Net cash used in operating and investing activities was 2.703 billion compared to net cash provided of 3.262 billion in the prior year. On a continuing basis, net cash used in operating and investing activities was 1.489 billion, including a significant increase in cash used for acquisitions and investments to 3.102 billion and 1.496 billion in supplemental cash contributions to Siemens pension plans. In the prior year, net cash provided by
operating and investing activities was 3.015 billion, including lower supplemental pension plan contributions of 1.255 billion more than offset by 1.794 billion in net proceeds from the Infineon share sale.
Siemens Managing and Supervisory Boards propose a dividend of 1.35 per share. The
prior-year dividend per share was 1.25.
Consolidated financial statements according to 292a HGB
Notes to consolidated financial statements according to 292a HGB
Strategic overview Siemens competitive strategy is to innovate through research and development (R&D), optimize its business portfolio to bring that innovation to market on a global basis, and back these efforts with a strong, conservative financial condition. Siemens is one of the most innovative companies in the world, holding more than 53,000 patents worldwide as well as numerous patent exchange and licensing agreements. Based on patent statistics, Siemens is number one in Germany, number two in Europe, and among the top ten in the U.S. To remain innovative, we invested 5.155 billion in R&D, even more than the 4.650 billion in fiscal 2004. We continually balance our business portfolio to maintain our leadership in established markets while penetrating new markets. In some cases this involves acquiring complementary technology that enables us to offer more complete solutions. We also use acquisitions to gain scale in new regions. In fiscal 2005, we pursued both strategies, and also exited or reduced our participation in markets where our competitive position did not enable us to achieve growth or profitability goals. Major transactions included the following:
In December 2004 (the first quarter of fiscal 2005), we entered the fast-growing alternative energy market by acquiring a wind power company, Bonus Energy A/S (Bonus) in Denmark. In May 2005, we expanded our position in the growing field of molecular imaging by acquiring CTI Molecular Imaging, Inc. (CTI) in the U.S. In July 2005, we strengthened our existing industrial automation portfolio by acquiring Flender Holding GmbH (Flender), a German-based industrial gear manufacturer, and Robicon Corporation (Robicon), a U.S.-based maker of voltage converters for industrial motors.

1,434 9,326 9,240 1,522 11,850 33,372 9,785 4,4,016 52,134 529

656 23

2,673 5,167 26,583 (7, 305) (1) 27,117 86,205
2,673 5,121 25,447 (6,386) 26,855 79,518
Eliminations, reclassifications and Corporate Treasury 9/30/05 9/30/04
Operations 9/30/05 9/30/04
Financing and Real Estate 9/30/05 9/30/04
6,603 (6) (15,489) (4) (178) 506 (8,568) 1,(1,632) (8,553)
11,(8) (12,257) (2) (237) 1 1,(1,284) (343)
1,471 1,772 12,758 15,362 12,744 1,3,746 49,678 3,463 8,799 3,092 8,217 4,743 1,836 1,626 81,454
908 1,361 11,275 12,251 11,295 1,018 2,793 40,901 3,790 6,394 2,501 7,242 3,598 2,217 1,284 67,927

4,978 5,3,3,13,304

4,895 5,3,2,705 11,934
3,049 (1) (15,998) 115 (475) 222 (13,088) 6,937 (26) 91 (2,467) (8,553)
850 (3) (7,449) 6 (282) 452 (6,426) 8,25 (2,664) (343)
564 9,965 9,134 9,898 2, 12,768 44,4,4,55,584 656
451 9,109 1,703 9,055 1,528 11,173 33,4,3,42,478 529

6,8,2,183 11,401

5,6,2,207 9,999

(8,553)

(343)

25,214 81,454

24,920 67,927

1,903 13,304

1,935 11,934
Consolidated Statements of Cash Flow
For the fiscal years ended September 30, 2005 and 2004 (in millions of )
Siemens 2005 Cash flows from operating activities Net income Adjustments to reconcile net income to cash provided Minority interest Amortization, depreciation and impairments Deferred taxes (Gains) on sales and disposals of businesses and real estate, net (Gains) on sales of investments, net (Gains) on sales and impairments of marketable securities, net Loss (income) from equity investees, net of dividends received Change in current assets and liabilities (Increase) decrease in inventories, net (Increase) decrease in accounts receivable, net Increase (decrease) in outstanding balance of receivables sold (Increase) decrease in other current assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase (decrease) in other current liabilities Supplemental contributions to pension trusts Change in other assets and liabilities Net cash provided by (used in) operating activities continuing and discontinued operations Net cash provided by (used in) operating activities continuing operations Cash flows from investing activities Additions to intangible assets and property, plant and equipment Acquisitions, net of cash acquired Purchases of investments Purchases of marketable securities (Increase) decrease in receivables from financing activities Increase (decrease) in outstanding balance of receivables sold by SFS Proceeds from sales of long-term investments, intangibles and property, plant and equipment Proceeds from sales and dispositions of businesses Proceeds from sales of marketable securities Net cash provided by (used in) investing activities continuing and discontinued operations Net cash provided by (used in) investing activities continuing operations Cash flows from financing activities Proceeds from issuance of common stock Purchase of common stock Proceeds from re-issuance of treasury stock Repayment of debt Change in short-term debt Dividends paid Dividends paid to minority shareholders Intracompany financing Net cash provided by (used in) financing activities Effect of exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental disclosure of cash paid for: Interest Income taxes

Estate and Eliminations, reclassifications and Corporate Treasury components are not
intended to purport the financial position, results of operations and cash flows as if they were separate entities under U.S. GAAP. The information disclosed in these Notes relates to Siemens unless otherwise stated. 2 Summary of significant accounting policies
Basis of consolidation The Consolidated Financial Statements include the accounts of Siemens
AG and subsidiaries which are directly or indirectly controlled. Additionally, the Company consolidates variable interest entities (VIEs) for which it is deemed to be the primary beneficiary. Results of associated companies companies in which Siemens has the ability to exercise significant influence over operating and financial policies (generally through direct or indirect ownership of 20% to 50% of the voting rights) are recorded in the Consolidated Financial Statements using the equity method of accounting. A list of Siemens subsidiaries and associated companies is being filed with the Commercial Registries of the Berlin-Charlottenburg and Munich District Courts.
Foreign currency translation The assets and liabilities of foreign subsidiaries, where the
functional currency is other than the euro, are translated using period-end exchange rates, while the statements of operations are translated using average exchange rates during the period. Differences arising from such translations are included as a separate component of shareholders equity. The exchange rates of the significant currencies of non-euro countries used in the preparation of the Consolidated Financial Statements were as follows:
Year-end exchange rate 1 quoted into currencies specified below September 30, Currency Swiss francs British pound U.S. Dollar ISO Code CHF GBP USD 2005 1.556 0.682 1.1.554 0.686 1.233 Annual average rate 1 quoted into currencies specified below Fiscal year 2005 1.542 0.688 1.1.549 0.680 1.215
Revenue recognition Revenue is recognized for product sales when title passes, the risks
and rewards of ownership have been transferred to the customer, the fee is fixed or determinable, and collection of the related receivable is probable. If product sales are subject to customer acceptance, revenues are not recognized until customer acceptance occurs. Revenues from long-term construction-type projects are generally recognized under the percentage-of-completion method, based on the percentage of costs to date compared to the total estimated contract costs, contractual milestones or performance. Revenues from service transactions are recognized as services are performed. For long-term service contracts, revenues are recognized on a straight-line basis over the term of the contract or, if the performance pattern is other than straight-line, as the services are provided. Revenue from software arrangements is recognized at the time persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is probable. Revenue from maintenance, unspecified upgrades or enhancements and technical support is allocated using the residual value method and is recognized over the period such items are delivered. If an arrangement to deliver software requires significant production, modification, or customization of software, the entire arrangement is accounted for under the percentage-of-completion method. Operating lease income for equipment rentals is recognized on a straight-line basis over the lease term. Interest income from capital leases is recognized using the interest method. Sales of goods or services sometimes involve the provision of multiple elements. In these cases, the Company applies the guidance in Emerging Issues Task Force (EITF) 00-21 Revenue Arrangements with Multiple Deliverables to determine whether the contract or arrangement contains more than one unit of accounting. An arrangement is separated if (1) the delivered element(s) has value to the customer on a stand-alone basis, (2) there is objective and reliable evidence of the fair value of the undelivered element(s) and (3), if the arrangement includes a general right of return relative to the delivered element(s), delivery or performance of the undelivered element(s) is considered probable and is substantially in the control of the Company. If all three criteria are fulfilled, the appropriate revenue recognition convention is then applied to each separate unit of accounting. The total arrangement consideration is allocated to the separate units of accounting based on each components objectively determined fair value, such as sales prices for the component when it is regularly sold on a stand-alone basis or third-party prices for similar components. If the three criteria are not met, revenue is deferred until such criteria are met or until the period in which the last undelivered element is delivered. The amount allocable to the delivered elements is limited to the amount that is not contingent upon delivery of additional elements or meeting other specified performance conditions.

Use of estimates The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent amounts at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification The presentation of certain prior year information has been reclassified to
conform to the current year presentation. See Note 3 for a description of discontinued operations.
Accounting changes Standards implemented As of October 1, 2003, the Company adopted
the fair value recognition provisions of SFAS 123, Accounting for Stock-Based Compensation using the prospective method set forth in SFAS 148, Accounting for Stock-Based Compensation Transition and Disclosure for all awards granted, modified or settled on or after October 1, 2003. Stock-based compensation cost is measured at the grant date at the fair value of the award based on a Black-Scholes option pricing model and is recognized as expense over the vesting period. Awards granted before October 1, 2003, continue to be accounted for under the intrinsic value based recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Under APB Opinion No. 25, compensation cost, if any, is measured based on the excess of the quoted market price at grant date over the amount an employee must pay to acquire the stock. The following table illustrates the effect on net income and earnings per share if the fair value based method of SFAS 123 had been applied to all awards:
Year ended September 30, 2005 Net income As reported Plus: Stock-based employee compensation expense included in reported net income, net of taxes Less: Stock-based employee compensation expense determined under fair value based accounting method, net of taxes Pro forma Basic earnings per share As reported Pro forma Diluted earnings per share As reported Pro forma 2.42 2.42 3.66 3.60 2.52 2.52 3.82 3.76 2,(59) 2,249 3,(115) 3,353 2004

3 Acquisitions, dispositions and discontinued operations

a) Acquisitions

During the years ended September 30, 2005 and 2004, the Company completed a number of acquisitions. These acquisitions have been accounted for under the purchase method and have been included in the Companys Consolidated Financial Statements since the date of acquisition. On a fiscal year basis, none of these acquisitions are considered material, individually or in the aggregate.
aa) Acquisitions in fiscal 2005
In May 2005, the Company acquired CTI Molecular Imaging, Inc., USA (CTI). The primary reason for the acquisition is to strengthen the Companys commitment to molecular imaging development. Siemens previously owned a 49% interest in a joint venture consolidated by CTI before the acquisition of which Siemens was the primary customer. CTI is integrated into Med and was consolidated as of May 2005, when it became a wholly owned subsidiary. Preliminary acquisition costs amount to 794 (including 60 cash acquired). The Company has not yet finalized the purchase price allocation. Based on the preliminary purchase price allocation, approximately 112 was allocated to intangible assets and 525 to goodwill. In fiscal 2005, the Company acquired, in several steps, the Austrian engineering group VA Technologie AG (VA Tech) which is now a wholly owned subsidiary of Siemens for preliminary acquisition costs of approximately 1,049 (including 535 cash acquired). The VA Tech business is consolidated as of July 15, 2005. VA Techs metallurgy, power transmission and distribution, and infrastructure activities will mainly be integrated into I&S and PTD to support their global growth targets. Smaller portions will be integrated into other business activities. The purchase price allocation is not yet final. Based on the preliminary purchase price allocation, 1,027 was allocated to goodwill and 128 to intangible assets that will be amortized over periods ranging from one to seven years. In order to comply with a European antitrust ruling, the VA Tech power generation business which includes the hydropower activities will be sold. Since the hydropower business is subject to a regulatory hold separate agreement and Siemens has no influence over the operations of the business, it is being held as a cost method investment until its disposal. In July 2005, the Company completed the acquisition of all shares of Flender Holding GmbH, Germany (Flender), a supplier of mechanical and electrical drive equipment, focusing on gear technology. The primary reason for the acquisition was to enable the Company to offer a full drive train (motor, inverter, gear) to customers. The business is being integrated into A&D and was consolidated as of July 2005. Preliminary acquisition costs amount to 702. The Company has not yet finalized the purchase price allocation. Based on the preliminary purchase price allocation, approximately 390 was allocated to intangible assets subject to amortization and 452 was recorded as goodwill. In fiscal 2005, the Company acquired Bonus Energy A/S, Denmark, a supplier of wind energy systems and substantially all of the assets of Robicon Corporation, USA, a manufacturer of medium voltage drives and power controls. The combined preliminary purchase price of the two acquisitions amounts to 481.

In each of the years ended September 30, 2005 and 2004, the Companys authorized but unissued capital totaled 667 or 222,210 thousand common shares. Authorized Capital 2004 replaced Authorized Capital 2001/I of 400 (representing 133 million shares) and Authorized Capital 2003 of 250 (representing 83 million shares) by resolution of the Annual Shareholders Meeting on January 22, 2004. The Companys shareholders authorized the Managing Board with the approval of the Supervisory Board to increase the capital stock by up to 600 through the issuance of up to 200 million new shares against cash contributions and/or contributions in kind (Authorized Capital 2004). The Managing Board is authorized to determine, with the approval of the Supervisory Board, the further content of the rights embodied in the shares and the conditions of the share issue. The Managing Board is authorized, with the approval of the Supervisory Board, to exclude pre-emptive rights of shareholders in the event of capital increases against contributions in kind and in certain pre-stipulated circumstances against cash. The Authorized Capital 2004 will expire on January 21, 2009. Authorized Capital 2001/II authorizes the Managing Board, with the approval of the Supervisory Board, to increase capital stock by up to 67 (representing 22 million shares) against contributions in cash until February 1, 2006 for the purpose of issuing them exclusively to employees of the Company and its subsidiaries, provided these subsidiaries are not listed companies themselves and do not have their own employee share schemes. Pre-emptive rights of existing shareholders are excluded. The Managing Board is authorized to determine, with the approval of the Supervisory Board, the further content of the rights embodied in the shares and the conditions of the share issue. Authorized Capital 1998 of 90 and Authorized Capital 1999 of 210 were replaced by resolution of the Annual Shareholders Meeting on January 23, 2003. The Companys shareholders authorized the Managing Board with the approval of the Supervisory Board to increase the common stock by up to 250 through the issuance of up to 83,333,334 shares for which the shareholders pre-emptive rights are excluded since these shares will be issued against contribution in kind (Authorized Capital 2003). The Authorized Capital 2003 was to expire on January 22, 2008. As mentioned above, Authorized Capital 2003 was replaced by resolution of the Annual Shareholders Meeting on January 22, 2004. On February 22, 2001, the Companys shareholders authorized the Managing Board with the approval of the Supervisory Board to increase the common stock by up to 400 through the issuance of up to 133,333,334 shares for offer to existing shareholders until February 1, 2006 (Authorized Capital 2001/I). As mentioned above, Authorized Capital 2001/I was replaced by resolution of the Annual Shareholders Meeting on January 22, 2004.

Stock Option Plans Description of plans 1999 Siemens Stock Option Plan
As part of a stock option plan for members of the Managing Board, key executives and other eligible employees, the Companys shareholders authorized the Managing Board on February 18, 1999 to distribute non-transferable options exercisable for up to an aggregate of 10 million common shares. The authority to distribute options under this plan would have originally expired on February 18, 2004. With the ratification by Siemens shareholders of the 2001 Siemens Stock Option Plan (further details see below), the 1999 Siemens Stock Option Plan (the 1999 Plan) has been terminated and further options have not been granted. Under the 1999 Plan, the exercise price is equal to the average market price of Siemens stock during the five days preceding the date the options were granted. The options are exercisable within the five years following a holding period of two years if Siemens AG stock price outperforms the Dow Jones Stoxx-Index by at least two percentage points on five consecutive days. This percentage applies to the first year of the five-year option exercise period, and increases by 0.5 percentage points in each subsequent year. As a result of such performance requirements, the plan has been accounted for as a variable plan under APB Opinion No. 25. The terms of the plan allow the Company, at its discretion upon exercise of the option, to offer optionees settlement of the options in either newly issued shares of common stock of Siemens AG from the Conditional Capital reserved for this purpose, treasury stock or cash. The alternatives offered to optionees are determined by the Managing Board in each case as approved by the Supervisory Board. Compensation in cash shall be equal to the difference between the exercise price and the average market price of the Companys stock on the five trading days preceding the exercise of the stock options.
Description of plans 2001 Siemens Stock Option Plan
At the Annual Shareholders Meeting on February 22, 2001, shareholders authorized Siemens AG to establish the 2001 Siemens Stock Option Plan, making available up to 55 million options. Compared to the 1999 Plan, the number of eligible recipients is significantly larger. The option grants are subject to a two-year vesting period, after which they may be exercised for a period of up to three years. The exercise price is equal to 120% of the reference price, which corresponds to the average opening market price of Siemens AG during the five trading days preceding the date of the stock option grant. However, an option may only be exercised if the trading price of the Companys shares reaches a performance target which is equal to the exercise price at least once during the life of the option. The terms of the plan allow the Company, at its discretion upon exercise of the option, to offer optionees settlement of the options in either newly issued shares of common stock of Siemens AG from the Conditional Capital reserved for this purpose, treasury stock or cash. The alternatives offered to optionees are determined by the Managing Board in each case as approved by the Supervisory Board. Compensation in cash shall be equal to the difference between the exercise price and the opening market price of the Companys stock on the day of exercising the stock options. As a result of its design, the new plan has no income effect under APB Opinion No. 25 in the case of settlement in shares due to the fact that the exercise price is also the performance target. Any settlements in cash would be recorded as compensation expense. Stock options may be granted within a period of 30 days after publication of the results for the fiscal year or quarter then ended. The Supervisory Board decides how many options to grant to the Managing Board, and the Managing Board decides how many options to grant to key executives and other eligible employees. Option grants to members of the Managing Board may only be made once annually after the close of the fiscal year. The issuance of stock options to members of the Managing Board on or after October 1, 2003, is subject to the proviso that the Supervisory Board may restrict the stock option exercise in the event of extraordinary, unforeseen changes in the market price of the Siemens share. Those restrictions may reduce the number of options exercisable by each Board Member, provide for an exercise in cash for a constricted amount only, or suspend the exercise of the option until the extraordinary effects on the share price have ceased. The fair value of the awards has not been adjusted for effects resulting from such restrictions. Reasonable estimates cannot be made until it is probable that such adverse events will occur. Since it is not possible to reasonably estimate the fair value of those options at the grant date, compensation costs are determined based on the current intrinsic value of the option until the date at which the number of shares to which a Board member is entitled to and the exercise price are determinable. Upon that date, fair value will be determined in accordance with the fair value recognition provisions of SFAS 123, Accounting for Stock-Based Compensation based on an appropriate fair value option pricing model.

In fiscal 2005, the Company granted 1,152,508 stock awards to 5,343 employees of which 24,177 awards were granted to the Managing Board. 16,460 awards forfeited in fiscal 2005, resulting in a year-end balance of 1,136,048 awards. Stock awards are accounted under the fair value recognition provisions of SFAS 123. Fair value was determined as the market price of Siemens shares less the present value of dividends expected during the 4 year vesting period which resulted in a fair value of 55.63 per award. Total fair value of stock awards granted in fiscal 2005 amounted to 64.

Phantom stock

Where local regulations restrict the grants of stock awards in certain jurisdictions, the Company grants phantom stock to employees under the same conditions as the Siemens stock awards, except that grantees receive the share prices equivalent value in cash only at the end of the four year vesting period. In fiscal 2005, 28,628 phantom stock rights were granted and 391 phantom stock rights forfeited resulting in a balance of 28,237 phantom stock rights as of September 30, 2005.
Employee share purchase plan
Under a compensatory employee share purchase program, employees may purchase shares in the Company at preferential prices once a year. The employee share purchase program is accounted under the fair value recognition provisions of SFAS 123. During the years ended September 30, 2005 and 2004, the Company incurred compensation expense (before income taxes) of 31 and 35, respectively, related to the sale of repurchased shares to employees. 28 Personnel costs
Year ended September 30, 2005 Wages and salaries Statutory social welfare contributions and expenses for optional support payments Expenses relating to pension plans and employee benefits 21,680 3,576 1,390 26,20,261 3,419 1,416 25,096
The average number of employees in fiscal year 2005 and 2004 was 439,400 and 412,400, respectively (based on continuing operations). Part-time employees are included on a proportionate basis rather than being counted as full units. The employees were engaged in the following activities:
Year ended September 30, 2005 Manufacturing and Services Sales and marketing Research and development Administration and general services 243,100 110,300 45,700 40,300 439,226,200 104,600 43,500 38,100 412,400

29 Earnings per share

Year ended September 30, (shares in thousands) Income from continuing operations Plus: interest on dilutive convertible debt securities Income from continuing operations plus effect of assumed conversion Weighted average shares outstandingbasic Effect of dilutive convertible debt securities and stock options Weighted average shares outstandingdiluted Basic earnings per share Diluted earnings per share 2005 3,3,079 890,732 45,798 936,530 3.43 3.3,3,471 890,705 45,510 936,215 3.87 3.71

In June 2003, the Company issued 2.5 billion of convertible notes (see Note 20). The dilutive effect of potential common shares has been incorporated in determining diluted earnings per share.
30 Segment information As of fiscal 2005, the Company has fourteen reportable segments referred to as Groups reported among the components used in Siemens financial statement presentation as described in Note 1. The Groups are organized based on the nature of products and services provided. Within the Operations component, Siemens has twelve Groups which involve manufacturing, industrial and commercial goods, solutions and services in areas more or less related to Siemens origins in the electrical business. Also included in Operations are operating activities not associated with a Group, which are reported under Other Operations, as well as other reconciling items discussed in Reconciliation to financial statements below. As a result of changes in the Companys management approach, various modifications were made to the Groups. Information and Communication Network (ICN) and Information and Communication Mobile (ICM), previously separate Groups, were combined to one Group named Com as of October 1, 2004. Following an intensive analysis by the Managing Board, the Company announced in the fourth quarter of fiscal 2005, the carve-out of the Distribution and Industry Logistics as well as of the Material Handling Products divisions of L&A into a separate legal entity, named Dematic. These activities have been retroactively reported in Other Operations for the periods presented. As discussed in Note 3, Coms MD business is reported as discontinued operations. Current and prior year Segment disclosure excludes the applicable information included in the Companys financial statement presentation. The Financing and Real Estate component includes the Groups SFS and SRE. The Eliminations, reclassifications and Corporate Treasury component separately reports the consolida-
tion of transactions among Operations and Financing and Real Estate, as well as certain reclassifications and the activities of the Companys Corporate Treasury. The accounting policies of these components, as well as the Groups included, are generally the same as those used for Siemens and are described in Note 2 Summary of significant accounting policies. Corporate overhead is generally not allocated to segments. Intersegment transactions are generally based on market prices. New orders are determined principally as the estimated sales value of accepted purchase orders and order value changes and adjustments, excluding letters of intent.

Marketing, selling and general administrative expenses
The income statement line item Marketing, selling and general administrative expenses is composed of:
Year ended September 30, 2005 Selling expenses General administrative expenses 10,390 3,294 13,9,599 3,229 12,828
Roll-forward of long-term investments
Accumulated Equityadjustments 1,076 1,076 Write offs during fiscal year 62 106
10/1/04 Investments in subsidiaries Investments in associated companies Miscellaneous other investments Long-term investments 509 2,116 1,454 4,079
Translation adjustment (37) (29)

Additions 252 786

Reclassifications (19) 105 (86)

Dispositions 685 1,264

9/30/2,3,572
Accumulated Writeoff 448 880
Net book value as of 9/30/2,3,768
Net book value as of 10/1/2,4,122

Corporate Governance

Siemens Aktiengesellschaft and Cycos AG, currently the sole German publicly traded corporation consolidated by the Company, provided the certifications required by Par. 161 of the German stock corporation law (AktG). Those companies made the certifications available to its shareholders.
This is a translation of the German Konzernabschluss und Konzernlagebericht gem 292 a HGB der Siemens AG zum 30. September 2005. Sole authoritative and universally valid version is the German language document. 129

Compensation Report

The Compensation Report outlines the principles used for determining the compensation of the Managing Board of Siemens AG and sets out the level and structure of Managing Board remuneration. In addition, the report describes the policies and levels of compensation paid to Supervisory Board members and gives details of stock ownership by members of the Managing and Supervisory Boards. The Compensation Report is based on the recommendations and suggestions of the German Corporate Governance Code and comprises data that, in accordance with the requirements of the German Commercial Code (HGB) as amended by the new Act on the Disclosure of Managing Board Remuneration (VorstOG), are an integral part of the Notes to Consolidated Financial Statements pursuant to 314 of the HGB or of Managements discussion and analysis pursuant to 315 of the HGB. Therefore, the information explained in the Compensation Report is not additionally presented in the Notes to Consolidated Financial Statements or in Managements discussion and analysis.
1. Managing Board remuneration
The Chairmans Committee of the Supervisory Board is responsible for determining the remuneration of the members of the Managing Board. The Committee comprises Dr. Heinrich v. Pierer (Chairman of the Supervisory Board), and Dr. Josef Ackermann and Ralf Heckmann (both Deputy Chairmen of the Supervisory Board). The remuneration of the members of the Managing Board of Siemens AG is based on the Companys size and global presence, its economic and financial position, and the level and structure of managing board compensation at comparable companies in and outside Germany. In addition, the compensation reflects each Managing Board members responsibilities and performance. The level of Board compensation is designed to be competitive in the international market for highly qualified executives in a high-performance culture. The Managing Board remuneration is performance-related. In fiscal year 2005 it had four components: (i) a fixed salary, (ii) a variable bonus that the Chairmans Committee may adjust by up to 20 percent of the amount of target attainment, (iii) stock-based compensation, and (iv) a pension benefit arrangement. The fixed salary and the bonus are based on target aggregate compensation that comprises 50 percent fixed and 50 percent variable remuneration. The target compensation is reviewed every two to three years on the basis of an analysis of the compensation paid by international peer companies to their top managers. The last review was conducted on April 1, 2003. The remuneration of the Managing Board members is composed as follows:

Cash compensation

(Amounts in )(1) Dr. Heinrich v. Pierer Dr. Klaus Kleinfeld (2) Johannes Feldmayer Dr. Thomas Ganswindt(3) Prof. Dr. Edward G. Krubasik Rudi Lamprecht(3) Heinz-Joachim Neubrger Dr. Jrgen Radomski Dr. Uriel J. Sharef Prof. Dr. Klaus Wucherer 2005 2004
Fair value of stockbased compensation 244,414 1,077,993 946,911 641,286 716,666 719,638 641,515 149,990 716,666 719,638 625,190 149,990 716,666 719,638 716,666 719,638 716,666 719,638 716,666 719,638 200,034 149,990 150,007 129,989 7,108,067 6,617,066
Total 1,202,803 4,638,046 3,270,104 3,321,190 2,537,967 3,059,103 2,406,463 1,784,251 2,549,351 2,997,694 2,355,621 1,891,462 2,539,591 2,980,223 2,535,055 2,971,945 2,548,499 2,984,245 2,538,884 2,980,944 1,956,870 1,973,808 1,531,997 1,779,391 27,973,205 33,362,302
958,389 3,560,053 2,323,193 2,679,904 1,821,301 2,339,465 1,764,948 1,634,261 1,832,685 2,278,056 1,730,431 1,741,472 1,822,925 2,260,585 1,818,389 2,252,307 1,831,833 2,264,607 1,822,218 2,261,306 1,756,836 1,823,818 1,381,990 1,649,402 20,865,138 26,745,236
Prof. Dr. Erich R. Reinhardt(4) Prof. Dr. Claus Weyrich(4) Total
The fair value of stock-based compensation shown in this table relates to stock options and stock awards granted in November 2005 and 2004 for fiscal year 2005 and 2004, respectively. Effective January 27, 2005, Dr. Heinrich v. Pierer was elected to the Supervisory Board of Siemens AG. Dr. Klaus Kleinfeld was appointed to succeed Dr. Heinrich v. Pierer as CEO and President of the Managing Board of Siemens AG, effective January 27, 2005. Dr. Thomas Ganswindt and Rudi Lamprecht were appointed full members of the Managing Board of Siemens AG and elected to the Corporate Executive Committee, effective October 1, 2004. Deputy members of the Managing Board.
The following table describes the details of cash compensation: Cash compensation
(Amounts in ) Dr. Heinrich v. Pierer Dr. Klaus Kleinfeld (2) Johannes Feldmayer Dr. Thomas Ganswindt(3) Prof. Dr. Edward G. Krubasik Rudi Lamprecht(3) Heinz-Joachim Neubrger Dr. Jrgen Radomski Dr. Uriel J. Sharef Prof. Dr. Klaus Wucherer

Accordingly, stock-based compensation was as follows:
Stock-based compensation Number of units Stock awards from LT bonus(1) 4,267 13,266 9,984 6,674 8,146 8,442 6,834 8,146 8,442 6,549 8,146 8,442 8,146 8,442 8,146 8,442 8,146 8,442 76,510 70,592 Other stock awards(1) 3,056 3,470 2,427 2,314 2,247 2,314 1,348 2,314 2,247 2,314 1,348 2,314 2,247 2,314 2,247 2,314 2,247 2,314 2,247 1,851 1,348 1,388 1,168 25,221 24,177 Fair values Stock awards from LT bonus(1) 244,414 737,988 571,884 371,275 466,603 469,628 391,452 466,603 469,628 375,127 466,603 469,628 466,603 469,628 466,603 469,628 466,603 469,628 4,382,495 3,927,031 Other stock awards(1) 170,005 198,762 135,014 132,546 125,001 132,546 74,989 132,546 125,001 132,546 74,989 132,546 125,001 132,546 125,001 132,546 125,001 132,546 125,001 106,025 74,989 79,505 64,976 1,444,660 1,344,968
(Amounts in number of units or ) Dr. Heinrich v. Pierer(3) Dr. Klaus Kleinfeld(3) Johannes Feldmayer Dr. Thomas Ganswindt(4) Prof. Dr. Edward G. Krubasik Rudi Lamprecht(4) Heinz-Joachim Neubrger Dr. Jrgen Radomski Dr. Uriel J. Sharef Prof. Dr. Klaus Wucherer
Stockoptions(2) 37,445 43,415 29,735 28,945 27,535 28,945 16,520 28,945 27,535 28,945 16,520 28,945 27,535 28,945 27,535 28,945 27,535 28,945 27,535 23,155 16,520 17,365 14,320 315,495 296,270
Stock options(2) 170,000 176,265 134,997 117,517 125,009 117,517 75,001 117,517 125,009 117,517 75,001 117,517 125,009 117,517 125,009 117,517 125,009 117,517 125,009 94,009 75,001 70,502 65,013 1,280,912 1,345,067
Total 244,414 1,077,993 946,911 641,286 716,666 719,638 641,515 149,990 716,666 719,638 625,190 149,990 716,666 719,638 716,666 719,638 716,666 719,638 716,666 719,638 200,034 149,990 150,007 129,989 7,108,067 6,617,066
Prof. Dr. Erich R. Reinhardt(5) Prof. Dr. Claus Weyrich(5) Total
After a holding period of four years, the stock awards will be settled on November 11, 2009 (awards granted in 2004 on November 12, 2008). Under the stock award agreement, the eligible recipients will receive a corresponding number of Siemens shares without additional payment. After a holding period of two years, the stock options will be exercisable between November 19, 2007 and November 18, 2010 (stock options issued in 2004 between November 20, 2006 and November 19, 2009) at a price of 74.59 (2004: 72.54) per share under the terms and conditions specified in the 2001 Siemens Stock Option Plan (for details see the Notes to Consolidated Financial Statements, page 114 et seq.). Effective January 27, 2005, Dr. Heinrich v. Pierer was elected to the Supervisory Board of Siemens AG. Dr. Klaus Kleinfeld was appointed to succeed Dr. Heinrich v. Pierer as CEO and President of the Managing Board of Siemens AG, effective January 27, 2005. Dr. Thomas Ganswindt and Rudi Lamprecht were appointed full members of the Managing Board of Siemens AG and elected to the Corporate Executive Committee, effective October 1, 2004. Deputy members of the Managing Board.

Ralf Heckmann First Deputy Chairman Chairman of the Central Works Council, Siemens AG Date of birth: 7/19/1949 Member since: 3/24/1988 Josef Ackermann, Dr. oec. Second Deputy Chairman Spokesman of the Board of Managing Directors, Deutsche Bank AG Date of birth: 2/7/1948 Member since: 1/23/2003 External positions German supervisory board positions: Bayer AG, Leverkusen Deutsche Lufthansa AG, Cologne Linde AG, Wiesbaden
Notes to consolidated financial statements according to 292a HGB Supervisory Board Supervisory Board committees
Supervisory Board committees
The Supervisory Board of Siemens AG has established four standing committees.

Committees

Meetings in FY meetings plus 6 decisions by notational voting using written circulations
Duties and responsibilities
Members as of Sept. 30, 2005 Heinrich v. Pierer, Dr. jur., Dr.-Ing. E.h. (Chairman) Ralf Heckmann Josef Ackermann, Dr. oec.

Chairmans Committee

The Chairmans Committee of the Supervisory Board is responsible for reviewing basic issues of business policy and management, especially in matters concerning the Managing Board. The Committee makes recommendations to the Supervisory Board on the appointment and dismissal of Managing Board members and determines the Managing Boards employment and remuneration framework. The Committee executes the contracts of employment with Managing Board members and determines their remuneration as well as the annual amounts of the variable and stockbased components of their compensation. The Committee makes recommendations to the Supervisory Board on the composition of Supervisory Board committees and through the shareholder representatives proposes shareholder candidates for appointment to the Supervisory Board. The Committee decides whether to approve business transactions with Managing Board members and related parties. The Committees duties include regularly reviewing the Companys corporate governance principles and formulating proposals to improve the Companys approach to corporate governance issues.

Audit Committee

5 meetings plus 1 decision by notational voting using written circulations
The Audit Committees duties include preparing Supervisory Board reviews of the annual financial statements of Siemens AG and of the consolidated financial statements of Siemens worldwide. The Committee also reviews the quarterly reports and liaises with the internal Financial Audit Department and with the independent auditors (particularly with regard to awarding the audit contract, defining the focal points of the audit, determining the auditors fee, and monitoring their independence).
Gerhard Cromme, Dr. jur. (Chairman) Heinrich v. Pierer, Dr. jur., Dr.-Ing. E.h. Ralf Heckmann Heinz Hawreliuk Henning Schulte-Noelle*, Dr. jur.
Mediation Committee, 31 (3), (5) of the German Codetermination Act