, where the economy is contracting rapidly. In contrast, growth in other oil-exporting countries remains robust, due to high oil prices. Growth in Africa is surprisingly strong in 2012. But the continent still suffers from an unstable political environment, and economic growth in many countries is highly dependent on raw material prices. The C.I.S. countries have to deal with relatively low growth of 3.6% in 2012. The whole region is negatively affected by the European sovereign debt crisis due to financial and trade linkages.

In the Americas, GDP growth is expected to slow slightly in 2012, to 2.3%. On one hand, the growth rate in Latin America is expected to decrease to 2.9%, due in part to lower export demand from a weak global economy. Furthermore, the global slowdown also causes some commodity prices to fall, which strongly affects Latin America as a major seller of commodities. Hence, investment spending has slowed down considerably. Representative for the economic development in Latin America is Brazil, which is expected to grow by only 1.6% in 2012. On the other hand, the U.S. is expected to grow slightly faster year-over-year, with 2.1% growth compared to 1.8% in 2011. U.S. investment growth is expected to be particularly strong: 5.6% in 2012 compared to 3.4% in 2011. Additionally, the American housing market seems to be stabilizing towards the end of the year. Nevertheless, the U.S. faces a high level of debt and low employment growth. Moreover, the country ’s political gridlock creates economic uncertainty particularly regarding tax increases and spending cuts that will take place automatically at the beginning of 2013 if no agreement can be reached (the so-called fiscal cliff). real gdp grOwth per regiOn (Change in % Compared to prior year) 1
World Europe, C.I.S.3, Africa, Middle East Americas Asia, Australia 4.7 3.0 4.6

5 4 3 2 1 0.9 2.5 2.4 2.3 2.4

2012 2 1 2 3

2011

According to IHS Global Insight as of October 15, 2012; growth rates provided by calendar year. Estimate for calendar year 2012. Commonwealth of Independent States.

In Asia, Australia growth is accelerating slightly in 2012, although China’s and India’s extraordinarily high growth levels are expected to cool down to 7.4% and 5.1%, respectively. China, a leading exporter, is significantly affected by the decrease in global demand, so gross fixed investments are trending in line with slower GDP growth. The Chinese government has implemented expansionary fiscal and monetary measures in order to support the economy. The Indian economy is negatively affected by strong credit linkages with a struggling Europe and weaker capital inflows. Moreover, India was also hit by a series of major electricity failures throughout the whole country. Japan’s economy started to recover from the consequences of the earthquake and tsunami in March 2011. Its expected growth rate of 2.3% is caused mainly by increased government spending, with a boost from stronger

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household spending. Furthermore, Indonesia, Thailand and Vietnam continue to grow rapidly and support the economy ’s growth of the Asia, Australia region of 4.7% in 2012. A key factor for Siemens as a manufacturer is real manufacturing value added, a component used in calculating gross domestic product by means of the production approach. Despite accelerating growth in both the Asia, Australia and Americas regions, growth in manufacturing value added on a global basis is expected to decline in 2012 to 4.1% from 4.5% in 2011. This is due to significantly slower growth in the Europe, C.I.S., Africa, Middle East region, including a slight decline in Europe. The partly estimated figures presented here for gross domestic product, gross fixed investments and manufacturing value added are drawn from an IHS Global Insight report dated October 15, 2012. Siemens has not independently verified this data. In addition to the common currency of the European Monetary Union (the euro, €) another key currency for Siemens is the US$. Following an appreciation of the € against the US$ at the beginning of fiscal 2012, concerns over the sovereign debt crisis in a number of southern European member states of the European Monetary Union led to decline of € against the US$. For the remainder of fiscal 2012, the value of the € relative to the US$ remained below its level at the end of fiscal 2011. During July 2012, the value of the € against the US$ reached its lowest levels of the fiscal year. Only at the end of fiscal 2012 did the value of the € begin to recover somewhat. Among the contributing factors were the German constitutional court’s rejection of applications to block the ESM and the ECB’s announcement of the modalities of a new government bond purchase program. Nevertheless at September 30, 2012, the value of the € against the US$ was around 4% below the level a year earlier.

Our businesses are 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. The average monthly price of copper (denominated in € per metric ton) for September 2012 was 4% higher than the average monthly price in September 2011; this reversed a previously negative trend year-over-year and was due to the release of financial and fundamental stimulus programs. Prices on a fiscal-year average were 8% lower in fiscal 2012 than the average for fiscal 2011. Prices for copper are still supported by tight supply and demand fundamentals and by speculative influences in the commodity markets. Nevertheless, because copper is produced in multiple locations and traded, such as across the London Metal Exchange, the risk to Siemens is primarily a price risk rather than a supply risk. Average monthly prices of aluminum traded at the London Metal Exchange faced more pressure year-over-year, losing 4% in September 2012 compared to September 2011. While, among other factors, high energy costs put upward pressure on aluminum, these were more than offset by oversupply. As with copper, we see developments in the aluminum market as posing a price risk, rather than a supply risk. The average monthly steel prices for September 2012 came down by 3% compared to the average monthly prices in September 2011. Especially at the end of fiscal 2012, steel markets and prices for upstream raw materials (e.g. iron ore) softened significantly (source: CRU, an independent business analysis and consultancy group focused on, among other things, the mining and metals sectors).

exChange rate develOpment Of the us$ per € (index: Beginning of fisCal 2008 = 100)
FY 2008 140 130 120 110 100 90 80 70 FY 2009 FY 2010 FY 2011 FY 2012

Source: Bloomberg

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develOpment Of raw material priCes (index: Beginning of fisCal 2008 = 100)
FY 2008 200 175 150 125 100 75 50 FY 2009 FY 2010 FY 2011 FY 2012

Copper

Aluminum (HG)

Steel HRC

Source: London Metal Exchange (LME) for copper and aluminum, CRU HRC Germany for steel; cash prices in € per ton.

In addition to the above-mentioned raw materials, we have exposure related to rare earth metals and magnets. The market situation for buyers improved considerably throughout fiscal 2012, with respect to both price and availability. Nevertheless, we track these factors closely as they could still pose significant price or supply risks for technology manufacturers, including Siemens. Our main exposure to the prices of copper and related products, and to steel and stainless steel, is in the Sectors Energy, Industry and Infrastructure & Cities. Our main price exposure related to aluminum is in the Energy Sector. In addition, Siemens is generally exposed to energy and fuel prices, both directly (electricity, gas, oil) and indirectly (energy used in the manufacturing processes of suppliers). Some of our continuing operations face price and supply risks related to rare earth metals, particularly the Industry Sector’s Drive Technologies Division and the Energy Sector’s Wind Power Division. Siemens employs various strategies to reduce the price risk in its project and product businesses, such as long-term contracting with suppliers, physical and financial hedging and price escalation clauses with customers.

C.1.2.2 market develOpment
According to an analysis published by IHS Global Insight on July 20, 2012, investments in 2012 are expected to continue to grow in nominal terms compared to 2011. But the pace of growth for 2012 is expected to slow down considerably compared to the prior year in almost all of the market segments that are significant for our Sectors. This is due largely to the sovereign debt crisis in the euro zone, especially in countries affected by bank solvency risks, credit availability and austerity measures, and also to repercussions of the sovereign debt crisis in other regions, particularly including emerging markets.

In markets significant for the Energy Sector, investments in power utilities are expected to grow by around 5% in 2012, slightly down from around 6% in 2011. Within these numbers, investments in many emerging markets are expected to continue to grow clearly or significantly in 2012 compared to 2011 – yet the expected growth rates in the majority of these countries are still slower than a year earlier. Demand in Europe is particularly weak. Following a recovery in 2011, power utility investments are expected to show a decline in nearly all European countries in 2012, especially in countries affected by the sovereign debt crisis. In contrast, investments in the U.S. are expected to grow moderately in 2012, following a decline a year earlier. Investments in the oil and gas markets are expected to grow around 6% year-over-year, down markedly from around 17% in 2011. Some of the most important countries in this market, including the U.S., Russia and Saudi Arabia, which increased their investments in 2011 substantially year-overyear, are expected to either clearly reduce investment growth in 2012 or to keep investments on the prior-year level. In the chemical industry, which is particularly sensitive to changes in current economic conditions, growth in investments is also expected to slow considerably year-over-year, down to around 5% in 2012 compared to around 17% a year earlier. This includes lower growth in China, the world’s largest national market, and shrinking investments year over-year in other major countries, among them Japan and Germany. In contrast, the growth rate in the U.S. is expected to remain nearly steady. Investments within the international healthcare markets, served by our Healthcare Sector, are expected to increase by around 2% in 2012, following a rise of around 10% in the year before. This decline in growth includes reduced investments not only in many European countries, but also in some emerging markets such as Brazil. Furthermore, growth in other large emerging markets, is expected to slow down year-over-year,

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such as in China and Russia, or come to a halt, as in India. In the U.S. market, which is particularly significant for our Healthcare Sector, growth in investments is expected to increase slightly in 2012 compared to the prior year. The Industry Sector is influenced by the development in some of the markets mentioned for the Energy Sector, including by the oil and gas markets and the chemical industry. In other markets significant for the Industry Sector, investments in the automotive industry are expected to grow by around 5% in 2012, down from growth in investments of around 15% a year earlier. This change includes all major countries, which are showing either significantly slower growth or declining investments year-over-year. These factors are particularly evident in Europe. Investment growth is declining also in a number of emerging markets, where investments were recently driven by strong demand for vehicles. Notable examples include China, which is experiencing significantly lower growth, and India, where investments are declining year-over-year following strong expansion a year earlier. Against this trend, growth in investments year-over-year is expected to accelerate in Japan. Even in the food and beverage industry, which is usually less susceptible to fluctuations in the economy, growth in investments is expected to decline significantly in 2012 to around 5%, down from around 15% a year earlier. This is due to significant declines in investments in many European countries, especially those affected by high unemployment and low consumer confidence. Investments are also expected to decline in a number of emerging markets as their populations are affected by rising food prices. Investments in the minerals sector are expected to grow by around 5% in 2012, sharply lower than growth of around 19% a year earlier. Within this sector, growth in investments in the largest industry, mining, is expected to contract most significantly: from around 21% in 2011 to around 5% in 2012. Among major countries in industrial mining, this decline in growth includes sharply lower growth in China and Canada and a reduction in investments in India year-over-year, while growth in investments in Australia is expected to come down only slightly. Investments in the machine building industry are expected to grow by around 7% year-over-year in 2012, compared to around 18% a year earlier. Growth in investments in the last few years was driven by exceptionally rapid expansion in China, which is by far the world’s most important investor in machine building. In contrast, growth in China is expected to slow markedly in 2012 as demand weakens in the country ’s manufacturing sector. For the pharmaceutical industry, investment growth is estimated to decline to around 6% in 2012, after around 15% in 2011. Within these numbers, the largest investors, China and Japan, are expected to continue to increase their investments in 2012 but at a slower pace than in 2011. Against this trend, the U.S. shows increasing growth in investments year-over-year. Investments in the pulp and paper

sector are expected to grow by around 4% in 2012, following investment growth of around 13% a year earlier. The development within the largest markets is expected to be mixed. While investment growth in China is slowing significantly and growth in Japan is nearly coming to a halt, investments in the U.S. are growing moderately following a decline in the prior year. In the metals industry, investments in 2012 are expected to grow by around 5% compared to around 16% a year earlier. Growth in China is expected to slow to single digits, and India is forecast to reduce its investments following a substantial increase a year earlier. Investment growth in Japan and South Korea is expected to decline less significantly year-over-year. Investments in water and wastewater utilities are expected to grow by around 4% in 2012 compared to around 8% in 2011. While investment growth in China is expected to be higher in 2012 compared to the prior year, and the U.S. is expected to increase investments in 2012 following a decline a year earlier, many other major countries, especially in Europe, are forecast to reduce their investments in 2012. The Infrastructure & Cities Sector is influenced by developments in a number of markets mentioned above for the Sectors Energy, Healthcare and Industry, including power utilities, oil and gas, healthcare and pharmaceuticals. In other markets important to the Sector, investments in both, the transportation infrastructure and transportation services markets, are expected to grow by around 5% in 2012. The pace of growth in the prior year was around 15% in transportation infrastructure, faster than growth of around 8% in transportation services. For transportation infrastructure, investments are expected to slow in the large Chinese market and shrink in some of the larger European countries, including France and Germany. The U.S. and Russia are expected to keep investment growth near the prior-year level. Overall growth in transportation service is held back by declining investments in Europe, even as China is expected to clearly increase investments in 2012 following a decline in investments a year earlier. Growth in investments in the public, research and education sector is expected to decline to around 3% in 2012, down from around 9% in 2011. While the large majority of European countries and also a number of emerging countries including Brazil and India are expected to reduce investments in 2012 compared to 2011, the U.S. is forecast to expand its public investments year-over-year. For construction and real estate, investments are expected to grow around 3% in 2012 compared to the prior year. A year earlier, growth in investments was around 12%. While these markets are depressed in Europe, growth in the U.S. is accelerating, as these industries are benefiting from low mortgage rates and improved consumer confidence. In the post and logistics sector, investment growth in 2012 is forecast to slow to around 2% year-over-year, compared to around 13% a year earlier. While growth in fiscal 2012 is particularly burdened by shrink-

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ing investment in large parts of Europe, the change year-overyear is particularly strong in Brazil, where sharp growth a year earlier is expected to be followed by a clear decline in investments. In the wholesale and retail sector, investment growth is expected to decline to around 3% year-over-year, down from around 13% a year earlier, following the same pattern as investments in post and logistics.

achieve sustainable, profitable growth and thereby continually increase our company value. As an integrated technology company, we intend to profit from the megatrends described above. Our strategy comprises what we call our three strategic directions: > focusing on innovation-driven growth markets, > getting closer to our customers, and > using the power of Siemens. One Siemens is our framework for sustainable value creation, with a financial target system for capital-efficient growth and the goal of continuous improvement relative to the market and our competitors. The financial target system of One Siemens defines financial key performance indicators for revenue growth, for capital efficiency and profitability, and for the optimization of our capital structure. In addition, we set hurdle rates that generally need to be considered before acquisitions are executed. Further, we defined an indicator targeted at an attractive dividend policy. We believe that these indicators will play a key role in driving the value of our Company. For further information, see C.2 finanCial perfOrmanCe measures. To achieve our One Siemens goal of sustainably enhancing the value of Siemens and of exploiting the full potential of our integrated technology company, we have defined three concrete focus areas along each of the three strategic directions set forth above, which we aim to address in the years ahead. In the strategic direction of focusing on innovation-driven growth markets, our first focus area is to be a pioneer in technology-driven markets. Here, we intend to concentrate on markets that are believed to have future growth potential, for example, in vertical IT and software. Our second focus area is to strengthen our portfolio. We are actively and systematically managing our portfolio with the principal aim of achieving or maintaining a No. 1 or No. 2 position in our current and future markets. To provide a leading environmental portfolio is our third focus area: Our Environmental Portfolio enhances our Company ’s revenue and makes a significant contribution to climate protection. In the second strategic direction of getting closer to our customers, one of our focus areas is to grow in emerging markets while maintaining our position in our established markets. We plan to offer more products, solutions and services for the rapidly growing entry-level segments, which are more price-sensitive and mostly found in emerging markets. A second focus

C.1.3 Strategy
C.1.3.1 glObal megatrends
Global megatrends are long-term developments that are expected to have an impact on all humanity. We at Siemens view demographic change, urbanization, climate change and globalization as megatrends that will drive global demand in coming decades. We have aligned our strategy with these developments and accordingly have organized our business into four Sectors: Energy, Healthcare, Industry, and Infrastructure & Cities. Demographic change includes two major trends: the world’s population continues to grow rapidly, and it continues to get older. Together, these two trends will challenge the ability of future healthcare systems to make affordable healthcare available to everyone. Urbanization refers to the growing number of large, densely-populated cities around the world. This trend intensifies the already strong demand for sustainable and energy-efficient infrastructures for buildings, transportation systems, energy and water. Climate change is a fact. The average global surface temperature increased by 0.76°C between 1850 and the beginning of the 21st century. The reduction of greenhouse gas emissions is vital to avoiding increasingly drastic effects on our ecosystem. There is a strong need for innovative technologies to increase efficiency and reduce the emissions related to energy generation and consumption. Globalization refers to the increasing integration of the world’s economies, politics, culture and other areas of life. Globalization leads to increased competitive pressure and demand for economical, timely-to-market, high-quality products and solutions.

C.1.3.2 strategy Of the siemens grOup
Our vision is to be a pioneer in > > > > energy efficiency, industrial productivity, affordable and personalized healthcare, and intelligent infrastructure solutions.

Our company strategy guides us in turning our vision into reality. We are aiming to be a market and technology leader in our businesses, based on our values – to be responsible, excellent and innovative. We believe that this will position us to

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C.2 finanCial performanCe measures area is to expand our service business. We believe that the large installed base of our products and solutions at our clients provides promising growth opportunities for our service business. Services play a key role in profitability at Siemens and, in addition, long-term service agreements are less likely to be impacted by economic fluctuations. To intensify our customer focus is our third focus area. We believe that customer proximity and local presence are important factors in being able to respond quickly to changing market requirements. In the strategic direction of using the power of Siemens, our first focus area is to encourage lifelong learning and development of our employees. We invest continuously in expanding the expertise of our people through demanding training and education programs. We aim to develop our employees worldwide by identifying talent and offering challenging tasks. To empower our diverse and engaged people worldwide is our second focus area. We believe that the strong potential of our employees’ skills, experience and qualifications can give us a clear competitive advantage in our global markets. The third focus area is to stand for integrity. On the basis of our values, we have formulated clear and binding principles of conduct that cover all aspects of our entrepreneurial activities. Beginning with fiscal 2013, we are implementing “Siemens 2014,” a company-wide program supporting the One Siemens framework for sustainable value creation. The goal of the program is to reduce cost, increase competitiveness, and become faster and less bureaucratic. We intend to improve profitability through five key enablers: cost reduction, strengthening core activities, go-to-market, optimizing our infrastructure, and simplifying governance. The program is aimed at raising Total Sectors profit margin to at least 12% by fiscal 2014. To achieve this goal, we are targeting substantial productivity gains over the next two fiscal years from the activities just mentioned. In the area of cost reduction, which is expected to yield the majority of these gains, we want to, for example, enhance product design by better integrating engineering, development, manufacturing and purchasing processes; improve global capacity utilization and presence; and increase process efficiency and quality. To achieve these results, our Sectors are undertaking a broad range of measures that are expected to result in charges to earnings in the next two fiscal years. This section on financial performance measures describes several measures that are or may be non-GAAP financial measures. Other companies that report or describe similarly titled financial measures may calculate them differently. As of the beginning of fiscal 2011, we introduced One Siemens – our framework for sustainable value creation; for further information see C.1.3 strategy. As part of One Siemens, we have developed a financial target system for capital-efficient growth that we believe will increase the value of our Company. Our goal is to achieve continuous improvement relative to the market and our competitors. The financial target system defines indicators for revenue growth, capital efficiency and profitability, the optimization of our capital structure, and our dividend policy. In addition, we set hurdle rates that generally must be considered before we make acquisitions.

C.2.1 Revenue growth
We believe that an important driver for increasing our Company ’s value over the long term is profitable revenue growth. Specifically, our goal is to grow our revenue faster than the average revenue growth of our most relevant competitors. For purposes of comparison to the revenue growth of our competitors, our revenue growth is calculated as the growth rate of reported revenue as presented in the Consolidated Financial Statements. revenue grOwth
Revenue current period Revenue prior-year period

– 1

× 100%

Actual FY 2012 FY 2011 7% 6%

C.2.2 Capital efficiency and profitability
Our aim is to work profitably and as efficiently as possible with the capital of our shareholders and lenders. We monitor our capital efficiency using adjusted return on capital employed, or ROCE (adjusted), which is reported on a continuing operations basis. This measure assesses our generated income from the point of view of our shareholders and lenders. ROCE (adjusted) is defined as income from continuing operations before interest after tax divided by average capital employed. Our target is to achieve a ROCE (adjusted) of 15% to 20%. ROCE (adjusted) in

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the fiscal years 2012 and 2011 was 17.0% and 25.3%, respectively. Siemens’ weighted average cost of capital (WACC) is currently 7.5%. return On Capital emplOyed (rOCe) (adjusted) (Continuing operations)
Income from continuing operations before interest after tax Average capital employed

compared to 15.1% a year earlier. Healthcare’s adjusted EBITDA margin was 18.5%, up from 15.7% in fiscal 2011. The adjusted EBITDA margin for our Industry Sector was 14.9%, down from 16.8% in the prior year. The adjusted EBITDA margin for Infrastructure & Cities was 7.5%, compared to 8.3% a year earlier. adjusted ebitda margins fy 2012

× 100%

Margin Energy Healthcare Industry 9.3% 18.5% 14.9% 7.5%

Target range 10 – 15% 15 – 20% 11 – 17% 8 – 12%

FY 2012 FY 2011

17.0% 25.3%

Infrastructure & Cities

Adjusted EBITDA margins of respective markets throughout business cycle. Target range: 15 – 20%

Our financial indicator for measuring capital efficiency at Financial Services (SFS) is return on equity after tax, or ROE (after tax), in line with common practice in the financial services industry. We define ROE (after tax) as SFS’ profit after tax, divided by SFS’ average allocated equity. For purposes of calculating ROE (after tax), the relevant income tax is calculated on a simplified basis, by applying an assumed 30% flat tax rate to SFS’ profit, excluding income (loss) from investments accounted for using the equity method, net, which is basically net of tax already, and tax-free income components and other components which have already been taxed or are generally taxfree. Our goal is to achieve ROE (after tax) of 15% to 20% at SFS. return On equity (rOe) (after tax)
SFS’ profit after tax SFS’ average allocated equity

C.2.3 Capital structure
Sustainable revenue and profit development can be achieved only on the basis of a healthy capital structure. A key consideration for us in this regard is maintaining ready access to the capital markets through various debt products and preserving our ability to repay and service our debt obligations over time. Therefore, we use the ratio of adjusted industrial net debt to adjusted EBITDA for optimizing our capital structure. For information on this calculation and its components see C.4.2 Capital struCture. Our goal is to achieve a ratio in the range of 0.5 – 1.0.
Capital struCture (Continuing operations)
Adjusted industrial net debt Adjusted EBITDA

× 100%

FY 2012 FY 2011

21.9% 22.6%

FY 2012 FY 2011

0.24 (0.14)

Target range: 15 – 20%

Target range: 0.5 – 1.0

Our goal is to achieve margins comparable to the best competitors within our industries throughout the entire business cycle. We therefore seek to maintain or improve the profitability of our businesses as appropriate. Our measure in this regard is adjusted EBITDA margins, defined as the ratio of adjusted EBITDA (as presented in C.3.3 reCOnCiliatiOn tO adjusted ebitda (COntinuing OperatiOns)) to revenue. We have defined adjusted EBITDA margin ranges for the respective industries of our four Sectors. Adjusted EBITDA target margin ranges for the Sectors, and their performance in fiscal 2012, are shown in the chart below. The adjusted EBITDA margin for Energy was 9.3%,

C.2.4 Dividend
At the Annual Shareholders’ Meeting, the Managing Board, in agreement with the Supervisory Board, will submit the following proposal to allocate the unappropriated net income of Siemens AG for the fiscal year ended September 30, 2012: to distribute a dividend of €3.00 on each no-par value share entitled to the dividend for fiscal year 2012 existing at the date of the Annual Shareholders’ Meeting, with the remaining amount to be carried forward. Payment of the proposed dividend is

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contingent upon approval by Siemens shareholders at the Annual Shareholders’ Meeting on January 23, 2013. The prioryear dividend was €3.00. dividend payOut perCentage
Total dividend payout Net income

C.2.5 Additional measures
In addition to the financial performance measures discussed above, we use several other metrics to assess the economic success of our business activities. To determine whether a particular investment is likely to generate value for Siemens, we use net present value or economic value added (EVA™). EVA™ considers the cost of capital in calculating value creation by comparing the expected earnings of an investment against the cost of capital employed. EVA™ is also an indicator for measuring capital efficiency in our Sectors and at SFS. To measure liquidity management of our operating activities, we analyze net operating working capital turns. In addition, we set hurdle rates that generally must be considered before we make acquisitions. In particular, acquisitions should have the potential to be accretive to EVA™ within three years after the integration and generate a 15% cash return within five years. Cash return is defined as Free cash flow divided by average capital employed.

× 100%

FY 2012 FY 2011

56% 42%

We intend to provide an attractive return to shareholders. We previously set a target range for our dividend payout percentage of 30% to 50% of net income. The proposed dividend of €3.00 per share for fiscal 2012 represents a total payout of €2.569 billion based on shares outstanding as of September 30, 2012. Based on net income of €4.590 billion for fiscal 2012, the dividend payout percentage would be 56%. The percentage for fiscal 2011 was 42%, based on a total dividend payout of €2.629 billion and net income of €6.321 billion. We intend in the years ahead to propose a dividend payout which – combined with outlays for share buybacks during the fiscal year – results in a sum representing 40% to 60% of net income, which for this purpose we may adjust to exclude exceptional non-cash effects. As in the past, we intend to fund the dividend payout from free cash flow.

C.2.6 Additional information for financial performance measures
C.2.6.1 return On Capital emplOyed (rOCe) (adjusted)
As part of One Siemens, we monitor our capital efficiency using the indicator return on capital employed ROCE (adjusted) (continuing operations). The following tables report this financial indicator as defined under One Siemens.

(in millions of €)

09/30/2012

06/30/2012

03/31/2012

12/31/2011

09/30/2011

Capital employed Fiscal 2012 Total equity Plus: Long-term debt Plus: Short-term debt and current maturities of long-term debt Less: Cash and cash equivalents Plus: Pension plans and similar commitments Less: SFS Debt Less: Fair value hedge accounting adjustment 1 Capital employed (continuing operations and discontinued operations) 2 Less: Assets classified as held for disposal presented as discontinued operations Plus: Liabilities classified as held for disposal presented as discontinued operations Capital employed (continuing operations) 2
1 Debt is generally reported with a value representing approximately the amount to be repaid. However for debt designated in a hedging relationship (fair value hedges), this amount is adjusted by changes in market value mainly due to changes in interest rates. Accordingly, we deduct these changes in market value in order to end up with an amount of debt that approximately will be repaid, which we believe is a more mean-

31,302 16,880 3,826 (10,891) 9,926 (14,558) (1,670) 34,817 (4,694) 2,016 32,138

32,313 15,234 5,236 (8,963) 9,060 (13,644) (1,638) 37,597 (4,696) 1,925 34,825

32,142 14,731 4,799 (8,424) 7,492 (13,303) (1,474) 35,962 (4,894) 1,685 32,753

33,947 14,566 2,841 (8,977) 6,774 (13,424) (1,544) 34,182 (4,969) 1,669 30,882

32,156 14,280 3,660 (12,468) 7,307 (12,075) (1,470) 31,391 (4,667) 1,756 28,479

ingful figure for the calculation presented above. For further information on fair value nOte 31 in d.6 nOtes tO COnsOlidated finanCial statements. hedges see 2 Average capital employed for a fiscal year is determined as a five-point average in capital employed of the respective quarters starting with the capital employed as of September 30 of the previous fiscal year.

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(in millions of €)

09/30/2011

06/30/2011

03/31/2011

12/31/2010

09/30/2010

Capital employed Fiscal 2011 Total equity Plus: Long-term debt Plus: Short-term debt and current maturities of long-term debt Less: Cash and cash equivalents Plus: Pension plans and similar commitments Less: SFS Debt Less: Fair value hedge accounting adjustment 1 Capital employed (continuing operations and discontinued operations) 2 Less: Assets classified as held for disposal presented as discontinued operations Plus: Liabilities classified as held for disposal presented as discontinued operations Capital employed (continuing operations) 2
1 Debt is generally reported with a value representing approximately the amount to be repaid. However for debt designated in a hedging relationship (fair value hedges), this amount is adjusted by changes in market value mainly due to changes in interest rates. Accordingly, we deduct these changes in market value in order to end up with an amount of debt that approximately will be repaid, which we believe is a more mean-

32,156 14,280 3,660 (12,468) 7,307 (12,075) (1,470) 31,391 (4,667) 1,756 28,479

31,542 14,191 4,971 (13,006) 5,997 (10,384) (808) 32,503 (5,636) 3,121 29,987

31,483 14,196 5,016 (14,973) 5,845 (10,037) (719) 30,812 (5,148) 2,966 28,630

32,057 15,656 4,051 (15,662) 7,234 (9,925) (1,037) 32,374 – – 32,374

29,096 17,497 2,416 (14,108) 8,464 (10,028) (1,518) 31,819 – – 31,819

ingful figure for the calculation presented above. For further information on fair value nOte 31 in d.6 nOtes tO COnsOlidated finanCial statements. hedges see 2 Average capital employed for a fiscal year is determined as a five-point average in capital employed of the respective quarters starting with the capital employed as of September 30 of the previous fiscal year.

Year ended September 30, (in millions of €) 2012 2011

Income from continuing operations before interest after tax Net income Less/Plus: Other interest expense/income, net Less/Plus: SFS Other interest expense/income 1 Plus: Less: Interest cost on Pension plans and similar commitments 2 Taxes on interest adjustments 3 4,590 (471) 462 333 (93) 4,821 595 5,416 5,416 31,816 17.0% 6,321 (376) 371 356 (81) 6,590 1,055 7,645 7,645 30,258 25.3%

Income before interest after tax Less/Plus: Income/loss from discontinued operations, net of income taxes Income from continuing operations before interest after tax Return on capital employed (ROCE) (adjusted) (continuing operations) (I) Income from continuing operations before interest after tax (II) Average capital employed (continuing operations) (I) / (II) ROCE (adjusted) (continuing operations)
1 SFS Other interest income/expense is included in Other interest income/expense, net. Adding back SFS Other interest income/expense in the numerator corresponds to the adjustment for SFS Debt in the denominator. 2 For fiscal 2012 and 2011, interest cost on Pension plans and similar commitments is calculated using the weighted average discount rate of our pension benefit plans for the fiscal year ended September 30, 2011 (4.5%) and September 30, 2010 (4.2%)

(both as reported in Notes to Consolidated Financial Statements) applied to Pension plans and similar commitments as reported in the Consolidated Statements of Financial Position as of September 30, 2011 and 2010, respectively. 3 Effective tax rate for the determination of taxes on interest adjustments is calculated by dividing Income taxes through Income from continuing operations before income taxes, d.1 COnsOlidated statements Of inCOme. both as reported in

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C.2.6.2 return On equity (rOe) (after tax)
The following table reports the calculation of ROE (after tax) of SFS as defined under One Siemens.

Year ended September 30, (in millions of €) 2012 2011

Calculation of income taxes of Financial Services (SFS) Profit of SFS (Income before Income Taxes, IBIT) Less/Plus: Income/loss from investments accounted for using the equity method, net of SFS 1 Less: Tax-free income components and others 2 Tax basis Tax rate (flat) Calculated income taxes of SFS Profit after tax of SFS Profit of SFS (IBIT) Less: Calculated income taxes of SFS Profit after tax of SFS ROE (after tax) of SFS (I) Profit after tax of SFS (II) Average allocated equity of SFS 3 (I) / (II) ROE (after tax) of SFS 368 1,681 21.9% 332 1,468 22.6% 479 (110) 368 428 (96) 332 479 428

(168) 57 368 30% 110

(92) (16) 319 30% 96

The contract amount is the agreed price or fee for that portion of the contract for which the delivery of goods and / or the provision of services has been irrevocably agreed. Future revenues from service, maintenance and outsourcing contracts are recognized as new orders in the amount of the total contract value only if there is adequate assurance that the contract will remain in effect for its entire duration (e.g., due to high exit barriers for the customer). New orders are generally recognized immediately when the relevant contract is considered legally effective and compulsory. The only exceptions are orders with short overall contract terms. In this case, a separate reporting of new orders would provide no significant additional information regarding our performance. For orders of this type the recognition of new orders thus occurs when the corresponding revenue is recognized. Order backlog represents an indicator for the future revenues of our Company resulting from already recognized new orders. Order backlog is calculated by adding the new orders of the current fiscal year to the balance of the order backlog as of the end of the prior fiscal year and by subtracting the revenue recognized in the current fiscal year. If the amount of an order already recognized in the current or the previous fiscal years is modified or if an order from the current fiscal year is cancelled, Siemens adjusts its new orders for the current quarter and also its order backlog accordingly, but does not retroactively adjust previously published new orders. However, if an order from a previous fiscal year is cancelled, new orders of the current quarter and, accordingly, the current fiscal year are generally not adjusted, instead, the existing order backlog is revised directly. Aside from cancellations, the order backlog is also subject to portfolio effects and to currency translation effects. There is no standard system for compiling and calculating new orders and order backlog information that applies across companies. Accordingly, Siemens’ new orders and order backlog measures may not be comparable with new orders and order backlog reported by other companies. Siemens subjects its new orders and its order backlog to internal documentation and review requirements. Siemens may change its policies for recognizing new orders and order backlog in the future without previous notice.

1 For information on Income (loss) from investments accounted for using the equity C.3.3 reCOnCiliatiOn tO adjusted ebitda (COntinuing method, net of SFS, see OperatiOns). 2 Tax-free income components include forms of financing which are generally exempted from income taxes. Others comprise result components related to the (partial) sale/divestment of equity investments, which are reclassified from at equity to available-for-sale financial assets and are therefore not included in the (Income) loss from investments accounted for using the equity method, net. Such results are already taxed or generally tax free. Others may also comprise an adjustment for material taxable Income (loss) from investments accounted for using the equity method, net. 3 Average allocated equity of SFS for a fiscal year is determined as a five-point average in allocated equity of SFS of the respective quarters starting with the allocated equity of SFS as of September 30 of the previous fiscal year.

C.2.6.3 definitiOns Of Other finanCial perfOrmanCe measures
We also use other financial performance measures in addition to the measures described above, such as new orders and order backlog for the assessment of our future revenue potential. We define and calculate new orders and order backlog as follows: Under its policy for the recognition of new orders, Siemens generally recognizes the total contract amount for a new order when we enter into a contract that we consider legally effective and compulsory based on a number of different criteria.

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C.3 results of operations
C.3.1 Results of Siemens
The following discussion presents selected information for Siemens for the fiscal year ended September 30, 2012: parison was also the primary factor in the order decline in Germany. Orders for Industry in the region were level compared to the prior-year period and Healthcare’s orders came in slightly below the level of fiscal 2011. In the Americas, order intake rose slightly on increases in three of the four Sectors. The Energy Sector showed a slight decrease due in part to a lower volume from large orders compared to the prior-year period. Order intake in the Asia, Australia region showed a slight decrease in fiscal 2012. Double-digit order growth in Healthcare was more than offset by decreases in the other Sectors. Order intake in India decreased sharply compared to the prior-year period, due primarily to a major contract win at Energy in the prior-year period. As previously disclosed, Siemens has decided that, subject to certain limited exceptions, it will not enter into new contracts with customers in Iran and has issued group-wide policies establishing the details of its general decision. Under the original version of the policies, among other exceptions, which have been previously disclosed, products and services required to maintain the installed base (e.g. deliveries of spare parts, maintenance and assembly services) were permitted to be provided. However, in the beginning of calendar year 2012, Siemens resolved to amend the policies to provide that no new business with respect to products and services destined to maintain the installed base in Iran’s oil & gas sector may be entered into under any circumstances. In addition, even outside the oil & gas sector, products and services for the installed base in Iran may be provided only in strictly limited circumstances which can be demonstrated to satisfy humanitarian purposes or private purposes serving the common good (e.g. water supply and healthcare of the civilian population). In the fourth quarter of fiscal 2012, Siemens revised its credit risk assessment for Iran. In accordance with project accounting principles, Siemens therefore revised project calculations for the affected projects that were still permitted to be provided under these policies. The change in credit risk assessment resulted in an earnings impact of €347 million. We expect further profit impacts related to Iran in fiscal 2013. For additional information, see C.9.3 risks.

C.3.1.1 new Orders and revenue
Revenue increased steadily quarter by quarter throughout fiscal 2012 and came in at €78.296 billion, up 7% from the prioryear period. Revenue growth included increases in all Sectors and all three reporting regions, supported by Siemens’ strong order backlog. Slowing growth in the world economy was evident in the development of new orders, which decreased 10% year-over-year primarily due to substantially lower volume from large orders compared to the prior-year period. This resulted in a book-to-bill ratio of 0.98 for Siemens in fiscal 2012. On an organic basis, excluding currency translation and portfolio effects, orders decreased 13% and revenue came in 3% above the prior year. The order backlog (defined as the sum of order backlogs of our Sectors) was €98 billion as of September 30, 2012, up from €97 billion a year earlier, including positive currency translation effects of €3 billion. Orders related to external customers in fiscal 2012 declined 10% overall, with results varying among the Sectors. Orders for Healthcare were up 5%, with most of its businesses contributing increases, and were level in Industry. Order intake declined in Energy and Infrastructure & Cities due to substantially lower volumes from large orders compared to the prior-year period, which included a number of orders for large wind-farms in Energy and a €3.7 billion order for trains in Germany won by Infrastructure & Cities. Orders from emerging markets on a global basis, as these markets are defined by the International Monetary Fund, declined 7%, less than orders overall, and accounted for €26.244 billion, or 34%, of total orders for fiscal 2012. In the region Europe, C.I.S., Africa, Middle East, orders declined 17% including double-digit decreases in Infrastructure & Cities and Energy, which were due to the high basis of comparison from large orders mentioned above. This high basis of comnew Orders (loCation of Customer)

Year ended September 30, (in millions of €) 2012 2011

% Change vs. previous year Actual Adjusted 1 Currency

therein Portfolio

Europe, C.I.S.2, Africa, Middle East therein Germany Americas therein U.S. Asia, Australia therein China therein India Siemens
1 Excluding currency translation and portfolio effects.

38,655 9,894 22,271 15,403 15,987 6,037 1,689 76,913
2 Commonwealth of Independent States.

46,711 17,353 22,077 15,732 16,378 6,241 3,310 85,166

(17)% (43)% 1% (2)% (2)% (3)% (49)% (10)%

(19)% (43)% (5)% (9)% (7)% (11)% (45)% (13)%

1% 0% 5% 6% 4% 8% (4)% 2%

1% 0% 1% 1% 0% 0% 0% 1%

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

69

revenue (loCation of Customer)
Year ended September 30, (in millions of €) 2012 2011 % Change vs. previous year Actual Adjusted 1 Currency therein Portfolio

Europe, C.I.S.2, Africa, Middle East therein Germany Americas therein U.S. Asia, Australia therein China therein India Siemens
1 Excluding currency translation and portfolio effects.

39,909 11,072 22,864 16,670 15,523 6,348 2,311 78,296
2 Commonwealth of Independent States.

38,448 10,810 20,470 14,368 14,357 6,389 2,353 73,275

4% 2% 12% 16% 8% (1)% (2)% 7%

2% 2% 5% 7% 3% (7)% 4% 3%

1% 0% 6% 8% 5% 7% (5)% 3%

0% 0% 1% 1% 0% (1)% 0% 0%

Revenue related to external customers rose 7% compared to fiscal 2011, including increases in all Sectors. Strong conversion from the Sectors’ order backlogs played a major role in broad-based revenue growth. Energy revenue increased 12% in fiscal 2012 and Healthcare revenue increased 9%. Revenue in Industry and Infrastructure & Cities showed a moderate growth compared to the prior-year period. On a global basis, emerging markets grew 7%, and accounted for €25.652 billion, or 33%, of total revenue in fiscal 2012. new Orders and revenue by quarter (in millions of €)
New orders Q4 12 Q3 12 Q2 12 Q1 12 Q4 11 Q3 11 Q2 11 Q1 11 21,495 17,769 17,857 19,792 21,059 22,879 20,582 20,647 Revenue Q4 12 Q3 12 Q2 12 Q1 12 Q4 11 Q3 11 Q2 11 Q1 11

On a geographic basis, revenue increased in all three reporting regions, led by double-digit growth in the Americas. In the Europe, C.I.S., Africa, Middle East region, revenue increased 4% year-over-year, including increases in all Sectors. In the Americas, higher revenue included double-digit increases in Energy, Industry and Infrastructure & Cities, due to revenue growth of 16% in the U.S. In the Asia, Australia region, revenue rose 8% on substantial increases in Energy and Healthcare, which were partly offset by decreases in Infrastructure & Cities and Industry.

Book-to-bill ratio 21,703 19,502 19,235 17,856 20,285 17,782 17,633 17,575 0.99 0.91 0.93 1.11 1.04 1.29 1.17 1.17

1 21

A. B.

To our Shareholders Corporate Governance

49 50 64 69 82 93

C. C.1 C.2 C.3 C.4 C.5

Combined Management Report Business and economic environment Financial performance measures Results of operations Financial position Net assets position 95 96 97 111 C.6 C.7 C.8 C.9 Overall assessment of the economic position Subsequent events Sustainability Report on expected developments and associated material opportunities and risks

70

C.3.1.2 COnsOlidated statements Of inCOme
Year ended September 30, (in millions of €) 2012 2011 % Change

Gross profit as percentage of revenue Research and development expenses as percentage of revenue Marketing, selling and general administrative expenses as percentage of revenue Other operating income Other operating expense Income (loss) from investments accounted for using the equity method, net Interest income Interest expense Other financial income (expense), net Income from continuing operations before income taxes Income taxes as percentage of income from continuing operations before income taxes Income from continuing operations Loss from discontinued operations, net of income taxes Net income Net income attributable to non-controlling interests Net income attributable to shareholders of Siemens AG

22,204 28.4% (4,238) 5.4% (11,162) 14.3% 516 (276)

22,229 30.3% (3,899) 5.3% (10,239) 14.0% 547 (374)

0% – 9% – 9% – (6)% (26)%

While revenue for fiscal 2012 rose 7% year-over-year as discussed earlier, gross profit was nearly unchanged from the prior-year level and declined as a percent of revenue. Industry, Energy and Infrastructure & Cities all dealt with a less favorable revenue mix year-over-year, which reduced their gross profit margins. Gross profit in Energy included €570 million in project charges related to offshore grid-connection projects. The majority of Healthcare’s charges for its Agenda 2013 initiative also impacted gross profit. In fiscal 2011, Healthcare’s €381 million in charges in the third quarter related to particle therapy were included in gross profit. Furthermore, all Sectors increased their spending for marketing, selling and administrative expenses and research and development expenses in anticipation of an improving global economic environment in the second half of the fiscal year. In fact, global economic growth slowed instead of picking up in the second half, leaving the Sectors with cost positions that adversely affected income. For more details on our research and development activities, including a split of research and development expenses for the Sectors, see C.8.2 researCh and develOpment. Income (loss) from investments accounted for using the equity method, net swung from a positive €210 million in fiscal 2011 to a negative €266 million in fiscal 2012. The primary factor was Nokia Siemens Networks B.V. (NSN), which took substantial restructuring charges in connection with repositioning its business. This in turn led to an equity investment loss of €741 million associated with NSN, compared to a loss of €280 million in the prior year. For additional information, see nOte 7 in d.6 nOtes tO COnsOlidated finanCial statements. Income from continuing operations in fiscal 2011 benefited from a gain of €1.520 billion on the sale of Energy ’s interest in Areva NP S.A.S. (Areva NP), partly offset by the negative impact of €682 million related to an adverse arbitration decision associated with our decision to exit our nuclear power joint venture with Areva S.A. (Areva). The net effect of these factors is included in Other financial income (expense) net. For additional information, see nOte 8 in d.6 nOtes tO COnsOlidated finanCial statements. In the current period, Income from continuing operations included €148 million in gains related to changes in other post-employment benefits (OPEB) in the U.S., more than offset by profit impacts of €347 million, primarily in the Energy Sector, related to a change in credit risk assessment for Iran. These gains and impacts were distributed among various line items.

(266) 2,234 (1,728) (5)

210 2,200 (1,716) 649

n/a 2% 1% n/a

7,279 (2,094)

9,608 (2,232)

(24)% (6)%

29% 5,184

23% 7,376

– (30)%

(595) 4,590 132 4,458

(1,055) 6,321 176 6,145

(44)% (27)% – (27)%

In fiscal 2012, we achieved Income from continuing operations of €5.184 billion. While this was one of our highest results ever, it was substantially lower than in the prior year. The primary factors in the decline were cost of goods sold; research and development expenses; marketing, selling and general administrative expenses; and income (loss) from investments accounted for using the equity method, net. In addition, the prior year included substantially higher financial income associated with a major divestment. Each of these factors is described in more detail below. Other line items in the Consolidated Statements of Income are discussed in nOtes 5, 6 and 8 in d.6 nOtes tO COnsOlidated finanCial statements.

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

71

As a result of these developments, Income from continuing operations before income taxes declined 24%. Income taxes declined 6% year-over-year. The effective tax rate was 29%. For comparison, the effective tax rate of 23% a year earlier benefited from the mainly tax-free Areva disposal gain. Loss from discontinued operations, net of income taxes in fiscal 2012 was €595 million, compared to €1.055 billion in fiscal 2011. Loss from discontinued operations, net of income taxes was comprised of the following:

that Siemens no longer considered it highly probable to complete its original plan to dispose of OSRAM via an initial public offering (IPO) in the third quarter of fiscal 2012, and therefore had to recognize accumulated depreciation, amortization, impairments and equity pick-ups related to OSRAM which under IFRS were not recognized beginning with the announcement of the IPO plan in March 2011. The Company intends to dispose of OSRAM via a spin-off to Siemens shareholders, which is subject to approval by the Annual Shareholders’ Meeting on January 23, 2013. While revenue rose 7% year-over-year, benefiting from currency translation and portfolio effects, ongoing market challenges held back profit development. In addition, discontinued operations include Siemens’ solar business, which posted losses of €241 million and €365 million in fiscal 2012 and 2011, respectively. Both years included pretax impairment charges: €150 million in fiscal 2012 and €231 million in fiscal 2011. Discontinued operations also include certain remaining items related to former activities that were disposed of in prior years. Fiscal 2012 included pretax expenses of €143 million related to a settlement with the Greek State, and negative tax effects of €115 million, both related to former Com activities. For additional information, see nOte 4 in d.6 nOtes tO COnsOlidated finanCial statements. Net income for Siemens in fiscal 2012 declined to €4.590 billion from €6.321 billion a year earlier. Net income attributable to shareholders of Siemens AG was €4.458 billion, down from €6.145 billion in the same period a year earlier.

Year ended September 30, (in millions of €) 2012 2011

% Change

Siemens IT Solutions and Services OSRAM Siemens’ solar business Other former activities

41 (121) (241) (274)

(826) 309 (365) (172)

n/a n/a (34)% 59%

Results related to Siemens IT Solutions and Services, which was sold to Atos S.A. (AtoS) in the fourth quarter of fiscal 2011, differed substantially year-over-year. In fiscal 2012, income was a positive €41 million, compared to a loss of €826 million in fiscal 2011, which included significant expenses related to the disposal. Results for OSRAM in fiscal 2012 included a non-cash effect of a negative €443 million (pretax). This effect arises from the fact

C.3.2 Segment information analysis
C.3.2.1 energy seCtOr Year ended September 30, (in millions of €) 2012 2011 Actual % Change Adjusted 1 Currency therein Portfolio

Profit Profit margin New orders Total revenue External revenue therein: Europe, C.I.S.2, Africa, Middle East therein Germany Americas Asia, Australia
1 Excluding currency translation and portfolio effects.

2,159 7.8% 26,881 27,537 27,302 14,077 1,927 8,131 5,093

4,230 17.2% 31,407 24,645 24,390 13,447 1,668 7,075 3,869

(49)% (14)% 12% 12% 5% 16% 15% 32% (18)% 7% 2% 3% 2% 1%

2 Commonwealth of Independent States.

1 21

A. B.

To our Shareholders Corporate Governance

49 50 64 69 82 93

C. C.1 C.2 C.3 C.4 C.5

Combined Management Report Business and economic environment Financial performance measures Results of operations Financial position Net assets position 95 96 97 111 C.6 C.7 C.8 C.9 Overall assessment of the economic position Subsequent events Sustainability Report on expected developments and associated material opportunities and risks

72

Energy reported a profit of €2.159 billion in fiscal 2012, a sharp decrease compared to fiscal 2011. Sector profit was held back by project charges related to offshore grid connection projects totaling €570 million. In the fourth quarter of fiscal 2012, Siemens revised its credit risk assessment for Iran. In accordance with project accounting principles, we therefore revised project calculations for the affected contracts. The change in credit risk assessment resulted in earnings impacts totaling €327 million mainly at Oil & Gas. Energy also recorded burdens of €152 million associated with the Olkiluoto project in Finland. In addition, Energy ’s business expansion strategy resulted in higher marketing, selling and general administrative expenses as well as higher research and development expenses, and profit development was also held back by a less favorable revenue mix. For comparison, profit of €4.230 billion in fiscal 2011 benefited from the Areva NP gain of €1.520 billion mentioned earlier, only partly offset by the €682 million profit impact related to the arbitration decision discussed earlier and the Sector’s €60 million share of special employee remuneration costs. The Sector expects further profit impacts related to Iran in fiscal 2013. new Orders by businesses

Revenue rose on conversion from the Sector’s strong order backlog in all three reporting regions, including a substantial increase in Asia, Australia. Orders came in 14% lower compared to the prior year, when the Sector recorded a substantially larger volume from major orders. This comparison effect was particularly notable in Europe, C.I.S., Africa, Middle East. Energy ’s book-to-bill ratio for fiscal 2012 was 0.98 and its order backlog was €55 billion at the end of the period. Fossil Power Generation generated profit of €1.933 billion on strong profit contributions from the service and products businesses, while results from the solutions business were significantly lower due to a less favorable project mix compared to a year earlier. Profit benefited from a €87 million gain from the sale of the 25% interest in OAO Power Machines. In addition, the Division recorded higher expenses for marketing and selling year-over-year. For comparison, profit a year earlier included the €1.520 billion Areva NP gain and a more favorable project mix in the component business, partly offset by the €682 million Areva arbitration impact. Profit in both years was burdened by charges related to the Olkiluoto proj-

Year ended September 30, (in millions of €) 2012 2011 Actual

% Change Adjusted 1 Currency

therein Portfolio

Fossil Power Generation Wind Power Oil & Gas Power Transmission
1 Excluding currency translation and portfolio effects.

11,116 4,932 5,307 5,824

12,487 6,461 5,551 7,271

(11)% (24)% (4)% (20)%

(17)% (26)% (10)% (21)%

2% 2% 2% 1%

4% 0% 3% 0%

revenue by businesses
Year ended September 30, (in millions of €) 2012 2011 Actual % Change Adjusted 1 Currency therein Portfolio

Fossil Power Generation Wind Power Oil & Gas Power Transmission
1 Excluding currency translation and portfolio effects.

11,161 5,066 5,115 6,593

10,203 3,686 4,719 6,334

9% 37% 8% 4%

5% 29% 3% 2%

3% 8% 2% 2%

2% 0% 3% 0%

prOfit and prOfit margin by businesses
Profit Year ended September 30, (in millions of €) 2012 2011 % Change 2012 Profit margin Year ended September 30, 2011

Fossil Power Generation Wind Power Oil & Gas Power Transmission

1,933 304 218 (302)

2,837 357 467 566

(32)% (15)% (53)% n/a

17.3% 6.0% 4.3% (4.6)%

27.8% 9.7% 9.9% 8.9%

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

73

ect in Finland, amounting to €152 million in the current year and €87 million a year ago. Revenue rose 9% year-over-year, with substantial growth in Asia, Australia and significant growth in the Americas more than offsetting a moderate decline in Europe, C.I.S., Africa, Middle East. Due to a lower volume from major orders, fiscal 2012 orders came in 11% lower than a year earlier, including a substantial decline in Europe, C.I.S., Africa, Middle East. Profit at Wind Power was lower year-over-year. Positive contributions from substantially higher revenue were offset by higher expenses for research and development, marketing and selling associated with expansion, a less favorable revenue mix, and increased pricing pressure. In addition, earnings came in lower due to a €32 million provision related to a wind turbine component from an external supplier and a charge of €20 million related to capacity adjustment. Revenue rose 37% yearover-year, due to conversion of large orders into current business mainly in Europe, C.I.S., Africa, Middle East, and, to a lesser degree, in the Americas and Asia, Australia. Revenue growth was supported clearly by positive currency translation effects. New orders were down 24% due primarily to a lower volume from large offshore orders in Germany. New order intake in the U.S. was down compared to fiscal 2011. With the expected near-term expiration of tax incentives in the U.S., orders in that country nearly ceased towards the end of fiscal 2012. Given market developments in the U.S., Wind Power announced plans to reduce its production capacity. Challenging market conditions at Wind Power, including pricing pressure, are expected to continue in coming quarters. Profit at Oil & Gas declined sharply year-over-year from the prior year due primarily to €275 million in earnings impacts

stemming from the change in credit risk assessment for Iran mentioned above. In other respects, Oil & Gas performed well, including a higher earnings contribution from its services business as well as from its turbines business. Revenue increased clearly due primarily to growth in Asia, Australia. Orders decreased substantially in Asia, Australia, taking orders lower for the Division overall. Power Transmission reported a loss of €302 million for fiscal 2012, compared to profit of €566 million for fiscal 2011. The major factor was €570 million in project charges related primarily to technically complex grid connections to offshore wind-farms in Germany. These charges were due to project delays resulting from a complex regulatory environment and the projects’ complex marine environment, which required revised estimates of resources and personnel. In addition, profit was impacted by charges totaling €66 million to address structural issues in the transformers business. Earnings were also held back by a less favorable revenue mix, due in part to low-margin orders booked during prior periods with significant pricing pressure. These factors were only partly offset by the release of a provision of €64 million related to a successful project completion. For comparison, prior-year period profit included charges of €57 million, including for staff reduction measures, associated with optimizing the Division’s global manufacturing footprint. Order intake decreased 20% compared to the prior year, which included a higher volume from large orders and a sharp drop in orders in the solutions business due in part to more selective order intake. All three reporting regions saw lower orders. The Division expects continuing challenges, including the technically complex gridconnection projects mentioned above and structural issues in certain businesses.

C.3.2.2 healthCare seCtOr Year ended September 30, (in millions of €) 2012 2011 Actual % Change Adjusted 1 Currency therein Portfolio

Profit Profit margin New orders Total revenue External revenue therein: Europe, C.I.S.2, Africa, Middle East therein Germany Americas Asia, Australia
1 Excluding currency translation and portfolio effects.

1,815 13.3% 13,806 13,642 13,600 4,593 1,056 5,692 3,315

1,334 10.7% 13,116 12,517 12,463 4,489 992 5,233 2,741

36% 5% 9% 9% 2% 6% 9% 21% 0% 4% 4% 4% 0% 0%

2 Commonwealth of Independent States.

1 21

A. B.

To our Shareholders Corporate Governance

49 50 64 69 82 93

C. C.1 C.2 C.3 C.4 C.5

Combined Management Report Business and economic environment Financial performance measures Results of operations Financial position Net assets position 95 96 97 111 C.6 C.7 C.8 C.9 Overall assessment of the economic position Subsequent events Sustainability Report on expected developments and associated material opportunities and risks

74

The healthcare market environment reflected continuing pressure on public health budgets in developed countries while healthcare spending increased in emerging market countries, particularly including China. In fiscal 2012, the Healthcare Sector launched “Agenda 2013”, which is a global initiative targeting innovation, regional presence, competitiveness, and human resource development. The initiative encompasses a realignment of the radiation therapy business that includes rightsizing measures and a program to improve the cost position at Diagnostics. The Healthcare Sector delivered €1.815 billion in profit in fiscal 2012, led by continued strong earnings performance from its imaging and therapy systems businesses. Results for the year were influenced by “Agenda 2013”, including €184 million in charges. The Sector expects additional charges in coming quarters. Profit development also included higher expenses for research and development as well as higher marketing, selling and general administrative expenses, due in part for investments in product development and expanded sales activities in emerging markets. These effects were partly offset by the Sector’s €49 million portion of the OPEBgain in the U.S. mentioned earlier and a net gain of €34 million from the successful pursuit of a patent infringement claim. For comparison, Healthcare profit in fiscal 2011 was held back by negative impacts related to particle therapy projects, primarily including €381 million in the third quarter when the Sector shifted the focus of certain projects primarily to research. Within this impact was a negative effect of approximately €100 million related to reducing revenue from prior periods. In addition the Sector took €32 million in charges stemming from increased cost estimates for completing particle therapy contracts in the first quarter. Fiscal

2011 profit was held back also by the Sector’s €43 million share of the special employee remuneration allocation mentioned earlier and a loss of €32 million on the sale of a healthcare IT business in France. Profit at Diagnostics came in at €314 million compared to €300 million a year earlier, driven primarily by higher revenue. In connection with the “Agenda 2013” initiative, Diagnostics took €80 million in charges in fiscal 2012 related to improving its cost position. For comparison, profit at Diagnostics in fiscal 2011 was impacted by an increase in valuation allowances for receivables triggered by a debt rating downgrade related to Greece. Purchase price allocation (PPA) effects related to past acquisitions at Diagnostics were €173 million in fiscal 2012. A year earlier, Diagnostics recorded €169 million in PPA effects. Revenue for Healthcare in fiscal 2012 increased 9% compared to the prior-year period, including growth on a broad basis among its businesses. Revenue a year earlier included the negative revenue effect of approximately €100 million related to particle therapy projects mentioned above. Orders came in 5% higher, with most businesses contributing increases. On a geographic basis, Asia, Australia and the Americas drove revenue and order growth, due to increases in China and the U.S. The book-to-bill ratio was 1.01, and Healthcare‘s order backlog was €7 billion at the end of fiscal 2012. The Sector’s Diagnostics business contributed to overall growth. Revenue and orders were up 8%, both reaching €3.969 billion from €3.667 billion and €3.678 billion, respectively, in the prior-year period. Diagnostics showed the same development as the Sector with regard to the regions. On an organic basis, both revenue and orders rose 4%.

C.3.2.3 industry seCtOr Year ended September 30, (in millions of €) 2012 2011 Actual % Change Adjusted 1 Currency therein Portfolio

Profit Profit margin New orders Total revenue External revenue therein: Europe, C.I.S.2, Africa, Middle East therein Germany Americas Asia, Australia
1 Excluding currency translation and portfolio effects.

2,467 12.0% 19,985 20,508 18,872 9,789 4,487 4,280 4,802

2,752 14.0% 20,184 19,590 18,124 9,376 4,293 3,801 4,947

(10)% (1)% 5% 4% 4% 5% 13% (3)% (3)% 2% 2% 3% 0% 0%

2 Commonwealth of Independent States.

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

75

In fiscal 2012, profit at Industry declined 10% year-over year as market conditions for the Sector became less favorable in the second half of the period. This was particularly evident in China and to a lesser extent in Germany, two of the Sector’s most important national markets. Profit development in fiscal 2012 was also held back by a less favorable business mix as well as higher marketing, selling, general and administrative expenses associated with innovation and growth opportunities. Furthermore, profit at Industry was impacted by market challenges for its renewable energy offerings. The Sector took €28 million in charges related to severance programs for adjusting capacity and adapting its portfolio primarily related to those offerings. These factors were only partially offset by Industry ’s €30 million portion of the OPEB gain mentioned earlier. For comparison, profit in fiscal 2011 was burdened by Industry ’s €75 million share of a special remuneration allocation. Revenue in fiscal 2012 for Industry rose moderately year-overyear on broad-based increases across its businesses. Industry ’s orders declined slightly compared to the prior fiscal year as higher orders at Industry Automation were more than offset by a decrease at Drive Technologies and the metal technologies business. On a regional basis, revenue was up in the Americas and Europe, C.I.S., Africa, Middle East, more than offsetting a decline in Asia, Australia. The decline in orders was due primarily to lower demand from Asia, Australia. Revenue and order development in fiscal 2012 benefited from positive currennew Orders by businesses

cy translation effects. On a book-to-bill ratio of 0.97, Industry ’s order backlog was €11 billion at the end of fiscal 2012, unchanged from a year earlier. Profit at Industry Automation declined 5% year-over year. The decline compared to the prior fiscal year was due mainly to a less favorable business mix, higher marketing and selling, general and administrative expenses and lower earnings from the Division’s offerings for renewable energy. On growth in all three reporting regions, revenue for the Division was up 7% and orders increased 6% year-over-year. Both fiscal years under review included PPA effects from the acquisition of UGS Corp., acquired in fiscal 2007. PPA effects were €149 million in fiscal 2012 and €137 million a year earlier. Profit at Drive Technologies in fiscal 2012 came in at €970 million, down significantly from a year earlier also due mainly to a less favorable business mix, lower earnings from its offerings for renewable energy, and higher research and development as well as marketing, selling and general administrative costs compared to fiscal 2011. The Division’s portion of the severance charges mentioned for the Sector was €20 million. While revenue for Drive Technologies grew moderately compared to fiscal 2011, orders declined clearly year-over year. On a regional basis, revenue growth was driven by the Americas and supported by moderate growth in Europe, C.I.S, Africa, Middle East. The decline in orders was due to weak demand from Asia, Australia.

Year ended September 30, (in millions of €) 2012 2011 Actual

% Change Adjusted 1 Currency

therein Portfolio

Industry Automation Drive Technologies
1 Excluding currency translation and portfolio effects.

9,547 9,395

8,983 9,995

6% (6)%

4% (8)%

3% 2%

0% 0%

revenue by businesses
Year ended September 30, (in millions of €) 2012 2011 Actual % Change Adjusted 1 Currency therein Portfolio

Industry Automation Drive Technologies
1 Excluding currency translation and portfolio effects.

9,563 9,640

8,974 9,179

7% 5%

3% 3%

3% 2%

0% 0%

prOfit and prOfit margin by businesses
Profit Year ended September 30, (in millions of €) 2012 2011 % Change 2012 Profit margin Year ended September 30, 2011

Industry Automation Drive Technologies

1,335 970

1,411 1,158

(5)% (16)%

14.0% 10.1%

15.7% 12.6%

1 21

A. B.

To our Shareholders Corporate Governance

49 50 64 69 82 93

C. C.1 C.2 C.3 C.4 C.5

Combined Management Report Business and economic environment Financial performance measures Results of operations Financial position Net assets position 95 96 97 111 C.6 C.7 C.8 C.9 Overall assessment of the economic position Subsequent events Sustainability Report on expected developments and associated material opportunities and risks

76

C.3.2.4 infrastruCture & Cities seCtOr Year ended September 30, (in millions of €) 2012 2011 Actual % Change Adjusted 1 Currency therein Portfolio

Profit Profit margin New orders Total revenue External revenue therein: Europe, C.I.S.2, Africa, Middle East therein Germany Americas Asia, Australia
1 Excluding currency translation and portfolio effects.

1,102 6.3% 17,150 17,585 16,731 10,121 2,880 4,344 2,267

1,126 6.6% 21,348 16,976 16,166 9,590 2,938 3,882 2,694

(2)% (20)% 4% 3% 6% (2)% 12% (16)% (22)% 1% 2% 3% 0% 0%

2 Commonwealth of Independent States.

Profit at Infrastructure & Cities came in at €1.102 billion, down slightly year-over-year. While the Power Grid Solutions & Products business and the Building Technologies Division both improved profit year-over-year, profit at Transportation & Logistics declined substantially due mainly to €86 million in charges at a rolling stock project in Germany. Profit development for the Sector was also held back by €42 million in charges related to severance programs. These negative effects were partly offset by a positive €50 million contribution from the Sector’s interest in AtoS and the Sector’s €30 million portion of the OPEB gain mentioned earlier. For comparison, profit in fiscal 2011 was burdened by the Sector’s €63 million share of a special employee remuneration allocation.

Revenue grew moderately year-over-year, as higher revenue in the regions America and Europe, C.I.S., Africa, Middle East more than offset a decline in Asia, Australia. Revenue growth was driven by Power Grid Solutions & Products and Building Technologies. Revenue at Transportation & Logistics declined slightly year-over-year. Orders for the Sector decreased 20% compared to the prior year, which included a sharply higher volume from major orders at Transportation & Logistics. This included Siemens’ largest-ever train order in Germany, worth €3.7 billion, and a major order for high-speed trains in the U.K. As a result, fiscal 2012 orders came in substantially lower in Europe, C.I.S., Africa, Middle East. Order intake was also clearly lower in Asia, Australia, only partly offset by a slight increase in the Americas. On a book-to-bill ratio of 0.98, Infrastructure & Cities’ order backlog was €24 billion at the end of fiscal 2012, unchanged from a year earlier.

new Orders by businesses
Year ended September 30, (in millions of €) 2012 2011 Actual % Change Adjusted 1 Currency therein Portfolio

Transportation & Logistics Power Grid Solutions & Products Building Technologies
1 Excluding currency translation and portfolio effects.

5,382 6,275 5,809

10,052 5,905 5,597

(46)% 6% 4%

(48)% 4% 0%

1% 2% 3%

0% 0% 0%

revenue by businesses
Year ended September 30, (in millions of €) 2012 2011 Actual % Change Adjusted 1 Currency therein Portfolio

Transportation & Logistics Power Grid Solutions & Products Building Technologies
1 Excluding currency translation and portfolio effects.

5,969 6,068 5,820

6,041 5,657 5,468

(1)% 7% 6%

(4)% 5% 3%

2% 2% 3%

0% 0% 0%

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

77

prOfit and prOfit margin by businesses
Profit Year ended September 30, (in millions of €) 2012 2011 % Change 2012 Profit margin Year ended September 30, 2011

Transportation & Logistics Power Grid Solutions & Products Building Technologies

236 457 379

365 413 364

(35)% 11% 4%

4.0% 7.5% 6.5%

6.0% 7.3% 6.7%

Profit at the Transportation & Logistics business declined 35% year-over-year. This decline was due mainly to the above-mentioned €86 million in charges related to delays in fulfilling a rolling stock order in Germany. In addition, the revenue mix in fiscal 2012 was less favorable due to lower margins associated with large, long-term contracts from prior periods which Transportation & Logistics began to convert into current business in fiscal 2012. Revenue came in slightly lower year-overyear, as higher revenue in the Europe, C.I.S., Africa, Middle East region was more than offset by lower revenue in Asia, Australia and the Americas. Order intake decreased 46% yearover-year, due to the sharply higher volume from large orders a year earlier. This comparison effect was particularly evident in the Europe, C.I.S., Africa, Middle East region, where Transportation & Logistics won the above-mentioned large orders in fiscal 2011 for trains in Germany and the U.K. The profit improvement at Power Grid Solutions & Products was driven by the business’ low and medium voltage activities. Profit from smart grid activities was held back by higher research and development, marketing, selling and general administrative expenses for growth initiatives. Revenue and orders increased clearly year-over-year, particularly including double-digit growth in the Americas. Profit at Building Technologies increased moderately yearover-year. Profit development in fiscal 2012 was held back by higher research and development, marketing, selling and general administrative expenses associated with growth initiatives. Growth in revenue and orders was driven by demand for the Division’s energy efficiency solutions. On a regional basis, revenue and orders were up in all three reporting regions.

C3.2.5 equity investments
In fiscal 2012, Equity Investments recorded a loss of €549 million compared to a loss of €26 million in fiscal 2011. The difference year-over-year is due mainly to a sharply higher equity investment loss related to our share in NSN, which increased to €741 million in fiscal 2012 compared to a loss of €280 million a year earlier. NSN reported to Siemens that it took restructuring charges and associated items totaling €1.059 billion in fiscal 2012 up from €151 million in the prior fiscal year. In fiscal 2012, NSN started implementing its previously announced global restructuring program aimed at maintaining its long-term competitiveness and improving profitability. Equity investment loss related to our share in EN declined to €23 million in fiscal 2012 compared to €46 million a year earlier. Losses in both fiscal years were partly offset by income from equity investments related to our share in BSH. Furthermore, results from Equity Investments in fiscal 2011 benefited from a €90 million gain on the sale of our share in KMW. Results at Equity Investments are expected to remain volatile in coming quarters.

C.3.2.6 finanCial serviCes (sfs)
Year ended September 30, (in millions of €) 2012 2011 % Change

Income before income taxes Total assets

479 17,405

428 14,602

12% 19%

In fiscal 2012, SFS recorded a higher profit (defined as income before income taxes) year-over-year. While both interest result and operating expenses associated with SFS’ growth strategy increased year-over-year, the current period was primarily affected by a €78 million gain on the sale of a stake in Bangalore International Airport Limited, a public-private partnership, reducing SFS’ equity participation from 40% to 26%. This gain was

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partly offset by higher credit hits. The growth strategy at SFS has led to a significant build-up in total assets, from €14.602 billion at the end of fiscal 2011 to €17.405 billion at the end of fiscal 2012, including positive currency translation effects. The following table provides further information on the capital structure of SFS as of September 30, 2012 and 2011:

Siemens Real Estate
Income before income taxes at SRE was €115 million in fiscal 2012, compared to €150 million in fiscal 2011. This decrease is due in part to lower income related to the disposal of real estate. SRE expects to continue with real estate disposals depending on market conditions.

Corporate items and pensions
Year ended September 30, (in millions of €) 2012 2011

Corporate items and pensions totaled a negative €302 million in fiscal 2012 compared to a negative €257 million a year earlier. The difference was due mainly to centrally carried pension expense, which totaled a negative €47 million in fiscal 2012, compared to a positive €75 million in the prior year. The change is due primarily to a negative effect resulting from a lower expected return on plan assets and higher interest costs. Corporate items were a negative €255 million in fiscal 2012 compared to a negative €331 million in fiscal 2011. The amount for fiscal 2012 benefited from positive effects related to legal and regulatory matters, compared to net expenses, including a provision of regional risks of €99 million, related to such matters in the prior year. In addition, fiscal 2012 includes an amount of €103 million related to reimbursements to AtoS, compared to €53 million in the prior year. It also includes a net gain of €19 million related to a major asset retirement obligation, compared to a net loss of €28 million in fiscal 2011. The prior year benefited from management’s allocation of €267 million of personnel-related costs related to special employee remuneration, which had been accrued in Corporate items in fiscal 2010. Within this amount, €240 million was allocated to the Sectors.

Allocated equity Total debt therein intragroup financing therein debt from external sources Debt to equity ratio Cash and cash equivalents

1,790 14,558 14,510 47 8.13 116

1,593 12,075 12,066 9 7.58 178

Both Moody ’s and Standard & Poor’s view SFS as a captive finance company. These rating 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 mainly determined and influenced by the size and quality of its portfolio of commercial finance as well as project and structured finance assets (primarily loans and leases) and equity investments. This allocation is designed to cover the risks of the underlying business and is in line with common risk management standards. The actual risk of the SFS portfolio is evaluated and controlled on a regular basis. The allocated equity is calculated quarterly.

C.3.2.7 reCOnCiliatiOn tO COnsOlidated finanCial statements
Reconciliation to Consolidated Financial Statements includes Centrally managed portfolio activities, Siemens Real Estate (SRE) and various categories of items which are not allocated to the Sectors and to SFS because the Company ’s management has determined that such items are not indicative of the Sectors’ and SFS’ respective performance.

Eliminations, Corporate Treasury and other reconciling items
In fiscal 2012, income before income taxes from Eliminations, Corporate Treasury and other reconciling items was a positive €23 million, compared to a negative €90 million a year earlier. The main factor of the improvement was Corporate Treasury activities, due mainly to positive changes in the fair market value of interest rate derivatives not qualifying for hedge accounting used for interest rate management, partly offset by negative currency effects relating to corporate financing activities.

Centrally managed portfolio activities
Centrally managed portfolio activities reported a loss of €29 million in fiscal 2012, compared to a loss of €40 million in fiscal 2011.

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

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79

C.3.3 Reconciliation to adjusted EBITDA (continuing operations)
The following table gives additional information on topics included in Profit and Income before income taxes and provides a reconciliation to adjusted EBITDA based on continuing operations. We report adjusted EBIT and adjusted EBITDA as a performance measure. The closest comparable GAAP figure under fOr the fisCal years ended september 30, 2012 and 2011
Profit 1 Income (loss) from investments accounted for using the equity method, net 2 2012 2011

IFRS is Net income as reported in our “Consolidated Statements of Income.” For further information regarding adjusted EBIT and adjusted EBITDA, please see C.12 nOtes and fOrwardlOOking statements.

(in millions of €)

2012

2011

Sectors Energy Sector therein: Fossil Power Generation Wind Power Oil & Gas Power Transmission Healthcare Sector therein: Diagnostics Industry Sector therein: Industry Automation Drive Technologies Infrastructure & Cities Sector therein: Transportation & Logistics Power Grid Solutions & Products Building Technologies Total Sectors Equity Investments Financial Services (SFS) Reconciliation to Consolidated Financial Statements Centrally managed portfolio activities Siemens Real Estate (SRE) Corporate items and pensions Eliminations, Corporate Treasury and other reconciling items Siemens
1 Profit of the Sectors as well as of Equity Investments and Centrally managed portfolio activities is earnings before financing interest, certain pension costs and income taxes. Certain other items not considered performance indicative by Management may be excluded. Profit of SFS and SRE is Income before income taxes. Profit of Siemens is Income from continuing operations before income taxes. For a reconciliation of Income from continuing operations before income taxes to Net income see d.1 COnsOlidated statements Of inCOme.

2,159 1,933 304 218 (302) 1,815 314 2,467 1,335 970 1,102 236 457 379 7,543 (549) 479 (29) 115 (302) 23 7,279

4,230 2,837 357 467 566 1,334 300 2,752 1,411 1,158 1,126 365 413 364 9,442 (26) 428 (40) 150 (257) (90) 9,608

87 41 6 – 25 8 – 12 2 10 25 15 9 1 133 (568) 168 7 – – (5) (266)

75 33 (3) – 35 9 – 19 8 7 18 11 7 1 121 (44) 92 12 – – 29 210

2 Includes impairments and reversals of impairments of investments accounted for using the equity method. 3 Includes impairment of non-current available-for-sale financial assets. For Siemens, Financial income (expense), net comprises Interest income, Interest expense and Other financial income (expense), net as reported in the Consolidated Statements of Income.

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Financial income (expense), net 3

Adjusted EBIT 4

Amortization 5

Depreciation and impairments of property, plant and equipment and goodwill 6 2012 2011

Adjusted EBITDA

Adjusted EBITDA margin

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

39 67 (5) (4) (20) 2 9 (15) (8) (6) 29 (16) (4) (2) 55 7 385 – (112) 29 137 501
4

827 823 (3) (3) 10 3 5 (2) (1) (1) (28) (7) (4) (1) 800 13 299 – (82) 94 10 1,133

2,033 1,825 303 222 (308) 1,804 305 2,469 1,340 966 1,048 236 452 381 7,355 12 (73) (36) 227 (331) (109) 7,043

3,327 1,981 364 470 520 1,322 295 2,735 1,403 1,152 1,136 361 409 365 8,521 5 37 (52) 232 (350) (129) 8,264

97 21 27 38 11 377 232 268 209 48 112 13 39 60 854 – 7 4 2 16 – 882

60 15 9 26 10 320 188 249 193 45 115 15 41 58 744 – 9 3 2 12 – 770
6

426 142 100 71 109 349 226 323 137 172 165 46 71 47 1,262 – 264 2 325 51 (41) 1,862

343 125 63 63 87 324 219 309 129 163 163 44 71 48 1,139 – 256 4 271 47 (50) 1,667

2,557 1,988 430 330 (187) 2,530 763 3,060 1,687 1,187 1,324 296 562 488 9,471 12 197 (31) 553 (264) (151) 9,788

3,730 2,121 435 560 617 1,967 702 3,292 1,725 1,360 1,414 421 521 471 10,404 5 303 (44) 504 (290) (179) 10,701

9.3%

15.1%

18.5% 14.9%

15.7% 16.8%

7.5%

8.3%

Adjusted EBIT is Income from continuing operations before income taxes less Financial income (expense), net and Income (loss) from investments accounted for using the equity method, net. Amortization and impairments, net of reversals, of intangible assets other than goodwill.

Depreciation and impairments of property, plant and equipment, net of reversals. Includes impairments of goodwill of € – million in the current period and € – million in the prior-year period, respectively.

5

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

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C.4 FinanCial Position
C.4.1 Principles and objectives of financial management
Siemens is committed to a strong financial profile, which provides the financial flexibility to achieve growth and portfolio optimization goals largely independent of capital market conditions. Financial management at Siemens is executed according to applicable laws and internal guidelines and regulations. It includes the following activities:

C.4.1.2 Cash management
Cash management comprises the management of bank partner relationships and bank accounts as well as the execution of payments, including the administration of cash pools, on a global level. Siemens strives to raise efficiency and transparency through a high level of standardization and continuous advancement of payment processes. Where permissible, the execution of intercompany and third party payments is effected centrally through group-wide tools with central controls to ensure compliance with internal and external guidelines and requirements. To ensure efficient management of Siemens’ funds, Corporate Treasury has established a central cash management approach: to the extent legally and economically feasible, funds are pooled and managed centrally by Corporate Treasury. Conversely, funding needs within Siemens are covered centrally by Corporate Treasury via intercompany current accounts and / or loans where legally and economically feasible.

C.4.1.1 Liquidity management
Our principal source of financing is cash inflows from operating activities. Corporate Treasury generally manages cash and cash equivalents for Siemens and has primary responsibility for raising funds in the capital markets for Siemens through various debt products, with the exception of countries with conflicting capital market controls. The relevant consolidated subsidiaries in these countries obtain financing primarily from local banks. Siemens follows a prudent borrowing policy that is aimed towards a balanced financing portfolio, a diversified maturity profile and a comfortable liquidity cushion. On September 30, 2012, Siemens held €10.891 billion in cash and cash equivalents, mainly in euro, which were predominantly managed by Corporate Treasury. Especially since the beginning of the global financial markets crisis, Siemens monitors funding options available in the capital markets, trends in the availability of funds and the cost of such funding very closely to evaluate possible strategies regarding its financial and risk profile. Corporate Treasury enters into reverse repurchase agreements with financial institutions with investment grade credit ratings. Siemens holds securities as collateral under these agreements via a third party (Euroclear) and is permitted to sell or re-pledge the securities. The extent to which Siemens engages in transactions involving reverse repurchase agreements depends on its liquidity management needs and the availability of cash and cash equivalents which varies from time to time. For further information on reverse purchase agreements see note 30 in d.6 notes to ConsoLidated FinanCiaL statements.

C.4.1.3 FinanCiaL risk management
Investments of cash and cash equivalents are subject to credit requirements and counterparty limits. Corporate Treasury pools and centrally manages Siemens’ interest rate, certain commodity and currency risk exposures and uses financial derivative instruments in transactions with external financial institutions to offset such concentrated exposures. Especially since the beginning of the global financial market crisis, Siemens monitors counterparty risk in its financial assets and financial derivative instruments very closely. For more detailed information about financial risk management at Siemens see note 32 in d.6 notes to ConsoLidated FinanCiaL statements.

C.4.1.4 management oF pension pLan Funding
Siemens’ funding policy for its pension funds is part of its overall commitment to sound financial management, which includes a continuous analysis of the structure of its pension liabilities. For more detailed information about Siemens’ pension plan funding see C.4.4.3 Funding oF pension pLans and simiLar Commitments.

C.4.1.5 CapitaL struCture management and Credit rating
To effectively manage its capital structure, Siemens seeks to maintain ready access to the capital markets through various debt products and to preserve its ability to repay and service its debt obligations over time. For more detailed information about Siemens’ capital structure, see below.

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A key factor in maintaining a strong financial profile is our credit rating which is affected by, among other factors, our capital structure, profitability, ability to generate cash flow, geographic and product diversification as well as our competitive market position. Our current corporate credit ratings from Moody ’s Investors Service (Moody ’s) and Standard & Poor’s Ratings Services (S&P) are noted as follows:

third highest long-term rating category. The modifier “+” indicates that our long-term debt ranks in the upper end of the “A” category. A rating outlook indicates the potential direction of a long-term credit rating over the medium-term. Rating outlooks of S&P’s fall into the following four categories: “positive,” ”negative,” ”stable” and “developing.” The U.S. Securities and Exchange Commission granted Moody ’s and S&P the status of nationally recognized statistical rating organizations (NRSROs). Siemens does not have any agreements with other nationally recognized statistical rating organizations to provide long-term and short-term credit ratings. We believe that our high credit rating for our long-term debt applied by Moody ’s and S&P’s allows us to raise funds in the capital markets with attractive conditions or to obtain flexible financing from banks. A high credit rating generally leads to lower credit spreads and therefore our rating also positively affects our funding costs. We expect no impact on our funding costs as a consequence of the revised rating outlook by S&P on November 14, 2012. Security ratings are not a recommendation to buy, sell or hold securities. Credit ratings may be subject to revision or withdrawal by the rating agencies at any time and each rating should be evaluated independently of any other rating.

Moody ’s

S&P

Long-term debt Short-term debt

Aa3 P-1

A+ A-1+

On June 5, 2012 Moody ’s raised its long-term Siemens’ credit rating from “A1” to “Aa3.” The rating classification “Aa” is the second highest rating within Moody ’s debt ratings category. The numerical modifier “3” indicates a ranking in the lower end of that rating category. At the same time Moody ’s revised its outlook for our credit rating from “positive” to “stable.” The Moody ’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium-term. Rating outlooks of Moody ’s fall into the following six categories: “positive,” “negative,” “stable,” “developing,” “ratings under review” and “no outlook.” Moody ’s announced that the rating action was prompted by the higher levels of profitability and cash flow leverage that the company has been able to achieve over the past few years, and Moody ’s assessment that these levels are likely to be sustainable through economic cycles, including the current period of economic weakness in Europe. Moody ’s rating for our short-term corporate credit and commercial paper is “P-1,” the highest available rating in the prime rating system, which assesses issuers’ ability to honor senior financial obligations and contracts. It applies to senior unsecured obligations with an original maturity of less than one year. On June 5, 2012 Moody ’s affirmed our “P-1” short-term rating. On November 14, 2012, S&P revised its outlook for Siemens’ credit rating from “positive” to “stable”. At the same time, S&P affirmed the “A+” long-term corporate rating and the “A-1+” short-term rating, which is the highest short-term rating within the S&P’s short-term rating scale. The outlook revision to “stable” captures the contraction of operating margin during fiscal 2012 as well as Siemens’ pursuit of more shareholder friendly actions in the form of a share buyback and a revision of the shareholder distribution policy from 30%-50% payout range to 40%-60% including share buybacks. Within S&P’s long-term credit rating definitions “A” has the

C.4.2. Capital structure
Given the favorable capital market conditions at the end of fiscal 2012, Siemens announced in August 2012 that it would adjust its capital structure through share buybacks amounting to up to €3 billion by December 30, 2012. The shares repurchased may be used for the purposes of cancellation and reduction of capital stock, issuance to employees, board members of affiliated companies and members of the Managing Board as well as to meet obligations arising under and in connection with convertible bonds and warrant bonds. In fiscal 2012, the Company repurchased 23,202,500 treasury shares at a weighted average share price of €76.14. Additionally, the Managing Board decided to cancel 33,203,421 treasury shares, which reduced common stock from 914 million shares to 881 million shares. After the end of fiscal 2012 Siemens repurchased additional 14,746,786 treasury shares at a weighted average price of €78.14 and completed this share buyback program in November 2012. In September 2012, Siemens issued €1.4 billion and £1.0 billion (€1.3 billion) in fixed-rate instruments, which were partly used to finance this share buyback program.

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

83

Considering the above mentioned transactions and the changes in equity and debt described in C.5 net assets position, the capital structure changed as follows:

(loss) from investments accounted for using the equity method, net. For further information, see C.3.3 reConCiLiation to ConsoLidated FinanCiaL statements.

Year ended September 30, (in millions of €) 2012 2011

% Change (in millions of €)

Year ended September 30, 2012 2011

Total equity attributable to shareholders of Siemens AG As percentage of total capital Short-term debt and current maturities of long-term debt Long-term debt Total debt As percentage of total capital Total capital (total equity and total debt)

30,733 60% 3,826 16,880 20,707 40% 51,440

31,530 64% 3,660 14,280 17,940 36% 49,470

(3)%

Short-term debt and current maturities of long-term debt 1 Plus: Long-term debt 1 Less: Cash and cash equivalents Less: Current available-for-sale financial assets Net debt

3,826 16,880 (10,891) (524) 9,292 (14,558) 9,926 326 (920) (1,670) 2,396 9,788

3,660 14,280 (12,468) (477) 4,995 (12,075) 7,307 591 (883) (1,470) (1,534) 10,701

15%

Less: SFS Debt 2 Plus: Pension plans and similar commitments 3 Plus: Credit guarantees Less: 50% nominal amount hybrid bond 4 Less: Fair value hedge accounting adjustment 5 Adjusted industrial net debt

4%

We have commitments to sell or otherwise issue common shares in connection with established share-based compensation plans. In fiscal 2012, commitments for share-based compensation were fulfilled through treasury shares. In fiscal 2013, we may again fulfill commitments for share-based compensation through treasury shares. Amongst other purposes mentioned above we may therefore repurchase additional treasury shares in fiscal 2013. For additional information with respect to share-based compensation see note 33 in d.6 notes to ConsoLidated FinanCiaL statements. As part of our One Siemens framework for sustainable value creation, Siemens decided to continue to use an indicator to evaluate its capital structure. For further information, see C.2 FinanCiaL perFormanCe measures. A key consideration in this regard is maintenance of ready access to the capital markets through various debt products and preservation of our ability to repay and service our debt obligations over time. Siemens set a capital structure target range of 0.5 – 1.0. The ratio is defined as the item Adjusted industrial net debt divided by the item Adjusted EBITDA (continuing operations). The calculation of the item Adjusted industrial net debt is set forth in the table below. Adjusted EBITDA (continuing operations) is defined as adjusted earnings before income taxes (EBIT) before amortization (defined as amortization and impairments, net of reversals, of intangible assets other than goodwill) and depreciation and impairments of property, plant and equipment and goodwill. Adjusted EBIT is defined as the line item Income from continuing operations before income taxes less the line item Interest income, less the line item Interest expense less the line item Other financial income (expense), net as well as less the line item Income

Adjusted EBITDA (continuing operations) Adjusted industrial net debt / adjusted EBITDA (continuing operations)
1

0.24

(0.14)

The item Short-term debt and current maturities of long-term debt as well as the item Long-term debt included in total fair value hedge accounting adjustments of €1,670 million and €1,470 million for the fiscal year ended September 30, 2012 and 2011, respectively. The adjustment considers that both Moody’s and S&P’s view SFS as a captive finance company. These rating agencies generally recognize and accept higher levels of debt attributable to captive finance subsidiaries in determining credit ratings. Following this concept, we exclude SFS Debt in order to derive an adjusted industrial net debt which is not affected by SFS’s financing activities. To reflect Siemens’ total pension liability, adjusted industrial net debt includes line d.3 ConsoLidated item Pension plans and similar commitments as presented in statements oF FinanCiaL position.

2

3

4 The adjustment for our hybrid bond considers the calculation of this financial ratio applied by rating agencies to classify 50% of our hybrid bond as equity and 50% as debt. This assignment reflects the characteristics of our hybrid bond such as a long maturity date and subordination to all senior and debt obligations. 5 Debt is generally reported with a value representing approximately the amount to be repaid. However for debt designated in a hedging relationship (fair value hedges), this amount is adjusted by changes in market value mainly due to changes in interest rates. Accordingly we deduct these changes in market value in order to end up with an amount of debt that approximately will be repaid. We believe this is a more meaningful figure for the calculation presented above. For further information note 31 in d.6 notes to ConsoLidated FinanCiaL on fair value hedges see statements.

C.4.3 Cash flows
The following discussion presents an analysis of our cash flows from operating, investing and financing activities for fiscal 2012 and 2011 for both continuing and discontinued operations. Discontinued operations include primarily OSRAM and Siemens IT Solutions and Services, which were classified as discontinued operations during the second quarter of fiscal 2011, and the solar business, which was classified as discontinued operations during the fourth quarter of fiscal 2012. Siemens IT Solutions and Services was sold to AtoS in the fourth quarter of fiscal 2011.

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Cash FLows
Continuing operations Year ended September 30, (in millions of €) 2012 2011 Discontinued operations Year ended September 30, 2012 2011 Continuing and discontinued operations Year ended September 30, 2012 2011

Net cash provided by (used in): Operating activities Investing activities therein: Additions to intangible assets and property, plant and equipment Free cash flow 1 Financing activities
1 The closest comparable financial measure of Free cash flow under IFRS is Net cash provided by (used in) operating activities. Net cash provided by (used in) operating activities from continuing operations as well as from continuing and discontinued

6,996 (5,034) (2,206) 4,790 (3,591)

8,081 (2,739) (2,163) 5,918 (7,062)

(24) (650) (204) (228) 674

(314) (1,305) (454) (768) 1,619

6,972 (5,685) (2,410) 4,562 (2,916)

7,767 (4,044) (2,617) 5,150 (5,443)

operations is reported in d.4 ConsoLidated statements oF Cash FLow. Other companies that report Free cash flow may define and calculate this measure differently.

We report Free cash flow as a supplemental liquidity measure, which is defined as net cash provided by (used in) operating activities less cash used for additions to intangible assets and property, plant and equipment. We believe that the presentation of Free cash flow provides useful information to investors because it gives an indication of the long-term cash-generating ability of our business and our ability to pay for discretionary and non-discretionary expenditures not included in the measure, such as dividends, debt repayment or acquisitions. We also use Free cash flow to compare cash generation among the segments of our business. Free cash flow should not be considered in isolation or as an alternative to measures of cash flow calculated in accordance with IFRS. For further information about the usefulness and limitations of this measure, see C.12 notes and Forward-Looking statements.

tion decision associated with Siemens’ decision to exit its nuclear power joint venture with Areva, which was deducted in the Consolidated Statements of Cash Flow within the line item (Gains) losses on sales of investments, net. A build-up of operating net working capital in the prior-year period reduced cash inflows near the level of fiscal 2012. Discontinued operations used net cash of €24 million in fiscal 2012, compared to net cash used of €314 million in the prioryear period. The largest factor of the decrease in cash outflows year-over-year was lower cash outflows related to Siemens IT Solutions and Services, which a year earlier included higher payments in connection with the establishment of Siemens IT Solutions and Services as a separate legal group, including for carve-out activities and personnel-related matters.

Cash flows from operating activities – Continuing operations provided net cash of €6.996 billion in fiscal 2012, compared to net cash provided of €8.081 billion in the same period a year earlier. In the current period income from continuing operations was €5.184 billion. Therein included were amortization, depreciation and impairments of €2.744 billion. A buildup of operating net working capital reduced the cash inflows by €0.7 billion. The increase in operating net working capital was due mainly to a decrease in billings in excess of costs and estimated earnings on uncompleted contracts and related advances primarily in the Energy Sector due in part to lower orders year-over-year. The current period also included cash outflows of approximately €0.3 billion related to the revaluation of the commercial feasibility of Healthcare’s particle therapy business for general patient treatment as well as Healthcare’s Agenda 2013 initiative. In the prior-year period income from continuing operations was €7.376 billion. Therein included were amortization, depreciation and impairments of €2.437 billion. Income from continuing operations also included the Areva NP disposal gain of €1.520 billion, partly offset by the negative impact of €682 million related to an adverse arbitra-

Cash flows from investing activities – Net cash used in investing activities for continuing operations amounted to €5.034 billion in fiscal 2012 compared to net cash used of €2.739 billion in the prior-year period. The increase in cash outflows from investing activities was due mainly to lower proceeds from sales of investments, intangibles and property, plant and equipment of €1.355 billion; to higher acquisitions, net of cash acquired, of €1.011 billion; and to the higher buildup in receivables from financing activities of €317 million relating to SFS’s asset growth strategy. Proceeds of €753 million in the current period from the sales of investments, intangibles and property, plant and equipment included the sale of our 25% interest in OAO Power Machines, held by the Energy Sector. In the prior-year period, proceeds from sales of investments, intangibles and property, plant and equipment provided net cash of €2.108 billion. This total included proceeds from the sale of investments of €1.587 billion, mainly related to the sale of our Areva NP stake for €1.7 billion in the second quarter of fiscal 2011, subsequently reduced by €0.7 billion in the third quarter of fiscal 2011 due to the arbitration decision mentioned earlier, and the sale of our 49% minority stake in KMW. Cash

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

85

inflows for the prior-year period also included higher proceeds from real estate disposals at SRE. Acquisitions, net of cash acquired, increased to €1.314 billion from €303 million in the prior-year period, comprising several acquisitions of entities within the Sectors to optimize our business portfolio, including in the current period the acquisition of the Connectors and Measurements Division of Expro Holdings UK 3 Ltd. in the Energy Sector as mentioned earlier. The aggregate consideration of this acquisition, net of cash acquired, amounted to €461 million. In the current period, cash outflows for the purchase of investments of €234 million included the second installment payment in connection with our equity investment in A2SEA A/S, a supplier of installation services for the construction of offshore wind-farms. The equity investment is held by the Energy Sector. For comparison, purchase of investments of €724 million in the prior-year period included cash outflows relating mainly to €500 million in new equity, which we provided to NSN in exchange for preferred shares in order to further strengthen NSN’s financial position and the first installment payment for our equity investment in A2SEA A/S. Discontinued operations used net cash of €650 million in fiscal 2012, compared to net cash used of €1.305 billion in the prioryear period. These lower cash outflows related primarily to OSRAM, which a year earlier included payments related to the acquisition of Siteco. While both periods included cash outflows of a mid triple-digit million € amount relating to Siemens IT Solutions and Services, these cash outflows were higher in fiscal 2011. Free cash flow from continuing operations decreased yearover-year due primarily to cash flows from operating activities as discussed above. On a sequential basis Free cash flow during fiscal 2012 and fiscal 2011 developed as follows:
Free Cash FLow (in millions oF €) 1
Q4 12 Q3 12 Q2 12 Q1 12 Q4 11 Q3 11 Q2 11 Q1 11 4,343 918 500 (971) 3,462 1,028 393 1,035

Cash flows from financing activities – Continuing operations used net cash of €3.591 billion in fiscal 2012, compared to net cash used of €7.062 billion in fiscal 2011. The decrease in net cash outflows in fiscal 2012 was due primarily to the proceeds from the issuance of long-term debt of €5.113 billion, including the issuance of US$3.0 billion bonds with warrant units in February 2012 as well as the issuance of €1.4 billion and £1.0 billion in fixed-rate instruments in four tranches in September 2012. These cash inflows were partly offset by the repayment of long-term debt of €3.218 billion relating to the redemption of €1.55 billion in 5.25%-fixed-rate-instruments, €0.7 billion in floating rate assignable loans, US$0.5 billion in floating rate notes and US$0.75 billion in 5.5% notes. In fiscal 2012 we recorded also cash outflows of €1.721 billion relating to the repurchase of 23,202,500 treasury shares at a weighted average share price of €76.14. For comparison, the prior-year period included the redemption of €2.0 billion in 5.75% bonds, a payment of €1.0 billion related to the binding offer to purchase additional shares in order to increase our stake in our publicly listed Indian subsidiary Siemens Ltd. and higher cash outflows for financing discontinued operations. Both periods included cash outflows for dividends, which were €2.629 billion (for fiscal 2011) in fiscal 2012 compared to €2.356 billion (for fiscal 2010) in fiscal 2011.

C.4.4 Capital resources and requirements
Our capital resources consist of a variety of short- and longterm financial instruments including, but not limited to, loans from financial institutions, commercial paper, notes and bonds as well as credit facilities. In addition to cash and cash equivalents and to available-for-sale financial assets, liquid resources consist of future cash flows from operating activities. Our capital requirements include, among others, scheduled debt service, regular capital spending, ongoing cash requirements from operating and SFS financing activities, including higher cash outflows related to the growth strategy of SFS, dividend payments, pension plan funding, portfolio activities, and cash outflows in connection with restructuring measures. Total debt comprises our Notes and bonds, Loans from banks, Obligations under finance leases and Other financial indebtedness such as commercial paper. Total debt comprises Shortterm debt and current maturities of long-term debt as well as Long-term debt, as stated on the Consolidated Statements of Financial Position. Total liquidity refers to the liquid financial assets we had available at the respective end of the reporting period to fund our business operations and pay for near-term obligations. Total liquidity comprises Cash and cash equiva-

1

Continuing operations.

1 21

A. B.

To our Shareholders Corporate Governance

49 50 64 69 82 93

C. C.1 C.2 C.3 C.4 C.5

Combined Management Report Business and economic environment Financial performance measures Results of operations Financial position Net assets position 95 96 97 111 C.6 C.7 C.8 C.9 Overall assessment of the economic position Subsequent events Sustainability Report on expected developments and associated material opportunities and risks

86

lents as well as current Available-for-sale financial assets, as stated on the Consolidated Statements of Financial Position. Net debt results from total debt less total liquidity. Management uses the Net debt measure for internal corporate finance management, as well as for external communication with investors, analysts and rating agencies, and accordingly we believe that presentation of Net debt is useful for those concerned. Net debt should not, however, be considered in isolation or as an alternative to short-term debt and long-term debt as presented in accordance with IFRS. For further information about the usefulness and limitations of Net debt, see C.12 notes and Forward-Looking statements.

Commercial paper program – We have a US$9.0 billion (€7.0 billion) global multi-currency commercial paper program in place, which includes the ability to issue US$-denominated extendible notes. In fiscal 2012 we issued commercial paper in varying amounts to fund our ongoing short-term capital requirements. Our issuances of commercial paper typically have a maturity of less than 90 days. As of September 30, 2012, we had no commercial paper outstanding. All commercial paper issued in fiscal 2012 was completely repaid within the year. Notes and bonds – We have a “program for the issuance of debt instruments” (debt issuance program, formerly called medium-term note program) of €15.0 billion in place which we update on a regular basis. The last update was made in May 2012. Under this program, we issued the following instruments:
> In September 2012, we issued €1.4 billion and £1.0 billion in fixed-rate instruments in four tranches comprising €400 million in 0.375% instruments due in September 2014, €1.0 billion in 1.50% instruments due in March 2020, £350 million in 2.75% instruments due in September 2025 and £650 million in 3.75% instruments due in September 2042. > In February 2012, we issued US$400 million in floating rate notes (three months London Interbank Offered Rate + 1.40%) due in February 2019. > In February 2009, we issued €4.0 billion in fixed-rate instruments in two tranches comprising €2.0 billion in 4.125% instruments due in February 2013 and €2.0 billion in 5.125% instruments due in February 2017. > In June 2008, we issued €3.4 billion in fixed-rate instruments in three tranches, comprising: €1.2 billion in 5.25% instruments due in December 2011, which were redeemed at face value on their maturity date; €1.0 billion in 5.375% instruments due in June 2014 and €1.2 billion in 5.625% instruments due in June 2018. > In August 2008, we increased two tranches of the €3.4 billion fixed-rate instruments by €750 million, including €350 million in 5.25% instruments due in December 2011, which were redeemed at face value on their maturity date and €400 million in 5.625% instruments due in June 2018. > In March 2006, we issued US$1.0 billion in notes in two tranches comprising US$500 million in floating rate notes (three months London Interbank Offered Rate + 0.15%) due in March 2012, which were redeemed at face value on their maturity date and US$500 million in 5.625% notes due in March 2016. The nominal amount outstanding under the debt issuance program was €9.9 billion as of September 30, 2012.

Year ended September 30, (in millions of €) 2012 2011

Short-term debt and current maturities of long-term debt Long-term debt Total debt Cash and cash equivalents Available-for-sale financial assets (current) Total liquidity Net debt 1

3,826 16,880 20,707 (10,891) (524) (11,415) 9,292

3,660 14,280 17,940 (12,468) (477) (12,945) 4,995

1 We typically need a considerable portion of our cash and cash equivalents as well as current available-for-sale financial assets at any given time for purposes other than debt reduction. The deduction of these items from total debt in the calculation of Net debt therefore should not be understood to mean that these items are available exclusively for debt reduction at any given time. Net debt comprises items d.3 ConsoLidated statements oF FinanCiaL position. as stated on

The changes in Net debt from fiscal 2011 to 2012 may also be presented as follows:
Changes in net debt (in millions oF €)
6,259 697 4,995 5,034 9,292

(7,693) Net debt at September 30, 2011 Net cash used in the build-up of operating net working capital 1 Income and other changes in net cash provided by operating activities Net cash used in investing activities 2 Changes in certain financing activities 3 Net debt at September 30, 2012

Total net cash provided by operating activities 2
1 In fiscal 2012, net cash used in the build-up of operating net working capital included net cash used in inventories less advance payments received of €85 million, net cash provided by trade and other receivables of €157 million, net cash provided by trade payables of €197 million and net cash used in billings in excess of costs and in estimated earnings on incompleted contracts and related advances of €965 million. 2 Continuing operations. 3 Included in fiscal 2012 primarily cash outflows related to dividends paid of totaling €2.784 billion and to purchase of common stock of €1.721 billion.

135 D. 239 E. 129 C.10 Compensation Report, Corporate Governance statement pursuant to Section 289a of the German Commercial Code, Takeover-relevant information and explanatory report 130 C.11 Siemens AG (Discussion on basis of German Commercial Code) 134 C.12 Notes and forward-looking statements

Consolidated Financial Statements Additional Information

87

In February 2012, Siemens issued US$ bonds with warrant units in an aggregate principal amount of US$3.0 billion in two tranches. The bonds due in August 2017 have a volume of US$1.5 billion and a coupon of notional 1.05% per annum; the bonds due in August 2019 have a volume of US$1.5 billion and a coupon of notional 1.65% per annum. The exercise price of the warrants was fixed at 137.5% of the reference price. On that basis, the exercise price amounts to €104.0018 per share. At issuance, one warrant will entitle its holder to receive 1,806.1496 Siemens AG shares. The warrants result in option rights relating to a total of about 21.7 million Siemens AG shares. The equivalent amount of these bonds outstanding as of September 30, 2012 was €2.3 billion. In September 2006, we issued a subordinated hybrid bond in two tranches, a euro tranche of €900 million in 5.25% notes and a British pound tranche of £750 million in 6.125% notes, both tranches with a final legal maturity in September 2066. The company has a call option after ten years or thereafter. If the bond is not called, both tranches will become floating rate notes according to the conditions of the bond. The total nominal amount of our hybrid bond as of September 30, 2012 was €1.8 billion. In August 2006, we issued notes totaling US$5.0 billion. These notes were issued in four tranches comprising: US$750 million in floating rate notes (three months London Interbank Offered Rate + 0.05%) due in August 2009, which were redeemed at face value at their maturity date; US$750 million in 5.5% notes due in February 2012, which were redeemed at face value on their maturity date; US$1.750 billion in 5.75% notes due in October 2016 and US$1.750 billion in 6.125% notes due in August 2026. We may redeem, at any time, all or some of the fixed rate notes at the early redemption amount (call) according to the conditions of the notes. The nominal amount of these notes outstanding as of September 30, 2012 was €2.7

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Universal Health Care

...without health care, and the debate about changing that has become a popular issue recently. The sharp difference between the two sides is a difference in ethical values; those for universal health care desire to see the government help others, mainly the lower class, and those who do not, wish that private companies be allowed to continue taking advantage of the status quo for profit. In this paper, I will argue why the Government should put in place The Universal Healthcare Systems.[1] Chapter 1 I think as a US citizen everyone should be entitled to healthcare, especially the ones who don’t have the financial stability to afford it. The lower class should have healthcare because they suffer, which is not ethically right. Without some form of health insurance, purchasing prescription drugs would not be possible. Many Americans, such as those with diabetes cannot survive without certain prescription medications. Now you wonder why I would say something like this well how many people you know who have medical conditions but unable to go to the doctor because they don’t have the finances to pay for a doctor's visit. The lower class is more prone to diseases and illnesses with can cause early departure. A universal healthcare system will benefit the poor citizens. Private insurance companies are a business, with a main focus to make a profit and keep business running. This makes it......

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