CORPORATES

CREDIT OPINION29 July 2016

Update

RATINGSSiemens Aktiengesellschaft

Domicile Germany

Long Term Rating A1

Type LT Issuer Rating - FgnCurr

Outlook Stable

Please see the ratings section at the end of this reportfor more information.The ratings and outlook shownreflect information as of the publication date.

Contacts

Martin Kohlhase 49-69-70730-719VP-Sr Credit Officermartin.kohlhase@moodys.com

Janko Lukac 49-69-70730-925Associate Analystjanko.lukac@moodys.com

Matthias Hellstern 49-69-70730-745MD-Corporate Financematthias.hellstern@moodys.com

Siemens AktiengesellschaftUpdate of Credit Opinion

Summary Rating RationaleSiemens A1 ratings reflect (1) its diversified revenues base by product and geography; (2)leading market positions in a range of key industrial technologies and services with highbarriers to entry; and (3) a strong liquidity profile supported by a well-balanced debt maturityprofile, sizeable cash and cash equivalents on hand as well as good access to the capitalmarkets.

The ratings also take into account the (1) elevated leverage of debt/EBITDA of 2.2x as a resultof debt-funded acquisitions; (2) underperforming businesses, although there has been someoperating performance improvements over the last quarters, most notably in Wind Powerand Renewables as well as Energy Management; and (3) the growing asset size of its financecaptive, which has almost doubled in the last six years to €25.0 billion.

Exhibit 1

Moody's expects elevated leverage to slightly decrease by end of fiscal 2016

This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significantacquisitions and divestitures.Source: Moody's

Credit Strengths

» Global scale, multiple market leadership positions, broad customer and geographicdiversification

» Strong R&D capabilities, complemented by acquisitions funded through asset disposals

» Strong liquidity profile, underpinned by diverse internal and external sources

Credit Challenges

» More recent acquisitions (e.g. Dresser-Rand, CD-adapco) leave leverage elevated at 2.2x

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This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 29 July 2016 Siemens Aktiengesellschaft: Update of Credit Opinion

» Underperforming businesses, track record of frequent project charges a constraint forgroup performance

» Growing asset size of Siemens Financial Services (SFS), its finance captive arm

Rating OutlookThe stable rating reflects our expectation that Siemens will remain one of the leading players in the global power generation, industrialautomation and healthcare equipment sectors, and that even with cyclical pressures and periodic shareholder return initiatives, thecompany's operating performance and financial policies will remain solidly supportive of an A1 rating over the long-term, as evidencedby EBITA margins of around 10% and debt to EBITDA below 2.0x (Moody's adjusted). With leverage of 2.2x (LTM as of June 30, 2016)and FCF/Debt of 6.4%, the rating is currently weakly positioned in the A1 rating category. However, Siemens' A1 rating factors in ourexpectation that the company's leverage and cash flow generation will improve over time.

Factors that Could Lead to an UpgradeThe rating could be raised if there were reduced competitive pressures throughout Siemens' broad operations. Additionally, revenuegrowth combined with EBITA margins sustained above 13% whilst maintaining a solid financial profile, as evidenced by adjusted debtto EBITDA sustained below 1.5x, and strong liquidity could also contribute to upwards rating pressure.

Factors that Could Lead to a DowngradeConversely, downward rating pressure could develop if there was evidence of a sustained erosion in Siemens' competitive strength,profitability and cash flow generation, particularly with respect to the group's core businesses. In the case of a more aggressive financialpolicy, this would be either through additional debt-funded acquisitions or share buybacks exceeding free cash flow generation.This erosion would lead to debt metrics below expectations for the current rating on a sustained basis, as evidenced by a debt toEBITDA ratio sustained above 2.5x (Moody's adjusted). Negative rating pressure could also result from a weakening of profitability, asevidenced by EBITA margin meaningfully below 10% on a sustained basis, or weak asset quality in Siemens' captive finance operations.

Key Indicators

Exhibit 2

Siemens Aktiengesellschaft Key Indicators

All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Financial Metrics

Detailed Rating ConsiderationsGlobal scale, multiple market leadership positions, broad customer and geographic diversification

Siemens' very large and diversified portfolio of industrial businesses spans over a broad range of customers, regions and end markets,with a majority of businesses having leading market positions on a global scale, supported by high barriers to entry. The maincontributors to the group's operating profits are the Power and Gas, Healthcare and Digital Factory divisions, together representing67% (as of H1 2016) of the profits from its industrial operations.

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3 29 July 2016 Siemens Aktiengesellschaft: Update of Credit Opinion

The market presence, reputation and consistent investments, in particular in R&D and more recently complemented by acquisitions,continue to translate in multiple market leading positions. The combination of Siemens and Gamesa's wind power businesses willcreate the world’s largest wind energy company. In 2015, Siemens had an 8% market share in installed capacity, while Gamesa had a6% market share. The combined 14% would surpass Vestas Wind Systems A/S (unrated, 13%), Goldwind New Energy HK InvestmentLtd. (unrated, 11%) and General Electric Company (A1 stable, 9%).

Siemens holds number 1 or 2 market positions in the areas of gas turbines, power transmission and distribution equipment andsolutions. Its Digital Factory division holds leading market positions globally in programmable logic controllers, industrial switching andindustrial software. The Process Industries and Drives division is a global leader in inverters and controls, motors, generators and gear-boxes. The Healthcare division is one of the leading companies in imaging equipment and in-vitro diagnostics. Each of these divisionshas multiple business units that compete against a range of strong companies worldwide.

Strong R&D capabilities, complemented by acquisitions funded through asset disposals

Siemens has a strong commitment to research and development (R&D) as witnessed by the sizeable annual R&D spent of €4.5 billionin 2015, or 5.9% of sales. Siemens is amongst the largest patent application and grant filers in Europe as well as globally. The groupholds more than 56,000 patents and employs more than 32,000 staff, or 9.2% of all employees, in R&D.

In order to complement its internal research and product development, Siemens has a long history of strategically filling out its productand service portfolio with acquisitions. An important source of funding for acquisitions have been disposals of non-core activities, suchas the white goods joint venture BSH, the sale of the hearing aid business Sivantos and the divestment of IT services company Unify.Siemens portfolio in our opinion has sufficient depth and breadth to allow for further future asset disposals and we anticipate Siemensto continue to complement the funding of acquisitions through such measures.

More recent acquisitions leave leverage elevated at 2.2x

Siemens in June 2015 closed the Dresser-Rand transaction, for which it raised $7.75 billion (€6.8 billion) of debt in May 2015, andannounced the acquisition of CD-adapco in January 2016 (closed in April) for a consideration of $970 million. In June, Siemens andGamesa (unrated) announced the combination of their wind power businesses. As part of this transaction, Siemens is offering Gamesashareholders a cash payment of €1.05 billion. The transaction is expected to close in the first quarter of 2017. Even if Siemens were topay with additional debt, we estimate that the impact on debt/EBITDA (LTM March 2016 2.2x) would be an increase of about 0.1x. Weexpect the leverage ratio to further improve towards 2.0x by fiscal year end 2016 (September 30).

Underperforming businesses, frequent project charges remain a constraint for group performance

Despite Siemens' strengths, around one third of its business portfolio (Energy Management, Building Technologies, Process Industriesand Drives; as measured by share of Industrial Business revenues per Q2 2016) has generated margins below the target margin corridorset by Siemens. We note though, that profitability improvements in Energy Management and Building Technologies have resulted inactual margins getting very close to the low end of the target margin ranges. Whilst progress has been made in fixing underperformingbusinesses and streamlining its business portfolio, businesses with revenues of approximately €14 billion still require managementattention to achieve a sustainable turnaround (margin of -4% in 2013, 1% in 2015, guidance for 2016 of around 3% and with amanagement target for around 6% in 2017 and larger than 8% by 2018).

Siemens has a long track record in terms of “execution” challenges, particulary in activities related to Energy Management and Mobilityand as evidenced by sizeable write offs and restructuring charges in the past. These charges have been a drag on operating profitabilityand cash flow generation, which remain weak. Siemens has offset these charges with restructuring and productivity gains; the companytargets annual productivity savings of between 3% and 5%. Of its current cost reduction measures with a target of savings of €1.0billion by 2017, the bulk of the programme is expected to yield results by FYE2016 (85%-95% of savings).

Growing asset size of finance captive

Siemens Financial Services (SFS) is one of nine divisions and responsible for managing a portfolio of €25.0 billion of assets, includingproject and commercial finance, equity investments and financial leases. SFS' activities support the other eight, industrial business-related divisions and hence are an integral part of Siemens' strategy. Despite the high growth rates of SFS' asset size in the last six years

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4 29 July 2016 Siemens Aktiengesellschaft: Update of Credit Opinion

(2010: €12.5 billion, 2015: €25.0 billion; compared to revenues for the Siemens group 2010: €69.0 billion, 2015: €75.6 billion), weexpect future growth of SFS' assets to be more in line with revenue growth of the group, i.e. in the low to mid single digit range (%).

The counterparties of SFS are strictly other businesses and are not consumer-related. This in particular holds also true for SiemensBank GmbH (A1 stable), a wholly-owned bank that is regulated. SFS benefits from its access to Siemens global deal flow and tosector specialists with technical know how. Funding is obtained through Siemens treasury operations, and is maturity and currencymatched according to Siemens generally taking out transaction risks. As part of its mandate, SFS is engaged in long-term projectfinance transactions in line with Siemens' project business. Although the life of some projects, especially those related to infrastructureand energy projects, is long, SFS is engaged in the early years (especially during the construction phase) of the overall life span of aproject to facilitate the respective financing. Consequently, SFS may not hold the exposure over the full project life cycle. Therefore weexpect average maturities for SFS to be between three and four years and generally believe the portfolio is well-diversified and with lowdefaults.

We monitor SFS' asset growth, gearing and income before income taxes to assess any potential impact its activities have on theindustrial business of Siemens.

Liquidity AnalysisStrong liquidity profile, underpinned by diverse internal and external sources

Siemens' liquidity is strong. For the quarter ending March 31 the company reported €6.3 billion of cash and cash equivalents, whichwas down by €3.65 billion against the previous quarter, largely due to dividends paid during the quarter which amounted to nearly€3.0 billion Siemens annual cash flow from operations (Moody's definition) for the past five years averaged €7.8 billion.

Among the external liquidity sources are a $9.0 billion commercial paper programme (of which $3.0 billion were outstanding asof March 31, 2016), a €4.0 syndicated credit facility (maturing in June 2020 and with one 1-year extension option), a $3.0 billionsyndicated credit facility maturing in September 2020 and a €450 million revolving bilateral credit facility maturing in September2016. As of September 2015 the equivalent of €7.1 billion of lines of credit were unused.

The multiple sources of liquidity allow Siemens to cover cash uses such as working cash (approximated as 3% of annual sales), workingcapital movements, capital expenditures (5-year average: €2.7 billion), dividend payments (5-year average: €2.7 billion) and share buy-backs (5-year average: €1.5 billion). Siemens has had the capacity to fund transactions of a certain size, such as CD-adapco or Gamesa(both around €1.0 billion), with existing sources, whilst it reverted to the debt capital market for the funding of Dresser-Rand.

ProfileSiemens Aktiengesellschaft (Siemens) is one of the world's leading manufacturers of power generation equipment and energymanagement systems, industrial automation products and services, building technologies, transportation equipment, as well ashealthcare equipment and diagnostics. The group in fiscal year 2015 (ending September 30) recorded revenues of €75.6 billion. As ofMarch 2016 end the order backlog of industrial businesses was €115 billion.

Rating Methodology and Scorecard FactorsMAPPING TO MOODY'S GLOBAL MANUFACTURING METHODOLOGY

Utilizing the rating factors identified in our Global Manufacturing rating methodology, Siemens' rating factors indicates an A2 gridindicated outcome, one notch below the assigned rating. While Siemens' scale and financial policy point to Aaa/Aa outcomes, thecompany scores weaker on operating margins, leverage and free cash flow-based metrics. Moody's 12- to 18-month forward view ofSiemens' financial profile suggests a grid indicated outcome of A2, reflecting our expectation of modest improvement over the ratinghorizon, but continued weakness in leverage and cash flow-based metrics.

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5 29 July 2016 Siemens Aktiengesellschaft: Update of Credit Opinion

Exhibit 3

Methodology Grid Siemens Aktiengesellschaft

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of 3/31/2016(L); Source: Moody's Financial Metrics™[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody's

Ratings

Exhibit 4Category Moody's RatingSIEMENS AKTIENGESELLSCHAFT

Outlook StableIssuer Rating A1Senior Unsecured MTN (P)A1Commercial Paper P-1Other Short Term (P)P-1

SIEMENS BANK GMBH

Outlook StableIssuer Rating A1ST Issuer Rating P-1

SIEMENS FINANCIERINGSMAATSCHAPPIJ N.V.

Outlook StableBkd Senior Unsecured A1Bkd Jr Subordinate A3Bkd Commercial Paper P-1Bkd Other Short Term (P)P-1

SIEMENS CAPITAL COMPANY, LLC

Outlook StableBkd Senior Unsecured A1Bkd Commercial Paper P-1Bkd Other Short Term (P)P-1

Source: Moody's Investors Service

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6 29 July 2016 Siemens Aktiengesellschaft: Update of Credit Opinion

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