Siemens 2010 Annual Report Download - page 126

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

Dividend policy
With One Siemens, we want to provide an attractive dividend
payout to our investors. We have therefore set a target for our
dividend payout ratio, defined as the ratio of the total dividend
payout to Net income (as presented in the “Consolidated Finan-
cial Statements”). In future, we aim to propose an annual divi-
dend payout ratio of  – % of Net income to our sharehold-
ers. For these purposes, the percentage calculation will take
into account exceptional non-cash effects within income. We
intend to fund the dividend payout from our Free cash flow.
Additional indicators
In addition to the financial indicators discussed above, we use
several other metrics to assess the economic success of our
business activities. To determine whether a particular invest-
ment is likely to generate value for Siemens, we use net pres-
ent value or economic value added (EVA™). EVA™ considers
the cost of capital in calculating value creation by comparing
the expected earnings of an investment against the cost of
capital employed. EVA™ will also be an indicator for measuring
capital efficiency in our Sectors and Cross-Sector Businesses.
To measure our liquidity management, we analyze the net
working capital turns of our operating activities, as well as the
capital expenditure rate, defined as Additions to intangible
assets and property, plant and equipment as a percentage of
amortization and depreciation. For our capital expenditure
rate, we have set a target range of  – % (for further infor-
mation, see “Financial position – Capital resources and require-
ments”). In addition, we set hurdle rates that generally need to
be considered before acquisitions are executed. In general,
acquisitions need to be EVA™ accretive within two years after
the closing of the transaction and need to be in line with our
ROCE (adjusted) target within three years after the closing of
the transaction.
VALUE CHAIN
Research and development
In fiscal , our research & development (R&D) activities
were targeted as before on () ensuring long-term future viabil-
ity, () enhancing technological competitiveness and () opti-
mizing the allocation of R&D resources.
With intelligent innovation management new key technolo-
gies were developed and important innovations were brought
to market maturity during fiscal . Examples of successful
innovations from Siemens’ Environmental Portfolio in fiscal
 include the first high voltage direct current (HVDC) trans-
mission line operating at a transmission voltage of  kV and
the latest generation of gas turbines. The HVDC transmission
line connects the hydroelectric power plants in China’s Yunnan
Province with millions of consumers in the metropolitan areas
of the Pearl River Delta , kilometers away – it transmits the
energy with only minimal losses because of the direct current
transmission on ultrahigh voltage level. In the U.S., the latest
generation of gas turbines went on the market, which, in com-
bination with steam turbines, will operate with a previously
unattained efficiency of over % – this technology will enable
the energy utility Florida Power & Light to reduce the fuel con-
sumption in its power plants by a third.
It is our aim to continue to strengthen our innovation capabil-
ity. In fiscal , Siemens spent €. billion on R&D. Despite
the financial and economic crisis, R&D intensity was level with
fiscal  and above the level in fiscal .
R&D intensity
Research and development
expenses (in billions of €)
Research and de-
velopment intensity 
FY 2010 3.846 5.1%
FY 2009 3.900 5.1%
FY 2008 3.784 4.9%
1 R&D intensity is defined as the ratio of R&D expenses and revenue.
The Industry Sector invested €. billion with an R&D intensity
of .%; the Energy Sector €. billion with an R&D intensity of
.%; and the Healthcare Sector €. billion with an R&D inten-
sity of .%. Our central research department (Corporate Tech-
nology, CT) and Siemens IT Solutions and Services accounted
for additional R&D spending.
We have , R&D employees in Germany and , R&D
employees in roughly  countries outside of Germany, includ-
ing the U.S., China, Austria, India, Slovakia, Switzerland, UK,
Croatia, Sweden, Denmark, Czech Republic and France.
Siemens holds roughly , patents worldwide, compared
to , patents a year earlier. In terms of the number of
published patent applications, Siemens ranked third in Ger-
many and second in Europe in calendar . In terms of the
number of patents granted, Siemens ranked thirteenth in the
U.S. in calendar . For comparison, Siemens was second in
Germany and in Europe, and twelfth in the U.S. in calendar
.