MAKING MODERN LIVING POSSIBLE Annual Report 2011 Danfoss delivers strong results www.danfoss.com Organization On December 31, 2011 The Danfoss Group in brief Danfoss is a global leader in the field of energy-efficient solutions that help save energy and meet the challenge of climate change. Our key competencies are the cooling of food, air conditioning, the control of electric motors and heating systems in buildings – as well as the provision of solutions for renewable energy such as solar power. Danfoss also includes Sauer-Danfoss, which is one of the world’s leading manufacturers of mobile hydraulics. We have built up our competencies within energy-efficient solutions for 78 years. Today Danfoss employs approximately 23,500 employees globally and has 110 sales companies around the world. Read more about Danfoss at www.Danfoss.com and about our energy-efficient solutions at: www.danfoss.com/SolutionsReady/ Date of publication: March 28, 2012 This report is available in Danish and English. In the event of any discrepancy between the two versions, the Danish version shall prevail. 2 Annual Report 2011 I The Danfoss Group Contents Management report – CSR highlights .......................................................................................................................................................................................................................................................................................................................... 4 – Financial highlights of the Group (DKK) ................................................................................................................................................................................................................................................................. 5 – 2011 highlights .......................................................................................................................................................................................................................................................................................................................... 6 – Letter from the Management – Danfoss delivers strong results .......................................................................................................................................................................................................... 9 – Strategic status – Continued focus on core deliveries in 2012 .............................................................................................................................................................................................................. 10 – Financial report for the Danfoss Group ................................................................................................................................................................................................................................................................... 13 – Presentation of results ...................................................................................................................................................................................................................................................................................................... 13 – Innovation ............................................................................................................................................................................................................................................................................................................................... 15 – Human capital ..................................................................................................................................................................................................................................................................................................................... 15 – Employees ............................................................................................................................................................................................................................................................................................................................... 15 – Acquisitions and business expansions in 2011 ................................................................................................................................................................................................................................................ 15 – Divestment and closure of companies and operations in 2011 .......................................................................................................................................................................................................... 16 – Competition case ............................................................................................................................................................................................................................................................................................................... 16 – Discontinued activities ................................................................................................................................................................................................................................................................................................... 16 – Events after year-end ...................................................................................................................................................................................................................................................................................................... 16 – Accounting policies ........................................................................................................................................................................................................................................................................................................... 16 – Corporate governance, risk management & compliance ......................................................................................................................................................................................................................... 17 – Board members ................................................................................................................................................................................................................................................................................................................... 18 – Management members ................................................................................................................................................................................................................................................................................................. 19 – Governance – Statutory account under the Danish Financial Statements Act, section 107b ........................................................................................................................................ 20 – Risk management .............................................................................................................................................................................................................................................................................................................. 21 – Compliance ............................................................................................................................................................................................................................................................................................................................. 23 – Risk overview ......................................................................................................................................................................................................................................................................................................................... 24 – Corporate citizenship ............................................................................................................................................................................................................................................................................................................. 26 – Danfoss Climate & Energy .................................................................................................................................................................................................................................................................................................. 30 – Sauer-Danfoss .............................................................................................................................................................................................................................................................................................................................. 32 – Shareholders 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