Prior to the decision on the separation, the OSRAM Division was primarily financed by the Siemens Group. In addition to participating in the cash management including the cash pooling system of Siemens, OSRAM is also included in the funding program of the Siemens Group by means of short-term loans and financial deposits(balance of the short- term loans and financial deposits as of 30 September 2012: around 580 million € in favor of Siemens). OSRAM also participated in the currency and raw materials price hedging transactions of the Siemens Group and used guarantees or other security provided by the Siemens Group. In addition, individual enterprises in the OSRAM Division used the Siemens Group's factoring program "Siemens Credit Warehouse" (see on this, below point e)) as well as the supplier financing program "Supply Chain Finance Program" (see on this, below point f)).
Towards the end of 2011, the step-by-step separation of OSRAM from the financial structures of the Siemens Group began and shall be completed according to the plan when the Spin-off takes effect.
a) Replacing of financial liabilities owed to Siemens
The financial liabilities owed to the Siemens Group will be replaced by separate, external financing shortly prior to the completion of the Spin-off (on this point see Chapter IX.2.e)(4)).
b) Cash pooling and cash management
The participation by the OSRAM Division in the cash pooling and other cash management of the Siemens Group will be terminated and replaced by independent programs of the OSRAM Group at the latest when the Spin-off takes effect. The respective agreements with the banks which will service the future cash pooling of the OSRAM Group have already been concluded. The necessary preparations for further cash management within the OSRAM Group have already for the most part been implemented.
c) Hedging
The currency and raw materials price hedging transactions concluded with Siemens will be terminated at the latest with the completion date of the Spin-off. The OSRAM Group has agreed on framework agreements with financial institutions under which individual currency, interest and raw materials price hedging transactions can be concluded with which the previous hedging obtained through Siemens can be seamlessly replaced.
d) Replacement of security as well as bank and group guarantees
In the course of OSRAM’s involvement in the group financing, companies in the Siemens Group have provided security for OSRAM's local credit and guarantee lines as well as foreign currency hedging transactions. Security in the amount of 247.2 million € provided by Siemens for these lines of the OSRAM Division was still outstanding on 30 September 2012.
Furthermore, the Siemens Group or banks, insurance companies and other financial institutions mandated by the Siemens Group have issued guarantees, sureties or other security for the benefit of OSRAM's suppliers, customers and partners in order to secure the performance of contractual obligations of OSRAM. At the end of 2011, OSRAM began to release these securities of the Siemens Group worldwide. This was done by exchanging these securities for corresponding securities of OSRAM or by issuing corresponding securities for guarantee credit lines of OSRAM. The portfolio of security that has not yet been released consists of five guarantees in the USA with a total volume of around 5 million €.
To the extent that such security has not yet been released or that liability of the Siemens Group remains, OSRAM GmbH and Siemens AG have agreed on a complete release from this security respectively the liability of OSRAM. The obligation to obtain releases comes into force as soon as OSRAM has its own group financing, but at the latest when the Spin-off takes effect. OSRAM must then replace the existing Siemens obligations either by providing its own security within 40 banking days or obtaining to release them. OSRAM will reimburse Siemens for all costs incurred for this after the Spin-off has taken effect, and OSRAM will pay a fee. In addition, OSRAM will indemnify Siemens against liability and all costs under claims, especially claims for payment, which are asserted against companies of the Siemens Group with regard to the aforementioned security.
e) Replacement of the factoring program
In the past, certain operational units of the OSRAM Division have participated in a factoring program named "Siemens Credit Warehouse". Under this program, receivables together with the credit risks pertaining thereto were sold to Siemens, while OSRAM remained responsible for the servicing, especially the collection of the receivables. Participation in the program was not in the nature of an advance financing and was terminated in 2011. OSRAM has concluded its own credit insurance program with the credit insurer Coface.
f) Replacement of supplier financing
In the past, the OSRAM Division and some of its strategic suppliers participated in supplier chain financing programs (Supply Chain Finance Programs – "SCFP") in Germany and the USA. These SCFPs are offered and managed by external suppliers. In this context, Siemens AG assumed joint and several liability for the obligations of the OSRAM Division owed to external suppliers. The participation of the OSRAM Division in the SCFP supported by Siemens was replaced in June 2012 by an independent OSRAM SCFP. During a transition period up to the Spin-off taking effect, Siemens AG continues to assume the liability for the obligations of the OSRAM Division under the SCFP by means of a guarantee. The guarantee is limited to a maximum amount of 70 million € and covers only payment obligations which arise under the OSRAM SCFP prior to the Spin-off taking effect. Siemens AG is entitled to collect the outstanding invoices in one amount from OSRAM at the earliest 15 days prior to the Spin-off taking effect and, thus, pay the external suppliers. Otherwise, the liability of Siemens AG expires upon payment of the last receivables secured by the guarantee.