flooring systems

Valu

For sustainability and environmental awarenessbonding systems

For optimized production processes

movement systems

flooring. bonding. movement.

F o r b o A n n ua l R e p o r t 2 0 0 9

P +41 58 787 25 25
F +41 58 787 20 25
info@forbo.com

F o r b o A n n ua l R e p o r t 2 0 0 9

Forbo International SA
Lindenstrasse 8
CH-6340 Baarflooring. bonding. movement.

Forbo Holding Ltd
Lindenstrasse 8
CH-6340 BaarF o r b o A n n ua l R e p o r t 2 0 0 9

For increased product benefits

flooring. bonding. movement.

Sustainability and environmental awareness
At Flooring Systems, making the products and processes more sustainable and environmentally friendly
is a constant focus. The increasing sensitivity of building owners and users in the public sector with regard toenvironmentally friendly products is reinforcing the demand for Forbo linoleum made from natural
raw materials.

Optimized production processes
Meeting the needs of customers and generating added value for their production process by providing­expertise is at the focus of Bonding Systems’ activities. The quality and the reliability of the products areconstantly improved for the users in an exchange of technical know-how with key customers.

Increased product benefits
Maximizing environmental compatibility while increasing the product benefits – this is a central topic forMovement Systems when it comes to developments of products and services. Research and development
are carried out in close collaboration with OEMs and users. Movement Systems is helping its customers to
become even more ­successful with constant new developments and innovations.

Publisher:
Forbo Holding Ltd, Baar
Concept and Design:
Gottschalk + Ash Int’l
Photos:Luxwerk, Zurich
Typesetting, Litho and Printing:
Neidhart+Schön AG, Zurich

Our Annual Report is publishedin German language and in
an English language translation.

Forbo at a glanceContents
2009 at a glance
Net sales by division
Employees by division
Financial overview – Group
Financial calendar

Forbo is a leading producer of flooring systems, adhesives, as well as
power transmission and conveyor belt solutions. The company employs some 6,000 people and has an international network of 44 sites
with production and distribution as well as 47 pure sales organizations in a total of 35 countries worldwide. Forbo is headquartered in
Baar in the canton of Zug, Switzerland.

2009 at a glance

Forbo operates worldwide. Its three divisions supply
many industries that are crucial for the economy such as
the construction industry, plant engineering, the machine
tool industry and consumer goods manufacturers. Like
many other companies, Forbo was affected by the global
economic crisis in the year under review, but nevertheless achieved gratifying results with a lower sales volume.

Systems· Flooring
14 production facilities in 7 countries and
	

·
·

sales companies in over 20 countries	Bonding Systems
20 production facilities in 12 countries andsales companies in over 20 countries	Movement Systems
9 production facilities in 8 countries andsales companies in over 25 countries

Net sales
EBIT
EBIT margin

Group profit

CHF 1,782.4 m
CHF 121.8 m

6.8 %CHF 76.1 m

Net sales by division
Change on previous year
CHF m

Flooring Systems

2009

in %

in local­currencies in %

in %

904.4

+ 1.3

+ 8.5

50.8

Bonding Systems

567.5– 13.3

– 9.7

31.8

Movement Systems

310.5– 16.4– 14.617.4

1,782.4

– 7.1

– 2.2

100.0

Total

Movement Systems

Flooring Systems

Bonding Systems

Employees by division
Number2009

Change on pre­vious year in %in %Flooring Systems

2,748

– 9.8

46.1

Bonding Systems

1,376

– 1.0

23.1

Movement Systems

1,793– 14.030.1

Corporate Functions

41

0.0

0.7

5,958

– 9.2

100.0

Total

Corporate Functions

Movement Systems
Flooring Systems

Bonding Systems

Financial overview – Group

2009

2008

2009

2008

CHF m

CHF m

EUR m1)

EUR m1)

1,782.4

1,918.7

1,177.7

1,209.0

Flooring Systems

904.4

892.9

597.6

562.6

Bonding Systems

567.5

654.6

375.0

412.5

Movement Systems

Income statement
Net sales

310.5

371.2

205.2

233.9

EBITDA

188.6

205.8

124.6

129.7

EBIT

121.8

117.1

80.5

73.8

Group profit

76.1

16.0

50.3

10.1

Balance sheet

CHF m

CHF m

EUR m1)

EUR m1)

Total assets

1,745.4

1,837.8

1,153.3

1,158.0

Operating assets

1,419.7

1,516.2

938.1

955.4

Shareholders’ equity

679.6

584.4

449.1

368.2

Net debt

255.1

404.5

168.6

254.9

Cash flow statement

CHF m

CHF m

EUR m1)

EUR m1)

Cash flow from operating activities

213.3

159.8

140.9

100.7

Cash flow from investing activities– 23.8– 406.1– 15.7– 255.9

Free cash flow

189.5

– 246.3

125.2– 155.2%%

ROS (EBITDA / net sales)

10.6

10.7

ROA (EBIT / operating assets)

8.6

7.7

Equity ratio (shareholders’ equity / total assets)

38.9

31.8

Gearing (net debt / shareholders’ equity)

37.5

69.2

Employees (as at December 31)

NumberNumber

Employees

5,958

6,563

Ratios per share

CHF

CHF

EUR1)

EUR1)

Earnings (undiluted)

33.67

6.86

22.25

4.32

Equity

300.7

249.6

198.7

157.3

Dividend / reduction in par value

6.02)

3.93)

4.0

2.5

Stock market capitalization (as at December 31)

CHF m

CHF m

EUR m1)

EUR m1)

Stock market capitalization

770.6

435.0

509.2

274.1

Key ratios

1) Euro value translated at the annual average rate of CHF 1.5134 / 1 EUR (2009) and CHF 1.587 / 1 EUR (2008).
Board of Directors proposes to the Ordinary General Meeting on April 23, 2010 distributing a dividend
2) Theof CHF 6.00 per registered share.
3) Approval of a par value reduction of CHF 3.90 per registered share at the Ordinary General Meeting on April 24, 2009.

Financial calendar
Ordinary General Meeting:

April 23, 2010

Letter to shareholders:August 17, 2010

Media release on the results for the first half of 2010:

August 17, 2010

Annual Report 2009

Contents Annual Report 20092

To our shareholders

6

Forbo Group:
overall improvement in operating results

11

Three divisions – three areas of competence

12

Flooring Systems:
position strengthened as system supplier for c­ ommercial market segment

18

Bonding Systems:
strengthening strategic segments

24

Movement Systems:
successfully adjusted structures

30

Group structure

31

Executive Board

35

Corporate governance54

The Forbo share
Forbo Group Financial Report

58

Consolidated balance sheet

59

Consolidated income statement

60

Comprehensive income statement

61

Consolidated shareholders’ equity

62

Consolidated cash flow statement

63

Notes – accounting principles

81

Notes

114

Group companies

118

Report of the statutory auditor

120

Consolidated income statements 2005 – 2009

121

Consolidated balance sheets 2005 – 2009
Financial Statements for Forbo Holding Ltd

123

Income statement

124

Balance sheet

125

Notes to the financial statements

132

Proposal for appropriation of available earnings

133

Report of the statutory auditor

2

Dr. Albert Gnägi
Chairman of theBoard of Directors‘The particular challenge in the year 2009 was torespond fast and very flexibly to market devel­
opments. After this intensive year, we have to beprepared for the upturn when it comes.’

This E. Schneider
Delegate of theBoard of Directors and CEO

3
To our shareholders

Dear Ladies and Gentlemen,
As expected, we had to face some major challenges in the year 2009. The problems were
triggered by the global financial and economic crisis, which led to a significant drop in
demand among many Forbo customers, with the severity depending on the region and theindustry. The weak demand in turn impacted on the sales of Forbo. All divisions andmany geographic regions were affected by the downturn, though to varying degrees.
Forbo had already made adjustments to its structures at the end of the third quarter 2008
and thus responded promptly and forcefully to the economic downturn. As a result, despite
the extremely difficult global economic conditions, our performance in the 2009 businessyear was on the whole satisfactory. The investments Forbo has made in growth markets inrecent years and its long-term innovation policy were critical factors in this achievement.
Sales performance hampered by weak demand
Strong Swiss franc reduces net sales additionally
The three divisions reported differing sales performance depending on the customer
segments and markets. While Flooring Systems posted slightly higher sales owing to theacquisition of Bonar Floors in fall 2008, the other two divisions recorded an appreciable
decline in sales. In the Movement Systems division in particular, some customers in the plantengineering segment in Germany, Italy and Japan reported dramatic sales slumps, which
in turn impacted on sales at Forbo.
Consolidated net sales in Swiss francs came to CHF 1,782.4 million (previous year: CHF 1,918.7
million), which is equivalent to a decline of CHF 136.3 million or 7.1 %. The acquisitions ofBonar Floors and Transtex Belting lifted sales by 8.3 %, while the strength of the Swiss franc
against the currencies in our main markets reduced net sales by 4.9 %.
Operating profit stronger despite crisis
A further increase in margins
The Group reported a significant improvement in its EBIT margin owing to the success of
its structural adjustments, higher-margin products and improved efficiency. Bonding
Systems additionally benefited from lower prices for raw materials although the cost of
integrating Bonar Floors into Flooring Systems and charges for structural adjustments
at Movement Systems reduced profitability in these two divisions.
On balance, however, Forbo lifted its EBIT margin from 6.1 % to 6.8 %.
Operating profit (EBIT ) improved
The improvement in operating profit at Bonding Systems more than offset the lower
operating profit reported by both Flooring Systems and Movement Systems.
Operating profit (EBIT ) for the entire Forbo Group therefore rose from CHF 117.1 million
to CHF 121.8 million despite the drop in sales. Operating profit before depreciations andamortizations (EBITDA) came to CHF 188.6 million (previous year: CHF 205.8 million).
Higher return on invested capital
The return on invested capital increased from 7.7 % to 8.6 % owing to an improvement in
operating profit and a significant reduction in invested capital.

4

Jump in earnings owing to improved operating profit and eliminationof ­exceptional charges
Group profit up substantially
The improvement in operating profit, coupled with the elimination of exceptional charges,
resulted in a marked increase in Group profit to CHF 76.1 million (previous year: CHF 16.0
million after exceptional charges).
Large reduction in net debt
Financing structure optimized
At mid-year, Forbo opted to refinance and extend its existing credit lines early and successfully issued a CHF 150 million four-year bond on July 6, 2009. At the end of November
2009, Forbo repaid a further portion of the US private placement and related derivatives.
The repayment, totaling CHF 173 million, was made using cash and existing credit lines.
These measures together further improved and diversified the company’s financing
structure, substantially extended maturities and optimized the timings.
The existing credit facilities and the new bond have significantly increased Forbo’s financial
flexibility and have assured the Group’s financing and growth for the next few years.
Further decrease in debt
Shareholders’ equity at the end of December 2009 stood at CHF 679.6 million, corresponding
to an equity ratio of 38.9 %. In addition, as at December 31, 2009, Forbo had cash andsecurities amounting to CHF 298.4 million. Net debt was significantly reduced down to
CHF 255.1 million (previous year: CHF 404.5 million).
In addition, Forbo holds treasury shares which were valued at around CHF 152 million as at
year-end 2009.
Proposal for cash distribution
Dividend of CHF 6.00
In the previous year, the cash distribution was cut back to CHF 3.90 per share owing to thedownturn in earnings. This year, the Board of Directors will propose to the Ordinary General
Meeting the distribution of a dividend of CHF 6.00 per share for the 2009 business year.

5

Outlook for 2010 business year
Visibility still poor
The signs of a gradual recovery of the global economy are multiplying in the wake ofthe severe economic downturn, but it is still unclear whether the recovery will be sustainable. We therefore do not expect to see any long-term impetus for growth. The economic stimulus programs are being phased out, government debt has risen steeply anda change in interest rate policies is in the offing. The impact of all this is difficult toestimate.
Furthermore, we believe that trends will vary significantly in the different regions andindustries.
These uncertainties make it difficult to make forecasts for 2010. Forbo has therefore
decided to refrain from making any statement at the present moment on sales and earnings
trends for the 2010 business year. If the economic conditions remain constant, operating
profit should improve in the absence of integration and restructuring costs.
Thank you
A word of thanks to our employees, customers, partners, and investors
2009 was an exceptional and very intense year, in which all Forbo employees faced real­c hallenges. On behalf of the Board of Directors and the Executive Board, we would like tothank all our employees for their tireless efforts and the flexibility they have consistently
shown in their work. Their skills and know-how have been instrumental in strengthening
the trust of our business partners.
We also wish to express our gratitude to our customers, suppliers, and other business
partners for the confidence they have placed in us over the past year and to you, our shareholders, for your loyalty to our company.

Baar, March 2010

Dr. Albert Gnägi
Chairman of the Board of Directors

This E. Schneider
Delegate of the Board of Directors and CEO

6Forbo Group: overall improvementin operating results

As expected, Forbo had to face major challenges in the year underreview. The economy in most regions of the world went into decline. Many customers felt the impact of a drop in demand – often
massive – and this in turn affected sales at Forbo.
Despite these circumstances, the Group succeeded in improving
its performance further through the systematic implementation of
special measures. According to the conditions in specific regions
and industries, Forbo gradually adjusted its capacities and costs
to reflect the fall in demand, while optimizing processes and its
product portfolios. It was thus able to increase operating profit by
4 percent over the previous year. The improved operating profit
plus the elimination of exceptional charges resulted in a significant
increase in Group profit, which rose to CHF 76.1 million (previous
year: CHF 16.0 million after exceptional charges).
In the reporting year, various measures further improved anddiversified the company’s financing structure, substantially­e xtended maturities and optimized timings. Net debt fell an impressive 37 percent.

Strong Swiss franc reduces net sales
Group net sales in Swiss francs came to CHF 1,782.4 million in the year under review (previous year: CHF 1,918.7 million), equivalent to a decline of 7.1 %, or 2.2 % in local currencies.
The organic reduction in sales was 10.5 %. The acquisitions made by Flooring Systems andMovement Systems in the summer and fall of 2008 added 8.3 % to net sales. Negative
cur­rency movements shaved 4.9 % off sales, the main reason being the strength of the Swiss
franc against the US dollar, the euro, and the pound sterling.
The Flooring Systems division saw net sales advance CHF 11.5 million to CHF 904.4 million,
which is equivalent to an increase of 1.3 %, or 8.5 % in local currencies. Bonar Floors, which
was acquired in fall 2008, was the main growth driver, adding 16.8 %, while currency fluctuations had a negative effect of 7.2 %. However, the organic reduction in sales was 8.3 %.
Bonding Systems generated sales of CHF 567.5 million, down CHF 87.1 million on the previous year. This is equivalent to a decline of 13.3 %, of which currency fluctuations accounted
for 3.6 %. In local currencies, sales were down by 9.7 %.
The Movement Systems division posted sales of CHF 310.5 million, a decline of CHF 60.7
million on the previous year. Sales fell by 16.4 %, or 14.6 % in local currencies year-on-year.
The Transtex Belting acquisition in the summer of 2008 had a positive effect of 2.3 %,which was slightly higher than the negative currency effect of 1.7 %. The organic reduction
in sales was 16.9 %.
The sales increases reported for France, Great Britain and Ireland in the following table 'Net
sales by geographic area' are due mainly to the acquisition of Bonar Floors. The sales
increase in Asia / Australia / Africa was driven primarily by the investments in growth markets
made in recent years.

7

Net sales by geographic area
Change on previous year%in %in local currencies in %

CHF m

2009

North, Central and South America

22.1

– 8.7

– 8.0

392.5

France

14.0

+ 6.2

+ 11.3249.4

Benelux

12.4

– 9.1

– 4.7

221.0

Germany

11.5

– 9.3

– 4.8

205.4

Asia / Australia / Africa

11.1

+ 3.0

+ 3.7

198.7

Great Britain / Ireland

9.1+ 38.3+ 61.2

161.9

Southern Europe

7.2– 22.5– 18.1

127.9

Scandinavia

6.8– 22.4– 12.4

121.5

Eastern Europe

3.7– 38.4– 31.966.7

Switzerland

2.1– 16.0– 16.0

37.4

50

100

150

200

250

300

350

400

Overall improvement in operating result
Operating profit before depreciations and amortizations (EBITDA) came to CHF 188.6 million
in the reporting year (previous year: CHF 205.8 million). This decline of CHF 17.2 million wasdue mainly to the business performance of Movement Systems, where the slump in demand
had an especially big impact on EBITDA . Depreciations and amortizations in the reporting
year came to CHF 66.8 million. The CHF 7.3 million increase year-on-year stemmed primarily
from depreciations and amortizations on tangible and intangible assets acquired the previous year. In addition to ordinary depreciations and amortizations amounting to CHF 59.5
million, the figure for 2008 also included non-recurring impairments of CHF 29.2 million.
Accordingly, Forbo increased operating profit (EBIT ) by CHF 4.7 million to CHF 121.8 million,
an increase of 4.0 %. In light of the economic circumstances, this was on the whole a gratifying performance, which can be ascribed primarily to the prompt measures taken to counteract the impact of the economic downturn. The EBIT margin came to 6.8 %, comparedwith 6.1 % the previous year.
The Flooring Systems division saw operating profit before depreciations and amortizations(EBITDA) decrease slightly by CHF 1.3 million to CHF 136.4 million compared to the previous
year (CHF 137.7 million). The profit contributed by Bonar Floors, acquired in 2008, was not
sufficient to offset the lower contribution from sales declines in the core business, theadditional costs arising from the integration of Bonar Floors and the costs of restructuring.
The Bonding Systems division improved operating profit before depreciations and amortizations (EBITDA) by CHF 8.9 million to CHF 47.2 million (previous year: CHF 38.3 million).
This significant improvement was due to the easing of raw material prices and the marketing of higher-margin products.
At Movement Systems, the slump in demand in an organization geared to manufacturing
and spare part services had an especially strong impact on operating profit. Accordingly,
operating profit before depreciations and amortizations (EBITDA) fell by CHF 26.5 million
year-on-year to CHF 14.9 million (previous year: CHF 41.4 million). The structural adjustments
undertaken by the division began to bite especially in the second half of 2009.

8

EBITDA by division
CHF m

2009

Change on pre­ – 25
vious year in %Flooring Systems

136.4

– 0.9

Bonding Systems

47.2+ 23.2

Movement Systems

14.9– 64.0

Headquarters / Consolidation– 9.9– 14.7

0

25

50

75

100

125

150

Taxes and financial income
The effective tax rate in the year under review was unchanged at 25 %.
Despite a slightly lower interest rate level in 2009, net financial expenses increased by
CHF 3.9 million to CHF 20.4 million (previous year: CHF 16.5 million). This increase stemmed

from higher average net debt owing to the acquisition of Bonar Floors in the second halfof 2008, the purchase of the stake in Rieter shares and the share buyback program.
Marked increase in free cash flow
Cash flow from operating activities came to CHF 213.3 million in the year under review.
The increase of CHF 53.5 million year-on-year can be ascribed mainly to the success of themeasures taken to reduce working capital.
The cash flow from investing activities came to CHF 23.8 million in 2009 (previous year:
CHF 406.1 million) and encompasses mainly investments in production plant, minus
the proceeds from property sales. The item in the 2008 accounts also included the cash
outflow from acquisitions (CHF 212.8 million) and the build-up in the shareholding in
Rieter Holding AG . Investment in property fell by a substantial 28 % on the previous year.
Free cash flow came to CHF 189.5 million in the year under review (previous year: CHF – 246.3
million).

9Free cash flow 2009
CHF m

Cash flow from operating activities

213.3

Cash flow from investing activities– 23.8

Free cash flow

189.5

– 300

– 200

– 100

0

100

200

300

– 300

– 200

– 100

0

100

200

300

Free cash flow 2008
CHF m

Cash flow from operating activities

159.8

Cash flow from investing activities– 406.1

Free cash flow

– 246.3

Significantly stronger balance sheet
Total assets as at December 31, 2009 stood at CHF 1,745.4 million (previous year: CHF 1,837.8
million). Total assets were down CHF 92.4 million on the previous year, mainly as a resultof changes in working capital and the sale of property and buildings.
Net debt at year-end 2009 was reduced substantially to CHF 255.1 million thanks to thehigher free cash flow generated by the Group. Shareholders’ equity increased in the same
period to CHF 679.6 million, equivalent to an equity ratio of 38.9 % (previous year: 31.8 %).
Gearing (net debt / equity) at the end of December 2009 stood at 37.5 % (previous year:
69.2 %).
Return on operating assets (ROA) increased from 7.7 % to 8.6 %. This was the result of the
CHF 4.7 million increase in operating profit (EBIT ) to CHF 121.8 million (previous year:
CHF 117.1 million) and the CHF 96.5 million decrease in operating assets, which fell sharply
to CHF 1,419.7 million (previous year: CHF 1,516.2 million).

10

Investments adjusted to reflect economic conditions
Owing to the economic downturn, Forbo focused its investment in the year under review
on the most important activities and projects. Accordingly, investments in fixed assets in2009 came to CHF 38.9 million, a decrease of CHF 19.1 million year-on-yer (previous year:
CHF 58.0 million). In the reporting period, Flooring Systems invested CHF 17.1 million, CHF 12.3
million less than the previous year (CHF 29.4 million). The investment was earmarked for new
manufacturing processes designed to expand the product range, for the modernization of
production plant and for efficiency gains. At Bonding Systems, investments in 2009 came to
CHF 9.3 million against CHF 10.5 million in 2008. The funds were used mainly for the initial
phase of production expansion in China, for general measures to boost efficiency and formarket developments. At Movement Systems, investments came to CHF 12.1 million, which
was also lower than the previous year (CHF 17.1 million). The investments were employed
primarily to modernize production plant, increase productivity, and expand into new markets and segments.

Capital investment 2005 – 2009
Flooring
Systems
CHF m

Bonding
Systems
CHF m

Movement
Systems
CHF m

Corporate

Total

CHF m

CHF m

17

9

12

1

39

2009
2008

29

11

17

1

58

2007

26

21

14

1

62

2006

18

31

13

3

65

2005

15

19

14

1

49

0

10

20

30

40

50

60

70

Headcount
At the end of the year, Forbo employed 5,958 people. This is down 605 employees on theprevious year, largely due to capacity adjustments linked to the economic downturn.

Employees by geographic area

Benelux%

Change on pre­vious year in %

2009

18.1

– 8.9

1,076

North, Central and South America

14.2– 10.5845

Germany

13.2

– 5.9

788

Asia / Australia / Africa

13.0

+ 2.8

776

Great Britain / Ireland

11.7– 13.5

699

France11.1– 10.6664

Eastern Europe

5.8– 16.3345

Scandinavia

4.6– 13.5276

Southern Europe

4.4– 15.1

264

Switzerland

3.8– 11.1

225

200

400

600

800

1,000

1,200

11

Bonding Systems
Bonding Systems is among the world’s leading suppliers of industrial
adhesives. Its high-performance products ensure stable and durable
bonding and are suitable for a wide range of applications in key mar­kets such as the paper processing industry, the packaging industry,
the shoe and textile industries, the furniture industry, as well as for
manufacturing automotive and motor home interior trims. Bonding
Systems also provides ready-made adhesives for flooring installations
and ceramic tiles as well as welding rods and leveling compounds
for the construction industry. The third business area is synthetic polymers which are marketed as emulsion polymers to customers in thead­hesives, varnish, paint and construction industries.

Bonding Systems

Movement Systems
Movement Systems is a global industry leader providing top-quality
power transmission belts, sophisticated conveyor and processing belts
as well as plastic modular, timing and flat belts made of synthetic
materials. These products are known under the brand name Siegling.
They are used in a wide range of applications in industry, trade andthe service sector, including conveyor and processing belts in the foodindustry, as treadmill belts in fitness studios and flat belts in maildistribution centers.

Movement Systems

Flooring Systems
The Flooring Systems division offers a broad and attractive range ofenvironmentally-friendly linoleum, high-quality vinyl floorings,
entrance matting systems for cleaning and drying shoes, carpet tiles
and needlefelt. Thanks to their excellent technical properties andattractive design, these floorings are invariably the first choice forpublic buildings, department stores, hospitals, schools, libraries,
commercial offices, leisure centers, hotels, restaurants and cafeterias
and are also used in the residential market. With a market shareof over 65 percent, Forbo is the world market leader in linoleum.

Flooring Systems

Three divisions –three areas of competence

12
Flooring Systems

Forbo Flooring Systems:
position strengthened as system supplierfor c­ ommercial market segment‘Despite the difficult circumstances, we pursued our strategy ofstrengthening and expanding our position as a leading system supplier for the commercial market segment in the year under review.
We forged ahead with the integration of Bonar Floors, which was
acquired in fall 2008, while the launch of an innovative linoleum
collection in spring 2009 enhanced our global market leadership in
the linoleum segment. The fall in demand in many regions madecost-cutting measures and structural adjustments unavoidable inorder to limit the impact of the economic downturn. The rapid
integration process and our response to changed market conditions
enabled us to consolidate our reputation among our business
partners as a powerful and reliable system provider.’The Flooring Systems division generated net sales of CHF 904.4 million in2009 (previous year: CHF 892.9 million).
The division therefore grew by 1.3 %on the previous year. The bulk of thegrowth (16.8 %) came from Bonar
Floors, which was acquired in fall 2008,
while currency fluctuations shaved
7.2 % off the total figure. In local currencies, sales growth came to 8.5 %.
The division’s contribution to Group sales was 50.8 %. North America and France reported
positive sales trends, but the other markets failed to match the previous year owing to theslump in demand. The costs of the accelerated integration of Bonar Floors and a substantial
downturn in demand ate into earnings despite cost-cutting efforts and structural adjustments. Operating profit (EBIT ) fell to CHF 100.8 million (previous year: CHF 111.6 million).

Market situation: strong position in environmentally-friendly products pays off
in difficult market conditions
The market in Eastern Europe, which for many years has been an important growth region
for Forbo flooring products, collapsed as new construction virtually came to a standstill.
Sales in the key Scandinavia and Benelux regions also dropped significantly because of thecrisis. Fortunately, large orders from the public sector in the United Kingdom offset the
impact of widespread weak demand at Flooring Systems.

Tom Kaiser
Executive Vice President
Flooring Systems

As sustainability is also becoming increasingly important in product decisions in theconstruction sector, linoleum sales increased in key markets such as Germany, France andNorth America.
Measures and investments: focus on production and market expansion
With an eye to future developments, in 2009, Flooring Systems again invested in measures
to boost productivity, expand capacity in the linoleum sector and in new manufacturing
processes designed to enlarge the product range. Investments were also made in IT infrastructure systems as part of the integration process and in sales distribution management.
In view of future needs, the division prepared the ground in France, Sweden and the Netherlands for consolidating the European production capacity for vinyl floorings.
The new manufacturing plant for vinyl commercial floorings began operations in Kaluga,
Russia in March 2009. A new service center in Shanghai means Flooring Systems is now able
to deliver to customers in Asia much more quickly. In India and New Zealand, Forbo is
now for the first time marketing its flooring products through own local distribution organizations.

13

Products: balanced product portfolio for commercial market segment
Flooring Systems launched 12 new flooring collections in order to underscore its position
as a system provider for the commercial market segment. Customers have been particularly
impressed by the excellent potential for combining products for different applications
within a single building. Worthy of particular mention are the extensive and environmentally-friendly linoleum collection Global 3, which is made from sustainable raw materials;
Flotex, a heavy-duty and low-maintenance vinyl flooring; Tessera carpet tiles for commercial
offices; Coral entrance matting systems, for use in the entrance areas of all building types;
and floorings for passenger transport.
With this balanced product range, as a leading system supplier in the commercial market
segment, Forbo has again substantially increased the added value it provides for its
customers and users.
Business trend: environmentally-friendly linoleum in demand in public sector
The integration of Bonar Floors was virtually complete within one year. Task forces from thetwo companies worked efficiently at all levels and in all areas to successfully complete
the integration projects despite the difficult economic conditions. Through the acquisitionof Bonar Floors and the associated expansion of the product range, Flooring Systems has
reinforced its strategy as a system provider for the commercial market segment.
Despite the difficult market conditions, demand for the major new linoleum collection
was gratifying as a result of very high levels of customer acceptance. With users in the public
sector increasingly conscious of the environmental impact of products, demand for ecofriendly floor coverings has grown in most markets.
The opposite was true for sales of carpet tiles, which are mainly used in UK banks andoffices. Faced with marked falls in sales, the division had to make far-reaching capacity cuts.
Flooring product groups for the residential market segment also saw a substantial drop
in demand.
Outlook: healthy basis for further growth
As a reliable and powerful partner for the global commercial market segment, Flooring
Systems will be focusing on marketing its comprehensive and attractive new product range
in 2010.
Flooring Systems has recorded exceptional charges in the year under review, but in 2010 it
expects a substantial improvement in profitability as integration costs will no longer be aconsideration and as synergies start to kick in. This forecast is based on the assumption thatthe economic situation will stabilize at the current level.

Flooring Systems

Floors create spaces and determine
usage, ambience and comfort. The
more specialized the use, the higher
the demands placed on the flooring
properties. The right choice transforms abstract space into a personalized living space. This is the art ofarchitecture and interior design,
an art in which the use of the rightmaterials is essential.

Forbo therefore works very
closely with professionals in theseareas. When creating its productcollections, Forbo designers arealso inspired by nature, art and thelatest design trends.

When considering new buildings
and renovations, decision-makers
take design and aesthetic aspects
into account but are also increasingly influenced by two key longterm factors: maintenance costs,
i.e. the best functionality combinedwith low costs, and ecologicalsustainability.

Forbo satisfies these demanding
product requirements with its fundof manu­f acturing know-how, life
cycle analysis and new and innovative trends and materials thatmeet the diverse needs of its customers. Environmental impact
is also gaining in prominence. Linoleum is a pure natural productthat is manufactured from linseedoil, resin, wood f lour, limestone,
jute and natural pigments.

Flooring Systems

Innovation focused on ­sustainability and­e nvironmental awareness
Every modernization and innovation
at Flooring Systems is focused on
making the products and processes
more sustainable and environmentally friendly. As well as building on
internal expertise, Forbo makes
use of the options offered by the market and society as a whole. In 2009,
for example, Forbo converted all
production plants in the Netherlands
and the UK to renewable energies.
Similar measures are planned forother countries.

Products and processes were also
renewed and improved in the reporting period: in Russia, vinyl flooringproduction has been modernized,
water-based dyes introduced andseveral waste reduction measures
implemented. Another new feature iscarpet backing made entirely fromrecycled materials. This environ­mentally-friendly innovation is thedistinguishing feature of the newWestbond carpet tile collection inpure wool. The Flotex range – a very
hard-wearing and easy-to-clean
flocked special floor covering – now
also contains recycled material.

creating better environments

Great emphasis is also placed onrecycling and reuse at Flooring Systems when producing linoleum andvinyl floorings for the commercial
market segment. The Dutch production plant in Coevorden actively
collects waste material from other
Forbo plants and other market
par­t icipants which it uses to produce
vinyl floorings for the commercial
market segment. This process makes
use of to the new hi-tech calendar
line.

Forbo is a market leader in resilient
f loor covering production when it
comes to processing of natural andrapidly-renewable materials. Muchof its approach builds on over one
hundred years of natural linoleum
production experience. This expertisenow feeds into all of the productsin the Flooring Systems product portfolio.

Sustainability plays an importantrole even beyond the manufacturing
stage. Any environmental impact
assessment must be based on anassessment of the product life cycle.
The analysis examines the entire
life cycle of a product from development through to disposal. Forbobuilds on reliable and professional
testing by independent experts.
One strategic goal for Flooring
Systems is the integration of life
cycle assessments for its products.
This sustainable approach shapes
future product development andensures continuous improvements
and innovation.

18

Bonding Systems

Forbo Bonding Systems:
strengthening strategic segments‘The economic crisis that started in late 2008 spread from North
America to Europe in the year under review. Most market segments were affected by the downturn in demand, and as a result
our customers’ production volumes declined sharply. Bonding
Systems responded rapidly and adapted its cost structures toreflect the altered circumstances. This response, along with lower
prices for raw materials, resulted in a marked improvement in
operating results. At the same time, we focused on developing
strategic market segments by strengthening international activities
for key accounts in order to serve our customers even better. We
took targeted measures to reinforce the organizations in growthmarkets.’

The Bonding Systems division generated net sales of CHF 567.5 million in2009 (previous year: CHF 654.6 million).
This is equivalent to a decline of 13.3 %,or 9.7 % in local currencies, of whichcurrency fluctuations accounted for
3.6 %. The division’s contribution
to Group sales totaled 31.8 %. North
America was unable to completely
bounce back from the slump towards
the end of the previous year. The markets in Europe experienced a marked decline indemand during the entire year and Asia improved steadily throughout 2009 after a modest
start. Despite the downturn in sales, Bonding Systems considerably lifted operating profit(EBIT ) to CHF 32.6 million (previous year: CHF – 5.7 million) owing to lower prices for raw materials and systematic changes to cost structures.

Michel Riva
Executive Vice President
Bonding Systems

Market situation: Asia least affected by slump in demand
The global economic crisis had different effects on the three business activities of Bonding
Systems. The industrial adhesives business suffered from weaker demand in many customer segments in North America during the year under review. Manufacturers of consumer
durables such as cars, textiles and furniture in particular maintained low production levels.
Europe felt the impact of the fall in demand at the start of the year, with Italy and Spain
hit especially hard. The impact on France and the United Kingdom was less pronounced.
Smaller markets such as Turkey and the Middle East were even able to improve on theprevious year’s sales. After a slow start in 2009, the Asia region performed well, especially inthe second half, supported by customer segments such as automotive, packaging andnon-wovens (applications such as hygiene products, outdoor wear and medical apparel).
The building and construction adhesives business activity was less seriously affected by
the decline in demand. The downtrend impacted the construction industry in the Netherlands in particular, which accounts for the lion’s share of sales. With local production in
Eastern Europe and the related market development activities, after an initial flat period,
sales grew at a low level, especially in the second half.
The synthetic polymers business activity continued to feel the repercussions of the economic crisis in North America and the resulting market overcapacities.
Measures and investments: focus on cost-cutting measures andtargeted investments
After the challenges of 2008, Bonding Systems set itself two main goals in 2009: continued
efforts to adjust structures and to reduce costs, and a focus on profitable segments. The
cost structures in Europe and North America were adapted to reflect the changed conditions in the first quarter of 2009. Owing to the rapid and systematic implementation ofthese measures, Bonding Systems succeeded in boosting earnings.
At the same time, the division made targeted investments in innovative products to benefit our major customers. A new production line for metallocene-based hotmelts was
installed in France, while in the Netherlands, in the building and construction adhesives
business acitvity, the division invested in a unique leveling compound production
process which generates less dust. In Guangzhou in Southern China, work began on theconstruction of a new facility for industrial adhesives. The facility is expected to be­o perational by mid-2010.

19

Bonding Systems strengthened its organization in its strategic segments and expanded
global account management for key customers. This enabled the division to gain new
customers and capture market share in a difficult environment. Targeted efforts were madeto strengthen the organization in growth markets such as China, Vietnam, India, Turkey,
Russia and the Middle East.
Products: focus on value added for customers and reducing
environmental impact
In the year under review, a number of new applications were developed in close cooperation with Forbo customers. These applications are superior in terms of their environmental
impact and generate value added for its manufacturing partners. For the manufactureof interior trim parts for motor vehicles, Bonding Systems has developed reactive polyurethane-based hotmelts. This innovative technology has impressed customers because it
reduces the number of production steps, speeds up processes, and in some cases eliminates
drying time. All of which serves to reduce capital investment.
In close cooperation with external partners over an extended period of time, Forbo has
developed a universal water-based primer which is an environmentally-friendly alternative
to solvent-based primers. It can be used for manufacturing plastic furniture edges, forexample.
Business trend: demand for consumer goods adhesives still strong
In a challenging marketplace, the market segments packaging, labeling and converting(book-binding, tissues, kitchen roll and toilet paper) market segements generally­m aintained sales at the previous year’s level. The various kinds of adhesives that aresupplied mainly to these industries – in particular synthetic, water-based adhesives
and hotmelts – also performed well.
The market segments that were hit hardest by the global downturn were wood processing
and the automotive industry. However, the automotive sector recovered gradually in thesecond half of the year on the back of government stimulus programs.
Outlook: continued focus on strengthening high-margin segments
Generally speaking, Bonding Systems does not expect any significant improvement inmarket conditions in the 2010 business year. After an extended period of weak demand in
North America and Europe, the markets are expected to stabilize to some extent. Forbosees potential, albeit modest, primarily in growth markets such as Asia and the Middle East.
Raw material prices will be critical for Bonding Systems again in 2010 since raw materials
account for the lion’s share of adhesive production costs. At the end of the year underreview, raw material prices were rising, and this trend is likely to continue into 2010. One of
the major challenges will be to offset these price rises as far as possible through further
increases in efficiency and by providing higher-margin special products.

Bonding Systems

Adhesives are an age-old humaninvention that have developed
into complex systems. Nowadays,
adhesive systems are invisible
yet omnipresent in everyday life.

They provide stability and comfort
in sports shoes, make furnituresolid and textiles watertight, bindpages together to make a book,
fix wooden elements securely anddurably in place in bridges, keeptiles on the wall, attach flooring,join different materials in vehicle
interiors, ensure odor-free pack­aging and keep the packaging stable.

Synthetic polymer emulsions are abuilding block used in the adhesives, varnish, paint and construction industries. Forbo is a longstanding business partner for many
manufacturers; Bonding Systems
works with those manufacturers to
improve the quality of existingproducts and develop new ones. The
worldwide success of Forbo adhesives is based on the technologicalsophistication of the processes
and products and the durability of
the adhesive systems.

Dynamic international cus­tomers
need a partner with a global presence and many years experience,
who understands what customers
need and works together with themto develop new approaches andsolutions. The wide range of applications is the result of intensive
research and development and is
the basis of Forbo’s technologicalleadership.

Bonding Systems

creating lasting connections

Within the framework of its activities
for key customers, Bonding Systems
has developed a complete range of synthetic adhesives for labeling glass
bottles in order to avoid the use of traditional adhesives, which containdairy proteins. The expanded productportfolio now covers virtually all
customer requirements and represents a genuine leap forward.

Labeling at high speed, processing
cold, wet or hot bottles, excellent resistance to ice and condensation water,
biodegradability – all of this is now
possible without having heating up theadhesive. Probably the most impressive advantage of the swift ® tak 3000
series is the low consumption rate,particularly compared with conventional products, but also comparedwith other products available on themarket.

Tests have shown that the new seriesrequires up to 40 percent less­adhesive than other products used
for labeling glass bottles.
For the textile industry, Bonding
Systems has developed an innovative
reactive polyurethane hotmelt
with chemical and physical characteristics that ensure outstanding anddurable adhesion on surfaces whichhave already been fluorocarbon­t reated to make them water-repellent.

Optimized production processes
using innovative adhesives

When used on textiles, this fluoro­
carbon treatment makes the fabrics
water-repellent enough to increasebreathability and wearer comfort.
Textiles treated in this way are usedin outdoor, sports and leisure wear,
occupation-specific clothing andmilitary apparel.

The newly-developed reactive hotmelt
is more flexible for manufacturing
purposes. Benefits include allowing
customers to opt for f luorocarbontreated materials, when purchasing
textile components around the world,
thereby reducing production leadtimes and making it much easier tohandle the material.

In addition, the material can be moreconsistently and durably impregnated due to the higher temperatures
used in heat treatment.

24
Forbo Movement Systems:
successfully adjusted structures‘The 2009 business year was marked by a significant drop in demand worldwide, primarily in the capital goods industry, which is
crucial for Movement Systems. Europe and Japan were hardest
hit by the recession in the reporting year, so adapting structures tothe lower sales volumes was unavoidable. At the same time, thedivision launched innovative new products in the food and logistics
segments, generating substantial value added for its customers
worldwide. This proved to be a valuable support in challenging
times.’

Movement Systems

The Movement Systems division
generated net sales of CHF 310.5 million in the year under review (previous
year: CHF 371.2 million), equivalent
to a decline of 16.4 %. In local currencies, the decrease was 14.6 %. The
Transtex Belting acquisition in the summer of 2008 had a positive effect of 2.3 %, which was slightly higher than the negative
currency effect of 1.7 %. The division’s contribution to Group sales was 17.4 %. Sales declined
in all regions. The crisis left its mark in North America as early as the second half of 2008,
but in 2009 it was Europe and Japan that were primarily responsible for the drop in sales.
The structural adjustments that were initiated began to have a real effect especially inthe second half of 2009 and lifted operating profit (EBIT ), which was negative in the first half,
into the black. EBIT for the year was CHF 0.5 million (previous year: CHF 24.6 million).

Matthias P. Huenerwadel
Executive Vice President
Movement Systems

Market situation: Europe in the eye of the storm
Traditionally, Movement Systems has a broad spread across all industrial production processes and all geographic regions. It generates about two-thirds of its sales in spareparts and services and about one-third in the OEM business for the plant engineering andmachine tool sectors. Sales in America, mainly an end-customer market, had alreadyweakened considerably in the second half of 2008, touching bottom in the first quarterof 2009. Sales in this market stabilized at a low level in the reporting year. In Europe, theimpact of the crisis was felt as of early 2009, with the European machine tool industry
reporting a steep drop in sales. Since Movement Systems in this region is geared mainly
to the new plant business, Forbo also saw its sales plummet. The markets that bore thebrunt of the crisis were Germany and Italy, where the proportion of capital goods for export abroad is high. The trend in Asia was similar, especially in Japan, where the market
is driven primarily by plant engineering for the export industry. Markets in which end customers account for a large proportion of business also reported a drop in sales because
customer production capacity had to be reduced overall and maintenance budgets cut.
This trend affected the spare parts business, too.
The various customer segments did not emerge unscathed, with the global economiccrisis impacting here in the form of declining sales. Only the food and tobacco processing
sectors turned in a satisfactory performance overall as a result of successful international
launches of various new and innovative products in the food segment and major projects
in the tobacco segment in Asia.
Measures and investments: focus on strategic business activities
In these challenging times, Movement Systems altered its structures to suit the changed
circumstances and lower volumes as far as possible and concentrated on implementing
strategic projects more rapidly. The new, five-meter-wide coating machine in the Transilon
center of excellence for conveyor and processing belts in Germany promises even better
quality for technically-demanding applications such as the food industry. It will be fully
operational by the first quarter of 2010. Another area of intensive development activity wasplastic modular belts. This is a promising product group for applications as diverse asmeat and poultry processing, ski lifts and manufacturing belts in the automotive industry.
The manufacturing and logistics center for the Asia-Pacific region began operations inShanghai at the end of 2008. It has been outfitted with next-generation production equipment, guaranteeing first-class Forbo quality. The range of unti-tear and abrasion-resistantlightweight PVC conveyor belts from Transtex Belting, a company acquired in 2008, wasintegrated rapidly and successfully in the year under review.

25

The division made intensive efforts to advance the global introduction of SAP, with the aimof having a standard SAP version in place at all Forbo locations by the end of 2010. The
customer relationship management system already in use in Europe was successfully rolled
out in America.
Products: innovation means value added and savings for customers
In the past year, Forbo again launched a variety of new product developments that generatevalue added for customers. For the bakery industry, for instance, Forbo has developed
belts with greatly improved anti-stick properties. The low friction of these belts is achieved
with a special polyurethane coating with a silky-smooth surface structure, which reduces
flour loss by up to 50 percent. This saving, however, is not the only advantage for bakeries:
cleaning time is substantially reduced because less flour is required and the bred also
tastes better.
The Amp Miser product range launched in 2008 continues to enjoy global success in thelogistics industry and has already been adopted as the standard by numerous companies.
Long-term tests have convinced many large customers that they can substantially reduce
their energy consumption by up to 37 percent because of reduced friction on the undersideof the belt. This belting also considerably reduces noise levels.
Business trend: structures adjusted for new realities
The steep drop in sales in all markets in the wake of the global economic crisis seriously
impacted Movement Systems in the year under review. The division had to permanently adjust its structures and processes to the new situation, while maintaining its extremely
broad range of products and services for all markets and customers. The long-term segmentation strategies, the use of new technologies and enhancing long-standing customer
relationships provided valuable support especially in challenging times.
Forbo continued to expand geographically, establishing its own business in India in fall2009 in order to benefit more from this fast-growing market with considerable potential
going forward.
Outlook: customer requirements are the ultimate goal
Movement Systems believes that sales in 2010 will remain at more or less the same level
as in 2009, though individual markets may experience a partial recovery. Following a period
in which the division reacted and adjusted to difficult external circumstances, Forbo now
has to refocus on the way forward. More than ever, satisfying customers is at the core of its
business – supporting its customers as they find their footing in the new situation.
By focusing on processes and the expansion of the global IT systems that support theseprocesses, furthermore, Movement Systems intends to increase the transparency andefficiency of the organization.
Movement Systems sees growth opportunities in the development of new products
through improved innovation processes, in the expansion of the plastic modular belt
business activity and in further expansion in growth markets such as India and China.

Movement Systems

Global markets today require maximum mobility and flexibility inall areas of business. Though notalways visible, Forbo is nonethelesspresent almost everywhere, en­suring optimum process reliability.

High-quality conveyor and pro­cessing belts in the food industry
ensure that fresh products areprocessed efficiently and underhygienic conditions. Treadmill
belts in fitness centers keep sports
enthusiasts on the move. Conveyor
belts and flat belts are key com­ponents in paper manufacturing
and processing machines. They
are crucial for printing daily newspapers, magazines and journals.

Conveyor belts provide smoothbaggage handling at airports and an
efficient flow in the distributionof letters and packages in logistics
centers with state-of-the-art equipment. Forbo’s timing belts arevery widely used as a component inmodern drive and handling t­ ech­nology and are synonymous withcost-effectiveness, precision andrelia­bility.

As markets become more globalized, industry needs innovative
concepts for production, material
flows and logistics, in which conveyor, processing and flat belts often
play a crucial role. Leading industrial companies the world overtherefore depend on the know-how
of Movement Systems’ expertiseas a professional partner in developing sector-specific, forward­looking solutions for drives, transport and manufacturing.

Movement Systems

New developments create
value added for customers

With innovative developments in thefood segment, Movement Systems
was able to generate value added for
its customers during the reporting
period. In collaboration with a wellknown provider of bakery machines,
Forbo developed a completely new
belt which is ideal for processing
dough, as the dough does not stick tothe belt. This is due to its special
polyurethane coating with a silkysmooth surface texture which also
reduces flour loss by up to 50 percent.

As much less flour is needed for production, the belt not only reduces
costs, but also means that the machinery and equipment can be cleaned
more quickly and easily.
For conveyor and processing belts
with unsealed edges, a new design wasdeveloped in the form of Frayfree,which minimizes fraying at the beltedge.

A special type of fabric, a special
weave and an optimized fiber length
improves the hold of the fibers in
the weave. State-of-the-art technology
also ensures that the individual
weave fibers are securely bonded tothe coating material. The belt edges
are thus more resistant to mechanicalwear and tear, are suitable for all
types of conveyor belt designs andtype programs, and are easy to clean.

Siegling – total belting solutions

These belts are ideal for the production transport of packed and unpacked
food such as confectionary and baked
goods.
The energy-saving conveyor belt Amp
Miser TM, launched towards the endof 2008, has successfully establisheditself in the logistics segment. The
lower drive power required means thatthe good can be conveyed further
with just a single drive.

The innovative coating of the woven
backing leads to up to 37 % less energy
consumption depending on the load,
and thus generates less CO 2 emissions
and substantially reduces operating
costs. Another positive effect isthe reduction in noise emissions byaround 3 dB compared with conventional conveyor belts. Typical appli­
cation areas include large logistics anddistribution centers as well as airports.

30Group structureThis E. Schneider
Delegate of the Board of Directors and CEO

Tom
KaiserMichelRiva

Matthias P.
Huenerwadel

Jörg
RiboniDanielKeist

Flooring Systems

Bonding Systems

Movement Systems

Corporate FinanceCorporate Center

Sales and Marketing

North America

Americas

Controlling

Mergers & Acquisitions

TreasuryTax

Human Resources /Pensions Switzerland

IT

Communications

Pensions
International

Legal Services

Investor Relations

Risk Management

Supply Chain andResilient Operations

Europe 1

Innovation andTextile Operations

Europe 2

Services

Asia | Pacific

Buildingand ­Construction­A dhesives

EuropeAsia | PacificInternal Audit31
Executive BoardTom
KaiserMichelRiva

Matthias P.
Huenerwadel

This E.
Schneider

Flooring Systems

Bonding Systems

Movement Systems Delegate of theBoard of Directors
and CEO

Jörg
RiboniDanielKeist

Corporate FinanceCorporate Center32
Executive Board

This E. Schneider
Delegate of the Board of Directors and CEO
This E. Schneider, born 1952, is a Swiss citizen. He studied economics at the University of St. Gallen (lic. oec. HSG) and at the Graduate School of Business,
Stanford University, California, USA . After holding various management functions
in Europe and the USA , he joined the Executive Board of Schmidt-Agency, where
he was responsible for strategic planning, operations and logistics from 1984
to 1990. From 1991 to 1993 he was Chairman and CEO of the listed company SAFAA ,Paris. In 1994, he became a member of the Executive Board of Valora, withresponsibility for the canteen and catering division. From 1997 to 2002, he wasDelegate and Vice President of the Board of Directors of Selecta Group. This E.
Schneider has been Delegate of the Board of Directors and CEO of the ForboGroup since March 2004. In addition, he is a member of the Board of Directorsof Galenica SA, Rieter Holding AG and Selecta AG .

Tom Kaiser
Executive Vice President Flooring Systems
Tom Kaiser, born 1956, is a German citizen. He completed his commercial apprenticeship in wholesale and export sales at Stahlwerke Südwestfalen in 1978. In
1992, he completed the International Executive Program at INSEAD, Fontainebleau,
France. From 1979 to 1988 he worked for Krupp Handel GmbH in North andSouth America and other locations. From 1988 to 1998 he held various management positions with Vaillant GmbH. In 1998, he joined the Wolf Group as Man­
aging Director. In March 2004, Tom Kaiser was appointed Executive Vice President
Flooring Systems and member of the Executive Board at Forbo.

Michel Riva
Executive Vice President Bonding Systems
Michel Riva, born 1964, is a Swiss citizen. He studied economics at the Universityof Applied Sciences Basel and the IMD in Lausanne, where he completed his
MBA . From 1989 to 1994 he held various financial positions at Hoffmann-La Roche.
Subsequently, he headed up Strapex Corporation, Charlotte, North Carolina,
USA . From 1998 to 2004, he held various Managing Director positions within thechemical company DuPont, latterly as Business Director Europe, Middle East
and Africa for the DuPont Powder Coatings business unit. In October 2004, Michel
Riva was appointed Executive Vice President Bonding Systems and member ofthe Executive Board at Forbo.

33

Matthias P. Huenerwadel
Executive Vice President Movement Systems
Matthias P. Huenerwadel, born 1968, is a Swiss citizen. He studied engineering at
the Federal Institute of Technology, specializing in manufacturing technologies
and technology management. He began his professional career as assistant to the
Executive Board of Franke Holding AG . In 1996, he moved to the USA , where he
was responsible for logistics, information technology and customer service with
Federal Home Products, Ruston, LA . From 1999, he held various managerial positions at Franke Foodservice Systems and managed its European operations from2002 to 2005. Matthias P. Huenerwadel took over the management of the Movement Systems division in October 2005 and is a member of the Executive Board
at Forbo.

Jörg Riboni
Chief Financial Officer, Executive Vice President
Jörg Riboni, born 1957, is a Swiss citizen. He studied economics at the Universityof St. Gallen (lic. oec. HSG) and is a Swiss certified public accountant. After holding
various positions in the auditing and consultancy sector, Jörg Riboni joined
the Cosa Liebermann Group where he was Head of Controlling and Finances for
the European Division. In 1995, he was appointed Chief Financial Officer ofJelmoli AG , which was sold at the end of 1996. From 1997 to December 2005,
he was Chief Financial Officer of Sarna Kunststoff Holding AG in Sarnen. Jörg
Riboni joined the Forbo Group in January 2006. He is a member of the Executive
Board and Chief Financial Officer.

Daniel Keist
Head Corporate Center, Executive Vice President
Daniel Keist, born 1957, is a Swiss citizen. He studied economics at the Universityof St. Gallen (lic. oec. HSG) and joined UBS in Zurich in 1984, where he wasManaging Director and Co-Head of the Corporate Finance Equity Advisory unit.
From 1998 to 2001 he was a member of the Executive Committee and CFO of
the Selecta Group. He was then a partner at Ernst & Young Corporate Finance in
Zurich until 2003, where he was responsible for various M & A, restructuring
and financing transactions. Until the summer of 2007, he was a member of the
Executive Committee of SIX Swiss Exchange and headed the Admissions division.
Daniel Keist has been a member of the Executive Board since August 2007 as
Head Corporate Center.

Production area Flooring Systems Netherlands

35
Corporate governanceAt Forbo, the concept of corporate governance encompasses theentire set of principles and rules on organization, conduct andtransparency designed to protect shareholders’ interests. Forbo’s
aim is to strike a careful balance between management and con­trol. The central rules are contained in the Articles of Association,
the Organizational Regulations, and the regulations of the com­mittees of the Board of Directors. The following information is set
out in line with the Directive on Information relating to Corporate
Governance (Directive on Corporate Governance ‘DCG’) and the­r elevant publications of SIX Swiss Exchange.
Group structure and shareholders
Group structure
Forbo Holding Ltd, domiciled at Lindenstrasse 8, 6340 Baar, is a limited company under Swisslaw. The holding company holds all companies, directly or indirectly, that belong to the
Forbo Group. The operational structure of the Group is shown in the organizational charton page 30. The scope of consolidation of Forbo Holding Ltd does not include any listedcompanies. The unlisted companies within the scope of consolidation of Forbo Holding Ltd
are listed under 'Group companies' starting on page 114 of the financial report. The company name and domicile, share capital and percentage of participation along with information relating to the allocation of the Group companies to the Group’s divisions can also befound in this list.
Significant shareholders
As of December 31, 2009, 2,023 shareholders were listed in the share register of Forbo
Holding Ltd, or 118 (6 %) more than in the previous year. At December 31, 2009, Forbo Holding
Ltd knew of the following significant shareholders with a holding of more than 3 %:31.12.2009

Michael Pieper1)

As a percentage (%)
31.45

Forbo Holding Ltd2)

16.46

This E. Schneider

6.39

1) Michael Pieper holds his interest directly and indirectly through Artemis Beteiligungen I AG.
2) – 1st trading line: 8.60 %; 2nd trading line 7.86 %.
– Forbo Holding Ltd holds its interest directly and indirectly through Forbo International SA and Forbo Finanz AG.

Disclosure of significant shareholders and significant shareholder groups and their holdings
is effected in accordance with the disclosures made in the year under review pursuant to
Article 20 of the Federal Stock Exchange and Securities Trading Act (SESTA) and the provisionsof the Ordinance of the Swiss Financial Market Supervisory Authority (FINMA Stock Exchange
Ordinance).
Tweedy, Browne Company LLC reported on November 18, 2009, that it had fallen below thethreshold of 3 %. No other disclosures were made in 2009.
For further information on significant shareholders or shareholder groups, we refer thereader to the above table or to page 127 of the financial report (duty of disclosure pursuant
to Article 663c, Swiss Code of Obligations).

36

Cross-shareholdings
Forbo Holding Ltd has not entered into any cross-shareholdings with mutual capital shareholdings or voting rights.
Capital structure
Share capital
As of December 31, 2009, Forbo Holding Ltd had a fully paid up share capital of CHF
271,315.20, which was divided into 2,713,152 listed registered shares, each with a par valueof CHF 0.10. Of this amount:– 67.94 % were registered in the name of 1,979 shareholders with voting rights– 24.60 % were shares of banks respectively the SIX SIS AG pending registration of transfer– 7.46 % were registered in the share register without voting rights
The shares of Forbo Holding Ltd (security number 000354151 / ISIN CH 0003541510) are listedon SIX Swiss Exchange. No different categories of shares exist. Each share entitles theowner to one vote. Further information on the Forbo share can be found on pages 54 and55. Further information on the rights of participation associated with the share can befound on pages 49 and 50 of this Annual Report.
At the Ordinary General Meeting of Shareholders of Forbo Holding Ltd of April 25, 2008,
the Board of Directors was authorized to buy back the company’s own shares up to a maximum of 10 % of the share capital over a period of three years through a second tradingline with the purpose of extinguishing them at a later stage. By December 31, 2009, Forbo
Holding Ltd had repurchased 213,152 shares (7.856 % of the voting rights) via the second
trading line. In other words, the total has not changed since January 1, 2009. At the Ordinary General Meeting of Shareholders of Forbo Holding Ltd on April 24, 2009, the Board of
Directors was then authorized to sell or to use for acquisitions or for securing convertible
or option rights those 213,152 shares repurchased pursuant to the share buyback program
adopted by the Ordinary General Meeting on April 25, 2008 via the second trading line of
the SIX Swiss Exchange. Should these shares not have been sold or used for acquisitions orfor securing convertible or option rights by the date of the Ordinary General Meeting in
2011, the Board of Directors is obliged to propose to the Ordinary General Meeting of 2011at the latest that these shares be destroyed.
Conditional and authorized capital
Pursuant to § 6 of the Articles of Association, Forbo Holding Ltd has a maximum conditional capital of CHF 16,645, corresponding to 166,450 registered shares to be paid up in fullwith a par value of CHF 0.10 each. The capital increase takes place in accordance with
the Articles of Association through the exercise of option and convertible rights which are
granted in connection with bonds issued by the company or one of its subsidiaries andthrough the exercise of option rights which are granted to the shareholders. Except forshareholder options, shareholders have no right of subscription. Holders of option or convertible rights are entitled to subscribe to the new shares. The registration of the newshares is subject to the general restriction set out in § 4 of the Articles of Association, which
stipulates that shareholders are entered in the share register with voting rights only ifthey declare expressly that they have acquired the shares in their own name and for theirown account.
There is no authorized capital.

37

Changes in capital
The Ordinary General Meeting of Forbo Holding Ltd on April 24, 2009 decided, based on
the audit report of an accredited expert auditor, to reduce the ordinary share capital of thecompany by CHF 10,581,292.80 from CHF 10,852,608 to CHF 271,315.20 by reducing the parvalue of the shares from CHF 4 to CHF 0.10. It was further decided to pay out the differenceof CHF 3.90 per share to the shareholders and to amend the Articles of Association accordingly.
The Ordinary General Meeting of Forbo Holding Ltd on April 25, 2008 decided, based on
the audit report of an accredited auditor, to reduce the ordinary share capital of the company
by CHF 27,131,520 from CHF 37,984,128 to CHF 10,852,608 by reducing the par value of theshares from CHF 14 to CHF 4. It was further decided to pay out the difference of CHF 10 per
share to the shareholders and to amend the Articles of Association accordingly.
The Ordinary General Meeting of Forbo Holding Ltd on April 27, 2007 decided, based on thespecial audit report of a specially appointed auditor, to reduce the ordinary share capitalof the company by CHF 16,278,912 from CHF 54,263,040 to CHF 37,984,128 by reducing the parvalue of the shares from CHF 20 to CHF 14. It was further decided to pay out the differenceof CHF 6 per share to the shareholders and to amend the Articles of Association accordingly.
Participation certificates and 'Genussscheine' (non-voting equity securities)
Forbo Holding Ltd has neither participation certificates nor non-voting equity securities.
Limitations on transferability and nominee registrations
Forbo Holding Ltd does not have any percentage limitations on voting rights. The Board of
Directors may only refuse to register stock in the share register if the purchaser of thestock does not expressly declare at the company’s request that he has acquired the sharesin his own name and for his own account.
Pursuant to § 4 of the Articles of Association, nominees may be entered in the share registerwith voting rights for up to a maximum of 0.3 % of the registered share capital entered in
the Commercial Register. Over and above this limit, nominees are only entered provided thename, address and shareholding of those persons are disclosed for whose account thenominee holds a total of 0.3 % or more of the registered share capital entered in the Commercial Register.
Resolutions on the amendment or abrogation of the clause on the registration of registeredshares require a majority of two thirds of the votes represented at the General Meeting andthe absolute majority of the par value of the shares represented.
No statutory privileges exist and there is no restriction on the transferability of the sharesof Forbo Holding Ltd.
Convertible bonds and warrants / options
Forbo Holding Ltd has no outstanding convertible bonds nor has it issued any marketablewarrants / options. Information on the option program available to the Executive Board canbe found on pages 47 until 49, as well as on pages 96 and 97 of this Annual Report.

38

Board of Directors
Members of the Board of Directors
The cutoff date for the following information is December 31, 2009.
With the exception of This E. Schneider, Delegate of the Board of Directors and CEO, noneof the members of the Board of Directors listed below has or has had any operational
management tasks for Forbo Holding Ltd or its Group companies. With the exception ofThis E. Schneider, none of the members of the Board of Directors sat on the Executive
Board of Forbo Holding Ltd or the management of its Group companies in the three business years preceding the period under review. There are no essential business relationships between the members of the Board of Directors and Forbo Holding Ltd or its Group
companies.
Dr. Albert Gnägi, Chairman
Albert Gnägi, born in 1944, is a Swiss citizen. He studied law at the Universities of Zurich
and Rome and holds a doctorate in law (Dr. iur.). He practices law in Zurich, specializingin commercial, company and inheritance law. He was Chairman of the Board of Selecta Group
from the IPO in 1997 until the takeover by the British company Compass Group in early
2001. From 1982 to 1997, he was a member and Chairman of the Board of Directors of Immuno
International AG , a manufacturer of biological pharmaceuticals, which went public in
Zurich in 1989. Since 1980, Albert Gnägi has been a member of the Board of Trustees of theSanitas Hospital in Kilchberg, and its president since 2002. He has been Chairman of theBoard of Directors of SAM Group Holding AG , Zurich, since 2007. He holds additional board
memberships in other companies and foundations. He has been Chairman of the Boardof Directors of Forbo Holding Ltd since March 2005.
Michael Pieper, Vice Chairman
Michael Pieper, born in 1946, is a Swiss citizen. He took a degree in economics (lic. oec. HSG)
at the University of St. Gallen. Michael Pieper has been with the Franke Group since 1988
and its owner and CEO since 1989. He is a member of the Board of Directors of Hero AG ,advalTech Holding AG , Feintool International Holding AG , Berenberg Bank (Schweiz) AG and
Rieter Holding AG in Winterthur. He was first elected to the Board of Directors of Forbo
Holding AG in 2000.
This E. Schneider, Delegate and CEO
For the curriculum vitae of This E. Schneider, please see page 32 of this report.
Dr. Peter AltorferPeter Altorfer, born in 1953, is a Swiss citizen. He studied law at the University of Zurich andholds a doctorate in law (Dr. iur.). He attended the PED program at the IMD, Lausanne. Until
1988, he worked at Bank Leu AG, subsequently as attorney at law, and today as partner at
the law firm Wenger & Vieli in Zurich, specializing in bank and company law. Peter Altorfer isa member of the Board of Directors of various companies, including Huber + Suhner AG ,Herisau, agta record ag, Fehraltorf, Abegg Holding AG , Zurich, several private and foreignbanks and non-listed investment companies in Switzerland. He has been a member of theBoard of Directors of Forbo Holding Ltd since March 2005.

39

Elected until OGM

AFC

HRC

Board of Directors of Forbo Holding Ltd
at December 31, 2009First elected

Vincent Studer
Vincent Studer was born in 1962 and is a Swiss citizen. He completed the Advanced Schoolof Economics and Business Administration in Berne and the formation as a Swiss certified
public accountant. In addition, he has attended various national and international training
courses. From 1991 to 2008, Vincent Studer worked at Ernst & Young AG in Berne as an external auditor and was head auditor auditing the statements of national and international
companies in various industries. In 2001 he was appointed a partner in the area of Auditing.
Since 2008 he has been a partner and member of management of the accountancy andauditing firm T & R AG , Gümligen / Berne, where he heads the Auditing business unit. Vincent
Studer is a member of the Board of Directors of Bank EEK AG in Berne and holds additionalboard memberships in other companies and foundations. He has been a member of theBoard of Directors of Forbo Holding Ltd since April 2009.

2005

2010

M

C

2000

2010

–

M

2004

2011

–

–

2005

2011

M

M

2009

2012

C

–

Chairman
Dr. Albert Gnägi
Non-executive director
Vice Chairman
Michael Pieper
Non-executive director
Members
This E. Schneider
Delegate of the Board of Directors and executive director
Dr. Peter Altorfer
Non-executive director
Vincent Studer
Non-executive director
Secretary of the Board
Nicole Häfeli
Non-member
AFC: Audit and Finance Committee
HRC: Committee for Human Resources and Remuneration
C: Chair
M: Member

Production area Bonding Systems China

41

Elections and terms of office
The members are elected by the General Meeting for a term of three years. A year is definedas the period between two Ordinary General Meetings. The first term of office after the
first election of a member of the Board of Directors is designed so that every year about one
third of all members have to be elected or re-elected. Members may be re-elected several
times. At the Ordinary General Meeting on April 24, 2009, Vincent Studer was elected as a
new member of the Board for a term of three years in a single vote. He replaced Dr. Rudolf
Huber. Further details on the terms of office of the other members of the Board of Directors
are contained in the table on page 39. In accordance with the Organizational Regulationsof Forbo Holding Ltd, members who have reached the age of 70 resign from the Board of
Directors at the Ordinary General Meeting of the following year. The average age of theincumbent members of the Board is around 58. In determining the composition of theBoard of Directors, importance is attached to the election of independent individuals withinternational experience in industrial companies as well as in the financial and consultancy
sectors.
Internal organizational structure
The allocation of tasks within the Board of Directors and the composition of the two Board
committees are shown in the table on page 39.
Decisions are as a general rule taken by the full Board of Directors. The Board constitutes twostanding committees from its own ranks – the Audit and Finance Committee ( AFC) andthe Committee for Human Resources and Remuneration (HRC) – to deal with clearly defined
subject areas of overriding importance. These two committees have mainly advisory andcontrol functions. In addition, the HRC is empowered to determine the compensation paid
to members of the Executive Board. The remuneration of the Delegate of the Board of
Directors and CEO is determined by the full Board of Directors. The members of these twocommittees are elected by the Board of Directors on an annual basis and can be dismissed
at any time.
As a rule, the Chairman of the Board of the Directors chairs the meetings of the Board andthe General Meeting. He plans and conducts the meetings of the Board and the General
Meeting. The meetings of the Board and the relevant items on the agenda are prepared by
the Chairman in consultation with the CEO. The Chairman monitors the execution of themeasures adopted by the Board and is in regular contact with the CEO for this purpose. He
is the direct superior of the CEO. In addition, the Chairman, in consultation with the CEO,represents the Board vis-à-vis the public, the authorities and the shareholders.
The Vice Chairman is tasked with deputizing for the Chairman should the latter be prevented for any reason whatever. In accordance with the Organizational Regulations andactual practice, the Vice Chairman has no further duties.
The Delegate of the Board of Directors is also CEO and as such is responsible for the­o perational management of the Group and for the tasks delegated to him by the Board of
Directors. The members of the Executive Board report to him for the exercise of thisfunction.
The Chairman, Vice Chairman and Delegate (CEO) are elected by the Board of Directors.

42

The Board of Directors meets on being convened by the Chairman, as often as business
requires but at least four times a year. When the Board is convened, the items on the agenda
must be notified at least five working days before the day of the meeting. This notification
period may be shortened in urgent cases. In 2009, the Board of Directors met six times, themeetings usually lasting a full day.
After mutual consultation, the Chairman and the CEO may invite members of the Executive
Board or other senior employees to attend Board meetings for individual items. Regularuse is made of this option. External consultants participate in the meetings of the Board of
Directors, the AFC or the HRC only in exceptional circumstances to deal with particular
items. As a rule, however, the meetings are held without external consultants.
Audit and Finance Committee
The Audit and Finance Committee (AFC) advises the Board of Directors in respect of its duties
towards the company in the areas of financial reporting, the accounting standards andsystems used, and decisions with significant financial implications. The AFC monitors theactivities of the internal auditors and the external auditors. Moreover, it establishes theaudit program of the internal auditors and proposes to the Board of Directors the choice ofthe external auditors for the attention of the Ordinary General Meeting. The CEO, CFO,
and Head Corporate Center are regularly requested to attend the meetings in an advisory
capacity, while the internal and external auditors may attend on special invitation.
The AFC convenes as often as business requires, but at least twice a year. In the 2009business year, two meetings were held, each lasting about half a day. The external auditors
were present at selected items on the agenda of the meeting of the AFC on the annual
financial statements, while the Ernst & Young representatives responsible for internal
auditing attended the discussion on the internal audit reports at both meetings of the AFC .
Committee for Human Resources and Remuneration
The Committee for Human Resources and Remuneration (HRC) advises the Board of Directors
in respect of its human resources duties towards the Group, in particular as regards theBoard itself and senior management personnel. The HRC prepares proposals for the attention of the Board of Directors regarding the selection of the members of the Board andof the CEO, and it assesses and approves the proposals of the CEO regarding the employmentof the Executive Board members. It prepares recommendations for the Board of Directors
regarding the remuneration of the Board, the Chairman, the Committee members and theCEO. The CEO is regularly involved in an advisory capacity. Agenda items and matters affecting the function or the person of the CEO are deliberated in his absence.
The HRC convenes as often as business requires. In the 2009 business year, two meetings
were held, each lasting about half a day.

43

Areas of responsibility
The Board of Directors bears ultimate responsibility for the management of Forbo Holding
Ltd. The main duties of the Board are the following non-transferable and indefeasible tasks
pursuant to the Swiss Code of Obligations and the Articles of Association:– ultimate management of the company and issuing the necessary directives– defining the organization– organization of accounting, financial controlling, and financial planning– appointment and dismissal of persons entrusted with management of the company– p reparation of the Annual Report and of the General Meeting and implementation of
its resolutions– notification of the court in the event of overindebtedness
The Board of Directors bears ultimate responsibility for supervising and monitoring management of the company and is responsible for the corporate strategy. It issues guidelines
for business policy and is regularly briefed on the current state of business.
Business to be dealt with by the Board of Directors is regularly submitted in advance to
the AFC , HRC , ad hoc committees or individual members, depending on the subject, forreview or an opinion. With the exception of its non-transferable and indefeasible tasks, theBoard of Directors may transfer tasks and responsibilities in full or in part to individual
members of the Board or to third parties.
The Board of Directors is empowered to take decisions on all matters which are not reservedor transferred to the General Meeting or another body of Forbo by law, the Articles of­A ssociation or regulations.
Management of the company has been delegated entirely to the CEO. Accordingly, the CEO
is responsible for the operational management of the Group.
In carrying out his tasks, the CEO is supported by the members of the Executive Board,
who report to him directly. The Executive Board comprises the CEO, CFO, Head Corporate
Center, and the Executive Vice Presidents of the three divisions. It is responsible forthe long-term success and market-driven management of the Forbo Group. This involves
preparing the bases for decision-making for the Board of Directors regarding:– corporate strategy, corporate targets, business policy, medium-term plans and budgets– corporate organization– organization of accounting, financial planning and financial controlling– financing and treasury principles– human resources and compensation policy
The members of the Executive Board are responsible for their particular area of activity andalso bear co-responsibility for safeguarding the interests of the Group and achieving thefinancial Group result.

44

Information and control instruments vis-à-vis management
The Executive Board meets as often as business requires, normally once a month. In the2009 business year, eleven meetings were held, each lasting from half a day to a full day.
At the meetings of the Board of Directors, any member may request information about all
matters concerning the Forbo Group. Outside the meetings, such requests for information
are to be addressed to the Chairman. The CEO and the other members of the Executive Board
inform the Board of Directors at each regular meeting about the current state of business,
important business events and significant deviations from the budget.
The Chairmen of the AFC and HRC report at the Board meetings on the activities of theircommittees and express the opinions and recommendations of the AFC or HRC on thebusiness items on which decisions are to be taken. Each member of the Board of Directors
has the right to inspect the minutes of the AFC and HRC meetings. The Executive Board
reports to the AFC through the CFO and the Head of the Corporate Center in consultation
with the CEO; it reports to the HRC through the CEO.
The Board is also regularly briefed outside meetings about events and challenges facing
the Group and the general performance of the divisions. In addition, the Chairman, Vice
Chairman and CEO are in regular contact when essential business policy issues are involved.
For important, particularly urgent events, the CEO informs the Chairman and the othermembers of the Board immediately.
The Delegate of the Board, who is at the same time CEO, conducts the meetings of the
Executive Board. For details concerning the participation of members of the Executive Board
in meetings of the Board of Directors and its committees, see the sections on internalorganization, the AFC and the HRC on pages 41 and 42.
The Board of Directors furthermore fulfils its supervisory and monitoring obligations bymeans of financial reporting and its role in the planning cycle. The internal and external
auditors also assist the Board in this task. Neither the external auditors nor the internal
auditors, however, were invited to any meetings of the Board of Directors in 2009 as there
were no special incidents or discoveries.
As part of financial reporting, the Board of Directors is informed as a rule once a month inwriting about the company’s current business performance and earnings situation by meansof annotated income statements, key ratios and deviation analyses.
The Board of Directors is, moreover, closely involved in the company’s planning cycle. As arule, the existing strategy is subjected to a thorough review by the Board in the first half ofthe year. The revised strategy is quantified in the three-year medium-term plan, which isapproved at mid-year by the Board. Based on the medium-term plan, the Board of Directors
sets the budget objectives for the coming business year. These budget objectives are thebasis for the detailed budget, which is approved and adopted by the Board of Directors in
the fourth quarter.

45

The current business year is assessed in a first estimate always at the end of April and in asecond estimate at the end of September. On completion of the business year, the extent towhich the budget has been reached is checked and deviations are analyzed. This analysis
is used to derive appropriate measures, which are then implemented in the next planning
cycle.
Internal Auditing is effected by Ernst & Young, which has been commissioned for thispurpose. Internal Auditing is administratively subordinated to the Head Corporate Centerand is functionally independent. It reports to the AFC .
The audits are conducted in accordance with an annual plan approved by the AFC . The
following types of audit are distinguished: full scope audits, limited reviews, follow-up
reviews, compliance audits und special engagements. The risks and weaknesses identified
in these audits are, where necessary, minimized or eliminated by measures adopted bymanagement and are constantly monitored.
In 2009 a total of seven full scope audits, one follow-up review and one special engagement
audit were conducted. The full scope audits were limited to individual business processes.
Internal Audit included in its review of audited Group companies any key controls that had
been defined in the framework of the internal control system (ICS). Internal audits, furthermore, involve various compliance reviews related to these processes. Lastly, additional risks
and controls in connection with the above-mentioned business processes were analyzed
in the audit. At least one company in each division was audited in the course of the full scope
audits.
By means of walk-through tests, the implementation and reliability of the controls introduced with ICS were examined on a random basis.
Risk management
The ongoing and systematic evaluation of current and future risks invariably involves iden­tifying and capitalizing on opportunities. Forbo regards risk management as a managerial
and working tool designed to – amongst others – safeguard the tangible and intangible
assets of the Group.
Forbo has a risk-based insurance coverage in line with industry practice and has appropriately insured in particular operational risks such as property damage, business interruption,and statutory liability. The risks specifically in the areas of property damage, business­interruption and liability are examined in the context of periodic risk engineering reports byexternal experts. For this purpose, production companies are visited at regular intervals,
and comprehensive surveys are worked through with local management. Action plans are
drawn up and implemented based on the risks identified. These risk engineering reports
have been prepared since 1990.
As regards business risks, Forbo addresses both strategic risks and market and financial
risks. In the area of market risks, interest and currency risks are monitored centrally andhedged in certain cases. The liquidity and financing of subsidiaries are also monitoredcentrally. Please also refer to pages 110 to 112 of the financial report.
With regard to the risk management process pursuant to Article 663b section 12 of the
Swiss Code of Obligations, the reader is referred to the relevant explanations on page 131(note 18 on 'Risk assessment') and on pages 109 to 113 (note 37 on 'Risk assessment andfinancial risk management') of the financial report.

Logistics area Movement Systems North America

47

Executive Board
Members of the Executive Board, activities and vested interests
The members of the Executive Board, their nationality, function, training and professional
career as well as other activities and vested interests are set out on pages 32 and 33 of thisAnnual Report.
Management contracts
Forbo Holding Ltd has concluded no management contracts with third parties.
Compensations, shareholdings and loans
Content and methodology of determining the compensationand the shareholding programs
Board of Directors
The amount of compensation paid to the Board of Directors is worked out by the HRC inthe spring for the current year and submitted to the full Board of Directors at its April
meeting for approval. In order to determine the remuneration, the compensation paid to
Board members of Forbo Holding Ltd is compared with that paid to Board members ofcomparable industrial companies based on information that is available from publicly
accessible sources or is known to Board members from their experience of office in similar
companies. Industrial companies are regarded as comparable which are similar to Forboin terms of sector, structure, size and complexity. No external consultants are co-opted for
determining the remuneration.
The members of the Board of Directors receive a fixed remuneration, the amount of whichis gradated according to whether the member is Chairman or a simple member of the Board
and whether he is a member of the AFC or HRC . 40 % of the consideration is distributed to
the Board of Directors as Forbo stock. These shares have a vesting period of three years. The
shares are valued by taking the average price in the ten stock market days after distributionof a dividend or repayment of par value. If no dividend is distributed or no repayment of parvalue is made, the average price during the first ten stock market days in June of the relevantbusiness year applies. Payment and distribution of the shares take place in December.
The amount of the remuneration for each Board member in the year under review, alongwith the details of the valuation of the shares, can be found on pages 108, 109 and 128 of
the financial report.
Executive Board
The amount of the fixed remuneration and the target bonus for the Executive Board is set
by the HRC in the fall for the following year; members of the Executive Board are excluded
from the deliberations. In determining the compensation, criteria such as function, respon­
sibility and experience are taken into account, and the compensation paid to members of
the Forbo Executive Board is compared with that paid to executive board members incomparable industrial companies based on information that is available from publicly accessible sources or is known to the members from their experience of office in similar companies. Industrial companies are regarded as comparable which are similar to Forbo in terms ofsector, structure, size and complexity. No external consultants are co-opted for determining
the remuneration.
The compensation of the members of the Executive Board consists of a fixed base salary plus
a performance-related bonus, which is determined in March, on completion of the business
year, on the basis of individual and company target achievement.

48

The variable component (performance-related bonus) is tied to financial (quantitative) andqualitative targets which are defined in accordance with the operational responsibilityof the Executive Board member in question. The qualitative targets are geared to the company’s long-term sustainable development and may account for between 15 % and 40 %of the total variable component; the remaining portion of the variable component depends
on the achievement of the financial (quantitative) targets. Depending on the function of
the Executive Board member in question, these may be Group and / or divisional objectives
and refer in particular to net sales, EBITDA , EBIT, current assets and net income. The variable
component may be as much as 120 % of the fixed remuneration, depending on the individual’s target achievement.
Payment of a bonus is linked with the Management Investment Plan (MIP) launched in 2006.
At least 50 % of the annual bonus of Executive Board members is thus paid into the MIP.
25 % of these sums in the MIP are invested in options and 75 % in shares. Shares and options
are subject to a three-year vesting period; the options have a maturity of five years.
Of special note with regard to the MIP is the treatment of options in the event of termination of the employment contract, invalidity or retirement. If notice is given terminating theemployment contract during the vesting period, the options are repurchased; the repurchase price corresponds to 100 % of the theoretical average value of the option based on
the share price during the last 14 trading days for the share before the employment contract
was terminated. In the event of invalidity or retirement (including early retirement), theoptions – regardless of whether or not they are still subject to a vesting period – may besold during the entire remaining period to maturity from the moment the invalidity or
retirement begins.
As per the balance-sheet date December 31, 2009, the Executive Board held the following
options:

Allocation

No.

Term

Vested until Subscription ratio

Strike price
CHF

2005

* 2,650

15.06.2005 – 14.06.2010

14.06.2008

1:1

235.00

2006

6,294

19.04.2006 – 19.04.2011

20.04.2009

1:1

370.00

2007

5,250

15.03.2007 – 15.03.2012

15.03.2010

1:1

564.69

2008

5,446

19.03.2008 – 19.03.2013

19.03.2011

1:1

822.00

2009

7,028

2.04.2009 – 2.04.2014

3.04.2012

1:1

214.63* Including the options held by the Delegate of the Board of Directors and CEO.

The amount of the remuneration for the Executive Board in the year under review, alongwith the details of the valuation and distribution of the shares and options, can be found on
pages 108, 109, 128 as well as 130 of the financial report. This compensation consists ofthe base salary, a performance-related bonus, private use of the company car, employer contributions to the pension funds, AHV / ALV (old-age and unemployment insurance) and
accident and company sick payment insurance.

49

With the exception of the severance payment for the Delegate of the Board of Directors
and CEO mentioned below, no severance payments have been agreed with Executive Board
members.
Delegate of the Board of Directors and CEO
The Delegate of the Board of Directors and CEO has a separate remuneration model which is
independent of that of the Board of Directors and Executive Board; he is also not a participant in the Management Investment Plan (MIP).
In fall 2005, it was agreed with the Delegate of the Board of Directors and CEO that part ofhis compensation for 2005 and the compensation for the following five years (from 2006 up
to and including 2010) would be paid largely in stock. In lieu of salary payments for thecontractual period of employment until December 31, 2010, he was allocated a number ofshares for the entire five-year term of the agreement (i.e. 2006 – 2010). These shares aretime-vested until December 31, 2010 and freely available only as of January 1, 2011. Should
he leave the company before this date, the shares must be returned on a pro rata basis.
Under the terms of this model, the Delegate of the Board of Directors and CEO is entitled toa severance payment amounting to a maximum of 18 monthly salaries in the event of
notice being given for which he was not at fault. This right lapses without compensation
on expiry of the vesting period on December 31, 2010.
With effect as of January 2009 the employment contract with the Delegate of the Boardof Directors and CEO was extended to encompass the period from January 1, 2011 to April 30,
2013. The remuneration will again be mainly in shares. The modalities correspond to thegreatest extent with the first contract. The 29,775 shares are vested until December 31, 2013.
No severance payment has been agreed as part of this contract extension.
In addition to the share package, the Delegate of the Board of Directors and CEO draws anannual cash compensation, which is used for settlement of employee contributions to thepension fund and to social security. With the share package and the cash remuneration,
all compensations such as bonuses, inflation, adjustments, options, etc. are settled.
The relevant figures for this compensation model are found on pages 108 and 128 of thefinancial report.
Shareholders’ participation
Voting right restriction and representation
The registration of shares with voting rights in the share register requires the consent of
the Board of Directors. Such consent may be withheld if the purchaser does not expressly
declare that he has acquired and is holding the shares in his own name and for his own
account. Pursuant to the Articles of Association, nominees may be entered in the share register with voting rights for up to a maximum of 0.3 % of the registered share capital enteredin the Commercial Register. The restriction regarding the registration also applies toshares that are subscribed or acquired through exercise of a subscription, option or convertible right. Resolutions on the amendment or abrogation of the clause on the registrationof registered shares requires a majority of two thirds of the votes represented at the General
Meeting and the absolute majority of the par value of shares represented.
Deviating from Article 689, paragraph 2, Swiss Code of Obligations, shareholders who areunable to attend the General Meeting in person may not be represented by any third
party of their choosing. They may only be represented by a member of a corporate body ofthe company, the independent proxy or another shareholder who is registered in theshare register.

50

Statutory quorums
Pursuant to § 13 of the Articles of Association, resolutions on the amendment or abrogationof the provisions regarding the moving of the company’s domicile, conversion of registered shares into bearer shares, registration of registered shares, representation of shares at
the General Meeting, the dissolution or merger of the company, and amendment of § 13
paragraph 4 of the Articles of Association require the approval of two thirds of the votes
represented at the General Meeting and the absolute majority of the par value of the shares
represented.
Convening of the General Meeting
The General Meeting is convened in accordance with the statutory provisions.
AgendaShareholders who represent at least 1 % of the share capital may request that an item beplaced on the agenda. This request must be communicated to the Board of Directors inwriting, indicating the proposals, at least 45 days before the date of the General Meeting.
Entry in the share register
Pursuant to the Articles of Association, shareholders’ rights of participation and represen­tation at the General Meeting are determined by the status of the share register on the
fourth day before the General Meeting.
Changes in control and defense measures
Duty to make an offer
The Articles of Association of Forbo Holding Ltd do not contain an opting-up clause or an
opting-out clause pursuant to Article 32 and 22 SESTA . However, as regards the determi­
nation of the minimum price, the Articles of Association deviate from Article 32, paragraph 4
SESTA in that, in the event of a compulsory offer, the offer price must at least correspondto the share price and may not be lower than the highest price which the bidder paid in thelast twelve months for shares of the company.
Clause in changes of control
As per year-end 2009, one member of the Executive Board is entitled to claim a severance
payment due to a change in the controlling shareholder in the event that certain conditions
arise. This severance payment corresponds to one annual salary at most.
Auditors
Duration of the mandate and term of office of the head auditor
PricewaterhouseCoopers have been the Forbo Group’s auditors since 1987. The predecessor
company of PricewaterhouseCoopers had been Forbo’s auditors since 1928. The auditors
are elected every year by the Ordinary General Meeting on a proposal by the Board of Directors. As the Auditor in Charge has to be changed at least every seven years, Daniel Ketterer
took over the function of Auditor in Charge as of the 2009 business year.
Auditing fees
The auditing fees levied by the Group’s auditors for auditing the consolidated financial
statements, including the statutory audit of the individual financial statements of theholding company and the consolidated subsidiaries, amounted to CHF 1.4 million in theyear under review.

51

Additional fees
For the year 2009, the auditing company invoiced additional consulting fees of CHF 0.7
million. Of this amount, CHF 0.6 million was for tax advice, and CHF 0.1 million for transaction
advisory services.
Informational instruments pertaining to the external audit
The external auditors prepare for the CEO, the CFO and the Head Corporate Center an annual
Management Letter on their work and the results of their audit at Group level in the year
under review. The key points are submitted to the Board of Directors in the form of a comprehensive report. The external auditors also prepare Management Letters on the subsidiaries they have audited. The AFC assesses and evaluates the proposals and statements it hasreceived and appraises the corrective measures taken by management. At the AFC’s invitation, representatives of the external auditors attend the AFC meetings in an advisory capacity.
The Chairman of the AFC reports on the activities of the AFC and its assessment of theexternal auditors at the meetings of the Board of Directors. Any member of the Board of
Directors has access to the minutes of the AFC meetings.
At its meetings, the AFC assesses the performance and fees of the external auditors as wellas their independence in both their auditing and their non-auditing capacities. This eval­uation is based on the documents provided by the external auditors and the discussion heldwith the external auditors in the meetings. It also relys on the evaluation of the CFO, who
obtains the opinion of local management with regard to the audit work for the subsidiaries.
The criteria for the evaluation of the external auditors are, in particular, their technical andoperational competency, their independence and objectivity, delivery of the audit reports
on time, breadth and focus of the audits, and the ability to provide effective and practical
recommendations. This assessment by the AFC forms the basis for the proposal made by the
Board of Directors to the Ordinary General Meeting regarding the choice of the external
auditors.
Information policy
Transparency for investors
Forbo provides objective and periodic communication with shareholders, the capital market,
the media and the public by reporting in timely fashion on business trends and activities
relevant for the company. Both the Chairman of the Board of Directors and the CEO can becontacted directly for such information.
Shareholders receive summary reports on the business year as well as half-year reports. The
Annual Report, like all other published documents, is available in printed form as well ason the Internet at www.forbo.com. The Ordinary General Meeting is an additional platform
for the exchange of information. Periodic publication of media releases and the annual
media and analysts’ conference are further information instruments for the capital market
and the media.
Ad hoc communication
The push and pull links for the dissemination of ad hoc releases in accordance with the
Directive on Ad hoc publicity of the SIX Swiss Exchange are available at the following
addresses:
www.forbo.com � Medien Center � Medienmitteilungen � Subscription Service
www.forbo.com � Media Center � Media Releases � Subscription Service
Communications to registered shareholders are sent by ordinary mail to the addresses
stated in the share register. The company’s official publication is the Swiss Commercial
Gazette.

Linoleum drying room Flooring Systems Netherlands

53

A financial calendar with the key dates can be found on the last page of the inlay at the
beginning of this report. Further information on the Forbo share is printed on pages 54 and55 of this Annual Report.
Publications may be ordered by email, fax or telephone.
E-mail: communications@forbo.com
Phone: + 41 58 787 25 25
Fax: + 41 58 787 20 25
The contact address for Investor Relations is:
Forbo International SA
Jörg Riboni, CFO
Lindenstrasse 8
P.O. Box 1041
CH -6341 Baar
Phone: + 41 58 787 25 25
The contact address for press information is:
Forbo International SA
Karin Marti, Head Corporate Communications
Lindenstrasse 8
P.O. Box 1041
CH -6341 Baar
Phone: + 41 58 787 25 25

54
The Forbo share

The serious financial crisis in 2008 spilled over into the real economy in 2009. Consumer
demand faltered, world trade fell into a slump, and companies were caught in a deepening
credit crunch. As a result, the equity markets went into a tailspin in the first quarter of2009. On March 13, 2009 the Forbo share touched bottom at CHF 140, 28 % below the level
it had been trading at a year previously.
In the second quarter of 2009, the tireless efforts of the world’s central banks plus various
government stimulus packages and rescue measures helped prevent the world economy
from going into free fall. The fears that had virtually paralyzed the capital markets earlier inthe year were allayed.
In the third and fourth quarters of 2009, market players began to feel more confident thatthe crash that had stunned the markets in the first quarter was unlikely to recur in thenear future. The restoration of calm on the equity markets along with low interest rates com­­bined to give market players an incentive to invest in risky assets again, with the resultthat the markets bounced back strongly.
The Forbo share, which had underperformed the market in 2008 because of its cyclicalnature, began to rally in the second quarter of 2009. The Forbo share staged an increasingly
dynamic upturn in the third and fourth quarters. The company had succeeded in convincing the market that it would manage the turnaround despite the difficult circumstances.
The successful placement of a CHF 150 million bond on the Swiss capital market in July2009 also had a positive effect.
The Forbo share outperformed the Swiss Performance Index (SPI) by a wide margin in 2009,closing the year at CHF 340. This was 74 % higher than the year-end price in 2008, whereas
the SPI gained about 23 % in the same period.
The Forbo share in comparison to the SPIForbo share
CHF

SPI

750

163 %

700

146 %

650

128 %

600

111 %

550

93 %

500

75 %

450

58 %

400

40 %

350

23 %

300

5%

250

– 12 %

200– 30 %

150– 47 %– 65 %

Dec. 31, 2005

Dec. 31, 2006

Dec. 31, 2007

Dec. 31, 2008

Dec. 31, 2009

55

2009
Number

2008
Number

2007
Number

2006
Number

2005
Number2,713,152

2,713,152

2,713,152

2,713,152

2,713,152

2,266,593

2,230,729

2,453,379

2,577,198

2,634,849

Share buyback second line

213,152

213,152---

Other treasury shares

211,988247,852

238,354

114,535

56,884

Reserve shares (without dividend rights)

21,41921,41921,41921,41921,419

Share capital
Issued registered shares1)
Thereof:
Shares outstanding

Issued nominal capital

CHF

CHF

CHF

CHF

CHF

271,315

10,852,608

37,984,128

54,263,040

54,263,040

Shares outstanding

226,659

8,922,916

34,347,306

51,543,960

52,696,980

Share buyback second line

21,315

852,608---

Other treasury shares

21,199991,408

3,336,956

2,290,700

1,137,680

Reserve shares (without dividend rights)

2,142

85,676

299,866

428,380

428,380

CHF

CHF

CHF

CHF

CHF

Total
Thereof:

Data per share
Shareholders’ equity Group

301

250

281

246

212

Group profit2)7)

33.7

6.9

44

24

– 17

Gross dividend and cash distribution

6.03)

3.9

10

6

0

High

1.85)

0.64)

1.44)

1.24)

0

Low

4.35)

2.14)

2.24)

2.14)

0

Payout ratio (in %)

18

57

23

25

0

Stock market statistics

CHF

CHF

CHF

CHF

CHF

7)

Gross dividend yield (in %)6)

Share prices

Market capitalization (m)7)

High

343

705

722

490

285

Low

140

188

447

291

233

Year-end

340

195

700

486

285

High

777

1,573

1,770

1,263

751

Low

317

420

1,097

750

614

Year-end

771

435

1,717

1,253

751

1) Nominal value per share 2009: CHF 0.10, 2008: CHF 4, 2007: CHF 14, 2005 and 2006: CHF 20.
2) Read also in the financial report, notes financial statements, page 88, earnings per share.
3) Proposal of the Board of Directors to the Ordinary General Meeting.
4) Calculated on the basis of a cash distribution in the form of a reduction in par value.
5) Calculated on the basis of a cash distribution in the form of a dividend payment.
6) Gross cash distribution as a percentage of Group profit.
7) Based on shares outstanding.

Fabrication area Movement Systems North America

57
Forbo Group
Annual Report
2009

Financial Report

Content

Forbo Group Financial Report
58

Consolidated balance sheet

59

Consolidated income statement

60

Comprehensive income statement

61

Consolidated shareholder’s equity

62

Consolidated cash flow statement

63

Notes – accounting principles

81

Notes

114

Group companies

118

Report of the statutory auditor

120

Consolidated income statements 2005 – 2009

121

Consolidated balance sheets 2005 – 2009
Financial Statements for Forbo Holding Ltd

123

Income statement

124

Balance sheet

125

Notes to the financial statements

132

Proposal for appropriation of available earnings

133

Report of the statutory auditor

58
Consolidated balance sheet

Forbo Group
Annual Report200931.12.2009

31.12.2008

Assets
CHF m

Note

885.7

928.7

Property, plant and equipment

16

549.9

586.3

Intangible assets

17

309.1

311.7

Deferred income tax assets

14

20.5

28.8

Investments in associates and other non-current assets

18

Non-current assets

Current assets

6.2

1.9

859.7

909.1

Inventories

19

261.0

298.3

Trade receivables

20

237.1

265.8

Other receivables

33.1

32.2

Prepaid expenses and deferred charges

30.1

23.6

Marketable securities

21

100.2

73.6

Cash and cash equivalents

22

198.2

215.6

1,745.4

1,837.8

679.6

584.4

0.3

10.9

Total assets
Shareholders’ equity and liabilities
CHF m

Shareholders’ equity
Share capital
Treasury shares

– 0.1

– 2.0

Reserves and retained earnings

679.4

575.5

720.2

676.6

Non-current financial debt

26

550.1

512.4

Non-current liabilities
Employee benefit obligations

27

68.6

58.6

Non-current provisions

28

38.8

37.0

Deferred income tax liabilities

14

Current liabilities

62.7

68.6

345.6

576.8

Trade payables

29

123.3

144.5

Current provisions

28

32.9

18.6

Accrued expenses

30

125.3

130.4

Current financial debt

31

3.4

181.3

Current tax liabilities

24.7

25.3

Other current liabilities

36.0

76.7

Total liabilities

1,065.8

1,253.4

Total shareholders’ equity and liabilities

1,745.4

1,837.8

The accompanying notes are an integral part of the consolidated financial statements.

59
Forbo Group
Annual Report
2009

Consolidated income statement

2009
CHF m

Net sales

Note

6

Cost of goods sold
Gross profit
Development costs

2008

7

1,782.4

1,918.7– 1,200.4– 1,325.0

582.0

593.7

– 27.9– 29.9– 270.0– 282.7

8– 128.3– 137.9

Other operating expenses

9– 46.4– 50.0

Other operating profit

10

12.4

23.9

121.8

117.1

4.3

9.2

– 24.7– 104.9

101.4

21.4

Marketing and distribution costs
Administrative costs

Operating profit
Financial income

12

Financial expenses

13

Group profit before taxes
Income taxes

14

Group profit for the year

– 25.3

– 5.4

76.1

16.0

CHF

Basic earnings per share

15

33.67

6.86

Diluted earnings per share

15

33.67

6.84

The accompanying notes are an integral part of the consolidated financial statements.

60
Comprehensive income statement

Forbo Group
Annual Report
2009

2009

2008

76.1

16.0

Translation differences– 8.9– 129.5

Changes in fair value of financial instruments available-for-sale

21.2– 79.2

CHF mGroup profit for the year
Income and expenses directly recognized in shareholders’ equity:

Impairment on financial instruments available-for-sale

-

79.2

Revaluation of land and buildings

-

143.3

Release of provisions reported directly in equity in connection with revaluationof land and buildings-

3.8

Actuarial loss on pension liabilities– 7.8– 46.6

Fair value adjustments of cash flow hedges

6.8

– 1.1

10.1

8.1

Other comprehensive income for the year, net of tax

21.4– 22.0Total comprehensive income

97.5

– 6.0

Fair value adjustments of net investment hedges

The positions reported in 'other comprehensive income for the year, net of tax' include theincome tax effects that are explained in note 14.
The accompanying notes are an integral part of the consolidated financial statements.

61
Consolidated shareholders’ equity

Forbo Group
Annual Report
2009

2009

CHF m
December 12, 2008

Share Treasury
capitalsharesReserves

Revaluation
reserve

10.9

696.9

143.3

– 2.0

Group profit for the year

Reservefor AFSfinancialassets-Reserves
Reserves
fromfrom net
cash flow investment
hedgeshedges– 7.0

Translation differences

Total

0.4 – 258.1

584.4

76.1

Other comprehensive income
for the year, net of tax

76.1

-

– 7.8

-

68.3

-

6.8

– 6.8

21.2

6.8

10.1

– 8.9

21.4

21.2

6.8

10.1

– 8.9

97.5

Total comprehensive
income-Change in revaluation reserve
Share-based payments
Treasury shares

-

-

4.5

4.5

0.0

1.9

1.9

Reduction in par value– 10.6

1.9

December 31, 2009

0.3

– 0.1

– 8.7
778.4

136.5

21.2

Share Treasury
capitalsharesReserves

Revaluation
reserve

Reservefor AFSfinancialassets

38.0

821.3

-

-

– 0.2

10.5 – 267.0

679.6

2008

CHF m
December 31, 2007

– 4.0

Group profit for the year

– 5.9

Translation differences

Total– 7.7 – 128.6

713.1

16.0

Other comprehensive income
for the year, net of tax
Total comprehensive
incomeReserves
Reserves
fromfrom net
cash flow investment
hedgeshedges-Share-based payments

16.0

-

– 42.8

143.3

-

– 1.1

8.1 – 129.5– 22.0-– 26.8

143.3

-

– 1.1

8.1 – 129.5

– 6.0

0.1

4.9

5.0

– 2.8 – 102.5– 105.3

Reduction in par value– 27.14.7– 22.4

December 31, 2008

10.9

– 2.0

Treasury shares

696.9

143.3

-

– 7.0

0.4 – 258.1

The accompanying notes are an integral part of the consolidated financial statements.

584.4

62
Consolidated cash flow statement

Forbo Group
Annual Report
2009

2009

2008

Group profit for the year

76.1

16.0

Tax expense

25.3

5.4

Cash flow from operating activities
CHF m

101.4

21.4

Net financial expenses

20.4

16.5

Depreciation and impairment on property, plant and equipment

58.9

81.5

Amortization and impairment on intangible assets

7.9

7.2

Group profit before taxes

-

79.2

– 3.5

– 7.0

Impairment on available-for-sale financial assets
Profit from disposal of property, plant and equipment

4.5

5.0

Income tax paid

– 33.8– 37.2

Increase / decrease (–) in provisions and employee benefit obligations

10.4– 12.7

Increase / decrease (–) in current liabilities

4.5– 12.9

Share-based payments

1)

42.6

18.8

Net cash generated from operating activities

213.3

159.8

-

– 212.8

Decrease in working capital

Cash flow from investing activities
CHF mAcquisition of subsidiaries, net of cash acquired
Purchase of non-current assets– 39.8– 55.4

Proceeds from sale of property, plant and equipment

13.2

12.1

Purchase of available-for-sale financial assets– 0.6– 237.2

Sale of available-for-sale financial assets

3.4

83.8

-

3.4

– 23.8– 406.1

– 2.0

0.9

Dividends received
Net cash used in investing activities
Cash flow from financing activities
CHF m

Decrease (–) / increase in current debt
Decrease (–) / increase in non-current debt

– 178.2

496.6-– 43.0

Repayment of debt of the acquiree to the seller– 22.9– 22.4

Interest received

1.3

5.3

Purchase of treasury shares– 3.8– 105.6

Proceeds from sale of treasury shares

5.7

0.3

Interest paid

Reduction of par value
Net cash generated from financing activities– 8.8– 22.4– 208.7309.7– 19.2

63.4

Change in cash and cash equivalents
CHF m

Decrease (–) / increase in cash and cash equivalents
Translation differences on cash and cash equivalents

1.8– 25.3

Total cash and cash equivalents at beginning of year

215.6

177.5

Total cash and cash equivalents at year-end

198.2

215.6

1) Excluding cash and cash equivalents.

The accompanying notes are an integral part of the consolidated financial statements.

63
Notes –
accounting principles

Forbo Group
Annual Report
20091

General information
Forbo Holding Ltd (the 'company') and its subsidiaries (together with the company constituting the 'Group') manufacture floorings, adhesives, and drive and conveyor technology.
The Group has a global network of locations with production and distribution plus puresales companies.
The company is a public limited company under Swiss law, domiciled in Baar, Switzerland.
It is listed on the SIX Swiss Exchange.
These financial statements were approved by the Board of Directors on March 10, 2010
and released for publication on March 15, 2010. The Report is subject to approval by theOrdinary General Meeting on April 23, 2010.

2

Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated.

		Basis of preparation
The consolidated financial statements of Forbo Holding Ltd were prepared in accordancewith the International Financial Reporting Standards (IFRS) and in compliance with Swiss law.
They were drawn up on the basis of the audited financial statements of the Group companies prepared according to uniform corporate accounting policies. The reporting date for all
Group companies is December 31.
The consolidated statements have been prepared in accordance with the principle ofhistorical purchase and manufacturing costs with the exception of available-for-sale financial
assets (securities), non-consolidated investments in associates, land and buildings, andderivative financial instruments, which are valued at fair value. The preparation of the con­solidated financial statements requires management to make estimates and assumptions
that can affect reported revenues, expenses, assets, liabilities and contingent assets andliabilities at the date of the financial statements. If the estimates and assumptions made bymanagement at the date of the financial statements to the best of its knowledge differ
from the actual circumstances, the original estimates and assumptions will be adjusted in
the reporting year in which the circumstances have changed. The comparable data fromthe consolidated financial statements of the previous year were, where necessary, restatedand supplemented and the presentation adjusted.
		Scope and principles of consolidation
The subsidiaries of Forbo Holding Ltd are all domestic and foreign companies in which theGroup holds, directly or indirectly, more than 50 percent of voting rights or in which it bears
managerial responsibility for operations and financial policies. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated
from the date that control ceases.

64
Forbo Group
Annual Report
2009

The purchase method of accounting is used to account for the acquisition of subsidiaries.
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair value at theacquisition date, irrespective of the extent of any minority interest. The excess of the costof acquisition over the fair value of the Group’s share of the identifiable net assets is recorded
as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.
Inter-company transactions, balances and unrealized gains or losses on transactions between
Group companies are eliminated. Accounting policies of subsidiaries have been changed,
where necessary, to ensure Group-wide consistency.
Associates are all entities over which the Group has significant influence but not control,
generally accompanied by a shareholding of between 20 % and 50 % of the voting rights.
Investments in associates are accounted for using the equity method of accounting andare initially recognized at cost. The Group’s investments in associates include goodwill identified on acquisition, net of any accumulated impairment loss.
The Group’s share of its associates’ post-acquisition profits or losses is recognized in theincome statement, and its share of post-acquisition movements in reserves is recognized
in reserves. The cumulative post-acquisition movements are offset against the carrying
amount of the investment. When the Group’s share of losses in an associate equals or exceeds
its interest in the associate, the Group does not recognize further losses, unless it has
incurred obligations or made payments on behalf of the associate.
The subsidiaries included in the group of consolidated companies are listed under 'Group
companies'.
		Foreign currency translation
The individual companies generally prepare their financial statements in the local currency.
The local currency (functional currency) as a rule corresponds to the currency of the primaryeconomic environment in which the company operates. Foreign currency transactions aretranslated into the functional currency using the exchange rates prevailing at the dates oftransactions or the dates of valuation where items are remeasured. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognized in the income statement, except when deferred in equity as qualifying cash
flow hedges or qualifying net investment hedges. Translation differences on non-monetaryfinancial assets and liabilities whose changes in fair value are recognized in income arereported in the income statement. However, translation differences on non-monetary financial assets whose changes in fair value are recognized in equity are taken to reserves.

65
Forbo Group
Annual Report
2009

The consolidated financial statements are prepared in Swiss francs. Unless otherwise noted,
all sums are stated in millions of Swiss francs (CHF m) and are generally rounded to one
decimal place. The annual statements of foreign Group companies stated in foreign currencies are translated into Swiss francs as follows: assets and liabilities at year-end exchange
rates; the income statement and cash flow statement at average exchange rates for the year.
Currency translation differences arising from the different translation of balance sheets
and income statements and from equity capital transactions are offset against consolidated
shareholders’ equity and taken to the income statement in the event the company isdivested.
On consolidation, exchange differences arising from the translation of net investment in
independent foreign operations, of borrowings, and of other currency instruments designated as hedges of such investments are taken to shareholders’ equity. When a foreign
operation is disposed of, exchange differences that were recorded in equity are recognizedin the income statement as part of the gain or loss on sale.
The following exchange rates have been applied for the most important currencies
concerned:
Income statement(Average exchange rates
for the year)

2009

2008

Balance sheet(Year-end exchange rates)

2009

2008

Currency
CHF

Euro countries

EUR

1

1.51

1.59

1.49

1.50

Sweden

SEK

100

14.20

16.52

14.46

13.75

United Kingdom

GBP

1

1.70

2.00

1.66

1.57

USA

USD

1

1.09

1.08

1.03

1.07

Canada

CAD

1

0.95

1.02

0.98

0.88

Japan

JPY

100

1.16

1.05

1.12

1.19

		Maturities
Assets are designated current assets if they are realized or consumed in the Group’s ordinary
business cycle within one year or are held for trading purposes. All other assets are assigned
to non-current assets.
All obligations which the Group intends to settle within the ordinary business cycle using
operating cash flows or which are due within one year of the reporting date are assigned tocurrent liabilities. All other obligations are assigned to non-current liabilities.
		66
Forbo Group
Annual Report
2009		Segment information
Segment reporting discloses financial and descriptive information on the reportable segments. The reportable segments are operating segments and combinations of operating
segments that meet specific criteria. Operating segments are components of a company forwhich separate financial information is available that is regularly examined by the chief
operating decision-maker concerned in order to determine how resources are to be allocated and performance assessed. Generally speaking, financial information must be reported
on the basis of internal controlling through which the performance of the operating segments
is assessed and decisions are taken on how allocate the resources to the operating segments.
The reportable segments apply the same accounting principles as the Group. The provisionof services of the reportable segments is calculated on the basis of market data, and theprices applied are therefore comparable to those that would have applied in a transaction
with a third party.
Segment reporting is prepared to include operating profit (EBIT ). Allocation of interest andtaxes to the individual divisions and Corporate is not appropriate owing to the highly
centralized functions Finances and Taxes.
		Net sales and revenue recognition
Sales revenue include the fair value of the consideration received or to be received for thesale of goods and services as part of ordinary business activity. Sales revenue is reported
net of sales tax, returns, discounts and rebates, as well as after elimination of intra-Groupsales.
The Group registers sales revenue when the amount of the revenue can be reliably determined and when it is sufficiently likely that the company will derive an economic benefit.
The amount of the revenue can only be reliably determined once all contingencies concerning the sale have been settled. The Group makes estimates on the basis of historical data,taking into account features specific to the customers, transactions, and agreements. Appropriate provisions are made for expected warranty claims.
		Research and development
All research costs are charged directly to the income statement in the period in which they
are incurred. Development costs must be capitalized if all the recognition criteria have beenmet, the research phase can be clearly distinguished from the development phase, andcosts can be clearly allocated to individual project phases without any overlap. Development
expenses that do not meet these criteria are taken to the income statement.

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Forbo Group
Annual Report2009		Share-based payments
Equity-settled share-based payments to employees are valued at the fair value of the equity
instrument on the date on which the payment is granted. The fair value of share options
is determined by the Black-Scholes model. The anticipated maturity used in the model isadjusted on the basis of best estimates with regard to the effects of non-transferability,
restrictions on exercise, and conduct. Further information on determining the fair value ofthe share options is provided in note 25. The fair value determined on granting equitysettled share-based payments is charged over the vesting period to the income statement
and is included in personnel expenses.
		Income taxes
Income taxes constitute the total of current and deferred income taxes.
Current income taxes are determined on the basis of taxable profits and the applicable tax
laws of the individual countries. They are recognized as an expense in the accounting period
in which the profits are made. The profit on which taxes are to be paid differs from theprofit or loss for the year in the income statement since it excludes expenses and revenues
that will only be taxable or tax-deductible in subsequent years if at all. The Group’s liability
for current income taxes is calculated on the basis of the applicable tax rates.
Deferred tax liabilities are recognized for temporary differences between assets and liabilities in the balance sheet and the amounts as measured for tax purposes if they will result intaxable income in future. Deferred tax claims are reported for temporary differences thatwill result in deductible amounts in future periods and for tax effects from fiscally offsettable
losses, but only insofar as it is likely that sufficient taxable profits will be available against
which these differences can be offset. Deferred taxes are not reported if the temporary differences arise from the recognition of goodwill or from the initial recognition of other assets
or liabilities which relate to events not affecting taxable income or the profit for the year.
Deferred tax claims and tax liabilities are measured at the tax rates that are expected to apply
in the period in which the asset will be realized or the liability will be settled based onenacted rates. Current and deferred tax assets and liabilities are offset when they arise fromthe same tax reporting group, relate to the same tax authority, the legal right to offset
exists, and they are intended to be settled net or realized simultaneously.
The carrying amount of the deferred tax claims is assessed each year on the reporting dateand reduced if it is no longer likely that sufficient taxable profits will be available to realize
the claim either wholly or in part.
Current and deferred income taxes are recognized as an income tax benefit or expense in
the income statement, with the exception of items posted directly to equity. In this case, thecorresponding tax effect is also to be recognized directly in equity.

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Forbo Group
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Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference
is controlled by the Group and it is probable that the temporary difference will not reversein the foreseeable future.
Property, plant and equipment
Land and buildings are carried on the balance sheet at their revaluation amount, which corresponds to the fair value at the date of revaluation less accumulated depreciations andimpairment losses. The revaluations are conducted regularly, but at least every five years, by
independent external valuers to ensure that the carrying amount does not differ materiallyfrom the carrying amounts determined on the basis of the fair value on the reporting date. All
accumulated depreciations are offset against the gross carrying amounts of the assets on
the revaluation date. The net amount is adjusted to the revalued amount. All other property,
plant and equipment are reported at cost less accumulated depreciations and recognizedimpairments.
Subsequent costs, for instance for expansion or replacement investments, are recognizedas part of the asset’s costs or as a separate asset only when it is probable that future economic
benefits will accrue to the Group as a result, and when the cost of the item can be measured
reliably. Expenses for repairs and maintenance which do not constitute a significant replacement investment are charged to the income statement as expenses in the year in which they
are incurred.
Increases in the carrying amount arising on revaluation of land and buildings are credited
to the revaluation reserve in shareholders’ equity. This does not apply if the revaluation
reserve for the same assets has been reduced with an effect on income. In such a case, theincrease is recognized as income in the amount of the previous decrease. Decreases that
offset previous increases in the same asset are charged against the revaluation reserves directly in shareholders’ equity. All further decreases are charged to the income statement.
Land is not depreciated. Depreciation of other assets is calculated on the basis for theircost or their revalued amounts (with the exception of assets under construction) using thestraight-line method over their estimated useful lives. The estimated useful life is usually
33 years for buildings used in operations and 5 to 10 years for plant and equipment. Other
operational assets are depreciated over three to ten years. Where components of larger
systems have different useful lives, they are depreciated as separate items. Useful lives andresidual values are reviewed annually at the reporting date, and any necessary changes aretaken into account prospectively.
If the carrying amount of an asset is greater than its estimated recoverable amount, it is
written down immediately to the recoverable amount (see note 16).

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Assets that are held in finance lease arrangements are depreciated over their estimateduseful life in the same way as assets belonging to the company or, if this is shorter, over thelife of the underlying lease agreement.
The profit or loss arising from the sale of property, plant or equipment is defined as thedifference between the sale proceeds and the carrying amount of the asset, and is recognized in income.
		Intangible assets
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s
share of the net identifiable assets of the acquired subsidiary at the date of acquisition.
Goodwill created on acquisition of subsidiaries is included in 'Intangible assets'. Goodwill istested annually for impairment and carried at cost less accumulated impairment losses.
Impairment losses on goodwill may not be reversed. Gains and losses on the disposal of anentity include the carrying amount of goodwill relating to the entity that is sold off.
For the purpose of impairment testing, goodwill is allocated to cash-generating units. The
allocation is made to those cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose.
Trademarks, licenses, customer relationships and technologies acquired in a business combination are recognized at fair value at the acquisition date. Trademarks carried in thebalance sheet with an indefinite useful life are not subject to amortization but are tested for
impairment at least annually. Any impairment is recognized as an expense in the income
statement. Certain trademarks, licenses, customer relationships and technologies have a finite
useful life and are carried at cost less accumulated amortization. Amortization is calculatedusing the straight-line method: trademarks 20 years, customer relations between 5 and 25
years, and technologies 30 years.
Acquired computer software licenses are capitalized on the basis of the costs incurred toacquire and bring to use the specific software. These costs are amortized over an estimateduseful life of three years.
Development costs that can be directly attributed to the design and testing of individual
software products controlled by the Group generally do not meet the criteria for intangible
assets on the balance sheet. These costs are recognized as an expense in the period inwhich they are incurred. Development costs previously recognized as an expense are notcapitalized in a subsequent period.

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Forbo Group
Annual Report2009		Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill and certain trademarks, arenot subject to planned amortization. They are tested for impairment annually. Assets that are
subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable. An impairment loss
is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell andvalue in use. For the purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash-generating units). Non-financial
assets other than goodwill that have suffered an impairment in the past are reviewed for possible reversal of the impairment at each reporting date.
		Financial assets
Classification
Financial assets are classified in the following categories: financial assets at fair value
through profit or loss, loans and receivables, and financial assets available-for-sale.
The classification depends on the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at initial recognition.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A
financial asset is classified in this category if acquired principally for the purpose of sellingin the short term. Derivatives are also classified in this category unless they are designatedas hedges. Assets in this category are classified as 'Other receivables'.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets except for
maturities greater than twelve months after the end of the reporting period, in which casethey are classified as non-current assets. The Group’s loans and receivables are reported in
the balance sheet under 'Trade receivables', 'Other receivables' and 'Cash and cash equivalents'.
(c) Financial assets available-for-sale
Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. The Group’s availablefor-sale financial claims and other claims are reported under 'Securities' in the balance
sheet.

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2009

Recognition and measurement
Purchases and sales of financial assets are basically recognized as soon as Forbo becomesa contractual party. In the case of regular purchases or sales (purchases or sales under acontract whose terms require delivery of the asset within the time frame generally established by regulation or convention in the market concerned), the settlement date isrelevant for the initial recognition and derecognition. This is the day on which the asset isdelivered to or by Forbo. Financial assets not classed as being at fair value through profit
or loss are initially recognized at fair value plus transaction costs. Financial assets which arecarried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when therights to receive cash flows from the investments have expired or have been transferred andthe Group has transferred substantially all risks and rewards of ownership.
Available-for-sale financial assets and assets in the category 'Financial assets at fair value
through profit or loss' are carried at fair value after their initial recognition. Loans and receivables are carried at amortized cost using the effective interest method.
Gains or losses arising from financial assets in the category 'Financial assets at fair value
through profit or loss' are presented in the income statement in the period in which they are
incurred. Dividend income from financial assets classed as at fair value through profit orloss is recognized in the income statement when the Group’s right to receive payments isestablished.
Changes in the fair value of monetary and non-monetary securities classified as availablefor-sale are recognized in equity with no effect on income. When securities classified asavailable-for-sale are sold or impaired, the accumulated fair value adjustments previously
recognized in equity are included in the income statement. Dividends on available-for-sale
equity instruments are recognized in the income statement when the Group’s right toreceive payments is established. The fair value of listed shares is determined by the current
stock market price.
The Group assesses at the end of each reporting period whether there is objective evidence
that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale financial assets, a significant or prolonged decline in
the fair value of the equity investments below their cost is also regarded as evidence thatthe equity investments are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost
and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss – is removed from equity and recognized in the separate consolidated income statement. Impairment losses on equity instruments recognized in the income
statement are not reversed through profit or loss. Impairment testing of trade receivables
is described in note 20.
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Forbo Group
Annual Report2009		Derivative financial instruments and hedging activities
The Group uses derivative financial instruments solely to manage financial risks and not forthe purpose of speculation.
Derivatives are initially recognized at their fair value on the date a derivative contract isentered into. This may be positive or negative. Subsequent measurement is also effected at
the fair value applicable on the reporting date. The method of recognizing the resulting
gain or loss depends on whether the derivative was designated as a hedging instrument and,if so, the nature of the item being hedged. The Group designates certain derivatives as
either:– h edges of the exposure to changes in fair value of a recognized asset or liability or an
unrecognized firm commitment (fair value hedge),– h edges of a specific risk of fluctuation payment flows (cash flow) associated with arecognized asset or liability (cash flow hedge), or– h edges of a net investment in a foreign operation (net investment hedge).
The Group documents at the conclusion of the transaction the relationship between thehedging instruments and the hedged items, as well as its risk management objectives andthe underlying strategy for effecting various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether thederivatives that are used in hedging transactions are highly effective in offsetting changes
in fair values or in cash flows of hedged items.
The fair values of the various derivative instruments used for hedging purposes are disclosed in note 34. Movements in the hedging reserve for cash flow hedges are reported in
the statement of comprehensive income. The full fair value of a derivative used for hedging
is classified as a non-current asset or liability when the residual maturity of the hedged item
is more than twelve months after the reporting date, and as a current asset or liability when
the residual maturity of the hedged item is less than twelve months. Trading derivatives areclassified as current assets or liabilities.
(a) Fair value hedge
Changes in the fair value of derivatives that are designated as and qualify as fair value
hedges of a recognized asset or a commitment are recorded in the income statement,
together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Group only uses fair value hedges to the hedge fixed interest
risk on borrowings. The gain or loss relating to the effective portion of interest rate swaps
taken up to hedge fixed rate borrowings is recognized in the income statement within
the 'financial result'. The gain or loss relating to the ineffective portion is recognized in theincome statement under the ’financial result’. Changes in the fair value of the hedged fixed
rate borrowings attributable to interest rate risk are recognized in the income statement
under the 'financial result'.

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2009

If the hedge no longer meets the criteria for hedge accounting, and the previously designated underlaying transaction is measured using the effective interest method, the required
adjustment of the carrying amount is implemented over the residual maturity.
(b) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated andqualify as cash flow hedges is recognized in equity. The ineffective portion of such changes
in fair value, however, is recognized directly in the income statement.
Amounts accumulated in equity are reclassified to profit or loss and are recognized asincome or expense in the period in which the hedged item affects profit or loss (forexample, when the forecast sale that has been hedged takes place). The gain or loss fromthe effective portion of interest rate swaps that hedge variable rate borrowings is recognized in the income statement. The gain or loss from the ineffective portion is also recognized in the income statement. However, when the forecast transaction that is hedged
results in the recognition of a non-financial asset (for example, inventories or property,
plant and equipment) or a non-financial liability, the gains or losses previously deferredin equity are included in the initial measurement of the cost of the asset or liability. The
deferred amounts are ultimately recognized in cost of goods sold in the case of inventories
or in depreciation in the case of property, plant and equipment.
When a hedging instrument expires, or is sold, or ceases to meet the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and isrecognized in the income statement only when the originally hedged forecast transaction
actually occurs. If a forecast transaction is no longer expected to occur, the cumulative gainor loss that was reported in equity is immediately transferred to the income statement.
(c) Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash flow
hedges. Any gain or loss on the effective portion of the hedging instrument is recognizedin equity; the gain or loss relating to the ineffective portion is recognized directly in theincome statement. Gains or losses accumulated in equity are transferred to the income statement when the foreign operation is sold off in full or in part.
(d) Derivatives valued at fair value through profit or loss
Certain derivative financial instruments are not suitable for hedge accounting. Changes in
the fair value of such derivatives are recognized directly in the income statement.

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Annual Report
2009

The Group employs hedge accounting in connection with the hedging of periodic interest
payments and the repayment of the nominal amount of the US private placement. Someof the derivatives employed are recognized as cash flow hedges in order to hedge the future
cash flows from the US private placement against fluctuations. The effective portion of thechange in market value of the hedging instrument is recognized in equity, with no effect on
the income statement, until the gain or loss on the hedged item is realized; the ineffective
portion of the change in market value of the hedging instrument is recognized in the income
statement. Cumulative changes in market value recorded under equity are transferred tothe income statement when the future firm commitments are recognized in the income statement.
		Inventories
Inventories are stated at the lower of cost or net realizable value. Cost includes directmaterial and, if applicable, other direct costs and related production overheads to the extent
that they are incurred in bringing the inventories to their present location and condition.
The net realizable value constitutes the estimated sales price less all estimated costs up tocompletion, as well as the costs of marketing, sales and distribution.
Inventories are for the greater part measured at average cost. Adjustments are made forunsaleable inventories and inventories with insufficient turnover.
		Trade receivables
Current trade receivables are stated at amortized cost, which generally corresponds to thenominal value. Allowances for doubtful risks are established based on the maturity structure and discernible solvency risks. In addition to individual allowances for specific known
risks, allowances are also made on the basis of statistically determined default risks.
		Marketable securities
Marketable securities are mainly available-for-sale financial assets. Initial recognition andsubsequent measurement are described separately under 'financial assets' on page 70
onwards of this report.
		Cash and cash equivalents
Cash and cash equivalents are stated at nominal value. They include cash on hand, postal
and bank accounts, and fixed-term deposits with an original maturity of up to 90 days.
		Shareholders’ equity
Shares are classified as share capital at their par value. Payments by shareholders over andabove the par value are credited to reserves.
Treasury shares are deducted at their par value from share capital. The acquisition costs inexcess of par value arising on the acquisition of treasury shares are debited to reserves.
Gains or losses above the par value from the sale of treasury shares are credited or debitedto reserves.
Dividends are debited to equity in the period in which the resolution on their distribution
is adopted.

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Forbo Group
Annual Report2009		Current and non-current financial debt
Current and non-current financial debt consists mainly of private placements, bonds,
bank loans, and leasing debt. It is stated at amortized cost (less transaction costs).
Borrowing costs are recognized in the income statement, using the effective interest
method.
Financial debt is assigned to current debt, unless the Group has to settle the obligation
12 months after the balance due date at the earliest or the Group enjoys unlimited right topostpone payment of the debt by at least 12 months after the reporting date.
		Employee pension plans
The Group maintains various pension plans designed as defined contribution and defined
benefit plans. These pension plans are established in accordance with the local conditions
in each country. The plans are funded either by contributions to legally autonomous
pension funds / insurance plans or by recognition of the pension plan liabilities in the financial statements of the respective companies.
For defined contribution plans, the costs incurred in the relevant period correspond to theagreed employer contributions.
For defined benefit plans, the pension liabilities are calculated annually by independentactuaries according to the projected unit credit method. They liabilities correspond to thepresent value of the expected future cash flows. The plan assets are stated at market value.
Current service costs incurred in the relevant period, less employee contributions, are statedas personnel expenses in the income statement. Past service costs resulting from changes
in pension plans are recognized in the income statement on a straight-line basis over the remaining average period until an active employee acquires a vested pension right, or are
immediately charged to the income statement if the employee has already retired. Profits
resulting from pension plan reductions or compensations are immediately taken to theincome statement.
Actuarial gains and losses are reported in the statement of comprehensive income under'Other comprehensive income for the year, net of tax', with due account being taken ofdeferred taxes.
		Provisions
Provisions are recognized if the Group has a current legal or constructive obligation as aresult of a past event, it is probable that an outflow of resources will be required to settle
the obligation, and a reliable estimate of the amount can be made. No provisions are
made for future operating losses. The provision is the best estimate on the reporting dateof the amount required to meet the current obligation, taking into account the risks anduncertainties underlying the obligation.

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Annual Report
2009

A provision for restructuring expenses is reported if the Group has defined a detailed,formal restructuring plan which has created a justified expectation among those affectedthat the restructuring will be carried out as a result of the plan’s implementation being
initiated or essential parts being announced. Measurement of a restructuring provision only
takes account of direct expenses for the restructuring. Only those expenses are included,
therefore, that are caused by the restructuring and are not related to the company’s businessactivities.
		Trade payables
Trade payables are non-interest-bearing and are disclosed at nominal value.
		Other current liabilities
With regard to the previous year, other current liabilities include derivative financial
instruments measured at market value in connection with the cash flow hedge for the US
private placement.
3

Changes in accounting principles
The following new and revised standards and interpretations of the International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee(IFRIC) of the IASB with a significant impact on the present financial statements came into
force during the year under review:
IFRS 7 – 'Financial instruments: disclosures' (amendment) – effective as of January 1, 2009.

The changes enhance disclosures about fair value and liquidity risk. Essentially, they
introduce a three-level hierarchy for fair value measurement. The IFRS 7 amendments result
solely in additional disclosures.
IFRS 8 – 'Operating segments' (new) – effective as of January 1, 2009.
IFRS 8 replaces the current standard IAS 14 'Segment reporting'. The new standard calls fora management approach in which the data in the segment reports determined pursuant to
IFRS 8 are determined according to internal accounting policies. Internal reporting to the
Executive Board and the Board of Directors is based on the three business units and Corporate
and on the same recognition and valuation principles as those used in the consolidated
financial statements. The application of IFRS 8 does not entail any significant adjustments,
except for additional disclosures for the full year and the fact that Corporate is defined as
an reportable segment.
IAS 1 – Presentation of financial statements’ (revised) – effective as of January 1, 2009.
The main changes compared with the previous version are the following: a) All non-ownerchanges in equity are required to be presented in one statement of comprehensive income
or in two statements. b) A company must show a statement of financial position (balance
sheet) at the beginning of the earliest comparative period as part of a complete statement if
it applies an accounting policy retrospectively or makes a retrospective restatement of
items. c) A company must disclose income tax relating to each component of other comprehensive income. d) A company must state reclassification adjustments relating to components of the other comprehensive income. The Group presents changes in equity that do notarise from owner changes separately in the statement of comprehensive income. The
information for the previous year has been restated so that it meets the requirements of therevised standard.

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Forbo Group
Annual Report
2009

The following new and revised standards and interpretations came into effect as of January 1,
2009. These standards and interpretations have been applied provided they are relevant
for the Group’s business activities. The application of these standards, however, has has no
significant effect on the Group’s disclosures, equity, profits or cash flows.
IFRS 1 – 'First-time adoption of IFRS ' and IAS 27 'Consolidated and separate financial statements
under IFRS ' (amended).
According to the amended standard, a company may, in the IFRS opening balance sheetof its separate financial statement, state the cost of an investment in a subsidiary, jointly
controlled entity or association as the fair value of the investment at the entity’s date oftransition to IFRS or as a carrying amount determined according to previously used accounting principles at the entity’s date of transition to IFRS . In IAS 27, the definition of the cost
method is eliminated and replaced by the requirement that dividends are to be presented
as income in the separate financial statement of the parent company.
IFRS 2 – 'Share-based payments' (amended).

The amendment of the standard is concerned with the definition of vesting conditions andcancellations. It clarifies that the definition of vesting conditions now only encompasses
service conditions and performance conditions.
IAS 23 – 'Borrowing costs' (revised).
The revised IAS 23 'Borrowing costs' eliminates the choice in the applicable standard as
regards the immediate expensing of borrowing costs that can be directly attributed to aqualifying asset. According to the revised version of IAS 23, these borrowing costs must
be capitalized as part of acquisition or production costs.
IAS 32 – 'Financial instruments: presentation' (amended).
The amendment states that puttable financial instruments and instruments or parts of
instruments that contain a contractual obligation to deliver a pro rata portion of the net
asset value of the company to another party only in the event of liquidation qualify as
equity provided that the financial instruments have specific features and meet specificcriteria.
IFRIC 13 – 'Customer loyalty programs' (new).
IFRIC 13 clarifies that sales of goods or services in connection with a customer loyalty program
are to be considered as multiple-element arrangements. The consideration received by
the customer is to be allocated to the individual elements of the agreement on the basis of
the fair value of the credits.
IFRIC 15 – 'Agreements for the construction of real estate' (new).
IFRIC 15 standardizes accounting practices across jurisdictions for the recognition of revenue

among real estate developers from the sale of units, such as apartments or houses, 'off plan',i.e. before construction is complete.

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Forbo Group
Annual Report
2009

IFRIC 16 – 'Hedges of a net investment in a foreign operation' (new).
IFRIC 16 covers accounting for hedges of net investments. IFRIC 16 now clarifies that only
the risk of foreign exchange differences between the functional currency of the foreign
operation and the functional currency of a parent company (but not the presentation currency in the consolidated statements) can be hedged. It is of no importance, therefore,
at which level in the corporate chain the higher-level company is situated. The requirementsof IAS 21 – 'The effects of changes in foreign exchange rates' are not applicable to hedging
instruments.
IAS 39 'Financial instruments: recognition and measurement' / IFRIC 9 'Reassessment of embedded
derivatives' (revised).
IAS 39 / IFRIC 15 allows entities, in accordance with the reclassification amendment, toreclassify particular financial instruments out of the 'fair value through profit or loss'
category in special circumstances. These amendments to IFRIC 9 and IAS 39 clarify that, on
reclassification from 'fair value through profit or loss', all embedded derivatives must
be reassessed and, if necessary, separately accounted for in individual financial statements.

Various adjustments to the standards have been published as part of the annual improvement project. Since these have little or no influence on the financial statements, wehave refrained from listing these changes in detail.
4

Management assumptions and estimates
The application of the measurement and accounting principles requires that circumstancesand estimates be assessed and assumptions be made with respect to the carrying amountof assets and debts. The estimates and the underlying assumptions are based on past experience and on factors deemed to be relevant. The actual values may deviate from the estimates.
The following is a description of the main areas in which, as a result of the uncertainty
surrounding estimates, there is a risk that a significant restatement of the reported assets
and debts could be needed within the next business year.

		Impairment of non-financial assets
Along with the regular periodic review of goodwill, the carrying amounts of fixed andintangible assets are also always reviewed if these amounts can no longer be realized due
to changed circumstances or events. If such a situation occurs, the recoverable amount isdetermined based on expected future revenues. This corresponds to either the discounted
expected value in use or the higher expected net sales price. If this is less than the current
carrying amount, the value is impaired to the recalculated figure. This impairment is recognized in expenses in the income statement.

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2009

If the asset itself does not generate any independent cash flow, the impairment test fora cash-generating unit is to be performed. As a rule, the Group defines the cash-generating
units on the basis of geographically cohesive markets, i.e. generally speaking an individual
country. Important assumptions in these calculations include growth rates, margins, estimatesand management’s experience of the future development of net current assets, anddiscount rates. The actual cash flows may deviate significantly from the planned discounted
future values. Likewise, the useful lives may be shortened or investment assets impairedin the event of a change in the use of buildings, machinery and facilities, change or abandonment of locations or lower than expected revenues over the medium term. The carrying
amounts of the respective property, plant and equipment and intangible assets is shown innotes 16 and 17.
		Employee pension schemes
Various employee pension plans and schemes exist for employees at the Group. In order tomeasure liabilities and costs, it is first of all necessary to determine whether a plan is adefined contribution or a defined benefit plan by applying the principle of substance overform. In the case of defined benefit plans, actuarial assumptions are made to estimate
future developments. These include assumptions and estimates relating to the discount rate,
the expected return on plan assets in individual countries, and future wage trends. In theiractuarial calculations for determining employee benefit obligations, the actuaries also use
statistical information such as mortality tables and staff turnover rates. If these parameterschange owing to a change in the economic situation or market conditions, the subsequent
results may deviate considerably from the actuarial reports and calculations. These deviations may have a significant medium-term effect on expenses and revenues from the employee
pension schemes and on equity. The carrying amounts of the plan assets and liabilities
carried in the balance sheet are set out in note 27.
		Provisions
In the conduct of ordinary business activities, a liability of uncertain timing and / or amount
may arise. Provisions are determined using available information based on reasonably
expected cash outflows. Depending on the outcome, claims against the Group may arisethat may not be covered, or are covered only in part, by provisions or insurance benefits.
The carrying amounts of such provisions are shown in note 28.
		Income taxes
The measurement of current tax liabilities is subject to the interpretation of tax regulationsin the relevant countries. The adequacy of this interpretation is assessed by the tax authorities in the course of the final assessment or tax audits. This may result in material changes
to tax expense. Furthermore, determining whether tax losses carried forward can be capitalized requires a critical estimate of the probability that they can be offset against future
profits. This assessment depends on a number of different factors and developments. An
analysis of the income taxes is set out in note 14.

80
Forbo Group
Annual Report
20095Standards approved but not yet applied
The following new and revised standards and interpretations had been published, though
they had not yet become compulsory by the time the consolidated financial statements
were approved by the Board of Directors: Since their impact on the consolidated financial
statements has not yet been systematically analyzed, the anticipated effects shown in thenotes to the table below represent an initial estimate by management.
Standard / Interpretation

Date effective

Planned application2011 business year

IAS 24 (revised) – 'Related party disclosures'*

January 1, 2011

IAS 32 (revised) – 'Financial instruments: Presentation'*

February 1, 20102011 business year

IFRS 2 (amended) – Share-based payment*

January 1, 20102010 business year**

July 1, 20092010 business year

IFRS 5 (revised) – Non-current assets held for sale*

January 1, 20102010 business year

IFRS 9 (new) – 'Financial instruments'*

January 1, 20132013 business year*

January 1, 2011

2011 business year

IFRS 3 (revised) – Business combinations and derived

supplements to IAS 27, Consolidated and separate
financial statements under IFRS, IAS 28 Investments
in associates and IAS 31 Interests in joint ventures

IFRIC 14 / IAS 19 (revised) – 'The limit on a defined

benefit asset, minimum funding requirements andtheir interaction'
IFRIC 17 (added) – Distributions of non-cash assets

to owners*

July 1, 20092010 business year

IFRIC 18 (new) – Transfers of assets from customers*

July 1, 20092010 business year

IFRIC 19 (new) – 'Extinguishing financial liabilities withequity instruments'*

July 1, 20102011 business year   * No significant impact on the consolidated financial statements is expected.
** The impact on the consolidated financial statements cannot yet be determined with sufficient certainty.

Various adjustments of the standards have been published as part of the annual improvement project. Since they have only a minor influence on the financial statements, we haverefrained from listing these changes in detail.

81
Notes

Forbo Group
Annual Report
20096

Segment reporting
Forbo is a global producer of Flooring Systems, Bonding Systems and Movement Systems.
The business units have their own management structure and are run separately because
the products that they manufacture, distribute, and sell differ fundamentally in terms of
production, distribution and marketing.
Flooring Systems develops, produces, and sells linoleum, vinyl floorings, dirt trap systems,
carpet tiles, and needle felt as well as the various accessory products required for laying,processing, cleaning, and care of flooring. Bonding Systems develops, manufactures, anddistributes adhesives for industrial applications and the construction industry as well as
synthetic polymers. Movement Systems develops, produces, and sells high-quality belts madeof synthetics for use in power transmission or as conveyor and process belts. Corporate
includes the costs of the Group headquarters and certain items of income and expenses
that are not directly attributable to a specific business.
Flooring Systems, Movement Systems, Bonding Systems, and Corporate are reportable segments. The identification of the reportable segments is based on internal management
reporting to the Chief Executive Officer of the Group and hence on the financial information
used to review the performance of the operational units in order to reach a decision on the
allocation of resources.
Segment information on the reportable segments for the reporting period:
2009
Flooring
Systems

Bonding
Systems

Movement
Systems

Total net sales

904.8

587.7

310.5

-

– 20.6

1,782.4

Inter-segment sales– 0.4– 20.2

-

-

20.6

-

Net sales to third parties

904.4

567.5

310.5

-

-

1,782.4

Operating profit (EBIT)

100.8

32.6

0.5

– 12.1-

121.8

Operating assets

732.0

388.1

258.1

41.5

-

1,419.7

Number of employees (December 31)

2,748

1,376

1,793

41

-

5,958

CHF m

Corporate Elimination

Total

Segment information on the reportable segments for the previous year:
2008
Flooring
Systems

Bonding
Systems

Movement
Systems

Total net sales

893.6

677.8

371.2

-

– 23.91,918.7

Inter-segment sales– 0.7– 23.2

-

-

23.9

-

Net sales to third parties

892.9

654.6

371.2

-

-

1,918.7

Operating profit (EBIT)

111.6

– 5.7

24.6

– 13.4-

117.1

Operating assets

779.1

403.6

290.1

43.4

-

1,516.2

Number of employees (December 31)

3,047

1,390

2,085

41

-

6,563

CHF m

Corporate Elimination

Total

Management reporting and controlling are based on the same accounting principles asexternal reporting.

82
Forbo Group
Annual Report
2009

The Chief Executive Officer assesses the performance of the reportable segments, basedon their operating result (EBIT ). The net financial result is not allocated to the divisions since
it is Group Treasury that in the main exercises central control over the financial result.
Sales between the divisions are effected at market prices. The reportable segments apply
the same accounting principles as the Group. Sales to third parties, as they are reported to
the Chief Executive Officer, are identical to the sales reported in the income statement.
Transfer of segment results to the income statement and balance sheet:

CHF m

2009

2008

Operating profit (EBIT)

121.8

117.1

Net financial expense– 20.4– 95.7

Group profit before taxes

101.4

21.4

31.12.2009

31.12.2008

Operating assets

1,419.7

1,516.2

Non-operating assets

325.7

321.6

1,745.4

1,837.8

CHF m

Total assets

Third-party sales and operating assets broken down by region in the reporting period andduring the previous year:2009

31.12.2009

Third-party
sales

Operatingassets

Switzerland (domicile)

37.4

102.8

France

249.4

172.8

Benelux

221.0

313.8

Germany

205.4

157.7

Great Britain / Ireland

161.9

218.5

Southern Europe

127.9

87.4

Scandinavia

121.5

55.8

CHF m

66.7

36.8

1,191.2

1,145.6

North, Central and South America

392.5

183.4

Asia / Australia / Africa

198.7

90.7

1,782.4

1,419.7

Eastern Europe
EuropeTotal net sales with third parties and operating assets

83
Forbo Group
Annual Report
2009

CHF m

2008

31.12.2008

Third-party
sales

Operatingassets

Switzerland (domicile)

44.6

107.7

France

234.8

195.5

Benelux

243.1

284.2

Germany

226.5

146.1

Great Britain / Ireland

117.0

239.1

Southern Europe

165.0

110.0

Scandinavia

156.6

59.0

Eastern Europe

108.3

52.1

1,295.9

1,193.7

430.1

212.9

EuropeNorth, Central and South America
Asia / Australia / Africa
Total net sales with third parties and operating assets

192.7

109.6

1,918.7

1,516.2

In the period under review, no customer accounted for sales that exceeded 10 % of total
Group sales.
7

Development costs
Development costs, which mainly include product development, amounted to CHF 27.9
million (2008: CHF 29.9 million).

8

Administrative costs
This item consists of the usual expenses related to administrative activities.

9

Other operating expenses'Other operating expenses' includes expenditure in connection with the integration of
acquired companies, ongoing restructuring programs, legal costs, extraordinary maintenance costs, warranties, costs for consulting and auditing, and insurance costs.

10

Other operating profit'Other operating profit' consists of, among other items, insurance payments received andproceeds from the sale of properties and of waste for recycling purposes.

11

Personnel expenses

2009

2008

CHF m

Salaries and wages

370.2

387.4

Social security contributions

94.6

94.2

Total personnel expenses

464.8

481.6

As at December 31, 2009, the Group had 5,958 employees (2008: 6,563). The average headcount over the year was 6,130 (2008: 6,092). Salaries and wages include share-based payments
worth CHF 4.5 million (2008: CHF 5.1 million).

84
Forbo Group
Annual Report
2009

About 120 managers participate in a bonus plan, which is linked to the achievement offinancial targets set for the Group, the divisions and individually determined objectives.

12

Financial income

2009

2008

CHF m

Income from sale of shareholder options / dividend income

2.1

3.4

Interest income1)

1.6

5.4

Gains on sale of available-for-sale financial assets

0.6

-

-

0.4

4.3

9.2

2009

2008

Impairment on available-for-sale financial assets

-

79.2

Loss on sale of available-for-sale financial assets

0.2

1.2

Gains on financial assets or liabilities at fair value through profit or loss
Total financial income

1) This consists in particular of interest accruing from cash and cash equivalents.

13

Financial expenses
CHF mInterest expenditure from financial liabilities valued at amortized cost

25.6

23.5

Gains from derivative financial instruments used in hedging

– 1.9

– 2.8

Loss on financial assets or liabilities at fair value through profit or loss

0.3-

Amortization of issuance costs for private placements / bonds

0.5

0.3

Currency translation losses, net

0.4

7.1

Currency translation gains from derivative financial instruments
used in hedging

– 1.6

– 1.3

Currency translation losses / gains (–) on financial assets or liabilities at fairvalue through profit or loss
Total financial expenses

1.2

– 2.3

24.7

104.9

The average interest rate on interest-bearing debt (private placements, bonds, and longand short-term bank loans) in 2009 was 3.6 % (2008: 4.5 %).

85
Forbo Group
Annual Report
2009

14

Income taxes

2009

2008

CHF m

Current income taxes

32.4

24.7

Deferred income taxes– 7.1– 19.3

Total income taxes

25.3

5.4

Analysis of tax expense
The following elements explain the difference between the expected and the effective tax
expense.
2009

2008

Group profit before taxes

101.4

21.4

Tax expense at the expected tax rate

– 23.6

– 2.2

– 4.0

– 1.1

-

22.8

Tax losses and temporary differences for which no deferred
tax assets have been recognized– 0.3– 31.1

Write-off of deferred tax assets– 11.5-

Recognition / utilization of tax losses not capitalized in prior years

11.9

8.1

CHF m

Tax effects of:
Non-tax-deductible expenses and tax-exempt income
Recognition of tax-effective items not included in Group profit

Prior-year and other positions
Total income taxes

2.2

– 1.9

– 25.3– 5.4

Since the Group operates in various countries with different tax laws and rates, theexpected and effective tax expense depends every year on the country-specific origin of
the revenues or losses. The expected tax expense is the sum of the expected, individual
tax income / tax expense of all foreign subsidiaries. The expected, individual tax income / tax
expense in a single country results from the multiplication of the individual profit / loss by
the tax rate applicable in the country concerned. The expected tax rate in the financial year
2009 was 23.3 % (2008: 10.5 %). In the previous year, the expected tax rate was lower than
expected, mainly because of losses in some countries with a high tax rate. In 2009, these losses
were considerably reduced, with the result that the expected tax rate increased accordingly.

86
Forbo Group
Annual Report
2009

Unused tax loss carry forwards capitalized or uncapitalized as deferred tax receivables,
broken down by maturity:
2009
CHF m

Not capitalized

Capitalized

Total

1 year

5.6

-

5.6

2 years

43.1

-

43.1

3 years

7.0

-

7.0

4 years

4.6

0.2

4.8

Expiry after:

5.2

3.1

8.3

275.1

31.5

306.6

340.6

34.8

375.4

Not capitalized

Capitalized

Total

2.7

-

2.7

2 years

1.7

-

1.7

3 years

118.0

-

118.0

4 years

0.4

-

0.4

5 years

0.5

-

0.5

5 years
More than 5 years
Total tax loss carry forwards
2008
CHF m

Expiry after:
1 yearMore than 5 years
Total tax loss carry forwards

304.2

86.1

390.3

427.6

86.1

513.7

In 2009, CHF 1.5 million (2008: CHF 2.7 million) of unused operating tax loss carry forwards
expired.
Deferred income tax assets and liabilities are offset when they relate to the same tax
jurisdiction, the legal right to offset exists, and they are intended either to be settled net or
to be realized simultaneously. The following amounts are shown in the balance sheet:
31.12.2009

31.12.2008

CHF m

Deferred tax assets

20.5

28.8

Deferred tax liabilities– 62.7– 68.6

Deferred tax liabilities, net– 42.2– 39.8

87
Forbo Group
Annual Report2009

Deferred tax assets and tax liabilities as well as tax credits and tax charges from deferredtaxes:
Deferred tax assets
CHF m

Property,plant andInventories equipment

Provisions

Loss carryforwards

Other

Total

As at December 31, 2008

12.7

16.3

33.6

18.7

9.3

90.6

Increase / decrease (–) deferred
tax assets

– 2.5

– 4.0

5.3

– 8.4

1.6

– 8.0

As at December 31, 2009

10.2

12.3

38.9

10.3

10.9

82.6

Property,plant andInventories equipment

Provisions

Loss carryforwards

Other

Total

– 12.3-– 46.0– 130.4

Deferred tax liabilities
CHF m

As at December 31, 2008

– 2.9

– 69.2

Decrease / increase (–) deferred
tax liabilities

0.4

7.9

– 0.6

– 0.4

– 1.7

5.6

As at December 31, 2009

– 2.5

– 61.3– 12.9– 0.4– 47.7– 124.8

Deferred tax assets / liabilities (–), net
as at December 31, 2008

9.8

– 52.921.3

18.7– 36.7– 39.8Deferred tax assets / liabilities (–), net
as at December 31, 20097.7

– 49.026.0

9.9– 36.8– 42.2

Change in deferred tax
assets / liabilities (–), net– 2.4

Of which addition to group of
consolidated companies-

Of which recognized in equity– 9.5

Of which recognizedin the income statement

7.1

Tax expense and income recognized directly in the comprehensive income statement:
2009
CHF m

2008

Before tax

Tax
expense (–) /incomeAfter tax

Before tax

Tax
expense (–) /incomeAfter tax

Change in fair value:
Financial instruments
available-for-sale

26.7

– 5.5

21.2

-

-

-

Land and buildings

-

-

-

194.6

– 51.3

143.3

Release of provisions

– 1.3

1.3

-

5.1

– 1.3

3.8

Actuarial losses on pension
obligations

– 3.6

– 4.2

– 7.8

– 61.414.7– 46.6

Cash flow hedges

6.8

-

6.8

– 1.1

-

– 1.1

Net investment hedges

10.1

-

10.1

8.1

-

8.1

Translation differences

– 7.8

– 1.1

– 8.9

– 129.5-– 129.5

Other comprehensive income

30.9

– 9.5

21.4

15.8

– 37.9– 22.1

88
Forbo Group
Annual Report
2009

15

Earnings per share
Undiluted earnings per share is calculated by dividing the net profit or loss for the year
attributable to registered shareholders by the weighted average number of registeredshares issued and outstanding during the year, less the average number of treasury shares
held.
Diluted earnings per share additionally takes into account the potential dilution effects
which would result if all share options in the money were exercised.
2009Group profit for the year (CHF m)
Weighted average number of outstanding shares
Undiluted earnings per share (CHF)
Adjustment amount of shares for stock option plans
Weighted average number of outstanding shares used
to calculate the diluted profit / loss
Diluted earnings per share (CHF)

2008

76.1

16.0

2,259,839

2,341,187

33.67

6.86

578

4,597

2,260,417

2,345,784

33.67

6.84

89
Forbo Group
Annual Report
2009

16

Property, plant and equipment
Cost or valuation
CHF m

Other
Machinery
property,
Land and
andplant andbuildings equipment equipment

AssetsTotal
underproperty,
construcplant andtion equipment

As at December 31, 2007

507.8

981.7

168.3

25.8

1,683.6

Net effects of the introduction of therevaluation model1)– 94.6---– 94.6

Additions

6.7

20.9

5.0

25.4

58.0

Disposals– 4.6– 10.8– 6.7-– 22.1

Change in scope of consolidation

19.0

17.7

0.5

9.5

46.7

Transfers

5.7

20.9

0.1

– 34.3– 7.6

Exchange differences– 35.1– 126.0– 16.1– 3.0– 180.2

As at December 31, 2008

404.9

904.4

151.1

23.4

1,483.8

Additions

3.6

11.4

3.1

20.8

38.9

Disposals– 23.3

– 5.3

– 4.3

-

– 32.9Transfers2)

0.9

6.8

12.5

– 20.6– 0.4

Exchange differences

– 3.3

0.6

– 0.3

– 0.6

– 3.6

As at December 31, 2009

382.8

917.9

162.1

23.0

1,485.8

Accumulated depreciationand impairments
CHF m

Other
Machinery
property,
Land and
andplant andbuildings equipment equipment

AssetsTotal
underproperty,
construcplant andtion equipment

As at December 31, 2007

284.3

825.2

150.4

-

1,259.9

Net effects of the introduction of the revaluation
model for land and buildings1)– 284.3---– 284.3

Depreciation

8.1

34.5

7.9

0.5

51.0

Impairments

-

21.2

-

-

21.2

– 7.7

-

-

-

– 7.7

Disposals-– 10.5– 6.3-– 16.8Transfers

-

– 2.1

– 2.4

1.3

– 3.2

Translation differences-– 107.7– 14.6– 0.3– 122.6

Reversal of impairments

As at December 31, 2008

0.4

760.6

135.0

1.5

897.5

Depreciation

15.5

35.1

8.3

-

58.9

Disposals– 10.7

– 4.9

– 4.0

-

– 19.6

Transfers2)

-

– 6.8

6.3

-

– 0.5

Translation differences

– 2.2

0.1

1.7

-

– 0.4

As at December 31, 2009

3.0

784.1

147.3

1.5

935.9

As at December 31, 2008

404.5

143.8

16.1

21.9

586.3

As at December 31, 2009

379.8

133.8

14.8

21.5

549.9

Net carrying amount

1) The item 'Net effects of the introduction of the revaluation model for property and buildings' includes all effects arisingout of the revaluation. The item at cost is made up as follows: value increase of CHF 184.5 million less the accumulated
depreciations and impairments as at January 1, 2008 of CHF 284.3 million and the accumulated depreciations for the firsthalf of 2008 amounting to CHF 6.1 million plus the exchange rate effects in the first half of 2008 amounting to CHF 11.3
million.
2) The item 'Transfers' includes, among other items, the reclassification of IT equipment to 'Other tangible assets' as part ofthe integration of the companies acquired in the 2008 financial year.

90
Forbo Group
Annual Report
2009

Property and buildings were last valued by independent valuers on July 1, 2008. In therevaluation in 2008, the methods used were market value, capitalized value and costoriented valuation. In applying the capitalized value method, the fair value was ascertainedby means of the discounted cash flow (DCF) method. In applying the cost-oriented valuation, the fair value was ascertained by means of the depreciated replacement cost method.
The increase in net value was recognized in the revaluation reserve in equity, taking into
account deferred taxes.
If land and buildings were carried at amortized costs / manufacturing costs, the figures
would be as follows:
2009

2008

CHF m

Cost

468.1

471.1

Cumulative depreciations– 260.2– 253.0

Net carrying amount

207.9

218.1

Property, plant and equipment also include leased assets with a net carrying amount of
CHF 0.3 million (2008: CHF 0.5 million).
The sum assured for buildings, machinery, equipment and inventories was CHF 2,178 million(2008: CHF 2,321 million).
Maintenance and repair costs amounted to CHF 29.9 million (2008: CHF 35.5 million). The
depreciation expense of CHF 58.9 million (2008: CHF 57.1 million) is included in the items'Cost of goods sold', 'Development costs', 'Marketing and distribution costs' and 'Administrative costs'.
The Group reviewed the recoverable amount of its machinery and equipment in the second
half of 2008. It was found that owing to the changed economic circumstances the actual
recoverable free cash flows from the use of certain assets were significantly poorer than originally assumed. The review resulted in an impairment charge of CHF 21.2 million during theprevious year, which was recognized in the income statement. These are assets used in the
Bonding Systems division, more specifically in production plants in the United States(CHF 20.0 million) and Russia (CHF 1.2 million). The recoverable value of the assets involved
was ascertained on the basis of their value in use. These impairment tests were conducted
over a planning period of five years by means of discounted free cash flows expected in future.
The discount rate used to determine the value in use was 9 % per annum.
The impairments and appreciations in value are carried in the income statement under'Other operating expenses'.

91
Forbo Group
Annual Report
2009

17

Intangible assets
Cost
CHF m

As at December 31, 2007
Additions
Disposals
Change in scope of consolidation

Goodwill

Trademarks / technologies

Other
intangible
assets

Total

137.6

54.7

15.4

207.7

1.2

-

2.3

3.5

-

-

– 1.8

– 1.8

90.7

50.9

59.8

201.4

Transfers

– 0.1

– 0.1

7.8

7.6

Translation differences– 19.4– 11.4– 14.4– 45.2As at December 31, 2008

210.0

94.1

69.1

373.2

Additions

-

-

1.0

1.0

Disposals

-

-

– 1.2

– 1.2

Transfers-– 30.430.8

0.4

Translation differences

– 0.8

0.4

4.3

3.9

As at December 31, 2009

209.2

64.1

104.0

377.3

Goodwill

Trademarks / technologies

Other
intangible
assets

Total

10.9

33.0

11.9

55.8

Amortization

-

-

2.3

2.3

Impairment

3.7

-

1.2

4.9

Disposals

-

-

– 1.8

– 1.8

Accumulated amortizationand impairment
CHF m

As at December 31, 2007

-

-

3.1

3.1

Translation differences

– 1.2

– 0.2

– 1.4

– 2.8

As at December 31, 2008

Transfers

13.4

32.8

15.3

61.5

Amortization

-

-

7.9

7.9

Disposals

-

-

– 1.2

– 1.2

Transfers

-

-

0.5

0.5

Translation differences

– 1.1

– 0.2

0.8

– 0.5

As at December 31, 2009

12.3

32.6

23.3

68.2

As at December 31, 2008

196.6

61.3

53.8

311.7

As at December 31, 2009

196.9

31.5

80.7

309.1

Net carrying amountAs part of the annual review of the amortization period, the useful life of the technologies
linked to the acquisition of Bonar Floors was set at 30 years (previously indefinite). Accordingly, the acquired technologies totaling CHF 30.4 million were reclassified as at January 1,
2009 in the category 'Other intangible assets', which includes all intangible assets with afinite useful life.
Intangible assets with an indefinite useful life (goodwill and trademarks) are subject to an
impairment test every year on the basis of the cash generating unit. The test is carried out
using a standardized method with discounted cash flow to calculate the value in use.
The cash flows for the first 5 years are estimated by management. Growth of 1 % is generally
assumed for the subsequent years. The discount rate corresponds to the weighted cost ofcapital before taxes including an average risk charge, which is estimated by management
and is between 8.5 % and 15 %.

92
Forbo Group
Annual Report
2009

The goodwill item as at December 31, 2009, mainly comprises goodwill from the Swiftacquisition in 2002 and the goodwill acquired in connection with the acquisition of Bonar
Floors in 2008 (see note 35). As at December 31, 2009, trademarks mainly refer to thetrademarks linked to the acquisition of Swift and Bonar Floors.
The annual impairment test of goodwill from the Bonar Floors acquisition yielded a value in
use that was significantly higher than the carrying amount. The discount rate applied was
8.5 %. The intangible asset items also underwent impairment testing by means of sensitivity
analyses. The cash-generating unit underlying the goodwill impairment test is the Flooring
Systems division. The cash-generating units underlying the impairment testing of trademarks
are the companies which generate sales using these trademarks. The discount rate appliedin the impairment tests for trademarks is 12.6 %.
The impairment test of goodwill and trademarks from the Swift acquisition in 2002 yielded avalue in use that was higher than the carrying amount. The cash-generating units underlying the impairment test are the companies acquired by the Bonding Systems division. The
discount rate applied in the impairment test is 8.5 %. The intangible assets also underwent
impairment testing by means of sensitivity analyses. Even an increase in the discount rate andthe use of a defensive business plan would not result in an impairment of goodwill.

18

Investments in associates
and other non-current assets

31.12.2009

31.12.2008

CHF m

19

Other investments in associates

1.5

1.5

Other non-current assets

4.7

0.4

Total investments in associates and other non-current assets

6.2

1.9

31.12.2009

31.12.2008

62.5

87.8

Inventories
CHF m

Raw materials and supplies
Work in progress

66.6

79.2

Finished goods

162.1

161.7

Provisions for inventory– 30.2– 30.4

Total inventories

261.0

298.3

The provisions for inventories amount to CHF 30.2 million (2008: CHF 30.4 million). Provisions
totaling CHF – 0.2 million (2008: CHF 1.6 million) were recognized in 'Cost of goods sold'.

93
Forbo Group
Annual Report
2009

20

Trade receivables

31.12.2009

31.12.2008

Accounts receivable

223.2

248.9

Notes receivable

35.0

37.2

CHF m

Allowance for doubtful trade receivables– 21.1– 20.3

Total trade receivables

237.1

265.8

Trade receivables after deduction of the allowance for doubtful trade receivables amounting
to CHF 21.1 million (2008: CHF 20.3 million) came to CHF 237.1 million (2008: CHF 265.8 million).
As a rule, no default interest is charged for receivables past due. As regards the trade receivables for which no allowance has been made or which are past due, there is no indication, asof the reporting date, that the debtors will not meet their payment obligations. Allowances
are made in the form of a specific allowance for losses. A specific allowance is required if the
debtor is unable to pay, the debt has been past due for more than 90 days or the debtor has
given notice of payment difficulties. Allowances take due account of default risks. In addition
to the specific allowance, a portfolio allowance may be made. For this purpose, trade receivables for which an additional allowance may potentially be necessary are grouped together
on the basis of similar risk characteristics and reviewed. Where appropriate, an allowance
is made. The decision as to whether to make a portfolio allowance in addition to a specificallowance is determined by whether past loss experience supports a potential valuation
allowance.
Trade receivables capitalized at the balance sheet date:
31.12.2009

31.12.2008

Total trade receivables, gross

258.2

286.1

Of which not due

205.4

224.6

CHF m

Of which past due for:Less than 30 days

26.7

31.8

Between 31 and 90 days

10.7

14.4

Between 91 and 180 days

4.9

6.6

Between 181 days and 1 year

8.1

5.8

2.4

2.9

Allowance for doubtful trade receivables– 21.1– 20.3

Total trade receivables

237.1

265.8

Over 1 year

As at December 31, 2009, CHF 36.3 million in trade receivables for which no allowance has
been made, were past due; an allowance has been made and a reserve established for tradereceivables totaling CHF 27.0 million.

94
Forbo Group
Annual Report
2009

Gross value of trade receivables by currencies:
31.12.2009

31.12.2008

CHF m
CHF

1.2

0.9

EUR

143.6

165.7

GBP

21.2

20.7

JPY

15.7

18.8

SEK

9.0

8.3

USD

34.1

30.6

Other
Total trade receivables, gross

33.4

41.1

258.2

286.1

Changes in allowances for doubtful trade receivables during the financial year:

CHF m

2009

2008

– 20.3– 18.5Additions

– 5.5

– 7.1

Release

1.1

3.8

Use

3.5

1.0

As at January 1

-

– 0.9

Translation differences

0.1

1.4

As at December 31– 21.1– 20.3

Change in scope of consolidation

The creation and release of allowances for doubtful trade receivables are contained in theitem 'Marketing and distribution costs' in the income statement.
21

Marketable securities'Marketable securities' mainly comprises registered shares of Rieter Holding AG , valued
at the closing price on the SIX Swiss Exchange on the last day of trading in the 2009 business
year.

95
Forbo Group
Annual Report
2009

22

Cash and cash equivalents

31.12.2009

31.12.2008

CHF m

Cash
Bank accounts
Short-term deposits with banks
Total cash and cash equivalents

0.2

0.3

177.0

201.8

21.0

13.5

198.2

215.6

The change in cash and cash equivalents can be found in the consolidated cash flow
statement.
23

Pledged or assigned assets
There are no significant pledged or assigned assets.

24

Share capital
After the CHF 3.90 reduction in par value from CHF 4.00 to CHF 0.10 per registered share,
the share capital of Forbo Holding Ltd stood at CHF 271,315 as at December 31, 2009 (2008:
CHF 10,852,608) and is divided into 2,713,152 registered shares with a par value of CHF 0.10
each. Of these, 21,419 registered shares without voting or dividend rights are at the disposalof the Board of Directors. Consequently, 2,691,733 registered shares were eligible fordividends as at December 31, 2009.
Changes in shares in circulation:
31.12.2009

Change31.12.2008

NumberNumberNumber2,713,152-

2,713,152

Treasury shares

211,988– 35,864

247,852

Share buyback 2008

213,152-

213,152

Total shares outstanding
Treasury shares
Shares with dividend rights:

Shares with no dividend rights
Total treasury shares
Total shares in circulation

21,419-21,419446,559– 35,864

482,423

2,266,593

35,8642,230,729

At the Ordinary General Meeting of Shareholders of Forbo Holding Ltd on April 24, 2009,
the Board of Directors was authorized to sell or to use for acquisitions or for securing
convertible or option rights the 213,152 shares that were the subject of the second tradingline share buyback program adopted by the Ordinary General Meeting on April 25, 2008.
In so far as these shares have not been sold or used for acquisitions or for securing convertible or option rights by the date of the Ordinary General Meeting in 2011, the Board of
Directors shall propose to the 2011 Ordinary General Meeting that the share certificates be
destroyed.

96
Forbo Group
Annual Report
2009

25

Stock Option Plan
Members of the Board of Directors (up to 2004) and members of the Executive Board were
granted stock options under a Stock Option Plan (SOP). The stock options constitute botha recognition of past performance and an insentive to perform well in the future. The underlying share price and strike price used for the allocation of the stock options is determinedby the closing price on the fifth trading day after payment of the dividend. The options issued
usually have a term of five years and a vesting period of three years.
With effect from March 15, 2006, the Board of Directors approved the introduction of theManagement Investment Plan (MIP). The SOP was discontinued after the introduction of the
MIP. The Board of Directors does not participate in the MIP. Under the MIP, participantsreceive at least 50 % of the variable component of their compensation in the form of sharesand options. The equity-settled part of the variable compensation is recognized at fairvalue and entered as a corresponding increase in equity. The shares are issued at the average
market price for the first 14 trading days in January of the current year. The options areissued on the basis of a valuation by an independent bank. The valuation is based on the
average market price of the shares in the first 14 trading days in January of the current
year. Equities and options are subject to a three-year vesting period. The term of the options
is 5 years. Shares and options issued within the framework of the MIP are equity-settled.
Options
The changes in the number of outstanding equity-settled options and their weighted
average strike price are as follows:2009
Weighted
averagestrike price

Options outstanding as at January 1
Granted2008
Numberof options

Weighted
averagestrike price

Numberof options

499

24,206383

19,212

215

8,117

822

6,044

Forfeited

-

-

-

-

Exercised220– 1,500235– 1,050

ExpiredOptions outstanding as at December 31

-

-

-

-

438

30,823499

24,206Of the 30,823 outstanding options (2008: 24,206), 10,894 were exercisable as at December 31,
2009 (2008: 5,200). The exercise of 1,500 options (2008: 1,050) resulted in the issue of
2,500 Forbo Holding shares (2008: 1,050) at a weighted average strike price of CHF 220(2008: CHF 235). The weighted average share price on the delivery date was CHF 254(2008: CHF 466). The expense for equity-settled options charged to the income statement
in application of IFRS 2 amounted to CHF 0.3 million (2008: CHF 0.6 million).

97
Forbo Group
Annual Report
2009

Information on the outstanding options as at December 31, 2009:

Series(CHF)

Number ofoutstanding
options

2005

235

3,700

0.5

3,700

2006

370

7,194

1.3

7,194

2007

565

5,768

2.2

-

2008

822

6,044

3.3

-

2009

215

8,117

4.3

-

30,823

2.6

10,894

Strike priceTotal options outstanding
as at December 31

Averageremainingterm (years)

Number of
exercisable
options

In the year under review, a total of 8,117 equity-settled options (2008: 6,044) were granted
under the MIP. The fair value of these options amounted to CHF 34.8 (2008: CHF 43.2). The
options were valued in accordance with the Black-Scholes model using the following input
factors: share price at issue date CHF 172 (2008: CHF 520), strike price CHF 215 (2008: CHF 822),
volatility 35.8 % (2008: 27.4 %), expected remaining term of 4.1 years (2008: 4.1 years), dividend yield 2.3 % (2008: 1.5 %) and risk-free interest rate 1.8 % (2008: 2.8 %). The expectedvolatility is based on adjusted historical market data for a period comparable to the
expected option term. The expected useful life applied in the calculation model has beenadjusted using the best possible estimate to reflect the restrictions on exercise rights andpotential behavior patterns.
SharesThe number of shares of Forbo Holding Ltd issued under the MIP in the year under review
was 1,643 (2008: 1,283). The share price value date was CHF 169 (2008: CHF 520).
The Delegate of the Board of Directors and CEO is remunerated primarily with shares. Basedon an employment contract signed in 2005, 47,395 shares were issued in 2006 at a market
value of CHF 270 each for the entire five-year contract term (2006 to 2010). These shares are
vested until December 31, 2010. The corresponding personnel expenses are charged tothe income statement over the entire contractual period on a pro rata basis. With effect fromJanuary 2009, the employment contract with the Delegate of the Board of Directors and
CEO was extended and now runs until end of April 2013. Compensation will again be paid
mainly in shares, which in accordance with IFRS 2 was recognized on a pro rata basis in
the year under review.
In the year under review, the amount charged to the income statement in application of IFRS 2
for shares issued to the Executive Board and Board of Directors came to CHF 4.2 million(2008: CHF 4.5 million).

98
Forbo Group
Annual Report
2009

26

Non-current financial debt

31.12.2009

31.12.2008

CHF m

Outstanding private placements / bonds

201.6

184.7

Unamortized issuance cost

– 1.4

– 0.5

Total outstanding private placements and bonds

200.2

184.2

Bank debt

349.0

458.8

Lease obligations

1.3

1.7

Less current portion– 0.4– 132.3

Total non-current financial debt

550.1

512.4

31.12.2009

31.12.2008

Maturities of non-current financial debt
CHF m

After 1 year

183.4

349.0

After 2 years

218.0

110.2

After 3 years

150.1

53.7

-

-

After 5 and more years
Unamortized costs

– 1.4

– 0.5

Total maturities of non-current financial debt

550.1

512.4

Forbo Holding Ltd issued a CHF 150.0 million four-year bond on July 6, 2009 (maturity: July 31,2013). The bond has a coupon of 4 1 / 8 % and has been traded on the SIX Swiss Exchange
since July 20, 2009.
Derivatives transactions:
Financial derivatives
Numberof contracts

Gross value
hedgedUnrealized
gain / loss

CHF m

CHF m

Derivative financial instruments as at December 31, 2008

15

132.0

– 42.2Derivative financial instruments as at December 31, 2009

24

15.8

0.4

Financial derivatives are valued at fair value in accordance with IAS 39. The positive
replacement value (total of all positive and negative fair values) as at December 31, 2009
was CHF 0.4 million (2008: CHF – 42.2 million).
The private placement and bond are measured at amortized cost using the effective
interest method.
Outstanding private placements and bonds as at 31.12.2009
Company
Private placement: Forbo NL Holding B.V.
(guaranteed by Forbo Holding AG)
Bond: Forbo Holding AG

Currencym

Term

Interest
rate

USD

50.0 2002 – 2012 6.290 %CHF

150.0 2009 – 2013 4.125 %99
Forbo Group
Annual Report
2009

Financial covenants
The private placement, the bond and bank debt contain standard general covenants. The
private placement and part of the bank debt also contain financial covenants, i.e. a defined
maximum debt gearing (the ratio of consolidated net debt to consolidated EBITDA may notexceed 3 to 1), a defined minimum interest coverage ratio (consolidated EBITDA to consolidated
net interest payable may not be less than 4 to 1), and capital adequacy rules (shareholders’equity in the consolidated balance sheet may not fall below CHF 535.5 million).
The private placement, the bond, and part of the bank debt include standard events ofdefault. All facilities are unsecured (with the exception of guarantees provided by Forbo
Holding Ltd as surety for its subsidiaries).
27

Employee benefit obligations
The Group has established several pension plans based on the specific requirements in the
countries in which it operates. It has both defined contribution and defined benefit plans.
The liabilities and assets under all the essential defined benefit plans are assessed annually
by independent actuaries in accordance with the projected unit credit method. The Group’s
largest pension plans are in the Netherlands and the United Kingdom.
Pension costs for defined benefit plans:
2009

2008

12.0

12.4

CHF m

Current service cost, net
Interest costs

35.1

35.2

Expected return on plan assets– 22.9– 37.9Curtailments and settlements

– 0.6

– 0.2

Actuarial net periodic pension costs

23.6

9.5

100
Forbo Group
Annual Report
2009

Changes in defined benefit obligations under the defined benefit plans:

CHF m

As at January 1
Current service cost, net

2009

2008

575.1

734.9

12.0

12.4

Employee contributions

4.9

4.8

Interest costs

35.1

35.2

Benefits paid

– 24.9– 35.3

Actuarial gains / losses (–)

30.6– 23.6

Inclusion of new pension plans-

1.1

Curtailments and settlements– 4.8– 33.2

Translation differences

7.5– 121.2

As at December 31

635.5

575.1

2009

2008

Changes in plan assets of the defined benefit plans at fair value:

CHF m

516.5

750.5

Expected return on plan assets

22.9

37.9

Employer contributions

14.8

16.6

Employee contributions

4.9

4.8

Actuarial gains / losses (–)

27.0– 96.9Benefits paid

– 24.9– 35.3Curtailments and settlements– 4.2– 33.0Translation differences

9.9– 128.1

As at December 31

566.9

516.5

As at January 1

The actual investment return on plan assets came to CHF 49.9 million (2008: expense of
CHF 59.1 million).

101
Forbo Group
Annual Report
2009

The present value of defined benefit pension liabilities and fair value of plan assets as at
year-end:
31.12.2009

31.12.2008 31.12.2007 31.12.2006 31.12.2005

CHF m

Present value of defined benefit
obligation

635.5

575.1

734.9

807.2

789.6

Fair value of plan assets– 566.9– 516.5– 750.5– 761.4– 688.5

68.6

58.6

– 15.6

45.8

101.1

-

-

12.5

-

-

68.6

58.6

– 3.1

45.8

101.1

Net liabilities / assets (–)
Net assets not recognizedin the balance sheet
Net liabilities / assets (–)
recognized in the balance sheet

Actuarial gains and losses and experience adjustments for past used for valuing the defined
benefit plan assets and liabilities:
2009

2008

2007

2006

2005

8.8

0.6

0.3

15.5

26.2

1.5 %

0%

0%

2.0 %

3.7 %

Actuarial losses (–) / gains

27.0– 96.9– 26.66.6

55.3

Percentage of plan assets

5.2 %– 12.9 %– 3.5 %

1.0 %

9.3 %

Experience adjustments
CHF m

Plan liabilities
Actuarial gains
Percentage of plan liabilities
Plan assets

Actuarial gains and losses are recognized in the balance sheet under 'Pension liabilities' andpresented directly in shareholders’ equity.
Most of the pension plans are financed in full or in part via outsourced funds. Pension
liabilities amounting to CHF 38.7 million (2008: CHF 38.7 million) of a total of CHF 635.5 million(2008: CHF 575.1 million) are not financed via a fund.

102
Forbo Group
Annual Report
2009

Changes in the net liabilities of defined benefit plans recognized in the balance sheet:

CHF m

2009

2008

Net assets (–) / liabilities as at January 1

58.6

– 3.1

Total pension expenses included in personnel expenses

23.6

9.5

Employer contributions– 14.8– 16.6

Actuarial losses / gains (–)

3.6

61.4

-

1.1

Translation differences

– 2.4

6.3

Net liabilities as at December 31

68.6

58.6

Inclusion of new pension plans

Actuarial gains and losses of defined benefit plans are presented in shareholders’ equity
through other comprehensive income:
2009

2008

Actuarial losses (–) / gains as at January 1

– 0.6

67.4

Actuarial gains (–) in the current period– 3.6– 61.4

Translation differences

1.3

– 6.6

– 2.9

– 0.6

Cumulative recognized gains and losses
CHF m

Total actuarial losses (–) as at December 31

The actuarial loss in 2009 is made up of gains of CHF 35.8 million (2008: CHF 93.6 million loss)
due to experience adjustments, losses of CHF 39.4 million (2008: CHF 23.0 million gain) due
to changes in assumptions and a nil gain (2008: CHF 12.0 million gain) from changes in the asset
ceiling.
The principal actuarial assumptions used for accounting purposes for defined benefit plans(expressed as weighted averages):
2009

2008

%
Discount rate

5.4

5.9

Expected return on plan assets

4.4

5.0

Future salary increases

3.0

3.0

Inflation

2.3

2.2

The expected return on plan assets is derived from long-term government bonds in therespective currency zones.

103
Forbo Group
Annual Report
2009

The weighted average distribution of the defined benefit plan assets by asset category
as at December 31:
2009

2008

%
Shares

27.0

23.0

Bonds

71.0

76.0

Real estate

1.0

1.0

Cash and other investments

1.0

-

100.0

100.0

Total plan assets as at December 31

The estimate for expected contributions in the subsequent year is based on the current year
amounts.
The cost of the contributions to defined contribution plans, which is included in personnel
expenses, amounted to CHF 5.3 million in 2009 (2008: CHF 5.4 million).

28

Provisions
CHF m

Environ- Provisions
Warranty
Othermentalfor legal Personnel
provisions provisions
claims provisions provisions

18.0

55.6

49.7

0.5

Additions

1.5

-

5.5

9.0

16.9

32.9

21.0

Used during the year

– 2.8

-

– 0.5

– 1.1

– 2.3

– 6.7

– 6.5

Reversed during the year

– 2.4

– 0.6

– 7.2

– 0.1

– 0.1

– 10.4

– 9.9

-

-

-

-

-

-

3.7

Translation differences

0.1

0.1

0.1

– 0.1

0.1

0.3

– 2.4

As at December 31

2.2

-

17.7

19.2

32.6

71.7

55.6

Change in scope of consolidation

11.5

Total
2008

5.8

As at January 1

19.8

Total
2009

of which current provisions

1.5

-

0.2

15.9

15.3

32.9

18.6

of which non-current provisions

0.7

-

17.5

3.3

17.3

38.8

37.0

Warranty provisions are linked to product sales and are based on past experience. Experience
shows that cash outflows are spread evenly over the warranty period of five to ten years.
The provisions for legal claims relate mainly to product liability claims in which the Group is
involved in the course of its normal business. The personnel provisions include the bonus
programs, provisions for paid leave and severance payments in connection with the downsizing programs. The category 'Other provisions' includes restructuring provisions andprovisions for structural adjustments.

29

Trade payables

31.12.2009

31.12.2008

122.4

141.4

0.9

3.1

123.3

144.5

CHF m

Accounts payable
Notes payable
Total trade payables

104
Forbo Group
Annual Report
2009

30

Accrued expenses

31.12.2009

31.12.2008

Accrued expenses for compensation and benefits to employees

57.2

65.8

Other accrued expenses

68.1

64.6

125.3

130.4

CHF m

Total accrued expenses

Accrued expenses for compensation and employee benefits mainly comprise overtime
accruals and commissions. Other accrued expenses include accrued volume rebates, commissions, premiums, interest and accrued warranty costs and similar items.

31

Current financial debt

31.12.2009

31.12.2008

3.0

49.0

CHF m

Current bank loans and overdrafts
Current portion of non-current debt

0.4

132.3

Total current financial debt

3.4

181.3

31.12.2009

31.12.2008

0.6

0.5

For information on covenants, see note 26.

32

Contingent liabilities
CHF mContingent liabilities'Contingent liabilities' refer to sureties and guarantees in favor of third parties.

33

Leasing

2009

2008

Up to 1 year

9.7

9.7

2 – 5 years

14.4

18.0

More than 5 years

3.3

4.1

27.4

31.8

CHF m

Operating leasing liabilities:

Total operating leasing liabilities:

Expenses for operating lease and rentals charged to the 2009 income statement came to
CHF 27.4 million in 2009 (2008: CHF 28.7 million). The Group has no significant operating
leasing contracts.
The finance liability leasing stood at CHF 1.3 million at year-end (2008: CHF 1.7 million) andis included in 'Non-current financial debt'.

105
Forbo Group
Annual Report
2009

34

Additional information on financial instruments
The financial instruments held on the accounting date fall into the following categories:
31.12.2009

Financialassetsavailablefor-sale

Cash and cash
equivalents

Loans andreceivables

Derivatives
usedfor hedging

Trade receivables and other receivables

-

269.6

-

-

Other financial assets

-

4.7

-

-

198.2

-

-

-

-

-

-

100.2

CHF m

AssetsCash and cash equivalents
Marketable securities
Financial derivatives
Total assets

-

-

0.5

-

198.2

274.3

0.5

100.2

Financialliabilities
at amortized
costs

Derivatives
usedfor hedging

Financial
instruments
heldfor trading

CHF m

Liabilities
Interest-bearing debt

553.0

-

-

Financial derivatives

-

0.1

-

144.5

-

-

697.5

0.1

-

Cash and cash
equivalents

Loans andreceivables

Derivatives
usedfor hedging

Financialassetsavailablefor-sale

Trade receivables and other receivables

-

297.9

-

-

Other financial assets

-

0.4

-

-

215.6

-

-

-

-

-

-

73.3

Trade payables and other payables

1)

Total liabilities

31.12.2008
CHF mAssetsCash and cash equivalents
Marketable securities
Financial derivatives
Total assets

CHF m

-

-

1.7

-

215.6

298.3

1.7

73.3

Financialliabilities
at amortized
costs

Derivatives
usedfor hedging

Financial
instruments
heldfor trading

Liabilities
Interest-bearing debt

693.2

-

-

Financial derivatives

-

35.1

8.8

Trade payables and other payables1)

168.6

-

-

Total liabilities

861.8

35.1

8.8

1) Excluding sales tax.

106
Forbo Group
Annual Report
2009

The following table classifies the financial instruments that are valued at fair value in a threelevel hierarchy:– L evel 1: Quoted prices for identical assets and liabilities.
– L evel 2: Input factors other than the quoted prices included in level 1 and which areobservable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
– L evel 3: Input factors for the asset or liability that are not based on observable market data
(unobservable inputs).

31.12.2009
CHF mLevel 1

Level 2

Level 3

Total

Financial assets available-for-sale

100.2

-

-

100.2

-

0.5

-

0.5

Financial derivatives

100.2

0.5

-

100.7

Financial derivatives

-

0.1

-

0.1

Total liabilities

-

0.1

-

0.1

Total assets

35

Acquisition of subsidiaries
The Group did not acquire any subsidiaries in the year under review.
On July 11, 2008, the Group acquired Transtex Belting, the lightweight PVC conveyor belt
operations of Fenner Dunlop (Charlotte) Inc. The acquired operations were integrated into
Forbo Siegling LLC , Huntersville, USA , and are reported as part of the Movement Systems
division.
On September 30, 2008, the Group acquired the Bonar Floors division of Low & Bonar PLC ,a company listed on the London Stock Exchange. Bonar Floors is a leading European
floorings manufacturer for the commercial market segment. By broadening the division’s
product portfolio, the acquisition has strengthened the position of Flooring Systems asa system provider of resilient floorcoverings for the commercial market.
The initial recognition of the acquisition of Bonar Floors was only provisionally determinedat the end of the 2008 business year, the year in which the acquisition took place. Whenthe purchase price allocation was definitively settled in the year under review, the fair valueof the brands at the acquisition date was reduced by CHF 1.0 million within the 12-month
period and goodwill was increased by CHF 1.0 million.
Bonar Floors Transtex Belting

Total

CHF m
Total acquisition price,including transaction costs

222.0

11.1

233.1

Fair value of net assets acquired– 131.3– 9.9– 141.2

90.7

1.2

91.9

Goodwill

107
Forbo Group
Annual Report
2009

The goodwill stems from the anticipated synergies which will be generated with the existing
Flooring Systems and Movement Systems divisions. Bonar Floors products are distributedin the same markets as those in which Flooring Systems operates. The product portfolio of
Bonar Floors is an ideal addition to the Forbo linoleum and vinyl flooring range. The
acquisition of Bonar Floors significantly strengthened the market position of Flooring Systems
as a provider of floor coverings for the commercial segment. The Transtex Belting prodcuts
have enabled Movement Systems to expand its position in the US market.
The fair values of the identifiable assets and liabilities and the corresponding carrying
amounts at the date of acquisition:
Bonar Floors

Transtex Belting

Total

Fair value

Acquiree’s
carrying
amountFair value

Acquiree’s
carrying
amountProperty, plant and equipment

46.7

40.6

3.8

3.4

Intangible assets

110.7

38.4

1.2

-

Inventories

42.3

41.9

4.9

4.9

Trade receivables

36.5

36.5

-

-

Cash and cash equivalents

20.3

20.3

-

-

CHF m

2.6

2.6

-

-

Deferred tax liabilities– 37.8

– 6.9

-

-

Trade payables– 25.8– 25.8--Provisions

– 3.7

– 3.7

-

-

Other liabilities– 60.5– 60.5--

Fair value of net assets acquired

131.3

83.4

9.9

8.3

Acquisition price settled in cash

– 219.3– 10.5– 229.8

Transaction costs

– 2.7

– 0.6

– 3.3

Cash and cash equivalents acquired

20.3

-

20.3

– 201.7– 11.1– 212.8

Other assets

Cash outflow on acquisition, net

108
Forbo Group
Annual Report
2009

36

Related party transactions
Compensation paid to the Board of Directors and Executive Board:
Executive
Board

CHF m
Remuneration

Membersof the Board of Directors

Total

Total

2009
2.4

2008
2.2

2009
0.8

2008
0.8

2009
3.2

2008
3.0

Employer contributions
to the pension scheme

0.4

0.4

0.2

0.2

0.6

0.6

Other long-term benefits

-

-

-

-

-

-

Termination benefits

-

-

-

-

-

-

Share-based payments

0.5

1)

Total payments

3.3

2.0

3.9

2)

2.8

4.4

4.8

4.6

4.9

3.8

8.2

8.4

1) In addition to the estimated, performance-based variable remuneration within the framework of the MIP (see note 25)
for 2009, amounting to CHF 2.0 million, this also includes the difference, amounting to CHF – 1.5 million, between thebonuses deferred at the end of 2008 (payable in equity instruments) and the value of the equity instruments actually
issued in the year under review.
2) This sum of CHF 3.9 million, includes the share-based payment to the Board of Directors and to the Delegate of the Boardof Directors and CEO, which is unchanged against the previous year, plus CHF 1.1 million from the new employment
contract with the Delegate of the Board of Directors and CEO (2011 to 2013), which was recognized on a pro rata basis in
the year under review in the accordance with IFRS 2.

The compensation paid to the Executive Board in 2009 consists of the gross basic salary,
private use of the company car, and social security payments made by the company.
Employer contributions to the pension fund are reported separately. Share-based payments
to the Executive Board consist of performance-based variable remuneration under the
MIP (see note 25) for 2009 amounting to CHF 2.0 million (payable in spring 2010) minus thedifference, amounting to CHF – 1.5 million, between the bonuses deferred at the end of2008 (payable in equity instruments) and the value of the equity instruments actually issued
in the year under review.
The compensation paid to the Board of Directors amounts to CHF 0.3 million (2008: CHF 0.3
million) for the Delegate of the Board of Directors and CEO. This includes an annual figure of
CHF 0.15 million (2008: CHF 0.15 million) to settle employee contributions to the pension
fund and social security, and CHF 0.17 million (2008: CHF 0.17 million) for private use of thecompany car, employer contributions to the pension fund and to AHV / ALV (old-age andunemployment insurance) plus accident and daily sickness benefits insurance. Employer
contributions to the pension fund are reported separately. The short-term compensation
for non-executive Board members of Forbo Holding Ltd totaled CHF 0.5 million (2008:
CHF 0.5 million).
With effect from January 2009, the employment contract of the Delegate of the Board of
Directors and CEO was extended and now continues until end-April 2013. Compensation willagain be paid mainly in shares. The modalities are very similar to the provisions of the firstcontract. The 29,775 shares are vested until December 31, 2013. The share-based compensation paid to the Board of Directors includes the annual portion of the Forbo shares allocated to the Delegate of the Board of Directors and CEO amounting to CHF 2.6 million (2008:
CHF 2.6 million) plus – a new element in 2009 – the annual portion of the Forbo shares allocated to the Delegate of the Board of Directors and CEO amounting to CHF 1.1 million (2008:
0.0 million). Pursuant to the extension of the employment contract until the end of April
2013. In accordance with IFRS 2, the shares were recognized on a pro rata basis in the year
under review.

109
Forbo Group
Annual Report
2009

Moreover, the share-based compensation paid to the Board of Directors includes the 1,135
Forbo shares allocated to the non-executive members of the Board of Directors in 2009 (2008:
599 shares) with a fair value value of CHF 0.2 million (2008: CHF 0.3 million).
Further details relating to the compensation paid to the Executive Board and the Board of
Directors can be found in note 17 'Disclosure of compensation paid to the Board of Directors
and the Executive Board pursuant to Article 663b bis and Article 663c CO ' separate financial
statements for Forbo Holding Ltd.
In view of the shareholding taken in Rieter Holding AG and the fact that This E. Schneider,
Delegate of the Board of Directors and CEO of Forbo Holding Ltd, was elected to the Boardof Directors of Rieter Holding AG in May 2009, Rieter is regarded as a related party. Enia
Carpet Group AG constitutes a related party because the Forbo Group holds 33 1 / 3 % of theequity.
In the period under review, the Forbo Group sold products worth CHF 0.6 million (2008:
CHF 1.1 million) to the Rieter Group. In 2009, the Forbo Group bought products from Enia
Carpet Group AG worth CHF 3.0 million (2008: CHF 3.8 million), while Enia Carpet Groupbought products from the Forbo Group worth CHF 0.1 million. The goods were sold to andpurchased from related parties at market conditions. As at December 31, 2009, Forbo had
no significant receivables due from or liabilities to related parties.
37

Risk assessment and financial risk management
The tasks of the Board of Directors include identifying risks, determining suitable measuresand implementing these measures or having them implemented. The Board of Directorsof Forbo Holding Ltd conducted a Group-wide risk assessment in the year under review andalso determined the risks to be managed by particular management levels. The Board of
Directors is closely involved in the assessment of strategic risks and, through dialogue with
the Executive Board, ensures that operational risks are given due attention and reported
accordingly. This approach gives the Board a complete overview of the key risks and measures.
With this overview, the Group is able to prioritize and allocate the necessary resources.
Financial risk management
In its financial operations, the Forbo Group uses derivative and non-derivative financial
instruments in order to manage the risks and opportunities arising from fluctuations
in exchange rates and interest rates. The various risks associated with existing assets andliabilities as well as planned and anticipated transactions are assessed and monitoredcentrally – with due regard to the Group’s overall risk exposure. In line with the Group’s
financial risk management policy, Corporate Treasury constantly monitors both the risk
exposure and the effectiveness of the hedging instruments and issues recommendations
with regard to the partial or complete hedging of existing risks.
The Group’s financial risk management policy does not permit the use of derivative financial
instruments for speculation. For the management of counterparty risk, derivative financialtransactions are concluded only with first-class banks. The creditworthiness of these institutions is assessed on the basis of evaluations by leading rating agencies.
Derivative financial instruments include instruments used by the company to manage foreign
currency and interest risks or combinations thereof.

110
Forbo Group
Annual Report
2009Management of currency risks
Risks arising from short-term currency exposure created by purchases and sales of goods
and services (transaction risks) are identified, and selective hedging strategies are implemented in line with an ongoing assessment of exchange rate movements. For the purposeof hedging transaction risks, the Group only uses foreign exchange forward and option
contracts with maturities of less than 15 months.
Furthermore, risks associated with the translation of assets and liabilities denominated inforeign currencies (translation risks) are managed by establishing an appropriate financing
policy, including net investment hedges.
The following table shows the sensitivity of profit before tax and of shareholders’ equity tochanges in the exchange rate of the US dollar, the euro, the pound sterling, and the Swiss
franc. Sensitivity is shown in relation to transaction risks and cash flow hedges. Transaction
risks, the effects of loans that qualify as net investments and net investment hedges are
not taken into account.
2009
CHF m
EUR / CHF

USD / CHF

EUR / USD

GBP / CHF

GBP / EUR

Change inexchange rate

Impact on profit
before tax

Impact on
shareholders’equity

5%

0.9

-

–5%

– 0.9

-

5%

0.3

-

–5%

– 0.3

-

5%

0.7

0.5

–5%

– 0.7

– 0.5

5%

0.1

-

–5%

– 0.1

-

5%

– 0.1

-

–5%

0.1

-

Change inexchange rate

Impact on profit
before tax

Impact on
shareholders’equity2008
CHF m
EUR / CHF

USD / CHF

EUR / USD

GBP / CHF

GBP / EUR

5%

0.5

-

–5%

– 0.5

-

5%

0.6

-

–5%

– 0.6

-

5%

0.5

0.8

–5%

– 0.5

– 0.8

5%

0.1

-

–5%

– 0.1

-

5%

– 0.3

-

–5%

0.3

-

111
Forbo Group
Annual Report
2009Management of interest rate risks
Interest-rate risks arise from the fact that the market value of interest-bearing assets andliabilities is affected by interest-rate fluctuations. Since these risks may have a negative
effect on the net financial result and shareholders’ equity, the Group uses derivative financial
instruments to manage them on a case-by-case basis. The table below shows the sensitivityof profit before tax and of shareholders’ equity to the stated changes in interest rates forliquidity, interest-bearing debt and financial derivatives.
An average figure has been used for liquidity since the final amount is not relevant whencalculating interest-rate sensitivity. The average was calculated by taking the arithmetic
mean of the initial and final amounts.

2009
CHF m
EUR

USD

CHF

Change ininterest rate

Impact on profit
before tax

Impact on
shareholders’equity

50bp

– 0.2

-

– 50bp

0.2

-

50bp

0.1

-

– 50bp

– 0.1

-

50bp

– 0.9

-

– 50bp0.9-

Change ininterest rate

Impact on profit
before tax

Impact on
shareholders’equity

50bp

1.1

0.1

– 50bp

– 1.1

– 0.1

2008
CHF m
EUR

USD

CHF

50bp

-

– 0.6

– 50bp

-

0.6

50bp

2.0

0.2

– 50bp

– 2.0

– 0.2

In the 2009 business year, all derivative financial instruments linked to the US private
placement were repaid. As a result, changes in interest rates no longer have any direct
effect on shareholders’ equity.

112
Forbo Group
Annual Report
2009Management of liquidity risksGroup companies need sufficient cash in order to meet their liabilities. The individualcompanies are responsible for managing their own cash surpluses and for raising funds
to cover their liquidity needs, subject to Group guidelines. In certain cases, approval must
be obtained from Corporate Treasury. The Group has sufficient liquidity reserves (as at
December 31, 2009, CHF 198.2 million in cash and CHF 99.2 million in undrawn committed
credit facilities) to meet its commitments at any time. At present, the Group regards aliquidity stock of about CHF 110 million as sufficient to meet its payment obligations at all
times.
The maturity structure of the existing financial liabilities can be seen in the following table.
They correspond to contractually agreed maturities and represent nominal payment
outflows. Inflows and outflows of funds from derivative financial instruments are shown
separately.
As at 31.12.2009

Remainingterm
to maturity
up to
1 yearRemainingterm
to maturity
1 – 2 years

Remainingterm
to maturity
2 – 5 years

Liabilities to banks

5.9

183.8

166.3

-

Interest-free liabilities

142.8

0.9

-

0.2

Leasing contract liabilities

0.4

0.4

0.5

-

Liabilities from private placements and bonds

9.5

9.5

217.3

-

Cash outflow from financial derivatives

15.5

-

-

-

Cash inflow from financial derivatives– 15.8---

Remainingterm
to maturity
up to
1 yearRemainingterm
to maturity
1 – 2 years

Remainingterm
to maturity
2 – 5 years

Remainingterm
to maturity
over 5 years

Liabilities to banks

57.0

349.4

110.1

-

Interest-free liabilities

168.6

-

-

-

CHF m

As at 31.12.2008

CHF m

Remainingterm
to maturity
over 5 years

1.3

0.3

0.1

-

142.1

3.4

60.0

-

Cash outflow from financial derivatives

183.2

-

-

-

Cash inflow from financial derivatives– 141.0---

Leasing contract liabilities
Liabilities from private placements and bonds

Management of credit risks
Credit risks arise from the possibility that customers may not be able to meet their agreed
commitments. To manage this risk, the financial creditworthiness of all customers isconstantly assessed. Credit risks are diversified through the company’s broad customer
base in different segments and geographic regions. With regard to counterparty risk
exposure to banks, Group-wide directives stipulate that financial investments and otherfinancial transactions are to be made only with first-class banks. Given the credit ratingsof Forbo’s counterparties, the Group does not anticipate any defaults.

113
Forbo Group
Annual Report
2009

Capital management
For the Group, capital management means managing its consolidated equity position.
This consists of paid-up share capital, treasury shares, reserves and translation differences;as at December 31, 2009, the position stood at CHF 679.6 million. The objectives of capitalmanagement are to ensure that the Group remains a going concern, to preserve its financial
flexibility for investments and to achieve a risk-adjusted return on equity for investors.
If economic conditions change, capital management may entail making adjustments to theGroup’s equity structure. These adjustments take the form of dividend distributions, capital
repayments or increases, and share buybacks.
In connection with the US private placement and certain bank facilities, the Group hasa covenant that defines the minimum amount of consolidated equity, which is CHF 535.5
million.
38

Events after the balance sheet date
There are no events to reportafter the balance sheet date.

114

AUD

1,400,000

100 %

S

Wetherill Park, NSW

AUD

6,000,000

100 %Forbo Flooring Austria GmbH

ViennaEUR

73,000100 %Forbo Siegling Austria Ges.m.b.H.

ViennaEUR

330,000

100 %Forbo Adhesives België BVBA

DendermondeEUR

61,000100 %Forbo Flooring N.V.

Dilbeek

EUR

250,000

100 %

S

S

Currency Share capital

Holding /Services

Wetherill Park, NSW

RegisteredofficeMovement
Systems

Forbo Floorcoverings Pty. Ltd.
Forbo Siegling Pty. Ltd.

Group companies

Bonding
Systems

Flooring
Systems

Group companies(As at December 31, 2009)

Shareholding

Forbo Group
Annual Report
2009

Australia
D

S

Austria
S
S

BelgiumS

BrazilForbo Pisos Ltda.

São Paulo

Forbo Siegling Brasil Ltda.

São PauloN

BRL

10,000100 %BRL

7,008,746

50 %

MS

CanadaForbo Adhesives (Canada) Ltd.

St. John

CAD

3,500,157

100 %Forbo Flooring Inc.

TorontoCAD

500,000

100 %Forbo Siegling Ltd.

TorontoCAD

501,000

100 %

S

CLP

335,631,092

50 %

MS

MS
S

Chile
Forbo Siegling Chile S.A.

SantiagoN

Czech Republic
Forbo s.r.o.

Prague

CZK

500,000

100 %Forbo Siegling Ceska republika s.r.o.

Liberec

CZK

100,000

100 %Bonar Floors s.r.o.

PragueCZK

200,000

100 %S

Forbo Flooring A / S

Glostrup

DKK

500,000

100 %S

Forbo Siegling Danmark A / S

Brøndby

DKK

1,100,000

100 %Oy Forbo Adhesives Finland Ab

Esbo

EUR

25,280100 %Forbo Linoleum OY

HelsinkiEUR

33,638

100 %

H

EUR

43,490,386

100 %

H

S

S
S

DenmarkMS

FinlandMS

FranceForbo Participations S.A.S.

Reims

Forbo Sarlino S.A.S.

Reims

EUR

6,400,000

100 %Forbo Adhesives France S.A.S.

Surbourg

EUR

1,440,000

100 %Forbo Siegling France S.A.S.

Lomme

EUR

819,000

100 %Forbo Reims SNC

Reims

EUR

3,879,810

100 %

MS

Forbo Château Renault S.A.S.

Château-Renault

EUR

8,000,000

100 %

MS

D

S
MS
S

115

15,400,000

100 %Holding /Services

EUR

Movement
Systems

Currency Share capital

Bonding
Systems

RegisteredofficeFlooring
Systems

Group companies

Shareholding

Forbo Group
Annual Report2009

Germany
Forbo Beteiligungen GmbH

LörrachForbo Erfurt GmbH

ErfurtEUR

2,050,000

100 %Forbo Flooring GmbH

Paderborn

EUR

500,000

100 %Forbo Adhesives Deutschland GmbH

Pirmasens

Paul Heinicke GmbH & Co. KG

Pirmasens

Realbelt GmbH

LörrachEUR

100,000

100 %S

Forbo Siegling GmbH

Hanover

EUR

10,230,000

100 %

MS

Kallithea (Athens)EUR

927,656

100 %Forbo Holding (Hong Kong) Ltd.

Hong Kong

HKD

1,000,000

100 %Forbo Siegling Hong Kong Ltd.

Hong Kong

HKD

1,000,000

100 %Bonar Floors Ltd

Hong Kong

HKD

123,548,000

100 %Forbo Adhesives Hungary Kft.

Budapest

HUF

3,000,000

100 %Forbo Siegling Hungária Kft.

Budapest

HUF

30,000,000

100 %Forbo Ireland Ltd.

DublinEUR127,000

100 %Forbo-Siegling (Ireland) Ltd.

DublinEUR25,395100 %Forbo Adhesives Ireland Ltd.

Dublin

EUR

2,520

100 %

S

Forbo Adhesives Italia S.p.A.

Pianezze (Vicenza)

EUR

416,000

100 %MS

Forbo Resilienti S.r.l.

Segrate (Milan)

EUR

60,000100 %Forbo Siegling Italia S.p.A.

Paderno Dugnano(Milan)EUR104,000

100 %

S

Tokyo

JPY

330,000,000

100 %

MS

GBP

25,000100 %Johor Bahru

MYR

2,500,002

100 %Tlalnepantla

MXN

24,676,404

100 %

D

D

EUR

5,120,000

100 %

EUR

1,023,000

100 %

H
MS
S
MS
H

GreeceForbo Adhesives Greece S.A.I.C

MS

Hong Kong
HS
S

HungaryS
S

Ireland
S
S

Italy
S

Japan
Forbo Siegling Japan Ltd.
Jersey, C.I.
Forbo Invest Ltd.

St. Helier

D

H

Malaysia
Forbo Siegling SDN. BHD.

S

MexicoForbo Siegling, S.A. de C.V.

S Sales
MS Manufacturing and Sales

H Holding / Services
N Not consolidated as at December 31, 2009
D Direct shareholding of Forbo Holding Ltd

S

MS

116

100 %

Holding /Services

454,000

Movement
Systems

Currency Share capital

Bonding
Systems

RegisteredofficeFlooring
Systems

Group companies

Shareholding

Forbo Group
Annual Report
2009

Netherlands
Forbo Eurocol B.V.

Zaanstad

EUR

Forbo Flooring B.V.

Krommenie

EUR

11,350,000

100 %Forbo NL Holding B.V.

Krommenie

EUR

13,500,000

100 %Forbo-Novilon B.V.

Coevorden

EUR

3,630,241

100 %Forbo Adhesives Nederland B.V.

Genderen

EUR

27,600100 %Forbo Siegling Nederland B.V.

RhedenEUR

113,445

100 %Forbo Stamoid B.V.

Genderen

EUR

227,000

100 %Forbo Flooring Coral N.V.

Krommenie

EUR

9,700,000

100 %Auckland

NZD

650,000

100 %

NOK

1,000,000

100 %

USD

16,221,000

100 %

MS
MS
H
MS
MS
S
H
MS

New Zealand
Forbo Siegling Ltd.

S

NorwayForbo Flooring AS

Asker

D

S

People’s Republic of China
Forbo Siegling (Shenyang) Belting Co., Ltd.

ShenyangMS

Forbo Shanghai Co., Ltd.

Shanghai

CHF

4,000,000

100 %Forbo Adhesives (Guangzhou) Co., Ltd.

Guangzhou

USD

8,000,000

100 %

MS

Forbo Adhesives (Shanghai) Co., Ltd.

Shanghai

USD

1,000,000

100 %

MS

Warsaw

PLN

50,000100 %S

Forbo-Revestimentos, S.A.

Leça da Palmeira(Porto)EUR74,850100 %Siegling (Portugal) Lda.

Gemunde (Porto)

EUR

500,000

100 %Forbo Adhesives Romania S.R.L.

Oradea

RON

7,077

100 %

Forbo Siegling Romania S.R.L.

Bucarest

RON

38,000100 %S

ZAO 'Forbo Siegling'

St. Petersburg

RUB

400,000

100 %S

OOO 'Forbo Stroitech'

Stary Oskol

RUB

144,181,000

100 %OOO 'Forbo Kaluga'

Moscow

RUB

158,313,780

100 %

MS

OOO 'Forbo Flooring'

Moscow

RUB

500,000

100 %S

Forbo Siegling s.r.o.

Malacky

EUR

6,639

100 %

Bonar Floors, s.r.o.

Bratislava

SKK200,000

100 %

S

MS

PolandForbo Adhesives Poland Sp. z o.o.
PortugalS

H

Romania
S

RussiaMS

Slovakia
MS
S

117

100 %

Holding /Services

6,015,006

Movement
Systems

Currency Share capital

Bonding
Systems

RegisteredofficeFlooring
Systems

Group companies

Shareholding

Forbo Group
Annual Report
2009

Spain
Forbo Adhesives Spain, S.L.

Mos (Pontevedra)

EUR

Forbo Pavimentos, S.A.

Barcelona

EUR

60,101

100 %Forbo Siegling Iberica, S.A.

Montcada i Reixac(Barcelona)EUR

1,532,550

100 %

SEK

8,000,000

100 %

MS
S
S

SwedenForbo Flooring AB

Gothenburg

Forbo Parquet AB

Tibro

Forbo Project Vinyl AB

Gothenburg

Forbo Adhesives Sweden AB

Gothenburg

SEK

100,000

100 %Forbo Siegling Svenska ABKållered(Gothenburg)

SEK

1,000,000

100 %

N

CHF

3,375,000

33 %

H

D

D

SEK

20,000,000

100 %

SEK

50,000,000

100 %

S
H
S
H
S

Switzerland
Enia Carpet Group AG

EnnendaFJK Carpet D GmbH

EnnendaN

CHF

20,00025 %H

Forbo Financial Services AG

Baar

D

CHF

100,000

100 %H

Forbo Finanz AG

Baar

D

CHF

10,000,000

100 %Forbo-Giubiasco SA

Giubiasco

D

CHF

10,000,000

100 %Forbo International SA

Baar

D

CHF

100,000

100 %

MS

TRY

725,000

100 %

S

GBP

8,000,000

100 %

GBP

100

100 %

H
MS
MS

H

TurkeyForbo Adhesives Ticaret Limited Sirketi

Istanbul

United Kingdom
Forbo-Nairn Ltd.

LondonForbo Adhesives UK Ltd.

Chatteris

Forbo UK Ltd.

LondonGBP49,500,000

100 %Forbo Siegling (UK) Ltd.

Dunkinfield

GBP

50,774100 %Forbo Flooring UK Ltd.

Kirkcaldy

GBP

4,000,000

100 %Bonar Tiles Holdings Ltd.

Derbyshire

GBP

1,000

100 %

H

Bonar Tiles Ltd.

Derbyshire

GBP

14,500,002

100 %

H

Westbond Ltd.

Derbyshire

GBP

400,000

100 %

H

USD

5,000,100

100 %

USD

19,957,259

100 %

D

H
MS
H
S
MS

H

USA

Forbo Adhesives, LLC

Wilmington, DE

Forbo America Inc.

Wilmington, DE

Forbo America Services Inc.

Wilmington, DE

USD

50,000100 %Forbo Flooring, Inc.

Wilmington, DE

USD

3,517,000

100 %Forbo Siegling, LLC

Wilmington, DE

USD

15,455,000

100 %

D

S Sales
MS Manufacturing and Sales

H Holding / Services
N Not consolidated as at December 31, 2009
D Direct shareholding of Forbo Holding Ltd

MS
H
H
S
MS

118
Forbo Group
Annual Report
2009

Report of the statutory auditor

Report of the statutory auditor
to the Ordinary General Meeting of
Forbo Holding Ltd, Baar

Report of the statutory auditor
on the consolidated financial ­s tatements
As statutory auditor, we have audited the consolidated financial statements of Forbo
Holding AG , which comprise the consolidated balance sheet, consolidated income statement, comprehensive income statement, consolidated shareholders’ equity, consolidated
cash flow statement, and notes (pages 58 to 117) for the year ended December 31, 2009.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and fair presentation of theconsolidated financial statements in accordance with the International Financial ReportingStandards (IFRS) and the requirements of Swiss law. This responsibility includes designing,
implementing, and maintaining an internal control system relevant to the preparation andfair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible forselecting and applying appropriate accounting policies and making accounting estimatesthat are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements
based on our audit. We conducted our audit in accordance with Swiss law, Swiss AuditingStandards and the International Standards on Auditing. Those standards require thatwe plan and perform the audit to obtain reasonable assurance whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the consolidated financial statements. The procedures selected dependon the auditor’s judgment, including the assessment of the risks of material misstatementof the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers the internal control system relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control system. An audit
also includes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our audit opinion.

119
Forbo Group
Annual Report
2009

OpinionIn our opinion, the consolidated financial statements for the year ended December 31, 2009
give a true and fair view of the financial position, the results of operations and the cash
flows in accordance with the International Financial Reporting Standards (IFRS) and comply
with Swiss law.

Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor­O versight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there areno circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890,
we confirm that an internal control system exists which has been designed for the preparationof consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers AG

Daniel Ketterer
Audit Expert
Auditor in Charge

Zurich, March 10, 2010

Reto Tognina
Audit Expert

120
Consolidated income statements 2005 – 2009

Forbo Group
Annual Report
2009

2009
CHF m

2008

2007

2006

2005

Net sales

1,782.4

1,918.7

2,004.0

1,879.5

1,702.0

Cost of goods sold– 1,200.4– 1,325.0– 1,331.9– 1,273.4– 1,151.8

Gross profit

582.0

593.7

672.1

606.1

550.2

Development costs– 27.9– 29.9– 31.6– 31.3– 32.4Marketing and distribution costs– 270.0– 282.7– 325.9– 300.6– 286.9

Administrative costs– 128.3– 137.9– 137.7– 131.9– 143.5

Other operating expenses– 46.4– 50.0– 33.9– 50.7– 74.3

Other operating income

12.4

23.9

19.4

18.0

10.8

Operating profit

121.8

117.1

162.4

109.6

23.9

Financial income

4.3

9.2

11.7

7.6

9.5

Financial expenses– 24.7– 104.9– 19.3– 21.0– 28.3

Group profit before taxes

101.4

21.4

154.8

96.2

5.1

Income taxes– 25.3– 5.4– 44.1– 35.0– 21.6

Group profit / loss (–) for the year

76.1

16.0

110.7

61.2

– 16.5

121
Consolidated balance sheets 2005 – 2009

Forbo Group
Annual Report200931.12.2009

31.12.2008 31.12.2007 31.12.2006 31.12.2005

Assets
CHF m

Non-current assets

885.7

928.7

601.7

593.4

597.3

Property, plant and equipment

549.9

586.3

423.7

421.5

422.4

Intangible assets

309.1

311.7

151.9

149.2

144.6

Deferred taxes

20.5

28.8

20.7

20.5

28.1

-

-

3.1

-

-

Employee benefit assets
Investments in associates and othernon-current assets

6.2

1.9

2.3

2.2

2.2

Current assets

859.7

909.1

803.5

905.2

993.7

Inventories

261.0

298.3

286.3

266.7

257.0

Trade receivables

237.1

265.8

287.7

293.7

273.8

Other receivables

33.1

32.2

29.5

25.1

22.8

Accrued income and prepaid expenses

30.1

23.6

22.5

25.6

35.5

Marketable securities

100.2

73.6

-

-

-

Cash and cash equivalents

198.2

215.6

177.5

294.1

404.6

1,745.4

1,837.8

1,405.2

1,498.6

1,591.0

Total assets

31.12.2009

31.12.2008 31.12.2007 31.12.2006 31.12.2005

Shareholders’ equity and liabilities
CHF m

Shareholders’ equity
Share capital

679.6

584.4

713.1

638.6

558.1

0.3

10.9

38.0

54.3

54.3

Treasury shares

– 0.1

– 2.0

– 4.0

– 3.5

– 1.6

Reserves and retained earnings

679.4

575.5

679.1

587.8

505.4

Non-current liabilities

720.2

676.6

254.7

304.4

512.9

Non-current financial debt

550.1

512.4

194.9

209.1

358.4

Employee benefit obligations

68.6

58.6

-

45.8

101.1

Non-current provisions

38.8

37.0

42.3

41.7

40.7

62.7

68.6

17.5

7.8

12.7

Current liabilities

345.6

576.8

437.4

555.6

520.0

Trade payables

123.3

144.5

138.1

131.5

131.8

Current provisions and accrued expenses

158.2

149.0

167.6

169.3

136.5

Current financial debt

3.4

181.3

24.2

128.3

155.5

Current tax liabilities

24.7

25.3

29.8

21.8

10.6

Deferred taxes

36.0

76.7

77.7

104.7

85.6

Total liabilities

1,065.8

1,253.4

692.1

860.0

1,032.9

Total shareholders’ equity and liabilities

1,745.4

1,837.8

1,405.2

1,498.6

1,591.0

Other current liabilities

122
Forbo Holding Ltd
Financial Statements
2009

Financial Statements for Forbo Holding Ltd

Content

Financial Statements for Forbo Holding Ltd
123

Income statement

124

Balance sheet

125

Notes to the financial statements

132

Proposal for appropriation of available earnings

133

Report of the statutory auditor

123
Income statement for Forbo Holding Ltd

Forbo Holding Ltd
Financial Statements
2009

2009

2008

IncomeCHF

NoteFinancial income
from investments in and advances to Group companies

1

42,699,290

87,631,320

from securities and short-term investments

2

56,292,117

221,952

9,801

1,596

Other income
Impairments
Total income-

98,158,000

99,001,208

186,012,868

2009

2008

Expenses
CHF

Notes

Administrative expenses

3

4,719,483

3,853,011

Financial expenses

4

14,463,396

170,598,603

15,000129,000

Total expenses

19,197,879

174,580,614

Net profit for the year

79,803,329

11,432,254

Taxes

124
Balance sheet for Forbo Holding Ltd(before appropriation of available earnings)

Forbo Holding Ltd
Financial Statements
2009

31.12.2009

31.12.2008

658,521,470

650,675,474

458,036,053

442,361,270

AssetsCHF

Note

Non-current assets
Shareholdings in Group companies

5

Advances to Group companies

6

Current assets
Other receivables from Group companies
Other receivables from third parties
Accrued income and prepaid expenses
Marketable securities

7

Cash and cash equivalents

8200,485,417

208,314,204

151,559,649

100,362,171

5,669,249

3,214,795

23,673

22,138708,985

264,433

130,574,960

82,921,410

14,582,782

13,939,395

810,081,119

751,037,645

31.12.2009

31.12.2008

483,396,397

412,665,657

9271,315

10,852,608

15,600,000

15,600,000

11

192,318,836

211,295,583

12

130,843,086

110,357,635

Retained earnings

64,559,831

53,127,577

Net profit

79,803,329

11,432,254

Total assets

Shareholders’ equity and liabilities
CHF

Note

Shareholders’ equity
Share capital
Statutory reserve:
General reserves
Reserve for treasury shares
Other reserves
Available earnings:

326,684,722

338,371,988

Bonds

13

150,000,000-

Non-current bank debt

14

130,350,000

181,300,000

34,174,572

110,398,141-

45,000,000

8,693,222

663,234

Liabilities

Advances from Group companies
Current bank debt
Other liabilities to Group companies
Current liabilities to third parties
Accrued expenses
Total shareholders’ equity and liabilities

17,844

21,1803,449,084

989,433

810,081,119

751,037,645

125Notes to the financial statements
for Forbo Holding Ltd

Forbo Holding Ltd
Financial Statements
20091

Financial income from shareholdings in and advances to Group companies
Income from shareholdings in and advances to Group companies amounts to CHF 42.7 million(previous year CHF 87.6 million) and consists of interest, dividend income and exchange rate
gains on foreign currency loans.

2

Financial income from securities and short-term investments
This item includes income from short-term investments of CHF 56.3 million (2008: CHF 0.2
million), income on securities transactions and interest from banks.

3

Administrative expenses
Administrative expenses increased against the previous year, up by CHF 0.9 million, andtotaled CHF 4.7 million.

4

Financial expenses
This item relates mainly to losses on foreign exchange accounts, bond issue costs, interest
expenses for current and non-current bank dept and advances to Group companies.

5

Investments in Group companies
As at December 31, 2009, Forbo Holding Ltd held the following direct investments:

Company
Forbo Adhesives UK Ltd.

GB-Chatteris

Activity
Manufacturing and Sales

Forbo America, Inc.

US-Wilmington, DE

Holding / Services

Forbo Beteiligungen GmbH

DE-Lörrach

Forbo Financial Services AG

CH-BaarForbo Finanz AG

CH-BaarForbo Floorcoverings Pty. Ltd.

AU-Wetherill Park, NSW

Forbo Flooring AB

SE-Gothenburg

Forbo Flooring AS

NO-Asker

Forbo-Giubiasco SA

Currency

Share capitalin 1,000

Equityinterest

GBP

0.1

100 %

USD

19,957100 %Holding / Services

EUR

15,400100 %Services

CHF

100

100 %

Holding / Services

CHF

10,000

100 %

Sales

AUD

1,400

100 %

Sales

SEK

8,000

100 %

Sales

NOK

1,000

100 %

CH-Giubiasco

Manufacturing and Sales

CHF

10,000100 %Forbo International SA

CH-BaarServices, Manufacturing
and Sales

CHF

100

100 %

Forbo Invest Ltd.

CI-St. Helier

Services

GBP

25

50 %

Forbo Participations S.A.S

FR-Reims

Holding / Services

EUR

43,490100 %Forbo Project Vinyl AB

SE-Gothenburg

Manufacturing and Sales

SEK

50,000100 %Paul Heinicke GmbH & Co KG

DE-Pirmasens

Services

EUR

1,023

72 %

6

Advances to Group companies
Advances to Group companies are denominated in Swiss francs and foreign currencies. The
net decrease year-on-year was CHF 7.8 million.

7

Marketable securities
The item 'Marketable securities' relates to the treasury shares in Forbo Holding Ltd. Thisbalance sheet item was valued at fair value at year-end.

126
Forbo Holding Ltd
Financial Statements
20098

Cash and cash equivalents
This item consists of bank deposits and cash equivalents with initial maturities of threemonths or less.

9

Share capitalAt the end of 2009 the company’s share capital was CHF 271,315.2, divided into 2,713,152
registered shares with a par value of CHF 0.10 each. In the year under review, the par value
was reduced by CHF 3.90 per share from CHF 4.00 following a cash distribution. 21,419
registered shares without voting or dividend rights are at the disposal of the Board of
Directors. Consequently, 2,691,733 registered shares were eligible for dividends inthe financial year 2009. The shares are listed on the SIX Swiss Exchange with the security
number 354 151.

10

Conditional capital
The initial CHF 8,500,000 of conditional capital reserved for the exercise of shareholder
options and warrants in connection with a bond issue was created by a resolution of theOrdinary General Meeting of Shareholders held on April 27, 1994. Following the exercise
of options and warrants in 1994, 1995 and 1997 and reductions in the par value by CHF 22
per share in 2003, CHF 8 per share in 2004, CHF 6 per share in 2007, CHF 10 per share in2008 and CHF 3.90 per share in 2009, the conditional capital as at December 31, 2009 was
CHF 16,645 (2008: CHF 665,800).

11

Reserve for treasury shares
The CHF 192,318,836 entered at year-end under 'Reserve for treasury shares' relates totreasury stock held by Forbo Holding Ltd and its subsidiaries valued at cost. The treasury
shares performed as follows over the period under review:
Treasury shares
Cost

As at January 1, 2009

CHF

Number ofregistered shares

211,295,583

482,423

Additions

3,788,173

13,450

Disposals– 21,010,485– 49,314

Reduction in par value– 1,754,435-

As at December 31, 2009

192,318,836

446,559

12

Other reserves
Other reserves rose by CHF 20.5 million. This increase is due mainly to the transfer to thereserve for treasury shares.

13

Bond issues
Forbo Holding Ltd issued a CHF 150.0 million four-year bond on July 6, 2009 (maturity:
July 31, 2013). The bond has a coupon of 4 1 / 8 %, and the issue was lead managed by Credit
Suisse. It has been traded on the SIX Swiss Exchange since July 20, 2009.

14

Non-current bank debt
The non-current bank debt totaling CHF 130.4 million consists of bilateral committed credit
lines with maturities of 2011 to 2012, on which interest is paid on money market terms (LIBOR
plus margin).

127
Forbo Holding Ltd
Financial Statements
2009

15

Contingent liabilities
Guarantees and letters of support to third parties in favor of Group companies amounted
to CHF 272.1 million (2008: 410.5 million) at year-end, of which CHF 270.7 million (2008:
CHF 374.3 million) was utilized. Most of this relates to a surety in connection with utilizedbank facilities and guarantees to investors and banks in connection with funds raised by
a Group company in the form of a US private placement (CHF 51.6 million).

16

Significant shareholders
From information made available to the Board of Directors, the following shareholders
or groups of shareholders with restricted voting rights were major investors in the company
pursuant to article 663c CO as at the reporting date:

Number of shares

As percentage

Michael Pieper, Hergiswil, and Artemis Beteiligungen AG, Hergiswil

853,367

31.45

Forbo Holding AG, Baar, through its two subsidiaries
Forbo International SA, Baar, and Forbo Finanz AG, Baar

446,559

16.46

This E. Schneider, Wilen b. Wollerau

173,467

6.39

128
Forbo Holding Ltd
Financial Statements
200917	Disclosure of compensation to the Board of Directors andExecutive Board pursuant to article 663b bis and article 663c CO
Compensation
For 20091):
Name and function

Variablecompensation

Base compensation
Cash

Other
compensation

Cash, shares,
options

Shares

Total

CHF

Number

CHF

CHF

CHF

CHF

Dr. Albert Gnägi, Chairman

206,995594

138,004-

26,248371,247

Michael Pieper, Vice Chairman

66,090189

43,910-11,722

121,722

Dr. Peter Altorfer, member

71,908207

48,092-

12,422

132,422

Dr. Rudolf Huber, member6)

41,667

-

-

-

4,459

46,126

Vincent Studer, member

50,312

145

33,688-

4,822

88,822-

59,673760,3396)

Non-executive members of theBoard of Directors2)

436,972

1,135

263,694

This E. Schneider,
Delegate of the Board of Directors and CEO3)4)

150,000

9,479

2,559,330-

373,165 3,082,495

Board of Directors

586,972 10,614 2,823,024-

432,838 3,842,834

Executive Board5)

1,950,000-- 2,047,500

690,909 4,688,409

Executive Board

1,950,000-- 2,047,500

690,909 4,688,409

1) The amounts shown in the table are based on valuation models used and disclosed in the Group consolidated financial statements.
For the valuation of shares and options this means that the grant date is authoritative. The compensation is booked to the appropriate
period. The table therefore discloses all compensation that has been granted for the 2009 financial year, even if the date of the payment
or the definitive legal acquisition is after December 31, 2009.
2) The non-executive members of the Board of Directors receive a fixed fee, the amount of which is graduated according to whether themember is Chairman or a simple member of the Board and whether he is a member of the AFC or HRC. The cash compensation is shown asa gross amount before deduction of social security contributions. 40 % of the compensation is paid to the directors in the form of sharesin Forbo Holding Ltd. The shares are valued at fair value on the grant date. The total compensation to the non-executive members of theBoard of Directors also includes a lump sum for expenses plus employer contributions to AHV / ALV (old-age and unemployment funds).
These are reported in the column 'Other compensation'.
3) The compensation paid to the Delegate of the Board of Directors and CEO is disclosed separately and subsumed under total compensation
to the Board of Directors. It is not possible to clearly allocate the total compensation to the two functions.
4) In fall 2005, it was agreed with the Delegate of the Board of Directors and CEO that part of his compensation for 2005 and for the following
five years (from 2006 up to and including 2010) would be paid largely in shares. In lieu of salary payments, for the contractual period of
employment until December 31, 2010, he was allocated 47,395 shares at market value on the date on which the agreement was signed, i.e.
CHF 270 each, for the entire five-year term of the agreement (2006 to 2010). The shares are valued at fair value on the grant date. Theseshares are vested until December 31, 2010 and freely available only as of January 1, 2011. Should he leave the company before this date,the shares must be returned to the company on a pro rata basis. In addition to the share package, the Delegate of the Board of Directors
and CEO draws an annual sum of CHF 150,000, which is used for settlement of employee contributions to the pension fund and for social
security contributions. With the share package and the cash remuneration, all compensations such as bonuses, inflation, options, etc.
are settled. The corresponding personnel expenses are charged to the income statement over the entire contractual period on a pro rata
basis (see note 25 to the consolidated financial statements). The Delegate of the Board of Directors and CEO does not participate in theManagement Investment Plan (MIP) or the share-based compensation program of the non-executive Board members. The entire compensation for the Delegate of the Board of Directors and CEO for 2009 came to CHF 3,082,495. This total included private use of the company car,employer contributions to the pension fund and to the AHV / ALV (old-age and unemployment insurance), plus accident and daily sickness
benefits insurance. These are shown in the column 'Other compensation'. With effect from January 2009, the employment contract with
the Delegate of the Board of Directors and CEO was extended to encompass the period from January 1, 2011 to April 30, 2013.
Compensation will again be paid mainly in shares. The modalities are very similar to the provisions of the first contract. The 29,775 sharesare vested until December 31, 2013. The extension of this employment contract has not been included in the table above and will beshown on a pro rata basis only as of January 1, 2011.
5) The total compensation paid to the members of the Executive Board (excluding the Delegate of the Board of Directors and CEO) came to
CHF 4,688,409 in 2009. It comprises a gross basic salary and a performance-related bonus, which is set in March of the subsequent year anddependent on achieving individual and the Group targets. The performance-related component is paid in accordance with the rules of theManagement Investment Plan (MIP) (see note 25 to the consolidated financial statements). The total compensation paid to the members of
the Executive Board also includes private use of the company car and employer contributions to the pension fund and to the AHV / ALV(old-age and unemployment insurance) plus accident and daily sickness benefits insurance, which are shown separately in the column'Other compensation'.
6) At the Ordinary General Meeting on April 24, 2009, Vincent Studer was elected as a new member of the Board for a three-year term ofoffice in a single vote. He replaced Dr. Rudolf Huber.

129
Forbo Holding Ltd
Financial Statements
2009

For 20081):
Name and function

Variablecompensation

Base compensation
Cash

Other
compensation

Cash, shares,
options

Shares

Total

CHF

Number

CHF

CHF

CHF

CHF

Dr. Albert Gnägi, Chairman

206,999295

138,001-

26,889371,889

Michael Pieper, Vice Chairman

66,02794

43,973-

11,932

121,932

Dr. Peter Altorfer, member

71,817

103

48,183-

12,650132,650

Dr. Rudolf Huber, member

74,945

107

50,055-13,012138,012

Non-executive members of theBoard of Directors2)

419,788599

280,212-64,484764,484

This E. Schneider,
Delegate of the Board of Directors and CEO3)4)

150,000

9,479

2,559,330-

369,817 3,079,147

Board of Directors

569,788 10,078 2,839,542-

434,301 3,843,631

Executive Board5)

1,930,000-- 2,005,500

666,274 4,601,774

Executive Board

1,930,000-- 2,005,500

666,274 4,601,774

1) The amounts shown in the table are based on valuation models used and disclosed in the Group consolidated financial statements.
For the valuation of shares and options this means that the grant date is authoritative. The compensation is booked to the appropriate
period. The table therefore discloses all compensation that has been granted for the 2008 financial year, even if the date of the payment
or the definitive legal acquisition is after December 31, 2008.
2) The non-executive members of the Board of Directors receive a fixed fee, the amount of which is graduated according to whether themember is Chairman or a simple member of the Board and whether he is a member of the AFC or HRC. The cash compensation is shown asa gross amount before deduction of social insurance contributions. 40 % of the compensation is paid to the directors in the form of sharesin Forbo Holding Ltd. The shares are valued at fair value on the grant date. The total compensation to the non-executive members of theBoard of Directors also includes a lump sum for expenses plus employer contributions to AHV / ALV (old-age and unemployment funds).
These are reported in the column 'Other compensation'.
3) The compensation to the Delegate of the Board of Directors and CEO is disclosed separately and subsumed under total compensation
to the Board of Directors. It is not possible to clearly allocate the total compensation to the two functions.
4) In fall 2005, it was agreed with the Delegate of the Board of Directors and CEO that part of his compensation for 2005 and for the following
five years (from 2006 up to and including 2010) would be paid largely in shares. In lieu of salary payments, for the contractual period of
employment until December 31, 2010, he was allocated 47,395 shares at market value on the date on which the agreement was sigend, i.e.
CHF 270 each, for the entire five-year term of the agreement (2006 to 2010). The shares are valued at fair value on the grant date. Theseshares are vested until December 31, 2010 and freely available only as of January 1, 2011. Should he leave the company before this date,the shares must be returned to the company on a pro rata basis. In addition to the share package, the Delegate of the Board of Directors
and CEO draws an annual sum of CHF 150,000, which is used for settlement of employee contributions to the pension fund and for social
security payments. With the share package and the cash remuneration, all compensations such as bonuses, inflation, options, etc.
are settled. The corresponding personnel expenses are charged to the income statement over the entire contractual period on a pro rata
basis (see note 25 to the consolidated financial statements). The Delegate of the Board of Directors and CEO does not participate in theManagement Investment Plan (MIP) or the share-based compensation program for the non-executive Board members. The total compensation for the Delegate of the Board of Directors and CEO for 2008 came to CHF 3,079,147. This total included private use of the company car,employer contributions to the pension fund and to the AHV / ALV (old-age and unemployment insurance), plus accident and daily sickness
benefits insurance. These are shown in the column 'Other compensation'.
5) The total compensation paid to the members of the Executive Board (excluding the Delegate of the Board of Directors and CEO) was
CHF 4,601,774 in 2008. It comprised a gross basic salary and a performance-related bonus, which is set in March of the subsequent year
and is dependent on achieving individual and Group targets. The performance-related component is paid in accordance with the rulesof the Management Investment Plan (MIP) (see note 25 to the consolidated financial Statements). The total compensation paid to themembers of the Executive Board also includes private use of the company car and employer contributions to the pension fund and to the
AHV / ALV (old-age and unemployment insurance) plus accident and daily sickness benefits insurance, which are shown separately in thecolumn 'Other compensation'.

130
Forbo Holding Ltd
Financial Statements
2009

Advances and loans
As at December 31, 2009, no advances or loans to members of the Board of Directors or
members of the Executive Board were outstanding.
Investments in Group companies
In 2009
As at December 31, 2009, the individual members of the Board of Directors and the­E xecutive Board (including related parties) held the following number of shares in Forbo
Holding Ltd:Name and function
Options1)5)

SharesSeries 2009 Series 2008 Series 2007 Series 2006 Series 2005

Tradable
options

1:12)

1:12)

1:12)

1:12)

1:12)

Dr. Albert Gnägi, Chairman

18,610

-

-

-

-

-

-

Michael Pieper, Vice Chairman

853,367

-

-

-

-

-

-

Dr. Peter Altorfer, member

574

-

-

-

-

-

-

Dr. Rudolf Huber, member

245

-

-

-

-

-

-

872,796

-

-

-

-

-

-

Non-executive members of theBoard of Directors
This E. Schneider, Delegate of theBoard of Directors and CEO3)

173,467

-

-

-

-

2,100

-

1,046,263

-

-

-

-

2,100

-

-

-

-

-

-

-

-

Matthias P. Huenerwadel, Executive VP
Movement Systems

1,212

1,496

1,157

1,204

1,385

-

-

Tom Kaiser, Executive VP
Flooring Systems

1,608

2,179

1,073

1,258

2,380

-

-

Daniel Keist, Head Corporate Center

847

2,034

783

-

-

-

-

Jörg Riboni, Chief Financial Officer

4,635

1,220

1,948

2,091

1,685

-

-

518

99

485

697

844

550

-

8,820

7,028

5,446

5,250

6,294

550

-

Board of Directors
This E. Schneider,
Executive Board member and CEO4)

Michel Riva, Executive VP
Bonding Systems
Executive Board

1) The details of the options are described in note 25 to the consolidated financial statements.
2) Subscription ratio.
3) The number of shares reported includes the 47,395 vested shares. With effect from January 2009, the employment contract with the
Delegate of the Board of Directors and CEO was extended to encompass the period from January 1, 2011 to April 30, 2013. Compensation
will again be paid mainly in shares. The modalities are very similar to the provisions of the first contract. The 29,775 shares are included in
the amount shown and are vested until December 31, 2013.
4) The compensation to the Delegate of the Board of Directors and CEO is disclosed separately and shown in the line Board of Directors.
5) Since participation in the MIP is not limited to members of the Executive Board, the number of outstanding options shown here as at
December 31, 2009 differs from the figures in note 25 to the consolidated Financial statements.

131
Forbo Holding Ltd
Financial Statements
2009

In 2008
As at December 31, 2008, the individual members of the Board of Directors and the­E xecutive Board (including related parties) held the following number of shares in Forbo
Holding Ltd:Name and function
Options1)5)

SharesSeries 2008 Series 2007 Series 2006 Series 2005

Tradable
options

1:12)

1:12)

1:12)

1:12)

Dr. Albert Gnägi, Chairman

18,416

-

-

-

-

-

Michael Pieper, Vice Chairman

853,178

-

-

-

-

-

Dr. Peter Altorfer, member

367

-

-

-

-

-

Dr. Rudolf Huber, member

2,062

-

-

-

-

-

874,023

-

-

-

-

-

Non-executive members of theBoard of Directors
This E. Schneider,
Delegate of the Board of Directors and CEO3)
Board of Directors
This E. Schneider,
Delegate of the Board of Directors and CEO4)
Matthias P. Huenerwadel, Executive VP
Movement Systems
Tom Kaiser, Executive VP
Flooring Systems

142,197

-

-

-

2,100

1,016,220

-

-

-

2,100

-

-

-

-

-

-

-

909

1,157

1,204

1,385

-

-

1,167

1,073

1,258

2,380

-

-

Daniel Keist, Head Corporate Center

436

783

-

-

-

-

Jörg Riboni, Chief Financial Officer

4,388

1,948

2,091

1,685

-

-

498

485

697

844

1,050

-

7,398

5,446

5,250

6,294

1,050

-

Michel Riva, Executive VP
Bonding Systems
Executive Board

1) The details of the options are described in note 25 to the consolidated financial statements.
2) Subscription ratio.
3) The number of shares reported includes the 47,395 vested shares.
4) The compensation to the Delegate of the Board of Directors and CEO is disclosed separately and shown in the line Board of Directors.
5) Since participation in the MIP is not limited to members of the Executive Board, the number of outstanding options shown here as at
December 31, 2008 differs from the figures in note 25 to the consolidated financial statements.

18

Risk assessment
With respect to the risk management process introduced at the beginning of 2008 persuant
to article 663b, item 12 CO, which entered into force on January 1, 2008, please refer to thecomments in note 37 to the consolidated financial statements, 'Risk assessment and financial
risk management'.

132
Forbo Holding Ltd
Financial Statements
2009

Proposal for appropriation of available earningsof Forbo Holding Ltd

The Board of Directors proposes to the Ordinary General Meeting that the available retained
earnings, consisting of:
2009

2008

Net profit

79,803,329

11,432,254

Retained profit

64,559,831

53,127,577

144,363,160

64,559,831

2009

2008

Proposal by the Board of Directors:
Dividend payment

16,150,3981)

02)

To be carried forward to the following year

128,212,762

64,559,831

Total profit available for distribution

144,363,160

64,559,831

CHF

Total profit available for distribution

be appropriated as follows:

CHF1) At the Ordinary General Meeting on April 23, 2010, the Board of Directors will propose the distribution of a dividend of
CHF 6.00 per registered share.
2) In lieu of a dividend, the Ordinary General Meeting of April 24, 2009, approved a cash distribution in the form of a CHF 3.90
reduction in par value to CHF 0.10 per registered share.

133
Forbo Holding Ltd
Financial Statements
2009

Report of the statutory auditor

Report of the statutory auditor
to the Ordinary General Meeting of
Forbo Holding Ltd, Baar

Report of the statutory auditor on the financial statements
As statutory auditors, we have audited the financial statements of Forbo Holding Ltd, which
comprise the income statement, balance sheet, and notes (pages 123 to 131) for the year
ended December 31, 2009.
Board of Directors’ responsibility
The Board of Directors is responsible for preparing the financial statements in accordancewith the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing, and maintaining an internal control system
relevant to the preparation of financial statements that are free from material misstatement,
whether due to fraud or error. The Board of Directors is further responsible for selecting
and applying appropriate accounting policies and making accounting estimates that arereasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Thosestandards require that we plan and perform the audit to obtain reasonable assurance as towhether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers the internal control system relevant to the entity’s preparation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion about the effectivenessof the entity’s internal control system. An audit also includes evaluating the appropriatenessof the accounting policies used and the reasonableness of the accounting estimates made, as
well as evaluating the overall presentation of the financial statements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

134
Forbo Holding Ltd
Financial Statements
2009

OpinionIn our opinion, the financial statements for the year ended December 31, 2009 are inaccordance with Swiss law and the company’s articles of incorporation.

Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor
Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there areno circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890,
we confirm that an internal control system exists which has been designed for the preparationof financial statements according to the instructions of the Board of Directors.
We also confirm that the proposed appropriation of available earnings complies with Swisslaw and the company’s articles of incorporation and recommend that the financial statements
submitted to you be approved.
PricewaterhouseCoopers AG

Daniel Ketterer
Audit Expert
Auditor in Charge

Zurich, March 10, 2010

Reto Tognina
Audit Expert

Sustainability and environmental awareness
At Flooring Systems, making the products and processes more sustainable and environmentally friendly
is a constant focus. The increasing sensitivity of building owners and users in the public sector with regard toenvironmentally friendly products is reinforcing the demand for Forbo linoleum made from natural
raw materials.

Optimized production processes
Meeting the needs of customers and generating added value for their production process by providing­expertise is at the focus of Bonding Systems’ activities. The quality and the reliability of the products areconstantly improved for the users in an exchange of technical know-how with key customers.

Increased product benefits
Maximizing environmental compatibility while increasing the product benefits – this is a central topic forMovement Systems when it comes to developments of products and services. Research and development
are carried out in close collaboration with OEMs and users. Movement Systems is helping its customers to
become even more ­successful with constant new developments and innovations.

Publisher:
Forbo Holding Ltd, Baar
Concept and Design:
Gottschalk + Ash Int’l
Photos:Luxwerk, Zurich
Typesetting, Litho and Printing:
Neidhart+Schön AG, Zurich

Our Annual Report is publishedin German language and in
an English language translation.

flooring systems

Valu

For sustainability and environmental awarenessbonding systems

For optimized production processes

movement systems

flooring. bonding. movement.

F o r b o A n n ua l R e p o r t 2 0 0 9

P +41 58 787 25 25
F +41 58 787 20 25
info@forbo.com

F o r b o A n n ua l R e p o r t 2 0 0 9

Forbo International SA
Lindenstrasse 8
CH-6340 Baarflooring. bonding. movement.

Forbo Holding Ltd
Lindenstrasse 8
CH-6340 BaarF o r b o A n n ua l R e p o r t 2 0 0 9

For increased product benefits

flooring. bonding. movement.