10% revenue increase

Improvement in all financial ratios

Focus on acquisitions

Global distribution agreement on patented upholstery material

The

Annual Report 2010/2011Gabriel Holding A/S

Increase in revenue and earnings

GABRIEL REALISES ITS POTENTIAL AND SETS UP A STRUCTURED ACQUISITION PROCESS

Management commentary:Even though international demand for contract furniture remained subdued in 2010/11, revenue was up by 10% to DKK 242.6 mil-lion. Profit before tax rose to DKK 22.5 million as against DKK 12.9 million last year. The increase in revenue and earnings per share thereby meets consolidated targets and clearly evidences that Ga-briel realises its potential on both new markets and within product areas at a more advanced stage in the value chain than its core product, upholstery fabrics.

However, Management is of the opinion that the poor economic conditions will continuously reduce the Company’s growth potential within its core business. Accordingly, a committee has been set up in order to deliver future increases in revenue and earnings through acquisitions.

Summary• Even though international demand for contract furniture remained

subdued in 2010/11, revenue was up by 10% to DKK 242.6 million.

• Operating profit (EBIT) came in at DKK 18,2 million as against DKK 10.4 million last year arising from revenue increase as well as higher productivity and improved use of resources.

• Profit before tax rose to DKK 22.5 million as against DKK.12.9 million last year. Contributing to the increase was the profit share after tax in the associated dye factory, Scandye, of DKK 3.4 million as against DKK 2.0 million last year. Financial income and expenses represented a net income of DKK 0.8 million as against DKK 0.5 million last year.

• Cash flows from operating activities were positive at DKK 26.7 million as against a negative DKK 8.5 million last year.

• Return on invested capital (ROIC) before tax accounted for 9.4% as against 5.8% last year.

• Research and development costs came in at a gross amount of DKK 7 million, accounting for an increase of more than 30% on last year.

• Gabriel has entered into a global distribution and development agreement on patented upholstery material improving the func-tional properties and environmental impact associated with the primary type of foam used in the production of office furniture, domestic furniture, mattresses, etc.

• The Board of Directors proposes to the general meeting that dividends of DKK 4.25 per share be distributed per share of DKK 20. Last year, dividends of DKK 3.25 were distributed.

• International demand for contract furniture has only been slightly on the increase since the economic downturn in 2009. The out-look for the 2011/12 financial year is subject to a high degree of uncertainty with regard to international economic trends. The recent unrest on the financial markets and the potential conse-quences for the global contract furniture market may bring about renewed instability and failing growth. For the 2011/12 finan-cial year, Management expects to report revenue and operating profit (EBIT) in line with 2010/11.

The Board of Directors proposes the following motions for approval at the general meeting of Gabriel Holding A/S on 15 December 2011:• Dividends of DKK 4.25 per share of DKK 20.• The Board of Directors proposes the re-election of Jørgen Kjær

Jacobsen, General Manager; Kaj Taidal, General Manager; Claus Christensen, General Manager and Søren B. Lauritsen, General Manager for service on the Board of Directors and the re-appointment of the Company’s auditors.

The Board of Directors proposes the annual report be approved at the general meeting of Gabriel Holding A/S at the Company’s address on Thursday, 15 December 2011 at 14.00 pm:

The annual report will be available at the Company’s website no later than three weeks prior to the general meeting, and the printed version of the annual report will be available at the Company’s ad-dress on 5 December 2011.

Invested capital:Total equity and liabilities less non-interest bearing debt and deferred tax.

Operating margin:Operating profit/loss (EBIT) as a percentage of revenue.

Return on invested capital (ROIC): Operating profit/loss (EBIT) as a percentage of average invested capital.

Earnings per share (EPS basic):Profit/loss after tax divided by the average number of shares outstanding.

Earnings per share diluted (EPS diluted):Profit/loss after tax divided by the diluted average number of shares outstanding.

Return on equity:Profit/loss after tax as a percentage of average equity.

Solvency ratio:Equity as a percentage of total assets.

Net asset value at year end:Equity as a percentage of the share capital.

Market price at year end:Quoted price of the shares at the OMX.

Price/book value:Market price in proportion to book value.

Price Earnings (PE):Market price in proportion to earnings per share.

Price Cash Flow (PCF):Market price in proportion to cash flow per share (excluding treasury shares).

Dividend yield: Dividends in proportion to market price at year end.

Payout ratio:Dividends as a percentage of profit/loss after tax

Definition of financial ratios for the group

A n n u a l R e p o r t 2 010 / 2 01102

03

Financial highlights for the group

KEY FIGURES Unit 2010/11 2009/10 2008/09 2007/08 2006/07

Revenue DKK million 242.6 220.4 204.7 279.7 278.2

Index 87 79 74 101 100

Thereof. export DKK million 221.2 200.1 182.8 243.8 236.5

Export percentage % 91 91 89 87 85

Operating profit (EBIT) DKK million 18.2 10.4 2.0 23.0 24.9

Net financing. etc. DKK million 4.2 2.5 -0.3 0.0 0.1

Profit before tax DKK million 22.5 12.9 1.7 23.0 25.0

Tax DKK million -5.6 -2.7 -0.4 -5.9 -6.1

Profit after tax DKK million 16.9 10.2 1.3 17.1 18.9

Cash flows from:

operating activities DKK million 26.7 -8.4 18.5 23.3 15.3

investing activities DKK million -3.7 -11.0 -58.5 -35.0 5.7

financing activities DKK million -8.8 4.4 34.5 - 8.4 -7.6

Cash flows for the year DKK million 14.1 -15.0 -5.5 -20.1 13.4

Investments in property. plant and equipment DKK million 4.5 13.6 24.3 32.1 7.2

Depreciation/amortisation and

impairment losses DKK million 6.2 4.5 4.4 4.9 3.9

Equity DKK million 136.7 125.8 115.4 122.6 113.8

Balance sheet total DKK million 228.8 221.7 197.1 154.5 147.7

Invested capital DKK million 195.2 193.8 163.9 122.7 113.8

Number of employees Number 64 63 92 117 119

Revenue per employee DKK’000 3,791 3,499 2,225 2,391 2,338

Gross profit per employee DKK’000 1,588 1,336 909 1,068 1,030

FINANCIAL RATIOS

Operating margin (EBIT margin) % 7.5 4.7 1.0 8.2 9.0

Return on invested capital (ROIC) before tax % 9.4 5.8 1.4 19.5 23.0

Return on invested capital (ROIC) after tax % 8.7 5.7 0.9 14.5 17.5

Earnings per share (EPS) DKK 8.9 5.4 0.7 9.0 10.0

Return on equity % 12.8 8.4 1.1 14.5 17.5

Solvency ratio % 59.7 56.7 58.6 79.3 77.0

Net asset value at year end DKK 72 67 61 64 60

Market price at year end DKK 80 68 69 118 182

Price/book value 1.1 1.0 1.1 1.8 3.0

Price earnings (PE) DKK 9.0 12.6 99 13.1 18.3

Price Cash Flow (PCF) DKK 5.7 - 6.5 9.6 22.6

Dividends proposed per share of DKK 20 DKK 4.25 3.25 0.00 4.00 4.40

Dividend yield % 5.3 4.8 0 3.4 2.4

Payout ratio % 48 60 0 49 49

The basis year applied for the index figures is 2006/07. Earnings per share were calculated in accordance with IAS 33. Other financial ratios are calculated in accordance with the Danish Society of Financial Analysts’ guidelines on the calculation of financial ratios ”Recommendations and Financial Ratios 2010”. The financial ratios were restated to reflect the share split in 2007/08, reducing the face value of the share from DKK 100 per share to DKK 20 per share.

3A n n u a l R e p o r t 2 010 / 2 011F i n a n c i a l h i g h l i g h t s f o r t h e g r o u p

Contents Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 02Financial highlights for the group . . . . . . . . . . . . . . . . . . 03Gabriel profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 05Gabriel’s Chinese box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Financial review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Sales and earnings for 2010/11 . . . . . . . . . . . . . . . . . 12 2010/11 financial year at a glance . . . . . . . . . . . . . . 12 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Product development and innovation in Gabriel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Gabriel China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Dye factory, Scandye UAB, Lithuania . . . . . . . . . . . . 15 Gabriel Ejendomme A/S . . . . . . . . . . . . . . . . . . . . . . . . . 16Gabriel sets time free for working . . . . . . . . . . . . . . . . 17Management of business risks . . . . . . . . . . . . . . . . . . . . 18One stop shop with FurnMaster . . . . . . . . . . . . . . . . . . . 20Gabriel and corporate governance . . . . . . . . . . . . . . . . 21

The green thread in Gabriel . . . . . . . . . . . . . . . . . . . . . . . 23Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . 24Touchable co-operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Shareholder information . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Company details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Statement by the Executive Board and the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . 29Independent auditors’ report . . . . . . . . . . . . . . . . . . . . . . 30Income statement 01 .10 .2010-30 .09 .2011 . . . . . . . . . 32Statement of comprehensive income 01 .10 .2010-30 .09 .2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Balance sheet at 30 .09 .2011 – assets . . . . . . . . . . . . 34Balance sheet at 30 .09 .2011 – equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Consolidated statement of changes in equity . . . . 36Parent company statement of changes in equity . . 37Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Notes to the financial statements . . . . . . . . . . . . . . . . . 40

The Group has the following registered address:

Gabriel Holding A/SReg. No. 58 86 87 28Hjulmagervej 55DK-9000 Aalborg Phone: +45 9630 3100Fax: +45 9813 2544E-mail: mail@gabriel.dkwww.gabriel.dk

A n n u a l R e p o r t 2 010 / 2 011 C o n t e n t s04

Gabriel profileBUSINESS CONCEPT Innovation and value-adding co-operation are key words of Gabriel’s business concept.

Gabriel is a niche company which develops, manufactures and sells upholstery fabrics and related textile products and components to be used in fields of application where product features, design and logistics have to meet invariable requirements and where qual-ity and environmental management must be documented.

VIS ION • Gabriel is to be the preferred development partner and supplier

to leading international manufacturers and lead users of uphol-stered furniture, seats and upholstered surfaces.

• Gabriel is to obtain Blue Ocean Status through an innovative business concept, patents, licences or similar rights.

• Gabriel is to enjoy a status as an attractive workplace for and partner of qualified employees and enterprises.

F INANCIAL TARGETS Gabriel targets:• A return on invested capital (ROIC) of at least 15% before tax. • An increasing operating margin (EBIT margin). • An average annual rise in earnings per share of a minimum of 15%. • An average annual revenue increase of at least 15%.

F IELDS OF APPL ICATION Gabriel’s services are directed towards the following fields of ap-plication: • Contract (contract furniture and seats for means of transpor-

tation, theatres, concert halls, cinemas, educational institutions, hotels, nursing homes, etc.

• Home (furniture for domestic use)

GROWTH STRATEGY – GROWING WITH THE LARGEST MARKET PARTICIPANTS Gabriel’s growth is ensured in close co-operation with selected key account customers in a global strategy.

Gabriel strives to account for the largest share of the selected key account customers’ purchases of furnishing fabrics, other refined components and related services in the value chain.

Gabriel is constantly attentive to potential acquisitions, alliances and business areas to optimise its competitiveness and value adding.

CORPORATE MODEL Relying on carefully chosen and effective management systems, core processes and a high competence level, Gabriel makes sure that innovation and value-adding business relationships enjoy the proper focus.

Gabriel’s value-adding model

Finance

Customers

Processes

Innovation and learning

Operating margin (EBIT-margin)

Return on invested capital (ROIC)

Gabriel’s history, business concept and vision

Market share

Earnings growth

Satisfaction Key Account/Distributor/End user

Price competitiveness Logistics

Global AccountManagement

Resource optimisation

Competent employees/partners

User groups

Knowledge sharing

Product and process innovation

Strategy understanding

Organisational learning

IT platform development

Satisfaction employees/partners

Potential Invested capital

Idea generation and analyses

Revenue growth

A n n u a l R e p o r t 2 010 / 2 011G a b r i e l p r o f i l e 05

GABRIEL’S PROCESS OUTL INE - STRATEGIC BUSINESS UN ITS Gabriel’s business model requires a process-oriented approach introduced in the organisation over several years. The increasingly important strategic business units (Masters) with their own visions, targets, strategies and budgets carry out some of the supporting processes.

The strategic business units are run as independent profit centres with their own business concepts, visions, targets, strategies, ac-tion plans and budgets. Intra-unit settlement takes place on an arm’s length basis and in competition with external suppliers. The individual profit centre is entitled to and under an obligation to generate earnings growth through external trading in goods and services where relevant. In addition, the individual business units are expected to buy services at the most competitive prices – both from intra-group and extra-group sources.

The strategic business units are to: • deliver future growth through new channels without compromis-

ing the overall strategy in the core processes• ensure a progressively increasing return on invested capital• reduce dependency on overheads in the core business• ensure competitive power throughout the entire value chain from

conception to user.

FurnMaster (established in 2003/04) offers subsupplies in the form of logistics solutions, cutting, sewing, upholstery and mount-ing of furniture and screens for Gabriel’s key account customers. In 2010/11, FurnMaster contributed increasingly to the strong per-formance of the Group and accounted for more than 10% of con-solidated revenue. The business unit holds major growth potential, which is brought to life through the strategy “furniture fabrics in use”.

FurnMaster’s product and service programme is set out in article on page 20.

Gabriel’s process outline

Managerial processes

Core processes

Supporting processes - strategic business units

Strategy process

A and B1 customers

Employee information

Management follow-up

Resource optimisation

Investor Relations

Shareholders, Analysts, etc.

InnovationMaster MarketingMaster IT-Master FinanceMaster Gabriel China Gabriel Erhvervspark

HR-Master ProjectMaster Suppliers and partners

Technology and Facilities

KAM from potential to regular customer relation

Product and process innovation - from conception to product ready for sale/new process A customers

SuppliersPrice competitiveness lowest cost Logistics from customer order to product supplied

All customers

KAM-Master SampleMaster DesignMaster FurnMaster QEP-Master LogisticsMaster

Gabriel’s value-adding model is based on the use of the following Balanced Scorecard Model (applied since 2003) and the follow-ing four perspectives.

The financial perspective sets out Gabriel’s targeted return on invested capital (ROIC) specifically defined as revenue potential with Gabriel’s selected customers and targeted sales and earnings growth.

The customer perspective is focused only on customer satis-faction. Both perspectives rely solely on profit targets supported by targets set out for the core and supporting processes.

The core processes have been selected on the basis of group strategy and carry defined targets (Key performance indicators). The core processes are as follows:

• Key Account Management (KAM)• Logistics• Product and process innovation• Price competitiveness.

The objective of Innovation and Learning is to ensure a continuous focus on innovation and learning among the employees.

A n n u a l R e p o r t 2 010 / 2 01106 G a b r i e l p r o f i l e

07

Gabriel China (established in 2003) comprises Gabriel’s repre-sentative office and the trading company, Gabriel (Tianjin) Interna-tional Trading Co. Ltd. sources products and services to Gabriel in Europe and develops and sells products and services to leading furniture manufacturers in Asia and the USA.

In 2010/11, both sourcing and sales were notably on the in-crease, and Gabriel China enjoyed growth both through sales to local leading manufacturers on the Chinese market and to other Asian and North American markets.

Please see article on page 11.

SampleMaster (established in 2000/01) develops and manu-factures samples and sales literature as well as valued-adding solu-tions in the form of effective and attractive sales tools. Even though it delivered only stable revenue for 2010/11, the business unit con-tributed increasingly to group results. In 2011/12, the business unit is expected to generate an increase in revenue and results.

Please see article on page 25.

Gabriel Ejendomme A/S - Gabriel Erhvervspark (estab-lished in 2011), comprising the Group’s building complex in the centre of Aalborg, develops and lets office premises to internal and external tenants.

The building was awarded a prize in 2010 by the Committee on prize awards for buildings in Aalborg “for its respectful refurbishment

of old factory buildings, which underpins Aalborg’s transformation from industrial city to a knowledge-based city”.

Reference is made to the financial review, page 16, and article on page 17.

In 2010/11, InnovationMaster (established in 2006/07) was continuously engaged in development projects offering major, yet uncertain, earnings potential. The projects are focused on the de-velopment of technical textiles and related products expected to be used primarily within Gabriel’s existing value chain.

At the beginning of the 2011/12, one of InnovationMaster’s proj-ects is ready for transfer to Gabriel Innovation A/S. Gabriel Inno-vation was established in 2008 with the objective of further devel-oping innovation projects from InnovationMaster to independent, sustainable business units.

In addition to product-oriented innovation processes, Innovation-Master has masterminded a large number of internal process in-novations in 2010/11 in order to boost Gabriel’s general com-petitiveness.

DesignMaster (established in 2006/07) is engaged in design-based activities and advisory services evolving around customer and end user behaviour. Such activities are facilitated by profound market insight and targeted research activities with a “time-to-mar-ket” horizon of 3-18 months.

The projects are carried out in Gabriel’s existing value chain and set out to realise the potential of upholstered textiles, techniques

Pixel 2 comes in new stylish colours.

A n n u a l R e p o r t 2 010 / 2 011G a b r i e l p r o f i l e 7

and related products. The business unit regularly engages in ac-tivities relying on core competencies such as textile design and finishing, upholstery design and technologies. In addition, design and production of complete furniture components are included in the solutions on offer.

Based on the concept “Furniture fabrics in use” and through tar-geted communication of Gabriel’s innovation and development strategies, the business unit has developed a close business rela-tionship with designers, development teams and decision-makers of designated furniture manufacturers.

At the beginning of the 2011/12 financial year, DesignMaster is, in addition to internally generated assignments, engaged in numer-ous assignments for external Gabriel Key Accounts.

KAM-Master (established in 2006/07) co-ordinates the co-operation between the individual Key Account’s organisation and Gabriel’s business units to foster maximum long-term value for each Key Account and KAM-Master. In 2010/11, Gabriel’s Key Ac-count Managers are organised in six individual business units in charge of designated customer activities within their area.

LogisticsMaster (established in 2006/07) handles the flow of goods and inventory management throughout the entire value chain from raw material over textile to product supplied and rep-resent the primary supporting function in one of Gabriel’s core processes, logistics.

The objective of the core process, logistics, is to ensure a strong delivery performance. In 2010/11, the process underwent several changes, including the implementation of a new IT platform to en-sure high reliability of delivery both today and in the future.

At the beginning of the financial year, delivery performance was down on usual standard, as the implementation of a new ERP sys-tem necessitated changes in important processes unavailable for testing prior to go-live. During the last nine months of the financial year, delivery performance was back to its usual level and is now above 98% for the intended date of delivery.

TransportMaster (established in 2009/10) is responsible for transport services and for optimum freight solutions to all Gabriel’s business units and customers.

IT-Master (established in 2006/07) ensures the proper operation of all operative IT systems of the group, supporting Gabriel’s stra-tegic and development.

FinanceMaster (established in 2006/07) is responsible for fi-nancial management and regular financial reporting. FinanceMas-ter participates actively in pinpointing value creation throughout the entire group and is in charge of financial management and risk management.

MarketingMaster (established in 2006/07) is a full-service ad-vertising agency offering marketing services to Gabriel’s business units and customers.

Aline from Inclass, Spain, carries Luna 2.

A n n u a l R e p o r t 2 010 / 2 01108 G a b r i e l p r o f i l e

QEPMaster, Quality, Environment and Production (established in 2006/07) supports Gabriel’s business development by opti-mising products, services and processes in terms of quality and environmental aspects. QEPMaster is responsible for the qual-ity of products and services and is accountable to its customers for all quality-related and environmental decisions in the supply chain. QEPMaster offers competencies within quality and envi-ronmental management, product labelling, working environment and production.

Technology and Facilities is in charge of the repair and maintenance of textile machines, including forging, machining and electricity as well as the refurbishment of buildings. This service is offered to all Gabriel’s business units and business partners.

MANAGEMENT SYSTEMSGabriel has been certified to DS/ISO 9001 (quality management) and EMAS/ISO 14001 (environmental management) since 1991 and 1996, respectively. Gabriel’s Chinese subsidiary, Gabriel “Tianjin” International Trading Co. Ltd., has been certified to DS/ISO 9001 since 2006.

In addition to the Balanced Score Card model implemented in 2002, Gabriel has taken the following important initiatives on which further information is available on Gabriel’s website:

• EU Flower ecolabel carried by its main products since 2003.• Development – Blue Ocean Strategy since 2005.• Innovation Cup participant in 2006, 2007, 2009, 2010 and

2011. • Division of Gabriel into independent Master units from 2006/07• First company in Denmark certified to the C2C scheme since

November 2010.

VALUE CHA INGabriel’s value chain covers all steps from conception to furniture user.

INNOVATIONWith Gabriel’s Blue Ocean Strategy in hand, new products and services should offer exceptionally functional or emotional utility value to the user. Close interplay with Gabriel’s network of custom-ers, users, suppliers, advisors and qualified employees ensures the evaluation of new conceptions and business potential.

Gabriel makes efforts to ensure that at least 30% of revenue de-rives from products and services launched within the past five years. In 2010/11, the share accounted for 31%.

The number of products released serves as an “early warner“. With six product launches in 2010/11, Gabriel failed to meet its target of 8 new products in the 2010/11 financial year.

HUMAN RESOURCESGabriel intends to attract and retain well-qualified employees to foster innovation and growth in their international endeavours. For this purpose, knowledge sharing is an important parameter.

All employees are familiar with Gabriel’s vision, strategy, targets and activity plans and are regularly updated on their work situa-tion as part of appraisal reviews and staff meetings. Accordingly, targets and areas of responsibility have been clearly defined for all employees for the purpose of stimulating professional and personal development.

”One stop Gabriel” – innovation in the value chain

Con-ception

Piece goods/coupon

Design/development

Raw material Yarn Greige

piece Dyeing/finishing

Cutting/sewing

Upholstery material Upholstery Fitting Gabriel

Contract

KeyAccounts Distributors

Other Accounts

GabrielHome

Furniture users

Fabric cut/cover

sewn

Partly fitted fabric

Furniture part

Finished furniture

Real06/07

Real07/08

Real08/09

Real09/10

Real10/11

30

25

20

15

10

5

0

Percentage of revenue generated by new products and number of products launched Percentage of revenue Number of products launched

A n n u a l R e p o r t 2 010 / 2 011G a b r i e l p r o f i l e 09

With the launch of the business unit, HR-Master during the 2010/11 financial year, human resources were given an even higher priority. HR-Master is to further improve profitability and to provide a setting in which the employees hold a global mindset and are able to excel in an increasingly changing world.

HR-Master assisted with the employment of 10 new employees - both for job re-openings and new job openings. Highly-skilled employees with higher education and extensive experience are continuously welcomed as part of Gabriel’s staff. However, Gabri-el is also pleased to take in newly educated candidates, who with fresh thinking and a new outlook on things may provide inspiration to Gabriel’s future endeavours.

Employee branding also came into play when Gabriel for the first time participated in the annual nation-wide career fair for newly educated candidates. The numerous visitors confirmed Gabriel’s position as an interesting, potential employer.

EMPLOYEE SATISFACTIONGabriel is to hold a status as an attractive workplace for all em-ployees. Accordingly, an employee satisfaction survey was re-introduced in 2011 for both Danish and foreign employees. The average satisfaction score was 4 on a scale from 1-5.

BOARD MEMBERS ELECTED BY THE EMPLOYEES In accordance with the Danish Executive Order on Employee rep-resentation in public limited companies, employee representatives and alternates for service on the Board of Directors are elected every fourth year. Currently, two employee representatives and two alternates are elected.

CORPORATE SOCIAL RESPONSIB I L ITY Corporate social responsibility is an integrated element in the busi-ness of the Group, meaning that Gabriel embraces responsibility for its actions and encourage a positive impact, either directly or indirectly, on social developments. The Company accedes to the principles laid down in the UN’s Global Compact.

Gabriel’s services and products must be in line with the requirements and expectations of its customers. Production and distribution are to promote a regular reduction in resources and in environmentally harmful emissions. Gabriel enjoys a status as a quality-conscious and environmentally conscious company rendered visible by its certifications to the ISO 9001, ISO 14001 and EMAS schemes.

Gabriel’s customers should be able to choose an environmentally sound and healthy product for which purpose the Company ap-plies the flower ecolabel and the Oeko-Tex label. These schemes enjoy a high level of trust from consumers, and similarly awareness of the schemes is on the increase.

One of the founders of the Cradle to Cradle (C2C) scheme in Den-mark, Søren Lyngsgaard, stated in a press release that “Gabriel is the frontrunner within the textile industry” as a result of the C2C certification of Gabriel’s product, Gaja, which is available in a special C2C colour scale with 35 colours.

For further information on environmental aspects and CSR, refer-ence is made to page 24 and www.gabriel.dk. The environmental report can be downloaded from the Gabriel’s website in January 2012.

The chairs of Aalborg Kongres and Kulturcenter carry Gabriel’s design Chess Royal and Chess Royal Dot.

10 A n n u a l R e p o r t 2 010 / 2 011 G a b r i e l p r o f i l e

Morten StamovGeneral ManagerGabriel China

Gabriel China has literally proven to be a Chinese box since its establishment as an independent business unit in 2003. Since its start-up, Gabriel China has boosted group results, and last year Gabriel China for the first time enjoyed profitability as an indepen-dent business unit. Even though China is a price-sensitive market characterised by increasingly fierce competition, the outlook for the ”Market in the middle” is promising. Annual growth of more than 100% has so far been the order of the day for Gabriel China, and revenue growth accounted for 60% in 2010/11, which Morten Stamov, General Manager, finds satisfactory.

- All our competitors are now strongly represented in China, resul-ting in fierce competition presumably of an unprecedented scale in the rest of the world. Therefore, we are of course unable to continuously double our revenue, even though 60% growth is still remarkable and highly positive, says Morten Stamov, who has been the head of Gabriel China since 2006.

APPEALING SALES PARAMETERSIn addition to the more than 600,000 metres of fabrics delivered by Gabriel China to Gabriel’s other markets, sales on the Chinese domestic market was highly on the increase. Low-end textiles ac-count for the vast part of sales, but the price group concept is hastily gaining ground and is accompanied with higher margins.

Chinese system furniture manufacturers and not least highly pro filed designers have come to appreciate Gabriel’s quality, warranty and short delivery times, fostering the conclusion of a number of important partnerships. Furthermore, Gabriel China gains market shares relying on its staff of 12 employees, which except from Morten Stamov, are all Chinese.

CHINESE GROWTH OUTSIDE CH INAAlso on the North American markets and in the rest of Asia, Ga-briel China has enjoyed a marked increase in demand. Sustaina-bility as a sale parameter is growing in importance on all domestic and export markets serviced by Gabriel China. Gabriel China is certified to the DS/ISO 9001 standard, and throughout the la-test four years, environmental awareness and reuse of furniture, etc. have come to play a more important role in society. For this purpose, Gabriel’s 10-year wear guarantee is an important sales parameter.

OPTIM ISTIC OUTLOOKIn 2010, Gabriel China was chosen as the preferred supplier of fabrics for the Chinese head offices Microsoft, Sony Ericsson, Volkswagen Finance, Bayer, Roche China and the world’s largest bank HSBC in Shanghai. This has really made its mark in the global market.

- The more successes in our portfolio and the stronger impact of our price group concept and high quality standards, the more progress we will make. However, trees do not grow into the sky, which is also the case in China. However, relying on our solid portfolio of development projects, we are highly optimistic about the future, says Morten Stamov.

Gabriel China elevates its strategic importance year by year and thereby also strengthens its position as an independent and sustainable business with solid profit margins .

Gabriel’s Chinese box

A n n u a l R e p o r t 2 010 / 2 011G a b r i e l ’ s C h i n e s e b o x 11

Financial review

SALES AND EARNINGS FOR 2010/11For the year under review, consolidated revenue came in at DKK 242.6 million as against DKK 220.4 million last year, accounting for an increase of 10%. The revenue increase for Q4 reached 11%.

Operating profit (EBIT) reached DKK 18.2 million (DKK 10.4 million).

Profit before tax amounted DKK 22.5 million (DKK 12.9 million). The profit share (after tax) from the associate, Scandye UAB, was DKK 3.4 million as against DKK 2.0 million last year.

Financial income and expenses accounted for a net income of DKK 0.8 million as against DKK 0.5 million last year.

Return on invested capital (ROIC) before tax stood at 9.4% (5.8%).

Cash flows from operating activities totalled DKK 26.7 million (negative at DKK 8.5 million).

In the Q3 report for 2010/11, full-year revenue was forecast at approx DKK 240 million and profit before tax at approx DKK 20 million by Management. Accordingly, the Company succeeded in meeting this forecast.

As a result of the present market situation, Management finds the results satisfactory.

2010/11 F INANCIAL YEAR AT A GLANCE Revenue Consolidated revenue was up by 10% to DKK 242.6 million as against DKK 220.4 million last year.

Cost of sales - gross profit The consolidated gross profit accounted for 41.9% in 2010/11 as against 38.1% in 2009/10. The improved gross profit was mainly attributable to further optimisation after the relocation of the Group’s dye factory and finishing activities to Scandye UAB, enhanced use of resources throughout the entire value chain as well as non-resource-intensive services and letting accounting for a higher portion of revenue.

Other external costs As a consequence of the rising activity level and the relocation of the warehouse and dispatch facilities to Lithuania, external costs were up by 13% to DKK 41.8 million.

Staff costs Consolidated staff costs rose by 10% to DKK 36.0 million in 2010/111 as against DKK 32.7 million last year. This increase was driven by the employment of additional staff members within sales and develop-ment. The average number of employees for the year under review was 64 as against 63 in 2009/10. At the end of the 2010/11 fi-nancial year, a number of 67 employees were working for the group.

Depreciation/amortisation Consolidated depreciation/amortisation was up by 38% on last year primarily arising from amortisation of intangible assets (DKK 1.8 million) and depreciation of investments in a new ERP system, which came into service on 1 October 2010.

Profit/loss from investment in Scandye UABThe profit share from the investment in Scandye UAB (40%) ac-counted for DKK 3.4 million as against DKK 2.0 million last year.

Financial income and expenses and tax Financial income and expenses represented a net income of DKK 0.8 million as against a net income of DKK 0.5 million last year. In the year under review, the item was positively affected by ex-change gains in 2010/11 and the low level of interest.

The effective consolidated tax rate stood at 25% as against 24% last year.

Balance sheet totalThe consolidated balance sheet total amounted to DKK 228.8 mil-lion as against DKK 221.7 million last year.

InvestmentsIn 2010/11, Gabriel invested an amount of DKK 4.5 million in property, plant and equipment as against DKK 13.6 million last year. The investments were primarily made in the refurbishment of Alki from France carries Europost.

12 A n n u a l R e p o r t 2 010 / 2 011 F i n a n c i a l r e v i e w

premises in Gabriel Erhvervspark let out to an important tenant and in fixtures and fittings, tools and equipment.

InventoriesConsolidated inventories rose to DKK 40.7 million as against DKK 35.1 million last year. The increase was, for the most part, attribut-able to the higher activity level and revised procurement patterns, which have had a positive impact on cost of sales.

ReceivablesReceivables totalled DKK 44.5 million as against DKK 47.3 million last year. Consolidated trade receivables rose to DKK 32.6 million as against DKK 29.3 million at 30 September 2010 arising from the higher activity level during the last quarter of the financial year.

Part of a Lithuanian VAT refund is still outstanding. The receivable had been reduced from DKK 10.0 million at 30 September 2010 to DKK 4.9 million at 30 September 2011.

Financing Consolidated cash flows from operating activities in 2010/11 amounted to DKK 26.7 million as against a negative DKK 8.5 mil-lion last year. The significant improvement of DKK 35.2 million was mostly due to profit increase and improvements in trade payables and receivables.

Bank loans closed at DKK 6.5 million. The Group has major un-drawn bank credit facilities and a liquidity reserve of DKK 27.5 million invested in Danish mortgage bonds.

EquityConsolidated equity stood at DKK 136.7 million at 30 September 2011 as against DKK 125.8 million last year.

Dividends The Board of Directors recommends to the general meeting that dividends of DKK 4.25 per share be distributed for 2010/11, equivalent to total dividends of DKK 8.0 million.

OUTLOOK In the 2010/11 financial year, Gabriel engaged in activities deemed to enhance future competitiveness and earnings. In addi-tion, the business model is regularly adjusted to promote growth in sales of and earnings from textiles as well as related products and services. As examples, we point out:

• The Group improved its sales channels through the establishment of local representation in London, England and Beijing/Shanghai, China.

• With the employment of two graduates, Gabriel has further op-timised its development competencies.

• Further growth potential has to be added to the customers and product portfolio. Product development made up an amount of DKK 7 million as against DKK 4.9 million last year.

• Gabriel has entered into a global distribution and development agreement on patented upholstery material improving the func-tional properties and environmental impact associated with the primary type of foam used in the production of office furniture, domestic furniture, mattresses, etc.

• Management is of the opinion that the poor economic condi-tions will continuously reduce the Company’s growth potential within its core business. Accordingly, a committee has been set up in order to deliver future increases in revenue and earnings through acquisitions.

• Measures are continuously taken to further develop Gabriel Erhvervspark to generate increasing rental income and higher property value.

International demand for contract furniture has only been slightly on the increase since the economic downturn in 2009. The outlook for the 2011/12 financial year is subject to a high degree of un-certainty with regard to international economic trends. The recent unrest on the financial markets and the potential consequences for the global contract furniture market may bring about renewed instability and failing growth.

For the 2011/12 financial year, Management expects to report revenue and operating profit (EBIT) in line with 2010/11.

SALES Consolidated revenue was up by 10% to DKK 242.6 million as against DKK 220.4 million last year.

Sale of the core product - contract furniture fabrics - rose by 8% on last year. Moreover, the revenue increase was derived from prod-ucts and services sold to the same customers but which belong to the next step in the value chain, e.g. cutting, sewing or upholstering of furniture parts and an increase in rental income from Gabriel Erhvervspark.

Atlantic design, BD Barcelona Design, Spain.

A n n u a l R e p o r t 2 010 / 2 011 13F i n a n c i a l r e v i e w

At the end of the 2009/10 financial year, the contract furniture market was deemed to be stable but not to offer any further growth potential. Similarly, the sale of supplementary products and ser-vices was in line with Management’s forecast. Management takes this as a sign of the successful implementation of the Group’s multi-annual strategy for innovation and business development – also during periods with unstable economic conditions. Management is of the opinion that the Gabriel Group enjoys a high degree of flexibility and adaptability to fluctuating economic conditions.

Export revenue grew by 11% to DKK 221.2 million as against DKK 200.1 million last year. Exports remained at 91%. Sale in Denmark rose by 6% to DKK 21.5 million as against DKK 20.3 million last year.

Gabriel maintains its strategy of ”growing with the largest market participants”, ensuring targeted efforts with selected key account customers. Gabriel’s focus on product and process innovation with assistance from several business units has had a positive impact on sales. During the year under review, further sales resources were allocated by means of the employment of Key Account Managers, who are to be responsible for the English and Chinese markets.

In February, Gabriel was represented at Scandinavia’s largest fur-niture expo in Stockholm. Gabriel’s success at the expo pinpointed that the strategy ”furniture fabrics in use” does in fact pay off and improves the success rate of several business units.

At NEOCON, North America’s largest furniture expo held in Chi-cago in June each year, Gabriel’s products enjoyed a strong repre-sentation on furniture displayed by several leading manufacturers. For instance, the furniture ”Kontour” launched by the North Ameri-can furniture manufacturer Davis Furniture and carrying Gabriel’s textile ”Atlantic” was given a NEOCON Gold Award.

PRODUCT DEVELOPMENT AND INNOVATION IN GABRIEL Also in 2010/11, product and process innovation from conception to upholstered product has been a core activity of Gabriel. Invest-ments in research and development were up by 30% to DKK 7 mil-lion, displaying growing interest in Gabriel’s innovative upholstery fabrics and solutions. Management is of the opinion that this focus has contributed to maintaining and strengthening value adding, competitiveness and growth potential.

In 2010/11, the Group managed to meet its target of a minimum of 30% of revenue deriving from products launched within the past five years, as revenue from these products accounted for 31% as against 34% in 2009/10.

All Gabriel Master units carry out product development and in-novation, which overall support the core process ”product and process innovation”. The unique market potential of the individual Masters is identified, developed and activated concurrently with the outcome of jointly coordinated efforts being utilised and of-fered to leading furniture manufacturers.

The business unit, DesignMaster, carries out regular design-based development and consultancy activities based on the desires, re-quirements and behaviour of customers and end users. This is facili-

tated by fundamental market insight and targeted research based on a ”time-to-market” horizon of 3-18 months.

The projects are carried out in Gabriel’s existing value chain and target at realising and transmitting the potential contained in the use of upholstery textiles, techniques and related products. Gabriel regularly engages in activities relying on core competencies such as textile construction, finishing, upholstery design and technology. In addition, design and production of complete furniture compo-nents are included in the solutions offered to the customers.

Based on the concept ”Furniture fabrics in use“ and through the communication of its innovation and development strategy, Gabri-el has managed to foster a close business relationship with design-ers, development teams and decision makers of selected furniture manufacturers.

Against this background, a number of projects have been realised, and new ones have been initiated. The year under review saw the launch of six new products. Accordingly, the Company failed to meet its target of eight new product launches during the 2010/11 financial year. The variance was prompted by the postponement of product launches to Q1 of the 2011/12 financial year. Refer-ence is made to www.gabriel.dk for further information on product launches and cases.

The business unit, FurnMaster, performed well in 2010/11 and is now a well-established supplier and development partner to lead-ing manufacturers of contract furniture, enjoying increasing sale and new business potential during the year under review.

Gabriel’s business unit, InnovationMaster, is to develop new busi-ness areas contributing new concepts, technologies and market entries with a ”time-to-market” horizon of 2-5 years.

In 2010/11, InnovationMaster was engaged in development proj ects with major, however, yet uncertain earnings potential. The projects focus on the development of technical textiles and related products for expected use primarily in Gabriel’s existing value chain.

After the financial year end and as a direct result of a project initi-ated in InnovationMaster and further developed by DesignMaster, Gabriel has entered into a global distribution and development agreement on patented upholstery material improving the func-tional properties and environmental impact associated with the primary type of foam used in the production of office furniture, domestic furniture, mattresses, etc. The product is an attractive so-lution to all manufacturers of furniture, mattresses, etc. intending to improve health implications, comfort and environmental impact before, during and after the use of the products.

Management is contemplating the establishment of an incubation company as an independent business unit under Gabriel Innova-tion A/S with the objective of developing technical and upholstery properties as well as identifying potential for development and sales agreements with leading manufacturers.

In addition to product-directed innovation processes, Innovation-Master is in charge of a number of internal process innovations

14 A n n u a l R e p o r t 2 010 / 2 011 F i n a n c i a l r e v i e w

conducted in 2010/11.The objective is to support Gabriel’s overall innovability and competitive power, contributing to higher produc-tivity in the Group’s independent business units.

GABRIEL CH INAThe business unit continuously reported positive sales trends in the 2010/11 financial year and delivered satisfactory earnings growth.

Gabriel China serves as an important element of the overall strat-egy of servicing global contract furniture manufacturers and dis-tributors and of offering innovative and competitive products on all markets.

Product development was in progress during the financial year, and regular deliveries were made to new strategic customers in the USA and Asia. New development projects are constantly in the pipeline, and local representation is on the rise.

Generally, the Chinese market is price sensitive, but the leading market players display an increasing interest in Gabriel’s products

enjoying documented environmental and energy-related sustain-ability, competitive prices and short delivery times.

In addition to sales, Gabriel China is in charge of design, develop-ment, logistics, procurement as well as documented and certified quality and environmental management.

DYE FACTORY, SCANDYE UAB, L ITHUANIAThe profit share (after tax) from the associate, Scandye UAB, came in at DKK 3.4 million as against DKK 2.0 million last year, which was attributable to a sales increase, process optimisation and higher productivity.

Scandye’s quality and environmental management is certified to ISO 9001 and ISO 14001. Furthermore, the business unit is certified to the working environment standard OHSAS 18001. Throughout 2010/11, the Company introduced lean processes ensuring regular optimisation and higher efficiency.

Ahrends’ model A2020 carries Gaja C2C.

A n n u a l R e p o r t 2 010 / 2 011 15F i n a n c i a l r e v i e w

GABRIEL ERHVERVSPARK– GABRIEL EJENDOM ME A/SIn line with last year, the group building complex was stated at cost less accumulated depreciation in the consolidated financial statements, representing a carrying amount of DKK 69.5 million.

The group building complex in Aalborg, which has been trans-ferred to the subsidiary ”Gabriel Ejendomme A/S”, has been stat-ed at calculated fair value of DKK 82.5 million, which is equivalent to additional value of DKK 13.0 million on the carrying amount recognised in the consolidated financial statements at 30 Septem-ber 2011.

Gabriel Ejendomme A/S reported a profit after tax of DKK 0.9 mil-lion for 2010/11, which is considered satisfactory. During the year under review, the Company entered into new important tenancy agreements with external tenants, just as demand from potential new tenants is on the increase.

Silent Solution models offer excellent acoustics and a terrific working environment.

At 30 September 20011, Gabriel Ejendomme A/S has leased out approx. 6,000 m2.

Innovative business environments are the centre of much interest as evidenced in Gabriel Erhvervspark. To this should be added further 8-9,000 square metres of non-refurbished industrial and inventory facilities. Gabriel intends to refurbish these facilities as the relevant tenants are identified. Management is constantly attentive to the potential optimisation of property value and income for the benefit of both tenants and owners.

Throughout the financial year, Gabriel Erhvervspark has developed its role as one of the meeting places in Aalborg for business peo-ple and academics facilitated by initiatives from both business and educational institutions, from Gabriel and other tenants of Gabriel Erhvervspark.

16 A n n u a l R e p o r t 2 010 / 2 011 F i n a n c i a l r e v i e w

The geographical location and the physical setting go together in Gabriel Ejendomme’s ultramodern office renting facilities encouraging cross-organisational co-operation .

Gabriel sets time free for working

Claus ToftegaardBusiness ManagerFinanceMaster

With its elegant, light office premises and auditorium with AV equipment, it is difficult to imagine that the weaving machines once have been up and running in the fully refurbished industrial building at Hjulmagervej, which today serves as the modern and stylish head office of Gabriel and workplace for a number of other companies.

When a company moves in, its employees may, in principle, plug in their comput-ers and start to work. Aalborg CSP, which develops steam generators for solar power systems, highly appreciates the physical setting.

- We are extremely pleased with our tenancy due to the availability of all facilities required. The required technology is available, and we do not have to allocate any resources to the administration of an alarm system or a canteen, as this is be-ing taken care of. The meeting and conference rooms supplied with AV equipment make it easy for us to give large presentations and hold client meetings, says Per Jørn Nielsen, CEO of Aalborg CSP.

GEOGRAPHICAL HOT SPOT With the bus and railway stations only 500 metres away and a five-minute drive to the motorway, the property has the perfect geographical location.

- We have plenty of open space, which in unavailable in the city centre. Parking facilities are readily available, and the building has the optimum location for trans-port purposes. It relieves a burden on our daily routines and is very important to us, says Per Jørn Nielsen.

CROSS -ORGANISATIONAL CO -OPERATIONThe former weaving facilities have been supplied with an open glass structure facilitating interaction with other organisations and cross-organisational co-opera-tion. For the IT company, Continia, this has had the outcome that today they share the services of a bookkeeper with one of the other enterprises in the building.

- We make use of the services of the bookkeeper twice a week, but she is always physically present in the building, which makes it easy to get in touch with her, which is of tremendous importance for our daily business. We could also make this arrangement with a non-inhouse partner, but this would not offer the same flexibility, says Henrik Lærke, CEO of Continia.

Sharing of experience and competencies is also a potential benefit.

- Another IT company has just moved in, so I might as well just pop into their office to get an idea of their practices. It seems only logical when you live under the same roof and share canteen facilities. And it is an attractive benefit of living in this house - networking is always an option, says Henrik Lærke.

A n n u a l R e p o r t 2 010 / 2 011 17G a b r i e l s e t s t i m e f r e e f o r w o r k i n g

Management of business risks

COMPETIT IVE S ITUATIONGabriel is a niche company developing and manufacturing up-holstery fabrics and related textile products and services to be used in fields of application where product features, design and logistics have to meet invariable requirements and where quality and environmental management must be documented. Gabriel is a well-known, global brand within its niche.

Gabriel constantly strives to develop and consolidate its position as the preferred supplier of furnishing fabrics and related com-ponents to strategically designated, international furniture manu-facturers. Accordingly, Gabriel prioritises the development of Blue Ocean products and services within its entire value chain.

Competitiveness is to be strengthened through the regular develop-ment of its business model allowing Gabriel to meet market demand and structural development. Outsourcing of supporting processes with the optimum location in low-wage countries and focus on selected core processes has strengthened Gabriel’s position as the preferred supplier and business partner.

CUSTOMERS AND MARKETS Gabriel targets its product development at selected key account cus-tomers accounting for approx. 44% of revenue. Gabriel genera tes

91% of its revenue from European customers, but overseas countries such as the USA and China contribute increasingly to revenue.

PRODUCTS Relying on its business model, Gabriel aims at diversifying risks by offering new product solutions throughout a large part of the value chain. This takes place in co-operation with strategically de-signated key account customers by developing furnishing fabrics, furniture parts and services for future use.

RAW MATER IALSIn recent years, the Gabriel’s primary raw materials, wool and polyester, have been exposed to major price fluctuations. On the basis of projected future production, Gabriel strives to meet its requirements by entering into short-term or long-term supply agree-ments with the Group’s primary suppliers.

CURRENCY R ISKS The Group hedges currency exposure considering projected future cash flows and projected future exchange rate movements. The majority of sales in Europe are settled in the customer’s currency, while several international customers opt for settlement in euros. The euro is primarily used as the settlement currency with other countries. Currency exposure generated by income is only of a limited scale, as the vast part of income is invoiced in euros.

The most important part of corporate purchases is settled in Danish kroner, euros or US dollars. To ensure an optimum interest level and to match financing in euros, the Group has raised a mortgage loan and entered into lease agreements denominated in euros. Bank financing is in the form of open credits denominated in euros or Danish kroner.

See note 23 for more information on currency risks.

INTEREST RATE R ISKSThe Group’s bank loans are open, floating-rate business credits, while the mortgage loan is an adjustable-rate loan denominated in euros subject to annual adjustment. The bond portfolio consists pri-marily of short-dated bonds denominated in Danish kroner, adjusting interest to the general societal interest level. Group receivables carry a fixed interest rate during their entire life as laid down by contract.

See note 23 for more information on interest rate risks.

The nature of Gabriel’s business area includes a number of commercial and financial risks of importance to the group’s future . Gabriel makes an effort to counter and minimise any risks manageable by the Company’s own actions . Gabriel policy is not to engage in active speculation in financial risks . Risk management only covers risks arising directly from the Group’s operations, investments and financing .

18 A n n u a l R e p o r t 2 010 / 2 011 M a n a g e m e n t o f b u s i n e s s r i s k s

CREDIT R ISKSIn line with group credit risk policy, all major customers and other business partners are regularly credit rated. Credit risk manage-ment is based on internal credit lines for customers. Triggered by the financial crisis, the Group has intensified its focus on the ap-proval of customer credit lines as well as on the management and monitoring of customers. Group trade receivables are distributed on numerous customers, countries and markets, ensuring a high degree of risk diversification. Gabriel has been provided collateral in productive equipment leased out to business partners.

CAPITAL RESOURCESThe Group regularly assesses the need for adjusting its capital structure to hold the required higher return on equity up against the higher degree of uncertainty surrounding external financing. In 2009, the Group chose to raise a mortgage loan to finance a construction project and to strengthen the Group’s cash resources. Most of the proceeds, equivalent to DKK 27.5 million, have been invested in Danish mortgage bonds. At year end 2010/11, Gabriel’s bank debt accounted for DKK 6.5 million. In addition, Gabriel has undrawn bank credit facilities. Against this back-ground, the Group is deemed to have sufficient liquidity to finance future operations and investments.

PLACES OF BUSINESSThe Group carries out some of its activities from Lithuania and China, which have undergone a high degree of political and fi-nancial turmoil, affecting business activities in this environment. Ac-cordingly, Gabriel’s business activities in Lithuania and China are exposed to risks not inherent in typical European business activities. Tax legislation, etc. in Lithuania and China undergoes frequent revision, resulting in a high risk level in these countries. The Group attempts to minimise these risks by interacting with business part-ners and local advisors.

INSURANCEIt is Gabriel’s policy to take out insurance against risks of mate-rial importance to the financial position of the Group. Insurance has been taken out against operating losses and product liability. Moreover, the company has taken out all-risk insurance covering property, plant and equipment as well as inventories in Denmark and abroad. ENVIRONMENTAL R ISKSCertifications for the Environmental Management Standard ISO 14001, the Eco Management and Audit Scheme (EMAS), the EU Flower ecolabel scheme, Oeko-Tex as well as for the Quality Management Standard ISO 9001 ensure that neither the activities nor the products of the company are exposed to any important en-vironmental risks. The objectives of Gabriel’s environmental policy are to prevent spillage/accidents and to ensure that the company’s products do not contain any health hazardous substances.

IT R ISKSThe Group has chosen to outsource the operation of its IT platform to external service partners, ensuring regular update of security systems and minimising the risk of major operational break-down.

TRADE R ISKS The majority of raw materials, semi-manufactured products and finished goods used by Gabriel are available from alternative sup-pliers in case of non-delivery by the usual suppliers.

CONTINGENCY PLANSIn accordance with the quality and environmental management systems, Gabriel in Aalborg continuously develops its contingency plans and communicates these to its staff. Gabriel holds regular first-aid and fire-fighting courses, and all areas have prepared an operational contingency plan in case of spillage/accidents.

”Koja” from Blå Station with Europost 2.

A n n u a l R e p o r t 2 010 / 2 011 19M a n a g e m e n t o f b u s i n e s s r i s k s

Anders L . MadsenBusiness ManagerFurnMaster

FurnMaster covers the entire value chain irrespective of the need for outsourcing the entire production or parts of it. In other words, FurnMaster may be in charge of everything from conception and design development to textile processing, procurement, production and logistics. In principle, furniture manufacturers only have to con-sider the date of delivery for the finished product.

- FurnMaster is meant to be a One Stop Shop for furniture production abroad. When customers choose to outsource to us, we may be in charge of the entire process from the beginning and till the end. We are in contact with the supsuppliers, buy the finest raw materials and components in low-wage countries, assemble the furniture and finally send out the finished product directly to the shops. It cannot become any simpler than that, says Anders L. Madsen, Business Manager of FurnMaster.

SHARPEST SHORTCUT TO THE MARKETWith FurnMaster as their partner, furniture manufacturers buy them-selves into a well-functioning logistics network of global subsuppliers and partners.

One of FurnMaster’s success areas is outsourcing for furniture manufacturers intending to profit from a global network of supsuppliers, of which an increasing number of manu-facturers make use .

One stop shop with FurnMaster

SUCCESSFUL CO -OPERATIONIn 2010, FurnMaster assisted Skandiform, one of Scandinavia’s leading suppliers of furniture for offices and public premises, with the production of chairs, which Skandiform’s Purchase Manager Peder Johnsson has far from regretted:

- We have been very pleased with our co-operation with FurnMaster, and they have really succeeded in meeting our tough requirements for quality and control, he says.

Most importantly, Skandiform does not have to be involved in the initial efforts to find the best subsuppliers and manage a vast number of processes before the furniture is on display in its showrooms.

- Finding the best subsuppliers was a joint effort, but from that point FurnMaster has been in charge of all administration regarding up-holstering and purchase of textiles and components. In May 2011, we launched a new project for which we will rely on the services of Gabriel DesignMaster. Accordingly, design and aesthetics will be addressed at an early stage in the process. The initial furni-ture prototypes have just been showcased, and they offer highly promising prospects, says Peder Johnsson.

20 A n n u a l R e p o r t 2 010 / 2 011 O n e s t o p s h o p w i t h f u r n m a s t e r

Gabriel and corporate governance

CORPORATE GOVERNANCE RECOMMENDATIONS BY NASDAQ OMX COPENHAGEN A/S NASDAQ OMX Copenhagen A/S has adopted a set of corporate governance recommendations (www.corporategovernance.dk/sw37806.asp). The recommendations were revised in August 2011 and subsequently approved by NASDAQ OMX Copenhagen A/S. These recommendations come into force for financial years begin-ning on or after 1 January 2012.

The supreme governing body of Gabriel has chosen to address the most recent recommendations (August 2011) and has carefully considered the recommendations. Gabriel widely complies with the recommendations. Gabriel has chosen a different practice within the following areas:

Composition and organisation of the supreme governing body Gabriel does not disclose the required and actual competencies of its supreme governing body.

Gabriel does not comply with the recommendation on independ-ence, as only one of the Company’s board members elected by the annual general meeting (Claus Christensen, General Manager) is considered independent. Gabriel attaches importance to the in-dividual board member’s capacity, competencies and contribution to group management. Accordingly, the Company has not defined an age limit for its board members.

Gabriel does not disclose the size of shareholdings, etc. in the Gabri-el Group held by individual members of the supreme governing body.

Due to the size and complexity of Gabriel, the supreme governing body has chosen not to set up any other board committees than the audit committee.

Total remuneration of the Board of Directors and the Executive Board is disclosed in the annual report. The annual report dis-closes the total figures for the Executive Board and the Board of Directors and does not specify any individual remuneration as this is personal information of limited relevance to the shareholders. Remuneration of the supreme governing body and the Executive Board is effected on market terms for a listed company of this size. Prompted by the size of the Company, the Board of Directors does not find it relevant to prepare a remuneration policy for the supreme governing body and the Executive Board.

A more thorough description of Gabriel’s management practice in re-lation to the recommendations by NASDAQ OMX Copenhagen A/S

is available at the company’s website, www.gabriel.dk/investorinfo/management-strategy/.

REPORTING ON INTERNAL CONTROL AND R ISK MANAGEMENT SYSTEMS The supreme governing body is overall responsible for the Group’s risk management and internal control in relation to financial reporting, including compliance with relevant legislation and other financial reporting regulations.

The objective of the group’s risk management and internal controls is to avoid any material misstatement and omissions during the fi-nancial reporting process. The Board of Directors/audit committee and the Executive Board regularly assess risks and internal controls arising from the Group’s activities and any impact on the financial reporting process.

Control environmentManagement regularly assesses the organisational structure and staffing of the Group and lays down and approves overall poli-cies, procedures and controls in relation to the financial reporting process, including clear-cut reporting policies and segregation of duties.

Risk assessmentWhen the annual business plan is prepared, material business risks are identified, and against this background Management makes an overall risk management, including an assessment of material risks arising from the financial reporting process. As part of the risk assessment, Management is annually to consider the risk of fraud and any other improper impact on the financial reporting process. The group’s Risk Management policy strives to eliminate and/or re-duce the risks identified based on an assessment of materiality and cost-benefit analyses. The Board of Directors annually assesses Gabriel’s IT security and insurance coverage. The most important risks arising from the financial reporting process are disclosed in the Management’s review and notes to the financial statements, to which reference is made.

Control activities At the board meetings, the Executive Board reports on the status of any risk factors attributable to strategy, organisation or operations. The Group has a systematic internal reporting system comparing monthly reporting to budget and regularly evaluating performance and meeting of specific targets through Key Performance Indica-tors, etc. The system highlights the different corporate activities and allows Management to gain insight into and knowledge about issues relating to the entire financial reporting process.

Throughout the years, Gabriel has striven to define and maintain explicit business con-

cept, visions, objectives and strategies . Executing strategy and performing planned ac-

tivities add value for customers, employees, shareholders and other stakeholders .

21A n n u a l R e p o r t 2 010 / 2 011G a b r i e l a n d c o r p o r a t e g o v e r n a n c e

Each quarter, the Board of Directors is provided with a thorough account of financial performance compared with budget and prior periods. Furthermore, the reporting describes and assesses mate-rial balance sheet items, cash flows, forecast future activities and earnings and other matters with an impact on operations.

InformationGenerally, the Board of Directors lays down required forecast fu-ture results and the requirements of the financial reporting in ac-cordance with relevant legislation and regulations. In addition, the Group aims at offering adequate, complete and precise informa-tion reflecting corporate performance.

Within the framework for listed companies, the Board of Directors attempts to promote open communication and to ensure that each employee is familiar with his/her function in the internal control process. The Group has chosen to divide operations and internal reporting into independent strategic business units. The strategic business units are run as independent profit centres with their own business concepts, visions, targets, strategies, action plans and budgets, ensuring that skills, follow-up and division of responsi-bilities are distributed on all organisational levels and that relevant information is communicated effectively and reliably throughout the entire system.

Monitoring Gabriel monitors the functioning of its internal control and risk man-agement system at all group levels on a regular basis and for each quarter. The scope thereof is determined primarily on the basis of the risk assessment and the effectiveness of controls and procedures.

Weaknesses, failings in controls or non-compliance with guidelines are reported to the Executive Board or the Board of Directors on the basis of materiality. The reporting is typically discussed at the next board meeting, at which the Board of Directors is informed of actual findings and recommendations on procedure updates, etc.

In their long-form audit report to the Board of Directors, the audi-tors appointed by the annual general meeting report any material failings in the Group’s internal control systems in relation to the financial reporting process.

The Board of Directors follows up on the implementation of any planned optimisation of risk management procedures and internal controls in relation to the financial reporting process.

AUDIT COM MITTEEIn accordance with section 31 of the Danish Act on Approved Auditors and Audit Firms, Gabriel Holding A/S set up an audit committee in 2009, on which the entire Board of Directors serves. The vice chairman of the Board of Directors acts as the chairman of the audit committee, which meets quarterly.

The audit committee is to:

1) monitor the financial reporting process,2 monitor the effective functioning of the company’s internal con-

trol and risk management systems,3) monitor the statutory audit of the financial statements, etc. and 4) monitor and check the auditor’s independence.

In 2010/11, the audit committee was highly attentive to the imple-mentation of the new ERP system in the Group.

Comfort+ an all-terrain textile.

22 A n n u a l R e p o r t 2 010 / 2 011 G a b r i e l a n d c o r p o r a t e g o v e r n a n c e

Kurt NedergaardBusiness ManagerQEP-Master

All Gabriel’s processes are subject to an environmental strat-egy and accordingly carry environmental labelling and envi-ronmental certifications. The Company’s textiles are solvent free and dyed without any heavy metals. In this way, Gabriel prevents any environmental exposure and unnecessary costs arising from the use of any environmentally dangerous sub-stances in production.

- We have deliberately chosen not to rely on extensive chemi-cal finishing of our textiles and minimise waste from produc-tion. This allows us to reduce our production costs. As ac con-sequence, our environmental strategy vastly supports our motto of being an excellent business opportunity, says Kurt Neder-gaard, Master of Quality, Environment and Production.

EXCEPTIONAL VALUE TODAY AND TOMORROWAt the same time, the environmental strategy allows the cus-tomers to have full confidence in their products, which subse-quently are resold to their own customers.

- The consumer is in direct contact with the textiles, so this ele-ment must under no circumstances pose any health risk. Our textiles guarantee high product safety, and our customers should not expect any unpleasant surprises for their customers in the form of nuisance and health risks, which in the worst case may have the outcome that our customers must withdraw their products from the market, says Kurt Nedergaard.

Using environmentally friendly textiles prevents sudden chang-es in supply reliability to the benefit of the customers, who will not be faced with failure in supply, because the textiles contain ingredients which are prohibited by public authorities or which the customers deliberately attempt to avoid.

High environmental standards are the order of day of all Gabriel’s endeavours . This has opened up for numerous environmental certifications, demonstrating that environmental awareness and competitiveness may go hand in hand in production .

The green thread in gabriel

COLOURFUL ENVIRONMENTALLY CORRECT TEXTILESAs the first enterprise in Denmark, Gabriel has been awarded Cradle-to-Cradle (C2C) certification. This adds a completely new dimension to sustainability, allowing production to be in benefit of the environment instead of being to its detriment. Many people are under the incorrect impression that envi-ronmentally correct textiles reduce the number of dyes avail-able, but Gabriel allows environmental considerations and advanced design features to go hand in hand.

- In my capacity as designer, I am fully aware of the importance of dyes. Environmental soundness will not boost your sales if your dyes are boring, says Kees de Boer. He works as designer with the Dutch manufacturer of office furniture, Ahrend, which has launched a C2C-certified chair carrying Gabriel’s textile, Gaja C2C - a textile which as standard comes in 35 exciting colours.

Corporate Social Responsibility (CSR) has become increas-ingly important to Ahrend and many other modern companies, for which purpose Gabriel’s textiles may make a difference, says Kurt Nedergaard.

- Gabriel’s products serve as a means to support and brand its customers’ environmental profile. Consumers increasingly wish to hold a green profile. In this way, our textiles may add value and enhance marketability of the products of our customers.

A n n u a l R e p o r t 2 010 / 2 011T h e g r e e n t h r e a d i n g a b r i e l 23

Corporate Social Responsibility

CSR POLICIESCorporate social responsibility is a self-regulating mechanism in-tegrated into the group’s business model, meaning that Gabriel embraces responsibility for the positive impact of its activities on general social developments and accedes to the UN Global Com-pact. Focus areas are:

• Gabriel’s products and services are developed and manufactured considering the safety and health of the users. Moreover, Gabriel strives to eliminate any practices harmful to the environment.

• Sound working environment during the entire supply chain and compliance with country-specific legislation and Gabriel’s own re-quirements. These requirements comprise specific technical speci-fications and matters disclosed in Gabriel’s Code of Conduct.

• Continuous job and competence development of all employees.• Gabriel desires to liaise with students on traineeships and edu-

cational projects for the benefit of both students and the enter-prise.

• Gabriel communicates openly on its CSR activities promoting CSR as a management activity.

QUALITY MANAGEMENT AND PRODUCT LABEL-L ING By means of the management standard ISO 9001 and ISO 14001 as well as by compliance with requirements laid down in a considerable number of international product standards, custom-ers and end-users are given high quality products. Gabriel carries out customer satisfaction surveys on a regular basis. Surveys per-formed at the end of 2010/11 showed a satisfactory level.

Gabriel makes easily available products with a positive impact on environment and health and continues its use of the EU Flower eco-label and the Oeko-Tex label.

Gabriel has decided to use theses labels due to their customers’ growing trust therein and rising awareness thereof.

In November 2010, Gabriel was awarded Cradle-to-Cradle certi-fication of the furniture fabrics ”Gaja”. Gabriel was the first Danish enterprise to be awarded this certification, and Gaja is launched in a new Cradle-to-Cradle version offering 35 colours.

CSR ACTIV IT IESGabriel serves on the CSR committee of the trade organisation, Danish Fashion and Textile, promoting CSR initiatives within this line of business. The committee acts as sparring partner to the trade organisation. In 2010/11, the line of business saw examples of enterprises that had to withdraw products from the market as they possessed harmful substances. Gabriel’s active CSR efforts prevent risks of the end-consumer and employees within production as well as financial risks and loss of consumer confidence. To improve knowledge of and advantages of systematic CSR efforts, Gabriel has given speeches at a large number of conferences focusing on CSR and Cradle-to-Cradle.

In cooperation with students at the Aalborg University, student proj-ects have been carried out based on the new international CSR standard ISO 26001. Gabriel’s CSR efforts were measured in rela-tion to the standard, and the project sets up an action plan for an implementation thereof, if any.

In the year under review, comprehensive supplier follow-up were made with particular focus on CSR. Thereby, Gabriel ensures that its suppliers live up to the UN’s Global Compact. Gabriel’s wool originates from New Zealand, and Gabriel monitors that animal welfare requirements are observed.

The Lithuanian dye factory, Scandye UAB, has, in addition to the certification to the ISO 9001 standard and the environment stand-ard ISO 1400, been certified to the Health and Safety standard OHSAS 18001.

EMPLOYEESIn 2011, the Company carried out an employee satisfaction survey which showed that the employees in general are satisfied with the conditions at Gabriel. The survey showed that the employees wish to constantly develop their qualifications, which is ensured through employee appraisals and realisation of development plans for all employees. The HR function coordinates development activities and participates in employment interviews and dismissals.

Based on the enterprise’s workplace evaluation, action plans have been prepared ensuring the continued development of the working environment. In addition to financial backing to sport activities, all em-ployees in Aalborg are comprised by the enterprise’s health insurance.

The former weaving facilities in Aalborg has been refurbished and transformed into office facilities. Gabriel Erhvervspark makes up the physical setting for the main part of Gabriel’s employees as well as its tenants. Together with the old factory buildings and green surroundings, joint facilities such as canteen, conference rooms and IT foster a stimulating and creative environment.

CSR FOCUS AREASGabriel currently assesses requirements of its’ suppliers’ CSR report-ing and follows up thereon through audits at the suppliers.Gabriel’s environmental action programme lays down specific ob-jectives for the development of environmental performance of the enterprise’s product programme, e.g. focusing on recycling.

The enterprise considers the application of the CSR standard ISO 26001 as basis for the continued CSR development at Gabriel and cooperative partners.

In recent years, QEPMaster has developed several CSR consultan-cy services which are also offered to enterprises outside Gabriel.

Additional informationGabriel’s CSR is further described at www.gabriel.dk.

24 A n n u a l R e p o r t 2 010 / 2 011 C o r p o r a t e S o c i a l R e s p o n s i b i l i t y

When the customers of BoConcept see and touch samples in fabrics or wood to be supplied on new furniture, SampleMaster is the driving force behind it . SampleMaster is fully responsible for the development and handling of BoConcept’s sample cards .

Touchable co-operation

Hanne P . AndersenBusiness ManagerSampleMaster

For many customers it is important to be able to see and touch the materials for their new furniture before making a choice - and they may bring home the samples to see them in their own homes. This is particularly the case for BoConcept’s customers, who design their own furniture using a wide selection of samples in fabrics, leather and wood.

As a result, five years ago BoConcept teamed up with SampleMas-ter in the efforts to develop an impressive series of sample cards, which are top professional in terms of quality and design.

- We excel in producing furniture and surfaces but are not geared for areas such as sample cards, etc. Consequently, it is much to our benefit to be able to outsource that part to SampleMaster, which holds the relevant expertise and which, in addition to design and production, is in charge of logistics. This leaves room and focus for our core competencies, says Jakob Lund, Store Opening Manager with BoConcept.

SAMPLEMASTER FROM THE BEGINN ING TO THE ENDSampleMaster is not only engaged in designing and manufacturing sample cards but is also in charge of entire inventory management

and the distribution of samples, which BoConcept finds highly ad-vantageous.

- As a matter of fact, the samples are out of our hands upon produc-tion launch. Our shops buy samples from our internal webshop, and the orders go directly to SampleMaster, which has its own inventory with samples, which they pack and distribute to our 300 shops in more than 50 countries. And SampleMaster constantly attempts to update the inventories with the newest samples, which eases our work considerably, says Jakob Lund.

SAMPLEMASTER SHOWS THE WAYFor SampleMaster, it is important that the customers may opt for a full package.

- Offering a complete palette of services to our partners is one of our top priorities. We may be in charge of the design of sample cards, collections and displays, but we may also source materials to our production in Lithuania and handle inventory management and dispatch. We are specialising in co-operation with many different subsuppliers, so we are not limited to Gabriel’s textiles, and we may also process materials such as steel and plastics, says Hanne Priess Andersen, Business Manager of SampleMaster.

Jakob Lund is in no doubt that BoConcept continuously will rely on SampleMaster’s packaging solution way out in the future.

- SampleMaster is good at taking the initiative and bringing to light new ideas and input unsolicitedly, which may help us to the next level. We highly appreciate this ability, and in the long run our fruitful business relationship may foster new development potential.

25A n n u a l R e p o r t 2 010 / 2 011To u c h a b l e c o - o p e r a t i o n

Shareholder information

06/07 06/0707/08 07/0808/09 08/0909/10 09/1010/11 10/11

200

175

150

125

100

75

50

25

0

10

9

8

7

6

5

4

3

2

1

0

Market price and net asset value at year end Market price in DKK Net asset value in DKK

Dividends and earnings per share Dividends per share in DKK Earnings per share in DKK

SHARE CAPITAL Gabriel Holding A/S’ share capital comprises 1,890,000 shares of DKK 20 each. Gabriel has one class of shares. All shares are freely negotiable securities. Gabriel Holding A/S is admitted for trading at NASDAQ OMX Copenhagen A/S under the ticker sym-bol GABR and the ID code DK0010049568. The share is traded under the Small Cap Index.

PR ICE MOVEMENTThe 2010/11 financial year opened with a price of 68 and closed with a price of 80. Market capitalisation came in at DKK 151.2 million at 30 September 2011.

CAPITAL MANAGEMENT The Group regularly assesses the need for adjusting its capital structure to hold the required higher return on equity up against

the higher degree of uncertainty surrounding external financing. A high solvency ratio has always been a top priority of Gabriel in order to ensure plenty of room for manoeuvre. The solvency ratio accounted for 60% at 30 September 2011, which is up on last year by 3 percentage points. Gabriel still makes efforts to reduce consolidated funds tied up.

Gabriel desires to provide its shareholders with a regular return on their investments while maintaining an appropriate equity level to ensure the company’s future operations. The Board of Directors proposes that dividends of DKK 4.25 per share be distributed for 2010/11, equivalent to total dividends of DKK 8 million.

Against this background, the present capital resources are deemed adequate in the present economic climate.

26 A n n u a l R e p o r t 2 010 / 2 011 S h a r e h o l d e r i n f o r m a t i o n

06/07 07/08 08/09 09/10 10/11

400

350

300

250

200

150

100

50

0

Market price at year end Market capitalisation in DKK million

Gabol A/S, Aarhus (40%)

Fulma A/S, Aarhus (31%)

Registered shareholders (21%)

Other shareholders (8%)

STOCK EXCHANGE ANNOUNCEMENTS IN THE 2010/11 F INANCIAL YEAR

23.11.10 Announcement of the annual report for 2009/10: Modest increase in revenue and earnings.

25.11.10 Updated financial calendar 2010/11

25.11.10 Notice of Annual General Meeting

25.11.10 Annual Report for 2009/10

16.12.10 Information on today’s general meeting

16.12.10 Minutes of the general meeting

28.02.11 Q1 interim report for 2010/11: Increasing revenue and operating profit in Gabriel

26.05.11 Interim report, first half of 2010/11: Improved key figures and continued increase in revenue

25.08.11 Q3 2010/11: Increase in revenue and earnings

25.08.11 Financial calendar for 2011/12

F INANCIAL CALENDAR FOR 2011/12

15.11.11 Announcement of the annual report

05.12.11 The printed annual report for 2010/11 is available

15.12.11 Annual General Meeting

09.02.12 Q1 report

15.05.12 Interim report, first half of the year

14.08.12 Q3 report

15.11.12 Announcement of the annual report

13.12.12 Annual General Meeting

COMPOSIT ION OF SHAREHOLDERS

INVESTOR RELATIONSGabriel Holding aims at providing a satisfactory and uniform infor-mation level to its investors and analysts ensuring stable price move-ments and reflecting forecast corporate performance at any time.

Gabriel’s website, www.gabriel.dk, is the stakeholders’ primary source of information and is regularly updated with new and rel-evant information on Gabriel’s profile, activities, line of business and results.

Investor relations contact:Anders Hedegaard Petersen, CEOPhone: +45 9630 3100E-mail: ahp@gabriel.dk

ANNUAL GENERAL MEETINGThe Annual General Meeting is to be held on the Company’s premises in Aalborg, Denmark, on Thursday, 15 December 2011, at 2 pm.

A n n u a l R e p o r t 2 010 / 2 011 27S h a r e h o l d e r i n f o r m a t i o n

Jørgen Kjær Jacobsen, general managerChairman (59 years of age)Joined the board in 2010 (D)

Executive positions:Raskier A/S

Directorships:Scandye UAB, Litauen (C)Mekoprint Holding A/S (C)UNO Danmark A/S (C)Nordjyske Medier A/S (VC)BKI Foods A/SUtzon Center A/SAM3D A/SGabol A/SRaskier A/S

Committee of shareholders and local councilSydbank A/S

Søren Brahm Lauritsen, general manager (44 years of age) Joined the Board in 2010 (D)

Executive positions:ONE Marketing A/S

Directorships:ONE Marketing A/S (C)Stanesø A/S

Kaj Taidal, general manager Vice Chairman and Chairman of the Audit Committee (52 years of age) Joined the board in 1998 (D)

Executive positions:A/S V. Sørensen

Directorships:Artemis A/S (C)A/S V. Sørensen (C)Bladt Holding A/S (C)Bladt Industries A/S (C)Dan-Iso Holding A/S (C)Dan-Iso A/S (C)EM-Fiberglas A/S (C)Impartex A/S (C)Slovakian Farm Invest A/S (C)

Other positions:Skanderborg Golfklub (C)

Ole Thomsen, engineering worker (59 years of age) Elected by the employeesJoined the Board in 2009

Claus Christensen, general manager(49 år years of age) Joined the Board in 1999 (I)

Executive positions:HC Projects A/SHCH A/S Novi A/S CC Holding ApSHC Invest ApSB&C Holding ApS

Directorships:Brøgger Arkitektfirma A/S (VC)DanPhone A/S (C)HC Projects A/S HCH A/S House of BI A/S (C)Inter-Data A/S (C)Judex Holding A/S Judex A/SKPF Arkitekter A/S (VC)M-Tec A/S (C)Medical Insight A/SNovi A/SNovi Innovation A/SScape Technologies A/SSydbank A/SStrøm Hansen A/S

Committee of shareholders and local councilSydbank A/S

Sales supporter Quinten Xerxes van Dalm(39 years of age) Elected by the employeesJoined the Board in 2010

Company details

BOARD OF DIRECTORS: EXECUTIVE BOARD:

Anders Hedegaard Petersen, CEO (35 years of age)Employed by the Company in 2004

External executive positions:KAAN ApS

AUDITORS:KPMG, Statsautoriseret Revisionspartnerselskab

BANKERS:Sydbank A/S

SUBSID IAR IES:Gabriel A/S, AalborgGabriel Innovation A/S, AalborgGabriel Ejendomme A/S, AalborgGabriel (Tianjin) International Trading Co. Ltd., Kina

ASSOCIATE:Scandye UAB, Litauen

REGISTERED OFF ICE AND REPRESENTATION:The registered office with sales, logistics, development, innovation and accounts departments are located in Aalborg.

Gabriel has its own representatives in Denmark, Sweden, Finland, Norway, Germany, France, Spain, Italy, the UK and China.

D = Dependent memberI = Independent member

28 A n n u a l R e p o r t 2 010 / 2 011 C o m p a n y d e t a i l s

Statement by the Executive Board and the Board of DirectorsThe Executive Board and the Board of Directors have today discussed and approved the annual report of Gabriel Holding A/S for 2010/11.

The annual report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and Danish disclosure requirements for annual reports of listed companies.

It is our opinion that the consolidated fi-nancial statements and parent company

financial statements give a true and fair view of the Group’s and the parent com-pany’s financial position at 30 September 2011 and of the results of the Group’s and the parent company’s operations and cash flows for the financial year 1 October 2010 – 30 September 2011.

Further, in our opinion the Management’s review gives a true and fair review of the development in the Group’s and the parent company’s operations and financial mat-ters, the results of the Group’s and the par-

ent company’s operations and financial position and the financial position of the companies comprised by the consolidated financial statements and describes the ma-terial risks and uncertainties affecting the Group and the parent company.

We recommend that the annual report be approved at the annual general meeting.

Aalborg, 15 November 2011

Executive Board

Anders Hedegaard PetersenCEO

Board of Directors

Jørgen Kjær Jacobsen Kaj Taidal Claus Christensen Chairman Vice chairman

Søren B. Lauritsen Quinten Xerxes van Dalm Ole Thomsen Elected by the employees Elected by the employees

A n n u a l R e p o r t 2 010 / 2 011 29S t a t e m e n t

Independent auditors’ report

TO THE SHAREHOLDERS OF GABRIEL HOLDING A/SWe have audited the consolidated financial statements and par-ent company financial statements of Gabriel Holding A/S for 2010/11 (pages 32-59). The consolidated financial statements and parent company financial statements comprise income state-ment, statement of comprehensive income, balance sheet, state-ment of changes in equity, cash flow statement and notes for the Group as well as for the parent company. The consolidated financial statements and parent company financial statements have been prepared in accordance with International Financial Report-ing Standards as adopted by the EU and Danish disclosure require-ments for consolidated financial statements and parent company financial statements of listed companies.

In addition to our audit, we have read the Management’s review, which has been prepared in accordance with Danish disclosure requirements for consolidated financial statements and parent com-pany financial statements of listed companies, and issued a state-ment thereon.

MANAGEMENT’S RESPONSIB I L ITY Management is responsible for the preparation and presentation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with Inter-national Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for consolidated financial statements and parent company financial statements of listed companies. This responsibility includes: designing, implementing and maintaining in-ternal control relevant to the preparation and fair presentation of consolidated financial statements and parent company financial statements that are free from material misstatement, whether due to fraud or error; selecting and using appropriate accounting policies; and making accounting estimates that are reasonable in the circum-stances. Management is also responsible for the preparation of a Management’s review that includes a fair review of the development in the Group’s and the parent company’s operations in accordance with Danish disclosure requirements for consolidated financial state-ments and parent company financial statements of listed companies.

AUDITORS’ RESPONSIB I L ITY Our responsibility is to express an opinion on the consolidated financial statements and parent company financial statements based on our audit. We conducted our audit in accordance with Danish Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit

to obtain reasonable assurance as to whether the consolidated financial statements and parent company financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and parent company financial statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements and parent company financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company’s preparation and presenta-tion of the consolidated financial statements and parent company financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the ap-propriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluat-ing the overall presentation of the consolidated financial statements and parent company financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our audit has not resulted in any qualification.

OPIN ION In our opinion, the consolidated financial statements and parent company financial statements give a true and fair view of the Group’s and the parent company’s financial position at 30 Sep-tember 2011 and of the results of the Group’s and the parent com-pany’s operations and cash flows for the financial year 1 October 2010 – 30 September 2011 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for consolidated financial statements and parent company financial statements of listed companies.

STATEMENT ON THE MANAGEMENT’S REVIEW Pursuant to the Danish Financial Statements Act, we have read the Management’s review in the annual report. We have not per-formed any further procedures in addition to the audit of the con-solidated financial statements and parent company financial state-ments. On this basis, it is our opinion that the information provided in the Management’s review is consistent with the consolidated financial statements and parent company financial statements.

Aalborg, 15 November 2011

KPMGStatsautoriseret Revisionspartnerselskab

Hans B. Vistisen Søren V. Nejmann State Authorised Public Accountant State Authorised Public Accountant

30 A n n u a l R e p o r t 2 010 / 2 011 I n d e p e n d e n t a u d i t o r s ’ r e p o r t

31A n n u a l R e p o r t 2 010 / 2 011

Income statement 01.10.2010 - 30.09.2011

Note

2

3

4

5

10

12

6

7

8

9

DKK’000

Revenue

Changes in inventories of finished goods and work in progress

Other operating income

Cost of sales

Other external costs

Staff costs

Depreciation/amortisation of intang. assets and prop., plant & e.

Operating profit (EBIT)

Share of profit after tax in associates

Financial income

Financial expenses

Profit before tax

Tax on profit for the year

Profit for the year

Proposed profit appropriation:

Proposed dividends

Retained earnings

Earnings per share (DKK)

Earnings per share (EPS), basic

Earnings per share (EPS-D), diluted

2009/10

220,406

-3,320

235

-132,925

-36,906

-32,671

-4,467

10,352

2,003

2,537

-1,996

12,896

-2,706

10,190

5.4

5.4

2010/11

242,611

1,800

558

-142,792

-41,778

-36,009

-6,167

18,223

3,430

2,481

-1,665

22,469

-5,610

16,859

8.9

8.9

2010/11

1,897

-

10,567

-

-1,907

-1,055

-538

8,964

-

4,782

-329

13,417

-2,060

11,357

8,033

3,324

11,357

2009/10

4,163

-

-

-

-1,318

-835

-1,315

695

-

1,012

-983

724

-151

573

6,143

-5,570

573

Consolidated Parent company

32 A n n u a l R e p o r t 2 010 / 2 011 I n c o m e s t a t e m e n t

Statement of comprehensive income 01.10.2010 - 30.09.2011

Note DKK’000

Profit for the year

Other comprehensive income

Value adjustment at fair value

Tax thereon

Value adjustment transferred to financial income and expenses

Value adjustment at the translation of foreign entities

Other comprehensive income after tax

Total comprehensive income

2009/10

10,190

81

-20

54

79

194

10,384

2010/11

16,859

171

-38

-

33

166

17,025

2010/11

11,357

171

-38

-

-

133

11,490

2009/10

573

81

-20

-

-

61

634

Consolidated Parent company

33A n n u a l R e p o r t 2 010 / 2 011S t a t e m e n t o f c o m p r e h e n s i v e i n c o m e

Balance sheet at 30.09.2011

Assets

Note

10

11

12

13

14

15

16

17

DKK’000

Non-current assets

Intangible assets:

Development projects

Property, plant and equipment:

Land and buildings

Plant and machinery

Fixtures and fittings, other plant and equipment

Other non-current assets:

Investments in subsidiaries

Investments in associates

Amounts owed by associates

Other receivables

Securities

Total non-current assets

Current assets

Inventories

Receivables

Cash at bank and in hand

Total current assets

Total assets

2009/10

6,241

68,351

1,818

10,252

80,421

-

11,674

9,898

1,458

29,667

52,697

139,359

35,066

47,295

-

82,361

221,720

2010/11

7,061

69,500

1,488

8,957

79,945

-

15,104

8,633

1,470

27,524

52,731

139,737

40,721

44,464

3,885

89,070

228,807

2010/11

-

0

-

-

0

67,288

-

-

-

27,524

94,812

94,812

-

13,300

818

14,118

108,930

2009/10

-

68,351

-

-

68,351

36,419

-

-

-

29,667

66,086

134,437

-

9,711

45

9,756

144,193

Consolidated Parent company

34 A n n u a l R e p o r t 2 010 / 2 011 B a l a n c e s h e e t

Equity and liabilities

Note

19

20

21

22

21

22

DKK’000

Equity

Share capital

Translation reserve

Reserve for fair value adjustment

Retained earnings

Proposed dividends

Total equity

Liabilities

Non-current liabilities

Deferred tax

Credit institutions

Lease liabilities

Total non-current liabilities

Current liabilities

Credit institutions

Lease liabilities

Trade payables

Corporation tax

Other payables

Total current liabilities

Total liabilities

Total equity and liabilities

2009/10

37,800

109

73

81,698

6,143

125,823

6,998

38,960

5,576

51,534

22,610

796

11,291

-

9,666

44,363

95,897

221,720

2010/11

37,800

142

206

90,524

8,033

136,705

7,960

36,907

4,003

48,870

12,388

1,086

13,029

4,072

12,657

43,232

92,102

228,807

2010/11

37,800

-

206

56,996

8,033

103,035

58

0

-

58

0

-

358

3,685

1,794

5,837

5,895

108,930

2009/10

37,800

-

73

53,672

6,143

97,688

3,706

38,960

-

42,666

2,011

-

-

-

1,828

3,839

46,505

144,193

Consolidated Parent company

35A n n u a l R e p o r t 2 010 / 2 011B a l a n c e s h e e t

Statement of changes in equity

Consolidated

DKK’000Total

equityProposed dividends

Retained earnings

Hedging reserve

Reserve for fair value

adjustmentsTranslation

reserveShare

capital

115,439

10,190

79

81

54

-20

194

10,384

0

125,823

125,823

16,859

33

171

-38

166

17,025

-6,143

136,705

-

6,143

-

-

-

-

-

6,143

-

6,143

6,143

8,033

-

-

-

-

8,033

-6,143

8,033

73,451

4,047

-

-

-

-

-

4,047

4,200

81,698

81,698

8,826

-

-

-

-

8,826

-

90,524

-54

-

-

-

54

-

54

54

-

-

-

-

-

-

-

-

-

-

-

12

-

-

81

-

-20

61

61

-

73

73

-

-

171

-38

133

133

-

206

30

-

79

-

-

-

79

79

-

109

109

-

33

-

-

33

33

-

142

42,000

-

-

-

-

-

-

-

-4,200

37,800

37,800

-

-

-

-

-

-

-

37,800

2009/10

Equity 01.10.09

Comprehensive income

Profit for 2009/10

Other comprehensive income

Exchange rate adjustment upon translation

of foreign entities

Value adjustment to fair values

Value adjustment transferred to financial

income and expenses

Tax on other comprehensive income

Total other comprehensive income

Total comprehensive income for the year

Transactions with shareholders

Reduction of share capital

Equity at 30 September 2010

2010/11

Equity at 1 October 2010

Comprehensive income for the period

Profit for 2010/11

Other comprehensive income

Foreign exchange adjustment at the

translation of foreign entities

Value adjustment to fair values

Tax on other comprehensive income

Total other comprehensive income

Total comprehensive income for the year

Transactions with shareholders

Distributed dividends

Equity at 30 September 2011

36 A n n u a l R e p o r t 2 010 / 2 011 S t a t e m e n t o f c h a n g e s i n e q u i t y

Parent company

DKK’000Total

equityProposed dividends

Retained earnings

Reserve for fair value

adjustmentsShare

capital

97,054

573

81

-20

634

0

97,688

97,688

11,357

171

-38

11,490

-6,143

103,025

0

6,143

-

-

6,143

-

6,143

6,143

8,033

-

-

8,033

-6,143

8,033

55,042

-5,570

-

-

-5,570

4,200

53,672

53,672

3,324

-

-

3,324

-

56,996

12

-

81

-20

61

-

73

73

-

171

-38

133

-

206

42,000

-

-

-

-

-4,200

37,800

37,800

-

-

-

-

-

37,800

2009/10

Equity at 01.10.09

Comprehensive income for the period

Profit/loss for 2009/10

Other comprehensive income

Value adjustment to fair values

Tax on other comprehensive income

Total comprehensive income

Transactions with shareholders

Reduction of share capital

Equity at 30 September 2010

2010/11

Equity at 01.10.10

Comprehensive income for the period

Profit for 2010/11

Other comprehensive income

Value adjustment to fair values

Tax on other comprehensive income

Total comprehensive income

Transactions with shareholders

Distributed dividends

Equity at 30.09.10

37A n n u a l R e p o r t 2 010 / 2 011S t a t e m e n t o f c h a n g e s i n e q u i t y

Cash flow statement

DKK’000

Cash flows from operating activities

Operating profit (EBIT)

Adjustment for non-cash items:

Depreciation/amortisation

Gain on the disposal of non-current assets

Cash generated from operations (operating activities)

before changes in working capital

Interest income

Interest expenses

Changes in inventories

Changes in receivables

Changes in trade and other payables

Corporation tax paid

Corporation tax refunded

Cash flows from investing activities

Acquisition of intangible assets

Acquisition of property, plant and equipment

Disposal of property, plant and equipment

Change in amount owed by associate

Investment in other receivables

Acquisition / disposal of securities

Cash flows from financing activities

External financing:

Repayment of long-term debt

Lease liability

Shareholders:

Dividends distributed

Changes for the year in cash and cash equivalents

Opening bank loans/cash and cash equivalents

Closing bank loans /cash and cash equivalents

2009/10

10,352

4,467

-235

14,584

2,537

-1,996

2,997

-16,948

-7,740

-1,895

-

-8,461

-1,433

-13,634

1,726

-640

54

2,931

-10,996

-1,936

6,372

-

4,436

-15,021

-5,578

-20,599

2010/11

18,223

6,167

-

24,390

2,481

-1,665

-5,655

-879

4,835

-2,179

5,328

26,656

-2,650

-4,507

-

1,253

-

2,217

-3,687

-2,061

-637

-6,143

-8,841

14,128

-20,599

-6,471

2010/11

8,964

538

-10,558

-1,056

4,782

-329

-

-2,921

1,074

-2,179

5,328

4,699

-

-

-

-

-

2,217

2,217

-

-

-6,143

-6,143

773

45

818

2009/10

695

1,315

-

2,010

1,012

-983

-

4,020

-1,069

-1,895

-

3,095

-

-4,191

-

-

-

2,931

-1,260

-1,936

-

-

-1,936

-101

146

45

Consolidated Parent company

38 A n n u a l R e p o r t 2 010 / 2 011 C a s h f l o w s t a t e m e n t

1 Segment information

2 Other operating income

3 Cost of sales

4 Other external costs

5 Staff costs

6 Financial income

7 Financial expenses

8 Tax on profit for the year

9 Earnings per share

10 Non-current assets

11 Investments in subsidiaries

12 Investments in associates

13 Amounts owed by associates

14 Other receivables

15 Securities

16 Inventories

17 Receivables

18 Research and development costs

19 Share capital

20 Deferred tax

21 Credit institutions

22 Lease liabilities

23 Financial risks

24 Operating leases

25 Contingent liabilities and collateral

26 Transactions with group companies, major shareholders, Board of Directors and Executive Board

27 Accounting estimates and judgments

28 New financial reporting regulations

29 Accounting policies

Outline of notes

39A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

Notes to the financial statements

1 Segment informationThe Gabriel Group has only one reportable business segment, as all products relate to furniture fabrics and related textiles. The products are sold to selected international leading manufacturers and key account customers specialised in upholstered furniture, seats and upholstered surfaces. Gabriel A/S accounts for most of the activities. Products for the individual business areas are primarily subject to the same production process, and the sales divisions have the same type of customer groups. The products are moreover distributed through the same channels.

More than 90% of the group’s products are sold to West European markets with similar financial and political conditions, uniform activities and risks as well as identical foreign currency risks. The Group is now less dependent on sales to individual customers as this year, no individual customers account for revenue exceeding 10% of the group’s total revenue.

Consequently, the Group’s income and expenses as well as assets are liabilities have not been broken down on operating segments in the notes.

The geographical break-down of revenue and non-current assets and the break-down of revenue on products and services are disclosed. The information is based on internal management reporting.

Geographical disclosuresGeographical disclosures specify revenue on geographical segments based on the geographical location of the customers. The break-down of assets on geographical segments relies on the physical location of the assets.

Revenue is broken down on markets as follows:

Consolidated Parent company

DKK’000 2010/11 2009/10 2010/11 2009/10

Denmark 21,457 20,307 1,897 4,163

Sweden 49,859 51,868 - -

Germany 50,950 44,513 - -

Other countries 120,345 103,718 - -

242,611 220,406 1,897 4,163

Break-down of non-current assets:

Denmark 114,530 116,329 94,420 133,167

Lithuania 25,207 23,030 - -

Other countries - - 1,210 1,270

139,737 139,359 95,630 134,437

Products and services

Break-down of revenue:

Textiles 240,649 219,223 - -

Rental income 1,962 1,183 1,897 4,163

242,611 220,406 1,897 4,163

2 Other operating income

Gain on the sale of property, plant and equip. - 235 10,558 -

Other operating income 558 - 9 -

558 235 10,567 -

Note

40 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

Consolidated Parent company

DKK’000 2010/11 2009/10 2010/11 2009/10

3 Cost of sales

Cost of sales for the year -142,393 -130,799 - -

Write-down for the year of inventories -399 -2,126 - -

-142,792 -132,925 - -

Write-down of inventories has not been reversed.

4 Other external costs

Fees to the auditors appointed at the annual general meeting

were recognised at the following amounts:

Statutory audit services 305 293 45 55

Other assurance engagements 14 - - -

Tax advisory services 28 28 14 14

Other services 439 136 128 114

786 457 187 183

5 Staff costs

Payroll, etc. -33,287 -30,800 -1,055 -835

Defined contribution pension schemes -1,933 -1,851 - -

Other social security costs -1,390 -1,190 - -

Other payroll-related costs -1,340 -157 - -

-37,950 -33,998 -1,055 -835

Payroll costs capitalised regarding development projects

and additions to property, plant and equip. 1,941 1,327 - -

-36,009 -32,671 -1,055 -835

Remuneration of the Board of Directors of the parent company -830 -545 -655 -435

Remuneration of the Executive Board of the parent company -1,980 -1,904 -400 -400

Remuneration of other executives -10,575 -7,882 - -

Average number of employees 64 63 - -

6 Financial income

Dividends from subsidiary - - 4,000 -

Interest income, cash, bonds, etc. 1,180 1,825 606 760

Interest income from subsidiary - - 176 252

Foreign exchange gains 1,301 712 - -

2,481 2,537 4,782 1,012

Note

41A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

Consolidated Parent company

DKK’000 2010/11 2009/10 2010/11 2009/10

7 Financial expenses

Interest expense, etc. -1,600 -1,996 -329 -983

Foreign exchange losses -65 - - -

-1,665 -1,996 -329 -983

8 Tax on profit for the year

Current tax -5,060 -237 0 0

Joint taxation contribution - - 529 1,457

Calculated tax upon disposal of activity to subsidiary - - -2,640 -

Adjustment of deferred tax -676 -2,469 -73 -1,608

Adjustment re. previous year 126 - 124 -

-5,610 -2,706 -2,060 -151

Tax on profit for the year is specified as follows:

Computed tax on profit before tax, 25% -5,617 -3,224 -3,354 -181

Tax effect of:

Non-deductible costs -187 -13 -45 -

Non-taxable dividends - - 1,000 -

Non-taxable interest -9 30 -9 30

Share of results after tax in associates 858 501 - -

Adjustment of tax in foreign subsidiaries to 25% -655 - - -

-5,610 -2,706 -2,060 -151

Effective tax rate 25.0% 21.0 % 15.4% 20.9 %

Transferred for taxation in subsidiary upon divestment of activity - - 348 -

9 Earnings per share

Profit for the year after tax 16,859 10,190

Average number of shares 1,890,000 1,890,000

Average number of treasury shares 0 0

Average number of shares in circulation 1,890,000 1,890,000

Earnings per share (EPS), basic of DKK 20 8.9 5.4

Earnings per share (EPS-D) diluted of DKK 20 8.9 5.4

Note

Notes to the financial statements

42 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

10 Non-current assets

Fixtures and fit. Development Land and Plant and other plant and DKK’000 projects buildings machinery equipment

2009/10

Cost at 01.10.2009 8,822 95,132 28,854 23,425

Additions during the year 1,433 4,191 1,230 8,213

Disposals during the year -378 - -2,706 -254

Cost at 30.09.2010 9,877 99,323 27,378 31,384

Depreciation/amortisation at 01.10.2009 2,626 29,657 26,453 20,100

Disposals during the year - 378 - -1,426 -199

Depreciation/amortisation for the year 1,034 1,315 533 1,231

Impairment losses for the year 354 - - -

Depreciation/amortisation at 30.09.2010 3,636 30,972 25,560 21,132

Carrying amount at 30.09.2010 6,241 68,351 1,818 10,252

Thereof development projects/in progress/assets under constr. 3,471 - - 6,372

Thereof assets held under finance lease - - - 6,372

Depreciated/amortised over 5 years 10-30 years 3-8 years 3-8 years

2010/11

Cost at 01.10.2010 9,877 99,323 27,378 31,384

Additions during the year 2,650 2,612 - 1,895

Disposals during the year -665 - -18,138 -11,758

Cost at 30.09.2011 11,862 101,935 9,240 21,521

Depr./amortisation at 01.10.2010 3,636 30,972 25,560 21,132

Disposals during the year -665 - -18,138 -11,113

Depreciation/amortisation for the year 1,506 1,463 330 2,545

Impairment losses for the year 324 - - -

Depreciation/amortisation at 30.09.2011 4,801 32,435 7,752 12,564

Carrying amount at 30.09.2011 7,061 69,500 1,488 8,957

Thereof development projects/in progress/assets under constr. 3,933 - - -

Thereof assets held under finance leases - - - 4,576

Depreciated/amortised over 5 years 10-25 years 3-8 years 3-8 years

In 2010/11, the Group carried out an impairment test of the carrying amount of recognised development projects in pro-

gress, resulting in a total impairment write-down of DKK 324 thousand, and for that purpose compared the progress of project

development in the form of costs incurred and results with project and business plans approved. Against this background, the

recoverable amount is deemed to be higher than the carrying amount.

Note

43A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

Parent company

DKK’000 2010/11 2009/10

11 Investments in subsidiaries

Cost at 01.10 36,419 36,419

Additions during the year upon transfer of activity to subsidiary 30,932 -

Disposals -63 -

Cost at 30.09 67,288 36,419

The disposal relates to the solvent liquidation of the wholly-owned subsidiary Sellgren-Tekstiili OY.

Registered Company capital Equity Profit before Profit for the Name office Stake DKK’000 DKK’000 tax DKK’000 year DKK’000

Gabriel A/S Aalborg 100% 25,500 72,096 20,279 14,906

Gabriel Innovation A/S Aalborg 100% 1,000 1,066 37 28

Gabriel Ejendomme A/S Aalborg 100% 1,000 30,873 1,182 886

Gabriel (Tianjin) Kina 100% 1,428 2,363 806 321

106,398 22,304 16,141

Consolidated

DKK’000 2010/11 2009/10

12 Investments in associates

Cost at 01.10 11,553 11,553

Cost at 30.09 11,553 11,553

Adjustments at 01.10 121 -1,725

Share of profit for the year 3,375 2,003

Intra-group profit and value adjustment of property 55 -157

Adjustments at 30.09 3,551 121

Carrying amount at 30.09 15,104 11,674

Gabriel’s share

Registered Profit for Profit for Name office Stake Revenue the year Assets Liabilities Equity the year DKK’000 DKK’000 DKK’000 DKK’000 DKK’000 DKK’000

Scandye UAB Litauen 40% 39,717 8,437 62,292 38,018 9,465 3,375

Value adjustment, property 1,487 -68

Intra-group profit -753 123

Goodwill at 30.09.2011 4,905 0

Carrying amount at 30.09.2011 15,104 3,430

Note

Notes to the financial statements

44 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

Consolidated

DKK’000 2010/11 2009/10

13 Amounts owed by associates

Cost at 01.10 9,898 9,258

Additions - 1,726

Disposals -1,265 -1,086

Carrying amount at 30.09 8,633 9,898

Gross receivables are specified as follows:

Due within 1 year 1,768 1,768

Due within 1-5 years 8,013 6,857

Due after 5 years 177 3,103

Unearned future financing income -1,325 -1,830

Total receivables 8,633 9,898

Net receivables are specified as follows:

Due within 1 year 1,335 1,265

Due within 1-5 years 6,998 5,591

Due after 5 years 300 3,042

Total receivables 8,633 9,898

The receivable arises from finance leasing of productive equipment to Scandye UAB. At the end of the lease term of 4-7 years, the lessee

has the option of acquiring the productive equipment. The assets leased out have been provided as collateral for the Group’s receivables.

14 Other receivables

Cost at 01.10 1,458 1,512

Additions 12 -

Disposals - -54

Carrying amount at 30.09 1,470 1,458

Gross receivables are specified as follows:

Due within 1 year 250 250

Due within 1-5 years 1,532 1,520

Unearned future financing income -312 -312

Total receivables 1,470 1,458

Net receivables are specified as follows:

Due within 1 year 148 148

Due within 1-5 years 1,322 1,310

Total receivables 1,470 1,458

The receivable arises from finance leasing of productive equipment and loan to a business partner.

Note

45A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

Note

Consolidated Parent company

DKK’000 2010/11 2009/10 2010/11 2009/10

15 Securities

Cost at 01.10 29,574 32,505 29,574 32,505

Additions during the year 25,520 26,770 25,520 26,770

Disposals during the year -27,834 -29,701 -27,834 -29,701

Cost at 30.09 27,260 29,574 27,260 29,574

Adjustments at 01.10 93 12 93 12

Adjustments for the year 171 81 171 81

Adjustments at 30.09 264 93 264 93

Carrying amount at 30.09 27,524 29,667 27,524 29,667

The investment portfolio comprises fixed-interest, Danish mortgage bonds.

16 Inventories

Raw materials and consumables 10,063 6,852 - -

Work in progress 3,640 4,611 - -

Finished goods and goods for resale 27,018 23,603 - -

40,721 35,066 - -

None of the group’s inventories are recognised at fair value.

17 Receivables

Trade receivables 32,603 29,259 - -

Amounts owed by subsidiary - - 12,285 5,148

Other receivables 11,860 14,326 1,015 616

Corporation tax receivable - 3,710 - 3,947

44,464 47,295 13,300 9,711

A total VAT receivable of DKK 4,932 thousand from Lithuania (2009/10 DKK 10,012 thousand) is recognised under other

receivables. The Group still experiences delays in the repayment process.

Credit risks vastly depend on the home country of the debtor. Based on the Group’s internal credit rating procedures and exter-

nal credit rating, receivables not subject to any write-down are deemed to hold high creditworthiness and to pose a low risk

of loss, see also note 23 for information on credit risks.

Trade receivables of the Group are broken down as follows on geographical areas:

Scandinavia 12,238 10,597

EU 18,867 15,197

Other countries 1,498 3,465

32,603 29,259

Notes to the financial statements

46 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

Note

Consolidated

DKK’000 2010/11 2009/10

17 cont. The Group’s trade receivables at 30 September 2011 include receivables of DKK 1,366 thousand (2009/10: DKK 545

thousand), which have been written down to DKK 1,304 thousand, based on an individual assessment (2009/10: DKK 495

thousand). Other external costs comprise bad debts of DKK 641 thousand (2009/10: DKK 430 thousand). Write-down of trade

receivables is due to customer bankruptcy or anticipated payment default.

Individually written-down receivables are broken down as follows on geographical areas:

Scandinavia 203 116

EU 938 227

Other countries 163 152

1,304 495

Trade receivables due at 30 September 2011, but not written down, were recognised as follows:

Maturity:

Up to 30 days 2,486 2,520

Between 30 and 60 days 603 1,416

More than 60 days 1,314 1,803

4,403 5,739

Interest income arising from receivables written down is not recognised.

18 Research and development costs

The correlation between research and development costs incurred and expensed is specified as follows:

Research and development costs incurred 6,961 5,330

Development costs recognised as intangible assets -2,650 -1,433

Amortisation and impairment of development projects 1,830 1,388

Research and development costs for the year recognised

in the income statement as other external expenses 6,141 5,285

19 Share capital

The share capital comprises 1,890,000 shares of DKK 20 each. No shares carry special rights.

Neither the Group nor the parent company holds any treasury shares.

Capital management

The Group’s ordinary activities still generate high cash flows enabling the Group to maintain solid financial resources. The Group

regularly assesses the need for adjusting its capital structure to hold the required higher return on equity up against the higher

degree of uncertainty surrounding external financing. A high solvency ratio has always been a top priority of Gabriel in order to

ensure plenty of room for manoeuvre. At 30 September 2011, the solvency ratio accounted for 60%, which is up on last year by

3 percentage points. Furthermore, reducing funds tied up is constantly on the group’s agenda.

Gabriel desires to provide its shareholders with a return on their investment while maintaining an appropriate equity level to

ensure the company’s future operations.

Against this background, the present capital resources are deemed adequate in the present economic climate.

47A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

Consolidated Parent company

DKK’000 2010/11 2009/10 2010/11 2009/10

20 Deferred tax

Deferred tax at 01.10 6,998 4,509 3,706 2,078

Transferred to subsidiary - - -3,751 -

Deferred tax for the year recognised in the income statement 676 2,469 73 1,608

Deferred tax for the year recognised in equity 38 20 38 20

Adjustment in respect of previous years 248 - -8 -

Deferred tax at 30.09 7,960 6,998 58 3,706

Deferred tax is incumbent on:

Intangible assets 1,765 1,560 - -

Land and buildings 4,019 3,752 - 3,752

Plant and machinery, etc. 1,869 1,732 - -

Current assets 149 20 58 20

Current liabilities 159 - - -

Tax losses - -66 - -66

7,960 6,998 58 3,706

21 Credit institutions

Amounts owed to credit institutions relate to:

Mortgage debt 38,939 40,971 - 40,971

Overdraft facilities 10,356 20,599 - 0

Total carrying amount 49,295 61,570 - 40,971

Amounts owed to credit institutions were recognised

on the balance sheet as follows:

Non-current liabilities 36,907 38,960 - 38,960

Current liabilities 12,388 22,610 - 2,011

Total carrying amount 49,295 61,570 - 40,971

Fair value 50,922 63,198 - 42,599

Debt falls due as follows:

0-1 year 13,134 24,185 - 2,786

1-5 years 11,007 11,044 - 11,044

> 5 years 32,588 37,110 - 37,110

The loan is a floating-rate mortgage loan in EUR (F1) subject to annual adjustment. The current level of interest is 1.4% p.a. with the principal accounting for EUR 5,920 thousand. The overdraft facility carries floating-rate interest denominated in Danish kroner.

The maturity analysis is based on all undiscounted cash flows, including estimated interest payments. Interest payments are estimated based on existing market conditions.

Note

Notes to the financial statements

48 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

22 Lease liabilities

Lease liabilities are recognised as follows on the balance sheet:

Consolidated Consolidated

2010/11 2009/10

Minimum Interest Carrying Minimum Interest Carrying DKK’000 lease payment element amount lease payment element amount

0-1 year 1,250 -164 1,086 1,001 -205 796

1-5 years 4,250 -247 4,003 5,885 -309 5,576

>5 years - - - - - -

5,500 -411 5,089 6,886 -514 6,372

Lease liabilities are attributable to the financing of a new ERP system, and financing thereof has been agreed with the Group’s

bankers. The agreement runs for five years.

23 Financial risks Prompted by its operations, investments and financing, the Group is exposed to a number of financial risks, including market

risks (currency risks, interest rate risks and risks relating to raw materials), credit risks and liquidity risks.

Gabriel policy is not to engage in active speculation in financial risks. Risk management covers only risks arising directly from the Group’s operations, investments and financing.

Management monitors the Group’s risk concentration broken down on customers, geographical areas, currencies, etc. Moreo-ver, Management monitors whether the risks of the Group are correlated, and whether the Group’s risk concentration has undergone any changes. The Group’s risk exposure and risk management have remained unchanged from 2009/10.

Reference is made to the balance sheet for a specification of the different categories of financial assets and liabilities. The fair value of financial assets and liabilities is in line with carrying amount - apart from amounts owed to credit institutions, see note 21.

The Group had no derivative financial instruments at 30 September 2011.

The Group measures its portfolio of bonds at market value, see note 15. Securities are classified as level 1 ”listed prices” in accordance with the market value hierarchy.

Note

49A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

23 cont. Financial risks

Currency risks

The Group’s foreign exchange positions in Danish kroner are specified as follows at 30 September 2011:

Bank loans Hedged Denominated in thousands Trade Trade payables/ by forward Currency receivables institutions contracts Net position

DKK 5,179 -22,733 - -17,554

EUR 21,932 -45,849 - -23,917

SEK 2,740 1,661 - 4,401

NOK 551 478 - 1,029

Other currencies 2,201 -971 - 1,230

Abroad 27,424 -44,681 - -17,207

The Group’s foreign exchange positions in Danish kroner are specified as follows at 30 September 2010:

Bank loans Hedged Denominated in thousands Trade Trade payables/ by forward Currency receivables institutions contracts Net position

DKK 5,701 -12,419 - -6,718

EUR 16,780 -67,689 - -50,909

SEK 2,920 -35 - 2,885

NOK 549 242 - 791

Other currencies 3,308 669 - 3,977

Abroad 23,557 -66,813 - -43,256

The Group hedges currency risks considering projected future cash flows and projected future exchange rate movements. The majority of sales in Europe are settled in the customer’s currency, while the euro is primarily used for settlement with other international customers. Currency risks generated by income are only of a limited scale, as the vast part of income is invoiced in the Scandinavian currencies or euros. The vast part of purchases is settled in Danish kroner or euros.

Any changes in the exchange rates at 30 September 2011 are not deemed to have any material impact on results or equity as result of the low currency exposure at 30 September 2011.

Currency exposure for 2011/12 is, in all material respects, deemed to remain unchanged from 2010/11.

Liquidity and interest rate risks Throughout many years, the Group has generated positive cash flows and has thus not been dependent on external financing.

The Group has a liquidity reserve of DKK 27.5 million placed in Danish mortgage bonds. At year end 2010/11, Gabriel’s bank loans represented DKK 6.5 million net. In addition, Gabriel has undrawn bank credit facilities of DKK 20 million. Against this background, the Group is deemed to have sufficient liquidity to finance future operations and investments.

The Group’s bank loans are open business credits, while the mortgage loan is an adjustable-rate loan denominated in euros subject to annual adjustment. The lease agreement in respect of the new ERP system carries floating-rate interest denominated in euros. The agreement runs for five years. The bond portfolio consists primarily of short-dated bonds denominated in Danish kroner, adjusting interest to the general societal interest level.

Note

Notes to the financial statements

50 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

23 cont. Financial risks

Group receivables carry a fixed interest rate during their entire life as laid down by contract. Accordingly, a drop or an increase in the market rate of interest of one percentage point is generally not deemed to materially affect consolidated results.

Risks relating to raw materials The Group typically enters into co-operative agreements with its most important suppliers to ensure reliability of delivery and to

fix prices. Note 25 discloses that Gabriel has concluded purchase agreements for raw material supplies for 2011/12. The Group is not exposed to any major price risks arising from its use of raw materials.

Credit risks The credit risk policy of the Group ensures that all major customers and co-operative partners are regularly credit rated. The

management of credit risks is based on internal credit limits for customers. Triggered by the imminent financial crisis, the Group intensified its focus on the approval of credit lines for customers as well as on the management and monitoring of customers. Group trade receivables are distributed on numerous customers, countries and markets, ensuring a high degree of risk diversi-fication. Based on the Group’s internal credit procedures, the creditworthiness of group receivables primarily depends on the home country of the debtor. The creditworthiness of debtors from Scandinavia and the EU is usually higher than that of debtors from other countries.

The Group aims at reducing risk through efficient monitoring and follow-up and credit insurance of major, foreign and domestic receivables or the provision of alternative collateral. Credit insurance has been taken out for all major foreign and domestic re-ceivables at 30 September 2011. Group receivables are usually due for payment no later than three months after delivery. The Group has a past record of minor bad debts and is usually exposed to only a limited risk of major losses. We refer to note 17.

The Group recognised as investments productive equipment for the associate, Scandye UAB, and another co-operative partner. Gabriel has been provided collateral in the leased equipment and with a guarantee for the amount. The lessees may perform the contracts at their residual values.

24 Operating leases At 30 September 2011, the Group held operating leases for cars with a residual lease liability of DKK 1,718 thousand. Of this

amount, DKK 492 thousand falls due within one year, while the rest falls due within two to four years. An amount of DKK 739 thousand was expensed in the year under review as against DKK 890 thousand in 2009/10.

25 Contingent liabilities and collateral The parent company has issued a letter of subordination to the bankers of a subsidiary covering the subsidiary’s bank loans at

any time.

The subsidiary, Gabriel A/S, has issued a guarantee of DKK 1,094 thousand to Scandye UAB’s bankers in Lithuania as col-lateral for Scandye UAB’s bank business.

As part of usual group operations, the Group has entered into purchase agreements for future raw material supplies at an amount of DKK 6,546 thousand to ensure raw material supplies in 2011/12.

Claims and warranties do not represent a major expense of the Group. This is the result of the certifications for the ISO 9001 Quality Management Standard since 1991 and the Environmental Management Standard ISO 14001 since 1996.

As collateral for amounts owed to credit institutions, Gabriel has provided collateral at an amount of DKK 44,100 thousand in land and buildings. The carrying amount of land and buildings was DKK 69,500 thousand at 30 September 2011, while amounts owed to credit institutions (mortgage debt) reached DKK 38,939 thousand.

Note

51A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

26 Transactions with group companies, major shareholders, Board of Directors and Executive Board The parent company’s related parties comprise subsidiaries as well as their Executive Board and Board of Directors. Further,

related parties comprise companies in which the above persons have substantial interests. Gabriel Holding A/S has no related parties exercising control.

Trading with group enterprises is specified as follows:

Parent company

DKK’000 2010/11 2009/10

Rent from group enterprises 1,242 2,981

Interest, etc. from group enterprises 218 252

Dividends from group enterprises 4,000 -

Transactions with group enterprises were eliminated in the consolidated

financial statements as set out in the accounting policies.

Related parties comprise associates over which Gabriel exercises

significant influence.

Consolidated

DKK’000 2010/11 2009/10

Trading with the associate, Scandye UAB, comprised the following:

Purchases from associates 25,976 23,596

Interest, etc. from associates 502 568

Apart from executive remuneration disclosed in note 5, the Group did not engage in any transactions with the Board of Directors, Executive Board, executive employees, major shareholders and other related parties in the year under review.

27 Accounting estimates and judgements The carrying amount of certain assets and liabilities is stated on the basis of Management’s estimated impact of future events

on the value of these assets and liabilities at the balance sheet date. Estimates important to the financial reporting include the calculation of provisions for inventory obsolescence, write-down for bad debts, depreciation/amortisation and impairment losses as well as contingent liabilities.

28 New financial reporting regulations IASB has issued the following new financial reporting regulations (IASs and IFRSs) and IFRICs which are not mandatory for

adoption by Gabriel Holding A/S in the preparation of the annual report for 2010/11: IFRS 9-13, Amendments to IFRS 1 and 7, Amendments to IAS 1, 12, 19, 27 and 28 and improvements to IFRS (2011). None of these have been approved by the EU.

Gabriel Holding A/S expects to implement the new standards and IFRICs upon their mandatory adoption. The new standards and IFRICs are not deemed to impact on Gabriel Holding A/S’ future financial reporting.

Note

Notes to the financial statements

52 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

29 Accounting policies Gabriel Holding A/S is a limited liability company domiciled in Denmark. The annual report for the period 1 October 2010 -

30 September 2011 comprises the consolidated financial statements of Gabriel Holding A/S and its subsidiaries (Group) and separate parent company financial statements.

The annual report of Gabriel Holding A/S for 2010/11 has been prepared in accordance with International Financial Report-ing Standards (IFRS) as adopted by the EU and Danish disclosure requirements for consolidated financial statements and parent company financial statements of listed companies.

Furthermore, the annual report complies with International Financial Reporting Standards issued by the IASB.

The Board of Directors and the Executive Board discussed and approved the annual report for 2010/11 of Gabriel Holding A/S on 15 November 2011. The annual report is presented to the shareholders of Gabriel Holding A/S for approval at the annual general meeting on 15 December 2011.

Basis for preparation The annual report is presented in DKK rounded to the nearest DKK 1,000.

The accounting policies, as described below, have been applied consistently during the year under review and for the com-parative figures.

For standards to be implemented in future, comparative figures are not restated. As the implemented standards and IFRICs have not impacted the balance sheet at 1 October 2009 and related notes, the balance sheet at 1 October 2009 and related notes have been omitted.

Changes in accounting policies With effect from 1 October 2010, Gabriel Holding A/S has implemented: • Revised IAS 24 Related party disclosures • Amendments to IFRIC 14 Prepayments of Minimum Funding Requirements • Amendments to IAS 32 Classification of Rights Issues • Amendments to IFRS 1 First-Time Adoption of IFRS • Improvements to IFRSs May 2010 • IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments The new standards and IFRICs did not affect the recognition and measurement in 2010/11.

Consolidated financial statements The consolidated financial statements comprise the parent company Gabriel Holding A/S and subsidiaries in which Gabriel

Holding A/S exercises control, i.e. the power to govern the financial and operating policies so as to obtain benefits from its activities. Control is obtained when the Company directly or indirectly holds more than 50% of the voting rights in the subsidiary or which it, in some other way, controls.

Enterprises over which the Group exercises significant influence, but which it does not control, are considered associates. Significant influence is generally obtained by direct or indirect ownership or control of more than 20% of the voting rights but less than 50%.

As to whether Gabriel Holding A/S exercises control or significant influence is determined on the basis of the potential voting rights exercisable at the balance sheet date.

The consolidated financial statements comprise the parent company, Gabriel Holding A/S, and the subsidiaries, Gabriel A/S, Gabriel Ejendomme A/S, Gabriel Innovation A/S, Gabriel (Tianjin) International Trading Co. Ltd. Scandye UAB is considered an associate and was recognised as an investment in associates in the annual report.

The consolidated financial statements have been prepared as a consolidation of the parent company’s and the individual sub-sidiaries financial statements prepared according to the group accounting policies. On consolidation, intra-group income and expenses, shareholdings, intra-group balances and dividends, and realised and unrealised gains on intra-group transactions are eliminated. Unrealised gains on transactions with associates are eliminated in proportion to the Group’s ownership share of the enterprise. Unrealised losses are eliminated in the same way as unrealised gains to the extent that impairment has not taken place.

Note

53A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

29 cont. Foreign currency translation A functional currency is set for each of the reporting group enterprises. The functional currency is the currency used in the pri-

mary economic environment in which the individual reporting enterprises operate. Transactions denominated in other currencies than the functional currency are transactions denominated in foreign currencies.

At initial recognition, transactions denominated in foreign currencies are translated to the functional currency at the exchange rates ruling at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and at the date of payment are recognised in the income statement as financial income or financial expenses.

Receivables, payables and other monetary items denominated in foreign currencies are translated to the functional currency at the exchange rates at the balance sheet date. The difference between the exchange rates at the balance sheet date and at the date at which the receivable or payable arose or was recognised in the latest financial statements is recognised in the income statement as financial income or financial expenses.

On recognition in the consolidated financial statements of subsidiaries with another functional currency than DKK, the income statements are translated at the exchange rates at the transaction date and the balance sheet items are translated at the ex-change rates at the balance sheet date. An average exchange rate for the month is used as the exchange rate at the transaction date to the extent that this does not significantly distort the presentation of the underlying transactions.

Foreign exchange differences arising on the translation of the share of the opening balance of equity of these enterprises at the exchange rates at the balance sheet date, and on translation of the income statements from the exchange rates at the transaction date to the exchange rates at the balance sheet date are recognised as other comprehensive income in a separate translation reserve in equity.

On recognition in the consolidated financial statements of associates with a different functional currency than DKK, the share of the profit/loss for the year is translated at average exchange rates, and the share of equity including goodwill is translated at the exchange rates at the balance sheet date. Foreign exchange differences arising on translation of the opening equity of foreign associates at the exchange rates at the balance sheet date and on translation of the share of profit/loss for the year from average exchange rates to the exchange rates at the balance sheet date are recognised as other comprehensive income in a separate translation reserve in equity.

Derivative financial instruments Derivative financial instruments are recognised and measured on the balance sheet at fair value. Positive and negative fair

values of derivative financial instruments are included in other receivables and payables, respectively. Fair values for derivative financial instruments are measured based on current market data and acknowledged valuation methods.

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of the fair value of a recognised asset or liability are recognised in the income statement together with changes in the fair value of the hedged asset or liability as regards the portion hedged.

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of future cash flows, and which effectively hedges changes in future cash flows, are recognised in equity under a separate reserve for hedging transactions until the hedged cash flows affect the income statement. At this time, any gain or loss regarding such hedging transactions is transferred from equity and recognised in the same item as the hedged item.

For derivative financial instruments that do not qualify for hedge accounting, changes in fair value are recognised in the income statement as financial income or financial expenses.

INCOME STATEMENT Revenue Revenue from the sale of goods for resale and finished goods is recognised in the income statement provided that delivery and

transfer of risk to the buyer has taken place before year end and that the income can be reliably measured and is expected to be received. Rental income is accrued and recognised on a straight-line basis over the period in accordance with contracts entered into.

Revenue is measured ex VAT, taxes and discounts in relation to the sale.

Note

Notes to the financial statements

54 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

29 cont. Other operating income Other operating income comprise items secondary to the principal activities of the enterprise, including rental income, grants

and gains on the disposal of intangible assets and property, plant and equipment.

Government grants for the acquisition of assets and development projects are recognised as deferred income on the balance sheet and subsequently as other operating income in the income statement concurrently with the depreciation/amortisation of the asset.

Cost of sales Cost of sales comprise costs incurred in generating revenue for the year, including direct and indirect costs of raw materials,

consumables, goods for resale, power, etc.

Other external costs Sales, distribution, maintenance, premises and administration account for the vast part of other external costs.

Profit/loss from investments in associates recognised in the consolidated financial statements The proportionate share of the results after tax of the individual associates is recognised in the consolidated income statement

after full elimination of the proportionate share of intra-group profits/losses.

Financial income and expenses Financial income and expenses comprise interest income and expense, gains and losses on securities and write-down of

securities, payables and transactions denominated in foreign currencies, amortisation of financial assets and liabilities as well as surcharges and refunds under the on-account tax scheme, etc. Furthermore, realised and unrealised gains and losses on derivative financial instruments which are not designated as hedging arrangements are included.

Dividends received from investments in subsidiaries are recognised in the parent company income statement in the financial year when the dividends are declared. To the extent that distributed dividends exceed comprehensive income for the relevant period, an impairment test is made.

Tax on profit/loss for the year Gabriel Holding A/S is jointly taxed with the subsidiaries, Gabriel A/S, Gabriel Ejendomme A/S and Gabriel Innovation

A/S. The current Danish corporation tax is allocated between the jointly taxed Danish companies in proportion to their taxable income (full absorption with deduction for tax losses). The jointly taxed companies are taxed under the on-account tax scheme.

Tax for the year comprises current tax and changes in deferred tax for the year. The tax expense relating to the profit/loss for the year is recognised in the income statement, and the tax expense relating to changes directly recognised in equity is recognised directly in equity.

BALANCE SHEET Development projects Development costs comprise salaries, amortisation and other costs directly or indirectly attributable to the Company’s development

activities.

Development projects that are clearly defined and identifiable, where the technical utilisation degree, sufficient resources and a potential future market or development opportunities in the Company is evidenced, and where the Company intends to produce, market or use the project, are recognised as intangible assets provided that the cost can be measured reliably and that there is sufficient assurance that future earnings can cover production and distribution costs, administrative expenses and development costs. Other development costs are recognised in the income statement as incurred.

Capitalised development costs are measured at the lower of cost less accumulated amortisation and impairment losses and recov-erable amount.

Following the completion of the development work, development costs are amortised on a straight-line basis over the estimated useful life. The amortisation period is usually five years.

Note

55A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

29 cont. Property, plant and equipment Land and buildings, plant and machinery, fixtures and fittings, other plant and equipment are measured at costs less accumu-

lated depreciation and impairment losses.

Cost comprises the purchase price and any costs directly attributable to the acquisition until the date on which the asset is available for use. The cost of self-constructed assets comprises direct and indirect costs of materials, components, subsuppliers, and wages and salaries as well as borrowing costs from specific and general borrower directly relating to the construction of the individual asset.

Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items, which are depreciated separately.

The cost of finance leases is stated at the lower of fair value and the net present value of future lease payments. When the net present value of the future lease payments is calculated, the interest rate implicit in the lease or the incremental borrowing rate is used as the discount factor.

Subsequent costs arising from, for instance, the replacement of components of property, plant and equipment are recognised in the carrying amount of the relevant asset when it is probable that future economic benefits will flow to the Group. The components replaced will be derecognised on the balance sheet, and the carrying amount will be transferred to the income statement. All other ordinary costs of repair and maintenance will be recognised in the income statement as incurred.

Depreciation is provided on a straight-line basis over the expected useful lives of the assets/components. The expected useful lives are as follows: Buildings 10-25 years Plant and machinery 3-8 years Fixtures and fittings, other plant and equipment 3-8 years Land is not depreciated.

The basis of depreciation is calculated on the basis of the residual value less impairment losses. The residual value is deter-mined at the acquisition date and reassessed annually. If the residual value exceeds the carrying amount, depreciation is discontinued.

When the depreciation period or the residual value is changed, the effect on depreciation is recognised prospectively as a change in accounting estimates.

Gains and losses on the disposal of property, plant and equipment are determined as the difference between the sales price less disposal costs and the carrying amount at the date of disposal. Gains or losses are recognised in the income statement as other operating income or other operating costs, respectively.

Impairment of non-current assets The carrying amount of non-current assets is subject to an annual impairment test. When there is an indication that assets may be

impaired, the recoverable amount of the asset is determined. The recoverable amount is the higher of an asset’s net selling price less anticipated disposal costs and its value in use. The value in use is calculated as the net present value of forecast future cash flows from the cash-generating unit to which the asset belongs.

An impairment loss is recognised if the carrying amount of the net assets exceeds their recoverable amount.

Note

Notes to the financial statements

56 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

29 cont. Investments in associates in the consolidated financial statements Investments in associates are measured according to the equity method.

Investments in associates are measured at the proportionate share of the enterprises’ net asset values calculated in accordance with the Group’s accounting policies minus or plus the proportionate share of unrealised intra-group profits and losses and plus or minus the carrying amount of goodwill.

Amounts owed by associates are measured at amortised cost. Write-down is made for bad debt losses.

Investments in subsidiaries in the parent company financial statements Investments in subsidiaries are measured at cost. Where the recoverable amount is lower than cost, investments are written

down to this lower value.

At the distribution of other reserves than retained earnings in subsidiaries, the distribution will reduce the cost of investments when the distribution is characterised as repayment of the parent company’s investment.

Amounts owed by associates Amounts owed by associates are attributable to lease contracts for assets of which the Group is the owner, but of which all

major risks and maintenance liabilities are incumbent on the associate. Finance leases are recognised on the balance sheet at the net present value of future lease payments. For the calculation of the net present value, the interest rate implicit in the lease is used.

Securities Listed bonds classified as available-for-sale are recognised as non-current assets at cost at the trade date and are measured at

fair value corresponding to the market price. Unrealised value adjustments are recognised directly in equity except for foreign exchange adjustments of bonds denominated in foreign currencies, which are recognised in the income statement as financial income or financial expenses. On realisation, the accumulated value adjustment recognised in equity is transferred to financial income or financial expenses in the income statement.

Inventories Inventories are measured at cost in accordance with the FIFO method. Where the net realisable value is lower than cost,

inventories are written down to this lower value.

Goods for resale, raw materials as well as consumables are measured at cost, comprising purchase price plus delivery costs.

Finished goods and work in progress are measured at cost, comprising the cost of raw materials, consumables, direct wages/salaries and indirect production overheads. Indirect production overheads comprise indirect materials, wages/salaries and maintenance as well as depreciation of productive equipment, buildings and equipment as well as factory administration and management.

The net realisable value of inventories is calculated as the sales amount less costs of completion and costs necessary to make the sale and is determined taking into account marketability, obsolescence and development in expected sales price.

Receivables Receivables are measured at amortised cost. Write-down is made for bad debt losses when there is an objective indication of

an impairment loss. In such cases, write-down is made individually for each specific receivable.

Write-down is determined as the difference between the carrying amount and the net present value of projected cash flows, including the net realisable value of any collateral.

Note

57A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

29 cont. Equity Dividends Proposed dividends are recognised as a liability at the date on which they are adopted at the annual general meeting (declara-

tion date). The expected dividend payment for the year is disclosed as a separate item under equity..

Treasury shares Cost of acquisition of, consideration received for and dividends received from treasury shares are recognised directly as re-

tained earnings in equity. Gains and losses on disposal are not recognised in the income statement.

Translation reserve The translation reserve in the consolidated financial statements comprises foreign exchange differences arising on translation

of financial statements of foreign entities from their functional currencies to the presentation currency used by Gabriel Holding A/S (Danish kroner).

Hedging reserve The hedging reserve comprises the cumulative net change in the fair value of hedging transactions that qualify for recognition

as a cash flow hedge and where the hedged transaction has not been realised.

Reserve for fair value adjustment Reserve for fair value adjustment comprises the cumulative change in the fair value of financial assets available for sale. The

reserve, which forms part of the Company’s distributable reserves, is eliminated and transferred to the income statement as the investment is sold or written down.

Current tax and deferred tax Current tax payable and receivable is recognised on the balance sheet as tax computed on the taxable income for the year,

adjusted for tax on the taxable income of prior years and for tax paid on account.

Deferred tax is measured using the balance sheet liability method on all temporary differences between the carrying amount and the tax value of assets and liabilities.

Where alternative tax rules can be applied to determine the tax base, deferred tax is measured based on the planned use of

the asset or settlement of the liability, respectively.

Deferred tax assets are recognised at the expected value of their utilisation; either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity and jurisdiction.

Deferred tax is measured according to the tax rules and at the tax rates applicable at the balance sheet date when the deferred tax is expected to crystallise as current tax. The change in deferred tax as a result of changes in tax rates is recognised in the income statement.

Liabilities other than provisions Amounts owed to credit institutions, etc. are recognised at the date of borrowing at the net proceeds received less transaction

costs paid. In subsequent periods, the financial liabilities are measured at amortised cost, corresponding to the capitalised value using the effective interest rate. Accordingly, the difference between the proceeds and the nominal value is recognised in the income statement as financial expenses over the term of the loan.

Financial liabilities also include the capitalised residual obligation on finance leases measured at amortised cost.

Liabilities comprising trade payables, group enterprises and other payables are measured at nominal value.

Note

Notes to the financial statements

58 A n n u a l R e p o r t 2 010 / 2 011 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s

29 forts. Leasing Lease liabilities are broken down on finance leases and operating leases.

A lease is classified as a finance lease when it substantially transfers all the risks and rewards incident to ownership to the Company. Other leases are classified as operating leases.

Accounting for finance leases and related liabilities is described under property, plant and equipment and investments.

Operating lease liabilities are recognised on a straight-line basis in the income statement over the term of the lease.

CASH FLOW STATEMENT The cash flow statement shows the cash flows from operating, investing and financing activities for the year, the year’s changes

in cash and cash equivalents as well as the cash and cash equivalents at the beginning and end of the year.

Cash flows from operating activities Cash flows from operating activities are calculated as the share of the profit/loss adjusted for non-cash operating items,

changes in working capital and corporation tax paid.

Cash flows from investing activities Cash flows from investing activities comprise payments in connection with acquisitions and disposals of enterprises and activi-

ties and of intangible assets, property, plant and equipment and other non-current assets as well as the acquisition and disposal of securities not recognised as cash and cash equivalents.

Cash flows from financing activities Cash flows from financing activities comprise the raising of loans, repayment of interest-bearing debt, acquisition of treasury

shares and payment of dividends to shareholders.

Bank loans/cash and cash equivalents The item comprises cash and bank loans (overdraft facilities).

SEGMENT INFORMATION The Group has only one reportable business segment as all its products are within the segment of furniture fabrics and related

textile products. The products are sold to leading, international manufacturers and lead users of upholstered furniture, seats and upholstered surfaces. Gabriel A/S is in charge of the vast number of activities. The manufacturing processes are practically identical for the individual business areas, and the sales divisions service the same type of customer groups. In addition, the product distribution channels are the same.

Revenue generated by the Western European markets accounts for more than 90% of total revenue, where the economic and political climates, activities, risks and currency exposure remain undifferentiated.

Consequently, the Group’s income and expenses as well as assets and liabilities are not broken down on operating segments in the notes.

The geographical break-down of revenue and non-current assets is disclosed based on the internal management reporting.

Note

59A n n u a l R e p o r t 2 010 / 2 011N o t e s t o t h e f i n a n c i a l s t a t e m e n t s