53 46 59
53 46 59
40 26 2140 26 2149 08 1339 55 01
39 55 0153 46 59

Northern Latitude

Pittsburgh

1 45 00
1 45 00
79 58 36
79 58 36
8 54 37
116 25 59
116 25 59
1 45 00

Western Longitude

Northern Latitude

Eastern Longitude

Northern Latitude

Western Longitude

Beijing
Bradford

Northern Latitude

EppingenEastern Longitude

49 08 1340 26 21

8 54 37
79 58 36

53 46 59
39 55 01

1 45 00
116 25 59

40 26 2179 58 36

39 55 01

116 25 59

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

N

30'
45
˚

22˚

90˚

270˚

22
5˚

30'

S

202
˚

SE

30'

180˚

SSW

SW

˚
157

5˚
13

ESE

112
˚ 30
'

'
˚ 30
247

SSE

WN
W

30'
67˚

E

W

292
˚ 30
'

ENE

30'

5˚
31

W
WS

0˚

NNE
NE

˚
337

NW

NNW

Units to Indicate Direction

Degrees are used not only for specifying
geographical longitudes and latitudes,
but also for direction. The range for indicating direction covers 360°. Startingfrom north (0°), degrees are counted in aclockwise direction, in a similar way
to the hours on a conventional watch face.
East lies at 90°, south at 180°, and west
at 270°. For greater precision, this system
is subdivided into two further levels.

Our Annual Report comprises two parts, the generalreport and the financial report. It is published in German
and is also available in English.

Contents

2 Forbo
3 Key Figures
4 To our Shareholders
8 Forbo Group: Focused Expansion of theAdhesives Business Has Positive Effects
14 Flooring: Position Well Maintainedin Declining Markets
18 Adhesives: Expansion into the USA with
the Acquisition of Swift
22 Belting: Resisting the Price Pressure with
High-Quality Products
25 Forbo all over the World
35 Group Structure
36 Corporate Governance
41 Board of Directors
48 Human Resources
50 The Forbo Share
52 Our Global PresenceForboForbo is a global producer of floor coverings, adhesives, and belts for conveying
and power transmission. The company employs some 5,700 people worldwide
and has an international network of 32 production companies and 80 marketing organizations in 30 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 some 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 application 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 andrestructuring projects within the Group in recent years, Forbo is an internationally well-established company today. In the foreground is the sustainable,
value- and growth-oriented company development.

2 Forbo Annual Report 2002

Key Figures1)
2002

2001

2002

2001

m CHF

m CHF

m EUR 2)m EUR 2)

1,531.1

1,485.1

1,043.7

–

130.8

–

86.5

Flooring

736.1

787.4

501.8

520.8

Adhesives

486.6

219.4

331.7

145.1

Belting

308.4

347.5

210.2

229.8

1,531.1

1,354.3

1,043.7

895.7

+13.1

–4.5

180.1

179.4

122.8

118.7

11.8

12.1

Operating profit

88.4

88.9

60.3

58.8

Continued operations

88.4

85.7

60.3

56.7

Change on previous year (%)

+3.2

–32.3

As % of operating assets (ROA)

6.6

7.9

–

3.2

–

2.1

29.0

34.3

Forbo GroupNet sales
Divested activities

Continued operations
Change on previous year (%)
Operating profit before depreciation

982.2

and amortization
As % of net sales

Divested activities
Consolidated profit
Change on previous year (%)
As % of average shareholders’ equity
Capital investments

42.6

51.8

–17.8

–42.9

6.9

7.1

45.2

66.4

30.8

43.9

1,600.6

1,331.6

1,091.1

880.7

Shareholders’ equity

590.6

652.2

402.6

431.3

Equity ratio (%)

36.9

49.0

485.4

235.2

330.9

155.6

82.2

36.1

Total assets

Net debt
As % of shareholders’ equity (gearing)

Employees (31. 12.)
Employees of acquired activities

NumberNumber

5,715

5,145

728

84

m CHF

m CHF

m EUR 2)m EUR 2)

108.8

73.7

74.2

48.7

Free cash flow
(before dividends, acquisitions and divestments)
Economic Value Added (EVA )® 3)

Stock market capitalization (at 31. 12.)

4.3

–2.1

2.9

–1.4

537.7

659.0

366.5

435.8

CHF

CHF

EUR 2)EUR 2)Per share data

1)
2)
3)
4)

Earnings per share

32.65

37.84

22.26

25.03

Shareholders’ equity per share

452.51499.78308.46330.54

Cash distribution per share

22.00 4)

22.00

15.00

14.55

Payout ratio (%)

67.4

58.1

For explanatory notes, see Financial Report

CHF values translated at year-average rateof CHF 1.467/1 EUR (2002) and 1.512/1 EUR (2001)

Registered trademark of Stern, Stewart & Co.
Proposal of the Board of Directors:
Cash distribution by reducing the nominal value

Forbo Annual Report 20023

To our Shareholders
Dear Ladies and Gentlemen
Consistent
implementationof the Group’s
strategy

In recent years, Forbo has taken and implemented essential strategic decisions,especially the focus on the three core activities, Flooring, Adhesives, and Belting. In line with this process, the Group was restructured on the organizationaland operative levels, and a stringent cost optimization process was started
in all areas. In 2002, a decisive step was made with the acquisition of the Swiftadhesives activities to reach a global position in the Adhesives Business, too.
The acquisition created the preconditions for a better than industry-averagecompany development. In fact, the Swift business has already made a positive contribution to the Group results in just under nine months since it was
acquired. Due to sluggish demand on world markets, unfavorable exchange
rate movements and the instable geopolitical situation, also Forbo’s sales andprofit suffered in the core businesses.

Operating profit
on the previous
year’s level

In the year under review, the Forbo Group recorded sales of CHF 1,531 million,a 13 % rise excluding the Carpet Business sold in October 2001. This increaseis the result of the Swift acquisition. The operating profit of CHF 88 million isnearly unchanged (previous year: CHF 89 million) despite amortization of
goodwill and acquired trademarks of CHF 6 million and the impact of the unfavorable exchange rate movements of about CHF 4 million. Operating cash
flow (EBITDA) at 12 % of sales remained on an acceptable level and is the basis
for the Group’s solid financial situation. The Group’s consolidated profit of
CHF 43 million is 18 % below the previous year especially as a profit of the higher
financial expenses through acquisitions and due to higher tax rates.

Earnings per share

The share buy-back program carried out in 2001 reduced the number of shares.
Related to the average number of outstanding shares, earnings per share was
CHF 32.65 compared with CHF 37.84 in the previous year, meaning that the 14 %decrease of the earnings per share is somewhat less than the Group’s consolidated profit decline.
Global position in the Adhesives BusinessWith Swift into
industry’s top ten

The integration of the acquired Swift activities has led to a clear new positioning of Forbo in the international adhesives business. The extraordinary significance of this acquisition is the geographical expansion into North America.
There, Forbo had not been present in the adhesives industry. Furthermore,
the Swift activities in Europe are a perfect fit with the company’s previous business, both geographically and by application segments. Whereas Forbo’s previous activities focused on shoes, furniture, construction, and car interior trims,
Swift is strengthening fields such as packaging, tobacco, and paper. Our market position has been strengthened substantially, especially in France, Italy, GreatBritain, and Ireland as well as in Scandinavia. The scope of Forbo’s activities
has clearly grown in these countries. Thus, Swift represents an ideal expansion

4 Forbo Annual Report 2002

of the Adhesives Business which was successful already in previous years. The
Swift acquisition makes Adhesives an important pillar of the Group, introducing
a completely new order of magnitude and strategic significance. Today, Forbo
is among the world’s leading producers of adhesives.
European presence with Belting expanded
Acquisitionin Great Britain

Effective October 1, 2002, Forbo acquired 100 % of the shares of British company Stephens Miraclo Extremultus Ltd., following years of holding a 25 %capital participation. The former family company has been representing Forbo’s
belting activities under the Siegling brand for more than 50 years and employs
approximately 80 people. With annual sales of CHF 17 million, Stephens Miraclo
Extremultus Ltd. is among the leading suppliers of belts for conveying andpower transmission in Great Britain and Ireland. The company has a strong position in the promising food segment which is very important in this geographical region. With the complete take-over, Forbo is now represented with its
own companies in all the key European markets.
Reorganization of the Flooring Business

Consistentmarket appearance

The linoleum and vinyl activities, which have so far been represented separately
in the Executive Board, were consolidated into a single Business at the beginning of the new fiscal year. This Business will in the future be represented in themarket by a global sales organization, under the name of Forbo Flooring. The
sales teams continue to be structured by project and residential activities on thenational level so that a segmented market coverage is ensured with the coreproducts of linoleum and vinyl. The production sites supplying the sales organizations worldwide with the flooring materials continue to be aligned to thetwo core products of linoleum (two production plants) and vinyl (five production plants). The streamlined organization will further enhance the appearance in the individual national markets and ensure a sharper customer focus
with products and product development as well as cost savings in the fieldof administration.
Unchanged cash distribution thanks to high free cash flow

Considerable
cash flow

A considerable operating cash flow (EBITDA) of CHF 180 million (previous year:
CHF 179 million) was reached despite difficult trading conditions. The cautious investment activity – in line with the business development and good management of working capital – led to an attractive, high level of free cash flow.
It reached CHF 109 million, compared with CHF 74 million in the previous year,
before dividends and excluding the purchase and sale of activities.

Forbo Annual Report 2002

5

US private placement
as innovative
company financing

A US private placement was successfully concluded under attractive conditionsin November 2002 for financing the acquisition of the Swift adhesives business and for general Group financing. The investors are US insurance companies.
The term of the placement is graduated over a period of five, seven, and ten
years, respectively. The private placement was heavily over-subscribed. Thus, thevolume of originally USD 150 million was increased to USD 275 million. As aresult, the Group’s long-term debt financing rests on three pillars, i.e. US Private
Placement, Swiss capital market, and, to a smaller extent, bank facilities.

Cash distribution
by reducing
the nominal value

In view of the profitable business activity and especially the high free cash flow,
the Board of Directors proposes to the Annual General Meeting a cash distribution as in the previous year of CHF 22 per registered share, by way of a reduction of the nominal value. On the one hand, this is to underline the distribution continuity. On the other hand, this is a special recognition of the company’s
75th anniversary because the shareholders will additionally benefit from a tax
favorable form of payment. The total amount to be distributed is CHF 29 million.

Solid balance sheet

At the end of 2001, the Group’s net debt was at CHF 235 million. Net debt rose
to some CHF 590 million in May 2002 as a result of the acquisition of the
Swift activities. As per December 31, 2002 net debt could be reduced to CHF
485 million as a result of the high free cash flow and the seasonal businessdevelopment, with additional positive effects from the weakening US Dollar towards the end of the year. As a result, the gearing is at 82 % (net debt in % ofequity capital). The equity ratio is 37 % – an acceptable level in connection withhigh liquidity. We expect the balance sheet ratios to show further improvements.
Personnel changes

Board of Directors

The terms of office of Dr. Paul Tanos and Prof. Dr. iur. Rolf Watter as Directorsof the Board will expire as of the 2003 Annual General Meeting. The two gentlemen will stand for re-election. Dr. Gerd Hofmeister, for personal reasons, will
resign at the forthcoming Annual General Meeting. We thank him for his active and most valuable cooperation since 1994.

Executive Board

In the course of the reorganization of the Flooring Business, Martin Richenhagen
was appointed Head of this Business and consequently has become a memberof the Executive Board at the beginning of 2003. Since 1998, he has been Managing Director of the German family company CLAAS KGaA mbH with responsibility for Marketing, Sales, and Human Resources. Richard S. Pemberton,
former Head of the Vinyl Business, was appointed Head of Flooring Sales. In
this function, he retired from the Executive Board. We wish him lots of successin his new position. Marien A.G. Weijenberg, Head of the former Linoleum
Business, left Forbo at the end of November 2002 by mutual agreement. We
thank him for his services rendered.

6 Forbo Annual Report 2002

Corporate GovernanceGood
corporate citizenshipGood corporate citizenship has always been a priority to Forbo. The Corporate Governance Guideline of SWX has been implemented, as have been thoserules of the Swiss Code of Best Practice which are relevant to Forbo. All
Members of the Board of Directors are non-executive and independent of thecompany. Our Board Committees have effective and appropriate control
mechanisms that have been in existence for years. However, we deem it much
more important than all the regulations is that the Board of Directors as
the shareholder representative is committed to actively practicing corporate
governance in accordance with the meaning of the term.
75th anniversary of the Forbo Group

Tradition
as a commitment

In 2003, the Forbo Group can celebrate its 75th anniversary. What started in 1928
as a network of European linoleum producers under the name of Continental
Linoleum Union in the form of a group that had an international presence already at that time is in existence still today. Apart from the core product linoleum which in a rejuvenated form, is still successful in today’s markets and continues to be one of our key profit contributors, the company’s product portfolio
underwent numerous changes in the 75 years of its existence.

Well prepared
for the future

Today Forbo has good preconditions for further entrepreneurial success with
its three global Businesses: Flooring, Adhesives, and Belting. As a company witha long tradition, we are proud of our roots and we know the strengths we canderive from. The resulting sense of responsibility and a high-quality awarenessare guiding us in our daily approach to our products, the natural resources,
our customers, partners, and employees. This gives the company stability andresistance.
Outlook 2003

Continued
sales growth

For the next few months, Forbo is not expecting a significant recovery of the current market conditions. As a result of these difficult trading conditions, wewill continue our strict cost management and focus on cash generation aimed
at posting a clearly positive free cash flow in 2003. This will further strengthen our balance sheet. We are expecting continued sales growth in local currencies following the first full-year contribution of Swift in 2003.

Thanks

We would like to thank you, dear shareholders, for your trust in and your loyalty to our company. At the same time, we would like to extend our thanks to all
the Forbo employees for their commitment.

Karl Janjöri
Chairman of the Boardof Directors

Werner Kummer
President and CEO

Forbo Annual Report 2002

7

Forbo Group: Focused Expansion of
the Adhesives Business Has Positive Effects
The business year 2002 was characterized by continued difficult economic
conditions and the acquisition of the Swift activities. The targeted expansion of the Adhesives Business had positive effects in all respects. The
Forbo Group’s international market position was essentially strengthened with the Swift acquisition, which made a substantial contribution to
the Group’s financial results. Thus, a company development could be
brought about that was better than that of the overall industry. Sales
in the business year 2002 reached CHF 1,531 million, an increase by 13 %excluding the Carpet Business sold in October 2001 (previous year:
CHF 1,354 million). The increase is the result of the acquisition of the Swiftadhesives activities in April 2002. Excluding this acquisition, sales decreased on a comparable basis by 2 % in local currencies and 5 % in Swiss
Francs to CHF 1,284 million. The operating profit of CHF 88 million isnearly unchanged (previous year: CHF 89 million), despite additional amortization of goodwill and acquired trademarks of CHF 6 million and unfavorable currency influences. The contribution of the original business to theoperating profit declined by CHF 14 million or 16 %, of which CHF 4 million alone were due to negative currency movements. As a result of clearlyhigher expenses for financing and an increased tax rate, Group profit
is at CHF 43 million after CHF 52 million in the previous year. As opposed tothis trend, the free cash flow could be increased to CHF 109 million (previous year: CHF 74 million).
The business development at a glance
Weak markets
for floor coveringsin Europe

Flooring sales declined by 3.6 % in local currencies. In Swiss Francs, the decrease
was 6.5 %, corresponding with sales of CHF 736 million versus CHF 787 million
in the previous year. This decline is essentially due to the weakness in themost important European markets. The sales losses could not be compensatedby continued growth of about 20 % in Eastern Europe.

Linoleum grows
in North America

Linoleum sales were CHF 372 million, 3.7 % and 6.9 % less than in the previous year in local currencies and Swiss Francs, respectively. Especially in the
fourth quarter, linoleum suffered from reluctant public spendings in key
European countries. As opposed, the North American linoleum market stayedon growth course with plus 6.9 %.

8 Forbo Annual Report 2002

Strong performanceof vinylin Eastern Europe

Forbo vinyl recorded sales of CHF 308 million, down 2.0 % in local currencies
and 4.8 % in Swiss Francs from the previous year. In the course of the year, sales
further picked up in Eastern Europe and Asia, partly compensating for weakbusiness in Northern and Western Europe.

m CHF
Change on previous year
currency adj. %2002 effective %Flooring
Adhesives*
Belting
Total
*

736.1
486.6
308.4
1,531.1

–6.5
121.8
–11.3
13.1

%

Sales
by Businesses

48.1
–3.6
31.8
124.6
20.1
–5.5
16.7 100.0

Including acquired activities of CHF 255.2 million

Adhesiveson growth course

With sales of CHF 487 million after CHF 219 million, the Adhesives Business is
on a clear growth course. Of the CHF 268 million increase, CHF 247 million
were accounted for by the Swift activities acquired in April 2002 whose integration in the existing Adhesives Business has been nearly completed. Even without the acquisitions, adhesives posted an increase by 8.2 % in local currencies
and 5.4 % in Swiss Francs.

Belting sufferingfrom weak capital
investments

The global business with conveying and power transmission belts recorded salesof CHF 308 million (previous year: CHF 348 million), 5.5 % less in local currencies and 11.3 % less in Swiss Francs. The significant currency influence is dueto the high percentage of Dollar-based markets. Especially sluggish demandfor capital investment weakened the OEM business with conveying and powertransmission belts, a trend that could not be made up for by replacement business. Business in North America and Asia was somewhat better than in Europe
where the recovery that started in the third quarter continued throughout the
fourth quarter.
Geographical distribution

Sales decline
in key markets

Expressed in local currencies and excluding the Swift acquisition, only Eastern
Europe was able to record marked sales growth. Sales could be maintainedon the previous year’s level in Great Britain, France, the USA, and Asia. Considerable sales decreases were posted especially in our traditional European key
markets such as Germany, Benelux, Scandinavia, and Switzerland. Except for Adhesives, all Businesses contributed to that result.

Forbo Annual Report 2002

9

Shift in sales
by markets

As a result of different market dynamics, Eastern Europe, Asia, and the USA
have gained in importance. The acquisition of the Swift adhesives activities complements this trend, raising the sales percentage of North, Central and SouthAmerica to about 23 % (previous year: 15 %) in line with the Group strategy. As
opposed, the German market’s contribution to Group sales decreased to 14 %(previous year: 17 %). The same trend applies to the Benelux countries and Scandinavia.
Sales by geographic areas%

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

22.6
13.9
13.3
9.8
9.6
8.4
7.4
5.8
4.8
4.4

Change on previous year
effective % currency adj. %

72.8
–5.7
–2.2
8.9
–4.6
2.1
26.8
11.5
24.7
–9.2

80.6
–3.0
0.7
11.8
–3.1
9.0
28.9
15.1
27.6
–9.2

m CHF
2002

346.2
213.0
204.3
150.0
146.4
128.1
113.1
89.4
73.7
66.9
0

50

100

150

200

250

300

350

400

Capital investments
SAP introductiona priority

In previous years, essential capital investments were concluded. All in all, it canbe noted that Forbo’s production plants are state of the art, with sufficient
production capacities. In 2002, the new vinyl coating and cutting facilities forthe project market (floor coverings for commercial buildings, hospitals andother large projects) were started successfully in Reims (France). As a result,
Forbo has now the necessary capacity – combined with higher productivity –to cater for this flourishing product category. Also in response to brisk demand,investments were made in the production of hot-melt adhesives in Pirmasens(Germany). The Group’s investment program is focused on the introduction ofstandardized ERP software (Enterprise Resource Planning) from SAP. All inall, the investment volume of CHF 45 million was below the level of previous
years and about CHF 35 million lower than depreciation in the year underreview.
Capital investments 1998–2002

2002
2001
2000
1999
1998

Flooring

Adhesives

Belting

m CHF

m CHF

23
46
37
60
66

11
9
7
9
9

Total

m CHF

Divested
activities
m CHF

m CHF

11
10
16
35
58

1
8
21
26

45
66
68
125
159
0

Flooring
Adhesives
Belting
Divested activities

10 Forbo Annual Report 2002

20

40

60

80

100

120

140

160

180

Employees
Swift acquisition
adds employees

As per December 31, 2002, the number of employees had risen from 5,145 to
5,715. 629 employees stem from the Swift acquisition, 99 employees from further acquisitions. Excluding acquisitions and on a comparable basis, this meansthat the number of employees decreased by 158 as a result of rationalizationand cost saving measures. This decrease was concentrated on the declining key
markets.
Employees by Businesses
2002

Flooring
Adhesives
Belting
Headquarters
Total**

Change2001/2002 %

2,611
1,377
1,684
43
5,715

%

–4.1 45.6
82.4 24.1
3.8 29.5–4.4
0.8
11.1 100.0

Including 728 employees from acquired activities

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

Change2001/2002 %

2002

23.2
14.7
14.3
9.9
9.1
8.7
7.2
6.4
5.8
0.7

0.1
–2.8
66.3
25.1
29.5
–6.9
–9.6
5.2
38.6
17.6

1,326
837
815
568
518
499
413
365
334
40
0

200

400

600

800

1 000

1 200

1 400

1 600

Result development
Attractive resultin spite ofnegative influences
worldwide

The operating profit (EBIT) of the Forbo Group reached CHF 88 million (previous year: CHF 89 million) despite negative influences worldwide, after additional amortization of paid goodwill and acquired trademarks of CHF 6 million
and a negative currency impact of CHF 4 million. This result development
must be seen against the background of a severe weakness in some of Forbo’s
markets. The effects of negative influences could be limited through theGroup’s strategic realignment in recent years, and notably the acquisition andsuccessful integration of Swift. The Swift activities have already made a considerable contribution to Group profit since the take-over on April 19, 2002. For
example, its contribution to the operating profit before depreciation andForbo Annual Report 200211

amortization (EBITDA) of CHF 29 million and CHF 23 million after depreciation (EBITA) is clearly above the original expectations. However, the weak
US Dollar impaired the good performance slightly in the fourth quarter. Thus,
the Forbo Group as a whole reached an operating profit before depreciation
and amortization (EBITDA) of CHF 180 million – slightly higher than in the previous year – corresponding with 11.8 % on sales (previous year: 12.1 %). The
operating profit after depreciation (EBITA) is CHF 100 million resulting in a return (EBITA/Operating Assets) of 8 %, as in the previous year, including andadjusted to a Swift’s full-year result.
EBIT by Businesses
Flooring
Adhesives
Belting
Headquarters/consolidation

m CHF
2002

Change2001/2002 %2002 %

63.6
37.6
10.9
–23.7

–19.1
126.5
–24.3
n/a

12.0
8.2
3.6
n/a

ROA*

–50
*

–25

0

25

50

75

100

Return on Assets(EBIT in % of operating assets)

Negative influences

The profit decrease has various reasons. The unfavorable currency development
versus the Swiss Franc had a negative impact of CHF 4 million on the operating profit in the course of the year. In addition to strong price pressure in all thebusiness areas, higher costs were incurred with raw materials, energy, and personnel. Both influences could only partly be offset by increased productivity. Finally, a strong sales decline had to be recorded in the linoleum business especially in the fourth quarter. In addition, there were also restructuring costs ofsome CHF 3 million.

Higher financial
expenses

Net financial expenses were at CHF 24 million, clearly higher than in the previous year (CHF 16 million). This is mainly due to the Swift acquisition which
was financed with borrowed capital. As a result of the slightly lower operating
profit, higher financial expenses, a higher tax rate, and weaker foreign exchange rates, the Group profit is CHF 43 million compared with CHF 52 million
in the previous year. The higher tax rate can be explained by a shift in the regional profit composition.

Positive Economic
Value Added

Forbo aims at enhancing the company value. Such a value is only created when
the return on assets employed is above the weighted average capital cost.
Despite an increase in the capital employed, a positive EVA® (Economic Value
Added) of CHF 4 million could be recorded in the year under review following the negative value of CHF 2 million in the previous year. This was possible
by reducing the capital cost to 5.5 % (previous year: 7.3 %). The capital cost

12 Forbo Annual Report 2002

reduction is mainly due to a higher percentage of borrowed capital and lower
interest rates. A summary of this calculation can be found in the Financial
Report on page 6.
Free cash flow

The free cash flow before dividend reached CHF 109 million versus CHF
74 million in the previous year. This does not include the purchase of activities
such as Swift in 2002 or the sale of the Carpet Business in 2001. The lower
level of capital investments and the reduced need for working capital had apositive effect on the free cash flow.
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

25

50

75

100

125

150

175

200

75

100

125

150

175

200

Free cash flow 2001
m CHF

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

136
–62
74
0

1)

25

50

Before dividend, purchase and sales of activities

Measures
Structures adapted

The cost cutting measures initiated already earlier were continued in the year
under review. They also affected the number of people employed which decreased by 158 on a comparable basis. In all three core Businesses, the structures
were adjusted to the demand situation and were further optimized. In thiscontext, several sales offices in Great Britain and the Benelux countries were integrated.

Projects speeded up
consistently

Numerous projects were speeded up consistently in spite of higher cost pressure with the goal of enhanced product innovation, market coverage andefficiency. The Group expects the implementation of these projects to bringabout a long-term, sustainable increase in profit, and cost reduction. The
introduction of standardized SAP software in all three businesses has been apriority project.

Forbo Annual Report 2002

13

Flooring: Position Well Maintainedin Declining Markets
Thanks to its strong market position, Forbo was able to restrain the negative influences of the general industry development. The flooring market
was declining in Europe, with particular pressure on carpet and cushion
vinyl. The consumers preferred stone or ceramic floor coverings, followedby parquet, linoleum, cork, and conventional vinyl. The strong growth
dynamics for laminate materials of the previous years has come to a standstill. Regionally affected were especially Germany, but also the Benelux
countries, the entire Scandinavian region, and Switzerland. The market situation was somewhat better in France, Great Britain, and in Southern
Europe. Demand was clearly picking up in Eastern Europe, and notably in
Russia. North America and Asia were also suffering from sluggish demand, although less pronounced than in Europe. With sales of CHF 736 million, Forbo performed well in this extremely difficult market environment.
In local currencies, the sales decline is 3.6 %, slightly less than the overall market. In Swiss Francs, sales decreased by 6.5 %, of which 2.9 %alone are due to negative currency movements. The operating profit is at
only CHF 64 million (CHF 79 million) because of the adverse conditions.
Linoleum
North America
still a growth market

Linoleum sales in local currency declined by 3.7 %, reaching CHF 372 million
compared with CHF 400 million in the previous year. Business in the fourth
quarter of the year under review was particularly weak. The decrease was due
to weak demand especially in the project business. Among the primary reasons were customers’ reluctance in key European countries with furnishing ofbusiness buildings, and reduced public spendings. The three largest markets
for linoleum, i.e. Germany, the Benelux countries, and Scandinavia, as well assome smaller European markets were declining. Exceptions were Great Britain,
France, and Austria. North America continued on its linoleum growth coursewith a plus of 6.9 %. As opposed to Europe, public buildings, but also buildings
taking into account environmentally friendly aspects had a positive impact inNorth America. Forbo defended its market leadership with a share of some 60 %in the linoleum world market.

Net margin kept
despitemarket situation

The continued pressure on prices because of the current market situation
could be offset by productivity improvements and cost savings. Thus, the net
margin could be maintained at an unchanged level.

14 Forbo Annual Report 2002

Presenceat key international
trade shows

Linoleum holds a unique niche position within the flooring market. The product is environmentally friendly, design-oriented, long-lived, and extremely
hard-wearing. Linoleum is used in the design-oriented residential area as well
as for project business in public buildings such as schools, homes for theaged, hospitals, and office buildings. The unique benefits of the product were
demonstrated at leading international trade shows: Domotex in Hanover(Germany), Surfaces in Las Vegas (USA), Neocon in Chigago (USA), Swissbau inBasle (Switzerland), Bâtimat in Paris (France), and for the first time also at
the occasion of the Salone del Mobile in Milan (Italy).

Linoleum
also for furnitureand kitchens

Also in 2002, product innovations were developed and introduced, notably for
applications of linoleum in furniture and kitchens. A new trend collection
for the residential area and a premium Artoleum® collection for project businesswere added to the product portfolio. Also the tile segment was expanded, e.g.
with the ‚Martha Stewart‘ collection for the North American market and a newtile collection for Sweden. Marmoleum® Click, unveiled at Domotex 2003, isbeing introduced. The product is laid like parquet or laminate, but it offers theadvantages of the linoleum surface as a natural product. Forbo expects thisproduct to strengthen the Group’s position in outlets specialized in residential
floor coverings. The current product development is focused on easy laying,
optimum cleaning and maintenance characteristics, and non-slip properties. All
in all, the positioning of linoleum as a trend and lifestyle product is being continued with a clear design orientation.

Sales by product groups
m CHF
2002

Linoleum
Vinyl
Other floor coverings
Total

372.0
308.0
56.1
736.1

Change on previous year
effective %currency adj. %

–6.9
–4.8
–12.6
–6.5

–3.7
–2.0
–10.7
–3.6

%

50.6
41.8
7.6
100.0

Forbo Annual Report 2002

15

VinylPrice differentiatedmarket developmentin the residential
area

Vinyl sales declined by 2.0 % in local currency. Sales reached CHF 308 million
after CHF 324 million in the previous year. The market for cushion vinyl usedespecially in the residential area continued to suffer from overcapacities andall signs of a market saturation in Western Europe, notably in the lower pricesegment. Sales declined particularly in Germany, the Benelux countries, GreatBritain, and Switzerland. The markets in Scandinavia and France stayed on asatisfactory level. Forbo was able to further grow its market share in the premium price segment. In Eastern Europe, the market share could be expanded substantially with a sales growth of about 20 %. Especially Russia continued to be aclear growth market. The Forbo brands Novilon® and Novilux® continued tobe leaders in the upper price segments of the market.

Progress in the
project business

The conditions for vinyl project business (commercial buildings, hospitals, andother large projects) differed from those prevailing in the residential area. The
market decline and the price pressure were less pronounced. For Forbo the business development was particularly positive in France and Eastern Europe. Essential progress was made in Asia, and notably in China.

New plant for
project businessIn 2002, the investment in a new coating and cutting plant for project floorings
in Reims (France) was concluded. The plant offers sufficient capacity for theprospering project business.

Product innovation

A new Novilon® collection of cushion vinyl was launched successfully at the endof 2002. It has a novel design effect and further improved application properties. With Eternal, a new collection for the project area was presented at Domotex. This innovative collection of heterogeneous, non-foamed vinyl is produced with state-of-the-art technology in the plant in Coevorden (the Netherlands). The products are characterized by an excellent design and uniqueproperties in terms of maintenance and life. As such they meet all the requirements made on demanding project applications.
Parquet floorings and carpets

Flanking products

As a supplement to its product range, Forbo manufactures parquet floorings
to a smaller extent, especially for the Scandinavian market, and textile needlefelt
floorings in France. Parquet production in Sweden reached sales of CHF 31 million after CHF 37 million in the previous year. Carpets including needlefelt
recorded sales of CHF 25 million.

16 Forbo Annual Report 2002

Capital investment into modern IT solutions
Improved processes
through SAPThe SAP introduction was speeded up in the Benelux countries, Germany, andSwitzerland, and the complete integration of sales and production was completed. The extension to the total Flooring Business is underway, and is expected to be concluded by 2004. The software facilitates and optimizes businessprocesses in stock management and production control, but especially so in sales
and order handling. The problems that occurred during the system introduction resulted in supply bottlenecks in the summer months. This unsatisfactory
situation could be completely corrected as from the third quarter.
Outlook

Restructuring
offers advantages
in a difficult market

It seems that the mostly difficult market conditions in our industry are here tostay also in 2003. The new structure of the Flooring Business with a global
sales organization gives Forbo more flexibility and consistency on the international level and in individual geographical markets. As in the past, the sales
teams are structured by project and residential business on the national level sothat a segmented market coverage is ensured with the core products, linoleum,and vinyl. The stronger coordination of project and residential business on thenational level will improve customer service and reduce costs. The new market-driven organizational structure in connection with new products is expected to bring about an expansion of business with the residential flooring industry. Following the expansion in the USA and in Asia, further growth should
be possible in these regions provided the economic activity is going to pick up.

Forbo Annual Report 2002

17

Adhesives: Expansion into the USA
with the Acquisition of Swift
For the adhesives industry, the year 2002 was not easy. In some segments,
the consolidation continued, while others had above-average growth
rates. Most outlets such as furniture and the construction industry sufferedfrom sluggish demand. The price level decreased partly, and the higher
raw material costs of the second half-year could not be passed on to themarket. Consequently, this industry in general had to live with reduced
margins. The result was a further consolidation in the entire industry. Forbo
was able to successfully resist these negative influences, steering a clear
growth course with net sales of CHF 487 million after CHF 219 million in theprevious year. The Swift activities acquired in April 2002, and their integration into the existing Adhesives Business, which has nearly been concluded, accounted for CHF 247 million of the total increase of CHF 268 million. Even without acquisitions, Forbo’s Adhesives Business was able
to increase sales by 8.2 % and 5.4 % in local currency and Swiss Francs, respectively. The operating profit reached CHF 38 million after CHF 6 million
amortization on goodwill and trademarks (previous year: CHF 17 million).
Excluding Swift, CHF 21 million were posted, a clear increase over theprevious year. This means that in 2002, the Adhesives Business became an
important pillar of the Forbo Group in terms of both sales and returns.
New positioning in the international Adhesives BusinessWith Swift
into the Top Tenof the Industry

The integration of the Swift activities acquired in April 2002 has led to a clear
new positioning of Forbo in the international adhesives business. The geographical expansion to North America is of extraordinary strategic significance.
Before, Forbo had not been present there in the adhesives market. Furthermore,
the Swift activities in Europe are a perfect match to the previous Forbo business. Whereas before Forbo had been active in areas like shoes, furniture, construction, and car interior trims, Swift especially strengthens the segments
packaging, tobacco, and paper. This product match is particularly pronounced in
France, Italy, Great Britain, Ireland, and Scandinavia. The share of Forbo activities has clearly been rising in these countries. Thus Swift is the ideal expansionof Forbo’s hitherto successful Adhesives Business. With the Swift acquisition,adhesives have grown into a completely new order of magnitude and strategic
significance for Forbo. Already in the year of the acquisition, Swift made apositive contribution to both operating profit and Group net profit. With Swift,
Forbo has thrust into the league of the world’s top ten producers of industrial
adhesives.

18 Forbo Annual Report 2002

Current market segments in the Adhesives Business
EuropeUSA

Asia

Paper, Packaging
Building, Construction
Woodworking, JoineryTransportation
Footwear, Leather
Consumer, Do it yourself
Assembly
Adhesives Intermediates

Forbo’s position
Swift’s position
Complementary position

Swift at a glance

Swift is a leading company in the development, production, and marketing ofindustrial adhesives. In North America, the company also produces and markets intermediate products for the adhesives production. Swift’s high customer
and technical service standards document its pronounced customer orientation. It offers a broad range of high-performance melt adhesives and waterbased products. Among the customers are mainly the paper and packaging
industries. On a regional basis, Swift is particularly strong in its ‘homeland’, theUSA, but also has a presence in Canada, Mexico, and in some European countries.

Minor acquisitions

In February 2002, Forbo purchased all the interests in SABA Klebstoff- und Abdichtungssysteme GmbH, Mannheim (Germany). With sales of some CHF
10 million, the company is a strong partner of the German automotive industry
and its suppliers. With this acquisition, Forbo was able to strengthen its position in this important market segment and to gain access to product solutions
that can be used in other geographical markets. The acquisition of Balco
Chemie Benelux BVBA in the year under review represents another step in the
expansion of the Adhesives Business, especially for securing the market position in Belgium. The take-over with annual sales of some CHF 1.5 million was
effective September 1, 2002.

Forbo Annual Report 2002

19

Enhanced service for stronger customer loyalty
Market sharesthrough customer
orientation

There are all kinds of adhesives. Apart from standard applications, special solutions are often needed. This is particularly true for the car industry. Depending on model and vehicle generation, new designs and materials are being usedin the car interior and must be bonded permanently. Forbo does not only
sell adhesives, but offers the customer a complete service package. If necessary,a team visits the customer to identify the suitable adhesives for a certain application, for example. It studies, among others, how existing machinery must
be set up to reach optimum results. This service is rounded off by a hotline
available around the clock. With this service approach, Forbo Adhesives is very
successful in the market, continuously winning market shares.

The ball is roundAt the beginning was leather. For more than 40 years, sports goods producer
Adidas has been manufacturing footballs for world championships. At the
beginning, this company had been looking for a partner able to supply highquality products, committed to long-term cooperation, and ready to support and help with innovation. Forbo Adhesives proved to be the right address.
Initially, a special coating was used preventing the ball from picking up moisture and gaining ever more weight during a game. Later on, the seams of the ballwere made water-proof, and today it is all about high technology: The world
championship balls consist of special synthetic materials that are tailor-madeto the requirements of professional players. Forbo Helmitin supplies an advanced latex product for bonding the different materials. Forbo products willagain demonstrate their quality during the 2006 football world championships.

Investments in
hot melt adhesives

The favorable market conditions for hot melt adhesives called for the investment
in new production facilities in Pirmasens (Germany). They serve to expand
capacities and improve product quality. The market position with car interior
trims could be strengthened with several product launches for new applications. For the shoe industry various solvent-free technologies (water-based or
hot melt adhesives) were developed to replace solvent-based adhesives.

20 Forbo Annual Report 2002

Outlook
Swift’s earnings
potential becomes
effective

Through the complete integration of Swift, the earnings potential of this acquisition will become fully effective in 2003. The establishment of an own organization in Asia focused on attractive market segments will further strengthen
Forbo’s international position. SABA, acquired in 2002, will be organizationally integrated into Forbo Helmitin in Pirmasens (Germany) to exploit all synergies. The capacities in the field of melt adhesives will have to be further expanded to meet the high demand.

Furtherpositive stimuli
for sales and profits

In 2003, the adhesives industry will continue to consolidate in certain segments
and grow in others. Forbo is represented in the most promising segmentswith the majority of its products, and the regional effects of the Swift acquisition will further strengthen the market position. As a result of the geographical multiplication of this market position, Forbo is expecting further positive
stimuli for adhesives sales and profits.

Forbo Annual Report 2002

21

Belting: Resisting the Price Pressure
with High-Quality Products
The generally weak trading conditions called for special efforts also in thefield of beltings in order to master the challenges presented by the markets. The acquisition of Stephens Miraclo Extremultus Ltd. closed a gap in
Forbo’s international presence. Now Forbo is also present in Great Britain
and Ireland with its own subsidiary, and has built up a strong position in
the very promising food sector of this region. In local currencies, sales
were 5.5 % below the previous year, reaching CHF 308 million after CHF
348 million in 2001. About half the sales decline is due to negative currency movements. The operating profit was CHF 11 million compared with
CHF 14 million in the previous year. Despite clearly lower sales, return onsales was still at 3.5 % (previous year: 4.1%). The reasons are productivity improvements, sales with better margins, and an essentially better
cost structure overall.
Market situation
Original equipment
under pressure

The OEM business with conveying and power transmission belts was underpressure due to the reluctance in the capital investments industry. Replacementbusiness proved to be somewhat more resistant to the business downturn. Socalled commodity products, i.e. products with a high degree of standardizationand thus exchangeability, suffered particularly. Some segments of the market,
however, such as belts for security systems at airports, received positive stimuli.
The food sector performed well, as new solutions were demanded in view ofthe higher requirements made on the hygiene standards of beltings.

Slight recovery
in thesecond half year

The overall market was clearly declining in the first months of the year, but stabilized in the second half-year. Whilst especially the USA, Canada, China,
and Southeast Asia as well as Eastern Europe recorded growth, other key markets such as Germany or Japan declined. Forbo was at least able to defend
its market shares in most regions. Market shares could be increased in the USA,
China, and some countries of Western and Eastern Europe. In a few markets
the prices were so unattractive that market shares were given up deliberately.

22 Forbo Annual Report 2002

Strategic goals reached
Expansion in China

The strategic goals were reached with the development and market launch of
new products, essential efficiency improvements, and cost reductions in production, the successful expansion into China, and the highly promising setupof the new sales organization in Malaysia. In Japan, Forbo was able to stabilize the situation by means of a sweeping restructuring program, in spite of mostunfavorable trading conditions, and to present itself in the market with important initiatives. In the USA, a large number of new customers could be won.
The market price pressure could be resisted especially with new products.

Acquisition closes
geographical gap

Effective October 1, 2002, Forbo acquired 100 % of the shares of British company Stephens Miraclo Extremultus Ltd., following a holding of 25 % for years.
The former family company has represented Forbo’s belting activities under
the Siegling brand for more than 50 years and now employs approximately
80 people. With annual sales of some CHF 17 million, Stephens Miraclo Extremultus Ltd. is among the leading suppliers of beltings in Great Britain and
Ireland. The company has a strong position in the promising food segment with
its large share in the total market in this region. With the complete take-over,
Forbo was able to enhance its market presence in Great Britain and Ireland, andis now represented with its own companies in all the key Western European
markets.
Optimized information, control, and production processes

ERP with SAP
standard software

In order to improve processes in logistics and business economics, a so-called
Enterprise Resource Planning Software (ERP) based on SAP standard software
was implemented in the year under review. It represents all the relevant information across different departments that are necessary for the optimized cooperation of individual business functions. This includes the availability ofresources, inventories, and incoming orders. The software initially introduced
for the Hanover site (Germany) was installed in a period of only eight months– very fast for projects of this kind. The entire process from order receipt via
product manufacture and shipment can now be controlled by this ERP system.
On this basis, processes can be further developed with a view to the future.
The introduction at European and Asian sites is underway. All the Siegling sites
worldwide will follow receiving the new system.

Forbo Annual Report 2002

23

Additional
advantages
for customers

The newly introduced belt calculation program B_Rex has become extremely
popular. It allows the customer the interactive, graphically supported, systematic, and thus reliable calculation for the design of transport systems. This has
been possible so far with data provided by Siegling in a written form. Now thedigital availability of data and their integration in a convenient application
software prevent time-consuming, manual calculations, and costly mistakes. Bymeans of the program, Siegling products can be simulated in virtually any
conceivable plant configuration. Thus B_Rex contributes to stronger customer
loyalty.
OutlookConsiderablystronger to face
the competition

With its improved internal infrastructure, Forbo is structurally stronger for facing the competition. The use of SAP ensures a high level of responsivenesstowards the customers. The ability to develop and offer innovative products evenfaster than before, is a clear competitive edge. The optimized use of the technical and operative strengths will contribute to a sharper customer focus. In theUSA, Canada, Mexico, Russia, China, and also in some European countries,
the market situation can be classified as conservatively optimistic. The German
and Japanese markets are likely to stay difficult also in 2003.

Secondary brand‘Realbelt’ offers
high quality
to the lower pricesegment

The introduction of the secondary brand ‘Realbelt’ at the end of 2002 is to open
up new market segments. It will offer the lowest market segment good quality
and a selective product range, with a reliability so far not known in this segment.

Towards
profitable growth

Against the background of unsatisfactory margins in Europe, and notably inGermany, it is our declared goal to reach not only pure sales growth, but also
profitable sales. The way to this goal has been paved with new standards ofreliability and customer focus combined with innovative products for the food,
wood and textile processing, paper, printing, and car industries.

24 Forbo Annual Report 2002

USA

Pittsburgh
China

BeijingEnglandBradford
Germany

Eppingen

Linoleum
Vinyl
Adhesives
Belting
Forbo all over the world

At a children’s hospital in China, vinyl floor coverings create a pleasantatmosphere; a prize-winning ecological bank building in the USA featureslinoleum floor coverings; the English stationery manufacturer Hallmark
requires innovative adhesives, and a chipboard manufacturer in Germany
relies on high-quality synthetic conveyor belts: the Forbo Group, as a
global player, sells a diverse range of products for demanding applications
all over the world. The following pages introduce people who have opted
for Forbo products in their daily work.

Linoleum

49 08 13

8 54 37

53 46 59

1 45 00

Northern Latitude

Forbo USA

Pittsburgh

Western Longitude

40 26 2179 58 36

39 55 01

116 25 59

Sandra Wasik

Forbo’s linoleum floor coveringsat the PNC Firstside Center.
“Inherent beauty of the product. Available color variations and choices.
Durability. Ease of maintenance. Cost.
All of these factors made Forbo’s
linoleum the obvious choice in areasthat require hard surface flooringin the PNC Firstside Center in Pittsburgh(USA). In addition to all these advantages, Forbo has many sustainablefeatures, including the use of all natural
renewable materials and a minimum
amount of energy used in manufacturing. These characteristics were influential when the building design process
moved toward LEED (Leadership in
Energy & Environmental Design) certification. Ultimately, the building waspresented with a Silver Award by the U.S.
Green Building Council and is thelargest building to receive this honor.”
Sandra Wasik has been the Vice Presidentof the Commercial Interior Design
Department at Astorino for seven years
and in the design profession for over
22 years. She incorporates sustainable/
green elements and products like
Forbo’s linoleum in many of her award
winning projects.

Vinyl49 08 13

8 54 37

53 46 59

1 45 00

40 26 2179 58 36

Northern Latitude

Forbo China

Beijing

39 55 01

Eastern Longitude

116 25 59

Xie Tian Hai

Forbo’s vinyl floor coverings
in a children’s hospital in Beijing.
“As an architect, I select an interior
floor covering not only for its technicalcharacteristics, but also for its aesthetics. Abrasion and wear resistance, antibacterial properties as well as easy
maintenance are minimum requirements
for the health care environment. Besides, Forbo offers me a large choice ofmodern and fresh colors. Their products also provide acoustic insulation
and walking comfort. Sarlon® Traffic
gave me the opportunity to design ahospital with a real feeling of well-being
for patients, and in which the staff ishappy and motivated to work in. In a traditional Chinese hospital, this is almosta revolutionary approach.”
Xie Tian Hai, designer at the Beijing
Tune Construction and Decoration
Company, and his team selected Forbo’s
Sarlon® Traffic floor covering in the
new out-patient building of the Beijing
recovering children’s hospital, one of
the largest and most famous children’s
hospitals in China. China is a country
with growing needs, and Xie Tian Hai
is confident to use more and more ofForbo’s floor coverings in hospitals, butalso in many other areas.

Adhesives

49 08 13
Northern Latitude

Forbo England

Bradford

8 54 37
Western Longitude

53 46 59

1 45 00

40 26 2179 58 36

39 55 01

116 25 59

Chris Mallows

Forbo’s adhesives in the production ofgreeting cards and gift-wrapping paper.
“My work as the Operations Manager
calls for me to fully exploit all available
resources to deliver quality, costeffective finished products. By working
in partnership with Forbo, who understands our business and its needs, wehave achieved improved unit costs allied
to higher quality finished products.
In our cardboard core winding department, Forbo thought ‘outside the box’and designed a higher value adhesive
which resulted in a 30 percent increasein core-making speeds, thus preventing
the need to invest in another machine
to cope for future expansion, and also
obtained a 30 percent increase in theyield from the adhesive, thus reducing
material handling costs.”
Chris Mallows, Operations Manager
for the past seven years of the multicard
gift-wrapping and finishing factoryof Hallmark Cards in Bradford, England.
Hallmark Cards is the world’s largest
greeting cards manufacturer, and Forboadhesives are used in every part oftheir business – from cardboard cores toenvelopes.

Belting
Northern Latitude

Forbo Germany

EppingenEastern Longitude

49 08 13

8 54 37

53 46 59

1 45 00

40 26 2179 58 36

39 55 01

116 25 59

Detlef KrollForbo’s synthetic conveyor
belts in wood processing.
“As Head of the mechanical engineering
department for wood-panelling, I
must use all available resources in the development and production of complete high-quality production lines forthe particle board/MDF/OSB-manufacturing industry. Thanks to our close
partnership with Siegling and their
good understanding of our business andits needs, we have maximized the quality and functionality of our productionlines. The high-quality Transilon® conveyor belts and Extremultus® drive belts
developed by Siegling for our spreading, compaction and conveying sections
meet our strict demands on function.”
Detlef Kroll is Head of the mechanicalengineering department for woodpanelling at Dieffenbacher GmbH & Co.
in Eppingen, Germany, one of thebiggest manufacturers of turnkey production lines for the wood-based
panel industry. Siegling products areused here in all production lines –from spreading and conveying, throughto handling the finished boards anddecorating panels by, for example, veneering, coating and laminating.

Dr. Paul J. Hälg
Executive Vice President
Adhesives

Gerold A. Zenger
Executive Vice President and CFO

Werner Kummer
President and CEO

Martin Richenhagen
Executive Vice President
Flooring

Dr. Jan Lipton
Executive Vice President
Belting

Jan E. Sångberg
Executive Vice President
Corporate Business Development

Group Structure

President and CEO

Werner Kummer, Swiss
Born in 1947, studied at ETH Zurich where he graduated in 1972 as a mechanical engineer. In 1979 he took
part in the MBA program of INSEAD in Fontainebleau, France. From 1988 to 1998, he was working for the
Schindler Group, initially as the Chairman of the Executive Board of Schindler Aufzüge AG, and from 1994 asa member of the Group management with responsibility for Asia/Pacific. Since December 1998, Werner
Kummer has been CEO and President of the Executive Board. He is a member of the Board of Directors of
Bâloise Holding AG (Switzerland) and of Huber & Suhner AG (Switzerland).

Executive
Vice President
and CFO

Executive
Vice President
Corporate Business
Development

Executive
Vice President
Adhesives

Gerold A. Zenger, Swiss
Born in 1945, he worked from 1968 to 1970 with Crown Life Insurance in Toronto, Canada, in the Group Accounting Services area. From 1970 to 1973, he studied at the Advanced School of Economics and Business
in Zurich and worked part-time with Swiss Aluminium Ltd. in various 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.

Jan E. Sångberg, Swede
Born in 1948, he graduated in 1970 in Business Economics from Gothenburg University and started working
with Forbo shortly afterwards, initially for Forbo Forshaga AB in Gothenburg. Since September 1988, Jan E.
Sångberg has been holding different positions within the Group, and he has been an Executive Board member since 1992 with responsibility for corporate business development. He is a member of the Board of
Directors of Enia Carpet Schweiz AG (Switzerland).

Dr. Paul J. Hälg, Swiss
Born in 1954, he studied Chemistry at ETH Zurich where he took his doctor’s degree in 1981. From 1981 to
1986, he worked for Swiss Aluminium Ltd. from where he went on to Gurit-Essex AG, where he finally wasappointed CEO. In June 2001, Paul J. Hälg was appointed Executive Vice President Adhesives and member ofthe Executive Board. He is a member of the Board of Directors of Gurit-Heberlein AG (Switzerland).

Executive
Vice President
Belting

Dr. Jan Lipton, Swiss

Executive
Vice President
Flooring

Martin Richenhagen, German

Born in 1952, he studied Engineering at ETH Zurich, and he took his doctor’s degree at ETH Lausanne in 1983.
Initially, he worked in research and development followed by management positions in different Swisscompanies. From 1992 to 1997, he was working with Schindler AG, where he was a member of the Executive
Board. Then, he joined the Executive Board of Keramik Holding AG. In April 2000, Jan Lipton was appointed
Executive Vice President Belting and member of the Executive Board.
Born in 1952, studied philology at the University of Bonn. Following several years in the role of a secondary
school teacher, he joined the Hille & Müller Group in 1985, where he was Managing Director before leaving. From 1995 to 1998, Martin Richenhagen was Sales Director of Schindler Aufzügefabrik GmbH, followedby the role of Managing Director of CLAAS KGaA mbH. In February 2003, Martin Richenhagen was appointed Executive Vice President Flooring and member of the Executive Board. He is a Supervisory Board Memberof Fendt GmbH (Germany) and member of the Advisory Council of Krone Holding GmbH & Co KG (Germany).

Chief Executive Officer

Chief Financial Officer

Flooring BusinessCorporate Business
Development

Adhesives Business

Belting Business

Forbo Annual Report 2002

35

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 SWX Swiss Exchange’s Directive on Information Relating to Corporate Governance, which
entered into force on July 1, 2002, provided investors with a framework within which they can obtain an overview of the essential elementsof a company’s system of corporate governance in a standardized form.
Forbo had already implemented key sections of the Corporate GovernanceDirective prior to its entry into force and now complies with all of its
provisions. The following information is set out in line with the Corporate
Governance Directive drawn up by the SWX Swiss Exchange and, whereapplicable, the Swiss Code of Best Practice. Based on the Corporate Governance Directive, reference is made where applicable to information in
the Annual Report, Financial 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 35 of this Annual Report. The Forbo Holding AG group of consolidated
companies does not include any listed companies. The relevant details relating
to the non-listed companies that belong to the Forbo Holding AG group of
consolidated companies are given on page 44 of the 2002 Financial Report in thelist entitled ‘Group companies’. Information relating to the allocation of theGroup companies to their respective business units is also included in this list.

Significant
shareholders

As of the end of December 2002, 3,490 shareholders were listed in the shareregister of Forbo Holding AG, 181 more than in the previous year. According to
the company’s information, only one shareholder holds more than 5 % of thevoting rights. On July 29, 2002, UBS Fund Management (Switzerland) AG, Basel,acquired a stake of 5.11% with voting rights, thereby exceeding the 5 % limit.
The Ordinary Annual General Meeting of Forbo Holding AG on April 23, 2002
resolved to implement a capital reduction as part of the previous year’s sharebuyback program (see also the section on ‘Capital structure’ below). Following
the entry of this measure in the Commercial Register and the destruction of
156,974 of its own registered shares, Forbo Holding AG, Eglisau, now holds treasury shares amounting to less than 5 % of the voting rights.

Cross-shareholdings

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

36 Forbo Annual Report 2002

Capital structure
Authorized andconditional capitalThis information is contained on page 39 of the 2002 Financial Report.

Changes in capital,
2000 to 2002

A capital change only occurred in the 2002 financial year. It was resolved at theAnnual General Meeting of April 23, 2002 to reduce the share capital as a result of the share buyback program from CHF 75,677,500 to CHF 67,828,800. The
corresponding change to the Articles of Association was also approved by the
Annual General Meeting.

Shares

The share capital of Forbo Holding AG is CHF 67,828,800, divided into 1,356,576
registered shares with a nominal value of CHF 50 each. Further details are
given in the Notes to the Financial Statements on page 39 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 theright to 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
on transferability
and nominee
registrations

With regard to relations with the company, only the party entered in the shareregister 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 incase a share holder were to acquire or hold more than 8 % of the total numberof registered shares entered in the commercial register or if the acquirer ofthe shares does not expressly declare at the company’s request that the shares arebeing 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 approval of the share transfer and shall declare that he is acquiring and shallhold the shares for his own account. The registered shares of Forbo Holding AG
are not evidenced by certificate. However, a shareholder may request that acertificate be printed and made available free of charge. Non-certificated shares,
including the rights associated with such shares, may only be transferred bymeans of assignment. The company must be duly notified of any such assignment for the process to be valid. If non-certificated shares are held by a bankon the shareholder’s behalf, such shares may only be transferred with the involvement of the bank. Resolutions on the amendment or deletion 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.

Forbo Annual Report 2002

37

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 43 of the Annual Report.
Board of Directors

Members of theBoard of Directors,
activities andvested interests

The names of the members of the Board of Directors, alongside their nationalities, qualifications, professional backgrounds, activities, and interests arelisted on page 41 of this Annual Report.
None of the members of the Board of Directors were responsible for operational management tasks for Forbo Holding AG or its Group companies. Similarly, none of the members were members of the Executive Board of Forbo
Holding AG or its Group companies during the three financial years prior to theyear under review. There are no significant business connections between themembers and Forbo Holding AG or its Group 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 ona staggered basis. Information in this regard is provided on page 41 of this Annual Report. In accordance with Forbo Holding AG’s Organizational Regulations, 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 age ofthe incumbent members of the Board is around 59. 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 as wellas in the financial and consultancy sectors.

Internal organizational structure

The allocation of tasks within the Board of Directors and the composition of
the three Board committees are detailed on page 41 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 2002. Meetings are convened with notificationof the agenda at least five working days in advance or with shorter notice being
given in urgent cases.

38 Forbo Annual Report 2002

The Executive Board and the Corporate Staff, as well as the managers of the subsidiaries, 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 commercial events.
Three committees composed of members of the Board of Directors deal withclearly demarcated subject areas of overriding importance. These standing committees, which are constituted on a yearly basis, advise the Board of Directors and draw up proposals. Six committee meetings were held in total in 2002.
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 independence of the same. The AFC also stipulates the tasks of theinternal auditing. The CEO and CFO are regularly requested to attend meetings in an 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 2002 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 mayother members of the Executive Board if specially invited to do so. The CDC convenes as often as business requires. During the year under review, there was
one meeting of the CDC.

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 the 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 2002.

Forbo Annual Report 2002

39

Definition of areasof responsibility

The Board of Directors is the supreme managerial and control body within the
Forbo Group. It currently comprises eight members, none of whom hold any
executive function within the company. The Board of Directors has fully delegated operational management of the company to the CEO and the Executive
Board in 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
state of 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 of the CEO, the CFO, the Head of Corporate Business Development, and the Heads of the Businesses, which previously numbered four but have been reduced to three. During the year under review, there
were initially seven members. These were reduced to six after the organizational changes introduced in the Flooring Business. The Executive Board is responsible for the operational management of the Group and also 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 for the Group’s success.

Informationand control
instruments

In addition to the external auditors, internal auditing is available to support theBoard of Directors and the Group Executive Board in the implementationof their supervisory duties. The internal auditing is independent, autonomous,and reports directly to the AFC.

40 Forbo Annual Report 2002

AFC
CDC
HRC

Term of Expiration

Member since

Born inBoard of Directors of Forbo Holding AG

ChairmanKarl Janjöri, Swiss

1935 1986 2006

From 1960 to 1997 in various functions at UBS AG (CH)(former Schweizerische Bankgesellschaft),thereof 18 years in the Executive Board
Chairman of the Board of Directors of BDL Banco di Lugano (CH)Member of the Board of Directors of Italcementi S.p.A. ( I),WJB Chiltern Group plc (GB)Vice Chairman
Dr. Willy Kissling, Swiss

1944 1994 2006

Lic. rer. pol./Dr. rer. pol. University of Berne (CH)PMD Harvard Business School (USA)
Chairman of the Board of Directors of Unaxis Holding AG (CH) anduntil May 2002 CEOVice President of the Board of Directors of Holcim Ltd. (CH), SIG Holding AG (CH)Member of the Board of Directors of Schneider Electric (F)Members
Dr. Anton H. Bucher, Swiss

1942 1986 2006

Lic. oec. publ./Dr. oec. publ. University of Zurich (CH)
Owner of the Real Estate Holding Abbestate (USA)
Chairman of the Board of Directors of Hüppi Holding AG (CH),
Bircher Holding AG (CH)Member of the Board of Directors of WRH Walter Reist Holding AG (CH)Member of the Foundation Board of Alberto-Giacometti-Stiftung (CH)Drs. Pieter P.A.I. Deiters, Dutch

1943 2002 2006

Lic. oec. HSG University of St. Gallen (CH)Member of the Board of Directors of Koninklijke Ten Cate B.V. (NL),
Berghave B.V. (NL), Steps International B.V. (NL), Teidem B.V. (NL),
Tootal B.V. (NL)
Consultant EBRD European Bank for Reconstruction and Development (GB)Dr. Gerd Hofmeister, German

1934 1994 2006

Dr. rer. pol. University of Graz (A)Master of Economics and Business Administration University Munich (D)Previously general partner of Ernst Siegling KG (D)Michael Pieper, Swiss

1946 2000 2004

Lic. oec. HSG Universität St.Gallen (CH)CEO der Franke Holding AG (CH)Member of the Board of Directors of Franke Holding AG (CH), Hero (CH),SWISS International Air Lines Ltd. (CH), Thyssen Krupp Steel AG (D)Dr. Paul Tanos, Austrian1944 1999 2003

Magister rer. soc. oec. and Dr. rer. soc. oec.
Diplomkaufmann Vienna University of Economics and Business Administrationand studies at the University of Klagenfurt (A)Chairman of the Supervisory Board of Palmers AG (A)Member of the Supervisory Board of Vitalis GmbH (A), Zürich VersicherungÖsterreich (A)Prof. Dr. iur. Rolf Watter, Swiss

1958 1999 2003

Dr. iur. University of Zurich (CH); LL. M of Georgetown University (USA)Partner of law firm Bär & Karrer (CH)
Professor for commercial law University of Zurich (CH)Member of the Board of Directors of Zurich Financial Services (CH)and their affiliated company Zurich Financial Services (CH)Member of the Board of Directors of Syngenta AG (CH), Centerpulse AG (CH),
Feldschlösschen Getränke Holding AG (CH), UBS Alternative Portfolio AG (CH),
A.W. Faber Castell (Holding) AG (CH)Member of the Board of ‘Schweizerischer Juristenverein’ (CH)General Secretary of the Board of Directors
Dagmar T. Jenni, Swiss
Attorney, LL. M

AFC : Audit and Finance Committee
CDC : Corporate Development Committee
HRC : Committee for Human Resources and Remuneration

Forbo Annual Report 2002

41

Group Executive Board
The Group
Executive Board,
activities andvested interests

The names of the Group managers, alongside their nationalities, function, qualifications, and professional backgrounds, as well as their activities and interests
are listed on page 35 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
the compensations
and the share-ownership programs

The compensations paid to the Board of Directors are calculated by the HRC,
with its proposal being submitted to a full meeting of the Board for approval.
The compensations 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 following year. The target agreements for the coming financial year
are also approved as part of this process. When the annual accounts are produced in March, performance is reviewed in light of the stipulated target agreements and taking into account any prevailing market conditions, and a decision is made on any bonuses or the issuance of options.

Compensations
for acting membersof governing bodies

The members of the Board of Directors are remunerated on the basis of a graduated remuneration scale applicable to the Chairman, vice-chair, and members. 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 for calculation for the
options. Total compensations, paid to the Board of Directors for all mandates
within the Forbo Group amounted to CHF 879,943 in 2002, including options at
tax value at the time of issue.
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 paidin the form of shares of the Forbo Holding AG. These shares may not be soldfor a period of three years. As part of a stock option plan, the Board of Directors
issued members of the Executive Board with options in Forbo Holding AG for
the first time in 2000. The basis of calculation was the theoretical market valueon the issue date in each case, subject to a maximum of 10 % of the total remuneration payable. Total compensations paid to the Executive Board in 2002
amounted to CHF 4,475,725. This includes all payments, i.e. base salaries, bonuses, shares, and options at their tax value on the date allocated.

42 Forbo Annual Report 2002

Compensations
for former membersof governing bodies

During the year under review, no payments were made to members of theBoard of Directors or Executive Board who resigned from the company during
the previous period or at an earlier date.

Share allotmentin the year
under review

No shares were allotted to the members of the Board of Directors in the year
under review, but 615 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 at December 31,
2002 was 59,165, with the Executive Board holding 3,588 shares on the keydate. These figures include any shares held by persons (natural persons and legal entities) with close links to the Board of Directors/Executive Board.

Options

As of December 31, 2002 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

2000

1,455 10. 04. 2001– 09. 05. 2005

09. 05. 2003

1:1

670

2001

3,820 08. 05. 2001– 07. 05. 2006

07. 05. 2004

1:1

741

2002

4,650 07. 05. 2002– 07. 05. 2007

06. 05. 2005

1:1

518

Executive Board

Forbo Annual Report 2002

43

Additional feesand remunerations

No further fees or payments were paid to the governing bodies during the year
under review.

Loans granted
to governing bodies

As of December 31, 2002, 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 290,000. 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 is acquiring 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
two-thirds of the votes represented at the Annual General Meeting, in addition
to an absolute majority of the represented share nominal values. Article 689,
paragraph 2 of the Swiss Code of Obligations notwithstanding, shareholders
who are unable to attend the Annual General Meeting in person may be represented. They may appoint as their representative an official of the company,
an independent representative or another shareholder who is entered in theshare register (Section 9 of the Articles of Association).

Statutory quorums

In accordance with Section 10 of the Articles of Association, resolutions regarding the conversion of registered shares into bearer shares, the entry of registered shares, the representation of shares at the Annual General Meeting, and thedissolution of the company, or a merger require the approval of two thirds ofthe votes represented at the Annual General Meeting, in addition to an absolutemajority of the represented nominal values.

44 Forbo Annual Report 2002

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 meeting date.
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.

Registrationsin the share register

In accordance with Section 4 of the Articles of Association, the share register
entries as at the 20th 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 accomodate (new) shareholders and to enable them to attend the Annual General Meeting, Forbo Holding AG deviatesfrom 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 makean 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 in the event that certain conditions arise due to a change in the controlling shareholder. This involves payment of a settlement.
Auditors

Duration of
the mandate andterm of officeof the head auditor

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

Forbo Annual Report 2002

45

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 1.7 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 to CHF 3.8 million for 2002. This amount was essentially incurred by activities in connection with the acquisition of the Swift activities,
e.g. Due Diligence.

Supervisory andcontrol instruments
pertaining to theaudit

The Audit and Finance Committee (AFC) of Forbo Holding AG is responsible
for supervising 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 any critical points.

Internal auditing

Ernst & Young AG, Basel, has been responsible for internal auditing since 2002.
The remit of the internal auditors includes, among other tasks, verifying thatinternal guidelines and requirements have been implemented and monitoring
the efficiency of internal processes. Furthermore, checks are carried out toassess whether appropriate control systems have been established from a financial and operational perspective. Ten companies were subjected to internal
audits in 2002. In terms of sales, these account for some 20 % of total Groupsales.

46 Forbo Annual Report 2002

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 as well as summarized reports for shareholders, as well as regular media releases. This target group-oriented information is also made available to interested parties via e-mail. Publications suchas the corporate brochure ‘In Focus’ or the Forbo employee newsletter ‘Forbo
Inside’ provide a revealing look into the world of Forbo.
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.

Direct communication with different
target groups

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 50 of this Annual Report.

Forbo Annual Report 2002

47

Human Resources
Forbo places particular emphasis on looking after its employees. As an international Group whose global activities were significantly extended
once more in 2002, well-trained and dedicated employees are the key toour success. Motivation, training, and identification with the company
and its objectives are all important aspects of group-wide HR programs.
Business Process Management Training
Continuous processoptimization

Forbo launched a new management training program in the early summer of2002 with the aim of consolidating managers’ knowledge of methods for analyzing and optimizing critical process flows and making it easier for them to
implement this knowledge in practice. The course began by tackling the basic theory and methods involved, followed by a practical section that looked atcase studies and real process flows from everyday practice. This two-days intensive seminar was attended by 120 participants in 2002.
Succession planning for managerial positions

Measures introduced

Forbo aims to fill more managerial positions from within its own ranks in future. This means that up-and-coming managers are to be more involved instrategically important projects and targeted in the development of managerial
skills such as teamwork and leadership. Intensive work began in 2002 on succession planning and, in cooperation with local management, on identifying andpromoting younger employees with the potential to become managers. Thisapproach will be continued in 2003.
Forbo TrophyAwardsfor outstandingachievements

The Forbo Trophy is awarded annually to a Group company in recognition ofoutstanding performance. The 2002 Forbo Trophy went to the team at Forbo
Sarlino in Reims (France). Reims is home to the French sales organization for
floor coverings and to the production site for vinyls and needlefelt coverings.
The award of the Forbo Trophy hinged on the positive development of the company over a sustained period, a trend that is also being upheld at a time when
the general economic situation is weak. Two factors were critical to the company’s success: Firstly, the company’s consistent customer focus and its efforts
to find for each customer the optimal solution from Forbo’s product portfolio.
Secondly, the intensified use of teamwork for the continuous improvement ofbusiness processes. Moreover, a stable management team that has been in place
for ten years has contributed to the site’s dynamic development.

48 Forbo Annual Report 2002

Special Achievement
Award

In additional to the Forbo Trophy, five Special Achievement Awards are presented in recognition of individual teams and employees. One of these was given
to representatives of Adhesives (Forbo Helmitin), three to employees in Flooring (Forbo Novilon and Forbo Nairn), and one to employees in Belting (Siegling
Canada).
Swift increases number of employees

Some 600
new colleagues

The acquisition of Swift means the addition of some 629 new staff whilst Stephens Miraclo Extremultus Ltd. will bring another approximately 80 employees.
This will increase the total size of the Forbo workforce to 5,715. Disregarding
the increase due to these acquisitions, the workforce has decreased in size by 158.
This development can be expected to continue due to the overall state of theeconomy and also as a result of the reorganization of the Flooring Business inthe first half of 2003.
Group Conference

Discussionof strategic aims
and expectations
for the future

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 within
a Group that operates on a global scale. In 2002, discussion focused on the
structure and further expansion of the Group as well as on the integration of
Swift and the resulting consolidation of the Group’s international positionin the Adhesives Business. The issues of cost management, raising profitability,
greater customer and service focus as well as an even more intensive focus on
product innovation were also high on the agenda.

Forbo Annual Report 2002

49

The Forbo ShareInvestor Relations

Forbo values close and direct contact with its private shareholders and institutional investors as well as with the media. Once again, in the previous year
the Group management took part in several road shows and analyst meetings,
as well as in a number of one-to-one talks, to discuss in detail the ForboGroup’s strategy and future prospects. Numerous media releases on businesstrends provided the media and investors with information on Forbo. The
current range of information can be consulted at any time on the company’s
website at www.forbo.com.

Share pricedevelopmentin 2002
slightly better
than SPIAs the world’s stock exchanges tended downwards, the SWX Swiss Exchange also
suffered inevitable losses. The Forbo share was unable to escape this generaltrend, although the losses suffered over the year as a whole were slightly lower
than those of the Swiss Performance Index (SPI). In view of the good cash
generation and a cash distribution policy geared towards continuity, a market
capitalization of approximately CHF 500 million appears to be low. Forbo
has created a good starting position for itself thanks to restructuring and acquisitions, with a view to realizing higher company profits against an improved
economic background. Whether or not the ambitious targets can be achieved depends to a large extent, however, on the future development of the general
economic situation. Even rising company profits can only be expected to generate improved share performance if the equity market stabilizes and the geopolitical situation calms down.
The Forbo Share in comparison to the SPI
CHF

SPI

900

6 000

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
31.12.1998

31.12.1999

31.12.2000

31.12.2001

31.12.2002

SPI, adjusted
Forbo registered share

Financial calendar

Annual General Meeting:Letter to Shareholders:Media release on half-year results for 2003:
Media release on the first three quarters 2003:

50 Forbo Annual Report 2002

April 29, 2003
July 25, 2003
July 25, 2003
October 28, 2003

2002

2001

2000

1999

1998

Share capital
Issued registered shares (of CHF 50)

NumberNumberNumberNumberNumber

1,356,576

1,513,550

1,513,550

1,513,550

1,513,550

1,305,207

1,305,052

1,463,010

1,463,522

1,454,824

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

156,974–––

Other own shares

25,48911,39010,406

9,894

18,592

Reserve shares (without voting and dividend rights)

25,88040,134

40,134

40,134

40,134

CHF

CHF

CHF

CHF

CHF

Nominal capital
67,828,800 75,677,500 75,677,500 75,677,500 75,677,500

Total
Thereof:65,260,350 65,252,600 73,150,500 73,176,100 72,741,200

Shares outstanding–

7,848,700–––

Other own shares

1,274,450

569,500

520,300

494,700

929,600

Reserve shares

1,294,000

2,006,700

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

453

500

556

539

542

Consolidated profit 1)

33

38

62

58

52

Gross dividend and cash distribution, respectively

22 2)

22

22

22

22

High

6.3

3)

5.3

3.5

3.9

5.1

Low

3.8 3)

2.6

2.7

2.9

2.4

67

58

36

38

42

Gross dividend return (%)
Payout ratio4) (%)

Stock market statistics
Share prices

Stock market capitalization (m)5)

CHF

CHF

CHF

CHF

CHF

High

585

839

828

764

900

Low

350

417

620

569

435

Year-end

412

505

730

750

600

High

764

1,228

1,220

1,126

1,326

Low

457

544

914

838

641

Year-end

538

659

1,068

1,098

873

See also Financial Report, ‘Notes to the Consolidated Financial Statements’, page 16‘Earnings per share’, page 19
2)
Proposal of the Board of Directors to the General Meeting of Shareholders:Cash distribution by reducing the nominal value
3)
Calculated on the basis of cash distribution by reducing the nominal value
4)
Gross cash distribution as % of consolidated profit (1999 before specific provisions)5)
Based on shares outstanding
1)

Forbo Annual Report 2002

51

Our Global PresenceMarch 2003

Typesetting, Litho and Printing: Neidhart + Schoen AG, ZurichExpert Advice on GPS System, Compass:
Institute of Cartography ETHZ, Zurich(cover and pages of photos)

Photos: Thomas Schuppisser, Zurich (photos on pages 26–33)
Bettina Schaefer, Zurich Hamburg (photo on page 34)

Conception and Design: Gottschalk + Ash Int’l

Imprint
Publisher: Forbo Holding AG, Eglisau Zurich
Editing: Klartext_Medienbuero, Wuppertal (G)GPS (Global Positioning System)

The GPS is a satellite-based measurement systemwith global coverage, installed and operated
by the American Department of Defense (DOD).
The GPS involves more than 21 satellites, whichorbit the Earth at an average height of 20,200 km
and at an average velocity of 3.3 km per second.
One orbit thus takes 11 hours 58 minutes, i.e. one
satellite circles our planet roughly twice a day.
The satellites transmit signals that allow the exact
position of a GPS receiver to be determined.
Position location requires signals from at least four
satellites. The receivers can be either stationary
or in motion, on the ground or in the air. The GPS
measurement process is used for land surveying,navigation, and other applications.

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