Corporate Governance

Corporate Governance
Corporate Governance
54 55
General — This report complies with the SWX Swiss Exchange corporate governance guidelines of 17 April 2002. Unless
otherwise indicated, the data are valid as at 31 December 2005.
1. Corporate structure and shareholders
1.1 Group structure
Operational group structure — The operational structure of AFG Arbonia-Forster-Holding AG comprises four divisions
– Heating Technology and Sanitary Equipment, Kitchens and Refrigeration, Steel Technology, and Windows and Doors – in
addition to the Finance, Controlling and Reporting function and the Corporate Center.
The company reports in line with IFRS on the basis of this structure. In the report section page 24 and consecutive pages
of this report contain descriptions of the divisions.
Basis of consolidation — The companies that make up the basis of consolidation of AFG Arbonia-Forster-Holding AG are
listed in the Financial section on page 110 of this report. The bearer shares of AFG Arbonia-Forster-Holding AG are listed
on SWX Swiss Exchange under security number 1213250/ISIN CH0012132509. Information about market capitalisation
can be found in the information for investors. The registered shares of AFG Arbonia-Forster-Holding AG are not listed on
the stock exchange. Besides AFG Arbonia-Forster-Holding AG, none of the other companies that make up the basis of
consolidation are listed on a stock exchange in Switzerland or abroad.
1.2 Major shareholders — Major shareholders at the end of 2005 and 2004:
On 18 May 2005, notification was received that Julius Baer Multistock SICAV holds a voting share of less than 5 % in AFG
Arbonia-Forster-Holding AG. No other disclosures as per Swiss stock exchange law were made during the year under
review. As far as the company is aware, there are no pooling agreements involving major shareholders. As far as the com-
pany is aware, there are no pooling agreemetnts involving major shareholders.
1.3 Cross-participations — AFG Arbonia-Forster-Holding AG does not hold more than 5 % of the votes or the equity of
any other group company and vice versa.
in %
31/12/2005 31/12/2004
Voting share Capital share Voting share Capital share
Edgar Oehler 59.0 26.0 58.9 26.0

2. Capital structure
Corporate Governance
2.1 Capital and changes to the capital during the last three years, and other financial instruments — Since the Annual
General Meeting voted to reduce the company’s share capital by 40 % from CHF 12,600,420 in 2003, it has remained
unchanged at CHF 7,560,252. There has been no change in the proportion of registered shares and bearer shares.
There is neither authorised nor conditional capital. The company has issued neither participation nor profit-sharing cer-
tificates. No convertible bonds or warrants issued by AFG Arbonia-Forster-Holding AG are outstanding. AFG Arbonia-
Forster-Holding AG issued a bond (term 2004–10) with an interest rate of 3.375 % and a total nominal value of CHF 150
million on 3 June 2004. The debt must be repaid on 3 June 2010. Interest is paid annually on 3 June. AFG Arbonia-
Forster-Holding AG concluded a private placement of USD 160 million with a group of US investors on 2 December 2004.
The placement is hedged against interest and exchange rate risks, and is composed of different tranches in USD and EUR
with terms of between four and ten years.
31.12.2005/31.12.2004/31.12.2003
Category Share of votes Number Nominal value Share capital
Registered shares 68.18% 2 700 000 0.84 2 268 000
Bearer shares 31.82% 1 260 060 4.20 5 292 252
Total 100% 3 60 060 7 560 252
2.2 Limitation on the transfer of registered shares and registration of shareholders — The transfer of registered shares
requires the consent of the Board of Directors. The Board of Directors may refuse consent provided AFG offers to acquire
the shares for itself or for another shareholder or third party at their actual value at the time of the request. Consent may
also be refused if the purchaser does not submit a declaration that he/she is purchasing the registered shares in his/her
own name and for his/her own account. Registered shares acquired by a trust or a domiciliary company will only be
entered in the ledger if the identity of the beneficial owner is made known to the company. This is subject to Art. 685 b
(4) of the Swiss Code of Obligations. No exceptions were granted to these principles in the year under review.

3. The Board of Directors of AFG Arbonia-Forster-Holding AG
56 57
3.1 Members of the Board of Directors — The Board of Directors of AFG Arbonia-Forster-Holding AG consists of the fol-
lowing members:
Edgar Oehler — (1942, Swiss citizen), Ph.D., executive member, Chairman of the Board of Directors and CEO since 13
October 2003. 1971–1995 Member of the Swiss National Council; member of several parliamentary committees; 1973–
1985 Editor-in-Chief of the daily newspaper “Die Ostschweiz”; 1985–1990 General Manager of AFG Arbonia-Forster-
Holding AG; 1991–2004 Chairman of the Swiss Cigarette Industry Federation, CISC FR.
Ernst Buob — (1946, Swiss citizen), Ph.D. (Law), Attorney-at-Law, non-executive member of the Board of Directors since
13 October 2003. Partner in the law firm Buob Staub & Partner, St. Gallen. Ernst Buob has never been part of the execu-
tive management of AFG Arbonia-Forster-Holding AG or its affiliated companies. His business relationship with AFG
Arbonia-Forster-Holding AG consists in the activities of the law firm Buob Staub & Partner with respect to this company
and its affiliated companies.
Arthur Loepfe — (1942, Swiss citizen), Ph.D. (Econ.), non-executive member of the Board of Directors since 2002.
1979–2002 Partner in BSG Business Consulting St. Gallen; 1993–2000 Economic Director of the Canton of Appenzell
Innerrhoden; since 1999 member of the Swiss National Council. Arthur Loepfe has never been part of the executive management
of AFG Arbonia-Forster-Holding AG or its affiliated companies. He has no material business relationships with
AFG Arbonia-Forster-Holding AG or its affiliated companies.
Ulrich Flückiger — (1942, Swiss citizen), Ph.D., non-executive member of the Board of Directors since 2005. 1985–1987
Vice Director Marketing & Sales at Maschinen AG, Berne; 1987–1999 Ray & Berndtson SA and CEO of Korn/Ferry (Schweiz)
AG; since 2000 Managing Partner of drf consulting AG. Arthur Loepfe has never been part of the executive management
of AFG Arbonia-Forster-Holding AG or its affiliated companies. During the year under review his business relationships
with AFG Arbonia-Forster-Holding AG consisted of executive search consulting conducted by drf consulting AG on behalf
of AFG Arbonia-Forster-Holding AG.
Andreas Gühring — (1963, German citizen), degree in engineering, since 2005 non-executive member of the Board of
Directors representing holders of bearer shares. 1992–1996 Head of Industrial Engineering at Hydac GmbH; 1997–2000
CEO of Valeo GmbH; 2000–2004 CEO (Technology) of ThyssenKrupp Federn GmbH; 2004–2005 CEO of Brose Fahrzeugteile
GmbH & Co. KG; since 2005 CEO of ThyssenKrupp Drauz Nothelfer Gmbh in Heilbronn. Andreas Gühring has never been
part of the executive management of AFG Arbonia-Forster-Holding AG or its affiliated companies. He has no material
business relationships with AFG Arbonia-Forster-Holding AG or its affiliated companies.

3.2 Other activities and interests
Edgar Oehler — Since 1988 owner, Chairman and CEO of Hartchrom AG/Surface Technologies International Holding AG,
Steinach (Canton St. Gallen); member of various boards companies and foundations in Switzerland and abroad.
Ernst Buob — Chairman of the Board of Moser Holding AG, Innsbruck; member of the Board of Directors of Hälg Holding
AG, St. Gallen, and Hartchrom AG/Surface Technologies International Holding AG, Steinach (Canton St. Gallen); member
of various boards of companies and foundations in Switzerland and abroad.
Arthur Loepfe — Member of the Board of Directors of Emil Ebneter AG/Appenzeller Alpenbitter, Appenzell AI, Brauerei
Locher AG, Appenzell AI, Serto AG/Gressel AG, Aadorf (Canton Thurgau), and Blumer-Lehmann AG/Holzwerk Lehmann
AG, Gossau (Canton St. Gallen); member of various boards of companies and foundations in Switzerland.
Ulrich Flückiger — Since 2001 majority shareholder, Chairman and Managing Director of drf consulting AG, Urdorf
(Canton Zurich).
Andreas Gühring — Member of the Supervisory Board of ThyssenKrupp Umformtechnik GmbH, Ludwigsfelde.
3.3 Corporate integration — There are no reciprocity agreements with other boards of directors of companies listed on
the stock exchange.
Corporate Governance
3.4 Election and term of office — The members of the Board of Directors are generally elected by the ordinary general
meeting for a period of three years. The first term of a member of the Board of Directors equals the remaining mandate
of the member he/she has replaced, if applicable. The members of the Board of Directors may be re-elected an indefinite
number of times. The terms of office of the current members are as follows:
First elected Term expires
Edgar Oehler 2003 2006 (proposed for re-election at the 2006 AGM)
Ernst Buob 2003 2006 (proposed for re-election at the 2006 AGM)
Arthur Loepfe 2002 2006 (proposed for re-election at the 2006 AGM)
Ulrich Flückiger 2005 2006 (will not stand for re-election at the 2006 AGM)
Andreas Gühring 2005 2006 (proposed for re-election at the 2006 AGM)

58 5
3.5 Internal organisation — The Board of Directors meets at the invitation of the Chairman as often as the business of
the company requires, and at least three times a year. The full Board of Directors met five times during the year under
review.
3.5.1 Division of duties — The Board of Directors is presided by its Chairman, Dr. Edgar Oehler, who is also Chief Execu-
tive Officer. Vice-Chairman of the Board of Directors is Dr. Ernst Buob. The Board of Directors is supported by an Audit
Committee and a Remuneration and Nominations Committee.
3.5.2 Board committees — Each committee has a written charter, approved by the Board of Directors, laying down its
powers and responsibilities and working procedures. The Board of Directors appoints the members and chairs of the com-
mittees.
Audit Committee — The Audit Committee is composed of at least three members, of whom at least two (one of whom
must be the chairman of the committee) are independent and have experience in finance and accounting. The main re-
sponsibilities of the Audit Committee are reviewing the effectiveness of the external and internal auditors, evaluating the
internal control system, reviewing the financial reports and the performance, fees and independence of the external audi-
tors. The Audit Committee meets as often as business requires.
Since 9 June 2005, the Audit Committee has comprised the following members:
– Arthur Loepfe, Chairman
– Ernst Buob, Deputy Chairman
– Andreas Gühring
The Audit Committee met once during the year under review.
Remuneration and Nominations Committee — The Remuneration and Nominations Committee is composed of at least
three members, of whom at least two are independent. The main responsibilities of the Remuneration and Nominations
Committee are approving the group’s remuneration policy and determining principles for selecting candidates for election
to the Board of Directors and for top management. The Remuneration and Nominations Committee meets as often as
business requires.
Since 9 June 2005, the Remuneration and Nominations Committee has comprised the following members:
– Edgar Oehler, Chairman
– Andreas Gühring, Deputy Chairman
– Ulrich Flückiger
The Remuneration and Nominations Committee did not meet during the year under review.

3.5.3 Working procedures of the Board of Directors — The Board of Directors met five times during the year under re-
view. During the 2005 financial year, most of the duties of the Board of Directors were carried out by the full board. Before
their meetings, members of the Board of Directors receive documentation enabling them to prepare properly to deal with
the items on the agenda. As a rule the meetings last three quarters of a day. Members of Group Management, repre-
sentatives of the external auditors and external consultants are invited as necessary to deal with specific issues.
3.6 Division of powers — The Board of Directors is responsible for guiding, supervising and monitoring the executive
management of the company. It is responsible for approving and regularly reviewing company strategy, enacting the ne-
cessary rules, instructions and guidelines, and establishing the organisation and risk policy of AFG Arbonia-Forster-Holding
AG. It is also responsible for supervising and monitoring the persons entrusted with running the company. The Board of
Directors has designated Dr. Edgar Oehler as Managing Director; he simultaneously heads Group Management as Chief
Executive Officer (CEO). The division of powers between the Board of Directors, Group Management and divisional man-
agement is set out in detail in the articles of association, by-laws and division of powers and responsibilities (“Kompetenz/
Pflichtenregelung”) of AFG Arbonia-Forster-Holding AG. Within the framework of the law and the articles of association,
and based on the by-laws and division of powers and responsibilities, the Board of Directors has delegated the manage-
ment of the group to Group Management. Group Management has limited powers to decide on its own affairs and on
applications from the divisions.
Corporate Governance
3.7 Group management information and control instruments — The Board of Directors is kept informed about the ac-
tivities of executive management and the divisions via a number of different channels: The Management Information
System (MIS) provides the members of the Board of Directors with fundamental information about the financial, income
and risk situation of the group. The external auditors provide the Board of Directors with written and spoken information
on the main findings of the audit. The CEO oversees the members of Group Management who report to him and ensures
compliance with the law, the articles of association and regulations throughout the Group. He reports to the Board of
Directors on a regular basis, and immediately in the event of extraordinary developments. The Board of Directors may
demand any additional information it needs to carry out its tasks.

4. Group Management
60 61
4.1 Members of Group Management — The Group Management of AFG Arbonia-Forster-Holding AG comprises the fol-
lowing members:
Edgar Oehler — (1942, Swiss citizen), Ph.D. (PR), Executive Member, Chairman of the Board of Directors and Managing
Director and CEO since 13 October 2003; see 3.1 and 3.2 for further details of his person.
Felix Bodmer — (1955, Swiss citizen), lic. oec. HSG, Chief Financial Officer (CFO) since 1 June 2003; 1986–1992 various
positions at Hilti Group in finance and controlling, latterly Head of Finance and Controlling at a German subsidiary;
1993–2000 ABB/Alstom, Commercial Director/CFO of group companies, latterly CFO/Head of Shared Services at Alstom
Power (Schweiz) AG; 2000–2003 CFO of Steiner Group.
Knut Bartsch — (1969, German citizen), degree in industrial engineering, Director of Heating Technology and Sanitary
Equipment Division since 1 May 2004; 1996–1997 Assistant Corporate Manager at Preussag AG/TUI AG; with Kermi
GmbH since 1997, Director since 1999.
Thomas Gerosa — (1949, Swiss citizen), business economist, Director of Windows and Doors Division since 1 May 2004;
since 1972 various positions at EgoKiefer AG, Director from 1987–2004, and from 1 May 2004, Managing Director and
CEO. Since 2000 Chairman of the Board of Directors of Alpha RHEINTAL Bank, Heerbrugg (Municipality of Balgach,
Canton St. Gallen).
4.2. Management agreements — AFG Arbonia-Forster-Holding AG has not signed any management agreements with
companies or natural persons outside the group.

5. Compensation, profit-sharing and lending
5.1 Procedure for establishing and setting compensation and profit-sharing programs — The compensation of serving
and former non-executive members of the Board of Directors is not tied to their performance, and is determined by the
Board of Directors itself in accordance with the articles of association. There are no profit-sharing programs. The Remu-
neration and Nominations Committee is responsible for defining the group’s remuneration policy and setting the salaries
of members of Group Management. The remuneration of members of Group Management (including executive members
of the Board of Directors) consists of a base salary and a performance-related component. The amount of this perform-
ance-related component is set by the Board of Directors. Performance evaluations are based on quantitative and quantita-
tive factors. There are no profit-sharing programs.
5.2 Compensation of serving members of corporate bodies — During the year under review, total compensation (includ-
ing reimbursement of expenses and the employer’s contribution to pension plans) paid to serving members of the Board
of Directors and Group Management amounted to:
a) Executive members of the Board of Directors and members of Group Management: CHF 3,082,970
b) Non-executive members of the Board of Directors: CHF 242,890
In 2005, no severance pay was paid out to members of the Board of Directors or members of Group Management whose
mandate came to an end in the course of the year.
5.3 Compensation of former members of corporate bodies — No compensation was paid in the year under review to
members of the Board of Directors or Group Management whose mandate came to an end during the previous financial
year or earlier.
5.4 Allotment of shares in the year under review — Shares were not allotted to either non-executive or executive mem-
bers of the Board of Directors, or to members of Group Management, in 2005. The same applies to natural or legal per-
sons closely associated with them.
Corporate Governance
5.5 Possession of shares — The total number of shares held by executive members of the Board of Directors, members
of Group Management and natural or legal persons closely associated with them on 31 December 2005, was as follows:
1,760 bearer shares, 2,333,620 registered shares. At 31 December 2005, no bearer shares or registered shares were held
by non-executive members of the Board of Directors or natural or legal persons closely associated with them.

62 63
5.6 Options — Since options have never been distributed as part of compensation packages to members of Group
Management or the Board of Directors, neither they nor natural or legal persons closely associated with them hold such
options.
5.7 Additional fees and honoraria — In the year under review, the law firm Buob Staub & Partner, St. Gallen (whose
Managing Partner is Ulrich Flückiger, a member of AFG’s Board of Directors), billed a total of CHF 263,610 for providing
legal advice and representation to AFG Arbonia-Forster-Holding AG and its affiliated companies. In the year under review,
drf consulting AG (whose Managing Partner is Ulrich Flückiger, a member of AFG’s Board of Directors), billed a total of
CHF 41,850 for providing executive search services to AFG Arbonia-Forster-Holding AG and its affiliated companies. Otherwise
no fees or honoraria amounting to or exceeding half the amount of regular remuneration were paid to members of
the Board of Directors or Group Management, or to persons closely associated with them, during the 2005 financial year
for additional services provided to AFG Arbonia-Forster-Holding AG or its affiliated companies.
5.8 Lending — At 31 December 2005, AFG Arbonia-Forster-Holding AG and its affiliated companies had not granted any
securities, loans, advances or credits to any member of the Board of Directors or Group Management or to natural or legal
persons closely associated with them.
5. Highest total compensation — In 2005 the highest paid executive member of the Board of Directors received, including
all types of compensation, a total of CHF 1,683,900.

6 Participatory rights of shareholders
6.1 Voting rights and voting by proxy — The articles of association of AFG Arbonia-Forster-Holding AG contain no
regulations that deviate from the law, and in particular no percentual limitation on voting rights. Every share entitles the
bearer to one vote. Every shareholder is entitled to be represented at the Annual General Meeting by a proxy furnishing
written power of attorney.
6.2 Statutory quorum — Under Art.13 (3) of the articles of association of AFG Arbonia-Forster-Holding AG, the rules on
the transferability of registered shares can only be changed by a resolution of the Annual General Meeting, approved by
at least two thirds of the voting shares represented and the absolute majority of the nominal share value represented.
Otherwise, the articles of association of AFG Arbonia-Forster-Holding AG contain no regulations that deviate from the
law.
6.3 Calling of Annual General Meeting — The articles of association of AFG Arbonia-Forster-Holding AG contain no
regulations that deviate from the law.
6.4 Reports — Shareholders who hold at least CHF 1 million of share capital have the right to request reports about dis-
cussion items. Requests for reports must be submitted to the Board of Directors in writing, specifying proposals, at least
40 days before the date of the General Meeting.
6.5 Registration in share ledger — Holders of registered shares whose names are entered in the share ledger of AFG
Arbonia-Forster-Holding AG 30 days before the date of the Annual General Meeting AG must be sent invitations to the
Annual General Meeting together with the list of proposals from the Board of Directors and admission tickets.
7. Change in control and protective mechanisms
7.1 Obligation to tender — Article 6 of the articles of association of AFG Arbonia-Forster-Holding AG exempts the pur-
chasers of its shares from the obligation to tender a public offering as stipulated by Sections 32 and 52 of the Swiss Stock
Market Act (opting-out clause).
7.2 Change in control clauses — AFG Arbonia-Forster-Holding AG has no arrangements or plans that favor members of
the Board of Directors and/or Group Management or other members of upper management that include change in control
clauses.
Corporate Governance

8. Auditors
64 65
8.1 Length of mandate and term of lead auditor — Since 2003, Ernst & Young AG, St. Gallen, has acted as the auditor
of AFG Arbonia-Forster-Holding AG. Markus Oppliger has held the position of lead auditor since 2003.
8.2 Audit fees — The various auditors billed a total of CHF 830,490 for auditing the financial statements and consoli-
dated accounts of AFG Arbonia-Forster-Holding AG and the financial statements of its affiliated companies. Of this
amount, CHF 581,000 was paid to Ernst & Young AG, St. Gallen.
8.3 Additional fees — In 2005, CHF 109,160 was billed for additional services by the statutory and group auditors of
AFG Arbonia-Forster-Holding AG and other auditors of affiliated companies throughout the group. Of this amount,
CHF 69,880 was paid to Ernst & Young.
8.4 Audit supervision and control instruments — The Audit Committee monitors the professional qualifications, independence
and performance of the external auditors on behalf of the Board of Directors, and reports to the Board of
Directors on its findings. In the year under review, additional measures to oversee the activities of the external auditors
included a meeting between the Chairman of the Board of Directors and the CFO with the lead auditor to discuss the
latter’s findings.
. Information policy — AFG Arbonia-Forster-Holding AG pursues an open information policy with respect to the public
and financial markets, based on the principles set out in Art. 72 of the amended Listing Regulations of the SWX Swiss
Exchange. The annual report of AFG Arbonia-Forster-Holding AG provides information about the business, organisation
and strategy of the group. AFG’s semi-annual report contains the profit and loss account, balance sheet and cash flow
statement for the first six months of the financial year. AFG’s website at www.afg.ch provides additional information. Press
releases publicise important information at short notice.