Dear Shareholders,
In fiscal 2008, we made great strides in reorganizing our business activities. Despite restructuring-related expenditures, the year was a successful one for Siemens.
In fiscal 2008, the Supervisory Board performed the duties assigned to it by law, the Siemens Articles of Association and the Bylaws for the Supervisory Board. We regularly advised the Managing Board on the management of the Company and monitored the Managing Board’s activities. We were directly involved in all major decisions regarding the Company. In written and oral reports, the Managing Board regularly provided us with timely and comprehensive information on Company planning and business operations as well as on the strategic development and current state of the Company. Actual deviations from business plans were explained to us in detail. Together with the Managing Board, we determined the Company’s strategic orientation. On the basis of reports submitted by the Managing Board, we discussed in detail all business transactions of major significance to the Company. The proposals made by the Managing Board were approved after detailed examination and discussion. We held a total of six regular meetings and one extraordinary meeting. When necessary, we voted on proposals using a notational, or written, voting process.
In my capacity as Chairman of the Supervisory Board, I was in regular contact with the Managing Board between Supervisory Board meetings and was kept up-to-date on the Company’s current business situation and key business transactions. At separate strategy meetings, I discussed with the Managing Board the perspectives and future orientation of the Company’s individual businesses.
Work in the Supervisory Board committees
To enhance the efficiency of its work, the Supervisory Board has set up a total of six committees, which prepare the proposals for the Supervisory Board as well as the issues to be dealt with at the Board’s plenary meetings. The decision-making powers of the Supervisory Board are delegated to these committees where legally permissible. The chairmen of the committees reported to the Supervisory Board on the committees’ work at subsequent Board meetings. The composition of the individual Supervisory Board committees and the number of committee meetings and decisions are shown in the Financial Information.
The Chairman’s Committee met seven times in fiscal 2008. Between meetings, I also discussed topics of particular importance to the Company with the members of the Chairman’s Committee. The Chairman’s Committee dealt with corporate governance principles and with various personnel topics – in particular, with the appointment of members of the Managing Board, with matters relating to the Managing Board, with Managing Board remuneration and with the introduction of the new income system and stock-oriented remuneration plan.
In fiscal 2008, the Mediation Committee met once. The Finance and Investment Committee – which replaces the former Ownership Rights Committee – met for the first time on September 23, 2008 and, in addition, voted on nine proposals using a notational, or written, voting process. Prior to the election of the shareholder representatives on the Supervisory Board, the members of the Nominating Committee discussed the nominations to be proposed at the Annual Shareholders’ Meeting of Siemens AG on January 24, 2008.
The Audit Committee met eight times. Together with the independent auditors, the President and Chief Executive Officer, the Chief Financial Officer and the General Counsel, the Audit Committee discussed the Annual Financial Statements and Management’s discussion and analysis (MD&A) of Siemens AG and the Consolidated Financial Statements and consolidated MD&A of Siemens worldwide, the proposal for the appropriation of net income and the Annual Report on Form 20-F for the U.S. Securities and Exchange Commission (SEC). The effects of compliance-related matters on the financial statements were also discussed. At an extraordinary meeting, the Audit Committee dealt with the findings of the Company's internal audit and the independent auditors regarding the charges incurred in the Company’s project business and the impact of these charges on profits in fiscal 2008 as well as with the process-enhancing measures taken by the Managing Board in this context. The Audit Committee also gave in-depth consideration to the appointment of the independent auditors for fiscal 2008, oversight of the auditors’ independence and qualification, and the determination of their fee as well as to the Company’s quarterly reports, the half-year financial report and the call for bids for independent auditors for fiscal 2009. In addition, the Audit Committee dealt with the Company’s risk management system and with the authorization and findings of the internal financial audit and the reports concerning legal and regulatory risks. The Audit Committee also focused on Company compliance with the provisions of Section 404 of the Sarbanes-Oxley Act (SOA) and the planned measures for eliminating weaknesses in the internal control system and enhancing the effectiveness of the anti-corruption compliance program. Furthermore, separate meetings were held with the independent auditors and the head of the Company's internal audit.
The Compliance Committee met five times in fiscal 2008. At its meetings, the Committee discussed the reports submitted by the law firm Debevoise & Plimpton LLP on its independent investigation and review of the Company’s internal compliance and control systems. On behalf of the Supervisory Board, the Committee decided to retain the law firm Hengeler Mueller to review possible damage claims against former members of the Managing Board.
The committee chairmen reported on the work of their committees on a regular basis at the plenary meetings of the Supervisory Board.
Topics at the plenary meetings of the Supervisory Board
Regular topics of discussion at the Supervisory Board’s plenary meetings were revenue, profit and employment development at Siemens AG, at Siemens’ Sectors and at Siemens worldwide as well as the Company’s major investment and divestment projects. The Managing Board reported regularly and comprehensively on Company planning and the strategic development, business operations and current state of the Company. Compliance-related measures and the changes in the structure of Operations at Siemens AG and Siemens worldwide were discussed at several meetings. Decisions were also made regarding personnel changes within the Managing Board.
At our meeting on November 7, 2007, we received a report on business development in fiscal 2007 and approved the Managing Board’s dividend proposal as well as the stock buyback program proposed by the Managing Board. At our meeting on November 28, 2007, we primarily discussed the financial statements and MD&A of Siemens AG and Siemens worldwide as of September 30, 2007 as well as the Company’s planning and budget for fiscal 2008, which had been presented at the November 7 meeting. We also discussed in detail the bundling of our business activities into three Sectors and, in this context, approved the necessary adjustments to the Bylaws for the Managing Board. At this meeting, we appointed Wolfgang Dehen and Dr. Siegfried Russwurm members of the Managing Board, effective January 1, 2008. Mr. Dehen was appointed CEO of the Energy Sector, and Dr. Russwurm was appointed head of Corporate Human Resources and Labor Director of Siemens AG.
At an extraordinary meeting on January 21, 2008, the Supervisory Board – following the recommendations of the Chairman’s Committee, the Managing Board and the law firm Debevoise & Plimpton LLP – decided to propose to the Annual Shareholders’ Meeting of Siemens AG on January 24, 2008 that the ratification of the acts of the members of the Managing Board in fiscal 2007 – with the exception of those of Peter Löscher – as well as the ratification of the acts of Professor Dr. v. Pierer as a member of the Supervisory Board be deferred.
At the Annual Shareholders’ Meeting on January 24, 2008, the five-year term of the Supervisory Board members elected at the Annual Shareholders’ Meeting in 2003 expired. Seven shareholder representatives and four employee representatives left the Supervisory Board. I would like to thank the departing members for their dedication and their constructive work on the Supervisory Board and its committees during their term of office. A new Supervisory Board was elected for the period 2008 to 2013. At the constituent meeting of the Supervisory Board on January 24, 2008 – immediately following the Annual Shareholders’ Meeting – the Chairman, First Deputy Chairman and Second Deputy Chairman of the Supervisory Board were confirmed in their offices and the necessary committee appointments made.
At our meeting on April 29, 2008, the Managing Board reported on the Company’s business and financial position at the end of the second quarter and informed the Board of the status of negotiations regarding the sale of Siemens Enterprise Communications (SEN). In addition, the Supervisory Board discussed the status of compliance-related investigations. The Board was also informed about the contractual modalities of the company’s directors and officers (D&O) liability insurance. Also at this meeting, the Supervisory Board – adopting a proposal by the Chairman’s Committee – appointed Jim Reid-Anderson a member of the Managing Board of Siemens AG, effective May 1, 2008. The previous CEO of the Siemens Healthcare Sector, Professor Dr. Erich R. Reinhardt, resigned from the Managing Board on April 30, 2008.
At our meeting on July 29, 2008, we dealt with the Company’s business and financial position as well as the status of compliance-related measures and a report on the work of the Compliance Committee. On the basis of an expert opinion provided by the law firm Hengeler Mueller, the Supervisory Board decided to seek damages from former members of the Corporate Executive Committee on the grounds that – in connection with allegations of illegal business practices and extensive bribery in international transactions in the years 2003 to 2006 and the resulting financial burdens on the Company – they had breached their organizational and supervisory duties. It was decided to claim damages from two former members of the Corporate Executive Committee arising from payments made to Wilhelm Schelsky or his companies. It was also decided that the former Corporate Executive Committee members in question be given an opportunity to state their positions regarding the allegations before a decision was made to enforce the damage claims. In addition, the Supervisory Board received a detailed report from the Managing Board on the status of the project to reduce sales, general and administrative (SG&A) costs. At the meeting, the Supervisory Board also discussed the Managing Board’s new compensation system and the stock-oriented remuneration plan and approved the adjustments made to the Bylaws for the Managing Board, Supervisory Board and the Chairman’s, Audit and Compliance Committees. At the meeting, the Supervisory Board extended the stock buyback program that had been approved in November 2007.
At our meeting on September 24, 2008, the Managing Board provided an overview of the state of the Company against the backdrop of the financial and real estate crisis in the U.S. and the anticipated economic downturn in and outside Germany. This topic was also the focus of the report on the business strategy of Siemens Financial Services. In addition, the Healthcare Sector reported on the current status of its business. We also discussed the status of the bidding procedure for appointing the independent auditors. We also met once in executive session. At this meeting, in which only members of the Supervisory Board participated, we discussed the efficiency review of Supervisory Board operations.
Corporate governance code
The Supervisory Board concerned itself with the provisions of the German Corporate Governance Code. Information on corporate governance at the Company and a detailed report on the level and structure of the remuneration paid to the members of the Supervisory and Managing Boards is provided in the Compensation Report of this Annual Report. At their meetings on November 21 and 28, 2008, the Managing and Supervisory Boards issued an unconditional Declaration of Conformity pursuant to § 161 of the German Stock Corporation Act (Aktiengesetz) and made it available to shareholders on the Company’s website. Siemens AG complies with all the recommendations of the current version of the German Corporate Governance Code and will continue to comply with these recommendations in the future.
Detailed discussion of the financial statements
Our independent auditors – KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin – audited the Annual Financial Statements of Siemens AG and the related MD&A as well as the Consolidated Financial Statements and consolidated MD&A for the year ended September 30, 2008 in accordance with the requirements of the German Commercial Code (HGB) and approved them without qualification. The Consolidated Financial Statements and the consolidated MD&A were prepared in accordance with § 315a of the HGB using the international accounting standards IFRS, as required in the European Union. KPMG’s audit was conducted in accordance with generally accepted German standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer in Deutschland e.V. (IDW) and the International Standards on Auditing (ISA).
The above-mentioned documents as well as the Managing Board’s proposal for the appropriation of net income were submitted to us by the Managing Board in a timely manner. The Audit Committee discussed these documents in detail on November 27, 2008. The KPMG audit reports were presented to all members of the Supervisory Board, and we reviewed them comprehensively at our meeting on November 28, 2008 in the presence of the independent auditors, who reported on the main findings of their audit. At this meeting, the Managing Board explained the Annual and Consolidated Financial Statements as well as the Company’s risk management system. It also provided a report on the scope, focal points and costs of the audit.
We concur with the results of the audit. Following the definitive findings of the examination by the Audit Committee and our own examination, we have raised no objections. In view of our approval, the financial statements prepared by the Managing Board are accepted as submitted. We endorse the Managing Board’s proposal that the net income available for distribution be used to pay out a dividend of €1.60 per share entitled to a dividend and that the amount attributable to shares of stock of Siemens AG held in treasury by the Company as of the date, as well as attributable to treasury stock retired by the date, of the Annual Shareholders’ Meeting be carried forward.
Changes in the composition of the Supervisory and Managing Boards
The five-year term of the members of the Supervisory Board elected at the Annual Shareholders’ Meeting in 2003 expired at the conclusion of the Annual Shareholders’ Meeting on January 24, 2008. The following shareholder representatives on the Supervisory Board – listed by length of service – left the Board: Peter von Siemens, Dr. Albrecht Schmidt, Dr. Henning Schulte-Noelle, Professor Dr. Walter Kröll, John David Coombe, Jerry I. Speyer and Professor Dr. Michael Mirow. The following employee representatives – also listed by length of service – left the Board: Birgit Grube, Hildegard Cornudet, Thomas Rackow and Roland Motzigemba, a substitute member who succeeded Gerhard Bieletzki when the latter resigned on December 3, 2007. The Supervisory Board would like to thank all members for their constructive and informed contributions and many years of loyal support.
The Annual Shareholders’ Meeting elected the following new shareholder representatives to serve on the Supervisory Board of Siemens AG: Jean-Louis Beffa, Gerd von Brandenstein, Michael Diekmann, Dr. Hans Michael Gaul, Professor Dr. Peter Gruss, Dr. Nicola Leibinger-Kammüller and Håkan Samuelsson. The following new employee representatives have also been elected: Harald Kern, Werner Mönius, Dr. Rainer Sieg and Birgit Steinborn.
Effective December 31, 2007, Rudi Lamprecht, Eduardo Montes, Dr. Jürgen Radomski, Dr. Uriel J. Sharef and Professor Dr. Klaus Wucherer stepped down from the Managing Board. The Supervisory Board appointed Wolfgang Dehen and Dr. Siegfried Russwurm members of the Managing Board, effective January 1, 2008. Mr. Dehen was appointed CEO of the Energy Sector, and Dr. Russwurm was appointed Labor Director of Siemens AG. Effective May 1, 2008, the Supervisory Board appointed Jim Reid-Anderson a member of the Managing Board. He succeeded Professor Dr. Erich R. Reinhardt as CEO of the Healthcare Sector. Dr. Reinhardt resigned from the Managing Board of Siemens AG on April 30, 2008.
The Supervisory Board would like to thank the members of the Managing Board as well as the employees and employee representatives of all Siemens companies for their work. Together, they made fiscal 2008 another successful year for Siemens.
For the Supervisory Board
Dr. Gerhard Cromme
Chairman
Berlin and Munich, November 28, 2008
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