Siemens 2011 Annual Report Download - page 201

153 D. Consolidated Financial Statements
273 E. Additional information
143 C. Additional information for supplemental
financial measures
145 C. Siemens AG (Discussion on basis of
German Commercial Code)
151 C. Notes and forward-looking statements
140 C. Information required pursuant to Section  ()
and Section  () no.  of the German Commer-
cial Code (HGB) and explanatory report
142 C. Compensation report and Corporate Governance
statement pursuant to Section a of the German
Commercial Code (HGB)

C.. Principles and objectives
of financial management
Siemens is committed to a strong financial profile, which pro-
vides the financial flexibility to achieve growth and portfolio
optimization goals largely independent of capital market con-
ditions.
Financial management at Siemens is executed according to
applicable laws and internal guidelines and regulations. It in-
cludes the following activities:
C... LIQUIDITY MANAGEMENT
Our principal source of financing is cash inflows from operat-
ing activities. Corporate Treasury generally manages cash and
cash equivalents for Siemens and has primary responsibility
for raising funds in the capital markets for Siemens through
various debt products, with the exception of countries with
conflicting capital market controls. The relevant consolidated
subsidiaries in these countries obtain financing primarily
from local banks. Siemens follows a prudent borrowing policy
which is aimed towards a balanced financing portfolio, a di-
versified maturity profile and a comfortable liquidity cushion.
On September , , Siemens held €. billion in cash
and cash equivalents, mainly in euros, which were predomi-
nantly managed by Corporate Treasury. Especially since the
beginning of the global financial markets crisis, Siemens
monitors funding options available in the capital markets,
trends in the availability of funds and the cost of such funding
very closely to evaluate possible strategies regarding its finan-
cial and risk profile.
Corporate Treasury enters into reverse repurchase agreements
with financial institutions with investment grade credit rat-
ings. Siemens holds securities as collateral under these agree-
ments via a third party (Euroclear) and is permitted to sell or
re-pledge the securities. The extent to which Siemens engages
in transactions involving reverse repurchase agreements de-
pends on its liquidity management needs and the availability
of cash and cash equivalents which varies from time to time.
For further information on reverse purchase agreements see
D. Notes to Consolidated Financial Statements.
C... CASH MANAGEMENT
Cash management comprises the management of bank partner
relationships and bank accounts as well as the execution of
payments, including the administration of cash pools, on a
global level. Siemens strives to raise efficiency and transparen-
cy through a high level of standardization and continuous ad-
vancement of payment processes. Where permissible, the exe-
cution of intercompany and third party payments is effected
centrally through group-wide tools with central controls to en-
sure compliance with internal and external guidelines and re-
quirements. To ensure efficient management of Siemens’
funds, Corporate Treasury has established a central cash man-
agement approach: to the extent legally and economically fea-
sible, funds are pooled and managed centrally by Corporate
Treasury. Conversely, funding needs within Siemens are cov-
ered centrally by Corporate Treasury via intercompany current
accounts and / or loans where legally and economically feasible.
C... FINANCIAL RISK MANAGEMENT
Investments of cash and cash equivalents are subject to credit
requirements and counterparty limits. Corporate Treasury
pools and centrally manages Siemens’ interest rate, certain
commodity and currency risk exposures and uses financial de-
rivative instruments in transactions with external financial in-
stitutions to offset such concentrated exposures. Especially
since the beginning of the global financial market crisis,
Siemens monitors counterparty risk in its financial assets and
financial derivative instruments very closely. For more de-
tailed information about financial risk management at Siemens
see D. Notes to Consolidated Financial Statements.
C... MANAGEMENT OF PENSION PLAN FUNDING
Siemens’ funding policy for its pension funds is part of its
overall commitment to sound financial management, which
includes a continuous analysis of the structure of its pension
liabilities. For more detailed information about Siemens’ pen-
sion plan funding see C... Funding of pension plans and
similar commitments.
C...
CAPITAL STRUCTURE MANAGEMENT
AND CREDIT RATING
To effectively manage its capital structure, Siemens seeks to
maintain ready access to the capital markets through various
debt products and to preserve its ability to repay and service
its debt obligations over time. For more detailed information
about Siemens’ capital structure, see below.
A key factor in maintaining a strong financial profile is our cred-
it rating which is affected by, among other factors, our capital
structure, profitability, ability to generate cash flow, geographic
C. Financial position