Siemens 2011 Annual Report Download - page 231

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)

change in the portfolio mix of invested assets can result in
corresponding increases or decreases in the value of plan as-
sets, particularly equity securities, or in a change of the ex-
pected rate of return on plan assets. Also, changes in pension
plan assumptions can affect net periodic pension cost. For ex-
ample, a change in discount rates or in the expected return on
plan assets assumptions may result in changes in the net peri-
odic benefit cost in the following financial year. In order to
comply with local pension regulations in selected foreign
countries, we may face a risk of increasing cash outflows to
reduce an underfunding of our pension plans in these coun-
tries, if any. At the end of fiscal , the combined funded
status of Siemens’ pension benefit plans showed an under-
funding of €. billion, compared to an underfunding of €.
billion at the end of fiscal . The underfunding at the end
of fiscal  included approximately €. billion related to
OSRAM. Further, the combined funded status of Siemens’
other post-employment benefit plans showed an underfund-
ing of €. billion at the end of fiscal , compared to an un-
derfunding of €. billion at the end of the prior fiscal year.
For further information, see D. Notes to Consolidated
Financial Statements.
C... COMPLIANCE RISKS
We are subject to regulatory risks associated with our in-
ternational operations: Protectionist trade policies and
changes in the political and regulatory environment in the
markets in which we operate, such as foreign exchange im-
port and export controls, tariffs and other trade barriers and
price or exchange controls, could affect our business in sever-
al national markets, impact our sales and profitability and
make the repatriation of profits difficult, and may expose us
to penalties, sanctions and reputational damage. In addition,
the uncertainty of the legal environment in some regions
could limit our ability to enforce our rights. For example, as a
globally operating organization, we conduct business with
customers in countries that are subject to export control regu-
lations, embargoes, sanctions or other forms of trade restric-
tions imposed by the U.S., the European Union or other coun-
tries or organizations. Business with customers in Iran has re-
cently become subject to significant further regulation under
Resolution  () of the Security Council of the United
Nations, the U.S. Comprehensive Iran Sanctions, Accountabil-
ity, and Divestment Act of  enacted on July ,  (CISA-
DA), including implementing measures thereto on federal and
state level, as well as the Council Regulation (EU) No.  /
 of October ,  on a tightening of the sanctions re-
gime against Iran, extended by Council Implementing Regula-
tion (EU) No.  /  of May , . Even though we have
decided, as a general rule, as described in more detail in
C... Orders and revenue not to enter into new contracts
with customers in Iran, we may still conduct certain business
activities and provide products and services to customers in
Iran under limited circumstances in accordance with the de-
tailed policies implementing this general rule. New or tight-
ened export control regulations, sanctions, embargos or other
forms of trade restrictions imposed on Iran or on other sanc-
tioned countries in which we do business may result in a cur-
tailment of our existing business in such countries and in an
adaptation of our policies. In addition, the termination of our
activities in Iran or other sanctioned countries may expose us
to customer claims and other actions. We are continuously
evaluating the potential impact, if any, of the above-refer-
enced Iran legislation or any amendments thereto on, among
other things, pre-existing contractual obligations in our Ener-
gy Sector’s business in Iran.
We expect that sales to emerging markets will continue to ac-
count for an increasing portion of our total revenue, as our
business naturally evolves and as developing nations and re-
gions around the world increase their demand for our offer-
ing. Emerging market operations involve various risks, includ-
ing civil unrest, health concerns, cultural differences such as
employment and business practices, volatility in gross domes-
tic product, economic and governmental instability, the po-
tential for nationalization of private assets and the imposition
of exchange controls. The Asian markets, in particular, are im-
portant for our long-term growth strategy, and our sizeable
operations in China are influenced by a legal system that is
still developing and is subject to change. Our growth strategy
could be limited by governments supporting local industries.
Our Sectors, particularly those that derive their revenue from
large projects, could be adversely affected if future demand,
prices and gross domestic product in the markets in which
those Sectors operate do not develop as favorably as expect-
ed. If any of these risks or similar risks associated with our in-
ternational operations were to materialize, our business, fi-
nancial condition and results of operations could be material-
ly adversely affected.
Current and future investigations regarding allegations of
public corruption and other illegal acts could have a mate-
rial adverse effect on the development of future business
opportunities, our net assets, financial condition and re-
sults of operations, the price of our shares and American
depository shares (ADS) and our reputation: We engage in
a substantial amount of business with governments and gov-