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A global team - winning together Annual Report 2009 Unternehmen The Company Henkel at a glance Global supplier of brands and technologies 133 years of brand success Competence in three business sectors: Laundry & Home Care Cosmetics/Toiletries Adhesive Technologies Highlights of 2009 Organic sales performance: -3.5 percent Laundry & Home Care: +2.9 percent Cosmetics/Toiletries: +3.5 percent Adhesive Technologies: -10.2 percent Share of sales accounted for by our growth regions: increase of 1 percentage point to 38 percent Adjusted return on sales (EBIT): 10.0 percent Net working capital: improvement of 3.9 percentage points to 7.8 percent of sales Net debt: reduced by 1.0 billion euros to 2.8 billion euros Key financials in million euros Sales Operating profit (EBIT) Adjusted operating profit (EBIT) 2008 2009 +/- 14,131 13,573 - 3.9 % 779 1,080 38.6 % - 6.6 % 1,460 1,364 Return on sales (EBIT) in % 5.5 8.0 2.5 pp Adjusted1) return on sales (EBIT) in % 10.3 10.0 - 0.3 pp Net earnings 1,233 628 - 49.1 % Earnings after minority interests 1,221 602 - 50.7 % 1) Earnings per preferred share in euros 2.83 1.40 - 50.5 % Adjusted1) earnings per preferred share in euros 2.19 1.91 -12.8 % in % 6.9 9.8 2.9 pp Capital expenditures on property, plant and equipment 473 344 - 27.3 % Research and development expenses 2) 429 396 - 7.7 % 55,513 51,361 - 7.5 % Return on capital employed (ROCE) Number of employees (annual average) Dividend per ordinary share in euros 0.51 0.51 3) 0.0 % Dividend per preferred share in euros 0.53 0.53 3) 0.0 % pp = percentage points Adjusted for one-time charges / gains and restructuring charges 2) Includes restructuring charges of 52 million euros (2008) and 13 million euros (2009) 3) Proposed 1) Sales by business sector Corporate 2 % Sales by region Laundry & Home Care 30 % Japan/Australia/ New Zealand 2 % North America 19 % Adhesive Technologies 46 % Cosmetics/ Toiletries 22 % Corporate = sales and services not assignable to the individual business sectors Corporate 2 % Growth regions1) 38 % Western Europe 39 % 1) Eastern Europe, Africa/Middle East, Latin America, Asia excluding Japan The Company Laundry & Home Care Cosmetics/Toiletries Adhesive Technologies Leading market positions worldwide Leading market positions worldwide Leading our markets worldwide Achieving profitable growth through innovation, strong brands and a heightened focus on our customer relationships Achieving profitable growth with appealing innovations under our strong brands, aligned to exacting customer demands Achieving profitable growth through innovations under our strong brands, efficient processes and a firm focus on our customers Further expanding our strong market position in Europe and our presence in the growth regions and North America Expanding our strong market positions in Europe and North America and selectively increasing our presence in the growth regions Developing new applications and growth potential in all regions of the world Key financials Key financials Key financials in million euros 2008 2009 +/- Sales 4,172 4,129 439 501 Operating profit (EBIT) Adjusted 1) operating profit (EBIT) Return on sales (EBIT) Adjusted 1) return on sales (EBIT) 450 10.5 % 10.8 % 530 12.1 % 12.8 % in million euros 2008 2009 +/- -1.0 % Sales 3,016 3,010 -0.2 % 14.0 % Operating profit (EBIT) 376 387 3.1 % 17.8 % Adjusted 1) operating profit (EBIT) 1.6 pp Return on sales (EBIT) 2.0 pp Adjusted 1) return on sales (EBIT) 379 12.5 % 12.6 % 387 12.9 % 12.9 % in million euros 2008 2009 +/- Sales 6,700 6,224 -7.1 % Operating profit (EBIT) 658 290 -55.9 % 2.1 % Adjusted 1) operating profit (EBIT) 680 506 -25.6 % 0.4 pp Return on sales (EBIT) 9.8 % 4.7 % -5.1 pp 0.3 pp Adjusted 1) return on sales (EBIT) 10.1 % 8.1 % -2.0 pp pp = percentage points 1) Adjusted for one-time charges / gains and restructuring charges pp = percentage points 1) Adjusted for one-time charges / gains and restructuring charges pp = percentage points 1) Adjusted for one-time charges / gains and restructuring charges Major brands Major brands Major brands Heavy-duty detergents; fabric softeners; laundry conditioning products; dishwashing products; all-purpose cleaners; scouring agents; floor and carpet care products; bath and WC cleaners; glass cleaners; kitchen cleaners; specialty cleaning products; air fresheners and insecticides for household applications Hair shampoos and conditioners; hair colorants; hair styling products; soaps; shower gels, body wash and bath products; deodorants; skin creams; skin care products; dental care and oral hygiene products; hair salon products Adhesive and sealant systems; surface treatment products for industrial applications in the automotive, packaging, aircraft, electronics, durable goods and metal sectors, and for maintenance, repair and overhaul applications; adhesives and sealants for craftsmen and consumers and for applications in the home, school and office Major innovations Laundry & Home Care Major innovations Cosmetics/Toiletries Major innovations Adhesive Technologies Persil ActicPower is particularly economical, offering a high yield plus its full laundry power from just 15 degrees Celsius. Available in a small, handy bottle. And Persil Hygiene Rinse ensures enhanced laundry hygiene, particularly at low wash temperatures. www.persil.de Schwarzkopf Essential Color - our first 100 percent permanent hair colorant without ammonia and with nature-based ingredients such as lychee and white tea for a deeply lustrous color offering long-lasting gray coverage. www.essentialcolor.com Loctite 5188 flange sealant is particularly suitable for use in engines, gear units and pumps. It remains superflexible yet adheres very well to metallic substrates even after long exposure to high temperatures and chemical attack. www.loctite.com Somat 9 - nine functions for an even better dishwashing result with the addition of two new components: an odor neutralizer to combat unpleasant smells and an Extra-Dry function to ensure that water runs evenly and effectively from the washed items. Launched in Western Europe and in Central and Eastern Europe, Somat Perfect Gel is the first multi-functional gel to hit those machine dishwashing product markets. www.somat.de Syoss - professional hair care at an affordable price. Developed and tested in cooperation with stylists, the formulations offer salon-standard hair beauty on a daily basis and are available in retail stores. The Syoss launch was Europe's most successful in the hair care sector in 2009. Technomelt Supra Cool 130 - a newly developed hotmelt adhesive for packaging that works at a significantly lower application temperature to reduce energy consumption. It also offers extremely high adhesive strength, outstanding flowability and a substantially wider range of application suitability. www.technomelt.com Marketed in the USA, innovative Purex Complete 3-in-1 laundry sheets combine the performance of a detergent with a fabric softener while also preventing the build-up of wash static in the drier. Plus: CO2 emissions attributable to transportation are reduced by almost 70 percent and packaging materials by some 45 percent. Dial Anti-Ox body wash with cranberries and anti-oxidant pearls - the most successful body wash launch in the USA. Gently cleans and protects the skin from harmful environmental influences. www.dialsoap.com www.purex.com www.syoss.de Major advancement in semiconductor attachment technology - with Ablestik Self-Filleting it is now possible to mount miniature electronic components more quickly and reliably than ever before. All that is needed is a small drop of this adhesive and the capillary force automatically ensures that the substance is distributed right to the edge of the component joint - where it automatically stops. www.henkel.com/ablestik At a glance The Company The Company We are successful because of our people. Only with talented, experienced and well-trained employees can we succeed in identifying and satisfying varying customer and consumer needs. Determined to achieve our three strategic priorities, we are committed to strengthening our global team. With a highly skilled workforce of some 50,000, our brands and our technologies, our objective is: winning together. Our three strategic priorities Achieve our full business potential Winning Culture Focus more on our customers Strengthen our global team Annual Report 2009 1 The Company Our employees at a glance Employees from throughout the world give our company its unique character. They are the foundation of our success. As an international and innovative company, we are committed to developing our people and continuously extending the diversity of our team. Globally structured Around 50,000 employees Employees by function Research and development 5 % Employees by region Production and engineering 49 % Asia-Pacific 17 % Administration 14 % Europe/Africa/ Middle East 63 % Latin America 8 % Marketing, selling and distribution 32 % North America 12 % Employees by gender Employees by age group Female 32 % 2 Annual Report 2009 Male 68 % 50 - 65 years 17 % 16 - 29 years 19 % 40 - 49 years 30 % 30 - 39 years 34 % The Company Contents Further information 01 The Company You will notice a number of cross-references on the pages of this Annual Report for 2009 indicating locations in this publication, in our Sustainability Report for 2009 and on the internet where you can find further information. 05 09 12 14 16 Annual Report Foreword Report of the Supervisory Board Management Board A global team - winning together Shares and bonds Sustainability Report 21 Group management report Internet 21 22 34 34 37 39 45 48 51 52 53 55 56 58 71 76 78 Group management report subindex Corporate governance Operational activities Strategy and financial targets for 2012 Value-based management and control system Business performance Assets and financial analysis Employees Procurement Production Research and development Marketing and distribution Sustainability/Corporate social responsibility Business sector performance Risk report Forecast Subsequent events 79 Consolidated financial statements 79 80 81 82 83 83 Consolidated financial statements subindex Consolidated statement of income Consolidated balance sheet Consolidated cash flow statement Statement of comprehensive income Statement of changes in shareholders' equity 84 Notes to the consolidated financial statements 132 Auditor's report 133 Responsibility statement 134 Corporate management of Henkel AG & Co. KGaA 140 Further information 142 Quarterly breakdown of key financials 143 Five-year summary 144 Credits Financial calendar Annual Report 2009 3 The Company Kasper Rorsted Chairman of the Management Board The Company Foreword 2009 was a challenging year both for Henkel and for the world The most important facts relating to fiscal 2009 are as economy as a whole, as the largest economic crisis in many follows: decades took its toll on us all. Despite the difficult business Sales fell nominally by 3.9 percent to 13,573 million euros, and organically by 3.5 percent. environment, we continued to advance toward our targets, making this anything but a lost year. We were able to convinc- Adjusted1) operating profit came in at 1,364 million euros ingly demonstrate, even under adverse market conditions, that we can act quickly and decisively, allowing nothing to compared to 1,460 million euros in the previous year. Adjusted1) net earnings after minority interests fell by stand in the way of our continuing successful growth. 13.0 percent to 822 million euros; and adjusted1) earnings per preferred share decreased by 12.8 percent to 1.91 euros. Laundry & Home Care and Cosmetics/Toiletries exhibited There were excellent developments with respect to our net strong growth, expanding their market positions in the working capital which decreased to 7.8 percent of sales - process; and as the year progressed, our Adhesive Technol- the first time we have managed to bring this metric down ogies business also began to rebound from the effects of to below 10 percent. the crisis. We were able to reduce our net debt by 1.0 billion euros to 2.8 billion euros. Industrial production experienced a significant decline The Management Board, Shareholders' Committee and in demand in a number of important segments, causing Supervisory Board propose that the Annual General Meet- the industrial businesses under our Adhesive Technologies ing approve an unchanged dividend of 0.53 euros per pre- umbrella to suffer. However, private consumption was less ferred share and 0.51 euros per ordinary share. affected by the economic downturn. Due to the recession, the price of crude oil fell during the first half of 2009; with In recognition of this exceptional team performance, I would this, the cost of the related commodity prices also decreased, like to extend my heartfelt thanks to all our employees for reducing our own raw material costs. However, as the general their undoubted commitment and hard work! economic situation stabilized in the second half of the year, raw material prices picked up again. Significant progress was made in 2009 in pursuit of our three strategic priorities: We responded consistently and effectively in all areas of 1. Achieve our full business potential our company to the recessive market environment. Unfor- 2. Focus more on our customers tunately, this involved some difficult decisions regarding 3. Strengthen our global team redundancies. This was painful for us but nevertheless important in order to secure the long-term competitiveness Innovations make strong brands even stronger. We generate of our businesses. more than 30 percent of our sales with products launched 1) Adjusted for one-time charges/gains and restructuring charges Annual Report 2009 5 The Company Foreword within the preceding three years. This makes us one of the our organizational structures in order to determine where strongest innovators in our markets. Again in 2009, we intro- and how we might achieve greater customer focus. And we duced numerous new product ideas into the marketplace, were able to augment our customer contacts at the highest enabling us to score heavily with our customers and con- management level with our \"Top-to-Top\" initiative, with sumers. In addition to the sustainability initiatives relevant the objectives of achieving a common strategic alignment, to the entire company, we are focusing in our consumer creating tangible added value for our customers and fully businesses on the ever more important aspects of care and and consistently utilizing our own competences - such as convenience. In the Adhesive Technologies business sector, our recognized leadership in the field of sustainability/ many of our innovations are aligned to new trends in ma- corporate social responsibility (CSR). terials, and applications in lightweight construction - for example in the automotive and aircraft industries. Sustainability and responsibility are among the salient features of Henkel's operations. But here too, we want to As part of our active portfolio management, we are aiming in further improve. The importance of this field of competence particular to further strengthen our leading brands. Today, becomes particularly apparent in periods of crisis. Hence we we already generate around 25 percent of our sales with again invested a great deal of time and effort pursuing our our three top brands - Schwarzkopf, Loctite and Persil. And ambitious sustainability targets in 2009, further reducing our ten largest brands account for more than 40 percent of energy and water consumption, decreasing waste volumes our revenues. Again last year, we eliminated a number of and cutting the number of occupational incidents at our marginal activities. In spring 2009, for example, we sold our sites. By reducing energy consumption in production and by business with adhesive tapes under the brands Duck and manufacturing energy-efficient products, we are able to re- Painter's Mate Green in North America. We also divested a duce the CO2 emissions - the carbon footprint - attributable number of smaller brands from our Cosmetics/Toiletries to our sphere of influence. Henkel's corporate philosophy business sector in the United States. dictates that every newly introduced product must make a contribution to sustainable development. The \"Global Excellence\" efficiency enhancement program, initiated in February 2008 in order to secure the long-term Our employees have been the foundation of our success profitability and competitiveness of the Henkel Group, was for 133 years, and it is to them that we are dedicating this implemented significantly faster than initially planned. year's annual report with the motto: A global team - win- Originally, our aim was to achieve annual savings of around ning together. With open feedback, clear recognition of 150 million euros starting in 2011. Following the accelerat- individual performance and tailored development plans ed execution of the program, we now expect to achieve or - in short, the right mix of challenge and reward - we are exceed these savings as of this year. engaging and enhancing the motivation and capabilities of our people. In this way, we are able to ensure that our global 6 The integration of the National Starch businesses we ac- team is always a match for the challenges it encounters, quired also proceeded more rapidly than originally planned. providing us with true competitive advantage as we take Here, we exceeded the synergies anticipated for 2009. our businesses forward. Our customers are at the center of everything we do. In The past financial year saw us redefine our personnel order to further cement our employees' awareness in this strategy, restructure our human resources organization regard, we made 2009 our Year of the Customer, reviewing and further simplify our processes. Using a modern talent Annual Report 2009 The Company Foreword management system, we are able to identify high potentials And speaking for the entire company, I would like to extend who we then systematically prepare with individual deve- our gratitude to our shareholders for their confidence in us lopment programs for the assumption of new and more and for the support they have shown for our actions. We are challenging responsibilities. likewise grateful to our customers around the world for their continuing loyalty and their trust in our company, in our With the great progress that we have made in implementing brands and in our technologies. As always, our customers our three strategic priorities, we are well on the way to remain the focus of our every effort. Finally, we must once achieving our financial targets for 2012: namely an average again express our thanks to our employees who, in the past of 3 to 5 percent per year in organic sales growth, increasing year, delivered exceptional performance under irrefutably our adjusted return on sales to 14 percent and generating difficult conditions. average growth of more than 10 percent per year in adjusted earnings per preferred share. We set these targets following We are confident that we are well equipped to meet the chal- very careful analysis of the potential of our portfolio, and lenges that lie before us. We have a healthy financial base, the crisis has done nothing to change this potential. our businesses are strongly positioned in their respective markets, we have successful brands and we have established 2010 will also not be an easy year. We intend to further re- a strong presence in the growth regions. We are determined fine and align our portfolio and to expand our businesses to deliver innovations that offer clear added value for our in the growth regions through selective investment. Strict customers, we shall continue to focus on securing our liquid- cost control, the adaptation of our structures in the mature ity, and we have our costs under control. markets, and measures to increase efficiency and competitiveness in our corporate functions are expected to make In short, we are definitely on track and heading for a bright important contributions to improving our return on sales. future. With our global team, we can all look forward to Securing our liquidity will also remain a focal point. And we winning together in 2010! will continue to respond flexibly to the economic developments of our markets, boldly committing to the necessary Dsseldorf, January 29, 2010 decisions that result. On behalf of the Management Board, I would like to thank the Supervisory Board and the Shareholders' Committee for their carefully considered advice and valuable support. Kasper Rorsted I would especially like to express our thanks to Dipl.-Ing. Chairman of the Management Board Albrecht Woeste who, as Chairman of the Supervisory Board and of the Shareholders' Committee of many years' standing, was a powerful driving force in Henkel's development until his departure in September 2009. We are now looking forward to a continuation of this successful collaboration with Dr. Simone Bagel-Trah, who has taken over the helm from Mr. Woeste. Annual Report 2009 7 The Company Dr. Simone Bagel-Trah Chairwoman of the Shareholders' Committee and of the Supervisory Board The Company Report of the Supervisory Board Report of the Supervisory Board Fiscal 2009 was an eventful year. Thanks to its dedicated team, analysis by business sector and region. Outside Supervisory Henkel succeeded in coping with a difficult economic envi- Board meetings, the Chair of the Supervisory Board also ronment by playing to the strengths inherent in each of its remained in regular contact with the Chair of the Manage- business sectors. The two consumer goods businesses Laundry ment Board for the purpose of regularly conferring on & Home Care and Cosmetics/Toiletries again made outstanding current developments and salient business events. contributions to consolidated sales and earnings in 2009, while the industrial operations under the Adhesive Technologies Major issues discussed in Supervisory Board meetings business sector recovered remarkably from the consequences The Supervisory Board met a total of four times in fiscal of the economic crisis in the course of the year. 2009. At these meetings, we examined in detail the reports All our employees around the world deserve great recog- of the Management Board and deliberated together with the nition for these achievements. On behalf of the Supervi- Management Board on the development of the corporation sory Board, I would therefore like to give my thanks to all as well as on strategic issues. Henkel personnel for their dedication to our common cause. We dealt in depth with the effects of the difficult eco- I would also like to express my gratitude to the members of nomic situation and how it was influencing business per- the Management Board and the Works Councils for their formance at Henkel. The Adhesive Technologies business constructive support and close cooperation. sector was the subject of particularly intensive discussion, And the Supervisory Board also thanks you, our shareholders, for the loyalty and trust you have shown in our company, its management, its employees, its products and its strategy. leading to appropriate measures being introduced to facilitate structural change and cost adjustment. At the meeting of February 17, 2009, we concerned ourselves primarily with the annual and consolidated financial statements of 2008 as well as the proposals to be put before Again in fiscal 2009, the Supervisory Board performed the the Annual General Meeting. We also dealt with the research duties incumbent upon it according to the requirements of and development strategy of the company and issues relating legal statute, the corporation's Articles of Association and to our R&D organization. applicable procedural rules. Aside from general business development, at our meeting of April 20, 2009, we also discussed in depth the integration Collaboration with the Management Board of the Adhesives and Electronic Materials divisions of National During the reporting period, we carefully and regularly Starch. We deliberated on our human resources diversity stra- monitored the work of the Management Board of Henkel tegy, agreeing the objective of utilizing the different talents, Management AG, which is the sole personally liable partner philosophies, perspectives and capabilities of our employees of the corporation, advising and supporting it in its exe- in order to ensure our success in the competitive environment cutive duties, in the strategic further development of the while establishing a balanced and effective organization. corporation and on individual matters of importance. The main issues dealt with at our meeting of September Our engagement with the Management Board was 22 were the financial position and strategy of the Henkel characterized by an intensive and collaborative exchange Group, the current status of our customer focus program of information. The Management Board kept us regular- and the general strategy for brand consolidation and brand ly informed in detail through both written and verbal management within our business sectors. communications relating to major issues affecting the At our meeting of December 15, 2009, we conferred in de- corporation and the Group companies. These included, tail on our financial and balance sheet planning, including in particular, aspects of the business situation and the aspects relating to our income statement and the budgets development of the Group, business policy, the profitabi- of the individual business sectors. We also discussed issues lity of our operations, and our short-term and long-term arising from the Accounting Law Reform Act [BilMoG] and corporate, financial and personnel planning, as well as agreed a corresponding amendment to the procedural rules capital expenditures and restructurings. In the course of governing the activities of our Audit Committee. preparing the quarterly reports, details were provided of Members of the Supervisory Board of Henkel AG & Co. the sales and profits of Henkel as a whole, with further KGaA are obliged to declare potential conflicts of interest Annual Report 2009 9 The Company Report of the Supervisory Board to the plenary body and to refrain from participating in the main areas on which the audit was to concentrate. The matters which could lead to such conflict of interest. Dr. audit fee was also established. h.c. Bernhard Walter, Member of the Supervisory Board of At the meeting of February 22, 2010, the Audit Committee Henkel AG & Co. KGaA, is also a member of the supervisory discussed together with the external auditor the annual and board of Daimler AG. In order to avoid a potential conflict consolidated financial statements for fiscal 2009 and also of interest in conjunction with a now settled legal dispute the risk report, thereupon preparing the corresponding concerning sponsorship claims of Daimler's Formula One resolutions for consideration by the plenary Supervisory team, Brawn GP, Dr. h.c. Walter has, at his own request, been Board. The Committee also made recommendations to the excluded from discussion of this matter in the Supervisory Supervisory Board regarding its proposal for the appointment Board and has not received any information whatsoever in by the Annual General Meeting of the external auditor for this regard. the subsequent financial year. A declaration from the auditor relating to its independence was duly received; the auditor Committee activities likewise provided details of the non-audit services rendered In order to efficiently comply with the duties incumbent upon in fiscal 2009 and those envisaged for fiscal 2010. us according to legal statute and our Articles of Association, The Nominations Committee made appropriate recom- we have assigned certain activities to two different commit- mendations in preparation for the resolution to be formu- tees: an Audit Committee comprised of three shareholder- lated by the Supervisory Board and placed before the 2010 representative members and three employee-representative Annual General Meeting with respect to the upcoming sup- members, and a Nominations Committee made up of three plementary elections to the Supervisory Board. shareholder-representative members. The memberships of the committees are shown in the table on page 136. Corporate governance and declaration of compliance These committees do the groundwork preparing for In 2009, the Supervisory Board consulted on issues relating certain resolutions passed by the plenary Supervisory Board; to corporate governance, and in particular, the latest editi- they also take decisions related to specific responsibilities on of the German Corporate Governance Code. For details assigned to them in accordance with relevant procedural ru- relating to the corporation's corporate governance policy, les. In the year under review, the respective chairpersons of please refer to the corporate governance report on the committees each provided detailed reports of the results to 26, with which we fully acquiesce. of their meetings to the plenary Supervisory Board. pages 22 At the meeting of February 23, 2010, we discussed and The Audit Committee met four times in 2009. During approved the joint Declaration of Compliance of the Ma- these sessions, the members primarily reviewed the quar- nagement Board, the Shareholders' Committee and the terly reports and the half-year financial report, discussing Supervisory Board with respect to the German Corporate their contents with the Management Board. The meeting Governance Code for 2010. The full wording of the current of August 3, 2009, at which the half-year financial report and the previous declarations of compliance can be found was discussed, was also attended by the auditor which sub- on the company website www.henkel.com. mitted a report on the results of its review. This gave rise to no objections. 10 Efficiency review Further issues of importance included the implications The Supervisory Board and the Audit Committee perform of the Accounting Law Reform Act with respect to the work an internal review of their operational efficiency at regular of the Audit Committee, and also the modifications required intervals on the basis of comprehensive checklists. These to relevant procedural rules. We further deliberated on the include questions relating to corporate governance and question of the effectiveness of Henkel's internal control potential for further improvement. and risk management system, and the status reports of Corresponding internal reviews were conducted in the the Chief Compliance Officer and of the Head of Internal period under review. At the meetings of the Audit Commit- Audit. The audit plan submitted by Internal Audit was also tee on February 22, 2010, and of the Supervisory Board on approved at this session. February 23, 2010, the results of these self-assessments were The Audit Committee mandated the external auditor, discussed in detail. There were no reservations with respect pursuant to the latter's appointment by the 2009 Annual to the operational efficiency of either the Supervisory Board General Meeting, to audit the annual and consolidated fi- or the Audit Committee, nor with respect to the requisite nancial statements for fiscal 2009, at the same time defining independence of their members. Annual Report 2009 The Company Report of the Supervisory Board Annual and consolidated financial statements; audit Co. KGaA, taking into account the financial and earnings po- The annual financial statements of Henkel AG & Co. KGaA and sition of the corporation, and expressed our endorsement of the management report have been prepared in accordance said recommendation. At this meeting, we also ratified our with the provisions of the German Commercial Code [HGB]. proposals for resolution to be presented before the Annual The consolidated financial statements and the Group manage- General Meeting relating to the appointment of the external ment report have been prepared according to International auditor for the next financial year, taking into account the Financial Reporting Standards (IFRS) as endorsed by the Euro- recommendations of the Audit Committee, and discussed pean Union, supplemented by the provisions under commer- the costs of the audit of the financial statements. cial law applicable according to Clause 315a (1) HGB. The auditor appointed for 2009 by the last Annual Ge- Risk management neral Meeting - KPMG AG Wirtschaftsprfungsgesellschaft Risk management issues were examined not only by the (KPMG), Berlin - has examined the 2009 annual financial Audit Committee but also in the plenary sessions of the statements of Henkel AG & Co. KGaA and the 2009 consolida- Supervisory Board. The emphasis here was on the risk ma- ted annual financial statements, including the management nagement system in place at Henkel and any reportable reports, in compliance with the generally accepted standards major individual risks. There were no identifiable risks that for the audit of financial statements promulgated by the could endanger the continued existence of the corporation Institut der Wirtschaftsprfer (IDW) and - in the case of as a going concern. The structure and function of the risk the consolidated financial statements - in supplementary management system were also integral to the audit per- compliance with International Standards on Auditing (ISA), formed by KPMG, which found no cause for reservation. It and has issued them with an unqualified opinion. is also our considered opinion that the risk management KPMG reports that the annual financial statements give system corresponds to the statutory requirements. a true and fair view of the net assets, financial position and results of operations of Henkel AG & Co. KGaA in accordance Changes in the Supervisory Board and the with generally accepted German accounting principles, and Management Board that the consolidated financial statements give a true and Dipl.-Ing. Albrecht Woeste, who joined our Supervisory Board fair view of the net assets, financial position, results of opera- in 1988 and became its Chairman in 1990, resigned his offices tions and cash flows of the Group for the year under review, effective the end of September 22, 2009. Dr. Simone Bagel-Trah in compliance with International Financial Reporting Stan- was elected the new Chairwoman. Following a decision by Ds- dards. KPMG further confirms that the consolidated financial seldorf District Court, Mr. Johann-Christoph Frey was appointed statements and Group management report for the year under as a new shareholder-representative member of the Supervisory review meet the requirements of Clause 315a (1) HGB. Board, this appointment being limited in accordance with the The annual financial statements and management report, consolidated financial statements and Group management recommendations of the German Corporate Governance Code to the end of the 2010 Annual General Meeting. report, the audit reports of KPMG and the recommendations We expressed our deep gratitude to Dipl.-Ing. Albrecht by the personally liable partner for the appropriation of the Woeste for his more than twenty highly successful years on profit made by Henkel AG & Co. KGaA were laid before all the Supervisory Board and his unwavering commitment to the members of the Supervisory Board in good time. We exami- long-term success and solid financial policies of the company. ned these documents and discussed them at our meeting of He was a champion of the fairness, mutual trust and respect February 23, 2010 attended by the auditor, which reported that characterize our corporate culture. With great pleasure, on its main audit findings. We received the audit reports we have appointed him Honorary Chairman of the Henkel and voiced our acquiescence therewith. Having received the Group in recognition of his services to the corporation. final results of the review conducted by the Audit Committee and concluded our own examination, we see no reason for There were no changes to the Management Board in 2009. objection. At our meeting of February 23, 2010, we approved the annual financial statements, the consolidated financial Dsseldorf, February 23, 2010 statements and the management reports as prepared by the personally liable partner. We discussed the recommendation by the personally liable partner for appropriation of the profit of Henkel AG & The Supervisory Board Dr. Simone Bagel-Trah (Chairwoman) Annual Report 2009 11 The Company Management Board Management Board Sitting from the left: Dr. Lothar Steinebach Kasper Rorsted Executive Vice President Finance/Purchasing/IT/Law, born 1948; with Henkel since 1980. Chairman of the Management Board, born 1962; with Henkel since 2005. Standing from the left: Dr. Friedrich Stara Hans Van Bylen Thomas Geitner Executive Vice President Laundry & Home Care, born 1949; with Henkel since 1976. Executive Vice President Cosmetics/Toiletries, born 1961; with Henkel since 1984. Executive Vice President Adhesive Technologies, born 1955; with Henkel since 2008. The Company Management The Company Board \"Diversity is a key factor in Henkel's success. We want to have a versatile team that is both motivated and capable while at the same time being ready and willing to constantly improve. Standing shoulder to shoulder, we will be able to meet and master the challenges that the future has in store.\" Kasper Rorsted \"Profitable growth is achieved not just through isolated measures aimed at increasing sales and earnings. It is also a function of the motivation felt by our employees and their identification with our values and objectives. Only with strong and committed teams will we be able to successfully de velop and sell products while also keeping our costs competitive. We have a great team dedicated to achieving our ambitious goals. And we are dedi cated to further strengthening and developing that team.\" Dr. Lothar Steinebach \"Creativity and entrepreneurship are among the indispensable attributes of our team. Only with these tools at our fingertips can we think beyond the current status quo and develop true innovations capable of securing profitable growth over the longer term. Our task is to give our employees the motivation and the necessary freedom to be creative.\" Dr. Friedrich Stara \"We are interested in our employees not just as factors of production but also as people and colleagues. Trust, constructive criticism and communi cation are essential tools that every manager must be able to use with ex pertise. Leadership is a 'people skill' that has to be demonstrated at every level - starting with the board.\" Hans Van Bylen \"It is important that our people adopt an entrepreneurial approach, accept responsibility and show the right kind of fighting spirit - for the sake of our customers and for the sake of Henkel. Commitment and creative scope are the yardsticks by which we gage ourselves and our team.\" Thomas Geitner The Company A global team - winning together A global team - winning together \"Strengthening our global team\" is one of the three strategic priorities that Henkel is pursuing. As a global team, our aim is to be successful in our markets and to win together with our customers. It is to this end that we align the principles underlying our human resources work, placing our focus on the following five core elements: success and link it in a clear and transparent manner to their individual compensation. For this, the managers responsible agree specific targets with their employees and provide regular constructive feedback regarding the attainment of those objectives, with the two parties jointly agreeing on performance-promoting measures. Harnessing internationality and diversity There are people from 116 nations working for Henkel. The number of company employees engaged outside Germany is continuously rising - and has now reached more than 80 percent. However, it is not just employees of different nationalities but also a balance of gender and experience in our teams that serves to enrich our corporate culture. Such a mix gives us a decisive competitive advantage - because it enables us to better understand our markets and therefore secure long-term success. Providing clear feedback Open feedback on the performance levels achieved, with due reference to our expectations, is decisive for the success of Henkel. It is the task of all line managers to identify the strengths and development potential of their employees and to discuss with them how to best harness these. The measures derived from such discussions lead to performance enhancement and enable each employee to be ideally deployed in accordance with their competences. Talent identification and development We assess all employees on an objective, fair and transparent basis. In 2008, we introduced a new process of appraisal and development for our managerial staff, applying the same set of global criteria: in annual \"Development Round Tables,\" line managers deliberate on the performance and potential of their employees and prepare individual development plans for them. Differentiated compensation We analyze the personal contribution made by our employees to our corporate Succession planning We further improved our succession planning in 2009 in order to ensure the best possible assignment of personnel to the most important managerial positions over the short, medium and long term. Our approach is to identify suitable successors as part of our talent management process and to agree measures enabling their further development. These will likely include specific training courses and job rotation on the basis of our \"Triple Two\" program in which up-and-coming managers are encouraged to work in two business sectors, in two countries and in two functions. The Company A global team - winning together Human Resources at Henkel supports all the business sectors with tailored measures for the further development of their teams while also helping the company to attract the best employees available. From the left: Zuzana SchtzHalkova Henkel's Head of HR in Central and Eastern Europe Kathrin Menges Head of Global HR at Henkel Edmundo Gonzales Manager - Remuneration and Bonus Payments Dorian Williams Head of Henkel HR in Africa/Middle East Christina Rositzka International Job Rotation Officer The Company Shares and bonds Shares and bonds Henkel share price outpaces overall market International, widely diversified shareholder structure Capital market communication further extended In the first three months of 2009, Henkel shares initially weakened slightly, as did the market as a whole. Then there was a further dip in Henkel share prices as a response to our ad-hoc announcement of April 9, 2009. However, our shares gained steadily in value thereafter and for the remainder Henkel share prices experienced above-average increases in of the year. This price rise was boosted by the fact that an 2009. Thanks to signs of an end to the global recession and increasing number of analysts and investors appeared to the first positive growth forecasts for the world economy feel that, although ambitious, our financial targets for 2012 in 2010, the DAX rose 23.9 percent compared to the closing were becoming increasingly achievable. Toward the end of price at the end of 2008. The industry benchmark in the the year, our preferred shares began to consistently improve form of the Dow Jones Euro Stoxx Consumer Goods index on their year-high prices, completing a generally gratifying increased by 31.5 percent. In this strong market environ- performance for 2009 and substantially outperforming the ment, the price of Henkel's preferred shares even outpaced relevant benchmark indexes. that increase, closing the year at 36.43 euros, 61.3 percent above the prior-year level, while our ordinary shares closed at 31.15 euros, a gain of 66.1 percent. Henkel preferred share performance versus market in 2009 in euros Henkel preferred share DAX (indexed) DJ Euro Stoxx Consumer Goods (indexed) 35 30 25 20 15 December 31, 2008: 22.59 euros May 6, 2009: Publication of results for Q1 2009 January 2009 August 5, 2009: Publication of results for Q2 2009 November 11, 2009: Publication of results for Q3 2009 December 31, 2009: 36.43 euros December 2009 Henkel preferred share performance versus market 2000 to 2009 in euros Henkel preferred share DAX (indexed) DJ Euro Stoxx Consumer Goods (indexed) 40 35 30 25 20 15 10 5 December 31, 1999: 22.07 euros January 2000 16 Annual Report 2009 December 31, 2009: 36.43 euros December 2009 The Company Shares and bonds Key data on Henkel shares 2005 to 2009 2005 2006 2007 Ordinary share 1.75 1.97 2.12 2.81 1.38 Preferred share 1.77 1.99 2.14 2.83 1.40 Ordinary share 26.18 32.73 34.95 18.75 31.15 Preferred share 28.33 37.16 38.43 22.59 36.43 Ordinary share 26.18 33.14 37.50 34.95 31.60 Preferred share 28.37 37.82 41.60 38.43 36.87 Ordinary share 20.32 25.66 29.96 16.68 16.19 Preferred share 21.46 28.21 33.70 19.30 17.84 Ordinary share 0.43 0.48 0.51 0.51 0.51 3) Preferred share 0.45 0.50 0.53 0.53 0.53 3) in euros1) 2008 2009 Earnings per share Share price at year-end 2) High for the year 2) Low for the year 2) Dividends Market capitalization 2) in bn euros 11.8 15.1 15.9 8.9 14.6 Ordinary share in bn euros 6.8 8.5 9.1 4.9 8.1 Preferred share in bn euros 5.0 6.6 6.8 4.0 6.5 Comparable based on share split (1:3) of June 18, 2007 2) Closing share prices, Xetra trading system 3) Proposed 1) Trading volumes decreased compared to the previous year, stock exchanges in Germany. In the USA, investors are able as did the average trading volume figures for the DAX as a to invest in Henkel preferred and ordinary shares by way of whole. Each trading day saw an average of 1.0 million pre- stock ownership certificates obtained through the Sponsored ferred shares changing hands (previous year: 1.7 million). Level I ADR (American Depositary Receipt) Program. The The average volume in the case of our ordinary shares de- number of ADRs representing ordinary and preferred shares creased to 200,000 per trading day (previous year: 330,000). outstanding at the end of the year was about 5.1 million Due to the increase in price levels, the market capitalization (end of 2008: 6.3 million). of our ordinary and preferred shares combined rose from 8.9 billion euros to 14.6 billion euros. Henkel shares remain an attractive investment for longterm investors. Shareholders who invested 1,000 euros when Henkel's preferred shares were issued in 1985, and then re-invested the dividends received (excluding taxes) in the Share data Preferred Ordinary Security code no. 604843 604840 ISIN code DE0006048432 DE0006048408 Stock exch. symbol HEN3.ETR HEN.ETR Number of shares 178,162,875 259,795,875 stock, would have had a portfolio value of about 11,070 euros by the end of 2009. This represents investment growth of The international significance of Henkel preferred shares 1,007 percent or an average yield of 10.4 percent per year. derives not least from their inclusion in major indexes that Over the same period, DAX tracking would have provided serve as important indicators for the capital market and as an annual yield of 7.0 percent. And over the last five and benchmarks for fund managers. Particularly noteworthy in ten years, the Henkel share has shown an average yield of this respect are the MSCI World, the Dow Jones Euro Stoxx, 13.4 and 7.0 percent per year respectively. and the FTSE World Europe indexes. Henkel is also listed in the Dow Jones Titans 30 Personal & Household Goods index, Henkel shares listed in all major indexes confirming our position as one of the 30 most important Henkel shares are predominantly traded on the Xetra elec- listed corporations operating in the personal and house- tronic market of the Frankfurt Stock Exchange. Henkel is hold goods sectors worldwide. And as a DAX stock, Henkel also represented on the floor of this and all other regional counts as one of the 30 most important listed companies Annual Report 2009 17 The Company Shares and bonds in Germany. As of year-end 2009, the market capitalization 2.2 percent of the total preferred shares outstanding. of the DAX-relevant preferred shares was 6.5 billion euros, The vesting period for newly acquired ESP shares is three placing Henkel 20th among the DAX companies (2008: 24th). years. In terms of trading volumes, Henkel was ranked 28th on the list (2008: 29th). Our DAX weighting was 1.22 percent. Henkel bonds Henkel is represented in the international bonds markets by International shareholder structure three bonds with a total volume of 3.3 billion euros: According to notices of disclosure received by the company, the Henkel family owns a majority of the ordinary shares Bond data Senior bond Senior bond Due date June 10, 2013 March 19, 2014 Nov. 25, 2104 1) Volume 1.0 bn euros 1.0 bn euros 1.3 bn euros Nominal coupon 4.25 % 4.625 % 5.375 % notifiable shareholding in excess of 3 percent of the voting Coupon payment date June 10 March 19 Nov. 25 shares. The ownership pattern of our preferred shares - the Listing Frankfurt Luxembourg Luxembourg significantly more liquid class of stock - shows a free float of Security code no. 664196 A0AD9Q A0JBUR 100 percent. A majority of these shares are owned by institu- ISIN code DE0006641962 XS0418268198 XS0234434222 amounting to 52.57 percent. Silchester International Investors Limited headquartered in London, UK, holds 3.01 percent of our ordinary shares. We have received no further notices of disclosure from other shareholders indicating a tional investors with globally distributed shareholdings. 1) Hybrid bond First call option for Henkel on November 25, 2015 Rest of Europe 20 % Further detailed information regarding these bonds, current developments in their respective prices and the associated risk premium (credit margin) can be found on our website www.henkel.com/ir. Switzerland 8 % Committed to capital market communication Shareholder structure: Institutional investors holding Henkel preferred shares Rest of World 10 % Germany 10 % USA 26 % UK 26 % Source: Thomson Reuters In the period up to 2007, Henkel repurchased around 7.5 mil- Henkel is covered by numerous financial analysts, primarily in the UK, Germany and the USA. Over 35 equity and debt analysts regularly publish reports and commentaries on the performance of the company. lion preferred shares to fund the Stock Incentive Plan operated for our senior executive personnel. As of December 31, Analyst recommendations 2009, this treasury stock amounted to 4.5 million preferred shares. Sell 19 % Buy 42 % Employee shares Since 2001, Henkel has been operating a share ownership plan for all employees worldwide. For each euro invested by an employee (limited to 4 percent of salary up to a maximum of 5,000 euros per year), Henkel added an additional 18 Hold 39 % At December 31, 2009; basis: 30 equity analysts 33 cents in 2009. The number of participants in this Em- Henkel places great importance on meaningful dialogue ployee Share Program (ESP) decreased in the year under with both investors and analysts. In 2009, institutional inves- review with around 9,500 employees in 56 countries buying tors and financial analysts were afforded the opportunity Henkel shares within the framework of the 2009 tranche. to talk directly with our top management in more than At year-end, around 14,000 employees held a total of some 30 capital market conferences and road shows held in four million shares within the ESP, representing roughly Europe and North America. The two highlights of the year Annual Report 2009 The Company Shares and bonds were our Analyst and Investor Conference held in Dsseldorf on February 25, 2009, and our Investor Day for the Laundry & Home Care business sector which took place on September 2, 2009. At this latter conference, Dr. Friedrich Stara and his management team presented the strategy and new developments of the Laundry & Home Care business sector to about 50 analysts and investors from around the world. In addition, we held numerous telephone conferences and one-on-one meetings - amounting to more than 500 events in all. Private investors are able to receive all relevant information through telephone enquiry or via the Investor Relations website www.henkel.com/ir. This also serves as the medium for the live broadcast of telephone and analyst conferences as well as the transmission of the Annual General Meeting. The latter also offers all shareholders the possibility of obtaining extensive information from Henkel's management. The quality of our capital market communication was again evaluated in 2009 by various independent ranking organizations. Once more, our Investor Relations team garnered a number of top positions in various comparisons with European corporations in the home & personal care category. You will find a financial calendar with all our important publishing and announcement dates on the inside back cover of this Annual Report. Annual Report 2009 19 Interdisciplinary teamwork on behalf of the operating business sectors: Experts from Purchasing working together with packaging developers in order to harmonize the color composition of plastics-based containers. The plastic granulates they are selecting - known as master batches - are used in the manufacture of bottles or caps to give them their color. By working together, the team lays the foundations for improved efficiency and cost economy. From the left: Ulrike Danne Packaging Manager - Cosmetics/Toiletries Dr. Christian Kirsten Head of Purchasing - Cosmetics/Toiletries Worldwide Manuel Delgado Purchasing Manager - Plastics Material Group and Head of Purchasing Spain/Portugal Dr. Janine Vo Project Manager for Master Batches in the Purchasing Dept. Robert Bossuyt Head of Purchasing - Laundry & Home Care Worldwide Group management report Subindex Group management report subindex 22 Corporate governance 45 Assets and financial analysis 22 I. Corporate governance/ Corporate management report 45 Acquisitions and divestments 26 II. Remuneration report 46 Net assets 45 Capital expenditures 47 Financing 34 Operational activities 34 Overview 48 Financial position 48 Key financial ratios 34 Organization and business sectors 48 Employees 34 Strategy and financial targets for 2012 51 Procurement 34 Starting point 52 Production 35 Strategic priorities and progress in fiscal 2009 53 Research and development 36 Financial targets for 2012 55 Marketing and distribution 37 Value-based management and control system 56 Sustainability/ Corporate social responsibility 37 EVA and ROCE 38 Statutory and regulatory situation 58 Business sector performance 58 Laundry & Home Care 39 Business performance 39 World economy 39 Private consumption and developments by sector 40 Management Board review of business performance 41 Sales and profits 43 \"Global Excellence\" restructuring program 43 National Starch: integration of operational activities 62 Cosmetics/Toiletries 66 Adhesive Technologies 71 Risk report 71 Risk management system 72 Disclosure of major individual risks 75 Overall risk 76 Forecast 44 Expense items 76 General economic development 44 Other operating income and charges 76 Sector development 44 Financial result 77 Opportunities 44 Net earnings 77 Outlook for the Henkel Group in 2010 45 Dividends and distribution policy 78 Long-term sales and profits forecast: 2012 financial targets 45 Earnings per share (EPS) 78 Subsequent events Annual Report 2009 21 Group management report Corporate governance Group management report Corporate governance at Henkel AG & Co. KGaA Corporate governance in the sense of responsible, transparent management and control of the corporation aligned to the long-term increase in shareholder value has long been an integral component of our corporate culture, and will remain so into the future. Consequently, the Management Board, Shareholders' Committee and Supervisory Board have committed to the following principles: Value creation as the foundation of our managerial approach Sustainability achieved through the application of socially responsible management principles Transparency supported by an active and open information policy the Articles of Association [Corporate Bylaws]). All shares of Henkel Management AG are held by the corporation. The rights and duties of the supervisory board of a KGaA are more limited compared to those of the supervisory board of an AG. In particular, the supervisory board is not authorized to appoint personally liable partners, to preside over the associated contractual arrangements, to impose procedural rules on the management board or to rule on business transactions. A KGaA is not required to appoint a director of labor affairs, even if, like Henkel, the company is bound to abide by Germany's Codetermination Act of 1976. The general meeting of a KGaA essentially has the same rights as the shareholders' meeting of an AG. In addition, it votes on the adoption of the annual financial statements of the corporation; it further formally approves the actions of the personally liable partners. In the case of Henkel, it I. Corporate governance/Corporate management report also elects and approves the actions of the members of the Shareholders' Committee. Resolutions passed in gen- This Corporate Governance Report describes the principles of eral meeting require the approval of the personally liable the management and control structure, corporate steward- partner where they involve matters which, in the case of ship and also the essential rights of shareholders of Henkel a partnership, require the authorization of the personally AG & Co. KGaA; in addition, it explains the special features liable partners and also that of the limited partners (Clause that arise from our particular legal form and our Articles of 285 (2) AktG) or relate to the adoption of annual financial Association as compared to a joint stock corporation (AG in statements (Clause 286 (1) AktG). Germany). It takes into account the recommendations of the German Corporate Governance Code and contains all the in- According to our Articles of Association, in addition to the formation required according to Clause 289 (4), Clause 289 (a) Supervisory Board, Henkel also has a standing Shareholders' and Clause 315 (4) of the German Commercial Code [HGB]. Committee comprising a minimum of five and a maximum of ten members, all of whom are elected by the Annual Gen- Legal form/Special statutory features of eral Meeting [AGM] (Article 27 of the Articles of Association). Henkel AG & Co. KGaA The Shareholders' Committee is required in particular to Henkel is a \"Kommanditgesellschaft auf Aktien\" (KGaA). perform the following five functions: A KGaA is a company with its own legal personality (i.e. 1. It acts in place of the AGM in guiding the business activi- it is a legal person) in which at least one partner assumes unlimited liability in respect of the company's creditors (personally liable partner). The other partners participate 2. It decides on the appointment and dismissal of personally liable partners. in the capital stock, which is split into shares, and their 3. It holds both the power of representation and executive liability is limited by these shares; they are thus not liable powers over the legal relationships prevailing between for the company's debts (limited partners per Clause 278 (1) the corporation and Henkel Management AG as the per- German Joint Stock Corporation Act [AktG]). There are the following major differences with respect to an AG: 22 ties of the corporation. sonally liable partner. 4. It exercises the voting rights of the corporation in the General Meeting of Henkel Management AG. At Henkel AG & Co. KGaA, the executive role is assigned 5. And it issues rules of procedure incumbent upon Henkel to Henkel Management AG - acting through its manage- Management AG (Clause 278 (2) AktG in conjunction with ment board - as the sole personally liable partner (Clause Clauses 114 and 161 HGB and Articles 8, 9 and 26 of the 278 (2), Clause 283 AktG in conjunction with Article 11 of Articles of Association). Annual Report 2009 Group management report Corporate governance Capital stock denominations; shareholder rights Authorized capital; share buy-back The capital stock of the corporation amounts to 437,958,750 According to Art. 6 (5) of the Articles of Association, there euros. It is divided into a total of 437,958,750 bearer shares is an authorized capital limit. Acting within this limit, the of no par value, of which 259,795,875 are ordinary bearer personally liable partner is authorized, subject to the ap- shares (proportion of capital stock: 259,795,875 euros or proval of the Supervisory Board and of the Shareholders' 59.3 percent) and 178,162,875 preferred shares (proportion Committee, to increase the capital stock of the corporation of capital stock: 178,162,875 euros or 40.7 percent). in one or several acts until April 9, 2011, by up to a total of Each ordinary share grants to its holder one vote. The 25,600,000 euros through the issue for cash of new preferred preferred shares accord to their holder all shareholder rights shares with no voting rights. All shareholders are essentially apart from the right to vote. Unless otherwise resolved in assigned pre-emptive rights. However, these may be set aside General Meeting, the unappropriated profit is distributed provided that the issue price of the new shares is not sig- as follows: first, the holders of preferred shares receive a nificantly below the quoted market price of the shares of preferred dividend in the amount of 0.04 euros per preferred the same class at the time of final stipulation of the issue share. The holders of ordinary shares then receive a dividend price. They may also be set aside in order to facilitate the of 0.02 euros per ordinary share, with the residual amount disposal of fractional amounts of shares. being distributed to the holders of ordinary and preferred In addition, the personally liable partner is authorized to shares in accordance with the proportion of the capital purchase ordinary and/or preferred shares of the corporation stock attributable to them (Article 35 (2) of the Articles of at any time up to October 19, 2010, subject to the condition Association). If the preferred dividend is not paid out either that the shares acquired on the basis of such authoriza- in part or in whole in a year, and the arrears are not paid tion, together with the other shares that the corporation off in the following year together with the full preferred has already acquired and holds as treasury stock, shall not share dividend for that second year, the holders of preferred at any time exceed 10 percent in total of the capital stock. shares are accorded voting rights until such arrears are This authorization can be exercised for any legal purpose. paid (Clause 140 (2) AktG). Cancellation or limitation of this To the exclusion of the pre-emptive rights of existing share- preferred dividend requires the consent of the holders of holders, treasury stock may be used to operate the Stock preferred shares (Clause 141 (1) AktG). Incentive Plan of the Henkel Group or transferred to third There are no shares bearing cumulative/plural voting parties for the purpose of acquiring companies or invest- rights, preferential voting rights or maximum voting rights ing in companies. Treasury stock may also be sold to third (voting restrictions). parties against payment in cash, provided that the selling The shareholders exercise their rights in the Annual General Meeting as per the relevant statutory provisions and price is not significantly below the quoted market price at the time of share disposal. the Articles of Association of Henkel AG & Co. KGaA. In particular, they may vote (as per entitlement), speak on agenda Major shareholders items, ask relevant questions and propose motions. According to notifications received by the company on De- Unless otherwise required by mandatory provisions of cember 30, 2009, a total of 52.57 percent of the voting rights statute or the Articles of Association, the resolutions of the is held by parties to the Henkel family's share-pooling agree- General Meeting are adopted by simple majority of the votes ment. This agreement was concluded between members of the cast and, inasmuch as a majority of shares is required by families of the descendants of company founder Fritz Henkel; statute, by simple majority of the voting stock represented it contains restrictions with respect to transfers of the ordi- (Art. 24 of the Articles of Association). This also applies to nary shares covered (Art. 7 of the Articles of Association). changes in the Articles of Association. However, modifications to the object of the company require a three-quarters' Interaction between Management Board, majority (Clause 179 (2) AktG). Shareho