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Executives

Mariel von Drathen – Head of Investor Relations

Peter Loscher – President and Chief Executive Officer

Joe Kaeser – Chief Financial Officer

Analysts

Mark Troman – Bank of America Merrill Lynch

Andreas Willi – JPMorgan

Ben Uglow – Morgan Stanley

James Stettler – UniCredit Bank AG

Will Mackie – Berenberg Bank

James Moore – Redburn Partners

Jay Cooper – Willington Shields & Co.

Olivier Esnou – Exane Ltd

Colin Campbell – SG Securities

Siemens AG (SI) F4Q2011 Earnings Conference Call November 10, 2011 10:00 AM ET

Mariel von Drathen

Welcome to our Fourth Quarter Fiscal 2011 Analyst Conference in London. Siemens’ President and CEO, Peter Loscher and Chief Financial Officer, Joe Kaeser will present to you this afternoon the fourth and full fiscal year results. In addition, Peter will give a progress report on our achievements in the light of the strategic framework for value creation on Siemens and an outlook for fiscal year 2012.

The earnings release, the flash slides, and all other documents were published this morning. This conference is being webcast. You can download all the files including this afternoon’s presentation from our website. You will also find a replay of the webcast, which will be available soon after the conference. I’d also like to refer to the Safe Harbor statement on page number two of the presentation.

After the presentation, we will have time for Q&A session. And so with that, I’d like to hand it over to you, Peter.

Peter Loscher

Mariel, thank you, very much. Welcome and good afternoon to everybody. The City of London needs urban infrastructure, transport solutions, so we hope we’re going to have more attendance in a couple of minutes. Siemens is ready to help. And we want to update you in terms of year one of the One Siemens financial target system, share with you basically what we have achieved in 2011, but then also focus on the capitalization growth initiative, what we plan mid-term and, finally, the guidance for 2012.

The strong operational finish delivered in the fourth quarter closed an outstanding fiscal year 2011 where we achieved our goals for the full year. Siemens also proved to be an (inaudible) of stability in an increasing uncertain macroeconomic environment. First, our order intake grew significantly by 16%. Second, organic revenue growth growing more than two times global GDP, 7%, and third, income from continuing operations excluding the impact from legal and regulatory matters like the Areva ruling reached €7.6 billion.

The guidance was achieved despite impairment charges in the solar business of €231 million in the fourth quarter and particle therapy charges of €381 million in the third quarter. We delivered on our numbers in 2011 and we made significant progress in streamlining also our portfolio further below this extra, among others, the most important transactions where the sale of SIS, our Siemens’ IT Services to AtoS.

And it’s also our clear intention to list Osram when the capital market conditions have stabilized. Osram delivered 7% comparable revenue growth while delivering a pretax margin of 5.2% somewhat lower than a year ago and similar to Q3.

Let me now come to the key figures of the fourth quarter. As previously indicated, orders in Q4 grew by 2% due to fewer large orders mainly in fossil and industry solutions and (inaudible) year-over-year. Revenue growth reached 9% year-over-year, fueled by double-digit growth in short cycle businesses and accelerated backlog conversion in the long cycle business. Book-to-bill was again about 1 and reached a healthy 1.04.

Our backlog increased further to more than €96 billion of which around €40 billion will convert to sales in 2012. We saw a strong year end quarter for our total sector profit compared to the Q4 last year which was impacted by €1.2 billion diagnostics impairment charges. On the downside, total sector profit was this quarter affected by the above mentioned impairment charges for the solar business and these charges follow our assessment of the growth prospects and market development would be forecasted for the concentrated solar power business.

In addition, we recorded negative effects of €88 million from volatile commodity markets. Since profitability below sectors improved, we tend to boast healthy EPS numbers of €1.33. A clear focus on the entire team was stringent execution to achieve a record high free cash flow of almost €3.5 billion. And Joe will talk about this in more detail.

Let’s have a look at the regional perspectives for orders and sales in the fourth quarter. We saw a concentration of large order wins in Europe and particularly in Germany. The base businesses in the America and Asia/Australia were very solid, but fewer major orders compared to the strong prior year, led to a modest decline in this region.

Major contributor to the order book was the renewable energy business. Among others, we won, again, large contracts for two offshore winds parks in Germany and Denmark. For example, we signed a 288-megawatt project in Meerwind Sud and Ost from the customer WindMW. And this is really our sixth large offshore wind park order in German waters and the first one with a private equity investment. (inaudible) is a major shareholder of WindMW.

And in transmission we extended our leading position in offshore grid connection through the HelWin2 order worth more than €0.5 billion from TenneT. Mobility strengthened its successful development in Russia where the (inaudible) train international with our partner Sinara closed a contract for the delivery of 1,200 regional trains with Russian Railways.

On top of that, we were able to secure a 40-year maintenance contract for 54 Sotchi Desiro trains. In health care, we were able to close a major $106 million contract for our clinical software package, Soarian, with a major US health care network.

The picture of growth distribution is different when we look at revenue. Growth was very broad based with particular strength in emerging markets, where China, for example, grew 18%. Indiana and Brazil even topped this performance with both achieving remarkable 30% growth year-on-year. Emerging markets, in total, already account for 36% of revenue.

Let’s move to the divisional picture for the quarter and major items that drove the profitability. In a very strong Q4, industry achieved a profit margin of 11.3%, delivered 11% organic revenue growth. We are very pleased with the performance of our short cycle business, industry automation and dry technologies. They continued to show strong double-digit growth rates.

Margins in industry automations were helped by top line growth, high capacity utilization and a favorable mix with a large portion of high margin systems business. Drive technologies benefited from higher capacity utilization, but also continued higher spending in research and development and was impacted by the already mentioned negative commodity effect.

Mobility took its margin up to 7.3% on solid project execution and looking ahead into 2012, we are confident about the current sales funnel. Energy delivered a solid quarter with healthy revenue growth of 11%, with contributions from all divisions and a stable order development. As previously indicated, we saw a market slowdown of order activity in fossil power generation, while we already mentioned large orders in renewable compensated for this.

The book-to-bill ratio for the sector was 1.13 and the backlog stands at €58 billion. Energy showed solid execution and achieved an underlying profit margin of 11.1% despite a negative effect of 300 basis points from the impairment charges for the solar business mentioned above.

Fossil power generation led all divisions with a profit of €407 million based on excellent project execution in its solution business. Compared to previous quarters, fossil recorded a less favorable business mix with lower contributions from the service business. In addition, energy margins were held back by continued pricing pressure in the wind business and in parts of power transmission where the transformer and high-voltage substations businesses were effective most. Power distribution returned to double-digit profitability despite higher research and development spend and investments in smart grid solutions.

Health care showed a strong earnings performance based on a solid 5% increase in order intake and 4% revenue growth with particular strength in emerging markets. They delivered 20% order growth on the back of a very strong business, for example, in China. And this compensated for ongoing uncertainty in Europe and the US, where we still see a softer market environment.

Main profit driver was in excellent performance of the imaging and therapy systems business. Diagnostics stagnant as expected in bookings and revenues at prior year levels with softening profitability. And as you could in today’s announcement, health care has launched a comprehensive program to improve its competitiveness and innovation. The overall goal is to stay ahead of the curve, of the expected changes in the health care markets, such as increasing cost pressures in developed health care systems and growth opportunities in many emerging countries.

The program contains a combination of growth investments in product development and footprint expansion as well as productivity program to improve the cost position in diagnostics and repositioning of the radiation therapy business.

One year ago, we set ourselves ambitious targets with the One Siemens framework to continuously build on our strong and highly competitive strategic and operational platform and improved performance further. When you look at the charts, they’re very encouraging. Our organic growth rate of 6.6%, so this is revenue growth versus competition on the upper left hand side, a 6.6% of Siemens, 3.3% below the 9.9% reported by our peers.

But we have to consider that some of our competitors significantly added to our top line through acquisitions while we look for the right target prices at the right time. Despite some headwinds like particle therapy charges in health care and solar impairment charges, all sectors are well within the targeted margin ranges, derived from our industry benchmarks.

We delivered on our ambition of capital efficiency by achieving a ROCE number of 20.7% and outperformed the target range of 15% to 20%. Strong profitability and focus on working capital management led to this excellent result, and including the net benefit from the Areva transaction, the ROCE was even at 24%.

So I would say this is an outstanding achievement when you consider that even taking the extraordinary number of Areva out, we are basically earnings three times our capital costs. And you probably do remember it was not a long time ago where a big portion of the discussion was is Siemens able to actually cover its capital cost.

Our capital structure ratio is below our target of 0.5 to 1 for adjusted net debt over EBITDA. But we believe this is not bad to have a healthy balance sheet. In difficult times, cash is king and the current turbulences in the financial markets due to the public debt crisis and (inaudible) economic uncertainties call for strong financial flexibilities which we certainly have.

After the major step up of the dividend in fiscal 2010, we continue our commitment of offering attractive returns to our shareholders based on the actual business performance. We will propose a further 11% increase to three years and which reflects a payout ratio of 41% right in the middle of our targeted range, between 30% and 50%.

And with that, let me now turn over to Joe.

Joe Kaeser

Thank you very much, Peter. A very warm welcome also from my side. Let’s see how that works. Here we go. And what I would like to continue with is the free cash flow generation. As you can see, the trend itself on our cash flow generation has been quite similar as to what we have seen in the recent past.

I have to admit though that the €5.1 billion came in at a very late stage in September. We would have actually been planning for about €4.2 billion. There were late orders coming in especially on wind and mobility, which had some associated prepayments. And we also were not yet in a position to completely settle on our particle therapy topics so that also about €300 million that actually supposed to be cash out in September which now are going into – what that basically means that we would expect there is somewhat more moderate free cash flow going into 2012.

We’re still able to manage our working capital (inaudible) above 9, which we believe is quite a decent numbers in comparison in the industry, even though we haven’t achieved the record 9.6, which we had a year ago.

So if we look into the sources of free cash flow over the past three years, obviously, now we’re focused on 2011, you can see that we’ve been down from a record €7 billion in 2010 to €5.1 billion. That’s total sectors here. And that the sources basically came from EBITDA with €800 million CapEx loss about an outflow of 200. And you can see that the net working capital has been going up by €2.1 billion obviously also as a fallout of the growth which we had in revenues and also the significant growth in order intake which actually calls for reserving the factors for the business going forward.

This was obviously different a year ago. I think you could see that the net working capital has actually been contributing €2.3 billion to the cash flow. And this time, net working capital was going up, eating up some cash into production and the inventories and as we can see, tax has been favorable with the €300 million.

If we look into the total bridge of net debt, you can see our Q and we’re talking about Q4 now, now the full year. Before, you can see that from reported net debt to €5.7 billion. The operating activities actually have been contributing quite a significant part to what we believe is a strong free cash flow in Q4. Profitability was at 2.1. Inventory was actually reduced by €1.3 billion, which also shows that there’s been somewhat caution about the quarters (inaudible) and upgrading too much into inventories, even though our revenues have been high.

The receivables on strong revenues had been increasing by €300 million. And as you can see, the change of payables in current liabilities actually helped contributing €1.6 billion to the free cash flow in Q4. Now this one usually has, sometimes, at least, a tendency to be a source of backswing in the following fiscal quarter 2012. So don’t be too surprised if fiscal Q1 we’ll see some changes here also on the payable matter.

And as you can also see, the trend is somewhat smaller, three payments as compared to bookings, continuously in Q4 and this had been contributing with about €400 million to a reduction in the free cash flow funds. So that leaves us with financing activities and (inaudible) for the present statements as we’ve invested an additional €1.3 billion mostly in equipment and project financing. CapEx were up €100 million as we have reported.

There was about €500 million equity, preferred equity contribution to NSN which then eventually results in a reported net debt of €5 billion. But if we do the adjustments as we have been describing them in the attachments, you can see that there’s a net positive adjusted on an industrial base of €1.5 billion plus. As you know, we also do consider the pension funding deficit as a liability in our adjusted net debt or EBITDA.

Now, if we leave away from the cash and asset positions and go to the P&L, you obviously can see that there has been some dynamics as usual in the so-called below the sector items. Total sectors in Q4 came in at €2.2 billion. Equity investments was a negative of 49. SFS had actually been contributing about 23 million, basically covering all the operational items below the line.

There has been a seasonalal high of the so-called corporate items. That usually is – Q4 is usually somewhat higher than the average of the quarters. That also has to do with some true-ups in the operational shared service charges out to the sectors. So if they have been overcharged, they get some credit at the event. It is not material to the story. It is just an explanation why Q4 usually is somewhat higher than the average over the year.

There had been some – one of matters in those items, one was the €53 million reimbursement of AtoS services, about €54 million where we took a cautious stand on some government debt in the Southern European hemisphere. And there was another €26 million volatility on the asset we’ve had. And obligation, as you know, this goes up and down depending on the development of the interest discount rate. So that will also remain volatile over time.

Same after you see how that worked out for the full year on the right hand side. Basically it’s self-explanatory. Due to a one-time positive base effect of €267 million on the employee bonus as of 2010, we have an optical positive of that amount. That obviously does not reoccur going forward, which that needs to be taken into consideration. The whole sovereign debt, cautious nets (inaudible) about €100 million charge all over the year. And as I said 54 of that being in Q4 and then the other positive on pensions, which also, again, always depending on the interest rate development and, therefore, obviously can be volatile in both directions.

We would actually expect that one to be growing into negative territory in 2012 as we move along. I will be coming to that later on. And taxes, obviously, it’s always something to consider before we end at net income from continued operations at €7 billion.

Now, if we go from yesterday to what we should expect for the community that expected 2012 on the below the line or through the sector environment. This is what I would like to give you some heads up here. As far as equity investments are concerned, we expect 2012 another somewhat volatile year. There is expected to be some stability on the (inaudible) Siemens JV as we move along. Obviously, also there is a lot of weakness in the Southern European consumer markets, but the emerging markets and also the East European markets remain strong. So we would expect that to be just about flattish going forward.

The main driver of volatility is and has been our joint venture on Nokia Siemens Networks. We are to expect a material impact in 2012 in a mid three digit gross amount of euro that has no DFP in the concept fully finalized, but obviously it goes without saying that we have a fiduciary duty to inform the market that we expect some material impact around the transformation program which NSN will announce anytime soon, but soon enough as that they’ve been able to consider it in more detail. So as a household number mid three digit a million euro number which we put into our guidance, if you want, what we expect in 2012.

The moment we have more substance, the moment the details are out, we obviously will inform the markets on how they’ll be looking like and what that also gives us in terms of subsequent savings and improvement of positions as we move along.

On SFS and centrally managed pension assets that should actually be just about what you have seen in 2011. SFS has been benefiting quite from a very, very robust and low credit default rate in 2011. We also look forward to seeing that in 2012, but this has never been a guarantee, and also SFS will shift to a more project financing Siemens Industrial Support area and that always means that the turn of assets becomes less while it is more dedicated to our industrial business. And that could also result in a somewhat lower return equity. But in terms of profitability, you should not expect significantly less as to what we’ve been used to in that particular business.

SRE, obviously, is the real estate service company. So if there is any profit that usually comes from the disposal of real estate, this has been and will be a continuous focus. We have about 2 million square meters of empty space in a global scale and you can be rest assured that we shall desire to reduce that to a much lesser number going forward.

Corporate items, if you expect a run rate of about €200 million in the quarter on average, Q4 higher the rest of the year, a bit less then it’ll be okay for a greater scheme of things. There is also a €200 million item, which is still open with regards to the Siemens IT arrangement of AtoS. That will be about €200 million over two years. That has to do with the incremental services for Siemens requests for about IT provider as an operational base, which we, however, keep at corporate. So if someone wants to do €100 million each year, that should be okay.

And last but not least, ladies and gentlemen, corporate treasury and other items that naturally is a volatile matter because of the interest and the currency hedges, which in part do not qualify for hedge accounting and will be transferred through the P&L. So therefore, it depends, of course, on how (inaudible) go and what the currencies will do. And so, we’ll keep you updated every quarter.

Now that much to the below the sector; framework on how we have been seeing those items when we look into 2012. We’ll be coming back to the more operational topic on 2011 and I will be going on to ‘12. In terms of income for continued operations, I mean that one already if we take out the €1 billion Areva, which we consider to be non-operational in our language, as to 2011, the income margin would actually be (inaudible) which is still after 2010. There is some earnings and growth conversion here. Obviously, despite what we have always said that we continue invest into organic growth. And that investment into organic growth obviously has been in R&D and SG&A.

Mostly and predominantly in engineering activities, especially in the emerging countries where we have been building up application centers to adapt our products and services and solutions to local demand, which has been actually already proven good for sells in terms of market penetration. That actually was about €400 million year-over-year in R&D, so €367 million to be accurate. You can see it in the financial P&L statements, which are attached to P&L statements, which are attached to the earnings release. So that here is a more rounding method, the €300 million. So it’s almost €400 million, €367 million to be accurate.

On the SG&A expenses, we have kept the G&A mostly flat. So, therefore, the later part of the investment has been going into sales and marketing. And that again is to build up applications center to penetrate the markets and make sure that we have a good, decent and robust regional footprint as we move along.

On the operation side, which is basically the cost of goods sold, gross profit environment, which is on the upper right. Here you can see that our gross profit went up from €20 billion to €22.1 billion. And that €2.1 billion actually resulted from two major factors. First of all, the so-called, how we call economic equation, which is price decline on one hand on the market place and the cost savings on the procurement side.

You can see that we have been experiencing some headwinds here in 2011. Customer price change was €2.3 billion, having a net worth over the adverse impact on profit and the procurement activities including design – new design of parts helped us save €1.3 billion. So, it’s been a bit about a billion shy on that marker. So all in all, the productivity and the product mix have been contributing with €3.1 billion to the bottom line in 2011.

Now that €3.1 billion was, in some part at least, a favorable mix resulting from the fact that our short cycle, high-profit business on investor information and the parts also drive technology has been powering full speed ahead and gave us something incremental for that big surge in 2011.

Whether or not that will stay in 2012, it obviously will depend on how robust Germany will be on its two major high-tech, high-innovation technology and so that (inaudible) on how that will be going.

So far we do not see designs that there should be any significantly bigger any time as you also of course, have been seeing some slowdown and cautious signs especially on the mid-sized company environment which is not that connected in the world to see various opportunities and risk are. So, in doubt, people stay put and look what the tech prices seems to be doing going forward.

In 2010, just for the record, we had about a tailwind between price change and purchasing savings of about 200 million. So that actually means that we compensated 1.2 billion on incremental headwinds between customer price savings and customer price change and that purchasing cycle.

So you we can see that if something also happens in the company, in terms of productivity and innovation in the design of products in the company. Now, obviously that has been yesterday. Now what, in a way, has been our thought process and we came out with a guidance range of what the market out to expect in 2012.

On the capital and price change, we see or expect some ease of pricing pressure on average from about three percentage points in 2011 to between 2.5% and 2.8%. The biggest ease is expected to be in the industrial, environment, energy and health care remained to be a very, very competitive market. There’s not much change in the price decline as compared to 2011.

The purchasing area is not going to be exactly helpful. There will be some €6 million, €7 million, €100 million on adverse impact which we expect to hit the bottom line in 2012. That actually comes from the fact that all our suppliers are fully booked, as we are in major parts. And so, therefore, we’ve been successful, but also at some point in time you obviously see a flattening everything on what is achievable. And that’s why we also have been shifting our emphasis in the procurement area from the more negotiation and putting point of view into a joint development of parts to make sure everyone has a sustainable benefit going for our suppler, as well as we as a company.

Now, on OpEx and CapEx. We do continue to invest into organic growth. And obviously 2012 will not be the year where this will all be pushing growth upwards because the market and the global environment is not as such but at the year and the business got something in 2012. We also have our different targets in mind. As you all know this investment needs to come earlier before the results are here.

So, that’s why we have, in our view of 2012 and what we have been telling the markets on how that should look like. We expect the OpEx to grow between €1.1 billion and €1.3 billion. And OpEx, what was it being R&D, selling as she have been for the most part. This will be R&D and in some part also, the selling part of SG&A.

Another area that we also continue to invest is CapEx. We have the CapEx grow between €0.3 billion and €0.5 billion going forward. So that should actually be expected to be in the range of €1.9 billion to €2.1 billion. We will be investing those OpEx and the CapEx into fill the application into engineering, into further putting our smart initiative to address the local demand in emerging countries, which still our belief to have north of 5% to 6% growth.

And obviously, the CapEx investment growth in the manufacturing side, such as Russia, that we have been reasonably successful in building new relationships, which also will provide geographic footprint and local investment. And we’ll also be in wind and it will (inaudible) to be in the area of the emerging countries.

So not much for the framework of what we have been using for our 2012 outlook. We know that the future is uncertain but as we still believe that the market also understand our full process. We may be right. We can be wrong but if you’d been wrong then you know what the changes are and what that could mean through the bottom line.

With that I will give it – I’ll hand it back to Peter for the 2012 outlook.

Peter Loscher

Thank you much, Joe. On this slide you can see that we have, but in the meantime, which we’re well aware of, basically fully aligned our organizational responsibility with our megatrend strategy. The new core industry sector is really now focused on its core industrial base. We have now also leveraged the excellent expertise and experience that we have gotten in the service areas. So we have a dedicated service division also now for industry. And the focus is really now a much more focused on the key industrial auto cost.

The new IT Sector on the right hand side obviously is a key focus basically. Of course we continuously to improve the operational excellence as these businesses tap into new growth field, such as the emerging markets through footprint expansions, which Joe has just mentioned. Also the smart finish would be then through portfolio expansion and innovative these markets like building automation or vertical software solutions. So this will be a key focus.

And third, of course, is establishing also an integrated and defective, both the market approach for the overall sector. So we want to really have a very focused customer approach, not just for CPs but also for logistic ops on airports and so on and so forth. The market potential, there’s a new sector stepping in. It says €300 billion euro market. And we will report actually early December.

The new reporting structure and the comparable fiscal 2011 numbers based on the new organization will be published on December 2nd. And Roland Busch will then give you an update on the IC activities in more detailed information on the strategic priorities during IC Analyst Call on December 5th and you will get all the additional information shortly through Mariel and her team.

100 billion, and which are the key growth drivers in terms of contributors to this 100 billion market. Obviously, as you can see, a big driver will be the energy sector. And then, of course, all sectors will have a role to play in terms of how they will contribute to the increment. I give you just the number in terms of if we go back. If you take today’s portfolio, the €74 billion in 2011 and you map it back into 2003. This portfolio has actually grown 8 percentage points.

Roughly half-half has been the organic growth in the near activities. So going forward, we will continue to drive with the core focus and organic growth strategy. But, of course, we will also look into M&A activities.

Very briefly, some illustrations on the key levers. So, as I said, one of the key priorities and benefits and advantages, what we have is the resilience of our product portfolio and the two main drivers for our revenue growth will be first. And here, you can see just the operational performance, if you go back once more.

On the right hand side, the operational performance full year 2008 is 3.5%, and now 12.6%. I think we have also proven that even during a significant global downturn the last recession to be resilient in terms of growth portfolio. And this year, again, we are back to more than growing double the speed of the global economy. Key growth driver will, of course, one of them, on the left hand side, the environmental portfolio.

We’ve grown in the meantime €29.9 billion. Growing 9%, you know that we have the target out for €40 billion in 2014. And the environmental portfolio today is already 41% of our total revenue. The second key growth driver will be the emerging markets.

Again, between 2010 and 2011, we were able to pick up a lot of percentage point in the meantime from an order intake as well as revenue of 33% of our sales is coming already from the emerging markets. You look into the employee base. We were also, as Joe was highlighting, through significant buildup of our employee base in terms of adding on engineering capacity for the field applications and for the smart initiatives. And now, we already have 27% of our total employee base already in the emerging markets.

When in terms of the indicators for the forecast as we look into 2012, obviously, the environment and the economy has clearly shown weakness. I mean, we see it on a daily and hourly basis. After, one has to say a much stronger recovery.

So, if you go back 18 months, I think nobody would have expected the rather rapid recovery where we have seen over the last 18 months. And in many industry, we are now back in terms of capacity utilization at every crisis level. But without any doubt, we see a slowdown of the cycle.

We see still have a very differentiated picture in terms of growth dynamics, emerging markets significantly higher than the industrial world, be it Europe or the United States. And, of course, the combination of public debt of structure deficits and unemployment in a number of you in many countries and also the US is waiting on the global economy.

When we look into our businesses, we have to assume we are taking into account some impact on the highly volatile financial markets on the real economy and we expect continued flattening, revenue growth and the short-cycle businesses.

At present, we see some signals for slowing and there are still high capacity utilization levels. And bearing this in mind and building on the comments from Joe, I want to summarize it in terms of outlook for 2012. We expect a moderate organic revenue growth. Moderate, meaning, 3% to 5% compare to fiscal 2011 and orders, again, exceeding revenues for the book-to-bill well above one.

We anticipate continued strong earnings performance in our businesses despite ongoing pricing pressure and higher operating expenses as far as outland budget. We set our goal for fiscal 2012 income from continuing operations based on the high level we achieved in 2011 excluding the net positive effects of 1 billion related to Areva that lifted the income to €7 billion in fiscal 2011.

In a year, we had to anticipate profit impact related to repositioning activities, of course it’s already mentioned by Joe, at NSN and in the health care sector and higher pension expenses.

And please also notice outlook excludes significant portfolio effects and impacts related to legal and regulatory matters. It is also conditional on continued revenue growth, particularly for businesses that are sensitive to short-term changes in the economic environment.

And if I summarize Siemens’ position of real strength as a company overall, we are operating at high efficiency with a strong portfolio, standing for stability and confidence. Even in the challenging times of today, we will continue to invest selectively for our midterm growth initiatives to drive innovation and the extension of our footprint, and we also have the financial flexibility to act.

And with this, I adjourn myself ready to take your questions.

Mariel von Drathen

Okay. Before we start the Q&A, I’d like to briefly draw your attention to the financial calendar. Peter already mentioned in his speech two days, I think important for you. December 2nd where we were released the fiscal 2011 financials and the new sector structure that is on Friday 2nd.

And on Monday the 5th, we will organize a conference call to walk you through the financials that we’re going to release before the weekend. Joe will be present at that call as well as Roland Busch who is the CEO of the new sector infrastructure in cities. And you’ll have the opportunity to ask questions around that sector.

For those two dates, before we go then to our Christmas holiday and then afterwards, in the New Year, I’d like to draw your attention to February 14th where we will organize a capital market day for the sector health care. And this be taking partly in London.

And, of course, you will be informed in due times about all the details of both the calls and the capital marketing.

So, with this, we can start the Q&A. I ask you to please shortly mention your name and the company name so that also the people that are online watching this on the webcast can follow you. We will start with the last row. We will start with Mark Troman.

Question-and-Answer Session

Mark Troman – Bank of America Merrill Lynch

Thank you. So, Mark Troman from Bank of America Merrill Lynch. Just two questions, please.

The first one is on productivity. You showed the slide on page 14, productivity mix and others it’s explainable to see the mix factors. But how much productivity could we get out of 2012 fiscal year? I guess in initiatives and health care, for example, but how much could we get in terms of the positive trial on that bridge compare to the pricing and higher selling in R&D expenses exception that you highlighted on the next slide. That’s question one.

And question two, on the balance sheet, clearly well below the gearing target and net debt. We think it’s point five to one times. What’s your attitude to M&A here? Is it to keep the balance sheet strong as possible given the problems in European sovereign credit market, et cetera, or are you happy to go spend on the right M&A to that gearing target?

And this one, in fact, gearing target is effectively being adjusted in the short term and what’s going on in Southern Europe. Thank you.

Peter Loscher

All right, Mariel. Thanks, Mark.

On productivity, I mean when you look at page 13, which goes into 2012, I mentioned that customer price change, right? I said that there could be some ease of the headwind. They’re doing purchase price change and what they are able to do short term on the procurement side.

So the headwind was anytime north in 2011 and at least could be 700 or maybe 650, pick a number. And then more than its gross, between three and five on revenues, I guess that’s pretty easy to do the match. I think that is a serious note because this is serious than I thought and that has become certain method we have in the whole model, which we believe is extremely transparent. It may not be like added concern.

Is that the short side of businesses? Industrial donation makes the product, ET, for example, perhaps technology are obviously volatile in terms of customer’s impact in our revenue, top and bottom line.

So, I’ll give you an example, the backlog of industrial donation is less than a month. And as flexible as you can be as a company, that is no way if there was an incident here driven by market and customers and likes that this could actually be compensated in some way.

And that’s a big uncertainty moving into 2012 and other years to peak. Volatility, potential volatility on what we expect is over in terms of top and bottom line going forward.

On the bottom seat, obviously, this is an important tool too because we’ve laid out the capital structure and be able to commit into make good on it all the time. For all of this, we’re clear about that this is no good and will matter into some final assistance in the fourth quarter.

We’ve practiced more messages to shareholders to portfolios and especially to our customers. And we continue to be committed with our guys in two factors. One, obviously, it’s a fact that we have fundamental market compression in the capital good environment. And I think that’s a good tool for everyone.

And the second topic is indeed that we’ve seen somewhat concern about the effectiveness of the political leadership of those economists which have been causing the debt crisis to fix it. And that is something which obviously is an important matter. So, we’ll remain cautious on our liquidity. We’ll make sure that at that point in time we’ll be operationally (inaudible). At the same token, we have our shareholders in mind and this is what will guide us as we move into 2012.

Mariel Von Drathen

We’ll continue to the second row with Peter Riley.

Peter Riley – Deutsche Bank

Good afternoon. It’s Peter Riley from Deutsche Bank. Three questions, please.

On the new sector in this (inaudible) in cities, do I understand it correctly that you’re moving out any major restructuring of that business given your guidance? There’s no mention of it restructuring.

Secondly on the diagnostics, the margin’s been sliding for the last two years now, the reason you’re slow in Q4. Is there anything you can say to give us any confidence that the margin is going to start going in the opposite direction?

And then thirdly, you said this morning you were going to invest a large amount of money to in Russia. I think it must have been in Euros. According to Transparency International, Russia is one of the most corrupt countries on earth. So, can you give us some communication? How are you going to keep Siemens clean in an environment like that, please?

Peter Loscher

I’ll make it very simple. We only do clean business. And I’ve said these already, since I joined the company, so this is our commitment overall. This is nothing and we can do the same thing in Russia.

We have a very long history in Russia. We know this country extremely well. We know perfectly the infrastructure needs and the modernization agenda. And we are a respected company, which it is just the demonstrational. For example, the success that we have with the State Rail Organization where we have major, major order wins. And we will certainly not be the last one.

So, the success speaks for itself. And when you look into the energy agenda and the energy need of the country and the infrastructure build-out, Siemens is the prime adverse. We are totally committed. And the one bill in Euro is just in terms of – it’s the biggest investment program that we have ever done in Russia. But it’s also a commitment in terms of to do it in partnership and to focus on that we localize part of it, that we have integrated value change, and that we participate in this modernization agenda.

So, I think this is – we have outstanding opportunities, but for sure the only thing that we would do, a clean business, without any doubt.

DX, I can only say I am as disappointed as you are. I mean there is unfortunately no silver bullet. I mean we know that medium term, this needs an extra – basically, equipped in generation. And therefore, the business has now decided plainly looking to the cost space, drive productivity programs, and we will readjust to this new environment. And therefore, obviously, the margin will turn. And productivity and cost setting made us what this business is now taking this is in this regard very, very important.

The new IC Sector, of course this is a growth initiative, it has nothing to do with the structure and you should not anticipate it. This is not a restructuring story. This is really making sure that we have organizationally aligned the strategy or do we have it just somewhere within different divisions in different businesses. So, we have now a totally integrated management team.

And with Roland sitting on our table in terms of as board member was a clear commitment of the organization to make sure that we have an integrated comprehensive execution plan behind this initiative, and that we go beyond just carrying it as a megatrend and as a strategy. So, no charges or defeat anticipated in this area.

Mariel Von Drathen

We’ll continue here at the front with Andreas Willi and then, next to him, Ben Uglow.

Andreas Willi – JPMorgan

Thank you. Andreas Willi from JPMorgan.

Two quick questions on the business and then a broader picture question.

On the fossil, you called for a weaker second-half this year. How do see that into next year and to the order impact of the – is that the stable levels or is that going to pick up again?

On health care, if you just look at the larger emerging modalities, are there any issues there in terms of what you need to do, as well on emerging market gross and cost in terms of – maybe you could describe a bit. What you see there and cost pressure from the customers?

On the bigger picture question, your earnings have grown fasters than most of your competitors the last few years. Your multiple has fallen faster than most of your competitors in the last few years. In term of an earnings multiple, what’s your analysis and what do you need to do to reverse that trend?

Peter Loscher

Andreas, this is Loscher with the last one and I will take you ahead here. And it was picked up very well in the meantime – in the press as well. You call it a loss year for Siemens.

So, the good thing is we have to continue to execute. It is up to our shareholder to make the choices and to decide what – how did you (inaudible). For us, it’s a continuous execution and to demonstrate that we are ever consistent, capital efficient growth story, which is clearly focused and dedicated not just to customers but also on the execution plans and the growth we’ll laying out. So, we will continue to execute.

And we are also living in an environment where many kinds share prices nothing to do with actually performance of the company. If you remember our third quarter call, end of July, the share price was somewhere around 90. All of us went on holidays, came back after the holidays, and the share price was below 70 without any change in terms of company guidance, without any additional company information.

So, we would like the company continue to execute well and do it on a consistent basis over the long-term. And then I’m convinced that the shareholders will eventually see it in a similar light. So, fossil, you were mentioning in terms of the order intake, what we have planned. Indeed, we have planned it right in this context, first-half versus second-half. We probably see a similar level going for 2012. Obviously, regionally it will be most likely quite different. We see, basically, energy expansion projects.

So, incremental capacity, it is still in emerging economy and then basically more efficient – gas turbines for example in the developed world. It will be probably a more flattish environment in the US. I’m talking about all those markets, okay? But overall, we would anticipate a similar type of market environment compared to 2011.

Your question in the modalities, indeed, the large modality business is market leader. We have an extremely good portfolio.

In the meantime, the Chinese market is actually our second biggest market. So, we have a very, very strong growth in China. In this modalities Siemens has already, for a number of years, executed the plan that we are now trying to drive for other businesses, the smart initiatives, be it the CT scanners, be it the very efficient MI scans.

So, this business is basically continuing to drive their innovation agenda towards gearing of a broader product range with different price points. But this is nothing new because they have already done it very successfully.

So, I would say continue to execute what you have already demonstrated and continue to do it well. So, I’m quite confident about this part of the business. Because as you are pointing in terms of the market environment in the public health care systems will not change.

There is less money available in the public health care system. The pricing pressure will continue. And you need to have product ranges which are attractive at different price points, and different type of ability to address different market needs for different hospitals, for example, this will not change. The US will continue to stay like this and Europe will also do so.

And we are gearing more and more the organization also to make sure that we have these product ranges and the same type of philosophy, not just for the peak imaging modalities but also for the rest of the business. And for example, the DX business has dangled a little historically.

And now, we are driving this business also more and more towards in this direction. This is pretty much – DX used to have a very, very focused footprint in terms of the industrialized world, US and Europe. And now, we are also looking into how can we leverage what the peak modalities have already done for as part of this cost repositioning and productivity measures, what we do.

So it’s also an aspect of cross-sharing of best practices within health care.

Mariel Von Drathen

We’ll continue with Ben here at the second row.

Ben Uglow – Morgan Stanley

Ben Uglow with Morgan Stanley.

I had a couple of questions. I guess, they may be slightly unfair, but about the margin ranges and the guidance. We sat here for a long time talking about industrial organization and drive as sort of co-division, where the margins were typically in a10% to 14% weight band and that was an ambitious target for some time.

We’ve gone through this, as Loscher described, an unusual demand environment where you’ve 50% year-over-year growth in German machine and all that, et cetera. Currently, those margins are close to 20%. If we get into a slower environment, what I’m curious to know from Joe is, are we coming back now toward a more normal 10% to 14% range? Or has the change at industrial automation made us ourselves structurally, you’re going to be much closer to 20%.

But basically, I guess what I’m asking you. If demand comes down, are we going back to the old days or can we stay at a reasonably high level, not necessarily where we are today? So, that was question number one.

Now, question number two, was just of your guidance when I managed to decipher the underlying situation this morning. What you’re actually saying is on a continuing net income bass, you actually expect a reasonable uplift year-over-year in your profit. That was my interpretation, after we take out health care and NSN charges.

Listening to the description of the headwinds, between price, et cetera, it seems to me like you’ve got some pressures. So, what is it in your portfolio that makes you confident about growing the underlying profit? Is it simply that you’ve got such a big battle right now, 40 billion plus, that as that comes through, it’s inevitable that your net income will go up?

And the third question unfortunately is obviously on NSN. I listened to the discussion this morning about future oriented technology. The further restricting in NSN, is it basically taking M3s out, i.e., of cost reduction? Or is there something more fundamental in terms of your portfolio that you need to address?

Basically, are we simply trying to get down from 60,000 employees or do you need to do more deals like Motorola or whatever? What additional needs to be done for NSN to fix it?

Peter Loscher

I thank you, Ben. I would not say that the questions are unfair there. Hard to answer. Because they kind of involved the future and that’s always as more difficult then to analyze the past on the environment and obviously the significant impacts of the short cycle business in the company to obviously the well-being of the top and the bottom line.

From what I can see is that actually the structure has been going into opposite direction. So the sensitivity to strengths or weakness on the cycle has actually become higher. And that’s got to do with two methods first, in general, about the fact that we have been driving and pushing automation forward on both ends to save cost on one hand and also to make sure that we are not lacking qualified resources to fulfill customer orders.

So the fixed cost content has become relative, less flexible, which is also good in (inaudible). And as you remember in 2010 and 2011 we delivered on what we said if the cycle goes after we deliver 70 plus cent on the euro to the bottom line. If you look at it, it has been achieved. Then, secondly, the sensitivity to volatility also has been going up to the fact that the software content of the business, think about PLM and the likes has been growing relative to the mechanics.

And then, obviously, software is always something which is considered icing on the cake and the lack thereof over the – the lack of structural benefit. And it is why we are highly alert and very sensitive as to what we hear in the market from both in the automotive industry, which is one of the major customers in that respect, and then, secondly, the mid-sized high-tech toolmakers’ industry which is we’re known for top of the line innovation product from Siemens.

The second, on the guidance, what is going on, as long as we assume the short cycle environment is slow in growth but still is robust in terms of downside protection, the numbers are not overly conservative, but achievable. And we are not planning for any protection charges of this and that. And this is important and if you read the guidance, we have been designing the non-ops, if you want, to be a billion.

You make them up with the sort of numbers in your analysis, which in ways agreeable, but since (inaudible) differences of opinion of what is operation and whatnot, we defined it to get the market a clear sign on what we mean by non-operational. One could also make an argument that particle therapy charges are non-reoccurring. And, for example, if that is taken to consideration or other (inaudible) as well see that, the bottom line in 2012 was to be considered to be operational, complete difference. So the clear, transparent in our thinking.

On energy, I mean, obviously, if you’ve heard this morning’s comments, basically, up in making in the press conference, first of all, contrary to industrial automation or imaging or DX or fossil, this is a joint venture that we have one share list and the second shareholder. So there is, by nature, a limited amount of paradoxes into the operation and it shouldn’t be the same token though.

The shareholders have made it reasonably clear that we need to change a bit better. We’ve been supporting the asset with (inaudible) equity injection. We also agreed that we have a full time – before we did that, a full time end operational chairman in place who oversees the development of actions in the company. And, obviously, what I said this morning that this could be mid-three digit million amount which we have been considering.

It has been a clear amount as a marker. The company is currently working on a strategic concept and that will involve both on how to take it to the level the company deserves to be, and secondly, what that would mean to the current set of operation. At the moment, that is ready. NSN will go out and announce the details and the equity stories at the cost savings part. It is important we obviously need to respect the agreements and the agreements say that Nokia as the full consolidating entity of NSN will also do the reporting to the market.

Ben Uglow – Morgan Stanley

(inaudible).

Peter Loscher

As a marker, when we talk about what we expect in 2012.

Ben Uglow – Morgan Stanley

Okay. So is the guideline...

Ben Uglow – Morgan Stanley

And the guideline, what we expect in 2012 and what the assumption has been on our part, what that could mean. This is by no means any guidance in terms of – this will be the number and this will be the right balances of the reception or to this or that. It is as the marker that you know we have considered, because, obviously, the fact that (inaudible) is we need to go today and give the market view of how we expect the world to develop in 2012 and the assets which we own 50% (inaudible) will be likely going out later.

So there’s got to be some sense of what we have been expecting and obviously that mid-three digit million number does not include any paybacks already, since if you haven’t – as a concept, you should not be playing with a lot of benefits to come over time. So that’s all what it is. There’s nothing more, nothing less to it.

Mariel von Drathen

Okay. We’ll continue with James Stettler across the row.

James Stettler – UniCredit Bank AG

Hi. James Stettler from UniCredit. In an environment where growth is slowing, what makes you think that the pricing pressure is going to be less than this year? And can you talk a bit about the problem errors that we know, of Wind and TND? Is that getting any better?

And then, in terms of your growth, you’re talking about 45% contribution from energy to 100 billion. What’s really driving that? Is it fossil, is it renewable, is it acquisitions? And if so, where are the big gaps that you need to fill.

Joe Kaeser

Okay. Maybe I’ll start with the pricing methods. We’ve got four sectors. We had about 3% on average last year and we expect that to be slightly less. I mean, obviously, not that big of a difference to be within 2.5% to 2.8%. I also said earlier that we do not expect an improvement or benefit in energy and health care. Those (inaudible) remained to be extremely competitive.

So that should not be a sign here that energy like the first power transmission or wind would be any easier to sell and to win as it was in 2011. On the contrary, markets don’t have one in terms of winning or to set enough demand, but obviously, there’s also consolidation and there are also competitors in the market who do not really have a big interest about EBITDA of 10% to 15% but how to survive the next quarter.

And it always makes the market somewhat volatile because you never know. But where we (inaudible) actually the price declined to ease the industry sector, the new industry sector. So why do we believe that there is such (inaudible)? It is still our view that industrial automation and drive technologies are not declining, even though growth eases.

And secondly that’s important, those two assets, Siemens’ assets as well as the market operates at capacity, and there have been little CapEx investments in the years of 2010 and 2010 because in all essence what we have been doing in that particular business was nothing as to come back to the levels that our directions are delivered.

So if you look at the – in further insight, of Siemens’ in that particular business, we are just about in the order intake levels as we were in 2008 and in terms of (inaudible). So there’s been a recovery. And that huge recovery, actually, in 2011 starting in 2010 on the order side has nothing been – nothing else been as to catch up again for what we lost at the year before, which was minus 16 and we added plus 14 last time.

So if you did that minus 16 from the top – or minus 14 from the top and add 16 from the bottom you have the same level as (inaudible). And that actually means that you have full capacity. So if you operate in full capacity and even though we grow, for example, I’m just making it up now, okay, just making it up, if synergies grow on a nominal basis at all you still need to have more output in order to preserve the same nominal level because they have this some price decline and you’ve added capacity, that actually gives you some lever of being firm on pricing.

So that’s the assumption. If for example industrial went down, (inaudible) went down, so those down capacities would be easing, utilization would be easing and usually causes some disturbance in the market in terms of pricing. On the same token, though, we have to say that our experience has been – last time it was going down, we’ve actually been expecting a huge price decline and industrial automation for the most part, it didn’t happen that badly because there seems to be a secret in the stickiness on the install base. It is particularly true for the process industries, (inaudible) is part of the industry.

Peter Loscher

And change on the flush out, the 45% of the incremental growth. And it is clear that we are benefiting from breadth of our energy portfolio. And I would say across the board there will be growth. But obviously in terms of – let’s start for example with what Joe was just highlighting the importance of building install salt base for the fossil business, so we continue to build market share and be successful in the fossil area. It’s very important to understand that as a consequential. Then it drives service growth going forward. The renewable business is a very important one which at this point in time quite different.

The dynamics between wind and solar – for wind, the opportunity right now is to industrialize and to globalize or to regionalize the business extremely well. And the solar business is currently impacted by the overall environmental in what we see in terms of cuts of subsidies and the uncertainty. It’s what we see. But medium term it will be an interesting business opportunity.

When we talk about the transmission HVDC, the oil and gas, I mean, there are amazing fields in there which we will continue to drive. Subsidy electrification, for example, is a very interesting area for us. So there are current strong businesses and then there are very specific technology areas in which we will continue to drive and to build.

But overall, across the spectrum of energy – I mean, the energy demand will double. The question is, will it be in 2030 or will it be in 2040. And there is no other company who has the comprehensive portfolio of what we have and this is what we leverage in terms of footprint, also a global footprint and take advantage of it.

Mariel Von Drathen

Okay. We still have a number of people wanting to have questions. We go here in the middle with Danielle Acosta [ph].

Danielle Acosta

Thank you. Two questions – one regarding the change in the pre-claimants profile, so the slide (inaudible) that is on page 11. Does it in any sense comes as to reflect of actually the regional mix changing again, customers in emerging regions being less willing to give large repayments? And the second question on transmission. The German Electricity Regulator has been stressing that the upgrade of the grid is quite urgent. What is the timeline you see in terms of that upgrade actually coming through in terms of orders? And could that be beneficial to pricing in any sense? Thank you.

Joe Kaeser

Well, look the upsize are always welcome, but by the same token, we only can take it very seriously once it has arrive as ordered. So I would not have a chance to put it to conclusion. It is an opportunity and those opportunities are needed in transmission. It has been for quite some time some oversupplies and weakness in transformers and also some very competitive pricing environments in substations, so that the treatment definitely would need some incremental demand, which ease the minds of the suppliers.

So we welcome any insights and any way of the regulator understanding that energy generation is something – those are put together. It is needed in that industry. So of course supported, we have the solutions and we definitely like to hear that. But then again, it hasn’t authorized in any preorder discussions at this time. But the sentiment is positive.

And also, by the way it’s true. Due to the fact that if you want to have renewable energy like wind that just happens to be in most of Europe, but most of the energy is needed in the South of Europe. So it’s a natural follow through to that question on how we can have achieve and determine in the future. And that’s relevant to transmission.

On the reduction of the prepayment, the ones who’ve been following us for a long period of time know that there’s been (inaudible) for quite some time. There had been some pockets of ease on the matter for some time again. But the general trend, the general trend on prepayment is that it’s relative to the order intake. It’s been going down all the time and it seems that people are holding on to liquidity. And people are holding on to a lesser leverage as they use to consider normal in the past.

And that’s been also one of the reasons why we ourselves to make sure that Siemens can also do asset and win the financing if need be because other sources of financing have not been (inaudible) anymore as they used to.

Mariel Von Drathen

We’ll continue with Will Mackie, same row, please.

Will Mackie – Berenberg Bank

Good afternoon. Will Mackie from Berenberg Bank. Firstly, just to follow on from what you mentioned there Joe. Against the background where some financial institutions are withdrawing capital, you’ve made a big step-up in the assets within SFS. Perhaps you could talk a little bit to how you see that portfolio evolving.

Joe Kaeser

I take this?

Will Mackie – Berenberg Bank

Yes. And to what extent that could really be used as a competitive tool or just a business enabler? Then with regard to healthcare, it maybe preemptive but against the backdrop of the agenda of 2013 you’ve put out. What sort of returns – maybe even at the EBITDA or EBIT margin level would you expect that diagnostics could return to you under some of the scenarios that you are contemplating at the moment? And lastly, on the cash flow, I think you flagged already that there’s some timing issues and some flow back into next year. Perhaps you could highlight what sort of total cash out, particularly with regard to SIS. I think you’ve flagged in the statement we could expect into next year. Thanks.

Joe Kaeser

Okay. Why don’t I maybe start with the cash flow. As I noted it’s been 5.2 billion in 2011. I kind of packed the amount which we appear to have been planning for in 2012 in the neighborhood of a billion plus. There is another 800 million, 900 million around the bottom of cash out flow of charges which we had been booking related – mostly consists by the parcels of particle therapy in 2011. That all materializes in 2012 following and following in parts even 2013. So someone expects those two – the total of those methods to be in efforts and back in 2012, you might be just right on.

On SFS, obviously SFS has been and even continues to be more (inaudible) enabler to the industrial side of the business. And I’m always clear that SFS is not a business core in itself. We discussed we have probably some external methods too because you’re looking to make sure that you have the same tools in place as others have who are in that business for (inaudible).

But first and foremost, SIS shows the industrial business of Siemens and make sure that through combining the industrial and financial logic by product financing with the industrial logic that we have a competitive and it’s going through. And so what I mean by that, for example, if we participate in equity for wind parks or the likes that will help finance the project. That will help basically that they get incremental orders. So what we do is we look in to the risk assessment of the financial logic as any financial or decently run and controlled financial institution does.

And then we combine with the incremental gross margin on what the order looks like and look at what the risk and opportunity profile is. So, clearly SFS for the most part, for the material parts will support industrial businesses of the four sectors. And that has also been increased on the balance sheet, which has been going into that.

And we’ll continue to beat the craze in 2012. They would expect SFS to grow its balance sheet between depending on, of course the business opportunities between a billion and a billion and a half, okay? That’s just about what’s in our liquidity assessment, the marker is for 2012. And that’s mostly related to helping the project business grow going forward and set forth of it.

The good side of that, of course, is that the clearance, the capital clearance goes down a bit. It was usually long-term items rather than the small ticket type of lease, which is usually highly profitable. So you could expect actually the return equity to be down a little bit. But it’s been north of 25%. So if we continue to be north of 20, it’s still at decent way to spend our money and get something in return.

Mariel von Drathen

Okay. We’ll continue with James Moore. Are you there?

James Moore – Redburn Partners

Thank you. My questions, three if I could; two financial and one subjective question on the guidance.

On the pricing, you talked about 3%, could you give us some sense as to how that look in 2011 by the three sectors? And secondly, on fossil, your first nine-month margin of 22.5% dropped 700 basis points to 15.5 in the fourth quarter. And you just take note that there would be some impacts there.

But I wonder if you could help us a little understand what proportion service was of sales in the quarter for the first nine months and how much of that first nine-month margin was provision release? Because I suspect there’s an element of facts in there.

And just objectively on the guidance, in the last couple of years, you’ve set two perfect guidance both of which you beat comprehensively. And should we think about you as being as conservative in your makeup of this guidance this time or have you learned a little?

Peter Loscher

If I may on the third question on the guidance, it looks tangled to tell, tangled to tell. Guidance always sounds improving looking to the future. We want to be transparent. The market understands our thought process and different thought process changes, and they know exactly we are purchasing. Sorry we can’t reflect that in the difference.

And if I look back in the last three years, there have been more points added in our rights rather than wrong. So I guess the score at this point in time even will deserve a miss sometimes on those methods. So as I said, time will tell.

The market knows what our full process is. We are very transparent on what we expect and how we’ve been looking at the year ahead. There is enough time to correct these methods if the environment changes. So, think about the incremental OpEx, which actually has been slightly accelerating as compared to the OpEx spend in 2011.

The beauty of that is it’s still a plan. So if we, for example, see some incremental content here, we still can say, “Well, we’re not just growing like that. Maybe we get a little slower.” It’s much better than you have to correct to your cost structure because that will cost you twice at the time when you decided the structures. So that sounds (inaudible).

Of course, we always keep in mind as we move along because all the times are uncertain. And it’s much uncertain because the industrials know how to run his business, but times are uncertain because in some part, we do have a political crisis that we don’t know any more on how to fix the methods that have been after closing over time.

And this is something which is in an area of concern, I believe in the area of influence. And that’s how you get to focus on what we can influence and we want to make transparent on how we operate in that matter.

So that’s sort of the guidance on the profile. Obviously, we have been continuously saying that those margins which we really like a lot because they’re different few years ago. They have included the over performance as we call it of about 300 plus base points.

That came in part from the release of sub-reserves that we didn’t care to be that optimistic on our execution. And it also was like a real good [Audio Gap] on our contingencies, which we have been planning in the order intake calculation.

So that would be the 350 base points that we look for. But we’ll see that again. But, obviously, this is something we do not calculate words. And at some point in time, we just want to normalize on that area.

And the Q4 impact, which was somewhat light, was accrued in there due to the fact that we do see that motion coming back to normal on one hand, and it should stay on that level in 2012. But it was also quite a material seasonal impact for the service business, which happens at times, especially during the summer season. And then the utilities need every kilowatt in order to cool down the houses. They don’t get your service guy into the turbines. And that obviously took its toll on the combined margins.

So I guess the times of the 20s plus are not fully sustainable. But it’s someone that’s in the 17, 18 range, maybe sometimes a bit below or a bit above depending on the structure that we could view as quite an industrially feasible and good performance.

On the pricing, I mean, I appreciate the effort, but I respectfully decline.

Mariel von Drathen

Okay. So we’re running a little bit out of time. But I’ll still try to get – take all the questions. So we have here in the front and the second row, we have Jay Cooper.

Jay Cooper – Willington Shields

Jay Cooper is my name with Willington Shields in New York. I have a question about your renewable business. What I see is sort of a competition arising between PV solar and what you’ve concentrated most of your efforts on. It seems to me the concentrating solar CSP.

So I find, and I’m talking with your people recently, an industry comp, which is you’ve formed a new vertically integrated sales organization to contact to drive specifically PV solar business. And I’m wondering where this is going, how important it is. Does it mean that you’re trying to balance CSP versus PV solar in your portfolio?

And that’s about it. If you could answer that, thank you.

Peter Loscher

Jay, obviously, we look at a couple of years back also in terms of how do we see the different technologies. We, at that point, saw that that actually CSP has an advantage CSP has an advantage because we have the storage facility. And actually, we did not anticipate the price level that we currently see with PV. So if you just look at in the last two years in terms of the lack, which exist in terms of PV, the PV capacity which is installed in a month, which is currently happening, there’s obviously a massive price decline on PV.

So we believe both technologies are viable going forward. It will be in different applications. In some instances, obviously, when you go for big, big megawatt plants, the CSP has clearly advantage. But it has to be developed.

And most recently, we have seen that even CSP projects are converted back into PV, for example, in the United States. And the overall environment is such that both technologies are constantly seeing a slowdown because we see the subsidy picture around the world being more constrained and the tax incentives are coming down.

So it will be very important to reach wholesale with parity. And I think at this point in time, this is not a mature technology field. So as a company, you have to basically make a couple of technology bets. And then at the end of the day, we will see which applications and which technology we’ll actually increase further.

So, in summary, overall, it’s a very attractive field. It is important, but I think it’s too early to tell because the industry is not as mature that you say this will be the winning technology even within PV. I mean, as we know, we have Kathleen Calorite, we have Nadya [ph], we have Tim Feldman [ph].

So, it is a very thorough analysis and then probably betting yourself in different technology areas and at the end of the day we have to see how they will eventually compete on a cost basis on its roadmap to the wholesale great parity.

Mariel von Drathen

We’ll continue. And let’s start with Olivier Esnou with Exane.

Olivier Esnou – Exane Ltd.

Thank you. Olivier Esnou, Exane. I actually have two questions. I’d like to have a few thoughts of the flexibility you have in AIDT. Can you give us an idea of the use of temporary walker you have right now? Please?

And secondly, on the renewable business, wind and solar, it’s difficult to see why the performance should improve next year from where I stand. Can you give us some comfort, I mean, basically what you’re looking for and what we should wait for? Is it an improvement from here? I mean on an underlying basis, of course, if we stood the (inaudible) should it get better or is it more likely to get worst next year? Thank you.

Peter Löscher

On the taxability, I mean, of course, we’ve been looking into the so-called contract broker environment, but our experience of the last crisis and we do not expect this type of crisis to happen again in that way as it was in 2009, by the way. If you analyze that situation again, it was not so much about how many contract brokers we had to let go. It was much more about how could we structure an environment where we have the existing workforce come down and cross all together and make sure that the workforce and the qualified people is available once it goes up again.

That has been the decisive factor on why we have also been able to take advantage from the recovery and also take advantage from collective cost saving on labor. So it’s not so much the impact. I mean it is important that the impact is not really mature as compared to the short time model which helped us keep the force, but we now lower the cost on the level which was utilized and helped us back, I guess, a point in time when the demand has been coming back in a quite impressive manner.

And this is something if it happened in a similar way, what the investor or Germany would need again to reiterate, to push and to implement in order to make some flexible impact on the cost structure. Other than that, I think it’s still true what I said earlier. Even Ben asked me about the spread on flexibility on those businesses that have actually been going into the opposite direction to do the fact that software grows relative to mechanics and the automation part also grows as relative to labor.

Then on the renewable, I think obviously the solar matter as we discussed now back and forth or backwards, so let me focus on wind. I mean, the wind energy is in the middle of becoming a global industrial business that’s been moving from a handcraft (inaudible) with a few limited areas into a broadly accepted means of renewable sources. There’s been a lot of new market entrance. There have been a lot of incumbents which have been struggling along when capacities are shooting up and when prices are coming down.

We see that continuing and that’s why I would not expect material profit impact underlying on that business rather than seeing significant growth on the top line which will help preserve and maybe gradually move the bottom line through scale impact. So then with all that said that is 13%, 14%, 15% margin in the former years are going to be gone for a while and we’d rather calculate the labor [ph] mid single, maybe comfortable mid single digit profit environment for awhile.

In the mid and long term, we expect that business also to add a significant components of service so that the model like we have been seeing in the traditional environment with building power plants and service then later and accommodation (inaudible) could also be evolving in developing – in the industry.

Mariel von Drathen Okay so we have one more question over here, Colin Campbell.

Colin Campbell – SG Securities

Hello. Yes, it’s Colin Campbell. Just given the highlight of you’re very under leveraged balance sheet and debts required to be maybe more of shareholder-friendly given the D rating, when might you consider a special dividends or share buybacks in this time at least?

Peter Löscher

Colin, thanks, I guess, for reiterating the question again. It has been there before. I take that as a feedback that this has been insufficiently answered and I guess I take that one for the time being. There’s nothing to add. We said that there is a massive uncertainty, but we acknowledge that we are behind on our commitment. Absolutely clear. We don’t need to debate that, absolutely clear. But we also said this is not going to be something which we do every year in the last quarter to see that we are in the range.

Secondly, we believe we are in an dismantled financial political environment, which is hard to predict in the next 6 to 12 months. And thirdly, we want to make sure that there is enough flexibility at any given point in time if the margin compression and the multiple compression of the capital goods industry continues to evolve. And that’s what I, I guess, feel comfortable sitting at this time, but then I also said that should not be missed.

We also said that we have our shareholders in mind. It’s not that we are wasting their money just because we don’t dare to discuss that at all.

Mariel von Drathen

Okay. Very well with this. We will close the Q&A session. Thank you very much. And I’d like to add. Please stay tuned for the events coming up in December. Thank you. Bye.

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