Siemens 2012 Annual Report Download - page 172

1 A. To our Shareholders
21 B. Corporate Governance 49 C. Combined Management Report
50 C. Business and economic environment
64 C. Financial performance measures
69 C. Results of operations
82 C. Financial position
93 C. Net assets position
95 C. Overall assessment of the economic position
96 C. Subsequent events
97 C. Sustainability
111 C. Report on expected developments and
associated material opportunities and risks

.. 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:
...  
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 that
is aimed towards a balanced financing portfolio, a diversified
maturity profile and a comfortable liquidity cushion. On Sep-
tember , , Siemens held €. billion in cash and cash
equivalents, mainly in euro, which were predominantly man-
aged 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 availabil-
ity of funds and the cost of such funding very closely to evalu-
ate possible strategies regarding its financial 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
   .     .
...  
Cash management comprises the management of bank part-
ner 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 transparency
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 manage-
ment approach: to the extent legally and economically feasi-
ble, 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.
...   
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 detailed
information about financial risk management at Siemens see
   .     .
...
    
Siemens’ funding policy for its pension funds is part of its over-
all commitment to sound financial management, which in-
cludes a continuous analysis of the structure of its pension
liabilities. For more detailed information about Siemens’ pen-
sion plan funding see
...     
 
.
...   
  
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.
.  