Siemens 2011 Annual Report Download - page 212

6 A. To our shareholders
23 B. Corporate Governance 51 C. Combined management’s discussion and analysis
52 C. Business and operating environment
80 C. Fiscal  – Financial summary
83 C. Results of operations
101 C. Financial position
114 C. Net assets position
117 C. Overall assessment of the economic position
118 C. Report on post-balance sheet date events
119 C. Report on expected developments and
associated material opportunities and risks
135 C. Information required pursuant to Section  ()
and Section  () of the German Commercial
Code (HGB) and explanatory report

shareholding, to make capital contributions to EN of € mil-
lion. The committed amount is due upon EN making acquisi-
tions or investments.
For additional information with respect to our guarantees and
our other commitments, see D. Notes to Consolidated
Financial Statements.
C... FUNDING OF PENSION PLANS
AND SIMILAR COMMITMENTS
Beginning with fiscal , the figures presented below relate
to both principal and non-principal pension and other post-
employment benefits provided by Siemens (referred to below
as Siemens’ pension plans). The presentation of prior-year in-
formation has been adjusted to conform to the current-year
presentation.
Funded status, pension plan assets and defined benefit obliga-
tion (DBO) of Siemens’ pension plans as well as funded status
of Siemens’ predominantly unfunded other post-employment
benefit plans as of September , , presented below refer
only to continuing operations. Prior-year information, howev-
er, includes combined amounts for Siemens IT Solutions and
Services and for OSRAM, which are presented in discontinued
operations since the end of the second quarter of fiscal .
For more information on Siemens’ pension plans and similar
commitments and the allocation between continuing and dis-
continued operations of the respective net amounts, see
D.
Notes to Consolidated Financial Statements.
The DBO of Siemens’ pension plans, which considers future
compensation and pension increases, amounted to €. bil-
lion on September ,  (including discontinued opera-
tions for OSRAM, the DBO was €. billion, down from €.
billion at the end of the prior fiscal year). The DBO decreased
mainly due to an increase in the discount rate for domestic
and some foreign pension plans. The fair value of plan assets
as of September ,  was €. billion (including discon-
tinued operations for OSRAM, the fair value of plan assets
was €. billion, down from €. billion at the end of the
prior fiscal year). Accordingly, the combined funded status of
Siemens’ pension plans on September ,  showed an un-
derfunding of €. billion (including discontinued operations
for OSRAM, the underfunding was €. billion, down from an
underfunding of €. billion at the end of the prior fiscal
year). The actual return on plan assets for the last twelve
months amounted to a negative €. billion, resulting mainly
from equity investments. This represents a return of negative
.% compared to the expected return of .%. Both the actu-
al and expected returns include discontinued operations for
OSRAM.
Siemens’ funding policy for its pension funds is part of its
overall commitment to sound financial management, which
also includes an ongoing analysis of the structure of its pen-
sion liabilities. To balance return and risk, Siemens has devel-
oped a pension benefit risk management concept. We have
identified as a prime risk a decline in the plans’ funded status
as a result of the adverse development of plan assets and / or
defined benefit obligations. We monitor our investments and
our defined benefit obligations in order to measure such
prime risk. The prime risk quantifies the expected maximum
decline in the plans’ funded status for a given confidence lev-
el over a given time horizon. A risk budget on the Group level
forms the basis for the determination of our investment strat-
egy, i.e. the strategic asset class allocation of plan assets and
the degree of interest rate risk hedging. Both our risk budget
and investment strategy are regularly reviewed with the par-
ticipation 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 constantly monitor their performance and
risk, both on a stand-alone basis, and in the broader portfolio
context. We review 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 initi-
ate 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 included significant defined benefits. However, in order
to reduce the Company ’s exposure to certain risks associated
with defined benefit plans, such as longevity, inflation, effects
of compensation increases and other factors, we implement-
ed new pension plans in some of our major subsidiaries in-
cluding Germany, the U.S. and the U.K. during the last several
years. The benefits of these new plans are based predomi-
nantly on contributions made by the Company and are still af-
fected by longevity, inflation adjustments and compensation
increases, but only to a minor extent. In addition to changes
in the plan design of its plans Siemens also regularly reviews
the available funding vehicle options for its pension benefits.