How can you manufacture customized products at affordable prices? How can you power a planet hungry for electricity without damaging it? How can disease be detected before it strikes? Annual Report 2007 Answers to the world’s toughest questions confronting Industry, Energy and the Environment, and Healthcare. www.siemens.com How can you manufacture customized products at affordable prices? How can you power a planet hungry for electricity without damaging it? How can disease be detected before it strikes? Annual Report 2007 Answers to the world’s toughest questions confronting Industry, Energy and the Environment, and Healthcare. www.siemens.com Answers Contents to the world’s toughest questions confronting Industry, Energy and the Environment, and Healthcare. Report of the Supervisory Board 6 Managing Board of Siemens AG 12 Letter to our Shareholders 14 How can you manufacture customized products At a Glance 20 at affordable prices? Worldwide Presence 22 Employees 24 Our answer: The intelligent factory. Investor Relations 26 We combine virtual product planning with leading-edge Innovators and Innovations 27 automation technologies to provide innovative solutions for highly flexible production processes. That’s how we make Fit42010 30 the manufacture of even customized products cost-effective. From Fit4More to Fit42010 32 Performance 34 Answers for industry. Portfolio 36 People Excellence 38 How can you power a planet hungry for electricity Operational Excellence 40 without damaging it? Corporate Responsibility 42 Our answer: Efficient energy supply. Corporate Responsibility Award 44 Our innovations are boosting the efficiency of power generation Portfolio 46 and transmission technologies while substantially reducing Group Presidents 48 CO2 emissions. The Intelligent Factory 50 Ecofriendly Electricity 58 Patient-centric Solutions 64 Answers for the environment. Corporate Governance Report* 80 How can disease be detected before it strikes? Compliance Report 88 Compensation Report 92 Our answer: Early detection and prevention. Information for shareholders* 106 Our offerings combine state-of-the-art laboratory diagnostics, Management’s discussion and analysis 108 imaging technologies and IT solutions to pinpoint disease early Consolidated Financial Statements 200 on, enhance diagnostic precision and optimize patient care. Statement of the Managing Board 322 Independent Auditors’ Report 323 Answers for life. Siemens Financial Calendar 332 Corporate Structure** * With separate table of contents ** See foldout inside back cover. Further information is available on the Internet at: www.siemens.com/answers Answers Contents to the world’s toughest questions confronting Industry, Energy and the Environment, and Healthcare. Report of the Supervisory Board 6 Managing Board of Siemens AG 12 Letter to our Shareholders 14 How can you manufacture customized products At a Glance 20 at affordable prices? Worldwide Presence 22 Employees 24 Our answer: The intelligent factory. Investor Relations 26 We combine virtual product planning with leading-edge Innovators and Innovations 27 automation technologies to provide innovative solutions for highly fl exible production processes. That’s how we make Fit 42010 30 the manufacture of even customized products cost-effective. From Fit 4More to Fit 42010 32 Performance 34 Answers for industry. Portfolio 36 People Excellence 38 How can you power a planet hungry for electricity Operational Excellence 40 without damaging it? Corporate Responsibility 42 Our answer: Effi cient energy supply. Corporate Responsibility Award 44 Our innovations are boosting the effi ciency of power generation Portfolio 46 and transmission technologies while substantially reducing Group Presidents 48 CO 2 emissions. The Intelligent Factory 50 Ecofriendly Electricity 58 Patient-centric Solutions 64 Answers for the environment. Corporate Governance Report* 80 How can disease be detected before it strikes? Compliance Report 88 Compensation Report 92 Our answer: Early detection and prevention. Information for shareholders* 106 Our offerings combine state-of-the-art laboratory diagnostics, Management’s discussion and analysis 108 imaging technologies and IT solutions to pinpoint disease early Consolidated Financial Statements 200 on, enhance diagnostic precision and optimize patient care. Statement of the Managing Board 322 Independent Auditors’ Report 323 Siemens Financial Calendar 332 Answers for life. Corporate Structure** * With separate table of contents ** See foldout inside back cover. Further information is available on the Internet at: www.siemens.com/answers Our values – Highest performance with the highest ethics Responsible We’re committed to ethical and responsible action. Excellent We deliver top performance and excellent results. Innovative We drive innovation to create lasting value. 6 Report of the Supervisory Board Dear Shareholders, In addition to very successful business operations, fi scal 2007 was characterized by major changes and extraordinary events at the Company. These developments also affected the composition and work of the Supervisory Board and the topics with which it dealt. In fi scal 2007, the Supervisory Board performed the duties assigned to it by law, the Siemens Articles of Association and the Bylaws for the Supervisory Board. We regularly advised the Managing Board on the management of the Company and monitored the Managing Board’s activities. We were directly involved in all major decisions regarding the Company. In written and oral reports, the Managing Board regularly provided us with timely and comprehensive information on Company planning and business operations as well as on the strategic development and current state of the Company. Actual deviations from business plans were explained to us in detail. Together with the Managing Board, we determined the Company’s strategic orientation. On the basis of reports submitted by the Managing Board, we discussed in detail all business transactions of major signifi cance to the Company. The proposals made by the Managing Board were approved after detailed examination and discussion. We held a total of six regular and two extraordinary meetings. Where necessary, we recorded our decisions in writing. Report of the Supervisory Board 7 During our respective terms of offi ce, both Professor Dr. Heinrich v. Pierer – who was Chairman until April 25, 2007 – and I were in regular contact with the Managing Board between Supervisory Board meetings. We were kept up-to-date on the Company’s current business situation and key business transactions. At separate strategy meetings, the Chairman of the Supervisory Board discussed with the Managing Board the perspectives and future orientation of the Company’s individual businesses. Intensive work in the Supervisory Board committees To enhance the effi ciency of its work, the Supervisory Board has set up a total of six committees, which prepare the resolutions of the Supervisory Board as well as the issues to be dealt with at the Board’s plenary meetings. Where legally permissible, the decision-making powers of the Supervisory Board are delegated to these committees. The composition of the individual Supervisory Board committees and the number of committee meetings and decisions are shown on page 319. The Chairman’s Committee met eight times in fi scal 2007. Between meetings, the Chairman of the Supervisory Board also discussed topics of particular importance to the Company with the members of the Chairman’s Committee. In fi scal 2007, these discussions were concerned primarily with the Managing Board’s proposal to focus the Company’s business operations on three Sectors and with the future structure of Siemens’ matrix organization. The Chairman’s Committee also dealt with the implementation of the Company’s corporate governance principles and with various personnel topics – in particular, with the appointment of members of the Managing Board, with matters relating to Managing Board contracts and with Managing Board remuneration. In fi scal 2007, the Mediation Committee again had no occasion to meet. The Ownership Rights Committee voted on six resolutions using a notational, or written, voting process. The chairman of the committee notifi ed the Supervisory Board of the outcome at subsequent meetings. In fi scal 2007, a Nominating Committee was established to prepare for the election of the Supervisory Board’s shareholder representatives by the Annual Shareholders’ Meeting of Siemens AG on January 24, 2008. The committee took up its duties after the end of fi scal 2007. The Audit Committee met seven times. Together with the independent auditors, the President and Chief Executive Offi cer, and the Chief Financial Offi cer, the Audit Committee discussed the Annual Financial Statements and management’s discussion and analysis (MD&A) of Siemens AG and the Consolidated Financial Statements and consolidated MD&A of Siemens worldwide, the proposal for the appropriation of net income and the Annual Report on Form 20-F for the U.S. Securities and Exchange Commission (SEC). The effects of compliance-related matters on the fi nancial statements were also discussed. In addition, the committee gave in-depth consideration to the Company’s quarterly reports, the Semiannual Report, the appointment of the independent auditors, oversight of the auditors’ independence and qualifi cation, and their fee. The Audit Committee dealt inten- sively with the Company’s risk management system and with the authorization and fi ndings of the internal fi nancial