Siemens 2006 Annual Report Download - page 131

Management’s discussion and analysis 127
Pension plan funding
The projected benefit obligation (PBO) of Siemens’ principal pension plans, which considers
future compensation increases, amounted to €26.2 billion on September 30, 2006, compared
to €25.0 billion on September 30, 2005. The fair value of plan assets as of September 30, 2006
was €23.5 billion compared to €21.5 billion on September 30, 2005. The measurement dates
for the valuation of certain Siemens pension funds, particularly our funds in the U.S. and U.K.,
do not coincide with the end of our fiscal year. While the return over the last twelve months
amounted to 6.6% or €1.366 billion, the aggregate return on plan assets between the last
measurement dates amounted to 6.2% or €1.291 billion. On September 30, 2006, the combined
funding status of Siemens principal pension plans showed an underfunding of €2.7 billion
compared to an underfunding of approximately €3.5 billion at the end of the prior fiscal year.
Siemens’ funding policy for its pension funds is part of its overall commitment to sound
financial management, which also includes an ongoing analysis of the structure of its pension
liabilities, particularly the duration by class of beneficiaries. We constantly review the asset
allocation of each plan in light of the duration of the related pension liabilities and analyze
trends and events that may affect asset values in order to initiate appropriate measures at a
very early stage.
Siemens also regularly reviews the design of its pension plans. Historically, the majority
of Siemens pension plans have included significant defined benefits. However, in order to
reduce the Company’s exposure to certain risks associated with defined benefit plans, such as
longevity, inflation, effects of compensation increases and other factors, we implemented new
pension plans in some of our major subsidiaries including Germany, the U.S. and the U.K.
during the last several years. The benefits of these new plans are based predominantly on
contributions made by the Company and, to a minor extent, the effects of longevity, inflation
adjustments and compensation increases. We expect to continue to review the need for the
implementation of similar plan designs outside Germany in the coming years to better control
future benefit obligations and related costs.
For more information on Siemens pension plans, see “Notes to Consolidated Financial
Statements.”
Management’s discussion and analysis