Siemens 2013 Annual Report Download - page 232

92 A. To our Shareholders
117 B. Corporate Governance 155 C. Combined Management Report
156 C. Business and economic environment
173 C. Financial performance system
179 C. Results of operations
192 C. Financial position
204 C. Net assets position
207 C. Overall assessment of the economic position
209 C. Subsequent events
210 C. Sustainability
227 C. Report on expected developments and
associated material opportunities and risks

We anticipate that SRE will continue with real estate disposals
depending on market conditions. We expect results from
Corporate items and pensions in fiscal  to be approximate-
ly a negative €. billion and profit related to Eliminations,
Corporate Treasury and other reconciling items to come in at
about a negative € million.
In the next fiscal year, we expect no material impact on Net
income from discontinued operations. For comparison, discon-
tinued operations in fiscal  resulted in income of € mil-
lion, due mainly to OSRAM, which we spun off at the end of
fiscal .
Capital efficiency
Our most important financial goal is capital efficiency, which
we measure in terms of adjusted return on capital employed
(ROCE (adjusted)). Due mainly to our expectations regarding
the development of income from continuing operations, we
expect ROCE (adjusted) for continuing operations to return to
our target range of % to % in fiscal . For comparison,
ROCE (adjusted) for continuing operations was .% in fiscal
. For SFS, we set a target range for return on equity or ROE
(after tax) for SFS of % to %. As mentioned above, we ex-
pect that SFS will continue to reach this range in fiscal .
Capital structure
For the medium-term we set a target for our capital structure,
defined as the ratio of adjusted industrial net debt to adjusted
EBITDA. We seek to achieve a ratio in the range of . to .. In
fiscal , we made progress toward this target, and we anti-
cipate that we will approach the lower end of the range at the
end of fiscal . We expect this to be strongly supported by a
planned buyback of Siemens AG shares worth up to €. bil-
lion over the next up to  months as mentioned above.
In the area of investment planning, we expect to continue our
investing activities, such as to safeguard market share and
competitive advantages based on technological innovation. We
will also continue investing in extending our capacities for de-
signing, manufacturing and marketing new solutions and for
the necessary replacements of these fixed assets. With regard
to capital expenditures for continuing operations, we expect a
substantial increase in fiscal  spending year-over-year.
Dividend and share buybacks
We intend to continue providing an attractive return to share-
holders. Therefore in the years ahead we intend to propose a
dividend payout which, combined with outlays during the fis-
cal year for publicly announced share buybacks, results in a
sum representing % to % of Net income, which for this
purpose we may adjust to exclude selected exceptional non-
cash effects. Furthermore, for fiscal , we are taking
proceeds from the sale of the NSN stake in fiscal  into
consideration. As in the past, we intend to fund the dividend
payout from Free cash flow.
C... OVERALL ASSESSMENT
We expect our markets to remain challenging in fiscal .
Our short-cycle businesses are not anticipating a recovery un-
til late in the fiscal year. We expect orders to exceed revenue,
for a book-to-bill ratio above . Assuming that revenue on an
organic basis remains level year-over-year, we expect basic
earnings per share (Net Income) for fiscal  to grow by at
least % from €. in fiscal .
This outlook is based on shares outstanding of  million as
of September , . Furthermore, it excludes impacts relat-
ed to legal and regulatory matters. Overall, the actual develop-
ment for Siemens and its Segments may vary, positively or
negatively, from our expectations due to the risks and oppor-
tunities described below. See C.. RISKS as well as C..
OPPORTUNITIES. This report on expected developments should
be read in conjunction with C. NOTES AND FORWARD-LOOKING
STATEMENTS.
C.. Risk management
C... BASIC PRINCIPLES
OF THE RISK MANAGEMENT
Our risk management policy stems from a philosophy of pur-
suing sustainable growth and creating economic value while
avoiding and managing inappropriate risks. As risk manage-
ment is an integral part of how we plan and execute our busi-
ness strategies, our risk management policy is set by the Man-
aging Board. Our organizational and accountability structure
as of September ,  requires each of the respective man-
agements of our Sectors, SFS, SRE, regions and Corporate Units
to implement risk management programs that are tailored to
their specific industries and responsibilities, while being con-
sistent with the overall policy established by the Managing
Board.
C... ENTERPRISE RISK MANAGEMENT PROCESS
We have implemented and coordinated a set of risk manage-
ment and control systems which support us in the early re-
cognition of developments jeopardizing the continuity of our
business. The most important of these systems include our
enterprise-wide processes for strategic planning and manage-
ment reporting. Strategic planning is intended to support us in
considering potential risks well in advance of major business
decisions, while management reporting is intended to enable