executing our tap agenda - siemens · the potential impact of such matters on our financial...

Copyright © Siemens AG 2008. All rights reserved.

Executing Our TAP Agenda

Peter Löscher, President and CEOJoe Kaeser, CFO

Q2 2008 Analyst ConferenceLondon, April 30, 2008

April 2008 Copyright © Siemens AG 2008. All rights reserved.Q2 2008 Analyst Conference

This document contains forward-looking statements and information – that is, statements related to future, not past, events. These statements may be identified by words such as “expects,” “looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “project” or words of similar meaning. Such statements are based on our current expectations and certain assumptions, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’ control, affect our operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens to be materially different from any future results, performance or achievements that may be expressed orimplied by such forward-looking statements. For us, particular uncertainties arise, among others, from changes in general economic and business conditions (including margin developments in major business areas); the challenges of integrating major acquisitions and implementing joint ventures and other significant portfolio measures; changes in currency exchange rates and interest rates;introduction of competing products or technologies by other companies; lack of acceptance of new products or services by customers targeted by Siemens; changes in business strategy; the outcome of pending investigations and legal proceedings, especially the corruption investigation we are currently subject to in Germany, the United States and elsewhere; the potential impact of such investigations and proceedings on our ongoing business including our relationships with governments and other customers;the potential impact of such matters on our financial statements; as well as various other factors. More detailed information about certain of these factors is contained throughout this report and in our other filings with the SEC, which are available on the Siemens website, www.siemens.com, and on the SEC's website, www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed, sought, estimated or projected. Siemens does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.

EBITDA (adjusted), Return on capital employed, Free cash flow, Cash conversion and Net debt are Non-GAAP financial measures.A reconciliation of these amounts to the most directly comparable IFRS financial measures is available on our Investor Relationswebsite under www.siemens.com/ir, Financial Publications, Quarterly Reports. 'Group profit from operations' is reconciled to 'Income before income taxes' of Operations under 'Reconciliation to financial statements' in the table 'Segment Information'.

Safe Harbour Statement

http://www.siemens.com/

http://www.sec.gov/

http://www.siemens.com/ir


Executing our Strategic Agenda

Execution of TAP agenda on track

Project issues under control

Full visibility on EPC problems at Energy (Fossil Power Generation): Fixes in place, transparency on change in business mix

No additional material findings at Industry(Mobility) with nearly 75% of projects volume reviewed

SG&A cost savings of 10% backed by bottom-up analysis; 20-30% margin effect relative to growth

Key takeawaysOur Principles …

IncreaseTRANSPARENCY

EnforceACCOUNTABILITY

DrivePERFORMANCE


Second Quarter 2008 Financial Highlights

Very strong organic order growth1) of 15% across all regions, with a book-to-bill of 1.3x

2% organic sales growth, but orders will drive 2x GDP growth for the yearStrongest organic growth at PTD (+13%), A&D (+11%), and Osram (+6%)Growth rates at PG, TS and SIS affected by revised estimates of project completion (€ 250m negative effect on revenues)Healthcare organic sales growth of 2% negatively impacted by slower market growthRegional strength in Asia and the Americas, with USA +7% organic

No slowdown for market leader A&D Double digit organic order and revenue growth across all regions, with a pre-PPA/OTC margin2)

of 17.5%

Group Profit from Operations of € 1,203m with very good underlying marginsStrong earnings conversion especially at A&D, PTD, and Med

Income from Continuing Operations of € 565mCorporate Items affected by increased expenses for compliance investigations and costs related to Siemens transformation programs

Management review of project businesses: PG completed, TS investigation nearly 75% through€ 857m total charges in Q2

1) All percentage growth figures are y-o-y on a comparable basis excluding currency translation and portfolio effects2) PPA = purchase price allocation, OTC = one-time costs, both related to the acquisitions of UGS and Flender


Order growth per group 1)

Regional order growth 1)

1) Q2 2008 y-o-y on a comparable basis excluding currency translation and portfolio effectsSource GDP 08 Forecast: Global Insight

14%

SBTI&S

Med

Osram

A&D

TSPG

PTD

12%2%

6%19%

29%23%

1%2 x GDP (global)

54%Africa/NME/GUS

21%Germany

19%Asia / Pacific

10%Americas

6%Rest of Europe

2 x GDP (regional)

Continued strong order growth

China and Germany main growth drivers

Continuing organic growth in USA despite economic slowdown

Industry: Particular strength at A&D and I&S

Energy: Strong order intake at PG and PTD capitalizing on strong global energy demand

Order growth in Q2 confirms strong position in attractive markets

Russia: +119%China: +23%

USA: +8%


Major customer wins across all sectors

Energy 130 Wind Turbines for two wind farms in Washington State

Largest ever order (~€300m) for Medium Voltage from China Light & Power

Two combined cycle units in Portugal for a value of ~€600m incl. service contract

Industry Mobility: Largest US light rail contract to date in Denver

ArcelorMittal chose Siemens Industry to modernize the automation equipment at its Vanderbijlpark plant

Volkswagen and Audi selected Siemens PLM for worldwide vehicle development

Health-care

Building and operation of a particle therapy center at University Clinic Schleswig-Holstein (within an industry consortium, total order volume ~€250m incl. financing)Klinikum Großhadern, a hospital unit of Munich University, installed three of our most advanced imaging technologies in MRI, CT and Angiography Multi-year agreement with Cleveland Clinic on enterprise-wide cardiology PACS


Key value drivers show strong earnings conversion

A&D Med PTD

14.2%

14.4%

Q2 2007

16.7%

Q2 2008

+310 bp

17.5%

13.4%

15.3%

Q2 2007 Q2 2008

16.3%

+100 bp

12.5%

8.1%

Q2 2007

11.6%

Q2 2008

+350 bp

PPA - € 35mOTC - € 2m

PPA - € 50mOTC - € 52m

Margin improvement driven by economies of scale as a result

of high capacity utilization

Increasing underlying profitability despite challenges in

market conditions

Favorable product mix and economies of scale associated

with higher revenue

PPA - € 37mOTC - € 9m

PPA - € 10m

As reported Adjusted for PPA, one time costs (OTC)


PG project review completed – no additional material impact

Project Review completed Main actions taken

Rigorous Limits of Authority process

Selective intake of new turnkey contracts

Dedicated partner management

Risk transfer to partners and customers

Centralization of project management

Recruiting, fast integration and training of project management resources

Modularization and standardization

Renegotiation of selected contracts

Expediting with critical suppliers

# of projects

Most critical projectsSteam power and nuclear power plantsCritical consortia partnerHigh risk countries

12.6(100%)

80%

Volume1) (€ bn)

'Core business' combined cycleFull turnkey

Single cycle Projects close to completion

62Status

March 17

39

√

Total charges of €559m; negative margin impact in coming quarters expected

√

1) Review of projects in backlog and warranty phase, scope of € 12.6 bn, of which Backlog Turnkey business € 5.9 billion


Business mix will drive higher Fossil PG margins

Backlog in Fossil

29%

Turnkey

71%

Products & Service

€ 22.5 bn08/03/31

Order intake in Fossil

30%

Turnkey

70%

Products & Service

€ 4.2 bnQ2 2008

Turning turnkey backlog into sales

Business mix will change

1,5 2,2 1,8

3,0

1,3

>2010

5.9

4Q 07 Turned into

revenue

New order intake

6.6

2Q 08 2H 08 2009 2010

0,5

Backlog in € bn

Order intake (%)

39% 34% 33%

61%

100%

2007

66%

100%

2010E

67%

100%

Long termtarget

Turnkey

Products& Service

New orders in 07-08 more profitable than older projects

Challenges from Olkiluoto - project <50% completed

Fossil PG Margin of 7-9% in 2009

Fossil's 2010 target of 11-15% confirmed


TS projects with limited additional charges so far

Status of project review Main actions taken

# of projects

14.0

10.6(73%)

0.8

Backlog1) (€ bn)

Remaining Projects

314

Charges of €209m after review of nearly 75% of volume

408Status

March 17Status

end of April

22

Strengthening of Limits of Authority process

Proactive contract management

Increased investments in development of platforms, e.g. Desiro Mainline

Combining activities in new Rolling Stock business unit

Productivity program to realign organization and adjust cost structure

Most critical projectsCombinoTransrapid

1) All projects > 2.5m as of March 31, 2008


SG&A cost reduction

€ bn, as reported1)

Main drivers

Eliminating duplicate functions on all levels by new accountability principles

Reducing number of legal entities and reporting units

Cutting overhead by new Sector setup and Regional clusters

Driving cost efficiency through streamlined go-to-market

Target breakdown

Sector CFO namedDivision CEO and CFO namedDecember 2007

New organization approvedManaging Board incl. Sector CEO approved

November 2007Supervisory Board

Share buyback completedCapital structure target achievedSG&A project completedTarget margins achieved

October 2010

Streamlining Other Operations completedOctober 2009

New management compensation scheme in place October 2008

Start pro forma reporting in new structureOutline new management compensation schemeGuidance on EPS range for 2009

July 2008Q3 conference call

Update on SG&A project April 2008 Q2 analyst conference

New target margins for Energy and Industry SectorTarget margins for Divisions

January 2008 AGM

Milestones (deliverables)Reporting dates





October 2010







January 2008 AGM


-6%

-22%

SG&A target translated into € 1.2 bn cost reduction plan

11.9

FY 06

~8.9

~3.2

12.1

FY 07

∼8.4

∼2.5

FY 10

Sales &Marketing

G&A

10.9

-10%

1) Continuing operations (i.e., without Siemens VDO)


Accountability of business leaders for SG&A reduction

Breakdown of reported SG&A costs, FY 2007, € bn

3.2

5.1

0.9

0.3

1.70.3

0.71.0

1.4

G&A costSales cost

12.1

Total SG&ACross-sector businesses and

others

1.7

Healthcare

2.0

Energy

0.7

Corporate

6.0

Industry

1.7

8.9


Key G&A improvement areas and levers

∼3.2Baseline FY 2007

Leverage newsector organization

Leverage new regionalcluster organization

Operate with clearaccountability

Ensure effective cor-porate governance

Capture synergies ofscale by appropriate

pooling

Ensure operational excellence

Target FY 2010 ∼2.5

Reductionby 22%

Key improvement areas

Consolidation of headquarter central functions from 8 Groups into 3 Sectors (e.g., in accounting, controlling, communication)

Bundling of infrastructure from ~ 70 regional companies into 20 regional clusters to exploit cost synergies (e.g., in accounting, controlling, IT)

No institutionalized 2nd opinionReduction of profit center structures from 900 to 500No corporate-driven performance controlling for regionsReduction of consultant support

Streamlining Corporate headquarters to governance activities resulting in cost reduction Reduction of number of corporate programs and initiatives by > 50%Reduction in number of legal entities from 1,800 to < 1,000Centralizing of auditing

Bundling of shared services to double Siemens-internal service coverageConsolidation of real-estate management into a single entity

Optimize fragmented and oversized IT services by infrastructure standardizationand application consolidationIntroduction of rolling forecast replacing bottom-up planning

Reported G&A cost, € bn


Levers for sales cost reduction and efficiency gains

FY 2007

Optimizationof infrastructure

Optimizationof back office

Front end

FY 2010 ∼8.4

∼8.9

Reductionby 6%

Key improvement areas

Bundling of infrastructure in Clusters Integration of legal entitiesStreamlining of sales mgt. structures Discontinuation of major IT projectsBundling of shared services to double service coverage

Centralization of sales back office (e.g. offer preparation, technical consulting,…) in 20 Clusters (instead of 70 countries) or across ClustersInterface optimization between HQ-Regions, no duplicate functionsReduction of HQ back office functions Removal of cross-Divisional coordination functions in vertical markets

Efficiency increase

Growth related increase

Sales efficiency:Standardization of planning, logistics, pricing, CRM processes across Clusters and selected DivisionsFocused market approach (selection of market segments) Leverage e-Business

Go-to-market / sales channels:Redefining sales representation in smaller countriesRestructuring of sales officesStronger orientation towards verticals like automotive, F&BLeverage channel management with partners Joint wholesale approachLeverage cross-Divisional sales

Reported sales cost, € bn


SG&A reduction targets are clearly defined

SG&A target costs, FY 2010, € bn

Sales costG&A cost

5.0

0.6

0.2

Corporate

0.80.7

1.7

Cross-sector businesses and

others

2.1

Total SG&A

1.9

Energy

0.7

4.3

2.5

Healthcare

8.4

0.6

0.21.5

1.5

Industry

10.9


SG&A reduction with growth at 2x GDPSG&A reduction (absolute)

GDP growth = 3% p.a.



-20%

-24%

-28%

SG&A in EUR billions, as reported1) SG&A in terms of sales (%)2)

Cutting and growing

10,912,1

2007

-10%

2010

16,7%12,6%

16,7%

2007

11,9%

2010

13,4%16,7%

2) Sales 2007 72.4 bn (Continuing Operations)

Margin effect is substantially larger than the 10% face value suggests1) Continuing operations (i.e., without Siemens VDO)


Execution roadmap for SG&A program

Milestones Deliverables

April 30, 2008Q2 semiannual analyst/ press conference

Overview on program goals and approachPresentation of key improvement areas and levers

July 30, 2008Q3 quarterly analyst/ press conference call

Update on key improvement areas and leversUpdate on program progress

November 13, 2008Q4 annual analyst/ press conference

Presentation of key organizational changes in G&A setup and go-to-market approach including Corporate, Sectors and regional clusters

October 2010 Global SG&A program completed and targets achieved

January / February 2008 Official launch: Global G&A Program and Siemens Sales Project

March 2008 Alignment on binding cornerstones of future G&A setup Decision on regional clusters and governance model

Starting in 2009: Q1 – Q4

Quarterly updates


Ahead of schedule to exit Other Operations by 2009

Other Operations FY 07 revenues of € 2.9 bn

Breakdown of OOP Target Scenarios Implementation Status

85%

12%

€ 2.3 bnExit via

ramp-down

Transfer into Sectors

Revenue

Under evaluation

3%

OOP Business Activities187 Business ActivitiesPrimarily outside GermanyRevenue: ~ € 2.3 bnProfit Margin: ~ -5%Employees: ~ 8,900 13 %

Implementation status(by revenue)

Implementation status(by activities)

0.6bn

2.3bn

Shared Services and Central Issues OOP Business Activities

66 %

solvedto be solved





October 2010







January 2008 AGM






October 2010







January 2008 AGM


All Values: Actual FY 2007


€ 2 bn share buyback tranche successfully executed

Number of sharesoutstanding

Share price and daily repurchase volume28 Jan – 8 April

We will provide continuing updates of next steps on share buyback

0

200.000

400.000

600.000

800.000

1.000.000

28-Jan-08

5-Feb-08

13-Feb-08

21-Feb-08

29-Feb-08

10-Mar-08

18-Mar-08

28-Mar-08

7-Apr-08

Volu

me

50

60

70

80

90

100

Share Price (€)

Repurchased Vo lume Gro ss Repurchased P rice

914.2m

01 Jan 08

24.9m

889.3m

08 Apr 08

(2.7% of sharesoutstanding)





October 2010







January 2008 AGM






October 2010







January 2008 AGM



Development of Industrial Net Debt (adjusted)

5.5 bn

Adjust-ment

-11.3 bn

Net Debt07/09/30

Profita-bility

1.0 bn

AssetManage-

ment

Share Buyback

3.9 bn

OthersDividend (paid) / Interest (paid)

2.0 bn2.0 bn

0.5 bn1.5 bn

Desinvest-ments

-5.8 bn

11.2 bn

Industrial Net Debt

(adj.) 07/09/30

Invest-ments

6.1 bn

4.6 bn

1.5 bn

Income Taxes(paid)

1.0 bn

8.9 bn

Net Debt08/03/31

6.9 bn

Adjust-ment

-0.3 bn

Industrial Net Debt

(adj.) 08/03/31

-7.2 bnAcquisitions:

therein i.e. Dade Behring

-4.4 bn

Therein i.e. SV sale 11.4 bn

Net Debt07/12/31: -5.6 bn

Investmentsin PPE / Intangible

Assets

Therein:.Pension deficit 0.0 bnOPEB +0.6 bnCredit guarantees +0.5 bnHybrid adj. -0.9 bnSFS adj. -7.2 bn

Therein:Pension deficit +1.0 bnOPEB +0.8 bnCredit guarantees +0.4 bnHybrid adj. -1.0 bnSFS adj. -6.7 bn

Therein:.Profit withdrawal SV -5.5 bnCorrection of the change in cash D/O +0.7 bnWithdrawal from other non cash effective expenses (i.e. currency) +0.6 bnInterest received +0.4 bn


Clear improvement in CAPEX ratios and NWC turns

As reportedComparable,excl. SV

Q1 Q20

10

6

7

8

9

NWC1) Turns

9.4

8.8

8.0

7.2

6.5

9.2

6.9

8.0

7.4

8.3

7.4

98%

106%

122%

140%

127%

144%

109%

131%

93%

115%

90%

109%

PPE+Intangibles/D&APPE/Depreciation

Q10%

100%

Q2

110%

120%

130%

110%

150%

90%

115%

95%

TargetRange

Total Groups(Operating Business)Capex/Depreciation X 100%

2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008

1) NWC = Net Working Capital of Operating Groups, including Inventory, Accounts Receivable, Accounts Payable, Prepayments and Billings in Excess

Net Working Capital turns CAPEX ratios


Fit42010 status – Q2 2008

Margin (based on Q2 2008 YTD) Cash Conversion Rate (Cont. Op.)

ROCE (Cont. Op.) Capital Structure (Industrial Net Debt/EBITDA)

3) Free Cash Flow from Continuing Operations; 2007 affected by factoring-stop (Com)4) Net Income (Continuing Operations)

1) Net Income (Continuing Operations) before interest 2) Q2 2008 comparable to Q2 2007 (SV within Disc. Op.)

7.0%SBT 10.0%Osram

-7.0%TS -2.0%PG

11.0%PTD 13.0%Med

1.0%SIS 41.0%SFS

16.0%A&D 7.0%I&S 0.31

0.87

1.180.32

0.86

CCR Target 0.96

CCR Target

0.87

Q2 2007 YTD Δ Q2 2008 YTDFCF3) 2.259 bn - 853 m 1.406 bnProfit4) 1.907 bn - 264 m 1.643 bn

13.6% 5.0%8.6%

Q2 2007 YTD 2) Δ Q2 2008 YTDProfit1) 1.930 bn - 271 m 1.659 bn∅ Capital Employed 28.364 bn 10.131 bn 38.495 bn

14-16% 0.88 0.84

0.04

Q2 2007 YTD Δ Q2 2008 YTD

Ind. Net Debt 6.095 bn - 5.798 bn 297 m

EBITDA5) 3.475 bn + 9 m 3.484 bn

0.8-1.0

5) Capital structure ratio was calculated using annualized EBITDA


Consistent Execution against our Plan

Reporting dates Milestones (deliverables)



December 2007 Sector CFO namedDivision CEO and CFO named

January 2008 AGM


April 2008 Q2 analyst conference Update on SG&A project



October 2008 New management compensation scheme in place

October 2009 Streamlining Other Operations completed

October 2010



Outlook 2008

Organic revenue growth for the fiscal year will be twice the rate of GDP growth

Group Profit from Operations will match prior year’s level

Income from Continuing Operations will match prior year’s level

This outlook excludes earnings impacts that may arise from legal and regulatory matters, which are not yet quantifiable, and from measures that may be taken as part of Siemens’ transformation programs, including SG&A reduction. Within discontinued operations, divestment of the enterprise networking business is expected to result in a substantial loss.


Outlook 2010

Restructuring story intact

Project management under control

Commitment to 2010 targets


Financial Calendar

June

May

July

June 2008 Post Q2 roadshows with CEO and CFO in Paris (June 3), New York and Boston (June 9-10), London (June 12), Frankfurt (June 13)

June 4, 2008Deutsche Bank German & Austrian Corporate Conference – Joe Kaeser, CFO

June 12, 2008JPMorgan Pan-European CEO Conference – Peter Löscher, CEO

May 20, 2008EPG conference – Joe Kaeser, CFO

June 30 – July 1, 2008Capital Market Days of Sector Energy – Munich, Germany

July 30, 2008Q3 Financial report and conference call


Reconciliation and Definitions for Non-GAAP Measures (I)

Group profit from Operations is reconciled to Income before income taxes of Operations under Reconciliation to financial statements on thetable Segment Information. See our Financial Publications at our Investor Relations website under www.siemens.com/ir.

Earnings before interest and taxes (EBIT) (adjusted) 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.

Earnings before interest, taxes, depreciation and amortization (EBITDA) (adjusted) is EBIT before Depreciation and Amortization, definedas amortization and impairments of intangible assets depreciation and impairments of property, plant and equipment.

Group profit is reconciled to EBIT and EBITDA on the table Segment Information Analysis (II). See our Financial Publications at our Investor Relations website under www.siemens.com/ir.

Return on Capital Employed (ROCE) is a measure of how capital invested in the Company or the Group yields competitive returns. For the Company, ROCE is calculated as Net income (before interest) divided by average Capital employed (CE). Net income (before interest) is defined as Net income excluding Other interest income (expense), net and excluding taxes on Other interest income (expense), net. Taxes on Other interest income (expense), net are calculated in simplified form by applying the current tax rate which can be derived from the Consolidated Statements of Income, to Other interest income (expense), net. CE is defined as Total equity plus Long-term debt plus Short-term debt and current maturities of long-term debt minus Cash and cash equivalents. Because Siemens reports discontinued operations, Siemens also calculates ROCE on a continuing operations basis, using Income from continuing operations rather than Net income. For purposes of this calculation, CE is adjusted by the net figure for Assets classified as held for disposal included in discontinued operations less Liabilities associated with assets classified as held for disposal included in discontinued operations.For the Operations Groups, ROCE is calculated as Group profit divided by average Net capital employed (NCE). Group profit for the Operations Groups is principally defined as earnings before financing interest, certain pension costs and income taxes. Group profit excludes various categories of items which are not allocated to the Groups since the Managing Board does not regard such items as indicative of the Groups’ performance. NCE for the Operations Groups is defined as total assets less tax assets, provisions and non-interest bearing liabilities other than tax liabilities.Average (Net) Capital employed for the fiscal year is calculated as a 'five-point average' obtained by averaging the (Net) Capital employed at the beginning of the first quarter plus the final figures for all four quarters of the fiscal year. For the calculation of the average during for the quarters, see below:




Reconciliation and Definitions for Non-GAAP Measures (II)

• NCE for Operations Groups

Our cash target is based on the Cash Conversion Rate (CCR), which serves as a target indicator for the Company’s or the Group’s cash flow. For the Company, CCR is defined as the ratio of Free cash flow to Net income, where Free cash flow equals the Net cash provided by (used in) operating activities less Additions to intangible assets and property, plant and equipment. Because Siemens reports discontinued operations, this measure is also shown on a continuing operations basis, using Income from continuing operations, Net cash provided by (used in) operating activities – continuing operations and Additions to intangible assets and property, plant and equipment for continuing operations for the calculation. For the Groups, CCR is defined as Free cash flow divided by Group profit.

All values needed for the calculation of ROCE and CCR can be obtained from the Consolidated Financial Statements and Notes to Consolidated Financial Statements.Group profit, Net capital employed and Free cash flow for the Company and the Groups can be found on the table Segment information. Our Consolidated Financial Statements are available on our Investor Relations website under www.siemens.com/ir.

Siemens ties a portion of its executive incentive compensation to achieving economic value added (EVA) targets. EVA measures the profitability of a business (using Group profit for the Operating Groups and Income before income taxes for the Financing and Real estate businesses as a base) against the additional cost of capital used to run a business (using NCE for the Operating Groups and risk-adjusted equity for the Financing and Real estate businesses as a base). A positive EVA indicates that a business has earned more than its cost of capital, and is therefore defined as value-creating. A negative EVA indicates that a business is earning less than its cost of capital and is therefore defined as value-destroying. Other organizations that use EVA may define and calculate EVA differently.

Average calculation for CE*: Year-to-DateQ1 2 Point average: (CE ending Q4 Prior year + CE ending Q1) / 2

Q2 3 Point average: (CE ending Q4 Prior year + CE ending Q1 + CE ending Q2) / 3

Q3 4 Point average: (CE ending Q4 Prior year + CE ending Q1 + CE ending Q2 + CE ending Q3) / 4

Quarter-to-DateQ1 2 Point average: (CE ending Q4 Prior year + CE ending Q1) / 2

Q2 2 Point average: (CE ending Q1 + CE ending Q2) / 2





Reconciliation and Definitions for Non-GAAP Measures (III)

Our capital structure target is based on an Adjusted industrial net debt divided by EBITDA (adjusted). For the calculation of Adjusted industrial net debt, we subtract from Net debt (defined as Long-term debt plus Short-term debt and current maturities of long-term debt less Cash and cash equivalents less Available-for-sale financial assets) (1) SFS debt excluding SFS internally purchased receivables and (2) 50% of the nominal amount of our hybrid bond; and add/subtract (3) Funded status of Pension benefits, (4) Funded status of Other post-employment benefits; andadd (5) Credit guarantees. The components of Net debt are available on our Consolidated Balance Sheets, SFS debt less internally purchased receivables is available in our Management Discussion & Analysis under Capital Resources and Requirements. The Funded status of our principle pension plans and Other post-employment benefits, the amount of credit guarantees and the nominal amount of our Hybrid bond is available in the Notes to our Consolidated Financial Statements.

To measure Siemens’ achievement of the goal to grow at twice the rate of global GDP, we use GDP on real basis (i.e. excluding inflationand currency translation effects) with data provided by Global Insight Inc. and compare those growth rates with growth rates of our revenue(under IFRS). In accordance with IFRS, our revenue numbers are not adjusted by inflation and currency translation effects.

Return on equity (ROE) margin for SFS was calculated as SFS’ Income before income taxes divided by the allocated equity for SFS.Allocated equity for SFS for the financial year 2007 is €1.041 billion. The allocated equity for SFS is determined and influenced by the respective credit ratings of the rating agencies and by the expected size and quality of its portfolio of leasing and factoring assets and equity investments and is determined annually. This allocation is designed to cover the risks of the underlying business and is in line with common credit risk management standards in banking. The actual risk profile of the SFS portfolio is monitored and controlled monthly and is evaluated against the allocated equity.

Group profit from Operations, EBIT (adjusted), EBITDA (adjusted), ROCE, CCR, EVA and Adjusted industrial net debt are or may be Non-GAAP financial measures as defined in relevant rules of the U.S. Securities and Exchange Commission. Our management takes these measures,among others, into account in its management of our business, and for this reason we believe that investors may find it useful to consider these measures in their evaluation of our performance. None of Group profit from Operations, EBIT (adjusted), EBITDA (adjusted), ROCE and EVA should be viewed in isolation as an alternative to IFRS net income for purposes of evaluating our results of operations; CCR should not be viewed in isolation as an alternative to measures reported in our IFRS cash flow statement for purposes of evaluating our cash flows; and Adjusted industrial net debt should not be viewed in isolation as an alternative to liabilities reported in our IFRS balance sheet for purposes of evaluating our financial condition.


Siemens Investor Relations Team

Webpage: http://www.siemens.com/investorrelations

e-mail: [email protected]

Telephone: +49-89-636-32474

Fax: +49-89-636-32830

Michael Sen +49-89-636-33780

Gerald Brady +1-408-492-4439

Florian Flossmann +49-89-636-34095

Sabine Groß +49-89-636-35755

Dr. Martin Meyer +49-89-636-33693

Christof Schwab +49-89-636-32677

Dr. Gerd Venzl +49-89-636-44144

Susanne Wölfinger +49-89-636-30639

http://www.siemens.com/investorrelations

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