Dear Shareholders,
Fiscal 2009 was marked by the impact of the global financial and economic crisis. Despite the adverse conditions, we can look back on a successful fiscal year. The timely cost-cutting measures adopted by the Managing Board and the Company’s new structure have proven their worth.
In fiscal 2009, the Supervisory Board performed the duties assigned to it by law, the Siemens Articles of Association and the Bylaws for the Supervisory Board. We regularly advised the Managing Board on the management of the Company and monitored the Managing Board’s activities. We were directly involved in all major decisions regarding the Company. In written and oral reports, the Managing Board regularly provided us with timely and comprehensive information on Company planning and business operations as well as on the strategic development and current state of the Company. Deviations from business plans were explained to us in detail. 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 two extraordinary meetings. 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 to 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 report 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 on pages 214 ff. in the Consolidated Financial Statements PDF in the Financial report.
The Chairman’s Committee met five times in fiscal 2009. 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.
The Mediation Committee was not required to meet in fiscal 2009. The Finance and Investment Committee met three times, focusing on the development of the company’s medium-term strategy and on preparations for the Supervisory Board’s decision on the Company budget for fiscal 2010. In addition, seven decisions were made using the notational voting process, and the Committee approved the sale of the residential real estate managed by Siemens Wohnungsbaugesellschaft and of the Company’s stake in the Fujitsu Siemens Computers (FSC) joint venture.
The Audit Committee met six 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) for Siemens AG and the Consolidated Financial Statements and the consolidated MD&A for Siemens worldwide, the proposal for the appropriation of net income and the Annual Report on Form 20-F for the U.S. Securities and Exchange Commission (SEC). In addition, the Audit Committee made a recommendation to the Supervisory Board for the Supervisory Board’s proposal to the Annual Shareholders’ Meeting concerning the election of the independent auditors.
The Audit Committee gave in-depth consideration to the appointment of the independent auditors for fiscal 2009 and the transition to the new auditors, Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart (formerly Ernst & Young AG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft). The Committee will continue to be responsible for monitoring the auditors’ independence and qualifications as well as the additional services they perform, determining their fee and examining the Company’s quarterly reports and the half-year financial report. The Audit Committee also dealt with the Company’s financial reporting process and risk management system and with the effectiveness, resources and findings of the internal financial audit as well as with reports concerning potential and pending legal disputes. In addition, the Audit Committee focused on Company compliance with the provisions of Section 404 of the Sarbanes-Oxley Act (SOA) and on the internal audit of the effectiveness of 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 six times in fiscal 2009. At its meetings, the Committee discussed the quarterly reports submitted by the Chief Compliance Officer as well as the claims for damages against former members of the Managing 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 financial situation and its 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. The Supervisory Board was regularly informed about the development and effects of the economic crisis.
At our meeting on November 12, 2008, we discussed the key financial figures for fiscal 2008 and approved the budget for fiscal 2009. In addition, we discussed the provision of approximately €1 billion made in the 2008 Annual Financial Statements related to the settlement being sought with authorities in Germany and the U.S. At this meeting, we also appointed Barbara Kux to the Managing Board of Siemens AG. She was assigned responsibility for supply chain management in the Company and named Chief Sustainability Officer. In this connection, the assignment of responsibilities within the Managing Board was reorganized.
At our meeting on November 28, 2008, we primarily discussed the financial statements and MD&A for Siemens AG and Siemens worldwide as of September 30, 2008 as well as the agenda for the Annual Shareholders’ Meeting on January 27, 2009. We also discussed the Annual Report 2008 – in particular, its Corporate Governance report and Declaration of Conformity with the German Corporate Governance Code. In addition, the Supervisory Board decided to propose to the Annual Shareholders’ Meeting that Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart (formerly Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft) be elected independent auditors for fiscal 2009. The Supervisory Board also approved Jim Reid-Anderson’s resignation from the Managing Board prior to the expiration of his appointment.
At an extraordinary meeting on December 15, 2008, the Supervisory Board discussed the termination of legal proceedings against Siemens AG in Germany and the U.S. in connection with the Company’s alleged bribery of public officials. The final settlement reflected the explicit recognition on the part of U.S. prosecutors and the U.S. Securities and Exchange Commission (SEC) of Siemens’ “extraordinary cooperation” and of its new and comprehensive compliance program and extensive remediation efforts. On this basis, the lead agency for U.S. federal government contracts, the Defense Logistics Agency (DLA), issued a formal statement confirming that Siemens would remain a reliable partner for U.S. government business.
At an extraordinary meeting on January 26, 2009, we discussed the Company’s withdrawal from the Areva NP joint venture and decided to terminate the shareholder’s agreement within the contractually stipulated timeframe – that is, no later than January 30, 2012 – and to sell the Company’s shares to majority shareholder Areva S.A. by exercising a put option.
At our meeting on January 27, 2009, immediately following the Annual Shareholders’ Meeting, the following personnel changes were made on the Supervisory Board and its committees due to the resignation of Ralf Heckmann from the Supervisory Board. Berthold Huber was elected First Deputy Chairman of the Supervisory Board. Lothar Adler, in addition to his membership on the Finance and Investment Committee, was elected to the Chairman’s Committee and to the Compliance and Mediation Committee. Birgit Steinborn was elected to the Audit Committee. And Hans-Jürgen Hartung was appointed to the Supervisory Board by court order.
At our meeting on April 28, 2009, the Managing Board reported on the Company’s business and financial position at the end of the second quarter. Jean-Louis Beffa and Werner Mönius were elected additional members of the Finance and Investment Committee. The Bylaws for the Supervisory Board were amended at the same time. Bettina Haller was elected to succeed Heinz Hawreliuk on the Audit Committee. Sibylle Wankel was elected to the Compliance Committee. The Bylaws for the Compliance Committee were also amended.
At our meeting on July 29, 2009, we dealt with the Company’s business and financial position at the end of the third quarter as well as with the status of compliance-related measures. In addition, the Managing Board informed us about the opportunities presented by economic stimulus programs, about the Company’s innovation strategy and about future plans in the field of nuclear power. The Supervisory Board also discussed new legal regulations – in particular, those concerning Managing Board remuneration.
At our meeting on September 23, 2009, the Managing Board provided an overview of the state of the Company. At the meeting, the Supervisory Board approved the fiscal 2010 budget, and the Healthcare Sector reported on the current status of its business. In addition, the Bylaws for the Supervisory Board, the Chairman’s Committee and the Audit Committee were amended to reflect new legal regulations. We also met in executive session, in which only members of the Supervisory Board participated, to discuss the efficiency review of Supervisory Board operations. Furthermore, we approved the agreement with the Company’s directors and officers (D&O) insurers to limit liability coverage to €100 million. We also approved the preliminary agreements with former Managing Board members Edward G. Krubasik, Rudi Lamprecht and Klaus Wucherer to settle Company claims. To avoid possible conflicts of interest, Michael Diekmann, who is CEO of the lead member company of the insurance consortium in question, did not participate in the discussion or the voting on liability coverage.
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 Corporate Governance report. At their meetings on September 16 and 23, 2009, the Managing and Supervisory Boards issued an unconditional Declaration of Conformity pursuant to Section 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 – Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft – 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, 2009 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 Section 315a of the HGB, using the international accounting standards IFRS, as required in the European Union. Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft’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 December 1, 2009. The audit reports prepared by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft were presented to all members of the Supervisory Board, and we reviewed them comprehensively at our meeting on December 2, 2009 in the presence of the independent auditors, who reported on the main findings of their audit. The independent auditors also reported that there were no major weaknesses in the Company’s internal audit or risk management systems. At this meeting, the Managing Board explained the Annual and Consolidated Financial Statements as well as the Company’s risk management system. The independent auditors also discussed the scope, focal points and costs of the audit.
We concur with the results of the audit. Following the definitive findings of the examination by the Audit Committee and our own examination, we have 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
Following the conclusion of the Annual Shareholders’ Meeting on January 27, 2009, Ralf Heckmann, First Deputy Chairman of the Supervisory Board, resigned from the Supervisory Board. A member of the Supervisory Board since 1998, Mr. Heckmann had served as First Deputy Chairman since 2002. The Supervisory Board subsequently elected Berthold Huber as his successor. Hans-Jürgen Hartung was appointed to the Supervisory Board by court order. Heinz Hawreliuk retired from the Supervisory Board on March 31, 2009, and Sibylle Wankel replaced him as a substitute member. The Supervisory Board would like to thank Mr. Heckmann and Mr. Hawreliuk for their constructive and informed contributions and many years of loyal support.
Effective November 17, 2008, the Supervisory Board appointed Barbara Kux to the Managing Board. She was assigned responsibility for supply chain management in the Company and also named Chief Sustainability Officer. Jim Reid-Anderson left the Company at his own request, effective November 30, 2008. Effective December 1, 2008, Hermann Requardt was appointed CEO of the Healthcare Sector. Mr. Requardt will continue to serve as head of the Corporate Technology Department.
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 2009 another successful year for Siemens.
For the Supervisory Board
Dr. Gerhard Cromme
Chairman
Berlin and Munich, December 2, 2009