A n n u a l R e p o rt 2 0 0 3

m3

m2

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Our Annual Report is publishedin German and is also available
in English.

Contents

Forbo Annual Report 2003
2 Forbo
3 Key Figures
4 To our Shareholders
8 Forbo Group:Market Positions Maintained under Difficult Conditions
16 Flooring:
Well Positioned with New Products
20 Adhesives:
Sales Growth through Acquisitions
22 Belting:Push into Technology-Driven Market Segments
25 Area, Space, Longitude: Forbo in all Dimensions
39 Group Structure
40 Corporate Governance
45 Board of Directors
54 Human Resources
56 The Forbo Share
Forbo Group Financial Report
61 Financial Review and Analysis
65 Consolidated Income Statement
66 Consolidated Balance Sheet
67 Consolidated Cash Flow Statement
68 Consolidated Statement of Changes in Shareholders’ Equity
69 Accounting Policies
75 Notes to the Consolidated Financial Statements
90 Report of the Group Auditors
91 Consolidated Income Statements 1999 –2003
92 Consolidated Balance Sheets 1999 –2003

Financial Statements of Forbo Holding AG
94 Income Statement
95 Balance Sheet
96 Notes to the Financial Statements
99 Proposal for Appropriation of Available Earnings
100 Report of the Statutory Auditors

Additional Information
102 Group Companies

Forbo is a global producer of floor coverings, adhesives, and belts for powertransmission, conveyor and processing applications. The company employs some
5,600 people worldwide and has an international network of 30 production
companies and 45 sales organizations in 17 countries. Forbo’s Head Office is in
Eglisau/Zurich.
In the flooring business, the focus is on environmentally friendly and designoriented linoleum and high-quality vinyl. With linoleum, Forbo is the world
leader with a global market share of more than 60 %.
In the adhesives business, Forbo is among the industry’s leading producers worldwide. The Group has strong positions in the global market in promising fields
of applications such as shoes, furniture, construction, car interior trims, packaging, and paper.
In the belting business, Forbo under the Siegling brand is among the leading companies in the field worldwide. For example its conveyor and processing belts
for the food industry, treadmill belts for fitness applications, and conveyor belts
in logistics operations occupy a particularly strong market position.
Forbo’s strategy focuses on core products with leading positions in global markets and attractive profitability prospects. Following the acquisitions and restructuring projects within the Group in recent years, Forbo is an internationallywell-established company today. In the foreground is the sustainable, valueand growth-oriented company development.

2 Forbo Annual Report 2003

Key Figures 1)
2003

2002

2003

2002

m CHF

m CHF

m EUR 2)m EUR 2)

Forbo GroupNet sales

1,598,9

1,531.1

Change on previous year (%)

+4.4

+13.1

Flooring

729.0

Adhesives
Belting
Operating profit before depreciation

1,051.2

1,043.7

736.1

479.3

501.8

572.9

486.6

376.7

331.7

297.0

308.4

195.2

210.2

156.7

180.1

103.0

122.8

9.8

11.8

60.4

88.4

39.7

60.3

–31.7

+3.2
10.6

29.0

and amortization (EBITDA)
As % of net sales
Operating profit (EBIT)
Change on previous year (%)
As % of operating assets (ROA)
Consolidated profit
Change on previous year (%)
As % of average shareholders’ equity
Capital investments
Total assets

4.7

6.6

16.1

42.6

–62.2

–17.8

2.8

6.9

46.2

45.2

30.4

30.8

1,563.8

1 600.6

1,028.1

1 091.1

Shareholders’ equity

572.5

590.6

376.4

402.6

Equity ratio (%)

36.6

36.9

379.3

485.4

249.4

330.9

66.3

82.2

Net debt
As % of shareholders’ equity (gearing)NumberNumber

5,585

5,715

9

728

m CHF

m CHF

m EUR 2)m EUR 2)

88.5

108.8

58.2

74.2

Economic Value Added (EVA®) 3)

–17.0

4.3

–11.2

2.9

Stock market capitalization (at 31. 12.)

464.8

537.7

305.6

366.5

CHF

CHF

Earnings per share

12.28

32.65

8.07

22.26

Shareholders’ equity per share

435.37

Employees (31. 12.)
Employees of acquired activities

Free cash flow
(before cash distribution, acquisitions
and divestments)

EUR 2)EUR 2)Per share data
452.51286.24308.46

Cash distribution per share

8.00 4)

22.00

5.26

15.00

Payout ratio (%)

65.1

67.4

1)

For explanatory notes, see Financial Report
CHF values translated at year-average rateof CHF 1.521/1 EUR (2003) and CHF 1.467/1 EUR (2002)
3)
Registered trademark of Stern, Stewart & Co.
4)
Proposal of the Board of Directors:
Cash distribution by reducing the nominal value of the share
2)

Forbo Annual Report 20033

To our Shareholders
Dear Ladies and GentlemenMarket positions
maintained underdifficult conditions

Thanks to numerous efforts in recent years, the Forbo Group has a solid market
position in its three core businesses. In 2003, the Group was able to further
improve the structure of these businesses. A high level of customer satisfaction isa good indicator of these improvements. Our recent customer survey showsthat we are a clearly preferred supplier of floor coverings as well as belts for powertransmission, conveyor and processing purposes although the quality andprices are on a relatively high level with markets characterized by price erosion.
Economically speaking, the results achieved in the course of the year did notmeet our expectations.

Depressed businessactivity worldwide

The main reason for these results is the global economic situation which wascharacterized also in 2003 by declining investments in public buildings, offices
and production plants – investments that are critical for our business. Additional factors were the uncertainties over the Iraq war and the lung disease SARS
in Asia. A disappointing economic development was especially observed inGermany, the Netherlands, Great Britain, Scandinavia, and Switzerland. These
important core markets of Forbo had a significant impact on sales and profit.
Additionally, the Group suffered from a very unfavorable exchange rate development of the US Dollar.
Sales development

Group sales riseby 4%

The results of the Forbo Group mirror the difficult economic climate and especially the exchange rate development. Sales rose to CHF 1,599 million or 4 %compared with the previous year when sales amounted to CHF 1,531 million. In
local currency the increase is 7%. The sales growth is almost completely the
result of the acquisitions made in 2002. All in all, the sales development in Western Europe was unsatisfactory. Positive exceptions are France and Southern
Europe for the flooring and adhesives businesses, and Germany for belting. Eastern Europe, North America and especially Asia remained on a growth course
in all three businesses. These dynamics became more pronounced in the fourth
quarter of 2003.

4 Forbo Annual Report 2003

Results
Decrease due
to a change
of geographicalsales mix andmargin pressure

The decline in high-margin sales regions had an essential impact on the profit.
In addition, the US Dollar weakness left its mark as the Forbo Group generates
a considerable sales percentage in North America and Asia on the basis of exports from the Euro currency zone.
Substantial overcapacities reinforced the intense competition resulting in fiercer
price pressure. Higher raw material prices for adhesives were another negative
cost factor. The personnel reduction of some 220 jobs announced in October 2003
in the context of further cost-cutting initiatives has been largely concluded.
After higher amortization of goodwill due to acquisitions, the operating profit(EBIT) is CHF 60 million, clearly below the previous year’s result (CHF 88 million). Lower EBIT combined with increased financial expenses and a higher tax
rate resulted in an unsatisfactory Group profit of only CHF 16 million (previous year: CHF 43 million).
Strong free cash flow and financial situation

Financial debt
reduced

Progress with the management of working capital and a reluctant investment
activity led to a free cash flow of CHF 89 million. As a result and in connection
with the weak Dollar, which had a positive impact, the Group’s net debt could
be reduced from CHF 485 million to CHF 379 million. The gearing (net debt as
a percentage of equity capital) was at 66% (previous year: 82 %). The equity
ratio amounted to 37 % as in the previous year and was thus on an adequate levelin connection with the high liquidity of CHF 189 million (previous year:
CHF 152 million).
Cash distribution by reducing the nominal value of the share

Lower than in
the previous year,
but on a considerable level

The Board of Directors proposes to the Annual General Meeting a cash distribution of CHF 8.00 (previous year: CHF 22.00) per registered share by way of
reduction of the nominal value which is a tax favorable form of payment. In thismanner both the Group’s profit development, and its strength of free cash
flow, are taken into account appropriately. Based on the 2003 year-end shareprice, the Forbo share still offers a yield of 2.3 %. The resulting total distribution amounts to CHF 11 million.

Forbo Annual Report 2003

5

Personnel changes
Board of Directors

Karl Janjoeri, a member of the Board of Directors since 1986 and Chairmanof the Board of Directors since 1999 decided to retire at the beginning of 2004.
The Board of Directors thanks Mr. Janjoeri for his contribution to the ForboGroup’s development over many years. As his successor, the Board of Directors
elected Dr. Willy Kissling, Vice-Chairman since 1998.
Michael Pieper’s term of office will expire as of the date of the 2004 Annual
General Meeting. He will stand for re-election for another term of office.

Executive Board

The Board of Directors and Werner Kummer, CEO of the Forbo Group since theend of 1998, have mutually agreed to terminate his employment contract effective March 3, 2004. He focussed the Group’s activities on three core businesses
in difficult times. The Board of Directors thanks Mr. Kummer for his contribution to the Group.
This E. Schneider was appointed the new CEO of the Forbo Group on March 4,
2004 and will be proposed to the Annual General Meeting as a new member ofthe Board of Directors.
OutlookSome indicators
pointing upwards

There are more signs for optimism at the beginning of the current year. The indicators for the economies in the USA and in Asia are pointing upwards. However, there is still uncertainty as to the development in the European economic
region that accounts for two thirds of our total sales. Key topics such as unemployment, public finances, taxes, and financing of social insurance schemes
are slowing down a quick recovery. The Dollar weakness continues to havea negative impact on European producers. Besides, fierce competition and overcapacities will increase the price pressure in the future.

Priorities 2004

For the current year it is our goal to stop the unsatisfactory profit development
and to create a solid basis for enhancing our profitability. To this end we will
review the Group’s strategies and operating processes, and initiate any changes,
if needed. In today’s economic climate it is imperative that we take the necessary steps immediately to improve our earnings situation.

6 Forbo Annual Report 2003

Sales will have to be increased in attractive market segments, and the productmix will have to be optimized so that we can stabilize or improve our margins.
In production, we will have to reduce manufacturing costs immediately and sustainably to maintain margins also in case of declining prices.
In the field of logistics, the business processes that are in place for order handling, production, inventories, and dispatching will have to be optimized in order
to benefit from investments in standardized and highly integrated IT solutions
on the basis of SAP/R3.
ThanksWe thank our customers for the loyalty and trust they have demonstrated in thepast year. We would also like to thank our employees for their commitment
during the past year and for doing their best in difficult times. Finally, we would
like to extend our thanks to you, dear shareholders, for your trust in ourcompany.

Dr. Willy Kissling
Chairman of the Board of Directors

Forbo Annual Report 2003

7

Forbo Group: Market Positions Maintained
under Difficult Conditions
Forbo recorded a 4 % sales increase to CHF 1,599 million in the businessyear 2003 compared with the previous year. In local currency, the increaseis 7 %. The market position could be strengthened in all three businesses
although the demand in some of the key markets was clearly declining. The
adhesives business reached double-digit sales growth resulting from theacquisitions made in the course of 2002. The trend in the flooring business
was slightly weaker as a result of the prevailing market conditions. The
sales development with belting was slightly positive in terms of local currency. At the beginning of the year, the adhesives business divested
Repoxit AG, a marginal activity with a sales volume of some CHF 16 million.
The Group’s operating profit after depreciation and amortization (EBIT)
reached CHF 60 million (previous year: CHF 88 million) and declined essentially by reason of a shift in geographical sales, margin pressure, andDollar weakness. Group profit of CHF 16 million is clearly below the previous
year’s result (CHF 43 million) and below expectations. However, the free
cash flow of CHF 89 million could be kept on a respectable level.
The business development at a glance
Flooring expands
product range

With sales of CHF 729.0 million compared with CHF 736.1 million in the previous year, the flooring business declined by 1.0 %, or 1.7% in local currency.
The losses in the linoleum business are due to the generally weak building market
for major projects and the restrictive investment policy of the public sector.
This trend could be partly countered by the expanded product range of cushion
vinyl for the project market. Positive exceptions from the unfavorable businesstrend in Europe are France and Southern Europe.

Adhesives withdouble-digit growth

The adhesives business increased sales by 17.7 % to CHF 572.9 million (previous
year: CHF 486.6 million) in Swiss Francs and expressed in local currency by
22.2 %. This is mainly the result of the acquisitions made in 2002. The integration of the Swift adhesives business into the Forbo Group has been concluded
successfully. A favorable development could be recorded in France and Southern
Europe, and demand started to pick up in North America in the last quarterof the year.

Belting winningmarket shares

Sales of the belting business were CHF 297.0 million (previous year: CHF 308.4
million), an increase by 1.4 % in local currency or a decrease by 3.7 % in Swiss
Francs. Additional sales were made in Asia and North America with some bigorders and progress in selected fields of application. Except for Germany, salesin Europe were declining.

8 Forbo Annual Report 2003

Sales by Businesses
m CHF
Change on previous year
2003 effective %currency adj. %Flooring
Adhesives
Belting
Total

729.0
572.9
297.0
1,598.9

–1.0
17.7
–3.7
4.4

%

–1.7
45.6
22.2
35.8
1.4
18.6
6.5 100.0

Sales by regions

The sales development in Western Europe was all in all unsatisfactory. Positive
exceptions are France and Southern Europe in the flooring and adhesives businesses, and Germany with belting. For all the three businesses, Eastern Europe,
North America, Asia and notably China remained on an expansion course.
Despite the Dollar weakness the amount of sales reached in Non-European countries could be increased to 32 %. Expressed in local currency, Forbo achieved
sales growth in Asia, America, Southern and Eastern Europe as well as in France.
In line with the general business trend, the business was declining in the Benelux countries, Germany, and Scandinavia. Decreasing sales were recorded in
Switzerland mainly as a result of divestments.

Sales by geographic areas%

North, Central and Southern America
Germany
Benelux
FranceScandinavia
Southern Europe
Asia/Australia/Africa
Great Britain/Ireland
Eastern Europe
Switzerland

23.7
13.4
12.7
10.5
9.2
8.6
7.9
5.8
5.2
3.0

Changes on previous year
effective % currency adj. %

9.4
0.4
–0.9
11.9
0.0
22.2
–1.2
4.3
13.7
–28.4

25.4
–3.1
–4.3
7.9
–3.2
18.7
1.5
9.3
10.4
–28.4

m CHF
2003

378.7
213.8
202.4
167.9
146.4
138.2
126.6
93.2
83.8
47.9
0

50

100

150

200

250

300

350

Forbo Annual Report 2003

400

9

Result development
Cumulation ofnegative influences

Operating profit (EBIT) decreased by CHF 28.0 million to CHF 60.4 million compared with the previous year as a result of a combination of various negative
influences. This includes a CHF 1.7 million higher amortization of goodwill, corresponding with a total of CHF 8.4 million. All three businesses contributed tothe decrease of the operating profit. In the flooring business, the result sufferedespecially from a shift of sales at the expense of the high-margin European
markets. The adhesives business recorded lower gross margins mainly as a resultof higher raw material prices combined with an unfavorable product mix, including a high percentage of pure volume business. In the belting business, pricepressure made an essential contribution to the disappointing result. The weak
Dollar had a negative impact on all three businesses, with a total negative impactof around CHF 10 million on operating profit. The return on assets employed(ROA) is 4.7 % (previous year: 6.6 %). Before depreciation and amortization, operating profit (EBITDA) was CHF 156.7 million and is by CHF 23.4 (13 %) lower
than in the previous year. This result corresponds with a return on sales of 9.8 %(previous year: 11.8 %). There was a substantial improvement in the third
quarter of the year following the reluctant development in the first two quarters.
However, the result in the fourth quarter showed a strong decline also as a result of restructuring costs.

EBIT by Businesses
Flooring
Adhesives
Belting
Headquarters/consolidation

m CHF
2003

Change2002/2003 %2003 %

53.9
31.0
1.2
–25.7

–15.3
–17.6
–89.0
n/a

10.3
7.0
0.4
n/a

ROA*

–50
*

–25

0

25

50

75

100

Return on Assets(EBIT in % of operating assets)

Higher financial
expenses
and tax rate

Net financial expenses of CHF 29.4 million were by CHF 5.2 million above theprevious year. Interest rates were clearly higher than in the previous year,
and financial debt was lower on average. The reason is the interim financing at
favorable interest rates for the Swift acquisition in 2002. At the end of November 2002, these facilities were replaced by a long-term US private placement withhigher interest rates. Group profit is CHF 16.1 million after CHF 42.6 million
in the previous year due to clearly lower operating profit, an increased tax rate,and higher financial expenses. The higher tax rate is caused mainly by a shift
in the geographical composition of the result.

10 Forbo Annual Report 2003

Economic Value
Added

Forbo’s objective is to enhance the value of the company. Value is only created
when the returns of the capital employed exceed the weighted average costof capital. Whereas in the previous year a positive – albeit modest – result of
CHF 4.3 million could be reached, the result in the year under review is with
CHF 17.0 million negative. This is mainly due to lower operating profit and thehigher weighted average capital cost (WACC) of 5.9% (previous year: 5.5 %).
A detailed overview can be found on page 64 of the financial report.

Free cash flow

The free cash flow before cash distribution reached CHF 88.5 million versus
CHF 108.8 million in the previous year. This amount is the result of the efficientmanagement of the Group’s net working capital and cautious investment inproduction plants in view of existing overcapacities.

Free cash flow 2003
m CHF

Cash flow from operating activities
Cash flow used for investments in long-term assets, net
Free cash flow 1)

123
–34
89
0

25

50

75

100

125

150

175

200

75

100

125

150

175

200

Free cash flow 2002
m CHF

Cash flow from operating activities
Cash flow used for investments in long-term assets, net
Free cash flow 1)

138
–29
109
0

1)

25

50

Before cash distribution, purchaseand sale of activities

Forbo Annual Report 2003

11

Capital investments
SAP coverage at 70 %A total of CHF 46.2 million was spent for investments. This means that also in
2003 the investment activity stayed clearly below the depreciation on fixed
assets of CHF 82.9 million. Additional investments were made for the implementation of a group-consistent and highly integrated IT structure on SAP/R3 basis. In the business year under review, this program focused on belting in Europe
and Asia, and flooring in France. By now, a SAP coverage of about 70 % has
been reached in the Group. The conclusion of this investment project with thecomplete implementation is planned for 2005. Forbo will then dispose, allover the Group, of an IT architecture aligned with the requirements of the threebusinesses, allowing the optimum decision-making, planning and businessprocesses.

Logistic structures
improved

In the adhesives business, the production capacity for hot melt adhesives wasincreased in Pirmasens (Germany). In the flooring business, warehouse automation was accelerated, and the logistic structures were further improved in
Krommenie (Netherlands). Besides, the production infrastructure for cushion
vinyl in the project area was improved at the Reims (France) and Forshaga(Sweden) sites.

Investment planning
2004

Further investments in logistics automation are envisaged in the flooring business. In Reims (France) the construction of an automated melt feeding system
for the production of vinyl is being planned, and the Coevorden (Netherlands)site will set up a treatment plant for re-use of plastic waste. The aim of theseprojects is to further reduce the vinyl production costs. In order to serve theEastern European growth market, the construction of a fabrication plant for
belting has been started in Slovakia. The conclusion of the SAP implementationis accelerated all over the Group.

Capital investments 1999–2003

2003
2002
2001
2000
1999

Flooring

Adhesives

Belting

m CHF

m CHF

m CHF

26
23
46
37
60

10
11
9
7
9

10
11
10
16
35

Total

Divested
activities
m CHF

m CHF

1
8
21

46
45
66
68
125
0

Flooring
Adhesives
Belting
Divested activities

12 Forbo Annual Report 2003

20

40

60

80

100

120

140

160

180

Employees
Job cuts necessary
becauseof cost pressure

As per December 31, 2003, Forbo employed 5,585 people. This is a reductionby 129 people over the end of 2002, on a comparable basis. The job cuts weremore or less proportional to the sales percentages of the businesses. The decrease by approximately 180 jobs so far in Western Europe compares with anincrease by 78 jobs in the growth markets of Asia, America and Eastern
Europe, again reflecting the business cycle in the individual regions. The job
reduction program, which was started in October of the year under review,
will be concluded at the end of the first quarter of 2004.

Employees by Businesses
2003

Flooring
Adhesives
Belting
Headquarters
Total

2,557
1,288
1,699
41
5,585

Change2002/2003 %*%–4.3 45.6–1.8 23.0
0.9 30.4–4.7
1.0–2.3 100.0*On a comparable basis

Employees by geographic areas
Benelux
North, Central and South America
Germany
FranceGreat Britain/Ireland
Scandinavia
Asia/Australia/Africa
Switzerland
Southern Europe
Eastern Europe%

Change2002/2003 %*

2003

22.3
15.4
14.4
10.2
9.4
8.7
7.1
6.0
6.0
0.5

–10.9
5.5
–4.2
0.5
1.7
–3.0
9.0
–1.8
–3.7
8.0

1,244
860
802
571
527
484
398
336
336
27
0

200

400

600

800

1 000

1 200

1 400

1 600

* On a comparable basis

Forbo Annual Report 2003

13

Brand leadership‘Forbo’ as theumbrella brand

Although Forbo is not a brand producer in the classical sense of consumer
brands, the Group disposes of numerous renowned brands. The Group name ofForbo has been integrated in many corporate and product names as a common
umbrella brand for all the businesses. The brands of the individual businesses
are partly market leaders. For instance, the floor covering collections have registered brand names that are well-known on the international level, such as
Marmoleum®, Artoleum® or Novilon®. Adhesives have mostly national names,such as Swift® in the USA and Eurocol® in the Netherlands. Beltings are soldworldwide under the Siegling® brand, having a world market share of about 20 %.
In Switzerland, the company displays the Forbo brand at selected high-grade
sport events with international media coverage. On the level of business areas,
there are numerous individual programs for supporting and enhancing thebrand image.
Process improvement

Systematic processdevelopment

In this business year, too, numerous projects were initiated and implemented
for further improving our business processes. The most important initiative resulted from a comprehensive telephone survey about customer satisfaction
carried out by a specialized institute. The survey produced good results for Forbo,
but it also showed that fast product availability and supply reliability are essential factors for customer satisfaction. It was our goal to improve the production and logistic processes in such a way that Forbo’s supply performance isperceived by customers as a positively differentiating factor in comparison withcompetitors. We wanted to reach this goal without increasing our stocks.
Flooring and belting reached this milestone in the course of the year by meansof sophisticated production planning tools, streamlining of the product offer,
categorization in groups with different availabilities, and the reduction or closureof decentral warehouses for finished goods. Today, the three businesses arecontinuously monitoring and evaluating supply reliability. Besides, it is planned
to repeat the customer satisfaction survey at regular intervals.

14 Forbo Annual Report 2003

Integration of sites
and centralization ofprocesses

Cost optimization efforts resulted in the restructuring of several sites in theyear under review, notably in the adhesives business in Europe (France, Spain,
Benelux, Austria, and Germany). The sales organization of the flooring business in Germany was integrated into a single site. The standardization of information technology systems based on SAP/R3 is increasingly facilitating theorder handling processes. It is more and more the objective to centralize theseprocesses by means of Shared Service Centers. In this sense, export orders ofindividual production sites were centrally controlled and coordinated in a firststep within the flooring business.

ISO certified

With very few exceptions, all the sites of the Forbo Group have been certified
according to ISO 9001 or 14 000. Numerous Forbo organizations successfully
passed the repeat certification audits that are demanded at regular intervals.

Forbo Annual Report 2003

15

Flooring: Well Positioned with
New Products
The flooring business recorded sales of CHF 729 million in the businessyear 2003 compared with CHF 736 million in the previous year. This corresponds with 46 % (previous year: 48 %) of total Group sales, meaning thatflooring continues to be the most important business. The sales decrease of
1.0 % is 1.7 % in local currency. Demand for linoleum and vinyl, except
for the project business, was subdued. Parquet floor coverings achieved
double-digit growth thanks to the home market of Sweden and brisk export activity to Eastern Europe. In contrast to considerable growth in markets such as Asia, Eastern Europe, Southern Europe, and France, a sales
decline was recorded in the traditional, high-margin markets of Western
Europe. The local price level could be maintained in most regions. The
weak Dollar resulted in lower sales after translation into Swiss Francs. Another adverse factor was the fact that Forbo generates substantial exports
from the Euro zone to the Dollar region. The operating profit of CHF 54
million was CHF 10 million lower than in the previous year (CHF 64 million).

Linoleum
Inconsistent regional
development

Sales of the linoleum product group were CHF 361.6 million (previous year:
CHF 372.0 million) and declined by 2.4 % local currency. The main reason forthe decrease is the reluctant building and investment activity of the public
sector, representing an important customer group. A positive development wasrecorded in France. Linoleum is moving forward in France, supplementing astrong market position of vinyl for the contract market. The trend is positive alsoin Germany and Southern Europe. This was in contrast to partly essential decreases in Great Britain, Benelux and Scandinavia. North America continues tobe on a growth course, increasing sales by nearly five percent in local currency
terms.

Red dot design award
won for the second
consecutive time

The new, third Artoleum® collection was developed after a detailed trend analysis in cooperation with more than 150 leading architects, designers and interior
decorators in 25 countries. As with earlier collections, painting was the major
source of inspiration. For the new collection, Forbo received the ‘red dot award’,an internationally renowned design award of the North Rhine-Westphalian
Design Center. With the collection ‘Marmoleum meets Mendini’ launched at theSalone del Mobile in Milan in April 2003, the design and art orientation remains an important topic for linoleum: Developed in cooperation with the wellknown Italian designer Alessandro Mendini, the collection offers artistic patterns with cubistic shapes, rhythmic lozenges or brush strokes inspired by theimpressionism. With this design collection we want to position linoleum as atrend product.

16 Forbo Annual Report 2003

Design orientation
also in theresidential area

The launch of the innovative linoleum product Marmoleum® click for the residential area has been started successfully. Like the popular laminate and parquet
system for self-installers, the click system does not need any additional fixation. The individual handy elements consist of a carrier plate with a two millimeter thick linoleum layer and can simply be put together. Installation istherefore very easy, and the floor covering can be removed, if necessary, and reinstalled somewhere else. The collection covers a range of 15 colors and isavailable in the form of panels or tiles.

Market leadershipstrengthened

Linoleum consists of naturally renewable raw materials, and the new productcombines in a unique way ecological living with attractive design and excellent
installation and use properties. Forbo has a share of more than 60 % in the
global linoleum market and has further expanded its market position. The marketing efforts are aimed at both the institutional building segment (commercial buildings, hospitals, schools and other public buildings) and applications in
the residential area.

Sales by product groups
m CHF
2003

Linoleum
Vinyl
Other floor coverings
Total

361.6
308.5
58.9
729.0

Change on previous year
effective %currency adj. %

–2.8
0.2
5.0
–1.0

–2.4
–1.3
1.4
–1.7

%

49.6
42.3
8.1
100.0

Forbo Annual Report 2003

17

VinylStrong development of the projectbusiness

Sales of the vinyl product group reached CHF 308.5 million (previous year:
CHF 308.0 Mio) and could thus be maintained on practically the previous year’slevel in spite of difficult market conditions. In local currency terms the sales
decrease is 1.3 %. A significant increase was achieved in France, similar to linoleum. Strong sales were also recorded in Southern and Eastern Europe, and in
Asia. The launch of vinyl with insulating properties was particularly successful
in these export markets. Sales of vinyl through retail channels showed a clearly
declining trend in Germany and the Benelux countries.

Product innovation
for the project area

As with linoleum, efforts are being intensified to launch new vinyl collections forthe project business. With the product innovation Eternal, we meet the demand of many customers for a vinyl floor particularly suitable for large-surface
rooms. Eternal has a wear-resistant and easy-care surface and is available invarious designs.

Trend setting in
the residential area

With Novilon® new generation a product line has been designed for young target groups. With lively animal designs, Novilon® Arta has the potential to
become a trend setter. Novilon® Moda is a collection for well-being, reflecting
a natural look in design, colors and patterns. Both collections have a wearresistant layer with diamond character, providing the floor with a gripping surface. Novilon® Vera produces a playful, light and colorful impression and is
an ideal match with the Novilon® new generation product line.

Vinyl show room
openedin Amsterdam

Forbo has opened a show room for vinyl products in the historic center of
Amsterdam, in the proximity of some of the world’s most prestigious museums
such as the Van Gogh museum and the Dutch Rijksmuseum. It shows theavantgarde of synthetic floorings in an unconventional setting, representing aninteresting customer attraction.
Parquet and textile floorings

Parquet flooringwith positive
development

Sales of the product group parquet and textile floorings, including needlefelt,
were CHF 58.9 million (previous year: CHF 56.1 million), 5.0 % higher thanin the previous year, or 1.4 % in local currency. The sales increase was supportedby the positive development of parquet in Southern and Eastern Europe, whereas
textile floorings including needlefelt suffered declining sales in Germany andthe Benelux countries.

18 Forbo Annual Report 2003

Outlook
Seeking profitable
growthExpanding the project business is a priority. We have the chance there to win
additional market shares also in mature markets by the combination of linoleum
and vinyl floorings. The distribution concept of a supplier of integrated solutions is becoming ever more effective. Apart from Asia and America, the Eastern
European growth market is opening itself also for our project business. With
the rising economic prosperity there is a growing demand for institutional andrepresentative buildings. We want to use our strong position in this field tofurther achieve profitable growth. With vinyl for the retail channels the emphasis is on the reduction of production costs on the one hand, and strengthening the market position in the high-price segment on the other hand. A selective
offer in the low-price segment is supposed to generate additional sales andprofit growth for the overall business.

Forbo Annual Report 2003

19

Adhesives: Sales Growth throughAcquisitions
The adhesives business recorded sales of CHF 573 million in the businessyear 2003. This corresponds with 36 % (previous year: 32 %) of Group total
sales, meaning that this business has been able to expand its second position within the Group. In the context of a reorganization program launchedat the beginning of 2003, a Swiss based company producing liquid industrial floorings (Repoxit AG) with annual sales of some CHF 16 million was
sold. Thus, the comparable sales in the previous year amounts to CHF 471
million. The sales growth therefore is 22 %, in local currency even more than
26 %, as a result of the acquisitions made in 2002. With an operating
profit of CHF 31 million (previous year: CHF 38 million), the earning powerof the adhesives business did not meet the expectations especially because of higher raw material costs and an unfavorable shift of the productmix. The Dollar weakness had an additional negative impact on sales andprofit through the currency translation into Swiss Francs.
Market situation
Poor economic
situationand expensive
raw materials

The adhesives business, too, suffered from the general economic conditions in
the year under review. The margin pressure was increased through price rises ofkey raw materials. The higher prices could be passed on to the customers only
to a very limited extent and with considerable delay.

Strategic objectives
further implemented

The sales increase is mainly due to the acquisition of the Swift adhesives business.
As a result, sales in local currency rose by 26 %. About 40 % of the adhesives
business’ total sales are accounted for by the North American market. 45 % of
total sales are realized in the four major European sales regions, i. e. Benelux,
Germany, Southern Europe, and France. In North America, Southern Europe,and France, growth could be generated in spite of the difficult economic
climate. Following the successful Swift acquisition, Forbo is now on track to become a global supplier. Forbo has a world market share of only 3 %, but is already among the major producers in this segment. The company is the market
leader in selected fields of application.

Focus onindustrial adhesives

With 80 % of sales, industrial adhesives are the core business with applications in
the paper and packaging industry, automotive, assembly, wood processing,and shoe industries. North America and Europe generate about half of total sales
each. Forbo’s adhesives activities for applications related to the building industry, accounting for some 20 % of total sales, have an excellent market position
especially in the Netherlands. This position could be further strengthened despite the recessionary environment.

New products

Product development in 2003 concentrated on adhesives for the packaging industry and special grades for lamination and assembly applications for the
automotive industry. The start-up of additional production capacities for reactive hot melt adhesives in Pirmasens (Germany) opens up new growth potential. A novel self-leveling subfloor adhesive has been launched for applications in
the building industry.

20 Forbo Annual Report 2003

Recognition
by customers

In Great Britain Forbo was presented the ‘Supplier of the Year’ award by a key
customer of the packaging industry in recognition of delivery reliability andcustomer proximity. The company produces high-quality cardboard sleeves for
packaging applications used in the food, beverage and cosmetics industries.

Streamlining
the organization

Different organizational units have been integrated in some countries in orderto make use of the efficiency and synergy potentials won with the acquisition of
Swift. This applies especially to France, Spain, the Netherlands, Germany, andSwitzerland. The consolidation of production sites and sales offices could be concluded successfully. In doing so, the needs of global key accounts and the transfer of expertise between the local production and sales organizations were taken
into account. The associated costs were predominantly charged to the restructuring provisions made for this particular purpose.
A poem of one kilometer

Customer focus
in the foregroundAn example of the demanding applications of Forbo adhesives is the extensionof the Benelux tunnel in Rotterdam. The Dutch port city built six additionaltunnel tubes for a motorway and a bicycle track. The complete wall covering of
the tubes covering a surface of 28,000 m2 consists of tiles installed with adhesives and joint compounds from Forbo. The order had been placed with Forbo
primarily on the grounds of quality control from dispatch through to thecompletion of the building project. A remarkable detail in the bicycle tunnel isa poem by Dutch writer Jules Deelder that extends as a tile mosaic on thewall over a distance of nearly one kilometer.
Outlook

High-quality
applications
and global-scalesegments

In 2004, returning to healthy margins is more important than ever. In order toreach this goal we will increasingly concentrate on selected segments of global
dimensions and with good chances of profitable growth. With more flexibility
in terms of formulations and supplier comparisons we should be able to keep
raw material costs under control. We are expecting increasing demand for adhesives, as can be seen in the USA already. In Eastern Europe and Asia, we are
seeking to expand our business activity based on the presence of the flooring andbelting businesses in these regions.

Forbo Annual Report 2003

21

Belting: Push into Technology-Driven
Market Segments
In the business year 2003, the belting business achieved sales of CHF 297
million after CHF 308 million in the previous year. In local currency, salesrose by 1.4 % compared with 2002, while they decreased by 3.7 % in Swiss
Franc terms. Total belting sales account for 18 % (previous year: 20 %) ofGroup sales. Increasing sales in Asia and North America were offset by declining sales in Europe, with the exception of Germany. At CHF 1 million(previous year: CHF 11 million), the operating profit remained just about positive. The weak US Dollar had an extremely adverse impact on the profit
especially because of the considerable export volume from Europe to the
Dollar area. Besides the business suffered a margin decline due to fierce
price competition.
Market situation
Dollar thwarts
market success

The global business with belts, which is heavily dependent on plant construction and investments in transport infrastructure, continued to suffer from an
unfavorable economic climate, notably in Europe. Sales could be increased onlyin Germany as well as in Southern and Eastern Europe. In America and Asia,
markets and sales followed a clear upward trend in local currency. However, thisfavorable trend was thwarted completely by the weak US Dollar so that sales infact decreased in both regions after currency translation into Swiss Francs. The
negative impact of exchange rate translation on sales was about CHF 14 million
and CHF 5 million for America and Asia, respectively.

Market position
maintained

The slight market decline that is still going on and fierce and intense competition among the market leaders resulted in continued price pressure. Nevertheless, Siegling succeeded in expanding its market position in selected segments
and markets, notably in North America and Asia. Today, business in Asia andNorth America contribute 23 % and 31%, respectively, to Group total belting
sales.

Expansion in
the Pacific region

Per March 31, 2003 Forbo took over the distribution business and retail tradefor belts from its New Zealand agent Stedar Belting Ltd. This company has been
distributing Forbo belts under the name of Siegling since 1983 on an exclusive
basis. With annual sales of approximately CHF 2 million, Stedar Belting Ltd. is theclear market leader with Siegling products in New Zealand for conveyor andpower transmission belts. With this move, Forbo successfully strengthened its
market presence with belts in the Pacific region.

22 Forbo Annual Report 2003

Market success through customer loyalty
Competitive edgein the mail sorting
segment

Thanks to a successful participation in a bidding, the previous supply volume in
the mail sorting segment (conveyor belts for mail sorting equipment) could
be boosted in North America. A key element of this project was the excellent customer relationship that has been existing for nearly 20 years, the segment-specific know-how and the complete product range necessary to meet the customer’s
requirements. We managed this major project by resorting to our global resources for development, production and fabrication. Against this backgroundthe customer considers us a stable and reliable business partner whose quality
and supply reliability he can count on.

Winninga major projectwith
new products

Forbo could sign an exclusive agreement for the supply and maintenance of belts
with an important customer in Australia. The agreement has a term of four
years and is so far the biggest individual order for conveyor and processing belts
as well as folder and carrier belts in the Australian market. The customer isthe market leader in the production of corrugated paper board and packaging
materials. The agreement includes all product areas but primarily focuses on
paper and bags, corrugated paper, folding boxes and metal cans. The main reason for the allocation was the combination of Forbo’s global network with
its ability to offer the local service which the customer requested. Besides the new
Extremultus® E-series offers various benefits as the core element of the offer:
These belts are especially characterized by shorter assembly times allowing ahigher plant availability. The fact that this big project could be won clearly
confirms the strategy, i. e. to consistently align the product development withsegment-specific market and customer needs.

Forbo Annual Report 2003

23

Outlook
Focus on attractive
segments

We want to develop even more intensively the Eastern European growth market.
Combined with a targeted market coverage, this requires the establishmentof a fabrication center in Slovakia. Another point of emphasis is the enhancement of our position in Asia, which is strong already today, with the further
expansion of the sales network and fabrication in China. This position is being
used increasingly also for products that are exported to the Japanese andNorth American markets. In addition, we concentrate our efforts on technologydriven applications and segments such as mail sorting plants and the printing
industry. We have completed our product range and know-how with different
new developments in a segment-specific manner. We will emphasize our supply reliability, which is high also compared with our competitors, and thus enhance customer loyalty. Furthermore, infrastructure improvements resulting
from the consistent implementation of SAP will bring about a better market performance. With the recovery of the world economy we are expecting increasing capital investments in production and processing plants. This will directly
impact our business and, in view of free capacities, the operating profit of thebelting business.

24 Forbo Annual Report 2003

m2
Surface, volume, longitude:
Forbo in all dimensions

m3
Three core businesses, a single strategic direction: Clear customer orientationmand consistent product competence.
Time and again, Forbo proves its uniqueexpertise through product innovations
and excellent quality. Our worldwide presence and reliable delivery are key elements in building customer loyalty andconsistently strengthen our position ininternational markets.

Flooring

In 2003, Forbo produced 56.8 million m2 of f loor coverings worldwide.
This is enough to cover 7,728 soccer fields.

Goal Line 70 m
Side Line 105 m

Extraordinary architecture demands extraordinary solutions. The floors at AlbaNova University Center in Stockholm, Sweden, are covered
with the Forbo linoleum product Marmoleum®
real, which satisfies all design requirements tothe highest possible degree. The building was designed by architects Henning Larsen, Denmark,and Acking & Wedel AB, Sweden.

Adhesives

In 2003, Forbo produced 266,837 m3 of adhesives worldwide. This is enoughto fill the entire loading capacity of 16,677 trucks.

On average, one truck transports
16 m3 of adhesives

Forbo manufactures the full range of adhesives
for the packaging, automobile, furniture and footwear industries. Often, we specifically develop
adhesives and processes in close cooperation withour customers. Here, high-quality adhesives
are used for sophisticated labeling applications.

N

O

R

T

H

S

E

Ro
t te

A

rd
am

TH
E
NE

TH

ER

LA

S

GE

ND

RM

AN

Y

In 2003, Forbo produced 3,250,000 meters (3,250 km) of belts for
power transmission, conveyor and processing applications worldwide.
This is 2.5 times the length of the Rhine River.

FR

AN

CE

BeltingThe Rhine River has a total length of 1,320 km.

Vo
r

de

rrh

ei

n

Ch
ur

ZE

AL
Y

IT

IT

SW
RL

LI

D

EC

AN

HT

rh

N

er

EI

nt

ST

Hi

EN

ei

n

The world is in motion. And Forbo helps to makethis happen. Forbo belting products are used ina wide range of production processes. Under the
Siegling brand name, Forbo develops, produces
and markets high-quality belts for power transmission, conveyor and processing purposes.
Here you see an application in the food industry.

Tom Kaiser
Executive Vice President
Flooring

Gerold A. Zenger
Executive Vice President
and CFO

This E. Schneider
President and CEO

Dr. Paul J. Haelg
Executive Vice President
Adhesives

Dr. Jan Lipton
Executive Vice President
Belting

Sails for relaxation

Skies to keep fit

Produces his own
olive oilHas clocked up 20,000
miles of flying balloons

Fine cooking is his
passionGroup Structure

President and CEO

This E. Schneider, Swiss
Born in 1952, he studied economics at St. Gallen University and Graduate School of Business, Stanford University, California, USA. After various management functions in Europe and the USA, he
was a member of the Executive Board of Schmidt-Agence (kiosk business of S. Schmidheiny) from1984 to 1990, with responsibility for strategic planning, operations and logistics. From 1991 to
1993 he was Chairman and CEO of the publicly listed company SAFAA, Paris. In 1994, he becamea member of the Executive Board of Valora with responsibility for the canteen and catering division. From 1997 to 2002 he was Delegate and Vice Chairman of the Board of Directors of the SelectaGroup. Since March 4, 2004, This E. Schneider has been CEO and President of the Executive Boardof the Forbo Group.

Executive
Vice President
and CFO

Gerold A. Zenger, Swiss

Executive
Vice President
Adhesives

Dr. Paul J. Haelg, Swiss

Born in 1945, he worked from 1968 to 1970 with Crown Life Insurance in Toronto, Canada, in theGroup Accounting Services area. From 1970 to 1973, he studied at the Advanced School of Economics and Business Administration in Zurich and worked part-time with Swiss Aluminium Ltd. invarious functions. From the end of 1973, he was responsible for Group reporting and consolidation.
In October 1976, Gerold A. Zenger joined Forbo as an Assistant Corporate Controller, and he assumed responsibility for the treasury area in 1979. He has been CFO since 1987, and he became an
Executive Board member in 1998.

Born in 1954, he studied Chemistry at ETH Zurich where he took his doctor’s degree in 1981. From1981 to 1986, he worked for Schweizerische Aluminium AG from where he went on to Gurit-Essex
AG where he was CEO from 1996 to 2001. In June 2001, Paul J. Haelg was appointed Executive Vice
President Adhesives and member of the Executive Board. He is a member of the Board of Directorsof Gurit-Heberlein AG (Switzerland). Paul J. Haelg has decided to take over the position of the CEO with
the Swiss based Daetwyler Group. The move will take place by the end of 2004 at the latest.

Executive
Vice President
Flooring

Tom Kaiser, German

Executive
Vice President
Belting

Dr. Jan Lipton, Swiss

Born in 1956, completed his apprenticeship in 1978 as ‘Gross- und Handelskaufmann’ at Stahlwerke
Südwestfalen. In 1992, he attended the International Executive Programme INSEAD, Fontainebleau.
From 1979 to 1988, he worked for Krupp Handel, among other areas in North and South America.
From 1988 to 1998, he held various management positions with Vaillant GmbH. In 1998, he joined
the Wolf Group as a Managing Director. In March 2004, Tom Kaiser was appointed Executive Vice
President Flooring and member of the Executive Board.

Born in 1952, he studied Engineering at ETH Zurich, and he took his doctor’s degree at ETH Lausannein 1983. Initially, he worked in research and development followed by management positions indifferent Swiss companies. From 1992 to 1997, he worked with Schindler AG, where he was a member of the Executive Board. Then he joined the Group Executive Board of Keramik Holding AG. In
April 2000, Jan Lipton was appointed Executive Vice President Belting and member of the Executive
Board.

Chief Executive Officer

Chief Financial Officer

Flooring Business

Adhesives Business

Belting Business

Forbo Annual Report 2003

39

Corporate GovernanceAt Forbo, the concept of corporate governance encompasses the entire setof principles and rules designed to protect shareholder interests withregard to organization, conduct, and transparency. Forbo’s aim is to strikea good balance between management and control. The following information is set out in line with the Corporate Governance Directive drawn up
by the SWX Swiss Exchange and, where applicable, the Swiss Code ofBest Practice. Based on the Corporate Governance Directive, reference ismade in the following text to information in the Annual Report or Forbo
Website in order to avoid repetition. In cases where no information has been
provided, it can be assumed that the corresponding sections of the Corporate Governance Directive are not applicable or immaterial in Forbo’s case.
Group structure and shareholders
Group structure

An organizational chart depicting the operational Group structure is given on
page 39 of this Annual Report. The scope of consolidation of Forbo Holding AG
with registered office in Eglisau (Valor No. 000354151/ISIN CH0003541510) does
not include any listed companies. The relevant details relating to the companies
that belong to the group of consolidated companies of Forbo Holding AG aregiven on page 102 of the Financial Report in the list entitled ‘Group Companies’.
Information relating to the allocation of the Group companies to their respective businesses is also included in this list.

Significant
shareholders

As of the end of December 2003, 3,668 shareholders were listed in the share register of Forbo Holding AG, 178 or 5.1% more than in the previous year. According to the company’s information, only one shareholder held more than 5 %of the voting rights as of December 31, 2003. On July 29, 2002 UBS Fund Management (Switzerland) AG, Basle, acquired a stake of 5.1% with voting rights,
thereby exceeding the 5 % limit. On January 29, 2004, UBS Fund Management
informed us that on January 27, 2004 the 5 % limit of voting rights was no longer
reached.

Cross-shareholdings

Forbo Holding AG is not involved in any capital or vote-based cross-shareholdings.
Capital structure

Authorized andconditional capitalThis information is contained on page 97 of the present Annual Report. The Annual General Meeting of Forbo Holding AG decided on April 29, 2003, to reduce the share capital to CHF 37,984,128, based on the Audit Report of an authorized auditor, by reducing the nominal value of each registered share by CHF 22
from CHF 50 to CHF 28. The corresponding change to the Articles of Association
was also approved by the Annual General Meeting.

40 Forbo Annual Report 2003

The following table shows the changes in capital over the last three years:

Changes in capital,
2001 to 2003

Year

2001
2002
2003

Share capital

Shares(units)Nominal value

Reserves

CHF

CHF

CHF

75,677,500
67,828,800
37,984,128

1,513,550
1,356,576
1,356,576

50
50
28

302,965,916
169,538,463
170,976,142

Available earnings
CHF

61,303,998
62,687,804 1)
78,075,456 2)

1)

Capital reduction as a result of the share buy-back program according to
the resolution passed by the Annual General Meeting on April 23, 20022)
Capital reduction as a result of the nominal value reduction according to
the resolution passed by the Annual General Meeting on April 29, 2003

Shares

The share capital of Forbo Holding AG is CHF 37,984,128, divided into 1,356,576
registered shares with a nominal value of CHF 28 each. Further details are
given in the Notes to the Financial Statements on page 97 of the Financial Report.
Each share entitles its holder to one vote. The economic and participatory
rights of those shareholders entered in the share register as having voting rights
are stipulated by law and in the Articles of Association. The participatory
rights encompass the right to attend the Annual General Meeting and the rightto table motions and to vote. Shareholders who cannot attend the Annual
General Meeting in person may be represented at the meeting. They may appoint
as their representative an official of the company, an independent representative, or another shareholder who is entered in the share register.

Limitations ontransferability
and nominee
registrations

With regard to relations with the company, only the party entered in theshare register shall be recognized as the holder of registered shares or beneficiary.
The entry of shares with voting rights shall always require the consent of theBoard of Directors, which may only be withheld in special cases. The consent of
the Board of Directors to the entry of the voting right may be withheld in casea shareholder were to acquire or hold more than 8 % of the total number of registered shares entered in the commercial register or if the acquirer of theshares does not expressly declare at the company’s request that the shares are being bought and shall be held in his own name and for his own interests. The
party acquiring registered shares shall submit a written application for approvalof the share transfer and shall declare that he is acquiring and shall hold theshares for his own account. The registered shares of Forbo Holding AG are notevidenced by certificate. However, a shareholder may request that a certificate
be printed and made available free of charge.

Forbo Annual Report 2003

41

Non-certificated shares, including the rights associated with such shares, may
only be transferred by means of assignment. The company must be duly notified
of any such assignment for the process to be valid. If non-certificated sharesare held by a bank on the shareholder’s behalf, such shares may only be transferred with the involvement of the bank. Resolutions on the amendment ordeletion of the clause on the entry of registered shares shall require a majority of
two-thirds of the votes represented at the Annual General Meeting in addition
to an absolute majority of the represented share nominal values.
Convertible bonds
and options

There are no outstanding convertible bonds. Information on the option programs available to the Board of Directors and the Executive Board is containedon page 49 of the Annual Report.
Board of Directors

Members of theBoard of Directors

In the business year 2003, the Board of Directors of Forbo Holding AG consistedof seven non-executive members.

Karl Janjoeri

Karl Janjoeri was born in 1935 and is Swiss. From 1960 to 1997 Karl Janjoeri held
various functions at UBS AG (former Schweizerische Bankgesellschaft), thereof
18 years in the Executive Board. Karl Janjoeri has been a member of the Board of
Directors of Forbo Holding AG since 1986 and has been its Chairman since1999. In additon, Karl Janjoeri is the Chairman of the Board of Directors of BDL
Banco di Lugano, member of the Board of Directors of Italcementi S.p.A.
(Italy) and the WJB Chiltern Group plc (England).
Karl Janjoeri retired from the Board of Directors at the beginning of 2004.

Dr. Willy Kissling

Dr. Willy Kissling was born in 1944 and is Swiss. He studied at the University ofBerne (Dr. rer. pol.) and at Harvard Business School (PMD). He has held various management positions since 1970. From 1987 to 1996, he was CEO and delegate of the Board of Directors of Landis & Gyr AG. From 1998 to 2002, he was
CEO of Unaxis Holding AG. Since 1994, Willy Kissling has been a member of theBoard of Directors of Forbo Holding AG, and its Vice Chairman since 1998.
Besides, he is the Chairman of the Board of Unaxis Holding AG, Vice Chairmanof Holcim Holding AG and a member of the Board of Directors of Schneider
Electric SA (France) and Kühne & Nagel International AG.
At the beginning of 2004, the Board of Directors appointed Dr. Willy Kissling as
its new Chairman.

42 Forbo Annual Report 2003

Dr. Anton H. Bucher

Dr. Anton H. Bucher was born in 1942 and is Swiss. He studied at the Universityof Zurich (Dr. oec. publ.). From 1976 to 1994, Anton H. Bucher worked with
Zellweger Uster AG, from 1981 to 1986 as the Deputy Director General and Vice
Chairman, from 1986 to 1994 as a member of the Board of Directors. From1987 to 1995, he was a member of the Board of Directors of Schweizerischer
Bankverein, and from 1987 to 1998 a member of the Board of Directors ofAscom Holding AG. Anton H. Bucher has been a member of the Board of Directors of Forbo Holding AG since 1986. He is the owner of a real estate company
in the USA.

Drs.
Pieter P. A. I. Deiters

Drs. Pieter P.A.I. Deiters was born in 1943 and is Dutch. He studied at the University of St. Gallen. From 1967 to 1993, he worked with Berghaus International
Fashion Group (Netherlands), from 1972 as its Chairman. From 1993 to 1998,
he was a member of the Board of Directors of Coats Vyella PCL, Clothing Division, England. Since 2002, Pieter P.A.I. Deiters has been a member of the Boardof Directors of Forbo Holding AG. He is a member of the Board of Directors ofvarious Dutch groups such as Koninklijke Ten Cate B.V., Berghaus B.V., Steps
International B.V., Teidem B.V. and Tootal B.V. Additonally, he is a Consultant of
the EBRD European Bank for Reconstruction and Development (Great Britain).

Michael Pieper

Michael Pieper was born in 1946 and is Swiss. Michael Pieper studied economics at St. Gallen University. He has been with Franke Group since 1988 and its
owner and CEO since 1989. Since 2000, he has been a member of the Board of
Directors of Forbo Holding AG. Michael Pieper is a member of the Board of
Directors of Hero, and SWISS International Air Lines Ltd. Besides, he is a member of the Supervisory Board of Thyssen Krupp Steel AG (Germany).

Dr. Paul Tanos

Dr. Paul Tanos was born in 1944 and is Austrian. Paul Tanos studied at the
University of Vienna and graduated as ‘Diplomkaufmann’. At Klagenfurt University he earned a doctorate in social science and economics. From 1986 to
2001 he was a member of the Management Board of Wienerberger Group (Austria). Since 1999, he has been a member of the Board of Directors of Forbo
Holding AG. In addition, Paul Tanos is Chairman of the Supervisory Board ofPalmers AG, Palmers Textil AG and Palmers Beteiligungs AG, Supervisory
Board member of Vitalis GmbH and Zürich Versicherung Österreich (all Austria). He is consultant of WOLF Garten GmbH (Germany).

Forbo Annual Report 2003

43

Prof. Dr. iur.
Rolf Watter

Prof. Dr. iur. Rolf Watter was born in 1958 and is Swiss. He studied law at the
University of Zurich and graduated as a Master of Laws of Georgetown University in the USA. He is a registered lawyer in the Canton of Zurich. Since 1994,
he has been a partner of Rechtsanwaltskanzlei Bär & Karrer in Zurich. He is apart-time Professor of Law at Zurich University. Since 1999, he has been a member of the Board of Directors of Forbo Holding AG. Rolf Watter is a memberof the Board of Directors of Zurich Financial Services and its subsidiary Zurich
Insurance Company. Besides he is a member of the Board of Directors of various companies such as Cablecom Group, Syngenta AG, Feldschlösschen Getränke
Holding AG, UBS Alternative Portfolio AG and A.W. Faber Castell (Holding) AG.
Until September 2003 he was also a member of the Board of Directors of Centerpulse AG. Besides, he is a member of the Board of Schweizerischer Juristenverein, member of the registration body SWX and the Disclosure TechnicalCommittee of SWX.

No operative
managerial tasks

None of the members of the Board of Directors has or had any operational management tasks for Forbo Holding AG or its consolidated companies. Neither
was any member part of the Executive Board of Forbo Holding AG or its consolidated companies in the three business years preceding the year under review.
There are no essential business relationships between the members of the Boardof Directors and Forbo Holding AG or its consolidated companies.

Cross-involvement

There is no cross-involvement between the Board of Directors of Forbo Holding AG and any other listed company.

Elections andterms of office

The individual members are elected by the Annual General Meeting for four
years and may be re-elected any number of times. The mandates expire on a
staggered basis. Information in this regard is provided on page 45 of this Annual
Report. In accordance with the Organizational Regulations of Forbo Holding AG, members who have reached the age of 70 resign from the Board of Directors at the Annual General Meeting of the following year. The average ageof the incumbent members of the Board is around 58. With regard to the composition of the Board of Directors, value is attached to the election of independent individuals with international experience in industrial companies aswell as in the financial and consultancy sectors.

44 Forbo Annual Report 2003

AFC
CDC
HRC

elected until

Member since

Board of Directors of Forbo Holding AG

ChairmanKarl Janjoeri (until January 31, 2004)
Dr. Willy Kissling (from February 1, 2004)

1986 2006
1994 2006

Members
Dr. Anton H. Bucher
Drs. Pieter P. A. I. Deiters
Michael Pieper
Dr. Paul Tanos
Prof. Dr. iur. Rolf Watter1986 2006
2002 2006
2000 2004
1999 2007
1999 2007

Secretary General of the Board of Directors
Dagmar T. Jenni, Attorney, LL. M, ARM
AFC : Audit and Finance Committee
CDC : Corporate Development Committee
HRC : Committee for Human Resources and Remuneration

ChairmanMemberForbo Annual Report 2003

45

Internalorganizational
structure

The allocation of tasks within the Board of Directors and the composition of thethree Board committees are listed on page 45 of this Annual Report.
The Board of Directors is the company’s supreme executive body. The Chairmanof the Board of Directors convenes its meetings in accordance with the Organizational Regulations as business dictates, but at least four times per year. Six
ordinary meetings were held in 2003. Meetings are convened with notificationof the agenda at least five working days in advance or with shorter notice being
given in urgent cases.
The Executive Board and the Corporate Staff, as well as the managers of thesubsidiaries, may be invited to meetings of the Board of Directors after priorarrangement with the Chairman. Regular use is made of this option with the
Executive Board generally being invited to attend meetings in an advisory capacity. The Executive Board informs each meeting about current business andimportant business events.
Three committees composed of members of the Board of Directors deal withwell-defined subject areas of overriding importance. These standing committees
consisting of three to four Board members, which are constituted on a yearlybasis, advise the Board of Directors and draw up proposals. Seven committee
meetings were held in total in 2003.

Audit and FinanceCommittee

The Audit and Finance Committee (AFC) is responsible for issues relating toGroup financing, verification of accounting principles and principles applied to
year-end accounts, discussion of audit results, monitoring of work of external
auditors, and their independence. The AFC also stipulates the tasks of the internal auditing. The CEO and CFO are regularly requested to attend meetings inan advisory capacity, whilst the involvement of representatives of the internal
auditing or the external auditors may also be requested by special invitation.
The AFC convenes as often as business requires but at least two times per year.
During 2003, it convened on three occasions.

Corporate
Development
Committee

The Corporate Development Committee (CDC) deals with issues relating to thecorporate strategy. This includes, in particular, the realization of strategic alliances, acquisitions and mergers, as well as the divestment of company activities.
The CEO attends meetings of the CDC in an advisory capacity, as may othermembers of the Executive Board on special invitation. The CDC convenes as often
as business requires. During the year under review, there were two meetingsof the CDC.

46 Forbo Annual Report 2003

Committee for
Human Resources
and Remuneration

The Committee for Human Resources and Remuneration (HRC) is responsiblefor issues relating to the remuneration of the Board of Directors, the Group’s
general human resources policy, particularly with regard to recruitment, periodic
evaluation, and performance-based remuneration of senior executives. Unless
it is his own performance assessment and salary determination that is being discussed, the CEO attends the HRC meetings in an advisory capacity. The HRC
meets as often as business dictates. Two meetings were held in 2003.

Definition of areasof responsibility

The Board of Directors is the supreme managerial and control body within the
Forbo Group. It currently comprises six members, none of whom hold any executive function within the company. The Board of Directors has fully delegatedoperational management of the company to the CEO and the Executive Boardin the absence of any provisions to the contrary set out in the relevant statutory
regulations, Articles of Association, or Organizational Regulations.
The Board of Directors is the senior managerial body and responsible for supervising and monitoring the Executive Board. It also passes guidelines on thecompany policies and strategy. The Board is regularly briefed on the current stateof business. At Forbo, the Chairman of the Board of Directors is the CEO’s
direct superior and is in close and regular contact with the other members of the
Executive Board.
The Executive Board comprises the CEO, the CFO and the Heads of the three
Businesses. Presently, the Executive Board consists of five members. The Executive Board is responsible for the operational management of the Group andalso prepares proposals regarding corporate planning and strategy for the
Board of Directors. The members of the Executive Board are jointly responsible
to the Board of Directors.
The Executive Board meets as often as necessary, but basically once per month.
During the meetings the business development, important events, projects,
budgeting, and strategic planning are discussed, and requests for approval areprepared for the Board of Directors. In 2003, there were 13 meetings of the
Executive Board.

Forbo Annual Report 2003

47

Information andcontrol instruments

In addition to the external auditors, internal auditing is available to support theBoard of Directors and the Group Executive Board in the implementation of
their supervisory duties. The internal auditing is independent, autonomous andreports directly to the AFC. In the context of internal audits the subsidiaries
are audited periodically. The audit is tailor-made in line with the size and risk
potential of a company. Basically the internal audit includes the examinationof essential business processes, management reporting, and IT security. Besides,
it covers the identification of possible efficiency improvements, compliancewith internal guidelines, and it covers the review of the risk management procedures adopted by the subsidiary companies.
The risks identified during these audits are minimized or eliminated and continuously monitored through the action plans initiated by the company management.
Group Executive Board

The Group Executive
Board, activities
and vested interests

The names of the members of the Group Executive Board, alongside their nationalities, functions, qualifications, and professional backgrounds, as well as
their activities and interests are listed on page 39 of this Annual Report.

Management
contracts

Forbo Holding AG has not entered into any management contracts with third
parties.
Compensations, shareholdings and loans

Content and methodof determining thecompensations andthe share-ownershipprograms

The compensation of the Board of Directors is defined by the HRC and submitted to the Group Board of Directors for approval.

Compensation
for current members

The members of the Board of Directors are remunerated on the basis of a graduated remuneration scale applicable to the Chairman, Vice-Chairman, andmembers. This consideration may be paid entirely in cash, or half of the total
amount may be paid in the form of options on Forbo Holding AG shares. The
theoretical market value on the issue date is used as the basis of calculation forthe options. Total compensations, paid to the Board of Directors for all mandates within the Forbo Group amounted to CHF 733,215 in 2003. This amountcomprises compensation for 8 members until the 2003 Annual General Meeting, respectively 7 members until the end of 2003.

The compensation and shareholding programs applicable to the Executive Board
are stipulated by the HRC at the last meeting before the end of the year for the
next year. At the same time, the target agreements for the coming business year
are approved. When the annual accounts are produced in March, performanceis reviewed in light of the stipulated target agreements and in consideration of theprevailing market conditions, and a decision is made on bonus payments andthe issuance of options.

48 Forbo Annual Report 2003

The remuneration paid to the Executive Board consists of a fixed base salary anda performance-related component, determined in each case at the end of thefinancial year. Up to 30 % of the performance-related component may be paid in
the form of shares of Forbo Holding AG. These shares may not be sold for aperiod of three years. As part of a stock option plan, the Board of Directors issued to members of the Executive Board options of Forbo Holding AG for the
first time in 2000. The basis of calculation was the theoretical market value on
the issue date in each case, subject to a maximum of 10 % of the total remuneration payable. Total compensations paid to six Executive Board members in2003 amounted to CHF 3,369,094, with one member retiring by the end of
August 2003. This amount includes the total compensation, i. e. base salary, bonus
and payments in kind. The amount of CHF 500,000 was paid to a member ofthe Executive Board after his retirement in August of the year under review, forconsultancy services rendered after his retirement until the end of 2003.
Compensations
for former membersof governing bodies

During the year under review, a member of the Executive Board who resigned
from the company in 2003 received a severance payment of CHF 653,453.

Share allotmentin the year
under review

No shares were allotted to the members of the Board of Directors in the year
under review, but 554 shares were allocated to members of the Executive Board
as part of the performance-related remuneration system. No shares were allocated to parties (natural persons or legal entities) with close links to the Boardof Directors/Executive Board.

Share ownership

The total number of shares held by the Board of Directors as of December 31,
2003 was 61,842. The Executive Board held in total 3,382 shares on the key-date.
These figures include any shares held by natural persons and legal entities withclose links to the Board of Directors/Executive Board.

Options

As of December 31, 2003 the Board of Directors and Executive Board held thefollowing options:Year allotted

Numbers

Term

Frozen until

Subscription ratio

Exercise price
CHF

Board of Directors
2001

917 08. 05. 2001– 07. 05. 2006

07. 05. 2004

1:1

741

2002

1,602

07. 05. 2002– 07. 05. 2007

06. 05. 2005

1:1

518

2003

2,156 31. 07. 2003– 30. 07. 2008

30. 07. 2006

1:1

360

2000

895 10. 04. 2001– 09. 05. 2005

09. 05. 2003

1:1

670

2001

2,445 08. 05. 2001– 07. 05. 2006

07. 05. 2004

1:1

741

2002

3,030 07. 05. 2002– 07. 05. 2007

06. 05. 2005

1:1

518

2003

5,000 31. 07. 2003– 30. 07. 2008

30. 07. 2006

1:1

360

Executive Board

Forbo Annual Report 2003

49

Additional feesand remunerations

No further fees or remunerations were paid to the governing bodies during theyear under review.

Loans granted
to governing bodies

As of December 31, 2003, Forbo Holding AG had not awarded any securities,
loans, credits, or advances to any members of the Board of Directors or Executive Board, or to any persons with close links to these members.

Highest totalcompensation

The highest total compensation paid to a member of the Board of Directors in
the year under review amounted to CHF 260,000. This figure does not include any
shares or options, as the individual in question did not receive any.
Shareholders’ participation rights

Voting rights
and representation
restrictions

The Board of Directors may withhold its consent to the entry of the voting rightof a shareholder or group of associated shareholders in the event that the 8%
limit stipulated in Section 4 of the Articles of Association is exceeded with regard
to the total number of registered shares entered in the commercial register.
Consent may furthermore be withheld if the acquiring party of the shares inquestion, despite being requested to do so, fails to expressly declare that he isacquiring and will hold the shares on his own behalf and for his own interests.
Resolutions on the amendment or deletion of the clause on the entry of registered shares (Section 4 of the Articles of Association) require a majority of twothirds of the votes represented at the Annual General Meeting, in addition toan absolute majority of the represented share nominal values (Section 11 of the
Articles of Association). Shareholders who are unable to attend the Annual
General Meeting in person may be represented by an official of the company, an
independent representative or another shareholder who is entered in the shareregister (Section 9 of the Articles of Association).

Statutory quorums

In accordance with Section 11 of the Articles of Association, resolutions on theamendment and cancellation of provisions regarding the conversion of registered shares into bearer shares, the entry of registered shares, the representationof shares at the Annual General Meeting, and the dissolution of the company,
or a merger require the approval of two thirds of the votes represented at the Annual General Meeting, in addition to an absolute majority of the represented
nominal values.
Convocation of the Annual General Meeting

The Annual General Meeting is convened in accordance with the statutory provisions.
AgendaAnnual General Meetings are convened at least 20 days prior to the meetingdate. The agenda, as well as any motions tabled by the Board of Directors and any
shareholder motions, are announced together with the invitation to attend themeeting.

50 Forbo Annual Report 2003

Registration in theshare register

In accordance with Section 4 of the Articles of Association, the share register
entries as at the 20 th day prior to the Annual General Meeting apply with regard
to determining the participation and representation rights of shareholders at
Annual General Meetings. In order to accommodate (new) shareholders and toenable them to attend the Annual General Meeting, Forbo Holding AG deviates from this provision in practice if entries are made where possible up to approximately seven days prior to the meeting date.
Changes of control and defense measures

Duty to make an offer

The Articles of Association of Forbo Holding AG contain neither an opting-up
clause (clause according to which the 33 1/3 % threshold stipulated in Article 32,
paragraph 1 of BEHG is raised) nor an opting-out clause (clause according towhich an acquiring party is released from a purchase offer).

Clauses on changesof control

A member of the Executive Board reserves the right to terminate his contract inthe event that certain conditions arise due to a change in the controlling shareholder. This involves payment of a settlement.
Auditors

Duration of themandate and termof office ofthe head auditor

PricewaterhouseCoopers AG have been the Forbo Group’s auditors since 1987.
The predecessor company of PricewaterhouseCoopers had been Forbo’s auditorssince 1928. The current head auditor, Stefan Raebsamen, has been in officesince 2002. The auditors are appointed each year by the Annual General Meeting.

Auditing fees

The auditing fees levied by the Group auditor for the audit of the consolidated
financial statements, including the statutory audit of the individual financial
statements of the Holding and consolidated subsidiaries, amounted to CHF 1.8
million in the year under review.

Additional fees

Total additional consultancy fees (e. g. tax and legal advice, as well as consultancy
during acquisitions, mergers and divestments), as invoiced by the audit company, amount of CHF 1.4 million for 2003.

Supervisory andcontrol instruments
pertaining
to the audit

The Audit and Finance Committee (AFC) of Forbo Holding AG is responsible forsupervising and monitoring the work of the external auditors. Ultimate responsibility lies, however, with the full Board of Directors. At the AFC’s invitation, representatives of the external auditors attend AFC meetings in an advisory capacity. For the purposes of assessing the external audit, the Chairmanof the Board of Directors holds discussions on a yearly basis with the head auditor, dealing with critical aspects of the auditing activity.

Forbo Annual Report 2003

51

Internal auditing

Ernst & Young AG, Basle, has been responsible for internal auditing since 2002.
The remit of the internal auditors includes, among other tasks, verifying that internal guidelines and requirements have been implemented and monitoring
the efficiency of internal processes. Furthermore, checks are carried out to assess
whether appropriate control systems are in place from a financial and operational perspective. Seven companies were subjected to internal audits in 2003. In
terms of sales, these account for some 19 % of total Group sales.
Information policy

Transparency
for investors

Forbo aims to provide comprehensive, objective, and timely information on business developments and commercially relevant events. To this end, it publishes
annual and half-year reports, summary reports for shareholders, and regular
media releases. This target group-oriented information is also made available tointerested parties via e-mail. Publications such as the corporate brochure ‘In
Focus’ or the Forbo employee newsletter ‘Forbo Inside’ provide a revealing look
into the world of Forbo.

Direct communication with different
target groups

All up-to-date information is available on the Forbo website at www.forbo.com.
Most information is also available to order in hard copy. This ensures thatshareholders, the media, and financial analysts can access required information
as and when necessary.
In addition, Forbo is involved in several activities designed to foster direct communication with different target groups. The primary measure as far as shareholders are concerned is the Annual General Meeting, whilst media conferences
and news releases are used to brief the media. Presentations as well as bothgroup and individual conferences on special topics are staged for the financial
community.
To view the financial calendar with key dates, and for further information on the
Forbo share, see also page 56 of this Annual Report.
Publications may be ordered via e-mail, fax or phone:e-mail: info@forbo.com
phone: +41 1 868 25 25
fax:+41 1 868 25 26
The contact address of Investor Relations is:
Forbo International SA
Gerold A. Zenger, CFO
Bauelenzelgstrasse 20
CH-8193 Eglisau
phone: +41 1 868 25 25

52 Forbo Annual Report 2003

Risk Management
Important control
and working tool

Risk management has gained in importance in recent years. The Forbo Group
has also strengthened and optimized its instruments for the integrated andsystematic control of business and operational risks. Forbo has a risk-adequate
insurance coverage in line with industry practice, especially against operationalrisks such as disruption of operations, and risks associated with fire and withproduct liability. The specific risks in terms of disruption of operations andliability are studied in the context of periodic risk engineering reports by external subject matter experts. In addition, production companies are visited ona regular basis, and comprehensive questionnaires are completed with the local
management. Action plans are developed and implemented based on the risks
identified. Forbo has been preparing such risk engineering reports since 1990.
As far as business risks are concerned, Forbo deals with both strategic risks aswell as with market and financial risks. As to market risks, interest and currency
risks are monitored and controlled centrally (see page 88 in this report). The
liquidity and financing of subsidiaries are also controlled centrally. In order toavoid losses through debtor failures, credit insurance policies are taken out inspecific cases, notably for business activities in difficult markets. Finally, the key
strategic risks in the three businesses are evaluated periodically and analyzed
for significance and probability on the basis of so-called risk maps. Risk management is seen by Forbo as a guidance and work tool for safeguarding the tangible and intangible assets of the Group, among others. In this sense risk management is considered a responsibility of both the Executive Board and theBoard of Directors.

Forbo Annual Report 2003

53

Human Resources
Training and development of our employees are essential elements ofForbo’s culture. Only through the planned development of human resources
can an international group such as Forbo reach its strategic goals andmeet the global requirements. Consequently, systematic training and development programs are the key to our success.
Corporate Training

The courses on Value Based Management carried out for several years were continued also in 2003. At first, the theoretical and methodological knowledge
bases are taught which are then applied to case studies from the daily practice.
The two-day intensive seminars were attended by about 100 employees. In
addition, numerous individual training activities and courses were organizedby the local companies.
Group Conference

In Zurich in 2003

Once a year, Forbo managers from across the world meet to discuss business,
their strategic aims, and their expectations for the future. This regular meetingis particularly significant in terms of the exchange of information and internal
communication because it enables personal contacts to be fostered across business units within a group that operates on a global scale. In 2003 the Group
Conference took place in Zurich. Apart from the discussion of internal matters,
the participants explored how Forbo is seen by customers. Customers of thethree businesses told the Conference how they perceive and experience Forbo as
a group.
Forbo Trophy and Special Achievement Awards

Awards foroutstandingachievements

Recognizing outstanding performance – this is the objective of the annual Forbo
Trophy and Special Achievement Awards. The Forbo Trophy is awarded annually to a Group company in recognition of outstanding performance. In 2003
this award was presented at the Group Conference in Zurich. It was presented
to Eurocol (Wormerveer, Netherlands). Through strong growth of market shares
over the years, Eurocol has become the leading supplier of adhesives for floor
and wall coverings in the Dutch market. The ambitious business plans were realized with great success, and the exemplary customer service has produced very
positive sales growth and excellent results. In addition to the Forbo Trophy, fiveSpecial Achievement Awards were presented in recognition of individual teams
and employees. They went to France (Forbo Sarlino), Austria (Forbo Contel),Germany (IT Team Belting Europe), Great Britain (Forbo Adhesives), the USA(Forbo Adhesives), and Japan (Siegling Japan).

54 Forbo Annual Report 2003

Forbo Flooring Sales Challenge Contest
Total solution forcontract floorings

Linoleum and vinyl floorings offer particular strengths to the contract market.
In buildings where linoleum is used, often vinyl can also be applied and viceversa. In the context of the Forbo Flooring Sales Challenge Contest every twomonths, sales people are awarded who have realized attractive total solutions
for the project market. The incentive program is very popular and supports thestrategic aim of the flooring business.
Internal communication‘Forbo Inside’
and Intranet

The Group-wide Intranet and the employee magazine ‘Forbo Inside’ publishedin four languages regularly report on internal initiatives, achievements and events
relevant to Forbo.

Forbo Annual Report 2003

55

The Forbo ShareInvestor Relations

Forbo values close and direct contact with its private shareholders, institutional
investors, and the media. Once again, the members of the Executive Board
took part in several roadshows and analyst meetings, as well as in a number of
one-on-one talks, to discuss in detail the Forbo Group’s strategy and future
prospects. Numerous media releases on business trends provided the media andinvestors with information on Forbo. Current information can be found on
the company’s website at www.forbo.com.

Declining share pricein 2003As the year 2002 brought clear losses to the world’s stock exchanges and also to
the SWX Swiss Exchange, the exchanges recovered in 2003 and could partly
make up for the losses suffered in previous years. The Swiss Performance Index(SPI) rose by some 22 % on an annual basis. The Forbo share could not follow
the SPI in 2003. In the first half-year the share price was around CHF 400, i. e. on
the level of the price at the end of 2002. Because of declining half-year resultscompared with the previous year the share price went down in the second halfof the year to CHF 335 – CHF 390. Based on the 2003 year end price of CHF 354
the stock exchange capitalization is CHF 465 million.

The Forbo Share in comparison to the SPI
SPI

CHF

850

5,750

800

5,500

750

5,250

700

5,000

650

4,750

600

4,500

550

4,250

500

4,000

450

3,750

400

3,500

350

3,250
3,000

300
31.12.1998

31.12.1999

31.12.2000

31.12.2001

31.12.2002

31.12.2003

SPI, adjusted
Forbo registered share

Financial calendar

Annual General Meeting:Letter to shareholders:Media release on the half-year results of 2004:
Media release on the first three quarters results of 2004:

56 Forbo Annual Report 2003

April 27, 2004
August 20, 2004
August 20, 2004
October 29, 2004

2003

2001

2002

2000

1999

Share capital
Issued registered shares 1)

NumberNumberNumberNumberNumber

1,356,576

1,356,576

1,513,550

1,513,550

1,513,550

1,314,986

1,305,207

1,305,052

1,463,010

1,463,522

Thereof:
Shares outstanding
Shares from buy-back program 2001––

156,974––

Other own shares

20,171

25,48911,39010,406

9,894

Reserve shares (without dividend right)

21,41925,88040,134

40,134

40,134

CHF

CHF

CHF

CHF

CHF

Nominal capital
37,984,128 67,828,800 75,677,500 75,677,500 75,677,500

Total
Thereof:36,819,608 65,260,350 65,252,600 73,150,500 73,176,100

Shares outstanding––

7,848,700––

Other own shares

564,7881,274,450

569,500

520,300

494,700

Reserve shares599,732

1,294,000

2,006,700

2,006,700

2,006,700

Shares from buy-back program 2001

Data per share
CHF

CHF

CHF

CHF

CHF

Shareholders’ equity Group

435

453

500

556

539

Consolidated profit 2)

12

33

38

62

58

Gross dividend and cash distribution, respectively

8 3)

22

22

22

22

4)

Gross dividend return (in %)

4)

6.3

High

2.4

5.3

3.5

3.9

Low

1.8 4)

3.8 4)

2.6

2.7

2.9

65

67

58

36

38

Payout ratio 5) (in %)Stock market statistics
Share prices

Stock market capitalization (m) 6)

CHF

CHF

CHF

CHF

CHF

High

438

585

839

828

764

Low

335

350

417

620

569

Year-end

354

412

505

730

750

High

575

764

1,228

1,220

1,126

Low

441

457

544

914

838

Year-end

465

538

659

1,068

1,098

1)

Nominal value per share 2003: CHF 28 (1998–2002: CHF 50)
See also Financial Report, ‘Earnings per share’, page 78
3)
Proposal of the Board of Directors to the General Meetings of Shareholders:Cash distribution by reducing the nominal value
4)
Calculated on the basis of cash distribution by reducing the nominal value
5)
Gross cash distribution as % of consolidated profit (1999 before specific provisions)6)
Based on shares outstanding
2)

Forbo Annual Report 200357

Forbo Group
Financial ReportFinancial Review and Analysis
Summary of financial results

2003

2002
% changeon previous
year

m CHF

m CHF

1,598.9

1,531.1+4.4

Operating profit before depreciation and amortization (EBITDA)

156.7

180.1

–13.0

Operating profit (EBIT)

60.4

88.4

–31.7

Net profit Group

16.1

42.6

–62.2

Earnings per share – basic (CHF)

12.28

32.65

–62.4

Earnings per share – diluted (CHF)

12.12

32.35

–62.5

Group net sales

Comment on the financial result development

The business year 2003 continued to be characterized by a difficult economic
and political climate. Following a period of insecurity in the wake of the Iraq war
and the lung disease SARS, poor consumer demand affected the business development in the further course of the year. Besides, the year 2003 was marked by adecrease of investment in public and commercial buildings as well as production
plants. Production overcapacities in connection with overall higher raw material
costs brought selling prices and gross margins under pressure. In addition, theDollar weakness had an adverse impact on sales and profits due to currency translation into Swiss Franc but also narrowed the gross margin obtained with products exported from the Euro region to North America and Asia.
Group sales rose by 4.4 % to CHF 1,598.9 million, or by 6.5 % in local currencies.
The increase is the result of the acquisitions made in the adhesives business in
2002.Accordingly, adhesives sales rose by 17.7 % (+22.2 % in local currencies). This
includes lost sales of about CHF 16 million in connection with the divestmentof Repoxit AG at the beginning of 2003. The flooring business recorded slightly
declining sales both in nominal terms (–1.0%) and in local currencies (–1.7%).
The belting business increased sales by 1.4 % in local currencies. Expressed in Swiss
Francs, however, sales decreased by 3.7 %. The combination of negative influences
caused a significant profit decrease in spite of higher Group sales. The operating
profit before depreciation and amortization (EBITDA) of CHF 156.7 million is
CHF 23.4 million below previous year. The return on sales (EBITDA/net sales) is
9.8 % (previous year: 11.8 %). Operating profit (EBIT) amounts to CHF 60.4 million (previous year: CHF 88.4 million) after depreciation of CHF 82.9 million and
CHF 2.2 million higher amortization of goodwill and other intangible assetsof CHF 13.4 million. All three businesses contributed to the decrease of operating
profit.
The EBIT of the flooring business is CHF 53.9 million, CHF 9.7 million lower thanin the previous year. The reason is the geographical shift in sales from high-margin markets in Western Europe to low-margin markets, on the one hand. On theother hand, the weak Dollar diminished the gross margin obtained with products
manufactured in the Euro Zone and exported into the Dollar area. The industrial
earning power (EBITDA/net sales) is at 13.0 % (previous year: 14.6%). The operating profit (EBIT) in relation to net sales of 7.4 % corresponds with a return on
assets (ROA) of 10.3 % (previous year: 12.0 %) based on an asset turnover of 1.4.

Forbo Financial Report 2003

61

At CHF 31.0 million, the operating profit of the adhesives business is CHF 6.6
million lower than in the previous year which is mainly due to higher raw material
costs and a shift of the product mix to the lower-margin volume business. Heretoo, the Dollar weakness had an adverse effect on both sales and profits in termsof Swiss Franc. The gross return on sales (EBITDA/net sales) of 9.5% is therefore clearly below the previous year’s level (11.8%). Also, the operating profit inrelation to the operating assets employed decreased to 7.0 % (previous year: 8.2 %,Swift on the basis of the results for the entire year). The amortization of goodwill and acquired trademarks associated with the Swift acquisition reduced 2003
operating profits by CHF 8.4 million (previous year: CHF 5.8 million).
The belting business recorded a slight sales increase by 1.4 % to CHF 297.0 million
in local currencies, but a strong decrease of operating profit by CHF 9.7 million
to CHF 1.2 million. The profit decrease is mainly due to the Dollar weakness. Apartfrom the profit decrease resulting from sales in the Dollar area and currencytranslations, the considerable European export volume into the Dollar area had
an additional adverse impact on margins and profits. With gross return onsales (EBITDA/net sales) of 7.2%, this activity continued to generate cash in the
period under review.
Following a reluctant trend in the first half year, the overall Group results showed
quite a positive development in the third quarter of 2003, although the second
half year was below the first half year. For the total year, a disappointing operating
profit of CHF 60.4 million (previous year: CHF 88.4 million) was achieved.
At CHF 29.4 million, net financial expenses are higher than in the previous year
(CHF 24.2 million) as a result of the full-year financing costs at higher interest
rates with respect to the Swift acquisition. Combined with an essentially lower
operating profit, the pre-tax profit decreased to CHF 31.8 million (previous
year: CHF 63.5 million). The regionally unfavorable result mix and partly tax-ineffective goodwill amortization led to a tax rate of 49.4% (previous year:
32.9 %). After tax charges of CHF 15.7 million, Group profit amounts to CHF 16.1
million and is 62.2 % below the previous year.

62 Forbo Financial Report 2003

Balance sheet summary

31.12.2003

31.12.2002

change

m CHF

m CHF

m CHF

Long-term assets

812.9

875.1

–62.2

Current assets (excluding cash and marketable securities)

562.2

573.1

–10.9

188.7

152.4

36.3

1,563.8

1,600.6–36.8

Shareholders’ equity

572.5

590.6

–18.1

Financial debt

568.0

637.8

–69.8

Other liabilities and provisions

423.3

372.2

51.1

1,563.8

1,600.6–36.8

Cash and marketable securities
Total assets

Total shareholders’ equity and liabilities

Balance sheet development

The balance sheet total decreased by CHF 36.8 million to CHF 1,563.8 million
compared with the previous year. The decrease of operating assets by CHF 73.1
million compares with an increase in cash and marketable securities by CHF
36.3 million. Investments in fixed assets of CHF 46.2 million are clearly lower thanthe depreciation of CHF 82.9 million. Of the investments, CHF 25.4 million areaccounted for by the flooring business, CHF 10.4 million by the adhesives business,
and CHF 10.0 million by the belting business. Currency-related higher values inthe Euro region compare with lower values in the Dollar region. The net increaseof operating assets resulting from currency translations is CHF 23.9 million.
Financial situation

Net financial debt decreased by CHF 106.1 million compared with year-end 2002.
This is mainly due to a free cash flow of CHF 88.5 million and the currency-related decrease of the US Private Placement by CHF 39.1 million. This contrasts
with an increase resulting from the cash distribution through the nominal value
reduction of the Forbo share, totaling CHF 28.7 million. Financial debt of CHF
568.0 million relate to a US Private Placement (CHF 343.2 million), with maturities between five and ten years, a Swiss Franc bond (CHF 150.0 million, repayable
in 2006), and bank debt of CHF 74.8 million. Thus, long-term borrowing restson three pillars. The financial derivatives acquired in connection with long-term
financing showed a total negative value of CHF 59.5 million at the end of theyear under review. As at the end of the previous year, they are shown under otherliabilities.
Shareholders’ equity decreased to CHF 572.5 million representing 36.6 % of
the balance sheet. Compared with the end of the previous year, this decrease ismainly the result of the cash distribution and the first-time recognition of the
Swiss pension fund as a defined benefit plan. With this strong equity position
and a gearing (net debt as a percentage of equity capital) reduced from 82.2 %to 66,3 %, combined with a very good liquidity, the Group continuous to be ona solid financial basis.

Forbo Financial Report 2003

63

Free cash flow

The free cash flow before dividends of CHF 88.5 million is the result of the cash
flow generated from operating activities reduced by investments in long-term
assets (net). This amount does not reflect the acquisition and divestment of business activities. The free cash flow is essentially due to restrained investments
in fixed assets of CHF 46.2 million (previous year: CHF 45.2 million), cash inflow
from asset disposals (CHF 12.0 million), efficient working capital management,
and the collection of a long-term loan in the amount of CHF 8.5 million.
Earnings per share

Related to the average number of outstanding shares, the earnings per share is
CHF 12.28 after CHF 32.65 in the previous year. The decline of the earnings per
share is approximately in line with the decrease of the Group profit (62.2%).
Share price development

As the year 2002 brought clear losses to the world’s stock exchanges and also to
the SWX Swiss Exchange, the Stock exchanges recovered in 2003 and could partly
make up for the losses suffered in previous years. The Swiss Performance Index(SPI) rose by some 22 % on an annual basis. The Forbo share could not follow the
SPI in 2003. In the first half-year the share price was around CHF 400, i. e. on thelevel of the price at the end of 2002. Because of declining half-year results compared with the previous year the share price went slightly down in the second
half of the year and fluctuated within the range of CHF 335 to CHF 390. Basedon the 2003 year end price of CHF 353.50 the stock exchange capitalization is
CHF 465 million.
Economic Value Added (EVA®)

Forbo’s objective is to enhance the value of the company. Value is only created
when the returns of the capital employed exceed the weighted average cost of capital. Whereas in the previous year a positive – albeit modest – result of CHF 4.3
million could be achieved, the result in the year under review was with CHF 17.0
million negative. This decline of the Economic Value Added is mainly due tolower after-tax operating profits (NOPAT) and the higher weighted average costof capital (WACC) of 5.9 % (previous year: 5.5 %). The higher capital costs are
essentially the result of a lower percentage of debt capital at higher interest rates.

EVA ®-calculation

2003

2002

m CHF

m CHF

44.7

67.5

1,040.4

1,144.9

Average interest rate after taxes

4.2 %

3.0 %

Cost of equity capital

8.1 %

8.4 %

Weighted Average Cost of Capital (WACC)

5.9 %

5.5 %

–17.0

4.3

Net operating profit after taxes (NOPAT)
Invested capital (IC)®

Economic Value Added (EVA )64 Forbo Financial Report 2003

Consolidated Income Statement
2003

Net sales

Notes

m CHF

m CHF

1/2

1,598.9

1,531.1–1,091.3–1,017.4

Cost of goods sold
Gross profit
Development costs

2002

3

507.6

513.7

–28.9

–24.2

–287.5–277.2Administrative costs

4–122.2–119.6

Other operating expenses, net

5

–8.6

–4.3

Marketing and distribution costs

Operating profit

60.4

88.4

7

7.9

5.0

Financial expenses

8

–37.3

–29.2

Share of results of associated companies

12

0.8

–0.7

31.8

63.5

–15.7

–20.9

16.1

42.6

2003

2002

Financial income

Profit before taxes
Taxes

24

Net profit for the year

Notes

CHF

CHF

Earnings per share (basic)

9

12.28

32.65

Earnings per share (diluted)

9

12.12

32.35

Forbo Financial Report 2003

65

Consolidated Balance Sheet
31.12.2003

31.12.2002

Assets
Notes

Long-term assets

m CHF

m CHF

812.9

875.1

Tangible assets

10

558.8

586.9

Intangible assets

11

163.9

178.6

Deferred taxes

24

61.5

65.6

Investments in associates and other long-term assets

12

Current assets

28.7

44.0

750.9

725.5

Inventories

13

247.9

255.9

Trade receivables

14

251.6

254.8

34.9

27.0

27.8

35.4

Other receivables
Prepaid expenses and deferred charges
Marketable securities

15

Cash and cash equivalents
Total assets

18.9

23.9

169.8

128.5

1,563.8

1,600.6

31.12.2003

31.12.2002

m CHF

m CHF

572.5

590.6

Shareholders’ equity and liabilities
Notes

Shareholders’ equity
Share capital

16

38.0

67.8

Treasury shares

16

–7.7

–11.7

Reserves and retained earnings

542.2

534.5

Long-term liabilities

670.7

638.6

Long-term financial debt

17

554.2

539.3

Employee benefit obligations

18

88.7

68.9

Provisions

19

21.3

22.6

Deferred taxes

24

Current liabilities

6.5

7.8

320.6

371.4

Trade payables

20

114.9

107.3

Accrued expenses

21

140.8

102.7

Short-term financial debt

22

13.8

98.5

Current tax liabilities

7.9

14.0

Other current liabilities

43.2

48.9

1,563.8

1,600.6

Total shareholders’ equity and liabilities

66 Forbo Financial Report 2003

Consolidated Cash Flow Statement
2003

2002

Cash flow from operating activities
m CHF

m CHF

Net profit for the year

16.1

42.6

Depreciation of tangible assets

82.9

80.5

Amortization of intangible assets

13.4

11.2

Share of results of associated companies

–0.8

0.7

Adjustment for net financial expenses

28.6

24.2

Interest paid

–36.1

–25.4

6.8

3.9

Interest received
Dividends received

0.5

0.6

Adjustment for tax expense

15.7

20.9

Taxes paid

–15.4

–17.0

Increase (+)/decrease (–) in provisions

–3.4

–6.7

Increase (+)/decrease (–) in current liabilities (excl. short-term debt)

–6.7

–9.5

Increase (–)/decrease (+) in current assets

1)

Total cash flow from operating activities

21.1

11.8

122.7

137.8

2003

2002

Cash flow from investing activities
m CHF

m CHF

0.0

–335.8

Increase (–) in long-term assets

–46.2

–45.2

Decrease (+) in long-term assets

12.0

16.2

Total cash flow from investing activities (before securities)–34.2–364.8Cash used for acquisitions

Increase (–)/decrease (+) in marketable securities
Total cash flow from investing activities

9.8

0.0

–24.4

–364.82003

2002

Cash flow from financing activities
Increase (+)/decrease (–) in long-term financial debt

m CHF

m CHF

51.3

395.2

0.0

–2.0

–84.7

–96.4

3.3

–2.0

Cash distribution to shareholders

–28.7

–29.0

Total cash flow from financing activities

–58.8

265.8

2003

2002

Increase (+)/decrease (–) in employee benefit obligations
Increase (+)/decrease (–) in short-term financial debt
Change in treasury shares

Change in cash and cash equivalents
Increase (+)/decrease (–) in cash and cash equivalents
Translation differences

m CHF

m CHF

39.5

38.8

1.8

–3.0

Cash and cash equivalents at the beginning of the year

128.5

92.7

Cash and cash equivalents at the end of the year

169.8

128.5

1)

excluding cash and marketable securities

Forbo Financial Report 2003

67

Consolidated Statement of Changes
in Shareholders’ Equity
2002

Share
capitalm CHF

Treasurysharesm CHF

Reservesm CHF

Translationdifferences
m CHF

Total
m CHF

At 1.1.2002

75.7–155.2

815.1

–83.4

652.2

Net profit for the year

42.6

42.6

146.7

–138.8

0.0

–3.2

1.2

–2.0

Marketable securities

–9.8

–9.8

Cash flow hedges

5.8

Elimination of own shares fromshare buy-back 2001

–7.9

Other changes in treasury shares
Fair value adjustments:

Translation differences

5.8
–69.2

Dividend paid

–29.0

–69.2
–29.0

At 31.12.2002

67.8

–11.7

687.1

–152.6

590.6

2003

Share
capitalm CHF

Treasurysharesm CHF

Reservesm CHF

Translationdifferences
m CHF

Total
m CHF

At 1.1.2003

67.8

–11.7

687.1

–152.6590.6

Net profit for the year
Changes in treasury shares

4.0

16.1

16.1

0.4

4.4

Fair value adjustments:
Marketable securities

5.2

5.2

Cash flow hedges

–3.8

–3.8

Change in accounting policies*–16.5

Translation differences
Nominal value reduction–29.8

At 31.12.2003

38.0* First time interpretation of Swiss pension plans
as defined benefit plans as per IAS 19

68 Forbo Financial Report 2003

–16.5
6.3

6.3
–29.8

–7.7

688.5

–146.3572.5

Accounting Policies
Basis of preparation

The Group’s consolidated financial statements are prepared in accordance withthe historical cost convention except for the revaluation to market value of certain
financial assets and liabilities and comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board(IASB) and Swiss law.
Effective January 1, 2003 the Group has included the Swiss pension plans in thecalculation of defined benefit obligations as per IAS 19. The liability resulting
from the first time interpretation of the Swiss pension plans as defined benefit
plans has been accounted for by adjusting retained earnings at January 1, 2003
(see page 72, pension plans).
The preparation of financial statements requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Scope of consolidation

The consolidated financial statements include Forbo Holding AG and all subsidiaries over which the Group exercises a controlling influence. A controllinginfluence normally exists when the Group owns more than 50 % of the voting
rights in a company. Intra-group transactions and balances are eliminated.
Companies acquired during the reporting year are included in the consolidated
financial statements as of their acquisition date, and all companies disposedof are eliminated from the accounts as of the date of disposal. The companies included in the consolidated financial statements are listed under Group companies (pages 102–105). Companies in which the Group has a minority interest between 20 % and 50 % are included in the consolidated financial statements using
the equity method of accounting and are presented as investments in associates.
Investments below 20 % are valued at their fair value.
Capital consolidation

The purchase method is used, whereby goodwill is capitalized and amortizedover its estimated useful life (but over a period not exceeding twenty years). The
value of the net capitalized balance is reviewed at the end of the year. Wherean indication of impairment exists, the carrying amount is written down to therecoverable amount.

Forbo Financial Report 2003

69

Foreign currency translation

The assets and liabilities of Group companies which do not report in Swiss Francs
as their reporting currency are translated at year-end exchange rates and theirincome statements are translated at weighted average exchange rates for the year.
Currency translation differences arising from changes in exchange rates between
the beginning of the year and the end of the year and the difference in net income
translated at weighted average and year-end exchange rates are taken directly
to shareholders’ equity. Exchange gains and losses arising from long-term intragroup financings with equity character denominated in foreign currencies are
likewise taken to shareholders’ equity. On the disposal of a company, the cumulative amount of these exchange differences is recognized in the income statement
together with the disposal gain or loss.
Exchange gains and losses arising in Group companies from transactions in foreign currencies are taken to the income statement.
Tangible assets

Tangible assets are stated at their acquisition or production cost less depreciation over their estimated useful lives. Depreciation is charged on a straight-line
basis over thirty years for buildings and over a period of three to ten years formachinery, equipment and other tangible assets. Where the carrying amount ofan asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The same depreciation rules apply for leased
assets where the Group companies assume all the risks and rewards of ownership (financial leasing). These assets are capitalized at the present value of the underlying lease payments. The corresponding payment obligations, excluding
the associated financing costs, are shown in the balance sheet as short- and longterm loans, depending on their due date. The interest element of the financing
is charged to the income statement over the lease period.
Expenditures for maintenance and repairs are charged directly to the income statement, whereas expenditures which enhance the value of assets, are capitalized.
Intangible assets

Intangible assets, other than goodwill, comprise mainly patents, licenses andtrademarks acquired from third parties. These assets are capitalized and amortizedon a straight-line basis over their estimated useful life (but over a period notexceeding twenty years). The value of the net capitalized balance is reviewed at theend of the year, and allowance is made for any impairment in value where thecapitalized balance is considered to exceed the future benefits.
Inventories

Inventories of raw materials, work in progress and finished goods are valued at
the lower of their average acquisition cost or, where applicable, group production
cost and their market (net realizable) value. The valuation of work in progress
and finished goods includes related production overheads. Appropriate allowance
is made for excess and obsolete inventories and reductions in sales prices. Unrealized profits on inventories resulting from intra-group transactions have been
eliminated in the income statement and balance sheet.

70 Forbo Financial Report 2003

Trade receivables

Trade receivables are stated at their nominal value less necessary allowance for
doubtful receivables. Allowance is made for individual receivables positions forwhich recovery is doubtful. A general allowance is made on the basis of pastexperience.
Marketable securities

The Group classifies its marketable securities as available-for-sale. Available-forsale marketable securities are initially recorded at cost and subsequently carriedat fair value, with all changes in fair value recorded in equity. When available-forsale marketable securities are sold, the cumulative gains and losses previously
recognized in equity are included in financial income or expense for the current
period. Unrealized losses are included in financial expense, already before themarketable securities are sold, when there is objective evidence that they are impaired.
Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less. This position is readily convertible to known
amounts of cash.
Income taxes

Income taxes include all taxes based upon the taxable profits of the Group, including withholding taxes payable on the distribution of retained earnings
within the Group. Other taxes not based on income, such as capital taxes, areincluded within other operating expenses.
Deferred income taxes are accounted for using the ‘balance sheet liability’ method.
Provisions for deferred taxes are established in respect of all temporary differences between the tax values of assets and liabilities and their values in the consolidated financial statements. Deferred taxes are calculated on the basis ofstandard local tax rates, with immediate adjustment for any changes in the relevant tax law. Deferred tax assets arising from a reduction of future tax liability
due to the carry forward of allowable losses and valuation differences are shownas assets only if levels of forecast profits make it likely that such tax assets will
be realized.

Forbo Financial Report 2003

71

Pension plans

For defined contribution plans, the expense charged to the income statement corresponds with the contributions made by the Group companies.
For defined benefit plans, the pension costs are assessed using the projected unit
credit method. Under this method, the cost of providing pensions is charged tothe income statement so as to spread the regular cost over the service lives of employees in accordance with the advice of qualified actuaries. Actuarial gains andlosses exceeding 10 % of the greater of the employee benefit obligation and theplan assets are amortized over the average remaining service lives of employees.
As a rule full actuarial valuations are carried out every three years and up-dated
during the intervening period. The pension obligation is measured as the present value of the estimated future cash outflows using interest rates of long-termhigh quality corporate bonds. The capitalization of surpluses of funded plans
is limited to the net total of any unrecognized losses and past service cost, and thepresent value of any economic benefits available in the form of refunds fromthe plans or reductions in future contributions to the plan.
The pension plans of the Swiss subsidiaries qualify as defined contribution plans
under Swiss law and have joined a multi-employer foundation (‘Sammelstiftung’)of an insurance company. In connection with the transfer of this insurance contract to the multi-employer foundation of another insurance company, the Grouphas reassessed the treatment of the Swiss plans under IAS 19 and included themper January 1, 2003 for the first time in the IAS 19 calculation of defined benefit
plans. Due to the transfer to a new multi-employer foundation, comparable calculations could not be made for previous years and consequently no restatementof prior years has been made.
Provisions

Provisions are recognized when the Group has a present or constructive obligation as a result of past events, 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.
Warranties

On the basis of past experience, provision is made for warranty costs at the time
the sales revenue is recognized.
Treasury shares

The Group’s holding in its own equity instruments are recorded as a deduction
from equity. The original cost of acquisition, consideration received for subsequent resale of these instruments and other movements are reported as changes
in equity.

72 Forbo Financial Report 2003

Revenue recognition

Revenues from the sale of goods are recognized at the time of transfer of therisks and rewards of ownership to the buyer. All costs incurred in connection withsales are appropriately accrued.
Research and development

Expenditure under this heading refers exclusively to development and design
activities and is charged to the income statement as and when incurred.
Derivative financial instruments

Derivative financial instruments held to hedge the Group’s exposure to financial
risks are initially recognized at cost and subsequently remeasured at their fairvalue. The method of recognizing the resulting gain or loss is dependent on thenature of the item being hedged. On the date a derivative contract is enteredinto, the Group designates certain derivatives as either a hedge of the fair valueof a recognized asset or liability (fair value hedge) or a hedge of the fair valueof a forecasted transaction or of a firm commitment (cash flow hedge). Changes
in the fair value of derivatives that are designated and qualify as fair value hedges
and that are highly effective, are recorded in the income statement, along with any
changes in the fair value of the hedged asset or liability that is attributable tothe hedged risk. Changes in the fair value of derivatives that are designated andqualify as cash flow hedges and that are highly effective, are recognized in equity. Where the forecasted transaction or firm commitment results in the recognition of an asset or of a liability, the gains and losses previously deferred inequity are transferred from equity and included in the initial measurement of
the cost of the asset or liability. Otherwise, amounts deferred in equity are transferred to the income statement and classified as revenue or expense in the same
periods during which the hedged firm commitment or forecasted transaction
affects the income statement.
The Group hedges certain net investments in foreign entities with foreign currency borrowings. All foreign exchange gains or losses arising on translation ofthese borrowings are recognized in equity and included in cumulative translation differences.

Forbo Financial Report 2003

73

Changes in the Scope of Consolidation

Effective January 1, 2003 Forbo Repoxit AG, Winterthur/Switzerland, was sold tothe management of the company. In 2002 the company had achieved net sales of
CHF 15.4 million with 68 emloyees.
On March 31, 2003 Forbo acquired the distribution business for belting from its
agent Stedar Belting Ltd. in New Zealand. The acquired activities were taken overby the newly founded Siegling Stedar Belting Ltd. and have achieved net sales of
CHF 1.6 million since the acquisition.

Description of Terms
Free cash flow

Cash flow from operating activities less cash flow used for investments in longterm assets, net (excl. marketable securities).
EVA®

EVA® (Economic Value Added) is a financial figure indicating how much value

a company has generated in a given year. Our calculations based on the Capital
Asset Pricing Model (CAPM) resulted in weighted average cost of capital(WACC) of 5.9 % (2002: 5.5 %).
EVA® = NOPAT–WACC x IC
NOPAT : Net Operating Profit After Tax
WACC : Weighted Average Cost of Capital
IC : Invested Capital

Operating assets

Total of tangible and intangible assets, inventories, trade receivables, other receivables, prepaid expenses and deferred charges.

Operating liabilities

Total of trade payables, accrued expenses, other current liabilities, employee
benefit obligations and provisions.

74 Forbo Financial Report 2003

Notes to theConsolidated Financial Statements
1

Segment information

By business segments 2003

Corporate andconsolidation
m CHF

Flooring
m CHF

Adhesivesm CHF

Belting
m CHF

Net sales

729.0

572.9

297.0

EBITDA

94.7

54.7

21.4

–14.1

156.7

Depreciation and amortization

–40.8

–23.7

–20.2

–11.6

–96.3

EBIT

53.9

31.0

1.2

–25.7

60.4

Operating assets

521.1

442.5

295.2

26.1

1,284.9

Operating liabilities

171.8

94.0

53.5

89.6

408.9

ROS, gross (EBITDA/net sales)

13.0 %

9.5 %

7.2 %

9.8 %

ROS, net (EBIT/net sales)

7.4 %

5.4 %

0.4 %

3.8 %

ROA (EBIT/operating assets)

10.3 %

7.0 %

0.4 %

4.7 %

Capital investments

25.4

10.4

10.0

0.4

46.2

Number of employees (at 31.12.)

2,557

1,288

1,699

41

5,585

Flooring
m CHF

Adhesivesm CHF

Belting
m CHF

Corporate andconsolidation
m CHF

Total
m CHF

736.1

486.6

308.4

By business segments 2002
Net sales

Total
m CHF

1,598.9

1,531.1

EBITDA

107.7

57.2

32.7

–17.5

180.1

Depreciation and amortization

–44.1

–19.6

–21.8

–6.2

–91.7

EBIT

63.6

37.6

10.9

–23.7

88.4

Operating assets

530.1

459.1

305.9

43.5

1,338.6

Operating liabilities

171.6

100.4

49.9

42.5

364.4

ROS, gross (EBITDA/net sales)

14.6 %

11.8 %

10.6 %

11.8 %

ROS, net (EBIT/net sales)

8.6 %

7.7 %

3.5 %

5.8 %

ROA (EBIT/operating assets)

12.0 %

8.2 %

3.6 %

6.6 %

Capital investments

22.6

10.4

10.9

1.3

45.2

Number of employees (at 31.12.)

2,611

1,377

1,684

43

5,715

Forbo is a global producer of floor coverings, adhesives and belts for conveying
and power transmission. In the flooring business, Forbo develops, produces andsells linoleum, vinyl and other floor coverings as well as the various accessory
products required for laying, processing, cleaning, and care. The adhesives business develops, manufactures and sells adhesives for industrial applications aswell as floor and wall adhesives. The belting business develops, produces and sells
high quality belts of modern synthetics for use in power transmission or as conveyor and process belts. ‘Corporate’ includes the costs of the Group headquarterand certain items of income and expenses which are not directly attributable toa specific business.

Forbo Financial Report 2003

75

By geographical segments 2003

Europe(Eurozone)
m CHF

Switzerland
m CHF

Rest ofEuropem CHF

Americas
m CHF

Asia/
Africa
m CHF

Total
m CHF

Net sales

722.3

47.9

323.4

378.7

126.6

1,598.9

Operating assets

681.4

126.3

217.4

193.2

66.6

1,284.9

Capital investments

24.8

3.5

7.6

6.5

3.8

46.2

Number of employees (at 31.12.)

2,953

336

1,038

860

398

5,585

By geographical segments 2002

Europe(Eurozone)
m CHF

Switzerland
m CHF

Rest ofEuropem CHF

Americas
m CHF

Asia/
Africa
m CHF

Total
m CHF

Net sales

680.4

66.9

309.5

346.2

128.1

1,531.1

Operating assets

713.4

138.4

199.2

222.3

65.3

1,338.6

Capital investments

27.5

4.1

5.1

6.4

2.1

45.2

Number of employees (at 31.12.)

3,065

413

1,057

815

365

5,715

Due tovolume andprice changes
m CHF

Divestments
and acquisitions 2003
m CHF

Net sales are based on the country in which the customer is located.

2

Changes in net sales by businesses
2003

2002

Net sales

Totalchange
m CHF

m CHF

m CHF

Of which due
to exchange
rate changes
m CHF

Flooring

729.0

736.1

–7.1

5.3

–12.4

0.0

Adhesives *

572.9

486.6

86.3

–21.6

123.3

–15.4

Belting

297.0

308.4

–11.4

–15.8

2.8

1.6

Total

1,598.9

1,531.1

67.8

–32.1

113.7

–13.8

* As from April 19, 2002 including the acquired Swift adhesives business

3

Development and production overhead costs

Development costs, which include product development as well as design activities, amounted to CHF 28.9 million (2002: CHF 24.2 million). Production overhead costs totaled CHF 162.1 million (2002: CHF 159.7 million) and are includedin ‘Cost of goods sold’

4Administrative costs

This item consists of the usual expenses related to administrative activities. The
Group has no significant costs for license fees or royalties.

76 Forbo Financial Report 2003

5

Other operating expenses, net

2003

m CHF

m CHF

Other expenses

24.1

19.9

Other income

–15.5

–15.6

8.6

4.3

Total other operating expenses, net

2002

Other operating expenses and income include all costs and income which can
not be clearly allocated to the other categories. In 2003 other expenses include
also costs in connection with the headcount reduction.

6

Personnel expenses

2003

2002

m CHF

m CHF

Salaries and wages

343.7

329.9

Employer’s social security contributions

91.3

76.2

Total personnel expenses

435.0

406.1

The Group’s headcount at December 31, 2003 was 5,585 (2002: 5,715). This includes 9 employees of the acquired activities. The average headcount over the year
was 5,689 (2002: 5,508).
About 120 managers participate in a bonus plan, which is linked to the achievement of financial targets by the Group as well as individually determined objectives. Up to 30 % of the bonus payment consists of shares of Forbo Holding AG.
The participants can dispose of these shares after a period of at least three years.
Call options are issued to the Board of Directors and the Group Executive Board
within the framework of a stock option plan. Until December 31, 2003 the following options were granted:

Exercise
priceYear alloted

NumberTerm

Frozen until

Subscription
ratio

2000

1,455

10.04.01–09.05.05

09.05.03

1:1

670

2001

4,322

08.05.01–07.05.06

07.05.04

1:1

741

2002

5,782

07.05.02–07.05.07

06.05.05

1:1

518

2003

7,156

31.07.03–30.07.08

30.07.06

1:1

360

CHF

No charge is made to personnel expenses in connection with share options.
For details please see Annual Report (page 48: Compensations, shareholdings
and loans).

Forbo Financial Report 2003

77

7

8

Financial income

2003

2002

m CHF

m CHF

Interest income

6.3

4.4

Dividend income

0.5

0.6

Foreign exchange gains, net

1.1

0.0

Total financial income

7.9

5.0

Financial expenses

2003

2002

m CHF

m CHF

Interest expense

35.7

27.5

Amortization of issuance costs of bonds and private placements

0.9

0.4

Amortization of costs syndicated bank facility

0.2

0.0

Impairment of available-for-sale securities

0.3

0.0

Realized losses on available-for-sale securities

0.2

0.0

Foreign exchange losses, net

0.0

1.3

Total financial expenses

37.3

29.2

The average interest rate on interest-bearing debt (bonds, private placements,
long- and short-term bank loans) in 2003 was 5.2% (2002: 4.5%).

9

Earnings per share

Basic earnings per share is calculated by dividing net profit for the year by theweighted average number of shares outstanding.

Net profit for the year (m CHF)
Weighted average number of shares outstanding
Basic earnings per share (net profit) (CHF)

2003

2002

16.1

42.6

1,307,974 1,305,619
12.28

32.65

Diluted earnings per share in addition takes into account the potential dilution
effects which would result if all share options were exercised.

Net profit for the year (m CHF)

2003

2002

16.1

42.6

Weighted average number of shares fordiluted earnings per share
Diluted earnings per share (net profit) (CHF)

78 Forbo Financial Report 2003

1,325,357 1,317,559
12.12

32.35

10

Tangible assets

The tangible assets also include leased assets with a net book value of CHF 2.6 million (2002: CHF 2.5 million) as well as non-operating property with a net bookvalue of CHF 7.3 million (2002: CHF 15.8 million). The net book value of the nonoperating property roughly equals its fair value.

Cost

Land andMachinerybuildings and equipment
m CHF
m CHF

Other tangible
assetsm CHF

Assets underconstruction
m CHF

Total tangible
assetsm CHF

At 31.12.2001, gross

446.5

716.2

141.9

35.3

1,339.9

Changes in scope of consolidation
Additions

69.1

122.5

14.1

3.5

209.2

3.0

21.4

15.1

5.1

44.6

Disposals

–18.5

–16.6

–8.5

–0.9

–44.5

Transfers

–2.9

15.5

2.6

–18.3

–3.1

Translation differences

–23.2

–41.0

–5.6

–1.5

–71.3

At 31.12.2002, gross

474.0

818.0

159.6

23.2

1,474.8

0.0

–0.8

–1.3

0.0

–2.1

Changes in scope of consolidation
Additions

2.8

10.5

9.7

22.9

45.9

Disposals

–7.0

–3.8

–14.3

–0.1

–25.2

Transfers

5.7

14.1

1.5

–21.3

0.0

Translation differences

10.6

20.3

6.8

0.9

38.6

At 31.12.2003, gross

486.1

858.3

162.0

25.6

1,532.0

Accumulated depreciation

Land andMachinerybuildings and equipment
m CHF
m CHF

Other tangible
assetsm CHF

Assets underconstruction
m CHF

Total tangible
assetsm CHF

At 31.12.2001, gross

150.5

508.9

103.6

0.8

763.8

Depreciation

15.8

50.2

14.3

0.2

80.5

Changes in scope of consolidation

25.6

76.9

9.3

0.0

111.8

Disposals

–5.6

–15.3

–7.4

–0.2

–28.5

Transfers

0.1

0.4

–0.3

–0.4

–0.2

Translation differences

–7.9

–27.5

–3.9

–0.2

–39.5

At 31.12.2002, gross

178.5

593.6

115.6

0.2

887.9

Depreciation

19.7

48.1

14.8

0.3

82.9

Changes in scope of consolidation

0.0

–0.8

–1.2

0.0

–2.0

Disposals

–5.9

–4.6

–11.8

0.0

–22.3

Translation differences

4.5

17.1

5.0

0.1

26.7

At 31.12.2003, gross

196.8

653.4

122.4

0.6

973.2

Total tangible assets at 31.12.2002, net

295.5

224.4

44.0

23.0

586.9

Total tangible assets at 31.12.2003, net

289.3

204.9

39.6

25.0

558.8

The fire insurance value of buildings, machinery and factory equipment of
CHF 2,017 million (2002: CHF 1,969 million) covers the replacement cost. The
business interruption risk arising from fire and the production and productliability risks are covered by a group-wide policy.
Maintenance and repair costs amounted to CHF 28.4 million (2002: CHF 29.9
million). The depreciation expense is included in ‘Cost of goods sold’, ‘Development costs’, ‘Marketing and distribution costs’ and ‘Administrative costs’.

Forbo Financial Report 2003

79

11

Intangible assets
Goodwillm CHF

Trademarks/
patentsm CHF

Other intangible assets
m CHF

At 31.12.2001, gross

29.8

29.1

0.7

59.6

Changes in scope of consolidation

149.4

25.0

2.1

176.5

Additions

0.0

0.0

0.6

0.6

Disposals

–0.2

0.0

0.0

–0.2

Cost

0.0

0.0

3.1

3.1

Translation differences

–14.9

0.0

–0.1

–15.0

At 31.12.2002, gross

164.1

54.1

6.4

224.6

Changes in scope of consolidation

0.6

0.6

0.0

1.2

Additions

0.0

0.0

0.3

0.3

Disposals

0.0

–0.5

0.0

–0.5

Translation differences

–3.9

0.0

0.4

–3.5

At 31.12.2003, gross

160.8

54.2

7.1

222.1

Goodwillm CHF

Trademarks/
patentsm CHF

Other intangible assets
m CHF

Total
m CHF

At 31.12.2001, gross

13.5

22.5

0.4

36.4

Amortization

6.7

3.8

0.7

11.2

Transfers

0.0

0.0

0.2

0.2

Translation differences

–1.9

0.0

0.1

–1.8

At 31.12.2002, gross

18.3

26.3

1.4

46.0

Amortization

8.4

4.1

0.9

13.4

Transfers

0.0

–0.5

0.0

–0.5

Translation differences

–0.7

0.0

0.0

–0.7

At 31.12.2003, gross

26.0

29.9

2.3

58.2

Total intangible assets at 31.12.2002, net

145.8

27.8

5.0

178.6

Total intangible assets at 31.12.2003, net

134.8

24.3

4.8

163.9

2003
m CHF

2002
m CHF

Investments in associated companies

5.1

4.1

Other investments

3.3

2.9

Loans to associated companies

19.0

19.0

Other long-term receivables

1.3

18.0

Total investments in associates and other long-term assets

28.7

44.0

Transfers

Accumulated amortization

12

Total
m CHF

Investments in associates and other long-term assets

As of October 1, 2001 the carpet business was sold to its management. Forbo
has granted a loan of CHF 19.0 million to the newly created group and holds a
25 % investment in Enia Carpet Group AG, Ennenda/Switzerland, the parent
company of the group. The valuation of the investment is based on the equity
method and resulted in an income of CHF 0.8 million (2002: CHF 0.7 million
expense). See also page 89, related party transactions.

80 Forbo Financial Report 2003

13

14

15

Inventories

2003

m CHF

m CHF

Raw materials and supplies

60.9

66.0

Work in progress

68.7

70.0

2002

Finished goods

130.0

131.2

Allowance for product risks

–11.7

–11.3

Total inventories

247.9

255.9

Trade receivables

2003

2002

m CHF

m CHF

Accounts receivable

238.0

252.3

Notes receivable

31.9

22.6

Allowance for doubtful receivables

–18.3

–20.1

Total trade receivables

251.6

254.8

Marketable securities

Marketable securities at December 31, 2003 and December 31, 2002 consist entirely of shares; primarily shares included in the SPI (Swiss Performance Index).
They have been classified as available-for-sale. During 2003, an impairment ofavailable-for-sale securities of CHF 0.3 million was identified and charged to theincome statement (no charge in previous year).

16

Share capital

The share capital of Forbo Holding AG amounts to CHF 37,984,128 at December 31,
2003 (2002: CHF 67,828,800), and is divided into 1,356,576 registered shares witha nominal value of CHF 28 each (2002: CHF 50). Of these, 21,419 registered shares(2002: 25,880 shares) without voting and dividend rights are at the disposition of
the Board of Directors. Consequently, 1,335,157 registered shares carried dividend
rights for the 2003 financial year. Changes in shares outstanding were as follows:

1.1.2003

ChangeNumberNumber

31.12.2003

Changes in shares outstanding
Total shares

1,356,576

Number

1,356,576

Treasury shares
Shares with dividend right
Shares without dividend right
Total treasury shares
Total shares outstanding

25,489–5,31825,880–4,461

21,41951,369–9,77941,5901,305,207

20,1719,779 1,314,986

Forbo Financial Report 2003

81

17

Long-term financial debt

2003

2002

m CHF

m CHF

Outstanding bonds

150.0

150.0

Outstanding private placements

343.2

382.3

Unamortized issuance cost

–4.0

–5.4

Total outstanding bonds and private placements

489.2

526.9

Unsecured bank loans

64.4

6.9

Secured bank loans

0.0

11.0

Unamortized cost syndicated bank facility

–0.7

0.0

Lease obligations

2.1

2.2

Less current portion

–0.8

–7.7

Total long-term financial debt

554.2

539.3

In the previous year the secured bank loans were covered by property of the Group(book value CHF 41.4 million).
2003

2002

Maturitites of long-term financial debt
m CHF

m CHF

after 1 year

0.9

1.6

after 2 years

150.3

1.5

after 3 years

193.1

151.4

after 4 years

0.0

144.6

after 5 and more years

214.6

245.6

Unamortized cost

–4.7

–5.4

Total

554.2

539.3

The costs of bonds, private placements and the syndicated bank facility areamortized over the respective terms.

Outstanding bonds and private placements at 31.12.2003
Company

Currencym

Term

Interest rate

Forbo Holding AG

CHF

150.0

2001–2006

4.125 %

Forbo NL Holding B.V. (guaranteed by Forbo Holding AG)

USD

103.0

2002–2007

5.120 %

Forbo NL Holding B.V. (guaranteed by Forbo Holding AG)

USD

122.0

2002–2009

5.790 %

Forbo NL Holding B.V. (guaranteed by Forbo Holding AG)

USD

50.0

2002–2012

6.290 %The bonds and private placements have no early redemption clause.

Outstanding syndicated bank facilities at 31.12.2003
Company

Forbo Holding AG

82 Forbo Financial Report 2003

Currency

Utilizedm

Term

Available
m

CHF

64.4

2003–2007

150.0

18

Employee benefit obligations

The Group has established several pension plans on the basis of the specificrequirements of the countries in which the Group has such plans. The Group has
both defined contribution and defined benefit plans.
The expense for contributions to defined contribution plans, which is includedin personnel expenses, amounted to CHF 4.9 million (2002: CHF 8.1 million).
Details of the pension expense related to the major defined benefit plans are as
follows:
2003 1)

2002 2)

m CHF

m CHF

Current service cost

13.8

11.5

Interest on obligation

31.6

26.9

Expected return on plan assets

–28.3

–28.3

Recognized actuarial losses

1.1

3.8 3)Net periodic pension cost

18.2

13.9

2003 including Swiss pension plans and early retirement arrangements
2002 excluding Swiss pension plans and early retirement arrangements
3) 2002 including change of unrecognized assets
1)
2)

The actual return on plan assets was CHF 64.3 million (2002: CHF – 42.0 million).
The amounts recognized in the balance sheet are as follows:2003 1)

2002 2)

m CHF

m CHF

Present value of obligations

660.5

475.5

Fair value of plan assets–543.8–397.8Unrecognized actuarial losses–28.0–102.8Unrecognized assets

63.6 3)Net liability in the balance sheet

88.7

38.5

2003

2002

m CHF

m CHF

Net liability at the beginning of the year

68.9

37.9

First-time inclusion of Swiss pension plans as of 1.1.2003

16.5

2003 including Swiss pension plans and early retirement arrangements
2002 excluding Swiss pension plans and early retirement arrangements
3) A reclassification of the unrecognized assets to the unrecognized actuarial losses
has been made at January 1, 2003. This reclassification had no impact on the employee
benefit obligations reported in the balance sheet.
1)
2)

Movements in the net liability recognized in the balance sheet are as follows:

Total pension expenses as included in personnel expenses

18.2

13.9

Employer contributions

–18.7

–14.9

0.0

2.8

Translation differences

3.8

–1.2

Net liability at the end of the year

88.7

38.5

Changes in scope of consolidation

1)

2002 excluding provisions for early retirement arrangements of CHF 30.4 million

Forbo Financial Report 2003

83

1)

The principal actuarial assumptions used for accounting purposes were
(expressed as weighted averages):

19

2003

2002

%

%

Discount rate

5.0

5.4

Expected return on plan assets

6.0

6.3

Future salary increases

2.9

3.1

Provisions

At 31.12.2002

Warranty
provisions
m CHF

Restructuringprovisions
m CHF

Other
provisions
m CHF

Total
provisions
m CHF

7.0

7.0

8.6

22.6

Charges to the income statement

1.2

0.4

2.2

3.8

Utilized during the year

–1.2

–7.0

–2.1

–10.3

Transfers

0.0

0.0

3.6

3.6

Translation differences

0.4

0.0

1.2

1.6

At 31.12.2003

7.4

0.4

13.5

21.3

Warranty provisions are made in connection with the sale of products and are
based on past experience. The restructuring provisions relate to the acquisitions
made during the previous year. The transfers reflect reclassifications to accrued
expenses.

20

Trade payables

Accounts payable

2002

m CHF

m CHF

106.9

100.5

8.0

6.8

Total trade payables

114.9

107.3

Accrued expenses

2003

2002

m CHF

m CHF

Accrued personnel expenses

30.5

24.9

Fair value of financial derivatives

59.5

23.0

Other accruals

50.8

54.8

Total accrued expenses

140.8

102.7

Notes payable

21

2003

Other accruals comprise accrued volume rebates, commissions, premiums, interest and accrued warranty cost and similar items.

84 Forbo Financial Report 2003

22

23

Short-term financial debt

2003

m CHF

m CHF

Short-term bank loans and overdrafts

13.0

90.8

plus current portion of long-term debt

0.8

7.7

Total short-term financial debt

13.8

98.5

Commitments and contingent liabilities

2003

2002

m CHF

m CHF

2.0

0.9

Commitments and contingent liabilities

2002

Contingent liabilities relate to sureties and guarantees in favor of third parties.
The effects on the Group’s earnings of changes in legal, fiscal and political conditions are not predictable and therefore not quantifiable.There are no significant lawsuits pending.
24

Income taxes

2003

m CHF

m CHF

Current taxes

13.1

16.9

2002

Deferred taxes

2.6

4.0

Total income taxes

15.7

20.9

Since the Group operates across the world, it is subject to income taxes in manydifferent tax jurisdictions. Consequently, the expected and the effective tax rate
will vary from year to year according to the source of earnings or losses bycountry.
The main elements contributing to the difference between the Group’s overall
expected tax rate (the weighted average tax rate based on the income before tax
of each subsidiary) and the effective tax rate are:Analysis of tax rate

2003

2003

2002

2002

%

m CHF

%

m CHF

31.8

Profit before taxes
Expected tax rate

35 %

63.5
38 %

11.2

23.9

tax exempt income

–6.0

–9.9

non tax deductible goodwill amortization

2.3

2.1

other non tax deductible expenses

4.7

4.7

Weighted average income taxes
Tax effects of:tax losses for which no deferred tax assets
have been recognized

10.0

7.4

changes of deferred tax rates

–1.0

–0.2

prior year adjustments

–4.0

–6.1

other items

–1.5

–1.0

15.7

Total income taxes
Effective tax rate

49 %

20.9
33 %

Forbo Financial Report 2003

85

The tax loss carry forwards of the Group amount to about CHF 278 million. Tax
loss carry forwards totaling CHF 43 million will expire within the next five years
if they are not used. The remaining amount of CHF 235 million can be used
longer than five years.
Deferred income tax assets and liabilities are offset when they relate to the same
fiscal authority. The following amounts are shown in the balance sheet:
2003

2002

m CHF

m CHF

Deferred tax assets

61.5

65.6

Deferred tax liabilities

–6.5

–7.8

Deferred tax assets, net

55.0

57.8

Deferred tax assets and liabilities and deferred tax charges and credits are attributable to the following items:

Deferred tax assets
At 31.12.2002

Inventories
m CHF

Tangible
assetsm CHF

Provisions
m CHF

Tax losscarry forwards
m CHF

Other
m CHF

Total
m CHF

9.1

2.2

4.8

55.4

2.9

74.4

Credited (+), charged (–)
–0.7

1.8

3.5

–3.2

–0.4

1.0

Translation differences

0.0

0.0

0.0

–0.2

0.0

–0.2

At 31.12.2003

8.4

4.0

8.3

52.0

2.5

75.2

Inventories
m CHF

Tangible
assetsm CHF

Provisions
m CHF

Tax losscarry forwards
m CHF

Other
m CHF

Total
m CHF

–4.1

–10.1

0.0

0.0

–2.4

–16.6

–0.6

–2.6

–0.8

0.0

0.4

–3.6

to the income statement

Deferred tax liabilities
At 31.12.2002
Credited (+), charged (–)
to the income statement
Translation differences

0.0

0.0

0.0

0.0

0.0

0.0

At 31.12.2003

–4.7

–12.7

–0.8

0.0

–2.0

–20.2

Deferred tax assets at 31.12.2002, net

5.0

–7.9

4.8

55.4

0.5

57.8

Deferred tax assets at 31.12.2003, net

3.7

–8.7

7.5

52.0

0.5

55.0

86 Forbo Financial Report 2003

25

Statement of added value

2003

2002

m CHF

m CHF

Gross added value

592.5

585.5

Depreciation and amortization

–96.3

–91.7

Net added value

496.2

493.8

Employees

435.0

406.1

Public sector

15.7

20.9

Creditors

29.4

24.2

Investors

29.8

29.0

Retained in the Group

–13.7

13.6

Total

496.2

493.8

Net added value per employee (CHF )87,22189,651

2003

2002

Distribution of added value

26

Translation of foreign currencies
2003

Currency

Income statement(average rates for the year)
CHF

27

2002

CHF

Change%Balance sheet(year-end-rates)
CHF

CHF

Change%7Euro countries

EUR 1

1.52

1.47

4

1.56

1.46

Sweden

SEK 100

16.67

16.01

4

17.16

15.83

8

United Kingdom GBP 1

2.20

2.33

–6

2.22

2.23

–1

USA

USD 1

1.35

1.56

–13

1.25

1.39

–10

Canada

CAD 1

0.96

0.99

–3

0.95

0.88

8

Japan

JPY

1.16

1.24

–6

1.17

1.17

–

100

Financial Risk Management

In its international operations and financial activities the Forbo Group is exposed
to various types of financial risks. In order to steer potential risks and benefits
arising from fluctuations in both exchange rates of foreign currencies and interest
rates the Group selectively uses derivative instruments. The various risks involved in existing assets and liabilities, planned transactions and expected transactions are monitored and managed centrally – taking into account the consolidated risk exposure of the Group. In adherence to the Group’s financial risk
management policy (established through the issuance of written guidelines andpolicies), Corporate Treasury continuously monitors both the risk exposure andthe effectiveness of the applied hedging instruments. Also, Corporate Treasury
advises the Finance Managers of the Group companies on the management ofidentified risks and recommends both the extent of a potential hedge transaction and the appropriate type of financial instrument. The Group’s financial risk
management policy does neither allow the use of derivate instruments for the
purpose of trading nor for the purpose of speculation. The counterparties of derivate transactions are cautiously selected and thus hedging transactions areconcluded with strong financial institutions only (based on the assessments of
the leading rating agencies).
All concluded derivative instruments are related to either management of currency risks or management of interest rate risks (or a combination of both).

Forbo Financial Report 2003

87

Management of currency risks

Risks arising from short-term currency exposures created by purchases and salesof goods and services (transaction risks) are identified and selective hedging
strategies are implemented in the light of an ongoing assessment of exchange rate
movements. As a rule, the Group uses forward and option contracts with maturities of up to twelve months only. These hedging transactions resulted in thefollowing open positions:
Number ofcontracts

Gross value
hedgedm CHF

Unrealized
gain/loss
m CHF

Forward contracts 31.12.2002

12

4.0

0.0

Forward contracts 31.12.2003

16

4.4

0.1

Financial derivatives

In accordance with IAS 39 the above instruments are recognized in the balance
sheet at fair value. The accumulated fair value (total of all negative and positivemarket values) at December 31, 2003 amounts to CHF 0.1 million (CHF 0.0 million at December 31, 2002).
Furthermore, risks associated with the conversion of assets and liabilities denominated in foreign currencies (translation risks) are taken into account by
establishing an appropriate financing structure.

Management of interest rate risks

The market values of interest-bearing assets and liabilities are subject to fluctuations of interest rates. The Group makes use of financial derivatives in orderto steer potential risks and benefits arising from interest rate movements and inorder to manage the duration of the interest rate fixings.
As a rule, the Group uses interest rate swaps and cross-currency interest rate
swaps with maturities of up to seven years only. These hedging transactions resulted in the following open positions:
Financial derivatives

Number ofcontracts

Gross value
hedgedm CHF

Unrealized
gain/loss
m CHF

17

384.7

–15.3

12

290.4

–59.5

Interest rate swaps and cross-currencyinterest rate swaps 31.12.2002
Interest rate swaps and cross-currencyinterest rate swaps 31.12.2003

In accordance with IAS 39 the above instruments are recognized in the balance
sheet at fair value. The accumulated fair value (total of all negative and positivemarket values) at December 31, 2003 amounts to CHF –59.5 million (CHF –15.3
million at December 31, 2002).

88 Forbo Financial Report 2003

28

Acquisitions

Changes in the scope of consolidation are set out on page 74.
In 2003 there were no material additions or disposals of assets and liabilities fromacquisitions or divestments.
In 2002 details of acquired assets and liabilities as well as the cash used for acquisitions were as follows:
2002

m CHF

29

Tangible assets

97.4

Inventories

40.1

Receivables and other current assets

80.4

Cash and cash equivalents

4.0

Employee benefit obligations–2.8

Provisions–13.2

Deferred tax liabilities, net–3.2

Trade payables and other liabilities–38.6

Fair value of acquired net assets (excluding intangible assets)

164.1

Goodwill

149.4

Trademarks/patents

25.0

Other intangible assets

2.1

Subtotal

340.6

Less acquired cash

–4.0

Less already owned 25 % investment in Stephens Miraclo Extremultus Ltd.

–0.8

Total cash used for acquisitions

335.8

Related party transactions

The Group owns 25 % of Enia Carpet Group and granted a loan of CHF 19.0
million (see page 80, Investments in associates and other long-term assets). Theinterest rate is 4.5 % and interest income amounted to CHF 0.9 million (2002:
CHF 0.9 million). In 2003 the Group purchased products for CHF 5.9 million(2002: CHF 7.1 million) from Enia Carpet Group, whereas Enia Carpet Group purchased products for CHF 2.7 million (2002: CHF 5.1 million) from Forbo Group.
These sales were made at arms’ length.
Please see also Annual Report (page 48: Compensations, shareholdings andloans).

Forbo Financial Report 2003

89

Report of the Group Auditors

Report of the Group Auditors
to the General Meeting of
Forbo Holding AG, Eglisau

As auditors of the Group, we have audited the consolidated financial statements(consolidated income statement, consolidated balance sheet, consolidated cash
flow statement, consolidated statement of changes in shareholders’ equity andnotes to the consolidated financial statements) on pages 65 to 89 of Forbo Holding AG for the year ended December 31, 2003.
These consolidated financial statements are the responsibility of the board of
directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgatedby the Swiss profession and with the International Standards on Auditing, which
require that an audit be planned and performed to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts
and disclosures in the consolidated financial statements. We have also assessed
the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides areasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view ofthe financial position, the results of operations and the cash flows in accordancewith the International Financial Reporting Standards (IFRS) and comply with
Swiss law.
We recommend that the consolidated financial statements submitted to you
be approved.
PricewaterhouseCoopers AG

S. Räbsamen

Zurich, March 4, 2004

90 Forbo Financial Report 2003

L. MonnConsolidated Income Statements 1999–2003
2003

2002

2001

2000

1999

m CHF

m CHF

m CHF

m CHF

m CHF

Net sales

1,598.9

1,531.1

1,485.1

1,776.8

1,754.5

Cost of goods sold–1,091.3–1,017.4–962.7–1,143.2–1,125.1

Gross profit

507.6

513.7

522.4

633.6

629.4

Development costs

–28.9

–24.2

–22.0

–29.8

–30.2

Marketing and distribution costs–287.5–277.2–288.6–333.6–335.2Administrative costs–122.2–119.6–116.6–129.8–122.3

Other operating expenses, net

–8.6

–4.3

–6.3

–9.8

–18.7

Operating profit before specific provisions

60.4

88.4

88.9

130.6

Specific provisions

123.0
–70.0

Operating profit after specific provisions

60.4

88.4

88.9

130.6

Financial income

7.9

5.0

3.4

16.8

13.8

Financial expenses

–37.3

–29.2

–19.4

–21.3

–19.4

Share of results of associated companies

0.8

–0.7

Profit before taxes

31.8

63.5

72.9

126.1

47.4

Taxes

–15.7

–20.9

–21.1

–35.4

–31.3

Net profit for the year

16.1

42.6

51.8

90.7

16.1

Forbo Financial Report 2003

91

53.0

Consolidated Balance Sheets 1999–2003
2003

2002

2001

2000

1999

Assets
m CHF

m CHF

m CHF

m CHF

m CHF

Long-term assets

812.9

875.1

716.4

778.9

866.9

Tangible assets

558.8

586.9

576.1

675.0

813.1

Intangible assets

163.9

178.6

23.2

19.4

24.0

Deferred taxes

61.5

65.6

72.7

65.1

27.3

Investments in associates and other long-term assets

28.7

44.0

44.4

19.4

2.5

Current assets

750.9

725.5

615.2

747.7

860.5

Inventories

247.9

255.9

227.0

260.7

306.2

Trade receivables

251.6

254.8

202.6

243.4

282.1

Other receivables

34.9

27.0

30.1

41.3

31.1

Prepaid expenses and deferred charges

27.8

35.4

29.0

19.2

19.6

Marketable securities

18.9

23.9

33.8

45.5

73.6

Cash and cash equivalents

169.8

128.5

92.7

137.6

147.9

1,563.8

1,600.6

1,331.6

1,526.6

1,727.4

2003

2002

2001

2000

1999

m CHF

m CHF

m CHF

m CHF

m CHF

Shareholders’ equity

572.5

590.6

652.2

813.9

794.8

Share capital

38.0

67.8

75.7

75.7

75.7

Treasury shares

–7.7

–11.7

–155.2–8.2–2.0

Total assets

Shareholders’ equity and liabilities

Reserves and retained earnings

542.2

534.5

731.7

746.4

721.1

Long-term liabilities

670.7

638.6

252.8

275.2

458.6

Long-term financial debt

554.2

539.3

164.5

145.1

247.3

Employee benefit obligations

88.7

68.9

69.8

88.0

91.8

Provisions

21.3

22.6

16.4

39.2

115.5

Deferred taxes

6.5

7.8

2.1

2.9

4.0

Current liabilities

320.6

371.4

426.6

437.5

474.0

Trade payables

114.9

107.3

79.4

90.2

139.6

Accrued expenses

140.8

102.7

80.9

88.7

86.7

Short-term financial debt

13.8

98.5

197.2

194.7

179.3

Current tax liabilities

7.9

14.0

14.1

16.0

18.3

Other current liabilities

43.2

48.9

55.0

47.9

50.1

1,563.8

1,600.6

1,331.6

1,526.6

1,727.4

Total shareholders’ equity and liabilities

92 Forbo Financial Report 2003

Financial Statements of Forbo Holding AG

Forbo Financial Report 2003

93

Income Statement of Forbo Holding AG
2003

2002

Notes

CHF

CHF

from investments in and advances to Group companies

1

31,879,666

161,083,326

from securities and short-term investments

2

5,310,232

992,326

5,972

677,191

37,195,870

162,752,843

2003

2002

IncomeIncomeIncome from services and other sources
Total income

Expenses
Notes

CHF

CHF

Administrative expenses

32,259,474

3,206,921

Financial expenses

49,473,773

11,080,638

346,928

349,876

Taxes
Valuation adjustments

9,728,043

117,769,878

Total expenses

21,808,218

132,407,313

Net profit for the year

15,387,652

30,345,530

94 Forbo Financial Report 2003

5

Balance Sheet of Forbo Holding AG(before appropriation of available earnings)
31.12.2003

31.12.2002

Assets
Notes

Long-term assets

CHF

CHF

534,628,153

437,285,710

Investments in Group companies

6339,854,375

265,126,811

Advances to Group companies

7

194,773,778

172,158,899

Current assets

31,917,571

45,069,972

Other receivables from Group companies

1,258,685

830,639404,201

1,242,255

8

1,645,883

1,278,769

Marketable securities

918,555,069

24,167,536

Cash

10

10,053,733

17,550,773

566,545,724

482,355,682

31.12.2003

31.12.2002

CHF

CHF

287,035,726

300,055,067

37,984,128

67,828,800

Other receivables from third parties
Prepaid expenses and deferred charges

Total assets

Shareholders’ equity and liabilities
Notes

Shareholders’ equity
Share capital

11/12

Statutory reserves:
General reserves
Reserve for own shares
Other reserves

15,600,000

15,600,000

139,103,691

13,866,720

14

146,272,451

140,071,743

62,687,804

32,342,274

Available earnings:
Profit carried forward
Net profit for the year
Liabilities

15,387,652

30,345,530

279,509,998

182,300,615

Long-term provisions

15

28,000,000

28,000,000

Bond issues

16

150,000,000

150,000,000

Long-term bank debt

17

64,440,000

032,760,000

085,7830Advances from Group companies
Other liabilities to Group companies
Current liabilities to third parties
Accrued expenses
Total shareholders’ equity and liabilities

46,98351,0984,177,232

4,249,517

566,545,724

482,355,682

Forbo Financial Report 2003

95

Notes to the Financial Statementsof Forbo Holding AG
1

Income from investments in and advances to Group companies

Income from investments in and advances to Group companies amounts to
CHF 31.9 million (previous year: CHF 161.1 million) and consists of interest anddividend income. In the previous year a special distribution from Forbo America
Inc. of CHF 111.6 million in the context of a group internal refinancing was made.
2

Income from securities and short-term investments

This item includes income from short-term investments of CHF 0.2 million (previous year: CHF 0.4 million), dividend income of CHF 0.5 million (previous
year: CHF 0.6 million) as well as realized and unrealized gains from securities of
CHF 4.6 million.
3

Administrative expenses

Administrative expenses amount to CHF 2.3 million which is CHF 0.9 million
less than in the previous year. The decrease is due to lower unrecoverable foreignsource taxes and lower general expenses.
4

Financial expenses

Financial expenses of CHF 9.5 million relate to the 41/8 % bond issue 2001– 2006of CHF 150.0 million and the amortization of capitalized issuance costs. Furthermore, interest expenses arose from loans drawn in the context of a syndicatedbank facility.
5

Valuation adjustments

Valuation adjustments of CHF 9.7 million (previous year: CHF 117.8 million)
relate mainly to investments in and loans to Group companies and take into account the uncertainty of economic and currency trends.
6

Investments in Group companies

See list of Group companies on pages 102–105. The increase of investments inGroup companies compared to the previous year amounts to CHF 74.7 million
and is mainly attributable to an additional capital injection at Forbo Beteiligungen GmbH and a capital increase at Forbo UK Ltd.
7

Advances to Group companies

Advances to group companies are denominated in Swiss Francs and foreign currencies. There was a CHF 22.6 million increase over the previous year’s figure.
8

Prepaid expenses and deferred charges

Prepaid expenses and deferred charges include, besides the usual items, capitalized cost of CHF 1.6 million incurred in connection with the 41/8 % bond issue
2001– 2006 and the syndicated bank facility. These costs are amortized over therespective terms.
9Marketable securities

Marketable securities include marketable shares, which are valued at market
value.
10

CashThis item consists of cash and cash equivalents with original maturities of threemonths or less.

96 Forbo Financial Report 2003

11

Share capitalAt the end of 2003 the Company’s share capital amounts to CHF 37,984,128 andis divided into 1,356,576 registered shares with a nominal value of CHF 28 each.
In the context of a cash distribution the nominal value per share of CHF 50 was
reduced by CHF 22 during the year. The Board of Directors put 4,461 of totally
available 25,880 reserve shares in circulation and deposited them in the context
of the Stock Option Plan for the Board of Directors and the Executive Board.
Thus, 21,419 shares without voting and dividend rights are still at the dispositionof the Board of Directors. Accordingly, 1,335,157 registered shares carry dividend rights for the 2003 financial year. The shares are listed on the SWX Swiss
Exchange with security number 354 151.
12

Conditional capital increase
CHF 8,500,000 of conditional capital reserved for the exercise of shareholder

options and warrants in connection with a with-warrants bond issue was createdby resolution of the Annual General Meeting of Shareholders held on April 27,
1994. Following the exercise of options and warrants in 1994, 1995 and 1997 anda reduction of the nominal value of CHF 22 per share the conditional capitalat December 31, 2003 amounts to CHF 4,660,600 (previous year: CHF 8,322,500).
13

Reserve for own shares

The CHF 9,103,691 included at year end under ‘Reserve for own shares’ refer toown shares held by Forbo Holding AG and its subsidiaries valued at cost. Detailsof own shares are as follows:

Own shares

Cost
CHF

No. of registeredshares nominal
CHF 50 /28

Total at 1.1.2003

13,866,720

51,369

Disposals–5,630,974–9,779Additional paid-in capital of reserve
shares put in circulation *1,437,679

Nominal value reduction–569,734

Total at 31.12.2003

9,103,691

41,590* 4,461 registered shares deposited (see 11, Share capital)

Forbo Financial Report 2003

97

14

Other reserves

Other reserves showed a year-on-year increase of CHF 6.2 million, which ismainly attributable to a transfer from ‘Reserve for own shares’ (CHF 4.8 million).
15

Long-term provisions

The CHF 28.0 million stated under this heading serve as a precautionary provision against general risks.
16

Bond issues

The 41/8 % bond issue 2001–2006 of CHF 150.0 million is due for redemption on
June 8, 2006.
17

Long–term bank debt

This item includes loans payable of CHF 64.4 million in the context of a midterm, syndicated bank facility of totally CHF 150.0 million.
18

Contingent liabilities

Guarantees and letters of support issued to third parties in favor of Group companies amount to CHF 505.3 million at year end, of which CHF 399.6 million(previous year: CHF 387.2 million) are utilized. Most of this relates to guarantees
to investors in connection with funds raised by a Group company in the formof a US private placement (CHF 343.2 million) and guarantees in connection withutilized swap facilities.

98 Forbo Financial Report 2003

Proposal for Appropriationof Available Earnings Forbo Holding AG
The Board of Directors proposes to the Annual General Meeting of Shareholders
that the available earnings, consisting of:
2003

2002

CHF

CHF

Net profit for the year

15,387,652

30,345,530

Profit carried forward from the previous year

62,687,804

32,342,274

Total available earnings

78,075,456

62,687,804

2003

2002

CHF

CHF

be appropriated as follows:

To be carried forward to the following year

78,075,456

62,687,804

Total

78,075,456

62,687,804

Instead of a dividend, a nominal value repayment of CHF 8.00 (previous year:
CHF 22.00) per share is proposed.

Forbo Financial Report 2003

99

Report of the Statutory Auditors

Report of the Statutory Auditors
to the General Meeting of
Forbo Holding AG Eglisau

As statutory auditors, we have audited the accounting records and the financial
statements (income statement, balance sheet and notes) on pages 94 to 98 of
Forbo Holding AG for the year ended December 31, 2003.
These financial statements are the responsibility of the board of directors. Our
responsibility is to express an opinion on these financial statements based on
our audit. We confirm that we meet the legal requirements concerning professional qualifications and independence.
Our audit was conducted in accordance with auditing standards promulgated by
the Swiss profession, which require that an audit be planned and performed toobtain reasonable assurance about whether the financial statements are free frommaterial misstatement. We have examined on a test basis evidence supporting
the amounts and disclosures in the financial statements. We have also assessed theaccounting principles used, significant estimates made and the overall financial
statement presentation. We believe that our audit provides a reasonable basis forour opinion.
In our opinion, the accounting records, the financial statements and the proposed
appropriation of available earnings comply with Swiss law and the company’s
articles of incorporation.
We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers AG

S. Räbsamen
Zurich, March 4, 2004

100 Forbo Financial Report 2003

L. Monn

Forbo Floorcoverings PTY. Ltd.

Wetherill Park, N.S.W.

Angus Fotheringhame

AUD

1,400,000

100%

S

Siegling Australia PTY. Ltd.

Wetherill Park, N.S.W.

Peter Duncan

AUD

3,000,000

100%

ViennaFranz Kahr

EUR

73,000100%

Holding/Services

General management

Belting

Flooring

Registered office

Company

Adhesives

Equity interest

Group Companies(December 31, 2003)
Share capital

Australia
D

S

Austria
Forbo Contel Handelsges.m.b.H.

S

Forbo Industrieprodukte Ges.m.b.H.

ViennaPeter Kraft/Stefan Resch

EUR

73,000100%

Siegling Austria Ges.m.b.H.

ViennaErich Knoll

EUR

330,000

100%

Forbo-Balco BVBA

DendermondeToon A.T. Burghouts

EUR

20,000100%

N.V. Forbo Linoleum S.A.

Groot-Bijgaarden

Lieven Messiaen

EUR

250,000

100%

S

Forbo Linoleum Ltda.

Itapevi-SP

Walter Gianfaldoni

BRL

10,000100%

S

Siegling Brasil Ltda.

Itapevi-SP

Carlos Oslaj

BRL

6,586,000

50%

St. John

Jack L. Chambers

CAD

3,500,157

100%

S
S

BelgiumS

BrazilN

MS

CanadaForbo Adhesives (Canada) Ltd.

MS

Forbo Linoleum Inc.

TorontoDenis P. Darragh

CAD

500,000

100%

Siegling Canada Ltd.

TorontoRick Zingel

CAD

501,000

100%

Brno

Tomás Kudera

CZK

500,000

100%

S

Forbo Flooring A/S

Glostrup

Jens-Christian Holm Iversen

DKK

500,000

100%

S

Siegling Danmark A/S

BrøndbyRoger Olsson

DKK

1,000,000

100%

Forbo Flooring AB Finland

HelsinkiAnne Takala

EUR

34,000100%

Oy Forbo Swift AB

Espoo

Jukka Koskinen

EUR

25,253

100%

MS

Forbo Helmitin SAS

Surbourg

José Castillo

EUR

3,050,000

100%

MS

Forbo Participations SAS

Surbourg

Christian Barreau

EUR

11,524,800

100%

Forbo Sarlino SAS

Reims

Alain Réquillart

EUR

6,400,000

100%

Forbo Swift Adhesives SA

Blois

José Castillo

EUR

800,000

100%

Siegling France SAS

Lomme

Egbert J. van Heerikhuizen

EUR

825,000

100%

Sté. de Production de Sols Textiles-P.S.T.

Reims

Alain Réquillart

EUR

3,092,000

100% MS

Sté. de Production de Sols Vinyles-P.S.V.

Reims

Alain Réquillart

EUR

3,447,000

100% MSSS

Czech Republic
Forbo s.r.o.

DenmarkMS

Finland
H

France102 Forbo Financial Report 2003

D

H
S
MS
S

Registered office

General management

Forbo Adhesives Automotive GmbH

Mannheim

Robert Tonolla

Forbo Beteiligungen GmbH

Waldshut-Tiengen

Gerold A. Zenger

Forbo Erfurt GmbH

ErfurtForbo Flooring GmbH
Forbo Helmitin GmbH

Holding/Services

Belting

Adhesives

Flooring

Equity interest

Company

Share capital

Germany
EUR

30,000100%

EUR15,400,000

100%

Rüdiger Beez

EUR

2,050,000

100%

Paderborn

Elmar Schmidt

EUR

500,000

100%

Pirmasens

Robert Tonolla

EUR

5,120,000

100%

EUR

1,030,000

100%

EUR

1,023,000

100%

D

S
H
MS
S
MS

Forbo Novilon GmbH

Frankfurt on the Main

Hans-Heinrich Kuhn

Paul Heinicke GmbH & Co KG

Pirmasens

Peter Kraft

Realbelt GmbH

Velen

Friedrich Konrad

EUR

100,000

100%

S

Siegling GmbH

HanoverDr. Jan Lipton

EUR

10,230,000

100%

MS

AthensPeter Garyfallou

EUR

895,000

100%

MS

Forbo Swift Adhesives Hungary Kft.

Budapest

András Mádi/Stefan Resch

HUF

3,000,000

100%

S

Siegling Hungária Kft.

Budapest

Juraj Fogarassy

HUF

30,000,000

100%

D

S
H

GreeceForbo Swift Adhesives Greece S.A.I.C.

HungaryS

Ireland
Forbo Ireland Ltd.

DublinDerek F. Byrne

EUR

127,000

100%

Siegling Ireland Ltd.

DublinJohn Siddle

EUR

25,395100%

Waller & Wickham Ltd.

DublinKevin Wickham

EUR

2,520

100%

S
S
S

Italy
Forbo Adhesives Italia S.p.a.

Pianezza (Vicenza)

Eros Mori

EUR

416,000

100%

Forbo Resilienti S.r.l.

MilanoSergio de Conto

EUR

51,000100%

Siegling Italia S.p.a.

Paderno Dugnano

Dr. Marco Tommasi

EUR

104,000

100%

S

Yokohama

Marco A. Crivelli

JPY

330,000,000

100%

MS

St. Helier

Denise Turpin

GBP

25,000100%

Johor Bahru

Marco A. Crivelli

MYR

2,500,000

100%

Tlalnepantla

Antonio Cillero

MXP

16,505,000

100%

S

Eurocol B.V.

ZaanstadJos H. den Ronden

EUR

454,000

100%

MS

Forbo Linoleum B.V.

KrommenieDrs. Pieter Hartog/Paul de Ruiter EUR

11,345,000

100% MS

Forbo NL Holding B.V.

KrommenieDrs. Pieter Hartog

EUR

13,500,000

100%
100% MS

MS
S

Japan
Siegling (Japan) Ltd.

Jersey, C. I.
Forbo Invest Ltd.

D

H

Malaysia
Siegling Malaysia SDN. BHD.

S

MexicoSiegling Mexico S.A. de C.V.

MS

Netherlands

Forbo Novilon B.V.

Coevorden

Geurt Stuurman

EUR

3,630,000

Forbo Swift Adhesives Nederland B.V.

GenderenToon A.T. Burghouts

EUR

27,000100%

Siegling Nederland B.V.

Spankeren-Dieren

Egbert J. van Heerikhuizen

EUR

113,000

100%

Forbo Financial Report 2003

H

MS
S

103

Registered office

General management

AucklandJohn Lumley

VettreMorten Aarhus

P. di Gioia/Ch. Barreau

Holding/Services

Belting

Adhesives

Flooring

Equity interest

Company

Share capital

New ZealandSiegling Stedar Belting Ltd.

NZD

650,000

100%

D

NOK

1,000,000

100%

N

HKD

200,00050%

146,391,000

100%

S

NorwayForbo Flooring A/SSPeople’s Republic of China
Fargo Chemicals Marketing Ltd.

Hong KongS

P. Clerc-Renaud/B. Jalon
Forbo Siegling (Shenyang) Belting Co. Ltd.

Shenyang

Marco A. Crivelli

CNY

Warszawa

Stefan Resch/Andrzej Trojecki

PLZ52,000100%

S

Jos H. den Ronden

PLZ

2,100,000

100%

S

MS

PolandForbo Swift Adhesives Poland Sp. z o.o.

Forbo Techniki Budowlane Polska Sp. z o.o. Warszawa

Portugal
Forbo-Revestimentos S.A.

Porto

Henrique M. Santos Jr.

EUR

75,000100%

Siegling (Portugal) Lda.

Gemunde (Maia)

José A. Pereira de Azevedo

EUR

235,000

100%

OradeaPeter Kraft/Stefan Resch

ROL

70,770,000

100%

St. Petersburg

Alexander Petrakovski

RUB

400,000

51%

S
S

Romania
SC Forbo Helmitin Romania S.R.L.

S

RussiaSiegling (ZAO)

S

Spain
Forbo Adhesives Spain S.L.U.

Mos (Pontevedra)

José Castillo

EUR

15,006

100%

Forbo Pavimentos S.A.

Barcelona

Agustin Matamoros

EUR

60,000100%

Siegling Iberica S.A.

Montcada i Reixac

José Flor Garre

EUR

1,533,000

100%

SEK

100,000

100%

SEK

20,000,000

100% MS

SEK

50,000,000

100% MS

MSS
S

SwedenForbo Flooring AB

Gothenburg

Lars Ivar Norén

Forbo Parquet AB

Tibro

Christer Engelbrektsson

Forbo Project Vinyl AB

Gothenburg

Christer Engelbrektsson

Forbo Swift Sweden AB

Gothenburg

Mark McDonnell

SEK

100,000

100%

GD-Golvdepån i Sverige AB

JönköpingLars Ivar Norén

SEK

700,000

100%

Siegling Svenska AB

MölndalRoger Olsson

SEK

1,000,000

100%

Enia Carpet Group AG

EnnendaDr. Benjamin J. Fuchs

N

CHF

3,000,00025%HFJK Carpet D GmbH

EnnendaDr. Benjamin J. Fuchs

N

CHF

20,00025%

H

Forbo CTU AG

Schönenwerd

Dietmar Meyer

D

CHF

10,000,000

100%

Forbo Finanz AG

Eglisau

Gerold A. Zenger

D

CHF

10,000,000

100%

Forbo Giubiasco SA

Giubiasco

Dr. Stefan Krummenacher

D

CHF

10,000,000

100% MS

Forbo Immob AG

EglisauAndreas P. Lerch

CHF

1,700,000

100%

H

Forbo International SA

EglisauWerner Kummer

CHF

100,000

100%

H

Immobilien Emmenau AG

Hasle-Rüegsau

Andreas P. Lerch

CHF

1,000,000

100%

Siegling (Schweiz) AG

WallbachPeter Martin

CHF

500,000

100%

D

D

S

S
S
S

Switzerland

104 Forbo Financial Report 2003

D

D

MS
H

H
MS

Holding/Services

Belting

Adhesives

Flooring

Equity interest

Company

Registered office

General management

Share capital

Forbo Nairn Ltd.

LondonBrian Paterson

GBP

8,000,000

Forbo Swift Adhesives Ltd.

ChatterisMark McDonnell

GBP

100

100%

Forbo UK Ltd.

LondonMargo Main

GBP

32,500,000

100%

Stephens Miraclo Extremultus Ltd.

Dukinfield

Kevin Richardson

GBP

50,774100%

Forbo Adhesives LLC

Wilmington, DE

Jack L. Chambers

USD

100

100%

Forbo America Inc.

Wilmington, DE

Eugene M. Chace

USD

19,957,258

100%

H

Forbo America Services Inc.

Wilmington, DE

Eugene M. Chace

USD

50,000100%

H

Forbo Finance Inc.

Wilmington, DE

Eugene M. Chace

USD

100,000

100%

H

Forbo Linoleum Inc.

Hazelton, PA

Denis P. Darragh

USD

3 ,517,000

100%

Siegling America LLC

Huntersville, NC

Wayne Hoffman

USD

15,455,100

100%

United Kingdom

D

100% MS

MS
H
S

USA

S
MS
H
N
D

D

MS

S
MS

Sales
Manufacturing and Sales
Holding/Services
Not includedin the 2003 consolidation
Direct participationsof Forbo Holding AG

Forbo Financial Report 2003

105

March 2004

Typesetting, Litho and Printing: Neidhart + Schoen AG, Zurich

Photos:
Bettina Schaefer, Zurich Hamburg
Daniel Gerber, Zurich
Per Arvidsson, Stockholm
William Grant & Sons International, Richmond, UK

Conception and Design: Gottschalk + Ash Int’l

Imprint
Publisher: Forbo Holding AG, Eglisau Zurich
Editing: Klartext_Medienbuero, Wuppertal (G )Forbo Holding AG
CH-8193 Eglisau Zurich
Telephone +41 1 868 25 50
Fax +41 1 868 25 51
E-Mail info@forbo.com
www.forbo.com
Forbo International SA
CH-8193 Eglisau Zurich
Telephone +41 1 868 25 25
Fax +41 1 868 25 26

E-MailInvestor Relations
Gerold A. Zenger
gerold.zenger@forbo.com

E-MailCorporate Communications
Ursula Leonhard
ursula.leonhard@forbo.com