Siemens 2010 Annual Report Download - page 122

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis
50 Business and operating environment
78 Fiscal  – Financial summary
81 Results of operations
98 Financial position
110 Net assets position
113 Overall assessment of the economic position

Important corporate programs and initiatives
Program for the reduction of legal entities
In order to reduce complexity within our group structure, opti-
mize synergies and strengthen governance and transparency,
we had started a program aimed at reducing the number of
legal entities. Due to significant M&A activities targeted at en-
hancing and optimizing our portfolio, the number of legal enti-
ties had substantially increased in recent years.
By the end of the current fiscal year, we achieved our target
of reducing the number of legal entities, including non-con-
trolling interests, to fewer than , by . This number
excludes the recently established legal entities related to the
legal carve-out of Siemens IT Solutions and Services and legal
entities that are due to be sold, liquidated or merged where
Siemens has taken all such action as is within its control to
complete such sale, liquidation or merger. This compares to
approximately , legal entities at the end of the prior fiscal
year, approximately , legal entities at the end of fiscal
 and approximately , legal entities at the end of fiscal
. The reduction was achieved primarily by integrating le-
gal entities into existing Siemens Regional Companies. Stream-
lining actions within our portfolio also contributed to the
achievement of this goal.
Real estate bundling program
In , Siemens initiated a multi-year program to improve the
efficiency of its real estate management, which is projected to
run until . Under the program, Siemens is bundling its
entire real estate portfolio in Siemens Real Estate (SRE) and
implementing further measures to increase the efficiency of
the real estate assets bundled in SRE. The program is expected
to generate approximately € million in annual cost savings
for the Siemens Sectors and Cross-Sector Businesses by the
end of fiscal  and approximately € million in annual
cost savings from  onward, mainly through the more effi-
cient utilization of space and a reduction in vacant property.
Compared to the cost position prior to the start of the program,
annual cost savings of approximately € million for the
Siemens Sectors and Cross-Sector Businesses have already
been achieved by the end of fiscal . During its implemen-
tation, the real estate bundling program entails costs associ-
ated with reducing vacancy and consolidating locations, pri-
marily at SRE. For further information, see “Results of opera-
tions – Segment information analysis – Reconciliation to
Consolidated Financial Statements – Siemens Real Estate.”
FINANCIAL PERFORMANCE MEASURES
The section “Financial performance measures” includes sev-
eral measures that are or may be non-GAAP financial measures.
For further information about these measures please see “Ad-
ditional information for supplemental financial measures” and
the last page of this Combined management’s discussion and
analysis.
Other companies that report or describe similarly titled finan-
cial measures may calculate them differently.
Fit program
In fiscal , we initiated our Fit program, which con-
tinued through fiscal . Beginning with fiscal , One
Siemens will be our framework for capital-efficient growth
and sustainable value creation. For further information, see
“– Strategy – Strategy of the Siemens Group.”
Our Fit program entailed financial performance mea-
sures focused on growth, profitability, capital efficiency, cash
conversion, and optimization of our capital structure. These
measures were selected to help us drive the value and com-
petitiveness of our Company and strengthen our leadership
positions or close the gap to our competitors. We had set ambi-
tious targets for all our financial performance measures that
we aimed to achieve by the end of fiscal . These targets
were established with normal business cycles in mind, i.e.,
without taking into account the global recession caused by the
financial crisis and its aftereffects on our business over the
past two fiscal years. Our ability to achieve these targets in the
current fiscal year was further affected by fourth quarter pre-
tax impairment charges of €. billion at our diagnostics
business and pre-tax charges of € million related to the
strategic reorientation of Siemens IT Solutions and Services.
For comparison, the prior-year period was influenced by pre-
tax impairment charges totaling €. billion related to NSN.
Operational performance measures
The first Fit operational performance measure focused
on growth in order to ensure the revenue development re-
quired to produce income growth. Our goal was to grow an-
nual revenue on an organic basis, excluding currency transla-
tion and portfolio effects, at twice the rate of global gross do-
mestic product (GDP) growth. In fiscal , revenue declined
% on an organic basis compared to the prior-year period. For
the calendar year , IHS Global Insight is predicting that
real global GDP will grow by .%. During the aggregate period
in which we applied Fit, we achieved a compound an-