Linde AG Financial Statements for the scal year 2012 fiLeadIng.
Group Governance 3 M E M B ER S O F T H E E X EC U T I V E B OA RD 4 M embers of T H E SU P ERV IS O RY OA RD B 6 R EP O R T O F T H E U P ERV IS O RY B OA RD S Corporate Governance Financial Statements 12 CO R P O R AT E GOV ER N A N C E D EC L A R AT I O N 6 8 B A L A N C E SH EE T O F L I N D E AG A N D CO R P O R AT E OV ER N A N C E EP O R t G R 69 I N COM E S TAT E M EN T O F L I N D E AG 19 R E MU N ER AT I O N R EP O R T (PA R T O F T H E M A N AG E M EN T R EP O R T ) 70 SUM M A RY O F N O N - C U R R EN T SSE T MOV E M EN T S A I N L I N D E AG Notes to the inancial Statements F Management Report of Linde AG 7 2 G EN ER A L I N FO R M AT I O N 74 N OT E S TO T H E A L A N C E SH EE T B Corporate Organisation Contents 8 4 N OT E S TO T H E N COM E S TAT E M EN T I 32 M AC RO ECO N OM I C E N V I RO N M EN T 8 6 SU P PL E M EN TA RY I N FO R M AT I O N O N T H E N OT E S 33 R E V EN U E A N D O RD ER I N TA K E 12 2 AU D I TO R S’ R EP O R T 34 R E SU LT S O F P ER AT I O N S O 35 N E T A SSE T S A N D F I N A N C I A L P O SI T I O N 36 R E SE A RC H A N D E V ELO PM EN T D 37 39 FIN A NCING A ND ME A SURE S TO A FEGUARD IQUIDIT Y S L CO R P O R AT E E SP O N SI B I L I T Y M A N AG E M EN T R Further Information 41 E M PLOY EE S A N D S O C I E T Y 124 R E SP O N SI B I L I T Y S TAT E M EN T 45 S A F E T Y A N D E N V I RO N M EN TA L P ROT EC T I O N 125 F I N A N C I A L C A L EN DA R 4 8 R ISK R EP O R T 126 Tables 59 D IS C LO SU R E S I N CCO RDA N C E W I T H § 289 (4) A 128 I M PRI N T O F T H E G ER M A N COM M ERC I A L CO D E (H G B) A N D COM M EN TA RY 62 D EC L A R AT I O N I N CCO RDA N C E W I T H § 289a O F T H E A G ER M A n Commercial Code (H G B) 63 E V EN T S A F T ER T H E B A L A N C E SH EE T DAT E 6 4 D I V I D EN D S 65 O U T LO O K
Group GovernanceGroup Governance 3 M E M B ER S O F T H E E X EC U T I V E B OA RD 4 T H E SU P ERV IS O RY B OA RD 6 R EP O R T O F T H E U P ERV IS O RY B OA RD S Corporate Governance 12 CO R P O R AT E OV ER N A N C E EC L A R AT I O N A N D CO R P O R AT E G D GOV ER N A N C E R EP O R t 19 R E MU N ER AT I O N R EP O R T (PA R T O F T H E M A N AG E M EN T R EP O R T )
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 MEMBERS OF THE EXECUTIVE BOARD PRO FE SSO R D R WO L FG A N G REI T ZL E G eorg D enoke Born 1949 born 19 6 5 Doctorate in Engineering [Dr.-Ing.], Degree in Information Science Degree in Economics and Engineering [Dipl.-Wirtsch.-Ing.] Degree in Business Administration [BA] Chief Executive Officer Responsible for the following global and central functions: Responsible for the following global and central functions: Capital Expenditure, Financial Control, Communications & Investor Relations, Corporate Strategy, Group Accounting & Reporting, Group Human Resources, Group Legal, Group Treasury, Growth & Performance, Insurance, Group Organisation & Information Services, Mergers & Acquisitions, Procurement, Risk Management, Innovation Management, Internal Audit, Tax as well as for Finance/Financial Control for the EMEA , Performance Transformation, SHEQ [Safety, Health, Americas, Asia/Pacific reportable segments Environment, Quality] and Gist Human Resources Director Member of the Executive Board since 2002 Member of the Executive Board since 2006 Professor D r A ldo B elloni San jiv L amba Born 19 5 0 born 19 6 4 Doctorate in Chemical Engineering [Dr.-Ing.] Chartered Accountant Bachelor of Commerce Responsible for the Engineering Division,3 the EMEA segment Responsible for the Asia/Pacific segment, [Europe, Middle East, Africa] and the Global Business the Asian joint ventures and the Business Unit Tonnage [on-site] Area Electronics [electronic gases] Member of the Executive Board since 2000 Member of the Executive Board since 2011 T homas B lades born 19 5 6 Bachelor of Science in Electrical Engineering [Dipl.-Ing.] Responsible for the Americas segment, the Global Business Unit Healthcare and the Business Area Merchant & Packaged Gases [liquefied gases and cylinder gas] Member of the Executive Board since 2012
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 THE SUPERVISORY BOARD Members of the Supervisory Board D R M A N FRED SC H N EI D ER T H I LO K Ä M mERER1 [C hairman] Trade Union Secretary IG Metall Former Chairman of the Supervisory Board of Bayer AG M AT T H E W F.C . MI AU Chairman of MiTAC-SYNNEX Group, Taiwan H A NS- D I E T ER K AT T E1 [D eputy C hairman] K L AUS- PE T ER MÜ L L ER Chairman of the Pullach Works Council, Chairman of the Supervisory Board Engineering Division, Linde AG of Commerzbank AG MIC H A EL D I EK M A N N J ENS RI ED EL1 [Second D eputy C hairman] Chairman of the Leuna Works Council, Chairman of the Board of Management Gases Division, Linde AG of Allianz SE X AV ER SC HMI DT1T H E SUPERV I SOR Y B OAR D PRO FE SSO R D R Secretary to the Executive Board of IG Bergbau, A N N -K RIS T I N AC H L EI T N ER Chemie, Energie Hannover Professor at the Technical University Munich (TUM)4 D R C L E MENS BÖ R SIG Former Chairman of the Supervisory Board of Deutsche Bank AG A N K E CO U T U RI ER1 [appointed on 6 December 2012] Head of Global Pensions, Linde AG G ERN OT H A H L1 Chairman of the Worms Works Council, Gases Division, Linde AG 1 Employee representative. Memberships of other German supervisory boards and comparable German and foreign boards are shown in N ot e  of the Notes to the financial statements.
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 Supervisory Board committees Mediation Committee The following member retired from the in accordance with § 27 (3) of the German Supervisory Board in the 2012 financial year: Codetermination Law (MitbestG) J OSEF SC H REGL E1 D R M A N FRED SC H N EI D ER [retired on 31 October 2012] [C H A I R M A N] Finance Director EMEA [Europe, Middle East, Africa] H A NS- D I E T ER K AT T E1 Engineering Division, Linde AG MIC H A EL D I EK M A N N G ERN OT H A H L¹ Standing Committee D R M A N FRED SC H N EI D ER [C H A I R M A N] H A NS- D I E T ER K AT T E1 MIC H A EL D I EK M A N N G ERN OT H A H L¹ K L AUS- PE T ER MÜ L L ER5 Audit Committee D R C L E MENS BÖ R SIG [C H A I R M A N] PRO FE SSO R D R A N N -K RIS T I N AC H L EI T N ER G ERN OT H A H L1 H A NS- D I E T ER K AT T E1 D R M A N FRED SC H N EI D ER Nomination Committee D R M A N FRED SC H N EI D ER [C H A I R M A N] MIC H A EL D I EK M A N N K L AUS- PE T ER MÜ L L ER 1 Employee representative. Memberships of other German supervisory boards and comparable German and foreign boards are shown in N ot e  of the Notes to the financial statements.
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 REPORT OF THE SUPERVISORY BOARDREPORT O F T H E SUPERV I SOR Y B OAR D6
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 The Supervisory Board worked intensively alongside the Meetings and resolutions of the Executive Board during the 2012 inancial year, a year f marked by the implementation of important measures for Supervisory Board The Linde Group’s strategy. Throughout the year, the Supervisory Board conducted In all, one extraordinary and four regular Supervisory detailed reviews of the roup’s situation, its prospects G Board meetings were held in the 2012 inancial year. One f and its strategic development, as well as the future long- shareholder representative, Mr Matthew Miau, was una- term positioning of The Linde Group and individual initi- ble to attend the extraordinary meeting on 20 June 2012, atives of key importance to the company, focusing above which was convened at short notice, and sent his apolo- all on the acquisition of US homecare company incare L gies. All the members of the Supervisory Board were H oldings Inc. ( incare). We monitored and advised the L present at the regular meetings held in 2012. Executive Board in the running of its business operations In addition to reviewing current business develop- in accordance with the duties assigned to us by law, the ments, our meetings also addressed the Group’s financial articles of association and the Supervisory Board’s pro- and risk situation, strategy, compliance with legal regu- cedural rules. Through verbal updates at our meetings lations and with internal guidelines, and key individual and in the form of written reports, the Executive Board business transactions requiring Supervisory Board ap- regularly provided us with timely and comprehensive proval. After a thorough review of the documents submit- updates on company performance, the economic situa- ted and detailed discussions on the proposals of the Ex- tion, profitability and plans for the company and its sub- ecutive Board, the Supervisory Board granted all the sidiaries, as well as briefing us on all issues relevant to necessary approvals. Due to time pressure, two proposals the strategy being pursued by the company and its sub- were approved outside Supervisory Board meetings in sidiaries, planning, business development, the risk situ- written form and on the basis of extensive documentation.7 ation, risk management and compliance. We assessed the One of these had already been discussed at a plenary plausibility of all documents presented to us and regularly meeting. The proposals related to a Gases Division invest- consulted the Executive Board on significant issues. The ment project requiring Supervisory Board approval which Supervisory Board was involved in all major decisions involved building on-site plants as part of a long-term made by the company. This includes Executive Board customer agreement and to the granting of consent to the transactions and measures requiring the approval of the Gases Division for an acquisition project. Supervisory Board, in particular the annual capital ex- In 2012, the Supervisory Board’s advisory and moni- penditure programme, major acquisitions, divestments, toring activities again focused on the Group’s growth and capital and inancial measures. The Chairman of the f prospects, its individual lines of business and its operat- Supervisory Board also ensured that he remained up to ing segments, with global homecare activities represent- date on the current business situation, significant busi- ing a major priority. The purchase of the Continental Eu- ness transactions and decisions taken by the Executive ropean homecare business of the gases company Board through various channels, including the minutes of Air Products was completed in pril of the reporting year, A Executive Board meetings. He maintained close contact with completion of the acquisition of US homecare com- with the Chief Executive Officer throughout the year, pany Lincare taking place in August 2012. The Supervisory sharing information and ideas, and held regular consul- Board welcomes the positioning of The Linde Group as tations with him on the roup’s strategy, planning, busi- G the leading global healthcare provider in the gases indus- ness development, risk situation, risk management and try. Ensuring that these new acquisitions are integrated compliance. On the basis of the reports submitted by the quickly into The Linde Group is now one of our most press- Executive Board and the auditors’ report, the Supervisory ing tasks. With this in mind, we have been working inten- Board was able to satisfy itself as to the effectiveness of sively on the requisite integration measures since the risk monitoring system set up in accordance with §91 September 2012. We were briefed by the Executive Board (2) of the German Stock Corporation Law (AktG). At no on the progress made on an ongoing basis and were con- time during the year did the Supervisory Board raise any fident that these processes were advancing apace. objections in relation to the sound and efficient manage- At the Supervisory Board meeting to approve the ment of the Group. f inancial statements on 8 March 2012, we discussed in detail and approved the annual financial statements of Linde AG and the roup financial statements for the year G ended 31 December 2011 and agreed the proposed appro- priation of earnings. We also, in the absence of the Exec-
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 utive Board, discussed and agreed on the targets reached Immediately before the Annual General Meeting on in relation to the variable cash emoluments and total 4 May 2012, the Executive Board presented the Group emoluments earned by the individual members of the f inancial results for the quarter ended 31 March 2012 and Executive Board for 2011, based on advice from the Stand- reported on current business development and potential ing Committee. In addition, we issued the declaration of acquisition opportunities. Moreover, on the basis of our compliance with the German Corporate Governance Code resolution in December 2011 and the corresponding pro- and adopted the Supervisory Board Report and orporate C posal to the Annual General Meeting, we adopted the G overnance Report for 2011, as well as the agenda for the terms and conditions of the new Long Term Incentive Plan Annual General Meeting, including the proposed resolu- 2012 for Executive Board members. The meeting was also tions. In this regard we also agreed on the proposal for a used to prepare for the subsequent shareholder meeting. new remuneration system for the Executive Board to be The Supervisory Board held an extraordinary meeting submitted to the 2012 Annual General Meeting for ap- on 20 June 2012 to discuss the possibility of making an proval. We adopted this new system in December 2011 offer to buy Lincare Holdings Inc., US, an acquisition being and it will apply to all members of the Executive Board considered by the Executive Board. The meeting enabled with effect from the 2012 inancial year. We also dealt f us to form a full picture of the transaction, the related with the proposal to be submitted to the Annual General opportunities and risks, the corporate and strategic goals Meeting regarding the abolition of the existing author- being pursued, the feasibility of the transaction, the in- ised capital and creation of a new authorised capital, the tended financing structure and the impact on Linde. Is- creation of conditionally authorised capital for a successor sues discussed particularly intensively included strategic scheme to the expiring share option scheme for members and financial aspects, the economic significance of the of the Executive Board and managers (Long Term Incen- transaction and the expected influence on the roup’sG tive Plan 2012), and the related replacement of the com- f inancial situation. The Supervisory Board subsequently pany’s existing authorisation to acquire and make use of gave its approval in principle to the issuing of an offer inREPORT O F T H E SUPERV I SOR Y B OAR D own shares. In addition to its regular reports on business the region of USD 4.6 bn and to the financing plan pro- performance and the general position of The Linde Group, posed by the Executive Board, providing for the conclu- the Executive Board also presented us with an updated sion of a financing agreement in the form of a bridging plan for the 2012 inancial year and the updated mid-term f loan from a banking consortium, the use of authorised business plan. The Executive Board dealt in detail with capital and a longer-term financing proposal, as well as8 selected key performance indicators and briefed us on to any steps required in accordance with company law. their financial and operational impact on Linde, particu- The final decision of the Executive Board published on larly with regard to the expected impact of efforts to 2 July 2012 to make an offer to incare shareholders of L acquire Air Products’ Continental European homecare USD 41. 50 per Lincare share and covering the related fi- business. Additionally, after detailed explanation by the nancing arrangements was approved by the Supervisory Executive Board, we also approved a transaction requir- Board’s Standing Committee as authorised by its proce- ing Supervisory Board consent, namely an internal re- dural rules. structuring measure in conjunction with the targeted At our meeting on 28 September 2012, the Executive acquisition of the Continental European homecare busi- Board outlined in detail the economic situation facing The ness of Air Products. Linde Group and its divisions, and described the outlook for the full 2012 inancial year. The Executive Board also f briefed the Supervisory Board on the current situation regarding the acquisition of L incare, completed in August 2012, presenting the integration plan and detailing progress made in integrating the Continental European homecare activities acquired from Air Products in A pril 2012. At the same time, the Executive Board pre- sented provisional information on the expected impact of the homecare acquisitions on The Linde Group’s financial position, net assets and results of operations. The meet- ing also focused on progress made in implementing the strategies highlighted in earlier years, ongoing strategic development and the company’s competitive environ- ment. Key questions discussed included the strategic positioning and direction of Linde and its divisions, and projects considered or launched in this regard, as well as the impact of such projects on The Linde Group’s financial position, net assets and results of operations. Taking into account the current general economic climate, the Exec- utive Board outlined the opportunities and risks in an
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 internationally competitive environment, as well as the Committees and committee significance of the process optimisation and efficiency gains programme and further measures to be taken in that meetings direction. Based on verbal reports from the Executive Board, the Supervisory Board is satisfied that the Group’s The Supervisory Board continues to have four committees: structure and processes are being continually assessed the Mediation Committee, formed under Section 27 (3) of and streamlined in order to increase and consolidate long- the German Codetermination Law (MitbestG), the Stand- term competitiveness across all lines of business. The ing Committee, the Audit Committee and the Nomination Supervisory Board was also presented with two transac- Committee. The Chairman of the Supervisory Board chairs tions requiring its approval, requiring resolutions on in- all the committees with the exception of the Audit Com- ternal structural and financing measures in accordance mittee. The current members of each committee are listed with company law. These were duly approved. on pa g e 5 . Information about the responsibilities of On 7 December 2012, the Executive Board presented each committee is given in the Corporate overnance G us with a report on current business developments and Report on pa g e s 12 to 18 . the performance of the Group in comparison with its main The Standing Committee of the Supervisory Board held competitors. It also presented us with a preview of the three meetings during the reporting year, and three res- 2012 inancial statements, the budget for the 2013 f olutions were also passed in writing. The Committee pre- f inancial year and the mid-term business plan, including pared decisions on Executive Board remuneration. On the financial, capital expenditure and human resources plans. basis of fundamental decisions and having been dele- The Executive Board submitted a progress report on the gated the right to make the final decisions by the full integration of the homecare acquisitions in Continental Supervisory Board, it approved the issuing of an offer to Europe and the United States. We carried out an intensive Lincare shareholders. The Standing Committee essentially review of the assumptions made by the Executive Board, focused on financing and capital measures and further particularly with regard to the risks for the company as- measures requiring approval in respect of the incareL sociated with the general economic environment. The transaction and duly gave its consent, thereby authoris- Executive Board explained any variances between the ing the Executive Board to make use of an instalment of plans and targets and the actual results. We also dealt at EUR 33 m of Authorised apital II based on the authorisa- C length with the motion from the Executive Board relating tions granted by the 2012 Annual General Meeting subject9 to the 2013 investment programme. After careful exami- to the exclusion of subscription rights. The necessary nation of the matter, we granted our approval. We also changes were then made to the articles of association. In adopted a revised version of our procedural rules, which addition, the Standing Committee adopted changes to the were adjusted in line with the provisions of the German articles of association required as a result of the issuing C orporate G overnance Code as last amended on of shares to fulfil share options and gave its consent to 15 May 2012, and discussed issues in relation to the Su- two members of the Executive Board taking up secondary pervisory Board elections at the 2013 Annual General occupations. Meeting and the structure of the Supervisory Board re- The Audit Committee met on four occasions during the muneration. year under review. In the presence of the auditors, the There were no conflicts of interest involving Supervi- Chief Executive Officer and the Chief Financial Officer, it sory Board members during the year under review. It discussed and reviewed in detail the annual inancial f should be noted that Linde acquired a 100 percent stake statements of Linde AG and the G roup f inancial state- in Mr Miau’s family company for a purchase price of ments, the management reports, the proposed appropri- EUR 2.1 m during the year under review. This transaction ation of profits, and the audit reports, including the report was effected on the basis of customary market conditions on the audit focus and the presentation by the auditors and did not involve any conflict of interest. Furthermore, of the main results of the audit. The Audit Committee this acquisition did not require the Supervisory Board’s raised no objections on the basis of its reviews. No sig- approval. nificant weaknesses in the accounting-related internal control system or in the system for the early identification of risks were detected by the auditors. The Audit Commit- tee also discussed the interim and half-year inancial f reports prior to their publication based on reports pre- sented by the Executive Board and the auditors. In addi- tion, this Committee prepared the proposal from the Su- pervisory Board on the appointment of the auditors at the Annual General Meeting, issued the audit mandate to the auditors, determined the audit focus and agreed the audit fees. Moreover, the Audit Committee monitored the inde- pendence, qualifications, rotation and efficiency of the auditors and the services provided by the auditors in ad-
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 dition to the audit itself. The Audit Committee also en- One committee member was unable to attend a meeting tered into an agreement with the auditors in accordance of the Standing Committee but was able to cast his vote with the roup’s internal rules about the provision of G in writing. All committee members were otherwise pres- services not related to the audit, and the auditors in- ent at all the other committee meetings. formed the Committee at each of its meetings about the The committee chairmen reported in detail about the fees it had charged in relation to such services. Further- work of their committees at the plenary Supervisory more, it remained up to date on evolutions in the risk Board meeting following their own meetings. management system and compliance structures, compli- ance issues, any legal or regulatory risks, the risk position and the identification and monitoring of risk within the G roup. The Audit Committee also reviewed the evolution C orporate governance and of control systems within the roup based on a presenta- G d eclaration of compliance tion by the Executive Board. It received a report on the structure, roles and responsibilities within the Internal We continually monitor changes to the German orporate C Audit department, on its audit work and the audit plan G overnance Code and permanently verify that the provi- for 2012. The Audit Committee was briefed on the effi- sions are being implemented correctly. In March 2013, the ciency of the internal control system, risk management Executive Board and the Supervisory Board issued an system and internal audit system; it discussed the find- updated declaration of compliance in accordance with ings in detail and was duly satisfied as to the efficacy of § 161 of the German Stock Corporation Law (AktG) and the systems in question. The Executive Board also briefed made it permanently available to its shareholders on the the Audit Committee on a regular basis with regard to the company’s website w w w. l i n d e . co m . Further informa- status of various activities relating to the external and tion on corporate governance at Linde can be found in internal financing of the Group and the safeguarding of the orporate overnance Report on C G pa g e s 12 to 18 . REPORT O F T H E SUPERV I SOR Y B OAR D its liquidity. The opening balance sheet and purchase price allocation in relation to the acquisition of Lincare in August 2012 were also discussed. The Committee also dealt with spot checks of the 2011 annual financial state- ments of Linde ktiengesellschaft and The Linde Group A10 carried out by the German Financial Reporting Enforce- ment Panel. No mistakes in the accounts were found as a result of these spot checks. For selected agenda items, department heads and external advisors also attended meetings of the Audit Committee, submitting reports and answering questions. In addition, the Chairman of the Audit Committee held talks on issues of significance in the periods between committee meetings, with the Chief Executive Officer, Chief Financial Officer, the auditors and the Head of roup Legal in particular. The Audit Commit- G tee and, where necessary, the Supervisory Board were regularly appraised of the outcome of these discussions. During the 2012 inancial year and at the beginning of f 2013, the Nomination Committee consulted on several occasions outside its meetings and in accordance with its remit on candidates for the regular election of sharehold- ers to the Supervisory Board at the 2013 Annual General Meeting. Finally, during a meeting in early 2013, the Com- mittee submitted its recommendation for the Supervisory Board’s nomination for the election. The Nomination Com- mittee based its recommendation on the criteria pro- posed in the German orporate Governance Code and the C terms of the rules of procedure. In particular, in assessing the suitability of candidates who were over the age of 72 or who would turn 72 during their period of office, the Committee took account of age. The Mediation Committee had no cause to meet during the year.
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 Annual inancial statements and f utive Board; the annual financial statements of Linde AG are hereby final. We also approve the Executive Board’s Group financial statements proposal for the appropriation of profits. KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, (KPMG) audited the annual financial statements of Linde AG for Changes to the composition of the year ended 31 December 2012 prepared in accordance with the principles set out in the German Commercial the Supervisory Board and the Code (HGB) together with the management report, as well Executive Board as the consolidated f inancial statements of The Linde Group for the year ended 31 December 2012 pre- There was one change during the 2012 inancial year to f pared in accordance with IFRS as adopted by the European the composition of the Supervisory Board and one change Union including the management report in accordance to the Executive Board. with German generally accepted standards for the audit Mr Josef Schregle resigned from his position as a share- of financial statements and in supplementary compliance holder representative on the Supervisory Board of Linde AG with International tandards on Auditing (ISA). The audi- S with effect from 1 November 2012. He was replaced by tors have confirmed that the Group financial statements Ms Anke Couturier with effect from 6 December 2012 for and the Group management report meet the requirements the remainder of his period of office as a Supervisory set out in Section 315a (1) of the German Commercial Code Board member. We have thanked Mr Schregle for his val- (HGB) and have issued unqualified opinions on both the uable contribution to the Board. The General Meeting on G roup financial statements and annual financial state- 29 May 2013 will mark the end of the period of office of ments. In accordance with the terms of its engagement, the current Supervisory Board. KPMG performed audit reviews of the interim and half- As already reported last year, the Supervisory Board yearly inancial reports in the 2012 inancial year. At no f f appointed Thomas Blades, a British national, to the Exec- time did these reviews give rise to any objections. KPMG utive Board of Linde AG with effect from 8 March 2012. Mr also confirmed that the system for the early identification Blades has international management experience, and of risks complies with legal requirements. No risks that was latterly responsible for the Oil as ivision of the G D might affect the viability of the company as a going con- Energy Sector at Siemens AG. At Linde he bears responsi-11 cern were identified. The audit focus during the 2012 bility for the gases business in the Americas segment as f inancial year was on the accounting-related processes well as for liquefied gases, the cylinder gas business and and controls in place at Linde AG in the fast-growing Asian global healthcare operations. His appointment is for three markets. No significant weaknesses in the internal control years. system were detected by the auditors in relation to the accounting process. Once again during the reporting year, The Supervisory Board would like to thank the Executive the auditors declared their independence to the Audit Board and all Linde employees for their highly dedicated Committee. approach to their work and for their sense of responsibil- The documents relating to the financial statements and ity and commitment. Over the past financial year they the audit reports were issued to all members of the Super- have once again mastered major challenges and achieved visory Board in good time. They were then the subject of very good results. extensive deliberations at the Audit Committee meeting on 5 March 2013 and the meeting of the Supervisory Board to approve the financial statements on 6 March 2013. The MUNICH, 6 MARCH 2013 auditors took part in the discussions both at the Audit ON BEHALF OF THE SUPERVISORY Committee meeting and at the meeting of the full Supervi- BOARD sory Board. They presented the main results of their audits and were able to provide supplementary information and to answer questions. The Audit Committee also presented the results of its review to the Supervisory Board. We conducted our own examination of all of the documents submitted and the audit reports and discussed them in detail. After considering the results of the preliminary DR MANFRED SCHNEIDER review by the Audit Committee and the final results of [CHAIRMAN] our own review of the documents submitted to us by the Executive Board and by the auditors, we find no grounds for objection and concur with the results of KPMG’s audit. We hereby approve and adopt the inancial statements f of Linde AG and the roup financial statements for the G year ended 31 December 2012 as drawn up by the Exec-
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 Corporate In addition to fixed compensation, the members of the Supervisory Board have to date received performance-re- Governance lated compensation whose variable components have a one-year rather than a multi-year assessment basis. Sec- tion 5.4.6, para 2, of the erman Corporate Governance G Code in the version dated 15 May 2012 recommends for CORPORATE the first time that performance-related compensation shall be oriented towards sustainable growth of the en- GOVERNANCE terprise. In accordance with Section 87, para 1, sentence 3, of the German Stock Corporation Law (Aktiengesetz), DECLARATION this can be regarded as a recommendation for a mul- ti-year assessment basis. A decision on the compensation A ND CORPORATE of the members of the Supervisory Board is made by the Annual General Meeting, which was unable to take ac- count of this changed recommendation last year. During GOVERNANCE the Ordinary Annual General Meeting on 29 May 2013, the Executive Board and the Supervisory Board intend to pro- REPORt pose a change to the compensation of the members of the Supervisory Board in the Articles of Association. This change will take account of the new recommendation. REPORT OF THE 6 This regulation shall take effect from 30 May 2013.” S U P E R V I S O R Y B O A R D C O R P O R AT E G O V E R N A N C E 12 The current declaration of compliance and all past dec- D E C L A R AT I O N A N D larations of compliance with the erman orporate G C C O R P O R AT E G O V E R N A N C E G overnance Code are available on the company’s website R E P O R t R E M U N E R AT I O N R E P O R T 19 at WWW. LI N DE . CO M /DE C L A R AT IO N O F CO M P LI A N C E . Linde AG also complies to the greatest possible extent with the suggestions made in the Code, with only one exception:12 The Code suggests that it should be possible for share- Compliance with the German holders to follow the Annual General Meeting via modern communication media (e.g. the Internet). We transmit the C orporate Governance Code and opening remarks made by the Chairman of the Supervi- declarations of compliance sory Board and also the Chief Executive Officer’s speech, but not the general discussion. In principle, the articles Linde AG follows the German orporate overnance Code C G of association permit the transmission of the Annual Gen- presented by the ‘Government Commission on the Ger- eral Meeting in full via electronic media. However, out of man Corporate Governance Code’ and as amended from respect for shareholders’ privacy, we do not transmit the time to time. In March 2012, the Executive Board and Su- contributions of individual speakers. Nevertheless, we pervisory Board of Linde AG issued a declaration of com- will continue to follow developments closely. pliance with the recommendations of the German C orporate overnance Code as amended on 26 May 2010 G in accordance with § 161 of the German Stock Corporation C orporate governance practices Law (AktG) and made this declaration permanently avail- able to the public on the Linde website. Linde AG has traditionally attached great importance to The German Corporate Governance Code was amended sound, responsible management and supervision geared following the issuing of this declaration of compliance in towards the creation of sustainable value added. Our suc- March 2012. cess has always been based on close and efficient coop- The Executive Board and Supervisory Board studied eration between the Executive and Supervisory Boards, the requirements of the German orporate overnance C G consideration of shareholders’ interests, an open style of Code as amended on 15 May 2012 in detail, before issuing corporate communication, proper accounting and the following declaration of compliance in March 2013. audit procedures, and a responsible approach to risk “The Executive Board and Supervisory Board of Linde AG and to legal rules and internal Group rules. declare in accordance with § 161 of the German Stock Cor- Linde upholds high ethical standards. In 2007, the poration Law: Executive Board developed a corporate philosophy enti- All recommendations of the ‘Government Commission tled The Linde Spirit and devised a new code of conduct on the German Corporate Governance Code’ in the latest known as the Code of Ethics, launching both throughout version have been and will be observed in future, with the Group. The Linde Spirit describes the corporate culture the following exception. which is manifested in the Linde vision and the values and
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 principles that underpin day-to-day activities. The Code All information on Linde’s core values and compli- of Ethics sets out the commitment made by all employees ance policy can be found on the company’s website at in The Linde Group to comply with legal regulations and WWW.LINDE.COM/GUIDELINESCOREVALUES and www.linde.com/ to uphold and protect the ethical and moral values of the co r p o r at e g o v e rn a nc e . G roup. It is based on Linde’s corporate culture and accords with its global values and fundamental principles. The Executive Board and Supervisory Executive Board has also issued its own guidelines on Board rocedures p competition law, antitrust law, the engagement of sales Linde AG, which has its registered office in Munich, is agents, occupational safety, environmental and health governed by the provisions of the German Stock Corpora- protection, quality and procurement. Like the Code of tion Law (AktG) and the German Codetermination Law Ethics, these guidelines apply to all employees through- (MitbestG), capital market regulations and the rules set out The Linde Group. In 2012, a new global guideline on out in its articles of association. The Executive Board and corruption prevention was developed. This entered into Supervisory Board are responsible for the management force in early 2013 and is binding on all employees. and supervision functions assigned to them. They coop- erate closely in the interests of Linde to ensure the con- Compliance tinuation of the Group as a going concern and to create To reinforce compliance with both legal regulations and sustainable value added. They must act in the interests voluntary principles, the roup has a global compliance G of the shareholders and for the benefit of the Group. organisation. Linde’s roup-wide compliance activities G are focused in particular on antitrust law, the fight against Executive Board corruption, export control and data protection. The com- The Executive Board of Linde AG is responsible for man- pliance organisation is affiliated to Group Legal. Compli- aging the company and conducting its business. Its ac- ance officers have been appointed in the divisions, busi- tions and decisions are geared towards the best interests ness units and operating segments to support Group-wide of the roup, taking into consideration the concerns of G observance of the compliance programme. The global shareholders, employees, customers and other stake- compliance officer coordinates and implements compli- holder groups. Its aim is to create sustainable value for ance measures. The Executive Board and the Audit Com- stakeholders. The Executive Board establishes the stra- mittee of the Supervisory Board are regularly informed tegic direction of the Group, agrees this strategy with the13 about the current state of progress in the compliance Supervisory Board and ensures it is properly implemented. organisation, including measures aimed at communicat- It is also responsible for annual and multi-year business ing existing rules of conduct to employees, training em- plans, Group financing and the preparation of quarterly, ployees in those rules and updating the rules as neces- half-yearly, annual and Group financial statements. In sary. Training is provided for Linde employees worldwide. addition, the Executive Board ensures that appropriate Classroom-based courses are supplemented by a risk management and risk control systems are in place G roup-wide e-learning programme. By the end of 2012, and provides regular, timely and detailed reports to the more than 36,000 e-learning training sessions had been Supervisory Board on all relevant roup issues including G held on the code of conduct, along with some 3,000 strategy, medium-term business plans, business trends, e-learning sessions on antitrust law. In addition, more the risk situation, risk management and compliance with than 6,000 members of staff were provided with training legal regulations and internal roup guidelines. The Ex- G on site by skilled trainers. We thereby create a working ecutive Board also takes the necessary measures to fa- environment in which our employees are entirely familiar cilitate compliance in the Group companies. Given the with our rules and guidelines. G roup’s extensive reach across international markets and The Integrity Line reporting system is an important industry sectors, the Executive Board is responsible for element of the compliance framework at The Linde Group. ensuring that this diversity is reflected at management It enables both internal and external stakeholders to raise level, especially with regard to such criteria as age, gen- issues or report any doubts or suspicions that they might der and international representation. The goal is to put have. In 2012, the Internal Audit department, Human Re- together the best teams worldwide. The Group’s HR strat- sources, roup Legal and the department for Safety, G egy includes the definition, delivery and continuous evo- Health, Environment and Quality (SHEQ) carried out lution of Group-wide talent development programmes. around 80 investigations on the basis of information re- The Group supports intercultural diversity by adopting an ceived via the Integrity Line. If an internal investigation international human resources policy and making ap- reveals that the doubts or suspicions raised were justified, pointments across national borders. Key Executive Board Linde examines the measures introduced to tackle the activities and transactions require the approval of the situation, doing so in accordance with a prescribed pro- Supervisory Board. This applies in particular to the annual cess and timeframe. capital expenditure programme, major acquisitions, di- vestments, and capital and inancial measures. While in f office, members of the Executive Board are bound by a
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 detailed restraint clause. Any conflicts of interest must be bers of the Supervisory Board ends with the closure of disclosed immediately to the Supervisory Board, as well the Annual General Meeting in 2013. The Supervisory as to fellow Board members. Board’s Nomination Committee is making preparations for The procedural rules of the Executive Board govern the election of shareholder representatives by the 2013 the work it performs, the allocation of responsibilities to General Meeting. When proposing candidates to the Su- individual members, the issues which must be dealt with pervisory Board, it takes into account the targets set by by the full Executive Board and the majority required for the Supervisory Board in terms of its future composition resolutions to be passed by the Executive Board. The Ex- as well as such criteria as the requirements of the erman G ecutive Board passes resolutions at meetings held on a Stock Corporation Law (AktG), the Corporate overnance G regular basis. A simple majority of the votes cast is suffi- Code and the Supervisory Board’s procedural rules. The cient for a resolution to be passed, unless a greater ma- composition of the Supervisory Board is balanced to en- jority is prescribed by law. If the vote is tied, the Chairman sure that its members collectively possess the knowledge, has the casting vote. Without prejudice to the collective skills and professional experience necessary to enable responsibility of all members of the Executive Board, each them to discharge their duties in a group with global op- member of the Executive Board has individual responsi- erations in a fit and proper manner. All Supervisory Board bility for the functions assigned to them when the deci- members must ensure that they have sufficient time to sions of the Executive Board are being made. It is incum- perform those duties. Supervisory Board members who bent upon the Chairman of the Executive Board to assume also sit on the executive board of a listed company must responsibility not only for the functions assigned to him, not hold more than three supervisory board offices in but also to coordinate all areas of responsibility entrusted listed companies or in comparable supervisory bodies of to the Executive Board in a proper manner. He is the main other business entities that do not belong to the same point of contact between the Executive Board and the group as the company for which they perform their exec- Supervisory Board and represents the company in public. utive board duties. Linde AG undertakes to support Super- C ORPORATE G OVERNAN C E D E C L ARAT I ON N D O R PO R ATE OVER N A N CE EPO Rt No conflicts of interest arose for any member of the visory Board members as appropriate in the pursuit of any Executive Board during the reporting period. Where such training or professional development necessary for the R conflicts of interest do occur, they must be disclosed im- performance of their duties. mediately to the Supervisory Board. No member of the In March 2011, the Supervisory Board defined specific Executive Board is a member of more than three super- objectives for its future composition in accordance with14 visory boards of listed companies outside The Linde Group § 5.4.1 of the German Corporate overnance Code, as set G G or of comparable supervisory bodies of other business out below. Taking into account the particular situation of entities. Information about memberships held by mem- the roup, these cover the roup’s international reach, G G bers of the Executive Board on other German supervisory potential conflicts of interest, the number of independent C boards or comparable erman and foreign boards of busi- G Supervisory Board members, an age limit for Supervisory A ness entities is given in N ot e [2 9] of the N otes to the Board members and the need for diversity. financial statements. The Executive Board has no committees. The interna- International expertise tional composition of the Executive Board also reflects With operations in more than 100 countries, The The Linde Group’s global footprint and its intercultural Linde Group has a global footprint. To reflect this, at diversity. Information on the composition of the Executive least five of the Supervisory Board members should Board and on individual Board members, including their have extensive international expertise. responsibilities and duties, may be found in the overview Potential conflicts of interest on pa g e 3 or on the Linde website. The CV s of Executive At least 75 percent of the Supervisory Board members Board members are available on the Linde website. should have no business or personal ties with the com- pany or its Executive Board that could constitute a Supervisory Board conflict of interest. The mere existence of an employ- Equal numbers of shareholder representatives and em- ment relationship between employee representatives ployee representatives sit on the Supervisory Board of and the company or its affiliated companies does not Linde AG, which comprises, in accordance with the com- preclude impartiality as described above. Supervisory pany’s articles of association, the number of members Board members should not have management or ad- specified as the minimum number in the relevant regula- visory roles on the executive bodies of the main com- tions. Currently, the minimum number specified by law is petitors of The Linde Group. No more than two former twelve. The appointment of the members of the Supervi- Executive Board members should sit on the Supervi- sory Board is also governed by the relevant legal regula- sory Board. tions. In accordance with the recommendations of the Age limit for Supervisory Board members G erman Corporate G overnance Code, the shareholder Supervisory Board members should be no older than 72. representatives were elected individually at the last elec- Diversity tion to the Supervisory Board at the Annual General Meet- The Supervisory Board is committed to diversity in its ing on 3 June 2008. The current term of office of the mem- composition and to the fair representation of women
L i n d e A G F i n a n c i al S t a t e m e n t s 2 0 1 2 in particular. The next scheduled elections for both year, some members of the Supervisory Board have sat shareholder and employee representatives on the Su- on the executive boards of companies with which Linde pervisory Board will take place in 2013. After these has business relationships and they continue to hold seats elections at the latest, the Supervisory Board should on those boards. Transactions with these companies took include at least two women. place under the same conditions as for non-related third These objectives were taken into consideration upon the parties. These transactions did not affect the independ- judicial appointment of a member with effect from 6 De- ence of the Supervisory Board members concerned. cember 2012 following the resignation of a Supervisory Linde AG has no controlling shareholder whose relation- Board member. ship with a member of the Supervisory Board could jeop- More than five members of the current Supervisory ardise that member’s independence. Consequently, the Board have acquired extensive international expertise as Supervisory Board is only composed of individuals with a a result of their careers to date. During the 2012 financial sufficient level of independence. year, Linde acquired a 100 percent stake in the family Information about the members of the Supervisory company of Mr Miau for a purchase price of EUR 2.1 m. This Board and their memberships of other legally prescribed transaction was effected on the basis of customary mar- G erman supervisory boards and/or comparable erman G ket conditions. This fact was known to all of the members or foreign boards of business entities is given in of the Supervisory Board. The Supervisory Board does N ot e [2 9] of the otes to the inancial statements. The N f not believe that this transaction involves any conflict of CV of Supervisory Board members are available on the s interest. Otherwise, there were no conflicts of interest in- Linde website. volving Supervisory Board members in the 2012 financial The Supervisory Board appoints the Executive Board year. Where such conflicts of interest do occur, they must and monitors and advises the Executive Board in the run- be disclosed immediately to the Supervisory Board. No ning of its business operations. Executive Board decisions Supervisory Board members currently have management that are of fundamental importance to the Group require or advisory roles on the executive bodies of any of Linde’s the approval of the Supervisory Board. With regard to major competitors. Four Supervisory Board members are the composition of the Executive Board, the Supervisory company employees. No other consultancy, service or Board considers diversity in addition to the appropriate work contracts have been concluded between Supervi- professional qualifications of candidates. It strives in par- sory Board members and the company. No former mem- ticular to achieve a suitable age range and proper rep-15 bers of the company’s Executive Board are currently mem- resentation of women. The appointments to the Executive bers of the Supervisory Board. One Supervisory Board Board also take into account the international operations member reached the age limit in the 2010 inancial year. f of The Linde Group. Professor Dr Belloni is Italian, Mr At the Annual General Meeting in 2008, the member Lamba is an Indian national and Mr Blades is from the UK . in question was also elected for a term of five years. The Chairman of the Supervisory Board coordinates When proposing candidates for the 2008 elections, the the work of the plenary Supervisory Board and chairs its Supervisory Board was aware of the age limit defined in meetings. He is responsible for ensuring that resolutions the procedural rules. However, it had good reason for passed by the Supervisory Board and its committees are proposing candidates that would reach the age limit dur- duly executed and he is authorised to issue the state- ing their term of office. The appointments were approved ments on behalf of the Supervisory Board required to at the Annual General Meeting. Since the election of Pro- implement the resolutions of the Supervisory Board and fessor Dr Dr Achleitner to the Supervisory Board at the its committees. The Chairman of the Supervisory Board Annual General Meeting held on 12 May 2011 and the ju- maintains close contact with the Chairman of the Execu- dicial appointment of Ms Anke Couturier with effect from tive Board throughout the year, sharing information and 6 December 2012, there have been two women on the ideas. Supervisory Board. The target set in 2011 of having two women on the Board by 2013 has thus been met. The Supervisory Board committees Supervisory Board currently considers the inclusion of The Supervisory Board has four committees, which do the two women on the Board to be appropriate. This level of groundwork for the plenary Supervisory Board. If it is representation is in line with the number of female exec- permitted by law and laid down in the procedural rules utives with experience in the management of industrial of the Supervisory Board, decision-making powers may companies, and also reflects the proportion of women in in individual cases be delegated by the Supervisory Board the workforce of The Linde Group, at around 20 percent, to these committees. The Chairman of the Supervisory and the proportion of women holding senior management Board chairs all the committees with the exception of the positions in the roup, at around 11 percent. G Audit Committee. The procedural rules of the Supervisory Board include The Standing Committee, which comprises three rules regarding the independence of its members. No shareholder representatives and two employee repre- member of the Supervisory Board is in a personal or com- sentatives, advises the Supervisory Board in particular on mercial relationship with the company or its bodies that the appointment and removal of members of the Execu- could represent a conflict of interests. In the past financial tive Board and on decisions regarding the remuneration