Annual 2007 Report

Annual Report 2007

www.rapala.com

Rapala VMC Corporation is a public company listed on the OMX Nordic Exchange in Helsinki

© 2008 Rapala VMC Corporation Locations of Business Operations

CONTENT RAPALA ANNUAL REPORT 2007 | 87 ANNUAL REPORT RAPALA Business Operations and Strategy Financial Statements - Crafted from Experience – - Review of the Board of Directors 24 Investor Information Positioned for Growth 4 - Auditors’ Report 28 - Shareholder Information 86 - Rapala and Year 2007 in Brief 6 - Consolidated Financial Statements, IFRS 29 - Locations of Business Operations 87 - Statement by President and CEO 8 - Key Financial Figures 71 - Strategy, Strengths and Priorities 10 - Parent Company Financials, FAS 74 - Lure Business 12 - Corporate Governance and Management 76 - Fishing Hook Business 16 - Shares and Shareholders 79 - Fishing Accessories Business 18 - Risk Management 82 - Third Party Fishing Products 20 - Environmental Affairs 84 - Hunting, Winter Sports and Outdoor 22

Group manufacturing and sourcing units

Group administration units

Group distribution units

Shimano distribution companies

Printed in Finland by Libris | Paper: Edixion 300/120 | Design and layout by Kuudes Kerros | www.kuudes.fi

RAPALA ANNUAL REPORT 2007 | 4 After World War II, Lauri revived his small lure lure small his World revived War Lauri II, After develop a lure that would increase the productivity productivity the increase would that alure develop design, which he developed further. Lauri fi Lauri further. developed he which made design, rst the still is that one –the action wobbling enticing fi his of 1936, In fi he shing. a carve to managed nally rough-looking lure that produced an off-centre and all the lures himself but was soon joined by his family. family. byhis joined soon butwas himself lures the all Lauri Rapala, the founder of the Rapala business, was was business, Rapala the of founder the Rapala, Lauri Production techniques and processes developed step making business that had blossomed just before before just blossomed had that business making the war. He was sure he had found a successful lure lure asuccessful found had he sure war. He was the had begun. living for himself and his family, Lauri started to to started Lauri family, his and himself for living fi and working byfarm To abetter make shing. living basis for many Rapala lures. The story of Rapala lures lures Rapala of story The lures. Rapala many for basis 1905. in his Finland in Hemade poverty into born With a history of 60 years as a business, 70 years of lure making experience and close to 300 world-record catches, catches, world-record abusiness, 70 oflure to300 as years experience years andclose making of60 ahistory With manufacturing platform and brand portfolio, the Group is well positioned for growth. forgrowth. iswell positioned theGroup andbrandportfolio, platform manufacturing Rapala and its products are clearly crafted fromexperience. Wi areclearlycrafted products andits Rapala Necessity – The Mother of Invention (1936–1945) Invention of Mother –The Necessity The Business Is Born (1945–1955) Born Is Business The 1936 Crafted fromCrafted Experience Weber and Ray Ostrom started to distribute Rapala Rapala distribute to started RayOstrom Weber and (Lauri Rapala and Sons) company was established. established. was company Sons) and Rapala (Lauri The successful Rapala lures started to build a good agood build to started lures Rapala successful The Monroe who had just died and it broke all circulation circulation all itbroke and died just had who Monroe Rapala-branded lures are tested before packing. packing. before tested are lures Rapala-branded outside Finland. In 1955, In Finland. fioutside started the sales export rst fi the 1952of amongst were lures Rapala take to rst Corporation. In 1962, published Corporation. magazine Life 1959, in and Ron America, North in reputation same edition that covered the history of Marilyn Marilyn of history the covered that edition same sure that the action was correct. Even today, all a long article on Rapala. It happened to be in the Foreign visitors to the Helsinki Olympic Games Games Olympic Helsinki the to visitors Foreign make to lure single every ontesting insisted Lauri the business was formalized and the Rapala-Uistin Rapala-Uistin the and formalized was business the 1957, In USA. the to later and Norway and Sweden to lures in the USA, a business later to become Normark Normark become to later abusiness USA, the in lures by step. Despite the increased production volumes, volumes, production increased the Despite by step. 1945 The American Dream (1955–1965) Dream American The th its track record and current unique distribution network, network, unique andcurrent distribution trackrecord th its 1959 1967 – the start of the co-operation with Marttiini. By Marttiini. with co-operation the of 1967 start –the While Rapala continued to grow and gain its its gain and grow to continued Rapala While 60’s and the fi 60’s the and worldwide reputation, copies started to enter the the enter to started copies reputation, worldwide Rapala has defended itself against copies with legal legal with copies against itself defended has Rapala early 60’s from the US to Canada, Rapala strengthened strengthened Rapala Canada, USto the 60’searly from quality that has differentiated its original products records. Consequently, piles of orders started to to started orders of piles Consequently, records. and VMC. Many new lure models were introduced in actions but more importantly with consistent high high consistent with importantly butmore actions pour in necessitating major capacity and production production and capacity major necessitating in pour market: at one time there were more than 40 copies 40copies than more were there time one at market: the mid-1970’s, Normark had established distribution distribution mid-1970’s,the established had Normark the fi the distribution in Sweden in the mid-60’s and made from copies. After export sales were expanded in the the in expanded were sales export After copies. from in the US market from all over the world. Since then, then, Since world. the over all from USmarket the in increases. rst contacts with the French companies Ragot Ragot companies French the with contacts rst International Co-operation (1965–1975) Co-operation International rst Rapala fi Rapala rst in launched were knives llet 1962 After Lauri Rapala died in 1974, in name died company Rapala the Lauri After 100 million in 1988. The range of lures was further further was lures of 1988. in range The 100 million widened, the Blue Fox spinner brand was introduced introduced was brand BlueFoxspinner the widened, was Risto son eldest the and Oy Rapala to changed was companies in Canada, the UK and Sweden. At the Atthe Sweden. and UK the Canada, in companies opened in 1973. in opened company and a caravan business. business. acaravan and company of 25 million lures were produced during 1936-1975, same time, Rapala signed distribution agreements to as Deputy President. Consequently, a major amajor Consequently, President. Deputy as Kasslin Jorma and Rapala of President as appointed and a manufacturing unit was established in Ireland. Ireland. in established was unit amanufacturing and atotal while markedly: increased capacity the and Production responsibilities. own their had Ensio and Esko brothers his while Rapala of President appointed Denmark and France. The new factory at Vääksy was was Vääksy at factory new The France. and Denmark In 1989,In led had who Rapala, Esko’s Jarmo son During this time, the Group acquired the Flipper boat boat Flipper the acquired Group the time, this During methods and technology were further developed developed further were technology and methods the product development from the mid-80’s, was mid-80’s, was the from development product the reached lures manufactured of number total the Positioned for Growth Family Business to Next Generation (1975–1989) Generation toFamily Next Business A Time of Change (1989–1998) Change of A Time 1975 (USA) and a Norwegian distribution company Elbe, Elbe, company distribution (USA) aNorwegian and These changes were followed by a management buy- byamanagement followed were changes These These deals increased the Group’s manufacturing Group’s manufacturing the increased deals These 2000 in acquired was business hook VMC French The Normark distribution companies in the USA, Canada, Canada, USA, the in companies distribution Normark Rapala started a distribution alliance with Shimano. Shimano. with alliance adistribution started Rapala distribution network was further expanded to Eastern Eastern to expanded further was network distribution out, where the management together with some capabilities markedly and made the Viellard family family and made markedly Viellard the capabilities and Japan in company adistribution established of fi shing accessories as well as rods, reels and fi and reels rods, as well fishing of as accessories shing restructuring followed: in a few years Rapala sold sold Rapala years afew in followed: restructuring started to develop a manufacturing unit in Estonia. Estonia. in unit amanufacturing develop to started and the Chinese lure manufacturer Willtech in 2001. in Willtech manufacturer lure Chinese the and and William Ng important shareholders of Rapala. The The Rapala. of shareholders Ngimportant William and product range was increased to include a wide variety variety awide include to increased was range product In the late 1990’s, Rapala bought Storm lures lures Storm 1990’s, late the bought In Rapala Finland as well as the French company Ragot. In 1991, In Ragot. company French the as well as Finland Europe, Switzerland and Brazil. Simultaneously, the the Simultaneously, Brazil. and Switzerland Europe, Stock Exchange in 1998. in Exchange Stock the UK, Sweden, Norway, Denmark, Holland and and Holland Denmark, Norway, Sweden, UK, the both the boat and caravan business and acquired the the acquired and business caravan and boat the both family and listed Rapala Normark Oy on the Helsinki Helsinki onthe Oy Normark Rapala listed and family the from company the bought bankers investment Expansion and Diversifi and (1998–2005) Expansion cation 1989 1998 A new era of strong growth started in 2005 in when started growth strong of era A new Jensen in the USA, knife manufacturer Marttiini Marttiini manufacturer knife USA, the in Jensen Ultrabite fi sh pheromone. With this product offering, fi offering, Ultrabite product this With sh pheromone. Rapala continued to implement its strategy for for strategy its implement to continued Rapala distribution network, manufacturing platform and continue its profi its continue Gear and new Trigger X attractants that include include that Xattractants Trigger new and Gear acquired the Terminator spinner bait business in in business bait Terminator spinner the acquired in Peltonen manufacturer ski cross-country and Luhr manufacturer lure bought and Switzerland and in companies distribution orestablished acquired profi Finland. Thereafter, Rapala has established a lure alure established has Rapala Thereafter, Finland. Shimano. Simultaneously the Group has developed a developed has Group the Simultaneously Shimano. Thailand China, Malaysia, Australia, Africa, South the USA and widened the distribution alliance with with alliance distribution the widened USA and the large variety of new products and product categories categories product and products new of variety large fi game big Guigo and Williamson The lines. shing brand portfolio, the Group is well positioned to to positioned well is Group the portfolio, brand 2004. in acquired were businesses including Rapala Pro Wear clothing, Rapala Vision Vision Rapala Wear clothing, Pro Rapala including Korea, to company adistribution Russia, in factory in Finland, fi shing line supplier Tortue in France table growth. In less than a year, the Group Group ayear, the than less In growth. table Profi table Growth Continues (2005- ) (2005- Profi Continues Growth table table growth. 2005-

RAPALA ANNUAL REPORT 2007 | 5 RAPALA ANNUAL REPORT 2007 | 6 winter sports, which fi sports, winter with several leading brands. leading several with Rapala’s business organization can be Europe and China, a leading global dis- global aleading andChina, Europe Hooks, Fishing Accessories, ThirdPar- la’s distribution networkinthe Nordic la’s distribution and hunting like include products, ucts fi is Group’s business The core ucts. divided to manufacturing anddistri- tomanufacturing divided e.g. the world’s largest lure factories in the world’se.g. lure factories largest on three sub-strategies and established of the fi andsmoothen the seasonality countries tre- lures, metal lures, er inhard-bodied lines. byfour product ed of these Fishing Lures, lines: product different itable growth. This strategy is founded which represent- is business, tackle ing industry and a strong brand portfolio bution on and, the other into fi hand, ble andfi hooks sourcing andR&D including platform sourcing strengths: a unique manufacturing, tribution networkinthe fi tribution Prod- andOther Products Fishing ty Rapala is an undisputed market lead- Rapala’s strategic objective is prof- is objective Rapala’s strategic Focus on Fishing Tackle Business Fishing on Focus shing tackle business. tackle shing llet knives. Other Prod- Other knives. llet Rapala and Year 2007 t well into Rapa- t well shing tackle tackle shing ve sh- with increasing emphasis on perform- Implementation of the Group’s strategy Investment in growth continued also also continued growth in Investment ropean lure manufacturing included rea. company Ko- inSouth new distribution ness in the USA, establishing a lure as- profi location started in2007. Major chang- started location of production volumes from Estonia to volumes Estonia of production from its strategic cooperation with Shimano with cooperation strategic its idation of all French operation toone operation French idation of all for profi for by establishing distribution joint ven- by acquiring the Terminator lure busi- by acquiring successfully achieved in2007. achieved successfully sure of the Irish lure factory andmove of lure the factory Irish sure a andopening inRussia sembly factory ance improvement initiatives targeting targeting ance improvement initiatives to turnaround the trend of declining of declining the trend to turnaround tures in Russia, Ukraine andHungary. Ukraine inRussia, tures the profi the new factory in Russia. The consol- The inRussia. the new factory clo- 2008, inApril and, the downsizing The restructuring of the Group’s Eu- restructuring The During 2007, the Group expanded 2007, expanded the Group During In Brief In t margins and to further improve andtofurther t margins Positive Turnaround in Profi tability table growth continued in 2007 continued in2007 table growth tability. This turnaround was was turnaround This tability. Rapala in 2007 – in2007 Rapala Possible additional acquisitions during Group’s for the fi net sales net sales were up were 11%net sales Sev- 2006. from 2008 may further increase the sales. As- the sales. increase may further 2008 2008 are expected to increase 8–12%. margin increased from 9.6% from increased to11.7%.margin recurring items, operating profi operating items, recurring es and improvement initiatives were were andimprovementes initiatives eral performance improvement initia- performance eral Comparable million. toEUR 242.5 ed andamount- year last 7%from creased ing unit inChina. unit ing started also at the Group’s also manufactur- started suming 2007 currency rates andno non- rates currency 2007 suming and increased the operating profi the operating and increased gin is expected to improve from 2007. toimprove from expected is gin tives started also gradually to capitalize tocapitalize gradually also started tives which in- net sales, Group to increase to EUR 28.3 million. Operating profi Operating million. to EUR 28.3 tive. Assuming 2007 currency rates, the the rates, currency 2007 Assuming tive. The outlook for 2008 is quite posi- quite outlook is forThe 2008 Investments in growth continued continued growth in Investments nancial year year nancial t mar- t t 30% t t Net sales EUR million 242.5 226.6 196.1 173.5 167.0 2003 2004 2005 2006 2007

Operating profi t RAPALA ANNUAL REPORT 2007 | 7 ANNUAL REPORT RAPALA EUR million 28.3 21.7 21.5 19.9 18.4 2003 2004 2005 2006 2007

Operating profi t margin % 11.7 11.4 11.0 11.0 9.6 2003 2004 2005 2006 2007 RAPALA ANNUAL REPORT 2007 | 8 Year 2007 was characterized by strong ventures in Russia, Ukraine andHun- Ukraine inRussia, ventures with Shimano in East European distri- 2007 with a target to turnaround the de- made in many and countries business initia- smaller several Inaddition, na. and develop- inEurope manufacturing include ones important themost con- not limited. limited. not was growth development andsales ness ued and started to show results. toshow results. andstarted ued units. Work to reduce working capital compared to business volumes contin- volumes business to compared clining trend inour profi trend clining in the fastest growing market in area growing in the fastest ing our manufacturing facilities inChi- facilities ourmanufacturing ing executed so that the investment in busi- improvement on performance emphasis bution. With the new distribution joint bution. With the new distribution strengthening and widening of ourdis- andwidening strengthening strong in 2007 and we joined forces solidation of our French operations in-solidation of operations ourFrench and cost cutting initiatives. These were were These initiatives. cutting and cost gary we will develop our distribution develop ourdistribution wewill gary the fi tives and organizational changes were were changes andorganizational tives of ourlure restructuring to Morvillars, Investment in growth continued continued growth in Investment Several initiatives were started in started were initiatives Several shing tackle business. The further further The business. tackle shing “We turned aroundthedeclining turned “We trendin ourpr President and CEO t margins. The The t margins. Statement by by Statement while wecontinued togrowourbusiness.” with our promises. This resulted from from resulted This ourpromises. with Group. Operating profi 243 million was an all time high for the high time anall was 243 million number of record catches inthe world catches ofnumber record Ra- for season. the 2009 new products number of new products to the market new production and sales records were were records andsales new production inthe estab- nator USA, lure business inthe one of ourkey objectives mains pala was again awarded fi awarded again was pala uct development. We brought a high development. Weuct ahigh brought lished a lure assembly factory in Rus- during 2007. during our performance improvement initia- our performance South Korea. Organic growth continued future too. We also acquired the Termi- strong in many areas. company anew in sales sia andstarted and we are ready to introduce excellent excellent tointroduce ready and weare atively more than sales, which means which means atively more thansales, of for EUR 2007 net sales The achieved. the IGFA for lure the category largest their performed in 2007 and several andseveral in2007 their performed re- Shimano with cooperation tribution tives andeffi tives tions while also the benefi while also tions that our profi Most of our business units improved units ofMost ourbusiness Great work was done again inprod- done work again was Great cient manufacturing opera- cient manufacturing t margins improved inline t margins ofi t margins andimproved ourprofi tability rel- t increased ts of our strong place in rst Jorma Kasslin Jorma will work hard in 2008 to continue this mented and the good work andthemented good inourglo- imple- being that are ment initiatives positive development. positive product offering, will continue todevel- will offering, product lieve that our operations and perform- and operations our that lieve continuation of our top line growth and growth line top our of continuation distribution network started to capital- op positively also in2008. also op positively organization, distribution network and inthe glo- due uncertainties tothe recent on the several performance improve- performance on the several improvement inprofi an reached for 2007 net result Our ize. bal organization, we expect 2008 to be a a be to 2008 expect we organization, bal bal economy and stock markets. Despite Despite markets. economy andstock bal few months unfavorable inthe past been all time record at EUR 17.5 record time all We million. ance, supported by our strong brands, brands, byourstrong supported ance, quite good despite the general uncertain- the general despite good quite President and CEO and President this challenging environment, webe- environment, challenging this ty especially in the US economy. Based The market outlook for 2008 seems market seems The outlook for 2008 Our share price development price share has Our tability. RAPALA ANNUAL REPORT 2007 | 9 RAPALA ANNUAL REPORT 2007 | 10 The Group’s unique manufacturing manufacturing Group’sThe unique Rapala’s strategic objective is profi is objective Rapala’s strategic France, and high quality knife manu- knife quality andhigh France, rope and China, a leading global distri- global aleading andChina, rope new products effi products new capability for its andrespected known nia and Russia, the most advanced tre- the advanced most andRussia, nia with for lures facility manufacturing platform consists of the world’s consists platform largest products with new and exceptional fea- new andexceptional with products lure factory in China, Europe’s largest Europe’s inChina, largest lure factory on three sub-strategies and established dustry and a strong brand portfolio with with portfolio brand andastrong dustry developed an extensive sourcing plat- sourcing anextensive developed covers theand covers four major continents expectations. ing for its selected products. Rapala’s re- products. selected for its ing is locally present in 27 different coun- in27 different present locally is bution network inthe fi form and process to ensure high quali- also has Rapala inFinland. facturing ble growth. This strategy is founded founded is strategy This ble growth. ble hook production facility located in located ble hook facility production sourcing andR&D including platform sourcing strengths: a unique manufacturing, several leading brands. leading several search and development is globally well well globally anddevelopment is search specialized factories in Finland, Esto- inFinland, factories specialized the world’s largest lure factories inEu-the world’s lure factories largest ty but low cost third party manufactur- party but low third ty cost tries. It allows the Group to introduce the tomeet fi tures quality newto continuously high bring Today Rapala’s distribution network network distribution Rapala’s Today Established and Continuously Continuously and Established Developed Strengths Developed Strategic Objective Strategic shermen’s demanding shermen’s demanding ciently andeffective- Strategy, Strengths shing tackle in- tackle shing Rapala’s theglobal visionistobecome leaderin the fi industry. shing tackle and Prioritiesand ta- This willThis beachieved throughprofi growth. table The brand for any new product can be be for can any brand newThe product The Group’s core business consists of consists Group’s business The core with new “hot” lures ready for all occa- for all ready lures new “hot” with together lures of established range wide with Shimano. hand, the wide distribution network al- network distribution thehand, wide fi Rapala also has a distribution alliance alliance adistribution has also Rapala ket both attractive and demanding. attractive both ket replacement market. The fi replacement market. The ries and other fi pala, the Group’s brand portfolio con- the Group’s portfolio pala, brand umes are lower are markets. thanintheumes core liamson, VMC, Marttiini andPeltonen. Marttiini VMC, liamson, like Storm, Luhr Jensen, Blue Fox, Wil- ue adding elements of fi ly tothe market long last- andtobuild lures, fi lures, chosen from this portfolio to match the desire tohave fi box atackle desire es external distribution agents in more development. In addition to its own dis- andfi retailers cal ing partnerships and alliances with lo- with andalliances partnerships ing brand inthe fi brand sions and circumstances makes the mar- makes andcircumstances sions sists of several other well known brands brands known other well of several sists sumable nature of lures andsome of lures othersumable nature so acts as achannel for market as andcus- acts so amongst the lowest cost but highest val- but highest the cost lowest amongst gory. targeted market segment or price cate- than 100 countries where vol-than 100 the sales countries us- the also Group network, tribution tomer for input, product which used is shing tackle products leads toastable leads products tackle shing The fi In addition to the global leading Focus on Fishing Tackle Business Fishing on Focus fi hooks, shing shing tackle market is also shing tackle industry, Ra- industry, tackle shing shing tackle. Lures are are Lures tackle. shing shermen. On the other other the On shermen. shing. The con- The shing. sig accesso- shing lled with a sherman’s sherman’s A lure assembling factory was estab- strong. continued growth organic Also with increasing emphasis on perform- very high on brand loyalty, which in- venture in Russia and Ukraine, control- Ukraine, and Russia in venture venture has also started to distribute bi- todistribute started also has venture has increased and will further increase increase further andwill increased has Implementation of the Group’s strategy mass market.mass mano agreed to establish a50/50 joint toestablish mano agreed when combination andShi- ness Rapala profi proven to be asuccess. tobe proven plement the Group’s These strategy. lished in Russia and a new distribution andanew distribution inRussia lished lure business was acquired in the USA. the new joint InRussia, led byRapala. developed a unique capability of being of being capability aunique developed of Rapala’s characteristics is that it has for “catch andrelease”, trend creasing high the known value of well creases earlier in 2007 in Hungary has already already has inHungary earlier in2007 cycle South parts. East European distri- discussions resulted in amajor busi- resulted discussions ing acquisitions and business combina- andbusiness acquisitions ing for profi for both aspirational and affordable to the bution center established with Shimano Shimano with established center bution successfully achieved in2007. achieved successfully ance improvement initiatives targeting targeting ance improvement initiatives quality brands. As a result of the in- aresult As brands. quality the demand for high quality lures. One One lures. quality the for demand high the use of live bait is declining. This to turnaround the trend of declining of declining the trend to turnaround tions continued in 2007 to further im- tofurther continued in2007 tions Terminator and spinner bait branded Discussions and negotiations regard- andnegotiations Discussions t margins. This turnaround was was turnaround This t margins. Strategy Implementation in2007 Implementation Strategy table growth continued in 2007 continued in2007 table growth fi planned for andhook mid-2008 dis- prove operations. operations. prove product categories continued. of current andextensions lines product ed. Distribution unit Waterqueen and complet- was Ragot unit of distribution in- of operations consolidation French of organic growth also Developmentcompany Korea. in inSouth terms of new initiatives were started in2007. The started were initiatives spooling facilities in order to further im- quarter. The plan is also to invest in line line in invest to also is plan The quarter. tributor VMC Europe during the third the third during Europe VMC tributor to Morvillars started and the relocation andthe relocation started to Morvillars supplier line shing Tortue are moves SUPPLY GROUP BRANDS DISTRIBUTION Several performance improvement performance Several Japan Thailand Australia China Canada South Korea Storm Malaysia Ireland Spinners Russia Estonia Finland Blue Fox Rapala Rapala Hardbaits USA OWN MANUFACTURING AND R&D AND MANUFACTURING OWN OWN DISTRIBUTION China Other lures Williamson Spain Sweden South Africa Willtech Storm Softbaits France Norway Denmark Finland Brazil Hong Kong Hong Luhr Jensen Blue Fox Big Game Product oreSource Source April 2008. The manufacturing func- manufacturing The 2008. April work is being transferred from Estonia Estonia from transferred work being is Ireland will discontinue inthe endof discontinue will Ireland nia while asignifi nia the development started Rapala rope, duction effi duction pro- andincrease lures of hard-bodied over inEsto- bythe Group’s lure factory byestablish- lure manufacturing of its ing a lure assembly factory inRus- factory alure assembly ing sia. The manufacturing operations in operations manufacturing The sia. as the world’sas manufacturer leading to the new factory in Russia. inRussia. to the new factory tions of the Irish factory will be taken taken be will of factory the Irish tions To strengthen the Group’s position Major operational changes andim- changes Major operational Terminal tackle Terminal China China XC-Skis VMC Slovakia Switzerland Willtech ciencies and capacity in Eu- Latvia Lithuania Estonia Poland Portugal France Finland, Estonia & Estonia Finland, Finland Marttiini Knives Hooks Peltonen cant part of assembly AND OWN R&D OWN AND Terminator Accessories China XC-Skis &Poles XC-Skis Sweden New Zeland Russia Finland Rods &Reels Rods Line Knives USA RAPALA-SHIMANO SOURCING (57/33/10) (50/50) Czech Republic Hungary Russia (50/50) Ukraine (50/50) DISTRIBUTION Product Group’s manufacturing facility inChi- facility Group’s manufacturing na with a target toenhance the produc- atarget na with ry performance. In addition, the Group theGroup Inaddition, performance. ry provements were started also inthe also started were provements cost cutting initiatives. Most of these ini- Mostof these initiatives. cutting cost erations that has been burdened by the introduced andimplemented introduced several unsatisfacto- with units in distribution andper- prices material raw increased sults have started to materialize gradu- tomaterialize have started sults sonnel costs. ally. time to restore the profi tion effi tiatives have been completed have been tiatives and the re- Organizational changes were made andshortenthe lead ciencies Germany Italy Belgium Netherlands SHIMANO tability of the op- LOCAL IMPORTERS Outdoor Other Fishing Other Rest of World Rest of Europe Winter Sports Shimano Hunting THIRD PARTY PRODUCTS

RAPALA ANNUAL REPORT 2007 | 11 RAPALA ANNUAL REPORT 20072007 | 12 “The“T restructuring and proceeds with majorproceeds pr Irish lure factory will established in Russia Russia in established efficiencies and op operations in Europe manufacturer hard- of ma capacity: anew steps to strengthen steps to strengthen assembly factory was as the world’s leading as the world’s leading be closed inbe closed April 2008.” bodied luresbodied and bo the Group’s position th lu lure manufacturing manufacturing lure de development our of in early 2007 the and increase production in Juhani Pehkonen Head of Fishing Lures Fishing of Head he restructuring a restructuring he re manufacturing cr e Group’s position oceeds with major velopment our of erations in Europe died lures a nufacturer of hard- of nufacturer ease productio ci es a nd nd

n nd

– a number oneabullet. – anumber with X-Rap has become the most successful X-Rap the become mostsuccessful has water fi fi fi Rapala’s lure brands kept their global Rapala’s theirglobal kept lure lur brands ye It is a winner for smallmouth bass in the the in bass smallmouth for winner a is It year with highly successful new prod- Rapala’s superior position in fresh water 20 2006. Rapa- stalwarts, 2007. industry The number o number one position as the most pre- most the as position one number pose or species they are designed for and designed they are orspecies pose uc la lure category (largest number of record plastics andsoft baits Hard launches. uct enjoyed astrong again la andStorm, lure launch everfor any fi every need from practical entry level to entry practical from need every cover the fi our lure brands andlures lures complimented bymetal outside of their intended That not is use. cess of X-Rap has further strengthened of X-Rap strengthened cess further has company byfar. phenomenal The suc- in Finland. X-Rap is a cross-over smash X-Rap smash in Finland. across-over is ing Association (IGFA) Association ing for records Six million fi million Six fe for big game fi for big fi sport for choice ferred force in salt water fi water insalt force sophisticated hi-end products. awarded the fi awarded great lakes of US, sea bass inJapan, blue bass of US, sea lakes great their positions inthetheir market. positions Together, the case with the with versatile Rapalathe X-Rap. case well perform they donot necessarily X-Rap Conquers the Five Oceans – and More –and Oceans Five the Conquers X-Rap sh caught) of International Game Fish- Game sh caught) ofInternational shing and made it a leading, dominant dominant it andmade aleading, shing rred c and ar t 07.

Most lures have their specifi In 2007, Rapala was once again once again In 2007, was Rapala la w u S Th shing in Australia andfor pike inAustralia shing i ho ne e shermen cannot be wrong. wrong. be cannot shermen rst price inthe worldwide price rst strengthened all shing Rapala is an undisputed market leaderin market hard isanundisputed Rapala Ra soft plastic lure brands. The net sales of Fishing Lures, including ofFishing Lures, netsales lurebrands,were all brands.The plastic Group soft s pa shing, too. shing, Soft Plastic Lures Hard shing tackle tackle shing shermen in in shermen sherman’s sherman’s c pur- c some EUR 74 million in 2007 (EUR 73 million in 2006). 2006). in million 73 (EUR 74 2007 in million EUR some will never forget the special qualities of qualities never forget the special will walleye, zander, trout, perch andmany perch zander, trout, walleye, Bass, predators. whacked bythe hungry Minnow the Rap legendary combines Rap Deep 10 goes down and stays there – there 10 andstays Rap down Deep goes Floater’s minnow shape and is ready to minnowFloater’s shape ready andis innovator andits the original is Rapala 2007 with new models and size exten- andsize new models with 2007 need a big lure to go deep anymore. X- con- Newbalsa now andinthe future. have stories many success of the recent nium” is presently the best selling plas- selling the best nium” presently is rock the fi jor breakthrough in2007. jor breakthrough prehensively covers fresh and salt wa- andsalt fresh covers prehensively (not tomention many other species) all cept lure another Minnowcept Rap ma- was es you can ever imagine toencounter on everimagine youcan es ing the unique material to new heights tonew heights material the unique ing innovation started with a wooden lure awooden with innovation started increase 10% from previous year. 10% previous from increase Shad Rap action with the Original theShad Rap Original with action balsa. The Group will keep on keep develop- will Group The balsa. been accomplished with plastic, Rapala 70 Although for ago. than more years became a walleye wonder overnight wonder overnight awalleye became size extensions for coming years. years. for coming extensions size sions enabling annual sales in pieces to inpieces annual sales sions enabling around the globe and got a kick start for start andgot the akick globe around though usually not for long before it gets not for it gets long before usually though the water. andcircumstanc- conditions ter, every luretic inthe now world. com- range Its “The dream lure of the dream new millen- “The A classic beauty, retro style designed designed style beauty, retro A classic With the X-Rap 10 youdon’t Deep X-Rap in continued togrow family - Rapala Fresh Water Highlights Water Fresh Rapala bodied and shing world. version 9cm shing The -bodied lures and Storm isoneoftheleading lures-bodied andStorm The demons of the deep are now of demons are the get- deep The where as aconsequence. where as the fi with water ammunition that no other compa- has never been higher. With never been thehas expan- highest quality black Sure nickel VMC quality highest Rap this season with strong sales every- sales strong with Rap season this Originally known for its legendary hard hard legendary for its known Originally Rap Magnums dive. Add the perennial Addthe dive. perennial Rap Magnums nums; 15 and 20. Four and six meter 15nums; and20. Fourandsix ny offer. can plastics to new hybrid categories, Storm popularity, and the reasons area obvious: obvious: area andthepopularity, reasons come a major player in soft plastic baits baits come amajor plastic player insoft colors. It proved to be especially popular other species have encounter hadabrief other species depth ranges are what the majority of what are the majority ranges depth in tropical fi in tropical Set hooks, X-Rap hooks, Set Walk a with comes baits, in recent years Storm has also be- also has Storm years inrecent baits, bullet like castability and stylish X-Rap new X-Rap The beat. Walk leading was favorite CD Magnum and you’ll get salt sion from traditional hard baits and soft andsoft baits hard sion traditional from salt water fi around the world. The brand awareness awareness the world. brand around The aline pumping experience that’s to hard pumpingaline experience the top water pack in 2007. Armed with the in 2007. with pack topwater Armed new X-Rap bytwo deceived Mag- ting the surface, often jumping, is anadren- is jumping, often the surface, the fi see to literally –andthat’sto reach where the new X- Top fi water Storm – From Hard-bodied Lures Lures Hard-bodied –From Storm Rapala Salt Water Highlights Water Salt Rapala to Soft Plastics and Hybrids and Plastics Soft to rst deep diving freshwater X- shermen of the world want shing. shing is skyrocketing in skyrocketing is shing sh alure smash on Another monster hit from Storm in 2007 in2007 Storm from hit Another monster VMC hooks and a user-friendly weight weight andauser-friendly hooks VMC was the Raz’r Back. The modern, perch perch the modern, Raz’r The was Back. Deep. Deep. Back is more durable is Back thanany other soft Grubs. In general, the products of this 2007 with the arrival of the Storm Pro- of the Storm the arrival with 2007 new 15 longWildEye Minnow cm is new lure in many major sport fi new lure inmany major sport mendous success in 2007 for panfi in2007 success mendous funny this baits, for creature meaning probably the most expensive, best look- plastic bait, has better swimming action action swimming better has bait, plastic looking but a deadly midget found atre- midget but adeadly looking anew Giving before! thelike Scatback control system. are grubs body ribbed compressed, sold and inbulk usually are category cast or trolled with fantastic results. fantastic with ortrolled cast current and only comes up with afi up andonly comes with current for the abest awards wiping elsewhere, on the market. range product the versatile offers most ing and best producing soft baits avail- baits soft producing andbest ing Storm range got a new size in2007. got anew size The range Storm Storm developed matching revolution- matching developed Storm ferently. The multi-injected, steel mould steel ferently. multi-injected, The dif- things does onlyfor but Storm price became on overnight sensation for one sensation on overnight became shaped Raz’r Back combines the best fea- shaped the Raz’r best combines Back simple reason: its extraordinary abili- extraordinary its simple reason: available in two versions: Shallow and Shallow versions: available intwo ary Pro Jig Heads that feature premium premium that feature Jig Heads Pro ary able. To compliment the new ProGrubs, tures of hard bait and soft plastic. Raz’r than most of the hard baits and can be be andcan ofthan most the baits hard ty to catch fi to new level, WildEye Minnow 6Deep trout the andrainbow USA andtrout Taking trout fi trout Taking The grub tails got new standards in got new standards tails grub The The world hasn’t seen anything worldThe anything hasn’t seen Probably the best all-around bait in bait all-around the best Probably sh. It stays deep even in fast eveninfast sh. deep It stays Storm Goes Hybrid Storm shing in fl shing owing owing water shing. sh in sh in sh. The new look was well received received well was look new The sales on this category to a to category this on sales on the market and revived the the revived and market the on 2007 season the for a facelift new rise. of multi-application hard baits. now covers practically every every practically covers now Classic Storm hard baits got got baits hard Storm Classic with the new MadFlash fi MadFlash new the with nish. X-Rap 12 was the missing 12 missing the X-Rap was With its introduction for 2007 2007 for introduction its With the X-Rap product range range product X-Rap the freshwater fi shing situation. link in a line comprehensive Products at the fi the at spread. Products rst

RAPALA ANNUAL REPORT 2007 | 13 RAPALA ANNUAL REPORT 2007 | 14 “Our manufacturing 30% in and total 30% 2007. Our focus is production planning grew more than operations in China China in operations management.” metal luresmetal more now on development and supplyand chain of improvement and than doubled in the production of ope and Kong Hong offi ce William Ng William Head of Chinese manufacturing manufacturing of Chinese Head rations lures while Williamson is one of the leading global brands for big game salt water fi water fo salt game brand big for Group new brands the is Trigger X global shing. leading the of one is Williamson while lures Combined Blue Fox and Luhr Jensen production makes the Group the world’s largest manufacturer and distributor of metal theworld’sofmetal makestheGroup anddistributor production manufacturer Jensen largest andLuhr Fox Blue Combined Williamson in 2004 and started toin- andstarted in2004 Williamson The Williamson product range consists consists range product Williamson The vest heavily in R&D and product design inR&D heavily design vest andproduct with a worldwide brand presence in32 presence aworldwide brand with has work inthe Williamson industry, hooks. The attention to sophisticated de- tosophisticated attention The hooks. Fiji, Bahrain orNewCaledonia. Fiji, Bahrain andre- Asia Oceanic Australia, Europe, brand game the big acquired Rapala rica to China. The results of this devel- porate super sharp high quality VMC VMC quality high sharp super porate power, the strongest distribution net- like lures introduced for the 2006 season for season the 2006 introduced lures like met- lures, trolling orlarge small ucts: detailed features like hook locking sys- opment work groundbreaking. are Af- South from transferred was duction dedicated offshore fi offshore dedicated Group’s The global. truly lure brand can cently also Central America. Thanks to to Thanks America. Central also cently the USA, are Major regions countries. game fi inbig ers of 14 families. product in order to make the famous South Afri- tomakethe South in order famous is available in remote countries such as suchas available countries inremote is become one play-become global of the leading son product lines. At the pro- At same time, lines. product son structured and upgraded the William- sign is typical for all Williamson prod- Williamson for all typical is sign al or lipless baits, teasers or accessories. oraccessories. teasers baits, orlipless al tems and loop protection, andthey incor- andloop protection, tems the strong export network, Williamson Today, has product Williamson each The new “Live” series of natural life- of natural new series “Live” The Supported by Rapala’s distribution distribution Rapala’s by Supported Big Game and Metal Lures Williamson Big Game Lures Game Big Williamson time inashort shing shing specialists re- specialists shing and Attractants the fi pheromones. thatinclude Ultrabite sh attractants were a breakthrough in big game fi in big abreakthrough were Double Header or Trout have Quiver or for amust musky Buck are spinners Luhr Jensen has ahugeLuhr market has Jensen share Hailing from Hood River, Portland, Or- Blue one Fox is of the Group’s metal 2007 season with new models. new models. with season 2007 ners designed for musky andtrophy for musky ners designed rable, quality fi pike fi pike fi egon, Luhr Jensen is a legend in lures Pixee like classics The of products. ing, and the series was expanded for the expanded was andthe series ing, found a permanent position in tackle intackle position found apermanent brax Musky Buzz series of surface spin- boxes worldwide. by millions of fi range versatile awide, offering brands salmon and trout fi andtrout salmon spoons andspoons Vibraxspinners are used and trolling accessories. The company’s The accessories. and trolling are designed for pike fi designed are and is the marketand is leader inthe North- great tradition of craftsmanship anddu- of craftsmanship tradition great the introduction of the Esox spoons thatthe of introduction spoons the Esox tion to salmon, trout or pike fi pike or trout salmon, to tion no need Diver introduc- andDipsy tail Bang- Crocodile, the Crippled Herring, Luhr Jensen Hard-bodied and Metal Lures Metal and Hard-bodied Jensen Luhr More recent innovations like the Highlights forHighlights the year 2007 were shing. shing. shing. Blue Fox Metal Lures Metal Fox Blue nishes on products like shermen every year for year shermen every while Musky shing shing andthe Vi-shing shermen. shermen. sh- West of the USA. It dominates salmon X, it is apheromone fi it is X, based hiccups. Luhr Jensen has maintained its its Luhr maintained hiccups. Jensen has manufactur- toRapala shifted been has fi fi In 2005, aworldwide the signed Group Environment, Fisheries andAquacul- Fisheries Environment, markets through Group’s effective dis- Group’s effective through markets network. The integration of the famous integration The network. ral and irresistible feeding behavior in feeding andirresistible ral which inthe natu- generates UK, ries planned. The production and shipping andshipping production planned. The plications as well. Luhr Jensen, with in in with Jensen, Luhr well. as plications ly fi ly ly went even smoother and faster than ly went evensmoother andfaster dominant market share in its tradition- marketdominant inits share one biotechnology brand called Ultra- one biotechnology called brand exclusive distribution agreement for excellent reputation, is a good addition agood is reputation, excellent andan history of 70 long years excess ing plants mainly in China without any in China mainly plants ing bally through the Group’s distribution the Group’s through distribution bally the world around all for other ap- fully bite. Re-branded by Rapala as Trigger Trigger as byRapala bite. Re-branded salmon brand toRapala’s brand salmon lure fami- al market areas inthe rapid- USA andis marketal areas acquisition in2005. acquisition ant developed byCEFAS (Centreant developed for tribution network. the sport fi the sport ture Sciences) governmental laborato- to the Group’s brand portfolio after its its after to the Group’s portfolio brand shing but the products are sold are success- but theshing products sh. sh. The brand was re-introduced glo- re-introduced was brand The nding its way to new international way tonew its international nding Trigger XAttractants marketshing for apherom- sh attract- sh r Trigger X product range for sea- the 2007 range Xproduct Trigger which is very promising as the Group is the is Group as promising which very is Group successfully launched a limited launched alimited successfully Group planning a wide range of different appli- of different range awide planning cations including pheromone including cations assembled for the 2008-2009 seasons. for the 2008-2009 positive extremely been has retail from on lures used andgel tobe spray based son. The program includes pheromone program The son. soft plastic among other among hot plastic categories soft and baits for salt water. The response forwater. salt response The and baits The project hadafl project The ying start as the The international introduction introduction international The The life-like look and great and look life-like The The exact imitations of live live of imitations exact The size and color extensions. color and size sound foundation for future a created catches and sales sales record for the Luhr Jensen Jensen Luhr the for record sales of the Luhr Jensen brand brand Jensen Luhr the of series have the need for left network resulted in an all time time all inan resulted network action of the Williamson Live Live Williamson the of action the new Lucius spoon was an was spoon Lucius new the through the Rapala distribution intended market area. Great the over all success instant European pike fi pike European market, shing specifiDesigned the to cally live bait in history. in the big game market. market. game big in the branded products inbranded products 2007. have been a breakthrough abreakthrough been have baitfi sh used in fi saltwater shing Products at the fi the at spread. Products rst

RAPALA ANNUAL REPORT 2007 | 15 RAPALA ANNUAL REPORT 2007 | 16 “Last year and sales pro proved that our us to maintain our our maintain to us continuous investment investment continuous time record fortime our record hook business and and business hook hooks.” leadership position in in position leadership innovation enables enables innovation in new technology and Stanislas de Castelnau Head of Fishing Hooks Fishing of Head fits were an all The family fi includes of also hooks range VMC The Group’sThe fi with electroplating. Successful innova- hook brand, and a market leader with andamarkethook leaderwith brand, ment and high quality customer service service customer quality ment andhigh fi andchemical ment of steel mated mechanical acombination of is auto-nological edge forming,results in good reactivity, capability for heat treat- proactivity and high quality. The tech- The quality. andhigh proactivity product development are key success development key success are product produce fi produce ufacturers and distributors. is the andthe Group rest within used Company, to in1796, established started of hooks with a short lead-time, which lead-time, ashort with of hooks ed VMC, which treble the is leading VMC, ed ing hook business, and have contributed andhave contributed hooking business, in France manufactures large quantities factors for VMC hooks. The hook The plant hooks. for VMC factors offourth hooks the are manufactured sold lure the man- toboth outside Group sold to more than 70 countries. One are a major strength inthe fi Group amajor strength are a wide range of single hooks, which hooks, to- of single range a wide a worldwide market to50%. close share gether the treble with hook are range to VMC’s position as the market as position to VMC’s leader. develop- inproduct tomer partnerships tions as well as value adding key cus- Advanced technology and strong The World’s Leading Treble Hooks Leading World’s The A Short History of VMC Hooks VMC of History A Short shing hooks in France in1910. inFrance hooks shing rm of Viellard, Migeon and and Migeon Viellard, of rm brand- are hooks shing VMC branded treble hooks are market leaders with a worldwide market share close to 50%. to50%. shareclose market withaworldwide leaders aremarket brandedtreblehooks VMC The Group also produces single hooks. The net sales of Fishing Hooks were some ofFishing netsales Hooks The single alsoproduces hooks. Group The nishing Fishing Hook sh- EUR 17 million in 2007 (EUR 15 2006). in million (EUR 17 2007 in million EUR At that time, each hook was individually individually was hook each time, that At Business To day, the pr o duc t ion c ap ac it y i s s ome ome s s i y it ac ap c ion t duc o pr the day, To The SparkThe Point technology developed 3 million hooks aday. hooks 3 million hooks designed for carp and dorado fi anddorado for carp designed hooks fi among hook sharpness hooks. This development was followed development was This hooks. in1974,hook introduced machine was fi The hand crafted. 2007 to be effective from the beginning now focuses on OEM customers while on OEM customers now focuses hook for all distribution, responsible market was also restructured during mounted on VMC hooks was launched was hooks mounted on VMC ket leader in 1990’s. In 2000, VMC was was leaderket in1990’s. VMC In2000, lent sales fi sales lent umes from 5 000 hooks a day to 60 000 aday 000 hooks to60 5000 from umes of 2008: VMC Inc., who previously was who was Inc., VMC previously of 2008: enabled it tooffer specifi intheduced market in2007. ing techniques were successfully intro- increasing the daily production vol- theproduction daily increasing for predators, four new Sparkfor Point predators, both in the USA and Europe with excel- inthe with USAboth andEurope by VMC has set up new standards for up new set standards has by VMC by international expansion, which led led which expansion, international by signed inthe USA markets, forsigned European acquired by and merged with Rapala. ter the development of this range fi ter the development range of this tribution. jig-heads of colorful program alarge too: to VMC treble hooks becoming amar- treble hooksbecoming to VMC New Products and Development in2007 Development and Products New The fi The worldwide experience of VMC of VMC worldwide experience The shing hook distribution for US hookshing distribution gures inthe fi gures rst automatic rst treble rst year of dis- de- c products semn Af- shermen. rst sh- Advance technologyAdvance andinnovations will allow VMC also tooffernew rang- also VMC allow will bewill on new production capacity: the hooks. hook machines will be built to increase Rapala USA is responsible for the retail for the retail USARapala responsible is In 2008, the development focus of VMC of the VMC development focus In 2008, es of products including Drop Shot sin- Drop including of products es el will be lengthened andnick- for tin lines electroplating and more treble side of the business. gle hooks andTropic hooks gle Spark Point treble the capacity at the Morvillars factory.the at capacity the Morvillars New Products and Development in2008 Development and Products New their all time sales record. sales time all their In 2007, VMC hooks reached reached hooks 2007,In VMC Products at the fi the at spread. Products rst

RAPALA ANNUAL REPORT 2007 | 17 RAPALA ANNUAL REPORT 2007 | 18 “Rapala’s functional and “We celebrate the Marttiini knives in in knives Marttiini p 2008. The2008. successful Rapala in fishing fishing in Rapala glasses and fishingglasses 80th anniversary80th of clothing improve the the improve clothing cooperation with already for 40 years.” thearound world.” increasesand catches knives has also lasted like knives, tools, fishing experience fishing lines, sun Sales and Marketing Director for Director Marketing and Sales Managing Director of Marttiini Päivi Ohvo F Lars Ollberg ishing Accessories ishing ractical accessories accessories ractical lures andfi fi arethe important most ofwhich the out ofaccessories, selection acomprehensive has Rapala shing hooks. llet have been soldhave since been 1967. Rapala’s internationally recognized fi Rapala Each fi Rapala sold un- the products all designs Rapala Over 38 million Rapala fi Rapala 38million Over monofi sold are inmore than70 countries. ries nical features. distribu- party for third manufacture under the Rapala trademark. The new The under the trademark. Rapala contractors. All Group accessories are are accessories Group All contractors. manufac- Rapala brands. own der its innovative and represent functional de- functional innovative andrepresent in all the main sport fi sport the main in all for aspecifi fully communicates the products’ tech- the communicates products’ fully sign and high quality. Rapala’s accesso- sources them to specially selected sub- tures them in its own factories orout- factories own them inits tures tri-lingual multicolor success- package tri-lingual fi its all tors; Rapala takes advantage of its strong brands and established supply chain by expanding its product selection beyond selection supplychain product byexpanding brandsandestablished its strong ofits advantage takes Rapala Well Known and Successful Brands Brands Successful and Well Known knives, fiknives, shing fi tools, shing lines, fi weresome shing ofAccessories clothing, netsales bags The andsunglasses. are lines lament andbraided llet knives are market leaders c purpose. Rapala does not shing tool products are sold sold are products tool shing Fishing Lines Fishing shing tool is tailor made made tailor is tool shing Fishing Tools Fishing Fillet Knives Knives Fillet Fishing Accessories shing markets. markets. shing le knives llet EUR 44 million in 2007 (EUR 46 million in 2006). in million 46 (EUR 2007 in million 44 EUR Business Nordic. The collection is sold inmany is collection The Nordic. The business of Marttiini developed developed of Marttiini business The sold underthe Vi- Rapala sunglasses The Wear collec- Pro Rapala The clothing were rationalized and focused: all wood well known inthe major fi known well fi Rovaniemi while all Marttiini’s leath- Marttiini’s whileRovaniemi all ni’s Estonian factory. Marttiini manu- markets. Rapala gives a strength guar- astrength gives Rapala markets. processing was moved to the factory in moved tothe factory was processing er sheaths are manufactured inMarttii- manufactured er sheaths are Group ermen’s anddemands. needs design quality, year.each optical Their reception. agreat ceived since 2005 where re- countries it has factured Rapala branded knife selection selection knife branded Rapala factured branded sunglasses were fi were sunglasses branded successfully during 2007. Operations market more share gain brand sion Gear and practical packaging fulfi packaging and practical are manufactured by selected contract. lines Rapala All lines. its all with antee tion covers all climates from tropical to shing tackle market tackle in2006. shing New Achievements in2007 Achievements New Fisherman’s Sunglasses Pro Wear Clothing Wear Pro rst sold to the shing line line shing ll the fi sh- All Rapala console games are made un- made are games console Rapala All was increased by introducing new dis- byintroducing increased was huge In2007, popularity. the game was Rapala brand within the retail stores stores the retail within brand Rapala 2007. during doubled their sales Bags oneInc, game manufac- of the leading Guangzhou sourcing offi sourcing Guangzhou many products shortened. In addition, Inaddition, shortened. products many pala Tournamentpala gained has Fishing, for are the new folding knives prospects increased knife pala’s produced Chinese plays for sales and product presenta- plays andproduct for sales and line’s now lookproduct uniform is launched for the Nintendo platform. Wii companies and customers from Estonia. from andcustomers companies easy to recognize. The visibility of the Activision with agreement der alicense continued in 2007 and the lead times for andthecontinued lead times in2007 ing and appearance had a face lift. The The lift. hadaface andappearance ing is packed and supplied to distribution factory were streamlined and produc- by over 50% during 2007. The future 2007. future by over The 50%during sory sourcing is managed by Rapala good. tion capacity increased. The sales of Ra- sales The increased. tion capacity tion. inthe world.turers Work on supply chain management management Work chain supply on The latest Rapala console game, Ra- console Rapala game, latest The The majority of the Group’s acces- majority The knife of the Chinese operations The In 2007, Rapala accessories’ packag- In 2007, accessories’ Rapala andRapala Vision Gear Rapala Both ce in China. inChina. ce Wear garments. Wear was reinforced by the new Angler se- bythe new Angler reinforced was Functional fi Rapala Limited Edition bags were were bags Edition Limited Rapala ries. These polarized fi markets. knives were introduced. These prod- proof and windproof jackets and trou- jackets andwindproof proof production and logistics of Rapala Pro Pro of Rapala andlogistics production launched for season. the 2008 ucts are especially designed for the US designed especially are ucts fi new electric andthree let knives ing tool selection for 2008. tool selection ing tothe Rapala’s additions important fi feature both high quality andcompeti- quality high both feature series and three new higher price point point price new higher andthree series sers. strengthened by the addition of water- a supply agreement was signed with with signed a supply was agreement the Finnish Logonet Oy for the design, for the Oy design, the Logonet Finnish tive prices. A value priced Rapala Sportsman’s Sportsman’s Rapala A valuepriced The Rapala Pro Wear collection was Wear was Pro Rapala collection The The Rapala Vision Gear product line product Vision Rapala Gear The Five new higher price pointfi price Five new higher New Products for 2008 for Products New shing nets and scales are are andscales nets shing shing sunglasses sunglasses shing llet sh- l- The Rapala Witch’s Tooth Witch’s Rapala The made by Marttiini, was sold out out sold was byMarttiini, made competitive pricing made the the made pricing competitive with combined look modern and price point. the of example aprime vest Collector Fillet knife, hand hand knife, Fillet Collector pocket solutions, practicality solutions,pocket practicality in record time despite its high its despite time in record Rapala 2007 clothing collection. clothing 2007 Rapala fi Shallows Wear Pro Rapala shing High quality materials, innovative quality High Products at the fi the at spread. Products rst

RAPALA ANNUAL REPORT 2007 | 19 RAPALA ANNUALNNUAL REPORT 20020077 | 20 “Increasing number of “Shimano and reels rods range.” experience.” experience.” to motors outboard electronics like fish are b addition to our product averyand important improve their fishing fishing their improve finders and electronic fishermen fishing uses Janne Paukkunen a Hannu Murtonen, P Spain, in Distribution of Head Head of Distribution in Eastern in Distribution of Head nd Northern Europe Northern nd ortugal and Brazil and ortugal est of the of classest Macedonia and Albania. In April 2007, InApril andAlbania. Macedonia hold, became a South East European dis- European East aSouth hold, became years. Rapala and Shimano strengthened theirRapala and Shimano strengthened products for Hungary, Romania, Bul- uct category. In its turn, Shimano dis- Shimano category. turn, uct Inits of the leading global brands in this prod- inthis brands global of the leading distribution covered 22 European coun- countries in Europe. This European dis- European This inEurope. countries distribution alliance in Hungary and inHungary alliance distribution ian distribution company, Euro- Rapala ian distribution Shimano rods and reels. In2007, this andreels. rods Shimano Since 1993, distributed the has Group garia, Slovenia, Croatia, Bosnia, Serbia, Serbia, Bosnia, Croatia, Slovenia, garia, tries and South Africa. Shimano is one is Shimano Africa. andSouth tries tribution co-operation has lasted for 14 lasted has co-operation tribution in4 products branded Rapala tributes tribution center of Rapala and Shimano of andShimano center Rapala tribution As of January 2007,As Rapala’s Hungar- In addition to the Group brandedfi additiontotheGroup In fi forsport products third alsodistributes party Rapala shing products, shing. The net sales of Third Party Fishing Products were some EUR 63 million in 2007 (EUR 54 million in 2006). in million 54 (EUR 2007 in million 63 EUR some were Products Fishing Party Third of sales net The Shimano Rods and Reels and Rods Shimano Fishing Products Third Party Eurohold. 2008. 2008. result of the new joint venture, these dis- these of the new joint venture, result theirmano distri- tostrengthen decided products started in Russia in December inDecember inRussia started products panies in both of these ac- countries. Oy, Europe will East Shimano pala As company, joint venture Ra- This pala. a ute, in addition to their current product clusive basis. Distribution of Shimano andother rods reels, Shimano offering, byRa- controlled company inFinland, Shimano fi Shimano South-East Europe when Shimano sub- by establishing a50/50 joint venture by establishing bution alliance in Russia and Ukraine scribed a33.4% shareholding inRapala scribed and in Ukraine in the beginning of year inthe beginning and inUkraine quire existing Rapala distribution com- tribution companies will start todistrib- start will companies tribution In October 2007, andShi- Rapala In October shing tackle products on ex- fi Rapala distributes several non-Group non-Group several distributes Rapala non-Group branded baits andattract- baits branded non-Group le boxes (Plano),le boxes (Cannon) riggers down ucts and equipment that it does not have that andequipment it does ucts clude fi in its own product portfolio. These in- These portfolio. product own in its and electric outboard motors (Minn motors Ko- outboard and electric ants. ta). The Group also distributes some ta). distributes also Group The tributes fi tion companies. In addition, Rapala dis- distribu- the newlythrough acquired especially brands, tackle shing Fishing Electronics and Other Products Other and Electronics Fishing sh fi sh shing related third party prod- party third related shing (Humminbird),nders tack- tr o me K act- o- )

RAPALA ANNUAL REPORT 2007 | 21 RAPALA ANNUAL REPORT 2007 | 22 “Manufacturing of gift gift of “Manufacturing products “Outdoor “Rapala is one the of “D “Distribution winter of with some of the products.” product offering for the production andhas products was started good additiongood to our gradually developed reduces the effects re of seasonalityof in our of huntingof sport and of of theof fishing tackle same customersame segment strongest brands in the shooting products in sp standalone business.” standalone sp as most of our of otheras most and supplyand chain.” and fits well into our bags, backpacks and balance the seasonality the Nordic countries tracking shoes area to afinancially sound like tents, sleeping sleeping like tents, distributors leading distribution system industry.” fishing tackle business few years ago to Gi Cynthia Foong Saku Kulmala Matts Baum Matts Nils Larsen Business Manager of of Manager Business Head of Distribution in Finland in Distribution of Head Head of Distribution in Sweden in Distribution of Head Denmark in Distribution of Head istribution winter of seasonality in ou ft Products duces the effect orts equipment equipment orts orts equipme orts k l b us nt s

in r es s where the fi Mauser, Tikka, Sako andCZ), Sako Mauser, Tikka, ammu- Rapala has distributed winter sport sport winter distributed has Rapala accesso- related andhunting Beretta) andTasco), &Bender Schmidt Bushnell, Rottweil and Gyttorp), optics (Leica, Remington), cartridges (Eley Hawk, Remington, Escort, Blaser, Winchester, Hunting, as well as winter sports, plays Group has distributed hunting products products hunting distributed has Group Game andNormark)Game include hunting ries (Nordic Hunter). The Group brand- Winchester, and (Norma, CCI nition knives, clothing andother re- hunting clothing knives, leading distributors of hunting products of products hunting distributors leading ucts and brands distributed by Rapala by Rapala distributed andbrands ucts lated accessories. equipment in Finland since 1999 inFinland and equipment clothing (Geoff Anderson, Blaser and ed hunting products (Marttiini, Wild (Marttiini, products hunting ed in the Nordic countries. in the countries. Nordic bution business inthe bution Nordic countries business since the 1960’s today one and is of the slow inthe autumn andthe winter. The an important role distri- inthe Group an important are rifl are The most important hunting prod- hunting important most The es and shotguns (Beretta, Franchi, Franchi, andshotguns (Beretta, es the seasonality of its core business. In additiontofi business. In core ofits the seasonality sh for hunting, outdoor and winter sports. The net sales of Other Products were some EUR 48 million in 2007 2007 in million 48 EUR some were Products Other of sales net The sports. winter and outdoor hunting, for shing tackle business is very Hunting, Winter Sports Sports Winter Hunting, Winter Sports Hunting Rapala also produces cross country skis and some other non-core products tocompliment products andsomeothernon-core skis country cross alsoproduces Rapala and Outdoor 19% to 80% to secure anddevelop the19% dis- tosecure to80% The most important winter sports prod- sports winter important most The Russia andFrance. Russia Hartola factory in Finland, Peltonen al- inFinland, factory Hartola Rapala is also an important distributor Group increased its shareholding inthe its increased Group (Rex), bindings (Rottefella) and cross cross and (Rottefella) bindings (Rex), (Peltonen), (Rex), poles ski wax ski ucts and brands are cross country skis skis country cross are andbrands ucts export markets are Norway, are Germany, markets export enjoying a 30% market share in Finland a30%market inFinland share enjoying Peltonen one is of manufacturers. er ski dition to the manufacture In ad- production. of Oy’s Peltonen Ski of skis in thecustomer to Peltonen buying some 50% door products and equipment. The most most The andequipment. products door out- of branded some other non-Group country ski boots (Alpina). boots ski country important outdoor products and brands andbrands products outdoor important bution markets. The most important by Rapala since 2002. In2005, the since 2002. by Rapala so sources lower priced models from oth- ski manufacturer Peltonen Ski Oy from from Oy Peltonen Ski manufacturer ski 2005. in Norway in business this started and anotable shareinother key distri- the leading brands in cross country skis, skis, country incross brands the leading the acquisition, Rapala was asignifi was Rapala the acquisition, to Prior of Peltonen products. tribution The Peltonen brand has been owned owned been has Peltonen brand The (EUR 42 million in 2006). in million 42 (EUR Outdoor ing products, Rapala also distributes third party products products third alsodistributes party Rapala ing products, cant nd os u o r s t- t To utilize its manufacturing capabili- hiking and trekking products (Vaude Game, TermoSwedGame, andNormark) in- China manufactures gift products that ery and equipment as fi as andequipment ery can be produced with the same machin- established with Shimano, with the distribu- established Inaddition industry. er andelectronics contract manufacturer for the consum- a as mainly some otherduces products pro- the also Group of the business, core cludes knives, backpacks, underwear ed outdoor products (Marttiini, Wild Tasco). Bushnell, ca, brand- Group The (Magellan), units GPS are distributed established with Shimano, with theestablished distri er Shimano bicycle parts as from Decem- from as parts bicycle Shimano Shimano bicycle parts as from Dece from as parts bicycle Shimano be ber 2007. and boots. and Tuckland) (Lei- optics and sports tion company in Russia distributes also also distributes Russia in company tion to fi for andcompensate the seasonality ties tion company in Russia distributes als y an r 20 As a result of the new joint venture aresult As As shing products, Rapala’s factory in Rapala’s factory products, shing a result of the n aresult 07 d eq . ui pm Other Products Other shing tackle. shing ew j oi nt bu m- o - RAPALA ANNUAL REPORT 2007 | 23 RAPALA ANNUAL REPORT 2007 / Financial Statements / 24 11% up 4%. American andNorth North America. Weakening of America. the USNorth US markets suffered somewhat from the The general conditions inthe fi conditions general The was strongest in East Europe, South Af- when the summer season clearly was weak dollar.weak was still generated inthe fi still was Due to normal weather conditions, the weather conditions, tonormal Due EUR 5.8 million. With comparable ex- EUR 5.8 million. Even if almost 50% of the sales is gener- is 50%of the sales almost Even if rope and North America, the trading the trading America, andNorth rope InWest Eu- andAsia. Australia rica, made their all time sales record: lure record: sales time theirmade all more than 80% of the operating profi ofmore than80% the operating peak season for fi provement and cost cutting initiatives initiatives cutting provement andcost (EUR 90%of million). the 226.6 Almost late. On the other hand, the season al- thelate. On other the hand, season ups and expanding existing operations. operations. existing ups andexpanding the Group’s byexpanding few years last the during reduced been has le business limited. conditions remained quite stable even if if even stable quite remained conditions change rates, Group’s net sales were up Group’s were net sales rates, change by sales American North dollar reduced 2007.of closer to equator by acquisitions, start- byacquisitions, toequator closer and hemisphere southern in operations not was growth development andsales sothat cuted the investment inbusiness increased their sales and Fishing Hooks Hooks andFishing their sales increased in the Group. These were though exe- though were in the These Group. from all geographical segments except so ended earlier in2007. ended so Market growth started somewhat earlier thanin2006, started sales were up were 1%,sales fi strong emphasis on performance im- and amounted to EUR 242.5 million million toEUR 242.5 and amounted ated during the second half of the year, growth was organic. This increase came came increase This organic. was growth tackle market were quite good in 2007. third party fi party third All product lines except Accessories Accessories except lines product All Year 2007 was characterized by Year characterized was 2007 Net sales were up 7% from last year

The seasonality of the fi seasonality The Market Situation and Sales and Situation Market 19% and products shing Review ofthe Board of shing tackle business business tackle shing hooks14%,shing rst six month six rst shing tack- shing shing shing t Directors +4.9 million), the of consolidation French The net of other non-recurring items was was items net of otherThe non-recurring Terminator business (EUR +1.0 million). EUR -0.7 million (EUR million).EUR -0.7 -0.4 million (EUR -1.1 lure factory Irish million) and employed a on capital reached Return Operating profi negative goodwill from the acquisition of the acquisition from goodwill negative of re- which items the largest recurring million). Also operating profi operating million). Also operations (EUR -2.5 million), closing of of closing million), -2.5 (EUR operations consolidated fi 13%. Formore detailed other products increased andamountedto11.7%increased (9.6%). sulted from the of sale 50%of from thesulted new dis- some other currencies (EUR 1.6 mil- segment information see the note see 2tothe information segment affected by weakening of US dollar and and dollar US of weakening by affected and reached EUR 28.3 million (EUR 21.7 million EUR 28.3 and reached good level at 15.9%good (12.3%). tribution joint-venture to Shimano (EUR toShimano joint-venture tribution Total net cash used in investing activities ininvesting used cash Total net Operating profiOperating t (EBIT) Average personnel for the period the for personnel Average Net profiNet period the t for Profi taxes t before EBITDA Net sales as a percentage of net sales, % sales, net of apercentage as Research and development expenses Employee benefi t expenses % period, the of end atthe (gearing) ratio Debt-to-equity % period, the of end atthe ratio Equity-to-assets period the of end atthe debt interest-bearing Net generated cash Net from operating activities

KEY FIGURES EUR million EUR The operating profit was negatively was profit operating The Operating profi Financial Results and Profi and Results Financial tability nancial nancial statements. up 30% was t for 2007 t included several non-t included several t margin margin t The result of currency hedges booked in The result inNordic includes the result gain The was a major turnaround and stopped andstopped amajor turnaround was fi year. Also the increase of Group prod- of Group the increase year. Also Rest of Europe increased their operating France, Ireland and few other countries. andfew other Ireland countries. France, ment initiatives started to gradually togradually started ment initiatives improve- performance of several result rial prices and personnel costs especial- costs personnel and prices rial profi (EUR million). +0.3 Formore informa- ly in China. On thely On other the inChina. hand, fi lion) as well as increase of raw mate- ucts sold in 2007 improved the result. using 2006 exchange rates, improved rates, exchange 2006 using capitalize during the second half of the clearly and reached 11.2%clearly andreached (9.8%). This cial statements. down due to restructuring provisions in see the notesee fi 22tothe consolidated gin, excluding non-recurring items and and items non-recurring excluding gin, the trend of declining profi of declining the trend tion on management of fi of management on tion EUR +1.0 was items nancial million All geographicalAll segments except Comparable operating profi t. The result in Rest of Europe was 242.5 4 577 -65.0 072005 2007 33.8 23.3 28.3 38.2 82.8 80.2 18.2 17.5 -3.7 1.6 0.7 226.6 122.2 3 987 2006 -54.1 -14.7 28.0 99.3 33.4 14.6 10.0 11.0 21.7 nancial risks risks nancial 0.5 1.2 t margins. t mar- t 3 780 196.1 nan- -47.0 -16.2 127.1 26.3 95.9 18.6 14.0 21.5 33.1 12.1 rst 0.4 0.7 % Operating profit Operating profit margin Net sales EUR million EUR EUR million EUR 2003 11.0 2003 18.4 2003 167.0 2004 11.4 2004 19.9 2004 173.5 2005 11.0 2005 21.5 2005 196.1 2006 9.6 2006 21.7 2006 226.6 2007 11.7 2007 28.3 2007 242.5 11.0 million). Also earning per sharein- per 11.0 earning million). Also Work to reduce working capital com- capital working reduce to Work This includes the acquisition of Termi- volumes increased, the Group was able the was Group volumes increased, working capital (end capital working of the year) tonet vious year level as a result of increased of increased aresult level as year vious EUR 18.2 million (EUREUR 18.2 10.0 million million). 2007 was up 59% and reached an all up anall 59% was andreached 2007 2.7 million is allocated to working capi- toworking allocated is 2.7 million of which EUR EUR 2.1 million is 2007 2005 and the fi million) including capital expenditure million) expenditure capital including ment information see thement note see 2tothe information million (EUR 97.8 million). In 2007, nator lure business, second installment installment second nator lure business, nancial statements. nancial mano (EUR 5.0 million) andanumber Shi- to joint-venture new distribution joint-venture. pages 71 and72. pages pared to business volumes continued and tobusiness pared purchase price for acquisitions closed in closed for acquisitions price purchase up 82% from last year and amounted to andamounted year up last 82% from Cash fl up inventories bought from Shimano in in Shimano from bought up inventories long-term distribution alliance, Rapa- alliance, distribution long-term includes the of sale 50%of the This lion. of EUR 9.9 (EUR 15.5 million million). creased to the highest level everat EUR tothe highest creased consolidated fi ceeds from sales of assets and disposal of anddisposal of assets sales from ceeds ence is booked as negative goodwill. Pro- of the Freetime acquisition closed in closed acquisition of the Freetime of smaller disposals. For more detailed information on acquisitions and dispos- and acquisitions on information 0.45 (EUR 0.28). For more share related related share (EUR0.45 0.28). more For 0.5 million to liabilities andthe differ- toliabilities 0.5 million from the of sale from 50%of the new distribu- started to show results. Even if business sales was 40% (43%) 40% was sales the start- excluding subsidiary shares totaled EUR 6.3 mil- EUR 6.3 totaled shares subsidiary amounted toEUR(EUR 3.7 14.7 million and other key fi average interest rates. Net result for als see the note see fi 3tothe consolidated als go acquisition closed in 2004. The total total The in2004. closed go acquisition tion joint venture. For more detailed seg- detailed more For venture. joint tion to reduce working capital toEUR 96.7 capital working to reduce the end of 2007 for the new distribution the for endof 2007 the new distribution time record EUR 17.5 record time (EUR million tal, EUR 0.9tofi tal, million As part of the strengthening of the of the part strengthening As Net cash used in investing activities activities ininvesting used cash Net Financial expenses were above pre- above were expenses Financial Cash Flow and Financial Position Financial and Flow Cash ow from operating activities was nancial nancial statements. payment ofnal the Gui- gures for 2003-2007 see for see 2003-2007 gures xed assets, EUR assets, xed - “Shares andShareholders” and“Corpo- “Shares The latest addition to this cooperation Management continued discussions and discussions continued Management with Shimano earlier in 2007 inHun- earlier Shimano in2007 with holders, shareholder agreement, shares, shares, agreement, shareholder holders, For more detailed information on share- information For more detailed East European distribution. Rapala has implement tofurther year the Group’s million) as a result of positive cash fl rate Governance” attached tothe con- attached Governance” rate months. The total proceed from this this from proceed total The months. todivi- right not give will new shares aver- weighted three-month a resented for mano the inOctober subscription negotiations regarding acquisitions and and acquisitions regarding negotiations ket area inthe fi ket area a joint venture toestablish decided nies nounced inOctober, when the compa- ropean distribution center established jor business combination when combination Rapa-jor business porate governance, see the sections the sections see governance, porate of EUR 5.62price which share, rep- per (122.2%). never has Group’s liquidity la issued 889 680 new shares toShi- new 889 shares 680 la issued la and Shimano agreed to join forces in cial statements. options, board authorizations andcor- authorizations board options, deepening its fi its deepening and at developing aimed consistently dend paid from the fi cluding Russia and Ukraine. This trans- This andUkraine. Russia cluding mar- growing inthe fastest distribution company anddevelop tomanage their in the note 28 to the consolidated fi ing decreased to a historically low 82.8% toahistorically decreased ing business combinations throughoutbusiness the between Rapala and Shimano was an- was andShimano Rapala between been better since it went public in1998. better been bility and cash fl strongly to EUR 80.2 million (EUR million 99.3 toEUR 80.2 strongly solidated fi share subscription was EUR 5 million. EUR 5million. was share subscription strategy for profi strategy and asset disposals. Improved profi disposals. and asset and they have alock-up of 12 period for the price These share. trading age action was completed in December and completed inDecember was action Eu- East South Shimano. with alliance gary has already proven to be a success. asuccess. tobe proven already has gary tions with related parties are disclosed disclosed are parties related with tions ty-to-asset ratio to 38.2% (33.4%). to38.2% ratio ty-to-asset Gear- the joint venture company,the joint venture Shi- Rapala Net interest-bearing debt decreased These discussions resulted inama- resulted discussions These Strategy Implementation - Growth -Growth Implementation Strategy nancial statements. Transac- statements. nancial shing tackle distribution distribution tackle shing shing tackle business in- business tackle shing table growth. ow increased the equi- ow increased nancial year 2007 2007 year nancial nan- ow ow ta- Fishing Accessories NET SALES BY PRODUCT LINE PRODUCT BY SALES NET NET SALES BY MARKET AREA MARKET BY SALES NET NET SALES BY UNIT LOCATION UNIT BY SALES NET Rest of the World the of Rest World the of Rest Fishing Products Other Products Products Other Rest of Europe Rest of Europe North America North America Fishing Hooks Third Party Nordic Nordic Lures 29% 30% 29% 30% 20% 36% 26% 19% 24% 21% 18% 12% 7%

RAPALA ANNUAL REPORT 2007 / Financial Statements / 25 RAPALA ANNUAL REPORT 2007 / Financial Statements / 26 New products for 2008 season were fi were season for 2008 New products will also distribute bicycle parts. distribute also will were all offered work offered inthe new all loca- were Europe. In Russia, the new joint venture the new joint InRussia, venture Europe. of expansion this EUR 10 After million. expected is joint venture this In 2008, In addition to negotiations regarding ac- Both theBoth market coverage and the prod- French operation into Morvillars was was into Morvillars operation French Group’s position in current markets and markets Group’s incurrent position 2007 and they have reached or are about about andthey orare have2007 reached of some annualEUR 2mil- sales ket with inthe USnumber two spinner mar- bait mano East Europe Oy, is owned 50/50 nalized and introduced to distribution todistribution andintroduced nalized Africa andSouth Australia Asia, rope, pala distributes Shimano rods and reels andreels rods Shimano distributes pala profi products started in the last quarter of quarter inthe last started products product categories was strengthened. published in June. This restructure will will restructure published inJune. This lion. Currently these lures are manufac- are lures these Currently lion. uct portfolio were expanded andthe expanded were portfolio uct uct lines, extensions of current product distribution alliance with Shimano, Ra- Shimano, with alliance distribution ed spinner bait and lure business was was spinner andlureed bait business established in Russia andanew distri- inRussia established organic growth, the emphasis on per- growth, organic channels. The deliveries of these new categories as well as special marketing, Development of or- strong. continued in andin22countries Africa in South ferred later to Rapala’s factory in China. later inChina. toRapala’sferred factory byRapala. and controlled by the parties formance improvement initiatives was was improvementformance initiatives but the production is planned trans- but is tobe the production bution company in South Korea. The bution The company Korea. inSouth sales growth especially in Eastern Eu- strong. A lure assembling factory was strengthened with the target to turn the toturn with target strengthened sales and brand initiatives continued. initiatives andbrand sales acquired inthe Terminator USA. acquired is around the declining trend in operating inoperating trend thearound declining and and development of new products affect some 90 persons in France, who quisitions and business combinations ganic growth also in terms of new prod- interms also growth ganic tured in a subcontract facility in Mexico inMexico facility inasubcontract tured Rapala’s more than to increase net sales the Group’s profi to reach the retail stores bynow. stores the retail to reach Also organic growth continued continued growth organic Also The plan to consolidate Group’s plan to consolidate The In January 2007, Terminator brand- Strategy Implementation -Profi Implementation tability Strategy improve andtofurther t margin tability. - Waterqueen and fi and Waterqueen Tortue planned for are moves mid-2008 The manufacturing operations inIre- operations manufacturing The vest EUR 0.4 million in line spooling fa- spooling inline EUR 0.4 million vest hard-bodied lures and increase produc- andincrease lures hard-bodied EUR 0.5 million. The plan is also toin- plan also The is EUR 0.5 million. 2008. The average number of personnel of number average personnel The 2008. now been completed. Distribution unit made and the new organization is up is andthemade new organization ment of its lure manufacturing opera- lurement manufacturing of its is centre distribution new the in ment reach some EUR 0.7reach million. which inRussia, tothe newnia factory ple started in the fourth quarter. The re- The quarter. inthe fourth ple started pected to reach EUR 1-2 million. These EUR 1-2 These toreach million. pected project is supported by an international byaninternational supported is project location of distribution unit Ragot has land will discontinue in the end of April April of end the in discontinue will land published. was inIreland lure factory inRus- factory alure assembly lishing effect will be seen in2009. seen be will effect have been relocations all After erations. improve op- tofurther inorder cilities enhance the production effi enhance the production ed also in the Group’s manufacturing start- were andimprovements changes Af- employs somecurrently 50persons. in Estonia that will continue that fi will in Estonia be will of factory the Irish functions ing in declining been has factory in the Irish invest- total The quarter. the third ing itability of the operations that has been been has that operations the of itability facility in China. This development This inChina. facility Esto- from bly transferred work being is sia. In December, the InDecember, plansia. the toclose sons at the endof 2007.sons manufactur- The anddevelop- the restructuring started from tomaterialize start will savings shorten the lead time to restore the prof- shorten the torestore lead time and running, the annual savings are ex- are the annual savings and running, dur- Europe VMC and hook distributor as the of world’s as manufacturer leading to move and the recruitment of new peo- to move andthe recruitment of Most did nottion. the want personnel the same time, signifi time, same the At the products. andpackaging testing over bythetaken Group’s lure factory some 20per- andwas few years the last andfull onwards of 2008 half the latter tions in Europe in early 2007 by estab- tion effi team of professionals and the target is to is andthe target ofteam professionals to expected are tory, the annual savings fac- tothe duties Estonian of its transfer and of factory theter the Irish closing To strengthen the Group’s position During 2007, major operational 2007, major operational During ciencies and capacity, Rapala shing line supplier cant part of assem- ciencies and nalizing, nalizing, % % of the period the of Equity-to-assets ratio Equity-to-assets Personnel at the end end the at Personnel Persons (gearing) Debt-to-equity ratioDebt-to-equity 2003 3 235 2003 156.1 2003 31.7 2004 3 361 2004 139.0 2004 31.4 2005 3 986 2005 127.1 2005 33.1 2006 3 921 2006 122.2 2006 33.4 2007 4 356 2007 82.8 2007 38.2 MANAGEMENT ANALYSIS EUR million EUR Number of personnel increased 11% increased ofNumber personnel The Group principles manage- Group forThe risk with unsatisfactory performance. In performance. unsatisfactory with have been made in distribution units Russia. For more detailed information information detailed Formore Russia. and inChina were increases Largest materialize gradually. The full impact gradually. full The materialize million) in 2007. planning system and related new proc- andrelated system planning prices and personnel costs. The fi The costs. andpersonnel prices proven to be a success not only regard- asuccess tobe proven later in 2008 whenlater in2008 the new production of 2008 onwards. 2008 of beginning the from seen be will these of to have started completed andthe results esses are implemented. are esses during the last quarter of 2007 but of the 2007 quarter the last during ed fi note 7tothe see on consolidat- personnel to4577 (3 increased 987).of personnel 4356 the andwas year (3during 921) earlier in 2007 in Hungary has already already has inHungary earlier in2007 implemented several cost cutting initia- implemented cutting cost several increased to EUR 1.6 million (EUR to EUR 1.6 1.2 million increased ing sales growth but also profi but also growth sales ing full benefi burdened by the increased raw material raw material bytheburdened increased sults of this project started to capitalize tocapitalize started project of this sults addition, the Group has introduced and introduced the has addition, Group at the year end. The average number number average at the end. The year tives. Most of these initiatives have been have been initiatives of Most these tives. tion center established with Shimano Shimano with established center tion Risk Management and Environmental Affairs Environmental and Management Risk Comparable operating margin, % margin, operating Comparable (profi % Operating reported, as margin t) Comparable operating profi t profiOperating reported t as net sales Comparable Foreign exchangeForeign effects (net) items Non-recurring exchangeForeign effects reported as sales Net Also fewAlso organizational changes The South East European distribu- Research and development expenses anddevelopment expenses Research nancial nancial statements. ts are expected to materialize Personnel and R&D and Personnel tability. rst re- rst The outlook for 2008 is quite good. No good. quite is outlook forThe 2008 while new initiatives are planned are and while new initiatives the sales. increase would further have been increased in several markets markets inseveral increased have been Business development and start-up costs costs development andstart-up Business that the Group’s net sales It expected is Possible new acquisitions during 2008 2007 to further improve Group’s prof- tofurther 2007 nifi ronmental Affairs” attached to the con- inthe described are areas inthese made were affairs ment andenvironmental rates and excluding non-recurring items, items, non-recurring andexcluding rates inthe of competition fi major changes lion (EUR 35.8 million). economy is not expected tohave asig- economy not is expected eral uncertainty especially in the US confi operating profi operating of the consolidation of operations in of the of operations consolidation offi close to last year levels at EUR 35.2 mil- implemented. Assuming 2007 exchange exchange 2007 implemented. Assuming tocapi- starting gradually are itability 8-12% assuming 2007 exchange rates. gen- The market expected. tackle are ing improve in 2008 compared to2007. compared improve in2008 for the fi solidated fi and“Envi- Management” “Risk sections sale agreement for the warehouse and for the warehouse agreement sale are expected to remain on 2007 levels as well as the work done and progress to compensate for recent costincreases. prices Inaddition, 2008. during talize ce building in Saint Marcel as part cant effect on Group sales in 2008. 2008. in sales Group on effect cant In the end of 2007, order backlog was In the endof was 2007, backlog order In January 2008, Rapala signed a signed Rapala In January 2008, Special initiatives started during during started initiatives Special rmed during 2007. These principles nancial year 2008 will increase increase will 2008 year nancial nancial nancial statements. Outlook for 2008 t margin is expected to sh- Annual General Meeting that adivi- Meeting General Annual The Board of Directors proposes tothe proposes of Directors Board The warehouse andoffi warehouse within the next few Reduction months. the next within bewill introduced to the distributors fl Rapala VMC Corporation VMC Rapala of of Directors Board 5, 2008 February Helsinki, France and will book a capital gain of gain acapital book and will France Group’s liquidity is good and the view andthe view good is Group’s liquidity 2007, company’s the parent distributa- not undermine this liquidity. this not undermine ness volumeness andimprovement of cash continuenations while new products combi- andbusiness new acquisitions place inthe Group’s fi per share be paid from the Group’s from paid dis- sharebe per of the Board of Directors is that the is dis- ofof Directors the Board deac in 2008. in2008. deac dend of EUR 0.18 for 2007 (EUR 0.12) of working capital compared tobusi- compared capital of working sea- for 2009 Newproducts developed. in 2008. in 2008. ing distributable funds be allocated allocated be funds distributable ing ble earnings totaled EUR 54.2 million. EUR 54.2 totaled ble earnings some EUR 0.9 inthe fi million son have just been fi after the endof theafter fi and applications are being planned and being are and applications tribution of the proposed dividend will will dividend of the proposed tribution ter of 2008. The plan is also to sell the tosell plan also The is ter of 2008. to retained earnings. At December 31, AtDecember earnings. to retained andthat any remain- funds tributable ow remain an important target also also target animportant ow remain No material changes have taken Negotiations and discussions for Proposal for Profi for Proposal tDistribution ce building in Lou- nancial year 2007. year nancial andthey nalized nancial position nancial 252.5 242.5 2007 28.3 28.3 10.0 11.2 11.7 -1.6 1.6 rst quar- 226.6 226.6 2006 22.1 21.7 9.8 9.6 0.4

RAPALA ANNUAL REPORT 2007 / Financial Statements / 27 RAPALA ANNUAL REPORT 2007 / Financial Statements / 28 Authorized Public Accountant Firm Accountant Public Authorized We have audited the accounting records, the review of the Board of Directors, the fi of ofDirectors, the theWe Board review records, have audited the accounting Authorized Public Accountant Accountant Public Authorized Juha Nenonen we perform the audit to obtain reasonable assurance about whether the review of the Board of Directors and of whether Directors of about the the Board review assurance the reasonable audit toobtain we perform Board of Directors and the parent company’s andthe parent fi of Directors Board Finnish Accounting Act, of the consolidated results of operations as well as of the fi as well as of operations results of the consolidated Act, Accounting Finnish view, bytheandfair EU, defi adopted as atrue as give Standards Reporting Ernst & YoungErnst Oy 2008 21 February Helsinki, ministration. ments, well on as as the review of the Board of the Directors, parent company’s fi notes tothenotes fi ments give a true and fair view of the parent company’s result of operations andof the fi of of company’s operations the view parent and fair result atrue give ments members of the Board of Directors and the Managing Director of the parent company can be discharged from li- from of company discharged the parent be can Director andthe Managing of Directors of the Board members principles used andsignifi principles used Companies Act. Companies ulations in Finland, containing the company’s parent containing sheet, income fl inFinland, balance cash ulations statement, cordance with International Financial Reporting Standards as adopted by the EU, as well as the review of the the bythe review EU, adopted as as well as Standards Reporting Financial International with cordance of Directors and the Managing Director have prepared the consolidated fi ent with theent consolidatedfi with consist- is of Directors of the Board review The and regulations. andother applicable Act rules Finnish counting ish Accounting Act and other applicable Finnish rules and regulations. The parent company’s parent The fi andregulations. andother applicable Act rules Finnish ish Accounting statement presentation. The purpose of our audit of the administration is to examine whether of toexamine the members is of ouraudit of the purpose administration The presentation. statement supporting the amounts and disclosures in the report andinthe fi inthe report anddisclosures the amounts supporting administration of Rapala VMC Corporation for the 12-month period ended 31 December 2007. The Board 2007. 31 Board ended for The the 12-month period December Corporation VMC of Rapala administration and fair view,and fair defi as able funds is in compliance with the Companies Act. incompliance the Companies is with able funds of distribut- the disposal regarding of Directors bythe Board proposal The audited for byus. the period ability the Board of Directors and the Managing Director of thecompany parent of have the Director complied the rules with andthe Managing of Directors the Board the fi We conducted our audit in accordance with Finnish Standards on Auditing. Those standards require that require standards Those on Auditing. We Standards Finnish with ouraudit conducted inaccordance

The consolidated fi In our opinion the parent company’sIn ouropinion the parent fi fiIn ouropinion the consolidated Financial International with inaccordance prepared statements, nancial In our opinion the review of the Board of Directors has been prepared in accordance with theAc- Finnish with inaccordance prepared been has of Directors of theIn ouropinion the Board review nancial statements are free of material misstatement. An audit includes examining on a test basis evidence evidence basis on atest audit An includes examining misstatement. of material free are statements nancial nancial statements. Based on our audit, we express an opinion on the consolidated fi anopinion on the consolidated on ouraudit, weexpress Based statements. nancial Parent Company’s Financial Statements, Review of the Board of Directors and Administration and Directors of Board the of Review Statements, Financial Company’s Parent ned in the Finnish Accounting Act, of the result of operations andof the fi of operations of the result Act, ned intheAccounting Finnish nancial statements and the parent company’s andthe parent fi statements nancial andthe adopted be can statements nancial cant estimates made by the management, as well as evaluating the overall fi the overall evaluating as well bythe made management, as estimates cant nancial statements and the parent company’s andthe parent fi statements nancial To the Shareholders of Rapala VMC Corporation VMC Rapala of To Shareholders the Auditors´ Auditors´ Report Consolidated Financial Statements nancial statements have been prepared in accordance with the Finn- nancial statements, prepared in accordance with prevailing reg- prevailing with inaccordance prepared statements, nancial nancial statements, assessing the accounting the accounting assessing statements, nancial nancial statements and gives a true atrue andgives statements nancial nancial statements, prepared inac- prepared statements, nancial ned in those standards andinthe ned inthose standards nancial statements andthe ad- statements nancial nancial nancial position. nancial statements andthe statements nancial nancial nancial position. ow statement and and statement ow nancial nancial position. nancial nancial state- nancial nancial state- nancial nancial STATEMENT, IFRS STATEMENT, CONSOLIDATED FINANCIAL CONSOLIDATED INCOMESTATEMENT EUR million EUR

Attributable to Attributable Operating profi t profiOperating impairments and depreciation t before operating expensesOther fi of ininventory inprogress Change work and products nished operating income Other Weighted average number of shares, 1000 shares 1000 shares, of number average Weighted Minority interestMinority companies inassociated results of Share services and Materials Income taxes Earnings perEarnings share Net sales Diluted weighted average number of shares, 1000 shares 1000 shares, of number average weighted Diluted EUR share, per earnings Diluted EUR share, per Earnings Company the of holders Equity profiNet period the t for Profi taxes t before Financial expenses Financial income andDepreciation impairments Employee benefi t expenses use own for Production

Note 30 10 10 14 11 6 8 4 5 2 7 38 781 38 781 -114.9 242.5 -65.0 -48.3 2007 33.8 23.3 28.3 0.45 0.45 -5.8 17.3 12.7 -9.6 17.5 -5.4 0.0 4.6 0.2 6.7 0.1 38 609 38 565 226.6 2006 -99.5 -48.1 -54.1 -12.1 28.0 0.28 0.28 10.8 14.6 11.0 -6.3 21.7 -3.6 0.0 0.5 0.2 1.5 5,7 1.1

RAPALA ANNUAL REPORT 2007 / Financial Statements / 29 RAPALA ANNUAL REPORT 2007 / Financial Statements / 30 CONSOLIDATED BALANCE SHEET CONSOLIDATED BALANCE ASSETS EUR million EUR Trade and other non-interest-bearing receivables non-interest-bearing Trade other and Total non-current assets Total assets Total assets Total current Available-for-sale investments inprogress construction and payments Advance Assets classifiAssets ed as held-for-sale Other tangible assets tangible Other assets intangible Other Cash andequivalents cash Cash G Current assets Interest-bearing receivables Interest-bearing Investment in companies associated and equipment Machinery Interest-bearing receivables Interest-bearing receivable tax Income Inventories Non-current assets Deferred assets tax receivables Non-interest-bearing Buildings Land oodwill Note 16 18 13 13 14 15 12 12 12 12 12 12 17 17 17 17 11 164.6 253.7 2007 84.3 43.4 52.2 12.9 27.3 88.1 0.9 8.0 0.9 0.0 0.0 0.6 4.8 0.7 8.1 1.7 0.1 0.1 7.7 243.6 154.0 2006 73.0 45.4 89.6 52.6 24.4 13.4 3.9 6.3 0.0 0.0 0.0 0.6 0.6 0.2 9.4 1.9 7.9 4.1 SHAREHOLDERS’ EQUITY AND LIABILITIES EUR million EUR Total shareholders’ equity and liabilities and equity Total shareholders’ liabilities Total current liabilities Total non-current equity Total Trade and other non-interest-bearing payables non-interest-bearing Trade other and Option programs to be settled incash settled be to programs Option Current liabilities Current Sh Minority interestMinority fund premium Share Income tax payable tax Income liabilities Interest-bearing liabilities Interest-bearing Equity Equity Non-current liabilities Non-current Derivatives Provisions Derivatives Provisions liabilities tax Deferred Employee benefi t obligations Company the of holders equity to attributable Equity period the for income Net earnings Retained Fund for invested non-restricted equity reserve value Fair are capital 22,24 22,24 Note 29 20 25 19 24 24 21 21 11 100.5 253.7 2007 96.9 96.0 58.3 56.3 53.6 49.8 37.0 16.7 17.3 0.9 4.9 5.3 0.0 0.0 3.6 3.2 0.4 1.8 0.7 0.1 0.1 243.6 2006 59.9 64.6 10.8 81.3 91.2 80.7 49.7 16.7 28.1 71.1 0.9 0.0 4.9 0.0 3.5 0.6 0.7 2.1 0.1 1.1

RAPALA ANNUAL REPORT 2007 / Financial Statements / 31 RAPALA ANNUAL REPORT 2007 / Financial Statements / 32 CONSOLIDATED CASH FLOWSTATEMENT CASH CONSOLIDATED EUR million EUR Total net generated cash from fi nancing activities activities ininvesting used cash Total net capital inworking Total change adjustments Total Adjustments Acquisition of subsidiaries, net of cash of net subsidiaries, of Acquisition of available-for-saleAcquisition investments assets of tangible Acquisition assets of intangible Acquisition Adjustments Cash and cash equivalents at the end of the period the of end atthe equivalents cash and Cash period the of beginning atthe equivalents cash and Cash equivalents cash and incash Change Current loan repayments withdrawals loan Current receivables ininterest-bearing Change inliabilities Change ininventories Change Change in receivables fiOther nancial items, net Change in working capital in working Change Income taxes Income taxes paid taxes Income received Interest Interest paid Net cash generated from fi from generated activities cash nancing Net activities investing in used cash Net Net profiNet period the t for Reversal of non-cash items non-cash of Reversal expenses and income Financial Foreign exchange rate effect rate exchange Foreign fi of Payment liabilities lease nance loan repayments Non-current withdrawals loan Non-current subscriptions share from Proceeds Dividends paid cash of net subsidiaries, of disposal from Proceeds assets tangible of sale from Proceeds generated cash Net from operating activities Other items Other benefi employee and inprovisions Change ts subsidiaries and assets tangible intangible, of disposals on Gains/losses inshares settled be to programs Option Share of results in associated companies companies inassociated results of Share Exchange rate differences Exchange andDepreciation impairments 7, 29 7, Note 10 10 18 13 14 15 12 12 11 3 3 8 -0.8 -27.5 16.9 072006 2007 -11.1 24.4 -12.1 27.4 -0.9 10.0 18.2 -0.1 -5.3 -5.6 -0.2 -0.2 -4.6 17.5 -6.7 -3.7 -1.0 -2.7 -7.0 -3.1 3.8 0.4 5.9 3.3 5.0 5.0 0.0 5.8 0.0 0.2 0.2 5.4 0.4 0.4 1.0 3.7 0.1 -58.3 -34.4 -13.2 -14.7 69.6 10.9 10.0 24.4 19.2 37.8 -6.9 11.0 -0.9 -0.3 -8.3 -6.2 -5.6 -0.4 -4.2 -1.0 -0.1 -8.1 -2.1 0.9 6.3 0.0 0.0 0.0 3.6 0.6 0.6 6.2 0.2 0.4 1.7 0.1 7.1 7.1 7.1 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY IN CHANGES OF STATEMENT CONSOLIDATED EUR million EUR Total recognized income and expenses expenses and income Total recognized expenses and income Total recognized Other changes Other investments net of hedges on losses and Gains fl cash on losses and Gains hedges ow Change in translation differences changes Other investments net of hedges on losses and Gains Change in translation differences Share option program option Share Shares subscribed with options program option Share Shares subscribed with options Equity on Dec. 31, 2007 Dec. on Equity 31, 2006 Dec. on Equity 1, 2006 Jan. on Equity Dividends paid Private offering profiNet period the t for inequity directly recognized expenses and income Net tax of net investments, available-for-sale on gains value Fair Dividends paid profiNet period the t for inequity directly recognized income Net tax of net investments, available-for-sale on gains value Fair

Share 0.0 0.0 3.6 3.5 3.5 0.1 capital 16.3 Attributable to equity holders of the Company the of holders equity to Attributable 16.7 16.7 Share 0.0 0.4 prerium fund

-0.1 -0.1 0.0 0.0 0.1 0.1 0.1 0.1 Fair value reserve

Fund for invested 4.9 4.9 non-restricted equity -9.8 -4.5 -3.4 -2.6 -2.6 -2.6 -2.7 -2.7

-7.1 Translation 0.0 0.7 differences 60.0 80.6 10.8 10.8 67.6 17.3 17.3 -4.6 -4.2 0.0 0.8 0.2 0.4 Retained earnings 0.9 0.3 0.3 0.6 0.2 0.2 0.2 0.2 0.1 Minority interest 96.9 75.4 81.3 14.8 11.0 -4.6 17.5 -4.2 -3.4 -2.6 -2.5 -2.7 5.0 0.0 0.0 0,0 0.0 0.8 8.5 0.4 0.4 0.4 0.7 0.1 0.1 Total equity

RAPALA ANNUAL REPORT 2007 / Financial Statements / 33 RAPALA ANNUAL REPORT 2007 / Financial Statements / 34 1. ACCOUNTING PRINCIPLES FOR THE CONSOLIDATED ACCOUNTS ADOPTION OF NEW AND AMENDED STANDARDS AND AND STANDARDS AMENDED AND NEW OF ADOPTION APPLIED NEW AND AMENDED STANDARDS AND INTERPRETATIONS INTERPRETATIONS AND STANDARDS AMENDED AND NEW APPLIED CMAYS BACKGROUND COMPANY’S FINANCIAL STATEMENTS TONOTES CONSOLIDATED BASIS FOR PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL CONSOLIDATED THE PREPARING FOR BASIS INTE 7 Financial Instruments and Amendment to IAS 1 Presentation of Finan- of 1Presentation IAS to Amendment and Instruments 7 Financial The Group has not early adopted any new or amended standards or in- or standards amended or new any adopted early not has Group The The Group adopted in 2007 the following new interpretations, which which interpretations, new following the in2007 adopted Group The A copy of the consolidated fi consolidated the of Acopy atthe available is statements nancial fi these approved has Company the of Directors of Board nancial The The Group will adopt in 2008 the following new interpretations issued in issued interpretations new following the in2008 adopt will Group The The consolidated fi nancial statements have been prepared in accordance The Group adopted in 2007 only one new standard and one amended amended one and standard new one only in2007 adopted Group The did not have impact on the Group’s fi Group’s the on impact have not did statements: nancial disclosures to improve the information on fi on information requires the It improve to disclosures instruments. nancial statements for publication at its meeting on February 4, 2008. Under Fin- Under 4,2008. February on meeting atits publication for statements cial Statements – Capital Disclosures. This standard has introduced new introduced has standard This Disclosures. –Capital Statements cial s inter- and standards to refers standards’ 31,cember ‘IFRS 2007. term The o of changing the fi the changing of statements. nancial and countries in30 operate Group”) “the or (“Rapala” subsidiaries its and consolidated fi nancial statements are presented in millions of euros. euros. fi of inmillions consolidated presented are statements nancial 20 risks arising from fi from arising risks instruments. nancial porting inHyperinfl porting Economies ationary proved for applying in the EU in accordance with the procedure established established procedure the with inaccordance EU inthe applying for proved ofpretations these in Finnish legislation and provisions based on this ap- Group’s website www.rapala.com or from Arabianranta 6, 00560 Helsinki, Helsinki, 00560 6, Arabianranta from or www.rapala.com Group’s website w terpretations. terpretations. the disclosure of qualitative and quantitative information about exposure to exposure about information quantitative and qualitative of disclosure the the publication of the fi nancial statements. The meeting has also the option option the also fi has the of meeting The publication the statements. nancial after held be will fi which shareholders, of inameeting statements nancial fi leading the of one is world. inthe Company the companies tackle shing land’s Companies Act, shareholders have the option to accept or reject the the reject or accept to option the have shareholders Act, Companies land’s in EU regulation (EY) 1606/2002. The consolidated fi nancial statements IFRIC 10 Interim Financial Reporting and Impairment and Reporting Financial 10 Interim IFRIC Derivatives Embedded of 9Reassessment IFRIC 2 IFRS of 8Scope IFRIC Re- Financial 29 IAS under Approach Restatement the 7Applying IFRIC IFRS standards as well as the SIC and IFRIC interpretations in effect on De- on ineffect interpretations IFRIC and SIC the as well as standards IFRS have been prepared on a historical cost basis, unless otherwise stated. The The stated. otherwise unless basis, cost historical a on prepared been have Rapala VMC Oyj (“Company”) is a Finnish public limited liability company company liability limited public aFinnish is (“Company”) Oyj VMC Rapala Helsinki stock exchange since 1998. The parent company Rapala VMC Oyj Oyj VMC Rapala company parent The 1998. since exchange stock Helsinki Finland. tandard, which had impact on the Group’s fi Group’s the on impact had which i.e.IFRS tandard, statements nancial rganized under the laws of Finland, domiciled in Asikkala and listed on the the on listed and inAsikkala domiciled Finland, of laws the under rganized ith International Financial Reporting Standards (IFRS), including IAS and and IAS including (IFRS), Standards Reporting Financial International ith RPRETATIONS IN 2008-2009 06-2007: CONSOLIDATION PRINCIPLES The Group will adopt in 2009 the following new and amended stand- amended and new following the in2009 adopt will Group The The consolidated fi consolidated The fi the comprise statements nancial statements nancial Acquired subsidiaries are accounted for using the purchase method of method purchase the using for accounted are subsidiaries Acquired goods or services. The Group estimates that this adoption will not impact impact not will adoption this that estimates Group The services. or goods ginning on or after July 1, 2008). This interpretation addresses account- inequity. changes of statement and statement income dated Group’s consoli- of fidation presentation the especially statements, nancial dresses how to apply IFRS 2 todresses share-based payment how to involv- arrangements apply IFRS gates the impact of this on the Group’s fi Group’s the on this of impact the gates statements. nancial ent accountingpolicies. o consoli- of presentation the affect will this that estimates Group The sures. recogni- the change not does However, revision the calculations. statement after January 1, 2009). According to the standard, segment information information segment standard, the to According 1, 2009). January after in2006-2007: issued interpretations and ards fi Group’s the on this of statements. nancial of the surplus that can be recognized as recognized be can that surplus the of Benefi 19 Employee inIAS limit amount the the on ts assess to how on ance provides general interpretation This guid- 1, January on or after 2008). ard brings changes to defi nitions and presentation of consolidated fi defi to consolidated changes of brings ard presentation and nitions nancial ment will not impact the Group’s fi Group’s the impact not will ment statements. nancial cess acquisition cost over the fair value of net assets acquired is recog- is acquired assets net of value fair the over cost acquisition cess ex- The acquisition. of date atthe value at fair measured are company acquired the of liabilities and assets the which to according accounting, consist- using Company, the as year reporting same the for prepared are fi The rights. voting the of subsidiaries the of 50% over statements nancial riod of time to get ready for use or sale. The Group estimates that amend- that estimates Group The sale. or use for ready get to time of riod capitaliz- requires standard revised This 1, 2009). January after or on ning nally for evaluating operating segment performance and deciding how to al- to how deciding and performance segment operating evaluating for nally nual periods beginning on or after January 1, 2009). This revised stand- revised This 1, 2009). January after or on beginning periods nual nual periods beginning on or after March 1, 2007). This interpretation ad- interpretation This 1, March 2007). after or on beginning periods nual recognized in the income statement and balance sheet. The Group investi- Group The sheet. balance and statement income inthe recognized pension’s asset or liability may be affected when there is a statutory or con- or astatutory is there when affected be may liability or asset pension’s public services. The Group estimates that this adoption will not impact the the impact not will adoption this that estimates Group The services. public Group’s fi nancial statements. would be required to be reported on the basis that management uses inter- uses management that basis the on reported be to required be would tractual minimum funding requirement. The Group investigates the impact impact the investigates Group The requirement. minimumfunding tractual the Group’s fi Group’s the statements. nancial disclo- Group existing or events, and transactions of measurement and tion to account for contractual arrangements arising from entities providing providing entities from arising arrangements contractual for account to fi Group’s the impact not will adoption that timates statements. nancial es- Group The parent). its of instruments equity (e.g. Group same inthe tity the segment information is prepared and reconciliations to the amounts amounts the to reconciliations and prepared is information segment the and statement income inthe reported that from different be may formation ing by entities that grant loyalty award credits to customers who buy other other buy who customers to credits award loyalty grant that byentities ing ing borrowing costs as part of the cost of assets that take a substantial pe- asubstantial take that assets of cost the of part as costs borrowing ing ing an entity’s own equity instruments or equity instruments of another en- another of instruments equity or instruments equity own entity’s an ing locate resources to operating segments (management approach). Such in- Such approach). (management segments operating to resources locate IFRS 8 Operating Segments (effective for annual periods beginning on or on beginning periods annual for (effective Segments 8Operating IFRS IFRIC 13 Customer Loyalty Programmes (effective for annual periods be- periods annual for (effective Programmes Loyalty 13 Customer IFRIC begin- periods annual for (effective (amendments) costs Borrowing 23 IAS IFRIC 14 IAS 19 – The Limit on aDefi on 19 Limit 14 –The IAS IFRIC Benefi ned Funding Minimum t Asset, periods annual for (effective Arrangements Concession 12 Service IFRIC IAS 1 Presentation of Financial Statements (amendment) (effective for an- for (effective (amendment) Statements Financial of 1Presentation IAS IFRIC 11 IFRS 2 Group and Treasury Share Transactions (effective for an- for (effective Transactions Share Treasury and 2Group 11 IFRS IFRIC Requirements and their Interaction (effective for annual periods beginning beginning periods annual for (effective Interaction their and Requirements beginning on or after January 1, 2008). This interpretation addresses interpretation This how beginning 1, January on or after 2008). balance sheet. IFRS 8 therefore requires explanations of the basis on which which on basis the of explanations requires 8therefore IFRS sheet. balance f the Company and its subsidiaries in which it holds, directly or indirectly, indirectly, or directly holds, it inwhich subsidiaries its and Company f the an asset. It also explains howthe explains also It anasset. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS AND TRANSACTIONS CURRENCY FOREIGN Associated companies, where the Group holds voting rights of 20-50% 20-50% of rights voting holds Group the where companies, Associated The investments in subsidiaries have been eliminated using the acqui- the using eliminated been have insubsidiaries investments The Foreign currency transactions are tr date of sale. erating profi t. The Group’s interest in an associated company is carried in profi erating carried is company associated inan Group’s interest The t. date. Non-monetary items denominated in foreign currency, measured at measured currency, in foreign denominated items Non-monetary date. ed at the functional currency rate of exchange ruling at the balance sheet cluded in the consolidated fi consolidated inthe cluded method. equity the using statements nancial signifi has Group the inwhich and inflcant in- are control, not but uence, seen as being disposed of. also should disposal the from Group’s gain/loss of Calculation statement. sets acquired is recognized as goodwill. Disposals of minority interest are as well as companies Group between transactions All method. cost sition ous fious fi consolidated The standards. statement nancial statements nancial also accounted for using the parent entity extension method, according to according method, extension entity parent the using for accounted also using for accounted are interest minority of Acquisitions investment. the of share the with accordance recognized is in losses accrued of interest Minority interest. equity minority the of the in item separate a as disclosed and profi net the from separately presented t is interest Minority statements. cial ininven- margins internal unrealized and dividends liabilities, and assets companies’ fi have nancial statements Associated holding. Group’s the of extent the to eliminated are companies currencies are recognized infi dif- recognized are Exchange currencies expenses. and income nancial of monetary interest-bearing assets and profi liabilitiesoperating translation the from losses and gains exchange Foreign t. denominated in foreign 2004, have not been restated and these values are according to the previ- the to according are values these and restated been not have 2004, rectly through income statement. Goodwill on consolidation is Goodwill not through amor- incomerectly statement. the of value fair the than less is acquisition of cost the If goodwill. as nized using the exchange rates prevailing at the dates of the transactions. Mone- transactions. the of dates atthe prevailing rates exchange the using Group’s share of the net assets acquired, the difference is recognized di- recognized is difference the acquired, assets net the of share Group’s Group has incurred obligations in respect of the associated companies. companies. associated the of inrespect obligations incurred has Group which the Group’s gain/loss from the disposal is recognized in the income income inthe recognized is disposal the from gain/loss Group’s the which tion of the acquisition. Conversely, divestments are included up to their their to up included are divestments Conversely, acquisition. the of tion the associate together with goodwill on acquisition, as amortized, less any any less amortized, as acquisition, on goodwill with together associate the refl that of amount atan sheet assets net balance the of the share its ects op- after statement income consolidated inthe recognized is year the for tween the consideration and the carrying value of the share of the net as- net the of share the of value carrying the and consideration the tween be- difference the which to according method, extension entity parent the tories and tangible have assets been eliminated in the consolidated fi nan- of share Group’s the When Group. inthe inuse principles accounting the 1, January date, transition IFRS the to prior 1, acquisitions IFRS under tion exemp- the with accordance In annually. impairment for tested but tized the transaction. Foreign exchange gains and losses for operating business business operating for losses and gains exchange Foreign transaction. the trans- been have items non-monetary Other determined. was value fair the when date atthe rates exchange the using translated are value, fair retranslat- are currencies inforeign denominated liabilities and assets tary functional currency. include the results of acquired companies for the period from the comple- the from period the for companies acquired of results the include in also is which goodwill, recognized previously of share disposed the include fi consolidated in the amount the of amaximum to up statements nancial associated and Group the any, if gains, between Unrealized impairment. is reduced to nil and any recognition of further losses ceases unless the the unless ceases losses further of recognition any niland to reduced is amount carrying the investment, an of amount carrying the exceeds losses items are recorded in the appropriate income statement account before before account statement income appropriate inthe recorded are items of date the on rate exchange the using currency functional the into lated Each entity in the Group determines its own functional currency and items items and currency functional own its determines Group inthe entity Each Under the equity method, the Group’s share of the associate’s profi associate’s the of share Group’s the method, loss t or equity the Under cluded in the fi nancial statements of each entity are measured using that that using fi inthe measured are cluded entity each of statements nancial been converted to correspond with to correspond been converted anslated into functional currency REVENUE RECOGNITIONREVENUE INCOME TAXES Deferred taxes are provided using the liability method, as measured measured as method, liability the using provided are taxes Deferred Rental income arising from operating leases isfor incomearising from operating accounted on a Rental Any goodwill arising on the acquisition of a foreign company and any and company aforeign of acquisition the on arising goodwill Any consolidated The fi nancial are statements presented in euros, which The Group’s income tax expense includes taxes of the Group companies companies Group the of taxes includes expense tax income Group’s The effects of items recognized directly in equity are similarly recognized. The The recognized. similarly are inequity directly recognized items of effects date. Goodwill and fair value adjustments arising from the acquisition prior prior acquisition the from arising adjustments value fair and Goodwill date. sheet balance of rate exchange the using translated and subsidiary eign sheet date between the tax bases of assets and liabilities and their carrying carrying their and liabilities and assets of bases tax the between date sheet straight-line basis over the lease terms. Royalty income is recorded ac- recorded is income Royalty terms. lease the over basis straight-line available, against which the deductible temporary difference can be utilized. utilized. be can difference temporary deductible the which against available, profi inventory intra-group companies, inacquired defits, assets benefined t net of valuation fair assets, tangible on difference depreciation the from arise differences fi for temporary main amounts The purposes. reporting nancial ated companies is reported in the income statement as calculated from net net from calculated as statement income the in reported is companies ated fi the for expense tax current taxable the from calculated is year nancial subsidiaries, whose functional and reporting currencies are not euros, are euros, not are currencies reporting and functional whose subsidiaries, cording to the contents of the agreement. Interest income is recognized by and possible return of goods. The costs of shipping and distributing prod- distributing and shipping of costs The goods. of return possible and sig- no and buyer the to passed have good the of ownership of rewards and in denominated sales from arising differences rate exchange and counts arising on the acquisition are treated as assets and liabilities of the for- the of liabilities and assets as treated are acquisition the on arising on the sale. the on for difference translation cumulative the euro, not is currency reporting and functional whose asubsidiary, of disposal the On inequity.. recognized are as acquisition of date the after and accounting of method purchase the of and equity of component inaseparate recognized are operation a foreign recorded when the service has been performed. been has service the when recorded areucts included in other operating expenses. Revenues are from services costs associated nifi consideration, the regarding remain uncertainties cant recognized inprofirecognized investment. net the of disposal on loss t or rate of balance sheet date. All exchange differences arising on the transla- the on arising differences exchange All date. sheet balance of rate exchange the using translated are sheets balance year. the Their for rate pension plans, inventories and other provisions, untaxed reserves and tax tax and reserves untaxed provisions, other and inventories plans, pension profi charge. tax income the including thus t and inassoci- results of share The periods. previous to related taxes possible with adjusted is tax The profi country. each of rate tax valid the on t based tax income The taxes. income indeferred change the and periods previous pany has acquired a right to receive the dividends. the receive to aright acquired has pany with enacted tax rates, to refl ect the temporary differences at the balance balance refl to atthe rates, tax differences enacted with temporary the ect well as fair value changes of loans which are hedges of such investments investments such of hedges are which loans of changes value fair as well tax asset totax the extent that it is probable that future profi taxable ts will be the effective yield method. Dividend income is recognized when the com- the when recognized is income Dividend method. yield effective the foreign currency. Sales of goods are recognized after the signifi the after recognized are goods of Sales risks currency. foreign cant to January 1, 2004 have been treated as assets and liabilities of the Group, Group, the of liabilities and assets as treated been have 2004 1, January to liabilities and assets of amounts carrying the to adjustments value fair that entity is recognized in the income statement as part of the gain or loss loss or gain the of part as statement income the in recognized is entity that use the from arising differences translation The inequity. entered are tion exchange average the using currency reporting Group the into translated in investment anet of part forms that item amonetary on arising ferences losses carried forward. Temporary differences are recognized as a deferred adeferred as recognized are differences Temporary forward. carried losses i.e. ineuros. is the Company’s functional and reporting currency. Income statements of statements Income currency. reporting and functional Company’s the is Net sales comprise of consideration rece consideration of comprise sales Net b ased on taxable profi t for the period, together with tax adjustments for for profi adjustments taxable on tax ased with together period, the t for iv ed less indirect sales taxes, dis-

RAPALA ANNUAL REPORT 2007 / Financial Statements / 35 RAPALA ANNUAL REPORT 2007 / Financial Statements / 36 TANGIBLE ASSETS TANGIBLE GOODWILL RESEARCH AND DEVELOPMENT COSTS DEVELOPMENT AND RESEARCH INTANGIBLE ASSETS Goodwill is tested annually for impairment. For this purpose, goodwill goodwill purpose, this For impairment. for annually tested is Goodwill Expected useful lives and indefi and lives useful Expected re- are assets intangible of lives nite Amortization of such a product is commenced when it is available for for available is it when commenced is aproduct such of Amortization Tangible assets are stated at historical cost, amortized on a straight-line astraight-line on amortized cost, athistorical stated are Tangible assets development expenses are amortized on a straight-line basis over their ex- their over basis astraight-line on amortized are expenses development es. The valuation of tangible assets acquired in a business combination is combination inabusiness acquired assets tangible of valuation The es. gible asset is recognized in the balance sheet only if it is probable that the the that probable is it if only sheet balance inthe recognized is asset gible sets are stated at cost, amortized on a straight-line basis over the expected expected the over basis astraight-line on amortized atcost, stated are sets an expense, are not to be capitalized at a later date. atalater capitalized be to not are expense, an amount according to the previous fi has which previous the to according standards, amount statement nancial of carrying the to corresponds combination 1, 2004 January to the prior acquired operations from Goodwill acquisition. an of cost the to included are an undefi ned period of time. The expected useful life for most trademarks trademarks most for undefian life useful expected The time. of period ned charges. Trademarks and other intangible assets whose useful life is es- or will be available to complete the project. Capitalized development costs costs development Capitalized project. the complete to available be will or exceed to expected are revenues future related the and viable commercially measured at cost less any accumulated impairment loss and not amortized. amortized. not and loss impairment accumulated any less atcost measured ve viewed at each balance sheet date and, where they differ signifi cantly from from cantly signifi differ they where and, date sheet balance each at viewed v velopment costs for such projects are capitalized if they are separately separately are they if capitalized are projects such for costs velopment nually. The valuation of intangible assets acquired in a business combina- inabusiness acquired assets intangible of valuation nually. The necessary to prepare the asset to be capable of operating in the manner in- manner inthe operating of capable be to asset the prepare to necessary use. Unfi nished are tested products annually for impairment. Capitalized rectly attributable to the business combination, such attributable rectly as professional fees, di- costs Any 1, 2004. January after acquired venture joint or undertaking useful lives which vary from 3 to 10 years and adjusted for any impairment impairment any for adjusted 10and 3to from years vary which lives useful previous estimates, depreciation periods are changed accordingly. accordingly. changed are periods depreciation estimates, previous pected useful lives, a maximum of fi of amaximum lives, useful pected ve years. Goodwill represents the excess of the cost of an acquisition over the fair fair the over acquisition an of cost the of excess the represents Goodwill Group, and the cost of the asset can be measured reliably. Intangible as- Intangible reliably. measured be can asset the of cost the and Group, tion is based on fair value as at the date of acquisition. acquisition. of date at the as value fair on based is tion tended. Research and development costs that were initially recognized as recognized initially were that costs development and Research tended. timated to be indefi nite are estimated to affect cash fl ow accumulation for future economic benefi ts that are attributable to the asset will fl ow to the tion, selling and administrative expenses, and if adequate resources exist exist resources adequate if and expenses, administrative and selling tion, produc- related and costs development future and deferred aggregate the it is deemed to have an indefi an have to deemed is it life. nite less any accumulated impairment loss, and is not amortized. not is and loss, impairment accumulated any less l is indefi nite and therefore they are not amortized. These intangibles are indefi is intangibles These amortized. not are they therefore and nite include all directly attributable material, employee benefi employee material, costs testing t and attributable directly all include and feasible technically be to identifi assessed are products the if and able Intangible assets include customer relations, trademarks, capitalized de- capitalized trademarks, relations, customer include assets Intangible Intangible assets with indefi nite useful lives are tested for impairment an- has been allocated to is generating cash measured Goodwill at units. cost Research and development costs are expensed as they are incurred, un- incurred, are they as expensed are costs development and Research b based on fair value as at the date of acquisition. Land is not depreciated as as depreciated not is Land acquisition. of date the at as value fair on based been used as the assumed acquisition cost according to IFRS. to according cost acquisition assumed the as used been ess they relate to a clearly defi ned project that meets certain criteria. De- defi criteria. aclearly to relate they ess certain meets that project ned alue of the Group’s share of the net assets of the subsidiary, associated associated subsidiary, the of assets net the of share Group’s the of alue asis over the expected useful life and adjusted for any impairment charg- impairment any for adjusted and life useful expected the over asis lopment expenses, patents, copyrights, licenses and software. An intan- An software. and licenses copyrights, patents, expenses, lopment GOVERNMENT GRANTS BORROWING COSTS IMPAIRMENTS OF TANGIBLE AND INTANGIBLE ASSETS Expected useful lives of tangible assets are reviewed at each balance Depreciation of a tangible asset is discontinued when the tangible as- An impairment loss is the amount by which the carrying amount of the impairmentis the loss amount An by which the carrying The carrying amounts of tangible and intangible assets are reviewed at reviewed are assets intangible and tangible of amounts carrying The e determined by comparing the received generated byrate rate Discount theused asset. that refl is a pre-tax ects infl cash dependent, outfl and ows ows. generating unit level for which there ar e recognized are grants The to. relate they asset the of value the from ducted dications of potential need for impairment may be for example changes in changes example for be may impairment for need potential of dications sheet date and, where they differ signifi cantly from previous estimates, de- estimates, signifi previous from differ cantly they where and, date sheet set is classifi ed as being held-for-sale in accordance with IFRS 5 standard 5standard IFRS with classifi is set inaccordance held-for-sale being as ed statement. Impairment losses attributable to unit a are cash-generating Impairment attributable losses statement. come and expenses. expenses. and come in- operating other item inthe statement income inthe included are and cifi c to the asset. Impairment loss is immediately recognized in the income income inthe cifi recognized immediately is loss Impairment asset. the c to spe- risks the and money of value time the of assessments market current de- is amount recoverable The amount. recoverable the exceeds assets ognition of the impairment loss. A previously recognized impairment loss loss impairment recognized Apreviously loss. impairment the of ognition useful The basis. equal an on unit the of assets other the thereafter, and, as revenue on a systematic basis over the useful life of the asset when when asset the of life useful the over basis asystematic on revenue as as other operating income. Current- asset. the of life useful the over depreciations lower as income as or change in profi tability. with Goodwill, intangible indefi assets nite useful mine the recoverable amount. However, the reversal must not cause that that cause not must However, reversal the amount. recoverable the mine match them with the related costs, which they are intended to compensate. market conditions and sales prices, decisions on signifi on decisions prices, sales and restructurings cant conditions market used to deducting fi therst goodwill allocated to unit the cash-generating pair costs are expensed as incurred. The cost of signifi of cost The incurred. as and expensed are renewals cant costs pair re- and maintenance Ordinary accordingly. changed are periods preciation purposes of assessing impairment, assetsare grouped at the lowest cash Government or other grants are recognized in the income statement as oth- as statement income inthe recognized are grants other or Government 3–10 years assets tangible Other Government grants relating to purchase of tangible assets are recognized the adjusted value is higher than the carryingamount that would have been termined by reference to discounted future net cash fl ows expected to be there is reasonable assurance that the grant will be received and all attach- all and received be will grant the that assurance reasonable is there lives of the related assets. Gains and losses on sales and disposals are are disposals and sales on losses and Gains assets. related the of lives useful remaining the over depreciated and capitalized are improvements is reversed only if there has been a change in the estimates used to deter- to used estimates inthe achange been has there if only reversed is life of the asset to be depreciated is reassessed in connection with the rec- ly, all grants of the Group have been recognized in the income statement statement income inthe recognized been have Group the of ly, grants all de- are grants sheet, balance the In with. complied be will conditions ing ahnr n qimn 5–10 years equipment and Machinery lives and unfi nished tangible assets are in all cases tested annually. For the the annually. For tested unfi and lives cases inall are assets tangible nished amount is the recoverable measured. In- indicationexists, impairment. If Borrowing costs are expensed as incurred. incurred. as expensed are costs Borrowing Operations. Discontinued and Held-for-sale Assets Non-Current years 20 Buildings lives: useful expected following the on based is Depreciation r operating income on a systematic basis over the periods necessary to necessary periods the over basis asystematic on income r operating ach balance sheet date to determine whether there is any indication of indication any is there whether determine to date sheet balance ach proceeds with the amount carrying e separately identifi able, mainly in- ACCOUNTING FOR LEASES ASSETS HELD-FOR-SALE Group as alessee as Group Group as alessor as Group FINANCIAL ASSETS FINANCIAL Currently the Group does not have arrangements that contain alease. contain that arrangements have not does Group the Currently and risks the all retains lessor the where assets, tangible of Leases Non-current assets held-for-sale (or assets included in the disposal disposal inthe included assets (or held-for-sale assets Non-current Lease payments are apportioned between the fi the between re- and apportioned are charges nance payments Lease Those leases under which the Group is a lessor are classifi are alessor is Group the which operating as under ed leases Those ed in the disposal group classifi group disposal inthe ed as ed estimated selling expenditure. After an asset has been classifi been has asset an After held- expenditure. as ed selling estimated less value fair and amount carrying of lower atthe measured are group) duction of the lease liability so as to achieve a constant rate of interest interest of rate aconstant achieve to as so liability lease the of duction determined if no impairment loss had been recognized in prior years. Im- over their estimated useful lives in accordance with the depreciation policy policy depreciation the with inaccordance lives useful estimated their over fi under acquired Tangible assets period. lease the over statement nance classifi carry- of lower atthe measured is asset the and reversed is cation availa- be must group) disposal (or asset the probable, highly be must sale on the remaining balance of the liability. The corresponding rental obliga- rental corresponding The liability. the of balance remaining the on recoverable amount. A non-current asset held-for-sale and assets includ- assets and held-for-sale asset Anon-current amount. recoverable used for comparable assets in own use. Lease income is recognized in the the in recognized is income Lease use. own in assets comparable for used underlying the of value present estimated the or asset leased the of value usual and customary, the management must be committed to selling and and selling to committed be must management the customary, and usual paid leases based on the time elapse of benefi of elapse time the on based t. leases paid pairment losses recognized for goodwill are not reversed. not are goodwill for recognized losses pairment within one year from the date of classifi of date the from year one within cation. wards and risks of ownership, are classifi are ownership, of risks and wards fi as ed Finance leases. nance from the other asset items. items. asset other the from tangible assets according to the nature of the asset. They are depreciated depreciated are They asset. the of nature the to according assets tangible for-sale, it is not depreciated. If the classifi the If the met, not is depreciated. not is it for-sale, criterion cation sale acompleted as recognition for qualify to expected be should sale the there under, and under rental agreements, are expensed on a straight-line astraight-line on expensed are agreements, rental under, under and there with liabilities interest-bearing in fi the of element interest the income inthe recognized being charge nance included are charges, fi of nance net tions, the assets rather than through continuing use. For this to be the case, the t ing amount prior to the classifi cation less depreciation and impairment, and and impairment, and classifi the to depreciation prior less amount ing cation leases. Leased assetsare presented i term. lease the over basis astraight-line on statement income period. lease or asset the of life useful estimated the of shorter the over depreciated are contracts lease lease payments. payments. lease fair the of lower atthe lease the of inception atthe capitalized are leases L Financial assets are classifi are assets Financial fi as ed prof- through value atfair assets nancial Non-current assets (or a disposal group) are classifi are group) if adisposal held-for-sale, as ed (or assets Non-current basis over the lease periods. Received incentives are deducted from the the from deducted are incentives Received periods. lease the over basis benefi ofts ownership, are classifi ed as operating leases. Payments made ble for immediate sale in its present condition subject only to terms that are are that terms to only subject condition present inits sale immediate for ble ble-for-sale fi nancial assets. The Group determines the classifi the fible-for-sale determines its Group of The cation assets. nancial t or loss, fi nancial assets held-to-maturity, loans and receivables or availa- or receivables and loans fi loss, t or held-to-maturity, assets nancial heir carrying amount will be recovered principally through the disposal of disposal the through principally recovered be will amount carrying heir eases of tangible assets, where the Group has substantially all the re- the all substantially has Group the where assets, tangible of eases held-for-sale are disclosed separately in the lessor’s balance sheet under under sheet balance lessor’s in the DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING HEDGE AND INSTRUMENTS FINANCIAL DERIVATIVE Derivatives may be designated as hedging instruments, in which case case inwhich instruments, hedging as designated be may Derivatives Loans and receivables are non-derivative fi non-derivative are fi with receivables and assets Loans nancial or xed fi with assets fi and Financial payments determinable or xed matu- xed Financial assets at fair value through profi through value atfair assets fi Financial include loss t or as- nancial Financial assets that are not classifi ed in the two preceding categories classifi not are that categories assets preceding two Financial inthe ed The Group is exposed to fi to infor- exposed is changes to Group The especially related risks nancial es recognized in are equity released into income statement in the period fl cash of discounting rates, and val- prices option market and ows quoted atfair remeasured subsequently are and into, entered is contract derivative determinable payments that are not quoted in an active market. Loans and and Loans market. active inan quoted not are that payments determinable e sets are classifi ed as held-for-trading are measured at fair value. Unrealized Unrealized value. fair at measured are held-for-trading as ed classifi are sets fi and held-for-trading sets as nancial sets include current and non-current assets and they can be interest-bear- be can they and assets non-current and current include sets come or expenses only infi and expenses or income operating inother presented are in- whennancial the derivativeand losses from derivative instruments instrument recognized in the income statement is assigned to in- and realized changes in fair value are recognized in the income statement. income inthe recognized are value infair changes realized and classifi are accounting, as- fi as ed Financial held-for-trading. assets nancial sets are recognized initially, they are measured at fair value by using quota quota using by value fair at measured are they initially, recognized are sets fi ateach designation this re-evaluates ate as- Financial year-end. nancial changes in derivatives are recognized in the income statement. In the case case the In statement. income inthe recognized are inderivatives changes cannot be measured reliably are reported at cost less impairment. The fair fair The impairment. less cost at reported are reliably measured be cannot values fair which for shares unlisted Certain models. valuation appropriate are classifi ed as available-for-sale. available-for-sale When fi nancial as- derecog- are receivables and loans when statement income inthe ognized on the trade date. trade the on mediately in the income statement. If hedge accounting is not applied, fair applied, not is accounting hedge If statement. income inthe mediately fl cash future of hedges as effective are and ows designated are that ments market rates and market prices, discounted fl cash ow analyses and other value changes in derivatives are recognized in the income statement. Gains Gains statement. income inthe recognized are inderivatives changes value on based is values fair of Determination date. sheet balance each on value value changes of available-for-sale fi available-for-sale of recog- changes are value tax, of net assets, nancial recognized directly in equity and the ineffective portion is recognized im- recognized is portion ineffective the and inequity directly recognized uation models. date the on value atfair recognized initially are derivatives All risk. nancial rate method less any allowance for impairment. Initially recognized amount amount recognized Initially impairment. for allowance any less method rate interest effective the using cost atamortized measured are receivables inten- apositive has Group the classifi are when rity held-to-maturity as ed nized, impaired, and through the amortization process. amortization the through and impaired, nized, uity to the income statement when the instrument is sold or its value has has value its or sold is instrument the when statement income the to uity eq- from transferred are value infair Changes equity. inshareholders’ nized pendent on the particular nature of the hedging relationship. hedging the of nature particular the on pendent terest-bearing fi chang- value fair terest-bearing Accumulated liabilities. or assets nancial tion and ability to hold to maturity. At present, the Group doe not have any have not doe Group the present, At maturity. to hold to ability and tion term. All of the Group’s currency derivatives, which do not qualify for hedge hedge for qualify not do which derivatives, currency Group’s the of All term. classifi are profi through assets value atfair as Financial as tion ed loss. t or fi appropri- and allowed where and, recognition initial after assets nancial fallen so that an impairment loss has to be recognized for the instrument. includes directly attributable transaction costs. Gains and losses are rec- are losses and Gains costs. transaction attributable directly includes ing or non-interest-bearing. In cash fl fi cash In derivative of value fair inthe changes instru- hedges, ow nancial hedge accounting is applied, the accounting for hedging instruments is de- is instruments hedging for accounting the applied, is accounting hedge hedge accountingis applied. hedge If accountingis not applied, fair value held-to-maturity fi nancial assets. held-for-trading if they are acquired for the purpose of selling in the near near inthe selling of purpose the for acquired are they if held-for-trading Derivative fi fiDerivative hedge to time, to time from used, are instruments nancial - Purchases and sales of available-for-sale fi available-for-sale of sales and Purchases recognized are assets nancial ign currency exchange rates and interest rates for loans and borrowings. borrowings. and loans for rates interest and rates exchange currency ign sets designatedsets upon initial recogni-

RAPALA ANNUAL REPORT 2007 / Financial Statements / 37 RAPALA ANNUAL REPORT 2007 / Financial Statements / 38 TRADE RECEIVABLES CASH AND CASH EQUIVALENTS INVENTORIES Currently, the Group has short-term standard and modifi and standard short-term has cur- foreign ed Group the Currently, fi derivative of value fair the of Changes are that instruments nancial If hedge If accountingis applied, hedging programs are ac- documented Hedge accounting is applied to hedges of net investment in the foreign foreign inthe investment net of hedges to applied is accounting Hedge ef- and designated is which swap, rate interest an has also Group The Trade receivables are carried at their anticipated realizable value, which is which value, realizable anticipated attheir carried are Trade receivables ed average cost where it approximates FIFO. The cost of fi of cost The FIFO. approximates it where cost goods average ed nished designated and qualify as fair value hedges are recorded in the income income inthe recorded are hedges value fair as qualify and designated det ed costs necessary to make the sale. the make to necessary costs ed dence (such as signifi as (such dun- dence unsuccessful and receivables of overdue cant es. Accumulated fair value changes recognized in equity are released into into released are inequity recognized changes value fair Accumulated es. equi- of differences intranslation directly recognized are value fair inthe es embedded derivatives. fair The fl rates. cash spot using discounted currency functional the to ows strument does not qualify for hedge accounting, any changes in fair value value infair changes any accounting, hedge for qualify not does strument asset hedged the of value fair inthe changes the with together statement orsold liquidated. other direct costs and related producti related and costs direct other and work in progress comprises raw materials, direct labor, depreciation, are recognized in the income statement. statement. income inthe recognized are or liability that are to attributable the hedged risk. Ifderivative fi nancial in- are subject to prospective and retrospective testing of effectiveness. effectiveness. of testing retrospective and prospective to subject are instruments hedging designated and 39 IAS of requirements the to cording us- subsidiaries inforeign investments net its hedges Group subsidiaries. ar foreign currencystandard forwards course of business, less the estimated costs of completion and the estimat- the and completion of costs estimated the less business, of course sessment and decision for credit loss allowances on is done locally in each ineach locally done is on allowances loss credit for decision and sessment amounts due according to the original terms of the receivables. The as- The receivables. the of terms original the to according due amounts values of modifi ed foreign currency forwards are received from the bank. bank. the from modifi of received are values forwards currency foreign ed rency forwards to which hedge accounting is not applied but which have which but applied not is accounting hedge which to forwards rency ning attempts or known fi known or attempts ning diffinancial probabil- increased thus and culties recorded in the same way as cash fl chang- cash of as way same inthe portion recorded Effective hedges. ow Cash and cash equivalents comprise cash in hand, deposits held at call when the hedged cash fl ow affects income or if the hedged subsidiary is w turities of three months or less. Bank overdrafts are included within borrow- t ty and the ineffective portion is recognized infi recognized is expens- portion and income nancial ineffective the and ty or hedges value fair any have not does Group the Currently, bank. the from have derivatives rate interest of values fl fair cash The as hedge. ow fective the fl cash converting then nominal and ture rates interest relevant with ows ing costs. Net realizable value is the estimated selling price in the ordinary ordinary inthe price selling estimated the is value realizable Net costs. ing it loss allowance of trade receivables is made when there is objective evi- objective is there when made is receivables trade of allowance loss it ings in current interest-bearing loans. interest-bearing incurrent ings income if the hedged subsidiary is soldincome ifor theliquidated. hedged subsidiary ity of customer insolvency) that the Group will not be able to collect all collect to able be not will Group the that insolvency) customer of ity Inventories are valued at the lower of cost or net realizable value. Cost is Cost value. realizable net or cost of lower atthe valued are Inventories are subsidiaries inforeign investments net of Hedges loans. currency ing been calculated using a discounted cash fl cash adiscounted using calculated been received are and method ow of fl values cash Fair risk. operative rate hedge to exchange ow made been business unit –basis. on case-by-case he original invoice amount less an estimated valuation allowance. Acred- allowance. valuation estimated an less amount invoice original he ith banks and other short-term highly liquid investments with original ma- original with investments liquid highly short-term other and banks ith ermined by the fi rst-in, fi method or, alternatively,rst-out (FIFO) weight- e determined by discounting the fu- on overheads, but excludes borrow- but on overheads, TREASURY SHARES FINANCIAL LIABILITIES RECOGNITION AND DERECOGNITION OF FINANCIAL ASSETS AND AND ASSETS FINANCIAL OF DERECOGNITION AND RECOGNITION IMPAIRMENT OF FINANCIAL ASSETS IMPAIRMENT OF FINANCIAL LI ABILITIES A fi nancial asset is derecognized when, and only when the contractual contractual Afi the when only and when, derecognized is asset nancial Afi afi or asset nancial balance the on recognized is liability nancial Financial liabilities include current and non-current liabilities and they they and liabilities non-current and current include liabilities Financial A previously recognized impairment loss is reversed if the reversal can can reversal the if isreversed loss impairment recognized Apreviously cu- Any statement. income inthe recognized are losses impairment All The Group assesses at each balance sheet date whether afi whether date sheet balance ateach asset assesses nancial Group The ( ed at the original effective interest rate. An impairment loss in respect of an an of respect in loss impairment An rate. interest effective original the at ed sheet when, and only when, the Group becomes a party to the contractual contractual the to aparty becomes Group the when, only and when, sheet ognized in the income statement on the purchase, sale, issue or cancella- or issue sale, purchase, the on statement income inthe ognized o charged or cancelled or expires. statement income inthe recognized are losses and Gains cost. amortized ef- the using cost atamortized measured subsequently are they ognitions, can be interest-bearing or non-interest-bearing. non-interest-bearing. or interest-bearing be can curities, the reversal is recognized directly in equity. An impairment loss in loss impairment An inequity. directly recognized is reversal the curities, fi available-for-sale For se- statement. come equity are that assets nancial fi the of amount carrying the and asset between nancial difference the as that on loss impairment any less value, fair current its and costs acquisition its fiavailable-for-sale between adifference as measured is asset nancial fl cash future estimated the of value discount- ows present the and amount, mulative loss in respect of an available-for-sale fi nancial asset recognized fi asimilar for return of rate market asset. nancial at carried not is that instrument equity unquoted an of respect in loss ment no such shares. nancial asset are substantially transferred. Afi a of transferred. a part or liability substantially are nancial asset nancial rights to the cash fl ows from the fi nancial asset expire or when it transfers respect of an unquoted equity instrument that is not carried at fair value, in- inthe recognized is reversal the securities, debt are that assets nancial fi fi available-for-sale For and atcost recognized. amortized - assets nancial provisions of the fi the of provisions instrument. nancial previously in equity is transferred to income statement. income to transferred is inequity previously when the liabilities are derecognized, impaired and through the amortiza- the through and impaired derecognized, are liabilities the when ti fi tion of the Group’s own equity instruments. At present, the Group holds holds Group the present, At instruments. equity own Group’s the of tion fi nancial liability is removed from the balance sheet when, and only when, it when, only and when, sheet fi balance the from removed is liability nancial fi the of fi ownership the of rewards and risks the all that so - asset, nancial tion process. at measured are program paper commercial Also method. interest fective the present value of estimated future cash fl ows discounted at the current measured is measured, reliably be cannot value fair its because value, fair fi impair- An statement. income inthe recognized previously asset nancial is extinguished, that is when the obligation specifi ed in the contract is dis- loans and receivables is measured as the difference between its carrying carrying its between difference the as measured is receivables and loans If the company or its subsidiaries recognizes own equity instruments instruments equity own recognizes subsidiaries its or company the If Financial liabilities are initially recognized at the fair value of the considera- the of value fair atthe recognized initially are liabilities Financial Financial assets and liabilities, except for derivatives and available-for-sale available-for-sale and derivatives for except liabilities, and assets Financial be related objectively to an event occurring after the impairment loss was was loss impairment the after occurring event an to objectively related be nancial assets, are recognized at the settlement date. settlement atthe recognized are assets, nancial treasury shares) these are shares) deducted fromtreasury equity. gain No or loss is rec- r group of fi of r group of inrespect loss impairment An impaired. is asset nancial on received plus directly attributable transactions costs. After initial rec- Share-based payments Share-based Pension obligations EMPLOYEE BENEFITS PROVISIONS WASTE ELECTRICAL AND ELECTRONIC EQUIPMENT ELECTRONIC AND ELECTRICAL WASTE The Group operates defi operates Group The benefined Can- inFrance, only plans t pension A warranty provision is recognized when a product containing awar- containing aproduct when recognized is provision Awarranty The Group has applied the requirements of IFRS 2 (Share-based Payment) Payment) 2(Share-based IFRS of requirements the applied has Group The T The Group is a distributor of electrical equipment that falls under the EU Di- EU the under falls that equipment electrical of adistributor is Group The exemption under IFRS 1, all cumulative actuarial gains and losses have losses and gains 1, actuarial cumulative all IFRS under exemption ed future cash outfled cash future ows. Defi ned benefi t liability of comprises the present service cost is recognized as an expense on a straight-line basis over the the over basis astraight-line on expense an as recognized is cost service spread the regular cost over the service lives of employees in accordance inaccordance employees of lives service the over cost regular the spread inwhich method, valuation actuarial credit unit projected the using sessed sis of what is known about past warranty costs. A restructuring provision provision Arestructuring costs. warranty past about known is what of sis so that it describes the market view of the time value of the money and the val- are Provisions certain. virtually is reimbursement the when only but set as- aseparate as recognized is reimbursement the reimbursed, be to sion average period until the benefi the until benefi the period If average vested. become ts already are ts past The assets. plan of value fair the or obligations pension of 10% ceed ex- they that extent the to employees, of lives service remaining average ac- All assets. plan of value fair the less and recognized yet not losses and ada and Sweden only. For defi only. For Sweden and ada benefined as- are costs pension t plans, which to year inthe statement income the to charged are plans contribution defi or plans contribution benefined defi to contributions The t plans. ned amount of the obligation. Where the Group expects some or all of aprovi- of all or some expects Group the Where obligation. the of amount 2004. vested immediately following the introduction of, or change to, a pension apension to, of, change or introduction the following immediately vested defi the of gains value actuarial and benefi ned service past less tobligation recognized as part of other operating expenses and as a current non-in- acurrent as and expenses operating other of part as recognized re ba- the on determined is involved sum the of size The sold. is clause ranty examination. of time atthe obligation the to relating risk obliga- the cover to required expenses the of value present net atthe ued required to settle the obligation and a reliable estimate can be made of the the of made be can estimate reliable a and obligation the settle to required p plan, past service cost is recognized immediately. In accordance with the plan. The pension obligation is measured as the present value of estimat- of value present the as measured is obligation pension The plan. probable that an outfl ow of resources embodying economic benefi ts will be be will ts benefi economic embodying resources of ow outfl an that probable with the advice of qualifi ed actuaries who carry out a full valuation of the the of qualifi of valuation afull advice the out with carry who actuaries ed to all option programs granted after November 7, 2002 that were unvest- terest-bearing payable. tuarial gains and losses are recognized in the income statement over the the over statement income inthe recognized are losses and gains tuarial the costs of providing pensions is charged to the income statement so as to as so statement income the to charged is pensions providing of costs the they relate. tion. discount The factor used when calculating present value is selected local conditions and practices. The plans are classifi are plans The practices. and defi either as conditions ed local ned launched its implementation or has informed the parties concerned. parties the informed has or implementation its launched plan, restructuring adetailed compiled has Group the when recognized is Provisions are recognized in the balance sheet when the Group has a has Group the when sheet balance inthe recognized are Provisions been recognized in retained earnings at the date of transition, January 1, because its fair value cannot be reliably measured, cannot be reversed. be cannot measured, reliably be cannot value fair its because hroughout the Group operates various pension plans in accordance with with inaccordance plans pension various operates Group the hroughout resent legal or constructive obligation as a result of a past event, and it is is it and event, past a of result a as obligation constructive or legal resent ctive on Waste Electrical and Electronic Equipment. Expected costs are are costs Expected Equipment. Electronic and Electrical Waste on ctive OPERATING PROFIT DIVIDENDS EARNINGS PER SHARE PER EARNINGS When the share options are exercised, the proceeds received, net of net received, proceeds the exercised, are options share the When refl date grant atthe determined options the of expense the The ects Diluted earnings per share amounts have been calculated by applying byapplying calculated been have amounts share per earnings Diluted The dividend proposed by the Board of Directors is not deducted from dis- from deducted not is Directors of Board bythe proposed dividend The The IAS 1 (Presentation of Financial Statements) standard does not de- not does standard Statements) Financial of 1(Presentation IAS The each balance sheet date with changes in fair value recognized in income inincome recognized value infair changes with date sheet balance each ingram cash. payments Share-based settled programs are valued at fair pay- share-based separate three has Group The 1, 2005. January of as ed date is the date at which the entity and another party agree to ashare- to agree party another and entity the atwhich date the is date deducting cost of sales corrected for changes in inventories and cost of cost and ininventories changes for corrected sales of cost deducting since the new Finnish Companies Act came into effect. into came Act Companies Finnish new the since programs option any on decided not has Group The fund. premium share state- income inthe recognized are estimates inthe changes The settled. made assumptions the reviews Group the basis aregular On vest. to sumed any transaction costs, are credited to share capital (nominal value) and and value) (nominal capital share to credited are costs, transaction any be to expected are that shares of number the of estimates its revises and as- are that options of number inthe account into taken but option the of shareholder as treasury shares, if any. if shares, treasury as common stock at the average market price during the period. In addition addition In period. the during price market average atthe stock common share when the exercise price of the options exceeds the average market market average the exceeds options the of price exercise the when share ment during the vesting period with a corresponding adjustment to the eq- pro- option synthetic one and programs option share two programs: ment ment with a corresponding adjustment to the equity or liability. liability. or equity the to adjustment acorresponding with ment option- Black-Scholes using value atfair valued are options These ment. ceeds the exercise price of the options. the of price exercise the ceeds refl not is exercise of assumption per The inearnings options. ected the of value on the grant date and recognized as an expense in the income state- income inthe expense an as recognized and date grant the on value uity or liability. In cash settled option programs liability is remeasured at remeasured is liability programs option settled cash In liability. or uity nized in employee benefi inemployee nized t expenses. ning of the period, or on the issuance of options, if that occurs later dur- nancial instruments are included in operating profi inoperating included are instruments nancial originate they t in case pricing model. The non-market criteria are not included in the fair value value fair inthe included not are criteria non-market The model. pricing Group’s estimate of the number of options that will ultimately Grant vest. preciation and possible impairments benefi employee to related costs deducting de- use, own ts, for production as well as other operating expenses. price of the shares during the period. The share options have a diluting ef- adiluting have options share The period. the during shares the of price the statement. The income statement effect of option programs are recog- are programs option of effect statement income The statement. the t the “treasury stock” method, as if the options were exercised at the begin- atthe exercised were options the if as method, stock” “treasury the to the weighted average number of shares outstanding, the denominator fi fect only when the average market price of the share during the period ex- period the during share the of price market average the when only fect issue during the year, excluding shares purchased by the Group and held held and Group bythe purchased year, shares the excluding during issue is the net amount arising from adding other operating income to net sales, ing the period, and as if the funds obtained thereby were used to purchase purchase to used were thereby obtained funds the if as and period, the ing includes the incremental shares obtained through the assumed exercise exercise assumed the through obtained shares incremental the includes have a shared understanding of the terms and conditions of the arrange- the of conditions and terms the of understanding ashared have holders. Earnings per share is calculated by dividing the net profi net the the to bydividing calculated is share per t attributable Earnings Foreign exchange differences and changes in the fair value of derivative fi derivative of value fair inthe changes and - differences exchange Foreign based payment arrangement, being when the entity and the counterparty based payment arrangement, being and when the the counterparty entity ne operating profi operating ne defi has Group profi The t. Operating follows: as it ned t ributable equity until approved equity Meetingof by General Share- the Annual ributable s of the by Company the weighted average number of shares in

RAPALA ANNUAL REPORT 2007 / Financial Statements / 39 RAPALA ANNUAL REPORT 2007 / Financial Statements / 40 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS AND ESTIMATES ACCOUNTING CRITICAL CASH FLOW STATEMENTCASH Determining fair value of acquisitions of value fair Determining Income taxes Impairment testing Impairment The preparation of the consolidated fi consolidated the of preparation The inaccordance statements nancial The key assumptions concerning the future and other key sources of The Group reviews at each balance sheet date especially the carrying carrying the especially date sheet balance ateach reviews Group The The carrying amounts of tangible and intangible assets are reviewed at reviewed are assets intangible and tangible of amounts carrying The tech- and patents (trademarks, rights property intellectual of value fair The eval- were assets tangible and capital working acquired of values fair The denominated in foreign currencies and from transactions between Group Group between transactions from and currencies inforeign denominated ed in net generated cash from operating activities, unless they can be par- fi the during paid taxes income All present- are year method. nancial direct quire the use of estimates. of use the quire ent, cash infl ows and outfl ows. An impairment loss is the amount by which which by amount the is loss impairment An outfl infl ows. and cash ows ent, ed fl cash ows. each balance sheet date to determine whether there is any indication of indication any is there whether determine to date sheet balance each signifi have that date, sheet balance atthe risk cant uncertainty estimation cash equivalents, separate from cash generated from (used in) operating, in) separate equivalents, generated fromcash cash from (used companies are presented on a separate row before change in and cash cash flcash ows expected to be generated by calculations re- theThese asset. amount of deferred tax assets. Deferred taxes are provided using the liabil- the using provided are taxes Deferred assets. tax deferred of amount of impairment, are assessing grouped at assets thegenerat- lowest cash come and expenses. and come abilities within the next accounting period, are discussed below. discussed are period, accounting next the within abilities li- and assets of amounts carrying the to adjustments material causing of assumptions are recognized in the accounting period during which esti- assumptions are based on historical experience and plausible future sce- mates. In addition, judgment esti- these from has differ may results to Actual notes. be accompanying and ments exercised in applying the account- mates and assumptions were fi were assumptions and mates pe- accounting subsequent inall and xed recoverable amount is determined by reference to discounted future net nology) and customer relations are established with discounting the relat- the discounting with established are relations customer and nology) acquisition. the before personnel appraisal external and byRapala uated riods. and inestimates changes Possible evaluated. continually are which narios, p Cash generated using fromCash operating activities hasthe been in- reported Cash and cash equivalents presented andequivalents in fl cash the cash Cash com- ow statement w ties. Unrealized exchange gains and losses from and cash equivalents cash fi or investing in) (used from cash net to activi- allocated nancing ticularly the carrying amount of the assets exceeds the recoverable amount. The The amount. recoverable the exceeds assets the of amount carrying the fi nished tangible are assets in all tested cases annually. the For purposes fi consolidated inthe recognized amounts the state- nancial affect that tions from operating business items; otherwise they are booked infi booked are they otherwise items; business in- nancial operating from investing and fi and investing activities. nancing ing unit level for which there are separately identifi separately are there which for level unit ing independ- mainly able, impairment. Goodwill, intangible assets with indefi with assets intangible un- and lives useful Goodwill, nite impairment. fi the of principles ing and estimates Management’s statements. nancial highly liquid investments with original maturities of three months or less. rise cash in hand, deposits held at call with banks and other short-term short-term other and banks with atcall held deposits inhand, cash rise ith IFRS requires management to assump- and estimates certain make Share-based payments Share-based Provisions ROUNDING OF FIGURES Employee benefits These factors include dividend yield, risk free interest rate, expected life of of life expected rate, interest free risk yield, dividend include factors These The timing of the recognition of a provision is based on management’s esti- management’s on based is aprovision of recognition the of timing The In the fi the In fi the means 0.0million EUR statements, nancial less gure is ed in the fair value of the option but taken into account in the number of number inthe account into taken but option the of value fair inthe ed option. the of value fair the incalculating used are assumptions Several el. ed unit credit actuarial valuation method. Several statistical and other ac- other and statistical Several method. valuation actuarial credit unit ed deferred assets from tax future taxa prob- is it that extent the to asset tax adeferred as recognized are ences gible assets, fair valuation of net assets in acquired companies, intra-group intra-group companies, inacquired assets net of valuation fair assets, gible All fi gures in these accounts have been rounded. Consequently the sum of sum the fiAll Consequently rounded. been have accounts inthese gures differences at the balance sheet date between the tax bases of assets and and assets of bases tax the between date sheet balance atthe differences are expected to be settled. The changes in the estimates are recognized in recognized are estimates inthe changes The settled. be to expected are madeassumptions and estimates revises its of the number of shares that the reviews Group the basis aregular On vest. to assumed are that options includ- not are criteria non-market Then ratio. forfeit personnel and option sources embodying economic benefi ts will be required to the settle obliga- a deferred tax accordingly. tax a deferred distri- whether reviews Group the date sheet balance each At accordance. able that future profi taxable ts will be available, against which the deduct- mate of the moment when the Group has a present legal or constructive ob- constructive or legal apresent has Group the when moment the of mate main temporary differences arise from the depreciation difference on tan- on difference depreciation the from arise differences temporary main rate, future salary increase and annual infl annual and increase salary future rate, informa- Statistical rate. ation visions, untaxed reserves and tax losses carried forward. Temporary differ- Temporary forward. carried losses tax and reserves untaxed visions, Options are valued at fair value using Black-Scholes option-pricing mod- option-pricing Black-Scholes using value atfair valued are Options the income statement. statement. income the serv- remaining expected the over income to credited or charged are tions tion used may differ from actual results. Changes in actuarial assump- tuarial assumptions are used in calculating the expense and liability re- liability and expense the incalculating used are assumptions tuarial tion and a reliable estimate can be made of the amount of the obligation. the of amount the of made be can estimate areliable and tion tent the recovery is not considered likely the deferred asset is adjusted in adjusted is asset deferred the likely considered not is recovery the tent than EUR 50 000. If the amount is EUR 0, an empty cell is used. is cell empty 0, an EUR is amount the If 000. 50 EUR than income statement. income Group’s the on impact aslight have could which employees the of lives ice lated to the plans. These factors include assumptions about the discount discount the about assumptions include factors These plans. the to lated in outfl an that probable is it re- of and ow event, apast of aresult as ligation, ible temporary difference can be utilized. The likelihood for the recovery of recovery the for likelihood The utilized. be can difference temporary ible inventory profiinventory defits, benefined pro- other and inventories plans, t pension liabilities and their carrying amounts for fi for The amounts purposes. carrying their and reporting liabilities nancial refl to rates, tax enacted with measured as temporary the method, ect ity have been calculated using exact fi exact using calculated been have gures. Pension costs for defi for costs Pension benefined project- the using assessed are t plans bution of earnings in subsidiaries is in its control and probable, and books books and probable, and control inits is insubsidiaries earnings of bution dividual fidividual fi sum presented the from deviate can gures figure. Key gures ble income is assessed, and to the ex- the to and assessed, is income ble DEFINITION OF KEY FIGURES

Operating profi t before depreciation and impairments (EBITDA) = Operating profi t + depreciation and impairments

Net interest-bearing liabilities = Total interest-bearing liabilities - total interest-bearing assets

Capital employed = Total equity + net interest-bearing liabilities

Working capital = Inventories + total non-interest-bearing assets - total non-interest-bearing liabilities

Total non-interest-bearing assets = Total assets - interest-bearing assets - intangible and tangible assets - assets classifi ed as held-for-sale

Total non-interest-bearing liabilities = Total liabilities - interest-bearing liabilities

Average interest rate on net interest-bearing debt, % = (Interest paid - interest received) x 100 Net interest-bearing debt

Net interest-bearing debt to EBITDA = Net interest-bearing debt Operating profi t before depreciation and impairments x 100

Return on capital employed (ROCE), % = Operating profi t x 100 Capital employed (average for the period)

Return on equity (ROE), % = Net profi t for the period x 100 Total equity (average for the period)

Debt-to-equity ratio (Gearing), % = Net interest-bearing liabilities x 100 Total equity RAPALA ANNUAL REPORT 2007 / Financial Statements 41 ANNUAL REPORT RAPALA

Equity-to-assets ratio, % = Total equity x 100 Total shareholders’ equity and liabilities - advances received

Earnings per share, EUR = Net profi t for the period attributable to the equity holders of the Company Adjusted weighted average number of shares

Dividend per share, EUR = Dividend for the period Adjusted number of shares at the end of the period

Dividend/earnings ratio, % = Dividend for the period x 100 Net profi t for the period attributable to the equity holders of the Company

Equity per share, EUR = Equity attributable to equity holders of the Company Adjusted number of shares at the end of the period

Effective dividend yield,% = Dividend per share x 100 Adjusted shares price at the end of the period

Price/earnings ratio = Adjusted shares price at the end of the period Earnings per share

Avarage share prices, EUR = EUR amount traded during the period Adjusted number of shares trated during the period

Year-end market capitalization, EUR = Number of shares at the end of the period x share price at the end of the period

Average number of personnel = Calculated as average of monthly averages RAPALA ANNUAL REPORT 2007 / Financial Statements / 42 2. SEGMENT INFORMATION SEGMENT 2. 2007 EUR million EUR GEOGRAPHICAL SEGMENTSGEOGRAPHICAL Total assets Total Total liabilities Allocated assets Allocated liabilities Allocated Operating profi t Capital expenditure Income taxes sales net Internal Net profiNet period the t for expenses and income Financial bydestination sales net External Net sales sales net External Non-recurring income and expenses and income Non-recurring andDepreciation impairments Unallocated assets 1) Unallocated liabilities 1) liabilities Unallocated Geographical segments (by unit location) provide products or services services or products provide location) unit (by segments Geographical The Group is led as a whole and not organized or managed in segments. insegments. managed or organized not and awhole as led is Group The ments. Businessments. that segments provide orare products services subject reporting in accordance with IAS 14. IAS with inaccordance reporting within a particular economic environment that is subject to risks and re- and risks to subject is that environment economic aparticular within to risks and returns that are different from those of other business seg- business other of those from different are that returns and risks to environ- economic inother segments of those from different are that turns For IFRS purposes, segments have though been established for fi for established been though have segments nancial purposes, IFRS For sports and Group branded products for winter sports and some other busi- other some and sports winter for products branded Group and sports nesses. Pricing of inter-segment transactions is based on market prices. market on based is transactions inter-segment of Pricing nesses. winter and outdoor hunting, for products party) (third branded non-Group fi and reels rods, mostly include ucts, Products Other electronics. shing fi branded non-Group include prod- shing Products Fishing Party Third ucts. Fishing Lures, are which lines, product on based are segments reporting Group’s primary reporting segments are geographical segments, namely namely segments, geographical are segments reporting primary Group’s Hooks, Fishing Accessories, Third Party Fishing Products and Other Prod- Other and Products Fishing Party Third Accessories, Fishing Hooks, Secondary World. the of Rest and Europe, of Rest Nordic, America, North 66.5 69.3 61.2 66.7 0.9 8.3 0.0 2.3 0.2 North 7.5 America 96.0 58.2 25.8 64.5 12.5 31.5 68.7 -1.7 5.0 1.9 Nordic 64.2 72.8 24.0 19.3 86.1 92.1 -4.3 -2.2 2.8 3.4 Rest of Europe 35.0 38.6 62.9 28.8 24.2 11.0 -1.5 2.3 5.4 Rest of the 0.1 World -25.8 -75.2 -75.2 -11.5 -0.3 Eliminations 156.8 242.5 242.5 242.5 253.7 113.5 217.6 43.3 28.3 36.1 -5.0 -5.8 17.5 -5.4 9.3 1.6 Total 2006 BUSINESS SEGMENTS 2006 2007 Total liabilities Total assets Total Total assets Total assets Total Allocated liabilities Allocated Allocated assets Capital expenditure Operating profi t Capital expenditure Capital expenditure 1) Unallocated assets and liabilities include interest-bearing assets and liabilities as well as deferred tax assets and liabil and assets tax deferred as well as liabilities and assets interest-bearing include liabilities and assets Unallocated 1) Interest-bearing assets Interest-bearing assets Income taxes sales net Internal Non-recurring income and expenses and income Non-recurring andDepreciation impairments Non-interest-bearing assets 2) Net sales Non-interest-bearing assets Net sales profiNet period the t for expenses and income Financial bydestination sales net External Net sales sales net External Unallocated liabilities 1) liabilities Unallocated Unallocated assets 1) 2) Allocation of Allocation assets to2) business segments has been specifi ed been restated accordingly. and, starting fromand, 2007, starting only non-interest-bearing are assets a 102.3 114.2 73.9 73.0 3.0 4.3 Lures 20.6 69.5 70.8 16.9 14.8 14.6 69.7 -0.9 11.6 65.1 -0.1 0.8 0.6 6.4 0.7 0.1 North Fishing Hooks America ities. 45.8 55.0 44.3 43.5 36.6 94.2 62.4 15.9 31.8 71.7 -1.6 6.9

0.9 0.0 4.8 3.4

llocated to business segments. Comparative information has has information Comparative segments. business to llocated Fishing Accessories Nordic 83.0 53.5 26.6 43.4 63.4 76.2 19.9 61.9 16.2 63.1 -0.2 -2.1 2.4 1.3 Third Party 7.0 Rest of 4.1 Fishing Products Europe 28.9 22.3 42.4 10.5 31.6 31.5 43.7 47.8 24.7 -0.2 12.1 -1.7 2.8 2.6 2.2 Other 5.7 Rest of the Products World -64.0 -64.0 -30.2 -18.1 24.5 -0.6 25.1 -2.9 27.9 28.1 -0.2 -3.2 -1.4 Eliminations Eliminations 226.6 226.6 226.6 226.6 225.6 243.6 243.6 162.3 242.5 218.4 129.4 212.2 253.7 33.0 13.8 13.8 31.4 11.0 -6.3 28.1 25.1 21.7 -0.4 -3.6 -7.1 9.3 Total Total

RAPALA ANNUAL REPORT 2007 / Financial Statements / 43 RAPALA ANNUAL REPORT 2007 / Financial Statements / 44 3. ACQUISITIONS AND DISPOSALS AND ACQUISITIONS 3. ACQUISITIONS INACQUISITIONS 2006 EUR million EUR million EUR

These acquisitions contributed EUR 9 million to the 2006 net sales and and sales net 2006 the to 9million EUR contributed acquisitions These 1) 2006 translation differences are EUR 0.2 million. Note 3 is based on exchange rates at acquisition date, whereas note 13 note is whereas date, acquisition at rates exchange on based 3is Note million. 0.2 EUR are differences translation 2006 1) Tangible assets Tangible Total purchase consideration Total purchase ginning of the year. the of ginning 2) Cash paid in 2007 includes a payment of EUR 0.8 million 0.8 EUR of apayment includes in2007 paid Cash 2) with exports to several other African countries. African other several to exports with the former managers of T&P, Grant and Mark Pledger, together own 30%. la South-Africa”) acquired of the 100% shares of Tatlowla South-Africa”) and Pledger Pty I fi French the acquired Rapala 2006, Tortue. supplier line January shing In Rapala South-Africa is the leading fi shing tackle distributor in South Africa while 70% now is South-Africa Rapala of ownership Rapala’s (“T&P”). Ltd EUR 1.0 million to the net profi 1.0 net the to million EUR fi These Group. the t of have would gures been the same even if the acquisitions would have taken place in the be- inthe place taken have would acquisitions the if even same the been Cash and cash equivalents and interest-bearing assets interest-bearing and equivalents cash and Cash Cash and cash equivalents acquired equivalents cash and Cash Cash paid 2) 1) Goodwill associatedCosts with the acquisitions later or in2008 paid Cash in2007 paid Cash in2006 paid Cash Working capital Working Intangible assets Interest-bearing liabilities Interest-bearing Fair value of acquired net assets net acquired of value Fair liability tax Deferred Deferred asset tax Net cash fl cash Net ow Net cost over assets net acquired of value fair net inthe interest Group’s of Excess n February 2006, Rapala VMC South-Africa Distributors Pty Ltd (“Rapa- Ltd Pty Distributors South-Africa VMC Rapala 2006, n February for the for Fetm custo n a amn fER02mlinfrteGioaqiiin acquisition. Guigo fi the and for million 0.2 acquisition EUR of Freetime payment nal ACQUISITIONS IN ACQUISITIONS 2007 These acquisitions contributed EUR 1.5 million to the 2007 net sales sales net 2007 1.5 the to million EUR contributed acquisitions These Also in February and April, Rapala made a 0.2 MEUR fi MEUR a0.2 made Rapala of April, and payment nal inFebruary Also dis- Hungarian Rapala’s of stake minority 10% acquired Rapala April, In The deal includes patents for the use of nickel titanium wire infi wire titanium nickel of use the for patents includes lures, shing deal The and EUR 0.2 million to the net income of the Group. These fi These Group. the of income net the to million 0.2 EUR would and gures fi other and baits spinner Terminator of branded lures. shing distributors and ment of fi of in2005. ment closed acquisition Freetime the of payment nal the Guigo acquisition closed in 2004 and in May a 0.8 MEUR fi MEUR a0.8 inMay and in2004 closed settle- rst acquisition Guigo the tribution company, Rapala Eurohold from Eurohold”), Mr Ltd Agh (“Rapala receivables. trade and inventories, lists, customer trademarks, t Senior. Acquisition raised Rapala’s ownership to 80%. to ownership Rapala’s raised Senior. Acquisition In January, Rapala acquired the fi the acquired Innova- Rapala January, Outdoor of In business tackle shing have been the same even if the acquisitions would place inhave even have the same acquisitions if the been taken beginning of the year. the of beginning ions LLC and Horizon Lures LP (“Terminator”), USA based manufacturers manufacturers based USA (“Terminator”), LP Lures Horizon and LLC ions Note Note 13 13 12 11 11 -0.5 2.9 2.7 0.7 0.1 ae necag ae tcoigdt. date. closing at rates exchange on based Fair value

Seller’s 2007 2007 -0.9 -1.0 2.9 2.5 0.2 0.4 2.7 2.7 2.7 carrying 3.1 0.1 0.1 0.1 value -0.3 3.9 5.9 0.0 0.0 1.2 0.1 1.1 Fair value

Seller’s 2006 2006 -0.9 3.9 8.3 5.0 6.3 0.0 0.0 6.6 0.2 9.2 carrying 0.7 0.7 0.1 0.1 1.1 value PARTIAL DISPOSALS PARTIAL EUR million EUR In October 2007, Rapala and Shimano decided to strengthen their dis- their strengthen to decided Shimano and 2007, Rapala October In The fair value of acquired intellectual rights is property established with Total consideration Total (2006: EUR 6.6 million) resulted in the fair value allocation of EUR 0.0mil- EUR of allocation value fair inthe resulted million) 6.6 EUR (2006: Acquired companies are accounted for using the purchase method of ac- of method purchase the using for accounted are companies Acquired and reels theiralliance worldwide, distribution and strengthened in Hungary 3.1 million EUR of price purchase The acquisition. of date the at assumed to combination business the of cost the allocating involves which counting, over cost EUR 1.0 million is recognized in income statement inincome 1.0 recognized is million EUR cost over ny, Rapala Shimano East Europe Oy, acquired existing Rapala distribution distribution Rapala existing Oy, acquired Europe East Shimano ny, Rapala patents and technology), EUR 0.5 million (2006: EUR 0.3 million) to de- to million) 0.3 EUR (2006: million 0.5 EUR technology), and patents Gain on disposals Consideration received incash received Consideration ferred tax liabilities and net goodwill of EUR 0.2 million (2006: EUR 0.7 mil- EUR (2006: million 0.2 EUR of goodwill net and liabilities tax ferred 0.3 million) to intellectual property rights related intangibles (trademarks, (trademarks, intangibles related rights property intellectual to million) 0.3 EUR (2006: million 0.2 EUR intangibles, related customer to million) 0.9 liabilities contingent and liabilities and acquired assets the of value fair the ture company in Finland, controlled ven- joint a50/50 byestablishing Ukraine and inRussia alliance tribution is value fair of Determination payments. royalty discounted estimated the lion (2006: EUR 0.0 million) in tangible assets, EUR 0.3 million (2006: EUR EUR (2006: million 0.3 EUR assets, intangible 0.0million) EUR (2006: lion lion). Excess of Group’s interest in the net fair value of acquired net assets assets net acquired of value fair net inthe interest Group’s of Excess lion). South-East Europe. Shimano subscribed a 33.4% shareholding in Rapala inRapala shareholding a33.4% subscribed Shimano Europe. South-East rods of manufacturers leading the of one Shimano, and 2007, May In Rapala Share of disposed minority interest minority disposed of Share goodwill disposed of Share Rapala Eurohold, Mr Agh Jr, owns the remaining 10%. 10%. remaining Jr, the Agh owns Mr Eurohold, Rapala of Director Managing the and 56.6% now is ownership Rapala’s Eurohold. Disposed working capital by Rapala. This joint venture compa- venture joint This by Rapala. 1.0 million arose from acquisitions in 2007. The goodwill of 2006 (EUR 0.7 (EUR 2006 of in2007. goodwill The acquisitions from 1.0 arose million A goodwill of EUR 0.2 million and an excess of Group’s interest in the inthe interest Group’s of excess an and million 0.2 EUR of Agoodwill In addition to these partial disposals, the assets of the French fi shing expansion of product and brand portfolio to implement the Group’s strategy. strategy. Group’s the implement to portfolio brand and product of expansion ed to distribute Shimano bicycle parts. This deal was closed in December age as well as utilization of economies of scale in production and distribu- companies in both of these countries. As a result of the new joint venture, venture, joint new the of aresult As countries. these of inboth companies flcash ows of present customerrelationships. net discounted and minimumduration) (average relationship customer of fair The contract. license the for pay to willing be would party external an and included also 50% of the Group’s distribution company in Czech Re- inCzech company distribution Group’s the of 50% also included and million) resulted from acquiring a distribution company in a new market and and market inanew company adistribution acquiring from resulted million) value of customer relations is established based on the estimated duration duration estimated the on based established is relations customer of value net fair value of acquired net assets over cost (negative goodwill) of EUR EUR of goodwill) (negative cost over assets net acquired of value fair net rent product offering, Shimano reels, rods and other Shimano fi Shimano other and rods reels, Shimano tackle shing offering, product rent public. start- also inRussia company distribution The onexclusive basis. products Goodwill isjustifiGoodwill of byexpansion ed the impairment testing of goodwill, see note 13. note see goodwill, of testing impairment the on details more For impairment. for tested been has goodwill Resulted tion. tackle shop where sold in December 2007. inDecember sold where shop tackle these distribution companies to distribute, started in addition to their cur- fl cash net (normalized rate that royalty estimated ow), based market the product assortment and market cover- assortment product 2007 5.9 5.9 5.3 0.4 0.1 0.1

RAPALA ANNUAL REPORT 2007 / Financial Statements / 45 RAPALA ANNUAL REPORT 2007 / Financial Statements / 46 4. O 4. Total 5. o 5. AU EUR million EUR EUR million EUR NON-RE I N Total Total Traveling expenses Total C several smaller income items, of which none is individually significant. individually is none which of items, income smaller several Other income, EUR 0.5 million (2006: 0.4 EUR million) is a combination of of combination a is million) EUR 0.4 (2006: million 0.5 EUR income, Other Audit-related fees fees Audit Auditors fees and services and fees Auditors acquired net assets over costs (negative goodwill) (negative costs over assets net acquired Valuation allowance for trade receivables trade for allowance Valuation Other disposals of assets of disposals Other factory lure Irish of Closure operations French of Consolidation Other non-recurring items non-recurring Other Other restructuring costs Other income Other Government grants assets tangible and intangible of sale from gains Other Other expenses Other expenses Consulting Outsourced logistics Sale of 50% of Rapala Shimano East Europe Oy Europe East Shimano Rapala of 50% of Sale Scrap sales Scrap Oy Europe East Shimano Rapala 50%of of Sale Sales commissions Sales expenses utility and Maintenance expenses marketing and Selling Insurance compensations Insurance Insurance expenses Insurance telecommunication and IT Excess of Group’s interest in the net fair values of values fair net the in interest Group’s of Excess Fees for tax services tax for Fees Rental income Rental Rents paid Rents Freight DIT LU t T ORS F ORS opera her D HER OPERA HER E C D I URR N OPERA EES AN EES I NG I NG N D SERV ti C TI TI O e ng NG PRO NG NG I NG M E AN IC N x ES C D E penses FIT O M X PENSES E

-48.3 2007 -11.6 2007 -6.9 -0.9 -0.8 -0.6 -0.6 -5.3 -4.5 -2.5 -0.7 -0.7 -3.7 -1.3 -1.5 -1.5 -0.1 -5.1 -5.1 -1.1 4.9 0.0 4.9 0.3 0.5 0.5 0.2 0.2 0.2 0.4 1.0 1.6 6.7 0.1 2006 2006 -48.1 -12.0 -0.9 -0.9 -0.8 -0.8 -4.9 -8.6 -4.0 -0.2 -0.4 -4.5 -4.4 -0.7 -0.7 -1.2 -1.2 -0.1 -0.1 -0.1 -4.1 0.0 0.0 0.3 0.6 0.2 0.4 1.5 0.1 AVERAGE PERSONNEL AVERAGE 8. d 8. 6. m 6. EUR million EUR EUR million EUR Persons 7. e EUR million EUR Total The employee benefit expenses include EUR 3.1 million employee related related employee million 3.1 EUR include expenses benefit employee The Total Total Total expenses from the consolidation of French operations and closing of Irish Irish of closing and operations French of consolidation the from expenses Rest of the World the of Rest Europe of Rest Nordic America North structurings. For more details on employee benefits for top management management top for benefits employee on details more For structurings. and option programs, see notes 28 and 29. and 28 notes see programs, option and lure factory, and EUR 0.9 million employee related expenses from other re other from expenses related employee million 0.9 EUR and factory, lure value of acquired net assets over cost over assets net acquired of value Other personnel expenses personnel Other cash in settled be to programs Option shares in settled be to programs Option benefits employee long-term Other Other tangible assets tangible Other assets intangible Other Wages and salaries and Wages Materials, goods and supplies and goods Materials, Machinery and equipment Machinery D D Pension costs - defined benefit plans benefit -defined costs Pension plans contribution -defined costs Pension External services External Buildings fair net the in interest Group’s of Excess epreciation of tangible assets tangible of epreciation assets intangible of epreciation Change in inventory in Change Purchases during the period the during Purchases m epre a plo t er ci y i an als b ee a ti an on ene d serv fit e fit d im x ic pa penses es i r m en t s -114.9 -112.4 3 223 4 577 -65.0 -52.0 2007 2007 2007 -0.3 -8.8 -0.6 -0.5 -3.3 -3.8 -0.4 -5.4 446 788 -1.9 -1.0 -0.1 120 -1.1 0.0 1.0 2 678 3 987 2006 2006 -46.0 2006 -99.5 -98.1 -54.1 -0.9 -6.3 -0.6 -3.9 -3.3 436 -3.7 755 -1.0 -1.0 -1.6 118 0.0 0.0 0.3 - 10. FINANCIAL INCOME AND EXPENSES AND INCOME 10. FINANCIAL T 9. RESEARCH AND DEVELOPMENT EXPENSES DEVELOPMENT AND 9. RESEARCH EXCHANGE GAINS AND LOSSES IN LOSSES AND GAINS EXCHANGE RECOGNIZED DIRECTLY IN EQUITY EUR million EUR HE INCOME STATEMENT 1.6 million recognized as an expense in 2007 (2006: EUR 1.2 million). EUR (2006: in2007 expense an as 1.6 recognized million Total Total Total Net profi t for the period includes research and development expenses of EUR EUR of expenses development and profiNet research includes period the t for d Gains and losses on hedges of net investments net of hedges on losses and Gains Change in fair value of interest rate rate interest of value infair Change investments and interest rate dearivatives had no income statement effect. statement income no had dearivatives rate interest and investments In 2007, as IAS 39 effectiveness requirements were fulfi 2007,In effectiveness 39 asIAS lled, hedges of net Interest expenses include interest expense of fi of expense interest include expenses of Interest contracts lease nance EUR -0.1 million in 2007 (2006: EUR -0.1 million). EUR (2006: -0.1 in2007 million EUR investments, net of tax of net investments, In fiIn expenses and income nancial In sales net In In other operating income and expenses and income operating other In Interest and other fi other and Interest income nancial Interest and other fi other and Interest expenses nancial Foreign exchange losses exchange Foreign gains exchange Foreign Fair value gains on available-for-sale available-for-sale on gains value Fair erivatives - hedge accounted -hedge erivatives purchases From loans and receivables and loans From derivatives, non-hedge accounted measured at amortized cost atamortized measured measured at amortized cost atamortized measured measured at amortized cost atamortized measured Change in fair value of currency currency of value infair Change Other fiOther nancial expenses fiOther nancial income Interest income from loans and receivables and loans from income Interest Interest expense on fi on expense Interest liabilities nancial From fiFrom liabilities nancial From fiFrom liabilities nancial receivables and loans From 072006 2007 -6.6 -0.3 -5.0 -0.2 -0.2 -0.4 -2.5 -1.0 -0.1 0.9 0.9 0.0 0.0 0.5 0.7 0.7 3.1 -5.9 -0.5 -0.5 -0.2 -5.7 -1.5 -1.4 -3.1 -7.1 0.0 0,0 4.6 0.2 0.7 0.1 0.1 0.1 11. TAXES INCOME INCOME TAXES IN THE INCOME STATEMENT INCOME THE IN TAXES INCOME EUR million EUR INCOME TAX RECONCILIATION The additional tax levied by the tax authorities has been fully booked but but booked fully been has authorities tax bythe levied tax additional The Taxes for prior years prior Taxes for Total cerning the taxation of the Group’s parent company in years 2004-2007. 2004-2007. inyears company parent Group’s the of taxation the cerning con- authorities tax Finnish with dispute ongoing an to relating cost tax al years include a total of EUR 1.9 million (2006: EUR 0.8 million) of addition- of million) 0.8 EUR 1.9 (2006: million EUR of atotal include years r deferred tax assets from prior years prior from assets tax deferred the Group is currently fi Court. currently is Group Administrative the the to appeal its nalizing In 2007, Group started to calculate deferred taxes on internal invento- internal on taxes deferred calculate to 2007, started In Group Other items Other Changes in the carrying amounts of amounts carrying inthe Changes Current income tax income Current tax rates on deferred tax balances tax deferred on rates tax tax benefitax recognized t is income exempt tax foreign subsidiaries t Income taxes in the income statement income inthe taxes Income Impact of the changes in the inthe changes the of Impact Income taxes at Finnish corporate atFinnish taxes Income Effect of consolidation and eliminations and consolidation of Effect Losses for which no deferred deferred no which for Losses withholding taxes Foreign expenses andNon-deductible in rates tax different of Effect Deferred tax ax rate (26%) rate ax y margins in more detail. Current income taxes and taxes from previous previous from taxes and taxes income Current detail. inmore y margins

072006 2007 -5.8 -5.8 -0.5 -0.2 -6.1 -1.7 -7.7 0.0 0.0 0.3 0.8 0.5 1.9 1.0 -0.8 -0.6 -0.5 -3.0 -3.8 -0.4 -3.6 -3.6 0.0 0.5 0.2 0.1 1.1

RAPALA ANNUAL REPORT 2007 / Financial Statements / 47 RAPALA ANNUAL REPORT 2007 / Financial Statements / 48 2007 2006 EUR million EUR MOVEMENT OFMOVEMENT DEFERRED TAXES 4.4 milli Total deferred tax assets tax Total deferred Total deferred tax liabilities tax Total deferred assets tax Total deferred forward carried Tax losses Tax losses carried forward carried Tax losses es will expire in years 2008 through 2013. through 2008 inyears expire will es At December 31, 2007, the Group had tax losses carried forward of EUR EUR of forward carried losses 31, tax had 2007, December Group At the Other temporary differences temporary Other differences temporary Other Other temporary differences temporary Other differences temporary Other ization of the tax benefi t is not probable. EUR 0.2 million of these tax loss- tax benefi these of million tax 0.2 the of EUR ization probable. not t is Inventory Inventory Net deferred tax asset tax deferred Net liabilities tax Deferred assets net acquired for adjustments value Fair reserves and other untaxed difference Depreciation eliminations and consolidation of Effect difference Depreciation Pension obligations Net deferred tax asset tax deferred Net assets net acquired for adjustments value Fair reserves and other untaxed difference Depreciation eliminations and consolidation of Effect difference Depreciation Pension obligations Provisions Pro been recognized in the consolidated fi consolidated inthe real- the recognized been because statements nancial visions on (2006: EUR 4.3 million), for which deferred tax assets have not not have assets tax deferred which for million), 4.3 EUR (2006: on earnings is in the control of the Group and such distribution is not probable probable not is distribution such and Group the of control inthe is earnings recognized in the consolidated balance sheet because distribution of the the of distribution because sheet balance consolidated inthe recognized within the foreseeable future. Deferred tax liability on undistributed earnings of subsidiaries has not been been not has subsidiaries of earnings undistributed on liability tax Deferred 2.9 6.3 4.9 0.3 3.6 2.6 0.6 5.5 0.5 3.4 0.2 0.2 0.2 0.2 1.9 1.0 1.3 1.3 1.6 1.5 0.7 0.1 0.1 0.1 1.1 1.1 Jan. 1

-0.6 Income -0.1 -0.1 0.0 2.0 0.0 0.0 0.3 0.3 0.3 0.6 0.6 0.5 0.2 0.2 1.9 1.3 1.5 1.4 2.1 0.1 0.1 0.1 0.1 0.1 statement 0.0 0.0 0.0 Equity -0.6 -0.2 -0.2 -0.2 -0.4 -0.4 -0.4 -0.4 -0.4 -0.1 -0.1 -0.1 Translation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 differences

-0.3 Aquisitions 0.3 0.3 0.5 0.5 0.5 (see note 3) 8.0 6.3 5.3 2.0 4.9 0.3 0.3 0.8 3.4 0.2 0.2 4.5 0.2 0.2 1.9 1.3 1.8 1.3 1.6 1.6 1.5 2.7 0.7 1.7 0.1 0.1 Dec .31 12. TANGIBLE ASSETS AND ASSETS HELD-FOR-SALE ASSETS AND ASSETS 12. TANGIBLE 2006 2007 EUR million EUR Translation differences Transfer held-for-sale to assets Translation differences Translation differences Transfer held-for-sale to assets Translation differences 1) Includes reclassifi cations between intangible and tangible assets of EUR 0.1 million in 2007 (2006: EUR 0.1 million). EUR (2006: 0.1 in 2007 million EUR of assets tangible and reclassifi intangible Includes 1) between cations The acquisition value remaining after depreciation for machinery intangi- machinery for depreciation after remaining value acquisition The Accumulated depreciation Dec. 31 Dec. depreciation Accumulated Accumulated depreciation Dec. 31 Dec. depreciation Accumulated Ad 1 Jan. cost Acquisition Acquisitions (see note 3) Acquisitions (see 1 Jan. depreciation Accumulated 31 Dec. cost Acquisition Acquisitions (see note 3) Acquisitions (see 1 Jan. depreciation Accumulated 31 Dec. cost Acquisition Acquisitions (see note 3) Acquisitions (see Additions 1 Jan. cost Acquisition Acquisitions (see note 3) Acquisitions (see Carrying value Dec. 31 Dec. value Carrying 1 Jan. value Carrying Carrying value Dec. 31 Dec. value Carrying 1 Jan. value Carrying million). Depreciation during the period Reclassifi cations1) Disposals Depreciation during the period Reclassifi cations1) Disposals Reclassifi cations1) Disposals Reclassifi cations1) Disposals ble assets was EUR 11.7 million on December 31, 2007 (2006: EUR 11.1 EUR 11.7 (2006: 31, EUR 2007 was December on million assets ble ditions -0.2 -0.1 2.0 2.0 0.0 0.0 1.9 1.9 1.9 1.9 1.7 1.7 Land 10.5 15.5 18.4 -0.5 -3.0 -0.2 18.1 18.1 -8.7 -8.7 -1.0 -1.0 -7.9 -0.1 -7.4 0.0 0.0 0.0 0.0 0.3 0.0 0.2 2.2 9.4 9.4 0.7 8.1 0.1 0.1 Buildings -33.5 -29.2 -31.4 -31.4 44.8 44.8 42.9 46.4 12.9 13.6 13.4 13.4 -0.3 -3.8 -3.7 -1.0 -1.3 -1.3 -1.2 Machinery 2.9 0.0 0.0 0.0 0.6 0.6 1.0 1.0 1.0 4.7 0.1 and equipment Other -0.6 -3.9 -3.9 -4.6 -0.4 -0.4 -0.4 -3.2 -1.0 -0.1 tangible -1.1 8.0 8.0 3.3 0.0 0.0 0.6 6.5 4.8 2.2 0.2 0.2 0.2 0.4 9.4 1.5 0.1 0.1 4.1 4.1 assets Advanced payments -0.8 -0.2 -0.4

-1.0 and construction 0.9 0.9 0.0 0.0 0.3 0.3 0.6 0.6 0.6 0.6 1.3 1.7 in progress -44.0 -44.0 -40.3 -45.5 73.9 29.8 73.5 73.5 29.4 29.4 28.4 -5.9 70.1 -3.2 -2.0 -2.2 -2.4 -5.7 -0.1 -2.1 0.0 2.2 0.2 1.0 1.3 1.4 0.7 7.4 0.1 0.1 0.1 7.7 Total

RAPALA ANNUAL REPORT 2007 / Financial Statements / 49 RAPALA ANNUAL REPORT 2007 / Financial Statements / 50 13. INTANGIBLE ASSETS ASSETS HELD-FOR-SALE ASSETS LEASED BY FINANCE LEASE AGREEMENTS LEASE BY FINANCE LEASED ASSETS EUR million EUR EUR million EUR Translation differences Translation differences Translation differences Acquisition cost Dec. 31 Dec. cost Acquisition 31 Dec. depreciation Accumulated Additions As part of the consolidation of Rapala’s French operations, Rapala signed s od over expected useful lives which vary from 3 to 10 years and adjusted adjusted 10 and 3 to from years vary which lives useful expected over od a s Accumulated depreciation Dec. 31 Dec. depreciation Accumulated 1) Includes reclassifi cations between intangible and tangible assets of EUR 0.1 million in 2007 (2006:EUR 0.1 million). (2006:EUR 0.1 in2007 million EUR of assets tangible and reclassifi intangible Includes 1) between cations Accumulated depreciation Jan. 1 Jan. depreciation Accumulated 31 Dec. cost Acquisition Acquisitions (see note 3) Acquisitions (see Additions 1 Jan. cost Acquisition Carrying value Dec. 31 Dec. value Carrying Other intangible assets include trademarks, patents, licenses, patents, include computer trademarks, assets intangible Other Carrying value Jan. 1 Jan. value Carrying for any impairment charges. The expected useful life for most trademarks trademarks most for life useful expected The charges. impairment any for Carrying value Dec. 31 Dec. value Carrying 1 Jan. value Carrying Intangible assets are stated at cost, amortized on a straight line meth- line astraight on amortized atcost, stated are assets Intangible Depreciation during the period Reclassifi cations Depreciation during the period Reclassifi cations1) Disposals Reclassifi cations1) Disposals oftware and customer relationships acquired in business combinations. combinations. inbusiness acquired relationships customer and oftware ale agreement for the warehouse and offi and warehouse the for in agreement ale Marcel inSaint building ce January 2008. The plan is also to sell the warehouse and offi and warehouse the sell to also is in plan building ce The 2008. January at cost less any accumulated impairment loss, and not amortized. Trade- amortized. not and loss, impairment accumulated any less at cost measured is Goodwill amortized. not and loss impairment accumulated marks with indefi nite lives and goodwill are tested for impairment annually. indefi impairment for with tested are marks goodwill and lives nite is decades and therefore these intangibles are measured at cost less any less atcost measured are intangibles these therefore and decades is Loudeac during 2008. during Loudeac 43.4 43.4 45.4 45.4 -0.4 -1.8 0.2 Goodwill Other -0.3 -0.5 -0.5 -4.3 -0.2 -4.2 12.1 12.1 -0.1 intangible 0.3 0.2 7.9 0.7 0.1 7.7 assets 2007 53.3 55.3 -0.5 57.5 -0.6 -0.5 -4.3 -0.2 -4.2 -2.3 51.1 -0.1 0.0 0.3 0.8 1.3 1.8 0.2 1.2 0.1 0.1 Total Buildings

2007 45.4 45.4 47.5 47.5 -2.6 -0.1 -0.1 -0.1 Machinery 0.0 0.2 0.2 0.4 0.1 Goodwill and equipment

Other -0.4 11.3 -0.3 -0.3 -0.6 -4.2 12.1 -0.1 -3.7 -0.1 intangible 0.0 0.0 0.0 0.3 1.3 1.8 1.4 1.2 7.9 7.6 0.1 assets Buildings 2006 2006 53.3 58.8 57.5 -0.3 55.1 -0.6 -4.2 -2.9 -0.1 -0.1 -3.7 -0.1 Machinery 0.0 0.3 0.2 0.0 0.0 0.3 1.6 0.1 0.1 0.1 Total and equipment 20 GOODWILL AND TRADEMARKS WITH INDEFINITE LIVES BY BUSINESS SEGMENTS BUSINESS BY LIVES INDEFINITE WITH TRADEMARKS AND GOODWILL Key assumptions Key 2007 INDEFINITE LIVES WITH TRADEMARKS AND GOODWILL OF TESTING IMPAIRMENT EUR million EUR The recoverable amount of the CGU is determined based on value-in- The Group is led as a whole and not organized nor managed in segments. insegments. managed nor organized not and awhole as led is Group The Growth rate Growth – Compared to actual growth rates during past 5 years, of cost pre-tax average weighted the is rate –Discount rate Discount operating margin, EBITDA estimated Group’s –The margin EBITDA Trademarks with indefi with Trademarks lives nite indefi with Trademarks lives nite duction volumes are derived from the utilization of existing property, plant plant property, existing of utilization the from derived are volumes duction en into account in the development of EBITDA margin. margin. EBITDA of development inthe account into en As a consequence, goodwill and trademarks with indefi with trademarks and tested are lives nite goodwill aconsequence, As a sales or a production organization or some other functions or operations on the business segment (product lines) level. lines) (product segment business the on reporting. segment secondary entity’s the or primary entity’s the either on count rate is the weighted average pre-tax cost of capital (WACC), which which (WACC), capital of cost pre-tax average weighted the is rate count assumptionsand on equipment. which most important The management of Group’s equity and debt taken into account their different return require- return different their account into taken debt and Group’sof equity cost total the represents capital of cost average Weighted (WACC). capital gross and sales on view management’s and margins actual years past on 2007 or in 2006. management has been conservative in determining the growth rate for im- for rate growth the indetermining conservative been has management ments. margin increase development. in The level general has cost also been tak- needed to operate on a stand-alone basis. However, according to IFRS, the the IFRS, to However, according basis. astand-alone on operate to needed uct assortment and utilization of distribution and manufacturing capacity. capacity. manufacturing and distribution of utilization and assortment uct use calculations. Cash fl ow projections, which were used in these calcu- pairment purposes. based is sales, net to compared profi impairments and depreciation t before was 7% in 2007 (2006: 9%). The growth rate used to extrapolate the cash cash the extrapolate to used rate growth The 9%). (2006: 2007 in 7% was formed impairment tests,fl no ow beyond the impairment fi a As result of 0%). the per-ve-year period (2006: is 0% losses have been recognized in pro- and sales estimated The Board. bythe approved and management the further implementation of Group’s strategic objectives. strategic Group’s of implementation further lowest cash-generating unit (CGU) cannot be cannot larger than a segment based unitlowest (CGU) cash-generating M lations, were based on recent most 5- Sales – The Group’s estimated sales are based on present and future prod- future and present on based are sales estimated Group’s –The Sales In addition, estimated sales are based on long-term growth of industry and and industry of growth long-term on based are sales estimated addition, In has based its cash fl Dis- cash margins. its gross based and has sales the are projections ow Goodwill Goodwill 06 ost of the units are also strongly interlinked i.e. some units do not have not do units i.e.some interlinked strongly also are units the of ost year fiyear by prepared forecasts nancial 34.1 32.2 1.5 1.9 Lures 14. IN COMPANIES ASSOCIATED INVESTMENTS Sensitivity analysis Sensitivity EUR million EUR INFORMATION ON LANIMO OÜ, ESTONIA OÜ, LANIMO ON INFORMATION The Group has a 33.3% interest in unlisted Lanimo Oü. Its main activity is activity main Its Oü. Lanimo inunlisted interest a33.3% has Group The The key sensitivity for the impairment test is the EBITDA margin and dis- and margin EBITDA the is test impairment the for keysensitivity The ences in reporting time schedule. Information for the fi the for Information schedule. time end- period inreporting nancial ences count rate. It is management’s opinion that no probable change in any of not include goodwill or impairments. Lanimo Oü’s fi Lanimo impairments. or the goodwill on include not based are gures 20% higher than used in the management’s calculations, it would not lead lead not would it calculations, management’s inthe used than higher 20% be would rate discount the if or bymanagement estimated than lower 20% producing leather-haberdashery. amount ofOü does Lanimo carrying The ties EUR 0.1 million, sales EUR 0.2 million and profi and 0.0million. million 0.2 EUR 0.1 EUR sales EUR million, ties t/loss would exceed the recoverable amount. Even if EBITDA margin would be would margin EBITDA if Even amount. recoverable the exceed would to an impairment in loss any of generating the cash units. amount carrying the where asituation to lead would keysensitivities the ing on December 31, 2006 are the following: assets EUR 0.1 liabili- EUR million, assets following: the are 31, 2006 December on ing fi the differ- to for due 30, information September on ending period nancial Assets 31 Dec. cost Acquisition Additions 1 Jan. cost Acquisition Ownership, % Ownership, Sales L Profi t/loss iabilities

0.0 Fishing 0.8 0.8 0.1 Hooks

Fishing 1.4 7.0 1.4 7.0 Accessories

Third Party 0.5 2.2 Fishing 0.6 2.1 Products

Other 0.0 1.2 1.3 0.1 Products 072006 2007 45.4 33.3 43.4 3.4 0.0 0.0 0.0 0.0 0.2 4.1 0.1 0.1 Total 33.3 O.0 0.0 0.0 0.0 0.0 0.0 0.2

RAPALA ANNUAL REPORT 2007 / Financial Statements / 51 RAPALA ANNUAL REPORT 2007 / Financial Statements / 52 17. RECEIVABLES 16. INVENTORIES INVESTMENTS 15. AVAILABLE-FOR-SALE EUR million EUR EUR million EUR million EUR Tahkon Eagle and BRF Morkullan. BRF and Tahkon Eagle Total Translation differences Total ers’ equity. Principal available-for-sale investments comprise of Kiinteistö Kiinteistö of comprise investments available-for-sale Principal equity. ers’ Available-for-sale investments comprise of unlisted shares that are meas- available-for-sale are recognized investments, net in of sharehold- tax, of changes value fair The value. fair their to approximately corresponds measured reliably impairment, which are possible less measured at cost ue by EUR 2.4 million (2006: EUR 1.0 million). 1.0 million). EUR (2006: 2.4million byEUR ue ured at fair value. Certain unlisted shares for which fair values cannot be Oy Brinkhaga, Kanavagolf Vääksy Oy, Arctic Circle Santa Claus Oy, As Oy Oy Oy, As Claus Santa Circle Oy, Arctic Vääksy Kanavagolf Brinkhaga, Oy In 2007 the carrying value of inventories differed from its net realizable val- realizable net its from differed inventories of value carrying the 2007 In Additions Carrying value Dec. 31 Dec. value Carrying Carrying value Jan. 1 Jan. value Carrying Work inprogress Work Current receivables Interest-bearing Interest-bearing Non-current receivables Disposals changes value Fair Non-interest-bearing Non-interest-bearing provisions value realizable Net Finished products Raw material Trade receivables Valuation allowance for trade receivables trade for allowance Valuation VAT receivable Other receivables Other income accrued and expenses prepaid Other Other receivables Other receivables Other Prepaid insurance expenses Loan receivables Loan receivables 2007 2007 2007 84.3 70.8 52.4 -2.4 -1.8 47.1 -0.1 0.0 0.0 0.0 2.8 9.0 0.6 0.6 0.2 2.4 1.4 7.0 0.1 0.1 2006 2006 2006 58.9 46.0 73.0 52.8 -1.0 -1.7 3.3 0.0 0.0 0.0 0.0 0.0 0.0 6.6 8.5 0.6 0.6 0.4 1.0 3.7 0.1 0.1 18. CASH AND CASH EQUIVALENTS CASH AND 18. CASH CREDIT LOSS ALLOWANCE FOR TRADE RECEIVABLES TRADE FOR ALLOWANCE LOSS CREDIT EUR million EUR EUR million EUR Translation differences Total Additions Other current interest-bearing Other rece The weighted average interest rate rate interest average weighted The Credit loss allowance for trade receivables Dec. 31 Dec. receivables trade for allowance loss Credit Credit loss allowance for trade receivables Jan. 1 Jan. receivables trade for allowance loss Credit Cash at bank and inhand and atbank Cash Short-term deposits Recovery Deductions creased probability of customer insolvency) that the Group will not be able able be not will Group the that insolvency) customer of probability creased and deposits with maturities of over three months. three over of maturities with deposits and 3.95%). (2006: 5.61% 31,was 2007 atDecember receivables loan current amount. carrying original their to corresponding as 2007 was 8.00% (2006: 4.00%). The weighted average interest rate of rate interest average weighted The 4.00%). (2006: 8.00% was 2007 unsuccessful dunning attempts or known fi known or attempts dunning unsuccessful diffinancial in- thus and culties Credit allowances have not been made on other receivables. other on made been not have allowances Credit there is objective evidence (such as signifi as (such and evidence receivables of objective is overdue there cant to collect all amounts due according to the original terms of the receivables. receivables. the of terms original the to according due amounts all collect to is regarded as corresponding to their book value. book their to corresponding as regarded is In most casesa credit loss allowances are determined individually, when Loan receivables are based on fl on value fair based their are case inwhich receivables rates, Loan oating regarded is receivables current of value fair the maturity, short their to Due the carrying value. carrying the Fair value of cash and cash equivalents does not differ signifi differ not does equivalents cash from and cash of cantly value Fair ivables include interest receivable receivable interest include ivables of non-current loanof receivables non-current in 2007 072006 2007 27.3 -0.6 21.7 -0.1 0.0 1.8 5.7 0.7 1.7 2006 23.3 24.4 -0.7 0.0 0.0 0.7 1.7 1.7 1.1 SHARES AND SHARE CAPITAL 19. EQUITY ATTRIBUTABLE TO SHAREHOLDERS TO ATTRIBUTABLE 19. EQUITY DIVIDENDS EUR million EUR Translation differences ed shares (RAP1VN0107). The book value of a share is EUR 0.09. Each Each 0.09. EUR is ashare of value book The (RAP1VN0107). shares ed share from both series is entitled to a lock-up period of 12 months. The new restricted series of shares shall shall shares of series restricted new The 12 of months. period a lock-up 24, 2008. 24, 38 578 769 old shares (trading code RAP1V) and 889 680 new restrict- new 680 889 and RAP1V) code (trading shares old 769 578 38 Gains and losses on cash fl cash on losses and Gains hedges ow On December 31, 2007, the share capital fully paid and reported in reported and paid fully 31, 2007, capital December share On the changes Other investments net of hedges on losses and Gains will not give right to dividend paid from fi from paid dividend to right give not will is there and 2007 year nancial was 39 468 449 (2006: 38 576 269), which is divided to two series: series: two to divided is which 269), 576 38 (2006: 449 468 39 was the Trade Register was EUR 3.6 million and the total number of shares shares of number total the and million 3.6 EUR was Tradethe Register its holders the same rights as the old shares, except that these new shares shares new these that except shares, old the as rights same the holders its ing the right to dividend between the series no longer exists i.e. October i.e.October exists longer no series the between dividend to right the ing investments, net of tax of net investments, Share premium fund Dec. 31 Dec. fund premium Share Shares subscribed with options 1 Jan. fund premium Share 31 Dec. capital Share Shares subscribed with options 1 Jan. capital Share Share option program option Share Translation differences contain exchange differences arising from the cur- the from arising differences exchange contain differences Translation For more details on dividends, see note 31. note see dividends, on details more For Retained earnings Jan. 1 Jan. earnings Retained Fund for invested non-restricted Dec. 31 equity Private offering Fund for invested non-restricted Jan. equity 1 31 Dec. reserve value Fair available-for-sale on gains value Fair 1. Jan reserve value Fair Private offering Retained earnings Dec. 31 Dec. earnings Retained period the for income Net Dividends paid be combined to the old series of shares as soon as the difference regard- differences arising from a monetary item that forms part of a net invest- anet of part forms that item amonetary from arising differences changes from hedging the net investment in foreign companies where this this where companies inforeign investment net the hedging from changes movements in the fair values of available-for-sale fi available-for-sale of values fair inthe de- movements and assets nancial includes reserve value Fair accounting. hedge for conditions the meets value fair contain also differences Translation company. inaforeign ment rivative instruments used for cash fl cash for used instruments rivative hedging. ow fi subsidiaries’ exchange and foreign of translation statements rency nancial one vote. New restricted shares grant grant shares restricted New vote. one 072006 2007 60.5 70.9 16.7 16.7 17.3 -4.6 -3.4 4.9 4.9 0.0 0.0 0.0 0.0 0.0 3.6 3.5 0.4 0.7 0.1 0.1 55.5 60.5 16.3 10.8 16.7 -4.2 -2.6 0.0 0.0 0.8 3.5 3.5 0.2 0.4 0.1 0.1 20. EMPLOYEE BENEFIT OBLIGATIONS BENEFIT EMPLOYEE 20. CHANGES IN SHARE CAPITAL IN 2007 IN CAPITAL SHARE IN CHANGES SHARE BASED PAYMENTS BASED SHARE BOARD’S AUTHORIZATIONS In October 2007, 889 680 new shares were issued to Shimano for for Shimano to issued were shares new 680 2007, 889 October In The new shares where listed as a new series of shares on the main list of list main the on shares of series anew as listed where shares new The This authorization includes the right for the Board to resolve on all terms terms all on resolve to Board the for right the includes authorization This garding the right to dividend between the series no longer exists i.e.Oc- exists longer no series the between dividend to right the garding ever, it has not been possible to get suffi get to possible ever, been not has it calcula- the for information cient den. In French plans retirement benefi ts are determined based on salary entitling to shares, including issuance in deviation from the shareholders’ shareholders’ the from indeviation issuance including shares, to entitling equal terms, or through public trading from the market. This authorization Alecta in are defi multi-employer Sweden Alecta ned benefi t pension plans. How- options or special rights entitling to shares in one or more issues. The The issues. more or inone shares to entitling rights special or options shall be combined to the old series of shares as soon as the difference re- capital was EUR 3 552 160.41 and the total number of outstanding shares shares outstanding of number total 160.41 the and 3552 EUR was capital supplementary pension arrangement to the CEO of subsidiary in Canada is inCanada subsidiary of CEO the to arrangement pension supplementary classifi defi afunded as ed by benefined operated plans ITP-pension t plan. The unfunded. are obligations French These employment. of period and and conditions of the issuance of new shares, options and special rights rights special and options shares, new of issuance the of conditions and 2007, the Board can decide to issue shares through issuance of shares, shares, of issuance through shares issue to decide can 2007, Board the month weighted average share price for the share from June 27 to Sep- to 27 June from share the for price share average weighted month u number of new shares to be issued including the shares to be obtained rights. The share capital increased with EUR 225.00 and the subscrip- the and 225.00 EUR with increased capital share The rights. nies is arranged under the Finnish statutory employee pension plan (TYEL) (TYEL) plan pension employee statutory Finnish the under arranged is nies signifinot benefi post-employment other no has Group The cant. t obliga- responds to less than 10% of all shares of the company. The shares may 39 468 449 at December 31, 2007. atDecember 449 468 39 purchase a maximum of 2 000 000 shares. This amount of shares cor- shares of amount This shares. 000 2000 of amaximum purchase from 5years of aperiod for inforce is authorization This rights. preemptive Group has defi has Group Swe- benefi and ned Canada inFrance, only plans t pension will not give right to dividend paid from the fi the from paid dividend to right give not will they and 2007 year nancial tober 24, 2008. As a result of the share capital increase, Rapala’s share share Rapala’s increase, capital share the of aresult As 24, 2008. tober 2007.These 25, shares new October on Helsinki Exchange Nordic OMX the 24, 2007. October on Trade inthe Register registered was subscription the to 071.20 corresponding 80 EUR of increase 27. capital tember share The athree- represented which share, per 5.62 EUR of price subscription the the main list of the OMX Nordic Exchange Helsinki on April 5,2007. All April on Helsinki Exchange Nordic OMX the of list main the on listed and 4,2007 April on Trade inthe Register registered were tions 500 000 shares have now been subscribed with 2003A option rights. rights. option 2003A with subscribed been now have shares 000 500 through an external pension insurance company. insurance pension external an through compa- Group’sFinnish the of personnel the of security pension The tions. are plans Swedish fi the the view of point Group’s From statements. nancial defi as for accounted in been have plans plans these fore contribution ned there- and operations, plan from byemployer assets and obligations of tion the resolution by the The Boardis AGM. also authorized to resolve to re- is in force until September 30, 2008. 30, September until inforce is In March 2007, 2 500 new shares where subscribed with 2003A option option 2003A with subscribed where shares new 2007, March 2500 In Most of the Group´s pension plans are defi are plans pension Group´s the of Most The plans. contribution ned have a lock-up period of 12 months. The new restricted series of shares shares of series restricted new The 12 of months. period alock-up have Based on authorization given by the Annual General Meeting (AGM) in April (AGM) givenMeeting General by on the Annual authorization Based For more details on share based payments, see note 29. note see payments, based share on details more For be repurchased either through a tender offer made to all shareholders on shareholders all to made offer atender through either repurchased be nder options or special rights shall be no more than 10 000 000 shares.

RAPALA ANNUAL REPORT 2007 / Financial Statements / 53 RAPALA ANNUAL REPORT 2007 / Financial Statements / 54 ASSUMPTIONS THE IN RECOGNIZED AMOUNTS % 2006 2007 S BALANCE SHEETBALANCE MOVEMENT IN PLAN ASSETS PLAN IN MOVEMENT BALANCE SHEET RECONCILIATION SHEET BALANCE EXPENSES RECOGNIZED IN THE INCOME INCOME THE IN RECOGNIZED EXPENSES EUR million EUR TATEMENT Total Actuarial gains and losses losses and gains Actuarial Annual inflAnnual rate ation inflAnnual rate ation Actuarial gains and losses losses and gains Actuarial C Current service cost service Current Obligations Dec. 31 Dec. Obligations C 1 Jan. Obligations In Interest cost F Present value of funded obligations Effect of any curtailments or settlements or curtailments any of Effect Fair value of plan assets on Jan. 1 Jan. on assets plan of value Fair Fair value of plan assets on Dec. 31 Dec. on assets plan of value Fair assets plan on return Expected Net obligations Present value of unfunded obligations Futu Discount rate assets plan on return Expected Paid contributions settlements or curtailments any of Effect Futu Discount rate Unrecognized prior service cost service prior Unrecognized Unrecognized actuarial gains/losses Plan comprise assets of cash. air value of plan assets plan of value air urrent service cost service urrent ontributions paid into the plans the into paid ontributions terest cost re increase salary re increase salary 072006 2007 -0.2 -0.2 -0.1 -0.1 6.0 5.3 4.0 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 0.7 0.7 0.7 0.7 0.1 0.1 0.1 0.1 Canada -0.2 0.9 2.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 5.5 2.5 2.5 4.5 0.7 0.7 0.7 France AMOUNTS FOR CURRENT AND PREVIOUS THREE PERIODS THREE PREVIOUS AND CURRENT FOR AMOUNTS EUR million EUR 21. PROVISIONS EUR million EUR 1) Includes reclassifi cations between provisions and accrued liabilities and deferred deferred and liabilities accrued and provisions reclassifi between Includes 1) cations The Group expects to contribute EUR 0.0 million to its defi its to 0.0million EUR benefi contribute to ned expects Group The t pen- vidually signifi cant. Restructuring and other provisions are expected to real- to expected are provisions signifi other and vidually Restructuring cant. Other provisions include distinct provisions, but no amounts which are indi- are which amounts no but provisions, distinct include provisions Other adjustment on adjustment assets Total provisions Total Translation differences sion plans in2008. plans sion on adjustment ize within the next 12 next months. the within ize unfunded obligations unfunded income of EUR 0.1 million in 2007 (2006: EUR 0.3 million). million). 0.3 EUR (2006: 0.1 in2007 million EUR of income plan assets plan liabilities plan funded obligations Experience Experience Present value of plan of value Fair Present value of Additions Additions Current Other provisions Restructuring provisions Restructuring Warranty provisions Warranty Non-current Provisions Dec. 31 Reclassifi cation1) Provisions Jan. 1 Provisions Dec. 31 Provisions Jan. 1 Provisions Dec. 31 Provisions Jan. 1 Utilized provisions Utilized provisions Utilized

0720 052004 2005 2006 2007 -0.1 -0.1 0.7 0.1 0.9 0.1 072006 2007 -0.4 -1.8 -0.1 3.3 0.0 0.0 3.6 3.2 3.2 0.0 0.8 1.9 0.1 0.1 0.1 0.1 -0.3 -0.3 0.9 2.0 0.0 0.0 0.8 1.9 1.0 1.6 0.1 0.1 1.1 1. Foreign Exhange Risks Risks Exhange 1. Foreign 22. FINANCIAL RISK MANAGEMENT AND DERIVATIVE DERIVATIVE AND MANAGEMENT RISK FINANCIAL 22. FINANCIAL INSTRUMENTSFINANCIAL RESTRUCTURING PROVISIONS RESTRUCTURING MARKET RISK In the fourth quarter, Group also booked a restructuring provision of provision arestructuring booked also Group quarter, fourth the In In 2007, the Group increased its emphasis on risk management by management risk on emphasis its increased 2007, In Group the Financial risks consist of market risks, credit and default risks and li- and risks default and credit risks, market of consist risks Financial The decision of closing was part of the European restructuring and deve- and restructuring European the of part was closing of decision The The main objective of the Group’s fi Group’s the of objective main The reduce to is management risk nancial The Group’s market risks are mainly caused by changes in foreign ex- inforeign bychanges caused mainly are risks market Group’s The discussions with personnel and trade unions where completed. where unions trade and personnel with discussions relo- be will units in2007. Other completed was Ragot of relocation The es. Mor- to moved are fi and (Tortue) queen) Marcel Saint of business line shing exposed to market price changes of certain raw materials mainly metals, metals, mainly materials raw certain of changes price market to exposed expenses in different currencies, which provide quite an effective hedge in hedge effective an quite provide which currencies, indifferent expenses between balance the regularly monitors Management Risk dollar. Group quidity risks. This note also presents the Group’s capital management. capital Group’s the presents also note This risks. quidity structuring, distribution from Loudeac (Ragot) and Saint Marcel (Water- Marcel Saint and (Ragot) Loudeac from distribution structuring, sure suffi cient liquidity. The Board has approved the Group’s risk manage- risk Group’s the suffisure approved has Board The liquidity. cient cated next summer at the latest. Restructuring provision was booked when when booked was provision Restructuring latest. atthe summer next cated on the Group’s earnings, cash fl cash also is Group earnings, Group’s The the on sheet. balance and ows sary actions to manage fi manage to actions sary risks. nancial agement procedures. cant part of expenses arise in euros, US dollars as well as HK dollars and change management processes. Group Risk Management, consisting of the CFO, CFO, the of consisting Management, Risk Group processes. management fi of implementation and development for management, man- risk nancial fi Group’s the with together responsible, is CEO and nance principles ment 2.5 million relating to the consolidation of operations in France. In the re- the In inFrance. operations of consolidation the to relating million 2.5 villars and also the distribution of VMC Europe is moved to the same premis- same the to moved is Europe VMC of distribution the also and villars uncertainty on earnings, cash fl cash earnings, on en- to as well as uncertainty sheet, balance and ows recruiting a Group Risk Manager to manage and develop Group’s risk risk Group’s develop and manage to Manager Risk aGroup recruiting nue finue products. the packaging and testing nalizing, Group Treasurer and Group Risk Manager, review fi Manager, review Risk Group Treasurer and Group regular on risks nancial Group’s foreign currency sales and expenses as well as the development of development the as well as expenses and sales currency foreign Group’s US follows closely dollar HK especially which of (renminbi), yuans Chinese which are priced on commodity markets. commodity on priced are which tions nor all open positions. the impacts of price fl price of impacts the infi uctuations of factors other and markets nancial tory will be taken over by the Group’s lure factory in Estonia that will conti- will that inEstonia lurefactory Group’s bythe over taken be will tory the key currencies. There is quite a good balance between the income and and income the between balance agood quite is There keycurrencies. the lopment of lure manufacturing operations. The manufacturing operations in operations manufacturing The operations. luremanufacturing of lopment it self. This has also affected the Group’s principle not to hedge all transac- all hedge to not principle Group’s the affected also has This self. it Major part of the Group’s sales is in euros and US dollars. Also asignifi Also dollars. US and ineuros is sales Group’s the of - part Major Ireland will end by summer 2008. The manufacturing functions of the fac- the of functions manufacturing The 2008. bysummer end will Ireland In the last quarter of 2007, Group booked a restructuring provision of EUR EUR of provision arestructuring 2007, of booked Group quarter last the In EUR 1.1 million for the costs related to the closing of the factory in Ireland. inIreland. factory the of closing the to 1.1 related EUR costs the for million basis to manage the Group’s fi Group’s the manage to basis neces- on decide and position risk nancial and interest rates.changes These may have a signifi cant impact The Group has net investments in subsidiaries whose equity is infor- is equity whose insubsidiaries investments net has Group The Group Risk Management regularly monitors the balance between for- between balance the monitors regularly Management Risk Group The Group has its external loan payable portfolio in several foreign cur- foreign inseveral portfolio payable loan external its has Group The As a result of sales and purchases in foreign currencies as well as op- as well as currencies inforeign purchases and sales of aresult As short-term are Group bythe used derivatives currency all Currently, Group does not apply IAS 39 (hedge accounting) for the currency de- currency the for accounting) (hedge 39 IAS apply not does Group In order to mitigate adverse impacts of foreign exchange movements movements exchange foreign of impacts adverse mitigate to order In eign currency and thus exposed to foreign exchange rate movements when when movements rate exchange foreign to exposed thus and currency eign eign subsidiaries during 2008. Hedging relationships are treated according according treated are relationships Hedging 2008. during subsidiaries eign eign currency denominated monetary receivables and payables and takes takes and payables and receivables monetary denominated currency eign exchange impacts on these do not always meet in the same section of the erations in several jurisdictions, Group has foreign currency denominated denominated currency foreign has Group jurisdictions, inseveral erations sales/purchases. and gains/losses exchange Group’s the between ences atfair remeasured subsequently are and into, entered is contract derivative sidiaries using equivalent currency loans payable. The Group plans to start start to plans Group The payable. loans currency equivalent using sidiaries sible. fi or purchases and gains/losses sales exchange foreign the items, nancial actions to increase or decrease the hedge if necessary and fi and necessary if hedge the fea- decrease nancially or increase to actions profi operating below or above booked are t. 4.Derivatives. section (hedge 39 modifi and IAS which to standard forwards currency foreign ed able as well as net income in these foreign currencies. However, the foreign foreign the However, currencies. foreign these in income net as well as able struments instruments line with general guidance set and by instructions the Board cy derivatives had an income statement effect of EUR -0.1 million (2006: -0.1 (2006: million EUR of effect statement income an had derivatives cy cur- of value infair changes All banks. from received are forwards currency accounting) is not applied. Fair values of standard foreign currency for- and consequentlyexposedto foreign exchange rate movements. Depend- IAS As date. atalater place take however will transaction denominated cy the date the on value atfair recognized initially are derivatives All activities. fl cash and earnings net on fi and changes business to related ows nancing and CEO. or combination instruments. Business units do most of their currency hedg- currency their of most do units Business instruments. combination or fl cash forecasted as well as purchases and fi and sales on ows commit- rm vestments in USD, AUD, JPY and NOK currency denominated foreign sub- foreign denominated currency NOK and JPY AUD, inUSD, vestments verse impact of currency movements on the Group’s net income and equity. and income net Group’s the on movements currency of impact verse ments, thements, uses Group derivative Derivative instruments. are instruments value on each balance sheet date. The underlying hedged foreign curren- foreign hedged underlying The date. sheet balance each on value rencies and it aims to use them to partially hedge loans and accounts receiv- accounts and loans hedge partially to them use to aims it and rencies rency derivatives are recognized in the income statement. In 2007, In curren- statement. income inthe recognized are derivatives rency receivables and payables. These are revalued at each balance sheet date date sheet balance ateach revalued are These payables. and receivables fl cash discounted the converting then and rates interest relevant to ows rivatives made to fi x exchange rates of sales and purchases, but the deriva- the fi but to made purchases, rivatives and sales of rates xexchange used may consist of foreign currency forward contracts, option contracts contracts option contracts, forward currency foreign of consist may used Instruments purchases. or sales nominated currency foreign season’s next 39 (hedge accounting) is not applied, these derivatives cause timing differ- timing cause derivatives these applied, not is accounting) (hedge 39 wards are determined by discounting the future nominal cash fl cash nominal future the bydiscounting determined are wards with ows to partially hedge its net investment also in SEK currency denominated for- denominated currency inSEK also investment net its hedge partially to in- net its hedge partially to started 2007, In Group euro. into the translated to IAS 39 as effective hedges of a net investment in a foreign subsidiary, subsidiary, inaforeign investment anet of hedges effective as 39 IAS to the functional currency using spot rates. The fair values of modifi ed foreign foreign ed modifi of values fair The rates. spot using currency functional the tives are used for the purpose of reducing adverse impacts of market price price market of impacts adverse reducing of purpose the for used are tives the Group’s consolidated risk position and exercises external derivative in- derivative external exercises and position risk consolidated Group’s the income statement. The purpose of this hedging is though to reduce the ad- ing on whether foreign currency monetary receivable anding payables on foreign whether relate currency to monetary ing against the Group’s parent company. Group Risk Management monitors monitors Management Risk Group company. parent Group’s the against ing in most cases short term and with aim to hedge some proportion of the EUR 0.1 million). Fair values of currency derivatives are summarized under under summarized are derivatives currency of values Fair 0.1EUR million).

RAPALA ANNUAL REPORT 2007 / Financial Statements / 55 RAPALA ANNUAL REPORT 2007 / Financial Statements / 56 Hedging of Net Investments in Foreign Subsidiaries Foreign in Investments ofNet Hedging Exposure to Foreign Exchange Risk from Transactions Risk Exchange Foreign to Exposure 2007 EUR million EUR Group Risk Management monitors regularly the amounts of foreign ex- foreign of amounts the regularly monitors Management Risk Group JPY Total excluded, hedge rate was 10.9%. 10.9%. was rate hedge excluded, accordingly. actions hedging equity on decides and investments net nominated change 31, 2007 (2006: EUR 68.9 million), of which 8.8% was subject to equity equity to subject was 8.8% which of million), 68.9 EUR 31, (2006: 2007 which means that the effective portion of foreign exchange effect on these these on effect exchange foreign of portion effective the that means which ty of the Group’s foreign subsidiaries was EUR 71.8 million on December 71.8 December on million EUR was subsidiaries foreign Group’s the of ty AUD loans is recorded directly in equity. The total non-euro-denominated equi- non-euro-denominated total The inequity. directly recorded is loans hedging. If the currencies that are linked to euro (DKK, EEK and LTL) were were LTL) and EEK (DKK, euro to linked are that currencies the If hedging. Other Other Non-euro currency NOK USD Actual foreign currency purchases purchases currency foreign Actual sales currency foreign Actual Currency derivatives Dec. 31. Dec. 2) derivatives Currency than the currency under analysis. The effect of other currencies is smaller. is currencies other of effect The analysis. under currency the than )Ecuiglasue o egn e netet nfrinsbiire. subsidiaries. foreign in investments net hedging for used loans Excluding 1) Net exposure statement inincome exposure Net 31. Dec. sheet inbalance exposure Net 31. Dec. 1) payable loans currency Foreign 31. Dec. receivable loans currency Foreign 31. Dec. payables trade currency Foreign 31. Dec. receivables trade currency Foreign other is currency reporting whose incompanies exposure currency Foreign 2) Currency derivatives are used to hedge a portion of purchases in foreign currency. currency. foreign in purchases of aportion hedge to used are derivatives Currency 2)

Total -31.4 -41.7 -18.7 91.5 15.2 29.7 13.5 46.7 -6.5 -9.8 net investment 4.8 5.0 9.0 7.3 USD (currency million) Loans used -23.7 -19.3 -19.3 75.0 16.0 -4.5 -4.4 for hedging 3.0 3.0 0.1 CNY (currency million) Total -20.9 -14.0 -14.6 2007 46.2 20.2 71.8 -6.9 -3.9 -3.3 net investment 2.9 0.6 1.9 0.3 0.5 EUR (EUR million) Loans used -30.0 -31.7 35.2 16.4 -5.6 -9.8 -4.5 for hedging 11.1 6.3 2.0 2.0 0.5 5.3 1.8 USD (EUR million) Hedge 105.3 -16.7 -16.7 62.0 82.0 -17.1 10.1 -0.4 -0.4 rate 8.8 CNY (%) Booked in translation -16.9 -13.0 -12.0 2006 -4.9 -2.8 -2.5 difference in 0.0 0.0 0.0 0.0 0.4 1.0 0.7 0.7 EUR equity (EUR million) EUR million EUR Sensitivity Analysis Sensitivity 2. Interest Rate Risk 2006 2007 EUR million EUR The effect of a 10% weakening of USD, HKD, CNY, AUD, NOK, CAD and and CAD NOK, AUD, CNY, HKD, USD, of weakening a10% of effect The The Group’s borrowings are mainly in euros and US dollars, which have a have which dollars, US and ineuros mainly are borrowings Group’s The A 10% strengthening would have the equal but opposite effect with exec- with effect opposite but equal the have would strengthening A 10% opposite effect on operating profi operating on a as above effect stated than opposite income net t and sensitivity includes both the from effect foreign currency transactions and substantial contribution to the overall interest rate risk. The Group’s borrow- Group’s The risk. rate interest overall the to contribution substantial ods, but this is decided based on prevailing market conditions. conditions. market prevailing on based decided is this but ods, does Group The risk. rate interest the manage to available instruments cial changing the interest rate periods as well as entering into derivative fi nan- consequently managing the Group’s overall interest rate risk. The Group’s The risk. rate interest overall Group’s the managing consequently result of used hedging instruments. instruments. hedging used of result needed. These actions may include changing the currency split of the ex- the of split currency the changing include may actions These needed. not have afi have not fi are rates interest peri- how on time policy xed different to xed 3) Without the effect on net income. net on effect the Without 3) Commercial paper program with variable interest rate interest variable with program paper Commercial tion of USD, where 10% strenghening would have EUR 0.2 million smaller smaller million 0.2 EUR have would strenghening 10% where USD, of tion ternal loan portfolio, selection between different sources of loan fi loan of sources different between nancing, selection portfolio, loan ternal translation of subsidiaries reporting in non-euro currency. In order to give to order In currency. innon-euro reporting subsidiaries of translation interest rate risk is monitored as cash fl cash as monitored is Risk risk rate Group interest risks. value fair and ow fl fully is almost are ings which company, parent Group’s the through owing Management analyzes regularly the interest risk and agree on actions if actions on agree and risk interest the regularly analyzes Management SEK against euro assuming that all other variables remain unchanged. This This unchanged. remain variables other all that assuming euro against SEK The Group has interest-bearing borrowings, where the interest is varia- is interest the where borrowings, interest-bearing has Group The Loans from fi nancial institutions with variable interest rate fi from interest Loans variable with institutions nancial fi from Loans fi with institutions nancial rate interest xed Operating profi t Operating profi t changes in market interest rates. interest inmarket changes Equity 3) Equity Net income 3) Equity Net income ble and connected to market rates. Consequently the Group is exposed to exposed is Group the Consequently rates. market to connected and ble -2.2 -0.6 -2.9 -1.6 -2.1 0.0 USD

The interest rate risk may also be managed by using interest rate swaps, swaps, rate interest byusing managed be also may risk rate interest The Most of the Group’s interest-bearing liabilities have an interest period effect of other currencies is smaller.effect statement effect but had an equity effect of EUR -0.0 million. Fair values of values Fair million. -0.0 EUR of effect equity an had but effect statement cash fl ow method and are received from the bank. In 2007, as IAS 39 effec- 39 2007, In fl IAS as cash bank. the from received are and method ow of less than one year. In order to manage the interest rate risk and to take take to and risk rate interest the manage to year. one order In than less of cial assets and liabilities, the impact of non-euro income statement items. items. statement income non-euro of impact the liabilities, and assets cial an accurate picture, analysis includes, the sensitivity in addition to fi nan- values of interest rate derivatives have been calculated using a discounted plies IAS 39 (hedge accounting) for these interest rate derivatives. The fair fair The derivatives. rate interest these for accounting) (hedge 39 IAS plies where the Group pays a fi xed rate and receives variable rate. The Group ap- afi Group pays The rate. Group the variable where receives and rate xed tiveness requirementstiveness were fulfi lled, in interest rate derivatives are summarized under section 4.Derivatives. section under summarized are derivatives rate interest loans payable is fi is payable loans period. interest longer a12-month or to xed It also includes the effect of hedging of net investments and cash fl cash and investments net of hedging of ow. The effect the includes also It benefi Group’s 12.9 the of million EUR levels, rate interest favorable t of -1.2 -1.1 0.9 0.9 0.7 0.7 HKD 0.0 2.4 2.4 0.0 1.5 1.5 CNY 48.0 -0.6 -0.5 -0.3 -0.5 -0.2 Non- -0.1 0.3 current AUD terest rate had derivatives no income 2007 42.5 15.0 -0.5 -0.5 -0.3 -0.5 -0.7 0.0 0.1 Current NOK 62.4 -0.8 -0.8 -0.6 -0.7 Non- -0.5 -0.5 0.5 current CAD 2006 59.0 -0.3 -0.5 -0.3 -0.7 -0.5 -0.1

0.0 Current SEK

RAPALA ANNUAL REPORT 2007 / Financial Statements / 57 RAPALA ANNUAL REPORT 2007 / Financial Statements / 58 Sensitivity Analysis Sensitivity 4. Derivatives 3. Other Market Price Risks Price Market Other 3. EUR Million EUR EUR EUR The effect ofThe effect liabilities with variable interest rate and interest rate swap The value of these purchases is still relatively low and market price risk risk price market and low relatively still is purchases these of value The regulated on priced are which raw-materials, some purchases Group The 4) Without the effect on net income. net on effect the Without 4) All foreign currency forwards mature within the next 12 months. The cash cash The 12 next months. the within mature forwards currency foreign All on net income and equity if there was a 1% change in interest rates, as- rates, ininterest a1% change was there if equity and income net on management actions are done in each manufacturing unit locally. Group Group locally. unit manufacturing ineach done are actions management lead. and zinc copper, as such metals commodity include These markets. 2009 and EUR 0.0 million during year 2010. year during 0.0million EUR and 2009 prices. No commodity hedging is currently carried out. out. carried currently is hedging commodity No prices. Commercial paper program with variable interest rate interest variable with program paper Commercial follows: EUR 0.0 million during year 2008, EUR 0.0 million during year year during 0.0million EUR 2008, year during 0.0million EUR follows: fl as in2010 mature terminating agreement swap rate interest the of ows Net fair values fair Net Negative fair values Nominal amount rate fi from interest Loans variable with institutions nancial Risk Management also monitors the development of these raw-material million million

The Groupdoes not The own any such publicly traded shares or securities estate investments and other unlisted shares for which no clear market market clear no which for shares unlisted other and investments estate available-for-sale fiavailable-for-sale insignifi are instruments real of nancial consist and cant suming that all other variables, in particular foreign exchange rates, re- main unchanged. price exists. which would be subject to market price risks. The Group’s investments in investments Group’s The risks. price market to subject be would which

Foreign -0,9 -0.1 currency -0,1 7.9 0.1 forwards Net income 072006 2007 12.9 Interest 0.0 0.0 0,2 Equity 4) rate swaps 072006 2007 20.8 -0.2 -1,2 0.2 Total Net income

Foreign currency 0.0 0.0 1.0 forwards Equity 4) Analysis of Trade Receivables that Where Due but Not Impaired Not but Due Where that Receivables Trade of Analysis CREDIT AND DEFAULT RISK DEFAULT AND CREDIT EUR million EUR 17. A credit loss allowance of trade receivables is made when there is ob- is there when made is receivables 17. trade of allowance loss Acredit Group Risk Management manages most of the credit and default risk risk default and credit the of most manages Management Risk Group For information on credit loss allowance for trade receivables, see note note see receivables, trade for allowance loss credit on information For of amount carrying the is risk default and credit maximum Group’s The No credit loss allowance is made on overdue trade receivables from from receivables trade overdue on made is allowance loss credit No The Group’sThe receivables are generated by accounts a large number of cus- Total ers, stopping the shipments, requirements for the shipments, payments for advance stopping ers, future shipments and eventually legal collection procedures. In signifi In procedures. collection legal eventually cases, and cant shipments country, credit risk is further reduced with credit insurance. insurance. credit with reduced further is risk credit country, one In renegotiated. be may terms payment cases, exceptional In cisions. cessful dunning attempts or known fi known or attempts dunning diffi nancial cessful increased thus and culties 23. fiall innote disclosed are which assets nancial customers, whose solvency is solid. considered whose customers, assessment and decision for credit loss allowances is done locally in each ineach locally done is allowances loss credit for decision and assessment also applied with new and existing specifi Customer customers. c cred- are credit of letters and payments advance Cash, out. carried are checks operative each to allocated is management risk credit The counterparties. ments related to liquidity management management liquidity to related ments remind- payment trigger may inpayments delays and regularly monitored related to fi nancial instruments. It seeks to reduce these risks by limiting probability of customer insolvency) that the Group will not be able to col- to able be not will Group the that insolvency) customer of probability the counterparties to banks, which have a good credit standing. All invest- All standing. credit agood have which banks, to counterparties the is behavior payment Customers’ unit. business ineach locally set and tored tomers worldwide.tomers Consequently, the credit risk is spread against multiple lect all amounts due according to the original terms of the receivables. The The receivables. the of terms original the to according due amounts all lect made. not are investments paper commercial instance For risk. credit low fi and moni- are limits it customers credit existing the of situation nancial jective evidence (such as signifi as (such evidence jective unsuc- and receivables of overdue cant business units consult with the CFO or Group Risk Manager before fi before Manager Risk Group or de- CFO nal the with consult units business business unit basis. on case-by-case customer, background new any to credit providing Before unit. business Past due but not impaired not but due Past Neither past due or impaired 1-3 months 1-3 4-5 months Over 7months Over 6-7 months Less than 1month than Less are made in liquid instruments with with instruments inliquid made are 072006 2007 33.6 45.4 3.6 0.8 0.5 1.8 5. 1 44.3 31.6 0.6 3.4 2.2 6.4 0.1 LIQUIDITY RISK LIQUIDITY 43.3 million (2006: EUR 16.7 million). Group’s domestic commercial paper paper commercial domestic Group’s 16.7 million). EUR (2006: million 43.3 The Group’s credit limit not drawn at December 31, 2007 was EUR EUR 31,was 2007 atDecember drawn not limit credit Group’s The further to system pooling cash international an introduce will Group The Group’s fi Group’s interest-bear- Group’s the of most raises management nance enhance its liquidity management in2008. management liquidity its enhance cient other liquidity reserves available at the maturity dates. dates. maturity atthe available reserves liquidity other cient and applicable interest rates. renewal The of commercial papers upon ma- commercial paper program, which together with Group’s credit limits is uti- is limits credit Group’s with together which program, paper commercial manage- liquidity Group’s the of Flexibility available. lines credit of amount 25.0 million). 25.0 domestic million 25.0 aEUR bylaunching in2007 increased was ment urer, based on forecasted cash fl ows, status of commercial paper markets markets paper fl commercial of cash status ows, forecasted on based urer, program not sold at December 31, 2007 was EUR 10.0 million (2006: EUR EUR 10.0 (2006: million EUR 31,was 2007 December at sold not program G Generally, of the Group’s the seasonality fl cash ow is and fairly predictable with balanced maturity profi le of loans as well as by keeping suffi cient turity of issued commercial papers is decided by the CFO and Group Treas- Group and CFO bythe decided is papers commercial issued of turity turity creates certain liquidity risk, which is managed by maintaining suffi bymaintaining managed is which risk, - liquidity certain creates turity lized to balance the seasonality of the Group’s cash fl cash Group’s the of seasonality the ma- and size ow. balance to The lized ing debt centrally. The Group seeks to reduce liquidity and refi and liquidity reduce to risks seeks nancing Group The centrally. debt ing roup’s fi nance management monitors Group’s liquidity position regularly. regularly. roup’s fi position liquidity Group’s monitors management nance

RAPALA ANNUAL REPORT 2007 / Financial Statements / 59 RAPALA ANNUAL REPORT 2007 / Financial Statements / 60 Maturity of The Group’s Financial Liabilities Liabilities Financial Group’s The of Maturity EUR million EUR * The proportion of the carrying value which is classifi is 39. which value IAS to fi as ed according carrying the of liabilities nancial proportion * The Total non-interest- Trade other and Total non-interest- Trade other and The following are the contractual maturities of fi of maturities contractual liabil- the are nancial following The 1) Maturity of interest payable has been presented in the contractual cash fl ows of loans from fi nancial institutions and commercial paper program. paper fl cash commercial fi and from loans contractual of the ows in institutions presented nancial been has payable interest of Maturity 1) non-hedge accounted non-hedge accounted Other interest-bearingOther liabilities 1) Currency derivatives, Currency derivatives, program paper Commercial Other interest-bearingOther liabilities 1) 2006 2007 ities, including interest payments. interest including ities, Interest rate derivatives,Interest Non-interest-bearing liabilities Non-interest-bearing Non-interest-bearing liabilities Non-interest-bearing hedge accounted Provisions Finance lease fi from Loans institutions nancial Finance lease fi from Loans institutions nancial Provisions Interest-bearing liabilities Interest-bearing liabilities Interest-bearing bearing payables bearing payables 148.6 154.6 121.9 90.8 15.0 37.0 28.1 3.3 2.0 0.0 0.0 0.8 1.8 1.6 0.7 0.1

Carrying value Carrying value 133.9 145.5 121.9 90.8 19.9 15.0 Financial 25.7 Financial 0.0 0.0 0.8 1.8 1.6 0.7 0.1 1.1 liabilities * liabilities * 156.0 132.3 142.4 19.9 15.0 25.7 99.1 0.0 0.0 Contractual 2.5 Contractual 2.7 0.1 0.1 1.1 cash fl ows cash fl ows 64.3 46.5 84.6 19.9 15.0 25.7 87.5 0.0 0.0 0.0 0.3 0.2 0.2 0.1 2007 2008 12.9 12.0 14.0 11.8 0.9 0.0 0.0 0.2 0.2 2008 2009 12.2 12.4 11.3 11.1 0.0 0.2 0.2 2009 2010 10.8 12.3 12.5 11.0 0.2 0.2 2010 2011 10.8 10.6 9.8 9.6 0.2 0.2 2011 2012 10.9 19.9 21.7 9.3 1.8 1.6 Later Later 156.0 132.3 142.4 19.9 15.0 25.7 99.1 0.0 0.0 2.5 2.7 0.1 0.1 1.1 Total Total CAPITAL RISK MANAGEMENT RISK CAPITAL 1. Gearing ratio below 150%, below ratio Gearing 1. 4. Equity-to-assets ratio above 30%. above ratio Equity-to-assets 4. The Group manages its capital structure and makes adjustments to adjustments makes and structure capital its manages Group The bearing debt, bearing using management capital its of effectiveness the monitors Group The The objective of the Group’s capital management is to ensure that it main- it that ensure to is management capital Group’s the of objective The debt, net interest-bearing debt to EBITDA and equity-to-assets ratio. The The ratio. equity-to-assets and EBITDA to debt interest-bearing net debt, interest-bearing net on rate interest average equity, on return ratio, gearing shareholder value. Therefore, the Group seeks to maintain a balance be- abalance maintain to seeks Group the Therefore, value. shareholder shareholders by buying back shares, crease the amount of borrowings. of amount the crease structure, capital the develop or To maintain implementation. strategy of 2. Return on equity clearly above the average interest rate on net interest- interest- net on rate interest average the above clearly equity on Return 2. 3. Net interest-bearing debt to EBITDA below 4.5, and 4.5, below EBITDA to debt interest-bearing Net 3. Group objective for capital management is to keep: to is management capital for objective Group tween the higher returns that might be possible with higher levels of borrow- of levels higher with possible be might that returns higher the tween maximize to and business its support to inorder ratios capital healthy tains the Group may adjust the dividend payments and repayments of capital to capital of repayments and payments dividend the adjust may Group the it taking into account changes in economic conditions and requirements requirements and conditions ineconomic changes account into taking it position. capital byasound afforded security and advantages the and ings For defiFor keyfi of nitions 41. page see gures, issue new shares and/or increase/de- and/or shares new issue Equity-to-assets ratio, % ratio, Equity-to-assets EBITDA to debt interest-bearing Net net on rate interest Average % equity, on Return % ratio, (gearing) Debt-to-equity EUR million EUR 1. Gearing ratio was 82.8% (2006: 122.2%), (2006: 82.8% was ratio Gearing 1. 4. Equity-to-assets ratio was 38.2% (2006: 33.4%). (2006: 38.2% was ratio Equity-to-assets 4. the average interest rate on net interest-bearing debt, which was 7.1% (2006: was which debt, interest-bearing net on rate interest average the 5.0%).

The Group capital structure is reviewed by the Board annually. The Group Group annually. The Board bythe reviewed is structure capital Group The Total shareholders’ equity and liabilities liabilities and equity Total shareholders’ equity Total period) the for (average Total equity 31 Dec. Total equity 1 Jan. Total equity 31 Dec. Total equity interest-bearing debt, % debt, interest-bearing 2. Return on equity, 19.7% (2006: 14.1%), was clearly higher than than higher 14.1%), clearly was 19.7% equity, on (2006: Return 2. nancial covenants set by the banks. bythe set covenants nancial 3. Net interest-bearing debt to EBITDA was 2.4 (2006: 3.5). 3.5). 2.4(2006: was EBITDA to debt interest-bearing Net 3. Cash andequivalents cash Cash liabilities interest-bearing Current Operating profiOperating and depreciation t before is not subject to externally imposed capital requirements other than the fi the than other requirements capital imposed - externally to subject not is In 2007, the Group met its objectives for capital management: capital for objectives its met 2007,In Group the (EBITDA) impairments Interest-bearing receivables Interest-bearing Non-current interest-bearing liabilities interest-bearing Non-current Net interest-bearing debt at the end of the period the of end atthe debt interest-bearing Net 31 Dec. debt interest-bearing Net expense interest net Paid profiNet period the t for period the of end atthe debt interest-bearing Net - advances received - advances 253.5 072006 2007 96.9 96.9 96.9 33.8 38.2 82.8 58.4 49.8 80.2 80.2 80.2 81.3 27.3 89.1 19.7 17.5 0.8 2.4 5.7 7.1 243.5 122.2 99.3 99.3 99.3 59.9 28.0 64.6 78.3 33.4 75.4 81.3 81.3 81.3 24.4 11.0 14.1 5.0 5.0 3.5 0.7

RAPALA ANNUAL REPORT 2007 / Financial Statements / 61 RAPALA ANNUAL REPORT 2007 / Financial Statements / 62 23. FINANCIAL ASSETS AND LIABILITIES BYCATEGORIES LIABILITIES AND ASSETS FINANCIAL 23. EUR million EUR * The proportion of the carrying value which is classifi ed as fi nancial assets and liabilities according to IAS 39. IAS to classifi is which according value fi as ed liabilities and carrying the of assets nancial proportion * The Available-for-sale investments Available-for-sale financial assets Currency derivatives - non-hedge accounted -non-hedge derivatives Currency Current fiCurrent liabilities nancial Current fiCurrent assets nancial Interest rate derivatives - hedge accounted -hedge derivatives rate Interest Financial liabilities measured at amortized cost amortized at measured liabilities Financial Hedge accounted derivatives -held-for-trading statement income through value fair at liabilities Financial Non-current fiNon-current liabilities nancial Non-current fiNon-current assets nancial Loans and receivables Trade and other non-interest-bearing payables non-interest-bearing Trade other and Trade and other non-interest-bearing receivables receivables non-interest-bearing Trade other and Other interest-bearingOther liabilities program paper Commercial interest-bearingOther liabilities Other interest-bearingOther receivables andequivalents cash Cash Provisions Finance lease fi from Loans institutions nancial Provisions Finance lease fi from Loans institutions nancial Non-interest-bearing receivables Non-interest-bearing Loan receivables Loan receivables 22,24 22,24 25 24 24 24 24 24 24 24 18 15 21 21 17 17 17 17 17 Note 48.2 42.6 52.2 15.0 27.3 37.0 0.0 0.0 0.0 0.6 0.6 3.2 Carrying 1.5 0.1 0.1 0.1 0.1 0.1 0.1 value

Financial 50.9 48.2 42.6 15.0 27.3 25.7 0.0 0.0 0.0 0.6 0.6

1.5 assets and 0.1 0.1 0.1 0.1 0.1 liabilities *

Fair value of fi - 2007 50.9 48.2 42.6 15.0 27.3 25.7 nancial assets 0.0 0.0 0.0 0.6 0.6 1.5 0.1 0.1 0.1 0.1 0.1 and liabilities * 62.9 59.0 52.6 24.4 28.1 0.9 0.0 0.0 0.0 0.0 0.8 0.6 Carrying 1.7 0.1 0.1 1.1 value

Financial 62.9 59.0 19.9 24.4 51.6 0.9 0.0 0.0 0.0 0.0 0.8 0.6 0.2 assets and 1.7 0.1 0.1 liabilities *

Fair value of 2006 62.9 59.0 19.9 24.4 51.6 fi n a n c i a l a s s e t s 0.9 0.0 0.0 0.0 0.0 0.8 0.6 0.2 1.7 0.1 0.1 and liabilities * 24. INTEREST-BEARING LIABILITIES INTEREST-BEARING LIABILITIES BY CURRENCY EUR million EUR EUR million EUR The fair value of fi nance lease liabilities corresponds to their book value. value. book their to fi of value fair corresponds The liabilities lease nance The fair value of fi nance leases is based on discounted future cash fl ows. JPY Total Total All signifi interest-bearingcant non-current loans are based on fl oating abilities is regarded as corresponding to their book value. book their to corresponding as regarded is abilities ue. Due to their short maturity, the fair value of current interest-bearing li- interest-bearing current of value fair the maturity, short their to Due ue. rates, in which case their fair value is regarded as equaling their book val- ZAR AUD Other Other CFH Other current liabilitiesOther program paper Commercial Other non-current liabilities non-current Other Current interest-bearing liabilities interest-bearing Current SEK Finance lease Non-current interest-bearing liabilities interest-bearing Non-current DKK NOK EUR DKK PLN Derivatives Finance lease fi from Loans institutions nancial Derivatives Finance lease fi from Loans institutions nancial USD program paper commencial fi and from Loans institutions nancial Other current liabilities include interest payable. interest include liabilities current Other The discount rate used corresponds to that applied to similar fi similar to applied that to leases. corresponds nance used rate discount The 2007 average interest rate, % rate, interest average 2007 25.4 21.5 49.7 Non- 0.0 1.5 1.2 0.1 current 2007 22.5 5.09 5.56 5.23 5.24 4.82 24.7 57.7 0.0 4.9 0.3 0.8 0.6 0.5 1.8 1.5 0.1 Current 108.3 2007 28.9 64.6 31.4 48.2 42.6 Non- 15.0 0.0 0.8 1.6 0.0 0.6 1.7 1.5 0.1 0.1 0.1 0.1 current 124.5 2006 2006 59.0 62.9 38.7 59.0 0.0 0.6 3.2 4.6 2.4 1.0 0.0 0.8 5.7 2.7 0.1 0.1 1.7 0.1 Current

RAPALA ANNUAL REPORT 2007 / Financial Statements / 63 RAPALA ANNUAL REPORT 2007 / Financial Statements / 64 25. NON-INTEREST-BEARING LIABILITIES FINANCE LEASE EUR million EUR EUR million EUR The Group has afi has Group This The inDenmark. abuilding for contract lease nance 1-3 years 1-3 Total minimum lease payments Total minimumlease Trade payables Trade Total are not individually signifi individually not are cant. and equipment and fi machinery for are Other option. contracts lease nance is regarded as corresponding to their book value. book their to corresponding as regarded is lease has terms of purchase option and escalation clauses but no renewal renewal no but clauses escalation and option purchase of terms has lease Accrued employee-relatedAccrued expenses receivedAdvances Due to their short maturity, the fair value of non-interest-bearing liabilities liabilities non-interest-bearing of value fair the maturity, short their to Due VAT payable 3-5 years Other current liabilitiesOther income deferred and expenses accrued Other Within one year one Within Current non-interest-bearing liabilities non-interest-bearing Current Present value of minimum lease payments minimumlease of value Present Less future fi nance charges 5years than Later 2007 10.3 18.6 37.0 2.0 4.9 1.0 0.1 2006 28.1 12.7 5.3 0.6 1.8 7.6 0.1 26. COMMITMENTS AND CONTINGENCIES AND COMMITMENTS 26. DISPUTES AND LITIGATIONS EUR million EUR COMMITMENTS The mortgages given as security for own commitments include business business include commitments own for security as given mortgages The The Group’s management does not have knowledge of any other open dis- open other any of knowledge have not does management Group’s The Total ary’s obligations related to the joint venture. joint the to related obligations ary’s mortgage of the parent company of EUR 16.1 million. Since Normark Sport Sport 16.1 Normark EUR of Since million. company parent the of mortgage parent company has guaranteed to Shimano the fulfi the Shimano to guaranteed has company parent subsidi- its of llment ditional tax cost, including delay penalties, caused by Finnish tax authorities’ dis- authorities’ tax byFinnish caused penalties, delay including cost, tax ditional ag nancial position. legal shareholder of the new distribution joint venture with Shimano, the the Shimano, with venture joint distribution new the of shareholder legal putes or litigations, which would have asignifi have would which fi litigations, or Company’s the on putes impact cant - 2.7 million. EUR is interpretation, puted Finland Oy, a 100% owned subsidiary of Rapala VMC Corporation, is the the is Corporation, VMC Rapala of subsidiary owned Oy, a100% Finland tion of Group’s parent company for years 2004-2007. As per 31.12.2007, per As 2004-2007. years for company Group’s ad- parent of the tion Guarantees Guarantees In the beginning of 2008, the Group is fi nalizing its appeal to Administrative Court Court fi is Group the Administrative to appeal 2008, of its beginning nalizing the In On behalf of other parties other of behalf On On own behalf own On Pledges mortgages Property Bu ainst the tax adjustment made by Finnish tax authorities concerning the taxa- the concerning authorities tax byFinnish made adjustment tax the ainst siness mortgages

Minumum -0.9

0.3 0.3 lease 2.5 0.2 1.6 1.6 payments

Present value of 2007 0.2 0.2 1.6 1.6 1.2 0.1 payments

Minumum 2007 19.7 16.1 -1.0 0.6 0.3 0.2 0.4 lease 1.8 1.8 2.7 3.1 payments

Present 2006 2006 16.6 19.3 0.3 0.8 0.6

0.2 0.2 value of 1.3 1.8 1.8 0.1 1.1 payments TRANSACTIONS AND BALANCES WITH RELATED PARTIES 27. LEASE CONTRACTS

THE GROUP AS A LESSEE Other expenses Purchases Paid rents Paid Receivables

2007 Payables

EUR million 2007 2006 Associated company Future minimum rental payable under non- Lanimo Oü 0.1 cancellable operating lease commitments Entity with signifi cant infl uence Within one year 2.9 3.2 over the Group 1) 0.1 0.1 0.0 1-3 years 3.6 4.4 3-5 years 1.2 3.1 2006 Later than 5 years 1.9 1.8 Total 9.5 12.6 Associated company Lanimo Oü 0.1 0.1 The Group leases offi ces, warehouses and manufacturing facilities under several non-cancellable operating leases. The leases have varying terms 1) Lease agreement for the real estate for the consolidated operations in France and a serv- and lengths, some of which may contain renewal options. ice fee.

THE GROUP AS A LESSOR EMPLOYEE BENEFITS FOR TOP MANAGEMENT

EUR million 2007 2006 EUR million 2007 2006

Future minimum rental payable under non- Salaries and other short-term employee benefi ts -3.2 -1.5 cancellable operating lease commitments Option programs to be settled in shares -0.1 -0.2 Option programs to be settled in cash -0.1 0.0 Within one year 0.1 0.1 Total -3.4 -1.8 RAPALA ANNUAL REPORT 2007 / Financial Statements 65 ANNUAL REPORT RAPALA 1-3 years 0.1 0.2 3-5 years 0.0 Total 0.2 0.3 Top management consists of members of the Board of Directors, CEO and other members of the Executive Committee. In 2007, two new members where appointed to the Executive Committee. Some of the offi ces, warehouses and manufacturing facilities that are cur- On December 31, 2007, members of the Board and the Executive rently not used by the Group are leased to external parties. The leases have Committee held directly a total of 902 181 Company shares and indirect- varying terms and lenghts, some of which may contain renewal options. ly through a controlled corporation 1 180 000 shares. Top management owns approximately 5.3% of the issued share capital and voting rights of Rapala. In 2006, 164 000 synthetic options (year 2006 program) and 22 500 28. RELATED PARTY TRANSACTIONS share options (year 2004 program) where granted to top management (in- cluding the two new members of Executive Committee). In 2007, no op- Subsidiaries owned directly or indirectly by the parent company have been tions where granted to top management. On December 31, 2007, top man- listed in note 33. Related party transactions between Group companies agement held 604 572 options of which exercisable 304 322 options (on have been eliminated. December 31, 2006, 523 273 options of which exercisable 143 773 op- tions). Taking into account the new composition of Executive Committee top management held on December 31, 2006 604 572 options of which exercisable 168 072 options. Option information for 2006 has been restat- ed to represent the new composition of Executive Committee. The option scheme principles are the same for top management as for other employ- ees. For more details on option programs, see note 29. Details of top man- agement shareholdings and options are given on pages 77-78. The Group has no business transactions or outstanding balances with top management or close members of their family. RAPALA ANNUAL REPORT 2007 / Financial Statements / 66 T EMPLOYEE FOR BENEFITS OTHER MEMBERS OF EMPLOYEE BENEFITS FOR CHIEF EXECUTIVE OFFICER EXECUTIVE CHIEF FOR BENEFITS EMPLOYEE EUR million EUR EUR million EUR HE EXECUTIVE COMMITTEE EXECUTIVE HE The Company shall give notice at any time or using 24 months notice peri- notice 24 using months or time atany notice give shall Company The aprofi to entitled also 712.is 22 CEO EUR is CEO of t salary monthly The Total Total The amount and payment of the bonus requires that the established EBIT- established the that requires bonus the of payment and amount The employment. If the service agreement is terminated by the Company with- Company bythe terminated is agreement service the If employment. es awarded under the scheme are paid in two installments, the fi the installments, intwo paid are scheme when the rst under awarded es scheme. In addition to the mandatory pension insurance, CEO has a right to aright has CEO insurance, pension mandatory the to addition In scheme. out a cause, CEO is entitled to severance compensation corresponding to corresponding compensation severance to entitled is CEO acause, out of termination for cause the on dependent is notice of term The contract. service the terminating to prior 6months 3or notice give shall CEO and od ond after a predetermined vesting period, to encourage retention of sen- of retention encourage to period, vesting apredetermined after ond 24 months’ salary (excluding profi (excluding salary 24 months’ t bonuses). ment of bonus is fully at the discretion of the Board of Directors. Bonus- Directors. of Board the of discretion atthe fully is bonus of ment untary pension scheme or a similar arrangement. The retirement age and and age retirement The arrangement. asimilar or scheme pension untary inavol- placed be to annually 8400 EUR of compensation further receive pension of CEO are determined in accordance with the legislation in force. inforce. legislation the with inaccordance determined are CEO of pension Option programs to be settled incash settled be to programs Option inshares settled be to programs Option incash settled be to programs Option inshares settled be to programs Option C the audited results for the relevant fi relevant the for results audited sec- the the and known are year nancial ior management. Salaries and other short-term employee benefi employee short-term other and ts Salaries benefi employee short-term other and ts Salaries In addition to the monthly salary, CEO and other members of the Executive Executive the of members other and CEO salary, monthly the to addition In DA and cash fl ow targets are achieved. If the targets are not achieved, pay- achieved, not are fl cash and DA targets the If achieved. are targets ow bonus according to the principles of the Group’s senior management bonus bonus management Group’ssenior the of principles the to according bonus ommittee participate in the Group’s senior management bonus scheme. scheme. bonus management Group’ssenior inthe participate ommittee 2007 2007 -0.6 -0.6 -2.5 -2.4 -0.1 0.0 0.0 0.0 2006 2006 -0.3 -0.4 -1.0 -0.1 -0.1 -1.1 0.0 0.0 29. SHARE-BASED PAYMENTS 29. SHARE-BASED EMPLOYEE BENEFITS FOR BOARD OF DIRECTORS OF BOARD FOR BENEFITS EMPLOYEE EUR million EUR On March 31, 2007, the exercise period for the 500 000 options issued issued options 000 500 the for 31, period March 2007, On exercise the Total The Group has applied the requirements of IFRS 2 (Share-based Payment) Payment) 2(Share-based IFRS of requirements the applied has Group The (2006: EUR 195 000). EUR (2006: ed as of January 1, 2005. The Group has three separate share-based pay- share-based separate three has Group The 1, 2005. January of as ed scriptions with the 2003 and 2004 stock option programs, and if all stock stock all if and programs, option stock 2004 and 2003 the with scriptions sation. Members of the Board of Directors are paid a daily travel allowance allowance travel adaily paid are Directors of Board the of Members sation. o options correspond to 3.4% of the Company’s shares and voting rights. voting and shares Company’s the of 3.4% to correspond options stock these with subscribed be can that shares The 168 shares. 1349 of increased be still may capital share Group’s the exercised, fully are options Share- program). (2006 incash settled program option synthetic one and of Directors and the Remuneration Committee in the fi inthe Committee Remuneration the and Directors of 2007 year nancial Board the on work their for 000 240 EUR of atotal paid were Directors of re- are and allowance travel tax-exempt maximum the to corresponding ment programs: two share option programs (2003 and 2004 programs) programs) 2004 and (2003 programs option share two programs: ment members of the Remuneration Committee do not receive further compen- further receive not do Committee Remuneration the of members under the 2003A share option program expired. All 500 000 shares have shares 000 500 All expired. program option share 2003A the under es- total The liability. or equity the to adjustment acorresponding with riod pe- vesting the during statement income inthe expense an as recognized Option programs to be settled inshares settled be to programs Option Chairman of the Board is paid an annual remuneration of EUR 60 000 andChairman of is the paid 000 Board an 60 annual remuneration of EUR timated value of the option program is EUR 5.1 million. EUR is program option the of value timated to all option programs granted after November 7, 2002 that were unvest- imbursed for accommodation and travel expenses. Members of the Board Board the of Members expenses. travel and accommodation for imbursed Salaries and other short-term employee benefi employee short-term other and ts Salaries by a maximum of 121 425 EUR and the number of shares by a maximum byamaximum shares of number the and 121 of EUR 425 by amaximum sub- share the of aresult As rights. option 2003A with subscribed been based payments programs are valued at fair value on the grant date and ther Members of the Board of Directors remuneration of EUR 30 000. The The 000. 30 EUR of remuneration Directors of Board the of Members ther 2007 -0.3 -0.2 0.0 2006 -0.2 -0.2 0.0 GENERAL TERMS AND CONDITIONS OF THE OPTION PROGRAMS PROGRAMS OPTION THE OF CONDITIONS AND TERMS GENERAL 2007 INPUT TO THE MODEL THE TO INPUT Term of contract of Term contract of Term 1) The exercise price has been reduced by the amount of dividends distributed after the subscription period for option rights h rights option for period subscription the after distributed dividends of amount the by reduced been has price exercise The 1) grant date, EUR grant date, EUR agreement outstanding options granted outstanding options granted average price of the share during the ten trading days before the test date. If at test date the difference between the exercis the between difference the date test at If date. test the before days trading ten the during share the of price average Vesting period Vesting period Vesting 2) The share-specifi c cash value will be determined in accordance with the end price on the test date (i.e. vesting date) or, a date) vesting (i.e. date test the on price end the with accordance in determined be will share-specifivalue The c cash 2) program program Option-pricing model model Option-pricing Conditions of Conditions of the ward will be paid and this incentive scheme shall automatically expire. automatically shall scheme incentive this and paid be will ward exercis the between difference the If date. test the of anniversary date, months’ test additional an twenty-four on and again eighteen determined be will twelve, six, price the end is the which negative, is adjustment) dividend the (including date test the on price end and price exercise the between difference the If paid. be will ward the agreement the grant date the grant date Share price at the atthe price Share atthe price Share Execution Execution Fair value of the option at the grant date, EUR EUR date, grant atthe option the of value Fair % date, grant atthe ratio forfeit Estimated % rate, interest Risk-free (years) option of life Expected % volatility, Expected EUR 1) Exercise price, ofNumber options ofNumber atPersonnel Nature of EUR 1) Exercise price, ofNumber options ofNumber atPersonnel Nature of For more details on dividends, see note 31. note see dividends, on details more For ment termination, options are forfeited. are options termination, ment ment termination, options are forfeited. are options termination, ment a general rule, in of case prior employ- a general rule, in of case prior employ- Employment during vesting period. As As period. vesting during Employment Employment during vesting period. As As period. vesting during Employment June 8, 2004-Mar. 31, 2008 2004-Mar. 8, June June 8, 2004-Mar. 31, 2005 2004-Mar. 8, June June 8, 2004-Mar. 31, 2010 2004-Mar. 8, June June 8, 2004-Mar. 31, 2007 2004-Mar. 8, June Granted shareGranted options Granted shareGranted options Inshares In shares 500 000 453 750 399 250 (expired) 2004B I 2003A 6.09 4.68 6.15 6.15 90 95 0 ment termination, options are forfeited. forfeited. are options termination, ment ment termination, options are forfeited. forfeited. are options termination, ment a general rule, in of case prior employ- a general rule, in of case prior employ- Employment during vesting period. As As period. vesting during Employment Employment during vesting period. As As period. vesting during Employment June 8, 2004-Mar. 31, 2006 2004-Mar. 8, June Feb. 14, 2006-Mar. 31, 2008 14,Feb. 2006-Mar. June 8, 2004-Mar. 31, 2008 2004-Mar. 8, June Feb. 14, 2006-Mar. 31, 2010 14,Feb. 2006-Mar. Granted shareGranted options Granted shareGranted options (expired) Scholes 2003A Black- 2.96 2.13 2.8 27 0 2004B II In shares In shares 500 000 446 168 Scholes 46 250 46 250 2003B 2003B Black- 6.09 6.40 3.25 6.02 2.07 6.15 3.8 90 38 11 5 ment termination, options are forfeited. forfeited. are options termination, ment ment termination, options are forfeited. are options termination, ment a general rule, in of case prior employ- a general rule, in of case prior employ- Employment during vesting period. As As period. vesting during Employment Employment during vesting period. As As period. vesting during Employment Scholes 2004A I 2004A Dec. 14, 2006-Mar. 31,2011 14, 2) Dec. 2006-Mar. Black- 3.54 2.35 e price and the end price (including the dividend adjustment) is positive, the re- the positive, is adjustment) dividend the (including price end the and e price s the case may be, on an additional test date. End price is the volume weighted weighted volume the is price End date. test additional an on be, may case s the e price and the end price is positive on any of the additional test dates, the re- the dates, test additional the of any on positive is price end the and e price as ended and before the commencement of the subscription period for shares. shares. for period subscription the of commencement the before and ended as 4.8 Dec. 14, 2006-Mar. 31,2009 14,Dec. 2006-Mar. June 8, 2004-Mar. 31, 2009 2004-Mar. 8, June 38 June 8, 2004-Mar. 31, 2007 2004-Mar. 8, June 7 Granted syntheticGranted options 2004A II 2004A Granted shareGranted options Scholes Black- 2.99 1.33 3.1 18 0 In cash 2) In shares 483 500 453 750 479 000 2004A I 2004A 411 250 2004B I Scholes 2006A Black- 5.96 5.93 6.32 2.61 3.74 113 6.15 5.8 38 95 10 ment termination, options are forfeited. are options termination, ment ment termination, options are forfeited. forfeited. are options termination, ment a general rule, in of case prior employ- a general rule, in of case prior employ- Employment during vesting period. As As period. vesting during Employment Employment during vesting period. As As period. vesting during Employment 2004B II Scholes Dec. 14, 2006-Mar. 31,2012 2) 14,Dec. 2006-Mar. Black- 3.16 1.41 Feb. 14, 2006-Mar. 31, 2009 14,Feb. 2006-Mar. Feb. 14, 2006-Mar. 31, 2007 14,Feb. 2006-Mar. Dec. 14, 2006-Mar. 31,2010 14,Dec. 2006-Mar. 4.1 18 5 Granted syntheticGranted options Granted shareGranted options Scholes 2006A Black- 1.09 4.12 4.3 16 5 In cash 2) 2004A II 2004A In shares 490 500 495 000 Scholes 46 250 46 250 2006B 2006B Black- 5.96 6.40 5.93 6.32 1.34 4.15 116 5.3 17 11 7

RAPALA ANNUAL REPORT 2007 / Financial Statements / 67 RAPALA ANNUAL REPORT 2007 / Financial Statements / 68 2006 INPUT TO THE MODEL THE TO INPUT Option-pricing model model Option-pricing Fair value of the option at the grant date, EUR EUR date, grant atthe option the of value Fair % date, grant atthe ratio forfeit Estimated % rate, interest Risk-free (years) option of life Expected % volatility, Expected

SHARE-BASED PAYMENT RECOGNITION IN THE INCOME STATEMENT STATEMENT INCOME THE IN RECOGNITION PAYMENT SHARE-BASED

E AVERAGE WEIGHTED AND OPTIONS OF NUMBER IN MOVEMENT EUR million EUR ECS RCSO PIN UIGTEYA XERCISE PRICES OF DURING OPTIONS THE YEAR 1998, has been excluded from the history, since it is not considered to be to considered not is it since history, the from excluded been has 1998, The expectedThe life of the option is based on historical non-market The data. volatility historical the byusing determined been has volatility expected The Total Total qualitative for volatility estimation purposes. The historical volatility is cal- is volatility historical The purposes. estimation volatility for qualitative criteria are not included in the fair value of the option but taken into account account into taken but option the of value fair inthe included not are criteria options. share the of life remaining average weighted the on based culated inDecember Offering, Public Initial to close very Period price. share the of Outstanding Dec. 31 Dec. Outstanding in2006 granted options to Correction duringGranted the year 1 Jan. Outstanding in the number of options that are assumed to vest. vest. to assumed are that options of number in the mlyebnfitepne Employee benefi t expenses Exercisable at the end of the year the of end atthe Exercisable year the during Expired during the yearExercised year the during Forfeited eerdtxs taxes Deferred pinporm ob ete ncs incash settled be to programs Option inshares settled be to programs Option Social security expenses liability from option programs option from liability expenses security Social (expired) Scholes 2003A Black- 2.96 2.13 2.8 27 0 2 354 168 2 354 2 318 668 903 668 -21 000 -12 000 Scholes 2003B -2 500 -2 Black- 3.25 2.07 3.8 38

Pcs. 5 ercised in 2007 was EUR 5.83 (2006: EUR 6.50). The weighted average average weighted The 6.50). EUR (2006: 5.83 EUR was in2007 ercised amount of dividends distributed) for options outstanding at the end of the the of end atthe outstanding options for distributed) dividends of amount year 2007 was EUR 5.96-6.32 (2006: EUR 4.68-6.44). 4.68-6.44). EUR (2006: 5.96-6.32 EUR was 2007 year remaining contractual life for the share options outstanding as atDecem- as outstanding options share the for life contractual remaining Weighted average share price at the date of exercise for the options ex- options the for exercise of date atthe price share average Weighted tions where granted in 2007). The range of exercise prices (reduced by the bythe (reduced prices exercise of range The in2007). granted where tions op- 1.23 (no EUR was 2006 year the during granted options for value fair ber 31, 2007 is 2.30 years (2006: 3.29 years). The weighted average average weighted The years). 3.29 (2006: years 31, 2.30 is ber 2007 Scholes 2004A I 2004A Black- 3.54 2.35 4.8 38 7 2004A II 2004A

Weighted average Scholes Black- 2007 5.99 4.68 6.22 2.99 1.33 6.19 6.41 6.15 exercise price 3.1 18 EUR/share 0 2004B I Scholes Black- 2.61 3.74 5.8 38 10 1 083 000 1 083 2 354 168 2 354 2 340 134 2 340 -991 000 2004B II 448 668 -77 966 -77 Scholes Black- 3.16 1.41 4.1 18 Pcs. 5 Scholes 2006A Black- 072006 2007 3.79 1.09 -0.3 -0.4 -0.7 -0.1 4.3 0.1 18 5 Scholes

Weighted average 2006B 2006 Black- 4.68 6.22 3.79 1.34 6.77 6.01 6.74 6.41 -0.9 -0.8 -0.1 5.3

0.0 0.0 exercise price 19 EUR/share 7

31. DIVIDEND PER SHARE PER 31. DIVIDEND 30. EARNINGS PER SHARE PER EARNINGS 30. SHARE-BASED PAYMENT RECOGNITION IN THE BALANCE SHEET SHEET BALANCE THE IN RECOGNITION PAYMENT SHARE-BASED EUR million EUR The dividend paid for 2006 was EUR 0.12 per share. A dividend of EUR 0.18 0.12 EUR of EUR Adividend was share. per 2006 for paid dividend The counts page 39. of earnings per share, see accounting principles for the consolidated ac- nancial statements for 2007. for statements nancial new restricted shares (RAP1VN0107). For more details on the calculations calculations the on details more For (RAP1VN0107). shares restricted new per share Meeting of forto is General Shareholders the proposed Annual Weighted average number of shares includes both old shares (RAP1V) and Weighted average number of shares includes both old shares (RAP1V) be held on April 3, 2008. This dividend payable is not refl not is payable dividend This 2008. fi 3, inthe April on ected held be - 4) Included in current other non-interest-bearing payables. non-interest-bearing other current in Included 4) Weighted average number of shares, 1000 shares 1000 shares, of number average Weighted shares 1000 shares, of number average Weighted (2006: EUR 0.0 million) and EUR 0.0 to share premium fund (2006: EUR EUR (2006: fund premium share 0.0to EUR and 0.0million) EUR (2006: Diluted weighted average number of shares, 1000 shares 1000 shares, of number average weighted Diluted shares 1000 option, share 2004B of Effect shares 1000 option, share 2004A of Effect shares 1000 option, share 2003B of Effect shares 1000 option, share 2003A of Effect EUR share, per earnings Diluted EUR share, per Earnings shares 1000 shares, of number average weighted Diluted of dilution Effect million EUR Company, the of holders equity the to profiNet attributable period the t for Assets premium fund. In 2007 EUR 0.0 million was credited to share capital capital share to credited was 0.0million EUR 2007 In fund. premium When the stock options are exercised, the proceeds received, net of any any of net received, proceeds the exercised, are options stock the When t 0.4 million). oilscrt xesslaiiyfo pinporm ) 4) programs option from liability expenses security Social qiyadlaiiis andEquity liabilities iblte rmoto rgast estldi ah incash settled be to programs option from Liabilities Equity Deferred assets tax ransaction costs, are credited to share capital (nominal value) and share share and value) (nominal capital share to credited are costs, ransaction 32. EVENTS AFTER THE BALANCE SHEET DATE SHEET BALANCE THE AFTER EVENTS 32. The Group has no knowledge of any signifi any of knowledge no has Group balance the The after events cant sheet date that would have a material impact on the fi the on impact amaterial have would that date sheet statements nancial for 2007. Material events after the balance sheet date have been discussed discussed been have date sheet balance the after events 2007.for Material in the Review of the Board of Directors. of Board the of Review in the

38 781 38 781 38 781 38 781 072006 2007 072006 2007 0.45 0.45 17.3 -0.4 0.2 0.4 0.1 38 609 38 609 38 565 38 565 0.28 0.28 10.8 -0.1 0.0 0.0 44 23 0.1 17 4 1

RAPALA ANNUAL REPORT 2007 / Financial Statements / 69 33. GROUP COMPANIES

Subsidiaries by geographical area Country Group holding % Nature of activity

Europe Normark S.r.o. Czech Republic 50 Distribution Elbe Lystfi skeudstyr ApS Denmark 100 Administration Normark Denmark A/S Denmark 100 Distribution Normark Sport Ltd. England 100 Administration Marttiini Oü Estonia 100 Manufacturing Normark Eesti Oü Estonia 100 Distribution Rapala Eesti AS Estonia 100 Manufacturing KL-Teho Oy Finland 100 Manufacturing Marttiini Oy Finland 100 Manufacturing Normark Sport Finland Oy Finland 100 Distribution Normark Suomi Oy Finland 100 Distribution Peltonen Ski Oy Finland 80 Manufacturing Rapala Shimano East Europe Oy 1) Finland 50 Administration Cannelle SA France 100 Distribution Nautisme SA France 100 Distribution Rapala France SAS France 100 Distribution RNF Diffusion SARL France 100 Distribution Tortue SAS France 100 Distribution VMC Péche SA France 100 Manufacturing Rapala Eurohold Ltd. Hungary 56.6 Distribution Rapire Teo Ireland 100 Manufacturing SIA Normark Latvia Latvia 100 Distribution Normark UAB Lithuania 82 Distribution Rapala B.V. Netherlands 100 Administration Elbe Normark AS Norway 100 Distribution RAPALA ANNUAL REPORT 2007 / Financial Statements 70 ANNUAL REPORT RAPALA Remen Slukfabrikk AS Norway 100 Administration Sandelin Berntsen Sport AS Norway 51 Distribution Vangen AS Norway 100 Administration Normark Polska Sp.z.o.o. Poland 100 Distribution Normark Portugal SA Portugal 100 Distribution OOO Raptech Russia 100 Manufacturing ZAO Normark Russia 50 Distribution Normark Spain SA Spain 100 Distribution Normark Scandinavia AB Sweden 100 Distribution Normark Trading AB Sweden 100 Distribution Rapala-Fishco AG Switzerland 100 Distribution VMC Waterqueen Ukrainia Ukraine 50 Distribution North America Normark Inc. Canada 100 Distribution NC Holdings Inc. USA 100 Administration Normark Corporation USA 100 Distribution Normark Innovations, Inc. USA 100 Sourcing/design/manufacturing VMC Inc. USA 100 Distribution Rest of the World Freetime Pty Ltd. Australia 100 Distribution Rapala V.M.C. Do Brazil Brazil 100 Distribution Rapala VCM China co. China 100 Distribution Willtech Industrial Ltd. Hong Kong 100 Administration and sourcing/design Starcut Ltd Hong Kong 100 Administration Willtech (PRC) Ltd. Hong Kong 100 Manufacturing Rapala Japan K.K. Japan 100 Distribution Rapala Asia Pacifi c Pte Ltd. Malaysia 100 Distribution Rapala VMC South-Africa Distributors Pty Ltd. South Africa 70 Distribution Rapala VMC Korea Co., Ltd 1) South Korea 100 Distribution Rapala VMC (Thailand) Co.,Ltd. Thailand 80 Distribution Associated companies by geographical area 1) Established in 2007 Lanimo Oü Estonia 33.3 Manufacturing Shares owned by the parent company KEY FINANCIAL FIGURES * Financial year 17 year months * Financial 1) Minority interest has been deducted from 2003 net profi net 2003 period. from the t for deducted been has interest Minority 1) Average personnel for the period the for personnel Average Attributable toAttributable as a percentage of net sales net of apercentage as sales net of apercentage as as a percentage of net sales net of apercentage as sales net of apercentage as sales net of apercentage as sales net of apercentage as sales net of apercentage as Capital employed at the end of the period the of end atthe employed Capital Capital expenditure Operating profi t profiOperating impairments and depreciation t before Scope of activity and profi and activity of tability Scope Minority interestMinority 1) Personnel at the end of the period the of end atthe Personnel period the of end atthe (gearing) ratio Debt-to-equity period the of end atthe ratio Equity-to-assets (ROE) equity on Return (ROCE) employed capital on Return period the of end atthe debt interest-bearing Net Research and development expenses Equity holders of the Company 1) Company the of holders Equity profiNet 1) period the t for Profi taxes t before taxes and Profi items extraordinary t before Net sales EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR Persons Persons % % % % % % % % % % % 3 095 3 235 2003* 139.0 219.4 156.1 26.8 84.8 19.0 14.3 15.2 31.4 11.4 FAS 31.7 17.4 13.1 6.9 9.9 8.6 5.2 2.2 4.5 1.0 7.9 140.6 139.0 173.5 3 067 3 361 2004 IFRS 24.9 16.0 19.9 12.0 14.3 14.2 31.4 11.4 21.7 81.7 12.1 5.3 0.3 0.6 9.2 9.2 7.0 0.1 3 986 3 780 171.3 2005 196.1 127.1 IFRS 95.9 26.3 20.8 18.6 13.8 14.0 14.0 21.5 13.4 11.0 11.0 33.1 21.7 0.0 9.5 0.4 0.7 7.1 226.6 180.6 122.2 3 987 3 921 2006 IFRS 99.3 28.0 33.4 10.8 13.8 12.3 14.6 12.4 11.0 21.7 14.1 4.9 6.5 9.6 0.5 0.2 1.2 6.1 4 356 242.5 4 577 2007 177.1 IFRS 33.8 23.3 28.3 38.2 82.8 80.2 15.9 13.9 17.3 19.7 17.5 11.7 3.8 0.3 9.3 9.6 1.6 0.7 7.2

RAPALA ANNUAL REPORT 2007 / Financial Statements / 71 RAPALA ANNUAL REPORT 2007 / Financial Statements / 72 * Financial year 17 year months * Financial New restricted shares 5) shares restricted New 4) shares Old 5) shares restricted New 4) shares Old 5) shares restricted New 4) shares Old 5) shares restricted New 4) shares Old Total Total Total 4) Trading code for old shares is RAP1V. is shares old for code Trading 4) Year end market capitalization market Year end Average share price 3) price share Average stricted shares has been calculated using the average share price of old shares. old of price share average the using calculated been has shares stricted 2) Share related key fi gures include both old shares (RAP1V) and new restricted shares (RAP1VN0107), unless otherwise informed. otherwise unless (RAP1VN0107), shares restricted new and (RAP1V) fi key shares old related both Share 2) include gures 3) Only old shares (RAP1V), since new restricted shares (RAP1VN0107) do not carry dividend right for 2007 and have a lock-up period for 12 for months. period alock-up have and 2007 for right dividend carry not do (RAP1VN0107) shares restricted new since (RAP1V), shares old Only 3) right to dividend paid from fi nancial year 2007 and there is a lock-up period of 12 months. The new restricted shares shall be combined be to shall the old shares shares as soon as the dif- restricted new The 12 of months. period alock-up fi is from there paid and 2007 dividend to year right nancial Weighted average number of shares shares of number average Weighted 5) Trading code for new restricted shares is RAP1VN0107. New restricted shares grant its holders the same rights as the old sha old the as rights same the holders its grant shares restricted New RAP1VN0107. is shares restricted new for code Trading 5) Share related key fi key related Share 2) gures Share capital 3) period the of end atthe price Share ference regarding the right to dividend between the series no longer exists i.e. October 24, 2008. The year end market capitali market end year The 24, 2008. i.e.October exists longer no series the between dividend to right the regarding ference Fully diluted weighted average number of shares of number average weighted diluted Fully period the of end atthe shares of number diluted Fully period the of end atthe shares of Number 3) period the for Dividend ofNumber shares of traded average number of shares 3) ofNumber shares 3) traded 3) price share Highest 3) price share Lowest ratio Price/earnings 3) yield dividend Effective ratio Dividend/earnings 3) share per Dividend share per Equity share per earnings diluted Fully share per Earnings 1000 shares 1000 shares 1000 shares 1000 shares 1000 shares 1000 shares 1000 shares 1000 shares EUR million EUR million EUR million EUR million EUR million EUR Shares EUR EUR EUR EUR EUR EUR EUR EUR % % % 9 164 995 9 164 37 543 37 543 37 543 37 543 37 543 37 543 204.6 204.6 2003* 24.41 2.20 3.60 0.36 0.36 33.5 4.36 5.45 5.75 1.43 FAS 0.12 15.1 3.4 4.5 5 090 048 5 090 37 560 37 560 37 543 37 543 37 543 37 543 13.56 218.5 218.5 2004 IFRS 0.09 6.85 28.2 5.82 0.32 0.32 5.24 1.55 1.55 18.2 5.87 3.4 3.4 res, except that these new shares will not give give not will shares new these that except res, zation and price/earnings ratio of the new re- new the of ratio price/earnings and zation 23 027 428 027 23 38 498 38 498 37 889 38 516 37 871 37 871 234.8 234.8 60.81 2005 IFRS 5.50 6.88 30.3 1.80 1.96 16.5 0.37 0.37 5.91 6.10 0.11 3.5 4.2 12 468 161 468 12 38 609 38 620 38 565 38 565 38 576 38 576 238.8 238.8 32.33 2006 IFRS 5.60 6.26 2.09 0.28 0.28 42.8 1.94 6.75 6.19 22.1 0.12 3.5 4.6 8 684 433 8 684 39 468 39 468 38 579 38 578 38 781 38 781 219.3 22.51 214.1 2007 IFRS 5.40 5.55 2.43 40.2 0.45 0.45 5.82 3.24 6.27 12.5 0.18 13.1 890 202 6.9 3.6 5.2 Net sales EUR million EUR Attributable to: Attributable Average personnel for the period the for personnel Average at the end of the period the of end at the sales net of apercentage as sales net of apercentage as sales net of apercentage as sales net of apercentage as and impairments at the end of the period the of end at the Capital expenditure Capital employed at the end of the period the of end atthe employed Capital Operating profi t profiOperating depreciation t before Minority interestMinority KEY FIGURES BY QUARTER BY FIGURES KEY Net interest-bearing debt debt interest-bearing Net Company the of holders Equity profiNet period the t for Profi taxes t before Q1/06 63.4 period the of end atthe Personnel (gearing) ratio Debt-to-equity period the of end atthe ratio Equity-to-assets (ROE) equity on Return (ROCE) employed capital on Return Net sales Q2/06 64.2 Q3/06 49.8 Q4/06 49.2 Q1/07 63.4 Q2/07 73.4 Q3/07 52.0 Q4/07 53.7 depreciation and impairments and depreciation Operating profit before EUR million EUR Q1/06 11.6 EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR Q2/06 9.7 Persons Persons Q3/06 4.4 % % % % % % % % Q4/06 2.4 Q1/07 12.3 10 Q1/07 Q1/06 3 766 136.6 195.2 3 797 112.7 32.3 28.6 63.4 10.0 21.9 15.8 12.3 18.2 11.6 -0.1 8.9 8.2 7.8 Q2/07 12.6 5.7 5.7 Q3/07 4.6

Q4/07 4.3 Q2/07 Q2/06 3 835 4 076 189.0 106.4 128.7 22.6 32.6 64.2 18.0 12.6 15.1 2.0 4.3 9.6 0.2 4.5 7.0 9.7 8.1 6.1 Operating profit EUR million EUR Q1/06 10.0 30 Q3/07 Q3/06 4 090 3 907 118.9 181.2 49.8 98.4 34.4 8.8 2.0 0.3 2.8 0.8 6.4 0.4 4.4 1.0 5.7 1.7 Q2/06 8.1 2.1 0.1 Q3/06 2.8

Q4/06 0.7 Q4/07 Q4/06 3 964 180.6 122.2 3 921 99.3 33.4 49.2 -0.3 -0.6 2.6 4.8 0.5 0.4 2.4 1.9 1.0 1.5 0.7 1.7 Q1/07 12.0 0.1 Q2/07 11.0 123.5 4 051 4 717 197.5 Q3/07 2.9 109.1 36.3 32.9 63.4 25.4 18.9 12.0 12.3 19.5 12.2 11.0 17.3 8.2 7.6 0.1 Q4/07 2.4 7.7 Profit before taxes EUR million EUR 4 622 4 337 101.9 112.3 192.7 23.6 33.2 73.4 15.0 12.6 13.4 31.2 11.0 17.2 2.0 6.6 9.8 6.7 0.1 Q1/06 7.8 9.1 Q2/06 6.1 Q3/06 1.0 4 957 4 510 180.7 52.0 36.2 89.5 98.1 2.9 8.8 5.6 4.6 5.2 6.4 1.0 1.4 2.7 1.7 2.1 0.1 Q4/06 -0.3 1.1 Q1/07 11.0 4 356 Q2/07 9.8 4 576 177.1 38.2 82.8 80.2 53.7 2.0 2.0 9.0 4.3 2.5 4.5 5.4 2.4 7.9 3.7 2.1 0.1 Q3/07 1.4 1.1 Q4/07 1.1

RAPALA ANNUAL REPORT 2007 / Financial Statements / 73 RAPALA ANNUAL REPORT 2007 / Financial Statements / 74 PARENT COMPANY FINANCIALS, FAS

EUR million EUR

PARENT COMPANY INCOME STATEMENT Total assets Total assets Total current Total non-current assets assets Tangible P Appropriations As Cash andequivalents cash Cash Operating profi t profiOperating and depreciation t before operating expensesOther Change in of inventory fi nished and work products operating income Other Current fiCurrent assets nancial Current assets impairments in progress Materials and services and Materials Inventories receivables Interest-bearing Investments Intangible assets Income taxes Non-current assets Non interest-bearing receivables interest-bearing Non profiNet period the t for Profi taxes and appropriations t before Extraordinary items Profi items extraordinary t before expenses and income Financial andDepreciation impairments Employee benefi t expenses use own for Production Net sales ARENT COMPANY BALANCE SHEET BALANCE COMPANY ARENT sets Interest-bearing Non-interest-bearing 131.6 177.4 2007 -13.5 45.8 98.6 19.8 13.6 27.3 25.7 -2.2 -4.1 -9.1 -1.1 6.9 5.0 8.6 6.5 5.4 1.0 1.0 1.2 1.4 6.7 0.7 7.4 1.7 0.1 0.1 0.1 149.2 2006 187.4 -13.9 44.0 98.8 38.2 20.6 27.4 -0.8 -0.4 -4.2 -1.0 -7.2 2.0 2.8 0.3 6.2 1.0 1.3 1.5 4.7 7.2 1.7 2.1 0.1 0.1 0. 4.1 1 EUR million EUR

Total non-current liabilities Total non-current Total shareholder’s equity and liabilities and equity shareholder’s Total liabilities Total current Total shareholders’ equity Appropriations Current liabilities Current Shareholders’ equity Shareholders’ Equity andShareholders’ Equity Liabilities Interest-bearing fund premium Share Share capital Interest-bearing Non-current liabilities Non-current Non-interest-bearing Non-interest-bearing Net income for the period the for income Net earnings Retained Fund for invested non-restricted equity reserve value Fair 177.4 2007 33.3 46.5 46.5 79.3 18.2 51.5 16.7 47.7 4.9 0.0 3.6 6.5 0.1 2006 187.4 44.9 59.6 50.2 72.5 10.2 58.7 55.1 16.7 0.9 3.5 0.2 2.1 Total

( ence regarding the right to dividend between the series no longer exists i.e. exists longer no series the between dividend to right the regarding ence except that these new shares will not give right to dividend paid from fi nan- of shares shall be combined to the old series of shares as soon as the differ- series new The 12 of months. period alock-up is there and 2007 year cial Old shares October 24, 2008. October New restricted shares PARENT COMPANY SHARE CAPITAL SHARE COMPANY PARENT Each shareEach from both classes is entitled to one vote. restricted New shares RAP1VN0107) grant its holders the same rights as the old shares (RAP1V), (RAP1V), shares old the as rights same the holders its grant RAP1VN0107)

EUR million EUR PARENT COMPANY CASH FLOWPARENT CASH STATEMENT COMPANY Total adjustments Total Total change in working capital inworking Total change Total net generated cash from fi nancing activities activities ininvesting used cash Total net Acquisition ofAcquisition subsidiaries of the period Ad Other fiOther nancial items, net Change inliabilities Change ininventories Change Change in receivables Cash and cash equivalents at the end of the period the of end atthe equivalents cash and Cash beginning atthe equivalents cash and Cash equivalents cash and incash Change Change in working capital in working Change Income taxes paid taxes Income received Interest Interest paid Income taxes Net cash generated from fi from generated cash Net Dividends received Purchases ofPurchases available-for-sale investments Purchases of tangible assets assets tangible of disposal from Proceeds Purchases of intangible assets activities in investing used cash Net generated cash Net from operating activities items non-cash of Reversal expenses and income Financial Net profiNet period the t for Proceeds from issue of shares of issue from Proceeds Loan repayments withdrawalsLoan Dividends paid justments Other items Other Depreciation andDepreciation impairments nancing activities -23.9 -23.6 2007 25.5 -0.3 -0.8 -4.9 -2.2 -6.7 -4.7 -1.0 -1.3 -1.3 -1.2 -0.1 17.1 6.9 5.0 8.6 9.8 6.5 8.4 3.4 2.2 0.4 1.2 7.2 7.4 1.1 101.8 -28.5 20 -21.8 -74.6 39 468 449 468 39 -17.9 38 578 769 578 38 23.4 -0.3 -4.2 -4.2 -2.9 -1.8 -1.2 -1.2 -1.7 3.9 3.9 0.9 6.3 0.8 2.6 4.6 0.4 0.4 1.0 2.7 7.2 2.1 06 889 680

Shares 2007 EUR million EUR

Total distributable equity The fi nancial statements of parent company have been prepared according to according prepared been have company fi parent of The statements nancial PARENT COMPANY STATEMENT OF CHANGES IN EQUITY IN CHANGES OF STATEMENT COMPANY PARENT Other distributable equity distributable Other funds distributable Other statements is available at the Group’s website www.rapala.com. website Group’s atthe available is statements Fund for invested non- restricted equity equity restricted non- invested for Fund earnings Distributable period the for income Net Dividends paid earnings Retained Finnish Accounting Standards (FAS). Parent company'sFinnish complete Accounting fi Standards (FAS). nancial Gains and losses on cash fl cash on losses and Gains hedges ow Share premium fund Dec. 31 Dec. fund premium Share Shares subscribed with options 1 Jan. fund premium Share 31 Dec. capital Share Shares subscribed with options 1 Jan. capital Share Retained earnings Dec. 31 Dec. earnings Retained period the for income Net Dividends paid 1 Jan. earnings Retained Fund for invested non-restricted Dec. 31 equity Private offering 1 Jan. equity restricted non- invested for Fund 31 Dec. reserve value Fair 1 Jan. reserve value Fair Private offering Private offering

DISTRIBU 3 472089 3 552 160 3 552 TABLE EQUITY 80 071 EUR 2007 38 576 269 576 38 269 576 38

Shares 2006 2007 52.3 52.3 54.2 54.2 16.7 16.7 59.1 -4.6 -4.6 4.9 4.9 4.9 0.0 0.0 0.0 0.0 3.6 3.5 6.5 6.5 0.1 3 471 864 3 471 864 2006 52.3 52.3 52.3 54.4 54.4 16.3 16.7 EUR -4.2 -4.2 0.0 3.5 3.5 0.4 2.1 2.1 2006

RAPALA ANNUAL REPORT 2007 / Financial Statements / 75 RAPALA ANNUAL REPORT 2007 / Financial Statements / 76 Rapala complies with the Corporate Governance recommendation for listed companies issued by the Helsinki Stock Exchange, Exchange, Stock recommendation forlistedbytheHelsinki companiesissued Governance complies withtheCorporate Rapala The Board’s duties and responsibilities andresponsibilities Board’s duties The de- the highest is Meeting General The vestments anddisposals. vestments the Finnish Central Chamber of Commerce and the Confederation of Finnish Industry and Employers. The full The version andEmployers. ofthe ofFinnish Industry andtheConfederation ofCommerce Chamber the Finnish Central ny where the shareholders in participate posed dividend, the release from liabili- from the release dividend, posed (Board) andCEO, the andthe President leases as well as deciding on major in- Companies Act such as the acceptance the acceptance as such Act Companies Company. Companies Act andthe Company’s Act Ar- Companies cision-making body of a limited compa- of alimited body cision-making election of the members of the Board and of of the theelection members Board amendments capital, share or decreasing of the fi inthe stipulated on the matters decides importance to the Group are decided by decided tothe are Group importance annual budgets, and stock exchange re- exchange andstock annual budgets, annual fi approval and confi and approval andCEO, of theand removal President are principally based on the Finnish based principally are guidelines, approval of quarterly and of quarterly approval guidelines, the supervision andmanagement of the the supervision to them. the Auditors, andthe paid compensation of Directors of the of members Board ty andpro- of Association to the Articles the Board. These include appointment These the Board. of key matters All of Association. ticles The Duties and Responsibilities of the Board Board the of Responsibilities and Duties The The Annual General Meeting (AGM) Meeting General Annual The increasing statements, nancial nancial reports, business plans, General Meeting Meeting General Corporate Governance Company’s Corporate Governance statement isavailable statement atthewebsite Governance Company’s Corporate rmation of strategic and Management AGM. The term of a Board member member AGM. of aBoard term The The Board has appointed aRemuner- has Board The that provide of Association Articles The The average attendance rate at these at these rate attendance average The Mr. Eero Makkonen andMr.Mr. Jan-Hen- Eero fi fi Emmanuel Viellard. Its members are Board elects a Chairman to serve until until toserve aChairman elects Board run concurrently with a director’s term term adirector’s with concurrently run rik Schauman. meetings was 94.9%. For was compensation meetings utive directors and currently consist of consist andcurrently directors utive drawn from the Company’s from non-exec- drawn mem- seven comprises Board current consolidated fi of Board members, see note 28 in the the AGM. date of until the next is The bers: the Group’s President andCEO, the Group’sbers: President bers not employedbers bythe Group. and no more than ten members. The The members. ten and no than more as a member of the Board. The Commit- The of the amember Board. as Mr. by chaired is that Committee ation the Board consists of no less than fi turing Operations and Hong Kong Of- the Head of Rapala’s Manufac- Chinese tee’s tasks includetee’s of approval the remu- tasks the date of AGM. the next the During ce and fi year, met 14nancial the Board times. Board members are elected bythe elected are members Board Committee members’ appointments Election and Terms of Board Members Terms Board and of Election Remuneration Committee Remuneration ve non-executive expert mem- nancial statements . statements nancial ve The Group comprises the parent com- the parent comprises Group The appointed bythe is Board. President The fi President. Forof compensation Presi- President. the Presi- assists Committee Executive 28 in the consolidated fi remuneration scheme is consistent with that the ensuring charged with is mittee of employment terms ment, including ap- policies employment and neration nancial Offi nancial comprises which typically ny’s Board, ments. plied tothe Company’s manage- senior pany and manufacturing anddistri- pany andmanufacturing dent and Executive Committee, see note see Committee, dent andExecutive of members of the The Group. erations the op- andplanning dent inmanaging els and bonus arrangements. The Com- The arrangements. andbonus els benefi and remuneration contracts, Since 1998, Mr. Jorma Kasslin has acted acted Since 1998, has Mr. Jorma Kasslin bution subsidiaries. Responsibility for subsidiaries rests with each compa- as the President and Chief Executive Of- andChiefExecutive the President as the Company’s goals. the Group President, Group ChiefFi- Group the President, Group of these the management anddirection tothe report Committee the Executive the subsidiary’s President. In addition, addition, In President. subsidiary’s the cer and as a member of the Board. The The of the amember Board. andas cer Business Organization and Responsibilities www.rapala.com President and Executive Committee Executive and President cer, Company Counsel and . nnil state- nancial t lev- The auditor JuhaThe is incharge Nenonen, The Group’s share- on insider The guidelines which are: Group branded lures, fi lures, branded Group which are: hooks, fi hooks, fi holdings follow to a great extent the the extent great a to follow holdings Ernst &Young for the responsible Ernst is Helsinki Stock Exchange. Information Information Exchange. Stock Helsinki ny’s website. ny’s nating the audit in all Group companies. the companies. Group auditnating inall andcoordi- for instructing responsible globally.nies auditors The of the Par- principles of the current regulations on regulations principles of the current CPA. no that sep- the has fact Group The er hand, into fi er hand, er register can be found be on the can Compa- er register includedon inthe persons public insid- each Group company has its own man- own company its Group each has ent Company,&Young Ernst Oy, are is refl insider shareholdings prepared by the the by prepared shareholdings insider arate internal audit function of its own own of auditits function internal arate agement team. The Group’s business or- Group’s The agement business team. audit of the majority of Group compa- ofaudit Group of the majority ganization can be divided into manufac- divided be can ganization turing and distribution and, on the oth- the audit. shing products andother products. products shing andcontent of inthe scope ected shing accessories, third party party third accessories, shing Insider Register Insider ve different businesses, businesses, ve different Audit shing shing

Chairman Jan-Henrik Schauman Jan-Henrik Year of birth: 1963 birth: of Year Year of birth: 1945 birth: of Year Year of birth: 1951 birth: of Year controlled corporation*: 100 000 100 corporation*: controlled BOARD OF DIRECTORS Options*: 30 000 30 Options*: Options*: 30 000 30 Options*: General Manager of Manager General Sofi na Vice President of Lisi Industries Lisi of President Vice Executive and Chairman Vice Shareholding*: - Shareholding*: Shareholding*: - Shareholding*: Shareholding and options*:- Indirect shareholding through M.Sc. (Econ.), MBA (Econ.), M.Sc. MBA Emmanuel Viellard B.A., CPA B.A., Marc Speeckaert *Shareholdings and options on December 31, 2007. December on options and *Shareholdings Chief Executive Offi Executive Chief cer Jorma Kasslin Jorma President and and President Year of birth: 1953 birth: of Year Year of birth: 1942Year of birth: controlled corporation*: 680 000 680 corporation*: controlled controlled corporation*: 100 000 100 corporation*: controlled Options*: 118 334 Options*: Options*: 30 000 30 Options*: Options also include synthetic options. synthetic include also Options Christophe Viellard Shareholding*: - Shareholding*: Shareholding*: - Shareholding*: M.Sc. (Eng.) Indirect shareholding through Indirect shareholding through Diploma ESCP Manufacturing Operations and Operations Manufacturing Hong KongHong Offi ce ofRapala’s Chinese Head Year of birth: 1946 birth: of Year Year of birth: 1962 birth: of Year controlled corporation*: 100 000 100 corporation*: controlled Options*: 30 000 30 Options*: Options*: 49 533 533 49 Options*: Shareholding*: - Shareholding*: Shareholding*: 890 580 890 Shareholding*: Indirect shareholding through Eero Makkonen King Ming (William) Ng Ming (William) King B.Sc. (Eng.) B.Sc. (Eng.)

RAPALA ANNUAL REPORT 2007 / Financial Statements / 77 RAPALA ANNUAL REPORT 2007 / Financial Statements / 78 Jevgeni Maksutenko Jukka Sairanen Jari Kokkonen Arto Nygren Aku Valta Aku OTHER GROUP KEY MANAGERS KEY GROUP OTHER Christian Victor EXECUTIVE COMMITTEE FISHING HOOKS Kevin Au DQ Yung Martyn LydonMartyn Rauno Rantanen Peter Nordlander Brian Wong Päivi Ohvo FISHING ACCESSORIES Research & Development –Rapala &Development Research Research & Development – Storm and Blue Fox Blue and –Storm &Development Research LF Yung Lars Ollberg LURES , Willtech Factory , Willtech , Willtech Factory , Willtech , Willtech Lures , Willtech , Sales and Marketing and , Sales , Marttiini , Willtech Fishing Accessories Fishing , Willtech , Vääksy Factory , Vääksy , Sales and Marketing and , Sales , Inverin Factory , Inverin , , Sales and Marketing and , Sales , , Pärnu Factory , Pärnu , Sourcing , Sortavala Factory , Sortavala Chief Executive Offi Executive Chief (CEO) cer Jorma Kasslin Kasslin Jorma President and and President (Board of Directors) See information above above information See Company Counsel, Secretary of the ofthe Secretary Counsel, Company Board and Investor Relations Investor and Board Europe Europe North and East in ofDistribution Head controlled corporation*: 70 000 controlled corporation*: 50 000 Options*: 58 806 58 Options*: Options*: 46 766 46 Options*: Olli Aho Olli Aho Shareholding*: -Shareholding*: Shareholding*: 600 600 Shareholding*: Indirect shareholding through Indirect shareholding through Hannu Murtonen Juhani Eskelinen , Group Tax and Risk Management Management Risk Tax and , Group Ristimäki Jussi Janne Paukkunen Janne Nicolle Jean-Philippe Tapio Nirkkonen Tapio Anu Natunen Anu ADMINISTRATION Group Reporting and Financial Control Financial and Reporting Group OTHER PRODUCTS Cynthia Foong Cynthia Gregg Wollner Gregg Saku Kulmala Esko Jäntti Mikko Häikiö DISTRIBUTION Mats Baum Philippe Guigo Philippe Roger Cannon Nancy Adelmann Financial Planning and Business Control Business and Planning Financial , Group Treasury , Group , Sweden , , , Finland , USA , Canada , Willtech Gift Products Gift , Willtech , France , KL-Teho , Peltonen , USA , Spain, Portugal and Brazil and Portugal , Spain, , France President of Rapala USA ofRapala President Tom Mackin Tom controlled corporation*: 10 000 Options*: 56 533 56 Options*: Shareholding*: 3 000 3Shareholding*: 000 Indirect shareholding through Chief Financial Offi Financial Chief (CFO) cer Jouni Grönroos controlled corporation*: 30 000 Options*: 44 500 44 Options*: Shareholding*: 8Shareholding*: 001 Indirect shareholding through Juhani Pehkonen Head of Lure Business ofLureHead Business controlled corporation*: 30 000 Options*: 58 800 58 Options*: Shareholding*: -Shareholding*: Indirect shareholding through *Shareholdings and options on December 31, 2007. December on options and *Shareholdings Ja Adamovics Janis Thomas Brumann Options also include synthetic options. synthetic include also Options Grant Pledger Grant Vitas Miskinis Victor Skvortsov Brian Hale Mark Pledger Manabu Kimoto Peter Nordlander Karoly Agh Mati Banhard Daniel Sirucka Roman Sereda , Poland Adamski Mirek Hasse Coucheron-Aamot Hasse Nils Larsen Lion Huang Leong Loke y Choi , South Korea , South , Australia jr. , Denmark , China , Malaysia and Thailand , South Africa , South , Hungary , Estonia , South Africa , South , Lithuania , Czech Republic , Czech , Ukraine , Japan , Russia , Latvia , China and South Korea South and , China , Switzerland Operations and Hong Kong Offi Kong Hong and Operations ce Head of Fishing Hook Business Hook ofFishing Head Head of Chinese Manufacturing Manufacturing ofChinese Head controlled corporation*: 10 000 Options*: 51 300 Options*: Stanislas de Castelnau Castelnau de Stanislas (Board of Directors) Shareholding*: -Shareholding*: Indirect shareholding through See information above above information See King Ming (William) Ng Ming (William) King , Norway AGM. The Board is also authorized to authorized also AGM. is Board The 10 000 000 shares. This authorization vote. For details on the restrictions on on the restrictions Fordetails vote. Register was EUR 3.6 million andthe EUR 3.6 million was Register Based on authorization given bythe on An- authorization given Based On December 31, December 2007,On the sharecapi- 2007, the Board can decide to issue toissue decide 2007, can the Board 2 000 000 shares. This amount of shares nual General Meeting (AGM) Meeting nual General inApril resolve to repurchase a maximum of amaximum torepurchase resolve the including issued tobe new shares (2006: 38576 269), to which divided is of 5 years from the resolution from bytheof 5years the from indeviation issuance cluding ing code RAP1V) new code and889 re- 680 ing in one or more issues. The number of issuance of new shares, options and options of new shares, issuance tore- for the Board includes the right Share Capital. Capital. Share book value of a share is EUR 0.09. valuebook of is ashare Each share from both series is entitled to one stricted shares (RAP1VN0107). The shares through issuance of shares, op- of shares, issuance through shares shareholders’ preemptive rights. This This rights. preemptive shareholders’ in- toshares, entitling rights special of the andconditions solve terms on all no be more than shall rights special shares to be obtained under options or authorization is in force for a period for inforce aperiod is authorization total number of shares was 39 468 449 39449 468 was of number shares total inthe Trade andreported paid fully tal the new shares, see chapter Changes in chapter Changes see the new shares, 38578 769 series: two (trad- old shares tions or special rights entitling to shares toshares entitling rights orspecial tions Shares and Voting Rights Board’s Authorizations In 2007, the shares traded between EUR 5.40 and 6.27 with an average price of EUR 5.82. 2007,withanaverageIn and6.27 5.40 priceofEUR EUR thesharestradedbetween Rapala’s shares have been traded on the OMX Nordic Exchange in Helsinki since 1998. in Helsinki Rapala’s Exchange Nordic shareshave beentradedontheOMX Shareholders Shares and April 5, 2007. All 500 000 shares have shares 000 5, 500 2007.April All 4, 2007 and listed on the main list of The share capital increased with EUR with increased sharecapital The June 27. 27 sharecap- toSeptember The were issued to Shimano for toShimano the subscrip- issued were will not give right to dividend paid from from paid dividend to right give not will In March 2007,whereIn March new shares 2500 225.00 and the subscriptions were reg- were 225.00 andthe subscriptions 24, 2007. The new shares where listed 2007. where24, new listed shares The now been subscribed with 2003A with op- subscribed now been represented a three-month weighted weighted athree-month represented ket. This authorization is in force until terms, equal on shareholders all to made restricted series of shares shall be com- purchased either through atender either offer through purchased lock-up period of 12 months. The newlock-up of The 12 months. period of the company. re- may be shares The than10% toless shares of all corresponds on October 25, 2007. These new shares 25, new shares 2007.on October These of Helsinki the OMX Exchange Nordic or through public trading from the mar- from public trading or through istered inthe Trade on April istered Register ital increase of EUR 80 071.20 corre- September 30, 2008. September bined to the old series of shares as soon soon as bined tothe of old shares series subscribed with 2003A option rights. sponding to the subscription was regis- was subscription the to sponding average share price for the shareprice average sharefrom as a new series of shares on the main list as the difference regarding the right to the right regarding the difference as tion rights. tion price of EUR 5.62 which price tion share, per the OMX Nordic Exchange Helsinki on Helsinki the OMX Exchange Nordic tered in the Trade Register on October inthe Trade ontered October Register the fi In October 2007, new 889 shares 680 In October nancial year 2007 andthey have 2007 a year nancial Changes in Share Capital inShare Changes Account about changes in address or inaddress changes about Account Viellard Migeon &Cie (VM&C) Migeon Viellard andUta- 40 shareholders. On June 29, 2006 Uta- 29, 2006 June On shareholders. 40 The shares of the Company shares belong The 39 468 449 at December 31, at December 2007. 449 39 468 via has undertaken tovoteinRapala’s undertaken has via Indus- Pruines De from purchased via via S.à.r.lvia (Utavia) into ashare- entered holders are Board members or managers ormanagers members holders Board are holders’ on June agreement 29, with 2006 ment. The main shareholder main The ment. of is Utavia respect to their shares in Rapala, andthe inRapala, totheir shares respect ular register holding their Book Entry of the Group. In total, Utavia has some 43% otherca. share- shareholding. The ership of shares. of ership toown- related andother matters dends of the share capital increase, Rapala’s of increase, the share capital aresult As 2008. 24, October i.e. exists no longer the series between dividend ing ca. 4.08% of the issued share capi- of 4.08% the issued ca. ing Shareholders should notify the partic- the notify should Shareholders bound bythe shareholders’bound said agree- subsidiary of VM&C. of VM&C. subsidiary shareholders of Utavia have agreed to be be to agreed have Utavia of shareholders share capital was EUR 3552 was capital share 160.41 and account numbers for of divi- payment numbers account tal and voting rights in Rapala. DPI inRapala. a is rights andvoting tal (DPI)tries 1610 represent- shares 000 with the ofJorma Kasslin, Rapala, CEO to the Book Entry Securities System. Securities to the Entry Book the total number of outstanding shares shares of number outstanding the total In the shareholders’ agreement, Uta- agreement, shareholders’ the In Shareholder Agreement Shareholder Register

RAPALA ANNUAL REPORT 2007 / Financial Statements / 79 RAPALA ANNUAL REPORT 2007 / Financial Statements / 80 * Number of shares includes both old shares (RAP1V) and new restricted shares (RAP1VN0107). The new restricted class of shares shall be combined to the old class class old the to combined be shall shares of class restricted new The (RAP1VN0107). shares restricted new and (RAP1V) shares old both includes shares of * Number of shares as soon as the difference regarding the right to dividend between the classes no longer exists i.e. on October 24, 20 October i.e.on exists longer no classes the between dividend to right the regarding difference the as soon as shares of SHAREHOLDERS BY CATEGORY ON DECEMBER 31, 2007 * 31, 2007 DECEMBER ON CATEGORY BY SHAREHOLDERS PRINCIPAL SHAREHOLDERS ON DECEMBER 31, 2007 * 31, 2007 DECEMBER ON SHAREHOLDERS PRINCIPAL ITIUINO HRHLIGO EEBR3,20 ON OF DECEMBER SHAREHOLDING DISTRIBUTION 31, 2007 * holds all restricted shares (889 680 shares). Shimano represents International shareholders category. shareholders International represents Shimano shares). 680 (889 shares restricted all holds VM&C to exercise the voting rights at- Utavia has undertaken not to sell more not tosell undertaken has Utavia vor of the resolutions approved and/or approved vor of the resolutions la during the period of fi submitted by VM&C and authorized andauthorized byVM&C submitted general meetings of shareholders in fa- in shareholders of meetings general than 50% of the shares it owns in Rapa- held tothetached byit. shares Rapala Shareholder category Shareholder Number of shares 1 000 001 - 000 -1000 10 001 -10 000 1 001 101 -500 1 -100 Total Total number of shares Fund Pension State The Total Administrative registrations Veritas pension insurace company company insurace pension Veritas &Cie Migeon Viellard Other shareholder’sOther total fund Firm Small OP-Finland AS Forvaltnings Odin c/o Norden Odin Odin Finland 501 -1000 501 Shimano Singapore Private Limited Private Singapore Shimano Hang Wai So Sofi naNV International shareholders International Individuals Non-profiorganizations t Public institutions companies insurance and Financial corporations public and Private Eläke-Fennia pension insurance company insurance pension Eläke-Fennia rst two years years two rst The parties tothe shareholders’ agree- parties The votes that theyvotes control at the general meetings of shareholders the and exercise touse ment undertake of Rapala so sold toany byUtavia. shares refusal agreement. VM&C has a right of fi aright has VM&C agreement. of the the shareholders’ execution after that two persons designated by VM&C byVM&C designated persons that two shareholders Number of 1 492 206 455 578 197 48 8 30.5 13.8 13.2 38.7 100 3.2 0.5 % rst Number of shares Number of shares Rapala for a period of three years from from years of three forRapala aperiod appointed as are respect) inthis Kasslin members of the Board. The parties tothe parties The of themembers Board. (the fi (the support Jorma Kasslin as the CEO of the CEO as Jorma Kasslin support to agreed have agreement shareholders’ and one person designated by Utavia byUtavia designated and one person the execution of thethe shareholders’ execution agree- Total shares Total rst person appointed being Jorma appointed being person rst 39 468 449 468 39 39 468 449 468 39 39 468 449 468 39 29 556 666 556 29 31 662 131 31 662 10 414 071 08. Shimano Singapore Private Limited Limited Private Singapore Shimano 08. 1 000 000 7 500 000 7 500 1 093 029 1 093 8 897 048 8 897 1 766 079 1 766 2 457 010 2 457 5 308 307 3 202 407 3 202 8 311 610 1 617 122 534 000 636 464 890 580 889 680 625 000 836 189 169 584 169 612 000 217 683 172 155 172 36 532 22.5 80.2 26.4 19.0 13.4 74.9 21.1 100 100 100 100 2.3 2.3 2.8 0.6 2.5 6.2 4.5 0.4 0.4 1.6 1.6 1.6 1.4 8.1 2.1 0.1 4.1 % % % SHARE PRICE DEVELOPMENT IN 2003-2007, EUR

6.50 6.00 5.50 5.00 4.50 4.00 3.50

1/03 7/03 1/04 7/04 1/05 7/05 1/06 7/06 1/07 7/07 01/08 ment and election of Emmanuel Viel- exercisable between March 31, 2010 mittee held directly a total of 902 181 lard as the chairman of the Board dur- and March 31, 2012 at an exercise price Company shares and indirectly through ing the same period. of EUR 6.44 per share (2006B). The a controlled corporation 1 180 000 Com- share-specifi c cash value will be deter- pany shares, corresponding to 5.3% of all mined in accordance with the end price shares and voting rights. If the share op- Option Programs on the test date (i.e. vesting date) or, as tion programs 2003 and 2004 were ex- The Group has three separate share- the case may be, on an additional test ercised in their entirety, shareholdings based payment programs: two share op- date. End price is the volume weighted and aggregate voting rights held by the tion programs settled with new shares average price of the share during the ten members of the Board and Group Execu- (2003 and 2004 programs) and one syn- trading days before the test date. If at test tive Committee would increase by 1.1%. thetic option program settled in cash date the difference between the exercise Details of management shareholdings (2006 program). The following option price and the end price (including the are given on pages 77-78.

schemes are currently in place mainly dividend adjustment) is positive, the re- 2007 / Financial Statements 81 ANNUAL REPORT RAPALA for senior and middle management and ward will be paid. If the difference be- Trading and Performance of the for the Board, excluding 2006 program, tween the exercise price and end price Company’s Shares which is not for non-executive Board on the test date (including the dividend members: adjustment) is negative, the end price The Company share (RAP1V) is quoted - The 2003B Share Option Pro- will be determined again on an addi- on the OMX Nordic Exchange in Hel- gram: A maximum of 500 000 op- tional test date, which is the six, twelve, sinki. The 2007 closing price on Decem- tions were issued to 90 managers, ex- eighteen and twenty-four months’ anni- ber 31 was EUR 5.55. The highest price ercisable between March 31, 2006 and versary of the test date. If the difference in 2007 was EUR 6.27, the lowest price March 31, 2008 at an exercise price between the exercise price and the end EUR 5.40 and the average price EUR of EUR 6.23 per share. Exercise price price is positive on any of the addition- 5.82. The share price decreased 10.3% in represents the weighted average share al test dates, the reward will be paid and 2007. The OMX Nordic Mid Cap price price in March 2004. this incentive scheme shall automatical- index decreased 8.9% in 2007. A total - The 2004 Share Option Program: A ly expiry. of 8 684 433 Rapala shares were trad- maximum of 1 000 000 options were is- The exercise price shall be reduced ed in 2007. This represents 22.5% of all sued to 106 managers, 500 000 exercisa- by the amount of dividends distributed RAP1V shares on December 31, 2007. ble between March 31, 2007 and March after the subscription period for option Due to the trading restrictions, the new 31, 2009 at an exercise price of EUR rights has ended and before the com- shares (RAP1VN0107) had no trading 6.16 per share (2004A), and 500 000 ex- mencement of the share subscription pe- and price quotation in 2007. ercisable between March 31, 2008 and riod. At the end of the year, the market cap- March 31, 2010 at an exercise price of The outstanding options under 2003 italization of all outstanding shares was EUR 6.41 per share (2004B). Exercise and 2004 share option programs rep- EUR 219.3 million. Earnings per share price represents the weighted average resented a 3.4% interest in the Compa- (basic) were EUR 0.45 (EUR 0.28 in share price in March 2005 (2004A) and ny’s outstanding shares on December 31, 2006). For more share related key fi g- March 2006 (2004B). 2007. For more details on share-based ures see page 72. - The 2006 Synthetic Option Pro- payments see note 29 in the consolidated gram (share-based incentive plan): A fi nancial statements. Dividend maximum of 1 000 000 options were is- sued to 116 managers, 500 000 exercisa- The Board proposes to the AGM that a Management Shareholding ble between March 31, 2009 and March dividend of EUR 0.18 per share will be 31, 2011 at an exercise price of EUR On December 31, 2007, members of the paid. 6.44 per share (2006A), and 500 000 Board and the Group Executive Com- RAPALA ANNUAL REPORT 2007 / Financial Statements / 82 The Board evaluates the Group’s evaluates fi Board The was on foreign exchange, credit, liquid- credit, exchange, on foreign was has increased when con- the has Group increased has Group wide insurances. insurances. wide Group management actions level risk Group management. The Group is constant- is Group The management. ment and developed risk management risk ment anddeveloped to allocated primarily is ment activity manage- risk daily management. The practices during 2007. of In2007, during focus practices ly developing new products to meet con- located more resources to risk manage- er hobbies. The Group is promoting the promoting er hobbies. is Group The cordingly, management al- Group has es related policies and instructions to be po- risk andstrategic operational cial, ity, compliance and hazard risks and risks ity, compliance andhazard implemented and coordinated by Group implemented byGroup andcoordinated Sport fi Sport sumer’s needs and creating new needs for new needs andcreating sumer’s needs strategic, operational andfi operational strategic, sition on a regular basis andestablish- sition basis on aregular attractiveness of sport fi sport of attractiveness of oth- range wide against competing are the Group’s products respect and inthis and what the Group has done to mitigate and what done to mitigate the has Group the consumers. tive sales and marketing as well as brand brand as well as andmarketing sales tive these risks. tinued to expand its operations fast. Ac- the management of the business units. the management units. of the business Rapala’s Approach to Risk Management Risk to Approach Rapala’s The following is a summary of key asummary is following The The importance of risk management shing is one form of leisure hobby one of leisure is form shing Group’s isdonebymonitoring This andmitigating andexecutionthe related ofbusiness targets. strategy Strategic Risks Strategic The objective ofRapala’s objective The riskmanagement shing through ac- through shing threats and risks and simultaneously identifying and managing opportunities. andmanaging andsimultaneously opportunities. identifying andrisks threats nancial nancial risks Management nan- The Group protects vigorously its intel- its vigorously protects Group The work, the market Group’s geographical Due to uniquely wide distribution net- Group is also acting in the forefront to rience, special functional features and features functional special rience, mental impacts of its operations. The The operations. of its impacts mental mental protection and increasing pre- increasing and protection mental moting initiatives to enhance environ- paredness to comply with continuously continuously with comply to paredness lectual property rights and takes legal legal andtakes rights property lectual equipment, to comply catch-and-release with e.g. develop products, the fi copy products and thus this does not con- not does this thus and products copy that the value of andsecuring identity by any means. The Group’s brands are are Group’s The brands by any means. by taking steps to reduce the environ- for the Group. Rapala is actively pro- actively for is the Rapala Group. is Group The portfolio. the brand is sets stitute a strategic threat for threat the Group. astrategic stitute illegal able are sumers todifferentiate actively managing the and brands theiractively managing also legally protected. protected. legally also ability of fresh fi copiers. illegal against actions the brands is not jeopardized or violated orviolated not jeopardized is the brands to high quality, unique fi the markets where its products are sold. are the products where markets its Affairs. tion Environmental the sec- see actions, the environmental on Formore details initiatives. tection tightening environmental regulations regulations environmental tightening trustworthy distribution channel. Con- the environment is a growing concern concern the agrowing environment is pollution of Increased andbreed. to live The Group faces competition in all inall competition faces Group The One ofOne the Group’s valuable most as- Consumers relate the Group’s relate brands Consumers Sport fi Sport Risk on avail- dependent is shing shing waters for waters fi shing is to support theimplementation ofthe is tosupport sig expe- shing sh pro- sh shes shes The Group’s manufacturing units are are units Group’sThe manufacturing ways to manage production and distri- fi risk is truly globally spread, evening evening spread, globally truly is risk manufacturing technologies or patents. manufacturing multaneously provide access to com- ment and brand-portfolio is essential in essential is ment andbrand-portfolio petitive labor cost. Rapala monitors the fi local inmany cases are petitors position mainly because of differenc- ucts is not dependent of any proprietary of not any dependent is proprietary ucts out seasonal and local market fl andlocal out seasonal country risks and labor costs and seeks andseeks costs andlabor risks country es in product offering. Rapala’s com- amajor Shakespeare) creating cluding compet- In2007, theglobal competitors. duction of its products. products. of its duction technologies of generic manufacturing of products. In some countries, competi- range andlimited scope geographical ed in several countries. Some of these coun- itor landscape developed when developed Jarden itor landscape bution costs. bution costs. succeeding in this competition. inthis succeeding of the develop- Group’s product strength The products. label their private selling acquired both Pure Fishing and K2 (in- andK2 Fishing Pure both acquired and considering the applications topro- and considering the development monitoring actively tions. tries include higher political risk but si- risk political include higher tries orcompetitive the Group’s operations tion did noton impact have amaterial tion is created by fi by created is tion limit- with operating producers tackle shing tackle company. This acquisi- The Group’s production is spread out spread is Group’sThe production Manufacturing of sport fi ofsport Manufacturing Rapala has limited amount of global limited has Rapala shing tackle retailers shing prod- shing uctua- shing shing 10% of is the Rapala Group’s net sales. The underlying consumer demand for demand consumer underlying The Rapala’s strategic distribution partner- Group is not critically dependent on any dependent not critically is Group on any dependent not critically is Group ment in local jurisdictions is allocated to allocated is jurisdictions ment inlocal mergers and acquisitions. Careful target target Careful andacquisitions. mergers consum- indirect not largelyengaged process and Group management contin- andGroup process uously monitors changes in the business intheuously business monitors changes customer represents clearly less than diversifi 2007. during ened andstrengthened suppliers, the andpotential existing environment. Strategic risk manage- risk Strategic environment. driven bybrand-consciousness. driven er retailing. This is not considered to itiatives are successful and in line with with andinline successful are itiatives ity, the Group is engaged in production inproduction ity, engaged the is Group bly through organic growth as well as as well as growth organic bly through be a risk as consumer demand is largely largely is demand consumer as arisk be sues in that securing the expansion in- process due diligence proper selection, single eventhe biggest customer: single specifi deep- further was ship Shimano with supplier. orrawmaterial product single sports equipment. The Group has also also has Group The equipment. sports such as weather. To offset the seasonal- and post-merger integration are key is- are integration and post-merger and distribution of winter fi winter of distribution and also impacted by unforeseeable factors al part of the Group’s sales. Due togeo- of Due the Group’s part sales. al amateri- creates products and outdoor graphical spread and multitude of andmultitude the spread graphical gic risks annually as part of the strategy of the strategy part annually as risks gic the unit. management of business each the Group’s strategic goals. goals. the Group’s strategic country- mostly tatively. are Customers the Group’s products is seasonal and seasonal is the Group’s products Rapala’s customer base is extensively extensively is Rapala’s base customer Rapala is expandingconsidera- Board evaluates the Group’s evaluates strate- Board Distribution of third fi party c and not operating globally. The c andnot operating Operational and Hazard Risks Hazard and Operational andquanti- geographically ed shing and and shing shing shing Availability of competent production la- of competent production Availability which the purchase price may fl price which the purchase which enable theraw totake Group Group’s product shipments concentrate shipments concentrate Group’s product riods could lead to loosing proportion of proportion lead toloosing could riods managed with high level of cooperation level of cooperation high with managed mally before each season. The Group’s The season. each before mally rily fi maintain good employer good maintain and reputation material price properly into account in properly into account price material purchases include raw materials for include raw materials purchases personnel relations to achieve this. this. toachieve relations personnel push any raw material price increases increases price push any rawmaterial to aims also Group The setting. price lems e.g. supply which cause could prob- units, in case of fi expanded its own distribution network network distribution own its expanded can have knock-on effects throughout havecan knock-on effects the Group’s manufactur- between cy damages but also to business interrup- to business but also damages ods. Supply problems during these pe- ent on any single external raw materi- ent external on any single ing and distribution units andinterrup- units anddistribution ing ing a period of time. of time. aperiod ing bution units, safety stocks and proper in- proper and stocks safety units, bution anddistri- the manufacturing between between the Group’s manufacturing the Group’s manufacturing between bor is essential and the Group aims to and the aims Group essential is bor by entering into purchase agreements, surances. surances. ard. Such hazard could lead to property peri- time short relatively to annually al or other production factor supplier. factor production orother al ate during the season. The Group aims aims Group The the season. ate during the effects of seasonality. the effects mitigate to hemisphere southern the to the sales for the entire season. for season. the the sales entire the rest of the organization. This risk is is risk This of the organization. the rest tion of at earlierthe supply stage chain ties, the Group is not critically depend- not critically the is Group ties, to the sales prices immediately ordur- prices to the sales to manage the raw material price risk risk price to manage the raw material There is a high level of dependen- ahigh is There The Group’s sales prices are prima- are prices Group’sThe sales There are signifi are There Due to seasonality in demand, the indemand, toseasonality Due In respect of activi- manufacturing In respect xed annually or bi-annually, nor- cn dependencies cant re or other haz- uctu- The Group’sThe fi Therefore, Rapala has increased the increased has Rapala Therefore, These new insurance policies e.g. take take e.g. policies new insurance These Finance. Equity hedging was also intro- also was hedging Equity Finance. year and Group management moni- management andGroup year Group’s key manufacturing anddistri- Group’s key manufacturing with aprogram started also has Group Group-coordinated global insurance Group management monitors andcoor- monitors management Group 2007, the Group established a process aprocess 2007, the established Group nancial risks several times during the during times several risks nancial anddefault risks credit market risks, ness interruption as well as for trans- ness unit. ness properly into account the high level of properly the into account high put inplace were in2007, portation policies for property damage and busi- uct liabilities was also issued in2007. issued also was liabilities uct duced for some key currencies in2007. forduced some key currencies external hedges are managed by Group out hazard prevention reviews inthe reviews prevention out hazard emphasis of hazard risk management. covering most of the Group companies. of most the companies. Group covering operational risks, which the respon- is risks, operational of management continuous the dinates andbudgets. plans of the operational insurance policy for andprod- general policy insurance for internal currency hedging while the hedging currency for internal bution operations. bution operations. broker to assist in the management of sibility of the management of each busi- and liquidity risks. Board evaluates fi evaluates Board risks. and liquidity the fi consolidated 7, by IFRS required in note as 22tail, to them continuously. andmanages tors In tion throughout losses the supply chain. the property damage insurer to carry tocarry insurer damage the property The policies. insurance global these the Group’s interdependency. Aglobal tional risks at least once a year as part part as once ayear at least risks tional Financial risks are discussed inde- discussed are risks Financial Board evaluates the Group’s evaluates opera- Board Rapala has assigned an insurance Financial Risks Financial of consist risks nancial nancial nancial statements. -

RAPALA ANNUAL REPORT 2007 / Financial Statements / 83 RAPALA ANNUAL REPORT 2007 / Financial Statements / 84 The Group aims to develop its products, products, todevelop its aims Group The will remain as small as possible. possible. as small as remain will to thattrying thevironment is Group human experience in the nature. In- inthe nature. human experience In addition, the Group promotes envi- the promotes In addition, Group im-Healthy environment is andclean Group. Safety risks are caused byhan- caused are risks Safety Group. most signifi most methods sothatmethods their im- environmental andoperating processes manufacturing nifi manage in a way that also future gen- on, based andare from, originate nesses ronmental issues beyond its own oper- own its beyond issues ronmental pact throughoutpact the product’s lifecycle portant for Rapala for the reason that its that its for for Rapala the reason portant ership, are related to transportation and totransportation ership, related are own- while inGroup products, of these erate in line with the local environmen- the local inlinewith erate The products. outsourced come from dling of fl dustrial and business activities inevi- emissions and waste are the sig- most are andwaste emissions Rapala’s using ence the products. nature erations would be able to go and experi- storage of goods. storage sport fi sport ations. terials during the production process. tal laws and regulations. Ways laws andregulations. tal of con- on the en- impacts various tably create of the impacts environmental cant The use of raw materials, airborne airborne of materials, raw use The Rapala and its Group companies op- companies Group andits Rapala Close to one third ofClose toone Rapala’s third sales shing, hunting and outdoor busi- andoutdoor hunting shing, ammable ma- andtoxicraw Environmental Affairs Rapala’s to Approach cant environmental impacts impacts environmental cant The mission of Rapala is to provide a positive and strong human experience in andstrong thenature istoprovideapositive mission ofRapala The and especially in sport fiand especially in sport shing and,therefore, lives theGroup fromandpromotes Environmental where it operates. materials to promote and increase recy- topromote andincrease materials mized. Production waste is separated the inpainting, the waste minimize to Inorder facilities. manufacturing ronmental friendly. ness to environment and actions toim- andactions toenvironment ness pala are produced in the Group’s produced own are pala ples of sustainable development. ples of sustainable participating in clean-up actions. inclean-up actions. participating prove environmental affairs in areas inareas affairs environmental prove lures are electronically engaged for engaged electronically are lures sold byRa- Close to50%of the products uously developed keeping in mind the inmind keeping uously developed cling. In addition, some of the Group’s environmental aspects andthe princi- aspects environmental external business processes, are contin- and internal including business, ducting into energy, plastics, bio materials, met- biointo energy, materials, plastics, ing education on clean andhealthy on education clean wa- ing imize the negative impacts of its busi- of its the negative impacts imize factories have replaced oil as anener- as oil have replaced factories funding of these organizations, provid- organizations, of these funding better adherence of With the paint. better bers of local and national environmen- andnational of local bers so usage and waste of lacquer is mini- is of lacquer andwaste usage so als, carton, paper waste and hazardous andhazardous waste paper carton, als, gy source with gas, which gas, moregy source is with envi- this advanced painting technique, al- ters and other environmental issues and issues andotherters environmental tal organizations. They take part in the tical actions the Group has taken tomin- taken the has Group actions tical The following is a summary of prac- asummary is following The Affairs Several Group companies are mem- are companies Group Several a cleanandhealthy environment. Production Processes Most of the Group products are long- are ofMost the products Group velopment rules in farming andforest- infarming velopment rules the registered from sourced is wood Hard-body lures manufactured bythe manufactured lures Hard-body years andevendecades. years Group are made of balsa, apache wood apache wood of balsa, made are Group mental challenge has been inthe plas- been has challenge mental rials. The Group is also working in co- raw materials. raw materials with more environmen- with raw materials for seeks continuously department ment anddevelop- ry. Group’s The research products may endup inthe orna- water products products are biodegradable and most of andmost biodegradable are products possibilities to replace currently used lasting, kept and used by consumers for consumers tomake their unused or dam- can be recycled. The biggest environ- biggest The recycled. be can der to fi der to suppliers inor- external with operation of the mate- features the desired crease in the process of developing biodegrada- of developing in the process ble plastic products. Even if some Even of if the ble products. plastic farms that respect the sustainable de- the sustainable that respect farms aged products available for recycling. products aged and plastics. An important part of the part important An and plastics. ties, the important challenge is toget the is challenge the important ties, fi the sport e.g. during ture currently but the is Group products tic the metal used in the Group products inthe products Group used the metal tally friendly substitutes that donot de- substitutes friendly tally All of the wooden parts of the Group of parts the wooden All nd more environmental friendly Raw Materials Raw Products shing activi- shing To of impacts the reduce environmental warming and lightning of the premis- andlightning warming were fi were work is still needed to implement new Group also aims to consolidate the ship- toconsolidate aims also Group On the Group level, Rapala has in- the level,has Rapala On Group ment other than use of electricity for ment of electricity other thanuse material will be introduced in2008. introduced be will material measurement. ments so that small quantities will not be will quantities that so small ments from whennents products shipping its panies and manages inventories tomin- inventories andmanages panies lake shores during 2007. These actions proceeded plastics ly on biodegradable es. The Group also optimizes its produc- its optimizes also Group The es. does not have much impact on environ- environmental performance indicators indicators performance environmental in2007. More affairs environmental andfollow-up of the reporting creased imize the volume stored. imize of goods ipated in 15 actions to clean lakes and and fi in 2007 imize sea transportation and minimize andminimize transportation sea imize between factories and distribution com- anddistribution factories between shipped separately. The storage of goods of goods separately.shipped storage The and to standardize and increase related related andincrease and tostandardize air transportation between the conti- between transportation air tion to minimize the shipping volumes the factories to distribution units. The The units. todistribution the factories transportation, the Group aims tomax- the aims Group transportation, In Spain, some 1 000 persons partic- R&DEnvironmental work especial- Transportation and Storage of Goods of Storage and Transportation Special Issues and Actions in2007 Actions and Issues Special byRapa- andorganized nanced rst products with this new this with products rst Foundation also arranges environmen- arranges Foundation also perience for hundreds of school children children school of hundreds for perience la Foundation, a Spanish environmental environmental aSpanish la Foundation, or hazards occurred in2007. occurred or hazards ca. in Spain. Similar activities were spon- foundation founded by Rapala, whofoundation by Rapala, founded is sored also e.g. inJapan Afri- e.g. andSouth also sored also its major fi its also tal andfi tal No material environmental accidents accidents environmental No material shing related education andex- education related shing nancial sponsor. Rapala sponsor. Rapala nancial

RAPALA ANNUAL REPORT 2007 / Financial Statements / 85 RAPALA ANNUAL REPORT 2007 | 86 Shareholders who the Shareholders wish AGM to attend In order to attend the AGM shareholders shareholders AGM the attend to order In The Annual General Meeting (AGM) of Rapa- (AGM) Meeting General Annual The gistered shareholders who wish to attend the the attend to wish who shareholders gistered AGM should temporarily re-register the sha- the re-register temporarily should AGM April 3, 2008 at Rapala Offi ce, Arabianranta available at www.rapala.com. as additional information on are the AGM, Arvopaperi- Ltd (Suomen Depository curities must notify the Company no later than March March than later no Company the notify must must register in the Company’s shareholder 25, 2008 at 4 pm (Finnish time). Instructions Instructions time). (Finnish pm 4 at 2008 25, 2008. ANNUAL GENERAL MEETING GENERAL ANNUAL res under their own name. Such re-registra- Such name. own their under res register maintained by the Finnish Central Se- Central Finnish bythe maintained register for submitting notice of as attendance, well tion must be made no later than March 20, 6, Helsinki, Finland. Finland. Helsinki, 6, l keskus Oy) by March 20, 2008. Nominee-re- 2008. 20, by March Oy) keskus a VMC Corporation will be held at10.00 on held be will Corporation a VMC FULL PRESS AND STOCK EXCHANGE RELEASES ARE AVAILABLE AT WWW.RAPALA.COM. AVAILABLE ARE RELEASES EXCHANGE STOCK AND PRESS FULL The following analysts follow follow analysts following The analysis on it. cover persons These ANALYSTS COVERING RAPALA follows: fi SCHEDULE IN 2008 In 2008 Rapala will publish will Rapala 2008 In FINANCIAL REPORTING FINANCIAL R Rapala on their own initiative. own their on Rapala nancial information as information nancial Shareholder apala and prepare investment Information 1st Quarter 2008 1st Quarter Jutta RahikainenJutta Jussi Hyöty Tomi Tiilola eQ Bank ABN AMRO Anita Kostermaa 2nd Quarter 2008 Quarter 2nd 3rd Quarter 2008 Quarter 3rd SEB Enskilda Interim Report on October 22, 2008 22, October on Report Interim 2008 23, July on Report Interim 2008 23, April on Report Interim Martin SundmanMartin Mika Karppinen Rauli Juva E. Öhman J:or Securities J:or Öhman E. plc. Bank Pohjola Kaupthing Bank FIM Securities Evli Bank Lauri Pietarinen t CONTACTS Should you require more information about Rapala, please do not hesitate hesitate not do please Rapala, about information more require you Should ANNUAL SUMMARY 2007 o contact one of the following persons: following the of one o contact June 18 June 18 July 2 July 26 Jouni Grönroos Tel: +358 9 7562 540 Tel: +358 9 7562 5417 Appointments to Executive operations proceeds and share capital increase increase capital share and alliance with Shimano in Shimano with alliance operations Consolidation of French French of Consolidation inIreland lurefactory of Closing Committee Committee French the of Consolidation Company Councel and Investor Relations Investor and Councel Company Chief Financial Offi Financial Chief cer with Shimano for Russia and and Russia for Shimano with October 24 October 25 October 25 October 11 Olli Aho Olli Shimano’s subscription of shares shares of subscription Shimano’s South-East Europe South-East of the distribution Strengthening Interim Report Q3 Report Interim Interim Report Q2 Report Interim November 30 December 13 Financial Reporting in 2008 in2008 Reporting Financial Establishment of a joint venture venture ajoint of Establishment E-mail: olli.aho@rapala.fi E-mail: Fax: +358 9 7562 5440 E-mail: jouni.gronroos@rapala.fiE-mail: Fax: +358 9 7562 5440 Ukraine distribution Jan 4 4 Jan Acquisition of Terminator of Acquisition Annual Accounts 2006 published 2006 Report Annual 2003A option rights and increase of increase and rights option 2003A April 4 April 4 April 26 General Meeting General Meeting General the share capital capital share the Subscription of new shares with with shares new of Subscription Interim Report Q1 Report Interim Feb 6 Mar 15 Mar 19 Notice to convene the Annual Annual the convene to Notice Annual of Decisions Locations of Business Operations

CONTENT RAPALA ANNUAL REPORT 2007 | 87 ANNUAL REPORT RAPALA Business Operations and Strategy Financial Statements - Crafted from Experience – - Review of the Board of Directors 24 Investor Information Positioned for Growth 4 - Auditors’ Report 28 - Shareholder Information 86 - Rapala and Year 2007 in Brief 6 - Consolidated Financial Statements, IFRS 29 - Locations of Business Operations 87 - Statement by President and CEO 8 - Key Financial Figures 71 - Strategy, Strengths and Priorities 10 - Parent Company Financials, FAS 74 - Lure Business 12 - Corporate Governance and Management 76 - Fishing Hook Business 16 - Shares and Shareholders 79 - Fishing Accessories Business 18 - Risk Management 82 - Third Party Fishing Products 20 - Environmental Affairs 84 - Hunting, Winter Sports and Outdoor 22

Group manufacturing and sourcing units

Group administration units

Group distribution units

Shimano distribution companies

Printed in Finland by Libris | Paper: Edixion 300/120 | Design and layout by Kuudes Kerros | www.kuudes.fi Annual 2007 Report

Annual Report 2007

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