Siemens 2010 Annual Report Download - page 125

113 Report on post-balance sheet date events
114 Report on expected developments and associated
material opportunities and risks
128 Information required pursuant to § () and
§ () HGB and explanatory report
133 Information required pursuant to § () and
§ () no.  HGB and explanatory report
135 Compensation and declaration pursuant to §a HGB
135 Additional information for supplemental
financial measures
138 Siemens AG (Discussion on basis of HGB)
147 Consolidated Financial Statements
261 Additional information

One Siemens
As of fiscal , we introduced One Siemens – our frame-
work for sustainable value creation (for further information,
see “– Strategy – Strategy of the Siemens Group”). As part of
One Siemens, we have developed a financial target system for
capital-efficient growth that we believe will drive the value of
our Company. Our goal is to achieve continuous improvement
relative to the market and our competitors. The financial target
system of One Siemens defines indicators for revenue growth,
capital efficiency and profitability, the optimization of our
capital structure, and our dividend policy. In addition, we set
hurdle rates that generally need to be considered before acqui-
sitions are executed.
Revenue growth
We believe that an important driver for increasing our Com-
pany ’s value over the long term is profitable revenue growth.
Specifically, our goal is to grow our revenue faster than the
average revenue growth of our most relevant competitors. For
purposes of comparison to the revenue growth of our com-
petitors, our revenue growth is calculated as the growth rate
of reported revenue (as presented in the “Consolidated Finan-
cial Statements”) over a rolling twelve-month period compared
to the same period a year earlier.
Capital efficiency and profitability
Our aim is to work profitably and as efficiently as possible with
the capital of our shareholders and lenders. We previously
monitored our capital efficiency using the indicator return on
capital employed (ROCE). As part of One Siemens, we are intro-
ducing an advanced financial indicator, ROCE (adjusted),
which is reported on a continuing basis, that adjusts ROCE
primarily to consider pension underfunding as financing, to
increase comparability of the metric with competitors, particu-
larly with respect to the finance business, and to align with our
definition of adjusted industrial net debt. For information on
the calculation of ROCE (adjusted), see “Additional information
for supplemental financial measures.” Our target is to achieve
ROCE (adjusted) in the range of  – %. For comparison, our
ROCE (adjusted) on the basis of reported figures was .% in
fiscal  and .% in fiscal .
In line with common practice in the financial services industry,
return on equity or ROE (after tax) will be our advanced finan-
cial indicator for measuring capital efficiency at SFS. Starting
with fiscal , we will define ROE (after tax) as SFS’ Profit af-
ter tax (annualized for purposes of interim reporting), divided
by SFS’ average allocated equity. Taxes will be calculated based
on a flat tax rate of % of the Profit of SFS, excluding Income
(loss) from investments accounted for using the equity meth-
od, net allocated to SFS, as well as tax-free income compo-
nents. Our target is to achieve ROE (after tax) at SFS in the
range of  – %.
We intend to maintain and further improve the profitability of
our businesses. Our goal is to achieve margins on the level of
the best competitors in our industries – throughout the com-
plete business cycle. Our adjusted EBITDA margins will be de-
fined as the ratio of adjusted EBITDA (as presented in “Results
of operations – Reconciliation to adjusted EBITDA“) to revenue
(as presented in the “Notes to Consolidated Financial State-
ments”). We have defined adjusted EBITDA margin ranges for
the respective industries of our three Sectors. These margin
ranges are  – % for the industries that our Sectors Industry
and Energy operate in, and  – % in the healthcare industry.
Starting with fiscal , central infrastructure costs will be
allocated primarily to our Sectors and will impact our adjusted
EBITDA margins (for further information, see “Notes to Con-
solidated Financial Statements”).
Capital structure
Sustainable profit and revenue can only be achieved on the
basis of a healthy capital structure. Therefore, we continue to
use our Fit indicator for optimizing our capital structure,
defined as the ratio of adjusted industrial net debt to adjusted
EBITDA. For One Siemens, we advanced our definition of ad-
justed industrial net debt as compared to the definition used
under Fit. Going forward, the calculation of adjusted in-
dustrial net debt will include an adjustment for Pension plans
and similar commitments (as presented in the “Consolidated
Financial Statements”), in order to consider our total pension
liability. Accordingly, adjustments will no longer be made only
for the Funded status of principal pension benefit plans and for
the Funded status of principal other post-employment benefit
plans which only represented a part of our total pension liabil-
ity. For further information on this calculation, see “Additional
information for supplemental financial measures.” Our future
target is to achieve a ratio in the range of . – .. For com-
parison, our One Siemens capital structure ratio was . in
fiscal  and . in fiscal .