We’ve defined our targets for fiscal 2009 and are equipped to meet and even surpass them. The challenges arising from today’s four global megatrends – shifting demographics, increasing urbanization, climate change and globalization – are creating major business opportunities that we fully intend to leverage. With our wide-ranging portfolio of innovative, energy-efficient products and solutions, we’re already better positioned than virtually any other company worldwide to provide answers to the toughest questions of our time.

When we restructured our Company organization, we raised our target margin ranges at both the Sector and Division levels. We’re firmly convinced that business growth is sustainable only when it’s profitable. That’s why we intend to reach or exceed the profitability of our top competitors in all our business fields. With this in mind, we’ve raised our target margin ranges for the Industry Sector to 9-13 percent, for the Energy Sector to 11-15 percent and for the Healthcare Sector to 14-17 percent. But it’s not just at the Sector level that we’ve set higher goals: we’ve also raised the bar for ten of our Divisions. For the Divisions that have not yet achieved their targets, we’ve taken timely steps to improve their profitability. In the Industry Sector, for example, we’ve launched the Mobility in Motion project to ensure that our Mobility Division reaches its target margin range of 5-7 percent.

However, to be truly successful, we have to do more than just generate sufficient growth and reach margin targets. What’s equally important, we have to ensure that we’re achieving a satisfactory ratio between our earnings and the capital we use in our business activities, that these activities are generating a sufficient amount of cash and that we’re optimizing our capital structure.

To measure the relation between our earnings and the capital our businesses use, we’ve adopted the yardstick return on capital employed (ROCE). We’ve set an ROCE target of 14-16 percent. In fiscal 2008, our ROCE for continuing operations was 4.8 percent. ROCE development was negatively impacted by a substantial increase in capital employed due to major acquisitions in fiscal years 2007 and 2008. Other factors that burdened our ROCE in fiscal 2008 include our restructuring program for the long-term reduction of our sales, general and administrative (SG&A) costs, provisions associated with the legal settlement being negotiated with public authorities in Germany and the U.S., and the establishment of the Siemens Stiftung.

To determine how much cash our activities are generating, we’re applying the metric cash conversion rate (CCR), which is the ratio of free cash flow from continuing operations to income from continuing operations. We’ve set a CCR target of “one minus the Company’s growth rate.” In fiscal 2008, our CCR was 3.09.

To achieve a healthy balance between equity and debt capital, we’ve also set a capital structure target: a ratio of adjusted industrial net debt to EBITDA of 0.8-1.0. At the end of fiscal 2008, this ratio stood at 0.42 for continuing operations.

The introduction of our new organizational structure was a first step toward cutting our SG&A costs. We intend to reduce these costs by €1.2 billion – to €10.9 billion – by 2010. In fiscal 2008, our measures in this connection generated substantial restructuring expenses of €1.1 billion. Our SG&A costs in fiscal 2008 totaled €12.7 billion, or 17.6 percent of our total revenue. This amount includes the larger part of our restructuring costs.