Edgar Filing: SIEMENS AKTIENGESELLSCHAFT

20-F

As filed with the Securities and Exchange Commission on November 27, 2013

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)

OF THE SECURITIES EXCHANGE ACT OF 1934

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2013

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 1-15174

Siemens Aktiengesellschaft

Federal Republic of Germany

(Jurisdiction of incorporation or organization)

Wittelsbacherplatz 2

80333 Munich

Federal Republic of Germany

Telephone: +49 (89) 636-00

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class				Name of each exchange on which registered
American Depositary Shares, each representing one
Common Share, no par value				New York Stock Exchange
Common Shares, no par value*				New York Stock Exchange

*	Listed, not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

The number of outstanding shares of each of the issuer’s classes of capital or common stock as of September 30, 2013: 843,002,405 common shares, no par value.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes x No ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨ Not applicable ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x		Accelerated filer ¨		Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ¨	International Financial Reporting Standards as issued	Other ¨
	by the International Accounting Standards Board x

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

FORWARD-LOOKING STATEMENTS

This document contains statements related to our future business and financial performance and future events or developments involving Siemens that may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. 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. We may also make forward-looking statements in other reports, in presentations, in material delivered to shareholders and in press releases. In addition, our representatives may from time to time make oral forward-looking statements. Such statements are based on the current expectations and certain assumptions of Siemens’ management, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’ control, affect Siemens’ operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements or anticipated on the basis of historical trends. These factors include in particular, but are not limited to, the matters described in Item 3: Key information—Risk factors.

Further information about risks and uncertainties affecting Siemens is included throughout this annual report on Form 20-F 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, performance or achievements of Siemens may vary materially from those described in the relevant forward-looking statement as being expected, anticipated, intended, planned, believed, sought, estimated or projected. Siemens neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated.

In this Form 20-F, references to “we,” “us,” “our,” “Company,” “Siemens” or “Siemens AG” are to Siemens Aktiengesellschaft and, unless the context otherwise requires, to its consolidated subsidiaries. Throughout this Form 20-F, whenever a reference is made to our Company’s website, such reference does not incorporate information from the website by reference into this annual report.

Due to rounding, numbers presented throughout this Form 20-F may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

TABLE OF CONTENTS


		Page

PART I
Item 1 :	Identity of directors, senior management and advisers		1
Item 2 :	Offer statistics and expected timetable		1
Item 3 :	Key information		1
	Selected consolidated financial and statistical data		1
	Dividends		2
	Exchange rate information		2
	Risk factors		3
Item 4 :	Information on the Company		12
	Overview		12
	Strategy		13
	Portfolio activities		14
	Description of business		16
	Employees and labor relations		30
	Environmental matters		30
	Environmental portfolio		32
	Property		34
	Intellectual property		35
	Research and development		35
	Supply chain management		39
	Legal proceedings		40
Item 4A :	Unresolved staff comments		47
Item 5 :	Operating and financial review and prospects		47
	Introduction		47
	Business and economic environment		48
	Fiscal 2013 compared to fiscal 2012		59
	Fiscal 2012 compared to fiscal 2011		72
	Reconciliation to adjusted EBITDA (continuing operations)		86
	Liquidity and capital resources		88
	Net assets position		105
	Subsequent events		108
	Report on expected developments		108
	Critical accounting estimates		116
	Recent accounting pronouncements		118
	Supplemental financial measures		118
Item 6 :	Directors, senior management and employees		132
	Management		132
	Compensation report		137
	Stock-based compensation		159
	Share ownership		160
Item 7 :	Major shareholders and related party transactions		162
	Major shareholders		162
	Related party transactions		163
Item 8 :	Financial information		163
Item 9 :	The offer and listing		163
	Trading markets		163
	Market price information		164
	Trading on the New York Stock Exchange		165


		Page
Item 10 :	Additional information		166
	Articles of Association and relevant provisions of German law		166
	Material contracts		178
	Exchange controls		179
	Taxation		179
	Documents on display		184
Item 11 :	Quantitative and qualitative disclosure about market risk		184
Item 12 :	Description of securities other than equity securities		184
	American depositary shares		184

PART II
Item 13 :	Defaults, dividend arrearages and delinquencies		187
Item 14 :	Material modifications to the rights of security holders and use of proceeds		187
Item 15 :	Controls and procedures		187
	Disclosure controls and procedures		187
	Management’s annual report on internal control over financial reporting		187
	Report of independent registered public accounting firm		188
	Changes in internal control over financial reporting		189
Item 16A :	Audit committee financial expert		189
Item 16B :	Code of ethics		189
Item 16C :	Principal accountant fees and services		189
	Audit Committee pre-approval policies		189
	Audit services		190
	Audit-related services		190
Item 16D :	Exemptions from the listing standards for audit committees		191
Item 16E :	Purchases of equity securities by the issuer and affiliated purchasers		191
Item 16F :	Change in registrant’s certifying accountant		192
Item 16G :	Corporate governance		192
	Significant differences between Siemens’ corporate governance and NYSE Corporate Governance Standards		192
Item 16H :	Mine Safety Disclosure		193

PART III
Item 18 :	Financial Statements		F-1
	Index to Consolidated Financial Statements		F-1
Item 19 :	Exhibits		III-1

iii

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PART I

ITEM 1:

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2:

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3:

KEY INFORMATION

SELECTED CONSOLIDATED FINANCIAL AND STATISTICAL DATA

The following table sets forth our selected consolidated financial data as of and for each of the years in the five-year period ended September 30, 2013. The selected consolidated financial data has been derived from, and should be read in conjunction with, our audited Consolidated Financial Statements (including the Notes thereto) presented in Item 18: Financial Statements. The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU) and are also in accordance with IFRS as issued by the International Accounting Standards Board (IASB).


Consolidated Statements of Income Data⁽¹⁾⁽²⁾	Year ended September 30,
Consolidated Statements of Income Data⁽¹⁾⁽²⁾	2013		2012			2011			2010			2009
	(in millions of €, unless otherwise stated)
Revenue		75,882		77,395			72,526			67,862			68,726
Income from continuing operations before income taxes		5,843		6,636			8,763			5,725			3,917
Income from continuing operations		4,212		4,642			6,625			4,065			2,456
Income (loss) from discontinued operations, net of income taxes		197		(360	)		(726	)		(184	)		(8	)
Net income		4,409		4,282			5,899			3,881			2,448

Basic earnings per share (in €)
Income from continuing operations		4.85		5.15			7.37			4.50			2.61
Income (loss) from discontinued operations		0.23		(0.41	)		(0.82	)		(0.22	)		(0.01	)
Net income		5.08		4.74			6.55			4.28			2.59
Diluted earnings per share (in €)
Income from continuing operations		4.80		5.10			7.29			4.45			2.57
Income (loss) from discontinued operations		0.22		(0.41	)		(0.81	)		(0.22	)		0
Net income		5.03		4.69			6.48			4.23			2.57


Consolidated Statements of Financial Position Data⁽²⁾	September 30,
Consolidated Statements of Financial Position Data⁽²⁾	2013		2012		2011		2010		2009
	(in millions of €)
Total assets		101,936		108,251		104,210		102,791		94,911
Long-term debt		18,509		16,880		14,280		17,497		18,940
Total equity		28,625		31,424		32,271		29,222		27,351
Issued capital		2,643		2,643		2,743		2,743		2,743

(1)

Under IFRS, the historical results of our Water Technologies Business Unit, OSRAM, Siemens IT Solutions and Services and the former operating segments Communications and Siemens VDO Automotive are reported as discontinued operations in our Consolidated Statements of Income for all periods presented and the assets and liabilities were classified on the Consolidated Statements of Financial Position as held for disposal. For further information see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 4.

(2)	Adjusted for effects of adopting IAS 19R (IAS 19, Employee Benefits (revised 2011; IAS 19R)), see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 2. Prior periods are presented on a comparable basis.

The number of shares outstanding at September 30, 2013, 2012, 2011, 2010 and 2009 was 843,002,405; 856,274,326; 874,251,347; 869,837,005 and 866,425,760, respectively.

DIVIDENDS

The following table sets forth in € and in US$ the dividend paid per share for the years ended September 30, 2009, 2010, 2011, 2012 and the proposed dividend per share for the year ended September 30, 2013. Owners of our shares who are United States residents should be aware that they will be subject to German withholding tax on dividends received. See Item 10: Additional information—Taxation.


	Dividend paid per share
Year ended September 30,	€			US$
2009		1.60			2.25
2010		2.70			3.68
2011		3.00			3.90
2012		3.00			3.99
2013		3.00	⁽¹⁾		—

(1)	Proposed by the Managing Board in agreement with the Supervisory Board; to be approved by the shareholders at the Annual Shareholders’ Meeting on January 28, 2014.

EXCHANGE RATE INFORMATION

We publish our Consolidated Financial Statements in euros. As used in this document, “euro” or “€” means the single unified currency that was introduced in the Federal Republic of Germany on January 1, 1999. “U.S. dollar,” “US$” or “USD” means the lawful currency of the United States of America. The currency translations made in the case of dividends we have paid have been made at the noon buying rate at the date of the Annual Shareholders’ Meeting at which the dividends were approved. As used in this document, the term “noon buying rate” refers to the rate of exchange for €, expressed in US$ per €, as announced by the Federal Reserve Bank of New York for customs purposes as the rate in The City of New York for cable transfers in foreign currencies.

In order that you may ascertain how the trends in our financial results might have appeared had they been expressed in US$, the table below shows the average noon buying rates in The City of New York for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York for US$ per € for our fiscal years. The average is computed using the noon buying rate on the last business day of each month during the period indicated.


Fiscal year ended September 30,	Average
2009		1.3556
2010		1.3539
2011		1.3988
2012		1.3011
2013		1.3151

The following table shows the noon buying rates for € in US$ for the last six months and for November 2013 up to and including November 15, 2013.


2013	High		Low
May		1.3192		1.2818
June		1.3407		1.3006
July		1.3282		1.2774
August		1.3426		1.3196
September		1.3537		1.3120
October		1.3810		1.3490
November (through November 15)		1.3530		1.3357

On November 15, 2013, the noon buying rate was US$1.3480 per €1.00.

Our shares are traded on the Frankfurt Stock Exchange in €. Fluctuations in the exchange rate between the € and the US$ will affect the US$ equivalent of the € price of the shares on the Frankfurt Stock Exchange and, as a result, are likely to affect the market price of the American Depositary Shares (ADS) on the New York Stock Exchange. We will declare any cash dividends in € and exchange rate fluctuations will affect the US$ amounts received by holders of ADSs on conversion of cash dividends on the shares represented by the ADSs.

RISK FACTORS

Our business, financial condition (including effects on assets, liabilities and cash flows), results of operations and reputation could suffer from material adverse effects due to any of the risks described below. While we have described below all the risks that we consider material, those risks are not the only ones we face. Additional risks not known to us or that we currently consider immaterial may also impair our business operations.

STRATEGIC RISKS

Our business, financial condition and results of operations may be affected by the uncertainties of economic and political conditions, particularly in the current macroeconomic environment, which is characterized by a high degree of uncertainty and modest recovery as well as the continuing risk of resurgence of crisis in financial markets and of renewed global economic downturn: Our business environment is influenced by domestic as well as global demand, which in turn is influenced by economic conditions. We still see a high degree of volatility in the global financial markets, primarily as a result of the ongoing crisis in the Eurozone. Future economic developments and, in consequence, the speed of economic growth and the sustainability of our market environment are dependent upon the evolution of a number of global and local factors such as the crisis in the credit markets, economic crises arising from sovereign debt overruns, and government budget consolidation measures related thereto, reduced levels of capital expenditures, declining consumer and business confidence, increasing unemployment in certain countries, fluctuating commodity prices, bankruptcies, natural disasters, political crises, imminent social unrest and other challenges.

In light of the latest economic developments, the high degree of unemployment in certain countries, the level of public debt in the United States, in Japan and in countries affected by the European sovereign debt crisis, uncertainties with respect to the stability of certain emerging markets, e.g. India or Indonesia, the risk of an escalation of the budgetary quarrels in the United States and the potential impact of budget consolidation measures by governments around the world, the bases for our expectations relating to the overall economic situation and specific conditions in markets relevant to us are subject to considerable uncertainties. In general, due to the significant proportion of long-cycle businesses in our Sectors and the importance of long-term contracts for Siemens, there is usually a time lag between the development of macroeconomic conditions and their impact on our financial results. Important exceptions include our short-cycle businesses in the Industry Sector, particularly those in Industry Automation and parts of Drive Technologies as well as parts of the Power Grid Solutions & Products Business within the Infrastructure & Cities Sector, which are highly sensitive to volatility in market demand. If the moderate recovery of macroeconomic conditions stalls again and if we are not successful in adapting our production and cost structure to subsequent changes to conditions in the markets in which we operate, there can be no assurance that we will not experience adverse effects that may be material to our business, financial condition and results of operations. For example, it may become more difficult for our customers to obtain financing and as a result they may modify, delay or cancel plans to purchase our products and services or to execute transactions. Furthermore, prices may decline as a result of adverse market conditions to a greater extent than currently anticipated. In addition, contracted payment terms, especially regarding the level of advance payments by our customers relating to long-term projects, may become less favorable, which could negatively impact our cash flows. Additionally, if customers are not successful in generating sufficient revenue or securing access to the capital markets, they may not be able to pay, or may delay payment of, the amounts they owe us, which may adversely affect our business, financial condition and results of operations.

Numerous other factors, such as fluctuations in energy and raw material prices, as well as global political conflicts, including those in the Middle East, North Africa and other regions, continue to impact macroeconomic

parameters and the international capital and credit markets. The uncertainty of economic and political conditions can have a material adverse impact on our business, financial condition and results of operations.

Our business is affected by a variety of market conditions and regulations. For example, our Energy Sector is exposed to the development of global demand for energy and is considerably affected by regulations related to energy and environmental policies. Our Healthcare Sector, in turn, is dependent on developments and regulations in healthcare systems around the world, particularly in the important U.S. healthcare market. Our Industry Sector is vulnerable to unfavorable market conditions in certain segments of the automotive and manufacturing industries. Our Infrastructure & Cities Sector focuses, among other things, on business with public authorities around the world and is thus vulnerable to restrictions in public budgets.

We operate in highly competitive markets, which are subject to price pressures and rapid changes: The worldwide markets for our products and solutions are highly competitive in terms of pricing, product and service quality, development and introduction time, customer service and financing terms. In many of our businesses, we face downward price pressure and we are or could be exposed to market downturns or slower growth, which may increase in times of declining investment activities and consumer demand. We face strong competitors, some of which are larger and may have greater resources in a given business area, as well as competitors from emerging markets, which may have a better cost structure. Some industries in which we operate are undergoing consolidation, which may result in stronger competition and a change in our relative market position. Certain competitors may be more effective and faster in capturing available market opportunities. These factors alone or in combination may negatively impact our business, financial condition, and results of operations.

Our business, financial condition and results of operations may be adversely affected by continued strategic alignments and cost-cutting initiatives: We are in a continuous process of strategic alignments and constantly engage in cost-cutting initiatives, including ongoing capacity adjustment measures and structural initiatives. Capacity adjustments through consolidation of business activities and manufacturing facilities, and the streamlining of product portfolios are also part of these cost reduction efforts. These measures may not be implemented as planned, may turn out to be less effective than anticipated, may only become effective later than estimated or may not become effective at all. Each of these factors alone or in combination may negatively impact our business, financial condition, and results of operations. Any future contribution of these measures to our profitability will be influenced by the actual savings achieved and by our ability to sustain these ongoing efforts.

Our business, financial condition and results of operations may be adversely affected by portfolio measures: Our strategy includes divesting activities in some business areas and strengthening others through portfolio measures, including mergers and acquisitions.

With respect to divestments, we may not be able to divest some of our activities as planned, and the divestitures we do carry out could have a negative impact on our business, financial condition, results of operations and our reputation. For example, we have announced the closure of our solar business and decided to divest the business activities included in our airport logistics and postal automation business, which as of September 30, 2013 was part of the Infrastructure & Cities Sector’s Mobility and Logistics Division.

Mergers and acquisitions are inherently risky because of difficulties that may arise when integrating people, operations, technologies and products. There can be no assurance that any of the businesses we acquire can be integrated successfully and as timely as originally planned or that they will perform as anticipated once integrated. In addition, we may incur significant acquisition, administrative and other costs in connection with these transactions, including costs related to integration of acquired businesses. For example, we are currently engaged in integration activities within the Infrastructure & Cities Sector’s Mobility and Logistics Division concerning the recently acquired rail automation business of Invensys plc., U.K., and within the Industry Sector’s Industry Automation Division concerning the acquisition of LMS International NV, Belgium, a leading provider of mechatronic simulation solutions. Furthermore, portfolio measures may result in additional financing needs and adversely affect our financial leverage and our debt-to-equity ratio. Acquisitions may also lead to substantial increases in intangible assets, including goodwill. Our Statements of Financial Position reflect a significant amount of intangible assets, including goodwill. Among our businesses, the largest amount of goodwill is

allocated to the Diagnostics Division and the Imaging & Therapy Systems Division of the Healthcare Sector, and the Industry Automation Division of the Industry Sector. If we were to encounter continuing adverse business developments including negative effects on our revenues, profits or cash, or adverse effects from an increase in the weighted average cost of capital (WACC) or from foreign exchange rate developments, or if we were otherwise to perform worse than expected at acquisition activities, then these intangible assets, including goodwill, might have to be written off, which could materially and adversely affect our business, financial condition and results of operations. The likelihood of such adverse business developments increases in times of difficult or uncertain macroeconomic conditions.

Our business, financial condition and results of operations may be adversely affected by our equity interests, other investments and strategic alliances, particularly in our segment Equity Investments: Our strategy includes strengthening our business interests through joint ventures, associated companies and strategic alliances. Certain of our investments are accounted for using the equity method, including, among others, BSH and EN (renamed to Unify after fiscal year end). Furthermore we hold other investments, for example Atos S.A. and OSRAM Licht AG. Any factors negatively influencing the profitability of our equity and other investments, including negative effects on revenues, profits or cash, could have an adverse effect on our equity pick-up related to these equity interests or may result in a write-off of these investments. In addition, our business, financial condition and results of operations could also be adversely affected in connection with loans, guarantees or non-compliance with financial covenants related to these equity and other investments. Furthermore, such investments are inherently risky as we may not be able to sufficiently influence corporate governance processes or business decisions taken by our equity investments, other investments and strategic alliances that may have a negative effect on our business. In addition, joint ventures bear the risk of difficulties that may arise when integrating people, operations, technologies and products. Strategic alliances may also pose risks for us because we compete in some business areas with companies with which we have strategic alliances.

Our businesses must keep pace with technological changes and develop new products and services to remain competitive: The markets in which our businesses operate experience rapid and significant changes due to the introduction of innovative technologies. To meet our customers’ needs in these areas, we must continuously design new, and update existing products and services, and invest in, and develop new technologies. Introducing new products and technologies requires a significant commitment to research and development, which in return requires expenditure of considerable financial resources that may not always result in success. Our sales and profitability may suffer if we invest in technologies that do not operate, or may not be integrated, as expected or that are not accepted in the marketplace as anticipated, or if our products or systems are not introduced to the market in a timely manner, in particular, compared to our competitors, or become obsolete. We constantly apply for new patents and actively manage our intellectual property portfolio to secure our technological position. However, our patents and other intellectual property may not prevent competitors from independently developing or selling products and services similar to or duplicate of ours. There can be no assurance that the resources invested by us to protect our intellectual property will be sufficient or that our intellectual property portfolio will adequately deter misappropriation or improper use of our technology. Furthermore, in some of our markets, the need to develop and introduce new products rapidly in order to capture available opportunities may lead to quality problems. Our operating results depend to a significant extent on our ability to anticipate and adapt to changes in markets and to reduce the costs of producing high-quality, new and existing products. Among recent technology trends, we carefully estimate the potential and relevance of cloud computing. We believe that the potential and usage scenarios of this technology vary among our products, solutions and services depending on the degree of information technology utilized. However, we also believe that this trend needs to be monitored closely, because it might bear the potential to change the competitive landscape. Any inability to adapt to the aforementioned factors could have a material adverse effect on our business, financial condition and results of operations.

We are subject to changes of regulations, laws and policies concerning our products: As a diversified company with global businesses we are exposed to various product related regulations, laws and policies influencing our processes. Recently, some jurisdictions around the world have adapted certain regulations, laws and policies requiring us to extend our recycling efforts, limit the sourcing and usage of certain raw materials and request additional due diligences and disclosures on sourcing and usage of the regulated raw materials. In

particular, we must comply with U.S. legislation to improve transparency and accountability concerning the sourcing of “conflict minerals” from mines located in the conflict zones of the Democratic Republic of Congo (DRC) and its adjoining countries. The term “conflict minerals” currently encompasses tantalum, tin, tungsten (or their ores) and gold. Conflict minerals can be found in a vast array of products. This U.S. legislation requires manufacturers, such as us, to investigate and disclose their use of any conflict minerals originating in the DRC or adjoining countries. It also implements guidelines to assist the manufacturer in preventing, by way of performing due diligence in its supply chain, any such sourcing from potentially financing or benefitting armed groups in this area. We are currently working on an implementation strategy for the above-referenced legislation. Since we operate within highly complex value chains, we are required to undertake a significant due diligence process requiring considerable investments of human resources and finances in order to comply with the conflict minerals due diligence and disclosure requirements. If our (sub-) suppliers are unable or unwilling to provide us with requested information and to take other steps to ensure that no conflict minerals, financing or benefitting armed groups in the DRC, are included in minerals or components supplied to us, we may be forced to disclose information about the use of conflict minerals in our supply chain in filings with the SEC. In addition, since the applicability of the new conflict minerals legislation is limited to companies publicly listed in the U.S., not all of our competitors are required to comply with this legislation or engage in similar efforts to disclose the usage of conflict minerals. If we are unable to achieve sufficient confidence throughout our supply chain, or if any of these risks or similar risks associated with these kinds of regulations, laws and policies were to materialize, our business, financial condition, results of operations and reputation could be materially adversely affected.

OPERATIONAL RISKS

Our business, financial condition and results of operations may be adversely affected by cost overruns or additional payment obligations related to the management of our long-term, fixed price or turnkey projects: We perform a portion of our business, especially large projects, under long-term contracts that are awarded on a competitive bidding basis. Some of these contracts are inherently risky because we may assume substantially all of the risks associated with completing a project and the post-completion warranty obligations. For example, we face the risk that we must satisfy technical requirements of a project even though we may not have gained experience with those requirements before we win the project. The profit margins realized on fixed-priced contracts may vary from original estimates as a result of changes in costs and productivity over their term. We sometimes bear the risk of unanticipated project modifications, shortage of key personnel, quality problems, financial difficulties of our customers, cost overruns or contractual penalties caused by unexpected technological problems, unforeseen developments at the project sites, unforeseen changes or difficulties in the regulatory or political environment, performance problems with our suppliers, subcontractors and consortium partners or other logistical difficulties. Certain of our multi-year contracts also contain demanding installation and maintenance requirements in addition to other performance criteria relating to timing, unit cost and compliance with government regulations requirements, which, if not satisfied, could subject us to substantial contractual penalties, damages, non-payment and contract termination. There can be no assurance that contracts and projects, in particular those with long-term duration and fixed-price calculation, can be completed profitably.

Increased IT security threats and higher levels of professionalism in computer crime could pose a risk to our systems, networks, products, solutions and services as well as to those of our service providers: Our business portfolio includes a broad array of systems, networks, products, solutions and services across our businesses that rely on digital technologies. We observe a global increase in IT security threats and higher levels of professionalism in computer crime, which pose a risk to the security of systems and networks and the confidentiality, availability and integrity of data. We attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems such as firewalls and virus scanners. To the extent we employ service providers, such as in the area of IT infrastructure, we have contractual arrangements in place in order to ensure that these risks are reduced in a similar manner. Nonetheless, our systems, networks, products, solutions and services, as well as those of our service providers remain potentially vulnerable to attacks. Depending on their nature and scope, such attacks could potentially lead to the leakage of confidential information, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and supply shortages, which in turn could adversely affect our business, financial condition, results of operations and reputation.

We may face operational failures and quality problems in our value chain processes: Our value chain comprises all steps, from research and development to supply chain management, production, marketing, sales and services. Operational failures in our value chain processes could result in quality problems or potential product, labor safety, regulatory or environmental risks. Such risks are particularly present in our Sectors in relation to our production and construction facilities, which are located all over the world and have a high degree of organizational and technological complexity. From time to time, some of the products we sell might have quality issues resulting from the design or manufacture of such products or from the software integrated into them. In particular, our Healthcare Sector is subject to requirements of the U.S. Food and Drug Administration, which require certain efforts safeguarding our product quality. If we are not able to comply with these requirements, our business, financial condition, results of operations and reputation may be adversely affected.

Furthermore, failures on the part of service providers we employ, such as in the area of IT, may have an adverse effect on our processes and operations and our ability to meet our commitments to customers or increase our operating costs. Any operational failures or quality issues could have a material adverse effect on our business, financial condition, results of operations and reputation.

We may face interruption of our supply chain, including the inability of third parties to deliver parts, components and services on time, and we may be subject to rising raw material prices: Our financial performance depends in part on reliable and effective supply chain management for components, sub-assemblies and other materials. Capacity constraints and supply shortages resulting from ineffective supply chain management may lead to delays and additional cost. We rely on third parties to supply us with parts, components and services. Using third parties to manufacture, assemble and test our products reduces our control over manufacturing yields, quality assurance, product delivery schedules and costs. The third parties that supply us with parts and components also have other customers and may not have sufficient capacity to meet all of their customers’ needs, including ours, during periods of excess demand. Component supply delays can affect the performance of our Sectors. Although we work closely with our suppliers to avoid supply-related problems, there can be no assurance that we will not encounter supply problems in the future or that we will be able to replace a supplier that is not able to meet our demand. This risk is particularly evident in businesses with a very limited number of suppliers. Shortages and delays could materially harm our business. Unanticipated increases in the price of components or raw materials due to market shortages or other reasons could also adversely affect the performance of our Sectors. Furthermore, we may be exposed to the risk of delays and interruptions of the supply chain as a consequence of natural disasters in case we are unable to identify alternative sources of supply or ways of transportation in a timely manner or at all. A general shortage of materials, components or sub-components as a result of natural disasters also bears the risk of unforeseeable fluctuations in prices and demand, which might adversely affect our business, financial condition and results of operations.

Our Sectors purchase raw materials including so-called rare-earth metals, copper, steel, aluminum and oil, which expose them to fluctuations in energy and raw material prices. In recent times, commodities have been subject to volatile markets, and such volatility is expected to continue. If we are not able to compensate for our increased costs or pass them on to customers, price increases could have a material adverse impact on our business, financial condition and results of operations. In contrast, in times of falling commodity prices, we may not fully profit from such price decreases as we attempt to reduce the risk of rising commodity prices by several means, such as long-term contracting or physical and financial hedging. In addition to price pressure that we may face from our customers expecting to benefit from falling commodity prices or adverse market conditions, this could also adversely affect our business, financial condition and results of operations.

We are dependent upon hiring, developing and retaining highly qualified management and technical personnel: Competition for highly qualified personnel remains intense in the industries and regions in which our businesses operate. In many of our business areas, we intend to expand our business activities, for which we will need highly skilled employees. Our future success depends in part on our continued ability to hire, integrate, develop and retain engineers and other qualified personnel. We address this risk with various measures, for example succession planning, employer branding, retention and career management. However, there can be no assurance that we will continue to be successful in attracting and retaining all the highly qualified employees and key personnel needed in the future, including in appropriate geographic locations, and any inability to do so could have a material adverse effect on our business, financial condition, results of operations and reputation.

FINANCIAL RISKS

We are exposed to currency risks and interest rate risks: We are exposed to fluctuations in exchange rates, especially between the U.S. dollar and the euro, because a high percentage of our business volume is conducted in the U.S. and as exports from Europe. In addition, we are exposed to currency effects involving the currencies of emerging markets, in particular the Chinese Yuan. As a result, a strong euro in relation to the U.S. dollar and other currencies could have an adverse impact on our revenues and results of operations. Certain currency risks as well as interest rate risks are hedged on a Company-wide basis using derivative financial instruments. Depending on the development of foreign currency exchange and interest rates, our hedging activities could have significant effects on our business, financial condition and results of operations. Our Sectors and Financial Services (SFS) engage in currency hedging activities which sometimes do not qualify for hedge accounting. In addition, our Corporate Treasury has interest rate hedging activities which also do not qualify for hedge accounting, and are subject to changes in interest rates. Accordingly, exchange rate and interest rate fluctuations may lead to higher volatility and adverse effects on our business, financial condition and results of operations. A strengthening of the euro (particularly against the U.S. dollar) may change our competitive position, as many of our competitors may benefit from having a substantial portion of their costs based in weaker currencies, enabling them to offer their products at lower prices.

We are exposed to volatile credit spreads: Regarding our Corporate Treasury activities, widening credit spreads due to uncertainty and risk aversion in the financial markets might lead to adverse changes of fair market values of our financial assets, in particular concerning our derivative financial instruments. In addition, we see a risk of widening credit spreads leading to increasing refinancing costs if the Eurozone sovereign debt crisis with its ongoing significant impact on global financial markets and the European financial sector in particular, continues or even worsens. Any such development could also further increase the costs for buying protection against credit risks due to a potential increase of counterparty risks.

Our future financing via Corporate Treasury may particularly be affected by the uncertainty of economic conditions and the development of capital and financial markets: Our Corporate Treasury is responsible for the financing of the Company. Negative developments in the foreign exchange, money or capital markets, such as limited availability of funds (particularly U.S. dollar funds), may increase our overall cost of funding. The ongoing Eurozone sovereign debt crisis continues to have an impact on global capital markets. The resulting higher risk awareness of governments lead to more regulations on the use of financial instruments through (1) the Regulation on OTC derivatives, central counterparties and trade repositories (European Market Infrastructure Regulation) and (2) other similar regulations in other jurisdictions, which may have an impact on the future availability or the costs of adequate hedging instruments for the Company. It may even lead to further regulation of the financial sector and the use of financial instruments. Such further regulations could adversely influence our future possibilities of obtaining debt financing, and/or may significantly increase our refinancing costs. Deteriorating credit quality and/or default of business partners may adversely affect our business, financial condition and results of operations.

Downgrades of our ratings could increase our cost of capital and could negatively affect our businesses: Our business, financial condition and results of operations are influenced significantly by the actual and expected performance of the Sectors and SFS, as well as the Company’s portfolio measures. An actual or expected negative development of our business, financial condition or results of operations could result in the deterioration of our credit rating. Downgrades by rating agencies could increase our cost of capital, may reduce our potential investor base and may negatively affect our business, financial condition and results of operations.

Our financing activities subject us to various risks, including credit, interest rate and foreign exchange risk: We provide our customers with various forms of direct and indirect financing in connection with large projects. We also finance a large number of customer orders, for example, the leasing of medical equipment, mainly through SFS. SFS also incurs credit risk by financing third-party equipment or by taking direct or indirect participation in financings, such as syndicated loans. In part, we take a security interest in the assets we finance or we receive additional collateral. Our business, financial condition and results of operations may be adversely affected if the credit quality of our customers deteriorates or if they default on their payment obligation to us, if the value of the assets in which we have taken a security interest or additional collateral

declines, if interest rates or foreign exchange rates fluctuate, or if the projects in which we invest are unsuccessful. Potential adverse changes in economic conditions could cause a decline in the fair market values of assets, derivative instruments as well as collateral, resulting in losses which could have an adverse effect on our business, financial condition and results of operations.

Our business, financial condition and results of operations may be adversely affected by several parameters influencing the funded status of our pension benefit plans: The funded status of our pension plans may be affected by an increase or decrease in the defined benefit obligation (DBO), as well as by an increase or decrease in the value of plan assets. Pensions are accounted for in accordance with actuarial valuations, which rely on statistical and other factors in order to anticipate future events. These factors include key pension plan valuation assumptions such as the discount rate, rate of future compensation increases and pension progression. Actual developments may differ from assumptions due to changing market and economic conditions, thereby resulting in an increase or decrease in the DBO. Significant movements in financial markets or a change in the portfolio mix of invested assets could result in corresponding increases or decreases in the value of plan assets, particularly equity securities. Also, changes in pension plan assumptions could affect net periodic pension cost. For example, a change in discount rates may result in changes in the net periodic benefit cost in the following fiscal year. In order to comply with local pension regulations in selected foreign countries, we may face a risk of increasing cash outflows to reduce an underfunding of our pension plans in these countries, if any.

For further information on financial risks and financial risk management, see Item 18 Financial Statements—Notes to Consolidated Financial Statements—Note 32.

COMPLIANCE RISKS

We are subject to regulatory risks associated with our international operations: Protectionist trade policies and changes in the political and regulatory environment in the markets in which we operate, such as import and export controls, tariffs and other trade barriers and price or exchange controls, could affect our business in several national markets, impact our sales and profitability and make the repatriation of profits difficult, and may expose us to penalties, sanctions and reputational damage. In addition, the uncertainty of the legal environment in some regions could limit our ability to enforce our rights and subject us to continually increasing costs related to designing and implementing appropriate compliance programs and protocols.

As a globally operating organization, we conduct business with customers in countries, such as Iran, Syria and Cuba, that are subject to increasingly expansive export control regulations, embargoes, economic sanctions or other forms of trade restrictions imposed by the U.S., the European Union or other countries or organizations. New or expanded export control regulations, economic sanctions, embargoes or other forms of trade restrictions imposed on Iran, Syria or on other sanctioned countries in which we do business may result in a curtailment of our existing business in such countries and in amendments to our policies. We are also aware of initiatives by institutional investors, such as pension funds or other companies, to adopt or consider adopting policies prohibiting investment in and transactions with, or requiring divestment of interests in entities doing business with Iran and other countries identified as state sponsors of terrorism by the U.S. Secretary of State. It is possible that such initiatives may result in us being unable to gain or retain investors, customers or suppliers. In addition, the termination of our activities in sanctioned countries may expose us to customer claims and other actions. Our reputation could also suffer due to our activities with counterparties in or affiliated with these countries. We have included details of our Iran-related activities in Item 4: Information on the Company—Overview, and are filing a related notice of disclosure with the SEC. Under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, upon receipt of the notice of disclosure by the SEC, the SEC is required to notify the US President and Congress of the filing. The President is then required to initiate an investigation into Iran-related activities disclosed in such notice, and make a determination as to whether sanctions should be imposed on the filing party. There is no assurance as to the outcome of any such Presidential investigation. If the relevant authorities were to impose penalties or sanctions on Siemens, such measures could have a material adverse effect on our business, financial condition and results of operations.

We expect that sales to emerging markets will continue to account for an increasing portion of our total revenue, as our business naturally evolves and as developing nations and regions around the world increase their demand for our offering. Emerging market operations involve various risks, including civil unrest, health concerns, cultural differences such as employment and business practices, volatility in gross domestic product, economic and governmental instability, the potential for nationalization of private assets and the imposition of exchange controls. The Asian markets, in particular, are important for our long-term growth strategy, and our sizeable operations in China are influenced by a legal system that is still developing and is subject to change. Our growth strategy could be limited by governments supporting local industries. Our Sectors, particularly those that derive their revenue from large projects, could be adversely affected if future demand, prices and gross domestic product in the markets in which those Sectors operate do not develop as favorably as expected due to such regulatory measures. If any of these risks or similar risks associated with our international operations were to materialize, our business, financial condition and results of operations could be materially adversely affected.

Current and future investigations regarding allegations of public corruption, antitrust violations and other illegal acts could have a material adverse effect on our business, financial condition and results of operations and on our reputation: We engage in a substantial amount of business with governments and government-owned enterprises around the world. We also participate in a number of projects funded by government agencies and intergovernmental and supranational organizations such as multilateral development banks. If we are found to have been engaged in public corruption, antitrust violations and other illegal acts, such activities may impair our ability to do business with these or other organizations. Corruption, antitrust and related proceedings may lead to criminal and civil fines as well as penalties, sanctions, injunctions against future conduct, profit disgorgements, disqualifications from directly and indirectly engaging in certain types of business, the loss of business licenses or permits or other restrictions. Accordingly, we may be required to record material provisions to cover potential liabilities arising in connection with such investigations and proceedings, including potential tax penalties. Moreover, any findings related to public corruption that are not covered by the 2008 and 2009 corruption charge settlements, which were concluded with American and German authorities, may endanger our business with government agencies and intergovernmental and supranational organizations, further monitors could be appointed to review future business practices and we may otherwise be required to further modify our business practices and our compliance program.

Our involvement in ongoing and potential future corruption or antitrust proceedings could damage our reputation and have an adverse impact on our ability to compete for business from public and private sector customers around the world. If we or our subsidiaries are found to have engaged in certain illegal acts or not to have taken effective steps to address allegations or findings of corruption or antitrust violations in our business, this may impair our ability to participate in business with governments or intergovernmental organizations and may result in our formal exclusion from such business. Even if we are not formally excluded from participating in government business, government agencies or intergovernmental or supranational organizations may informally exclude us from tendering for or participating in certain contracts. For example, legislation of member states of the European Union could in certain cases result in our mandatory or discretionary exclusion from public contracts in case of a conviction for bribery and certain other offences or for other reasons. As described in more detail in Item 4: Information on the Company—Legal proceedings, we and certain of our subsidiaries have in the past been excluded or currently are excluded from some contracting, including with governments, development banks and multilateral financial institutions, as a result of findings of corruption or other misconduct. Ongoing or potential future investigations into allegations of corruption or antitrust violations could also impair existing relationships with, and our ability to acquire new private sector business partners. For instance, such investigations may adversely affect our ability to pursue potentially important strategic projects and transactions, such as strategic alliances, joint ventures or other business combinations, or could result in the cancellation of certain of our existing contracts and third parties, including our competitors, could initiate significant third-party litigation.

In addition, future developments in ongoing and potential future investigations, such as responding to the requests of governmental authorities and cooperating with them, could divert management’s attention and resources from other issues facing our business. The materialization of any of these risks could have a material adverse effect on our business, financial condition and results of operations and on our reputation.

Our business, financial condition and results of operations could suffer as a result of current or future litigation: We are subject to numerous risks relating to legal, governmental and regulatory proceedings to which we are currently a party or to which we may become a party in the future. We routinely become subject to legal, governmental and regulatory investigations and proceedings involving, among other things, requests for arbitration, allegations of improper delivery of goods or services, product liability, product defects, quality problems, intellectual property infringement, non-compliance with tax regulations and/or alleged or suspected violations of applicable laws. In addition, we may face further claims in connection with the circumstances that led to the corruption charges. For additional information with respect to specific proceedings, see Item 4: Information on the Company—Legal proceedings. There can be no assurance that the results of these or any other proceedings will not materially harm our business, financial condition and results of operations. Moreover, even if we ultimately prevail on the merits in any such proceedings, we may have to incur substantial legal fees and other costs defending ourselves against the underlying allegations. Under certain circumstances we record a provision for risks arising from legal disputes and proceedings. In addition, we maintain liability insurance for certain legal risks at levels our management believes are appropriate and consistent with industry practice. Our insurance policy, however, does not protect us against reputational damage. Moreover, we may incur losses relating to legal proceedings beyond the limits, or outside the coverage, of such insurance or exceeding any provisions made for legal proceedings related losses. Finally, there can be no assurance that we will be able to maintain adequate insurance coverage on commercially reasonable terms in the future. Each of these risks may have a material adverse effect on our business, financial condition and results of operations.

Examinations by tax authorities and changes in tax regulations could adversely affect our business, financial condition and results of operations: We operate in around 190 countries and therefore are subject to different tax regulations. Changes in tax law in any of these jurisdictions could result in higher tax expense and payments. Furthermore, legislative changes could materially impact our tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities. In addition, the uncertain tax environment in some regions could limit our ability to enforce our rights. As a globally operating organization, we conduct business in countries subject to complex tax rules, which may be interpreted in different ways. Future interpretations or developments of tax regimes may affect our business, financial condition and results of operations. We are regularly examined by tax authorities in various jurisdictions.

We are subject to environmental and other governmental regulations: Some of the industries in which we operate are highly regulated. Current and future environmental and other governmental regulations or changes thereto may require us to change the way we run our operations and could result in significant increases in our operating or production costs. In addition, while we have procedures in place to ensure compliance with applicable governmental regulations in the conduct of our business operations, it cannot be excluded that violations of applicable governmental regulations may be caused either by us or by third parties that we contract with, including suppliers or service providers, whose activities may be attributed to us. Any such violations expose us to the risk of liability, reputational damage or loss of licenses or permits that are important to our business operations. In particular, we could also face liability for damage or remediation for environmental contamination at the facilities we design or operate. For example, we are required to bear environmental clean-up costs mainly related to remediation and environmental protection liabilities, which have been accrued based on the estimated costs of decommissioning facilities for the production of uranium and mixed-oxide fuel elements in Hanau, Germany, as well as a nuclear research and service center in Karlstein, Germany. For further information, see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 24. Under certain circumstances, we establish provisions for environmental risks. With regard to certain environmental risks, we maintain liability insurance at levels that our management believes are appropriate and consistent with industry practice. We may incur environmental losses beyond the limits, or outside the coverage, of such insurance, and such losses may have a material adverse effect on our business, financial condition and results of our operations. In addition, our provisions for environmental liabilities may not be sufficient to cover our ultimate losses or expenditures resulting therefrom.

ITEM 4:

INFORMATION ON THE COMPANY

OVERVIEW

Siemens traces its origins to 1847. Beginning with advances in telegraph technology, the Company quickly expanded its product line and geographic scope and was already a multi-national business by the end of the 19th century. The Company formed a partnership under the name Siemens & Halske in 1847, reorganized as a limited partnership in 1889 and as a stock corporation in 1897. The Company moved its headquarters from Berlin to Munich in 1949, and assumed its current name as Siemens Aktiengesellschaft, a stock corporation under the Federal laws of Germany, in 1966. The address of our principal executive offices is Wittelsbacherplatz 2, 80333 Munich, Germany; telephone number +49 (89) 636 00.

During fiscal 2013, Siemens employed an average of 362,400 people on a continuing basis and operated in around 190 countries worldwide. In fiscal 2013, we had revenue of €75.882 billion. Our balanced business portfolio is based on leadership in electronics and electrical engineering. Reflecting our strategy to benefit from global megatrends, Siemens’ operations have been divided into four Sectors since fiscal 2012. These Sectors are Energy, Healthcare, Industry and Infrastructure & Cities. We combine the expertise in our four Sectors with a commitment to original research and development (R&D) to build strong global market positions. The Energy Sector offers a wide spectrum of products, services and solutions for the generation and transmission of power and for the extraction, conversion and transport of oil and gas. The Healthcare Sector develops, manufactures and markets diagnostic and therapeutic systems, devices and consumables, as well as information technology systems for clinical and administrative purposes. The Industry Sector’s portfolio ranges from industry automation and drives products and services to system integration and solutions for plant business. The Infrastructure & Cities Sector bundles capabilities in the area of building and mobility solutions, low and medium voltage components, systems and solutions as well as power distribution, including Smart Grid applications. Besides these activities, Financial Services (SFS) supports Sector activities as a business partner while continuing to build up its own business with external customers. The segment Equity Investments comprises equity stakes held by Siemens that are either 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 businesses operate under a range of regional and economic conditions. In internationally-oriented long-cycle industries, for example, customers have multi-year planning and implementation horizons that tend to be independent of short-term economic trends. Our activities in these areas include primarily the Energy Sector and the transportation and logistics solutions business within the Infrastructure & Cities Sector. The Healthcare Sector’s business activities are relatively unaffected by short-term economic trends but are dependent on regulatory and policy developments around the world. In fields with more industry-specific cycles, customers tend to have shorter horizons for their spending decisions and greater sensitivity to current economic conditions. Our activities in these areas include automation and parts of drives operations within the Industry Sector as well as low and medium voltage operations within the Infrastructure & Cities Sector. Our businesses, especially the Healthcare Sector, are also substantially influenced by technological changes and the rate of acceptance of new technologies.

As a globally-operating organization, we also conduct limited business with customers in Iran, Syria and Cuba. The U.S. Secretary of State designates these countries as state sponsors of terrorism and subjects them to export controls. Our activities with customers in these states are insignificant relative to our size (substantially less than 1% of our revenue in fiscal 2013) and do not, in our view, represent either individually or in aggregate a material investment risk. We actively employ systems and procedures for compliance with applicable export control programs, including those in the United States, the European Union and Germany.

Following the admission of South Sudan as a member state of the United Nations, the regulations established by the Managing Board of Siemens AG in 2007 in light of the humanitarian situation in Sudan were changed in March 2013: Whereas all business activities with Sudan, with the sole exception of participation in the humanitarian projects of internationally recognized organizations, are still prohibited as previously disclosed, all direct and indirect business activities with South Sudan are now permitted company-wide.

general decision. In the fourth quarter of fiscal 2012, as a result of an analysis of our contracts with Iranian customers in particular with respect to expected payment defaults and force majeure events, we recorded adjustments affecting several line items in our consolidated statements of income, in particular revenue and cost of sales, recognized in prior periods from projects that were still permitted to be provided under these policies. For additional information, see Item 3: Key information—Risk factors, Item 4: Information on the Company—Description of business and Item 5: Operating and financial review and prospects—Fiscal 2012 compared to fiscal 2011—Adjustments for long-term contracts with customers in Iran.

STRATEGY

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 steadily, and it continues to get older. Together, these two trends will challenge the ability of future healthcare systems to make healthcare available to everyone. Urbanization refers to the growing number of densely-populated metropolitan centers around the world. This trend intensifies the already strong demand for sustainable and energy-efficient infrastructures for buildings, transportation systems, energy and water. We view climate change as a fact and that reducing greenhouse gas emissions is vital to counteract the 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.

STRATEGY OF THE SIEMENS GROUP

Our vision is to be a pioneer in

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energy efficiency,

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industrial productivity,

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next-generation healthcare, and

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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 achieve sustainable, profitable growth and thereby continually increase our company value. We intend to profit from the megatrends described above.

Our strategy comprises what we call our three strategic directions:

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focusing on innovation-driven growth markets,

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getting closer to our customers, and

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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.

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 we proceed to make acquisitions. 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 Item 5: Operating and financial review and prospects—Business and economic environment—Financial performance system.

To achieve our One Siemens goal of sustainably enhancing the value of Siemens and exploiting the full potential of our 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 widely expected to have future growth potential, such as software and IT. Our second focus area is to strengthen our portfolio. We are actively and systematically managing our portfolio with the principal aim of having our businesses achieve or maintain a No. 1 or No. 2 position in their respective markets. To provide a leading environmental portfolio is our third focus area: Our Environmental Portfolio increases our Company’s revenue and makes a significant contribution to climate protection.

In the 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 located in emerging markets. A second focus 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 profitable growth 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 tailored training and education programs. We aim to develop the potential of 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 in fiscal 2013, we have been 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. Our Sectors are continuing to execute a broad range of measures expected to yield sustainable productivity gains.

PORTFOLIO ACTIVITIES

Since fiscal 2011, we have completed the following transactions to optimize our business portfolio for sustainable profitability and growth:

ACQUISITIONS

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At the beginning of May 2013, Siemens acquired all the shares of six entities constituting the rail automation business of Invensys plc., U.K. (Invensys). With the acquisition, Siemens expanded and complemented the Infrastructure & Cities Sector’s rail automation business;

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At the beginning of January 2013, Siemens acquired all of the shares in LMS International NV, Belgium, a leading provider of mechatronic simulation solutions. With the acquisition, Siemens expanded and complemented the Industry Sector’s product lifecycle management portfolio with mechatronic simulation and testing software;

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At the beginning of May 2012, Siemens acquired all of the shares of five entities constituting the Connectors and Measurements Division of Expro Holdings UK 3 Ltd. The acquired business engineers and manufactures subsea components such as cable connectors, sensors and measuring devices;

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Acquisition of various other entities in fiscal 2012, which were not material individually including RuggedCom Inc., the NEM B.V. business and eMeter Corporation;

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At the beginning of July 2011, OSRAM completed the acquisition of 100% of Siteco Lighting GmbH, a developer, designer and manufacturer of professional lighting fixtures;

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Siemens increased its stake in its publicly listed Indian subsidiary Siemens Ltd. from about 55% to 75%. The transaction was completed at the end of April 2011.

DISPOSITIONS AND DISCONTINUED OPERATIONS

Dispositions

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In August 2013, Siemens completed the sale of its 50% stake in Nokia Siemens Networks Holding B.V., held by the Equity Investments segment, to Nokia;

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In the first quarter of fiscal 2012, Siemens completed the sale of its 25% stake in OAO Power Machines, held by the Energy Sector;

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In March 2011, Siemens completed the sale of its 34% stake in the joint venture Areva NP S.A.S., held by the Energy Sector, to Areva S.A.;

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The sale of the 49% stake in Krauss-Maffei Wegmann GmbH & Co. KG, held by the Equity Investments segment, was completed in January 2011;

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At the beginning of January 2011, Siemens closed the disposal of its Electronics Assembly Systems business, which was reported in Centrally managed portfolio activities, to ASM Pacific Technology Ltd.

Discontinued Operations

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In the first quarter of fiscal 2013, Siemens decided to sell its Water Technologies Business Unit. The conditions for Water Technologies to be classified as held for disposal and discontinued operations were fulfilled as of the fourth quarter of fiscal 2013;

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In the fourth quarter of fiscal 2012, Siemens decided to dispose of its solar business and classified its solar business as held for disposal and as discontinued operations as of September 30, 2012. In the second quarter of fiscal 2013 Siemens reclassified the solar business to continuing operations since it no longer fulfilled the conditions to be classified as held for disposal and discontinued operations;

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At the end of March 2011, Siemens announced its plan to publicly list its subsidiary OSRAM. Following the announcement, Siemens classified OSRAM as held for disposal and as discontinued operations. In fiscal 2012, the Company announced its intention to dispose of OSRAM via a spin-off to Siemens shareholders, which was approved by the Annual Shareholders’ Meeting on January 23, 2013. In July 2013, Siemens completed the spin-off of OSRAM. Siemens retains a minority stake of 17% in OSRAM and additionally contributed a 2.5% stake to Siemens Pension Trust e.V.;

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In December 2010, Siemens and Atos S.A. (AtoS) signed an option agreement which granted AtoS the right to acquire Siemens IT Solutions and Services. This option was exercised by AtoS in February 2011 and Siemens classified Siemens IT Solutions and Services as held for disposal and as discontinued operations. On July 1, 2011, the transaction closed following the relevant antitrust approvals and the approval by AtoS shareholders.

For a detailed discussion of our acquisitions, dispositions and discontinued operations, see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 4.

DESCRIPTION OF BUSINESS

Our financial reporting as of September 30, 2013 comprised six reportable segments. These segments consisted of:

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four Sectors Energy, Healthcare, Industry and Infrastructure & Cities,

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Equity Investments and

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SFS.

In addition, we separately break out two Businesses and eight Divisions within our Sectors. These are

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in the Energy Sector: the Fossil Power Generation Division, the Wind Power Division, the Oil & Gas Division and the Power Transmission Division,

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in the Healthcare Sector: the Diagnostics Division,

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in the Industry Sector: the Industry Automation Division and the Drive Technologies Division and

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in the Infrastructure & Cities Sector: the Transportation & Logistics Business, which includes the Rail Systems and Mobility and Logistics Divisions, the Power Grid Solutions & Products Business, which includes the Low and Medium Voltage and the Smart Grid Divisions and the Building Technologies Division.

The following figure shows Siemens’ segment reporting structure for the periods covered by this annual report:

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ENERGY

The Energy Sector offers a wide spectrum of products, solutions and services for generating and transmitting power, and for extracting, converting and transporting oil and gas. It primarily addresses the needs of energy providers, but also serves industrial companies, particularly in the oil and gas industry.

The following table provides key financial data for the Energy Sector.


		Year ended September 30, 2013
Total revenue		€26.638 billion
External revenue		€26.386 billion
External revenue as percentage of Siemens revenue		34.77%
Sector profit		€1.955 billion

The following chart provides a geographic breakdown of the Energy Sector’s external revenue in fiscal 2013.

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In fiscal 2013, the Energy Sector comprised five Divisions: Fossil Power Generation; Wind Power; Oil & Gas; Power Transmission; and Energy Service. In addition, the Sector includes two sector-led businesses: Solar and Hydro. Results for these businesses are included in results for the Sector. Siemens has decided to exit solar activities after completion of projects under execution. In the Hydro business, we are active in small and large hydro power stations, via our minority stake in Voith Hydro Holding GmbH & Co. KG. Furthermore, our Hydro business also comprises our activities in ocean power tidal turbines. As of fiscal 2014, the Fossil Power Generation Division and the Oil & Gas Division were combined into a single Division under the name Power Generation.

The Fossil Power Generation Division offers high-efficiency products and solutions for fossil-based power generation. These solutions include substantial innovation and engineering know-how aimed at converting fossil fuels to power with high efficiency, which increases return on investment for customers and helps them improve their environmental performance. The Division concentrates on products and solutions for gas and steam turbines, turbo generators, heat recovery steam generators including control systems, with an emphasis on combined-cycle power plants. It also develops solutions for instrumentation and control systems for all types of power plants and for use in power generation. These solutions include information technology solutions providing management applications from the plant to the enterprise level. The Division is also working on developing and producing commercial systems based on emerging technologies such as integrated gasification, coal liquefaction, and carbon capture and storage. Due to the broad range of the Division’s offerings, the revenue mix may vary from reporting period to reporting period depending on the share of revenue attributable to products, solutions and services and the revenue’s regional distribution in the respective periods. As mentioned above, as of fiscal 2014, the Fossil Power Generation Division was combined with the Oil & Gas Division to form the Power Generation Division.

The Wind Power Division manufactures wind turbines for onshore and offshore applications, including both geared turbines and direct drive machines. The product portfolio is based on four product platforms, two for each of the onshore and offshore applications. The onshore products have power ratings between 2.3 to 3.0 megawatts and rotor diameters ranging from 93 to 113 meters. The power rating for offshore products ranges from 3.6 to 6.0 megawatts, with rotor diameters ranging from 107 to 154 meters. The revenue mix of the Division may vary from reporting period to reporting period depending on the project mix between onshore and offshore projects in any given period. A significant part of the Division’s business activities take place offshore and in countries in the northern hemisphere. Therefore, its production and sales figures are typically higher during the hemisphere’s spring and summer months, when weather conditions facilitate the installation of wind turbines.

The Oil & Gas Division has a comprehensive portfolio of highly efficient rotating machinery (gas turbines, steam turbines, compressors with associated equipment) and electrical, instrumentation and telecommunication (EIT) solutions. This portfolio is the basis of our offerings to all our markets, predominantly the oil and gas industry, process industry and industrial power generation industry, for applications ranging from cogeneration to offshore production, water treatment and subsea processing. As mentioned above, as of fiscal 2014, the Oil & Gas Division was combined with the Fossil Power Generation Division to form the Power Generation Division.

The Power Transmission Division provides customers with turnkey power transmission solutions as well as discrete products, systems and related engineering and services. It covers high-voltage transmission solutions,

power and distribution transformers, high-voltage 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, such as power plants and onshore and offshore wind farms, to various points along the power transmission network. The Division is working with joint ventures in China involving different partners and has a joint venture with Infineon Technologies in Germany for the design, manufacture and sale of high-performance semiconductors.

The Energy Service Division offers comprehensive services for products, solutions and technologies, covering performance enhancements, maintenance services, customer trainings and consulting services for the Divisions Fossil Power Generation, Wind Power and Oil & Gas. Financial results relating to the Energy Service Division are included in these Divisions.

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 licensing partners, especially in markets requiring a high degree of local knowledge.

The Sector’s principal customers are large power utilities, independent power producers, and industrial companies, particularly in the oil and gas industry. Because certain significant areas of the Sector’s business, such as power plant construction, involve working on medium- to long-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 Fossil Power Generation Division competes in all regions of the global fossil energy markets with demand in Europe and in the U.S. driven mainly by the need to replace aged existing inefficient and inflexible power plants, while demand in emerging countries is driven by capacity additions required as a result of economic growth.

The Wind Power Division is active in both the onshore and the offshore market segments around the world, and has maintained a leading position in the global offshore market for several years. The Division focuses on markets where it can entertain a profitable business, such as the U.S., the U.K. and Scandinavia, although debates over subsidy schemes in these countries are causing some uncertainty and ultimately are expected to lead to increased price pressure. Selected emerging-market countries are increasing their focus on wind energy as a way to increase resource independence, thus offering a sound business perspective.

Oil and gas, addressed by our Oil & Gas Division, continue to play a vital role in the world’s energy supply due to the increasing demand for energy. Oil has very little spare global production capacity and, even in a weak global economy, demand still outstrips supply. On a regional level, growth in the oil and gas market is mainly driven by the U.S., the Middle East, Russia, Brazil, and Africa. To keep up with increasing demand and the depletion of existing reservoirs, the oil and gas industry is going deeper offshore and exploring unconventional resources and state-of-the-art enhanced oil and gas recovery techniques such as subsea processing. In addition, stricter environmental regulations to reduce waste and emissions are putting pressure on the oil and gas industry to improve energy efficiency, creating opportunities for a leading solution and technology provider like Siemens.

The main drivers in the markets addressed by the Power Transmission Division are expanding infrastructure in emerging countries, equipment replacement and modernization in mature economies, and integration of renewable energies. The most important geographical markets are emerging countries including Brazil, China, and India, and mature markets with a significant potential for modernization and new installation such as the U.S.

The Energy Sector’s business activities vary widely in size, from selling components and performing comparatively small projects up to major turnkey contracts, such as for the construction of a new power plant. 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. For additional information about our long-term contracts, see Item 3: Key information—Risk factors. Moreover, the Sector generates an increasing portion of its revenue from oil and gas and industrial customers in emerging markets. While emerging markets represent a growth market for

power generation, transmission products and systems, the Sector’s activities in these markets expose it to risks associated with economic, financial and political disruptions. These factors could result in lower demand or affect customers’ abilities to pay.

While the Sector historically competed primarily with large industrial companies from industrialized 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 competition consists of a relatively small number of equipment manufacturers, some with very strong positions in their domestic markets, as well as a large number of engineering, procurement and construction contractors. 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 have historically been mainly focused on their large home market, but they have begun to evolve from local to international suppliers. Korean engineering and procurement companies offer a large range of products and solutions, and position themselves as one-stop-shops that offer customer solutions from a single supplier. In instrumentation and controls, ABB and Emerson Electric are the Division’s principal competitors.

The principal competitors in the onshore market served by the Wind Power Division are Enercon, Gamesa, General Electric, Goldwind, REpower and Vestas. In the offshore market the principal competitors are Alstom, Areva and REpower. Furthermore, Vestas and Mitsubishi Heavy Industries have announced that they are going to combine their individual capabilities to also enter this market segment. 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 wind power industry suffers from overcapacity and is widely 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 broader market and some with a regional focus, playing key roles.

The primary competitors of the Power Transmission Division are ABB with its Power Products and Power Systems divisions and the Grid division of Alstom. A few notable manufacturers such as Toshiba, China XD Group or Crompton Greaves in certain regions and niche specialists (e.g., TBEA) represent another group of competitors. International competition is increasing from manufacturers in emerging countries such as China, India and Korea.

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 SFS, financing to assist customers in purchasing the Sector’s products.

The following table provides key financial data for the Healthcare Sector.


		Year ended September 30, 2013
Total revenue		€13.621 billion
External revenue		€13.598 billion
External revenue as percentage of Siemens revenue		17.92%
Sector profit		€2.048 billion

The following chart provides a geographic breakdown of the Healthcare Sector’s external revenue in fiscal 2013.

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The Healthcare Sector includes four Divisions: Imaging & Therapy Systems, Clinical Products, Diagnostics and Customer Solutions. The Sector also includes one sector-led Business Unit, Audiology Solutions. In addition to its Sector-level financial results, Healthcare also separately breaks out financial results for the Diagnostics Division.

The Imaging & Therapy Systems Division provides large-scale medical devices for diagnostic imaging and for image-guided therapies. Imaging equipment includes computed tomographs, magnetic resonance imaging equipment, angiography systems for diagnostics, and positron emission tomography. Siemens is the market leader in these fields. Image-guided therapies mainly comprise angiography systems for minimally invasive procedures and computed tomographs in radiation therapy planning. By increasing the synergy between imaging equipment and therapy solutions, the Division aims to help healthcare providers achieve better results with more efficient processes.

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 cost-efficient, 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 detecting and managing disease and conducting patient risk assessments. The Division’s product portfolio represents a comprehensive range of diagnostic testing systems and consumables, including offerings for clinical chemistry and immunodiagnostics, molecular diagnostics (i.e., testing for nucleic acids), hematology, hemostasis, microbiology, point-of-care testing and clinical laboratory automation solutions.

The Customer Solutions Division provides healthcare information technology (HIT) systems. It is responsible for the Sector’s service business and customer relationship management on a global level. HIT supports users in connection with their tasks in the clinical, administrative and financial workflow to support efficient, safe and quality patient care delivery. The portfolio is comprised of integrated financial and clinical systems, electronic health record and health information exchange as well as an expanding offering of systems optimization services. The service business is intended to leverage the Sector’s installed base of imaging and diagnostics systems worldwide. In particular, the Division’s experience in remote and proactive services, innovative service and educational offerings, and logistics processes is intended to differentiate it from competition and drive process efficiency. The Division also manages the global sales force of the Sector and defines the regional go-to-market approach to support a diverse customer base with solutions for patient care.

The sector-led Business Unit, Audiology Solutions, provides hearing aids.

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 its in-house sales staff, which is grouped in its Customer Solutions Division, supported by dedicated product specialists. In some countries, the Sector also uses dealers, particularly for the sale of low-end products (such as low-end ultrasound and X-ray equipment). The Sector’s products are serviced primarily by its own dedicated personnel.

Because 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.

Under regulations passed as part of the U.S. Affordable Care Act, which became effective at the beginning of calendar year 2013, the U.S. medical technology industry is subject to an excise tax on certain medical devices. Currently, this tax impacts our diagnostics and imaging businesses.

In fiscal 2013, the Healthcare Sector continued implementing “Agenda 2013”, a global initiative launched in fiscal 2012 to increase its innovative capacity and competitiveness. “Agenda 2013” is the Sector’s proactive response to the challenges emerging from a changing market environment. To meet these challenges, “Agenda 2013” provides for measures targeting innovation, regional presence, competitiveness, and human resource development. These measures 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 and a related research and development and sales cooperation with Varian Medical Systems. In addition, “Agenda 2013” includes a program to improve the cost position in the Diagnostics Division. For further information, see Item 5: Operating and financial review and prospects—Fiscal 2013 compared to fiscal 2012—Segment information analysis—Healthcare.

The Healthcare Sector has cooperation agreements with various companies, including Bruker, Toshiba, Hitachi, KuKa, Volcano, Thales, Philips, Biosense Webster, Esaote, ViiV Healthcare, Tocagen, Sysmex and Thermo Fisher Scientific.

The Healthcare Sector’s principal competitors in medical imaging are General Electric, Philips, Toshiba, Hitachi and Hologic. Other competitors include Roche, Abbott, Danaher, Alere, bioMérieux and Sysmex for in-vitro diagnostics, McKesson, Cerner and Allscript for healthcare information technology systems and Sonova, GN Resound and William Demant 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.

INDUSTRY

The Industry Sector offers a broad spectrum of products, services and solutions that help customers use resources and energy more efficiently, improve productivity, and increase flexibility. The Sector’s integrated technologies and holistic solutions primarily address industrial customers, particularly those in the process and manufacturing industries. The portfolio spans industry automation, industrial software, drive products and services, system integration, and solutions for industrial plant businesses. The Sector has further strengthened its industrial software business with the acquisition of LMS International NV (LMS), which was completed in fiscal 2013.

The following table provides key financial data for the Industry Sector.


		Year ended September 30, 2013
Total revenue		€18.586 billion
External revenue		€16.943 billion
External revenue as percentage of Siemens revenue		22.33%
Sector profit		€1.478 billion

The following chart provides a geographic breakdown of the Industry Sector’s external revenue in fiscal 2013.

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The Industry Sector consists of three Divisions: Industry Automation, Drive Technologies and Customer Services. The Sector also includes a sector-led Business Unit, Metals Technologies. In addition to its Sector-level financial results, Industry also breaks out financial results for the Industry Automation Division and the Drive Technologies Division. Financial results relating to the Customer Services Division are included in results for Industry Automation, Drive Technologies and Metals Technologies. In the first quarter of fiscal 2013, the Sector announced its plan to dispose of its business of mechanical, biological and chemical water treatment and processing. During the fourth quarter of fiscal 2013, this business fulfilled the requirements to be reported as discontinued operations. Results for prior periods are reported on a comparable basis. In November 2013, Siemens announced the sale of this business. The transaction is subject to regulatory approval.

The Industry Automation Division offers a range of standard products and system solutions for automation technologies used in the manufacturing and process industries. As one of the leading providers of industry software, the Division can help manufacturing companies optimize their entire value chain: from product design and development, through production, to sales and service. The Division’s offerings include automation systems and software, motor controls, machine-to-machine communication products, sensors, product and production lifecycle management products, and software for simulating and testing mechatronic systems. In fiscal 2013, the Division acquired LMS, a provider of mechatronic simulation software that expands and complements the Division’s product lifecycle management portfolio. As noted above, the divestment of the mechanical, biological and chemical water treatment and processing business was decided in fiscal 2013 and this business is reported as discontinued operations for all periods covered in this annual report. The sale of this business, which is subject to regulatory approval, was announced in November 2013.

The Drive Technologies Division offers products and comprehensive systems across the entire drive train. These offerings are customized to the respective application and include numerical control systems, inverters, converters, motors (geared and gearless), drives and couplings. In addition, Drive Technologies supplies integrated automation systems for machine tools and production machines. The Division also offers integrated lifecycle solutions and services for industries such as shipbuilding, cement, mining, and pulp and paper. With its e-Car business, the Division develops motors and inverters for electric cars.

The Customer Services Division offers a comprehensive portfolio of services and supports industrial customers in their efforts to increase their productivity. The portfolio includes product-related services and software solutions like condition monitoring designed to enhance the reliability, profitability, efficiency and environmental performance of industrial plants.

The Sector-led Metals Technologies Business Unit offers engineering and plant-building services for the iron and steel industry, and 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 environmental systems.

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 worldwide, including in emerging markets, especially those in the Asia, Australia region, which Sector

management believes to have 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 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. In recent years, material costs have been subject to significant price volatility 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.

Product lifetimes in the Sector’s product businesses typically range from three to twenty years from introduction. Lifecycles tend to be shorter for products in which 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 investment. The Industry Sector can be strongly affected by economic cycles, because markets for some of its business activities tend to react very quickly to changes in the overall economic environment. This pattern includes many of the business activities of the Industry Automation Division and those business activities of the Drive Technologies Division that serve customers in the manufacturing industries. The markets for other business activities within the Sector generally show a more delayed response to changes in the overall economic environment. This pattern includes those business activities of the Drive Technologies Division that serve customers in process industries, the energy and the infrastructure sector and activities of the Metals Technologies Business Unit.

Competitors of the Industry Sector can be grouped into two categories: 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, Schneider Electric and Rockwell. 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.

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 Systèmes 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, Yaskawa, WEG and SEW. The main competitors of the Metals Technologies Business Unit are Danieli and SMS.

Asian competitors are generally focused on large-scale production and cost-cutting. European and U.S. competitors are typically 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, customer budget constraints and rapid technical progress within the industry continue to cause significant downward pressure on prices. In addition, competitors continue to shift their production to low-cost countries.

INFRASTRUCTURE & CITIES

The Infrastructure & Cities Sector offers a wide range of technologies for increasing the sustainability of 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. While the Sector has decided to divest its airport logistics and postal automation business, it has acquired the rail automation business of Invensys Invensys to expand and complement its rail automation business.

The following table provides key financial data for the Infrastructure & Cities Sector:


		Year ended September 30, 2013
Total revenue		€17.879 billion
External revenue		€17.128 billion
External revenue as percentage of Siemens revenue		22.57%
Sector profit		€306 million

The following chart provides a geographic breakdown of the Infrastructure & Cities Sector’s external revenue in fiscal 2013.

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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 combined and reported together as the results of the Sector’s Transportation & Logistics Business. Financial results of the Divisions Low and Medium Voltage and Smart Grid are combined and reported together as the Sector’s Power Grid Solutions & Products Business.

The Rail Systems Division comprises Siemens’ rail vehicle business, encompassing the entire spectrum of rolling stock—including high-speed trains, commuter trains, passenger coaches, metros, people movers, light rail vehicles, locomotives, bogies, traction systems and rail-related services. The Division combines its expertise in the fields of mass transit, regional and long-distance transportation, driverless systems, traction systems, bogies and onboard power supplies in order to offer comprehensive know-how for sustainable, efficient and reliable rail vehicles.

The Mobility and Logistics Division primarily provides products, solutions (including IT solutions) and services for rail transportation operating systems, such as central control systems, interlockings and automated controls. The Division also provides offerings for road traffic, including traffic detection, information and guidance systems. In fiscal 2013, the Division announced its plans to divest its airport logistics business for cargo tracking and baggage handling and its postal automation business for letter and parcel sorting. In fiscal 2013, the Division acquired the rail automation business of Invensys, which has a leading position as provider of signal services and rail control and communication solutions.

The Low and Medium Voltage Division supplies electrical grid operators, large industrial electricity consumers and construction markets with medium and low-voltage electrical power equipment. Furthermore, the Division provides products, systems and services for distributing electrical power from high-voltage transmission grid access to medium or low-voltage grids and for directing electrical power to end consumers and their access points. Medium voltage equipment includes distribution switchgear, control gear, circuit breakers and components for distributing and switching of electrical power coming from the high voltage transmission grid to the medium voltage distribution grid and within the medium voltage grid itself. The low voltage portfolio consists of power distribution boards, busbar trunking systems, distribution boards and terminal blocks, as well as products for protecting, switching, measuring and monitoring devices and socket outlets.

The Smart Grid Division provides energy automation solutions, smart grid applications, transmission and distribution services and rail infrastructure electrification solutions for mainline and mass transit applications. In addition, the Division offers meter data management solutions and services relating to the planning of electric network grids and the operation and maintenance of transmission and distribution products, systems and solutions.

The Building Technologies Division offers products, services and solutions for commercial, industrial, public and residential buildings. Primary applications include building operation and automation, comfort, safety and security. In addition, the Division offers energy solutions and energy management services aimed at improving a building’s energy cost, reliability, comfort and performance, while minimizing its impact on the environment. The Division’s offerings include heating and ventilation controls, security systems and devices for intruder detection, video surveillance and building access control, total room automation systems, and fire safety solutions for fire detection, protection alarms and non-water-based fire extinguishing.

Until the end of fiscal 2013, the Infrastructure & Cities Sector also held the Atos shares, which Siemens received following the sale of Siemens IT Solutions and Services to AtoS. Due to a change in management responsibility related to Siemens’ shares in AtoS, the shares have been included within Equity Investments since the beginning of fiscal 2014.

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, third-party distributors, panel builders, original equipment manufacturers, value added partners, installers and general contractors.

Overall, the Sector’s principal customers are industrial, infrastructure and public customers in a broad range of markets, including construction and real estate, transportation and logistics and utilities. 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 those in the Low and Medium Voltage Division. Business activities that are generally affected later by changes in the overall economic environment include those in the Smart Grid and Building Technologies Divisions. The development of markets served by our Divisions Rail Systems, Mobility and Logistics and parts of Smart Grid is driven primarily by public spending. Customers of these Divisions usually have multi-year planning and implementation horizons, and their contract tenders therefore tend to be independent of short-term economic trends.

The Sector is active worldwide, including in 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 this region expose it to risks associated with economic, financial and political disruptions that could result in lower demand or affect customers’ abilities to pay. The large size of some of the Sector’s projects occasionally exposes it to risks relating to technical performance or specific customers, regulations or countries. In the past, the Sector has experienced significant losses on individual projects in connection with such risks, primarily at the Divisions Rail Systems and Mobility and Logistics. For additional information on these risks, see Item 3: Key information—Risk factors.

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 STS, Bombardier and General Electric. The primary competitors of the Low and Medium Voltage Division are ABB, Eaton 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 providers, and competitors in the service field often include small local players.

EQUITY INVESTMENTS

In general, the segment Equity Investments comprises equity stakes held by Siemens that are either accounted for by the equity method, at cost or as current available-for-sale financial assets and for strategic reasons are not allocated to a Sector, SFS, Centrally managed portfolio activities, SRE, Corporate items or Corporate Treasury.

The main investments within Equity Investments are:

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A 50% stake in BSH Bosch und Siemens Hausgeräte GmbH (BSH), Germany: BSH is a leading manufacturer of household appliances, offering an extensive range of innovative products tailored to customer needs and global megatrends alike. BSH was founded in 1967 as a joint venture between Robert Bosch GmbH, Germany and Siemens.

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A 17% stake in OSRAM Licht AG (OSRAM), Germany: OSRAM, formerly wholly owned by Siemens, is a leading lighting manufacturer. Its portfolio covers the entire value chain from components to electronic control gears as well as complete luminaires, light management systems and lighting solutions. Effective July 5, 2013, Siemens spun off OSRAM. The spin-off was made on the basis of the Spin-Off and Transfer Agreement dated November 28, 2012, authorized by the Annual Shareholders’ Meeting of Siemens AG on January 23, 2013. With the spin-off, Siemens shareholders received one OSRAM share per ten Siemens AG shares. A total of 80.5% of the OSRAM shares became widely held shares. Following the spin-off, a further 2.5% of the shares were transferred to the Siemens Pension Trust e.V. For further information, see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 4.

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A 49% stake in Enterprise Networks Holdings B.V. (EN), Netherlands: EN is a provider of open communications, network and security solutions to enterprise customers, founded in fiscal 2008 as a joint venture between The Gores Group, U.S. and Siemens.

In the fourth quarter of fiscal 2013, Siemens closed the sale of its 50% stake in Nokia Siemens Networks Holding B.V. (NSN), a leading supplier in the telecommunications infrastructure industry, to the other shareholder, Nokia Corporation.

Due to a change in management responsibility related to Siemens’ shares in AtoS, the shares, which were held by the Infrastructure & Cities Sector until the end of fiscal 2013, are included within Equity Investments effective with the beginning of fiscal 2014.

For additional information on investments held in Equity Investments and the sale of our share in NSN, see Item 5: Operating and financial review and prospects—Fiscal 2013 compared to fiscal 2012—Segment information analysis—Equity Investments, Item 7: Major shareholders and related party transactions—Related party transactions, as well as Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 4.

FINANCIAL SERVICES (SFS)

Financial Services provides a variety of financial services and products to other Siemens units and their customers and to third parties. SFS has three strategic pillars: supporting Siemens units with finance solutions for their customers, managing financial risks of Siemens and offering third-party finance services and products. Financial Services intends to grow its business in a profitable, controlled manner.

The following table provides key financial data for SFS:


	Year ended September 30, 2013
Total assets		€18.661 billion
Total assets as percentage of Siemens assets		18.31%
Income before income taxes		€409 million

SFS’ business can be divided into capital business and fee business. While capital business predominantly relates to financial assets on SFS’ statements of financial position generating income from customers of Siemens’ Sectors and other third parties, fee business mainly comprises internal services provided to Siemens. SFS conducts its business through seven Business Units, one Business Segment (Venture Capital) and two functions: Corporate Pensions and Trade Finance Advisory.

The Commercial Finance Business Unit offers a comprehensive range of solutions for equipment financing, leasing, rental and related financing for equipment supplied by Siemens or third-party providers.

The Project & Structured Finance Energy; Project, Structured & Leverage Finance Healthcare and Project & Structured Finance Infrastructure and Cities & Industry Business Units offer a broad range of project & structured financing solutions. Their offerings comprise debt financing, equity participations and financial advisory services. In addition, the Project, Structured & Leveraged Finance Healthcare Business Unit offers leveraged solutions across all Siemens businesses.

These four Business Units each have a global mandate. The focus of their activities is directly or indirectly related to Siemens Sectors’ businesses, predominantly in the energy, healthcare, industry and infrastructure markets. Their customers comprise Siemens Sector customers as well as third-party vendors. The Business Units serve customers of all sizes including small- and medium-sized enterprises, corporations and public sector organizations.

The Venture Capital Business Segment’s main task, together with Siemens’ Sectors, is to identify and finance young companies worldwide during their start-up phase, thereby helping Siemens’ Sectors to access new technological solutions and tap new markets.

The Treasury Business Unit operates the global Corporate Treasury of the Siemens Group, with SFS employees thereby managing liquidity, cash and financial risks (interest, foreign exchange, commodities) on behalf of Corporate Treasury.

The Financing & Investment Management Business Unit manages fee-based receivables and offers investment management services. SFS operates the Credit Warehouse, i.e., it is engaged in the process of monitoring and warehousing short-term trade receivables originated by the operating units and partially transferred to Corporate Treasury. The investment management services focus on pension asset management for Siemens as well as selected external clients.

The Insurance Business Unit acts primarily as an insurance broker for Siemens and external customers. The Business Unit supports Siemens and non-affiliated companies in all insurance-related matters such as claims management as well as risk transfer to insurance and financial markets, including structured solutions using own re-insurance capacities. It also acts as broker of selected Siemens-financed insurance policies for employees.

SFS’ products and services are provided through a network of companies, located throughout Europe (including Russia), Asia Pacific (including China and India) and North America, comprising non-regulated, partially or fully regulated entities, such as Siemens Bank GmbH. Siemens Bank GmbH’s banking license, which was granted by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin), covers engaging in loan and guarantee business as well as in deposit taking and enables access to the deposit and refinancing facilities of the Deutsche Bundesbank. In its transactions with Siemens and third parties, SFS observes international banking industry standards, where applicable.

SFS’ main sources of risk are associated with its external credit exposure and its equity portfolio. For further information, see Item 3: Key information—Risk factors.

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, Société Générale Equipment Finance and Sumitomo Mitsui Financial Group. Particularly in the commercial finance business, SFS’ competitors are often local financial institutions and competition therefore varies from country to country.

ITRSHRA DISCLOSURE

The Iran Threat Reduction and Syria Human Rights Act of 2012

The Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA) added a new Section 13(r) to the Securities Exchange Act of 1934 that requires Siemens to disclose in this report whether it or any of its

affiliates engaged during fiscal 2013 in certain Iran-related activities. ITRSHRA requires Siemens to disclose these Iran-related activities even if they were permissible under US law or engaged in by a non-US affiliate of Siemens in accordance with applicable local law.

Siemens Export Control Guidelines

Siemens actively employs systems and procedures designed to ensure Siemens’ compliance with ITRSHRA and other economic sanctions and export control programs, which are set out in Siemens’ Export Control and Customs Guidelines (the “Export Control Guidelines”). The Export Control Guidelines reflect the requirements of U.S., German and European Union economic sanctions and export control regulations, and also include additional internal restrictions. For example, under the Export Control Guidelines, neither Siemens nor any of its affiliates is permitted to conduct any business with any entity listed on the Office of Foreign Assets Control’s Specially Designated Nationals (SDN) List and designated with the codes “SDGT” or “NPWMD”. Siemens automatically electronically screens all actual and potential business partners, and if any partner fails the initial screening, all transactions with that partner are automatically blocked and can only be released by a Siemens export control officer if it is ultimately determined that the partner should not have failed the screening.

Siemens Iran Activities

As a globally-operating organization, Siemens also has limited business with customers in Iran. Siemens’ activities in Iran have been insignificant relative to its size (in the aggregate substantially less than 1% of its gross revenue and net profit in fiscal 2013).

Siemens intends to continue the process of withdrawing from its remaining business in Iran. As part of this process, certain of the remaining Iran-related activities of Siemens described below are coordinated through Siemens SSK, an affiliate of Siemens AG, that has an office in Tehran, Iran. While Siemens SSK was not engaged in Iran-related activities during fiscal 2013 that have to be reported under the ITRSHRA, Siemens SSK paid taxes, utilities, and other fees owed to Iranian government agencies in the ordinary course of business.

The information below is to the best of Siemens’ knowledge, and Siemens is not aware of any potentially reportable sales by third-party-owned distributors of Siemens-provided products other than as set forth for transactions in the Healthcare Sector below.

In fiscal 2012 the effects of the sanctions imposed on Iran triggered a change in accounting estimate. Due to this change the fiscal 2013 net profit figures reported under the individual contracts described below are not representative of these contracts’ overall profitability. For more information on the accounting for these contracts, see Item 5: Operating and financial review and prospects—Fiscal 2012 compared to fiscal 2011—Adjustments for long-term contracts with customers in Iran.

INFRASTRUCTURE AND CITIES

In November 2012, Siemens S.A.S., a French affiliate of Siemens AG, pursuant to a prior framework agreement with a French company (the “Customer”), repaired an Iran Air smoke detector that it had sold to the Customer, which was subsequently resold by the Customer to Iran Air. In fiscal 2013, gross revenue attributable to the repair was approximately €2,200, and net profit was approximately €1,500.

In fiscal 2013, Siemens AG delivered 23 diesel electric locomotives to Iran Power Plant Projects Management Co., a private Iranian company, for resale to the Islamic Republic of Iran Railways, the official railway of the Government of Iran. In fiscal 2013, gross revenue attributable to this activity was approximately €41,282,000. Revenue for this activity has been recognized only to the extent of contract costs incurred. Therefore a net profit of €0 was realized in fiscal 2013 for this activity.

ENERGY

In fiscal 2013, Siemens AG delivered two oil units and three control panels to Hampa Engineering Co., a private Iranian company, for onsale to Lordegan Urea Fertilizer Co., also a private Iranian company. In fiscal 2013, gross revenue attributable to this activity was approximately €937,000, and net profit was approximately €722,000.

In fiscal 2013, Siemens AG delivered one synthesis gas train to Kaveh Methanol Co., a private Iranian company. In fiscal 2013, gross revenue attributable to this activity was approximately €15,293,000. During fiscal 2013 we received payments from the customer which, due to the change in accounting estimate referred to above, resulted in a disproportionately high net profit of approximately €13,740,000.

HEALTHCARE

In fiscal 2013, Siemens AG, either directly or through its affiliates, delivered certain medical equipment, including an ultrasound device, CT scanners, an MRI and related accessories and x-ray systems and related accessories, and provided related spare parts and maintenance services, hearing aids and diagnostic reagents, in certain cases through private Iranian or non-Iranian distribution partners, to end customers that included certain Iranian state hospitals, universities and other state-funded health organizations and centers.

In the aggregate for fiscal 2013, gross revenue and net profit attributable to these Iran-related activities in the Healthcare sector were approximately €7,535,800 and €573,490, respectively.

Fiscal 2014 and Beyond

As previously disclosed, Siemens has decided that, subject to certain limited exceptions and in compliance with applicable law, it will not enter into new contracts with customers in Iran and has issued group-wide policies establishing the details of its general decision. In the beginning of calendar year 2012, Siemens resolved to amend its already existing policies to provide that no new business with respect to products and services destined to maintain the installed base in Iran’s energy sector (e.g. deliveries of spare parts, maintenance and assembly services) may be entered into under any circumstances. In addition, outside the energy sector, products and services for the installed base in Iran may be provided only in strictly limited circumstances when the proposed sale can be demonstrated to serve humanitarian purposes and the public welfare. Consistent with these policies and with respect to the activities described above, Siemens intends to continue the process of withdrawing from its remaining business in Iran, including by not entering into new business with Iran or providing products or services to maintain the installed base of Siemens-provided products in Iran, except as required by contractual obligations or for humanitarian or public welfare reasons, such as supplying life-saving medical equipment or critical spare parts for public services installations, provided such sales continue to be permissible under applicable export control and economic sanctions laws and regulations.

For additional information, see Item 3: Key Information—Risk factors.

EMPLOYEES AND LABOR RELATIONS

The following tables show the division of our employees by segments and geographic region as of September 30 for each of the years shown. Part-time employees are included on a proportionate basis.


	As of September 30,
Employees by segments⁽¹⁾	2013		2012		2011
	(in thousands)
Energy		84		87		82
Healthcare		52		51		51
Industry		100		101		98
Infrastructure & Cities		90		89		87
Financial Services		3		3		3
Other⁽²⁾		35		36		35

Total		362		366		355

(1)	Continuing operations.

(2)	Includes employees in corporate functions and services and units not allocated to any Sector or Financial Services.


	As of September 30,
Employees by geographic regions⁽¹⁾	2013		2012		2011
	(in thousands)
Europe, C.I.S., Africa, Middle East		220		222		217
therein Germany		118		119		116
Americas		78		81		78
therein U.S.		53		54		52
Asia, Australia		64		63		59
therein China		32		30		29

Total		362		366		355

(1)	Continuing operations.

During 2013, we had an average of 38,000 temporary employees in our continuing and discontinued operations.

A significant percentage of our manufacturing employees, especially in Germany, are covered by collective bargaining agreements determining working hours and other conditions of employment, and are represented by works councils. Works councils have numerous rights to notification and of codetermination in personnel, social and economic matters. Under the German Works Constitution Act (Betriebsverfassungsgesetz), works councils are required to be notified in advance of any proposed employee termination, they must confirm hiring and relocations and similar matters, and they have a right to codetermine social matters such as work schedules and rules of conduct. Management considers its relations with the works councils to be good.

During the last three years, we have not experienced any labor disputes that significantly affected our operations.

ENVIRONMENTAL MATTERS

In each of the jurisdictions in which we operate, Siemens is subject to national and local environmental and health and safety laws and regulations that affect our operations, facilities, products and, in particular, our former nuclear power generation business. These laws and regulations impose limitations on the discharge of pollutants into the air, soil and water and establish standards for the treatment, storage and disposal of solid and hazardous waste. Whenever necessary, remediation and clean up measures are implemented and budgeted accordingly. Because of our commitment to protecting and conserving the environment and because we recognize that

leadership in environmental protection is an important competitive factor in the marketplace, we have incurred significant costs to comply with these laws and regulations and we expect to continue to incur significant compliance costs in the future.

In 1994, we closed a site in Hanau, Germany, which we had used for the production of uranium and mixed-oxide fuel elements. A smaller related site in Karlstein, where we operated a nuclear research and service center, was closed in 1989. We are in the process of cleaning up both facilities in accordance with the German Atomic Energy Act (Atomgesetz). We have developed a plan to decommission the facilities that involves the following steps: clean-out, decontamination and disassembly of equipment and installations, decontamination of the facilities and buildings, sorting of radioactive materials and intermediate and final storage of radioactive waste. This process will be supported by ongoing engineering studies and radioactive sampling under the supervision of German federal and state authorities. We expect that the process of decontamination, disassembly and final waste conditioning of radioactive waste will continue until 2018. We will be responsible for storing the material until the government-developed storage facility becomes available. With respect to the Hanau facility, the process of setting up intermediate storage for radioactive waste has neared completion and the facility has been released from the scope of application of the German Atomic Energy Act so that its further use is unrestricted under that Act. However, the State of Hessen still requires us to monitor the ground water until uranium levels consistently meet targets set by the State. The ultimate costs of this project will depend, in part, on where the government-developed storage facilities will be located and when they become available. We set up a provision with respect to this matter, which as of September 30, 2013 amounted to €1,096 million. This provision is based on a number of significant estimates and assumptions as to the ultimate costs of this project. Several parameters relating to the development of a final storage facility for radioactive waste were specified based on the so called Schacht Konrad final storage. Parameters related to the life-span of the German nuclear reactors reflect a planned phase-out until 2022. For additional information on our asset retirement obligations attributable to environmental clean-up costs, see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 24.

Some of our products are subject to the Directive 2002/95/EC of the European Parliament and of the Council on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (the RoHS Directive). The RoHS Directive bans the use of certain hazardous substances in electrical and electronic equipment. We are in compliance with current requirements under the RoHS Directive.

In 2011 the EU Commission published Directive 2011/65/EU (the RoHS II Directive) which replaced the RoHS Directive and, after national transposition, will lead inter alia to changes in the future scope of the ban to encompass use of certain hazardous substances in electrical and electronic equipment (e.g., inclusion of medical equipment by July 2014) and the requirement for manufacturers to declare the conformity of products with the Directive. During the review process, the exemptions from the RoHS Directive were also amended. We are currently adapting our business processes to the relevant changes of the RoHS II Directive, taking into consideration the timeline defined in the RoHS II Directive.

The EU Commission’s recent review of Directive 2002/96/EC on Waste Electrical and Electronic Equipment (the WEEE Directive) resulted in publication of new Directive 2012/19/EU (the new WEEE Directive). Within the next five years the scope of this new WEEE Directive will remain comparable to the existing WEEE Directive. After this period, additional requirements could result from the inclusion of photovoltaic panels into the scope of the new WEEE Directive. Due to the phase out of our solar business, we currently do not expect to incur substantial costs as a result of these additional requirements.

Restrictions on the use of certain substances comparable to those of the RoHS Directive and of the WEEE Directive remain under discussion in several other countries, such as the U.S., Australia, Argentina, Brazil, China and South Korea.

We are also subject to the Regulation (EC) No 1907/2006 of the European Parliament and of the Council concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), which is entering into force in various steps over an approximate 15-year period that began in 2007. We have not incurred substantial costs to-date to comply with the REACH regulation. We plan to implement any additional measures which may be necessary for us to comply with possible future enhancements of this regulation.

The experience of the last three years has shown that neither the Directive 2004/35/EC of the European Parliament and of the Council on Environmental Liability with Regard to the Prevention and Remediation of Environmental Damage nor the applicable remediation measures for damage to protected species and natural habitats, have had any impact on Siemens to-date. Nevertheless we continue to maintain insurance coverage for these risks, which is available in the market.

It is our policy to comply with environmental requirements and to provide workplaces for employees that are safe, environmentally sound, and that do not adversely affect the health or environment of their communities. Compliance with environmental requirements is also a focus of the environmental process reviews we conduct. In remediation of the results of recent environmental process reviews additional cost for the implementation and operation of R&D, production and modified logistic processes may be incurred in future periods. Taking such remediation measures into account, we believe that we are in substantial compliance with all relevant environmental and health and safety laws and regulations. However, there is a risk that we may incur expenditures significantly in excess of our expectations to cover environmental liabilities, to maintain compliance with current or future environmental and health and safety laws and regulations and/or to undertake any necessary remediation.

ENVIRONMENTAL PORTFOLIO


	Year ended September 30,
Indicators⁽¹⁾	2013		2012
Revenue generated by the Siemens Environmental Portfolio (in billions of €)		32.3		32.7
Accumulated annual customer reductions of carbon dioxide emissions generated by elements from the Siemens Environmental Portfolio (in millions of metric tons)		377		333

(1)	Continuing operations.

Our Environmental Portfolio serves as an example of how we strive to align our business activities with the aforementioned megatrends, in this case climate change. The Environmental Portfolio consists of products, systems, solutions and services (Environmental Portfolio elements) that reduce negative impacts on the environment and emissions of carbon dioxide and other greenhouse gases (defined together in the following as carbon dioxide emissions) responsible for climate change.

In addition to its environmental benefits, our Environmental Portfolio enables us to compete successfully in attractive markets and generate profitable growth. In fiscal 2013, revenue from continuing operations from the Environmental Portfolio amounted to €32.3 billion, which accounted for 43% of our revenue from continuing operations in this fiscal year. This revenue includes revenue from newly developed and additionally qualified elements, and excludes revenue from elements that no longer fulfill our qualifications.

In fiscal 2010, we set ourselves a revenue target for the Environmental Portfolio within the One Siemens framework: to exceed €40 billion in revenue from the Environmental Portfolio by the end of fiscal 2014. Due to recent and ongoing portfolio changes it is no longer likely that we will achieve this target purely with our own operations by the end of fiscal 2014. Siemens’ strategic focus on technologies for energy efficiency and climate and environmental protection will nevertheless remain in place. For fiscal year 2013, more than two-thirds of the revenue from our Environmental Portfolio were already generated with products and solutions for energy efficiency.

With our Environmental Portfolio, we intend, among other things, to help our customers reduce their carbon dioxide footprint, cut their energy costs and improve their profitability through an increase in productivity. Taking together all elements of the Environmental Portfolio that were installed at customer locations since the beginning of fiscal 2002 and remain in use today, we have reduced customer carbon dioxide emissions by 377 million metric tons in fiscal 2013, which is the equivalent of the following twelve cities’ combined yearly emissions: Berlin, Cape Town, London, Los Angeles, Melbourne, Mexico City, Moscow, New York City, São Paulo, Seoul, Singapore and Tokyo.

REPORTING PRINCIPLES

We report the revenue from our Environmental Portfolio and annual customer reductions of carbon dioxide emissions generated by it in accordance with internal regulations defined in our Environmental Portfolio Guideline. This Guideline is based on the Reporting Principles of the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, revised edition, and the Greenhouse Gas Protocol for Project Accounting. Both of these standards are published by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).

The principles underlying these standards are relevance, completeness, consistency, transparency, accuracy and conservativeness. As there are currently no accepted international standards for identification and reporting of so-called green products, we are engaging in standardization activities with external organizations. The revenue generated by the Environmental Portfolio is recognized in accordance with revenue recognition policies as described in Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 2.

GOVERNANCE—PROCESSES AND DEFINITIONS

The qualification of Environmental Portfolio elements as well as their respective reporting is based on defined processes and criteria. In principle, any product, system, solution or service of Siemens’ continuing operations may qualify for the Environmental Portfolio. The business portfolio of Siemens’ continuing operations is reviewed annually regarding the qualification of Environmental Portfolio elements based on the criteria described below. This covers the inclusion of newly developed elements as well as the integration of additionally qualified elements where evidence of fulfillment of the qualification criteria was not available in prior reporting periods. For additionally qualified Environmental Portfolio elements, we report their prior-year revenue and prior-year contribution to reducing customer carbon dioxide emissions on a comparable basis. Elements that no longer fulfill our qualification criteria are excluded from our Environmental Portfolio.

Prior to inclusion in the Environmental Portfolio, potential new Environmental Portfolio elements have to undergo a multilevel internal evaluation process. Our Sustainability Board annually acknowledges changes in the composition of the Environmental Portfolio. A further task of the Sustainability Board is to discuss potential concerns of stakeholders with regard to the inclusion or deletion of certain technologies in the Environmental Portfolio.

CRITERIA FOR INCLUSION OF ENVIRONMENTAL PORTFOLIO ELEMENTS

An Environmental Portfolio element can be a product, a system, a solution or a service as defined above. Furthermore, a core component of a system or solution may qualify as an Environmental Portfolio element if the component provided by Siemens is key to enabling environmental benefits resulting from the system’s or solution’s overall application. To qualify for inclusion in the Environmental Portfolio, an element must meet one of the selection criteria described below, which are energy efficiency, renewable energy or environmental technologies. Products, systems, solutions and services with planned application in military use or nuclear power are not included in the Environmental Portfolio.

•

Energy efficiency: The criteria for energy efficiency are an improvement in energy efficiency of 20% or more during the customer use phase compared to the applicable baseline, or a reduction of at least 100,000 metric tons of carbon dioxide equivalents per reporting period in the customer use phase. Examples of elements that meet the energy efficiency criterion are combined cycle power plants and intelligent building technology systems.

•

Renewable energy: This criterion covers technologies in the field of renewable energy sources such as wind turbines or smart grid applications and their respective core components.

•

Environmental technologies: This criterion is related to water and wastewater treatment, air pollution control, waste reduction, recycling, e-car infrastructure and its core components. It also includes the Siemens Consulting Service which analyzes customers’ environmental impact. Additionally, a criterion for the Healthcare Sector is an environmental impact reduction in terms of noise, radiation or total weight of at least 25% compared to the baseline.

BASELINE METHODS

Energy efficiency, annual customer reduction of carbon dioxide and environmental impact are all assessed by a comparison with a reference solution (baseline). There are three different options for the reference solution: before-after comparison, comparison with a reference technology or comparison with the installed base. The baselines are reviewed annually and, if necessary, adjusted, such as when statistical data on the installed base is updated because of technical innovations or regulatory changes. The calculation of the reduction of carbon dioxide emissions is based on a comparison for every relevant Environmental Portfolio element with a baseline. For this calculation, we focus on those elements that have a material impact on the overall carbon dioxide emissions reduction. For some emission reduction calculations, the baseline reference for the installed base is determined using known global emission factors such as those for power production. The baselines used for our calculations are mainly based on data of the International Energy Agency (IEA) for gross power production and for grid losses, on data from the Intergovernmental Panel on Climate Change (IPCC) for fuel-based emission factors, and our own assessments of power production efficiency. For consistency reasons, we generally apply global emission factors for calculating emission reductions.

REPORTING ESTIMATES

The inclusion of elements in the Environmental Portfolio is based on criteria, methodologies and assumptions that other companies and other stakeholders may view differently. Factors that may cause differences, among others, are: choice of applicable baseline methodology, application of global emission factors that may be different from local conditions, use patterns at customers that may be different from standard use patterns used for carbon dioxide abatement calculations and expert estimates if no other data is available.

To date, there is no applicable international standard that applies across companies for qualifying products, systems, solutions and services for environmental and climate protection, or for compiling and calculating the respective revenue and the quantity of reduced carbon dioxide emissions attributable to such products, systems, solutions and services. Accordingly, revenue from our Environmental Portfolio and the reduction of our customers’ annual carbon dioxide emissions may not be comparable with similar information reported by other companies. We report the annual carbon dioxide emissions reduction in the period of installation of the Siemens Environmental Portfolio element. The period of installation will be determined by milestones or based on estimated construction periods. This may differ from the timing of revenue recognition. Furthermore, we subject revenue from our Environmental Portfolio and the reduction of our customers’ annual carbon dioxide emissions to internal documentation and review requirements that are less sophisticated than those applicable to our financial information. We may change our policies for recognizing revenue from our Environmental Portfolio and the reduction of our customers’ annual carbon dioxide emissions in the future without prior notice.

As in previous years, we again commissioned an independent accounting firm with a limited assurance engagement to review the reported results for our Environmental Portfolio for fiscal 2013. This review was conducted in accordance with the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information. Nothing came to the attention of the independent accounting firm that would cause them to believe that the section Siemens Environmental Portfolio of the Environmental Portfolio Report—containing the revenue generated by the Environmental Portfolio and the annual customer reduction of carbon dioxide emissions attributable to it—has not been prepared, in all material respects, in accordance with the defined reporting principles.

PROPERTY

Siemens operates more than 290 major production and manufacturing plants in more than 35 countries worldwide, including facilities at certain joint ventures and associated companies. A major production and manufacturing plant is defined as a facility at the Business Unit level, in which raw or source materials are transformed into finished goods on a large scale by using equipment and production resources such as machines, tools, energy and labor. Around 140 major production and manufacturing plants are located in the region Europe, C.I.S., Africa, Middle East; around 80 major production and manufacturing plants are located in the region

Americas and around 70 major production and manufacturing plants are located in the region Asia, Australia. With around 100 major production and manufacturing plants, the Energy Sector accounts for the greatest proportion of these, followed by the Infrastructure & Cities Sector (around 80 major facilities), the Industry Sector (around 70 major facilities) and the Healthcare Sector (around 40 major facilities).

Siemens also owns or leases other properties including office buildings, warehouses, research and development facilities and sales offices.

Siemens’ principal executive offices are located in Munich, Germany.

We believe that our current facilities are in good condition and adequate to meet the requirements of our present and foreseeable future operations.

None of our properties are subject to mortgages and other security interests granted to secure indebtedness to financial institutions.

INTELLECTUAL PROPERTY

Siemens owns several thousand patents and has licenses covering its products and services worldwide. Research and development is a priority throughout Siemens on a Sector, Cross-Sector Business and Division basis. For a discussion of the main focus of the current research and development efforts of each Sector, see Item 4: Information on the Company—Research and development. Siemens also owns thousands of registered trademarks worldwide. None of the Company, the Sectors, SFS or the Divisions is dependent on any single patent, license or trademark or any group of related patents, licenses or trademarks for their respective operations.

RESEARCH AND DEVELOPMENT

RESEARCH AND DEVELOPMENT—ORGANIZATION AND STRATEGY

In fiscal 2013, we continued to focus on the following areas in research and development (R&D):

(1)

ensuring long-term future viability,

(2)

enhancing technological competitiveness, and

(3)

optimizing the allocation of R&D resources.

Our R&D activities are geared toward ensuring economically sustainable energy supplies and developing software solutions, which are essential to maintaining the long-term competitiveness of our Sectors. Accordingly, major focus areas include:

•

increasing the efficiency of renewable and conventional energy sources for power generation,

•

improving low-loss electricity transmission systems,

•

developing new solutions for smart grids, carbon dioxide separation systems for power plants, and technologies for storing energy from fluctuating renewable sources,

•

making medical imaging, in-vitro diagnostics, and healthcare IT an integral part of outcome oriented treatment plans, and

•

further development of industrial software to accelerate processes at every point along the value chain.

Another major focus is promoting more efficient energy use in buildings, industrial facilities, and the transport sector. Examples include the development of electric drives and mass transportation systems such as local and long-distance trains and subways.

Across all focus areas, we recognize the vital importance of sophisticated software solutions. This is true not just for the areas mentioned above but also in nearly all of the other fields in which Siemens is active. Siemens software was used, for example, to virtually develop, build, test, and continually optimize the Mars rover Curiosity, before it was built. Curiosity landed on Mars in August 2012.

R&D activities are carried out by both our Sectors and our Corporate Technology (CT) department. The Sectors focus their R&D efforts on the next generations of their products and solutions. In contrast, the aim of CT is to work with our operating units to develop the Group’s technology and innovation strategies, especially for the next generation of their products and solutions. In addition, CT helps secure our technological and innovational future.

CT is a worldwide network with primary locations in Germany, the U.S., China, Russia, India, and Austria. The more than 6,900 CT employees contribute their in-depth understanding of fundamental technologies, models, and trends, as well as their wealth of software and process expertise. CT strives to secure the technological and innovative future through commonly developed core technology initiatives such as future of automation, data to business or system integration. With its global network of experts, our corporate research unit serves as a strategic partner for Siemens’ operating units. CT makes important contributions along the entire value chain, from research and development to production technology, manufacturing processes, and the testing of products and solutions. CT is also networked with leading universities and research institutes worldwide. The principal objectives of these close collaborations with strong external partners are:

•

leveraging the potential of joint R&D projects,

•

establishing and further developing a network of universities and research institutes that Siemens closely cooperates with, as well as systematically enhancing communication with these institutions, and

•

strengthening Siemens’ attractiveness as an employer of choice for highly qualified young talents in scientific and technical disciplines.

Such new collaborative approaches are also a substantial part of our Open Innovation (OI) concept, in which we receive input from internal as well as external experts that significantly contributes to the innovative power of the Company. With OI we aim to overcome the barriers of silo thinking, to prove and truly leverage the potential of an open network enterprise. Since 2008, when the first OI project was launched, 35,000 employees from more than 80 countries have participated in nine internal OI pilot projects and our external efforts have mobilized more than 1,750 external solvers on 17 projects.

The technology fields addressed by OI cover all technological areas of Siemens. They include:

•

research on materials that help make our products more efficient;

•

the creation of IT platforms, IT security solutions, software architecture, technical systems, energy technologies, sensors, and electronic components; and

•

research into new solutions for system engineering, data analysis, automation and communication technologies, medical information systems, and imaging processes.

In addition, Siemens takes part in publicly funded research programs. The most important research areas include the development of sustainable technologies including recycling, the communication of machines, the creation of new materials and bio-technology.

CT offers extensive process and production consulting services for development and manufacturing units at Siemens. CT employs more than 4,400 software developers at locations in Asia, Europe, and the Americas. These specialists help our Business Units develop concepts from the initial idea to the finished product.

CT strategically handles the intellectual property of Siemens. Around 430 experts help the Company register patents and trademarks, establish them, and put them to profitable use.

RESEARCH AND DEVELOPMENT FIGURES

In fiscal 2013, we reported research and development expenses of €4.291 billion, compared to €4.245 billion in fiscal 2012 and €3.903 billion in fiscal 2011. The resulting R&D intensity, defined as the ratio of R&D expenses and revenue, was 5.7%, above the R&D intensity in fiscal 2012 and fiscal 2011.

LOGO

R&D expenses and intensity for the Sectors in fiscal 2013, 2012 and 2011 were as follows:


	R&D expenses (in millions of €)						R&D intensity
	Year ended September 30,						Year ended September 30,
	2013		2012		2011		2013			2012			2011
Energy		872		868		782		3.3	%		3.1	%		3.1	%
Healthcare		1,230		1,314		1,173		9.0	%		9.6	%		9.4	%
Industry		1,265		1,192		1,103		6.8	%		6.1	%		5.9	%
Infrastructure & Cities		731		699		696		4.1	%		4.0	%		4.1	%

CT incurred additional R&D expenses.


	Year ended September 30,
R&D indicators⁽¹⁾	2013		2012
	(in thousands)
Employees⁽²⁾		29.8		29.5
Inventions⁽³⁾		8.4		8.8
Patent first filings⁽⁴⁾		4.0		4.6

(1)	Continuing operations.

(2)	Average number of employees in fiscal year.

(3)	Number of inventions reported by the Business Units in an internal report.

(4)	First filings as part of inventions submitted to patent offices.

In our continuing operations, we had an average of approximately 13,300 R&D employees in Germany and approximately 16,500 employees in approximately 30 other countries during fiscal 2013, including, among others, the U.S., China, Austria, and India.

As of September 30, 2013, Siemens held approximately 60,000 granted patents worldwide in its continuing operations. As of September 30, 2012, it held approximately 57,000 granted patents. In terms of the number of published patent applications in calendar year 2012, Siemens ranked third in Germany and second in Europe. Siemens was also ranked eleventh in the statistics for patents issued in the U.S. in calendar year 2012.


Rank in patent office statistics	2012		2011		2010
Germany—German Patent and Trade Mark Office (DPMA)		3		3		3
Europe—European Patent Office (EPO)		2		1		1
U.S.—United States Patent and Trademark Office (US PTO)		11		10		9

RESEARCH AND DEVELOPMENT IN THE SECTORS

Our R&D activities in the Energy Sector are focused on developing methods for the efficient generation and transmission of electrical energy, including

•

technologies for low-loss electricity transmission,

•

advanced gas turbines that increase the efficiency and reduce emissions of power plants,

•

combined cycle power plants, to increase the availability of electricity through higher flexibility,

•

wind turbine innovations,

•

technologies that extract the greenhouse gas carbon dioxide from the flue gas that occurs during fossil fuel-fired power generation (carbon capture and storage), and

•

a subsea power grid to make deep-sea oil and gas extraction more profitable.

Examples of research and development in Energy include Type B75 rotor blades for wind turbines, which are 75 meters in length; this makes them, to our knowledge, the longest rotor blades in operation in the world as of the date of this report. At 25 tons, the B75 is also a “lightweight,” as it is 10% to 20% lighter than comparable rotor blades. Heavy rotor blades are subjected to higher stress loads and also require more massive nacelles, towers, and foundations. The combination of intelligent design and low weight therefore has a positive effect on the cost of wind power production.

In 2011, a combined-cycle power-generation island built by Siemens in Irsching, Germany, demonstrated an unprecedented net efficiency rating of 60.75% at an output of 578 megawatts. In April 2013, three additional power plant blocks featuring H-Class gas turbines commenced commercial operation in Cape Canaveral, Florida. Another combined-cycle power plant with this turbine as the main driver has been commissioned in August 2013 in Dangjin, South Korea. It also reaches an efficiency level of approximately 61%.

In fiscal 2013, Siemens installed the HelWin1 offshore platforms in the North Sea. With a capacity of 576 megawatts (MW), these platforms will supply clean wind-generated electricity to more than 500,000 German households on the mainland. HelWin1 will link the two offshore wind farms, known as Nordsee Ost and Meerwind, to the mainland. The alternating current power generated by the wind turbines is transformed into low-loss high-voltage direct current (HVDC) for transmission onto land. The total transmission losses for this connection are less than 4%. Siemens’ HVDC Plus technology not only reduces the space requirements for HVDC systems, which is a decisive factor for installation at sea, but also features self-stabilization. This enhances grid reliability in the event of power fluctuations, which can occur with wind-based power generation.

The R&D activities in the Healthcare Sector are focused on meeting customer requirements, which are the result of two major trends: the world’s population continues to grow steadily and to get older. These trends increase the pressure on healthcare providers to treat more and more people at increasingly lower costs in order to stabilize rising healthcare expenditures. To overcome the challenges of making healthcare more efficient and more effective, the healthcare measures have to focus on the individual patient and the success of the treatment.

One of the Sector’s R&D fields involves the development of systems that help physicians make precise diagnoses of large numbers of patients and are also robust, easy to use, and inexpensive to purchase and maintain. One example is the world’s first wireless ultrasound device, Acuson Freestyle. The system makes it easier to use advanced ultrasound technology in areas that need to be aseptic, or sterile. Examples include interventional radiology, anesthesiology, intensive care, catheter labs, and emergency care. Ultrasound with wireless transducers is also ideally suited for minimally-invasive procedures such as nerve blockades, access to blood vessels, and positioning for therapeutic interventions and biopsies.

Along with its full-size computed tomography scanner SOMATOM Perspective 128, Healthcare offers a version designed especially for outpatient clinic and small and medium-sized hospitals named SOMATOM Perspective 64. It reduces radiation doses for patients by up to 60 percent, with improved image quality. The system needs only 18 square meters, it can be installed in less than two days, and it comes with low energy consumption and air-conditioning requirements. Both versions are among the most economical scanners in their respective classes.

Another focus area is automating clinical work processes and optimizing laboratory diagnostics, with a goal of enabling physicians to identify diseases more precisely and at an earlier stage. Physicians are then able to monitor the effect of medications more accurately and benefit from the evaluation and analytical capabilities of modern computer technology. As a result, therapies can be tailored more closely to a patient’s needs. The Sector also develops products that meet the specific, targeted requirements of the healthcare systems of emerging countries.

One of the R&D priorities in the Industry Sector is the software-based integration of product planning and production processes within the framework of product lifecycle management. The objective is to accelerate processes at every point along the value chain. A good example is the technology for industrial production of implants. With the help of intelligent software solutions, prosthetics can be produced more efficiently and cost-effectively. Innovative technologies like these can cut the time from design to market in the manufacturing industry by up to 50%. The further development of automation and drive technology, and industrial software in particular, plays a major role here. This applies to the product development and production process as well as to the integration of the drive system. It also applies to metal manufacturing, where the software-assisted planning and operation of entire steel mills are increasingly influencing production. Moreover, the Industry Sector is striving to achieve greater energy efficiency, reduce raw material consumption, and lower emissions. These objectives also guide the development of technology-based service concepts such as energy management and remote maintenance systems, as well as the creation of efficient, resource-conserving solutions for steel production.

R&D activities in our Infrastructure & Cities Sector focus on urban growth issues. Main research fields therefore cover sustainable technologies for major metropolitan areas and their infrastructures. The main aims are to increase energy efficiency, reduce burdens on the environment, increase cost-effectiveness, and improve the quality of life in cities. To this end, the Sector develops building technologies that conserve energy, solutions for ensuring an efficient and secure supply of electricity in cities, and intelligent traffic and transport systems. Examples include the extremely lightweight and almost fully recyclable Inspiro modular subway train and the innovative and especially lightweight SF7000 bogie. In the field of building automation, the Desigo facility automation system integrates many of its system components into buildings themselves and thus achieves significant energy savings. In addition, researchers are looking for ways to integrate buildings into smart grids. Through such integration, the buildings can feed the electricity they produce into the grids and provide additional power during times of peak demand.

In fiscal 2013, Siemens launched a large “smart city” project in Vienna, Austria in conjunction with partners. A living laboratory will be created in the next five years in the waterside district of Aspern, which is expected to constitute one of the largest urban development projects in Europe. In this laboratory, power supply, building systems, intelligent power grids, and information and communication technologies will interact in an optimized way.

SUPPLY CHAIN MANAGEMENT

The principal goal of supply chain management at Siemens is to ensure the availability and quality of the materials we require to serve our customers also considering innovation strength and sustainability of our suppliers. We aim to strengthen our competitiveness by achieving substantial savings in our purchasing volume. In fiscal 2013, Siemens’ purchasing volume amounted to approximately €38 billion, which equaled roughly half of our total revenue. Our primary strategies for achieving savings in purchasing are the following:

•

Siemens-wide managed volume: We bundle more than half of our purchasing volume which includes direct and indirect material. Through this worldwide pooling of volume, we achieve substantial economies of scale.

•

Sourcing from emerging markets: We try to move towards a globally balanced supply chain network. One essential element is to constantly increase the share of sourcing from Global Value Sourcing (GVS) countries, which are generally emerging economies. To accomplish this goal, we identify, select and fully qualify suppliers from GVS countries, and engage them in a continuous development process that extends to sustainability thereafter. Additionally, we encourage and support our suppliers to expand their

operations in order to follow our manufacturing footprint in these countries. In fiscal 2013, we further increased the proportion of our sourcing coming from GVS countries on a comparable basis.

•

E-sourcing: We significantly increased the proportion of external purchases that we award via electronic bidding over the last few years to more than 10%.

We expect to realize further savings potential within the framework of Siemens 2014 by further integrating supply chain management activities into other business activities, such as design and production. The relevant lever in this context is material cost productivity and in particular Design-to-Cost, which optimizes the design of products in order to reduce material cost.

We are strengthening Siemens’ innovation power by benefiting from the innovative strength in our supplier network. With our Siemens Supplier Forum, we established a platform for regular dialogue with our top strategic suppliers at the CEO level. With this dialogue, we aim to ensure long-term cost leadership, realize shared growth potential and increase innovation capabilities. To promote outstanding suppliers for their excellence, we introduced Siemens Supplier Awards for a number of categories.

Sustainability is a guiding principle for our supply chain management. Sustainability requirements are therefore an integral part of all relevant supplier management processes—such as supplier selection, supplier qualification and evaluation, and supplier development. We require all of our suppliers to comply with the principles of our Code of Conduct for Siemens Suppliers, which include respect for the basic rights of employees and environmental protection. We also require them to support its implementation in their own supply chains. We have established a risk-based system of appropriate processes to enable us to systematically identify potential risks in our supply chain. It consists of sustainability self-assessments by suppliers, risk evaluation conducted by our purchasing department, sustainability questions within supplier quality audits and sustainability audits by external auditors. To further encourage sustainable business conduct throughout our entire global supply chain, we are committed to building our suppliers’ competence and intensifying knowledge transfers related to sustainability.

In 2012, the SEC adopted a regulatory rule, known as the “Conflict minerals rule.” This rule aims to increase transparency and responsibility in the procurement of “conflict minerals” from the conflict zones of the Democratic Republic of Congo and the surrounding region. A project organization was established to address the requirements within our supply chain in fiscal 2013. For further information, see Item 3: Key information—Risk factors.

LEGAL PROCEEDINGS

PUBLIC CORRUPTION PROCEEDINGS

Governmental and related proceedings

As previously reported, in May 2011 Siemens AG voluntarily reported a case of attempted public corruption in connection with a project in Kuwait in calendar 2010 to the U.S. Department of Justice, the SEC, and the Munich public prosecutor. The Munich public prosecutor discontinued the investigations, which related to certain former employees, but imposed conditions on them. Siemens is cooperating with the U.S. authorities in their ongoing investigations.

As previously reported, in July 2011 the Nuremberg-Fuerth public prosecutor notified Siemens AG of an investigation against several employees in connection with payments related to the healthcare business in the Caribbean. In November 2012, the Nuremberg-Fuerth public prosecutor discontinued its investigation.

As previously reported, in July 2011 the Munich public prosecutor notified Siemens AG of an investigation against a former employee in connection with payments to a supplier related to the oil and gas business in Central Asia from calendar 2000 to 2009. Siemens is cooperating with the public prosecutor.

As previously reported, in October 2011, the Turkish Prime Ministry Inspection Board notified Siemens Sanayi ve Ticaret A.S., Turkey, of an investigation in connection with alleged bribery in Turkey and Iraq from calendar 1999 to 2007. Siemens is cooperating with the authority.

In February 2013, Siemens AG and the European Investment Bank (EIB) signed a settlement agreement addressing alleged past violations of the EIB’s anti-fraud policy. The settlement includes a commitment by Siemens that the concerned business unit will voluntarily refrain from bidding on projects financed by the EIB for a period of 18 months. Further, Siemens commits to provide funds, totaling €13.5 million over five years, to organizations or institutions that promote good governance and the fight against corruption.

Since July 2013, following the voluntary self-reporting of certain facts by Siemens Ltda. Brazil to the Brazilian antitrust authorities in May 2013 mentioned below, several Brazilian prosecutorial offices have initiated or resumed investigations into alleged criminal conduct, including alleged bribe payments, anticompetitive conduct and undue influencing of public tenders, in connection with several metro transport projects. Among the resumed investigations are in particular two cases that had been reported before, namely the investigations by the Brasilia and Sao Paulo public prosecutors related to alleged misconduct in calendar 2007 and around 2000, respectively. Siemens is cooperating with the authorities.

In August 2013, a Brazilian Appellate Court upheld a decision to suspend Siemens Ltda. Brazil from participating in public bids and signing contracts with public administrations in Brazil for a five year term, based on alleged irregularities in calendar 1999 and 2004 public tenders. Siemens is seeking remedial action against the decision of the Appellate Court.

As previously reported, Siemens AG had filed a request for arbitration against the Republic of Argentina (Argentina) with the International Center for Settlement of Investment Disputes (ICSID) of the World Bank. Siemens AG claimed that Argentina had unlawfully terminated its contract with Siemens for the development and operation of a system for the production of identity cards, border control, collection of data and voters’ registers (DNI project) and thereby violated the Bilateral Investment Protection Treaty between Argentina and Germany (BIT). A unanimous decision on the merits was rendered by the ICSID arbitration tribunal in February 2007, awarding Siemens AG, inter alia, compensation in the amount of US$217.8 million, plus compound interest thereon at a rate of 2.66% since May 18, 2001. Argentina subsequently filed applications with the ICSID aiming at the annulment and reversal of the decision and a stay of enforcement of the arbitral award. In August 2009, Argentina and Siemens AG reached an agreement to mutually settle the case and discontinue any and all civil proceedings in connection with the case without acknowledging any legal obligations or claims. No payment was made by either party. As previously reported, the Argentinean Anti-Corruption Authority is conducting an investigation against individuals into corruption of government officials in connection with the award of the contract for the DNI project to Siemens in calendar 1998. Searches were undertaken at the premises of Siemens Argentina and Siemens IT Services S.A. in Buenos Aires in August 2008 and in February 2009. The Company is cooperating with the Argentinean Authorities. The Argentinean investigative judge also repeatedly requested judicial assistance from the Munich public prosecutor and the federal court in New York. In December 2011, the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice filed an indictment against nine individuals based on the same facts as the investigation of the Argentinean Anti-Corruption Authority. Most of these individuals are former Siemens employees. The former member of the Managing Board of Siemens AG, Dr. Uriel Sharef, is also involved. Siemens AG is not party to the proceedings.

As previously reported, in February 2010 a Greek Parliamentary Investigation Committee (GPIC) was established to investigate whether any politicians or other state officials in Greece were involved in alleged wrong-doing of Siemens in Greece. The GPIC’s investigation was focused on possible criminal liability of politicians and other state officials. Greek public prosecutors are separately investigating certain fraud and bribery allegations involving—among others—former board members and former executives of Siemens A.E., Elektrotechnische Projekte und Erzeugnisse, Greece (Siemens A.E.), and Siemens AG. In January 2011, the GPIC alleged in a letter to Siemens A.E. that the damage suffered by the Greek state amounted to at least €2 billion. Furthermore, the GPIC issued a report repeating these allegations. In addition, the Hellenic Republic Minister of State indicated in a letter to Siemens that the Greek state will seek compensation from Siemens for the alleged damage. In April 2012, the Greek Parliament approved a settlement agreement between Siemens and the Greek State, the material provisions of which include the following: Siemens waives public sector receivables in the amount of €80 million. Furthermore Siemens agrees to spend a maximum of €90 million on various anti-corruption and transparency initiatives, as well as university and research programs and to provide €100 million of financial support to Siemens A.E. to ensure its continued presence in Greece. In exchange, the

Greek State agrees to waive all civil claims and all administrative fines related to the corruption allegations and to utilize best efforts to resolve all pending disputes between Siemens and the Greek state-companies or its public authorities.

In February 2012, the Munich public prosecutor notified Siemens AG of a request for mutual assistance in criminal matters by the Swiss Federal Prosecution authority. The investigation of the Swiss Federal Prosecution involved the Swedish subsidiary Siemens Industrial Turbomachinery (SIT) in connection with alleged payments to employees of a Russian natural gas production company between calendar 2004 and 2006. In July 2013, the Swiss Federal Prosecution launched a criminal investigation against SIT for organizational neglect. In September 2013, the investigation was discontinued due to a settlement with the Swiss Federal Prosecution that included a restitution payment to a nonprofit organization and a compensation claim relating to forfeiture of profits in the lower double digit US$ million range.

As previously reported, the Vienna public prosecutor, Austria, is conducting an investigation into payments between calendar 1999 and 2006 relating to Siemens Aktiengesellschaft Österreich, Austria, and its subsidiary Siemens VAI Metal Technologies GmbH & Co., Austria, for which valid consideration could not be identified. In September 2011, the Vienna public prosecutor extended the investigations to include a potential corporate liability of Siemens AG Austria for tax evasion. Siemens is cooperating with the authorities.

As previously reported, in December 2009, the Anti-Corruption Commission of Bangladesh (ACC) sent a request for information to Siemens Bangladesh related to telecommunications projects of Siemens’ former Communications (Com) Group undertaken prior to calendar 2007. In January 2010, Siemens Bangladesh was informed that in a related move the Anti Money Laundering Department of the Central Bank of Bangladesh is conducting a special investigation into certain accounts of Siemens Bangladesh and of former employees of Siemens Bangladesh in connection with transactions for Com projects undertaken in the period from calendar 2002 to 2006. In February 2010 and June 2012, the ACC sent requests for additional information. Siemens is cooperating with the authorities.

As previously reported, in November 2009 and in February 2010, a subsidiary of Siemens AG voluntarily self-reported possible violations of South African anti-corruption regulations in the period before calendar 2007 to the responsible South African authorities. The authorities have requested further documentation. Siemens is cooperating with the authorities.

As previously reported, in June 2010, the Frankfurt public prosecutor searched premises of Siemens in Germany in response to allegations of questionable payments relating to an Infrastructure & Cities project in Thailand. Siemens is cooperating with the authority.

As previously reported, in August 2010, the Inter-American Development Bank (IADB) issued a notice of administrative proceedings against, among others, Siemens IT Solutions and Services Argentina alleging fraudulent misstatements and antitrust violations in connection with a public invitation to tender for a project in the province of Cordoba, Argentina, in calendar 2003. Siemens is cooperating with the IADB.

As previously reported, in August 2010, the IADB issued a notice of administrative proceedings against, among others, Siemens Venezuela alleging fraudulent misstatements and public corruption in connection with a public invitation to tender for healthcare projects in the Venezuelan provinces of Anzoategui and Merida in calendar 2003. Siemens is cooperating with the IADB.

The Company remains subject to corruption-related investigations in several jurisdictions around the world. As a result, additional criminal or civil sanctions could be brought against the Company itself or against certain of its employees in connection with possible violations of law. In addition, the scope of pending investigations may be expanded and new investigations commenced in connection with allegations of bribery or other illegal acts. The Company’s operating activities, financial results and reputation may also be negatively affected, particularly as a result of penalties, fines, disgorgements, compensatory damages, third-party litigation, including with competitors, the formal or informal exclusion from public invitations to tender, or the loss of business licenses or permits. Additional expenses and provisions, which could be material, may need to be recorded in the future for penalties, fines, damages or other charges in connection with the investigations.

Civil litigation

As previously reported, Siemens AG reached a settlement with nine out of eleven former members of the Managing and Supervisory Board in December 2009. The settlement relates to claims of breaches of organizational and supervisory duties in view of the accusations of illegal business practices that occurred in the course of international business transactions in calendar 2003 to 2006 and the resulting financial burdens for the Company. The Annual Shareholders’ Meeting approved all nine settlements between the Company and the former members of the Managing and Supervisory Board in January 2010. The shareholders also approved a settlement agreement between the Company and its directors and officers insurers regarding claims in connection with the D&O insurance of up to €100 million. Siemens recorded €96 million gains, net of costs, from the D&O insurance and the nine settlements. In January 2010, Siemens AG filed a lawsuit with the Munich District Court I against the two former board members who were not willing to settle, Dr. Thomas Ganswindt and Heinz-Joachim Neubürger. The criminal proceedings pending with the Munich District Court I against Dr. Ganswindt were terminated in July 2011. Against this backdrop, Siemens AG reached a settlement with Dr. Thomas Ganswindt in November 2012, which was subject to the approval of the Annual Shareholders’ Meeting. The Annual Shareholders’ Meeting of Siemens AG approved the settlement agreement with Dr. Ganswindt in January 2013. Therefore Siemens withdrew from the proceedings pending before the Munich District Court I in March 2013, as provided for in the settlement. The lawsuit against Heinz-Joachim Neubürger is still pending. In January 2013, Mr. Neubürger filed a counter claim against Siemens AG, requesting the transfer of Stock Awards in fiscal 2004 and 2005 plus dividends and interest. Siemens AG is contesting this counterclaim.

As previously reported, in June 2008, the Republic of Iraq filed an action requesting unspecified damages against 93 named defendants with the United States District Court for the Southern District of New York on the basis of findings made in the “Report of the Independent Inquiry Committee into the United Nations Oil-for-Food Programme.” Siemens S.A.S. France, Siemens Sanayi ve Ticaret A.S., Turkey, and the former Siemens subsidiary OSRAM Middle East FZE, Dubai, are among the 93 named defendants. In February 2013, the court dismissed the Republic of Iraq’s action with prejudice. The Republic of Iraq has appealed this decision.

ANTITRUST PROCEEDINGS

As previously reported, in February 2007, the European Commission launched an investigation into possible antitrust violations involving European producers of power transformers, including Siemens AG and VA Technologie AG, Austria (VA Tech), which Siemens acquired in July 2005. The German Antitrust Authority (Bundeskartellamt) has become involved in the proceeding and is responsible for investigating those allegations that relate to the German market. Power transformers are electrical equipment used as major components in electric transmission systems in order to adapt voltages. In October 2009, the European Commission imposed fines totaling €68 million on seven companies with regard to a territorial market sharing agreement related to Japan and Europe. Siemens was not fined because it had voluntarily disclosed this aspect of the case to the authorities. The German Antitrust Authority continued its investigation with regard to the German market. In September 2012, the German Antitrust Authority and the Company ended the legal proceeding by entering into a settlement agreement. Siemens agreed to pay a fine in the single-digit € million range.

As previously reported, in April 2007, Siemens AG and former VA Tech companies filed actions before the European Court of First Instance in Luxemburg against the decisions of the European Commission dated January 24, 2007, to fine Siemens and former VA Tech companies for alleged antitrust violations in the European Market of high-voltage gas-insulated switchgear between calendar 1988 and 2004. Gas-insulated switchgear is electrical equipment used as a major component for power substations. The fine imposed on Siemens AG amounted to €396.6 million and was paid by the Company in calendar 2007. The fine imposed on former VA Tech companies, which Siemens AG acquired in July 2005, amounted to €22.1 million. In addition, former VA Tech companies were declared jointly liable with Schneider Electric for a separate fine of €4.5 million. In March 2011, the European Court of First Instance dismissed the case regarding the fine imposed on Siemens AG and re-calculated the fines for the former VA Tech companies. Former VA Tech companies were declared jointly liable with Schneider Electric for a fine of €8.1 million. Siemens AG and former VA Tech companies appealed the decision in May 2011.

In addition to these proceedings, authorities in Brazil, the Czech Republic and Slovakia are conducting investigations into comparable possible antitrust violations. In October 2010, the High Court of New Zealand dismissed corresponding charges against Siemens.

As previously reported, in September 2011, the Israeli Antitrust Authority requested Siemens to present its legal position regarding an alleged anti-competitive arrangement between April 1988 and April 2004 in the field of gas-insulated switchgear. In September 2013, the Israeli Antitrust Authority concluded that Siemens AG was a party to an illegal restrictive arrangement regarding the Israeli gas-insulated switchgear market between 1988 and 2004, with an interruption from October 1999 to February 2002. The Company is considering to appeal this decision.

Based on the above mentioned conclusion of the Israel Antitrust Authority, electricity consumer groups filed two class-actions for cartel damages against a number of companies including Siemens AG with an Israeli District Court in September 2013. The plaintiffs seek compensation for alleged damages, which are claimed to amount to €582 million. In addition, according to an ad hoc-notice of the Israel Electric Corporation (IEC), the IEC is concurrently preparing to file a separate claim for damages against Siemens AG and other companies that allegedly formed a cartel in the Israeli gas-insulated switchgear market. Siemens AG is defending itself.

As previously reported, in November 2010, the Greek Competition Authority searched the premises of Siemens S.A. in Athens in response to allegations of anti-competitive practices in the field of telecommunication and security. In August 2012, the proceedings were discontinued without sanctions based on the settlement agreement between Siemens and the Greek State mentioned above.

In connection with the January 24, 2007 decision of the European Commission regarding alleged antitrust violations in the high-voltage gas-insulated switchgear market, claims are being made against Siemens. Among others, a claim was filed by National Grid Electricity Transmission Plc. (National Grid) with the High Court of England and Wales in November 2008. 21 companies have been named as defendants, including Siemens AG and various of its subsidiaries. National Grid originally asserted claims in the aggregate amount of approximately £249 million for damages and compound interest. In November 2012, National Grid increased the aggregate amount to £364 million due to accrued compound interest. Siemens believes National Grid’s claim to be without merit. As discussed, the European Commission’s decision has been appealed to the European Court of First Instance. In June 2009, the High Court granted a stay of the proceedings pending before it. In June 2009, the Siemens defendants filed their answers to the complaint and requested National Grid’s claim to be rejected. A case management conference was held in November 2012. The High Court of England and Wales lifted the stay of the proceedings granted in June 2009 and decided on the scope of further discovery and set a time schedule leading up to a court session expected to be held in 2014.

As previously reported, in December 2010 and in March 2011, the Turkish Antitrust Authority searched the premises of several diagnostic companies including, among others, Siemens Healthcare Diagnostik Ticaret Limited Sirketi in Turkey, in response to allegations of anti-competitive agreements. Siemens cooperated with the authority. In May 2012, the Turkish Antitrust Authority decided that the law had not been violated, and discontinued the proceedings.

As previously reported, the Italian Antitrust Authority searched the premises of several healthcare companies, among others those of Siemens Healthcare Diagnostics S.r.l. and Siemens S.p.A. in February 2010. The investigation addresses allegations of anti-competitive agreements in relation to a tender of the procurement entity for the public healthcare sector in the region of Campania for the supply of medical equipment in calendar 2009. In May 2011, the Italian Antitrust Authority sent a Statement of Objections to the companies under investigation which confirmed that the proceedings against Siemens Healthcare Diagnostics S.r.l. were closed, but accused Siemens S.p.A. of having participated in an anti-competitive arrangement. In August 2011, the Italian Antitrust Authority fined several companies, including Siemens S.p.A. for alleged anti-competitive behavior. The fine imposed on Siemens S.p.A. amounts to €1.1 million. The company appealed the decision. In April 2012, the Regional Administrative Court overturned the decision of the Italian Antitrust Authority. In November 2012, the Italian Antitrust Authority appealed the decision of the Regional Administrative Court.

As previously reported, in September 2011, the Competition Commission of Pakistan requested Siemens Pakistan Engineering Co. Ltd., Pakistan (Siemens Pakistan), to present its legal position regarding an alleged

anti-competitive arrangement since calendar 2007 in the field of transformers and air-insulated switchgears. Siemens cooperated with the authority. In December 2011, Siemens Pakistan filed a leniency application. In April 2012, the Competition Commission of Pakistan accepted the leniency application and granted Siemens Pakistan a 100% penalty reduction for the alleged behavior.

As previously reported, in June 2007, the Turkish Antitrust Agency confirmed its earlier decision to impose a fine in an amount equivalent to €6 million on Siemens Sanayi ve Ticaret A.S., Turkey, based on alleged antitrust violations in the traffic lights market. Siemens Sanayi ve Ticaret A.S. has appealed this decision and this appeal is still pending.

In May 2012, the Brazilian Anti-Trust Authority notified Siemens Ltda., Brazil of an investigation into anti-trust behavior in the field of air-insulated switchgear and other products from calendar 1997 to 2006. Siemens is cooperating with the authorities.

As mentioned above, in May 2013, Siemens Ltda. Brazil entered into a leniency agreement with the Administrative Council for Economic Defense and other relevant authorities relating to several Brazilian metro transport projects. The Company is cooperating with the authorities. It cannot be excluded that significant cartel damages claims will be brought by customers against Siemens Ltda. Brazil based on the outcome of the investigations.

OTHER PROCEEDINGS

As previously reported, Siemens AG is a member of a supplier consortium that has been contracted to construct the nuclear power plant “Olkiluoto 3” in Finland for Teollisuuden Voima Oyj (TVO) on a turnkey basis. Siemens AG’s share of the consideration to be paid to the supplier consortium under the contract is approximately 27%. The other member of the supplier consortium is a further consortium consisting of Areva NP S.A.S. and its wholly-owned subsidiary, Areva NP GmbH. The agreed completion date for the nuclear power plant was April 30, 2009. Completion of the power plant has been delayed for reasons which are in dispute. In December 2011, the supplier consortium informed TVO that the completion of the plant is expected in August 2014. In February 2013 TVO announced that it is preparing for the possibility that the start of the regular electricity production of the plant may be postponed until calendar year 2016. The supplier consortium and TVO continue to assess the schedule and the risk of further slippage in detail. The final phases of the plant completion require the full cooperation of all parties involved. In December 2008, the supplier consortium filed a request for arbitration against TVO demanding an extension of the construction time, additional compensation, milestone payments, damages and interest. In June 2011, the supplier consortium increased its monetary claim to €1.94 billion. TVO rejected the claims and made counterclaims against the supplier consortium consisting primarily of damages due to the delay. In June 2012, the arbitral tribunal rendered a partial award ordering the release of withheld milestone payments to the supplier consortium of approximately €101 million plus interest. As of September 2012, TVO’s alleged counterclaims amounted to €1.59 billion based on a delay of up to 56 months. Based on a completion in August 2014, TVO estimates that its counterclaims amount to €1.77 billion. The further delay beyond 56 months (beyond December 2013) as well as the further slippage in the schedule currently under assessment by the supplier consortium and TVO could lead TVO to further increase its counterclaims. In October 2013 the supplier consortium increased its claim for an extension of construction time and its monetary claims to €2.65 billion. The arbitration proceedings may continue for several years.

As previously reported, Siemens AG terminated its joint venture with Areva S.A. (Areva) in January 2009. Thereafter Siemens AG entered into negotiations with the State Atomic Energy Corporation Rosatom (Rosatom) with a view to forming a new partnership active in the construction of nuclear power plants, in which it would be a minority shareholder. In April 2009, Areva filed a request for arbitration with the ICC against Siemens AG. Areva sought an order enjoining Siemens AG from pursuing such negotiations with Rosatom, a declaration that Siemens AG is in material breach of its contractual obligations and a reduction of the price payable to Siemens AG for its stake in the Areva NP S.A.S. joint venture. The final award of the arbitral tribunal was notified in May 2011. According to this award, Siemens had to pay Areva liquidated damages of €648 million plus interest. Pursuant to the arbitral award, the disputed non-compete obligation was reduced to four years (ending in September 2013).

As previously reported, Siemens is involved in the construction of a power plant in the United States. Siemens Energy, Inc., USA, and Kvaerner North American Construction, Inc., USA (Kvaerner) are consortium partners in this project, commissioned by Longview Power LLC, USA (Longview). Foster Wheeler North America Corp, USA (Foster Wheeler) supplied the boiler for the project. Kvaerner filed an arbitration request before the American Arbitration Association in June 2011, and in October and November 2012, the parties filed claims for monetary damages against one another. The amounts claimed by Longview and Foster Wheeler from the consortium partners total approximately US$243 million. Siemens filed claims for monetary damages of approximately US$110 million against Longview and Foster Wheeler. Kvaerner is claiming approximately US$252.8 million from Longview and Foster Wheeler. Longview filed for bankruptcy under Chapter 11 of the US Bankruptcy Code, which may result in delay to the arbitration proceeding dealing with the claim and counterclaim.

In July 2008, Hellenic Telecommunications Organization S.A. (OTE) filed a lawsuit against Siemens AG with the district court of Munich, Germany, seeking to compel Siemens AG to disclose the outcome of its internal investigations with respect to OTE. OTE seeks to obtain information with respect to allegations of undue influence and/or acts of bribery in connection with contracts concluded between Siemens AG and OTE from calendar 1992 to 2006. In May 2009, OTE was granted access to the public prosecutor’s files in Greece. At the end of July 2010, OTE expanded its claim and requested payment of damages by Siemens AG of at least €57.07 million to OTE for alleged bribery payments to OTE-employees. While Siemens AG continues to defend itself against the expanded claim, Siemens AG and OTE remain in discussions to resolve the matter.

As previously reported, Siemens A.E. entered into a subcontract agreement with Science Applications International Corporation, Delaware, USA, (SAIC) in May of 2003 to deliver and install a significant portion of a security surveillance system (the C4I project) in advance of the Olympic Games in Athens, Greece. Siemens A.E. fulfilled its obligations pursuant to the subcontract agreement. Nonetheless, the Greek government claimed errors related to the C4I-System and withheld amounts for abatement in a double-digit million € range. Furthermore, the Greek government is withholding the final payment in a double-digit million € range, claiming that the system has not yet been finally accepted. Although Siemens A.E. is not a contractual party of the Greek government, under Siemens A.E’s subcontract agreement with SAIC non-payment by the Greek government also has an economic effect on Siemens A.E. SAIC has filed for arbitration contesting all the Greek government’s claims and the withholding of payments. In July 2013, the arbitration court issued the arbitral award ordering the Greek State to pay €40 million to SAIC. The Greek State is contesting the enforcement of the arbitral award. The final resolution of this dispute has been complicated by public bribery and fraud allegations against Siemens A.E. in Greece, which have resulted in extensive negative media coverage concerning the C4I system.

As previously reported, Russian authorities are conducting widespread investigations regarding possible fraudulent activities of resellers and governmental officials relating to procurement of medical equipment in the public sector. As is the case with other providers of medical equipment, OOO Siemens, Russia, has received numerous information requests and inquiries were made on-site by the authorities regarding tenders in the public healthcare sector. OOO Siemens is cooperating in the ongoing investigations which also relate to certain individual employees.

As previously reported, in April 2009, the Defense Criminal Investigative Service of the U.S. Department of Defense conducted a search at the premises of Siemens Medical Solutions USA, Inc., United States, in Malvern, Pennsylvania, in connection with an investigation relating to a Siemens contract with the U.S. Department of Defense for the provision of medical equipment. Siemens is cooperating with the authorities.

As previously reported, in June 2009, Siemens AG and two of its subsidiaries voluntarily self-reported, among others, possible violations of U.S. Export Administration Regulations to the responsible U.S. authorities. In October, 2011, the U.S. Department of Commerce notified Siemens that it closed its case without taking further action. In January 2013, the U.S. Department of the Treasury notified Siemens that it closed its case without taking further action.

As previously reported, in December 2011, the United States Attorney’s Office for the Northern District of New York served a Grand Jury subpoena on Siemens that seeks records of consulting payments for business

conducted by the Building Technologies Business Unit in New York State over the period from January 1, 2000 through September 30, 2011. In June 2013, the authority notified Siemens that it closed its case.

In February 2012, the United States Attorney’s Office for the Eastern District of New York served a subpoena on Siemens Healthcare Diagnostics Inc., United States, for information relating to a diagnostics process. Siemens is cooperating with the authority.

In January 2013, Siemens Electrical, LLC, USA (Siemens Electrical), an entity wholly-owned by Siemens Industry, Inc., USA, entered into a Deferred Prosecution Agreement (DPA) with the New York County District Attorney’s Office. The DPA relates to misconduct concerning Master Electrician and Minority Business Enterprise requirements in connection with contracts with the New York City Department of Environmental Protection. The individuals responsible for the admitted misconduct were Siemens’ former business partners to the predecessor to Siemens Electrical. Under the terms of the DPA, Siemens Electrical agreed to, among other things, forfeit US$10 million. The case will be dismissed after two years if the company meets certain specified conditions under the DPA.

In March 2013, Nokia Siemens Networks Holding B.V. (NSN), Nokia Corporation and Nokia Finance International B. V. (Nokia Finance) filed a request for arbitration against Siemens AG. NSN, Nokia Corporation and Nokia Finance sought damages in the amount of €238 million for alleged breaches of the framework agreement entered into among the parties in 2007. The claims related to a contract which had been transferred to a subsidiary of NSN. In connection with the sale of Siemens AG’s shares in NSN to Nokia on July 1, 2013, the parties settled the dispute.

End of October 2013 Essent Wind Nordsee Ost Planungs- und Betriebsgesellschaft mbH filed a request for arbitration against Siemens AG alleging violations of a contract for the delivery of a High Voltage Substation entered into by the parties in 2010. The claimant claims damages in an amount of €256 million plus interest and a determination that Siemens AG shall be liable for any further damages, which are claimed to amount to €152 million. Siemens AG will defend itself against this action.

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

ITEM 4A:

UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 5:

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

INTRODUCTION

Section 21E of the Securities Exchange Act of 1934. 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. We may also make forward-looking statements in other reports, in presentations, in material delivered to shareholders and in press releases. In addition, our representatives may from time to time make oral forward-looking statements. Such statements are based on the current expectations and certain assumptions of Siemens’ management, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’ control, affect Siemens’ operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements or anticipated on the basis of historical trends. These factors include in particular, but are not limited to, the matters described in Item 3: Key information—Risk factors.

The following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related Notes prepared in accordance with IFRS, as issued by the IASB and as adopted by the EU, as described in Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 1. Due to rounding, numbers presented throughout this Form 20-F may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

In this report, we present a number of supplemental financial measures that are or may be “non-GAAP financial measures” as defined in the rules of the SEC. For definitions of these financial measures and a discussion of the most directly comparable IFRS financial measures, the usefulness of Siemens’ supplemental financial measures, the limitations associated with these measures and reconciliations to the most comparable IFRS financial measures, see Item 5: Operating and financial review and prospects—Supplemental financial measures.

BUSINESS AND ECONOMIC ENVIRONMENT

THE SIEMENS GROUP—ORGANIZATION AND BASIS OF PRESENTATION

We are a globally operating 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 166 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 362,000 employees as of September 30, 2013 and business activities in nearly all countries of the world and reported consolidated revenue of €75.882 billion in fiscal 2013. 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 900 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 President and Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) as well as the heads of selected corporate functions and the CEOs of the Sectors.

Our fundamental organizational principles are:

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the CEO principle,

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the end-to-end business responsibility of the Sectors, Divisions and Business Units, and

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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, AktG). 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 in business matters. During fiscal 2013 our regional units were organized in Clusters and Countries, which were 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 and Human Resources, 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.

Our business activities focus on our 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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Within this Item, 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: orders, revenue, profit and profit margin. Divisions within a Sector may do business with each other, leading to corresponding 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 orders and revenue. Such orders and revenue are eliminated on the Siemens level within Eliminations, Corporate Treasury and other reconciling items and are not included in 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 Item 5: Operating and financial review and prospects—Supplemental financial measures as well as Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 36.

On a geographic basis, Siemens was subdivided into 14 Regional Clusters as of September 30, 2013, which were in turn assigned to one of our three reporting regions. We report financial measures for these three regions:

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As of November 2013, following the close of fiscal 2013, we disbanded our Regional Cluster organization. Following this organizational change, we have designated 30 Lead Countries which are individually responsible for managing a number of other countries regarding market penetration. Each Lead Country reports directly to the Managing Board.

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 (within the region Asia, Australia).

FINANCIAL PERFORMANCE SYSTEM

Overview

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. For further information on One Siemens see Item 4: Information on the Company—Strategy—Strategy of the Siemens Group. Our goal is to achieve continuous improvement relative to the market and our competitors. The financial target system defines indicators for revenue growth, profitability and capital efficiency, 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.

In the following subchapters we describe financial performance measures which have been defined in accordance with One Siemens and are used to manage and control activities at the Group level. These measures are or may be non-GAAP financial measures. Other companies that report or describe similarly titled financial measures may calculate them differently. For further information about these measures, please see Item 5: Operating and financial review and prospects—Supplemental financial measures.

Revenue growth

We believe that profitable revenue growth is an important driver for increasing our Company’s value over the long term. Within the framework of One Siemens we have set ourselves the goal to grow our revenue faster than the average revenue growth of our most relevant competitors. For comparison with our competitors, our revenue growth is calculated as the growth rate of reported revenue as presented in the Consolidated Financial

Statements. For purposes of measuring, managing and controlling the organic revenue growth this growth rate is adjusted for currency translation and portfolio effects. A detailed analysis regarding revenue growth is provided in Item 5: Operating and financial review and prospects—Fiscal 2013 compared to fiscal 2012—Results of Siemens—Orders and revenue.

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Profitability and capital efficiency

Within the framework of One Siemens it is our goal to achieve margins throughout the entire business cycle that are comparable to those of the best competitors within our markets. We seek to maintain or improve the profitability of our businesses as appropriate. Therefore we have defined adjusted EBITDA margin ranges for our four Sectors. These are defined as the ratio of adjusted EBITDA (as presented in Item 5: Operating and financial review and prospects—Reconciliation to adjusted EBITDA (continuing operations)) to revenue. Adjusted EBITDA target margin ranges for the Sectors, and their performance are shown in the chart below.

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In fiscal 2013, we used income from continuing operations at the Group level to measure, manage and control profitability. For a detailed analysis of this measure refer to Item 5: Operating and financial review and prospects—Fiscal 2013 compared to fiscal 2012—Results of Siemens—Consolidated statements of income. Effective with the beginning of fiscal 2014, we use net income. This measure is the primary driver of basic earnings per share (EPS) from net income, which we use for communicating with the capital markets.

Within the framework of One Siemens we seek to work profitably and as efficiently as possible with the capital of our shareholders and lenders. We manage and control our capital efficiency using adjusted return on capital employed, or ROCE (adjusted), for continuing operations. This financial measure assesses our generated income from the point of view of our shareholders and lenders. ROCE (adjusted) for continuing operations is defined as income from continuing operations before interest after tax divided by average capital employed. We intend to achieve a target for ROCE (adjusted) for continuing operations of 15% to 20%. ROCE (adjusted) for continuing operations amounted to 13.8% in fiscal 2013, compared to 15.5% a year earlier. The decrease was due to a combination of lower income from continuing operations and higher average capital employed. ROCE (adjusted) for continuing and discontinued operations amounted to 13.5% in fiscal 2013, compared to 13.1% a year earlier. For information on the calculation of ROCE (adjusted) and its components see Item 5: Operating and financial review and prospects—Supplemental financial measures. Siemens’ weighted average cost of capital (WACC) at the end of fiscal 2013 was approximately 7.5%.

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Our financial indicator for measuring capital efficiency at 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 income tax already, and tax-free income components and others such as components which have already been taxed or are generally tax-free. For information on the calculation of ROE (after tax) and its components, see Item 5: Operating and financial review and prospects—Supplemental financial measures. We intend to achieve a target for ROE (after tax) of 15% to 20% at SFS.

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Capital structure

A key consideration within the framework of One Siemens is to maintain ready access to the capital markets through various debt products and preserve 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 managing and controlling our capital structure and as an indicator for the required period in years to repay the adjusted industrial net debt. Interest, taxes, depreciation and amortization are not taken into consideration for purposes of this financial measure. Our goal is to achieve a ratio in the range of 0.5 – 1.0. The capital structure ratio as of September 30, 2013 increased to 0.34, compared to 0.24 a year earlier. This difference was due to an increase of adjusted industrial net debt and a decrease of adjusted EBITDA (continuing operations). For more information, see Item 5: Operating and financial review and prospects—Reconciliation to adjusted EBITDA (continuing operations) and Item 5: Operating and financial review and prospects—Liquidity and capital resources—Capital structure.

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Dividend and share buybacks

We intend to continue providing an attractive return to shareholders. Therefore in the years ahead we intend to propose a dividend payout which, combined with outlays during the fiscal year for publicly announced share buybacks, results in a sum representing 40% to 60% of net income, which for this purpose we may adjust to exclude selected exceptional non-cash effects. Furthermore, for fiscal 2014, we are taking proceeds from the sale of the NSN stake in fiscal 2013 into consideration. As in the past, we intend to fund the dividend payout from Free cash flow.

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, 2013: to distribute a dividend of €3.00 on each no-par value share entitled to the dividend for fiscal year 2013 existing at the date of the Annual Shareholders’ Meeting, with the remaining amount to be carried forward. Payment of the proposed dividend is contingent upon approval by Siemens shareholders at the Annual Shareholders’ Meeting on January 28, 2014. The prior year dividend was €3.00 per share.

The proposed dividend of €3.00 per share for fiscal 2013 represents a total payout of €2.529 billion based on shares outstanding as of September 30, 2013. Based on net income of €4.409 billion for fiscal 2013, the dividend payout percentage would be 57%. The percentage for fiscal 2012 was 59%, based on a total dividend payout of €2.528 billion and a net income of €4.282 billion. Net income in fiscal 2012 was adjusted retrospectively for effects of adopting IAS 19R.

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Outlays for Siemens publicly announced share buybacks (excluding incidental transaction charges) during fiscal 2013 totaled €1.152 billion and represent 26% of net income. The percentage for fiscal 2012 was 41% with outlays for share buybacks in the amount of €1.766 billion.

With the spin-off of OSRAM in fiscal 2013, Siemens shareholders received one OSRAM share per ten Siemens AG shares. For additional information regarding the spin-off of OSRAM, see Item 4: Information on the Company—Description of business—Equity Investments.

Additional measures

In addition to the financial performance measures discussed above, we use several other financial measures 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.

ECONOMIC ENVIRONMENT

Worldwide economic environment

The beginning of fiscal 2013 was accompanied by a further slowdown of the global economy. Although European financial markets calmed in reaction to a statement by the European Central Bank (ECB) president committing the ECB to preserve the Euro, worldwide economic activity decreased thereafter. Global gross domestic product (GDP) growth hit a trough of less than 2% in the fourth quarter of calendar 2012, and this continued through the first quarter of calendar 2013. Since then, the world economy has been reaccelerating, due to a slightly stronger U.S. economy, a recovery in Europe, the stabilization of Chinese growth (which slowed at the beginning of 2013), and substantial improvements in Japan. World GDP growth has picked up to more than 3% for the rest of 2013. However, because of the weak start to the year the recent reacceleration of the global economy does not yet bring annual growth figures back to prior-year level. Global GDP growth is expected to slow to 2.4% in calendar 2013 from 2.7% in calendar 2012. Growth of global fixed investment spending and value added manufacturing—both important indicators for Siemens as a producer of capital goods—is projected to decline to an even greater degree: fixed investments from 4.1% in 2012 to 3.1% in 2013, and value-added manufacturing from 2.9% in 2012 to 2.1% in 2013. These global aggregate figures reflect fairly divergent

developments. On the one hand, most advanced countries’ economies were gaining momentum in the course of calendar 2013. On the other hand many emerging countries were losing momentum compared to higher growth rates in the past.

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In most of the larger European economies the recession has ended. For the first time after six quarters of shrinking GDP, Euro zone production increased again in the spring quarter of 2013. In addition, government bond yields receded clearly in the countries most affected by the sovereign debt crisis, which reduced their borrowing costs and put government budgets on a more sustainable path. The crisis in Cyprus—the fifth country in the European Union to receive an international bail-out—had only a temporary effect on yields and volatility in financial markets. As governments kept tightening their budgets, fiscal austerity remained a drag on the European economy. In addition, unresolved problems in the banking sector restricted credit supply to the private sector. This lack of sufficient funds to finance investments still has the potential to stifle the region’s recovery. Exchange rate developments involving the Euro did not support Euro zone exports. In the Middle East economic recovery continued to be very weak. In Egypt, the political crisis intensified again and the conflict in Syria continued to escalate. Oil-exporting countries were affected by the slowdown of the world economy. GDP growth in these countries was decreasing below historical trends. Despite some moderation in commodity prices, GDP growth in Africa picked up slightly. However, uncertainty on the economic and political fronts poses a continuing threat to African economic development. Economic activity in the C.I.S. countries, which is mainly determined by its largest member, Russia, was weak again in 2013. Similar to some other emerging countries, Russia suffered from a reversal of capital flows out of the country. In sum, the region Europe, C.I.S., Africa and Middle East in 2013 is projected to grow at nearly the same modest rate of 1% as in 2012. Investment spending performed even worse: it contracted 1% in 2013, after it had already shrunk 0.4% in 2012. Value added manufacturing also stagnated in 2013 after a decline in 2012.

The Americas region saw significantly slower growth in 2013: GDP increased 1.8%, after growth of 2.7% in 2012. The U.S. was the main factor, due to budget tightening measures (the “sequester”) which started at the beginning of calendar 2013. According to an International Monetary Fund estimate, the sequester reduced the country’s 2013 growth rate by as much as 1.75 percentage points. Accordingly, GDP figures for the U.S. are masking a gradual improvement in the private sector. For example, the construction sector was recovering further, consumer spending was growing moderately, and fixed investments—which were affected most by the political uncertainties and even went to negative growth at the beginning of 2013—were picking up. Monetary policy continued to be very expansionary, although fears of a gradual reduction (“tapering”) of “quantitative easing” measures caused long-term interest rates to rise. Latin American growth was low and roughly unchanged compared to 2012. After a very low GDP increase of 0.9% in 2012, the Brazilian economy accelerated modestly to 2.4% in 2013. Because the Brazilian economy is estimated to operate near its potential, supply-side constraints have held back growth and exacerbated inflationary pressures. For the Americas region overall, growth of investment spending and value-added manufacturing both slowed in 2013: fixed investment growth from 4.6% in 2012 to 3.0% in 2013, value-added manufacturing from 4.3% to 1.8%.

In Asia, Australia GDP growth in 2013 is expected to remain at 4.8%, virtually the same level as in the two previous years. In the first half of 2013, the Chinese economy continued to slow down to 7.5% GDP growth year-over-year because global demand for Chinese products was weaker and concerns emerged about the health of the country’s financial system and the sustainability of its public debt. India had to deal with even more severe problems. The slowing economy, a current account deficit, high inflation and unresolved structural problems caused foreign capital to exit the country and the Rupee to lose one fifth of its value against the U.S. dollar within one year. These adverse developments for the Asia, Australia region were counterbalanced by the recovery of the Japanese economy. The government’s unusual measures to kick-start the Japanese economy out of its deflationary spiral seem to be successful: GDP expanded by a 4% annual rate in the first half of 2013. Although GDP growth for the Asia, Australia region remained stable in 2013, growth of fixed investment and value-added manufacturing slowed by roughly one percentage point, to 5.4% and 3.6%, respectively compared to 2012.

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The partly estimated figures presented here for GDP, fixed investments and manufacturing value added are calculated by Siemens AG based on an IHS Global Insight report dated October 15, 2013.

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 exposure related to nickel and ferro-alloy materials.

The average monthly price of copper (denominated in € per metric ton) for September 2013 was 15% lower than the average monthly price in September 2012, reflecting a more moderate economic sentiment during fiscal 2013 and increasing production from new or extended mine projects. Prices on a fiscal-year average were 5% lower in fiscal 2013 than the average for fiscal 2012. Because copper is produced in multiple locations and traded in multiple locations, such as 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 were 17% lower in September 2013 as compared to September 2012. Prices on a fiscal-year average were 8% lower in fiscal 2013 than the average for fiscal 2012. Higher premiums for physically delivered aluminum offset the erosion of exchange prices to some extent. Besides that, the aluminum industry is suffering from oversupply due to a combination of weaker investment sentiment among customers and rapid expansion of production capacities by manufacturers. 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 2013 declined by 10% compared to the average monthly prices in September 2012. Prices on a fiscal-year average were 8% lower in fiscal 2013 than the average for fiscal 2012 (source: CRU, an independent business analysis and consultancy group focused on, among other things, the mining and metals sectors).

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Our main exposure to the prices of copper and related products, and to carbon 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, fuels included in logistics costs).

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.

Market development

Overall, markets served by our Energy Sector grew moderately in fiscal 2013 compared to fiscal 2012, with all of the Sector’s businesses except for solar power benefiting from improved market conditions year-over-year. In particular, the markets for fossil power, wind power and power transmission recovered from market declines in fiscal 2012 and returned to the levels reached in fiscal 2011.

Growth for the markets served by our Fossil Power Generation Division benefited from a shift towards larger, more efficient units with higher power output. Globally, customers in emerging markets mainly added new capacities while customers in advanced economies mainly replaced existing power plants that are now considered relatively inefficient and inflexible. Despite the overall growth of fossil markets, the market for advanced gas power plants remained approximately at the same level as in fiscal 2012. Demand in Europe was held back by an ongoing slow economic development and uncertainties in regulatory frameworks. Political instability impacted market development in the Middle East despite social and economic pressure to add capacity. Within the Americas region, the U.S. added gas turbines to replace aging infrastructure and take advantage of the country’s ongoing natural gas boom. Fossil markets in the Asia, Australia region remained strong, with a number of nations adding capacity. These included China and India for coal-fired power generation and South Korea for gas-fired power plants.

In the markets served by our Wind Power Division, growth came from new offshore wind projects. Also onshore wind markets returned to a moderate growth path compared to fiscal 2012, except in the U.S. where concerns about potential expiration of tax incentives had led to a market boom due to project pre-drawings in 2012.

The markets served by our Oil & Gas Division rose on increased investment demand for exploration and production of oil and gas. On a geographic basis, market growth for the Division’s compression and oil and gas solutions business came mainly from the U.S., the Middle East, Africa, Russia, and Brazil. Growth in the Division’s industrial power markets was led by Asia, the Middle East, and parts of Europe. While market for small steam turbines remained on previous year’s level, demand was stronger for small-scale combined-cycle power plants.

The markets served by our Power Transmission Division recovered from weakness a year earlier. While markets grew slightly in most regions, year-over-year, growth was strongest in North-East Asia, the Middle East,

Africa and the Americas. In emerging countries, growth was driven mainly by expansion of infrastructure. In industrialized economies, customers mainly replaced and modernized equipment and also integrated renewable sources into their transmission grids. Despite the larger pattern of global growth, power transmission markets also suffered from overcapacities in certain segments, especially power transformers.

In fiscal 2013, markets addressed by our Healthcare Sector grew moderately year-over-year. Growth was clearly driven by emerging markets, as these countries continue to expand access to healthcare for a broader population and build up their healthcare infrastructure. In contrast, markets in industrialized countries grew only modestly compared to the prior fiscal year as demand was held back by healthcare reforms and budgetary constraints, particularly in Europe. Healthcare IT markets grew faster than the healthcare market as a whole, on particular strength in the U.S. On a geographic basis, markets in Asia, Australia grew in the high single digits, including double-digit growth rates in China. Markets in the Americas including the U.S. grew moderately. Growth in the U.S. was supported by strong demand for healthcare IT solutions driven by the HITECH Act and the relevant portions of the Affordable Care Act. In contrast, markets in Europe, C.I.S., Africa, Middle East declined slightly. In Europe, markets experienced a further decline in spending for healthcare in southern and western European countries, which continued to suffer from the sovereign debt crisis.

The overall market for our Industry Sector as well as for the Divisions Industry Automation and the Drive Technologies declined in fiscal 2013. While the pharmaceutical, chemical, automotive and food and beverage markets grew slightly compared to the prior fiscal year, this growth was more than offset by declines in other markets including particularly machine building and Industry’s markets for solutions and products for wind power. On a regional basis, markets in Asia, Australia and the Americas did not offer growth opportunities year-over-year, while markets in Europe declined, particularly in Southwest Europe. Within the Asia, Australia region, growth accelerated somewhat in China in the second half of fiscal 2013 following a weak development in the first half of the fiscal year. Within the Americas, market development in the U.S. was supported by lower energy prices due largely to a greater supply of energy produced in the U.S., primarily natural gas. But momentum declined somewhat during the fiscal year.

Within the markets served by our Industry Automation Division, short-cycle manufacturing industries saw de-stocking by customers which held back market development. Industrial IT markets grew moderately, but slightly below their expected long-term average growth rate.

Markets served by our Drive Technologies Division also saw de-stocking effects within short-cycle industries. Markets for industrial infrastructure industries, including the Division’s markets for solutions and products for wind power and rail markets, declined or showed no growth momentum. Markets for long-cycle industries such as mining and oil and gas grew only slightly year-over-year, or even declined. In some industries customers delayed or postponed large infrastructure projects.

Overall, the market for the Infrastructure & Cities Sector grew moderately in fiscal 2013. While markets served by the Transportation & Logistics Business showed a steady recovery including tenders for a number of large projects, markets for the Power Grid Solutions & Products Business and the Building Technologies Division showed little or no growth. Customers cut spending in both these markets, and also delayed project awards in the power grid solutions market.

In fiscal 2013, markets served by our Transportation & Logistics Business showed a steady recovery from the weak environment a year earlier. Moderate growth was driven by large contract awards, particularly in the U.K. and the Middle East. Furthermore, market growth was positively influenced by demand from major cities, which continued to invest in public transport systems. On a regional basis, the highest growth rates came from Asia, Australia, driven by strong demand from China. Demand in the Americas was also clearly up year-over-year. Within Europe, market development was divided between northwestern countries, which kept their public transport investments stable and southern countries, which held back investments as part of wider austerity programs. As a result, markets in the Europe, C.I.S., Africa, Middle East region showed the lowest growth of all regions.

Demand in the markets served by our Power Grid Solutions & Products Business remained weak across all regions in fiscal 2013. Higher demand from industrial customers was more than offset by delayed project awards and reduced grid investments by utility companies. Reduced investments were particularly evident in

southern Europe. Investment sentiment was also affected by uncertainty in the regulatory environment, such as in Germany which is undertaking a massive shift to renewable energy (“Energiewende”). Demand in the U.S. showed signs of recovery in the industry and construction categories, but investment in power grid solutions by utilities remained weak.

Markets served by our Building Technologies Division held steady year-over-year as customers were hesitant to increase investments. Markets in the solution business suffered from ongoing price pressure due mainly to aggressive pricing by system houses and large providers of building technologies solutions. On a regional basis, slight market growth in Asia, Australia and the Americas was largely offset by a slight decline in Europe, C.I.S., Africa, Middle East.

FISCAL 2013 COMPARED TO FISCAL 2012

FISCAL 2013—FINANCIAL SUMMARY

In fiscal 2013 our revenue came in 2% below the prior fiscal year. A slight increase at Infrastructure & Cities was more than offset by lower revenue at Industry and Energy. Revenue at Healthcare was stable year-over-year. On an organic basis, excluding currency translation and portfolio effects, revenue was 1% down year-over-year, within our forecast given in our Annual Report for fiscal 2012. We increased orders by 8% year-over-year. This increase was driven by our Infrastructure & Cities Sector and the Energy Sector. Both Sectors won a sharply higher volume from major contracts—Infrastructure & Cities within its Transportation & Logistics Business and Energy within its Wind Power Division.

In fiscal 2013, we achieved income from continuing operations of €4.212 billion. This was lower than income from continuing operations of €4.642 billion a year earlier and also below our expectation of €4.5 to €5.0 billion as presented in our Annual Report for 2012. A condition of that forecast was an expected recovery in the markets for our short-cycle businesses in the second half of fiscal 2013. This did not materialize. Additionally, that forecast assumed “Siemens 2014” charges for fiscal 2013 of €1.0 billion (pretax). In fact the amount came in €0.3 billion higher. Other factors largely offset each other. While profit in the Energy Sector was burdened by portfolio topics related to the solar business, this impact was more than offset by positive effects related to the sale of our stake in NSN. Due mainly to these factors, we adjusted our forecast for Income from continuing operations to €4.0 billion in the Interim Report for the third quarter of fiscal 2013.

Lower Income from continuing operations year-over-year was due mainly to sharply lower profit in Infrastructure & Cites and Industry. These Sectors took the two largest shares in the above-mentioned “Siemens 2014” charges. Profit at Infrastructure & Cities was also burdened by sharply higher project charges while profit development at Industry was also held back by challenging market conditions, particularly in the Sector’s short-cycle businesses as mentioned above. In contrast, Healthcare significantly improved profit year-over-year due mainly to successful execution of its “Agenda 2013” and lower charges associated with the initiative compared to the prior year. Profit at Energy rose moderately year-over-year. In both fiscal years the Sector’s profit development was heavily burdened by charges. While profit in the current period was particularly impacted by “Siemens 2014” charges, charges related to projects and Iran were substantially higher in the prior-year period. While Total Sectors profit fell year-over-year, this was partly offset by a strong improvement outside the Sectors. In particular, Equity Investments posted a profit in fiscal 2013 following a loss a year earlier, as it benefited from a positive effect stemming from a partial reversal of an impairment of our stake in NSN and a gain related to the sale of this stake during the fourth quarter of fiscal 2013. In the prior fiscal year, results at Equity Investments were burdened by substantial restructuring charges at NSN.

Net income in fiscal 2013 increased to €4.409 billion, up from €4.282 billion a year earlier, as results related to discontinued operations swung to a positive €197 million in fiscal 2013 from a negative €360 million a year earlier. The improvement in discontinued operations year-over-year was due mainly to OSRAM, which we successfully spun off in the fourth quarter of fiscal 2013. Due to higher Net income and a lower number of shares outstanding year-over-year following the share buyback program which we initiated in the fourth quarter of fiscal 2012, basic EPS rose to €5.08 in the current period, up from €4.74 a year earlier.

In fiscal 2013, Healthcare reached the upper end of its adjusted EBITDA margin target range. Adjusted EBITDA margin at Industry fell year-over-year, but the Sector remained in its target range. Despite burdens from the solar business, Energy nearly reached the lower end of its adjusted EBITDA target range, while Infrastructure & Cities clearly missed its range.

As a result of a combination of lower than expected Income from continuing operations and a higher average capital employed, ROCE (adjusted) for continuing operations declined to 13.8% in fiscal 2013. This was below the lower end of our target range of 15% to 20%, which we expected to reach. ROCE (adjusted) for continuing operations a year earlier was 15.5%.

Our Free cash flow from continuing operations rose 11% to €5.257 billion year-over-year, as we increased our cash flows from operating activities and reduced investments in intangible assets and property, plant and equipment year-over-year.

We made further progress in fiscal 2013 with regard to reaching our capital structure target. This target is defined as the ratio of adjusted industrial net debt to adjusted EBITDA, and set at 0.5 to 1.0 for the medium term. As forecast in our Annual Report for 2012, we increased the ratio year-over-year, to 0.34 from 0.24 a year earlier.

Overall, we believe that we achieved the goals for revenue and our capital structure announced in our Annual Report for 2012. Also we exceeded our revised target for Income from continuing operations announced in our Interim Report for the third quarter of fiscal 2013. ROCE (adjusted) for continuing operations was below our expectations due primarily to lower Income from continuing operations than we forecast a year ago.

During the course of fiscal 2013 it became less likely that our previous expectations for our markets would materialize. We therefore no longer expect to achieve a Total Sectors profit margin of at least 12% in fiscal 2014. But we will continue to rigorously execute our “Siemens 2014” program that was designed to achieve the margin target. At the end of fiscal 2013, we were ahead of identifying and implementing the measures within the program aimed at sustainably improving our productivity. We expect that “Siemens 2014” will help us to narrow or close the gap to our competitors in coming years.

During fiscal 2013, we also made strong progress in focusing our portfolio. Our successful spin-off of OSRAM was the first such partial spin-off by a German company. With the spin-off, Siemens shareholders received one OSRAM share per ten Siemens AG shares. Independence gives OSRAM the entrepreneurial flexibility to focus exclusively on its own market, with additional sources for financing. A stake in OSRAM gives shareholders of Siemens AG an additional opportunity to participate in OSRAM’s potential growth and value creation. The shares of Siemens AG rose on the first day of trading for OSRAM, July 8, 2013, and the shares of both companies clearly outperformed the German DAX stock index through the remainder of the fiscal year. We also sold our 50% stake in NSN. After the end of fiscal 2013, we signed an agreement to sell our business of mechanical, biological and chemical water treatment and processing. Furthermore, we intend to sell our airport logistics and postal automation business and exit our solar business after completion of projects under execution. At the same time, we strengthened our core activities by acquiring LMS International NV (LMS) to expand and complement the Industry Sector’s industrial IT and software business, and by acquiring Invensys Rail to expand Infrastructure & Cities’ presence in the growing global rail automation market.

We intend to continue providing an attractive return to shareholders. As in the past, we intend to fund the dividend payout from Free cash flow. The Siemens Managing Board, in agreement with the Supervisory Board, proposes a dividend of €3.00 per share, unchanged from a year earlier.

RESULTS OF SIEMENS

The following discussion presents selected information for Siemens for the fiscal year ended September 30, 2013:

Orders and revenue

Orders for fiscal 2013 totaled €82.351 billion, an 8% increase year-over-year, due primarily to higher volume from large orders. In contrast, revenue came in at €75.882 billion, down 2% from the prior year. This resulted in a book-to-bill ratio of 1.09 for Siemens in fiscal 2013. On an organic basis, excluding currency translation and portfolio effects, orders increased 10% and revenue came in 1% below the prior year.

The order backlog (defined as the sum of order backlogs of our Sectors) was €100 billion as of September 30, 2013, up from €97 billion a year earlier, despite negative currency translation effects of €4 billion.


	Orders (location of customer)
	Year ended September 30,				% Change				therein
	2013		2012		Actual		Adjusted⁽¹⁾		Currency		Portfolio
	(in millions of €)
Europe, C.I.S.⁽²⁾, Africa, Middle East		44,534		38,536		16%		16%		(1)%		1%
therein Germany		11,743		9,871		19%		19%		0%		0%
Americas		22,219		21,539		3%		5%		(3)%		1%
therein U.S.		14,635		14,727		(1)%		(1)%		(1)%		1%
Asia, Australia		15,598		15,863		(2)%		0%		(3)%		1%
therein China		6,605		6,017		10%		8%		0%		2%

Siemens		82,351		75,939		8%		10%		(2)%		1%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

Orders related to external customers in fiscal 2013 increased 8% overall, with results varying among the Sectors. Infrastructure & Cities reported double-digit growth on large orders at Transportation & Logistics, including a €3.0 billion contract win for trains and maintenance in the U.K. Orders for Energy were up 7%, driven by major contracts for wind power, and were level in Healthcare. Order intake declined 3% in Industry due mainly to the challenging market environment for the Sector’s short-cycle businesses during most of fiscal 2013. On a global basis, orders from emerging markets, as these markets are defined by the International Monetary Fund, increased 10%, faster than orders overall, and accounted for €28.702 billion, or 35%, of total orders for fiscal 2013.

In the region Europe, C.I.S., Africa, Middle East, orders increased 16%, including double-digit increases in Infrastructure & Cities and Energy driven by the major contract wins mentioned above. The higher volume of large orders in both Sectors was also the primary factor in order growth in Germany. Orders for Healthcare and Industry in the region came in slightly below the level of fiscal 2012. Within moderate order growth in the Americas, a 10% increase in Energy more than offset an 8% decline in Industry. Order intake in the Asia, Australia region showed a slight decrease in fiscal 2013.

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. In the fourth quarter of fiscal 2012, as a result of an analysis of our contracts with Iranian customers in particular with respect to expected payment defaults and force majeure events, we recorded adjustments affecting several line items in our consolidated statements of income, in particular revenue and cost of sales, recognized in prior periods from projects that were still permitted to be provided under these policies. For additional information, see Item 3: Key information—Risk factors.


	Revenue (location of customer)
	Year ended September 30,				% Change				therein
	2013		2012		Actual		Adjusted⁽¹⁾		Currency		Portfolio
	(in millions of €)
Europe, C.I.S.⁽²⁾, Africa, Middle East		39,874		39,947		0%		0%		(1)%		1%
therein Germany		10,750		11,049		(3)%		(3)%		0%		0%
Americas		20,916		22,078		(5)%		(4)%		(2)%		1%
therein U.S.		14,179		15,946		(11)%		(11)%		(1)%		1%
Asia, Australia		15,092		15,370		(2)%		0%		(3)%		1%
therein China		6,140		6,322		(3)%		(4)%		0%		1%

Siemens		75,882		77,395		(2)%		(1)%		(2)%		1%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

Revenue related to external customers declined 2% compared to fiscal 2012. A slight increase in Infrastructure & Cities was more than offset by moderate declines in Energy and Industry due to weak investment sentiment through most of fiscal 2013 and continuing softness in Industry’s short-cycle markets. Healthcare revenue came in near the prior-year level. On a global basis, emerging markets grew 1% and accounted for €25.827 billion, or 34%, of total revenue in fiscal 2013.

While revenue was stable year-over-year in the Europe, C.I.S., Africa, Middle East region, results within the region were mixed for the Sectors. Increases in Infrastructure & Cities and Energy were offset by declines in Industry and Healthcare. Lower revenue in the Americas was due primarily to Energy, which experienced an order gap for wind-farms in the U.S. in the latter half of calendar 2012 due to uncertainties regarding production tax incentives. The sharp drop in orders subsequently affected fiscal 2013 revenue development. In the Asia, Australia region, revenue declined 2% on decreases in Industry and Energy that could not be offset by increases in the other two Sectors.

LOGO

Consolidated Statements of Income


	Year ended September 30,
	2013			2012			% Change
	(in millions of €)
Gross profit		20,829			21,925			(5	)%
as percentage of revenue		27.4	%		28.3	%		—
Research and development expenses		(4,291	)		(4,245	)		(1	)%
as percentage of revenue		5.7	%		5.5	%		—
Selling and general administrative expenses		(11,286	)		(11,043	)		(2	)%
as percentage of revenue		14.9	%		14.3	%		—
Other operating income		503			523			(4	)%
Other operating expenses		(427	)		(364	)		(17	)%
Income (loss) from investments accounted for using the equity method, net		510			(333	)		n/a
Interest income		948			939			1	%
Interest expenses		(789	)		(760	)		(4	)%
Other financial income (expenses), net		(154	)		(5	)		<(200	)%
Income from continuing operations before income taxes		5,843			6,636			(12	)%
Income tax expenses		(1,630	)		(1,994	)		18	%
as percentage of income from continuing operations before income taxes		28	%		30	%		—
Income from continuing operations		4,212			4,642			(9	)%
Income (loss) from discontinued operations, net of income taxes		197			(360	)		n/a
Net income		4,409			4,282			3	%
Net income attributable to non-controlling interests		126			132			—
Net income attributable to shareholders of Siemens AG		4,284			4,151			3	%

Income from continuing operations before income taxes for fiscal 2013 declined to €5.843 billion from €6.636 billion a year earlier.

The largest factor in the decline was €1.276 billion in charges in the Sectors for the “Siemens 2014” program. These charges resulted from measures taken in fiscal 2013 to reduce costs by improving regional footprints, adjusting capacity, and increasing process efficiency. The charges are included in the following functional costs:


	Year ended September 30, 2013
	(in millions of €)
Cost of sales (and accordingly, gross profit)		762
Research and development expenses		37
Selling and general administrative expenses		374

In addition, charges of €104 million were included in other line items, predominantly in Other operating expenses. For comparison, in fiscal 2012, Healthcare reported charges of €184 million under its “Agenda 2013” initiative, which began a year before the “Siemens 2014” program. In fiscal 2013, the Sector’s charges under this initiative are included within “Siemens 2014” charges.

A number of factors in addition to the “Siemens 2014” charges reduced gross profit year-over-year. These included continuing market challenges, such as lower capacity utilization in Industry, pricing pressure and a less favorable revenue mix in a number of our businesses. In addition, both years included various charges and gains, including project charges in the Sectors Energy and Infrastructure & Cities. The most relevant of these charges are disclosed in Segment information analysis. While the net amounts of these items were significant at Group level in fiscal 2013 and fiscal 2012, there was only a small change in the net amount year-over-year.

Income from continuing operations before income taxes benefited from a sharply lower loss related to our stake in Nokia Siemens Networks Holding B.V. (NSN), which narrowed to €76 million from €741 million a year earlier. In addition, results related to NSN in fiscal 2013 benefited from a positive effect of €301 million

stemming from a partial reversal of a fiscal 2009 impairment of our stake in NSN, and a gain of €76 million from the sale of the NSN stake in the fourth quarter of fiscal 2013. These changes year-over-year are included in Income (loss) from investments accounted for using the equity method.

Including the developments described above, Income from continuing operations before income taxes declined 12% year-over-year. Due to a lower tax base and a lower effective tax rate compared to fiscal 2012, the decline in Income from continuing operations year-over-year came in at 9%.

Income from discontinued operations, net of income taxes in fiscal 2013 was €197 million, compared to a loss of €360 million in fiscal 2012, and was comprised of the following:


	Year ended September 30,
	2013			2012			% Change
	(in millions of €)
OSRAM		277			(135	)		n/a
Siemens IT Solutions and Services		71			40			78	%
Other		(151	)		(265	)		43	%

This substantial positive swing was due mainly to OSRAM, for which the prior-year amount included a negative catch-up effect of €443 million (pretax), arising when we deemed it no longer highly probable to complete our original plan to dispose of OSRAM via an initial public offering. We subsequently completed the spin-off and listing of OSRAM in the fourth quarter of fiscal 2013.

In addition, the item Other in fiscal 2012 included a burden of €143 million (pretax) from a settlement related to Greece. For additional information on discontinued operations, see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 2.

As a result of the positive swing in income from discontinued operations, Net income for Siemens was 3% higher than in the same period a year earlier. Net income attributable to shareholders of Siemens AG increased to €4.284 billion, from €4.151 billion in fiscal 2012.

Basic earnings per share were €5.08 in fiscal 2013, up from €4.74 in fiscal 2012, reflecting higher Net income attributable to shareholders of Siemens AG, and a lower number of weighted average shares outstanding due to share buybacks in fiscal 2013. For additional information, see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 35.

SEGMENT INFORMATION ANALYSIS

Energy


	Year ended September 30,						% Change						therein
	2013			2012			Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Sector
Profit		1,955			1,901			3	%
Profit margin		7.3	%		6.9	%
Orders		28,797			26,930			7	%		8	%		(2	)%		1	%
Total revenue		26,638			27,736			(4	)%		(3	)%		(2	)%		0	%
External revenue		26,386			27,501			(4	)%
therein:
Europe, C.I.S.⁽²⁾, Africa, Middle East		14,346			14,261			1	%
therein Germany		2,231			1,927			16	%
Americas		7,153			8,141			(12	)%
Asia, Australia		4,886			5,098			(4	)%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

Energy reported a profit of €1.955 billion in fiscal 2013, up 3% year-over-year. The Sector took €301 million in charges under the “Siemens 2014” program, primarily for reducing its cost structure, adjusting capacity and improving its regional footprint. Fossil Power Generation contributed lower earnings than a year earlier, but still accounted for most of the Sector’s profit and was the highest profit performer among all Siemens Divisions. Profit at Oil & Gas increased year-over-year on substantially lower charges related to Iran. Wind Power’s profit remained on the same level as in fiscal 2012, despite €94 million in charges related to turbine blades. Power Transmission cut its loss nearly in half compared to the prior year, due mainly to substantially lower charges mainly related to grid-connections to offshore wind-farms. These charges totaled €171 million in fiscal 2013 compared to €570 million in fiscal 2012. The solar business was reclassified from discontinued operations to continuing operations in fiscal 2013 and is reported within Energy on a retrospective basis. The loss from the solar business was nearly unchanged year-over-year, at €255 million, compared to €258 million a year earlier. In the current fiscal year, the loss included impairments and costs associated with the ramp-down of the business of €181 million. In fiscal 2012, the loss included impairments of €150 million.

Revenue declined 4% compared to the prior-year period as declines at Fossil Power Generation and Power Transmission were only partially offset by increases at Wind Power and Oil & Gas. On a regional basis, revenue rose in Europe, C.I.S., Africa, Middle East and declined in other regions. Orders came in 7% higher due mainly to large orders at Wind Power in Europe, C.I.S., Africa, Middle East. Order intake was clearly higher in the Americas, while orders declined significantly in the Asia, Australia region. The book-to-bill ratio for Energy was 1.08, and its order backlog was €54 billion at the end of the fiscal year.


	Orders
	Year ended September 30,				% Change						therein
	2013		2012		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Fossil Power Generation		10,682		11,116		(4	)%		(2	)%		(2	)%		0	%
Wind Power		6,593		4,932		34	%		34	%		(2	)%		1	%
Oil & Gas		5,801		5,307		9	%		9	%		(2	)%		2	%
Power Transmission		5,700		5,824		(2	)%		0	%		(2	)%		0	%

(1)	Excluding currency translation and portfolio effects.


	Revenue
	Year ended September 30,				% Change						therein
	Year ended September 30,				% Change						therein
	2013		2012		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Fossil Power Generation		10,239		11,161		(8	)%		(7	)%		(1	)%		0	%
Wind Power		5,174		5,066		2	%		4	%		(2	)%		1	%
Oil & Gas		5,152		5,115		1	%		0	%		(1	)%		2	%
Power Transmission		6,167		6,593		(6	)%		(4	)%		(2	)%		0	%

(1)	Excluding currency translation and portfolio effects.


	Profit									Profit Margin
	Year ended September 30,									Year ended September 30,
	2013			2012			% Change			2013			2012
	(in millions of €)
Businesses
Fossil Power Generation		1,693			1,933			(12	)%		16.5	%		17.3	%
Wind Power		306			304			1	%		5.9	%		6.0	%
Oil & Gas		433			218			99	%		8.4	%		4.3	%
Power Transmission		(156	)		(302	)		48	%		(2.5	)%		(4.6	)%

Fossil Power Generation generated profit of €1.693 billion in fiscal 2013, significantly below €1.933 billion in fiscal 2012. The main drivers of the change were a decline in revenue in the solutions business and a less favorable revenue mix particularly in the products business. Both years included burdens on profit. In the current year, the Division recorded €129 million in “Siemens 2014” charges. A year earlier, charges of €152 million related to the Olkiluoto project in Finland were partly offset by an €87 million gain on the Division’s divestment of its joint venture stake in OAO Power Machines. Revenue was 8% lower year-over-year, resulting mainly from declining order intake for turnkey projects. On a geographic basis, revenue declined significantly in the Europe, C.I.S., Africa, Middle East region. Order intake was down 4%, as a substantial decrease in Asia, Australia and a moderate decline in the region Europe, C.I.S., Africa, Middle East were partially offset by a significant increase in the Americas.

Profit at Wind Power was €306 million in fiscal 2013, nearly unchanged from fiscal 2012. Both fiscal years included burdens on profit. In the current fiscal year, the Division took the €94 million in charges mentioned above, for inspecting and retrofitting installed onshore turbine blades, primarily in the U.S. A year earlier, profit was held back by 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 was slightly higher than in the prior year as increases in Europe, C.I.S., Africa, Middle East and Asia, Australia more than compensated for a sharp decline in the Americas. The sharp decline in the Americas was due to the onshore wind farm business, where the U.S is the largest national market for Wind Power. New projects in the U.S. were halted or postponed in the latter half of 2012 due to uncertainty regarding continuation of production tax incentives. The resulting order gap led to a steep drop in fiscal 2013 revenue in the Americas compared to a year earlier. Order intake was up 34% year-over-year, due mainly to a much higher volume from large orders, which included several large offshore wind-farms in Europe, C.I.S., Africa, Middle East.

Profit at Oil & Gas almost doubled year-over-year, to €433 million, due primarily to substantially lower charges related to adjustments for long-term construction and service contracts with customers in Iran. In fiscal 2013, the Division recorded €46 million in these charges on Division profit in the first quarter as part of compliance with sanctions on Iran, primarily on its oil and gas industries, enacted in October 2012. In fiscal 2012, the Division recorded charges totaling €275 million related to Iran, mainly as a result of a revenue reduction of €282 million. For additional information regarding these adjustments, see Item 5: Operating and financial review and prospects—Fiscal 2012 compared to fiscal 2011—Adjustments for long-term contracts with customers in Iran. The Division also took €34 million in charges for the “Siemens 2014” program. Revenue was slightly higher compared to the prior year on increases in Europe, C.I.S., Africa, Middle East and the Americas, partially offset by a decrease in Asia, Australia. Order intake was up 9% as growth in Asia, Australia and Europe, C.I.S., Africa, Middle East more than offset a decline in the Americas.

Power Transmission sharply reduced its loss compared to fiscal 2012, to €156 million, despite €129 million in charges for the “Siemens 2014” program. The major factor in the change was lower project charges related mainly to grid connections to offshore wind-farms, which fell to €171 million from €570 million a year earlier. These charges were due to project delays resulting from regulatory complexity and the projects’ challenging marine environment, which required revised estimates of resources and personnel. Profit development was held back by margin compression related to these projects and orders booked in prior periods with significant pricing pressure. Operational challenges strongly cut back profit in the high-voltage products business. Revenue for the Division was down 6% year-over-year due to declines in Europe, C.I.S., Africa, Middle East and Asia, Australia. Orders came in 2% lower compared to the prior year, due in part to more selective order intake. On a regional basis, a decline in Europe, C.I.S., Africa, Middle East was partially offset by increases in other regions. The Division expects continuing challenges in coming quarters.

Healthcare


	Year ended September 30,						% Change						therein
	2013			2012			Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Sector
Profit		2,048			1,815			13	%
Profit margin		15.0	%		13.3	%
Orders		13,950			13,806			1	%		4	%		(3	)%		0	%
Total revenue		13,621			13,642			0	%		2	%		(3	)%		0	%
External revenue		13,598			13,600			0	%
therein:
Europe, C.I.S.⁽²⁾, Africa, Middle East		4,544			4,593			(1	)%
therein Germany		995			1,056			(6	)%
Americas		5,631			5,692			(1	)%
Asia, Australia		3,422			3,315			3	%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

The Healthcare Sector delivered €2.048 billion in profit in fiscal 2013, up significantly from the prior-year level with all businesses contributing to profit growth. Results for the year were positively influenced by lower charges associated with the Sector’s “Agenda 2013” initiative, which declined to €84 million from €184 million in fiscal 2012. Healthcare intends to maintain the achievements of the initiative going forward, including improvements in cost position and competitiveness. In particular, expenses for research and development and selling and general administrative expenses both declined compared to fiscal 2012. Effective January 1, 2013, results for Healthcare included negative effects on profit from an excise tax on medical devices which was introduced in the U.S., affecting most businesses in the Sector.

Profit at Diagnostics came in at €350 million compared to €314 million a year earlier. Profit development followed the pattern of the Sector with regard to “Agenda 2013,” including lower charges and improvements in cost position. In particular the charges fell to €35 million from €80 million in fiscal 2012. Purchase price allocation (PPA) effects related to past acquisitions at Diagnostics were €169 million in fiscal 2013. A year earlier, Diagnostics recorded €173 million in PPA effects.

Revenue for Healthcare in fiscal 2013 was nearly unchanged compared to fiscal 2012, while orders increased slightly year-over-year. On an organic basis, both revenue and orders were up. On a geographic basis, revenue growth in Asia, Australia was offset by declines in the other regions. Asia, Australia and the Americas drove order growth due to increases in China and the U.S. The book-to-bill ratio was 1.02, and Healthcare’s order backlog was €7 billion at the end of fiscal 2013.

Revenue at Diagnostics declined 1% in fiscal 2013, from €3.969 billion to €3.942 billion, and showed the same development as the Sector with regard to the regions. On comparable basis revenue was up 2%.

Industry


	Year ended September 30,						% Change						therein
	2013			2012			Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Sector
Profit		1,478			2,448			(40	)%
Profit margin		8.0	%		12.6	%
Orders		18,417			18,962			(3	)%		(3	)%		(1	)%		1	%
Total revenue		18,586			19,409			(4	)%		(4	)%		(1	)%		1	%
External revenue		16,943			17,772			(5	)%
therein:
Europe, C.I.S.⁽²⁾, Africa, Middle East		9,261			9,644			(4	)%
therein Germany		4,198			4,464			(6	)%
Americas		3,290			3,484			(6	)%
Asia, Australia		4,393			4,644			(5	)%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

In fiscal 2013, profit at Industry fell sharply to €1.478 billion, impacted by €424 million in charges for the “Siemens 2014” program primarily for improving the Sector’s global footprint and reducing costs associated with administrative processes. Profit development was held back also by lower revenue and a less favorable business mix, due mainly to continuing softness in the Sector’s short-cycle businesses. In addition, the Sector took €100 million in charges for two large projects at its metals technologies business.

The market environment for Industry through most of fiscal 2013 was clearly more challenging than a year earlier. Despite signs of stabilizing towards the end of the period, revenue declined moderately year-over-year on broad-based decreases at both Divisions and the metals technologies business. Orders for the Sector declined 3% year-over-year, as reported growth on larger orders at the end of the year was more than offset by a low order intake through most of fiscal 2013.

On a geographic basis, Industry’s orders and revenue both showed a broad-based decline in all three reporting regions. The book-to-bill ratio was 0.99, and Industry’s order backlog declined to €10 billion at the end of fiscal 2013.


	Orders
	Year ended September 30,				% Change						therein
	2013		2012		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Industry Automation		8,143		8,524		(4	)%		(5	)%		(1	)%		2	%
Drive Technologies		9,024		9,395		(4	)%		(3	)%		(1	)%		0	%

(1)	Excluding currency translation and portfolio effects.


	Revenue
	Year ended September 30,				% Change						therein
	2013		2012		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Industry Automation		8,194		8,463		(3	)%		(3	)%		(1	)%		1	%
Drive Technologies		9,208		9,640		(4	)%		(4	)%		(1	)%		0	%

(1)	Excluding currency translation and portfolio effects.


	Profit							Profit Margin
	Year ended September 30,							Year ended September 30,
	2013		2012		% Change			2013			2012
	(in millions of €)
Businesses
Industry Automation		1,038		1,316		(21	)%		12.7	%		15.6	%
Drive Technologies		527		970		(46	)%		5.7	%		10.1	%

Profit at Industry Automation declined substantially year-over year, due in part to €114 million in charges for “Siemens 2014.” Continuing softness in the Division’s short-cycle markets led to lower revenue year-over-year and reduced capacity utilization. The Division took measures to improve its business mix via a ramp-down of certain low-margin activities, including the solar inverter business. In contrast, the Division’s industrial IT and software business contributed revenue and order growth year-over-year, due in part to recent acquisitions including LMS. Revenue for the Division overall came in 3% below the prior year, on declines in the Americas and Europe, C.I.S., Africa, Middle East. The Division’s moderate decline in orders year-over-year was evident in all three reporting regions, led by a clear decrease in the Americas.

In addition, the Division took PPA effects related to long-lived assets of LMS, which totaled €33 million for the year. Effects from deferred revenue adjustments and inventory step-ups related to LMS totaled an additional €43 million. Both fiscal years under review included PPA effects from the acquisition of UGS Corp., acquired in fiscal 2007. These effects were €147 million in fiscal 2013 and €149 million a year earlier.

Profit at Drive Technologies in fiscal 2013 came in at €527 million, a sharp decline from the prior-year level. The main impact was €243 million in charges for “Siemens 2014.” Profit development also included a revenue-driven decline due to challenging market conditions for the Division’s higher-margin short-cycle businesses and its offerings for renewable energy. On a geographic basis, both orders and revenue declined moderately on lower volume in all three reporting regions, particularly including Asia, Australia which showed a clear decline year-over-year.

Infrastructure & Cities


	Year ended September 30,						% Change						therein
	2013			2012			Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Sector
Profit		306			1,102			(72	)%
Profit margin		1.7	%		6.3	%
Orders		21,894			17,150			28	%		28	%		(3	)%		2	%
Total revenue		17,879			17,585			2	%		1	%		(1	)%		2	%
External revenue		17,128			16,731			2	%
therein:
Europe, C.I.S.⁽²⁾, Africa, Middle East		10,482			10,121			4	%
therein Germany		2,633			2,880			(9	)%
Americas		4,283			4,344			(1	)%
Asia, Australia		2,363			2,267			4	%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

Profit at Infrastructure & Cities came in at €306 million in fiscal 2013, down from €1.102 billion a year earlier. The biggest factor in this decline year-over-year was €468 million in “Siemens 2014” charges, taken primarily to improve the Sector’s cost efficiency and regional footprint. These charges led to declines in profit at Power Grid Solutions & Products and Building Technologies, which otherwise showed strong profit performances. Transportation & Logistics took the largest part of the Sector’s “Siemens 2014” charges.

Furthermore, its profit was impacted by project charges of €270 million related to high-speed trains. In the prior fiscal year, charges related to these matters were sharply lower at €86 million. Transaction and integration costs related to its Invensys Rail acquisition, which closed in the third quarter of fiscal 2013, further impacted the Business’ profit year-over-year. As a result of the above mentioned factors, Transportation & Logistics posted a loss in the current fiscal year, compared to a profit in the prior fiscal year.

Revenue was up 2% compared to the prior fiscal year, as increases at Transportation & Logistics and Power Grid Solutions & Products more than offset a slight decline at Building Technologies. Orders for the Sector rose substantially year-over-year. This growth was driven by Transportation & Logistics, which recorded a sharply higher volume from major orders compared to the prior fiscal year including €3.0 billion for trains and maintenance in the U.K. Orders for Power Grid Solutions & Products were also higher year-over-year, while orders for Building Technologies came in near the prior-year level. On a regional basis, revenue rose in Europe, C.I.S., Africa, Middle East and in Asia, Australia. Regional order development was similar but even more pronounced. The large contract awards mentioned above drove growth in Europe, C.I.S., Africa, Middle East. Orders in Asia, Australia were also up substantially. On a book-to-bill ratio of 1.22, Infrastructure & Cities’ order backlog rose to €29 billion at the end of fiscal 2013.


	Orders
	Year ended September 30,				% Change						therein
	2013		2012		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Transportation & Logistics		10,040		5,382		87	%		85	%		(5	)%		6	%
Power Grid Solutions & Products		6,392		6,275		2	%		4	%		(2	)%		0	%
Building Technologies		5,769		5,809		(1	)%		0	%		(1	)%		0	%

(1)	Excluding currency translation and portfolio effects.


	Revenue
	Year ended September 30,				% Change						therein
	2013		2012		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Transportation & Logistics		6,318		5,969		6	%		2	%		(2	)%		6	%
Power Grid Solutions & Products		6,102		6,068		1	%		3	%		(2	)%		0	%
Building Technologies		5,754		5,820		(1	)%		0	%		(1	)%		0	%

(1)	Excluding currency translation and portfolio effects.


	Profit								Profit margin
	Year ended September 30,								Year ended September 30,
	2013			2012		% Change			2013			2012
	(in millions of €)
Businesses
Transportation & Logistics		(448	)		236		n/a			(7.1	)%		4.0%
Power Grid Solutions & Products		403			457		(12	)%		6.6	%		7.5%
Building Technologies		351			379		(7	)%		6.1	%		6.5%

Transportation & Logistics posted a loss of €448 million in the current fiscal year, compared to profit of €236 million a year earlier. The two main factors for the change were sharply higher project charges year-over-year, which included the above mentioned €270 million from delays for receiving certification for new high-speed trains in fiscal 2013, up from €86 million for these matters in the prior fiscal year, and €267 million in charges related to “Siemens 2014.” The latter charges include a goodwill impairment of €46 million on the airport logistics and postal automation business which Transportation & Logistics intends to sell. Profit development for the fiscal year was also held back by low margins associated with large long-term contracts. The

acquisition of Invensys Rail during the third quarter of fiscal 2013 resulted in €76 million in transaction and integration costs for the fiscal year and PPA effects of €23 million. Revenue for the Business rose 6% while orders were up 87%, due primarily to a sharply higher volume from major orders year-over-year, including the above-mentioned €3.0 billion order in the U.K. Both revenue and order growth benefited from the acquisition of Invensys Rail.

Profit at Power Grid Solutions & Products came in at €403 million, down from €457 million a year earlier. The decline was due to €97 million in “Siemens 2014” charges. Revenue and orders increased slightly year-over-year. On a regional basis, revenue was higher in Asia, Australia and the Americas and declined slightly in Europe, C.I.S., Africa, Middle East. Orders rose in Asia, Australia and Europe, C.I.S., Africa, Middle East, only partly offset by a decline in the Americas.

Profit at Building Technology declined to €351 million in fiscal 2013, from €379 million a year earlier as the Division absorbed €100 million in “Siemens 2014” charges in the current period. Selective order intake led to a more favorable business mix compared to the prior fiscal year, particularly including Building Technologies’ higher-margin product and service business. It also led to a slight decline in revenue and orders year-over-year. On a regional basis, lower volume was due mainly to the Americas.

Equity Investments

In fiscal 2013, Equity Investments recorded a profit of €396 million, compared to a loss of €549 million a year earlier. This improvement year-over-year was due mainly to a sharply lower loss related to our share in NSN, which declined to €76 million from €741 million a year earlier. In addition, results related to NSN in fiscal 2013 benefited from a positive effect of €301 million stemming from a partial reversal of a fiscal 2009 impairment of our stake in NSN, and a gain of €76 million from the sale of the NSN stake in the fourth quarter of fiscal 2013. The equity investment loss related to our share in EN widened to €96 million in fiscal 2013 from a loss of €23 million a year earlier. The loss in the current period was due largely to additions to Siemens’ net investment in EN, which resulted in the recognition of previously unrecognized losses. Profit at Equity Investments in both fiscal years included equity investment income related to our stake in BSH.

Financial Services (SFS)


	Year ended September 30,
	2013		2012		% Change
	(in millions of €)
Income before income taxes		409		479		(14	)%
Total assets		18,661		17,405		7	%

Profit (defined as income before income taxes) at SFS came in at €409 million, compared to €479 million in the prior-year period, which benefited from a €78 million gain on the sale of a portion of SFS’s stake in Bangalore International Airport Limited. SFS continued to successfully execute its growth strategy and higher total assets year-over-year helped generate a higher interest result compared to the prior-year. The current period was affected by burdens including a €52 million impairment of SFS’s equity stake in a power plant project in the U.S.

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.

Centrally managed portfolio activities

Centrally managed portfolio activities reported a loss of €12 million in fiscal 2013, compared to a loss of €29 million in fiscal 2012.

Siemens Real Estate (SRE)

Income before income taxes at SRE was €171 million in fiscal 2013, compared to €115 million in fiscal 2012. This increase was due in part to higher income related to the disposal of real estate.

Corporate items and pensions

Corporate items and pensions reported a loss of €839 million in fiscal 2013 compared to a loss of €668 million in fiscal 2012. The loss at Corporate items was €419 million, compared to a loss of €261 million in fiscal 2012 which included positive effects related to legal and regulatory matters. Centrally carried pension expense totaled €420 million in fiscal 2013, compared to €407 million in fiscal 2012.

Eliminations, Corporate Treasury and other reconciling items

Income before income taxes from Eliminations, Corporate Treasury and other reconciling items was a negative €70 million in fiscal 2013, compared to a positive €23 million in the same period a year earlier. The change year-over-year included lower results from Corporate Treasury activities, due mainly to lower interest income from liquidity compared to the prior-year period.

FISCAL 2012 COMPARED TO FISCAL 2011

ADJUSTMENTS FOR LONG-TERM CONTRACTS WITH CUSTOMERS IN IRAN

As described in more detail in Item 5: Operating and financial review and prospects—Fiscal 2013 compared to fiscal 2012—Results of Siemens, we have decided that, subject to certain limited exceptions, we will not enter into new contracts with customers in Iran and have issued group-wide policies establishing the details of our general decision. However, we are still party to a number of long-term construction and service contracts that were entered into prior to this general decision and were permitted under our policies at the time these contracts were entered into.

Our Iran policies, which are designed to ensure compliance with applicable sanctions, require the termination of contracts with Iranian customers when it is contractually permissible. The contracts with our Iranian customers include termination clauses for the event of a payment default and/or force majeure. The force majeure clause is applicable if, for example, business transactions with the customer and/or the products and services agreed upon in the contract are subject to sanctions.

Based on economic and political developments in the fourth quarter of fiscal 2012, we concluded at the end of fiscal 2012 that payment defaults under most of our existing contracts with Iranian customers were highly probable. Specifically, over the course of fiscal 2012, the U.S., the EU and other countries had imposed new sanctions or tightened existing sanctions against Iran. As a direct effect of these sanctions, Iranian oil exports decreased and restrictions on monetary transactions were implemented. Throughout fiscal 2012, decreasing cash flows from oil exports triggered an economic crisis in Iran that deepened in the fourth quarter of fiscal 2012. This economic crisis led to a material devaluation of the Iranian Rial, an increase in inflation and domestic political conflicts. In addition, conflicts with neighboring countries and discussions about the Iranian nuclear program intensified during fiscal 2012. Against this background, we observed delays in receipt of advance payments due from our Iranian customers towards the end of fiscal 2012 and, as of the end of fiscal 2012, expected that there was a high probability of such payment delays becoming more significant in fiscal 2013, inevitably leading to payment defaults.

We also believed that it was highly probable that we would be required to terminate certain contracts with our Iranian customers due to force majeure. Blacklistings of customers, end customers or their shareholders are generally considered to be force majeure events. In fact, one of our customers had previously been blacklisted by the EU in fiscal 2012 and appealed the blacklisting. Given that the final EU court decision was not available and that we expected further EU sanctions later in the 2012 calendar year, we subsequently concluded as of September 30, 2012 that it was highly probable that we would be required to terminate the contracts with that customer due to force majeure.

Based on these considerations, we analyzed each contract with our Iranian customers individually against the background of our Iran policies in the fourth quarter of fiscal 2012 and assessed if either the payment default scenario or the force majeure scenario triggered a change in accounting estimate. Based on this analysis we grouped our Iran contracts into contracts to be continued because management’s best estimate was that these contracts would not be terminated and contracts to be terminated based on management’s best estimate that these contracts would be terminated due to expected payment defaults or due to force majeure. During fiscal 2013, we terminated one of our largest contracts with Iranian customers as well as several small contracts. For the remaining contracts, we continuously reviewed whether changes in facts and circumstances, such as changes in applicable sanctions, would require a change in management’s best estimate regarding the continuation or termination of the contracts. As of September 30, 2013, we considered the termination of the remaining contracts that we expected to terminate at the end of fiscal 2012 still highly probable, except for two minor contracts the termination of which was no longer considered to be contractually permissible.

For contracts to be continued, the worsened creditworthiness led to uncertainty about the collectability of amounts already included in revenue and in income from continuing operations. Uncollectable amounts or amounts for which recovery had ceased to be probable were recognized as an expense.

For contracts to be terminated, certain goods or services that were originally agreed under the relevant contract would not be delivered or rendered to the customer. The scope of the contract and thereby its volume decreased as a result of the expected termination. This decrease in total contract volume is reflected in decreased total contract revenue and decreased total contract costs. The absolute and relative decrease in total contract revenue and total contract costs, however, is not identical for each contract for a number of reasons. As our contracts often require that we give prior notice of termination, we have to continue to perform during the notice period and generally incur contract costs during this period. In addition, some expected future contract-specific components were sub-contracted and could not be cancelled by us without incurring additional costs, for example due to damage payments. These and other expected future contract costs until completion under the revised scope had to be considered in the accounting for construction contracts even though the related contract revenue would no longer be generated due to the termination of the contract.

As a result of the analysis, we determined that adjustments in accordance with the requirements of IAS 11 had to be made to a number of the contracts reviewed. The adjustments in the fourth quarter of fiscal 2012 resulted in a reduction of income from continuing operations before income taxes of €347 million. The reduction was due mainly to a reversal of revenue of €389 million, predominantly in the Energy Sector, which was partly compensated by adjustments in cost of sales. In our segment reporting, profits of the Energy and Infrastructure and Cities Sectors were reduced by €327 million and €20 million, respectively.

RESULTS OF SIEMENS

The following discussion presents selected information for Siemens for the fiscal year ended September 30, 2012:

Orders and revenue

Revenue increased steadily quarter by quarter throughout fiscal 2012 and came in at €77.395 billion, up 7% from the prior-year 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 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 €97 billion as of September 30, 2012, unchanged from the prior year level, including positive currency translation effects of €3 billion.


	Orders (location of customer)
	Year ended September 30,				% Change					therein
	2012		2011		Actual			Adjusted⁽¹⁾		Currency		Portfolio
	(in millions of €)
Europe, C.I.S.⁽²⁾, Africa, Middle East		38,536		46,958		(18	)%		(19)%		1%		1%
therein Germany		9,871		17,329		(43	)%		(43)%		0%		0%
Americas		21,539		21,351		1	%		(5)%		5%		1%
therein U.S.		14,727		15,063		(2	)%		(9)%		6%		1%
Asia, Australia		15,863		16,228		(2	)%		(7)%		4%		0%
therein China		6,017		6,204		(3	)%		(10)%		8%		0%

Siemens		75,939		84,537		(10	)%		(13)%		2%		1%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

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 declined 6%, less than orders overall, and accounted for €26.175 billion, or 34%, of total orders for fiscal 2012.

In the region Europe, C.I.S., Africa, Middle East, orders declined 18% 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 comparison 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 moderate 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.


	Revenue (location of customer)
	Year ended September 30,				% Change					therein
	2012		2011		Actual		Adjusted⁽¹⁾			Currency		Portfolio
	(in millions of €)
Europe, C.I.S.⁽²⁾, Africa, Middle East		39,947		38,545		4%		2	%		1%		0	%
therein Germany		11,049		10,788		2%		2	%		0%		0	%
Americas		22,078		19,775		12%		5	%		6%		1	%
therein U.S.		15,946		13,735		16%		7	%		8%		1	%
Asia, Australia		15,370		14,206		8%		4	%		5%		0	%
therein China		6,322		6,346		0%		(7	)%		7%		(1	)%

Siemens		77,395		72,526		7%		3	%		3%		0	%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

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 significantly 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 €25.525 billion, or 33%, of total revenue in fiscal 2012.

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.

Consolidated Statements of Income


	Year ended September 30,
	2012			2011			% Change
	(in millions of €)
Gross profit		21,925			21,907			0	%
as percentage of revenue		28.3	%		30.2	%		—
Research and development expenses		(4,245	)		(3,903	)		(9	)%
as percentage of revenue		5.5	%		5.4	%		—
Selling and general administrative expenses		(11,043	)		(10,146	)		(9	)%
as percentage of revenue		14.3	%		14.0	%		—
Other operating income		523			555			(6	)%
Other operating expenses		(364	)		(501	)		27	%
Income (loss) from investments accounted for using the equity method, net		(333	)		146			n/a
Interest income		939			845			11	%
Interest expenses		(760	)		(786	)		3	%
Other financial income (expenses), net		(5	)		646			n/a
Income from continuing operations before income taxes		6,636			8,763			(24	)%
Income tax expenses		(1,994	)		(2,137	)		7	%
as percentage of income from continuing operations before income taxes		30	%		24	%		—
Income from continuing operations		4,642			6,625			(30	)%
Loss from discontinued operations, net of income taxes		(360	)		(726	)		50	%
Net income		4,282			5,899			(27	)%
Net income attributable to non-controlling interests		132			176			—
Net income attributable to shareholders of Siemens AG		4,151			5,723			(27	)%

Income from continuing operations before income taxes was 6.636 billion in fiscal 2012. While this was one of our highest results ever, it was substantially lower than in fiscal 2011. The primary factors in the decline were cost of sales; research and development expenses; selling and general administrative expenses; and income (loss) from investments accounted for using the equity method, net. In addition, fiscal 2011 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 Item 18: Financial Statements—Notes to Consolidated Financial Statements—Notes 5, 6 and 8.

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 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 Item 4: Information on the Company—Research and development.

Income (loss) from investments accounted for using the equity method, net swung from a positive €146 million in fiscal 2011 to a negative €333 million in fiscal 2012. The primary factor was Nokia Siemens Networks Holding 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 Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 7.

Income from continuing operations before income taxes 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 (expenses), net. For additional information, see Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 8.

In fiscal 2012, Income from continuing operations before income taxes 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 adjustments for long-term contracts with customers in Iran. These gains and impacts were distributed among various line items.

As a result of these developments, Income from continuing operations before income taxes declined 24%. Income taxes declined 7% year-over-year. The effective tax rate was 30%. For comparison, the effective tax rate of 24% in fiscal 2011 benefited from the mainly tax-free Areva disposal gain. Income from continuing operations was €4.642 billion in fiscal 2012, compared to €6.625 billion in fiscal 2011.

Loss from discontinued operations, net of income taxes in fiscal 2012 was €360 million, compared to €726 million in fiscal 2011. Loss from discontinued operations, net of income taxes was comprised of the following:


	Year ended September 30,
	2012			2011			% Change
	(in millions of €)
Siemens IT Solutions and Services		40			(835	)		n/a
OSRAM		(135	)		293			n/a
Other		(265	)		(184	)		34	%

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 €40 million, compared to a loss of €835 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 arose from the fact 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. While revenue rose 7% year-over-year, benefiting from currency translation and portfolio effects, ongoing market challenges held back profit development.

Discontinued operations also include our Water Technologies Business Unit and 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 Item 18: Financial Statements—Notes to Consolidated Financial Statements—Note 4.

Net income for Siemens in fiscal 2012 declined to €4.282 billion from €5.899 billion in fiscal 2011. Net income attributable to shareholders of Siemens AG was €4.151 billion, down from €5.723 billion in fiscal 2011.

SEGMENT INFORMATION ANALYSIS

Energy


	Year ended September 30,						% Change						therein
	Year ended September 30,						% Change						therein
	2012			2011			Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Sector
Profit		1,901			3,864			(51	)%
Profit margin		6.9	%		15.5	%
Orders		26,930			31,823			(15	)%		(19	)%		2	%		2	%
Total revenue		27,736			24,884			11	%		7	%		3	%		1	%
External revenue		27,501			24,630			12	%
therein:
Europe, C.I.S.⁽²⁾, Africa, Middle East		14,261			13,665			4	%
therein Germany		1,927			1,667			16	%
Americas		8,141			7,096			15	%
Asia, Australia		5,098			3,869			32	%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

Energy reported a profit of €1.901 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 recorded adjustments for long-term contracts with customers in Iran, which reduced Sector profit by €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 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. The solar business posted a loss of €258 million in fiscal 2012, compared to a loss of €366 million in fiscal 2011; both years included impairment charges, €150 million in fiscal 2012 and €231 million in fiscal 2011. For comparison, profit of €3.864 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.

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 15% lower compared to fiscal 2011, 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 0.97 and its order backlog was €55 billion at the end of the period.


	Orders
	Year ended September 30,				% Change						therein
	2012		2011		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Fossil Power Generation		11,116		12,487		(11	)%		(17	)%		2	%		4	%
Wind Power		4,932		6,461		(24	)%		(26	)%		2	%		0	%
Oil & Gas		5,307		5,551		(4	)%		(10	)%		2	%		3	%
Power Transmission		5,824		7,271		(20	)%		(21	)%		1	%		0	%

(1)	Excluding currency translation and portfolio effects.


	Revenue
	Year ended September 30,				% Change						therein
	2012		2011		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Fossil Power Generation		11,161		10,203		9	%		5	%		3	%		2	%
Wind Power		5,066		3,686		37	%		29	%		8	%		0	%
Oil & Gas		5,115		4,719		8	%		3	%		2	%		3	%
Power Transmission		6,593		6,334		4	%		2	%		2	%		0	%

(1)	Excluding currency translation and portfolio effects.


	Profit								Profit Margin
	Year ended September 30,					% Change			Year ended September 30,
	2012			2011		% Change			2012			2011
	(in millions of €)
Businesses
Fossil Power Generation		1,933			2,837		(32	)%		17.3	%		27.8	%
Wind Power		304			357		(15	)%		6.0	%		9.7	%
Oil & Gas		218			467		(53	)%		4.3	%		9.9	%
Power Transmission		(302	)		566		n/a			(4.6	)%		8.9	%

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 fiscal 2011. Profit benefited from a €87 million gain from the sale of the 25% interest in OAO Power Machines. In addition, the Division recorded higher selling expenses compared to fiscal 2011. For comparison, profit in fiscal 2011 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 project in Finland, amounting to €152 million in the fiscal 2012 and €87 million in fiscal 2011. 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 in fiscal 2011, 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, higher selling expenses 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% year-over-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. Orders were down 24% due primarily to a lower volume from large offshore orders in Germany. 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.

Profit at Oil & Gas declined sharply year-over-year from fiscal 2011. The adjustments for long-term contracts with customers in Iran mentioned above reduced profit of the Division by €275 million. 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, profit in fiscal 2011 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 fiscal 2011, 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.

Healthcare


	Year ended September 30,						% Change						therein
	2012			2011			Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Sector
Profit		1,815			1,334			36	%
Profit margin		13.3	%		10.7	%
Orders		13,806			13,116			5	%		0	%		4	%		0	%
Total revenue		13,642			12,517			9	%		4	%		4	%		0	%
External revenue		13,600			12,463			9	%
therein:
Europe, C.I.S.⁽²⁾, Africa, Middle East		4,593			4,489			2	%
therein Germany		1,056			992			6	%
Americas		5,692			5,233			9	%
Asia, Australia		3,315			2,741			21	%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

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. Profit development also included higher expenses for research and development as well as higher 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 OPEB-gain 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. 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% in fiscal 2012, both reaching €3.969 billion from €3.667 billion and €3.678 billion, respectively, in fiscal 2011. Diagnostics showed the same development as the Sector with regard to the regions. On an organic basis, both revenue and orders rose 4%.

Industry


	Year ended September 30,						% Change						therein
	2012			2011			Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Sector
Profit		2,448			2,758			(11	)%
Profit margin		12.6	%		14.8	%
Orders		18,962			19,140			(1	)%		(3	)%		2	%		0	%
Total revenue		19,409			18,601			4	%		2	%		2	%		0	%
External revenue		17,772			17,135			4	%
therein:
Europe, C.I.S.⁽²⁾, Africa, Middle East		9,644			9,254			4	%
therein Germany		4,464			4,272			5	%
Americas		3,484			3,085			13	%
Asia, Australia		4,644			4,796			(3	)%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

In fiscal 2012, profit at Industry declined 11% 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 selling and general 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-over-year on broad-based increases across its businesses. Industry’s fiscal 2012 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 currency translation effects. On a book-to-bill ratio of 0.98, Industry’s order backlog was €11 billion at the end of fiscal 2012, unchanged from a year earlier.


	Orders
	Year ended September 30,				% Change						therein
	2012		2011		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Industry Automation		8,524		7,939		7	%		5	%		2	%		0	%
Drive Technologies		9,395		9,995		(6	)%		(8	)%		2	%		0	%

(1)	Excluding currency translation and portfolio effects.


	Revenue
	Year ended September 30,				% Change						therein
	2012		2011		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Industry Automation		8,463		7,985		6	%		3	%		2	%		0	%
Drive Technologies		9,640		9,179		5	%		3	%		2	%		0	%

(1)	Excluding currency translation and portfolio effects.


	Profit							Profit margin
	Year ended September 30,							Year ended September 30,
	2012		2011		% Change			2012			2011
	(in millions of €)
Businesses
Industry Automation		1,316		1,417		(7	)%		15.6	%		17.7	%
Drive Technologies		970		1,158		(16	)%		10.1	%		12.6	%

Profit at Industry Automation declined 7% year-over year. The decline compared to the prior fiscal year was due mainly to a less favorable business mix, higher selling and general 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 6% and orders increased 7% 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 in fiscal 2011.

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 selling and general administrative expenses 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.

Infrastructure & Cities


	Year ended September 30,						% Change						therein
	2012			2011			Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Sector
Profit		1,102			1,126			(2	)%
Profit margin		6.3	%		6.6	%
Orders		17,150			21,348			(20	)%		(22	)%		2	%		0	%
Total revenue		17,585			16,976			4	%		1	%		3	%		0	%
External revenue		16,731			16,166			3	%
therein:
Europe, C.I.S.⁽²⁾, Africa, Middle East		10,121			9,590			6	%
therein Germany		2,880			2,938			(2	)%
Americas		4,344			3,882			12	%
Asia, Australia		2,267			2,694			(16	)%

(1)	Excluding currency translation and portfolio effects.

(2)	Commonwealth of Independent States.

In fiscal 2012, 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 in fiscal 2012 compared to fiscal 2011, profit at Transportation & Logistics declined substantially due mainly to €86 million in charges at a rolling stock project in Germany taken in fiscal 2012. Profit development for the Sector in fiscal 2012 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.

In fiscal 2012, 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 in fiscal 2012 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% in fiscal 2012 compared to fiscal 2011, 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 in fiscal 2012 was also clearly lower year-over-year 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.


	Orders
	Year ended September 30,				% Change						therein
	2012		2011		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Transportation & Logistics		5,382		10,052		(46	)%		(48	)%		1	%		0	%
Power Grid Solutions & Products		6,275		5,905		6	%		4	%		2	%		0	%
Building Technologies		5,809		5,597		4	%		0	%		3	%		0	%

(1)	Excluding currency translation and portfolio effects.


	Revenue
	Year ended September 30,				% Change						therein
	2012		2011		Actual			Adjusted⁽¹⁾			Currency			Portfolio
	(in millions of €)
Businesses
Transportation & Logistics		5,969		6,041		(1	)%		(4	)%		2	%		0	%
Power Grid Solutions & Products		6,068		5,657		7	%		5	%		2	%		0	%
Building Technologies		5,820		5,468		6	%		3	%		3	%		0	%

(1)	Excluding currency translation and portfolio effects.


	Profit							Profit margin
	Year ended September 30,							Year ended September 30,
	2012		2011		% Change			2012			2011
	(in millions of €)
Businesses
Transportation & Logistics		236		365		(35	)%		4.0	%		6.0	%
Power Grid Solutions & Products		457		413		11	%		7.5	%		7.3	%
Building Technologies		379		364		4	%		6.5	%		6.7	%

In fiscal 2012, 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 in fiscal 2012 came in slightly lower year-over-year, 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 in fiscal 2012 decreased 46% year-over-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 in fiscal 2012 was driven by the Business’ low and medium voltage activities. Profit from smart grid activities was held back by higher research and development and selling and general administrative expenses for growth initiatives. In fiscal 2012, revenue and orders increased clearly year-over-year, particularly including double-digit growth in the Americas.

Profit at Building Technologies in fiscal 2012 increased moderately year-over-year. Profit development in fiscal 2012 was held back by higher research and development and selling and general administrative expenses associated with growth initiatives. Growth in revenue and orders in fiscal 2012 compared to fiscal 2011 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.

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 was 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 fiscal 2011. 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.

Financial Services (SFS)


	Year ended September 30,
	2012		2011		% Change
	(in millions of €)
Income before income taxes		479		428		12	%
Total assets		17,405		14,602		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 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.

Reconciliation to Consolidated Financial Statements

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.

Siemens Real Estate (SRE)

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

Corporate items and pensions totaled a negative €668 million in fiscal 2012 compared to a negative €742 million in fiscal 2011.

Corporate items were a negative €261 million in fiscal 2012 compared to a negative €356 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 fiscal 2011. In addition, fiscal 2012 include an amount of €103 million related to reimbursements to AtoS, compared to €53 million in fiscal 2011. 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. Fiscal 2011 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.

Centrally carried pension expense totaled €407 million in fiscal 2012, compared to €385 million in fiscal 2011.

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 in fiscal 2011. 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.

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 IFRS is Net income as reported in our “Consolidated Statements of Income.”

For further information regarding adjusted EBIT and adjusted EBITDA, see Item 5: Operating and financial review and prospects—Supplemental financial measures.

For the fiscal years ended September 30, 2013, 2012 and 2011 (in millions of €)


	Profit⁽¹⁾									Income (loss) from investments accounted for using the equity method, net⁽²⁾									Financial income (expenses), net⁽³⁾
	2013			2012			2011			2013			2012			2011			2013			2012			2011
Sectors
Energy Sector		1,955			1,901			3,864			(39	)		22			12			(27	)		44			831
therein:
Fossil Power Generation		1,693			1,933			2,837			32			41			33			(13	)		67			823
Wind Power		306			304			357			(8	)		6			(3	)		(6	)		(5	)		(3	)
Oil & Gas		433			218			467			—			—			—			(3	)		(4	)		(3	)
Power Transmission		(156	)		(302	)		566			20			25			35			(10	)		(20	)		10
Healthcare Sector		2,048			1,815			1,334			8			8			9			(18	)		2			3
therein:
Diagnostics		350			314			300			—			—			—			(27	)		9			5
Industry Sector		1,478			2,448			2,758			(4	)		11			18			(17	)		(14	)		(1	)
therein:
Industry Automation		1,038			1,316			1,417			—			1			7			(4	)		(7	)		—
Drive Technologies		527			970			1,158			(5	)		10			7			(11	)		(6	)		(1	)
Infrastructure & Cities Sector		306			1,102			1,126			26			25			18			2			29			(28	)
therein:
Transportation & Logistics		(448	)		236			365			18			15			11			(7	)		(16	)		(7	)
Power Grid Solutions & Products		403			457			413			8			9			7			(6	)		(4	)		(4	)
Building Technologies		351			379			364			—			1			1			—			(2	)		(1	)
Total Sectors		5,788			7,266			9,082			(10	)		66			57			(60	)		61			804

Equity Investments		396			(549	)		(26	)		372			(568	)		(44	)		7			7			13
Financial Services (SFS)		409			479			428			85			168			92			389			385			299
Reconciliation to Consolidated Financial Statements
Centrally managed portfolio activities		(12	)		(29	)		(40	)		69			7			12			(2	)		—			—
Siemens Real Estate (SRE)		171			115			150			—			—			—			(110	)		(112	)		(82	)
Corporate items and pensions		(839	)		(668	)		(742	)		—			—			—			(249	)		(305	)		(339	)
Eliminations, Corporate Treasury and other reconciling items		(70	)		23			(90	)		(6	)		(5	)		29			30			137			10

Siemens		5,843			6,636			8,763			510			(333	)		146			5			173			705

(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 Item 18: Financial Statements—Consolidated Statements of Income.

(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 (expenses), net comprises Interest income, Interest expenses and Other financial income (expenses), net as reported in Item 18: Financial Statements—Consolidated Statements of Income.

(4)	Adjusted EBIT is Income from continuing operations before income taxes less Financial income (expenses), net and Income (loss) from investments accounted for using the equity method, net.

(5)	Amortization and impairments, net of reversals, of intangible assets other than goodwill.

(6)	Depreciation and impairments of property, plant and equipment, net of reversals. Includes impairments of goodwill of €70 million, €85 million and €128 million for the fiscal years 2013, 2012 and 2011, respectively.

(Continued)


Adjusted EBIT⁽⁴⁾							Amortization⁽⁵⁾						Depreciation and impairments of property, plant and equipment and goodwill⁽⁶⁾						Adjusted EBITDA						Adjusted EBITDA margin
2013			2012		2011		2013		2012		2011		2013		2012		2011		2013		2012		2011		2013			2012			2011

	2,022			1,835		3,021		132		97		97		478		537		507		2,631		2,470		3,625		9.9	%		8.9	%		14.6	%

	1,674			1,825		1,981		19		21		15		143		142		125		1,835		1,988		2,121
	320			303		364		32		27		9		103		100		63		454		430		435
	436			222		470		49		38		26		79		71		63		564		330		560
	(167	)