Siemens 2009 Annual Report Download - page 182

94
 Reports Supervisory Board /
Managing Board  Corporate Governance  Management’s discussion and analysis  Consolidated Financial Statements
44 Business and operating environment 63 Fiscal 2009 – Financial summary 66 Results of operations 84 Financial position
guarantees have fixed or scheduled expiration dates. For addi-
tional information with respect to our guarantees, see “Notes
to Consolidated Financial Statements.”
Capital commitments – As of September 30, 2009 and 2008,
the Company has commitments to make capital contributions
to various companies of €294 million and €241 million, respec-
tively. The September 30, 2009 and 2008 balance, includes a
conditional commitment to make capital contributions to EN
of €172 million, representing our proportionate share in EN.
The committed amount is due upon EN making acquisitions or
investments.
Pension plan funding
The defined benefit obligation (DBO) of Siemens’ principal
pension plans, which considers future compensation and pen-
sion increases, amounted to €25.1 billion on September 30,
2009, compared to €22.7 billion on September 30, 2008. The
fair value of plan assets as of September 30, 2009 was €21.1
billion compared to €20.2 billion on September 30, 2008. Ac-
cordingly, the combined funding status of Siemens principal
pension plans on September 30, 2009 showed an underfund-
ing of €4.0 billion compared to an underfunding of €2.5 billion
at the end of the prior fiscal year. The actual return on plan as-
sets for the last twelve months amounted to €1.9 billion, re-
sulting almost entirely from fixed income investments. This
represents a 10.0% return, compared to the expected return
of 6.5%.
Siemens’ funding policy for its pension funds is part of its over-
all commitment to sound financial management, which also
includes an ongoing analysis of the structure of its pension li-
abilities, particularly the duration by class of beneficiaries. To
balance return and risk, Siemens has developed a pension
benefit risk management concept. As prime risk we have iden-
tified a decline in the principal plans’ funded status as a result
of adverse developments of plan assets and/or defined benefit
obligations. We monitor our investments and our defined ben-
efit obligations in order to measure such prime risk. The prime
risk quantifies the expected maximum decline in the funded
status for a given confidence level over a given time horizon.
A risk budget on group level forms the basis for the determina-
tion of our investment strategy, i.e. the strategic assets class
allocation of principle plan assets and the degree of interest
rate risk hedging. Both, risk budget and investment strategy,
are regularly reviewed with the participation of senior external
experts of the international asset management and insurance
industry to allow for an integral view on pension assets and
pension liabilities. We select asset managers based on our
quantitative and qualitative analysis and subsequently con-
stantly monitor their performance and risk, both on a stand-
alone basis, as well as in the broader portfolio context. We re-
view 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 in-
cluded significant defined benefits. However, in order to re-
duce 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 are still affected by
longevity, inflation adjustments and compensation increases
to a minor extent only. 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.”
Pension funded status (in billions of €)
Sept. 30,
2009 (4.0)
Sept. 30,
2008 (2.5)
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