Annual Report 2011

Knorr-Bremse Group

Annual Report

Knorr-Bremse Group

Annual Report | 2011

2011

At a Glance KNORR-BREMSE GROUP

2007

2008

2009

2010

2011

Sales

EUR mill.

3,251

3,384

2,761

3,712

4,241

Net income

EUR mill.

198

192

99

239

329

Employees (as per Dec. 31)*

15,235 15,890 15,613 18,053

20,050

Personnel costs

EUR mill.

622

686

641

721

805

Balance-sheet total

EUR mill.

1,735

1,788

1,664

2,194

2,530

Equity

EUR mill.

566

639

533

754

902

Capital expenditure **

EUR mill.

140

134

101

113

159

Depreciation **

EUR mill.

113

115

118

147

165

Incoming orders

EUR mill.

3,767

3,209

3,185

4,040

4,073

Research and development expenditure

EUR mill.

159

171

153

175

209

* incl. Leasing * *not including investments in financial assets

Knorr-Bremse Group

Annual Report

Knorr-Bremse Group

Annual Report | 2011

2011

At a Glance KNORR-BREMSE GROUP

2007

2008

2009

2010

2011

Sales

EUR mill.

3,251

3,384

2,761

3,712

4,241

Net income

EUR mill.

198

192

99

239

329

Employees (as per Dec. 31)*

15,235 15,890 15,613 18,053

20,050

Personnel costs

EUR mill.

622

686

641

721

805

Balance-sheet total

EUR mill.

1,735

1,788

1,664

2,194

2,530

Equity

EUR mill.

566

639

533

754

902

Capital expenditure **

EUR mill.

140

134

101

113

159

Depreciation **

EUR mill.

113

115

118

147

165

Incoming orders

EUR mill.

3,767

3,209

3,185

4,040

4,073

Research and development expenditure

EUR mill.

159

171

153

175

209

* incl. Leasing * *not including investments in financial assets

Main Majority-owned Subsidiaries of Knorr-Bremse AG The Americas Knorr Brake Holding Corporation, Watertown, NY (US)*

Knorr-Bremse Brasil (Holding) Administração e Participação Ltda., São Paulo (BR)

Anchor Brake Shoe Company LLC (US)

Knorr-Bremse Sistemas para

Bendix Commercial Vehicle Systems LLC (US) Bendix Spicer Foundation Brake LLC (US)* IFE North America LLC (US) Knorr Brake Corporation (US) Knorr Brake Ltd. (CA) Merak North America LLC (US) New York Air Brake Corporation (US) Technologies Lanka Inc. (CA)*

Veículos Comerciais Brasil Ltda. (BR) Knorr-Bremse Sistemas para Veículos Ferroviários Ltda. (BR)

Europe – Middle East – Africa

Asia – Australia

Knorr-Bremse Systeme für Schienenfahrzeuge GmbH, Munich (DE)

Knorr-Bremse Systeme für Nutzfahrzeuge GmbH, Munich (DE)**

Knorr-Bremse Asia Pacific (Holding) Ltd., Hongkong (HK)

Freinrail Systèmes Ferroviaires S.A. (FR)

Bost Ibérica S.L. (ES)

Hasse & Wrede CVS Dalian, China Ltd. (CN)*

Knorr-Bremse Rail Systems Italia S.r.I. (IT)

Hasse & Wrede GmbH (DE)

IFE-VICTALL Railway Vehicle Door S ystems

IGE-CZ s.r.o. (CZ)

Knorr-Bremse Benelux B.V.B.A. (BE)

Knorr-Bremse Ges.m.b.H. (AT)

Knorr-Bremse Fékrendszerek Kft. (HU)

Knorr-Bremse Nordic Rail Services AB (SE)

Knorr-Bremse KAMA Systems for

Knorr-Bremse Systemy dla Kolejowych

Commercial Vehicles OOO (RU)*

Srodków Lokomocji PL Sp. z o.o. (PL)

Knorr-Bremse Polska SfN Sp. z o.o. (PL)

Knorr-Bremse Rail Systems (UK) Ltd. (GB)

Knorr-Bremse Sistemi per Autoveicoli

Knorr-Bremse S.A. (Pty.) Ltd. (ZA)* Knorr-Bremse Vasúti Jármű Rendszerek Hungária Kft. (HU) Merak Sistemas Integrados de Climatización S.A. (ES) Microelettrica Scientifica S.p.A. (IT) Oerlikon-Knorr Eisenbahntechnik AG (CH) Sociedad Española de Frenos, Calefacción y

Commerciali S.p.A. (IT) Knorr-Bremse Systèmes pour Véhicules Utilitaires France S.A. (FR) Knorr-Bremse System för Tunga Fordon AB (SE) Knorr-Bremse Systems for Commercial Vehicles Ltd. (GB) Knorr-Bremse Systémy pro užitková vozidla ČR, s.r.o. (CZ)

(Qingdao) Co., Ltd. (CN)* Knorr-Bremse Australia Pty. Ltd. (AU) Knorr-Bremse Brake Equipment (Shanghai) Co., Ltd. (CN) Knorr-Bremse Braking Systems for Commercial Vehicles (Dalian) Co., Ltd. (CN) Knorr-Bremse CARS LD Vehicle Brake Disc Manufacturing (Beijing) Co., Ltd. (CN)* Knorr-Bremse CAFF Systems for Commercial Vehicles Chongqing Ltd. (CN)* Knorr-Bremse Commercial Vehicle Systems Japan Ltd. (JP)** Knorr-Bremse India Pvt. Ltd. (IN) Knorr-Bremse / Nankou Air Supply Unit (Beijing) Co., Ltd. (CN)*

Señales S.A. (ES)

Knorr-Bremse Rail Systems Japan Ltd. (JP)*

Dr. techn. Josef Zelisko Ges.m.b.H. (AT)

Knorr-Bremse Rail Systems Korea Ltd. (KR)

Contact Knorr-Bremse AG Moosacher Straße 80 80809 Munich Germany www.knorr-bremse.com

Knorr-Bremse Systems for Commercial Vehicles India Pvt. Ltd. (IN) Knorr-Bremse Systems for Rail Vehicles (Suzhou) Co., Ltd. (CN) * M inority holding in subsidiary by non-group companies ** 20 % stake held by Robert Bosch GmbH, Stuttgart (DE) As per December 31, 2011

Sigma Transit Systems Pty. Ltd. (AU) Sydac Pty. Ltd. (AU) Westinghouse Platform Screen Doors (Guangzhou) Ltd. (CN)*

Corporate Communications Christoph Günter Tel: +49 89 3547-1402 Fax: +49 89 3547-1403 E-Mail: [email protected]








Asia – Australia










IGE-CZ s.r.o. (CZ)















Señales S.A. (ES)








Overview

04 06 08 10 12

2011 at a Glance The Executive Board of Knorr-Bremse AG The Supervisory Board of Knorr-Bremse AG Report of the Supervisory Board The State and Development of Knorr-Bremse AG and the Knorr-Bremse Group

Reports

38 40 42 56 64 68

Rail Vehicle Systems Markets Market Successes Products Aftermarket Site-specific Projects

Consolidated Financial Statements

76 78 82 92 104 110

Commercial Vehicle Systems Markets Market Successes Products Aftermarket Site-specific Projects

118 120 128 138 144

Knorr-Bremse Group Knorr Excellence Responsibility Employees Trade Fairs

150 171 172 174 175 176 177

Notes to the Consolidated Financial Statements Consolidated Cash Flow Statement Segment Reporting Statement of Changes in Group Equity Independent Auditors’ Report Consolidated Balance Sheet Consolidated Statement of Income

2011 at a Glance Knorr-Bremse makes donation to help victims of natural disaster in Japan István Lepsényi, Managing Director of Knorr-Bremse’s Hungarian subsidiary, named Manager of the Year 2010 in Hungary Ansgar Fries joins the Executive Board of Knorr-Bremse Commercial Vehicle Systems, taking charge of the Center of Competence for chassis and brake control Bendix opens third plant in Acuña, Mexico

Expanded production facilities at IFE-VICTALL in Qingdao officially opened Knorr-Bremse plant in Suzhou celebrates completion of third expansion phase

Knorr-Bremse IT-Services founded

The 2011 Financial Statements Press Conference takes place at headquarters in Munich

January

March

Knorr-Bremse and Deutsche Bank celebrate a century of successful collaboration Knorr-Bremse voted “Best Brand in the Commercial Vehicle Sector” for the sixth time running Merak Railway Technologies completes expansion of Shanghai plant Heinz Hermann Thiele is made an honorary citizen of Aldersbach

May

February

April

June

Knorr-Bremse Commercial Vehicle Systems receives 2011 VDA Logistics Award

Presentation of the in-house 2011 Knorr Excellence and CSR Awards

Knorr-Bremse celebrates 30th anniversary of ABS anti-lock brakes

Knorr-Bremse showcases products and services at the UITP trade fair in Dubai

Knorr-Bremse supports DocStop and donates a “DocMobil”

Group-wide Knorr-Bremse Identity project kicks off

Knorr-Bremse sets out its stall at the Railtex fair in London

Dr. Stefan Haas, Head of Innovation and Development at Knorr-Bremse Rail Vehicle Systems, receives the European Railway Award for development of the eddy-current brake Knorr-Bremse KAMA named Company of the Year by the President of the Russian Federation Start of production at the Knorr-Bremse CAFF joint venture in Chongqing

“North American Product Leadership of the Year Award” goes to Knorr-Bremse subsidiary Bendix

Knorr-Bremse Global Care provides emergency aid for Horn of Africa famine 10,000th Chinese metro car fitted with Knorr-Bremse systems Microelettrica acquires Comet Fans S.r.l., an Italian manufacturer of axial fans for rail vehicles

Knorr-Bremse conducts its fourth worldwide employee survey

In Barcelona, Knorr-Bremse receives the European Business Award

Knorr-Bremse wins major order for metro project in Beijing

Series production of ESP celebrates tenth anniversary

Knorr-Bremse KAMA honored for best charitable project

Bendix acquires select assets from US traffic data management provider Iteris Inc.

Knorr-Bremse joins the exhibitors at the ComTrans and Railway Salon Expo fairs in Russia

The first turf is cut for the new Knorr-Bremse Manufacturing & Development Center in Pune, India

July

September

November

August

October

December

Knorr-Bremse again receives excellent ratings from Standard & Poor’s and Moody’s

Heinz Hermann Thiele awarded the Beuth Medal of Honor

The 500,000th drum brake is produced at Knorr-Bremse KAMA

Knorr-Bremse stages “Girls for Technology” camp in Munich

Knorr-Bremse obtains approval for KAB60 control valve for the Russian market

Knorr-Bremse Corporation in the USA purchases a 75% stake in Technologies Lanka in Canada

The first turf is cut for a new Knorr-Bremse plant in Brazil

Jochen Hahn wins European Truck Racing Championship

Expansion measures successfully completed at Knorr-Bremse plant in Liberec, Czech Republic

TATA Tec Day staged at Tata Motors premises in Pune, India

6

The Executive Board of Knorr-Bremse AG

EXECUTIVE BOARD

Klaus Deller

Dr. Lorenz Zwingmann Spokesman of the Executive Board since October 10, 2011

Dr. Dieter Wilhelm

Dr. Raimund Klinkner Chairman of the Executive Board until October 10, 2011

7

8

The Supervisory Board of Knorr-Bremse AG

Wolfgang Hubert* Munich (since March 18, 2011)

Dr. Hans-Peter Binder Berg

Werner Ratzisberger* Munich

Dr. Kurt Kiethe Munich

Dr. Martin Kimmich* Munich

Manfred Wennemer Bensheim

Representative of the disabled, Chairman of the Works Council of Knorr-Bremse Systeme für Schienenfahrzeuge GmbH, Knorr-Bremse AG, KB Media GmbH, Knorr-Bremse IT-Services GmbH

Retd. Member of the Board of Management of Deutsche Bank AG, Munich Branch

Project engineer, mechanical surface treatment, Knorr-Bremse Systeme für Nutzfahrzeuge GmbH

Attorney at law

IG Metall Trade Union Secretary, Munich Office

2nd Deputy Chairman, Former Chairman of the Executive Board of Continental AG

*Employee representative

SUPERVISORY BOARD

Heinz Hermann Thiele Munich

Dr. Eduard Gerum* Rosenheim

Dr. Wolfram Mörsdorf Essen

Günter Wiese* Berlin (since March 18, 2011)

Dr. h. c. Horst Zimmer LampertheimHofheim

Heinz Hausner* Salzweg

Chairman, Entrepreneur

1st Deputy Chairman, Consultant to the Executive Board of Knorr-Bremse Systeme für Nutzfahrzeuge GmbH

Retd. Member of the Executive Board of ThyssenKrupp AG

Full-time Chairman of the Works Council of Knorr-Bremse Systeme für Schienenfahrzeuge GmbH, Berlin plant

Retd. Member of the Board of Management of Mercedes-Benz AG

Assistant Representative of the IG Metall Trade Union, Passau Office

Frank Hellmer* Munich (until March 18, 2011) Test engineer, Knorr-Bremse Systeme für Schienenfahrzeuge GmbH

Klaus Gegenfurtner* Aidenbach (until March 18, 2011) Toolmaker, Knorr-Bremse Systeme für Nutzfahrzeuge GmbH

9

10

Report of the Supervisory Board In the course of fiscal 2011, the Supervisory Board concerned itself in detail with the state and development of Knorr-Bremse AG and all Group companies.

Along with important individual transactions and human resources decisions, this also included consideration of fundamental aspects of strategic direction and corporate planning. In addition, the Supervisory Board received regular reports from the Executive Board either in the course of its meetings or in written or oral form. The Supervisory Board examined important individual transactions, as well as deciding on items of business that required its approval either by law or in line with company statutes. The information and analyses upon which the decisions of the Supervisory Board were based were discussed and assessed in depth together with the Executive Board. In order to comply with the requirements of the German Accounting Law Modernization Act in terms of corporate governance, a second meeting of the Financial Statements Committee was held in mid year. At its meetings, the Financial Statements Committee dealt in particular with the supervision of the accounting process, the efficacy of the internal controlling system, the risk management system and the internal audit system, as well as the work of the auditors. In fiscal 2011 the Knorr-Bremse Group was able to increase sales to EUR 4.24 billion (2010: EUR 3.71 billion). The Rail Vehicle Systems division posted further sales growth assisted primarily by the recovery of the freight market in North America, but also by positive impetus from the European region. The Commercial Vehicle Systems division benefited from the recovery of the markets in Europe and North America in particular, as well as from the expansion of its business across all regions, and was also able to report substantial sales growth. To safeguard the future development of the company, in 2011 Knorr-Bremse continued to invest in the strategic development and expansion of its production plants. In the year under review, a new Commercial Vehicle Systems plant was opened in Acuña (Mexico). Also in 2011, two extensions to the Rail Vehicle Systems plants in Shanghai and Suzhou were officially opened in China. Moreover, the Commercial Vehicle Systems plant in Liberec (Czech Republic), which was only inaugurated in 2010, was expanded in the year under review.

In addition to organic growth, the year under review saw corporate strategy continue to focus on targeted acquisitions and joint ventures with the aim of optimizing the product portfolio. In the rail vehicle sector the acquisition of the Kalmar Tågkompetens AB in Kalmar (Sweden), a specialist in the door aftermarket segment, and Technologies Lanka Inc. in La Pocatière (Canada), who specialize in linear door motors, led to a strengthening of the onboard system portfolio. In addition, Microelettrica Scientifica S.p.A., Milan (Italy), acquired Comet Fans S.r.l., Solaro (Italy), an Italian manufacturer of axial fans for locomotives, vehicle drive systems and other industrial applications, also expanding the portfolio. The acquisition of an additional 25% of the Icer Rail S.L. joint venture in Pamplona (Spain) also reinforced the friction materials product segment (subject to official approval). Also, KnorrBremse Systeme für Schienenfahrzeuge GmbH, Munich (Germany), purchased the remaining 25% of KnorrBremse Nordic Rail Services AB, Lund (Sweden), from HVL BaneTeknik A/S, Snekkersten (Denmark). In the commercial vehicle sector, Knorr-Bremse’s US subsidiary Bendix Commercial Vehicle Systems LLC, Elyria (USA), acquired select assets of Iteris Inc., Santa Ana (USA), strengthening its product portfolio in the field of active safety systems. In addition, the joint venture Knorr-Bremse CAFF Systems for Commercial Vehicles Chongqing Ltd. was founded in Chongqing (China) for the production of commercial vehicle braking system and drivetrain components, representing a further important strategic step forward in the world’s largest commercial vehicle market. Against the backdrop of rising sales, the company’s top priority remained ensuring the highest quality standards in its products and processes. In 2011, work continued on the optimization of processes and structures in all of the key areas. In particular, the FIT (Finance & IT Excellence) initiative introduced in 2010 was further expanded in the year under review. In the context of the ONE IT project the company’s organizational IT structures were refined and, effective January 1, 2011, merged to form Knorr-Bremse IT Services GmbH.

SUPERVISORY BOARD

The 2011 Financial Statements and the Management Report on Knorr-Bremse AG, the 2011 Consolidated Financial Statements and the Management Report on the Knorr-Bremse Group drawn up by the Executive Board, and the company‘s accounts were examined by the auditors elected by the Annual Shareholders‘ Meeting, KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, and endorsed with their unqualified opinion dated March 2, 2012. The Supervisory Board also examined the Financial Statements for fiscal 2011, the Management Report, the proposed allocation of unappropriated retained earnings, and the Consolidated Financial Statements and Management Report on the Knorr-Bremse Group. No objections were raised. At its meeting on March 16, 2012, the Supervisory Board approved the 2011 Financial Statements, which thereby became legally binding. The Supervisory Board concurs with the Executive Board’s proposal for the allocation of unappropriated retained earnings. The Consolidated Financial Statements were also approved. The auditors attended the meeting of the Financial Statements Committee on February 24, 2012 as well as the financial statements meeting of the Supervisory Board on March 16, 2012, reported on their key findings and answered outstanding questions. KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, also examined the Executive Board‘s report on relations with affiliated companies, drawn up in line with Paragraph 312 German Corporation Law (AktG). The auditors endorsed this report with the following opinion: “Having audited and assessed this report in accordance with professional standards, we confirm that: 1. The factual contents of the report are correct. 2. The consideration furnished by the Company in the legal transactions set out in the report was not unreasonably high.”

The term of office of the existing Supervisory Board expired in 2011. At the Annual Shareholders’ Meeting on March 18, 2011 the previous representatives of the shareholders were re-elected to the Supervisory Board of Knorr-Bremse AG. The employees are now represented by Wolfgang Hubert, Werner Ratzisberger, Dr. Martin Kimmich, Dr. Eduard Gerum, Günter Wiese and Heinz Hausner. On behalf of Knorr-Bremse AG, the Supervisory Board wishes to thank all its former members for their contributions to the work of this body. Effective October 10, 2011, Dr. Raimund Klinkner resigned his seat on the Executive Board and all other positions at Knorr-Bremse by mutual agreement and left the company on December 31, 2011. On October 10, 2011, Dr. Lorenz Zwingmann assumed the interim role of Spokesman of the Executive Board of Knorr-Bremse AG in addition to his existing duties in the areas of Finance, Controlling and IT. It is with a deep sense of gratitude that we honor the memory of Dr.-Ing. E. h. Wilfried Lochte, who passed away on March 7, 2011. Dr. Lochte was a member of the Supervisory Board of Knorr-Bremse AG and of the Supervisory Board of Knorr-Bremse Systeme für Nutzfahrzeuge GmbH from 1993 to 2008. With his extensive experience and pronounced entrepreneurial thinking, throughout this period Dr. Lochte stewarded the progress of Knorr-Bremse with great commitment and was instrumental in shaping the company’s development through fundamental decisions on its strategic direction. He maintained close, friendly and trusting relations with the company’s shareholders. We will not forget him.

Munich, March 16, 2012 The Supervisory Board

The Supervisory Board also examined the Executive Board‘s report on relations with affiliated companies and has no objections to the concluding statement by the Executive Board or to the auditors‘ findings. Heinz Hermann Thiele, Chairman

11

Management Report In fiscal 2011, the Knorr-Bremse Group saw sales climb more than half a billion euros or 14% to EUR 4.24 billion (2010: EUR 3.71 billion). The Rail Vehicle Systems division posted a further 8% increase in sales in 2011, reaching a total of EUR 2.19 billion (2010: EUR 2.02 billion). In the year under review, growth was driven not least by the North American region, on the back of a resurgent freight car market, and by Europe. Knorr-Bremse´s Commercial Vehicle Systems division reported 22% growth in 2011 with business expanding in every region as sales reached EUR 2.07 billion (2010: EUR 1.70 billion). A key contributory factor here was the ongoing buoyancy of the commercial vehicle markets in Europe and North America in particular.

14

The State and Development of Knorr-Bremse AG and the Knorr-Bremse Group An overview of the Knorr-Bremse Group

General economic developments

The Knorr-Bremse Group is the world‘s leading manufacturer of braking systems for rail and commercial vehicles. For more than 100 years now the company has pioneered the development, production, marketing and servicing of state-of-the-art braking systems. Other lines of business in the rail vehicle systems sector include automatic door systems, HVAC systems, control components and windscreen wiper systems, platform screen doors, friction material, simulators and driver assistance systems. In the commercial vehicle systems sector, the product range includes complete braking systems with driver assistance systems, as well as torsional vibration dampers and powertrain-related solutions, and transmission control systems for enhanced energy efficiency and fuel economy.

Compared to the recovery of the worldwide markets in the previous year, the global economy proved far more volatile in 2011, with marked differences in developments from one region to the next. In overall terms, however, worldwide growth can be said to have continued.

The structure of the Knorr-Bremse Group is based on the regions Europe, North America and South America, and Asia/Australia, and the development of the Group is geared to meeting the specific requirements of the markets and customers in these regions.

The economic performance of the Eurozone was particularly hard hit by the pronounced sovereign debt of several EU member countries, including Greece, Spain and Portugal. Following on from 1.9% growth in 2010, economic output in the Eurozone rose by a similarly modest 1.6% in 2011. With growth of 3.0% (2010: 3.6%), Germany made a substantial contribution to GDP growth in the Eurozone.

This regional organizational structure is designed to offer globally active customers uniform technical platforms worldwide, while at the same time taking specific local needs into account. It also ensures that customers who operate on a regional basis are supplied with globally proven systems and components.

A slowdown in the pace of growth became evident in both industrialized and emerging nations, with the latter continuing to make a larger contribution to growth. In 2011, the gross domestic product (GDP) of the emerging economies increased by 6.2% (2010: 7.3%) compared to average GDP growth of just 1.6% (2010: 3.2%) for the industrialized nations of the world. Global figures showed overall economic growth of around 3.8% (2010: 5.2%).

Following the same pattern as in the Eurozone, in the USA economic growth slowed from 3.0% in 2010 to 1.8% in 2011. The reasons here included the high level of sovereign debt, a weak housing market and the continuing weak state of consumer confidence. In Brazilian economy too, the pace of GDP growth slowed to 2.9%, down from 7.5% in 2010. China and India, by contrast, retained their role as drivers of global economic growth. In 2011, GDP in China was up 9.2% (2010: 10.4%), while India saw GDP rise 7.4% (2010:

MANAGEMENT REPORT

9.9%). In Japan, however, GDP sank 0.9% as a result of the natural disaster that occurred in the spring of 2011 (2010: +4.4%). The growing uncertainty surrounding the development of the real economy was also reflected in the commodity markets in 2011. Following a sharp rise in the first half year, commodity prices faded strongly towards year-end in what was a highly volatile market environment. From around USD 90 per barrel at the end of 2010, the price of oil rose to USD 127 per barrel at the beginning of the second quarter of 2011, before falling back to USD 107 per barrel at year end. Aluminum prices followed a similar pattern and, after rising as high as USD 2,800/t (top price in 2008 approx. USD 3,300/t, lowest price in 2009 approx. USD 1,300/t) declined again to approximately USD 2,000/t in the course of the year under review. On the balance sheet date the value of the US dollar – which lines up alongside the euro as one of the Group’s main operating currencies – had risen 3.2% against the euro compared to December 31, 2010, with one euro worth USD 1.29. As an annual average, the euro traded at USD 1.40.

4,241 3,712 3,251

3,384

329 2,761 239

198

192

99

2007

2008

2009

2010

2011

Sales and net income for the Knorr-Bremse Group in EUR millions Sales

Net income

15

16

Development of the Knorr-Bremse Group in 2011

Consolidated sales for the Knorr-Bremse Group were up 14.2% from EUR 3,712.2 million in 2010 to EUR 4,240.8 million in fiscal 2011. This figure includes negative currency translation effects in the amount of approximately EUR 60 million (compared to positive effects of EUR 170 million in 2010). In an economic environment that remained volatile, the company benefited from its strong strategic position with two globally active divisions, Rail Vehicle Systems and Commercial Vehicle Systems, in markets that developed differently. The Rail Vehicle Systems division witnessed diverse regional developments in the year under review and was able to increase sales to EUR 2,186.9 million (2010: EUR 2,024.4 million). Positive impetus was mainly generated by the North American region, led by the recovery of the freight market, and by Europe. In 2011 the Commercial Vehicle Systems division grew its business across all regions and posted sales of EUR 2,068.2 million (2010: EUR 1,700.7 million). In Europe and North America in particular, the division benefited from the ongoing positive development of the commercial vehicle markets.

The business environment by sector The development of the global markets and the ongoing overall increase in the volume of freight transportation had different impacts on the various regions across the Group. For the Rail Vehicle Systems division, the market environment was shaped by a modest recovery in the rail freight sector. In Europe demand for freight cars stabilized, while the locomotive market showed 15% growth. In South America, by contrast, demand for freight cars more than doubled, while in North America it reached three times its prior-year level. Demand for locomotives was also up in both of these regions. In Asia, demand for freight cars increased by 16%, while demand for locomotives showed a 24% decline.

Following their 2010 recovery, the commercial vehicle markets stabilized in 2011 with truck production (airbraked trucks of 6t and over) rising 4%. In Europe, truck production was up by a further 31% in 2011 (2010: +53%). Even so, the market remained 24% below the level of its record year 2008. The North American market was vitalized by rising replacement investments, growing 54% in the year under review (2010: +23%). In South America, truck output was 14% up in 2011 (2010: +54%). The Asian region was unable to sustain the growth of past years, with truck production falling 9% in 2011 (2010: +46%).

Acquisitions, additions and joint ventures In the year under review Knorr-Bremse continued its strategy of improving its market position through targeted acquisitions. Effective January 1, 2011, Knorr-Bremse Nordic Rail Services AB, Lund (Sweden), acquired the Swedish door aftermarket specialist Kalmar Tågkompetens AB, Kalmar (Sweden), thereby strengthening its portfolio in the Northern European market. Also effective January 1, 2011, the organizational structures of Knorr-Bremse IT-Services GmbH, Munich (Germany), became operational, uniting the IT functions of Knorr-Bremse AG, Munich (Germany), Knorr-Bremse Systeme für Nutzfahrzeuge GmbH, Munich (Germany), and Knorr-Bremse Systeme für Schienenfahrzeuge GmbH, Munich (Germany). With effect from January 19, 2011, Knorr-Bremse Asia Pacific (Holding) Ltd., Hong Kong (China), and the Chinese manufacturer Chongqing CAFF Automotive Braking & Steering Systems Co., Ltd., Chongqing (China), founded the joint venture Knorr-Bremse CAFF Systems for Commercial Vehicles Chongqing Ltd., Chongqing (China). Knorr-Bremse holds a 66% stake in the joint venture company, which manufactures brake components in the

MANAGEMENT REPORT

air supply and brake control segments, as well as transmission and clutch control components.

BaneTeknik A/S, Snekkersten (Denmark), with retroactive effect from December 31, 2010.

On July 27, 2011, Microelettrica Scientifica S.p.A., Rozzano (Italy), acquired Comet Fans S.r.l., Solaro (Italy), an Italian manufacturer of axial fans for locomotives, vehicle drive systems and other industrial applications, thereby expanding its product portfolio. In addition, Microelettrica Scientifica S.p.A., Rozzano (Italy), extended its worldwide sales activities through the establishment of two joint ventures, one in Brazil (Microelettrica do Brasil Ltda., São Paulo (Brazil), founded on January 14, 2011) and the other in Turkey (Microelettrica Scientifica Aktif Ltda., Istanbul (Turkey), founded on November 1, 2011).

Overall, these acquisitions had no substantial effect on the assets, financial status and profitability of the KnorrBremse Group in fiscal 2011.

On July 29, 2011, North American subsidiary Bendix Commercial Vehicle Systems LLC, Elyria (USA), purchased select assets of Iteris Inc., Santa Ana (USA). This led to Bendix adding the Lane AutoVue Departure Warning system and the Safety Direct data management system to its portfolio in the North American market.

The aim is also to always ensure the same customary high standards in terms of production processes and product quality at all Knorr-Bremse plants around the world. In January 2011 a new Commercial Vehicle Systems plant was opened in Acuña (Mexico). Among other things this plant will be producing brake and spring brake cylinders for the commercial vehicle market in North America. The physical proximity to the two established plants in Acuña means that optimum utilization of corporate shared services and processes is assured. The resultant lean and costeffective processes ensure a lasting boost for the competitiveness of Knorr-Bremse. Elsewhere, in Liberec (Czech Republic) the need for greater capacity led to the Commercial Vehicle Systems plant, which was only inaugurated in June 2010, being expanded in 2011 by a further 7,500 m². The additional space was taken up in part by new production lines for bayonet-type filter cartridges and double-diaphragm brake cylinders.

On October 27, 2011, Sociedad Española de Frenos, Calefacción y Señales S.A., Getafe (Spain), acquired an additional 25% stake in the Icer Brakes S.A. joint venture in Pamplona (Spain), enabling it to further strengthen its position in the manufacturing of brake pads (subject to approval by the antitrust authorities). On December 2, 2011, the newly founded Knorr Brake Corporation Canada Holdings Ltd., Montreal (Canada), acquired the onboard systems specialist Technologies Lanka Inc., La Pocatière (Canada), not least adding linear drive technology to the company’s door systems business in North America. On December 30, 2011, Knorr-Bremse Systeme für Schienenfahrzeuge GmbH, Munich (Germany), purchased the outstanding 25% of the shares in KnorrBremse Nordic Rail Services AB, Lund (Sweden), from HVL

Major projects In 2011 Knorr-Bremse continued its rigorous strategy of localizing assembly operations and creating production capacity on site in the various markets. Aligned with KnorrBremse’s regional approach, this enabled the company to further enhance its global market position in a series of business areas and thereby secure its commercial success.

Three new production lines were also set up at the Naberezhnye Chelny plant in Russia, where the Knorr-Bremse KAMA Systems for Commercial Vehicles OOO joint venture is based. September 2011 saw the start of production of three new products – manual slack adjusters, power clutches and clutch master cylinders – all further additions

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to the portfolio of the joint venture, which had previously concentrated on the manufacture of drum brakes and torsional vibration dampers. In China the Rail Vehicle Systems division geared up to meet changing local market conditions and invested in the expansion of production capacity. In 2011, this led to the opening of two extensions to existing facilities. One of these was at the Shanghai plant, where Knorr-Bremse subsidiary Merak manufactures HVAC systems. The newly extended plant is designed to comply with the highest international standards of process organization, labor efficiency, logistics and quality, based on full implementation of the globally applicable Knorr-Bremse Production System (KPS). The extension was officially opened in May 2011. The second extension, opened in March 2011, was at the Suzhou plant, originally founded in 2005 and since twice extended – in 2007 and again in 2010. The latest measures brought an additional 5,700 m² of production space and office facilities covering around 3,300 m².

Quality and processes Knorr-Bremse continues to target best-in-class processes as the foundation on which its competitive capabilities are based. In 2011, processes and structures were again reviewed and enhanced across all key areas. For several years now, Knorr-Bremse has been bundling initiatives designed to drive the continuous improvement of its business processes within the Knorr Excellence (KE) business model, which has been rolled out across the Group. In this context, the company has brought together all process optimization initiatives from across the divisions. In addition, in 2011 KnorrBremse also merged its management systems within a single, harmonized process model, leading to the creation of a common platform within the Group that facilitates access to the business processes and enhances communications.

In the Rail Vehicle Systems division, one key measure was to anchor the specific requirements of the International Railway Industry Standard (IRIS) in the various processes and ensure compliance across all plants. Knorr-Bremse has become one of the first companies in the rail transportation sector to implement certification to this standard across the Group. For several years now the Strong Focus program has successfully brought together all activities designed to boost productivity, cut costs and promote growth. As part of a multi-year forward projection, valuable ideas submitted by the workforce and management are collected, evaluated and gradually implemented. In 2011 this brought further substantial cost savings and improvements in productivity along the value chain, helping safeguard the company’s competitiveness.

MANAGEMENT REPORT

Assets, financial status and profitability

In 2011 the main factors in the development of the Knorr-Bremse Group’s business were the continuing recovery of the commercial vehicle markets and growth in the rail vehicle sector which varied from one region to the next. Consolidated sales rose 14.2% in 2011 to EUR 4,240.8 million (2010: EUR 3,712.2 million). In Europe, consolidated sales were up 15.0% to EUR 2,169.5 million (2010: EUR 1,886.0 million), which corresponds to 51.2% of the consolidated total (2010: 50.8%). The Americas contributed EUR 1,020.0 million (2010: EUR 827.0 million) or 24.1% (2010: 22.3%) to consolidated sales. In the Asia/Australia region, sales amounted to EUR 1,051.3 million (2010: EUR 999.2 million), which equates to 24.7% (2010: 26.9%) of the consolidated total. Incoming orders were valued at EUR 4,072.5 million (2010: EUR 4,040.0 million), 4.0% below the level of annual sales and 0.8% up on the previous year. Orders on the books at the Knorr-Bremse Group declined 3.4% in the year under review to EUR 3,268.1 million (2010: EUR 3,381.8 million).

rail vehicle HVAC systems business unit, Merak Sistemas Integrados de Climatización S.A., Getafe (Spain), reported a loss in the year under review. This was largely down to the loss of high-margin sales to a Chinese customer, as well as the substantial impact on income of quality problems, primarily affecting supply obligations in China. The consolidated balance sheet total rose 15.3% in 2011 to EUR 2,530.4 million (2010: EUR 2,194.2 million), largely influenced by investments in fixed assets, the volumeled increase in inventories, and the rise in liquid funds. At year-end 2011, total assets represented 59.7% of sales. As a proportion of the balance sheet total, intangibles, fixed assets, and investments were down against the prioryear level to 32.7% (2010: 36.5%). Working capital, defined as the sum of inventories and accounts receivable, minus accounts payable trade, rose as a result of the increased volume of orders to EUR 470.6 million at yearend (2010: EUR 415.6 million) or 39.9 days’ sales (2010: 40.3 days). The equity ratio rose by 1.3 percentage points from 34.4% to 35.7%.

Net income for the Knorr-Bremse Group increased in the year under review to EUR 329.3 million (2010: EUR 239.4 million). Net return on sales reached 7.8% (2010: 6.4%). The European region contributed EUR 173.9 million to net income, corresponding to a net return on sales of 8.0%. Net income from the Americas totaled EUR 76.0 million, with a net return on sales of 7.5%. The Asia/Australia region posted net income of EUR 79.4 million, which equates to a net return on sales of 7.6%.

Of the Group’s total assets, 48.9% are tied up in the European region, 23.8% in the Americas, and 27.3% in the Asia/Australia region. Net cash flow of EUR 194.7 million led to net liquidity of EUR 397.0 million and was achieved primarily by an inflow of funds from gross cash flow equivalent to 12.1% of sales. Substantial capital requirements were generated in 2011 by investments (EUR 158.9 million), dividends (EUR 177.4 million) and an increase in working capital (EUR 54.9 million). The ratio of net liquidity to shareholders’ equity stood at 44.0%, compared with 26.8% in 2010.

In fiscal 2011, the door systems business unit (KnorrBremse Ges.m.b.H, Mödling (Austria), IFE Division) had to contend with a drop in profitability due to product quality and delivery performance issues. Appropriate provisions have been made in the financial statements. The

Knorr-Bremse’s robust strategic positioning, the positive development of the company’s business and its excellent working capital management were confirmed by the external rating agencies Standard & Poor’s and Moody’s, who have been rating the Knorr-Bremse Group

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Overall assessment of the economic position of the Group

since 2000. Moody’s awarded Knorr-Bremse an “A3/Outlook stable” rating, while Standard & Poor’s rated the company “A-/Outlook stable”. That makes Knorr-Bremse the only family-owned company in the Standard & Poor’s Global Automotive Suppliers Ranking 2011 with investment grade status to be awarded an “A” rating.

Within the general economic environment described above, the Knorr-Bremse Group maintained its overall position with regard to its assets and financial status, and was able to further increase its net liquidity in 2011. The Group’s profitability was ensured by rigorous cost management and above all by the internal optimization of processes and structures. With an equity ratio of 35.7% and net liquidity of EUR 397.0 million, the structure of the Group’s assets is extremely stable, so that it can continue to readily meet its financial obligations.

Knorr-Bremse AG As the parent company, Knorr-Bremse AG performs the role of service provider and holding company, as well as a strategic management function on the operational side. Rising income from investments in associated and related companies meant that income before taxation increased to EUR 183.2 million in the year under review (2010: EUR 119.3 million). Along with interests in affiliated companies, the balance sheet of Knorr-Bremse AG largely reflects receivables from and payables to Group companies and these are centrally administered, partly within the framework of the cashpooling process managed by Knorr-Bremse AG. KnorrBremse AG acts as an in-house bank for its subsidiaries around the world. This includes handling the central hedging of market price risks. The subsidiaries contract their hedging transactions with Knorr-Bremse AG, which in turn hedges part or all of the net residual risk for the Group with external banks. With the aid of the global process standardization and transparency achieved through Knorr Excellence, KnorrBremse AG is able to efficiently control its own business and that of the associated and related companies.

MANAGEMENT REPORT

Appropriation of retained earnings Knorr-Bremse AG posted unappropriated retained earnings of EUR 263.9 million in 2011 (2010: EUR 262.6 million). The Annual Shareholders Meeting will be asked to approve the proposal that an amount of EUR 156.0 million from the unappropriated retained earnings of KnorrBremse AG be used to pay a dividend of EUR 60.00 (2010: EUR 60.00) per dividend-bearing share with a par value of EUR 26.00, with the balance to be carried forward to new account.

Relations with affiliated companies KB Holding GmbH, Grünwald, Germany, directly holds more than half the share capital of Knorr-Bremse AG. Pursuant to § 312 German Corporation Law (AktG), a report on relations with affiliated companies has been drawn up which includes the following statement: “In the legal transactions listed in the Report on Relations with Affiliated Companies, in accordance with the circumstances known to us at the time at which the said transactions took place, our company received appropriate counterperformance in each case.” The report was audited by the Auditors and received their unqualified opinion.

Assets Balance sheet total in EUR millions

FIxed assets/intangibles

Liabilities 2,194.2

2,530.4

2,194.2

2,530.4

34%

30%

34%

36%

3%

3%

9%

8%

Investments

Current assets/RAP

49%

46%

52%

51%

Liquid assets

14%

21%

5%

5%

2010

2011

2010

Structure of assets, liabilities and finances of the Knorr-Bremse Group

2011

Balance sheet total in EUR millions

Shareholders‘ equity

Pension accruals

Short-term debt

Borrowings

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Regional developments by division

In the year under review, the Rail Vehicle Systems division contributed EUR 2,186.9 million (2010: EUR 2,024.4 million) to consolidated Group sales, while the Commercial Vehicle Systems division posted sales of EUR 2,068.2 million (2010: EUR 1,700.7 million). The continuing buoyancy of the commercial vehicle markets and the expansion of the division’s global market position led to convergence of the contribution to sales of the two divisions in 2011. The Commercial Vehicle Systems division accounted for 49% (2010: 46%) and the Rail Vehicle Systems division for 51% (2010: 54%) of consolidated sales. The development of the two divisions is set out below for the individual regions that make up the Group.

Europe Rail Vehicle Systems 2011 brought an end to the decline in rail freight transportation that set in towards the end of 2008 under the influence of the financial and economic crisis. The market situation in both the original equipment and aftermarket sectors showed a modest recovery. Compared to the previous year, more locomotives were purchased in the year under review and locomotive output increased by around 15%. Production of freight cars remained at the prior-year level, settling at 7,000 units. In the European passenger transportation sector too, a recovery set in and several important large-scale projects were revived or newly awarded in both the mass transit and mainline sectors. Knorr-Bremse was among the beneficiaries of European market developments and in 2011 was again able to win some important orders. The company’s position in the European mass transit sector was strengthened by incoming orders. One example here was the framework agreement that Knorr-Bremse concluded with Alstom to equip the LINT mass transit multiple units. The first job under this agreement will cover 65 DMU cars for the Neckar-

Köln line. In the metro segment, Knorr-Bremse is to supply door systems, oil-free compressors, shoe brake units and brake resistors to the Moscow Metro. In the multiple unit and high-speed rail markets too, Knorr-Bremse was able to conclude significant sales agreements. For example, Knorr-Bremse was the successful bidder in the tender for the new V300 Zefiro highspeed trains for operator Trenitalia and is to equip 50 eight-car sets with HVAC and door systems. The company also won the order to supply the braking systems for Kazakh Railways’ twin-unit KZ8A locomotives. The equipment concerned (the EP Compact brake control system with electronic brake pressure control and wheel slide protection) was specially developed to operate at temperatures down to minus 55 °C. Also, after many years of development and marketing activities, a pilot order in the European region was obtained for the LEADER driver assistance system.

Commercial Vehicle Systems After truck output in Western Europe had fallen in 2009, the market began to recover in 2010. This trend continued in 2011 with truck production reaching 422,000 units. However, while this equated to a 30% increase year-onyear, the market still trailed 25% behind its pre-crisis level of 562,000 vehicles built. All of Knorr-Bremse’s customers in the original equipment sector benefited almost equally from this upturn, which therefore had a positive impact on the full range of products manufactured and marketed by the Commercial Vehicle Systems division’s European production network. Trailer output in Western Europe also showed 30% growth in 2011, rising to 156,000 units. However, this was still 23% down on the 2008 peak of 202,000 trailers built. Production of trucks in Central and Eastern Europe also increased, rising 35% from around 75,000 units in 2010 to 101,000 units in 2011, slightly outpacing the growth in Western European truck output. In the aftermarket sector too, Knorr-Bremse benefited from the positive development of the European market.

MANAGEMENT REPORT

Along with the disc brake, the key sales drivers in Europe in 2011 were the electronic braking systems ABS and EBS. Also in the year under review, two important electronic safety systems celebrated an anniversary: Series production of ABS anti-lock brakes for commercial vehicles began 30 years ago, laying the foundation for the electronic braking system EBS, and the electronic stability program ESP celebrated its tenth anniversary. In the context of the SFTP vehicle platform that went into series production in September 2011, for the first time Knorr-Bremse is supplying an electronic braking system for the heavy-duty trucks built by Daimler AG, including the new Actros model. Knorr-Bremse is also to equip the vehicles with Electronic Air Control (EAC), an air supply system including compressors, and disc brakes. 2011 also brought successes for Knorr-Bremse with smaller vehicle manufacturers. One such order was obtained from the European subsidiary of the Japanese manufacturer Nissan, NISSAN Motor Iberica S.A. This concerns the supply of the entire braking system, which along with ABS also includes the integrated electronic stability program (ESP), the air supply system, disc bakes and brake cylinders. In addition, Knorr-Bremse’s Polish subsidiary was able to conclude new long-term agreements with the leading Polish commercial vehicle manufacturers, thereby creating a stable basis for future business development. In 2011 Knorr-Bremse also benefited from the upswing in the Eastern European market. By way of example, the year under review brought the next stage in the expansion of the successful Knorr-Bremse KAMA Systems for Commercial Vehicles OOO joint venture initiated in 2007 between Knorr-Bremse and the largest Russian commercial vehicle builder, KAMAZ. September 2011 saw the start of production of three new products – manual slack adjusters, power clutches and clutch master cylinders – all further additions to the portfolio of the joint venture, which had previously concentrated on the manufacture of drum brakes and torsional vibration dampers. Also in 2011, the joint venture celebrated production of its 500,000th drum brake.

North America Rail Vehicle Systems In 2011 the freight car market in North America experienced its first upturn since 2008 in terms of unit output. New freight car construction increased from 17,000 units in the prior year to 47,000 units in the year under review. On top of this, North American customers took delivery of some 890 locomotives in 2011, which equates to growth of over 150%. A further 420 locomotives built in North America were exported in the year under review. In the passenger transportation sector, the market was buoyant, not least on account of the expansion and construction of mass transit networks. Knorr-Bremse benefited from the positive development of the rail freight market and was able to increase its market share significantly in this segment. Knorr-Bremse was selected by the largest US freight car manufacturer, Trinity Rail Group, as its preferred supplier of braking systems and components and in that capacity supplied braking systems for the majority share of approximately 14,000 freight cars delivered by Trinity in 2011. Also worthy of note is an order by TTX of 3,600 car sets of KnorrBremse freight car brake equipment for new intermodal cars. In the mass transit sector, Knorr-Bremse was able to build on its existing position and won orders for several additional important mass transit projects. Thus Knorr-Bremse Rail Vehicle Systems will be supplying air treatment systems and bogie equipment for over 460 MPM-10 metro cars for the Montreal Metro. This major order and the accompanying product development work has also assured Knorr-Bremse of a good starting point from which to acquire pending orders for the Paris Metro, which is based on the same technology. Knorr-Bremse also strengthened its collaboration with the Northeast Illinois Regional Commuter Railroad Corporation and will be equipping a total of 160 regional passenger cars for central and suburban Chicago with oil-free compressors,

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rapid-action brake control units, ESRA brake control electronics, bogie equipment, and shoe brakes.

Commercial Vehicle Systems The recovery of the North American truck market continued in 2011. Compared to the prior year, vehicle output was up 54% at 335,000 units. Replacement purchases had a positive impact on this upward trend. Nevertheless the market still trails 33% behind its 2006 peak of 500,000 units. Calendar year 2011 saw significant legislative and regulatory changes impacting the US commercial vehicle market. “The Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles,” for example, establishes standards which will help reduce greenhouse gas emissions and increase fuel efficiency in medium- and heavy-duty commercial vehicles. Knorr-Bremse’s North American business is handled by its subsidiary Bendix Commercial Vehicle Systems LLC under the Bendix brand. Bendix made use of the positive market climate to expand capabilities and capacity at key manufacturing facilities to meet rising customer demand. Thus a third production plant at the Acuña, Mexico campus was opened in January 2011. The products manufactured at the Acuña III plant include spring brake actuators and brake chambers for the commercial vehicle market. In 2011 Bendix was able to build on its position as the leading supplier of effective active safety solutions in the North American market. With Bendix Wingman Advanced, Bendix launched an innovative system that delivers Adaptive Cruise Control with Braking features along with collision mitigation technology. In addition, Bendix once again expanded its product portfolio in this area, acquiring the data management system SafetyDirect and the vision-based Lane Departure Warning (LDW) system AutoVue from Iteris, Inc. This acquisition rounds out the current portfolio and helps Bendix further secure its strong position in the market for active driver assistance

systems. Bendix is also to equip coaches built by Prevost, a leading North American manufacturer of premium touring and conversion coaches with Adaptive Cruise Control (ACC) systems. This makes Prevost the first coach manufacturer to launch Adaptive Cruise Control with Braking as an option.

South America Rail Vehicle Systems Global demand for raw materials again exerted a positive influence on freight volumes in South America. As a result, production of freight cars continued to rise in 2011, climbing over 100% to 4,300 units and thus gradually approaching its 2008 peak of 5,000 units. The number of locomotives built also increased by over 100%. Procurement levels, by contrast, remained very low, with just 50 locomotives purchased. The passenger transportation market also remains buoyant. Two major events in the shape of the 2014 World Cup in Brazil and the 2016 Olympics in Rio de Janeiro are driving the expansion of the mass transit networks in Brazil. The aftermarket sector in South America also showed positive development in 2011. Knorr-Bremse was able to benefit from the upward trend and signed an agreement with MRS Logistica S.A., one of the largest transportation companies in the Brazilian rail freight market. Up to 2013, Knorr-Bremse is to handle the servicing of the company’s CCB II brake control systems, handling some 200 systems a year.

Commercial Vehicle Systems 2011 brought a further improvement in the South American commercial vehicle market, which saw truck production rise 14% to 209,000 units. As in 2010, the market is in fine shape, driven not least by developments in Brazil, where the introduction of the EURO 5 standard in 2012

MANAGEMENT REPORT

led to purchases in the Brazilian commercial vehicle market being brought forward to 2011. In 2011 Knorr-Bremse was again successful in obtaining important orders from its customers. For example, shipments of 24,000 pedal units and the same number of automatic air treatment systems to Ford Caminhões began in the year under review. Also, Knorr-Bremse began supplying 110,000 brake shoes a year to MercedesBenz in Brazil.

Asia/Australia Rail Vehicle Systems The rail vehicle market in Asia/Australia showed positive development in 2011. On the one hand the region’s main growth driver to date, China, throttled back its demand for new vehicles, above all in the high-speed train and locomotive sectors, where state stimulus packages and extensive infrastructure projects had been driving growth. On the other hand the Indian market developed very strongly, with substantial growth in both rail freight and passenger transportation. Positive impetus was also generated by the markets in Australia and Southeast Asia. Despite the slowdown in the Chinese market, KnorrBremse was still able to acquire further significant orders in the mass transit sector. By way of example, KnorrBremse will be supplying the braking systems for 64 eight-car sets for an additional metro line in Beijing. This is the largest single order in the metro sector for KnorrBremse in Asia. In addition, Knorr-Bremse is to supply the braking systems for 234 metro cars for Guangzhou Metro and 402 cars for Nanjing Metro. In total, 2011 brought Knorr-Bremse incoming orders to equip over 2,000 metro cars in China. Knorr-Bremse brake equipment for mass transit vehicles is installed in 14 cities across the country and in all, the company has to date received orders for brake equipment for more than 10,000 metro cars.

In Southeast Asia an initial major order governing braking systems for 1,200 coal wagons for Indonesia was acquired. In India Knorr-Bremse scored additional successes in both the rail freight and passenger transportation sectors and more than doubled its sales. Following on from the equipment of some 11,000 freight cars with modern Bogie Mounted Brake Systems (BMBS) in 2010/2011, the refurbishment of 600 freight cars with BMBS began in the year under review. Knorr-Bremse is also supplying brake calipers for state-of-the-art LHB coaches in an order that will increase from 780 coaches per year in 2012 to 3,000 LHB coaches per year in the next five years. In Australia Knorr-Bremse was able to further strengthen its market position with orders received for braking systems for more than 1,940 freight cars. In addition, KnorrBremse received an initial order to supply 180 LEADER driver assistance systems and eleven simulators to Rio Tinto in Pilbara, Western Australia. Knorr-Bremse will also be supplying the braking systems for 66 streetcars for the mass transit network in Adelaide. Significant business was also generated by the Australian aftermarket, where Knorr-Bremse won the order to overhaul the complete braking systems of 76 multiple units for the Melbourne Metro.

Commercial Vehicle Systems The Asia/Australia region reported a 9% drop in truck production in 2011. This was due to developments in China, the world’s largest commercial vehicle market in unit output terms. In China truck production was 16% down in 2011 at 1,119,000 units compared to the record year 2010, thus still performing at a very high level. While 2010 was strongly influenced by government stimulation directly influencing truck production, a new five-year plan came into effect in 2011 with still positive but more moderate effects on the truck industry.

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Chinese manufacturers hold a dominant 98% share of the domestic commercial vehicle market, which explains why foreign manufacturers and suppliers are increasingly entering into joint ventures in order to secure a share of the growing market. By starting a joint venture early in 2011 with the Chinese company Chongqing CAFF Automotive Braking & Steering Systems Co. Ltd. for the production of commercial vehicle braking system and drivetrain components, Knorr-Bremse too took another important strategic step forward in the Chinese market. The joint venture opened for business at the beginning of 2011. Knorr-Bremse’s local presence in China through its companies in Dalian and Shanghai already dates back several years. The commercial vehicle markets in India and Japan, by contrast, experienced an upswing in 2011. Japan, which was hard hit by a major earthquake and tsunami early in the year under review, recovered in the course of the year and actually increased its truck production by 5% to 163,000 units. Commercial vehicle output in India rose 15% to 322,000 units. The majority of commercial vehicles in the Indian market are still equipped with more basic braking systems. In the year under review, Knorr-Bremse India presented an effective anti-roll-back system designed to match these braking systems and prevent vehicles rolling backwards when moving off on an uphill incline.

Americas 24.1% Asia/Australia 24.7% Europe 51.2% Consolidated sales by region

MANAGEMENT REPORT

Capital expenditure and depreciation

In 2011, the Knorr-Bremse Group invested EUR 158.9 million in fixed and intangible assets, which was 40.1% more than in the previous year (2010: EUR 113.4 million). This upward trend accompanied the positive development of sales in the year under review. At EUR 85.3 million, 53.7% of the company‘s capital expenditure was invested in Europe. EUR 38.1 million (24.0%) was invested in the Americas and EUR 35.5 million (22.3%) in Asia/Australia. Broken down by division, the allocation of capital expenditure was such that the Rail Vehicle Systems division benefited in the amount of EUR 65.9 million (2010: EUR 61.2 million) and the Commercial Vehicle Systems division in the amount of EUR 74.7 million (2010: EUR 50.4 million).

million in 2010 to EUR 164.6 million in the year under review. With EUR 76.1 million, Europe accounted for the largest share of depreciation, followed by Asia/Australia with EUR 55.2 million and the Americas with EUR 33.3 million. A breakdown of depreciation by division shows that the larger proportion of EUR 97.7 million (2010: EUR 82.9 million) was accounted for by Rail Vehicle Systems, while depreciation at the Commercial Vehicle Systems division amounted to EUR 60.8 million (2010: EUR 61.0 million). In 2011, investment activity focused primarily on the expansion of worldwide production capacities and on replacement investments, as well as on the start of construction of new production plants in India (Faridabad/ Pune), the US (Westminster) and Brazil (Itupeva).

Depreciation on intangible and fixed assets showed a slight increase across the Group, rising from EUR 146.9

2007

2008

2009

2010

2011 Capital expenditure Depreciation Consolidated capital expenditure and depreciation in EUR millions

140 113 134 115 101 118 113 147 159 165

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Research and development

As a technology group, Knorr-Bremse continued to drive forward its research and development efforts in the year under review in close collaboration with its customers. Total expenditure on research and development and project planning amounted to EUR 208.8 million in 2011 (2010: EUR 175.3 million), which equates to 4.9% (2010: 4.7%) of consolidated sales. As the global technology leader in the fields of braking systems for rail and commercial vehicles, Knorr-Bremse develops innovative products distinguished by their safety, high quality, reliability and customer benefits. This applies in equal measure to the other fields covered by the product portfolios of the Rail Vehicle Systems division (automatic door systems, air-conditioning and driver assistance systems, control components and platform screen doors) and the Commercial Vehicle Systems division (driver assistance systems, fuel-saving systems and powertrain-related innovations such as PBS and transmission control systems). Knorr-Bremse’s success in the market with these products is founded on its comprehensive command of electronics, pneumatics, and mechanical engineering. These capabilities enable the company to adopt an integrated approach and provide its customers with complete systems. The long-standing trend towards the introduction of innovative system solutions and modular solutions involving the increasing use of mechatronic systems is continuing, which gives Knorr-Bremse a competitive edge in the marketplace.

2007

159

2008

171

2009

153

2010

175

2011

209

Consolidated research and development expenditure in EUR millions

In 2011, development activities in the rail vehicle sector focused among other things on the development of innovative products for the growth markets of the BRIC states as well as for Middle Eastern countries. Thus, for example, the KAB60 control valve was inspected and approved as compliant with the specific product requirements, such as major variations in temperature. The HVAC systems built by Knorr-Bremse subsidiary Merak can also withstand extreme climatic conditions. Moreover they have been equipped with an efficient sand filtration system that can also extract the sand and dust particles from the air in desert regions to ensure optimum on-board air quality. In the commercial vehicle sector, development activities in the year under review focused – as in the previous year – on the next-generation ABS, EBS and ESP systems and on the further enhancement of the electronically controlled air treatment system (EAC2). Also on the development agenda were the Pneumatic Booster System (PBS) and the mechatronic control system for automatic transmissions. In addition, work began on the development of a new generation of disc brakes. In line with Knorr-Bremse’s regional strategy, in 2011 the proportion of the Group’s development capacity located in emerging markets such as India and China was further increased. At year-end 2011, the Knorr-Bremse Group employed a worldwide total of 2,486 people in the field of research, development and project planning (2010: 2,059). In 2011 the Group continued to pursue its ambition of realizing innovative solutions that meet local market and customer requirements, and of continuously improving these solutions in the interests of its customers, as evidenced by an impressive number of innovations and awards.

MANAGEMENT REPORT

Human resources

At year-end 2011, the Knorr-Bremse Group employed a total of 20,050 persons (18,143 excluding leasing) compared to 18,053 (16,277 excl. leasing) one year earlier. This equates to a year-on-year increase of 11.1% (11.5% excl. leasing). In the European region, there were 10,442 employees on the payroll at year-end 2011 (9,957 excl. leasing) compared to 9,861 (9,243 excl. leasing) at the end of 2010. Thus the proportion of employees in Europe declined from 54.6% in 2010 to 52.1% in 2011. The workforce in Germany totaled 3,848 employees (3,587 excl. leasing), which is 417 more than in 2010 (3,431 or 3,235 excl. leasing) and equates to 19.2% of the total Group payroll. The number of employees in the Americas also rose in 2011, reaching 4,569 (4,363 excl. leasing) at year-end compared to 3,854 (3,556 excl. leasing) in 2010. The proportion of the total Group workforce in the Americas rose to 22.8% (2010: 21.4%). In Asia/Australia the size of the workforce increased from 4,339 in 2010 (3,478 excl. leasing) to 5,039 (3,823 excl. leasing). The proportion of the total headcount employed in the region reached 25.1% in 2011, up from 24.0% in 2010.

The number of employees in both divisions increased, although without keeping pace with the rise in sales. In the Rail Vehicle Systems division, the number of employees at year-end 2011 was again up at 11,083 (9,955 excl. leasing) compared to 10,824 (9,523 excl. leasing) one year earlier. In the Commercial Vehicle Systems division too, the headcount continued to rise, reaching 8,636 employees (7,858 excl. leasing) at year-end 2011 compared to 7,063 (6,590 excl. leasing) in 2010. The number of employees in the holding companies also increased from 166 (164 excl. leasing) to 331 (330 excl. leasing) at the end of 2011. In view of demographic trends and in line with the company‘s international growth strategy, Knorr-Bremse attaches great importance to sustained human resources development. The importance of HR development is underlined by the People Excellence (PEX) initiative, which bundles all the necessary measures. The targeted advancement of high potentials and the creation of the appropriate development and career opportunities provide a source of employee motivation and support long-term loyalty. Through cooperation with key universities and participation at recruiting and university job fairs, Knorr-Bremse is regularly perceived as an innovative employer by young talents. In line with the increasingly international nature of its HR efforts, the company continues to support periods of employment at foreign locations within the Group. We would like to thank all of the company‘s employees for their commitment and hard work in 2011. Our thanks also go to the employee representatives for their constructive collaboration.

Americas 22.8% Asia/Australia 25.1% Europe 52.1% Group workforce by region on Dec. 31, 2011

2007

15,235

2008

15,890

2009

15,613

2010

18,053

2011

20,050

Group workforce on Dec. 31, 2011

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Social responsibility and sustainability

Particularly in times of globalization and climate change, being successful invariably also means conducting all aspects of one‘s business, from planning to execution, with foresight. Doing so in awareness of a responsibility for the impact of one‘s actions on people, the environment, and society, and working relentlessly to improve that impact, has become a maxim of modern corporate management.

tivities in the amount of approximately EUR 1,500,000. The main focus of the organization‘s activities in 2011 was again on long-term projects, such as the construction of a high school in Rwanda and a vocational training center in Faridabad, India. In 2011, Global Care also provided emergency aid following the disasters in Japan and during the drought in East Africa.

In 2011, several projects were initiated to further enhance Knorr-Bremse‘s sustainability performance. Thus, KnorrBremse published its first Communication on Progress since becoming a signatory to the United Nations Global Compact initiative, thereby documenting its commitment to observe and implement the Global Compact‘s principles. To foster the dialog between the Group’s various regions, in the year under review a Group-wide network with a focus on corporate responsibility topics was founded. This CR Roundtable is made up of corporate responsibility representatives from all the regions and is designed to facilitate regular communication regarding ongoing projects, strategic goals and operational measures, as well as the exchange of best practices.

Knorr-Bremse Global Care e. V. was founded in response to the tsunami disaster of December 26, 2004 to provide unbureaucratic, effective and lasting help to the victims. In the year under review, 42 aid projects were realized in a total of 24 countries on four continents. The projects are supervised on a voluntary basis and with great dedication by Knorr-Bremse employees. In 2011, with donations totaling EUR 1.73 million, Knorr-Bremse Global Care e. V. reached out to help some 65,000 people.

As a technology leader, Knorr-Bremse has a duty to develop innovative products and system solutions that support sustainable value creation and provide maximum benefits for its customers. The company therefore engages in the systematic pursuit of innovative technologies that help optimize safety, functionality, energy efficiency and environmental compatibility. In 2011, for example, the Rail Vehicle Systems division launched the Ecodesign project to assess and continuously improve the environmental impact of products over their entire life cycle. Initial measures to optimize environmental compatibility were already derived and implemented in the year under review. These Life Cycle Assessments are to be extended in the coming year. As in previous years, in 2011 Knorr-Bremse supported the charitable organization Knorr-Bremse Global Care e. V., which was founded in 2005, providing funding for its ac-

MANAGEMENT REPORT

Follow-up report

No events with a material influence upon the assets, financial or earnings position of the Knorr-Bremse Group at the balance-sheet date have since taken place.

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Report on risks and opportunities

The Knorr-Bremse Group operates an established, multistage, worldwide planning, reporting and controlling system. Standard reporting periods and report contents have been defined across the Group. These formal reports are supplemented in greater depth by presentations on routine and special subjects at monthly review meetings. In addition, the Knorr-Bremse Group has put in place a standardized risk management system at top management level. This is based on a risk report that is discussed at regular top management and Executive Board meetings and used as a basis for introducing appropriate measures. This ensures that the operational risk management system is duly complemented at strategic level. In its entirety, this control system has proved an effective, reliable network for the early identification and remediation of potentially undesirable developments. Risk assessment and management also forms an important part of the process of describing, documenting, and continuously improving business processes across the Knorr-Bremse Group (Knorr Excellence model).

Business risks The Knorr-Bremse Group is active in business segments that for some years have been characterized by a dynamic process of consolidation on the customer side. This has resulted in powerful demand-side leverage, with corresponding pressure on prices. Knorr-Bremse responds to these factors with innovative products and systems, positioning itself as a partner for long-term relationships that target cost-effective solutions for the customer. The earlier Knorr-Bremse is involved in the customer’s project as a whole, the better the chance of attaining that target. Regional commercial vehicle and rail vehicle markets are subject to irregular cycles. Market volatility and fluctuating growth can affect individual suppliers, market segments or entire regions. As a globally active corporate group, Knorr-Bremse is particularly exposed to the risks

implicit in the changing state of the global economy. The development of the economies of individual countries and the worldwide flow of trade are carefully monitored in order to minimize risks affecting the company’s sales. At the same time, Knorr-Bremse’s international presence renders the Group largely immune to risks that are restricted to an individual region. The increased volatility being encountered worldwide in the commercial vehicle industry also affects Knorr-Bremse and continues to be carefully monitored. If customer creditworthiness falls, the risk of the loss of receivables outstanding increases and Knorr-Bremse counters this risk through effective receivables management. In the course of its dynamic growth in recent years, Knorr-Bremse has integrated a number of companies and shareholdings into the Group. The financial and cultural risks typically associated with such integration processes were effectively minimized by means of systematic analysis and assessment of the target companies. When it comes to overcoming cultural barriers, KnorrBremse can draw on 20 years of experience with integration processes related to the acquisition of numerous companies as well as to joint ventures in which the company holds a majority stake and is responsible for operational management. This experience will pay dividends in any future mergers and acquisitions and has been mapped in the form of structured processes. Knorr-Bremse and its systems are at the leading edge of technological development. This also engenders risks which, because of the safety-critical nature of the applications concerned, require particularly careful monitoring. To this end, Knorr-Bremse routinely employs comprehensive quality planning, quality assurance and testing procedures. To ensure continuous improvement of its business processes, Knorr-Bremse takes its lead from international standards. The individual plants regularly undergo internal and external audits in this context. Above and beyond this, despite having already attained a very high level of quality, both divisions work intensively to continuously improve the quality and reliability of

MANAGEMENT REPORT

their products with the aid of the Knorr Excellence quality program “Quality First.”

Operational risks Risks due to production downtimes are covered by commercially appropriate insurance contracts. Flexible working time models enable unexpected short-term shifts in capacity requirements to be accommodated efficiently. Knorr-Bremse maintains a close working relationship with suppliers and service providers. In order to avoid delivery delays or quality defects, which in turn could lead to lost production time and have a negative impact on earnings, Knorr-Bremse attaches great importance to careful supplier selection procedures. Suppliers are also continuously subjected to technical and commercial audits. In the current economic environment, there is also a risk of business partners becoming insolvent – a risk to which the company responds directly. Exchange rate risk is not of crucial importance for the Knorr-Bremse Group because geographic diversification over recent years has enabled the Group to establish a high proportion of local manufacturing and local suppliers within the respective currency zones. In order to limit the residual exchange rate risk related to transactions across different currency zones, Knorr-Bremse is increasingly identifying opportunities to exploit compensatory supply volumes within the Group. In selected cases, currency risks are also hedged by means of derivatives. Such measures, however, serve exclusively to hedge basic transactions within the scope of normal business operations. The basis for managing foreign exchange risks is provided by the Guideline on Managing Currency Exposure in the Knorr-Bremse Group, which sets out the procedures to be followed and the necessary scope of hedging transactions in binding form for all Group companies. The monitoring of compliance with this guideline is part of the relevant Knorr Excellence process.

The risk of fluctuations in the price of commodities that are of relevance to Knorr-Bremse is also hedged to an appropriate extent by means of derivatives in so far as these fluctuations could have a substantial impact on the Group’s profitability. In the case of steel and aluminum, basis hedging is undertaken to cover a part of the risk. Business processes within the Knorr-Bremse Group are supported by powerful and state-of-the-art IT systems. In order to avoid malfunctions, Knorr-Bremse attaches great importance to harmonization of the hardware and software architecture, the integrity and security of existing data, appropriate back-up solutions, and careful management of access control. Compliance with the IT Security Guideline is comprehensively monitored with the aid of internal and external audits at all major sites around the world. The Corporate Data Center in Munich, Germany, meets the very highest requirements (industry standard) in terms of efficiency, reliability and security. Based on this platform, the necessary global transparency and the integration of all corporate sites – and of recent additions in particular – are being further enhanced. In response to increasingly stringent environmental requirements, Knorr-Bremse has aligned its worldwide activities with the international standard ISO 14001. The majority of the company’s sites have already been certified or recertified accordingly. In Asia, as well as in the other regions, imitation and counterfeit products remain a serious threat to business in the commercial vehicle and rail vehicle sectors. The most effective countermeasure to this threat is KnorrBremse’s technical expertise, which on account of the safety-critical applications of its products is both recognized and appreciated by customers around the world. Careful analysis of the Group-wide risk profile has revealed that no identifiable risks exist that would threaten the survival of the company or have a substantial impact on its assets, financial status or profitability. Nor are any such risks currently expected to arise in the future.

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Outlook

In the next two years, Knorr-Bremse is expecting to see a slowdown in the pace of economic growth, accompanied by further volatility in markets around the world. In regional terms the markets will probably continue to show divergent developments. In Europe, the high level of sovereign debt of certain EU member states represents a threat to Eurozone stability. In the US, too, the high level of sovereign debt and its impact on the real economy are considered critical, so that no major growth-driving impetus can be expected here. And while forecasts predict continuing strong growth for the emerging markets in South America and Asia, here too initial recessionary trends are making themselves felt as a result of inflation and restrictive monetary policies. Against this backdrop, for the next two years we are anticipating widespread moderate economic growth, albeit exposed to high risks and uncertainties in the regional markets. The emerging markets of Asia will probably continue to account for the lion’s share of global economic growth in 2012 and 2013, although by no means on the same scale as in previous years. In the European rail vehicle market we are currently anticipating modest growth for the next two years. The rail freight market is expected to stage a recovery, while a stable market environment is expected in the passenger sector. In the UK, three major projects are due to be awarded in 2012 that will have a decisive impact on the development of the market. Other growth drivers are expected to include the modernization of the rail network in Russia and the expansion of the mass transit sector in South Africa, not least via the PRASA project. The rapidly progressing Middle Eastern region will move toward center stage through the planned creation of a rail network and the accompanying expansion of the rail vehicle fleet. In the European commercial vehicle sector the market is expected to stabilize in 2012 and 2013. The volume of trucks built in 2012 will probably be slightly down on the

prior-year level. The period covered by our outlook is unlikely to see a return to the record level of 2008. In fiscal 2012, the main challenge for the Commercial Vehicle Systems division in Europe will be posed by the increasing globalization of its business. Further expansion into markets of the future, such as Russia, China and India, and the shipments this calls for from Europe, along with the introduction of products that meet specific local requirements and selective penetration of new fields of activity should drive the growth of the company‘s business in the medium term. In all growth projects, the focus is on increasing customer benefits and extending our technology leadership, with the quality and reliability of all products being assigned top priority. In the North American OEM rail vehicle market, KnorrBremse is anticipating a further increase in the output of freight cars and locomotives in 2012 and 2013. In the freight car segment, growth will be driven by two factors: rising demand for raw materials and growing numbers of replacement purchases. In the locomotive segment, new emissions legislation from 2015 means that high purchase volumes can be expected between now and 2014. Other contributory factors will include fleet modernization measures and continuing dynamic export activities on the part of US locomotive builders. Completing the picture, there are major mass transit orders pending in San Francisco and New York City, for example, so that positive market developments are forecast for the next few years in this area as well. Knorr-Bremse is expecting to see further growth in the North American commercial vehicle market in 2012 and 2013. The aftermarket segment looks set to become increasingly important over time as market shares in the OEM sector increase. In the South American region the rail freight sector is expected to show further growth, driven by the ongoing rise in global demand for raw materials. Demand for

MANAGEMENT REPORT

freight cars will likely settle at a high level, while demand for locomotives looks set to show a further increase. In the passenger transportation sector additional projects are anticipated, not least in conjunction with the forthcoming major sports events. In the South American commercial vehicle sector, truck output is expected to fall in 2012 compared to 2011 as a result of the introduction of the EURO 5 emissions standard. Production volumes will probably pick up again from 2013 onwards. In the rail vehicle sector in the Asia/Australia region, the outlook for 2012 and 2013 shows marked regional differences. In China future developments remain uncertain on account of the cutback in investments in the expansion of the rail network. The mass transit sector could well contribute to market buoyancy through the planned placement of orders for 10,000 cars in the next few years. Further growth is anticipated in India, Australia and Southeast Asia. In the commercial vehicle sector, the region as a whole is expected to show a moderate increase in truck production in 2012 and 2013. Following on from “over-stimulated” record production in China in 2010, truck and bus output returned to normal levels in 2011 and is expected to show moderate growth in the next few years. The commercial vehicle markets in India may well remain stagnant but Japan is expected to continue its positive development unabated. Based on the regional backdrops set out above, KnorrBremse expects to see moderate sales growth in 2012 and 2013 in a business environment marked by uncertainty. Regional developments will be influenced by the risks for the further growth of the global economy described above, which differ from one region to the next. Presuming that the economic picture does not deteriorate any further, Knorr-Bremse expects earnings to remain stable. Based on the assumptions made for the

Group, the assets, financial status, and profitability of Knorr-Bremse AG too can be expected to remain stable – depending on income from the company‘s investments. In the coming years, Knorr-Bremse will continue to pursue a policy geared to safeguarding the company‘s longterm health and in particular will be driving forward the steps already introduced to expand its capacities in regions where demand is growing. These include, for example, an intensive marketing effort in the BRIC countries and the introduction of innovative products, as well as the selective expansion of the company‘s fields of activity. The focus here will remain on boosting customer benefits and securing the company’s technology leadership.

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Report AGAINST A BACKGROUND OF CONTINUED ECONOMIC RECOVERY, KNORR-BREMSE POSTED FURTHER GROWTH IN 2011. This demonstrates the success of its two divisions – Knorr-Bremse Rail Vehicle Systems and Knorr-Bremse Commercial Vehicle Systems – in developing and marketing products that meet highly specialized customer requirements. With a view to maintaining this capability, the Group continued to innovate during 2011, developing new markets and fine-tuning its corporate processes. Its global strategy of maintaining a broad base in a wide range of markets and regions once again earned it excellent ratings from two prestigious rating agencies.

Rail Vehicle Systems 2011 saw Knorr-Bremse Rail Vehicle Systems once again increase its sales revenues – by 8% to EUR 2.19 billion (previous year: EUR 2.02 billion) – thanks mainly to recovery in the North American freight market and positive developments in Europe during the course of the year.

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Markets Developments in the global rail market during the course of the year were satisfactory, with production of freight cars level-pegging in Europe and rising significantly in North and South America. In the mass transit, mainline passenger and freight sectors, Knorr-Bremse was able to conclude a number of important contracts. And in India the company succeeded in almost doubling sales revenues in both mainline sectors.

Europe The decline in freight transportation caused by the financial and economic crisis appears to be over for the time being. During the course of the year, the situation in both the OE sector and the aftermarket improved for the first time since the end of 2008. Locomotive production rose by some 15%, and the number of freight cars produced leveled off at around 7,000 units. Knorr-Bremse was able to sign a number of important contracts, particularly for multiple units and high-speed trains.

North America During the period under review, production in the North American freight market rose for the first time since 2008. Output of new freight cars increased from 17,000 to 47,000 units, and Knorr-Bremse was able to benefit from this positive trend, signing a number of major contracts in the segment. Developments in the passenger segment were also positive, particularly due to the expansion of existing mass transit projects and the launching of new ones.

South America An increase in global demand for raw materials triggered a significant increase in freight transportation in South America. This, in turn, had an impact on freight car production, which was up more than 100% at 4,300 units. Two major events – the Soccer World Cup in Brazil in 2014 and the Olympic Games in Rio de Janeiro in 2016 – were the main drivers of efforts to expand mass transit networks.

Asia/Australia Developments in the rail market in Asia/Australia during the year under review were once again positive, with strong growth in both the freight and passenger sectors. Despite a slight downturn in the Chinese market, Knorr-Bremse achieved a number of successes in the Asia/Australia region, the main drivers being Australia, Southeast Asia and India – where Knorr-Bremse succeeded in almost doubling sales revenues in the passenger and freight sectors.

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Market Successes Knorr-Bremse Rail Vehicle Systems’ reputation as a reliable and innovative supplier enabled it to conclude a range of contracts with customers all over the world. In North America two well-known operators ordered braking systems for several thousand new freight cars, and in China the company equipped its 10,000th metro car with brakes. Important orders also came from India, Development of worldwide sales revenues for the Rail Vehicle Systems division in EUR Kazakhstan, the Gulf region and many other markets. millions 2009

1,553

2010

2,024

2011

2,187

Europe Framework contract for revised LINT platform In order to meet the new technical specifications for interoperability (TSI) in Europe, Alstom has revised its popular LINT platform – and Knorr-Bremse is once again involved with this diesel multiple unit for local transport applications. On the basis of a follow-up framework contract signed during the year under review, the company will be contributing brake control systems, bogie equipment and air dryers to future LINT orders. The contract covers some 400 vehicles. Alstom’s positive experience with Knorr-Bremse systems in the past and its longstanding good working relationship with the company contributed to the decision to select it to supply the LINT platform once again. In addition to the products previously supplied, Knorr-Bremse will also be supplying Alstom with magnetic track brakes.

Door and HVAC systems for Italian high-speed trains Trenitalia, Italy‘s national railroad operating company, is intending to run more new high-speed trains in the future. The high-speed car-sets will travel at up to 360 km/h and offer real competition for air travel. Along with cross-border routes, Trenitalia is focusing on rapid and safe domestic rail connections in particular.

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For its high-speed project Trenitalia is aiming to use V300 ZEFIRO trains, also known in Italy as the ETR 1000. The car-sets are to be developed by a consortium comprising vehicle builders Ansaldobreda and Bombardier. The Italian operating company has placed an order with the two firms for 50 eight-car sets to be delivered over a five-year period starting in 2012. Knorr-Bremse is also on board and will be equipping the new trains with innovative door and HVAC systems. Like the advanced design of the trains themselves, the E3D door system to be supplied by KnorrBremse subsidiary IFE will set new standards in the high-speed train segment. Despite its low weight, the door system nevertheless presents impressive levels of pressure tightness and flexibility in service. For example, the clear opening widths of 800-1,600 mm in various types of vehicle can be realized with the same door concept. The HVAC systems are being entirely sourced from Knorr-Bremse’s Spanish subsidiary Merak. To ensure pressure tightness and guarantee comfort levels, several subsystems are required: roof-mounted compact HVAC saloon units, temperature sensors, fan heaters (in vestibules and toilets), oxygen sensors and the entire air ducting system.

First order for LEADER in Europe Locomotive manufacturers Vossloh Spain have placed an order with Knorr-Bremse subsidiary Sociedad Española de Frenos for 30 units of the driver assistance system LEADER. LEADER is a sophisticated train management system that helps locomotive engineers drive their trains as economically and safely as possible by displaying recommendations on how to save fuel and minimize in-train forces. The system enables fuel savings and thus emissions reductions of up to 15%. LEADER helps train operators reduce energy consumption by calculating an optimum speed profile for every stretch of track. It also assists schedule compliance. Along with track and topography profiles, the system takes account of the schedule and the specific technical data of the locomotives and trains, drawing on this data to deliver energy-optimized train handling recommendations. In all, Vossloh is to equip 15 Euro 3000 diesel locomotives destined for Israel Railways with LEADER. The locomotives will be working in passenger transportation and each of the two cabs will feature a LEADER unit. The systems are slated for shipment to Vossloh in the first quarter of 2012. In June 2011, a locomotive and control car already in service with the operator were equipped with two LEADER units by way of pre-series installation. This way the engineers have a chance to familiarize themselves with the system and Knorr-Bremse has an opportunity to acquire initial long-term experience with it under real conditions in Israel.

Systems for Moscow metro Absolute reliability is crucial for the vehicles operating on Moscow metro. In very low winter temperatures more than 9 million people use it at peak times – considerably more than it was designed to cope with. As a result, trains enter and leave the stations at very short intervals. And because some of the metro is above ground, they also have to operate at extremely low temperatures.

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During the year under review, Knorr-Bremse was selected on the basis of its experience in the Russian rail vehicle market to supply various systems for new metro trains being built by the two Russian companies Metrowagonmash and OAO TVZ. Factors that clinched the deal for Knorr-Bremse included the low overall cost, the high level of aftermarket service offered by local personnel and Knorr-Bremse’s plan to manufacture the systems directly in Russia. The contracts cover braking, door and HVAC systems, as well as resistors and high-speed circuit breakers from Knorr-Bremse’s subsidiary Microelettrica.

Locomotive braking systems for extremely low temperatures in Kazakhstan As part of an upgrade and expansion of its freight transportation system, Kazakhstan is purchasing a large number of new locomotives. The state railway system recently placed an order with French vehicle builder Alstom for 200 KZ8A double locomotives for freight trains and 95 locomotives for mainline passenger operations. Knorr-Bremse is involved in supplying complete locomotive braking systems for the initial order of 25 double locomotives from Alstom – the first time it has developed such a system for the Russian GOST standard. The company also has a further option to supply systems for the remaining 175 vehicles, which will be built by a joint venture between Alstom, Kazakhstan State Railways and Transmash Holding. Contracts for the 95 mainline passenger train locomotives are due for signature during 2012. Knorr-Bremse was once again able to draw on its extensive experience with projects in Russia involving the development of components for extremely cold conditions. The requirement for braking systems to withstand temperatures down to minus 55 °C is a huge challenge. Working in some cases with suppliers, Knorr-Bremse had already developed new, cold-resistant plastics and elastomeres capable of functioning under such extreme conditions. Cast parts also had to be made largely with new materials. The requirements in terms of tolerances for moving parts were also extremely high, as temperature changes cause different degrees of expansion of the materials involved. The bogies are being equipped with Type PEC7 block brakes, and the BP Compact system – including slide protection with valves adapted for the GOST market – is being used for the electronic HL pressure control. The new KAB60 distribution valves specially developed by Knorr-Bremse for Russian freight trains will also be supplied for the new locomotives. Even though they are installed inside the locomotives, these systems are also capable of withstanding temperatures down to minus 50 °C or below. The large number of electric locomotives involved in the project clearly shows the huge expansion of the national rail system being planned by Kazakhstan State Railways.

Knorr-Bremse Systems for Deutsche Bahn In April 2011, Deutsche Bahn signed a framework agreement with vehicle builder Bombardier for the supply of up to 200 diesel locomotives for mainline passenger and freight operations. The agreement, which runs till 2020, involves locomotives based on the Bombardier TRAXX platform. Instead of one large diesel engine, they will have four innovative industrial diesel engines designed for speeds of up to 160 km/h. The first twenty locomotives – due for delivery by mid 2013 for service on Deutsche Bahn’s regional passenger network – will be fitted with Knorr-Bremse systems that include the VV270-T oil-free compressor, the MBS locomotive brake control system and the RZS compact brake caliper with cast iron disc.

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Braking systems for new Hyundai Rotem locomotives As part of a modernization project, the Turkish state railway operator Türkiye Cumhuriyeti Devlet Demiryollari (TCDD) is planning wide-scale electrification of the country’s rail network. As a first step, 80 or more newly developed electric diesel locomotives ordered from Hyundai Rotem are to go into service. Knorr-Bremse is involved in the project and will be equipping the locomotives with complete braking systems including the brake control system, VV270-T oil-free compressors, compact brake calipers and wheel brake discs. It is no coincidence that Knorr-Bremse was chosen to supply these systems – the company has been working with vehicle builder Hyundai Rotem and operator TCDD for many years. Delivery of the braking systems is slated for the period from mid-2012 to the end of 2013.

Important orders for Merak from Alstom and Bombardier During the year under review, Knorr-Bremse’s Spanish subsidiary Merak delivered on two important orders in the European rail market: HVAC systems manufactured by Merak were installed in Regio2N double-decker trains ordered by French operator SNCF from the Canadian conglomerate Bombardier and also in Régiolis regional trains, for which SNCF has signed a supply contract with French manufacturer Alstom. The Régiolis regional trains consist of low-floor 4- and 6-car trainsets that offer high levels of comfort thanks to their broad aisles and colorful, bright interiors. Of a total of 166 trainsets ordered, 100 are being equipped with Merak HVAC systems. By the end of 2011, Merak had already delivered 51 of these for installation in the pre-series trains. The Régiolis trains are destined to replace older trains in the SNCF fleet and also help expand rail services in some of the French regions. Bombardier’s Regio2N double-decker trains consist of six, seven or eight cars that feature an articulated architecture and wide connectors, which create transparency and offer easy access throughout the

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length of the train. In the year in question, Merak worked on developing the HVAC systems for the first batch of 129 trains ordered. Delivery is expected to run until 2015.

Innovative freight car braking system for the United Arab Emirates The United Arab Emirates have started to invest in a country-wide rail network called “Etihad Railways“ which is intended to link the UAE with other countries in the Middle East. The first step involves building a line some 270 km in length, on which 110 freight cars will carry pure sulfur granulate between the gas fields in the Western Desert region of Shah and the port of Ruwais. Two subsequent phases in the program will involve expanding the network to more than 1,000 km. The first line is scheduled to go into operation early in 2014. As part of the project, the state operator Etihad-Rail has ordered seven diesel locomotives from U.S. manufacturer EMD and 240 bulk freight cars from CSR in China. All the locomotives and freight cars will be equipped with a state-of-the-art electronic AAR braking system – the EP60 – from New York Air Brake. New York Air Brake will also be providing a new, innovative technology that enables the locomotive engineer to open and close the freight car loading doors by remote control and also to monitor their status via the main control line of the EP60 system. In addition, wireless sensors installed in the freight cars will alert the locomotive engineer to hot boxes or derailment further down the train.

North and South America New York metro to test HVAC systems New York City Transit (NYCT) is operational 24 hours a day, 365 days a year. It is one of the largest and most complex metro systems in the world. Anyone who wants to supply systems to NYCT must go through a lengthy qualification process that includes in-service testing. Knorr-Bremse’s braking systems have already passed this test. In the year under review, Knorr-Bremse subsidiary Merak began preparing for the qualification process for HVAC systems. The tests to prove the reliability of the Merak systems are due to start in the summer of 2012.

Framework contract with Trinity Rail Group In the year under review, Knorr-Bremse subsidiary New York Air Brake (NYAB) concluded a framework agreement governing the supply of braking systems to Trinity Rail Group (TRG), one of the largest freight car builders in North America, with a market share of approximately 35%. Under this agreement, NYAB will supply at least 55% of the braking systems installed at TRG up to the end of 2014. In 2011 it supplied some 14,000 systems. This makes NYAB the first choice braking system supplier to TRG within what is a long-standing partnership with this OEM. Along with the mutual trust established over the years and the strong focus on customer service among NYAB employees, the main arguments in clinching the agreement were the reliability and life cycle cost of the NYAB systems. Given that TRG is changing its business model to focus more on leasing freight cars, total cost of ownership considerations played a major role in the company’s purchase decision.

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High volume of orders for passenger trains from North and South America North American company Knorr-Bremse Corporation can look back on a successful year, during which it received a large number of orders, particularly from the passenger rail sector. The biggest of these came from Montreal Metro, for which Knorr-Bremse is to supply air treatment systems, bogie equipment and HVAC systems to be installed in 468 new trains being built by a consortium consisting of Bombardier and Alstom. Knorr-Bremse also received orders from São Paulo to equip 378 maglev cars, from American train operator Amtrak for equipment for 70 e-locomotives and from Toronto for systems for a large number of new metro cars. New York City Transit also placed a major order with Knorr-Bremse: during the course of the year in question the company began deliveries of 352 Type VV120-T oil-free compressors. As this is the only oil-free compressor currently licensed for North America, Knorr-Bremse is expecting further significant orders during the course of the coming year. Although there are few signs of any major investment in the North American high-speed market, the mass transit infrastructure was expanded during the past year. Many cities are planning new lines or expanding existing networks, and Knorr-Bremse received orders from Houston, Atlanta and Minneapolis. After supplying streetcars for Minneapolis with braking, door and HVAC systems some 10 years ago, the company received a further order for braking systems for 59 street cars ordered by Minneapolis from Siemens.

Major orders from TTX U.S. freight car provider TTX owns a fleet of more than 200,000 freight cars of many different kinds. In the year under review, the company continued to expand and for the majority (approx. 80%) of its newly ordered cars opted for the DB-60 braking system from Knorr-Bremse’s North American subsidiary New York Air Brake (NYAB). A breakdown of the orders shows that some 2,700 braking systems are to be provided for freight cars from OEM National Steel Car and around 1,000 for cars to be built by Gunderson of Portland, Oregon. Initial systems were shipped at the end of the year under review. Shipments to Gunderson are scheduled for completion in the second quarter of 2012, with the final deliveries to National Steel Car to be made one month later.

EP60 for the world’s biggest producer of iron ore The world’s biggest producer of iron ore, the Vale company of Brazil, is to equip its latest ore train with the EP60 braking system specially developed by Knorr-Bremse for very long and heavy freight trains. The electronic transmission of the braking signal in the EP60 system means that the brakes are applied or released simultaneously along the entire train. This system prevents a situation arising in which the brakes on the front cars are already being applied while the rear cars are still unbraked and pushing forwards. A similar effect occurs when the brakes are not released simultaneously and the rear cars hold the train back until the brakes are fully released. Thanks to the faster transmission of the command data, the EP60 system eliminates this problem, leading to a more even braking profile, shorter stopping distances, less wear and tear, and lower fuel consumption.

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The newly equipped train comprises 330 cars and is hauled by four locomotives. With an axle load of 37.5 tons, each car can take a payload of 150 tons, making them the biggest in the world. The train is due to enter service in 2012.

Mass transit orders from Brazil Two substantial orders enabled Knorr-Bremse to maintain a strong position in the Brazilian mass transit market in the year under review. First the São Paulo Metro placed an order with vehicle manufacturer CAF for 26 new car-sets comprising a total of 156 cars. The trains are destined for metro line 5. KnorrBremse is manufacturing the air supply systems, brake control units, bogie equipment and HVAC systems for the new vehicles. Another order that went to CAF was for 60 cars for the Recife Metro. In this case, Knorr-Bremse is providing the air supply, brake control systems and bogie equipment. One of the main reasons why the orders were placed with Knorr-Bremse was that much of the content of these systems is manufactured locally in Brazil. In addition, Knorr-Bremse products stand for absolute reliability and very high quality, and these factors also played an important part in the purchase decision of the Brazilian customers.

Asia/Australia Major order for metro project in Beijing Knorr-Bremse has been awarded the contract to equip another metro line in Beijing in what is the largest single order in the metro sector for Knorr-Bremse in Asia. The company is to supply the braking systems for 64 eight-car metro units built by Chinese manufacturer CNR Changchun Railway Vehicles Co. Ltd. (CRC), destined to operate on the new metro line 6 in Beijing. This latest order has enabled Knorr-Bremse to further strengthen its market position in the high-growth metro segment in China. The order includes the supply of EP2002 brake control units, Type VV120 compressors and brake calipers for all 512 cars of the new multiple units. The components are to be manufactured at KnorrBremse’s Chinese plant in Suzhou. Metro line 6 links the eastern and western suburbs of Beijing, covering almost 43 kilometers and serving 27 stations. The first segment of 33 kilometers is due to become operational in 2012. The second construction phase is scheduled for completion in 2015. This further order is the next step in the successful partnership between Knorr-Bremse and CRC in China. Back in 2009, Knorr-Bremse won four orders for the metro network in Beijing and to date has supplied the brake equipment for seven metro lines in the Chinese metropolis.

10,000th Chinese metro car equipped Knorr-Bremse has further underpinned its strong position in the Chinese market. The order to equip 240 cars for metro line 1 in Kunming, the capital of the Chinese province of Yunnan, ensured that Knorr-Bremse was able to supply the braking system for its 10,000th metro car in China. Total incoming orders in the Asian metro sector in the year under review covered equipment for more than 2,000 cars.

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7,000 of the 10,000 metro cars with Knorr-Bremse brakes are in service in the three major conurbations of Shanghai, Beijing and Guangzhou alone. Outside the major conurbations, Knorr-Bremse has also supplied systems for the metro networks in numerous other Chinese cities, including Shenzhen, Nanjing, Tianjin, Hangzhou, Shenyang, Suzhou, Dalian and Xi’an. Given the planned expansion of the local mass transit networks in over 30 Chinese cities, Knorr-Bremse is anticipating further orders for the Chinese metro sector in the medium term.

Knorr-Bremse upgrades Indian freight car brakes The Indian national rail operator, Indian Railways, has launched a staged upgrade of its freight car fleet, installing modern bogie brakes that are easier to maintain, more efficient and more reliable. By the end of the year under review Knorr-Bremse India had shipped more than 10,000 bogie brakes to various vehicle builders for installation in new cars. At the same time Indian Railways started the process of retrofitting its existing fleet with the new systems. The braking systems were developed in cooperation between Knorr-Bremse India and Knorr-Bremse’s North American subsidiary New York Air Brake (NYAB). Along with modern bogie brakes, the KnorrBremse plant in India also continues to manufacture conventional brakes, but demand is progressively shifting toward the more technically advanced bogie brakes.

Supplying the Japanese high-speed train market In the year under review, Knorr-Bremse supplied a large proportion of the braking components for the 23 sets that make up the new E5 generation of Shinkansen trains. These high-performance brakes bring the high-speed trains operated by Japanese railroad company JR East safely to a halt from speeds of up to 360 km/h. To this end, Knorr-Bremse developed an ultra-compact lightweight type of brake caliper based on its tried-and-tested modular design. The brake discs and flexible Isobar sintered brake pads were specially designed to cope with the extreme demands of possible emergency braking in the event of an earthquake. The new E5 generation is rapidly becoming a genuine competitor for air travel. On the “Tohoku” Shinkansen line, the trains cover the route from Tokyo via Hachinohe to Aomori on the east coast of the main island of Honshu in less than three hours. This meant increasing operating speeds from 275 to 320 km/h, which called for a much more powerful braking system. Some of the brake equipment supplied to JR East in 2011 is already in successful operation on scheduled services.

Braking systems for coal wagons for Indonesia Indonesia’s largest state-owned railroad operator, PT. Kereta Api Indonesia (Persero), has ordered 1,200 freight cars for the transportation of coal from Chinese rail vehicle manufacturer Baotou Beifang Chuangye Co. Ltd. Knorr-Bremse won the order to supply the braking systems. Following successful completion of negotiations, a supply contract for braking systems for the 1,200 coal wagons for Indonesia was signed in April 2011. A delegation from Baotou Beifang Chuangye Co. Ltd. visited Knorr-Bremse’s Suzhou site in China for the signing ceremony. The guests were officially welcomed by the COO of Knorr-Bremse Asia Pacific (Holding) Ltd., Domingo Mendieta. This project marks a milestone for Beifang Chuangye in its strategic drive to access additional markets in Asia. Over

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the next few years, Beifang Chuangye is aiming to secure another order for between 7,000 and 10,000 freight cars for the Indonesian market.

Australian operators opt for Knorr-Bremse Knorr-Bremse benefited during the year in question from growth in the Australian rail freight market, supplying braking systems for some 2,000 freight cars destined for the country’s railroad system. The main growth driver was the ongoing expansion of iron ore and mineral mining, particularly in the north and west of the country. The biggest project in 2011 involved an order by BHP Billiton Iron Ore from manufacturers Bradken and Qiqihar Railway Rolling Stock Co. Ltd. (QRRS) for 720 freight cars equipped with Knorr-Bremse EP60 or TMB60 braking systems. Over the course of the year Knorr-Bremse supplied braking systems for a total of 1,946 freight cars in Australia. The company was also successful in securing new orders including braking systems for 1,022 freight cars for the company Iron Ore and 360 freight cars for BHP Billiton Iron Ore for delivery over the next few months. Knorr-Bremse’s activities in Australia involve close cooperation with its North American subsidiary New York Air Brake (NYAB). For example the two companies have started jointly developing a braking system for the narrow-gauge railroads that are transporting increasing volumes of coal in the Australian state of Queensland.

Sigma overhauls HVAC systems in Sydney 370 Tangara Electric Multiple Units from the original fleet dating back to 1980 are currently in service with City Rail in Sydney, Australia. Because the HVAC systems in these popular urban trains were not

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functioning reliably, particularly in high summer temperatures, Knorr-Bremse subsidiary Sigma Coachair was tasked with bringing them up to the latest industry standards. After a detailed examination of operational failures, a review of the technological options and – in particular – consideration of City Rail’s specific fleet requirements, the design of the HVAC systems and the maintenance concept were completely upgraded. Following successful field testing, Sigma Coachair replaced large numbers of HVAC components – some of which were around 30 years old – with new ones during the course of 2011. Amongst other things, compressors, heat exchangers, thermostats, switches and air intakes were replaced and refrigerant circuits and wiring layouts redesigned. The aim throughout was to improve the reliability of the units, increase maintenance periods and extend the life of the HVAC systems. Additional temperature sensors and a new automatic data logging system will also make it easier to identify overhaul requirements, plan maintenance work and avoid costly system failures.

Systems for new metro trains in Delhi The metro system operated by Delhi Metro Rail Corporation (DMRC) has a total of 13 lines. As part of its program of modernization and expansion, DMRC recently increased the size of its order for new trains from Indian manufacturer Bharat Earth Movers Limited: instead of the 70 trainsets originally ordered each having four cars, they are now to be delivered with six. This has benefited Knorr-Bremse, as the company is supplying the electro-pneumatic braking systems, bogie equipment and door systems. The contracts were signed in late summer 2011 and the first deliveries are scheduled for spring 2012.

CCB II deliveries for Indian diesel locomotives In November of the year under review, Knorr-Bremse India delivered the CCB II braking systems for the first 50 new diesel locomotives that the Indian State railway system is adding to its fleet. The delivery process will run continuously until the year 2013. CCB II is the standard brake control system for the AAR market and therefore for North America as well. For India, Knorr-Bremse has adapted the North American CCB II system to meet the special requirements of Indian operations.

LEADER AutoPilot for Rio Tinto Knorr-Bremse’s LEADER system is a unique locomotive instrumentation and control technology that reduces fuel consumption while effectively managing trip time and minimizing in-train forces. LEADER operates in real time, evaluating the state of the train and determining driving strategies to improve the overall energy efficiency of the train movement. LEADER has proven capable of providing fuel savings of between 8 and 12%, reducing in-train force events by 50% and managing schedules to improve network throughput. Knorr-Bremse is currently engaged in six deployments of LEADER with key account customers around the globe, focused on heavy haul freight applications. The most ambitious project for LEADER is for the mining group Rio Tinto in Western Australia, where the goal is to achieve driverless trains by 2015, controlled by

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LEADER. There are significant engineering developments necessary to reach the operational goal of driverless trains but the potential operational improvements are compelling. Rio Tinto’s application of LEADER extends the system’s capability from advising to full control – this has been titled LEADER AutoPilot. The system includes active communication links to the network control system and to the onboard locomotive control systems to directly actuate train commands. LEADER will optimize train movements including multi-locomotive consists and ECP braking systems. The system’s core software is capable of this type of control today, but currently issues only recommendations to the locomotive driver. To meet rigorous engineering requirements and the safety levels necessary for driverless trains, the entire software program is being rewritten to CENELEC standards. The Rio Tinto project started in 2011 with a series of studies and laboratory exercises. LEADER will deploy at Rio Tinto in assistant mode in 2012 and evolve to increasing stages of automation during the 2013/2014 period until driverless trains controlled by LEADER are achieved.

Prizes and awards European Railway Award for Knorr-Bremse The European Railway Award is presented annually by the Community of European Railways (CER), the Association of the European Rail Industry (UNIFE), and the European Rail Infrastructure Managers (EIM) in recognition of outstanding services to the railway sector. During the year in question, Dr. Stefan Haas, Head of Innovation and Technology at Knorr-Bremse Rail Vehicle Systems, was presented with the Award in the “Technical Achievements” category for the development, industrialization and successful introduction of the linear eddy-current brake. The French physicist Léon Foucault first described the principle of the linear eddy-current brake back in the 19th century. However, before Knorr-Bremse was able to launch an eddy-current brake for rail vehicles in commercial operation there were numerous technical challenges to be resolved, not least in terms of braking force limits, signaling compatibility, power supply, availability, and mechanical installation in the bogie. Today the linear eddy-current brake offers an ideal complement for conventional friction brakes and regenerative brakes. It operates independently of any wheel-rail adhesion, is not subject to wear and tear and applies the braking force evenly and without delay.

EEF Future Manufacturing Award In 2011 Knorr-Bremse Rail Systems (UK) Ltd., based in Wiltshire in the south of England, won the “Future Manufacturing Award” presented by the Engineering Employers Foundation (EEF). The EEF awards are designed to recognize innovation and excellence in the fields of manufacturing and technology. KnorrBremse received the award in recognition of its complete redesigning of the production cell and process for the manufacture of its EP2002 brake control system. Due to the rise in worldwide demand for the EP2002 system – for metro trains in China and Dubai, for example – Knorr-Bremse’s UK subsidiary needed to increase production capacity and output. In totally revamping the EP2002 production process, the company not only focused on increasing output but also adopted a far-reaching approach designed to minimize waste and potential error in the manufac-

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turing process as a whole. As well as enhancing productivity, the redesigned cell also provides a better working environment for the employees and at the same time raises the quality of the product even further.

Three awards for Knorr-Bremse UK Knorr-Bremse Rail Systems (UK) Ltd. received three awards from Siemens during the course of the year in question. The “Going the Extra Mile“ award recognized the company’s problem-solving skills and rapid reaction times as well as the excellent partnership between Siemens and Knorr-Bremse. And the “2011 Award for Class 444 Overhaul“ went to Knorr-Bremse in two areas: Knorr-Bremse Rail Systems received it for its work as a partner in overhauling braking systems, and Sigma (Burton) received it for the overhaul of HVAC systems.

Knorr-Bremse Poland wins TRAKO award The TRAKO 2011 International Railway Trade Fair took place in Gdansk, Poland, over a period of four days in October. During the course of this important European event Knorr-Bremse Poland was presented with the “TRAKO 2011 Trade Fair Polish Business Locomotive 2011 Award,” one of the most prestigious awards in the Polish rail industry. Every year since 2007, the trade journal Rynek-Kolejowy has singled out companies whose products and innovations have made a significant contribution to the Polish rail market. Presenting the award to Jacek Bilas, Managing Director of Knorr-Bremse Poland, the managing directors of the journal paid tribute to the role played by the company in helping to develop the Polish market.

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Products During the course of 2011, Knorr-Bremse Rail Vehicle Systems launched new, innovative products in many areas with the aim of making rail transportation even more efficient, safe and environmentally friendly. In Russia, a distribution valve specially developed for the country’s freight transportation system achieved approval, and in Germany, Knorr-Bremse collaborated with a partner to develop a system that paves the way for a condition-dependent approach to maintenance.

Tests start on KAB60 control valve in Russia In terms of territory, Russia is the world’s largest country. Every day, huge volumes of freight, including many raw materials, are transported via the country’s 85,500 km of railroad track – and the rail network is constantly being expanded. As such, the country offers a promising market for Knorr-Bremse. At the end of October 2011, the KAB60 control valve specially developed for the Russian freight market received official approval. Knorr-Bremse was initially commissioned to manufacture 1,500 of the valves for field-testing. The valves are compatible with the components used in the Russian market and during overhaul the current valves are replaced with the new ones, enabling them to be tested under real conditions. Official approval was preceded by several years of development work on ensuring the valves’ ability to function reliably at ambient temperatures down to minus 55 °C – conditions under which valves manufactured for other markets would quickly reach the limits of their capabilities. The new KAB60 valve developed by the Knorr-Bremse engineers can actually function down to minus 60 °C. Another priority was durability: whereas Russian valves currently have to be overhauled approximately every two years, laboratory tests showed that the Knorr-Bremse valves could function for six years – considerably reducing lifecycle costs. Knorr-Bremse also offers considerable advantages in terms of reliability and operation. The brakes can be controlled more rapidly and precisely, with reduced variation of brake

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cylinder pressure and shorter fill and release times. This makes it easy to operate the relatively long trains used in Russia. Once the initially limited quantity of Knorr-Bremse valves have demonstrated their reliability during two winter periods, restrictions can be lifted and the approval process completed, putting series production of the valves – planned to take place in Russia itself – firmly on the horizon.

New sand separation for HVAC systems In desert regions, airborne sand and dust particles represent a serious problem when it comes to ensuring high air quality on board trains. Knorr-Bremse subsidiary Merak has responded by engineering an efficient sand separation system for HVAC systems that removes the sand and dust from the ambient air uptake. The new filtration system is based on three cleaning stages. First of all a fresh air grille prevents large particles or water droplets from entering the system. The air is drawn in from the more favorable side of the train depending on the wind direction and the direction of travel. In the event of a sandstorm, all of the grilles on both sides can also be closed. In the next step the air is directed through several cyclonic filters so that the sand is separated out and only clean air enters the system. A turbo ventilator removes the sand from the cyclonic filters automatically, keeping maintenance costs low. In the third and final stage the air passes through several filter bags with different size filters, removing any remaining particles. The result of this filtration architecture is that only entirely clean air enters the HVAC system, hugely improving air quality on board the train.

Monitoring the sanding process Trains and streetcars use sand to increase the traction between wheel and rail and ensure safe braking even in poor weather conditions. To ensure that the sanding system always functions properly, it has to be checked – usually by the driver – every time the train goes into service. Now Knorr-Bremse has developed a sensor-based system that enables this checking routine to be carried out automatically in a few seconds. The sensors are currently being used on urban trains operated by the Berlin S-Bahn. The sand flow sensor is based on a principle developed 20 years ago that involves measuring the induction effect triggered by the electrostatically charged sand particles as they pass through a conductor loop. The system is used in industry, for example, to measure the mass flow of coal dust in power stations, where there is a need to detect blockages in the transport pipes. Knorr-Bremse Rail Vehicle Systems has now adapted this principle for use in rail vehicles. Sensors monitor the volume of sand being blown between the wheel and the rail through the sand pipe, and if they identify any malfunctions in the sanding process, the driver is informed via a cab display. Thanks to the new automatic sensor-based monitoring system, lengthy manual checking of the sanding system is no longer required – saving time and helping make train operations more efficient.

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Shared platforms for train simulators Up till now, the train simulator markets served by New York Air Brake (NYAB) and Sydac were clearly separated. With its TDS model series, NYAB developed and supplied an excellent platform for simulating extremely long freight trains that is currently used above all in NYAB’s home market of North America but also in similar markets elsewhere. Sydac, on the other hand, supplies simulators for passenger trains and is well known for its highly realistic, high-definition displays of tracks, controls and passengers. The company has a strong presence in Australia, Asia and the UK. The successful merger of the two companies’ platforms means that Knorr-Bremse is now in a position to combine the advantages of the two systems on a modular basis. Thus, for example, the high-definition display offered by Sydac’s passenger train simulators can be integrated into NYAB’s TDS simulators. And conversely, NYAB’s highly complex train models can be easily reproduced on Sydac simulators. This means that when operators are setting up customized simulators they can choose from a wide range of new options, making it easier to meet their specific demands. A further advantage is the fact that their regional supplier can now offer expertise in all types of simulator. In addition to enabling a wider range of simulators to be offered, integration of the two platforms has also enhanced their quality. Because the joint platform consists entirely of tried-and-tested modules from both systems, overall quality has been enhanced and duplication of effort avoided.

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On track for greater efficiency Microelettrica Scientifica S.p.A., a member of the Knorr-Bremse Group based in the Italian town of Rozzano, develops and manufactures ecometers for measuring electricity consumption on trains, identifying potential savings and ensuring maximum operating efficiency. To make sure the train operates at maximum efficiency, the energy consumption on the various networks has to be precisely measured and the data passed from the train to the operator’s control room. For some time, systems such as Eurometer, Integrameter and City Metering have offered reliable consumption data capture and management. But the new ecometer from Microelettrica Scientifica now combines all these functions into a single system. The ecometer measures the current and voltage on both AC and DC networks and can therefore be used on all European systems to calculate the vehicle’s consumption in relation to the current available from the catenary system. Combined with the Knorr-Bremse driver assistance system LEADER, Sydac simulators and appropriate consumption data management, it constitutes an important element in a comprehensive energy saving system for trains. Weighing in at less than 30 kg and with a height of no more than 480 mm, the Ecometer can be swiftly installed by a technician and is designed to be maintenance-free. With a mere 0.2% deviation it is particularly accurate, and its modular design makes it very good value for money. Data transfer can take place according to the needs of the particular operator via optical fiber cable, existing loops or radio frequency.

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Knorr-Bremse launches Ecodesign From the point of view of both manufacturers and customers, the efficient use of resources is an important driver of innovation in the rail vehicle sector. The Ecodesign project launched by Knorr-Bremse in 2011 aims to further develop resource-efficient product solutions for rail vehicles. Specific products are selected on the basis of environmental criteria – for example energy consumption – and their impact on the environment during the entire lifecycle is analyzed with a view to improving product sustainability and minimizing overall energy requirements, for example by intelligent design and optimum operational management. In the course of various pilot projects, Knorr-Bremse looked at the materials it was using, focusing mainly on the scope for utilizing lightweight materials for certain components with a view to minimizing the vehicle’s overall energy requirements. Another aspect examined was the energy required to manufacture and process the products. Here, again, the idea was to reduce the use of resources to a minimum – while always ensuring the safety, quality and functionality of all products.

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Intelligent monitoring Knorr-Bremse and SKF, a specialist in rolling bearings and industrial monitoring systems, have joined forces to develop COMORAN, a system that combines safety monitoring for rolling stock sub-systems with comprehensive condition monitoring. The European TSI High Speed directive that came into force in February 2008 defines the requirements for monitoring critical safety-relevant systems. Damage to wheelset bearings, derailment, unstable running or hot axle boxes must be reliably identified and immediately reported to the locomotive engineer. For some years now, Knorr-Bremse systems have Reducing lifecycle costs It is not just in terms of safety that the demands provided these functions in highmade on rail systems are growing. Fleet operators are increasingly calling for preventive diagspeed trains. nosis of wear and damage so as to prolong the life of components. In collaboration with SKF’s Condition Monitoring Center, Knorr-Bremse developed COMORAN (Condition Monitoring for Railway Applications) to meet this demand. COMORAN uses data already available from the train’s monitoring functions for an on-line diagnostic system that helps identify the first signs of wear or damage. The system facilitates long-term condition monitoring of critical components to identify wear or damage, with operational data being relayed to the maintenance specialists to enable them to carry out preventive maintenance throughout the system’s entire life.

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Cooperation between Knorr-Bremse and SKF did not come about by chance. Knorr-Bremse has decades of experience in control and monitoring systems for rail vehicles, and SKF is a globally recognized leader in the field of industrial monitoring and machine diagnostics.

Cost-effective In order to offer a cost-effective system it makes sense to combine the required functions with systems already installed in the vehicle. Integrating the system with the existing brake control and wheel slide protection system has obvious advantages: combining various individual systems reduces complexity and improves overall system availability. Extra power supplies, communication interfaces and pulse generators are not required. Information already generated by the wheel slide protection system – for example rotation speeds – can be drawn on directly by the diagnostic system.

Permanent diagnostic function COMORAN consists of two main components – an additional 19” electronic monitoring board that can be integrated into the existing KnorrBremse ESRA system for brake control and wheel slide protection, and combined multifunctional sensors that measure revolutions, temperatures and acceleration, for example on axle bearings, transmissions or motors. The interplay of the various components is best illustrated using the example of the axle bearings, whose replacement represents a significant

cost factor in rail vehicle maintenance. COMORAN axle bearing diagnostics enable the impulse generators for the wheel slide protection system and the additional acceleration data from the wheelset bearings to be used to continuously evaluate speed-related bearing frequencies. The frequency spectrums thus identified make it easy to differentiate between intact bearings and worn or faulty ones. Tools specially developed by SKF enable such defects to be portrayed graphically in the form of a trend analysis so that future performance can be predicted with maximum accuracy. A configurable parameter database ensures that bearings of any type or from any manufacturer can be monitored. Similar options exist for monitoring drive components, motors, shafts and clutches. The same sensors can be used to monitor wheel treads and flats. Here, too, using the same interfaces and sensor signals as the brake control system saves extra cost.

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Aftermarket Knorr-Bremse’s Rail Services bring together all the company’s aftermarket services for brakes and onboard systems into a single flexible program focused on efficiency, comfort, delivery reliability and spare parts availability. As part of the program the company has further developed its aftermarket logistics – an effort that paid off when it won a prestigious service contract from Russia.

Servicing the “Peregrine” Bringing a train to a safe halt from 250 km/h calls for a high-performance braking system. But even the best brakes in the world cannot be guaranteed to work safely unless they are regularly serviced. Siemens, the company responsible for servicing the eight Velaro RUS high-speed trains operating in Russia, has opted to put this task in the hands of Knorr-Bremse, and has awarded the company a 30-year contract for full servicing of the braking systems. “Sapsan,” which means “peregrine” in Russian, is the name given by Russian railway operator RZD to the Velaro RUS high-speed train that serves the important line between Moscow and St. Petersburg. Despite calling at several halts on the way, the Sapsan covers the 650-odd kilometers in a mere three hours and 45 minutes. One of the reasons Siemens awarded Knorr-Bremse the contract was that the company was able to offer its own local service center in St. Petersburg. This is already at the planning stage and will enable the company to carry out all the necessary technical work in modern workshops equipped with stateof-the-art assembly and testing technology operated by a team of highly trained specialist engineers. After it comes on stream in August 2014 the facility will be used over a period of 30 years to overhaul the air supply and brake control systems four times and the bogie equipment five times.

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With effect from 2011, the contract also includes checking safety valves and pressure switches and overhauling the Isobar brake pads in addition to the regular overhauling of brake components. It also involves supplying Knorr-Bremse original spare parts and providing regular training in braking systems. If required, Knorr-Bremse specialists will travel to Russia to hold training courses in braking systems and commissioning for the Velaro RUS operators and Siemens employees.

1,000th screw compressor block overhauled In the fall of 2011, Knorr-Bremse overhauled its 1,000th compressor despite having only launched the service three years ago. To avoid compressor failure, which could even put a vehicle out of service, it makes sense for operators to have the compressor block – the heart of any screw compressor – regularly overhauled. The process involves returning the compressors to an “as-new” condition in terms of wear, performance, service life and appearance. Specially trained technicians check what individual components can be reused. Casings and rotors are refurbished, seals and bearings are removed using a specially developed process, reusable parts are carefully cleaned and all seals and wear-prone parts such as roller bearings are replaced. But the most important step involves the precise adjustment of the rotors – crucial if the overall system, which is specially designed for the requirements of a rail vehicle, is to function reliably in the long term. At the end of the overhaul process, extensive testing under real conditions ensures that the compressor has been returned to an “as new” condition in the usual Knorr-Bremse quality. The customer benefits in many different ways from such a professional overhaul process. It offers better value for money than complete compressor replacement and improves vehicle availability by avoiding downtimes caused by compressor failure. It also saves office work, because in addition to the overhaul, the customer receives original spare part kits from a single source. Using screw blocks overhauled by Knorr-Bremse reduces the lifecycle costs for the customer without any concessions being made in terms of quality. The process was developed in Munich and established there on the basis of special assembly systems. Demand for local compressor overhaul in the Chinese market is on the increase, and Knorr-Bremse responded in 2011 by setting up its own repair line based on company production standards. Chinese colleagues were provided with exhaustive training both in Munich and locally.

Service contract for Merak in the United States In the year under review, Knorr-Bremse subsidiary Merak won the service contract for the overhaul of 64 HVAC systems in New York‘s “AirTrain JFK.“ The AirTrain units provide the mass transit link between New York‘s John F. Kennedy Airport, the New York City Transit subway network and the Long Island Railroad. For some time now the U.S. market has been experiencing a rise in demand for HVAC system overhauls. One driving factor here is increasing system complexity, which means that train operators prefer to have the HVAC systems overhauled by specialists instead of by their own workshop personnel. Then there is the change in legislation prohibiting the use of the widespread R-22 refrigerant from 2014 onward. This has led to operators using the opportunity of a scheduled overhaul to have their systems converted to more modern refrigerants.

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Merak is expecting this kind of contract to account for a major proportion of the service business in the U.S. in the next five years.

Aftermarket activities regrouped in Australia Knorr-Bremse Australia and Sigma Coachair, the manufacturer of HVAC systems for rail vehicles and industrial applications acquired in 2010, began the process of merging their aftermarket activities in the year under review. The idea is that the two formerly separate manufacturers should in future present one face to the customer. The process of bundling the aftermarket business was accompanied by further progress in terms of service activities. Thus, for example, Knorr-Bremse Australia developed new training courses, based on which customers are no longer instructed in individual product areas but at cross-product level in a single course that covers the Group‘s braking, HVAC and door systems.

New aftermarket partner in Brazil MRS Logistica is one of the biggest freight transportation companies in the Brazilian rail market. It operates some 18,000 freight cars and almost 700 locomotives on a network of more than 1,600 kilometers serving three federal states which together account for approx. 56% of Brazilian GDP. Most of the freight carried by MRS consists of products such as iron ore, finished steel products, cement and agricultural goods, which have to be transported reliably from A to B, often to tight deadlines. In order to ensure continuous vehicle availability, the Brazilian company has initially contracted Knorr-Bremse Brazil to service the CCB II control valves on 254 of its locomotives up till spring 2013. Although this is the first such service contract, the two companies are not entirely unknown to each other – Knorr-Bremse is already extensively involved in providing equipment for the operator’s rolling stock, being responsible for all the CCB II valves for the locomotives and DB-60 systems for approximately 70% of the freight cars.

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Site-specific Projects With a view to securing the company’s long-term success, Knorr-Bremse Rail Vehicle Systems launched a large number of site-specific projects during the year under review. On virtually all continents the company either set up new facilities or expanded existing ones. In the Chinese city of Suzhou it opened a new service center, and in Italy the acquisition of a specialist manufacturer of ventilators and a well-known producer of electronics for rail vehicle applications enabled the division to further expand its product portfolio.

New plant opened in England Knorr-Bremse has relocated the UK and Eire business of the Australian rail vehicle HVAC systems manufacturer, Sigma Coachair, acquired in 2010, to a new factory in Burton upon Trent, Staffordshire, England. Now officially known as Knorr-Bremse Rail Systems (Burton) Limited, the company will continue to pursue its established activities in the development and production of HVAC systems for rail vehicles and industrial applications. The portfolio of services also includes customer service and overhaul work for Knorr-Bremse subsidiary Merak, as well as for several other manufacturers of rail vehicle HVAC systems.

Comet Fans S.r.l. acquired Knorr-Bremse subsidiary Microelettrica is pushing ahead with the vertical integration of its operations through the acquisition of Comet Axial Fans S.r.l., a niche supplier of fans for rail vehicle and industrial applications. Given the expansion of the portfolio beyond axial fans, the company has been renamed Comet Fans S.r.l. Based in Milan, Italy, this specialist manufacturer develops and produces not only fans but also ventilation systems, condensers, radiators and wet cooling towers.

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In the rail vehicle sector Comet fans are used, for example, in HVAC and air supply systems for passenger coaches, but also for cooling brake resistors. In the industrial sector the fans are used in a wide range of electrical machinery, heat exchangers and radiators, not least in refineries, chemical plants or the cement industry. In the year under review, Microelettrica began the integration of Comet into its own structures.

Plan for new joint venture in Russia The Russian state railway company RZD set up its second freight car subsidiary back in 2010 in the form of the “Second Freight Company” (Vtoraya Gruzovaya Kompaniya, or WGK). As from 2015 the new company is to take over some 20% of Russian rail freight transportation. It is also planned for this wholly-owned subsidiary of RZD to be the partner in a new Russian joint venture being set up with Knorr-Bremse. During the course of the year in question, both companies laid the foundation for the joint venture in the form of a Declaration of Intent. An important element was the decision to set up and operate a joint production facility in Russia that will initially manufacture disc brakes, air supply systems for passenger trains and control valves for freight cars.

Green light for new U.S. plant The positive development of business at Knorr Brake Corporation (KBC) in North America and the forecast mid-term demand were the main factors in the decision to start planning a new production shop in Westminster in the year under review, in the immediate vicinity of the existing plant. From 2013 onwards this 18,000 square meter site will provide work for around 250 employees, manufacturing a portfolio including train brake systems, bogie equipment, compressors and air dryers, as well as HVAC systems.

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In line with Knorr-Bremse’s strategy of localized production, the company will manufacture systems for the North American market in collaboration with certified local suppliers. Standardized processes anchored in the Knorr-Bremse Production System (KPS) will ensure the customary high quality of Knorr-Bremse products, from raw material processing to final quality control. Compliance with the LEED (Leadership in Energy and Environmental Design) guidelines means that the new facility will also be built to the latest environmental standards. These include measures to ensure minimum water consumption and the efficient use of energy in production operations and in the building’s HVAC systems. KBC will achieve a further reduction in its carbon footprint through the ingenious use of natural daylight for lighting purposes.

Acquisition of Technologies Lanka Knorr Brake Corporation (KBC) has added to its product portfolio with the acquisition of Technologies Lanka, an innovative developer and manufacturer of rail vehicle electronics systems and components located in Quebec, Canada. The purchase will enable KBC to leverage its diverse product portfolio ranging from linear door systems to HVAC system controllers as well as its highly innovative Research & Development team. Since entering the rail industry in 1997, Lanka has had steady growth in revenues and profits. Now as a member of the Knorr-Bremse Group, Lanka has the opportunity for further growth through access to Knorr-Bremse’s extensive distribution channels, diverse inter-company relationships and industry expertise.

Operations begin at Suzhou II+ The Knorr-Bremse facility in Suzhou is the Group’s largest production plant in China. In the space of just twelve months, Knorr-Bremse Suzhou has doubled its output – which was one reason for the new extension to the plant, which was opened in March 2011. Knorr-Bremse began production of rail vehicle systems in China by opening an assembly plant in Shanghai in 2000. With the start of production at the new Suzhou II+ plant, the company has developed into one of the largest suppliers in the Chinese rail vehicle market. By the end of the year under review, the addition of the new extension had brought the workforce at the plant to almost 800 employees. Through the extension, Knorr-Bremse created additional floor space for machining centers. Workpiece throughput was enhanced by optimizing the routing and machining times of the parts, with fixed cycles for everything from assembly to inspection and packaging. To respond to and foster the expansion of aftermarket activities in China, Knorr-Bremse also set up a new Service Center at the site, covering 1,800 m2. The recently set-up Technical Solution Team is also supporting aftermarket activities. In direct contact with customers, the team works closely with them to draw up overhaul schedules, for example, and discuss technical details of agreements. At the same time, Knorr-Bremse expanded its Field Service Team for locomotives, extending the area covered from Suzhou to the west of the country. By the end of 2011 more than 100 service technicians were deployed covering a total of 51 cities. In addition, the company established a new Systems Engineering and Commissioning Center staffed by some 50 engineers and technicians. In the course of the expansion, Knorr-Bremse also took ecological aspects into account. A rainwater tank now provides water for watering the grounds. Solar modules for the production of hot water are

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installed on the roofs. And to ensure ideal conditions on site for up to 1,000 employees the company has also built a state-of-the-art canteen and new changing rooms and showers.

IFE VICTALL joint venture grows Steady growth in demand meant that the IFE Victall joint venture in Qingdao, China, reached the limits of its capacity within a few years of first being set up in 2006. After expanding the facility to more than 12,000 m², Knorr-Bremse relaunched production in the spring of 2011. During the course of the year IFE Victall, with its workforce of 650, produced more than 28,000 access systems, making it the biggest manufacturer of door systems within the Knorr-Bremse Group. In line with Knorr-Bremse’s global KPS production system the plant is being equipped with state-ofthe-art machinery and modern workplaces, with particular emphasis put on the design of the production lines. The opportunity has also been taken to upgrade the existing production area with a view to saving energy and protecting the environment. A special feature of the IFE Victall plant in Qingdao is the fact that all production processes take place in one building, with even the paint shop integrated into the production chain. This makes it possible to achieve huge time savings.

Merak expands in Shanghai Merak Railway Technologies Shanghai was founded by Knorr-Bremse‘s Spanish subsidiary Merak in January 2001. Operations began with a staff of ten, working on roughly 500 m2, but the plant was soon caught up in rapid growth. To meet the ongoing rise in demand for HVAC systems in the region, the Shanghai facility was expanded yet again in the year under review, so that today some 360 employees are engaged in operations on more than 13,000 m2. During the expansion, Knorr-Bremse implemented the highest international standards in terms of efficient logistics, excellent quality and optimal industrial safety in line with the Knorr-Bremse Production System (KPS). But the importance of the Shanghai plant for the region cannot be defined by sales figures and employee numbers alone. The plant is also responsible for coordinating the numerous HVAC system projects taking place in Asia, which are characterized by a high level of localization.

Plants to merge in Australia The plans for the cross-functional merger of the four Australian locations that Knorr-Bremse has been operating since the acquisition of HVAC system manufacturer Sigma Coachair in 2010 have been finalized. The official groundbreaking ceremony for the expansion of the existing plant in Granville is scheduled to take place in the first quarter of 2012, with the move slated to follow approximately twelve months later. The main drivers of the expansion to almost 14,000 m2 of office and production space are the growth in sales over recent years and the additions to the product range. Merging the different locations will make cross-functional cooperation far more efficient. KnorrBremse is keen to bring together the ongoing Australian development and production activities for Sigma Coachair HVAC systems and for rail and commercial vehicle brake components under one roof. In addition, the aftermarket business in the rail vehicle HVAC and brake systems segments will also be managed by the Granville plant from 2013 onwards.

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New plant in India With more than a billion inhabitants – about half of them under the age of 25 – robust economic growth and a steadily growing middle class that is keen on traveling and whose willingness to consume is stimulating the economy, India has the fastest growing rail transportation market in the world. In response to this, Knorr-Bremse started constructing a new plant in Faridabad in December 2011.

Levels of orders for Knorr-Bremse products are a good indication of the relatively steady economic growth enjoyed by the Indian subcontinent in recent years. And all the signs are that the high growth rates are set to continue in the medium and long term. One of the main drivers is the Indian government’s infrastructure expansion plan, which includes modernization of the rail network. Existing rail vehicles are being upgraded and orders placed for new ones – both areas in which KnorrBremse has played an active role in India for many years.

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Close to the existing plant The existing plant in the north Indian city of Faridabad no longer has the capacity to cope with expected future levels of demand – which was why Knorr-Bremse began construction of a new plant during 2011. The new facility is being built in the immediate vicinity of the current one – avoiding the loss of staff that usually results from relocation and retaining workforce skills. On a 22,000 m2 site housing state-of-the-art production and office facilities, a workforce of some 400 will produce brake control systems, bogie equipment, compressors and air dryers for rail vehicles. As part of Knorr-Bremse’s international strategy these components will be manufactured largely for the Indian market in close collaboration with certified regional suppliers.

Improved working conditions and a green focus As elsewhere, Knorr-Bremse will be applying the principles of its global production system (KPS) to ensure uniform processes across the entire value chain from raw material processing via surface treatment right down to assembly and quality control. The new facility is state-of-the-art – and not just in terms of an improved working environment, easier communication between departments and offices situated close to the production areas. The design of the building also conforms to green building standards, with effective air conditioning and high levels of insulation considerably reducing carbon dioxide emissions.

Involvement in development center in Pune Parallel to the construction of the new building in Faridabad, Knorr-Bremse Rail Vehicle Systems is also involved in the new Technology Center India (TCI) currently being built in Pune by the Commercial Vehicle Systems division as a software development center for commercial vehicle products manufactured for the Asian market. In order to benefit from synergies, the new building will also house a software development center for the Rail division.

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Commecial Vehicle Systems During the year under review Knorr-Bremse Commercial Vehicle Systems expanded its business in all regions and grew by 22% overall. Truck production in Europe and North America was up 30% and 54% respectively, but there was also strong growth in Asia and South America as the division benefited from the ongoing recovery in global commercial vehicle markets.

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Markets During the year in question the global commercial vehicle market recorded strong growth. Although levels of production in China declined, overall production figures around the world continued to rise compared with the previous year, and Knorr-Bremse won many tenders and orders in the sector.

Europe The recovery in the Western European commercial vehicle market that had set in during the previous year continued in 2011. Truck production was up 30% at a total of around 420,000 units, but the market still remained below the levels achieved before the crisis. Apart from disc brakes, the most important source of sales revenues for Knorr-Bremse was ABS and EBS systems.

North America As in Europe, there was also a recovery in the North American commercial vehicle market, with production up 54% at 335,000 units. Knorr-Bremse used the favorable market conditions to adapt its production facilities in line with customer requirements. The company also opened a third plant in Acuña, Mexico.

South America A positive boost also came from South America, where developments that had started in 2010 continued. The commercial vehicle market grew by some 14% to 209,000 units, driven in particular by the Brazilian market, where the planned introduction of the EURO 5 standard in 2012 triggered advance purchases of vehicles.

Asia/Australia Intervention by the Chinese government in the capital markets had a dampening effect on the truck market in that country and levels of production were down 16% at 1,119,000 units. The successful launch of its joint venture in Chongqing was an important strategic step for Knorr-Bremse in the Chinese market. 2011 saw the Indian and Japanese markets grow by 11% and 5% respectively.

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Selling systems to China and Russia The commercial vehicle markets in China and Russia are amongst the biggest in the world. In both regions Knorr-Bremse is using its years of experience and its skills in the field of braking systems to support local OEMs.

When major OEMs in the traditional markets are planning new vehicle platforms, they often buy individual systems from various suppliers and then put these together in-house so that they fit perfectly into the architecture of the new vehicle. Up till now, however, manufacturers in China or Russia have tended to use the strengths of their own engineers to develop appropriate vehicle platforms for the market, with a main focus on the chassis and drivetrain. They often buy in entire braking systems from elsewhere, thereby ensuring that their vehicles are fitted with systems that are perfectly suited to the particular application.

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Several system projects in development or already approved In both China and Russia, Knorr-Bremse is increasingly being brought in to supply entire systems, with the company assuming complete responsibility – including initial design, calculations, layout and across-the-board technical consultancy. This means that although the markets are only beginning to show signs of growth, the local OEMS are already able to equip their vehicles with high-end products. Projects such as these have enabled KnorrBremse to build up business relations in both China and Russia and expand its share of these markets. During the year under review both countries saw the launch of various ABS and disc brake projects supervised by the regional KnorrBremse companies with the help of the parent company. Drum brakes and EBS systems – usually for heavy-duty trucks or buses – are also currently being developed by some manufacturers or have reached the approval stage. Knorr-Bremse’s close involvement in these projects is due above all to the company’s globally recognized role as a technological pacemaker in the development of braking systems. The manufacturers have ambitious plans and want their vehicles to be equipped with high-end technologies from trusted partners who deliver top quality.

Growing markets require modern solutions All the indications are that the commercial vehicle sectors in China and Russia are set to grow further. New legislation in China means that ABS is increasingly being installed in trucks. And in Russia there is already a statutory requirement for commercial vehicles to be fitted with ABS. Furthermore the electronic stability program ESP is to become compulsory in all new trucks in Russia from 2016. As one the world’s leading manufacturers of electronic vehicle safety systems, Knorr-Bremse is once again the right partner to turn to.

Demanding challenges for Knorr-Bremse experts When it comes to selling systems in China and Russia, one of the challenges – in addition to the need to bring together the right specialists for the various components, whatever their normal location or department – is that there is often also a requirement to source as many components as possible from local manufacturers. This is partly because imported products would seldom meet the strict cost objectives of the OEMs, but partly also because a certain level of local content enables manufacturers to qualify for government support.

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Market Successes Against a background of market recovery, Knorr-Bremse Commercial Vehicle Systems achieved a number of important successes. For the first time the company provided an EBS electronic braking system for installation in heavy-duty trucks manufactured by Daimler AG. In Germany, the company was designated “Best Brand in the Truck Industry” in the “Brakes” category for the sixth Development of worldwide sales revenues for the Commercial Vehicle Systems diviyear in succession. And Knorr-Bremse’s North American sion in EUR millions subsidiary Bendix Commercial Vehicle Systems celebrat2009 1,221 ed delivery of its 750,000th air compressor. 2010 1,701 2011

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Europe Knorr-Bremse drives forward business with SOEMs There are roughly 250 companies in the SOEM (Special Original Equipment Manufacturer) category in Europe, Russia, Turkey, the Middle East and North Africa. In addition to well-known manufacturers of trucks, buses and off-road vehicles, this sector also includes manufacturers of special-purpose vehicles used, for example, by airport fire services or for certain agricultural applications. In these specific cases, safety systems such as the electronic stability program ESP, the Autonomous Emergency Braking System AEBS or the Lane Departure Warning system LDW have an increasingly important role to play. Not least on account of the closely defined application areas of their products, many SOEMs build only a small number of their highly specialized vehicles and are therefore unlikely to have their own braking systems specialists on the staff. This is increasingly leading these manufacturers to engage the services of Knorr-Bremse as an experienced system supplier, to provide them with the necessary expertise, from the planning of their vehicles to final delivery. This professional, competent and customized support from Knorr-Bremse ensures that the braking system is perfectly geared to the respective application of the vehicle.

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In the year under review, Knorr-Bremse deliberately intensified its efforts to bundle the expertise of the sales staff responsible for the various regions and to expand its technical support team. The resultant more intensive exchange of experience and knowledge is intended to help identify trends and developments in the SOEM sector early on, as well as generating the ideal response to the diverse range of customer needs. In total, Knorr-Bremse’s business with SOEMs showed an increase of around 35% over the previous year, thanks to numerous new orders that were successfully completed in 2011. For instance, KnorrBremse supplied the complete braking system for the new vehicle platforms of Nissan in Spain and Ford in Turkey. The company also obtained the orders to equip the state-of-the-art electric minibuses built by Gruau in France and the light trucks manufactured by SCAM of Italy. And buses manufactured by British builder Alexander Dennis for the New Zealand market are also being equipped with KnorrBremse EBS systems. But SOEM demand is not restricted to braking systems: Knorr-Bremse also supplies Belgian manufacturer Van Hool, for example, with ELC Electronic Level Control and the Tire Pressure Monitoring System TPMS for many of its new buses.

500,000th drum brake made at Knorr-Bremse KAMA On December 1, 2011, Knorr-Bremse KAMA, a joint venture between Knorr-Bremse and the biggest Russian commercial vehicle manufacturer KAMAZ, produced the 500,000th drum brake at its Naberezhnye Chelny facility in the Russian Republic of Tatarstan. At a small celebration, Klaus Deller, KnorrBremse Executive Board member responsible for the Commercial Vehicle Systems division, officially presented the brake to KAMAZ Director General Sergey Kogogin. Along with drum brakes, the joint venture in Naberezhnye Chelny also manufactures torsional vibration dampers for the Russian truck market.

ABS for new Fendt 900 During the year in question, vehicle manufacturer Fendt was the first company to install Knorr-Bremse’s newly developed ABS anti-lock braking system for agricultural vehicles as standard equipment in its tractors. As tractors become increasingly powerful and faster, this ABS system ensures reliable braking and a high degree of safety as well as better steering and control on both dry and wet surfaces. The vehicle can also brake safely on loose surfaces such as gravel or snow without any danger of the wheels locking.

Long-term contracts with Polish vehicle manufacturers Five years on from the foundation of Knorr-Bremse’s Polish subsidiary Knorr-Bremse Polska SfN Sp. z o.o the company posted its best ever results. In both the aftermarket and trailer sectors the company was able to sign long-term contracts with the leading Polish commercial vehicle manufacturers, thereby creating a stable basis for future business development. With the companies Zaslaw, Wielton and Feber Knorr-Bremse signed contracts in particular for the supply of complete EBS braking systems and pneumatic suspension systems over several years. During the year in question, in addition to consolidating and expanding its market share, Knorr-Bremse was particularly concerned to take action against product piracy and the use of non-original spare

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parts which are increasingly being sold on the Polish market. The company provided comprehensive information to workshops on product liability and the risks involved in marketing and using nonoriginal spare parts.

Knorr-Bremse supplies complete braking systems to Nissan Europe Japanese automotive company Nissan’s European subsidiary NISSAN Motor Iberica S.A. is planning to launch a newly developed light truck on the European market in 2014. In order to meet rigorous market requirements, the vehicles are to be equipped with state-of-the-art braking technology and a whole range of safety features. Knorr-Bremse is developing and supplying the entire braking system for the new vehicles – including not only the ABS8 anti-lock system with integrated ESP electronic stability program but also the air control system and the disc brakes with brake cylinders for the front and rear axles. Knorr-Bremse succeeded in winning this order because the company was able to support Nissan in meeting its delivery deadlines and supply complete solutions tailored to customers’ requirements. The company was heavily involved in designing and configuring the braking system for the new truck at an early stage in the project. As well as providing the axle-mounted pneumatic disc brakes, KnorrBremse is also offering across-the-board technical support during the course of the project. For Knorr-Bremse, Nissan is one of the first customers in Europe to fit the new ABS8 system in conjunction with ESP as standard. With Knorr-Bremse as a competent supplier, the Japanese manufacturer hopes to expand its market share in Europe. Production is slated to start at the end of 2013.

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Hasse & Wrede supplies visco-dampers for Audi and BMW During the year in question, Knorr-Bremse’s subsidiary Hasse & Wrede, manufacturer of visco-dampers and hydraulic dampers for passenger car, truck, marine and stationary engines, received further orders for visco-dampers for the new generations of engines being developed by leading automotive manufacturers. The company is to develop and design visco-dampers for Audi’s new V8 engines and parts of its V6 engines. Hasse & Wrede will also again be supplying visco-dampers for all BMW’s four and six cylinder diesel engines. Thanks to its excellent engineering and manufacturing skills, Hasse & Wrede posted strong growth in all regions of the world during 2011.

Knorr-Bremse involved in new Daimler platform Knorr-Bremse has enjoyed a close and constructive working relationship with Daimler AG for many years. The launch of volume production of various KnorrBremse components for the SFTP platform marks an important milestone in the successful partnership: The company will for the first time also be supplying Daimler with an EBS electronic braking system for the heavy-duty trucks – including the new Actros – produced by this world leader. Knorr-Bremse will be equipping the twin-axle semitrailer tractor units with an EBS5.1 electronic braking system. A variant of EBS5, the system was designed specifically for the requirements of the new vehicle platform and its new electronic architecture. It integrates a wide range of functions that are now regarded as essential for commercial vehicles into a single brake control system. In addition to driver assistance systems such as EPS and ABS, these include coupling force and wear control and retarder control.

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North and South America ACC in Prevost coaches Prevost, a leading North American manufacturer of premium touring coaches, has launched Prevost Aware – a system based on Adaptive Cruise Braking from Knorr-Bremse’s U.S. subsidiary Bendix – as an option for its H-series motor coach models. This makes Prevost the first coach manufacturer in the world to offer the option of Adaptive Cruise Control (ACC) with braking. The innovative technology of the ACC system delivers warnings and active interventions that help coach drivers avoid accidents and collisions. The system also includes Bendix ESP full stability to help drivers mitigate loss of control, particularly on wet or snow- and ice-covered roads, by acting on selected wheels to stabilize the vehicle. In addition, the Bendix Stationary Object Alerts system provides audible and visual driver alerts when the vehicle is approaching a stationary metal object such as a car. Thanks to ACC, the driver can respond to the impending hazard in a timely and appropriate way.

Mercedes and Ford opt for Knorr-Bremse in South America In the year under review, Knorr-Bremse secured two substantial orders in Brazil. One of these involves the company supplying all the air control systems and pedal units for the new medium and heavyduty trucks built by Ford. The other concerns Knorr-Bremse Brazil equipping a proportion of the new buses and medium and heavy-duty trucks built by Mercedes-Benz with brake shoes for their drum brakes.

Knorr-Bremse is also supplying the EAC2.5 intelligent electronic air control system and the compressors. The company had already supplied air control systems for the previous platform, but only some of the various vehicle types within the platform had been equipped with EAC. In the case of the current SFTP platform, virtually 100% are fitted with EAC systems – half of which are being supplied by Knorr-Bremse. In the case of the disc brakes for the new vehicles, Knorr-Bremse has complete responsibility, with the latest generation of SM and SL disc brakes being fitted to the front and rear axles. Knorr-Bremse subsidiary Hasse & Wrede is also supplying visco-dampers for the entire range of engines.

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Asia/Australia Volume production starts at Chinese OEMs Following on from initial shipments of air dryers from Knorr-Bremse India in 2010, relations with the Chinese truck manufacturer Foton continued to expand in the year under review. In June, KnorrBremse began deliveries of power clutches for the current H3 generation of Foton vehicles. The clutch units are produced locally in China at the Knorr-Bremse Dalian plant. The next-generation H4 trucks are also to feature equipment from Knorr-Bremse. Back in 2010 an agreement was signed with Foton governing the development and supply of pedal units, power clutches and handbrake valves for the new H4 generation of heavy-duty trucks. Starting with the H4 platform, local assembly operations were joined by the increasingly localized procurement of numerous components. In this way, Knorr-Bremse has laid the foundation for the industrialization of additional product variants in China, which will enable the company to cover an even wider market for high-quality components. In addition, Knorr-Bremse also managed to step up its disc brake business in China. The company further strengthened its position with Yutong, the world‘s largest bus builder, where disc brakes are becoming more prominent in both buses and coaches. On top of this, Knorr-Bremse was able to engage in new disc brake projects for trucks with OEMs Foton and Shaanxi. To be ideally prepared for the breakthrough of the disc brake in the Chinese truck market, Knorr-Bremse also localized the entire assembly operation in Dalian in line with its own high production standards.

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Important new orders from India In the year under review, a number of new production projects enabled Knorr-Bremse India to reinforce its position on the subcontinent. Among other projects, the company obtained a substantial order from Ashok Leyland for pedal units for the new generation of truck cabs that the Indian OEM will be manufacturing from 2012 onwards. The company also began volume production of exhaust brakes for truck builder Mahindra Navistar for their Type MN25, MN31 and MN40 heavy-duty trucks. For the MN40 models Knorr-Bremse is also supplying the entire braking system including anti-lock braking system (ABS). In 2011, Knorr-Bremse also received orders from numerous other OEMs, including one from Tata Cummins for air compressors and another from Ashok Leyland for drum brakes.

Electronic braking systems for New Zealand British bus manufacturer Alexander Dennis Limited (ADL) won the order to supply 120 vehicles to bus operator NZ Bus in Auckland, New Zealand, one of the country’s leading passenger transport companies with a fleet of more than 1,000 vehicles. Knorr-Bremse is also benefiting from this order as the chosen electronic braking system (EBS) supplier. The NZ Bus project is of particular strategic significance for KnorrBremse, not only on account of its volume but also because one of the company’s main competitors is the incumbent electronics partner to ADL. This demonstrates the strong position that Knorr-Bremse has developed with ADL over the last few years. The order from the UK also documents the level of trust that ADL is investing in Knorr-Bremse as the supplier for the very first EBS-equipped models the manufacturer has ever supplied. The first of the new vehicles – all ADL’s single-deck Enviro 200 midi buses – were delivered in time for the Rugby World Cup hosted by New Zealand in the summer of 2011, with the remainder to follow over the subsequent twelve months.

Prizes and awards “Best Brand” – for the sixth year running The “Best Brand” award is regarded as a reliable indicator of quality and recognizes the reliability and safety of the products concerned. It is also an important indicator of the general acceptance of a brand and its image. In 2011, readers of the trade journals trans aktuell, lastauto omnibus and FERNFAHRER were once again invited by publishers ETM and DEKRA, the vehicle inspection experts, to vote for the best vehicles and brands in the industry. More than 8,000 readers took part in the process, and KnorrBremse Commercial Vehicles Systems was again declared “Best Brand” in the “Brakes” category. Knorr-Bremse was particularly pleased to receive this award as it comes from industry experts with a thorough knowledge of the business who deal with the vehicles, products and services on a daily basis. The fact that Knorr-Bremse has been designated “Best Brand” for six years running is a matter of considerable pride to the company. At the same time it is an incentive to continue to use the expertise and experience of its workforce to create even more innovative and competitive products and services that set the market standard and make an important contribution to road safety.

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Knorr-Bremse wins VDA Logistics Award The VDA Logistics Award is a widely-recognized accolade with which the German Association of the Automotive Industry (VDA) has honored forward-looking logistics concepts in the automotive supply chain since 2008. In the year in question this prestigious award went to Knorr-Bremse Commercial Vehicle Systems. The VDA sees the role of the award as being to draw attention to the importance of logistical processes. The assessment criteria for deciding on the winner include the visionary quality and innovativeness of their ideas as well as their economic usefulness. The jury congratulated Knorr-Bremse Commercial Vehicle Systems on its optimization of logistics processes along the entire value chain and the permanent impact this approach has had on the roles and duties of all concerned. As part of the Supply Chain Excellence initiative Knorr-Bremse succeeded in achieving an unprecedented degree of process-orientation through cross-location and cross-company supply chain management. By implementing a large number of innovative, high-quality projects to optimize flows of materials and information, the company has achieved considerable success. For example, inventories were reduced by more than 25% and schedule effectiveness was also significantly improved. By optimizing the transport network the company was also able to reduce carbon dioxide emissions by 16%.

Bendix wins Frost & Sullivan Award In June 2011, internationally renowned management consultants Frost & Sullivan presented their “North American Product Leadership of the Year Award” to Knorr-Bremse’s U.S. subsidiary Bendix Commercial Vehicle Systems. With this award, Frost & Sullivan recognize companies demonstrating outstanding achievement and superior performance in areas such as leadership, technological innovation, customer service and strategic product development. Bendix Commercial Vehicle Systems was singled out for its outstanding contribution to safety technologies in the North American commercial vehicle market and won the award for its Wingman Advanced technology, an innovative collision warning system with emergency brake assist. Wingman Advanced is a further development of Bendix Wingman Active Cruise with Braking (ACB) and combines adaptive cruise control with braking and collision mitigation technology. According to Frost & Sullivan, Bendix with Wingman Advanced takes the integrated safety systems market to the next level by combining three critical active safety technologies – electronic stability control, adaptive cruise control with braking, and forward collision mitigation braking and warning – into a single unit.

István Lepsényi receives “Manager of the Year 2010” award The Managing Director of Knorr-Bremse Hungary, István Lepsényi, was named Manager of the Year 2010 by the Hungarian National Association of Managers, Menedzserek Országos Szövetsége. At the presentation ceremony in January 2011, the Association praised the company’s sustained success in Hungary, Mr. Lepsényi’s management skills, his effective market strategy, and his outstanding contribution to the health of the Hungarian economy and of the automotive industry in particular. Particular tribute was paid to the important part Mr. Lepsényi played in the economic development of the Hungarian region in which Knorr-Bremse’s operations are located. The Association also singled out his intensive cultivation and expansion of university links for special mention, as well as the successful implementation of corporate social responsibility programs at Knorr-Bremse Hungary.

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Knorr-Bremse KAMA voted “Best Company of the Year 2011” and wins quality award Knorr-Bremse KAMA, the joint venture between Knorr-Bremse and KAMAZ, the Russian market leader for commercial vehicles, received several honors in 2011. It was voted “Best Company of the Year 2011” in a competition set up by the president of the Russian Federation, Dmitry Medvedev, with a view to recognizing efforts to modernize the Russian economy. The managing director of Knorr-Bremse KAMA, Manfred Kindermann, was also presented with the Quality Prize of the regional government of the Republic of Tatarstan by Farid Mukhametshin, Chairman of the State Council of the Republic of Tatarstan. The prize is awarded annually by the Prime Minister of the Republic.

Knorr-Bremse KAMA voted “Well-doer of the Year” Since 2009 the charitable organization Knorr-Bremse Global Care e. V. and Knorr-Bremse KAMA have been supporting a local project in an old people’s home in the vicinity of the Knorr-Bremse site in Naberezhnye Chelny. In 2011 the Knorr-Bremse KAMA joint venture was once again voted “Well-doer of the Year” by the Republic of Tatarstan. With the help of Knorr-Bremse, several parts of the home have been renovated. In Russia, older people are usually cared for by the daughters of their family, but in cases where women are single parents or have to go to work it is difficult for them to do so. When old people’s homes are looking for help, they often find it difficult to compete with institutions for children or adolescents. The home being supported by Knorr-Bremse houses a total of 60 people, of whom 40 have a disability. They are now accommodated in two completely renovated blocks with rooms that have been adapted to cope with disabled patients. For the first time the home has also been equipped with multi-functional beds, which are more comfortable for the patients and facilitate the work of the staff. But the role of Knorr-Bremse is not limited to financial support – Knorr-Bremse KAMA employees also regularly visit the home and spend time with the old people.

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Products Products from Knorr-Bremse have a reputation for reliability, safety, performance and efficiency. They are also precisely tailored to the specific requirements of international customers. During the year under review, Knorr-Bremse developed a special rear axle ABS module for the BRIC states and launched volume production of an ABS system for agricultural vehicles. In the aftermarket, the company launched its original remanufacturing service for the EBS2 braking system and the EAC1 electronic air control system.

Growing demand for air dryers with OSC cartridges Air dryers for commercial vehicle braking systems fulfill an important function – they dry the compressed air supplied by the compressor and in so doing help to prevent corrosion of the braking system. Modern oil separating cartridges (OSCs) not only remove humidity from the air but also filter more than 95% of the aerosols and residues of the oil needed to ensure the smooth running of many compressors. This additional cleaning function plays a particularly important role in prolonging the life of modern ESP and ABS systems, as certain aerosols attack the rubber seals commonly used in these systems. In the year under review the trend to move from conventional filter cartridges to modern OSCs continued at Knorr-Bremse, with OSCs accounting for around a third of all filter cartridge production – an increase of some 26% compared with the previous year.

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Jochen Hahn wins championship Jochen Hahn is the new Truck Race European Champion. At the final held at Le Mans on October 9, 2011 he achieved a superb victory – with a little help from Knorr-Bremse.

By crossing the line in second place at the end of an exciting final race at France’s legendary Le Mans racetrack on October 9, 2011, Jochen Hahn ensured that nobody could prevent him from securing the overall title of FIA European Truck Racing Champion 2011 for himself. His victory was celebrated by his entire team and countless fans as well as by Knorr-Bremse, which was delighted to have contributed to his success. The company has been pleased to support Jochen Hahn and his team continuously since 2001 and since 2003 has been an official sponsor.

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Perfectly tuned 23 men and one woman took part in the race this season. The event is a huge challenge for the drivers, as it takes considerable skill to steer a truck round a race track rather than an ordinary road. The equipment has to be right as well – the tires, engines and brakes must all be perfectly tuned. The latter in particular are crucial for ensuring that the drivers can brake with complete accuracy, circuit after circuit. According to Jochen Hahn, having the right brakes accounts for at least a third of the overall truck performance. The race is always led by drivers who are able to brake at the very last minute before the bends – and that calls for top-quality materials. In Jochen Hahn’s case the high-performance brakes come from Knorr-Bremse. The company uses the opportunity offered by the truck race to see how individual components react under extreme conditions and applies any insights thus gained to its volume production of braking systems. The FIA regulations for the European Truck Race championship require all the trucks’ components to be taken from normal series production, so the braking systems tested by KnorrBremse in conjunction with the Hahn Racing Team are not prototypes, as often happens in Formula One racing, for example.

Knorr-Bremse organizes “Go & Stop” competition at Nürburgring At the race organized at the historic Nürburgring in early July the Knorr-Bremse logo was not just confined to the truck it was sponsoring. This is an event that attracts not only the truck racing elite of Europe, but also a veritable Who’s Who of manufacturers and suppliers, many of whom set up exhibition stands to showcase their products. Knorr-Bremse had a double role, as a longstanding partner to Jochen Hahn’s racing team, and as the organizer of the “Go & Stop” competition – an event that never fails to draw the crowds. The Go & Stop competition is not just about maximum speeds but also driver skills: competitors need to cover the 400 meter-long straight as quickly as possible, but they cannot simply sweep past the grandstand and zoom across the finishing line. Instead, they have to stop precisely on a predetermined point. It is a tricky challenge that makes for a lot of fun for both drivers and spectators. Klaus Deller, Member of the Executive Board of Knorr-Bremse AG responsible for the Commercial Vehicle Systems division, presented the cup to the 2011 winner.

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Fuel savings achieved by PBS even higher than expected Knorr-Bremse’s Pneumatic Booster System (PBS), for which a global patent has been applied for, solves the problem of so-called turbo-lag in diesel-engined commercial vehicles, ensuring improved performance and reduced fuel consumption. At the end of November 2011, the specialist journal lastauto omnibus measured the actual fuel savings in a series of independent tests carried out on a 27-kilometer circuit using an almost fully loaded 430 hp semitrailer roadtrain. The results were impressive: up to 6.9% fuel savings – considerably more than Knorr-Bremse’s initial conservative estimate of between 2% and 5%. A large turbodiesel can take several seconds to build up to maximum torque, so PBS blows compressed air from the braking system into the engine’s inlet manifold to briefly boost engine performance, thereby bridging the gap caused by turbo-lag at start-off, during overtaking or on gradients. PBS makes the engine respond much more rapidly, enabling the driver to change into a higher gear earlier on, reducing average engine revs and leading to a significant cut in fuel consumption. A vehicle equipped with PBS accelerates as though it had an engine with between 20% and 30% less cubic capacity. In other words, a smaller engine, provided it is equipped with PBS, can replace a larger one. For local delivery journeys or passenger transportation the reduced space requirements for the engine are advantageous – but PBS is also enormously useful in countries where commercial vehicles are traditionally equipped with smaller engines. The Pneumatic Booster System is due to go into volume production in 2012.

New functions integrated into TEBS Knorr-Bremse’s TEBS electronic trailer braking system is now available in a second generation. TEBS combines almost all the braking functions for a vehicle and trailer into a single, compact mechatronic module. In addition to basic brake control, today’s market is increasingly looking for intelligent monitoring and control systems to improve the operational efficiency of vehicles. Knorr-Bremse’s response has been to create a clear added-value for vehicle operators by further developing functions that analyze and make intelligent use of the information available from the trailer. The focus is not just on developing new, safety-relevant functions but also ones that solve some of the problems faced by freight companies on a daily basis. During the year in question, two of these functions were developed under the names of iCargo and iCorner. The iCargo function kicks in when uneven loading means that either the drive axle of the tractor vehicle or the central trailer axle is overloaded. Trailer EBS distributes the load – figuratively speaking – by using the iCargo function to ensure that the trailer’s individual axles receive a different bellows pressure. The changed load distribution is also taken into account by the brake pressure control system so that each axle contributes precisely the right amount to the braking process. iCorner comes into play when a truck finds itself “in a tight corner.“ Every vehicle has to meet certain statutory requirements in terms of cornering ability in order to be able to negotiate the roundabouts that are becoming increasingly common on our road systems. If the vehicle design comes up against its limitations, the manufacturer can make use of steered axles, but this involves considerable unnecessary cost. iCorner offers an alternative by making intelligent use of the lift axles or by reducing the effective wheelbase in combination with iCargo, thus facilitating cornering on roundabouts.

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Knorr-Bremse improves agricultural vehicle safety Agricultural tractors are becoming increasingly powerful and are therefore capable of pulling increasingly heavy trailers at ever higher speeds. As a result the demands made on agricultural trailers are more and more similar to those made on truck trailers, and safety-relevant products are becoming increasingly important. Knorr-Bremse was quick to respond to this trend and in 2011 launched a comprehensive, innovative braking system for agricultural vehicles based on its tried-and-tested electronic truck braking system. At the heart of the new braking system for agricultural trailers over 3.5 tons is the EBS G2.1 electronic braking system that includes ABS, load-related braking and the RSP roll stability program, which brakes individual wheels in critical situations, reducing speed and in particular lateral acceleration. During drastic avoidance maneuvers this can help prevent vehicle rollover caused by the high center of gravity of agricultural vehicles. TEBS G2.1 can operate on power systems between 8 and 32 volts and can therefore be used anywhere in the world. A system prototype was installed in a high-performance JUMBO trailer built by the Upper Austrian agricultural machinery manufacturer Pöttinger and first presented to the public at the Agritechnica trade fair.

Trailer Roadtrain Module (TRM) for EuroCombis and Roadtrains Combined with TEBS G2, Knorr-Bremse’s Trailer Roadtrain Module (TRM) enables very long truck/trailer or tractor/semi-trailer combinations to be braked rapidly and safely. Now Knorr-Bremse has developed a version suited to so-called EuroCombi roadtrains. A EuroCombi is an extra-long combination of tractor, trailers and/or semitrailers that can be up to 25.25 meters in length – more than the current European limit of 18.75 meters – and can weigh up to 60 t. The EuroCombi is already authorized for use in some parts of Europe, and in Germany initial field testing is due to be running by 2012. In the USA, Canada and Australia, roadtrains can even reach lengths of up to 100 m. The idea is that by increasing the load volume and payload, transportation costs can be minimized and the efficiency of road transport increased. The length of the roadtrains and the changed payload means that the demands made on the braking system are also different. In the case of a 60 m transporter with a conventional pneumatic braking system, for example, this results in 75% of braking power only being available after a delay of 1.6 seconds. But by conveying the signal electronically, TRM combined with EBS can reduce that delay to less than a quarter of a second. And TRM can even be used on vehicle combinations in which the tractor unit does not have an electronic braking system. In this case the traditional pneumatic signal is converted into an electronic one by pressure sensors and relayed instantly to the TEBS unit via the CAN bus system.

Remanufacturing of EBS2 and EAC1 Remanufacturing, that is to say the reconditioning of used components, is a key topic across the entire automobile and commercial vehicle industry. From both economic and ecological angles it is becoming increasingly important to reduce the consumption of energy and resources. For many years now, Knorr-Bremse has been investing in the development and testing of solutions that enable the company to offer remanufactured options in the aftermarket – with a special focus on technically complex

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Technological milestones 30 years of ABS, 10 years of ESP – during the year under review Knorr-Bremse celebrated two milestones in the history of the commercial vehicle industry in which the company had played a central role. The history of one of the most successful systems in the commercial vehicle sector – the ABS anti-lock braking system – started in 1968. Compared with the passenger car ABS Developing an ABS system for trucks was considsystems that existed at the time, the erably more complicated because of the wide variety of different vehicle models and types of requirements for an ABS system for braking system involved, the extreme load commercial vehicles were much changes and the more complex installation environment. more demanding. Building on its wide experience with wheel slide protection systems for rail vehicles, KnorrBremse, together with MAN, was able to showcase an ABS system for trucks at the IAA Commercial Vehicles in 1969.

Joint success From the 1970s onwards, Knorr-Bremse worked together with Bosch on commercial vehicle ABS development. The two companies pooled their expertise, with Bosch working on the control unit and Knorr-Bremse developing the 2-chan-

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nel pressure modulator valve. But it was still many years before a concept finally emerged – a simplified 4-channel system with an innovative 2-channel axle valve module – that met the ambitious targets in terms of vehicle stability, steerability and stopping distance, as well as offering value for money. Volume production by the two companies started in 1981, and a year later this electronic safety device was already making rapid advances in the European market. From 1985 onwards, Knorr-Bremse worked on its own, developing a new, microprocessor-based control unit that was not only more cost-efficient but could also be more easily modified to meet new market requirements. The fact that ABS has been fitted on virtually all European commercial vehicles since the early 1990s is not just down to common sense on the part of vehicle manufacturers and their customers. Since 1991 there has also been a legal requirement for new trucks over 3.5 tons, all buses seating more than eight people, and trailers to be fitted with this system. In the late 1990s, Knorr-Bremse Commercial Vehicle Systems took over the Bosch and Bendix activities in the field of air-braked commercial vehicles, which allowed the various different ABS solutions to be united into a single global product family. The addition of many new functions, combined with ongoing further development of the system and – last but not least – close consultation with customers, has enabled Knorr-Bremse to become one of the world’s leading suppliers of commercial vehicle ABS systems. In technical terms, though, this is no coincidence: ABS is a

product that brings together all the company’s main areas of expertise: brake control, air pressure regulation and wheel brakes.

ABS experience as the basis for developing ESP In 1996, parallel to Knorr-Bremse’s ongoing development of ABS, the company also embarked on another major project in the field of electronic safety systems for commercial vehicles – the electronic stability program ESP. The challenges were similar to those the company had faced with ABS – ESP for commercial vehicles is also much more complex than for passenger cars. But because the approach was similar to that used for ABS, it took a mere five years before ESP for commercial vehicles was ready for volume production. Initially the system was only used for 4x2 semitrailers, but over the years Knorr-Bremse achieved a further breakthrough with the development of an ESP system for 8x4 trucks and combinations with pony trailers – a difficult challenge because of the even more complex acceleration forces involved. To this day Knorr-Bremse remains the only supplier for this category of truck.

Looking well beyond Europe Throughout this period Knorr-Bremse had more than just Europe in mind. Nowadays the company’s North American subsidiary Bendix sells many more EPS systems – adapted to local requirements – than are sold in Europe. And KnorrBremse ESP systems can be found all over the world.

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products and modules – thus keeping service costs down for the customer. In the year under review, the Knorr-Bremse plant in Aldersbach began remanufacturing of the electro-pneumatic modules for the EBS2 electronic braking system and the EAC1 electronic air control unit. Original parts returned from the field are disassembled, cleaned, inspected and processed at KnorrBremse’s UK subsidiary in Bristol. The re-usable parts are then shipped to Aldersbach for use in volume production of remanufactured products. Knorr-Bremse uses the same assembly equipment for the remanufactured products as for original equipment, so that the modules undergo the same end-ofline quality and safety tests as original parts. The overriding principle is that remanufactured products must always comply with the same standards in terms of functionality and quality as the comparable OEM parts. As products become increasingly complex, Knorr-Bremse endeavors to offer its customers service options that meet their requirements and guarantee complete functionality of the parts concerned.

Bendix launches new spring brake In the year under review, Bendix Spicer Foundation Brake – a joint venture between Knorr-Bremse’s North American subsidiary Bendix Commercial Vehicle Systems and the manufacturer of truck components Dana Commercial Vehicle products LLC – launched the Bendix EverSure, a new double-diaphragm spring brake for drum brakes that sets new standards. The Bendix EverSure is significantly lighter and therefore offers better fuel efficiency. It is also considerably more robust and requires less maintenance while at the same offering enhanced performance. Trucks and trailers fitted with the lighter Bendix EverSure spring brake can carry an increased payload. At the same time the lightweight design helps compensate for the increased weight of commercial vehicle engines as a result of the requirement to comply with stricter emissions regulations. Another positive effect of the lighter weight is the brake’s greatly superior vibration resistance. The very low vibration levels help prolong the life of the spring brake and its supporting components substantially. Another key advancement in the Bendix EverSure spring brake is the elimination of contact between the power spring coils. This “no-touch technology” means that the protective coating remains intact, enabling the Bendix EverSure to offer far better corrosion resistance than competitive products. The spring brake also sets new standards of performance: the new diaphragm design means the Bendix EverSure delivers higher braking power during both normal and prolonged braking.

750,000th compressor from Bendix Knorr-Bremse subsidiary Bendix Commercial Vehicle Systems, the top supplier of compressors in North America, celebrated another production milestone at the start of 2011 when the company’s Acuña plant in Mexico manufactured the 750,000th Bendix BA-921 air compressor – less than ten years after production of the compressor first began in 2002. Fleet operators and freight companies value the BA-921 on account of its robust design and high performance as a compressor for pneumatic braking systems. The single-cylinder air compressor was originally designed to reduce weight and oil consumption despite the higher system pressure. The BA-921 model also features a long service life and low mainte-

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nance costs. It ensures better air quality and a high delivery rate to the vehicle tanks with minimum fuel consumption. The compressor has a boost capability up to 3 bar for turbo compressors and generates torque of up to 170 Nm, for example for an auxiliary power-steering pump.

New Wingman Advanced active safety system launched In the year under review, Knorr-Bremse’s North American subsidiary Bendix Commercial Vehicle Systems launched the new Bendix Wingman Advanced system, an innovative active safety system that combines adaptive cruise control with new collision mitigation technology. Using a radar sensor mounted to the front of the vehicle, Wingman Advanced constantly measures the distance to the forward vehicle. The radar sensor can also detect stationary objects in the vehicle’s lane of travel. If the distance to the forward vehicle or stationary object closes too fast, the system first provides audible and visual alerts to the driver. If the driver fails to respond adequately and the distance continues to close, Wingman Advanced acts to initiate emergency braking. Wingman Advanced remains available even when – in inclement weather or heavy traffic – the driver deactivates the adaptive cruise control function that helps maintain a safe following distance. The Wingman Advanced collision mitigation feature delivers about two-thirds of the available braking power of the vehicle to minimize the risk of a rear-end collision or reduce its severity. This compares with about one-third of the available braking power delivered through Bendix Adaptive Cruise Control with Braking. Wingman Advanced uses the Bendix electronic stability program not only to prevent rear-end collisions but also to mitigate loss of control and roll-over. Numerous major truck manufacturers in North America have shown an interest in the system. As a result, in the year under review, Knorr-Bremse’s U.S. subsidiary was already engaged in discussions with OEMs regarding the possible launch of volume production of the new active safety system.

Lift axle system for India developed Towards the end of the year under review, Knorr-Bremse India successfully completed preparations for volume production of the second generation of a pneumatic lift axle system for the Indian market. Start of production for a variety of OEMs is scheduled for the first quarter of 2012. Lift axles are additional axles that are usually lifted but can be lowered to distribute the weight of a heavy payload more evenly across the axles. This not only helps reduce tire wear but also serves to provide better grip, which is important for the optimal performance of the braking system. With the second generation of the pneumatic lift axle system, Knorr-Bremse was able to further reduce the number of parts and the overall system costs. In addition, the company has also developed an anti-tire-theft system. The new lift axle system is also backward-compatible with existing applications, as well as with systems from other manufacturers.

Anti-Roll-Back System for conventional trucks High-end commercial vehicles never encounter the problem of rolling back as they move off uphill. Their electronic braking systems have a functionality that ensures they can pull away from a standstill on even steep gradients with no risk of rolling back. In more conventional trucks, such as those fre-

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quently encountered on Indian roads, moving off uphill is often a risky business, particularly with a full payload. If the driver is too slow on the gas as he lets in the clutch, he risks rolling back into the vehicle behind. Now Knorr-Bremse India has developed an Anti-Roll-Back System (ARB) that effectively minimizes this risk. At the heart of the Anti-Roll-Back System is a mechatronic valve module. If the driver is intending to move off uphill, he activates the ARB system with a manual switch. When he then releases the brakes, the front brakes are released as usual, but thanks to the ARB system the rear brakes are only released with a delay of around three seconds. That gives the driver plenty of time to drive off normally uphill, without rolling back.

ABS rear axle module developed for BRIC states ABS anti-lock braking systems for the BRIC states have to meet special requirements. As well as being extremely robust, they have to be cost-effective in design and cover the entire spectrum from simple ABS systems to complex EBS electronic systems. This was the brief for Knorr-Bremse’s development of the Compact Rear Axle Module (CRAM ), which completed beta-testing during the year in question. The first modules are due for delivery to two customers for field testing in 2012. The module combines all the components into a single, compact system that can be manufactured with a high local added value and installed at relatively low cost by manufacturers, as there is no need for individual systems to be linked up to the vehicle.

New 20-inch disc brake for China Knorr-Bremse has been successfully marketing its 22.5-inch brake disc for Chinese commercial vehicles for some years. But as 20-inch wheels with tube-type tires are still commonly used in China, particularly for off-road vehicles, Knorr-Bremse also developed a new 20-inch disc brake specially designed for Chinese conditions during 2011. At the same time, the company started negotiating with potential Chinese suppliers to ensure local content and also began the process of transferring an entire disc brake production line from Aldersbach (Germany) to Dalian (China) in a bid to ensure uniform high quality standards worldwide. One of the main drivers of demand for disc brakes in China is the need to improve braking performance, particularly on urban roads. Rapid infrastructure expansion has meant that trucks and buses are operating at increasing speeds, and there is a need for ways to improve road safety. One of the main advantages of the disc brake is that the braking force can be applied very precisely, which improves bus safety and comfort – factors that are of increasing importance for fleet operators. In any case the law now requires buses over 12 m in length to be fitted with ABS and disc brakes on their front axles.

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Aftermarket Customized, value-for-money solutions, superbly trained personnel and a strong regional presence are the basic elements of Knorr-Bremse’s comprehensive service offer to dealerships, workshops and fleet operators. During the year under review the company further improved the excellent aftermarket service, for which it has gained an enviable reputation.

Active Service Everything at Knorr-Bremse – from the development of its products to their installation, operation and maintenance – is designed to offer top quality and service throughout their lifecycle. The company has brought together its entire range of services for dealerships, repair shops, fleet managers and drivers under the title of “Active Service,” with the aim of enabling them to achieve maximum efficiency and economy in all aspects of their operational and business processes. The service portfolio is based on the criteria of safety, quality and economy. Active service offers a concept tailored to each particular application and designed for the increasing complexity of commercial vehicle systems. The efficiency of the servicing carried out by repair shops is ensured by the use of OEM-quality products, the provision of technical training to enhance practical skills and the availability of telephone and on-line support. Despite the increasing variety of products involved, standardization reduces inventory costs and capital tie-up and ensures product availability in the case of servicing. Service manuals and a wide range of other technical information can be rapidly consulted on the Internet, and the availability of other web-based services such as product catalogues with full technical details means all the required servicing information can be easily found.

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Linking of product searches, web shop, legacy parts and warranty information via SAP makes for easy access right across the board. European warranty information is also directly relayed to Knorr-Bremse’s QSYS quality system.

Training capacity significantly expanded In response to rising demand for technical training, Knorr-Bremse significantly expanded its training capacity and range of courses in 2011, especially in the field of EBS electronic braking systems. A total of 1,500 people received training during the course of the year. The main beneficiaries are repair shops and dealerships, for whom the courses offer an opportunity to acquire important practical skills for servicing safety-critical systems. Building on basic theoretical knowledge, the courses use functional models to explain how the braking system works and interacts with the entire vehicle. Such realistic, practical training improves the efficiency and quality of service offered by repair shops.

Further development in e-services Web shop, training portal, warranty processing and reporting, legacy parts management or downloads of software updates are just some of the many services on offer from the e-services department at Knorr-Bremse Commercial Vehicle Systems. Over the years, the range of content and functions has steadily increased – in line with the need to respond rapidly to the precise requirements of the customer. In 2011 a comprehensive strategy was drawn up for further developing the existing e-services. It includes targeting the portals at the various groups, improving the systems’ user-friendliness and establishing a uniform graphical design. One vital element – albeit invisible to the on-line user – is a system architecture that enables future functions to be simply and rapidly integrated.

Modified European warehousing system improves parts availability Reliable delivery performance and constant availability are the basis for any successful business. In the aftermarket service sector the availability of spare parts is particularly crucial. In the year under review Knorr-Bremse therefore focused on the structure of its European warehousing. The existing distribution warehouses in Sweden and the Czech Republic were merged with the Berlin one, and – in close consultation with customers – a new materials disposition system was introduced for the German, Austrian and Swiss aftermarkets. This has brought lasting improvement to the availability of spare parts for servicing operations. Integration of the Swedish and Czech warehousing locations with the one in Berlin, which supports not only the aftermarket but also trailer sales, SOEMs (Special Original Equipment Manufacturers) and exports, means that customers can benefit from the existing wide range of products and also enjoy an excellent delivery performance. The distribution warehouse in Berlin coped smoothly with the increased throughput volumes and turnover of articles. The basic idea of the new warehousing and distribution strategy is a carefully balanced division of labor and responsibilities between Knorr-Bremse and its partners. A highly transparent ordering system in

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terms of logistical throughout and replacement times increases efficiency for both parties, enhances parts availability across the entire portfolio and ensures reliable delivery performance.

EAC diagnostics included in NEO platform NEO System Diagnostics is an electronic diagnostic platform developed by Knorr-Bremse for commercial vehicles that provides rapid, comprehensive, professional support for servicing of electronic vehicle systems. NEO either communicates directly with the vehicle’s electronic control module or via a diagnostic interface. It covers a wide range of functions from error code diagnostics down to complete system analysis, enabling even complex faults to be rapidly identified and localized. Using state-of-the-art hardware and software, testing procedures are carried out step by step, providing information on faults and how to rectify them. Regular software updates ensure that repair shops provide a service that is based on the very latest technology. During the year under review, Knorr-Bremse made the testing software for all Electronic Air Control (EAC1) applications available on the diagnostic platform. This also includes the service functions for the OSC desiccant cartridges for the EAC electronic air control unit, which have to be regularly replaced and recalibrated, as well as diagnostics for all applications related to the EBS5.X electronic braking system. In addition to basic functions, they offer data mirroring, enabling the repair shop to reliably replace the electronic control unit itself. The software can also be used to carry out calibration of the sensors.

New service concept for the SM and SL generation of disc brakes During the year under review the company started to introduce a service concept for Type SM and SL pneumatic disc brakes, following their successful incorporation as original equipment. The service philosophy for SM-SL brakes is very much on the same lines as the approach taken in the past, which means the service kits can be used for most application scenarios. These consist of brake pad, tappet and carrier guide seal kits, caliper units and brake carriers. As the service and maintenance units have remained the same, no additional training is required in using the kits. There is one important difference in the case of the SL brake – the format of the brake pads is not compatible with the existing generation of SB, SN and SK brakes. The SM and SL brakes are all fitted with the new ProTecS brake pad holders, which offer improved economy and greater safety thanks to optimum application of the brake pads. In order to enable the advantages of ProTecS to be applied to braking systems already in service, Knorr-Bremse has also developed backward-compatible, OEM-quality brake pads with ProTecS for SNSB brakes.

EAC2 concept for excellent service The demands made on truck and bus air supply systems have continued to evolve over time. In addition to the increasingly compact design of systems, further functions – for example aimed at reducing fuel consumption – have been incorporated. In response to all these requirements, Knorr-Bremse developed the EAC2 electronic air control unit, the first of which were used for the new Daimler Actros platform during the year under review.

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Even during the development phase of the EAC2, Knorr-Bremse focused on the entire product lifecycle, paving the way for creating a product that retains its value. Depending on requirements, the vehicle owner can opt for the entire mechatronic unit to be replaced or for a repair to be carried out using Knorr-Bremse Original Service Kits. This new service concept is now being applied as part of the market launch of this product and is available to OEMs and independent repair shops alike.

Service collaboration with Scania Commercial vehicle manufacturers are increasingly extending the range of services offered by their repair shop networks to cover other products and brands. In response to this trend Scania is determined to extend the range of services offered by its approved service centers. One potential area identified by the company is trailers and semi-trailers pulled by Scania trucks. To put this idea of “Vehicle Related Parts” (VRPs), as Scania calls it – into practice, the company requires additional systemspecific expertise as well as the necessary parts for all current trailer systems. During the year under review, Knorr-Bremse and Scania agreed to work closely together in this field. In future, the equipping of repair shops and the training of service personnel will be shared between Scania, Knorr-Bremse’s Munich headquarters and its European sites. Knorr-Bremse customers will have access to Scania network, thus ensuring high uptime. Under a joint implementation plan the repair shops are already being prepared for these additional service tasks, and their personnel is undergoing training. The project will enable Knorr-Bremse to further expand its existing specialist aftermarket support network in Europe.

Significant increase in Chinese aftermarket sales The rapid development of the Chinese economy has triggered equally rapid growth in the commercial vehicle population. In the last five years alone, the number of trucks and buses has increased by some 37% to around 8 million vehicles. As a result, demand for spare parts for these vehicles is now also beginning to grow. In response to this, Knorr-Bremse launched an extensive program in 2011 aimed at strengthening its aftermarket service to Chinese fleet operators and persuading them to rely on the company’s triedand-tested OE spare parts. The program was an immediate success, with sales in the Chinese aftermarket rising by more than 50% compared with the previous year. As well as the growing vehicle population, the innovative technologies involved have resulted in new approaches and increased demand for servicing. Growing numbers of urban bus operators and logistics companies in particular are investing in Knorr-Bremse OE spare parts to minimize downtimes and keep their vehicles on the road.

Expansion of Southeast Asian service network During the year under review, Knorr-Bremse succeeded in further expanding its aftermarket service network in Southeast Asia. Developments in the fields of trailer ABS, electronic braking systems, tire pressure and temperature monitoring systems and original spare parts kits for trailer brakes were particularly encouraging – helped by the fact that the market remained relatively stable despite the Japanese tsunami and the flooding in Thailand.

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Nevertheless, widespread sales of non-original parts and product counterfeits remained a challenge, despite the fact that these are of lower quality, are potentially dangerous and reduce vehicle availability. Local Knorr-Bremse staff made great efforts to raise awareness of this issue amongst dealers and repair shops. Many operators see spare parts as a “necessary evil,” involving expenditure that they are anxious to keep to a minimum. It is therefore a major task to convince dealers and repair shops of the advantages of the Knorr-Bremse systems in their vehicles and to inform them of the risks involved in using non-refurbished components and non-original parts and in delaying overdue servicing.

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Site-specific Projects During the year under review a number of site-specific projects enabled Knorr-Bremse Commercial Vehicle Systems to further strengthen its market position. The division expanded its plant in Liberec, Czech Republic in order to increase its capacity and flexibility; in China, Russia and the USA it developed extra production capacity; and in India it started the construction of a new manufacturing and development center.

Production capacity expanded in Liberec During 2011 Knorr-Bremse expanded its plant in the Czech town of Liberec, increasing capacity for manufacturing current products and also creating scope for additional ones. During the construction process back in 2009 an option for further expansion had already been included, and Knorr-Bremse made use of this in the year under review. In all an area of 7,500 additional square meters was added to the plant, around a third of which was put to immediate use. The Czech plant set up new production lines for bayonet filter cartridges and Type NG4 double-diaphragm brake cylinders and also took over the processing of compressor crank cases from Aldersbach, with air dryers being transferred from Liberec to Kecskemét. To generate further synergies, Knorr-Bremse is also planning to transfer production of further crank cases from various external suppliers to Liberec, thereby increasing its own value creation. In addition, further insourcing projects are due to be implemented in the near future. To make full use of the remaining 5,000 m2 on the new site, Knorr-Bremse has brought in an external logistics provider whose services the company can make cost-effective use of. But as its space requirements grow over the years, Knorr-Bremse has an option to take over these parts of the site itself at short notice, enabling it to respond swiftly to any changes in the market.

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New production lines in Russia Knorr-Bremse KAMA, the joint venture set up by Knorr-Bremse and Russian truck manufacturer KAMAZ, started manufacturing three new products in Russia in September 2011: mechanical slack adjusters, clutch servos and master cylinders. The three assembly lines were relocated from KAMAZ subsidiary OOO KAMAZ Autotekhnika Zainsk to the joint venture’s production site in Naberezhnye Chelny, following complete modernization to bring them up to Knorr-Bremse’s production and logistics standards. To ensure that the new products were manufactured by experienced personnel, many of the assembly specialists previously employed on the lines were re-employed by Knorr-Bremse KAMA. They also received a thorough introduction to Knorr-Bremse standards that has already resulted in improved quality and productivity.

New plant in Acuña, Mexico In January 2011, Bendix Commercial Vehicle Systems celebrated the opening of its new manufacturing facility in Acuña, Mexico, which is already the company’s third plant in Acuña. At the Acuña III site Bendix manufactures actuator products including spring brakes and service chambers for the commercial vehicle market. The former brownfield site on which the new plant was built was first refurbished and upgraded to meet the company’s rigorous and globally applicable manufacturing and quality standards for facilities and equipment. In another preparatory measure, lean manufacturing experts reviewed the entire production process using a Systematic Layout Planning model to ensure maximum efficiency. By opening the new plant at the end of 2011, Bendix Commercial Vehicle Systems was able to add 112 jobs to the regional economy. Expanding the existing Acuña operations also enabled the company to further leverage corporate shared services while maintaining lean and cost-effective manufacturing processes to allow Bendix to operate competitively in the marketplace.

Bendix acquires systems from Iteris To reinforce its market position as a leading supplier of effective safety solutions, Knorr-Bremse’s North American subsidiary Bendix has acquired the SafetyDirect system and the AutoVue Lane Departure Warning system from the renowned U.S. supplier of traffic management technologies, Iteris LCC. Within the Knorr-Bremse Group the acquisitions round out a suite of leading safety systems that already includes the ESP electronic stability program, Bendix Wingman Advanced collision mitigation technology, and SmarTire, a tire pressure monitoring system. The integration of the technologies and associated research, development, sales and service operations into the electronics business units at Bendix and Knorr-Bremse had been largely completed by the end of the year under review. SafetyDirect is a Web portal that allows fleet owners the opportunity to analyze safety information about their vehicles that is wirelessly transmitted – in real time – via existing fleet communication systems. The system can provide an immediate warning to fleet operators if their drivers are braking too hard when cornering or traveling too fast. This helps fleet managers identify risky driver behavior and provide drivers with targeted training.

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AutoVue – the market-leading visual Lane Departure Warning (LDW) system in North America – alerts truck drivers if they inadvertently drift out of lane. The system contains a camera that tracks visible lane markings and continually detects when the vehicle begins to drift toward an unintended lane change. When this occurs, AutoVue automatically emits an alarm signal, alerting the driver to make a correction.

Joint venture in China starts production First set up in early 2011 as a joint venture between Knorr-Bremse Asia Pacific (Holding) Ltd. and Chinese manufacturer Chongqing CAFF Automotive Braking & Steering Systems Co. Ltd., Knorr-Bremse CAFF Systems for Commercial Vehicles Chongqing Ltd. started production at the end of April 2011. KnorrBremse has a 66% share in the new company and its Chinese partner 34%. Founded in 1952, Chongqing CAFF Automotive Braking & Steering Systems Co. Ltd. was one of the first manufacturers of automotive components in China. It enjoys an excellent reputation in the country and has helped shape the Chinese automobile and truck industry over the last few decades. Based in Chongqing, the joint venture manufactures components in the air supply (e.g. air dryers) and brake control (e.g. valves) segments as well as transmission and clutch control components for mediumand heavy-duty trucks. The entire production process – from manufacture of die-cast aluminum parts to machining, surface treatment and assembly – takes place in Chongqing. The joint venture is also responsible for sales and marketing. The medium-term plan is to develop the joint venture into one of the leading suppliers to the truck industry in the People’s Republic of China. The process of integrating two companies from very different cultural backgrounds is a great challenge for all concerned, but both joint-venture partners are driving it forward with great energy. In addition to renovating the buildings and upgrading the plant equipment, Knorr-Bremse is also focusing on training the local staff to ensure that the company’s uniform global production and quality standards are adhered to in China. But a priority at the outset was providing customers with information about this latest development. Knorr-Bremse’s customer portfolio in China includes well-known vehicle builders such as Shaanxi Heavy Truck, CNHTC, SIH, North Benz, Dongfeng and in the bus segment Kinglong, Ankai, Huanghai – as well as the transmission manufacturer Fast.

New production and development center in India In November 2011, Knorr-Bremse began construction of a new production and development center for commercial vehicle products just a few hundred meters from the existing plant in Pune, India. The new buildings will not only enable current processes to be optimized but will also increase the level of vertical production at the plant. Options for additional vertical integration within the product portfolio are also being examined. The new plant in Pune is taking its lead from the value stream factory that Knorr-Bremse set up in Liberec in the Czech Republic in 2010. Consequently, all processes at the new Indian plant will also be geared rigorously to value creation. At the same time, the new facilities will open up extensive expansion opportunities for the company. All production modules can be expanded separately with no negative impact on structures at the plant, making it possible to respond quickly to changes in market needs. The new plant will also permit further product lines to be added to the portfolio made in India. To date this has been prevented by a lack of space at the existing plant.

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Expansion in Brazil It is already the largest joint facility for rail and commercial vehicle systems within the Knorr-Bremse Group. In response to significant growth in recent years and the expectation of positive business developments in the medium term, the Knorr-Bremse Group is investing in a new facility in South America that offers considerably greater capacity. In the rail vehicle sector Knorr-Bremse will use the new plant to manufacture brake control systems, bogie equipment for freight and mainline passenger trains and also onboard systems. And in the truck sector Knorr-Bremse Brazil will produce the entire Knorr-Bremse product portfolio for the local market, including brake control, air supply and treatment, brake cylinders, disk and drum brakes and torsional vibration dampers. The move to the city of Itupeva, some 85 kilometers from the current site, is necessary because the latter has reached the limits of its capacity. The restricted production space available in the current buildings offers little scope to make additional products or to improve processes. And further expansion is no longer permitted because the surrounding area is increasingly turning into a residential district.

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Capacity significantly expanded The new site has enabled Knorr-Bremse to significantly expand its capacity in production and equipment refurbishment, surface treatment, functional and endurance testing and vehicle testing. The offices and staff facilities have also been extended and upgraded as part of the rebuild. As the new site is not far from the old one, many of the 750-strong workforce will be moving to Itupeva with Knorr-Bremse, so the company will be able to rely on their experience and expertise to maintain the same high standards of quality and product reliability as before.

New logistics concept In addition to an optimal layout and improved production processes, the main focus in the new facility has been on installing an in-house surface treatment plant and introduction of a new logistics concept based on the Knorr-Bremse KPS production system. In collaboration with suppliers these measures should considerably reduce manufacturing throughput times and achieve significant cost savings. Care was taken during the planning process to ensure that the product development section and all production-related departments were located directly inside the new plant. With its consistent focus on the products, the new facility features attractive, functional architecture and was especially designed to have a reduced energy requirement and a minimal environmental footprint.

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The Knorr Bremse Technology Center India (TCI) is to be located directly alongside the new production plant. At the TCI, Knorr-Bremse’s Commercial Vehicle Systems and Rail Vehicle Systems divisions will be bundling their software development activities for products for the Asian market. By 2015 the Center is expected to employ some 200 people. Pune is a leading IT and software center in India, which means there is a good local supply of highly qualified software development engineers.

Tried-and-tested production standards worldwide In 2011 Knorr-Bremse drove forward the expansion of its production capacity by establishing local assembly operations in all the relevant markets. After adaptation to local requirements, two long-serving disc brake lines in Aldersbach were transferred to Bowling Green, USA and Dalian, China with the aim of ensuring uniformly high production and quality standards at all Knorr-Bremse sites worldwide. The assembly line in the USA went into operation in 2011, and production start-up in China is slated for 2012. Creation of the new production line in Dalian is Knorr-Bremse’s response to growing demand for a disc brake specially designed for the Chinese market. The new plant, which was established using the expertise of experienced specialists at Aldersbach and at the Disc Brake Center of Competence in Munich, is capable of turning out up to 300,000 disc brakes per year. As well as supervising the establishment of production in Dalian, the Knorr-Bremse experts also provided training for the personnel who assisted them. Large numbers of Chinese maintenance engineers and operators also received training on the new machines in Aldersbach. In the summer of 2011 Knorr-Bremse brought on stream a disc brake line specially designed for the U.S. market at the Bowling Green site operated by its North American subsidiary Bendix Commercial Vehicle Systems. Again this was part of Knorr-Bremse’s strategy of offering products with a maximum of local

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content. The new assembly line has considerably increased production capacity in Bowling Green – as in China, up to 300,000 disc brakes can now be produced each year. One of the special features of both the new assembly lines is the fact that they are directly linked to the Aldersbach site. If any problems occur with the equipment or control systems, colleagues in Aldersbach can, if necessary, offer remote support in real time.

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Knorr-Bremse Group In addition to the targeted pursuit of product innovations, the key success factors for the future of Knorr-Bremse include process optimization, employee development, corporate responsibility, environmental protection and social engagement, aspects which remained among the top priorities for this family-owned company in 2011.

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Knorr Excellence Under the heading of Knorr Excellence (KE), Knorr-Bremse has introduced a standardized model for all its management systems and has merged all process optimization initiatives across the entire Group. The declared aim of KE is to achieve excellence in all corporate processes. Knorr-Bremse works continuously to improve the Group’s performance, not least with a view to ensuring higher levels of customer satisfaction. In 2011, Knorr-Bremse continued the program, focusing in particular on the FIT (Finance & IT Excellence) initiative.

PEX

PEX The PEX – People Excellence – initiative was re-launched in 2011 with human resources and executive development projects. Development of the initiative continued in the reporting period with a view to systematically describing all human resources work throughout the employee life cycle and successively improving the worldwide human resources organization on this basis. Initial focus processes were defined for the PEX key elements “Strategy,” “Source,” “Development,“ “Place“ and “Administration“ and a self-assessment exercise to determine the current status was carried out in cooperation with the various sites. Plans envisage adding to this process landscape in 2012. At the same time, the implementation of the focus processes at the sites is to be evaluated at regular intervals and further local improvements are to be made. Within the human resources function, PEX represents a future-oriented basis on which to take the quality of human resources work forward around the world. PEX thus defines the basic principles of excellent people management in HR.

Q-First Within the Q-First quality campaign, in the year under review Knorr-Bremse once again defined a large number of specific measures to ensure that each and every component developed and supplied by Knorr-Bremse is of the highest possible quality. Q-First comprises a raft of measures covering areas such as management, human resources, development, production, supplier development, complaints

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K n o rr - B r e ms e G r o u p

management and customer relations. As a manufacturer of safety-critical products, Knorr-Bremse considers these measures indispensable. One fundamental principle of the Knorr-Bremse quality management policy is prevention rather than cure. Potential errors must be detected and eliminated in good time before they lead to defects in product components in service. In 2011, Knorr-Bremse therefore once again dedicated its efforts to ensuring that safety-relevant requirements were taken into consideration from the beginning of the development process. In addition, the company again conducted a large number of Product Safety Audits (PSA) throughout the world. These especially strict audits that are specific to Knorr-Bremse ensure that internal and external suppliers comply with the Group’s very high quality standards.

Supply Chain Excellence In 2011, the Supply Chain Excellence (SCE) project focused on the global development and harmonization of logistics performance levels. In both divisions, further progress was made with the optimization of processes from suppliers through factories to the customer, and flexibility was improved. The measures taken correspond to the steadily mounting challenges faced as a result of the growing importance of the BRIC countries, with their longer supply chains and more volatile demand behavior.

Finance & IT Excellence The FIT (Finance & IT Excellence) initiative is one of the cornerstones of the Knorr Excellence Program. In the year under review, the initiative was mainly focused on one major project: the new company Knorr-Bremse IT-Services GmbH, a direct subsidiary of Knorr-Bremse AG, which started operations on January 1, 2011. The IT units in Germany, which were previously spread across the divisions, have now been combined in a single organization. Since the beginning of 2011, the new company has been responsible for providing the IT services required by the divisions throughout the world. Despite this fundamental change, the launch of the new company was more of an evolution than a revolution. A number of preparatory steps had already been taken in previous years and technicallyoriented areas such as applications development and support for Human Resources, Finance and Controlling had been brought together in Corporate IT at cross-divisional level.

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Experience at the 5-day factory operated by Knorr-Bremse Rail Vehicle Systems in Budapest and the value stream factory of Knorr-Bremse Commercial Vehicle Systems in Liberec was very important in this context. This experience was used consistently for the planning and implementation of plant optimization and construction projects and played a key role in the further development of the global Knorr-Bremse production and logistics network. In 2011, the SCE initiative received the Logistics Award of the Association of the German Automobile Industry, VDA.

KPS In 2011, the main focus of the Knorr-Bremse Production System (KPS) was on the introduction of a uniform shop floor management system throughout the Group. This ensures that the opportunities for process improvements in production are identified and systematically realized day by day. In the Rail and Commercial Vehicle Systems divisions, value streams were optimized with a view to reducing throughput times and making processes more flexible. One of the key aspects was the more intensive involvement of suppliers. In the Rail Vehicle Systems division, Knorr-Bremse standardized its approaches for measuring and improving machinery utilization. A uniform production material supply system was developed that already takes account of the production sector’s zero-defect approach at the material supply stage.

Faster financial statements Another key focus of the FIT initiative in 2011 was the “Fast Close” project, which combines all the procedures and methods needed for the fast completion of annual financial statements soon after the end of the financial year. The project is challenging because faster processing must not be allowed to have any adverse effect on quality. Despite the faster close, the quality of the information provided must be just as high as in the past. After Fast Close had been implemented for the first time in 2010, work in 2011 focused on process stabilization.

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In the Commercial Vehicle Systems division, value stream planning was further intensified at various sites including the Dalian plant in China. In addition, the company laid the foundation for employees and managers to be trained at a Knorr-Bremse Value Stream Academy in the future.

GPE Supplier management is a key success factor in the Knorr-Bremse value chain. All measures for the further improvement of supplier management are grouped together in the Global Purchase Excellence program. Further improvement of processes, methods and resources was consistently pursued in 2011 and will continue to drive the ongoing worldwide improvement of efficiency and quality in the future.

Progress In 2011, the optimization and harmonization of business processes on the basis of improvements resulting from Knorr Excellence initiatives was continued under the PROGRESS program. To support business processes, SAP was introduced in nine further projects in 2011. Almost all Knorr-Bremse Group sites now utilize SAP or SAP-harmonized processes. This has proven its worth and will be continued going forward. In addition, in the year under review Knorr-Bremse adopted the latest version of SAP and migrated its IT platform to state-of-the-art technology. This represents an important milestone in safeguarding the future and ensuring process efficiency at Knorr-Bremse.

ECCO2 Under its ECCO2 (Efficient Cut of CO2) initiative, Knorr-Bremse had already set Group-wide climate protection targets based on the 20/20/20 formula in 2009. By 2020, the energy efficiency of the Group is to be improved by 20% and CO2 emissions thereby cut by 20%. In 2011, Knorr-Bremse again deployed a variety of measures to help reach this target. In addition, the CO2 balance of new buildings was made a major consideration in the planning and construction of new facilities.

External ratings again outstanding The globally-oriented strategy of the Knorr-Bremse Group, its broad-based positioning in numerous markets and regions and an intelligent and prudent financial policy have again led to outstanding ratings from two prominent rating agencies. These creditworthiness ratings again placed KnorrBremse among the highest-rated automotive and commercial vehicle suppliers worldwide. After rating agency Standard & Poor‘s had already upgraded Knorr-Bremse from “BBB+/Outlook positive” to “A-/ Outlook stable” in 2010 and confirmed this in 2011, in the year under review Moody’s followed suit, awarding the company an upgrade from “Baa1 Outlook positive” to “A3 Outlook stable.” Both rating agencies thus reaffirmed the Group’s investment grade status. In their ratings the two agencies acknowledged in particular the intelligent financial management and stable cash flow generation at Knorr-Bremse. Based on a very robust and conservative financial policy, the agencies reported, even under what were at times difficult economic conditions the com-

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pany was able to further consolidate and strengthen the liquidity base it put down in 2010. KnorrBremse’s rapid and rigorous response to the sharp downturn in the world’s commercial vehicle markets in 2009 proved vital in positioning the Group to benefit when the market recovery began to pick up speed in 2010. The expansion and targeted ongoing development of the Group’s geographic presence, with local companies in all of the major countries and markets, was also expressly mentioned by both rating agencies as a particular strength of Knorr-Bremse. The company’s continued systematic expansion of its rail vehicle systems activities in Asia came in for special mention in this respect. In addition, both Standard & Poor’s and Moody’s again pointed to product diversification at Knorr-Bremse as a decisive stability factor. The Group’s separate business areas, rail vehicle and commercial vehicle systems, are subject to different economic cycles that can take very different courses in terms of time and from one region to the next. In times of crisis this makes a substantial contribution to minimizing risk. In addition, the intensification of activities in the aftermarket sector in both divisions was seen to help mitigate the impact of the economic cycles in the OEM sector.

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A successful combination: Deutsche Bank and Knorr-Bremse 100 years on The partnership between Knorr-Bremse and Deutsche Bank is marked by solidarity, constancy and reliability. The two companies now have a 100-year history of successful cooperation.

In May 2011, senior figures from Deutsche Bank met with Heinz Hermann Thiele, the proprietor of Knorr-Bremse and Chairman of the Supervisory Board, as well as members of both the Executive and Supervisory Boards to mark this special anniversary. The high-ranking guests from Deutsche Bank included Dr. Josef Ackermann, Chairman of the Board and of the Group Executive Committee, as well as Jürgen Fitschen, Member of the Management Board of Deutsche Bank.

Close ties for many years “The rapport between Deutsche Bank and Knorr-Bremse has always been more than just a run-of-the-mill business relationship based on financial participation,” Heinz Hermann Thiele underlined in his anniversary address. Over the

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past century a trusting and constructive working relationship has sprung up between the two companies. From 1929 onwards, the former Director General of and Partner in Knorr-Bremse, Johannes Philipp Vielmetter, was both a shareholder and a Supervisory Board member at Deutsche Bank. As the financial crisis of the day reached its peak, Vielmetter and other members of the bank’s Supervisory Board acquired substantial portions of equity, supporting Deutsche Bank through the troubled economic times. In 1931 Knorr-Bremse itself also held a stake in Deutsche Bank. For its part, in the 1930s Deutsche Bank was the majority shareholder in Knorr-Bremse AG, with 51% of the company‘s share capital.

Shared success in internationalization In times of rapid economic growth too, the two companies continued to stand side-by-side. In the post-war years, with the support of Deutsche Bank, Knorr-Bremse drove forward the internationalization of its business. For Heinz Hermann Thiele it was the close personal ties between the companies and their representatives that invariably held the key to their shared success. And over recent decades, starting roughly in the 1970s, Thiele noted ever-closer and decidedly amicable relations between the two companies. In 1985, Dr. Hans-Peter Binder – a member of the Board of Management at Deutsche Bank’s Munich branch – became a member of the Supervisory Board of Knorr-

Bremse AG, placing his expertise and experience at the company’s disposal. “He was a decisive figure in the development of the company from a medium-sized supplier to what is today a profitable technology group with sales of over EUR 4 billion. From the outset, his personal advice and support were crucial to the development of Knorr-Bremse,” declared Thiele.

Positive outlook for future collaboration In the opinion of the proprietor of Knorr-Bremse, relations between the two companies will draw closer still in the future. “Our mutual solidarity in both turbulent and successful times, our reciprocal personal involvement in the various development phases of the two enterprises and the resultant close ties are something special and a characteristic feature of the relationship between our companies.“

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Responsibility Sustainability and corporate responsibility are important priorities for a forward-looking family business like Knorr-Bremse. For more than 100 years the company has been assuming responsibility for its products, employees, business partners, society and the environment.

Corporate Responsibility (CR) Operating in a manner that is both sustainable and socially responsible is an important element in Knorr-Bremse’s corporate philosophy. Confidence in the company is increased by responsible behavior towards the workforce, customers and suppliers – and society in general. With a view to maintaining this, Knorr-Bremse is actively working on a program of environmental sustainability and social responsibility as well as innovation and value creation.

CR strategy The CR strategy launched by the company in 2010 represents a logical extension of its commitment to responsible corporate governance. It systematizes the company’s responsibilities for its employees, the environment and society in general, and determines the main focus of its activities in the area. The strategy is based on the Group’s core values and the internationally recognized principles of the UN Global Compact, which sets standards for companies and organizations in the fields of human rights, labor, environment and anti-corruption. The Knorr-Bremse Group signed up to the UN Global Compact in 2010, and by doing so signaled its commitment to adhering to the Compact’s ten basic principles. Knorr-Bremse has defined six areas as the central focus of its CR strategy: CR Management, Products, Workforce, Environmental and Climate Protection, Social Commitment and CR Communication. These are described in greater detail below.

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CR Management CR Management involves systematic implementation of the CR strategy within the company – identifying areas of focus, defining goals and developing specific measures for implementation within the various departments. For the purpose of discussion and decision-making the company has set up a CR Council consisting of a representative of the Executive Board, two members of management from each of the two divisions and the head of the Corporate Responsibility department. Knorr-Bremse draws ideas for the further development of its CR management from a regular dialogue with internal and external stakeholders. For example the company regularly analyzes customer requirements and future market trends with a view to incorporating these into the various CR management areas and developing appropriate measures. During the year under review, the company set up a Group-wide network to discuss CR issues – the CR Round Table – in order to promote an exchange of ideas amongst the regions represented within the Group. The Round Table makes it possible for regions and divisions/departments to talk to internal CR representatives about strategic goals, current CR projects and their operational implementation.

A car for DocStop Knorr-Bremse not only contributes towards greater road safety with its products – the company also sponsors the organization “DocStop for Europeans.”

DocStop was launched in 2007 in order to provide truck drivers at home and abroad with easy access to professional medical care. As well as continuing to sponsor the DocStop project during the year under review, Knorr-Bremse also donated a VW Golf to this mobile emergency medical service. Since June 2011, staff at DocStop have been able to use the vehicle for their travel needs. It might be toothache, migraine or sudden eye problems – whatever the complaint, professional truck drivers tend to just grit their teeth and keep going. The pressure to meet deadlines makes them reluctant to go to a doctor and they often either ignore medical symptoms or try to treat them themselves.

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When it comes to the actual integration of ecological and social aspects into corporate processes, the latter are first analyzed from the point of view of sustainability before appropriate measures are drawn up. For example, during the year in question, the principles of the UN Global Compact were integrated into the company‘s procurement structures, with the requirements of the Compact being incorporated into the quality management guidelines for the area. The company intends to use audits and self-disclosure forms to check the extent to which individual suppliers adhere to these principles.

Products As one of the leading companies in its sector, Knorr-Bremse develops solutions that combine maximum customer benefit with lasting value-added. Its innovative technologies are known to offer high levels of safety, quality and functionality, but criteria such as energy and resource efficiency and environmental compatibility are also becoming increasingly important for both products and production processes. Knorr-Bremse is therefore concentrating on developing manufacturing processes and product applications that have a minimal impact on the environment. As part of its drive towards developing sustainable products, the company launched the Ecodesign project in 2011 with the aim of analyzing the ecological footprint of selected products during their entire lifecycle and using the information to further enhance their environmental compatibility. During the year in question, analyses of the value-added process for individual products in the Rail Vehicle Systems division yielded important insights into the use of materials and resources, environmental compatibility and product use. The next step involves implementing specific improvement measures.

This is where DocStop comes in. Any truck driver on trans-European roads who experiences medical problems can contact DocStop at any time of day or night. The DocStop hotline is staffed 24 hours a day, 365 days a year by trained personnel who are able to speak most European languages and can provide information about a DocStop partner, usually with opening times, contact details and availability of parking. The contact points are normally located at service areas or medical practices and hospitals in direct proximity to motorway slip roads. The service staff then help the driver to find a suitable doctor.

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Workforce The Knorr-Bremse Group is concerned to offer an attractive and responsibly managed working environment to its entire global workforce of over 20,000 employees, wherever they are and whatever area they work in. Committed, well-trained employees form the company’s backbone and are the key to its future success. That is why Knorr-Bremse’s global human resources strategy aims to encourage and motivate current employees and ensure their long-term loyalty, as well as enhancing the company’s attractiveness to potential recruits. During the year under review, Knorr-Bremse once again carried out a global employee survey aimed at measuring levels of satisfaction within the Group and identifying possible areas for improvement. The results and the insights they offer are currently being analyzed and evaluated, and the first improvements are due for introduction in 2012. It is crucial for a globally operating company like Knorr-Bremse to maintain common values and an active corporate culture throughout the Group. To this end, Knorr-Bremse continued to work on developing its corporate and management culture during the year in question. As part of a constructive dialogue with international specialists and managers, the existing corporate culture was analyzed – with a focus on current and future challenges – and new approaches were identified. This enabled new corporate values and management guidelines to be developed, and during the coming year these will be communicated to all members of the workforce and integrated into management training measures. Knorr-Bremse puts great store by workplace health and safety for its employees. The year under review saw a wide variety of health-promotion campaigns and activities at the company’s various sites, including health days, examinations by the company doctors, advisory sessions on health and sports programs. As part of its comprehensive health and safety and environmental protection policy the company takes a systematic approach to safety management, carrying out extensive workplace risk assessments, promoting safety awareness amongst employees, analyzing any accidents that occur and planning appropriate measures to avoid them in the future. The majority of its European sites are also certified under the OHSAS (Occupational Health and Safety Series) 18001 standard. During the year in question IFE North America and the Johannesburg site in South Africa also achieved OHSAS 18001 certification.

Environmental and Climate Protection Knorr-Bremse also acts responsibly in the field of environmental and climate protection. The company’s aim is to minimize the environmental impact of the manufacture and use of its products. To ensure that this happens throughout the company, Knorr-Bremse organizes initiatives aimed at increasing employees’ awareness of the issue. This responsibility for environmental and climate protection is laid down in the official Group-wide health and safety and environmental protection policy, which covers aspects such as resource efficiency, ecological awareness-raising, environmental management and product responsibility. To put this commitment into practice Knorr-Bremse has set up a mandatory environmental management system covering internal and external environmental regulations and standards. The Group’s production and service sites in Europe and the Americas – and most of those in the Asia/Pacific region – are already certified to the ISO 14001 environmental management standard, and further sites will be un-

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dergoing the certification process over the next few years. In the year under review, Knorr-Bremse’s subsidiary IFE North America also achieved ISO 14001 certification. In addition to this, the energy efficiency initiative ECCO2 (Efficient Cut of CO2) is designed to contribute to climate and environmental protection. Knorr-Bremse has set itself the ambitious target of increasing energy efficiency by 20% and achieving a 20% reduction in CO2 emissions by the year 2020 (base year: 2009), and during the year under review the company came significantly closer to achieving this goal. The main focus of activities under the ECCO2 initiative in 2011 was on improving waste heat recovery, increasing the use of energy-saving lighting, adapting and optimizing assembly lines and launching an across-the-board awareness-raising campaign amongst the workforce. The measures adopted in 2011 enabled CO2 emissions to be cut by 11% compared with the base year and energy efficiency to be increased by 15%.

Social Commitment For Knorr-Bremse, the concept of corporate responsibility also includes social commitment. The company perceives its role as participating in the life of the community and helping to shape and positively influence its social environment. Social commitment for Knorr-Bremse covers both local and international projects. The charitable organization Knorr-Bremse Global Care e. V. supports people all over the world who are in need as a result of environmental disasters, accidents, armed conflict, poverty or illness. The main focus of the aid programs run by the charity is on medium- and long-term education and infrastructure projects, but it also offers rapid emergency relief in the aftermath of natural disasters. The company also organizes so-called Local Care Initiatives – social projects run in the neighborhood of company sites that rely on the involvement of local Knorr-Bremse employees. Local Care projects

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can range from financial support for social institutions to so-called Corporate Volunteering Projects, in which individual employees become involved on a voluntary basis. During the coming year, KnorrBremse intends to systematize its local support activities and increase awareness of them within the company. The aim is to have an exchange of information about successful initiatives, generate new ideas for further projects, create synergies and – last but not least – establish local commitment as an integral part of corporate culture.

CR Communication Knorr-Bremse is aware of the importance of communicating the strategies and goals of its corporate responsibility program and providing information about progress made in achieving them. In order to strengthen confidence in the company it welcomes dialogue with its various stakeholders – employees, customers, business partners and representatives of civil society. The company attaches particular importance to internal communication and uses a variety of different channels to strengthen employee awareness of its sustainability goals and activities. It organizes regular internal presentations and publishes articles on specific CR activities in its in-house magazine as well as running training sessions in corporate responsibility and corporate values for new members of staff. The company also presents annual Group-wide CR Awards for outstanding projects in the fields of environment and social commitment. The 2011 winner in the “Environment” category was the Knorr-Bremse site in Aldersbach for its project to optimize the energy efficiency of an assembly line. The CR Award in the “Social Commitment” category went to Knorr-Bremse KAMA in Russia for the long-term involvement of its employees in an old people’s home in the vicinity of the production facility.

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In order to keep external stakeholders informed, Knorr-Bremse is increasingly publishing reports on its CR activities. The UN Global Compact Progress Report published for the first time in 2011 documented annual measures taken and results achieved in relation to the ten principles of the UN Global Compact. Knorr-Bremse is also working on providing more information about its sustainability achievements on the Internet, so that the various interest groups can receive a more complete picture of the company’s adherence to its corporate responsibilities.

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Long-term aid worldwide A regular income, a roof over your head, access to medical care and education – all these things cannot be taken for granted in many countries of the world. Which is why, for the past six years, the charity Knorr-Bremse Global Care e. V. has been supporting people affected by environmental disasters, accidents, armed conflict, poverty or illness. Ever since the charity was first set up in 2005, the Knorr-Bremse Group has been expanding its social commitment During 2011, Knorr-Bremse Global Care e. V. was provided with additional resources that enabled year on year. it to expand its social commitment and increase the number of projects it implemented. The Knorr-Bremse Group stepped up its annual funding of the charity by EUR 500,000 to EUR 1.5 million – boosting the motivation of members of the organization to continue improving the lives of people in need. Faced with steady growth in the number of projects, higher levels of donations and the challenge of ambitious quality targets, Knorr-Bremse Global Care decided to carry out a review of its internal processes during 2011, as a result of which the charity revised and expanded its project selection criteria. To receive funding, projects have to aim to help people in need to achieve greater self-reliance. Only carefully planned, long-term measures can identify new possibilities and achieve long-lasting change. Knorr-

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Bremse Global Care e. V. focuses on providing support to groups and entire communities in a bid to achieve far-reaching structural change. Members of the organization endeavor to help people to improve their lives and determine their own destinies. That is why – wherever possible – future projects will entail hands-on involvement by members of the Knorr-Bremse workforce.

Long-term aid for some 65,000 people During the year under review, Knorr-Bremse Global Care e. V. ran 42 projects in 24 countries – 24 of them carried over from 2010 and 18 new ones. Some 65,000 individuals all over the world benefited from total funding of EUR 1.73 million. In no fewer than 21 of the projects, the commitment of Knorr-Bremse colleagues at local level was crucial to their successful implementation. The organization’s aim is always to support projects that have a long-term impact and promote self-reliance, enabling those affected to become economically independent. But Knorr-Bremse Global Care e. V. also takes action in the aftermath of unforeseen disasters, providing rapid support to ensure the survival of those affected. For example, in 2011 the organization provided emergency aid following the tsunami in Japan and the famine in East Africa. Examples of the organization’s activities during the year under review include the construction of a new children’s home near Nairobi, in Africa, and also an important aid project in India.

Training Center in Faridabad, India The aim of the training center for young people in the vicinity of the Knorr-Bremse site in Faridabad, India is to enable young people to become independent and determine their lives for themselves. The local organization Prayas Social Welfare Society (Prayas SWS) already provides free elementary education to a total of some 6,000 children from poor backgrounds by making use of unused school facilities in the afternoons. In a bid to offer the children a chance to receive vocational training as well, Prayas SWS and Knorr-Bremse Global Care e. V. are supporting the construction of a training center that will give them the prospect of making a living for themselves. Learning a trade would normally be beyond the means of these children and adolescents. Together with some of his colleagues, A. P. Garg, Managing Director of Knorr-Bremse India Private Ltd., a subsidiary of the Knorr-Bremse Group, has energetically supported and supervised the project.

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Employees Thanks to the outstanding work ethic and motivation of its employees, in 2011 Knorr-Bremse again achieved significant sales growth in both its divisions. Knorr-Bremse sees this work ethic as the basis for its long-term success. During the year under review the Group therefore made significant efforts to further enhance its attractiveness as an employer and to give its employees the opportunity to participate in shaping the company’s future – through its employee survey, for example, which was repeated in 2011.

Employment situation By the end of 2011, the workforce of the Knorr-Bremse Group had risen from 18,053 employees in the previous year (16,277 excluding leasing) to 20,050 (18,143 excl. leasing). This represents an 11.1% increase in staffing levels compared to 2010. Employee numbers rose in both divisions, reflecting the positive growth trend in Knorr-Bremse’s business. In the Rail Vehicle Systems division the number of employees grew from 10,824 (9,523 excl. leasing) to 11,083 (9,955 excl. leasing). In the Commercial Vehicle Systems division the number of employees rose from 7,063 (6,590 excl. leasing) in 2010 to 8,636 (7,858 excl. leasing) in 2011. The number of employees in the holding companies also increased, from 166 (164 excl. leasing) to 331 (330 excl. leasing) at the end of 2011.

Employees in the regions In the European region – which also includes Africa and the Middle East in Knorr-Bremse’s organization – the Group employed 10,442 people on December 31, 2011 (9,957 excl. leasing). This represents an increase of 5.9% over the previous year. Europe therefore accounted for 52.1% of all Group employees, compared with 54.6% in the previous year.

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The number of employees in Germany at the end of the year under review was 3,848 (3,587 excl. leasing), 12.2% more than one year previously. Germany therefore accounted for 19.2% of the Knorr-Bremse workforce. In the rest of Europe excluding Germany the number of employees grew from 6,430 (6,008 excl. leasing) to 6,594 (6,370 excl. leasing), which equates to 32.9% (2010: 35.6%) of the total workforce. The Group had 3,758 employees in North America on December 31, 2011 (3,558 excl. leasing), up 24.1% from the previous year. This represents an increase in the proportion of group employees in North America from 16.8% to 18.7%. The Group had 826 employees in South America in 2010 (806 excl. leasing), compared to 811 in 2011 (805 excl. leasing). The Asia/Australia region saw another rise in staffing levels, from 4,339 employees at the end of 2010 (3,478 excl. leasing) to 5,039 on December 31, 2011 (3,823 excl. leasing). This represented an increase of 16.1%. The proportion of the Group workforce employed in the Asia/Australia region grew from 24.0% to 25.1%.

Human resources development Outstanding, globally recognized products, processes and services can only be delivered by an outstanding workforce. The human resources policy plays a vital supporting role here by providing systematic and targeted human resources development and placing particular emphasis on international job assignments around the entire globe. A comprehensive talent management program, which was further enhanced during the year under review, develops qualified successors for key management positions and offers high potentials attractive career opportunities across the whole of the Group. Development Centers are held several times each year, allowing Knorr-Bremse to identify individual strengths and areas for improvement and to define targeted and systematic professional development measures for each participant.

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Management Evolution Program (MEP) Knorr-Bremse has been running its successful Management Evolution Program (MEP) for 13 years now, giving recent graduates the opportunity to participate in three important projects as management trainees, gaining valuable insights into operations in different parts of the Group. In the year under review the number of trainees was increased from 10 to 16, reflecting the ongoing internationalization of the Group’s business. The three six-month placements develop trainees’ hard and soft skills in a professional context. Direct project responsibility and a structured, rotating training program teach the young people how to handle responsibility in an international environment at an early stage in their career.

Global Employee Survey (GES) Any company’s long-term success in the marketplace is crucially dependent on its ability to subject its own actions to critical scrutiny. In September of the year under review the Group conducted its fourth Global Employee Survey. The high response rate of 77% indicates that many employees took this opportunity to play an active part in shaping their future and the future of the business. All Group employees worldwide were invited to complete one of the questionnaires, which were available in 14 languages. The completed questionnaires were evaluated anonymously, ensuring that individuals could not be identified in the process. Representatives of the specialist departments and the works council were involved in updating the questionnaires from previous years. The aim was to ensure comparability with the key findings of previous employee surveys, while at the same time incorporating new subject areas such as Corporate Responsibility (CR). In the year under review the questionnaires could also be completed online for the first time. Employees without internet access were able to participate using paper questionnaires, as in previous years. In future the Employee Survey will take place every two years, alternating with the Leadership Feedback survey in which employees evaluate their managers.

Staff Dialogue (SD) Growing together, learning from each other – the performance review process is an active dialogue, not a one-way street. This dialogue is more than just an important human resources management tool – it is also the basis and prerequisite for successful working relationships between managers and their teams. Knorr-Bremse therefore continued to implement its Staff Dialogue program systematically in the year under review. Managers across the entire Group are required to conduct a comprehensive review dialogue with each of their employees at least once a year, during the first quarter. During the dialogue, manager and employee review the previous year’s work together. The aim is to identify, in concrete terms, how far the employee has fulfilled his or her objectives and responsibilities, their strengths and weaknesses, the challenges that lie ahead and career development prospects for the future. The Staff Dialogue focuses on professional performance and also on people skills. But these regular dialogues fulfill other important functions, too: setting targets for the coming year, discussing further development opportunities and above all building a relationship of trust between manager and employee.

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Focus on leadership Good leadership is the basis for a contented workforce and efficient teamwork. Numerous studies have also demonstrated a significant correlation between leadership and corporate success. Leadership Development was therefore one of the top priorities of Knorr-Bremse’s human resources policy during the year under review, with greater emphasis placed on this topic across a diverse A new management development concept range of human resources instruThey must be conversant with the latest management techniques, they must be consistent, ments in order to strengthen and they must allow their staff appropriate levels of enhance the Group’s management autonomy, and they must always be ready to listen to their employees’ concerns. These are just culture. some of the skills effective managers need to possess. Knorr-Bremse is dedicated to supporting a systematic development and training process in order to achieve this goal – a process that was reconfigured during the year under review. The new development program focuses on leadership at all management levels – from the newly appointed team leader through to managers with many years of experience behind them. This leadership initiative was launched with training events for senior executives in the top management tier which were rolled out dur-

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ing the year under review. One of the primary aims was to deliver a focused program to update senior managers on the latest leadership tools and strategies, to build awareness of the corporate values and develop new leadership guidelines – helping to establish a uniform approach to leadership throughout the Group. Following the completion of this initiative, the next step in 2012 will be to provide systematic training for the lower management tiers, which will be aligned with globally harmonized standards.

High potentials programs for future managers The focus was also on leadership in tailored training programs for high potentials in the mid and upper management tiers. In Knorr-Bremse’s newly launched Senior Potential Program – designed to train potential candidates for departmental management roles – participants were able to select the modules most appropriate to their needs from a package of training offers, putting together a program tailored to their individual requirements. Leadership skills were a core element in all the modules provided, although building and developing an international network was another key aim of this program. The Group has also staged two International Management Promotion Groups to date, inviting international high potentials for specialist departmental management roles to Germany

for training in line with a comprehensive, timetabled curriculum covering self-management, strategic thinking and leadership skills.

Leadership Feedback promotes team cohesion The Leadership Feedback initiative, which was successfully completed in November 2010, for the first time featured a uniform international questionnaire and made use of a supporting online program. Approximately 1,000 managers in over 50 locations were evaluated by around 13,000 employees. The second part of this initiative followed during the year under review: drawing on the Feedback results, teams took part in workshops, joining forces to develop strategies for improving and optimizing their teamwork in the future.

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Trade Fairs Local presence as a global player: Knorr-Bremse was represented by expert teams at all the major trade fairs in the rail and commercial vehicle sectors and presented its innovative products to an international audience. Over the next few years, the business of both KnorrBremse divisions will be influenced by the megatrends of energy efficiency, safety, urbanization and globalization.

Rail Vehicle Systems In the coming years, major global trends will have a significant impact on the rail vehicle industry and will pose considerable challenges. With its focus on energy efficiency, safety, urbanization and globalization, Knorr-Bremse is already developing the products and systems that will be needed in the future. As a global player, in 2011 the company again presented its systems expertise to a broad-based specialist audience throughout the world.

UITP, Dubai, April 2011 Under the motto of “Boosting public transport: Action!,“ a large number of exhibitors from around the world presented their latest solutions for the rail market. The Knorr-Bremse Group and its subsidiaries displayed ground-breaking products to make rail transportation more efficient, more environmentally compatible and, most important, safer.

Railways & Harbours, Johannesburg, April 2011 This event comprised two components: a conference with a large number of presentations on the background to and specific features of the South African rail market and a trade fair, where more than 80 exhibitors showcased their products.

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SIFER, Lille, April 2011 Since its return to Lille, the only French trade fair solely for the rail sector has increasingly become a platform for the exchange of ideas and experience, which is why it is a firm fixture in the events calendar of Knorr-Bremse.

Korea Railways & Logistics Fair, Busan, June 2011 “RailLog” in Busan is Korea‘s only rail trade fair, as well as being one of the few held in Asia. Apart from product presentations, the event concentrates on the logistics sector. In 2011, one of the main issues at RailLog was how to ensure the efficient organization of the growing volumes of rail traffic in Asia.

Railtex, London, June 2011 In 2011, Britain‘s largest railway technology exhibition was once again a key venue for the international rail industry. The exhibition for rail equipment, systems and services was held at London‘s Earls Court exhibition center.

Conference on Modern Rolling Stock, Graz, September 2011 The conference has become a popular meeting-point for many international rail experts. The two and a half days of the event included a large number of technical presentations with topics ranging from new results of basic research on rolling stock technology to questions of infrastructure and approval. Innovative products from components to systems and even entire vehicles were also on show.

EXPO 1520, Moscow, September 2011 At the third International Salon of Rolling Stock and Rail Technologies, “EXPO 1520,” record orders were placed in 2011. The Russian rolling stock market is growing and so too is EXPO 1520: compared with the previous event, there was an increase of about 50% in the exhibition space used by manufacturers from around the world to showcase their products.

IREE, New Delhi, September 2011 Every day, the Indian rail network carries some 20 million passengers and about 2.5 million tons of freight. This was one of the reasons why the International Railway Equipment Exhibition attracted more than 300 exhibitors to New Delhi, where they showcased their solutions for the modern rail vehicle market on a total exhibition area of 11,000 m². Knorr-Bremse and many of its subsidiaries were among the exhibitors.

Alstom Tech-Day, Paris, September 2011 Alstom invited Knorr-Bremse, as one of its top suppliers, to the Alstom Tech-Day at the company‘s headquarters in Paris. Knorr-Bremse took advantage of the day to refresh contacts with the French rail vehicle producer and made a number of technical presentations. The “Little Oktoberfest” organized by Knorr-Bremse rounded off the event in convivial Bavarian style.

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APTA, New Orleans, October 2011 Some 17,000 rail vehicle industry decision-makers met in New Orleans in 2011 at the exhibition held to coincide with the Annual Meeting of the American Public Transportation Association (APTA). Together with a large number of other suppliers, Knorr-Bremse showcased its latest developments in the rail sector.

Nordic Rail, Jönköping, October 2011 Nordic Rail focused on special requirements for rail solutions in the Nordic countries. Demand for speedy and efficient rail transport in the Far North has been at a high level for many years.

TRAKO, Gdansk, October 2011 The “Trade Fair Trako 2011,” which took place over four days in 2011, is the second-largest European rail vehicle showcase after Innotrans. As one of more than 400 exhibitors, Knorr-Bremse Poland presented a wide variety of products relevant to the Polish market.

Metro China, Beijing, November 2011 The largest metro event of the year in China covered all aspects from planning and design through to operation and maintenance and attracted considerable attention from Chinese metro operators. They were not only interested in Knorr-Bremse braking systems but also in IFE doors, Westinghouse platform screen doors and Microelettrica switchgear.

AusRAIL PLUS, Brisbane, November 2011 The largest annual specialist event for rail traffic in the Asia-Pacific region offered decision-makers a first-class platform for the discussion of technological developments and investment opportunities. More than 300 exhibitors made use of this forum to present their latest products and services.

Knorr-Bremse also took part in the 5th Public Transport Innovation Congress in Freiburg, as well as presenting its products at Public Transport/Interiors in Berlin; Suissetraffic in Geneva; Czech Raildays in Ostrava; Railway Interchange in Indianapolis; and the 13th International Conference on Rail Transportation in Saragossa.

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Commercial Vehicle Systems Safety and efficiency combined with tailor-made solutions for highly diverse markets are essential requirements in today’s commercial vehicle sector. Knorr-Bremse Commercial Vehicle Systems presented its solutions in this field to a wide specialist audience in 2011.

Comtrans, Moscow, September 2011 Russia is a huge country posing a whole host of transport challenges. International commercial vehicle manufacturers continue to be highly interested in the Russian market. At this trade fair, which is to be held in alternating years with the commercial vehicle IAA in Hanover in the future and has thereby anchored its position as the leading commercial vehicle showcase in Eastern Europe, Knorr-Bremse presented a selection of products geared to the special requirements of the Russian market.

Equip Auto, Paris, October 2011 The biennial trade fair for car and commercial vehicle equipment held at the Villepinte Exhibition Center in the north of Paris has become one of the key venues for manufacturers, dealers and suppliers to present new products and services. In 2011, 1,800 exhibitors from 50 countries took part in the event, including Knorr-Bremse.

TATA Motors Technology Day, Pune, October 2011 At the technology day held by Indian automaker TATA, Knorr-Bremse not only presented a wide variety of products developed for the Indian market but also gave live demonstrations of some systems including the Anti-Roll-Back System (ARB), the Autonomous Emergency Brake System AEBS and the electronic stability program ESP.

Presence at aftermarket fairs Ensuring optimum long-term safety and efficiency levels in safety-critical commercial vehicle systems demands outstanding levels of after-sales service. Knorr-Bremse presented its wide range of services at the Trost-Schau in the new Stuttgart exhibition center, at the tenth Carat-Leistungsmesse in Kassel, at PV Automotive in Hanover and at Wessels und Müller in Osnabrück.

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Notes to the Consolidated Financial Statements

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Principles and methods

The consolidated financial statements have been drawn up in accordance with generally accepted accounting principles, complying with the accounting requirements of the German Commercial Code (HGB) and additional statutory provisions. Figures in the consolidated financial statements are shown in thousands of euros (TEUR). Certain items on the balance sheet and in the statement of income are combined for the sake of greater clarity. These items are explained separately in the Notes to the Consolidated Financial Statements.

Accounting and valuation The financial statements of the companies included in the consolidated financial statements are prepared according to uniform principles of accounting and valuation applied to the Group. For the purposes of consolidation according to the equity method, any valuations in the financial statements of the associated companies that deviate from the uniform principles applied to the Group are retained. Purchased intangible assets are valued at acquisition cost less scheduled depreciation; additional depreciation is taken where necessary. Fixed assets are recorded at acquisition or production cost, less scheduled depreciation in the case of items subject to wear and tear; additional depreciation is taken where necessary. Depreciation on fixed assets is generally applied using the linear method, based on useful life. In the case of German companies included in consolidation, additions prior to January 2008 and after January 2009 are for the most part depreciated using the declining balance method, switching over to the linear method as soon as the latter results in higher depreciation. Minor fixed assets are depreciated to the maximum extent permissible under the respective countries’ tax provisions. Interests in affiliated, associated and related companies and miscellaneous investments are stated at cost or, in the event of a probable sustained diminution in value, at fair value (where the latter is lower). Materials and supplies are carried in inventories at the lower of average acquisition cost or replacement cost. Provision against realization risks is made where necessary. Work in process and finished products are stated at production cost, but in no case higher than the projected sales revenues less any costs accruing prior to sale. Production cost includes direct cost of materials and labor, as well as production overhead. A reasonable allowance is made where there is a risk of a decline in inventory values. Receivables are stated at their nominal value, less any necessary provisions against specific debts. Receivables bearing no or low interest are stated at their net present value. General charges have been made to cover the general credit risk. Other assets are stated at the lower of average acquisition cost, net present value or fair value.

N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Earnings or disbursements prior to the balance sheet date are shown as prepaid income or prepaid expenses where they represent revenues or expenses for a certain period after the balance sheet date. Foreign currency items are valued at the rate existing at the transaction date or – if less favorable – at the rate at the balance sheet date. Where foreign currency items have been hedged, they are valued at the corresponding hedging rate. Where the remaining term is one year or less, foreign currency items are valued at the mean spot rate at the final balance sheet date. Rate-hedging and option transactions are performed selectively and exclusively for hedging purposes. Wherever possible, financial derivatives covering assets, borrowings, open contracts or transactions with a high probability of closure are bundled together as single items for valuation purposes (“macro hedges”). Accrued liabilities include reasonable and sufficient allowance for all perceivable risks and any contingent liabilities. Accruals are valued in accordance with § 253 (1) and (2) of the German Commercial Code (HGB), whereby use has been made of the options for retention of control laid out in Article 67 (1) clause 2 and (3) clause 1 of the Act Introducing the German Commercial Code (EGHGB). Transfers to accrued liabilities are made using the net method. In Germany, pension plan accruals and similar commitments are set up according to actuarial principles based on realistic assumptions. Assumptions included in the calculations include future salary increases and future pension adjustments, as defined in § 16 of the German Law on Occupational Pensions (BetrAVG), as well as assumptions relating to staff turnover. The calculations are based on the biometric reference values devised by Klaus Heubeck (mortality tables RT 2005 G). The following parameters were applied: Interest rate: Salary increases: Annuity trend:

5.13% p.a. 3.00% p.a. 1.50% p.a.

Pension plan accruals are determined using the modified discount value method. Our foreign subsidiaries cover pension plans and similar commitments by accruals that are calculated according to principles similar to those used in Germany. Only in the United States of America are pension plans and similar commitments of major significance to the net worth, financial position and results of the Group. Here the projected unit credit method has been used, based on the following parameters: Interest rate: Salary increases: Annuity trend: Liabilities are stated at their settlement value.

6.12% p.a. 3.50% p.a. up to 2.50% p.a.

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Consolidated companies In addition to Knorr-Bremse AG, 19 German and 99 foreign subsidiaries over which Knorr-Bremse AG can exert a direct or indirect controlling influence are included in the consolidated financial statements. Investments in one German and two foreign companies are shown in the consolidated financial statements as investments in associated companies. One German and eight foreign subsidiaries have not been included in consolidation because of their minor significance in relation to the net worth, financial position and results of the Group. Two German companies are not shown as associated companies, but instead are stated at acquisition cost. During fiscal year 2011 the Group acquired the following companies, which are included in consolidation: Comet Fans S.r.l., Solaro, Milan/Italy Kalmar Tågkompetens AB, Kalmar/Sweden Knorr Brake Corporation Canada Holdings Ltd., Montreal/Canada MSA Electroteknik Sanayi ve Ticaret Limited Şirketi, Serifali, Istanbul/Turkey Technologies Lanka Inc., La Pocatière/Canada The following companies are also newly established or included in consolidation for the first time: Knorr-Bremse CAFF Systems for Commercial Vehicles Chongqing Ltd., Chongqing/China Microelettrica do Brasil Comercialização e Importação de Produtos Eletromecânicos Ltda., Barueri, São Paulo/Brazil Knorr Brake Realty LLC, Westminster, Maryland/USA The following companies have been renamed: Knorr-Bremse Brasil (Holding) Administração e Participação Ltda., São Paulo/Brazil (formerly Indústria Freios Knorr Ltda., São Paulo/Brazil) Knorr-Bremse Rail Systems (Burton) Ltd., Stretton, Burton upon Trent/Great Britain (formerly Sigma Coachair (UK) Ltd., Newhall/Great Britain) Sigma Air Conditioning Pty. Ltd., Wetherill Park, Sydney/Australia (formerly Sigma Coachair Group Pty. Ltd., Wetherill Park, Sydney/Australia) The following companies have been merged or wound up: EMC Traction S.r.l., Milan/Italy Officine de Zan S.r.l., Rozzano, Milan/Italy MicroEner S.A.S., Noisy le Grand/France


This means that compared to the previous year, the number of companies included in consolidation has increased by six foreign companies. On the following pages, a detailed list of affiliated and associated companies appears in a separate breakdown of the Group’s shareholdings. The above-mentioned changes in the scope of consolidation had no significant impact on the Group’s net assets, financial position and operating results. The newly consolidated companies caused the balance sheet total to increase by EUR 17.9 million.

Principles of consolidation Until December 31, 2009, the book value method was used to consolidate investments in subsidiaries. This entailed offsetting book values against the value of our interests in the shareholders’ equity of the subsidiaries at the time of the initial consolidation. Companies were included in consolidation at the date of acquisition or at the balance sheet date. Since fiscal year 2010, investments in subsidiaries have been consolidated using the revaluation method. This entails reporting shareholders’ equity at the value corresponding to the market value of the assets and borrowings to be included in the consolidated financial statements. Companies are included in consolidation at the date of acquisition. Since 2002, any resulting goodwill has been capitalized in compliance with GAS standards. Scheduled depreciation is applied on the basis of operational considerations relating to useful life; within the Group, this may not exceed 20 years. The useful life of goodwill is determined using the subsidiaries’ longerterm, strategic business models. Wherever possible, a negative goodwill resulting from the consolidation in investments is released for the year in which it arises, as permitted by German commercial law and accounting standards. Associated companies are consolidated using the equity method, with goodwill generally included as part of the cost of acquiring interests in associated and related companies. Associated companies acquired prior to January 2010 were consolidated at the date of acquisition or the balance sheet date. As from fiscal year 2010, companies are included in consolidation at the date of acquisition. Our share in the annual results of companies consolidated in accordance with this method, including amortization on goodwill, is shown in the statement of income under Financial results. Receivables and liabilities between consolidated companies are netted. Unrealized intercompany profits resulting from intercompany trade in goods and services are eliminated in the consolidated statements. In the consolidated statement of income, revenues from intercompany sales and other intercompany income are offset against the corresponding expenses.

155

156

Foreign currency translation The individual financial statements of the foreign companies included in consolidation are translated into euros at the mean spot rate at the balance sheet date, with the exception of shareholders’ equity, which is translated into euros at the historic rate. Income statement items are translated into euros at the mean rate. Any resulting translation difference is reported under Group equity and noted in the statement of changes in group equity.

Deferred taxes Deferred taxes as defined under §§ 274 and 306 of the German Commercial Code (HGB), resulting from temporary differences between the amount stated in the tax accounts of individual group companies and the amount stated in the consolidated balance sheet (including differences arising as a result of accounting and valuation adjustments or during the consolidation process), are netted wherever possible, in accordance with legal requirements. In the individual balance sheets prepared according to the uniform principles of accounting and valuation applied to the Group (“Financial statements II”), the option to capitalize assets to the amount of probable tax relief in the following years is used in individual cases. The calculation of deferred taxes is based on the tax rates that are expected to be valid at the time of their realization. Deferred taxes on losses carried forward are capitalized in individual cases, where there is sufficient probability that the tax benefits can be realized. At each balance sheet date, the book value of deferred tax assets is reviewed and, if necessary, adjusted as appropriate.


157

158

2

Changes in intangibles, fixed assets and investments Acquisition or production cost Additions to purchased fixed and intangible assets amounted to TEUR 205,579 in fiscal year 2011. This figure includes investments in the amount of TEUR 158,864.

In EUR thousands (TEUR)

Carried forward Jan. 1, 2011 *)

Additions *)

Reclassifications *)

Disposals *)

Industrial property rights/trademarks

261,714

14,102

21

(4,493)

Goodwill

256,750

32,137

Purchased intangibles

518,464

46,239

21

(5,086)

Land, equivalent rights to real property, and build-

303,391

19,845

1,515

(8,520)

Technical equipment and machinery

476,149

41,399

19,845

(23,820)

Other equipment, plant and office equipment

403,646

37,268

14,658

(16,286)

54,856

60,828

(36,039)

(1,481)

1,238,042

159,340

(21)

(50,107)

Investments in affiliated companies

6,610

94

0

0

Investments in associated companies

4,570

0

(44)

(200)

Miscellaneous investments

73,254

6,855

44

(263)

Investments

84,434

6,949

0

(463)

1,840,940

212,528

0

(55,656)

(593)

ings, including buildings on land not owned

Advances to suppliers and construction in progress

Fixed assets

Intangibles, fixed assets and investments

*) valued at acquisition or production cost


Currency Balance differences *) Dec. 31, 2011 *)

Accrued depreciation/ amortization

Net value Dec. 31, 2011

Net value Dec. 31, 2010

159

Depreciation/ amortization during the fiscal year

3,851

275,195

(199,313)

75,882

82,133

(20,850)

5,816

294,110

(180,654)

113,456

135,144

(54,534)

9,667

569,305

(379,967)

189,338

217,277

(75,384)

(5,357)

310,874

(124,958)

185,916

181,487

(7,162)

(2,963)

510,610

(313,432)

197,178

174,314

(43,195)

(1,980)

437,306

(323,129)

114,177

112,282

(38,724)

(1,420)

76,744

(5,847)

70,897

48,918

(154)

(11,720)

1,335,534

(767,366)

568,168

517,001

(89,235)

130

6,834

(2,793)

4,041

3,822

0

0

4,326

0

4,326

4,570

0

(1,358)

78,532

(16,083)

62,449

57,177

(6)

(1,228)

89,692

(18,876)

70,816

65,569

(6)

(3,281)

1,994,531

(1,166,209)

828,322

799,847

(164,625)

160

3

Intangibles This heading includes primarily the acquisition of goodwill, patents, rights to the use of names and trademarks, and IT software. IT software and goodwill account for the majority of additions. Any resulting goodwill is subject to scheduled depreciation over a period of not more than 20 years. Other intangibles are subject to scheduled depreciation over periods of between three and 10 years. In fiscal year 2011 an additional provision in the amount of EUR 28.8 million was made against Sigma Group goodwill. All intangible assets have a limited useful life.

4

Fixed assets Movements of fixed assets are presented in the compilation on the preceding pages. To take technical and economic factors into account, scheduled depreciation was applied to acquisition costs. During the fiscal year, additional depreciation amounting to TEUR 264 was applied to a plot of land.

5

Investments Investment movements are set out in the compilation above. Miscellaneous investments consist of miscellaneous loans (TEUR 18,931), loans to affiliated companies (TEUR 41,546), long-term investments (TEUR 1,823), and investments in other companies (TEUR 149). The Group’s shareholding in OLB Oberlandbahn Fahrzeugbereitstellungs GmbH, Munich/Germany was sold during the fiscal year under review.

List of shareholdings 1 Consolidated affiliated companies

Share in capital in %

Albatros GmbH, Munich/Germany

100.0

Anchor Brake Shoe Company LLC, West Chicago, Illinois/USA

100.0

BCVS Canadian Holdings LLC, Anjou, Quebec/Canada

100.0

BCVS Mexican Holdings LLC, Cd Acuña, Coah/Mexico

100.0

Bendix Commercial Vehicle Systems LLC, Elyria, Ohio/USA

100.0

Bendix CVS Canada Inc., Anjou, Quebec/Canada

100.0

Bendix CVS de Mexico SA de CV, Cd Acuña, Coah/Mexico

100.0

Bendix Spicer Foundation Brake Canada, Inc., Kingston, Ontario/Canada

100.0

Bendix Spicer Foundation Brake LLC, Elyria, Ohio/USA

80.0

Bost Ibérica S.L., Madrid/Spain

100.0

BSFB Holdings, Inc., Elyria, Ohio/USA

100.0

Comet Fans S.r.l., Solaro, Milan/Italy

100.0

Dr. techn. Josef Zelisko Ges.m.b.H., Mödling/Austria

100.0

Freinrail Systèmes Ferroviaires S.A., Reims/France

100.0

Hasse & Wrede CVS Dalian, China Ltd., Dalian/China

70.0


1 C onsolidated affiliated companies (continued)


Hasse & Wrede GmbH, Berlin/Germany

100.0

Heine Resistors GmbH, Dresden/Germany

51.0

Heine Resistors (Suzhou) Co. Ltd., Suzhou/China

100.0

IFE CR a.s., Brno/Czech Republic

100.0

IFE North America LLC, Westminster, Maryland/USA

100.0

IFE-Tebel Australia Pty. Ltd., Granville/Australia

100.0

IFE-Tebel Technologies B.V., Leeuwarden/The Netherlands

100.0

IFE-VICTALL Railway Vehicle Door Systems (Qingdao) Co., Ltd., Qingdao/China IGE-CZ s.r.o., Brno/Czech Republic Kalmar Tågkompetens AB, Kalmar/Sweden

59.0 100.0 70.0

KB Gamma Beteiligungs GmbH, Munich/Germany

100.0

KB Lambda Beteiligungs GmbH, Munich/Germany

100.0

KB Media GmbH Marketing und Werbung, Munich/Germany

100.0

KB Sigma Beteiligungs GmbH, Munich/Germany

100.0

KB Omikron Beteiligungs GmbH, Munich/Germany

100.0

Knorr-Amabhiliki (Pty.) Ltd., Kempton Park/South Africa

74.0

Knorr Brake Corporation Canada Holdings Ltd., Montreal, Quebec/Canada

100.0

Knorr Brake Corporation, Westminster, Maryland/USA

100.0

Knorr Brake Holding Corporation, Watertown, New York/USA

89.3

Knorr Brake Ltd., Kingston, Ontario/Canada

100.0

Knorr Brake Realty LLC, Westminster, Maryland/USA

100.0

Knorr Brake Truck Systems Company, Watertown, New York/USA

100.0

Knorr-Bremse / Nankou Air Supply Unit (Beijing) Co., Ltd., Nankou/China

55.0

Knorr-Bremse Asia Pacific (Holding) Ltd., Hong Kong/China

100.0

Knorr-Bremse Australia Pty. Ltd., Granville/Australia

100.0

Knorr-Bremse Benelux B.V.B.A., Heist-op-den-Berg/Belgium

100.0

Knorr-Bremse Beteiligungsgesellschaft mbH, Munich/Germany

100.0

Knorr-Bremse Brake Equipment (Shanghai) Co., Ltd., Shanghai/China

100.0

Knorr-Bremse Braking Systems for Commercial Vehicles (Dalian) Co., Ltd., Dalian/China

100.0

Knorr-Bremse Brasil (Holding) Administração e Participação Ltda., São Paulo/Brazil

100.0

Knorr-Bremse CAFF Systems for Commercial Vehicles Chongqing Ltd., Chongqing/China

66.0

Knorr-Bremse CARS LD Vehicle Brake Disc Manufacturing (Beijing) Co., Ltd., Daxing/China

50.0

Knorr-Bremse Commercial Vehicle Systems Japan Ltd., Tokyo/Japan

80.0

Knorr-Bremse Fékrendszerek Kft., Kecskemét/Hungary

100.0

Knorr-Bremse Ges.m.b.H., Mödling/Austria

100.0

Knorr-Bremse India Pvt. Ltd., Faridabad/India

100.0

Knorr-Bremse KAMA Systems for Commercial Vehicles OOO, Naberezhnye Chelny/Russia

50.0

Knorr-Bremse Investment GmbH, Munich/Germany

100.0

Knorr-Bremse IT-Services GmbH, Munich/Germany

100.0

Knorr-Bremse Nordic Rail Services AB, Lund/Sweden

100.0

Knorr-Bremse Polska SfN Sp. z o.o., Warsaw/Poland

100.0

Knorr-Bremse Rail Systems Italia S.r.l., Campi Bisenzio/Italy

100.0

Knorr-Bremse Rail Systems Japan Ltd., Tokyo/Japan

94.0

Knorr-Bremse Rail Systems Korea Ltd., Seoul/South Korea

100.0

Knorr-Bremse Rail Systems OOO, Moscow/Russia

100.0

Knorr-Bremse Rail Systems (Burton) Ltd., Stretton, Burton upon Trent/Great Britain

100.0

161

162



Knorr-Bremse Rail Systems (Machining) Ltd., Melksham, Wiltshire/Great Britain

100.0

Knorr-Bremse Rail Systems (UK) Ltd., Melksham, Wiltshire/Great Britain

100.0

Knorr-Bremse SA Holding Company (UK) Ltd., Melksham, Wiltshire/Great Britain

100.0

Knorr-Bremse S.A. (Pty.) Ltd., Kempton Park/South Africa

75.0

Knorr-Bremse S.R.L., Bucharest/Romania

70.0

Knorr-Bremse Sistemas para Veículos Comerciais Brasil Ltda., São Paulo/Brazil

100.0

Knorr-Bremse Sistemas para Veículos Ferroviários Ltda., São Paulo/Brazil

100.0

Knorr-Bremse Sistemi per Autoveicoli Commerciali S.p.A., Arcore/Italy

100.0

Knorr-Bremse System för Tunga Forden AB, Malmö/Sweden

100.0

Knorr-Bremse Systeme für Nutzfahrzeuge GmbH, Munich/Germany

80.0

Knorr-Bremse Systeme für Schienenfahrzeuge GmbH, Munich/Germany

100.0

Knorr-Bremse Systeme für Schienenfahrzeuge Ibero Holding GmbH, Munich/Germany

100.0

Knorr-Bremse Systèmes pour Véhicules Utilitaires France S.A., Lisieux/France

100.0

Knorr-Bremse Systems for Commercial Vehicles India Pvt. Ltd., Pune/India

100.0

Knorr-Bremse Systems for Commercial Vehicles OOO, Moscow/Russia

100.0

Knorr-Bremse Systems for Commercial Vehicles Ltd., Bristol/Great Britain

100.0

Knorr-Bremse Systems for Rail Vehicles (Suzhou) Co., Ltd., Suzhou/China

100.0

Knorr-Bremse Systemy dla Kolejowych Srodków Lokomocji PL Sp. z o.o., Cracow/Poland

100.0

Knorr-Bremse Systémy pro uzitková vozidla CR s.r.o., Hejnice/Czech Republic

100.0

Knorr-Bremse Ticari Arac Fren Sistemieri Limited Şirketi, Istanbul/Turkey

100.0

Knorr-Bremse US Beteiligungs GmbH, Munich/Germany

100.0

Knorr-Bremse US Investment GmbH, Munich/Germany

100.0

Knorr-Bremse Vasúti Jármü Rendszerek Hungária Kft., Budapest/Hungary

100.0

Knorr-Bremse Verwaltungsgesellschaft mbH, Munich/Germany

100.0

Maquiladora de Acuña SA de CV, Cd Acuña, Coah/Mexico

100.0

Merak Jinxin Air Conditioning Systems (Wuxi) Co., Ltd., Wuxi/China

51.0

Merak Knorr Climatización S.A., Buenos Aires/Argentina

100.0

Merak North America LLC, Westminster, Maryland/USA

100.0

Merak Railway Technologies (Shanghai) Co., Ltd., Shanghai/China

100.0

Merak Sistemas Integrados de Climatización S.A., Getafe/Spain

100.0

Microelettrica do Brasil Comercialização e Importação de Produtos Eletromecânicos Ltda.,

90.0

Barueri, São Paulo/Brazil Microelettrica Power Devices (Pty) Ltd., Johannesburg/South Africa Microelettrica Power (Pty) Ltd., Johannesburg/South Africa

100.0 74.0

Microelettrica Scientifica (Pty) Ltd., Johannesburg/South Africa

100.0

Microelettrica Scientifica S.p.A., Rozzano/Italy

100.0

Microelettrica USA LLC, Randolph, New Jersey/USA

100.0

MSA Electroteknik Sanayi ve Ticaret Limited Şirketi, Serifali, Istanbul/Turkey M.S. Resistances S.A.S., Saint Chamond/France

51.0 51.0

New York Air Brake Corporation, Watertown, New York/USA

100.0

Oerlikon-Knorr Eisenbahntechnik AG, Niederhasli/Switzerland

100.0

Sigma Air Conditioning Pty. Ltd., Wetherill Park, Sydney/Australia

100.0

Sigma Coachair Group (China) Co. Ltd., Changzhou/China

100.0

Sigma Coachair Systems (US) Inc., Chicago, Illinois/USA

100.0

Sigma Transit Systems Pty. Ltd., Wetherill Park, Sydney/Australia

100.0




Skach Ges.m.b.H., Mödling/Austria

100.0

Sociedad Española de Frenos, Calefacción y Señales S.A., Getafe/Spain

100.0

Stahlwerk Volmarstein GmbH, Wetter (Ruhr)/Germany

100.0

STE Schwingungs-Technik GmbH, Klieken/Germany

100.0

Sydac Pty. Ltd., Adelaide/Australia

100.0

Sydac Ltd., Manchester/Great Britain

100.0

Technologies Lanka Inc., La Pocatière, Quebec/Canada

75.0

Techtrain Associates Limited, Doncaster/Great Britain

100.0

Unicupler GmbH, Niederurnen/Switzerland

100.0

Westinghouse Brakes Australia Pty. Ltd., Concord West/Australia

100.0

Westinghouse Platform Screen Doors (Guangzhou) Ltd., Guangzhou/China Westinghouse Platform Screen Doors Ltd., Walsall/Great Britain

2 Associated companies valued using the equity method

65.0 100.0


Gorilla Brake & Components, Inc., Brantfort, Ontario/Canada

20.0

Icer Rail S.L., Pamplona/Spain

25.0

Webasto Kiekert Bustüren GmbH, Karlsfeld/Germany

50.0

3 Affiliated companies not included in consolidation


Black River Air Logistics Corp., Watertown, New York/USA

100.0

Di-Pro LLC., Fresno, California/USA

100.0

Freios Knorr Argentina S.A., Buenos Aires/Argentina

100.0

KB Investment UK Ltd., Chippenham/Great Britain

100.0

Knorr-Bremse RUS OOO, Nizhny Novgorod/Russia

100.0

Metco Technical Consulting AG, Zug/Switzerland

100.0

Sigma Coachair (UK) Holdings Ltd., Newhall, Swadlincote/Great Britain

100.0

Sigma Transit Systems (Taiwan) Co. Ltd. Taipei/Taiwan

100.0

ITERIS Europe GmbH, Bietigheim-Bissingen/Germany

100.0

4 Associated companies valued without using the equity method Megalith Grundstücksverwaltungsgesellschaft mbH & Co. Vermietungs KG, Mainz/Germany –

Share in capital in % 100.0

Deutsche-Anlagen-Leasing GmbH holds majority voting rights Sanctor Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Marzahn KG, Düsseldorf/Germany – Deutsche-Immobilien-Leasing GmbH holds majority voting rights

99.0

163

164

6

Inventories 2011 TEUR

2010 TEUR

244,436

184,402

Materials and supplies Work in process

58,010

60,164

Finished products, merchandise

214,838

195,916

less advances received on orders

(227,500)

(221,145)

289,784

219,337

Total

7

Receivables and other assets 2011 TEUR

2011 TEUR

2010 TEUR

Remaining term more than 1 year

in total

in total

413

695,183

689,066

Other assets

8,955

109,341

92,133

Total

9,368

804,524

781,199

Accounts receivable, trade

8

Cash and cash equivalents This item includes cash at bank, checks and cash on hand.

9

Prepaid expenses Group prepaid expenses amounted to TEUR 12,337 (2010: TEUR 12,182).

10

Deferred taxes At the balance sheet date deferred tax assets amounted to TEUR 63,030 (2010: TEUR 68,713), while deferred tax liabilities totaled TEUR 0 (2010: TEUR 1,636). In compliance with the legal requirements, deferred tax assets and liabilities are stated at the netted amount. Of the deferred tax assets, TEUR 32,728 (2010: TEUR 39,169) relate to deferred taxes on individual balance sheets of group companies and TEUR 30,302 (2010: TEUR 29,544) relate to consolidation entries affecting net income. Deferred tax assets on individual balance sheets result primarily from temporary differences in accrued liabilities, receivables and other assets. Deferred tax assets relating to consolidation adjustments are primarily the result of eliminating unrealized intercompany profits. Deferred tax liabilities relate solely to deferred taxes on individual balance sheets of group companies. At individual company level and at Group level, deferred taxes are stated at the projected tax rate in the respective countries at the time of realization. Tax rates range from 0% to 40%, while the rate on consolidation activities is ca. 35%.


11

Capital stock The capital stock of Knorr-Bremse AG is divided up into 2,600,000 bearer shares, each with a nominal value of EUR 26. Stella Vermögensverwaltungs-GmbH and KB Holding GmbH, both based in Grünwald/ Germany, have informed Knorr-Bremse AG that directly or indirectly, they hold a majority interest in Knorr-Bremse AG.

12

Capital reserves Capital reserves are unchanged from the previous year. Like the legal reserve, they are subject to the restrictions of § 150 of the German Corporation Law (AktG).

13

Retained earnings In addition to the legal reserve, Retained earnings include the accumulated earnings of the companies included in consolidation, where these have not been distributed. Furthermore this heading reflects all Group items that exert an influence on shareholders’ equity. The legal reserves amounted to TEUR 8,883 (2010: 8,680). The statutory reserves (TEUR 6,869) rose by TEUR 748 compared to the previous year (TEUR 6,121). Miscellaneous retained earnings amounted to TEUR 415,978 (2010: TEUR 298,207) at the balance sheet date. The capitalization of deferred tax assets meant that an amount of TEUR 63,030 (2010: 67,077) was subject to the payout restriction laid down in § 268 (8) clause 2 of the German Commercial Code (HGB).

14

Pension plan accruals Pension plan accruals are valued according to the provisions of the German Accounting Law Modernization Act. Pension plan accruals

2011 TEUR

2010 TEUR

199,667

192,257

The shortfall in cover for pension funds in Great Britain amounted to TEUR 17,479 as at year-end 2011.

15

Other accrued liabilities 2011 TEUR

2010 TEUR

78,940

59,109

Miscellaneous accruals

564,351

469,412

Total

643,291

528,521

Provisions for taxes

The taxation provisions include projected income tax payments for the year under review or, where the fiscal year diverges from the financial year, an income tax charge allocated on an accrual basis. Tax charges are also shown for preceding assessment periods. Miscellaneous accruals relate primarily to warranty and product liability commitments, personnel costs, restructuring activities, anticipated losses on contracts and other risks in connection with current operations, as well as invoices outstanding.

165

166

16

Liabilities 2011 TEUR

2011 TEUR

2010 TEUR

Remaining term less than 1 year

in total

in total

Accounts payable, banks

33,188

135,394

110,615

Accounts payable, trade

513,263

514,410

492,782

Other liabilities: Liabilities from accepted bills Miscellaneous liabilities

6,063

6,063

114

124,697

126,319

111,353

(thereof for taxes)

(51,513)

(51,513)

(37,281)

(thereof for social security)

(11,443)

(11,443)

(11,530)

130,760

132,382

111,467

677,211

782,186

714,864

(2,075)

(101,758)

Total liabilities (thereof with a remaining term of more than 5 years)

17

Contingencies and miscellaneous financial commitments 2011 TEUR

2010 TEUR

Warranties

8,262

8,601

Guarantees

14,332

8,474

0

11,000

190,669

195,697

Land charge Leasing commitments

As required by § 314 (1) no. 2a of the German Commercial Code (HGB), it should be noted that the Group has retained options to purchase the remaining shares in three companies acquired in 2011, including: Microelettrica do Brasil Comercialização e Importação de Produtos Eletromecânicos Ltda., Barueri, São Paulo/Brazil, Kalmar Tågkompetens AB, Kalmar/Sweden and Technologies Lanka Inc., La Pocatière/Canada. The options are not included in the book values of the affiliated companies because it is not possible to provide a meaningful estimate of their value at the present time. The Knorr-Bremse Group has entered into leasing contracts primarily for office buildings and production facilities in which the leased asset is assignable to the lessor. These off-balance-sheet leasing transactions represent an alternative form of finance to borrowing. Commitments associated with these leasing agreements are carried under Miscellaneous financial commitments and amount to TEUR 190,669; maturities range from one year or less (TEUR 31,291), to between one and five years (TEUR 86,517), to over five years (TEUR 72,861). The agreements do not include any unusual termination or renewal options. A long-term purchase agreement exists between Group company Bendix Spicer Foundation LLC, Elyria, Ohio/USA and Gorilla Brake & Components, Inc., Brantford, Ontario/Canada. Under the terms of this agreement, Bendix Spicer Foundation LLC undertakes to purchase from Gorilla Brake & Components, Inc. 85% of the spare part deliveries made within the latter company’s regional sphere of influence. Thanks to the risk management system in place, the risk of a claim arising on contingent liabilities is rated as minimal.


18

Other operating income Other operating income consists primarily of gains on currency exchange, income from the reversal of reserves, income from disposals of fixed assets and rental income. The heading also carries gains on currency differences amounting to TEUR 65,237 (2010: TEUR 70,799), as well as income relating to other accounting periods in the amount of TEUR 42,531 (2010: 16,016), primarily from the reversal of reserves.

19

Cost of materials 2011 TEUR

2010 TEUR

2,123,014

1,836,789

88,709

75,956

2,211,723

1,912,745

2011 TEUR

2010 TEUR

Wages and salaries

649,496

580,733

Statutory social welfare contributions and expenses relating to

155,320

140,131

Personnel costs

804,816

720,864

(thereof for retirement benefits)

(39,788)

(33,225)

Average number of employees during the fiscal year

Number

Number

Wage earners

8,634

7,211

Salary earners

8,669

7,851

205

201

17,508

15,263

2011 TEUR

2010 TEUR

164,619

146,863

Expenditure on materials, supplies and merchandise Expenditure on services purchased Total

20

Personnel expenses/staff

pensions and employee benefits

Apprentices Total

21

Depreciation Depreciation and amortization on purchased intangibles and on fixed assets

In addition, rental and leasing expenses totaling TEUR 51,079 (2010: TEUR 47,499) were incurred during the reporting period.

22

Other operating expenses Other operating expenses consist primarily of maintenance costs, direct sales costs, legal and consulting fees, commissions, travel expenses and miscellaneous administrative expenses. Other taxes for the Group amount to TEUR 15,420 (2010: TEUR 12,078). Expenses resulting from foreign exchange fluctua-

167

168

tions during the fiscal year amounted to TEUR 62,346 (2010: TEUR 72,354). The fee paid to the independent auditors, KPMG AG Wirtschaftsprüfungsgesellschaft and their affiliates, amounted to TEUR 632 for fiscal year 2011. Of this TEUR 502 was paid out for audit services and TEUR 130 for other services.

23

Financial results Miscellaneous interest and similar income

2010 TEUR

14,065

6,163

Depreciation on investments

(6)

(2,078)

Interest and similar expenses

(18,005)

(14,818)

(9,932)

(8,044)

(181)

(239)

(4,127)

(10,972)

(thereof for discounts on accruals) Income from associated, affiliated and other companies

Total

24

2011 TEUR

Extraordinary result Extraordinary expenses reflected the one-off effect of adjustments in the previous year required to comply with the German Accounting Law Modernization Act.

25

Taxes on income Taxes on income and earnings amounted to TEUR 168,794 (2010: TEUR 130,295), and included deferred taxes in the amount of TEUR 9,340 (2010: TEUR 8,842).

26

Net income 2011 TEUR

2010 TEUR

Net income

329,296

239,381

Minority interests in earnings of consolidated subsidiaries

(38,198)

(30,690)

Retained earnings brought forward from the previous year (after

106,556

180,670

(133,730)

(126,805)

263,924

262,556

distribution of dividends) Withdrawals from retained earnings

Unappropriated consolidated net income (Knorr-Bremse AG unappropriated retained earnings)

27

Financial derivatives Financial instruments are not held for trading purposes. Underlying transactions and their derivatives are bundled together as single items for valuation purposes (“macro hedges”). These bundled derivatives are netted out without affecting net income wherever the respective impact on income of the underlying transaction (hedged item) and the related hedge offset each other (net hedge presentation method).


Forward exchange and option transactions are performed purely and exclusively in order to hedge current and future foreign currency payables and receivables from the sale and purchase of goods and services and the elimination of exchange rate risk for selected assets. The aim of hedging operations at Knorr-Bremse is to reduce the risks posed by foreign exchange fluctuations to the ordinary course of business. Currency hedging is based on the volume of open commitments arising or expected to arise from core business activities. Maturities are based on the lifespans of the underlying business transactions, whereby highly probable transactions are hedged over a rolling three-year planning period. Because the conditions and parameters of the hedges match those of the hedged items, any payment flows or changes in value are offset in full. The Knorr-Bremse Group uses forward exchange contracts, currency options, interest rate swaps and cross currency swaps as hedging instruments. Not included in the hedging report are forward exchange derivatives with a nominal value of EUR 34.6 million. Financial instruments amounting to EUR 907.1 million in total (representing hedged risks) are included in macro hedges. Of this amount, EUR 258.5 million is attributable to the hedging of assets (micro hedges), EUR 128.6 million to the hedging of open contracts (micro hedges) and EUR 520.0 million to the hedging of high-probability transactions (portfolio hedges). Commodity futures contracts are used exclusively to hedge price risks arising on fluctuations in the purchase prices of raw materials used in Knorr-Bremse Group products (portfolio hedges). The volume of underlying transactions (hedged items) is calculated on the basis of high-probability requirements for raw materials over a rolling twoyear planning period. The derivatives are based on reference indices traded on commodity futures exchanges. The effectiveness of the hedging relationship is retrospectively analyzed using statistical correlation techniques, showing a correlation in excess of 80%. Concluded contracts totaling EUR 7.4 million are carried in full in macro hedges. The nominal and market values of financial instruments as at December 31, 2011 break down as follows: Total Dec. 31, 2011

Total Dec. 31, 2011

Total Dec. 31, 2010

Total Dec. 31, 2010

Nominal value

Market value

Nominal value

Market value

Forward exchange transactions

611

(26)

652

(8)

Currency options

170

(3)

113

1

125

(30)

140

(26)

36

(4)

0

0

7

(1)

14

1

in EUR millions

Foreign exchange contracts

Interest rate contracts Cross currency swaps Interest rate swaps

Commodity-related contracts Swaps

Negative market values correspond to the risks associated with financial derivatives; of these, EUR 0.7 million are recorded under accrued liabilities. Positive market values are offset by risks associated with the underlying transactions (hedged items) in the respective macro hedges. While cross currency swaps generally come under the heading of interest rate instruments, in terms of content they are used exclusively to hedge foreign currency risks, because the interest rates in the underlying currencies are exchanged at fixed rates. The market value of financial derivatives is best defined as the price one party is prepared to pay in order to assume the rights and/or obligations of another party. Market values are calculated on the basis of market information available at the balance sheet date and by applying standard market valuation methods as follows:

• Currency hedging contracts are valued on the basis of reference rates, taking account of forward premiums and discounts.

169

170

• Cross currency swaps are valued analogously to pure interest rate contracts or currency hedging contracts, on the basis of discounted, projected cash-flows using market interest rates and reference rates for the remaining lifespans of the instruments.

• The lease payments for one real estate leasing contract were hedged by an interest rate swap.

• Commodity contracts are used to hedge risks associated with steel and aluminum price fluctuations. The contracts are valued at market price.

• Options are valued using recognized models for calculating option prices (e.g. Black-Scholes).

Paid option premiums are carried under Other assets. As at the balance sheet date, the book value of call option premiums paid out amounted to EUR 2.5 million.

28

Research and development expenditure In fiscal year 2011, Group expenditure on research and development amounted to TEUR 208,823 (2010: TEUR 175,284).

29

Miscellaneous The Group financial statements are published in the official electronic Federal Gazette and in the Commercial Register at the local first-instance court in Munich, Germany. Under the terms of § 264 (3) of the German Commercial Code (HGB), the subsidiary companies Knorr-Bremse Systeme für Schienenfahrzeuge GmbH, Munich/Germany, and Hasse & Wrede GmbH, Berlin/Germany, are exempt from the obligation to publish their figures pursuant to § 325 of the German Commercial Code.

30

Total remuneration of the Supervisory Board and Executive Board The total remuneration of members of the Supervisory Board amounted to TEUR 345 and the total remuneration of the Executive Board to TEUR 5,916. Pension commitments to former members of the Executive Board and their surviving dependents are covered by an accrual of TEUR 24,766; payments in the fiscal year amounted to TEUR 2,823.

Munich, March 2, 2012 Knorr-Bremse AG Executive Board

Klaus Deller

Dr. Dieter Wilhelm

Dr. Lorenz Zwingmann

C O N S O L I D AT E D C A S H F L O W S TAT E M E N T

Consolidated Cash Flow Statement in Compliance with GAS 2 (German Accounting Standard) Cash funds are comprised of the Group’s cash and cash equivalents, and marketable securities. 2011 TEUR

2010 TEUR

329,296

239,381

164,625

148,941

Increase in accruals

110,699

134,927

Income from disposals of intangibles, fixed assets and investments

(25,542)

1,908

Increase in inventories, receivables and other assets not related to

(70,092)

(208,489)

33,315

139,716

Cash flows from operating activities

542,301

456,384

Disbursements for investments in intangible assets

(10,472)

(8,344)

Result for the period (including minority interests in consolidated results) Depreciation and amortization on/Additions to intangibles and fixed assets

investing or financing activities Increase in payables and other liabilities not related to investing or financing activities

Proceeds from disposals of intangible assets Disbursements for investments in fixed assets

854

1,294

(148,391)

(105,025)

Proceeds from disposals of fixed assets

36,669

2,313

Disbursements for investments in financial assets

(6,855)

(27,347)

Proceeds from disposals of financial assets Disbursements for the acquisition of consolidated companies and

592

0

(52,423)

(42,672)

(180,026)

(179,781)

other business units

Cash flows from investing activities

Proceeds from additions to shareholders’ equity Disbursements to company owners and minority shareholders

114

956

(177,415)

(64,737)

59,463

43,557

(36,938)

(118,491)

(154,776)

(138,715)

12,018

20,335

Changes in cash funds resulting from cash-relevant transactions

219,517

158,223

Cash funds at the beginning of the period

312,879

154,656

Cash funds at the end of the period

532,396

312,879

Proceeds from borrowings Disbursements for the redemption of borrowings

Cash flows from financing activities

Change in cash funds resulting from exchange rate movements and changes in group structure

Interest paid out in fiscal year 2011 amounted to TEUR 7,588, interest received to TEUR 11,759. Income tax paid out in 2011 amounted to TEUR 111,577, tax refunds received to TEUR 12,760.

171

172

SEGMENT REPORT

Segment Report in Compliance with GAS 3 (German Accounting Standard) In order to comply with GAS 3, Knorr-Bremse AG has compiled the following report on three segments that are subject to reporting requirements. The breakdown by segment is based on the Group’s activities in the three major geographical regions that provide the geographical framework for the Group’s internal organizational and reporting structures. The operating segments cover three regions: Europe, the Americas and Asia/Australia, each of which is characterized by different market and customer demands. The Knorr-Bremse Group’s main product lines – braking systems for rail and commercial vehicles – are represented in all three regions. Fiscal Year 2011

Europe

America

Asia/ Australia

Knorr-Bremse Group

Sales by region

2,582,660

1,064,929

1,078,656

4,726,245

thereof net sales with third parties

2,169,485

1,020,007

1,051,305

4,240,797

thereof net sales with other segments

413,175

44,922

27,351

485,448

Net income

173,881

76,043

79,372

329,296

Income tax charge

89,130

38,979

40,685

168,794

Investments (excluding financial investments)

85,307

38,086

35,471

158,864

Depreciation (excluding financial investments)

76,145

33,269

55,205

164,619

(200)

0

0

(200)

19

0

0

19

1,235,951

602,726

691,716

2,530,393

Europe

America

Asia/ Australia

Knorr-Bremse Group

Sales by region

2,288,048

891,346

1,041,295

4,220,689

thereof net sales with third parties

1,886,009

826,977

999,177

3,712,163

thereof net sales with other segments

402,039

64,369

42,118

508,526

Net income

109,783

47,320

82,278

239,381

Income tax charge

59,754

25,758

44,783

130,295


74,751

21,337

17,281

113,369


72,350

33,134

41,379

146,863

0

(252)

0

(252)

13

0

0

13

998,130

523,777

672,250

2,194,157

in EUR thousands (TEUR)

Result for associated companies Result for affiliated and other companies Assets

Fiscal Year 2010


Result for associated companies Result for affiliated and other companies Assets

SEGMENT REPORT

Fiscal Year 2011

Net sales



Assets

Rail vehicle systems

2,186,898

65,932

97,738

1,476,974

Commercial vehicle systems

2,068,223

74,686

60,776

1,136,804

(14,324)

18,246

6,105

(83,385)

Knorr-Bremse Group

4,240,797

158,864

164,619

2,530,393

Fiscal Year 2010

Net sales



Assets

Rail vehicle systems

2,024,389

61,236

82,941

1,435,022

Commercial vehicle systems

1,700,682

50,361

61,043

967,908

(12,908)

1,772

2,879

(208,773)

3,712,163

113,369

146,863

2,194,157


Miscellaneous/consolidations


Miscellaneous/consolidations Knorr-Bremse Group

The analysis does not show borrowings or interest payable by region, because these items are controlled centrally across the Group by the parent company, thus are not dependent on regional decisions associated with day-to-day business operations. The usual prices apply as agreed between counterparties.

173

174

S TAT E M E N T O F C H A N G E S I N G R O U P E Q U I T Y

Statement of Changes in Group Equity in Compliance with GAS 7 (German Accounting Standard) Changes in group equity 2011

Capital stock

Capital reserves

Retained earnings

Net income

Minority interests

Knorr-Bremse Group

67,600

153

313,008

262,556

110,544

753,861

(156,000)

(21,415)

(177,415)

291,098

38,198

329,296

in EUR thousands (TEUR) As at Dec. 31, 2010 Dividend payments Net income 2011 Transfers to retained earnings

133,730

Currency fluctuations Other fluctuations As at Dec. 31, 2011

(133,730)

0

(1,371)

1,031

(340)

(13,637)

10,610

(3,027)

67,600

153

431,730

263,924

138,968

902,375

Capital stock

Capital reserves

Retained earnings

Net income

Minority interests

Knorr-Bremse Group

67,600

153

153,717

232,670

78,639

532,779

Dividend payments

(52,000)

(9,882)

(61,882)

Net income 2010

208,691

30,690

239,381

Changes in group equity 2010

in EUR thousands (TEUR) As at Dec. 31, 2009

Transfers to retained earnings

126,805

(126,805)

0

Currency fluctuations

37,319

4,565

41,884

Other fluctuations

(4,833)

6,532

1,699

110,544

753,861

As at Dec. 31, 2010

67,600

153

313,008

262,556

Group equity includes capital differences arising on foreign currency translation in the amount of TEUR -443, of which TEUR -16 relates to minority interests. Other changes in minority interests result primarily from the purchase of former minority interests in Knorr-Bremse Nordic Rail Services AB, Lund/Sweden. Following the purchase, the Group holds a 100% interest as at the balance sheet date. Minority interests also reflect the first-time inclusion in consolidation of Kalmar Tågkompetens AB, Kalmar/Sweden Knorr-Bremse CAFF Systems for Commercial Vehicles Chongqing Ltd., Chongqing/China Microelettrica do Brasil Comercialização e Importação de Produtos Eletromecânicos Ltda., Barueri, São Paulo/Brazil MSA Electroteknik Sanayi ve Ticaret Limited Şirketi, Serifali, Istanbul/Turkey Technologies Lanka Inc., La Pocatière/Canada.

INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report We have audited the consolidated financial statements prepared by Knorr-Bremse Aktiengesellschaft, Munich – comprising the balance sheet, income statement, notes to the financial statements, cash flow statement, statement of changes in equity and segment report – as well as the group management report for the business year from January 1 to December 31, 2011. The preparation of the consolidated financial statements and the group management report in accordance with German commercial law is the responsibility of the parent company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with § 317 HGB [German Commercial Code] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with German principles of proper accounting and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements comply with the legal requirements and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development.

Munich, March 2, 2012 KPMG AG Wirtschaftsprüfungsgesellschaft

signed Rupprecht Independent auditor

signed Peth Independent auditor

175

176

C O N S O L I D AT E D B A L A N C E S H E E T

Consolidated Balance Sheet as at December 31, 2011 Assets

Notes

Dec. 31, 2011 TEUR

Dec. 31, 2010 TEUR

Purchased intangibles

(3)

189,338

217,277

Fixed assets

(4)

568,168

517,001

Investments

(5)

70,816

65,569

828,322

799,847

Intangibles, fixed assets and investments Inventories

(6)

289,784

219,337

Accounts receivable, trade

(7)

695,183

689,066

Other assets

(7)

109,341

92,133

18

12

532,378

312,867

1,626,704

1,313,415

(9)

12,337

12,182

(10)

63,030

68,713

2,530,393

2,194,157

Notes

Dec. 31, 2011 TEUR

Dec. 31, 2010 TEUR

Capital stock

(11)

67,600

67,600

Capital reserves

(12)

153

153

Retained earnings

(13)

431,730

313,008

Unappropriated consolidated net income

(26)

263,924

262,556

Minority interests

138,968

110,544

Group equity

902,375

753,861

Other marketable securities Cash and cash equivalents

(8)

Current assets Prepaid expenses Deferred tax assets Balance sheet total

Equity and Liabilities

Pension plan accruals

(14)

199,667

192,257

Other accrued liabilities

(15)

643,291

528,521

Accruals

842,958

720,778

Accounts payable, banks

135,394

110,615

Accounts payable, trade

514,410

492,782

Other liabilities

132,382

111,467

782,186

714,864

2,874

3,018

0

1,636

2,530,393

2,194,157

Liabilities

(16)

Deferred income Deferred tax liabilities Balance sheet total

(10)

C O N S O L I D AT E D S TAT E M E N T O F I N C O M E

Consolidated Statement of Income for the Fiscal Year from January 1 to December 31, 2011 Notes Net sales Changes in inventories Own work capitalized

Total operating performance

2011 TEUR

2010 TEUR

4,240,797

3,712,163

11,756

2,832

395

272

4,252,948

3,715,267

Other operating income

(18)

191,467

154,943

Cost of materials

(19)

(2,211,723)

(1,912,745)

Personnel expenses

(20)

(804,816)

(720,864)

Depreciation and amortization on purchased

(21)

(164,619)

(146,863)

Other operating expenses

(22)

(761,040)

(677,250)

Financial results

(23)

(4,127)

(10,972)

498,090

401,516

0

(31,840)

(168,794)

(130,295)

329,296

239,381

38,198

30,690

intangibles and fixed assets

Income before taxes Extraordinary expenses

(25)

Taxes on income

Net income Minority interests in results of consolidated subsidiaries

(26)

177








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