Oriflame Ar 2007 Ang 0

ANNUAL
REPORT
2007
Contents
1 Chairman’s statement
4 2007 in brief
8 CEO’s statement
10 A platform for success
12 The Oriflame opportunity
18 Strong growth – naturally
20 Natural Swedish Cosmetics
24 Moving closer to our markets
26 Oriflame’s people – a multitude of strengths
32 Company footprint – high priority for Oriflame
34 Corporate Social Responsibility
38 Key figures
40 The Oriflame share
42 Management report
43 Consolidated income statements
44 Consolidated balance sheets
45 Consolidated statements of changes
in shareholders’ equity
46 Consolidated cash flow statements
47 Notes to the consolidated financial statements
65 Report of the independent auditors
66 Corporate governance report
72 Board of Directors
74 Senior Management
Financial calendar 2008
• First quarter 2008 and Shareholders’ Day on 24 April, 2008

• Annual General Meeting on 19 May, 2008
• Capital Market Day in Stockholm on 21 May, 2008
• Second quarter 2008 on 13 August, 2008
• Third quarter 2008 on 22 October, 2008
Chairman’s statement
– A record year for Oriflame
with sales, profits and share price
at all time highs.
The 40th anniversary was a year we will all remember. In addition to celebrations and memorable
events throughout the world, we generated substantial returns to our shareholders. Our share price
increased by 40 per cent to reach its peak towards the end of the year. Sales and profits increased in
an impressive way. During the last 18 years, Oriflame has increased sales at an annually compounded
rate of 17 per cent.
Our direct sales model has proven its sustainability and validity for 40 years. Today, with only 1 per cent
of our sales in Sweden and operating in 60 countries around the world, we are a truly global company.
The beauty and direct selling industry is well positioned for future growth and today Oriflame is one
of the leaders in the industry and growing faster than most of our global competitors.
Globalisation has opened up tremendous markets around the world where our business model has
a very good fit.
2007 was a year with strong growth in all our regions around the world. Especially encouraging is
our strong growth in Asia and Latin America while we are maintaining strong momentum in our core
CIS and Eastern European markets. I am confident that we have a solid platform to expand from into the
years ahead.
The key to our success has been a strong and consistent company culture promoting an entrepre-
neurial spirit and a clear set of values.
Our mission and passion is to fulfil dreams for people around the world, a dream often focused on
building a better quality of life by belonging to the Oriflame sales network.
In order to succeed with this we must strive to continuously deliver better support in all areas of
our business. Our newly opened Stockholm office, where we have brought together some of our key
functions is an important step towards increasing our service level and our
operating efficiency.
Looking forward, we are all faced with mounting environmental challenges
such as global warming, depleted natural resources and widespread pollution. The
environment has always been a focus for Oriflame and we recognise that we, like
all other companies, have an important role to play and a responsibility to step up
our efforts even further to address these issues in our day to day operations.
I would like to, on behalf of the board, thank the Management Team and all
the dedicated people in our companies around the world for making our 40th
anniversary year a very memorable one!
Robert af Jochnick
Chairman
Oriflame Annual report 2007 | 1

2 | Oriflame Annual Report 2007
4.5 MILLION
UNITS
SINCE ITS LAUNCH IN
SEPTEMBER 2007, ORIFLAME
BEAUTY WONDER LASH
HAS SOLD MORE THAN
4.5 MILLION UNITS.
Oriflame Annual Report 2007 | 3

2007 in brief
• Sales increased by 24 per cent in local currencies and by 21 per cent in euros to 1,109.4 million.
• Average number of sales consultants increased by 22 per cent to 2.2 million. Closing sales
force was up by 25 per cent.
• Productivity increased by 2 per cent in local currencies and –1 per cent in euros.
• Operating profit* increased by 22 per cent to 155.4 million (127.1).
• Operating cash flow amounted to 102.2 million (121.6).
• Oriflame’s Board of Directors will propose to the AGM a dividend of 1.25 (1.01) per share,
amounting to 69.7 million, corresponding to 60 per cent of net profit before restructuring
costs and related deferred income tax.
• Establishment of new operational platform ahead of plan.
Key figures 2007 2006 Change, %

Sales, m 1,109.4 917.9 21
Operating profit, m *
155.4 127.1 22
Net profit, m **
116.0 93.5 24
Cash flow from operating activities, m 102.2 121.6 (16)
Gross margin, % 70.1 69.1 –
Operating margin, % *
14.0 13.8 –
Return on capital employed, % 48.7 43.4 –
Net interest bearing debt, m 182,0 193.5 (6)
Interest cover 7.5 8.6 –
Earnings per share, diluted, in **
2.05 1.61 27
Average number of sales consultants 2,204,400 1,807,700 22
Average number of employees 6,438 5,610 15
*) Before restructuring costs due to the new operational platform of 25.8m in 2007
**) Before restructuring costs due to the new operational platform of 25.8m and related deferred income tax of 1.8m in 2007
1967 1968 1969 1970 1972 1978 1985 1986 1989 1990 1991 1992
Market entries
Sweden Finland Norway UK Netherlands Spain Portugal Indonesia Chile Czecho- Poland Russia
Denmark slovakia Hungary Turkey
Mexico Latvia

Since the listing on the Nordic Exchange in 2004,
Oriflame has had an average annual sales growth
of 18 per cent and a total increase in operating
profit of over 40 per cent. In addition, the number
of independent sales consultants has increased by
nearly 50 per cent.
Sales by product category 2007 Regional sales 2007 Regional operating profit 2007
Asia 1% (0) Latin America 2% (3)

Accessories Colour Asia 6% (5) Latin America Western
9% (11) cosmetics 5% (4) Europe &
27% (26) Western Europe Africa 7% (7)
Fragrances & Africa 9% (10)
18% (17) Central Europe
& Mediterranean
27% (28)
Central Europe
Toiletries Skin care & Mediterranean CIS & Baltics CIS & Baltics
19% (19) 26% (26) 24% (25) 57% (56) 63% (62)
Cash flow from

Average sales force operating activities Return on capital employed Sales and operating profit
000’s million million % million million
2,500 150 500 100 1,200 250
2,000 120 400 80 1,000 200

800
1,500 90 300 60 150
600
1,000 60 200 40 100
400
500 30 100 20 200 50
0 0 0 0 0 0
03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07
Capital employed Sales

Return on capital employed, % Operating profit
1993 1994 1995 1996 1997 1998 2000 2001 2002 2003 2005 2006
Ukraine Bulgaria Peru Macedonia Estonia Azerbaijan Kazakhstan Serbia & Mongolia Armenia Belarus China
Slovakia Lithuania Ecuador Morocco Colombia Thailand Montenegro Moldova Iran
Greece Romania Croatia Egypt Bosnia Georgia Vietnam
India Slovenia
Sri Lanka
With sales in 60 countries, Oriflame offers a complete
range of high quality skin care, fragrances, colour cosmetics,
toiletries and accessories, marketed through a sales force
of independent sales consultants. Although the company
has grown rapidly, it has never lost sight of its original
business concept – Natural Swedish Cosmetics, sold
from friend to friend.

Forecast market growth, CAGR 2007 – 2012
%
Baby care 3.7
5.9
Bath & shower 1.7
4.0
Deodorants 2.5
2.3
Hair care 3.0
5.5
Colour cosmetics 2.2
4.8
Men’s grooming 3.1
4.9
Oral hygiene 2.2
3.2
Fragrances 2.7
3.8
Skin care 4.5
7.5
Depilatories 2.2
4.5
Sun care 5.3
7.8
metics & toiletries 3.0
5.1
World
Oriflame markets
Size of direct selling market Size of market

billion billion
30 12 300 60
25 10 250 50
20 8 200 40
15 6 150 30
10 4 100 20
5 2 50 10
0 0 0 0
98 99 00 01 02 03 04 05 06 07 98 99 00 01 02 03 04 05 06 07
World (LHS) World (LHS)

Oriflame markets (RHS) Oriflame markets (RHS)
Global cosmetics & toiletries sales Global cosmetics & toiletries sales by region
2002 – 2012 F 2002 – 2012 F
billion billion
300 Baby care 300
Bath and shower products
250 250
Deodorants
200 Hair care 200
Colour cosmetics Western Europe
150 Men’s grooming products 150 Eastern Europe
Oral hygiene North America
100 Fragrances 100 Latin America
Skin care Asia Pacific
50 50
Depilatories Australasia
0 Sun care 0 Africa and Middle East
2002 2007 2012 F 2002 2007 2012 F
Note: Sum of sectors is greater than the market size because the four men's toiletri
sub-sectors are included in men's grooming products as well as deodorants,
skin care, bath and shower products, and hair care.
Source: Euromonitor IMS 2008.

Moving closer to becoming
number one
Faster decisions, less bureaucracy and increased focus. Oriflame has already started to reap the benefits of
implementing a new operational platform during 2007. Not only was this necessary in order to ensure long
term profitability; it was also essential to bring us closer to attaining our vision – to become the number
one beauty company selling direct.
Some years are more important than others. For Oriflame, 2007 anniversary – we held the largest Global Gold Conference ever,
will go on records as such a year. We showed strong growth in gathering together 3,800 people in Tenerife, Spain.
all regions and in all our cosmetic product categories. We carried All our main markets performed well during 2007. Key to
out successful recruitment campaigns. We improved our supply their growth was, in fact, our highly motivated sales force and
chain. We celebrated Oriflame’s 40th anniversary with the largest organisation. We can also look back on a number of successful
Global Gold Conference ever. And we showed record profit and product introductions and positive responses to our catalogues.
record sales. Another key factor was that we managed to improve service lev-
These events were all important from the point of view els to the consultants through our Product Fulfilment Project,
of strengthening our four strategic cornerstones – People and which aims at reviewing our entire supply system.
Culture, Brands and Products, The Oriflame Opportunity and This resulted in record figures for 2007, with sales up by 24
World Class Service. They were also important from the point per cent in local currencies and 21 per cent in euros. Meanwhile,
of bringing us closer to achieving our vision; to become the net profit before restructuring costs and related deferred income
number one beauty company selling direct. tax was up by 24 per cent to €116 million.
Moving many of our key functions has consumed time, However, we are not leaning back to enjoy what we have
money and energy during 2007. But we have already started to achieved during 2007 – and the first 40 years of our existence. To
benefit. As a relatively small company, we must optimise the use ensure future growth and profitability, we will further sharpen our
of our resources. And being physically close means that we can efforts and raise our goals. In ten years time, when we celebrate
speed up our decision making process while at the same time Oriflame’s 50th anniversary, we aim to have tripled both sales and
benefit from the dynamism created through mixing competen- our sales force, to have added more markets, not least in Asia, and
cies. The combination of product and catalogue development to have widened our scope of products.
has already proven forceful. Hopefully, our new centrally placed The ambition may seem high – but I am certain that we
Stockholm office, will also make it even more attractive to work have the concept, as well as the business model, to achieve this.
for Oriflame. However, work still remains to put all aspects of I also know that Oriflame’s people possess the necessary energy,
the platform into place. This will be one of our main tasks dur- culture and spirit.
ing 2008. One of my main tasks is to contribute to cultivating all these
One of Oriflame’s main strengths is the unique business entrepreneurial talents. Great results are made by great people
opportunity we offer, i.e. to make money today and fulfil your and it is a great joy to work with you. Thank you.
dreams tomorrow. This means that without major commitments
anybody can join the company as a sales consultant and make 12 March 2008
money instantly through selling our products to their friends,
colleagues or neighbours, while those who put an extra effort into
building their own sales network will also be rewarded through
our Success Plan. In 2007 we carried out a number of success-
ful recruitment campaigns in many markets, which resulted in Magnus Brännström
almost 500,000 new sales consultants. Meanwhile, to celebrate Chief Executive Officer
the success of our top sales consultants – and Oriflame’s 40th

A platform for success
In 2007, Oriflame introduced a new operational platform. The main objective was to create a lean, effective
and powerful organisation, with the strength and ability for Oriflame to take important steps to becoming the
number one beauty company selling direct.This included uniting a number of our key support functions in one
office in Stockholm.
The move of a number of Oriflame’s key support functions is a The new platform in summary:
strategic step and an investment in Oriflame’s brand image and • Establishing a new Group Support Office in Stockholm,
unique selling point – Natural Swedish Cosmetics. The purpose including:
is to create a more integrated organisation with powerful prod-
uct development capabilities and shorter lead times. – Marketing and Packaging Development
Implementing the new platform entailed co-locating – Catalogue Development
Oriflame’s product development and catalogue functions to – Supply Chain
Stockholm, Sweden. Furthermore, it included expanding central – Sales Support
and regional logistic hubs in Warsaw, Poland and Moscow,
Russia. • Moving Group Finance from Waterloo, Belgium to the
It also includes investments in R&D capabilities, with the existing corporate office in Fribourg, Switzerland
establishment of a skin research centre in Stockholm. The aim is • Moving the Swedish sales function to the new Group
to further enhance the development of skin care products based Support Office in Stockholm
on Swedish science and natural ingredients. Meanwhile, a fur- • Moving Quality Assurance from Dublin to Stockholm
ther investment of €2.4 million in Oriflame’s R&D centre in
Dublin was decided upon. • Shifting logistics closer to main markets by:
– Moving the Central Logistics from Waterloo to Warsaw
– Integrating the Nordic Hub in Malmö, Sweden, with the
existing Group Distribution Hub in Warsaw
– Expanding the regional hub in Moscow
• Reinforce the Group’s IT and online operations in Prague,
Czech republic
• And, as a consequence of the above, closing the offices
in Waterloo and Malmö.
The majority of these measures were initiated in 2007. One of

Oriflame’s main targets for 2008 is to put the new organisation
into place. The total cost of implementing the platform is esti-
mated at €30–35 million, of which 25.8 million was expensed
in 2007.

3.2 MILLION UNITS
SINCE ITS LAUNCH IN AUGUST 2007, ORIFLAME BEAUTY
COLOUR ATTRACTION HAS SOLD MORE THAN
3.2 MILLION UNITS.
The establishment of product and catalogue

development in Stockholm is a strategic step
and an investment in Oriflame’s brand image
and unique selling point – Natural Swedish
Cosmetics.

Make money and a career –
while improving your looks
”Oriflame presents an opportunity for ordinary people to become extraordinary, beautiful, affluent and smarter.”
This is how one of Oriflame’s more than two million sales consultants – an Indian graduate in English literature with
a master’s degree in foreign trade – describes the company. Although the reasons for joining may vary among the
many sales consultants in the 60 countries where Oriflame is represented, most of them agree that using Oriflame
products makes them look great – whilst making money and having fun.
An important key to Oriflame’s success lies in the method of driver is the opportunity of personal development through taking
selling its products; i.e. person to person. Apart from allow- part in the cost-free training sessions and events.
ing customers to get personal advice from someone they know However, the main three drivers for joining Oriflame are the
– making shopping reliable, convenient and fun – it also pro- products, the financial rewards and the social benefits of being a
vides consultants with access to an unlimited income and career consultant, i .e. look great, make money and have fun.
opportunity. Becoming an Oriflame consultant is easy and re-
quires no investments or long-term commitments. After a mod- Financial rewards
est fee has been paid, a starter kit is provided. Thus, new recruits Sales consultant compensation is divided into three parts:
can make money the same day they join, while simultaneously • Immediate profit – Sales consultants buy products from
building a sales network – and a potential to fulfil their dreams. Oriflame at a discount on the catalogue price and earn a 30
Oriflame launched its direct sales method in 1967 – when the per cent mark up when selling them on to their consumers.
company was founded – as a vital part of its innovative business • Volume discounts – Sales consultants can earn an additional
concept. Over the years it has proved to be a successful marketing 3–21 per cent on their personal sales and the sales of those
method, especially in emerging markets lacking a Western-style consultants they have recruited to sell Oriflame products.
retail structure. However, the benefits of direct selling are equally • Cash awards and bonuses – Sales consultants are also rewarded
applicable in mature markets, as it offers an alternative to the for separate achievements related to leadership development,
often crowded, stressful and impersonal beauty marketplace. training and motivation of the people they have recruited.
All rewards are based on achieving targeted sales volumes of
A career – or a more flexible life the Oriflame products.
Today, Oriflame provides earning opportunities for hundreds
of thousands of people. Also, many consultants join in order Encouragement and motivation
to purchase the products at a discount for themselves and their Oriflame has a well-developed system for encouraging sales
family and some later discover that there is an interesting oppor- consultants. An important part of this is the Success Plan, ac-
tunity to do more with Oriflame. The flexibility of the system cording to which sales consultants are rewarded for their own
means that consultants decide for themselves what they want to sales, as well as those of any consultant within their network.
achieve by joining Oriflame. In some parts of the world, becom- This provides sales consultants with an incentive to maximise
ing an Oriflame consultant could provide a way of supporting network sales and to enlist new consultants to grow the scope
the family, while also fulfilling a career dream. In other parts, of their network. Apart from the financial rewards, successful
joining Oriflame could be a way to achieve a more flexible life, sales consultants and network builders are also rewarded with
well suited to bringing up a family, to make extra money while Senior Manager and Director titles, such as Gold, Sapphire or
studying or to extend ones social life. An increasingly important Diamond Director, depending on their achievements.

Increasingly important means of encouragement are the cost free the platform – in some markets, structured and well functioning
training programmes and seminars that Oriflame offers. Each work methods have already been in place for many years.
year, international conferences are held for different groups (i.e. The Oriflame University also offers a variety of training pro-
Gold, Diamond, Executive) of top sales consultants. These con- grammes for consultants, ranging from presentation techniques
ferences combine education with motivation and relaxation in to product knowledge. In 2007, the Oriflame Beauty Academy
an atmosphere reflecting the company’s fundamental values of was introduced, which offers training sessions in make-up tech-
togetherness, spirit and passion. niques, etc. These are tools which can be used both to motivate
existing consultants and to attract new. The next step will be
Support tools to introduce e-learning. There are, however, already a number
Sales consultants are offered a number of tools to help them of Internet-based training tools, such as the Success Plan Simu-
succeed, coordinated in SARPIO – Sales and Recruitment Proc- lator, where consultants can simulate earnings from building a
esses in Oriflame. SARPIO is the global platform for processes, business, and the Virtual Beauty Guide, where different make
training and communication. It has been developed in order to up looks can be tested on models online.
offer consultants support in developing themselves and their
businesses, while ensuring that they convey the Oriflame brand
in a consistent way. SARPIO was introduced in 2005 and to
date about a third of the top leaders have adopted the SARPIO
work methods. The aim is that about 50 per cent will start using

“Whether you believe in fairy tales or not –
they exist and one of them is called Oriflame.
There are very few network companies that have been successful
for 40 years. Still, after 40 years, sales is growing, the number of sales
consultants is increasing, products are improving and service is
even better…
In other words, the company has a great future. There are very
many network companies in this world. There are lots to choose
from, but you only have one life. Be very careful when you
dedicate your life to a company. I have dedicated 11 years
of my life to Oriflame and I will never regret it.”
Tamilla Polezhaeva,
Gold President Director,
Russia
“To be or not to be,” is the motto

I chose the day I decided to join our
wonderful company, Oriflame.
To me it describes my motivation to become a
successful woman in a male dominated environment.
Today I can truly say that I played a major role in helping
my children to graduate from the best universities in
Egypt and that I have achieved a better standard of
living for my entire family. ‘Believing’ is the air I breathe
every day. Without it I would not be where I am
today.”
Rawia Affifi,
Sapphire Executive Director,
Egypt

“The reason why we joined
Oriflame was their offer of a
wide range of products and
their great quality!
These are things that have fascinated us
and enabled us to pass them on with
confidence.The company provides ‘the
wisdom of nature and the best of science,’
because of their innovative products
inspired by nature. Once in a lifetime you
get the chance to ride in a golden carriage.
But you have to recognise it, jump in and
take your destiny into your own hands. In
the game of life you can be either a player
or a spectator. Be a player!”
Olga & Milan Vlajic,

Diamond Executive Directors,
Serbia
“I am a woman who did not believe that

I could be successful in Network Marketing.
But this business is so amazing that it significantly changed my life.
Oriflame is pure Network Marketing, so it is really not a money
game and the company never lies. It says what there is, it gives
what it says. So if it is a bonus it is a real bonus. Oriflame never
hides anything. I like that. By the time I was 26 years old I was the
youngest Diamond Director in the world. Before Oriflame I was
a really shy girl with no self-confidence. Now, after fulfilling my
dreams, I really feel that I have become a stronger woman and
my life is so meaningful with Oriflame.”
Cynthia Venika,
Gold Executive Director,
Indonesia

37 PER CENT
DURING 2007, GIORDANI GOLD SHOWED
A 37 PER CENT INCREASE IN SALES.

Strong growth – naturally
Increased sales in emerging markets and greater demand for natural products were some of the key drivers
of the international cosmetics and toiletries industry in 2007, resulting in continued strong overall growth.
And just like the previous year, many of Oriflame’s main markets in Eastern Europe, Asia and Latin America
were star performers. Meanwhile, Oriflame continues to play different roles in different markets.
Strong growth and a continuous move towards more premium an average of 3 per cent a year in the period 2007–2012, reach-
products could be observed in 2007. Some main factors behind ing €268.6 billion in 2012. Skin care is expected to be the fastest
the growth of the cosmetics markets is increasing global wealth growing segment, increasing by 4.5 per cent annually to reach
and urbanisation in developing countries as well as an ageing €65.7 billion in 2012.
population. The development of natural and organic ingredi-
ents, a continuous increase in market segmentation behind in- From business opportunity to topic of conversation
novation and a focus on key trends like “product convenience” From business opportunity to socialising – Oriflame plays dif-
and “product experience” following the consumers’ changing ferent roles in different markets. In emerging markets we offer
lifestyles are additional major factors.There is also an increas- sales consultants a unique earnings opportunity – and also the
ingly holistic view on beauty, health and wellness and more and opportunity to get started through offering favourable credit.
more cross-industry innovations are appearing on the market In more mature markets, such as Western Europe, direct
(combining health, beauty and food). Demand is growing in selling creates the togetherness that many people are seeking,
areas such as: providing sales consultants with additional income and personal
development.
• Anti-ageing products
• Skin whitening products Competition
• Dermatologically inspired skin care In most markets of Central and Eastern Europe, Oriflame enjoys
• Body care – especially firming/anti-cellulite products a leading position, being either the largest or the second largest
• Colour cosmetics with skin care benefits cosmetics company among the direct sellers. In these, and other
• Men’s products emerging markets, direct selling is well suited, and it generally
takes longer for cosmetic companies selling through retail to get
Continued market growth a foothold.
In total, the global market for cosmetics and toiletries increased In most of Oriflame’s major markets, key competitors are
by 5.8 per cent in 2007, reaching €232 billion. Growth contin- therefore other beauty companies selling direct.
ued to be driven by the emerging economies of Eastern Europe
– with Russia and Ukraine leading the way – Latin America and
Asia. Russia alone grew by 13.3 per cent in 2007, to a value of
€7.9 billion. Asia grew by an estimated 12 per cent and Latin
America increased by 11 per cent.
The strong growth is expected to continue. Overall, the glo-
bal market for cosmetics and toiletries is forecasted to grow by

SKIN CARE
IS EXPECTED TO BE THE FASTEST GROWING SEGMENT
WITHIN THE COSMETICS & TOILETRIES INDUSTRY.

Natural Swedish Cosmetics
From the eternal favourite Tender Care Protecting Balm to the new best-seller anti-wrinkle skin care
range Ecollagen. From the Oriflame Beauty Wonder Lash mascara to the Oriflame Beauty Power Shine
lipstick. Over the years, Oriflame has launched thousands of products within skin care, colour cosmetics,
fragrances, toiletries and accessories. In 2007 alone, we introduced more than 250 different cosmetic
products. They have one thing in common – they all convey the concept “Natural Swedish Cosmetics”. This
is the firm foundation of the brand. It is also the key to continued success.
In 2007, Oriflame launched a major international initiative to Highlights 2007

bring its organisation closer to the consumer – “Consumer Con- The combination of strong sales for existing products and
nect”. The aim was to get better at understanding our consum- launches of new products contributed to overall growth.
ers and meeting their needs, wants and aspirations by gathering
consumer insights and generating creative ideas. SKIN CARE
These face-to-face discussions, which will continue in 2008, Oriflame strengthened its position in the Anti-Ageing Skin Care
have proven useful in many ways. Apart from “fishing” for new segment with the successful launch of Ecollagen, with its inno-
insights, this consumer-centric approach enables Oriflame’s vative Tri-peptide technology that naturally re-plumps wrinkles
cross-functional professionals to build a more reliable “feel” by from within. The re-launch of the Royal Velvet range, a supreme
watching, listening, talking and interacting with consumers. anti-ageing skin care ritual, enriched with exclusive Iris Isoflavenes
This will feed the innovation funnel and foster the Company’s extract, positioned the brand amongst the top sellers and achieved
growth, ensuring that it stays at the forefront of the market. 57 per cent growth vs 2006. Time Reversing, fighting hormonal
Just like previous surveys among consumers and consultants ageing, strengthened the offer with new products and re-launch-
worldwide, the message is clear. What distinguishes Oriflame ing the existing ones. The successful Day & Night creams, as well
from its competitors and makes it unique is the Swedish aspect as the instant illuminating Serum have all been enriched with a
of the brand, symbolised by the key words progressive, quality, gold complexion enhancer to provide a radiant look.
natural and ethical. The mid-price range Optimals, launched last year, is now
Oriflame’s biggest skin care brand with a growth of 32 per cent
The beauty offer vs 2006.
Oriflame will therefore continue to build its strong image linked To offer complete care for beautiful hands, five new prod-
to its Swedish origins, skin care heritage and natural inspiration. ucts were introduced within the hand care collection, including
The most important category remains skin care, which is essen- a new formulation for the successful, antibacterial hand gel.
tial for the quality perception of the Oriflame brand.
Oriflame’s beauty offer is inspired by the purity and power COLOUR COSMETICS
of the Swedish nature, using extracts like the Swedish lingonberry, The biggest colour brand, Oriflame Beauty, combines the wis-
featured in the Skindividual skin care range. Our formulations dom of nature with the best of science and includes the following
are developed using the latest scientific technology and our best-sellers: Wonder Lash Mascara with Carnauba Wax Milk &
products are manufactured according to the highest standards the patented brush which lifts & lengthens lashes, Power Shine
of quality. Lipstick with rose hip seed oil & meta-shine technology for lips
Market trends and consumer preferences are closely moni- that explode with shine, and Colour Attraction Lipstick with
tored in order to continuously adapt Oriflame’s offer. Every year, Vitamin E & micro spheres for bolder, deeper and richer colour.
a flow of new products is created in close cooperation between Giordani Gold grew by 37 per cent due to top sellers like
marketers, packaging engineers, formulation scientists, purchas- Bronzing Pearls, Infinite Mascara and new Adaptive Foundation
ing managers and in-house creative teams. Gathering the major- with Opal pigment technology, which adapts to skin tone. Visions
ity of these functions under the same roof in Stockholm during V Freaking Amazing Mascara continued its success.
2007 has already proven beneficial to the work process.

35 LANGUAGES
A NEW ORIFLAME CATALOGUE IS DISTRIBUTED EVERY
3–4 WEEKS – EACH EDITION IN FIVE REGIONAL VERSIONS
AND IN 35 LANGUAGES.
FRAGRANCE Sales of Fashion Accessories were slightly suppressed as they have

The Gem Collection leads us into the world of real perfumery. been used to support launch offers. Trendy jewellery at lower
Amethyst Fatale is the first scent in the collection, achieving prices is an attractive segment for the younger target group.
promising results in the masstige market. Ascendant, capturing
the essence of male beauty, was the biggest male launch. Sales of The power of the catalogue
Miss O continued to increase and is the biggest youth fragrance. The Oriflame catalogue is how our brands & products come to
New Embrace for him & her, Precious Eau de perfume as well as life for our consultants and consumers. Our catalogues are literally
classics like Giordani Gold with flanker Giordani White Gold, shops without walls providing our consultants with their most
Divine with new flanker Sensual, Glacier and Midsummer Him important, tangible sales tool.
also continued to drive category sales. A new catalogue is distributed every 3-4 weeks, which means
between 12 and 18 editions a year, depending on local market
TOILETRIES conditions. Each catalogue includes a display of Oriflame prod-
The new Nature Bath & Shower Range boosted category sales. ucts, new offers and promotions. Great efforts are made into
With the successful launch of Optifresh toothpaste and tooth- differentiating between the catalogues to make sure that each
brushes, Oriflame entered the oral care market. Oriflame Foot- offers a new and exciting shopping experience. Each edition was
care maintained its strong position supported by the popular published in five regional versions – and in 35 languages.
Reviving Foot Spray. Alongside the catalogue Oriflame’s main communication
channel is, of course, word of mouth. This is supported by use of
ACCESSORIES the Internet, PR, events, leaflets, posters in service centres and,
Continued growth for Cosmetic Accessories as they remained for major launches such as Ecollagen, TV, print and billboards
the strongest product sector of the category. Expansion of gift were also used in key markets.
items in present-giving seasons led to growth in Deco & Gifts.
OPTIFRESH
R E M I N E R A L I S I N G S YS T E M
SEA ALGAE
Rich in zinc, iron,
Get a gorgeous, natural calcium and phosphor

that help remineralise
tooth enamel.
smile FLUORIDE
Helps protect teeth
from acids that cause
cavities, plaque and
bad breath.
resh Toothbrush AC T I O N
Attach to teeth
to effectively clean the teeth to help strengthen
e. Its multi-angle bristles tooth enamel and
ween teeth to remove protect it from
With tongue cleaner to help acids that cause
acteria and dirt and non-slip teeth to demineralise.
controlled brushing.
£ 0.00p YO U R T E E T H
£ 0.00p
Are remineralised.
And the natural
beauty of your
teeth is
maintained!
I N G TO OT H PA S T E W I T H
AT E R - M I N T F L AVO U R .
M U LT I - AC T I O N TO OT H PA S T E W I T H
brighten and whiten F R E S H S W E E T- M I N T F L AVO U R .
prevent cavities & fight Helps prevent cavities.

r build-up. Helps fight plaque and tartar.
maintain healthy gums. Helps prevent bad breath.
resh Multi-action OptiFresh Multi-action

ng Toothpaste Toothpaste
local
name
nt flavoured whitening tooth- Sweet-mint flavoured multi-action tooth-
ml. paste. 75 ml.
£ 0.00p 10424 £ 0.00p
£ 0.00p £ 0.00p

600,000 UNITS
SINCE ITS LAUNCH IN SEPTEMBER 2007,
ASCENDANT EDT SOLD ALMOST
600,000 UNITS.
Moving closer to our markets
Oriflame continued efforts to move inventory closer to the company’s main markets in 2007. In parallel,
the review of our entire supply chain continued. The aim of these measures is to increase the efficiency
of our distribution system and to speed up our response to market changes – and, ultimately, to improve
our service levels.
The Product Fulfilment Project, Oriflame’s review of its entire Manufacturing – and sourcing
supply chain, was initiated in 2006 and continued in 2007. Oriflame’s products are manufactured both in-house and by
The project is aimed at improving service levels in all our main various subcontractors with expertise in specific product areas.
markets. So far, it has resulted in more efficient inventory man- Oriflame’s manufacturing units are based in Poland, Swe-
agement. In the next stage of the project, service levels are ex- den, India, China and Russia. These factories focus primarily
pected to improve as the new distribution network is rolled out on the production of Skin Care, Toiletries, Fragrances and Lip-
throughout the company during 2008 and 2009. sticks, areas in which Oriflame has sufficient volumes to achieve
Meanwhile, Oriflame is continuing to move inventories economies of scale. The main task of the production unit in
closer to the main markets, with Warsaw now serving as a main China, which was opened in 2006, is to support sales operations
group warehouse. This site will be expanded further to serve as a in China. Meanwhile, the development of the Colour Cosmetics
distribution centre with pick & pack capabilities, starting from Centre in Moscow continues in cooperation with our partner,
the first quarter 2008. We have also intensified our efforts of the Weckerle Group. Production of lipsticks commenced in the
evaluating sourcing opportunities closer to the main markets. first quarter 2008.
The purpose of these changes is to increase flexibility and Oriflame also cooperates with a number of specialised sub-
reduce lead-times wherever possible, with the overall aim of contractors. All sourcing is managed from the Group Purchasing
improving service levels. These measures will also enable us to function, which controls both sourcing from subcontractors and
efficiently handle increased volumes and a greater number of the supply from our own manufacturing units. In addition to
product introductions in the future. day-to-day purchasing, it also focuses on developing Oriflame’s
supplier base from a strategic perspective. The target is to ensure
Research and development a base of flexible, efficient and quality-orientated suppliers.
Oriflame has R&D teams based in Ireland and Sweden. In 2008,
a skin care research centre will be established in Stockholm. The Quality assurance
aim is to further enhance the development of skin care products Oriflame’s quality assurance team works both with the in-
based on Swedish science and natural ingredients. Meanwhile, house manufacturing operations and subcontracted suppliers to
a further investment of €2.4 million in Oriflame’s R&D centre achieve consistent adherence to the ethical, safety and quality
in Dublin was decided upon. The efforts within R&D resulted standards set up by the company. Oriflame maintains a policy of
in a number of new, innovative products being launched during global compliance for all its products to ensure conformity with
the year. the highest market standards.

25 MILLION UNITS
SINCE ITS LAUNCH IN 1971, TENDER CARE HAS SOLD
MORE THAN 25 MILLION UNITS.
Logistics and supply chain

The task for Oriflame’s supply chain organisation is to ensure
product availability in all our markets. In order to increase
responsiveness through reduced lead times, in 2006 Oriflame
moved a large part of its inventory from the hub in Venlo,
Netherlands, to the hub in Warsaw, Poland. This hub has been
expanded in order to support further volumes. Over 20 per cent
of Oriflame’s stock is now held in Warsaw – which is closer to
Oriflame’s major markets. Meanwhile, the CIS Supply Centre
in Moscow has started to operate. The results of this move are
improved service levels, better inventory levels – and substantial
annual cost savings.

Oriflame’s people –
a multitude of strengths
Merging a number of Oriflame’s key functions to one office is not only about the physical move to a new
location. Much more important is the amalgamation of knowledge, competencies and creativity. Our aim
is to create a setting that will help us to attract, develop and retain the diversity of talent that is essential
for reaching our future goals.
At year end 2007, Oriflame had 7,078 employees. These profes- Attract, develop and retain
sionals were located in offices all over the world including Stock- To be able to attract outstanding professionals, we must moti-
holm, Moscow, Warsaw, Santiago and Bangkok. vate them to join us and offer them a potential for development.
We have therefore launched a number of management and lead-
Oriflame is a fast growing company, with ambitions to constant- ership training programmes. We have also implemented a new
ly add new people and new markets to its world. Against that strategy for compensation and benefits. To find the right person
background, a strong corporate culture is essential for success. for each position, we have adopted a performance management
Not only should all employees know what Oriflame stands for, and succession planning system.
but also that she or he is an ambassador for the company and Our most important training programmes are found in the
should therefore act in accordance with Oriflame’s core values. Oriflame Academy, implemented in 2007. This internal three-
step development programme has been created to support and
These are: strengthen Oriflame’s culture, by ensuring that all employees
understand our core values and operating principles. It is also
• Togetherness – people who work together and share the aimed at increasing integration, strategic understanding, leader-
same goals achieve greater results. They motivate each other ship and management skills.
and know that pulling together is more rewarding than going
it alone. The Number One beauty workplace
Striving to become the number one beauty company selling
• Spirit – people with a can-do spirit have a winning attitude direct, we also need to become the number one workplace – in
and never give up. They are prepared and committed to do every respect. It is increasingly important when young talents
what it takes to succeed. choose an employer to be able to offer them strong ethical values,
high moral standards and a good reputation.
• Passion – passionate people have the power to change the Read more about Oriflame’s ambitions and performance
world. They love what they do, they believe in it. They know in the area of Corporate Social Responsibility in the next few
deep down that they can make a difference. pages.

Oriflame Academy – supports and strengthens
Oriflame’s culture, core values and operating
principles. It is also aimed at increasing
integration, strategic understanding, leadership
and management skills.

“In order to become the number one beauty company
selling direct, we need to attract, recruit, develop and
retain the best professionals. Our new office will help
us in all of these respects.”
Sofia Wiksten, Alice Devine and Martin Thuresson
“At Oriflame, team-
work means everything.
It’s fun and inspiring for
the creative process to
have constant access to
input from colleagues
representing different
disciplines of the com-
pany.”
Miriam Larsson and

Petra Rode
“Sitting together means

that we can communicate
effortlessly. It is also much
more fun. Oriflame is a
multicultural and dynamic
company with a lot of
positive energy. This is
really reflected in the
atmosphere of our new
office.”
Roxana Bovia-Thomaeus
and Gregory Ferriere
200,000 UNITS
IN DECEMBER 2007,
SALES OF AMETHYST
FATALE REACHED
ALMOST 200,000 UNITS.
Company footprint – high
priority for Oriflame
Oriflame is dedicated to further increase its efforts relative to social and environmental responsibility,
adopting best practice and becoming a role model within the direct sales industry.
Oriflame’s consumers expect high-quality performance products fore it became fashionable, which in fact was many years before
that are safe to use and do not harm the environment. They also the testing ban was included in EU regulations.
expect the company to act responsibly in all other aspects of its
operations. What distinguishes Oriflame from its competitors …to clean production
and makes the brand unique is the Swedish aspect of the brand, In general, cosmetics manufacturing is a clean process. Oriflame
symbolised by the words progressive, quality, natural and ethical. currently operates five cosmetic manufacturing plants – in Poland,
This means that we must constantly, and in everything we do, Sweden, India, China and Russia. Environmental data is continu-
live up to what the brand symbolises. ously monitored at these factories in order to find opportunities
In 2007, Oriflame appointed groups within the company to for improvement.
evaluate our operations from the point of view of the environ- As regulatory requirements vary in different parts of the
ment, our suppliers’ social responsibilities and other ethical issues. world, Oriflame has adapted its policies to comply with the ever-
In 2008, these groups will start collecting data in order to establish changing and increasingly demanding environmental legislation
an action plan to measure performance and set specific targets. at local and international levels.
Below, you will find some of the things that we have done so Oriflame Products Poland (OPP) is the main manufacturing
far in order to be responsible corporate citizens: plant, producing more than 161 million units of skin care and col-
our products in 2007. The data on page 33 shows that although
From clean products… output from OPP increased by more than 21 per cent between
When formulating new products, Oriflame makes a point 2006 and 2007, the incremental growth in energy consumption is
of striving to use natural ingredients that are in line with the lower than that figure. Higher recycling rates of waste plastic, glass
Oriflame Code of Good Environmental Practice and are not and paper packaging were also achieved.
harmful to the environment. For example, the cleansing agents Oriflame’s Swedish plant (OPS) near Stockholm is located
used in shampoos and shower gels are approved by the Swed- in a green area. It is an integral part of the local community of
ish Society for Nature Conservation and are in line with the Ekerö and works very closely with the local authorities to mini-
Good Environmental Choice (Bra Miljöval) standard. We also mise its impact on the environment. The OPS data on page 33
continuously monitor scientific reports on environmental issues also shows that although bulk production increased in OPS by
to ensure that action can be taken to replace suspect ingredients 33 per cent from 2006 to 2007, the increase in energy consump-
or packaging materials. tion was less than 5 per cent.
Oriflame was one of the first companies to utilise plant ex- Energy conservation and other important environmental
tracts in skin care products and we have always tried to optimise aspects are key considerations in the design and specification of
the use of ingredients from renewable plant sources. Oriflame Oriflame manufacturing plants and production equipment.
took a firm stance against testing cosmetics on animals long be-

ORIFLAME WAS ONE OF THE FIRST COMPANIES TO UTILISE PLANT EXTRACTS
IN SKIN CARE PRODUCTS AND TO USE INGREDIENTS FROM RENEWABLE PLANT SOURCES.
…and clean packaging …suppliers and society

For years Oriflame has used only paper from sustainably man- All suppliers are committed to operating under Oriflame’s Code
aged forests for the vast majority of its catalogues, and ensures of Ethical Practice and other associated policies cover such is-
that the paper is treated in an environmentally friendly bleach- sues as animal testing, child labour, consumer protection and
ing process. The company strives to minimise packaging and the environment.
avoid the use of materials that are harmful to the environment. Oriflame contributes to the communities in which it oper-
During production and transportation, Oriflame endeav- ates by providing employment and business opportunities as well
ours to save energy and minimise its impact on the environ- as supporting charities on a local, regional and global level. The
ment. In the past few years, significant energy savings have various charity activities Oriflame is involved in include funding,
been achieved by the relocation of distribution hubs as part of product donations and the time and energy of employees spent
the Product Fulfilment project, a major re-engineering of the in numerous social causes. One of these is the World Childhood
Oriflame supply chain. Foundation, which Oriflame co-founded in 1999 and which is
under the patronage of HM Queen Silvia of Sweden.
Oriflame Products Poland (OPP) and Oriflame Products Sweden (OPS) environmental data
Production Resources Liquid waste

OPP Energy Water
Year Units (mlllion) Bulk (tonnes) Electrical Energy (MWh) Gas (Nm3) Water (m3) Effluent (m3)
2006 133.5 13,400 4,695 618,400 94,000 85,000
2007 161.5 15,004 5,118 593,100 112,711 101,440
OPS
2006 39 8,160 6,702 Not used 21,233 14,184
2007 60 10,876 6,995 Not used 26,097 14,155

“Multicultural companies must
take bigger responsibility.”
“Ever since the start we’ve been entering into people’s homes. We’ve seen how tough life is in many parts
of the world. That’s why the number of projects we’re involved in aimed at helping women and children in
vulnerable situations increases every year. Now Oriflame is preparing for the next step in contributing to the
communities where we operate. Our aim is to be role models”, says Robert and Jonas af Jochnick, brothers
and founders of Oriflame, in this roundtable discussion about corporate social responsibility, CSR.
What does CSR mean to you both – and to Oriflame? What have you done in the CSR area so far?
Jonas af Jochnick: To always act with responsibility and to be a Jonas af Jochnick: We have, for instance, always been using natu-
good corporate citizen – and to inspire others to do the same. ral ingredients in our products which are not harmful to the
This is particularly important for an international company like environment – and which haven’t been sourced by causing harm
Oriflame, which operates in so many different countries and or suffering to animals. We strive to manufacture our products
cultures. with a minimum of impact on the surroundings. All suppliers
are also committed to operating in accordance with our ethical
How do you make sure Oriflame people act the standards.
Oriflame way?
Robert af Jochnick: From the start 40 years ago, we’ve been stress- Robert af Jochnick: Apart from this, we have been trying to con-
ing the importance of our corporate culture, based in the Swed- tribute in different ways to the communities where we operate.
ish aspect of the brand and symbolised by the key words progres- Oriflame is a grass roots company and we get a unique insight
sive, quality, natural and ethical. into the everyday lives of, especially, women as they account for
most of our sales representatives and of their children – around
Jonas af Jochnick: This perception of the brand is one of our main the world. That’s why the number of projects we’re involved in
strengths and something we have to prove constantly. Employ- aimed at helping women and children in vulnerable situations
ees, sales representatives and consumers around the world have increases every year.
come to expect Oriflame to be the “good guy” in the area of
companies selling direct. We’re proud of this – and we put a What do you see as your next step in the area of CSR:
lot of effort into making sure that the company lives up to this Jonas af Jochnick: Oriflame has started to make a thorough analy-
reputation. sis of its footprints – and depending on the results we will take
the necessary measures. It is important, however, to regard this
as a constant discussion within the organisation, and that we
never lean back and are happy with what we have done.
Robert af Jochnick: Our aim is to become role models within

CSR among the beauty companies selling direct. And we will do
our utmost to achieve this.

Jonas af Jochnick Robert af Jochnick
“Our aim is to become role models within

CSR among the beauty companies selling direct.
And we will do our utmost to achieve this”.

Defending the rights of children
Oriflame has a long tradition of supporting projects aimed at improving living conditions for the under-privileged
in the countries where we operate.The number of aid projects we work with continues to increase every year.
The purpose of these initiatives, be they purely local or via the World Childhood Foundation, is primarily to
defend the rights of children.These are a few examples of projects Oriflame support:
INDIA – Deepalaya (www.deepalaya.org)

For the past 28 years, Deepalaya has been working in the urban slums of Delhi and has also made inroads into rural development
in the states of Haryana and Uttarakhand. Focus is on marginalised children and youths, who are offered education and health care.
The aim is to provide them with means to train for a profession and the opportunity to support themselves as grown-ups. A signifi-
cant detail of the way Deepalaya works is that they call handicapped children “differently-abled” instead of disabled.
TURKEY – ASCL
The Association in Support of Contemporary Living is a non-profit, non-governmental organisation in Turkey, striving to provide
under-privileged girls with education. Every year, some two million Turkish girls are denied education. Around 500 of these girls
are supported by ASCL through six years of secondary education. Of the 459 ASCL-girls who graduated in 2006, 156 did so with
honours.
RUSSIA – MiraMed (www.miramed.org)

MiraMed’s mission is to protect, educate and support Russia’s disadvantaged youth and children growing up in institutions. It also
strives to eliminate sexual trafficking of vulnerable young women and girls from the CIS countries, while assisting in the rescue,
return and rehabilitation of trafficking victims. MiraMed, which was founded in 1991, runs social protection programs, including
humanitarian aid, education and training at MiraMed Centers for Social Adaptation in Moscow, St. Petersburg and Uglich.

Deepalaya in India focuses on marginalised
children and youths, who are offered education
and health care.

Key figures
Five-year record
’000 (unless otherwise stated) 2007 2006 2005 1 2004 1 2003 1
Sales 1,109,385 917,945 765,690 670,692 652,136
Gross profit 777,826 634,662 522,729 463,627 446,564
Gross margin, % 70.1 69.1 68.3 69.1 68.5
EBITDA 182,2972 144,619 120,328 120,446 124,392
Operating profit 155,396 2 127,055 106,746 109,500 114,026
Operating margin, % 14.0 2 13.8 13.9 16.3 17.5
Profit before tax 131,721 2 108,328 101,684 99,566 85,616
Net profit 115,9993 93,499 90,482 87,844 72,532
Cash generated from operations 137,800 149,591 83,001 117,960 69,670
Cash flow from operating activities 102,181 121,582 63,440 90,454 45,364
Average operating capital 258,107 237,318 201,057 161,561 136,188
Return on operating capital, % 60.2 53.5 53.2 67.8 83.7
Average capital employed 320,646 293,771 240,032 201,238 179,555
Return on capital employed, % 48.7 43.4 44.7 54.7 63.7
Net interest bearing debt 182,019 193,491 73,492 57,527 189,760
Interest cover 7.5 8.6 11.2 9.2 6.3
Earnings per share, basic, 1.65 1.62 1.52 1.51 1.35
Earnings per share, diluted, 1.63 1.61 1.52 1.50 1.29
Average number of employees 6,438 5,610 4,961 4,527 4,182
1
Excluding gain on disposal and before items such as stock exchange listing and refinancing expenses and restructuring charges
2
Before restructuring costs due to the new operational platform of 25.8m in 2007
3
Before restructuring costs due to the new operational platform of 25.8m and related deferred income tax of 1.8m in 2007

Quarterly figures
2005 2006 2007
Sales, million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
CIS & Baltics 93.9 73.4 81.7 133.9 132.0 109.6 95.7 159.1 152.8 144.9 119.0 196.4
Central Europe & Med. 49.4 51.7 47.7 61.0 55.4 55.8 46.3 66.4 59.4 64.1 55.7 79.6
Western Europe & Africa 18.8 21.5 19.4 24.8 22.1 23.3 19.6 25.4 24.2 25.5 20.8 28.9
Latin America 6.0 8.0 8.7 10.5 9.2 10.2 10.1 10.5 10.3 12.4 12.4 14.0
Asia 7.2 7.8 7.2 8.4 9.1 10.4 11.7 12.4 15.2 16.0 15.0 16.0
Other 6.2 6.2 6.2 6.1 6.2 6.5 5.4 5.7 6.6 6.7 6.7 6.7
Oriflame 181.6 168.5 170.9 244.7 234.0 215.7 188.8 279.5 268.5 269.6 229.6 341.6
Operating profit, million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

CIS & Baltics 18.5 8.9 15.0 30.3 28.1 23.8 12.3 34.9 31.3 28.1 16.7 43.6
Latin America 0.1 0.5 0.8 0.6 0.8 1.6 1.3 0.7 0.7 1.4 1.3 1.0
Asia (0.2) (0.1) (0.3) (0.4) (0.2) (0.1) 0.2 0.2 1.1 0.9 0.4 (0.1)
Other (3.5) (3.0) (5.6) (8.8) (3.6) (9.4) (9.8) (10.4) (5.3) (9.5) (10.6) (10.8)
Oriflame 27.2 19.7 20.8 39.1 39.0 31.3 13.8 43.0 41.3 37.7 19.7 56.7
Average sales force, ’000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

CIS & Baltics 799.6 749.5 701.3 816.5 923.8 918.9 876.6 994.2 1,135.0 1,215.7 1,145.8 1,264.9
Latin America 49.5 52.0 57.6 62.2 63.1 66.9 71.8 74.7 73.8 84.2 92.5 100.1
Asia 115.9 121.1 121.0 125.0 135.5 160.9 176.4 203.9 224.0 245.6 253.9 271.0
Oriflame 1,608.5 1,599.0 1,499.8 1,634.1 1,775.0 1,804.0 1,739.4 1,896.2 2,092.7 2,242.8 2,151.0 2,298.8
A number of factors impact sales and margins between quarters:

• The effectiveness of individual catalogues and product introductions
• Effectiveness of recruitment programmes
• Timing of sales and marketing activities
• The number of effective sales days per quarter
• Currency effect on sales and results
Definitions
EBITDA Operating capital Return on capital employed

Operating profit before financial Total assets less cash and cash equiva- Operating profit plus interest income
items, income/loss from associates, lents and non interest bearing liabili- divided by average capital employed.
taxes, depreciation and amortisation. ties, including deferred tax liabilities.
Net interest bearing debt
Cash generated from operations Return on operating capital Interest-bearing debt minus cash and
Operating cash flow before interest Operating profit divided by average cash equivalents.
and bank charges paid and before operating capital.
income taxes paid. Interest cover
Capital employed Operating profit plus interest income
Cash flow from operating activities Total assets less non interest bear- divided by interest expenses and charges.
Operating cash flow after interest and ing liabilities, including deferred tax
bank charges paid and after income liabilities.
taxes paid.

The Oriflame share
Oriflame Cosmetics was introduced on the OMX Nordic Exchange on 24 March 2004 through an initial public offering of Swedish
Depositary Receipts (SDRs). On 31 December 2007, the number of shareholders and SDR holders was 4,494. Each SDR represents
one share. The last price paid on 28 December 2007 was SEK 413 giving Oriflame a total market capitalisation of SEK 23 billion.
During 2007 an average of 249,187 shares were traded per day. A total of 62.2 million Oriflame shares were traded on the OMX
Nordic Exchange at a value of SEK 21.5 billion.
Oriflame Cosmetics top 10 shareholders as at 31 December 2007*

Shares Capital and votes, %
SSB CL Omnibus 7,669,873 13.8
Stichting af Jochnick Foundation 6,016,001 10.8
Jonas af Jochnick and family 5,049,573 9.1
JP Morgan Chase Bank 4,330,682 7.8
Robert af Jochnick and family 4,055,715 7.2
Robur 2,149,565 3.9
JP Morgan Bank 1,824,198 3.3
Mellon Omnibus 1,523,028 2.7
Andra AP-fonden 970,468 1.7
Others 22,152,611 39.7
Total 55,741,714 100
Source: VPC and share register

* Oriflame may be unaware as to the identity of the beneficial owners of the shares as they may be held through nominees.
Share price
SEK The share OMX Stockholm_PI Turnover of number of shares per 1,000 (including after market trades) Number
450 of shares
400
350
300
250 30,000
25,000
200
20,000
15,000
150
10,000
5,000
100
2004 2005 2006 2007 © OMX AB

Ownership structure on 31 December 2007
Number of Number
Shareholding shareholders % of shares %
1– 1,000 3,735 83.1 700,327 1.3
1,001– 10,000 494 11.0 1,660,468 3.0
10,001– 50,000 157 3.5 3,439,924 6.2
50,001– 500,000 96 2.1 15,055,773 27.0
500,001– 1,000,000 4 0.1 2,266,587 4.0
1,000,001– upwards 8 0.2 32,618,635 58.5
Total 4,494 100.0 55,741,714 100.0
Source: VPC and share register
Dividend policy and dividend proposal

The Board of Directors has adopted a dividend policy to the effect that, absent changes in the Company’s operations or capital struc-
ture, Oriflame intends to distribute, over the long term, at least 50 per cent of the Company’s annual profit after tax as dividends.
For 2007, the Board of Directors proposes to the Annual General Meeting a distribution of €1.25 (€1.01) per share. The last day of
trading including right to dividend is 19 May and payment of cash dividend will occur through VPC on 27 May.
History of share capital

The table below presents the changes in the Company’s share capital since 2003. Documents pertaining to the changes in Oriflame’s
share capital prior to and during this period may be consulted at the Luxembourg Register of Commerce and Companies:
Change in Total share
Change in share capital Total number capital
Year Transaction numbers of shares ’000 of shares ’000
2003(1) New issue 2,249,060 2,892 56,198,629 72,264
2003(2) New issue 187,500 241 56,386,129 72,505
2003(3) Reduction (2,650,316) – 53,735,813 72,505
2003 Decrease in par value – (5,335) 53,735,813 67,170
2003(4) New issue 42,500 53 53,770,313 67,223
2004(5) New issue 30,000 37 53,808,313 67,260
2004(6) New issue 2,433,116 3,041 56,241,429 70,302
2004(7) New issue 3,100,000 3,875 59,341,429 74,177
2005(8) New issue 141,761 177 59,483,190 74,354
2006(9) Cancellation of redeemed shares (3,813,304) (4,766) 55,669,886 69,588
2007(10) New issue 71,828 89 55,741,714 69,677
(1)
Issued at a price of 0.37 per share pursuant to the exercise of warrants granted as a part of the 1999 delisting to the Company’s former mezzanine debt providers.
(2)
Issued at a price of 1.83 per share pursuant to the exercise of employee share option plans.
(3)
Reflects the cancellation of treasury shares.
(4)
Issued pursuant to the exercise of employee share option plans. Of the 42,500 shares, 42,000 were issued at a price of 0.74 and 500 were issued at a price of 0.68.
(5)
Issued pursuant to the exercise of employee share option plans. Of the 30,000 shares, 13,000 were issued at a price of 1.92, 11,000 were issued at a price of
1.55 and 6,000 were issued at a price of 0.68.
(6)
Issued pursuant to the exercise of achievement and other options in connection with the offering on the Stockholm Stock Exchange. Of the 2,433,116 shares,
2,094,736 shares were issued at a price of 0.68, 9,750 shares were issued at 1.19, 64,320 shares were issued at 1.55, 64,090 shares were issued at 1.92,
100,000 shares were issued at 2.00, 3,000 shares were issued at 2.65, 34,220 shares were issued at 3.38, 23,000 shares were issued at 4.11 and 40,000
shares were issued at 11.23.
(7)
Reflecting the new issue of 3,100,000 shares at the offering price of SEK 190 per SDR.
(8)
Reflecting the new issue of shares in the share incentive programme for management.
(9)
On 30 October 2006 the Company cancelled 3,813,304 shares, which were redeemed during the summer of 2006.
(10)
Reflecting the new issue of shares in the share incentive programme for management.

Management report
Sales Financial position

Sales increased by 24 per cent in local currencies and 21 per cent Net interest-bearing debt amounted to €182.0 million com-
in euros. Sales growth in local currencies was driven by 22 per cent pared to €193.5 million at year-end 2006. Net debt/EBITDA
increase in the average size of the sales force (13 per cent in 2006) amounted to 1.00 (1.34) and interest cover amounted to 7.5
and a 2 per cent productivity improvement (4 per cent in 2006). (8.6).
The increase in sales was due mainly to a strong development
in all regions. Local currency sales in Asia increased by 50 per cent Dividend
(43 per cent in euros), Latin America 31 per cent (23 per cent in Oriflame’s Board of Directors will propose to the AGM a div-
euros), CIS & Baltics 29 per cent (23 per cent in euros), Central idend of €1.25 (1.01) per share, or 60 per cent of net profit
Europe & Mediterranean 13 per cent (16 per cent in euros) and before restructuring costs and related deferred income tax. The
Western Europe & Africa 11 per cent (10 per cent in euros). total amount corresponds to €69.7 million. The dividend will be
paid after the AGM in May.
Results
Gross margins improved to 70.1 per cent (69.1) as a result of Human resources
price increases, sourcing gains and a positive product mix. The During 2007 the average number of employees increased by 15
operating margin before restructuring costs amounted to 14.0 per cent to 6,438 (5,610).
per cent (13.8) resulting in an operating profit of €155.4 million
(127.1). Oriflame had restructuring charges related to the new Board of Directors and management
operational platform of €25.8 million in 2007. Net profit decreased The Board of Directors consists of 8 non-executive directors and
by 2 per cent to €92.0 million (93.5) and earnings per share after the CEO. Directors are elected at the annual general meeting
dilution amounted to €1.63 (1.61). and, unless re-elected, remain in office for a term of one year.
If a vacancy arises during the course of the financial year, the
Cash flow and capital expenditure Board of Directors is entitled to elect a replacing director to fill
Cash flow from operating activities amounted to €102.2 million the vacancy for the period until the next annual general meeting
(121.6) for the full year. Operating cash flow increased as a result of the Company.
of €37.7 million in higher EBITDA excluding restructuring The Board of Directors met 10 times during the year un-
costs. This was partly offset by €16.3 million in higher working der review. The topics covered at meetings include the financial
capital requirements compared to €9.9 million in lower working outlook of the Company, a review of current investments and
capital requirements in 2006. The increase in working capital was approval of future investments, risk scenarios and the long-term
principally due to a €46.1 million build-up of inventories while plans of the Group.
inventories last year decreased by €2.8 million. For more information about the Board of Directors and
Cash flow used in investing activities during 2007 amounted management, see section Corporate Governance.
to €–36.8 million (–39.5).
42 | Oriflame Annual report 2007

Consolidated
income statements
Year ended 31 December
’000 Note 2007 2006

Sales 3 1,109,385 917,945
Cost of sales (331,559) (283,283)
Gross profit 777,826 634,662
Selling and marketing expenses (418,075) (334,871)

Administrative expenses 4 (204,355) (172,736)
Operating profit before restructuring 3 155,396 127,055
Restructuring 22 (25,813) –
Operating profit after restructuring 129,583 127,055

Financial income 5 1,933 996
Financial expenses 5 (25,608) (19,723)
Net financing costs (23,675) (18,727)
Net profit before tax 105,908 108,328
Current tax 6 (16,488) (17,745)

Deferred tax 6, 11 2,558 2,916
Net profit 91,978 93,499
Earnings per share, 7

Basic 1.65 1.62
Diluted 1.63 1.61
The attached notes on pages 47 to 64 form an integral part of the consolidated financial statements.

Consolidated
balance sheets
At 31 December
’000 Note 2007 2006

Assets
Intangible assets 8 12,893 11,393
Property, plant and equipment 9 138,374 122,089
Investment property 10 2,254 2,504
Deferred tax assets 11 15,040 12,446
Other long term receivables 6,027 6,534
Total non-current assets 174,588 154,966
Inventories 12 186,085 140,940

Trade and other receivables, net 13 92,295 78,328
Cash and cash equivalents 14 63,080 62,000
Total current assets 341,460 281,268
Total assets 516,048 436,234
Equity
Share capital 15 69,678 69,588
Reserves 16 (25,584) (34,681)
Retained earnings 16 48,727 12,975
Total capital and reserves 92,821 47,882
Liabilities
Interest-bearing loans 17 223,293 235,668
Other long term non interest-bearing liabilities 322 292
Deferred tax liabilities 11 5,305 4,977
Total non-current liabilities 228,920 240,937
Current portion of interest-bearing loans 17 21,806 19,823

Taxes payable 9,892 7,630
Trade and other payables 18 133,902 103,443
Provisions 22 28,707 16,519
Total current liabilities 194,307 147,415
Total equity and liabilities 516,048 436,234
44 | Oriflame Annual report 2007

Consolidated statements of
changes in shareholders’ equity
Share Share Legal Special Translation Hedging Other Total Retained Total
capital premium reserve reserve reserve reserve reserves reserves earnings equity
’000 (Note 15) (Note 15) (Note 16)
At 31 December 2005 74,354 59,709 7,348 5,313 (46,740) (209) 520 25,941 59,474 159,769
Translation loss for the period – – – – (4,835) – – (4,835) – (4,835)
Cash flow hedging reserve – – – – – 857 – 857 – 857
Total income and expense recognised
directly in equity – – – – (4,835) 857 – (3,978) – (3,978)
Profit for the period – – – – – – – – 93,499 93,499
Total recognised income and expense – – – – (4,835) 857 – (3,978) 93,499 89,521
Redeemed shares (4,766) (59,709) – – – – – (59,709) (86,231) (150,706)
Movement in legal reserve – – 16 – – – – 16 (16) –
Release of translation reserve – – – – 217 – – 217 (217) –
Share incentive plan – – – – – – 2,832 2,832 – 2,832
Dividends – – – – – – – – (53,534) (53,534)
At 31 December 2006 69,588 – 7,364 5,313 (51,358) 648 3,352 (34,681) 12,975 47,882
Translation loss for the period – – – – (2,757) – – (2,757) – (2,757)

Cash flow hedging reserve – – – – – 783 – 783 – 783
Total income and expense recognised
directly in equity – – – – (2,757) 783 – (1,974) – (1,974)
Profit for the period – – – – – – – – 91,978 91,978
Total recognised income and expense – – – – (2,757) 783 – (1,974) 91,978 90,004
Issuance of new shares 90 2,652 – – – – – 2,652 – 2,742
Movement in legal reserve – – (1) – – – – (1) 1 –
Share incentive plan – – – – – – 8,420 8,420 – 8,420
Dividends – – – – – – – – (56,227) (56,227)
At 31 December 2007 69,678 2,652 7,363 5,313 (54,115) 1,431 11,772 (25,584) 48,727 92,821
Oriflame Annual report 2007 | 45

Consolidated cash flow
statements
Year ended 31 December
’000 Note 2007 2006

Operating activities
Operating profit 129,583 127,055
Adjustments for:
Depreciation and amortisation 18,481 14,732
Share incentive plan 8,420 2,832
Foreign exchange gain/(loss) (2,354) (4,732)
(Profit)/loss on disposal of property, plant and equipment (48) (218)
Operating profit before changes in working capital 154,082 139,669
Decrease/(increase) in trade and other receivables (11,394) (12,694)
Decrease/(increase) in inventory (46,074) 2,827
Increase/(decrease) in trade and other payables 41,186 19,789
Cash generated from operations 137,800 149,591
Interest and bank charges paid (20,155) (16,137)
Income taxes paid (15,464) (11,872)
Cash flow from operating activities 102,181 121,582
Investing activities
Proceeds on sale of property, plant and equipment 407 443
Interest received 903 579
Purchase of property, plant and equipment and investment property (34,467) (37,914)
Purchase of intangible assets (3,605) (2,592)
Cash flow used in investing activities (36,762) (39,484)
Financing activities
Funds (paid)/received from refinancing and movement in loans (10,588) 133,171
Redemption of shares – (153,434)
Proceeds from issuance of new shares 2,742 2,728
Dividends (56,197) (53,502)
Cash flow used in financing activities (64,043) (71,037)
Increase in cash and cash equivalents 1,376 11,061

Cash and cash equivalents at 1 January 61,767 50,895
Effect of exchange rate fluctuations on cash held (315) (189)
Cash and cash equivalents at the end of the period 14 62,828 61,767

Notes to the consolidated
financial statements
Note 1 • Status and principal activity period or in the period of the revision and future periods if the revision
affects both current and future periods.
Oriflame Cosmetics S.A. (”OCSA” or the ”Company”) is a holding com- The accounting policies set out below have been applied consist-
pany incorporated in Luxembourg and registered at 20 Rue Philippe II, ently by Group entities to all periods presented in these consolidated
2340 Luxembourg. The principal activity of the Company’s subsidiaries is financial statements.
the direct sale of cosmetics. The consolidated financial statements of the
(b) Basis of consolidation
Company as of and for the year ended 31 December 2007 comprise the
The Company prepares consolidated financial statements that aggre-
Company and its subsidiaries (together referred to as the “Group”). The
gate the assets and liabilities and income and expenses of the Com-
financial statements were authorised for issue by the Directors on 14 April
pany and its subsidiaries. Subsidiaries are defined as entities over which
2008.
the Company has the power, directly or indirectly, to govern the finan-
cial and operating policies of an entity so as to obtain benefits from it’s
Note 2 • Summary of significant accounting policies activities. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control com-
The consolidated financial statements of Oriflame Cosmetics S.A. have mences until the date control ceases.
been prepared by management in accordance with International Financial Intra-group balances and any unrealised gains and losses or income
Reporting Standards (IFRS) as adopted for use in the European Union and expenses arising from intra-group transactions, are eliminated in
and the interpretations issued by the International Financial Reporting In- preparing the consolidated financial statements.
terpretations Committee (“IFRIC”). The accounting policies set out be-
low have been applied consistently to all periods presented in these con- (c) Foreign currencies
solidated financial statements. Certain comparative amounts have been Transactions in foreign currencies are translated at the foreign exchange
reclassified to conform with the current year presentation. Separate stat- rate ruling at the date of the transaction. Monetary assets and liabilities
utory financial statements for the Company have been prepared in ac- denominated in foreign currencies at the balance sheet date are translated
cordance with Luxembourg law and are available from the Company to euro at the foreign exchange rate ruling at that date. Foreign exchange
upon request. differences arising on revaluation of monetary assets and liabilities are rec-
ognised in the income statement. Non-monetary assets and liabilities that
(a) Basis of preparation are measured in terms of historical cost in a foreign currency are translated
The financial statements are presented in euro, rounded to the nearest using the exchange rate at the date of the transaction. Non-monetary as-
thousand. They are prepared on a historic cost basis, except for finan- sets and liabilities denominated in foreign currencies that are stated at fair
cial instruments that are stated at fair value. value are translated to euro at foreign exchange rates ruling at the dates
The preparation of financial statements in conformity with IFRS re- the fair value was determined.
quires management to make judgements, estimates and assumptions Assets and liabilities of foreign operations, including goodwill and fair
that affect the application of policies and reported amounts of assets value adjustments arising on consolidation, are translated at the closing
and liabilities, income and expenses. The estimates and associated as- rate of exchange at the balance sheet date and profits and losses at
sumptions are based on historical experience and various other factors monthly average rates. Exchange differences arising on trading transac-
that are believed to be reasonable under the circumstances, the results tions are included in earnings for the period and exchange differences
of which form the basis of making the judgements about carrying val- arising on the translation of the financial statements of foreign subsidi-
ues of assets and liabilities that are not readily apparent from other aries are reported as movements in translation reserves. Exchange dif-
sources. Actual results may differ from these estimates. ferences arising on loans between subsidiaries which are of a long term
In particular, information about significant areas of estimation uncer- investment nature, where settlement is not planned or anticipated in
tainty and critical judgments in applying accounting policies that have the foreseeable future, are reported as movements in translation re-
the most significant effect on the amounts recognised in the financial serves until the disposal of the net investment, at which time they are
statements is included in the following notes: recognised in the income statement.
Note 6 and 11 – utilisation of tax losses
Note 16 – measurement of share-based payments (d) Derivative financial instruments
Note 22 – provisions and contingencies The Company uses derivative financial instruments to hedge its exposure
Note 24 – valuation of financial instruments. to foreign exchange and interest rate risks arising from operational, invest-
The estimates and underlying assumptions are reviewed on an on- ing and financing activities.The Company does not hold or issue derivative
going basis. Revisions to accounting estimates are recognised in the financial instruments for trading purposes. However, derivates that do not
period in which the estimate is revised if the revision affects only that qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at cost. Subse- ing increase in the equity.The fair value is measured at the grant date and
quent to initial recognition, derivative financial instruments are stated spread over the period during which the employees become uncondi-
at fair value. The gain or loss on re-measurement to fair value is recog- tionally entitled to the options. The amount recognised as an expense is
nised immediately in profit or loss. However, where derivatives qualify adjusted to reflect the actual number of share options that vest.
for hedge accounting, recognition of any resultant gain or loss depends (h) Taxation
on the nature of the item being hedged (see accounting policy (e)). Tax on the profit or loss for the year comprises current and deferred tax.
The fair value of interest swaps is the estimated amount which the Current tax comprises income tax payable calculated on the basis
Group would receive or pay to terminate the swap at the balance of the expected taxable income for the year, any adjustments of tax
sheet date, taking into account current interest rates and the current payable for previous years and other corporate taxes payable.
creditworthiness of the swap counterparties. The fair value of forward Deferred tax is provided using the balance sheet liability method on
exchange contracts is their quoted market price at the balance sheet all temporary differences between carrying amounts for financial re-
date, being the present value of the quoted forward price. porting purposes and the amounts used for taxation purposes. De-
(e) Hedging ferred tax liabilities associated with investments in subsidiaries are not
(i) Cash flow hedges recognised as the Group is able to control the timing of the reversal of
Where a derivative financial instrument is designated as a hedge of the the temporary differences. The amount of deferred tax provided is
variability on cash flows of a recognised liability, a firm commitment or based on the expected manner of realisation or settlement of the car-
a highly probable transaction, the effective part of any gain or loss on rying amount of assets and liabilities, using tax rates enacted or sub-
the derivative financial instrument is recognised directly in equity. stantively enacted at the balance sheet date.
When the firm commitment or forecasted transaction results in the Deferred tax assets are recognised only to the extent that it is prob-
recognition of an asset or a liability, the cumulative gain or loss is re- able future taxable profits will be available against which the assets can
moved from equity and included in the initial measurement of the as- be utilised. Deferred tax assets are reduced to the extent that it is no
set or liability. Otherwise the cumulative gain or loss is removed from longer probable that the related tax benefit will be realised.
equity and recognised in the income statement at the same time as the (i) Intangible assets
hedged transaction. The ineffective part of any gain or loss is recog- (i) Goodwill
nised in the income statement immediately. Goodwill arising on acquisition represents the excess of the cost of
When a hedging instrument expires or is sold, terminated or exer- acquisition over the fair value of the net identifiable assets acquired.
cised, or the entity revokes designation of the hedge relationship but Goodwill is stated at cost less any accumulated impairment losses.
the hedged forecast transaction is still expected to occur, the cumula- Goodwill is allocated to cash-generating units and is not amortised but
tive gain or loss at that point remains in equity and is recognised in is tested annually for impairment.
accordance with the above policy when the transaction occurs. If the
hedged transaction is no longer expected to take place, the cumulative (ii) Other intangible assets
unrealised gain or loss recognised in equity is recognised immediately Other intangible assets acquired by the Group including licenses, soft-
in the income statement. ware and trademarks are stated at cost less accumulated amortisation
and impairment losses.
(ii) Hedges of monetary assets and liabilities
Where a derivative financial instrument is used economically to hedge (iii) Subsequent expenditure
the foreign exchange exposure of a recognised monetary asset or lia- Subsequent expenditure on capitalised intangible assets is capitalised
bility, no hedge accounting is applied and any gain or loss on the hedg- only when it increases the future economic benefits embodied in the
ing instrument is recognised in the income statement. specific asset to which it relates. All other expenditure is expensed as
incurred.
(iii) Hedge of net investment in foreign operation
Where a foreign currency liability hedges a net investment in a foreign (iv) Research and development
operation, foreign exchange differences arising on translation of the li- Development regarding the design and production of software applica-
ability are recognised directly in equity. tions is capitalised if the application is technically sound and the Group
has sufficient resources to complete development. The expenditure
(f) Revenue capitalised includes cost for own staff and an appropriate proportion of
Revenue, which excludes value added tax and other applicable turn- identifiable overheads. Capitalised development expenditure is stated
over taxes, represent sales to individual sales consultants and licensed at cost less accumulated amortisation and impairment losses.
distributors or, in the case of mail order and retail sales, to individual
customers. Sales are recognised in the income statement when the (v) Amortisation
significant risks and rewards of ownership have transferred to the buy- Amortisation is charged to the income statement on a straight-line
er. No revenue is recognised if there are significant uncertainties re- basis over the estimated useful life of intangible assets unless such lives
garding recovery of the consideration due. are indefinite. Goodwill and intangible assets with an indefinite useful
life are systematically tested for impairment at each balance sheet date.
(g) Employee benefits Intangible assets, except goodwill, are amortised from the date they
(i) Pension obligations are available for use. The estimated useful life for licenses is 10 years,
Obligations for contributions to defined contribution pension plans are trademarks between 5 and 10 years, capitalised development costs
recognised as an expense in the income statement as incurred. between 3 and 5 years and software between 3 and 5 years.
(ii) Equity related compensation (j) Property, plant and equipment
Share options granted under company stock option programmes allow (i) Owned assets
employees to acquire shares of the Company. The fair value of the op- Items of property, plant and equipment are stated at purchase price less
tions granted is recognised as an employee expense with a correspond-

accumulated depreciation and impairment losses.The cost of assets under factured inventories and work in progress, cost includes an appropriate
construction includes the cost of materials, direct labour and an appropri- share of overheads based on normal operating capacity.
ate proportion of overheads. The carrying amounts of tangible assets are Provision is made for obsolete, slow moving or defective items,
reviewed to determine whether they are in excess of their recoverable where appropriate.
amount as at each balance sheet date. If any such excess exists, the carry- (m) Trade and other receivables
ing amount is reduced to the recoverable amount with the amount of the Trade and other receivables are stated at cost less impairment losses
reduction recognised as an expense in the income statement. (see accounting policy o).
Where parts of an item of property, plant and equipment have dif-
ferent useful lives, they are accounted for as separate items of prop- (n) Cash and cash equivalents
erty, plant and equipment. Cash consists of cash at bank and in hand together with term deposits
and highly liquid debt instruments with original maturities of three
(ii) Leased assets months or less. Bank overdrafts that are repayable on demand and
Leases in which the Group assumes substantially all the risks and re- form an integral part of the Group’s cash management are included as
wards of ownership are classified as finance leases. The owner-occu- a component of cash and cash equivalents for the purpose of the
pied property acquired by way of finance lease is stated at an amount statement of cash flows.
equal to the lower of it’s fair value and it’s present value of the mini-
mum lease payments at inception of the lease, less accumulated de- (o) Impairment
preciation and impairment losses. The carrying amount of the Group’s assets, other than inventories (see
accounting policy l) and deferred tax assets (see accounting policy h),
(iii) Subsequent costs are reviewed at each balance sheet date to determine whether there
The Group recognises in the carrying amount of an item of property, is an indication of impairment of the carrying value. If such indication
plant and equipment the cost of replacing part of such an item when exists, the assets’ recoverable amount is estimated.
that cost is incurred if it is probable that the future economic benefits For goodwill and assets that have an indefinite useful life the recov-
embodied with the item will flow to the Group and the cost of the erable amount is estimated at each balance sheet date.
item can be measured reliably. All other costs are recognised in the An impairment loss is recognised whenever the carrying amount of
income statement as an expense as incurred. the asset, or its cash-generating unit, exceeds its recoverable amount.
(iv) Depreciation Impairment losses are recognised in the income statement.
Depreciation is charged to the income statement on a straight-line The recoverable amount of assets is the greater of their net selling
basis over the estimated useful life of the assets. For assets under con- price and value in use. In assessing value in use, the estimated future
struction, the asset will be depreciated when it is commissioned. Im- cash flows are discounted to their present value using a pre-tax dis-
provements to leasehold property are depreciated over their useful count rate that reflects current market assessments of the time value
economic life or the duration of the lease, whichever is shortest. Land of money and the risks specific to the asset. For an asset that does not
is not depreciated. Other depreciation rates are as follows: generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
Buildings 2%–5% per annum (p) Share capital
Leasehold improvements 15%–50% per annum Dividends are recognised as a liability in the period in which they are
Plant and machinery 7%–15% per annum declared.
Furniture and equipment 15%–25% per annum (q) Interest bearing borrowings
Computer equipment 15%–33% per annum Interest bearing borrowings are recognised initially at fair value less attrib-
utable transaction costs. Subsequent to initial recognition, interest bearing
Motor vehicles 15%–25% per annum borrowings are stated at amortised costs with the difference between the
costs and redemption value being recognised in the income statement
(k) Investment property over the period of the borrowings on an effective interest basis.
Investment properties are properties that are held either to earn rent- (r) Trade and other payables
al income or for capital appreciation or for both. Investment property Trade and other payables are stated at cost.
is recorded at cost less accumulated depreciation. Depreciation is
charged to the income statement on a straight line basis with rates (s) Provisions
between 2% to 5% per year. Rental income from investment property A provision is recognised in the balance sheet when the Group has a
is recognised within selling and administrative expenses in the income present legal or constructive obligation as a result of a past event, and
statement over the term of the lease. it is probable that an outflow of economic benefits will be required to
settle the obligation. If the effect is material, provisions are determined
(l) Inventory by discounting the expected future cash flows at a pre-tax rate that
Inventories are stated at the lower of cost and net realisable value. Net reflects current market assessments of the time value of money and,
realisable value is the estimated selling price in the ordinary course of where appropriate, the risks specific to the liability.
business, less the estimated costs of completion and the selling ex-
penses. For finished goods manufactured by the Group, cost is taken (t) Expenses
as production cost, which includes an appropriate proportion of at- (i) Operating lease payments
tributable overheads. Payments made under operating leases are recognised in the income
The cost of inventory is based on the first-in first-out principle statement on a straight line basis over the term of the lease. Lease in-
and includes expenditure incurred in acquiring the inventories and centives received are recognised in the income statement as an inte-
bringing them to their final location and condition. In the case of manu- gral part of the total lease expense.

(ii) Finance lease payments • IFRIC 11 IFRS 2 – Group and Treasury Share Transactions requires a
Minimum lease payments are apportioned between the finance charge share-based payment arrangement in which an entity receives goods
and the reduction of the outstanding liability. The finance charge is al- or services as consideration for its own equity instruments to be ac-
located to each period during the lease term so as to produce a con- counted for as an equity-settled share-based payment transaction,
stant periodic rate of interest on the remaining balance of the liability. regardless of how the equity instruments are obtained. IFRIC 11 will
become mandatory for the Group’s 2008 financial statements, with
(iii) Net financing costs
retrospective application required. It is not expected to have any
Net financing costs comprise interest payable on borrowings calculat-
impact on the consolidated financial statements.
ed using the effective interest rate method, foreign exchange gains and
losses, and gains and losses on hedging instruments that are recognised
in the income statement.
• IFRIC 12 Service Concession Arrangements provides guidance on cer-
tain recognition and measurement issues that arise in accounting for
Interest income is recognised in the income statement as it accrues,
public-to-private service concession arrangements. IFRIC 12, which
using the effective interest method. The interest expense component
becomes mandatory for the Group’s 2008 financial statements, is
of finance lease payments is recognised in the income statement using
not expected to have any effect on the consolidated financial state-
the effective interest rate method.
ments.
(u) Segment reporting
A segment is a distinguishable component of the Group that is en- • IFRIC 13 Customer Loyalty Programmes addresses the accounting by
gaged in providing products or services within a particular economic entities that operate, or otherwise participate in, customer loyalty
environment (geographical segment), which is subject to risks and re- programmes for their customers. It relates to customer loyalty pro-
wards that are different from those of other segments. grammes under which the customer can redeem credits for awards
(v) New standards and interpretations not yet adopted such as free or discounted goods or services. The Group is evaluat-
A number of new standards, amendments to standards and interpretations ing the impact of adopting the IFRIC 13, which becomes mandatory
are not yet effective for the year ended 31 December 2007, and have not for the Group’s 2009 financial statements.
been applied in preparing these consolidated financial statements:
• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum
• IFRS 8 Operating Segments introduces the ”management approach” Funding Requirements and their Interaction clarifies when refunds or
to segment reporting. IFRS 8, which becomes mandatory for the reductions in future contributions in relation to defined benefit as-
Group’s 2009 financial statements, will require the disclosure of seg- sets should be regarded as available and provides guidance on the
ment information based on the internal reports regularly reviewed impact of minimum funding requirements (MFR) on such assets. It
by the Group’s Chief Operating Decision Maker in order to assess also addresses when a MFR might give rise to a liability. IFRIC 14 will
each segment’s performance and to allocate resources to them. become mandatory for the Group’s 2008 financial statements, with
Currently the Group presents segment information in respect of its retrospective application required, and it is not expected to have
geographical segments (see note 3). The Group is evaluating the any impact on the consolidated financial statements.
impact of adopting this standard.
• Revised IAS 23 Borrowing Costs removes the option to expense bor-

rowing costs and requires that the entity capitalise borrowing costs
directly attributable to the acquisition, construction or production of
a qualifying asset as part of the cost of that asset. The revised IAS 23
will become mandatory for the Group’s 2009 financial statements. In
accordance with the transitional provisions the Group will apply the
revised IAS 23 to qualifying assets for which capitalisation of borrow-
ing costs commences on or after the effective date.

Note 3 • Segment reporting
The primary and the only segmentation of the business is based on geographic cosmetics sales. The segmentation is based on the Group’s man-
agement and internal reporting structure.
Operating profit
Sales before restructuring
’000 2007 2006 2007 2006
CIS & Baltics 613,150 496,484 119,830 99,285
Central Europe & Mediterranean 258,856 223,844 52,229 45,404
Western Europe & Africa 99,414 90,317 12,931 11,266
Latin America 49,131 39,970 4,403 4,443
Asia 62,230 43,649 2,259 106
Group overhead and other operations 26,604 23,681 (36,256) (33,449)
Consolidated 1,109,385 917,945 155,396 127,055
Capital Depreciation
expenditure and amortisation
’000 2007 2006 2007 2006
CIS & Baltics 12,463 27,184 6,104 4,135
Latin America 646 541 395 307
Asia 1,913 2,009 1,529 1,458
Group overhead and other operations 16,273 5,585 5,628 3,853
Consolidated 38,072 40,506 18,481 14,732
Assets Liabilities
’000 2007 2006 2007 2006
CIS & Baltics 214,319 179,928 47,683 42,955
Latin America 20,010 14,170 3,884 2,999
Asia 36,808 30,204 14,098 11,441
Group overhead and other operations 112,252 81,921 312,286 291,872
Consolidated 516,048 436,234 423,227 388,352
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
The group overhead and other operations segment includes revenue and expenses from, amongst others, mail order business and licensee sales
and new markets, unallocated items such as corporate assets and expenses, and interest bearing loans and expenses.

Note 4 • Administrative expenses Note 6 • Income tax expense
Below is a summary of certain administrative expenses: ’000 2007 2006

’000 2007 2006 Recognised in the income statement
Salaries and wages 104,124 87,211 Current tax expense 16,488 17,745
Social security contributions 19,986 17,774 Deferred tax expense:
Pension expenses 4,691 4,250 Origination and reversal
Equity settled transactions 8,420 2,832 of temporary differences 1,464 (1,305)
137,221 112,067 Utilisation of losses brought forward (4,022) (1,611)
Less amount presented in cost of sales (19,534) (14,455) (2,558) (2,916)
Personnel expenses 117,687 97,612 Total income tax expense
in the income statement 13,930 14,829
Auditors’ remuneration 1,134 1,054
Auditors’ remuneration for non-audit services 190 409 Reconciliation of effective tax rate
Research and development 9,557 9,615 Profit before tax 105,908 108,328
Average applicable tax rate, % 9.0 8.6
Depreciation 16,481 13,153 Tax at applicable tax rate 9,483 9,358
Amortisation 2,000 1,579 Adjustment to tax expense
Depreciation and amortisation expenses 18,481 14,732 Non-deductible expenses 6,076 4,210
Utilisation of tax losses brought forward (4,022) (1,611)
The average number of employees in 2007 was 6,438 (5,610).
Withholding taxes 1,352 1,340
Other taxes 1,067 1,428
Note 5 • Financial income and expense Adjustments in respect of prior years (26) 104
Tax expense 13,930 14,829
Recognised in profit or loss Effective tax rate, % 13.2 13.7
’000 2007 2006 The tax rates of the Group’s subsidiaries range between 0% and 39%.
Interest income on bank deposits 903 579 The Group benefits from favourable tax regimes in a number of coun-
Change in fair value of financial tries, the benefits of which are expected to continue in the foreseeable
assets designated at fair value 495 417 future.
IRS income 535 –
Total financial income 1,933 996
Note 7 • Earnings per share
Bank charges and interest expense (a) Basic
on financial liabilities (21,267) (14,266) Earnings per share are based on the net profit attributable to ordinary
IRS expense – (599) shareholders of 91,978,000 ( 93,499,000) and the weighted average
Foreign exchange losses, net (4,341) (4,858) number of shares outstanding during the year. The weighted average
Total financial expense (25,608) (19,723) number of shares used in the computation was 55,696,640 for the year
to 31 December 2007 (57,674,309).
Total net financial expense (23,675) (18,727)
(b) Diluted
Diluted earnings per share are calculated taking into account the po-
Recognised directly in equity
tential dilutive effect of the achievement share options granted under
’000 2007 2006 the share incentive scheme (see note 19). The weighted average
Effective portion of changes in fair number of ordinary shares adjusted for the share schemes can be
value of cash flow hedge 248 1,456 specified as follows:
Fair value of cash flow hedges transferred 2007 2006
to profit or loss 535 (599) Weighted average number
Total movement 783 857 of shares outstanding (basic) 55,696,640 57,674,309
Effect of share schemes 865,501 399,519
Weighted average number
of shares outstanding (diluted) 56,562,141 58,073,828
Diluted earnings per share are based on the same net profit for the
year as used in calculating basic earnings per share, because the total
number of shares has been increased by the number of shares deemed
to have been issued for no consideration.

Note 8 • Intangible assets
’000 Software Trademarks Licences Goodwill Total
Cost
At 31 December 2005 8,316 678 2,924 5,398 17,316
Additions 2,448 144 – – 2,592
Re-classification – – 31 – 31
Disposals (754) – – – (754)
Translation (14) – – – (14)
At 31 December 2006 9,996 822 2,955 5,398 19,171
Additions 3,487 118 – – 3,605
Re-classification (2) – – – (2)
Disposals (601) – – – (601)
Translation (107) – (1) – (108)
At 31 December 2007 12,773 940 2,954 5,398 22,065
Amortisation
At 31 December 2005 2,856 384 2,924 – 6,164
Charge for the year 1,478 56 – – 1,534
Re-classification 45 – – – 45
Disposals – – – – –
Translation 35 – – – 35
At 31 December 2006 4,414 440 2,924 – 7,778
Charge for the year 1,933 67 – – 2,000
Re-classification 57 – – – 57
Disposals (607) – – – (607)
Translation (56) – – – (56)
At 31 December 2007 5,741 507 2,924 – 9,172
Net book value

At 31 December 2005 5,460 294 – 5,398 11,152
At 31 December 2006 5,582 382 31 5,398 11,393
At 31 December 2007 7,032 433 30 5,398 12,893
During 1997, the Company acquired the remaining 49 per cent of the Group’s interest in Oriflame Cosmeticos Ltda in Portugal from a party
related to the af Jochnick family. This resulted in a goodwill amount of 2.3 million. During 2001, goodwill of 4.6 million arose on acquisition of
Rockport Mauritius Ltd and at the end of 2001, the minority shareholders of Oriflame India Pvt. Ltd were bought out which resulted in goodwill
of 1.8 million.
At balance sheet date, the goodwill was tested for impairment. As the Company has only one business segment which is cosmetics, the full carry-
ing amount of goodwill of 5.4 million (2006: 5.4 million) is allocated to that unit. The recoverable amount is determined based on value-in-use
calculations. These calculations use pre-tax cash flow projections based on financial budgets covering a five year period. Growth rate assumptions
do not exceed past performances and recoverable amounts are estimated to be higher than the carrying amount of goodwill. No impairment loss
was recognised in 2007 and in 2006.
Included in software additions during the year are costs for own developed software for an amount of 0.5 million ( 0.6 million).

Note 9 • Property, plant and equipment
Improve-
Freehold ments to
land & leasehold Plant & Furniture & Computer Motor Under con-
’000 buildings property machinery equipment equipment vehicles struction Total
Cost
At 31 December 2005 47,805 14,995 32,773 14,323 25,335 6,463 28,915 170,609
Additions 2,535 2,154 6,770 2,864 3,227 1,029 18,744 37,323
Disposals (2) (487) (573) (1,170) (1,173) (1,127) – (4,532)
Re-classification 4,953 542 (1,193) (35) (9) – (4,312) (54)
Translation (399) (345) (242) (281) (219) (75) (627) (2,188)
At 31 December 2006 54,892 16,859 37,535 15,701 27,161 6,290 42,720 201,158
Additions 9,045 3,273 12,692 4,081 4,363 1,062 – 34,516
Disposals – (441) (240) (488) (1,771) (1,009) – (3,949)
Re-classification 40,145 (5) 2,439 130 (3) 16 (42,720) 2
Translation (1,032) (316) 410 (388) (259) (12) – (1,597)
At 31 December 2007 103,050 19,370 52,836 19,036 29,491 6,347 – 230,130
Depreciation
At 31 December 2005 9,572 7,780 19,964 9,948 19,311 4,337 – 70,912
Charge for the year 985 2,121 3,974 1,686 3,403 894 – 13,063
Disposals – (480) (569) (1,131) (1,084) (1,043) (4,307)
Re-classification – – – (14) – – – (14)
Translation 47 (225) (35) (190) (152) (30) – (585)
At 31 December 2006 10,604 9,196 23,334 10,299 21,478 4,158 – 79,069
Charge for the year 2,758 2,041 4,960 2,151 3,601 868 – 16,379
Disposals – (303) (210) (424) (1,737) (914) – (3,588)
Re-classification – – 132 (130) (59) – – (57)
Translation 47 (224) 460 (235) (135) 40 – (47)
At 31 December 2007 13,409 10,710 28,676 11,661 23,148 4,152 – 91,756
Net book value

At 31 December 2005 38,233 7,215 12,809 4,375 6,024 2,126 28,915 99,697
At 31 December 2006 44,288 7,663 14,201 5,402 5,683 2,132 42,720 122,089
At 31 December 2007 89,641 8,660 24,160 7,375 6,343 2,195 – 138,374
Finance leases Reclassification

Included in property, plant and equipment at 31 December 2007 is the In 2007 investment property including comparative figures has been
net book value of assets under finance leases totaling 959,219 reclassified from property, plant and equipment and disclosed sepa-
( 1,170,419), of which furniture and equipment 0 ( 18,315), motor rately (see note 10).
vehicles 170,315 ( 156,877), plant and machiner y 788,904
( 995,227).

Note 10 • Investment property Amounts included in the Profit or Loss:
’000 2007 2006 ’000 2007 2006

Gross carrying value at January 1 3,429 3,814 Rental income from investment property 675 483
Additions 10 36 Direct operating expenses (33) (44)
Translation effects (255) (421) Depreciation (102) (104)
Gross carrying value at December 31 3,184 3,429 Net rental income 540 335
Accumulated depreciation at January 1 925 929
Charge of the year 102 104 The fair value of two investment properties has been determined
Translation effects (97) (108) through valuations by independent valuers. The fair value of the third
investment property has been calculated based on net present value
Accumulated depreciation at December 31 930 925
of expected annual rentals applying a 15% discount factor.
Net book value at year end 2,254 2,504 The fair value of Investment property has been estimated at 6 million.
Investment property includes two commercial and warehouse premises

leased to third parties as well as a plot of land.
The related contractual leases contain initial non-cancellable periods
from 2 to 3 years. For one of the lease contracts a renewal period of 2
years is considered. For the second lease contract there is no subse-
quent renewal condition.
Note 11 • Deferred taxation
Deferred tax assets and liabilities at 31 December 2007 and 2006 are attributable to the items detailed in the table below:
2007 2006
’000 Assets Liabilities Net Assets Liabilities Net Movement
Property, plant and equipment & intangible assets 256 (3,970) (3,714) 400 (2,086) (1,686) (2,028)
Inventories 2,783 (640) 2,143 2,294 (2,287) 7 2,136
Trade and other receivables 485 (242) 243 299 (116) 183 60
Accruals 5,571 – 5,571 4,786 – 4,786 785
Other 2,087 (453) 1,634 2,499 (488) 2,011 (377)
Tax losses carried forward 3,858 – 3,858 2,168 – 2,168 1,690
Tax assets/(liabilities) 15,040 (5,305) 9,735 12,446 (4,977) 7,469 2,266
Translation difference 292
Deferred tax income 2,558
Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:
’000 2007 2006
Deductible temporary differences 8,361 5,266
Tax losses 76,384 66,752
Total 84,745 72,018
Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available
against which the Group can utilise the benefits.

Note 12 • Inventories The movement in the allowance for impairment in respect of trade
receivables during the year was as follows:
’000 2007 2006
Raw materials 18,371 13,635 ’000 2007 2006
Work in progress 124 100 Balance at 1 January 20,739 20,690
Finished goods 161,593 126,798 Impairment loss recognised 2,938 2,811
Other inventories 28,833 18,652 Specific debts write off against
Inventory reserves (22,836) (18,245) provision (3,729) (2,762)
186,085 140,940 Balance at 31 December 19,948 20,739
During 2007 the Company wrote down 7.6 million ( 9.0 million) of The allowance accounts in respect of trade receivables are used to
inventory mainly due to obsolescence. record impairment losses unless the Group is satisfied that no recovery
of the amount owing is possible. At that point the amount considered
irrecoverable is written off against the financial asset directly.
Note 13 • Trade and other receivables
’000 2007 2006 Note 14 • Cash and cash equivalents

Trade receivables 42,424 40,683
Cash and cash equivalents included in the cash flow statement com-
Other receivables 24,118 15,958 prise the following balance sheet amounts:
Prepaid expenses 25,753 21,687
92,295 78,328 Short term Bank
’000 Cash deposits overdrafts Total
Exposure to credit risk At 31 December 2005 46,542 4,365 (12) 50,895

The maximum exposure to credit risk for trade receivables at the re- Net flow (15,732) 27,014 (221) 11,061
porting date by geographic region was: Exchange differences (94) (95) – (189)
At 31 December 2006 30,716 31,284 (233) 61,767
Carrying amount Net flow 31,393 (29,998) (19) 1,376
’000 2007 2006 Exchange differences (309) (6) – (315)
CIS & Baltics 12,744 10,273 At 31 December 2007 61,800 1,280 (252) 62,828
Central Europe and Mediterranean 12,942 14,955
Western Europe 8,330 9,130
Africa 1,131 663 Note 15 • Share capital
Latin America 5,897 4,457
The Company has one class of share capital with an authorised share
Asia 1,380 1,205 capital of 102,400,000. All shares have equal rights to dividends and
42,424 40,683 shareholders are entitled to one vote per share at annual and general
meetings of the Company. The shares have a par value of 1.25.
Impairment losses A reconciliation of the movements in share capital is detailed below:
The aging of trade receivables at the reporting date was:
Gross Impair- Gross Impair- No. of shares ’000
ment ment Share capital
’000 2007 2007 2006 2006 Balance 31 December 2005 59,483,190 74,354
Not past due 35,138 340 32,681 389 Cancellation of redeemed shares (i) (3,813,304) (4,766)
Past due 21–180 days 9,393 2,456 9,811 2,118 Balance 31 December 2006 55,669,886 69,588
Past due 181–360 days 2,484 1,988 2,201 2,102 Issue of new shares (ii) 71,828 90
Past due 12–18 months 2,481 2,467 3,218 2,879 Balance 31 December 2007 55,741,714 69,678
Past due > 18 months 12,876 12,697 13,511 13,251
62,372 19,948 61,422 20,739 (i) On 30 October 2006 the Company cancelled 3,813,304 shares,
which were redeemed during the summer (see note 16 (vi)).
Based on experience the Group makes impairment allowance on trade (ii) On 14 August and 8 October 2007 the Group issued 67,851 and
receivables not past due, which usually is around 1%. This allowance 3,977 shares respectively to Oriflame employees and sales con-
varies from market to market depending on the latest trends in collect- sultants as part of the share incentive plan that was approved by
ability of the trade receivables. the EGM on 19 May 2005. The consideration received was 2.7
million, of which 0.1 million was credited to the share capital and
2.6 million was credited to share premium.

Note 16 • Reserves Note 17 • Interest-bearing loans
(i) Legal reserve ’000 2007 2006

The Company is required by Luxembourg law to appropriate to a legal Non-current liabilities
reserve at least 5% of its statutory net profit, until the aggregate re- Bank loans 222,892 234,921
serve equals 10% of its issued share capital. The legal reserve is not
Finance lease long-term liabilities 401 747
available for distribution.
223,293 235,668
(ii) Special reserve Current liabilities
During 2003, the par value of the shares was decreased to 1.25 per Short-term loans 3,623 1,713
share, which resulted in a special reserve within equity. This reserve is Current portion of long-term loans 17,500 17,500
part of the distributable reserves. Bank overdrafts 253 232
Finance lease short-term liabilities 430 378
(iii) Translation reserve 21,806 19,823
Included in the translation loss for 2007 are the following:
(a) Exchange loss of 2.3 million ( 2.6 million) arising on long term On 4 April 2006 the Company entered into an agreement for a 375.0
inter-company debt of an investment nature, and; million multi-currency committed five year credit facility (the “Credit
(b) A foreign exchange loss of 1.2 million ( 1.3 million loss) arising Facility”), which consists of a 200.0 million revolving and a 175.0 mil-
from the translation of financial statements of foreign subsidiaries. lion term facility . The term facility is amortised by equal quarterly re-
payments as follows:
Included in the translation reserve is a revaluation reserve related to 15.0m from 31 December 2006 until 30 June 2007
certain assets of 10.4 million ( 9.6 million). 15.0m from 30 September 2007 until 30 June 2008
20.0m from 30 September 2008 until 30 June 2009
(iv) Hedging reserve 20.0m from 30 September 2009 until 30 June 2010
The hedging reserve comprises the effective portion of the cumulative 52.5m from 30 September 2010 until 31 December 2010
net change in fair value of the cash flow hedging instruments. 52.5m as at 4 April 2011.
(v) Dividends The Credit Facility provides that utilisations may be in euros or other
In May 2006, the AGM of the Company approved a dividend of 0.90 freely available currencies, as agreed. The interest payable is calculated
per share, as proposed by the Board of Directors, i.e. 53.5 million in at the relevant inter-bank rate plus the applicable margin.
total. The Credit Facility contains a number of operating covenants,
including restrictions on subsidiary borrowings, restrictions on lending
In May 2007, the AGM of the Company approved a dividend of 1.01 and giving guarantees for financial indebtedness, and restrictions on the
per share, as proposed by the Board of Directors, i.e. 56.2 million in disposal of material assets. It also contains a number of financial
total. covenants which include required ratios of consolidated net debt to
consolidated EBITDA of the Group, operating profit coverage and cap
The Board of Directors will propose to the AGM in May 2008 a divi- on distributions. The Group was in compliance with these covenants as
dend payment of 1.25 per share, amounting to 69.7 million in total. of 31 December 2007.
Cont’d
(vi) Share redemption
In May 2006, the EGM of the Company approved distribution of 2.60
per share through a redemption program. In July 2006 the Company
redeemed 3,923,212 shares at 39 each or 153.0 million in total. The
cost of the redemption program was 0.4 million, which was registered
immediately in retained earnings. Subsequently the Company cancelled
3,813,304 shares reducing the share capital, share premium and the re-
tained earnings respectively by 4.8 million, 59.7 million and 84.2 mil-
lion. The remaining 109,908 redeemed shares were sold to employees
at market price ( 2.7 million in total) as investment shares in the 2006
share incentive scheme. The difference of 1.6 million between the re-
deemed value of 4.3 million and the consideration received from the
employees was expensed in retained earnings (see note 19).
(vii) Other reserve

The other reserve comprises the increase in equity from services re-
ceived with respect to the equity settled share based payments plan.

Note 17 cont’d
Terms and debt repayment schedule
The terms and conditions of outstanding loans were as follows:
31 December 2007 31 December 2006
Normal Year of Face Carrying Face Carrying
’000 Currency interest rate maturity value amount value amount
Revolving bank facility euro Euribor+50 to 125 bps 2011 90,000 89,218 85,000 84,140
Team loan euro Euribor+50 to 125 bps bullets from 2006 to 2011 152,500 151,174 170,000 168,281
Finance lease liabilities PLN 6,23% 2010 999 831 1,488 1,125
Short terms loans various between 5% and 13% 2008 3,623 3,623 1,713 1,713
Bank overdrafts INR between 10% and 15% 2008 253 253 232 232
Total interest-bearing liabilities 247,375 245,099 258,433 255,491
At 31 December 2007 the Group had total banking facilities available of 362.1 million ( 379.5 million), of which 250.2 million ( 257.2 million)
has been utilised as bank overdrafts, guarantees, short-term loans and long-term loans.
Note 18 • Trade and other payables Note 20 • Related parties
’000 2007 2006 Identity of related parties

Trade payables 37,651 27,665 The group has a related party relationship with its subsidiaries (see
Other payables 20,873 18,981 note 21), its directors and executive officers, and a number of compa-
nies related through common key management personnel or owner-
Accrued expenses 75,378 56,797
ship interests.
133,902 103,443
Transactions with key management personnel
The Directors of the Company held beneficial interests in the shares
Note 19 • Equity compensation plans of the Company at 31 December as follows:
Number of shares
On 19 May 2005 the Oriflame EGM approved a share incentive plan,
according to which key Oriflame employees are entitled to receive cer- R. af Jochnick and family 3,693,201
tain number of ’achievement’ shares for free for every ’investment’ J. af Jochnick and family 5,049,573
share they were offered to subscribe for after three years, provided Alexander af Jochnick 362,514
that the Company achieves certain growth in operating profit for that Christian Salamon 4,020
period. The EGM authorised the Board of Directors to offer up to Marie Ehrling 300
150,000 investment shares annually for the years 2005 – 2007. The fair
Lilian Fossum 500
value of services received in return for share options are measured by
reference to the value of the share options granted.The estimate of the Helle Kruse Nielsen –
fair value of the share options is measured based on a Black Scholes Lennart Björk 10,000
model. Magnus Brännström 181,709
The number of investment shares is as follows: The major shareholders, the af Jochnick family and the Stichting af
Jochnick Foundation jointly exercise control over 15,121,289 shares
Share schemes which represents 27.1% of the issued share capital and the outstanding
2007 2006 2005 shares as at 31 December 2007.
Granted at the beginning
of the scheme 71,828 109,908 141,761 The key management personnel compensation is as follows:
Forfeited during 2005 – – (1,800) For the year ended 31 December 2007, the members of the Board
of Directors (excluding the Chairman and Magnus Brännström who in
Forfeited during 2006 – (800) (13,300)
his capacity as Chief Executive Officer is an employee) received total
Forfeited during 2007 (3,481) (4,700) (5,500) compensation of 254,353 ( 145,000). The Chairman received
Outstanding at the end 60,257 ( 48,750).
of the period 68,347 104,408 121,161 For the year ended 31 December 2007, the Chief Executive Officer
received total compensation of 844,483 ( 836,266), of which
676,171 ( 581,620) was salary and 83,122 ( 81,352) pension con-
tributions under the pension scheme for senior management, and
85,190 ( 173,294) other benefits and allowances.
Total compensation to the members of the Corporate Committee,
which consists of the Chief Executive Officer, the Chief Operating Of-
ficer and the Chief Financial Officer (excluding the Chief Executive

Officer and including the previous Chief Financial Officer) who were Oriflame Egypt Ltd Egypt 100
employed in the year ended 31 December 2007, were 1,926,176 Oriflame Estonia OU Estonia 100
( 1,345,277), which was made up of 1,617,230 ( 1,080,726) in sala- Oriflame Oy Finland 100
ries, 210,972 ( 98,185) in payments into pension schemes and
Oriflame Kosmetik Vertriebs GmbH Germany 100
97,974 ( 166,366) of other benefits and allowances.
Oriflame Hellas Sole Shareholder Ltd Greece 100
Other related party transactions Oriflame Georgia LLC Georgia 100
During the period, the following transactions were conducted with Oriflame Hungary Kozmetika Kft Hungary 100
related parties: Oriflame Persia LLC Iran 100
Oriflame India Pvt. Ltd. India 100
’000 2007 2006 SilverOak Laboratories Pvt. Ltd. India 100
Services provided by Cypoint AB 14 46 Oriflame Cosmetics Indonesia 100
Services provided by Credus Management AB 74 2 Oriflame GTC Ltd. Ireland 100
Expenses and employee costs incurred on Oriflame LLP Kazakhstan 100
behalf of and recharged to Oriflame Cosmetics LLC Kosovo 100
Medicover Holdings S.A. 1,826 1,696 Oriflame Latvija S.I.A Latvia 100
Medicover health care services 264 227 Oriflame Kosmetika UAB. Lithuania 100
Oriflame Kozmetika doo. Macedonia 100
All transactions with related parties are done on arm’s length basis.
Oriflame Investments Ltd Mauritius 100
Cypoint AB provides services to host the extranet website and assist
with the corporate intranet. In the past, Cypoint has developed both Oriflame (Mexico) SA de CV Mexico 100
the extranet and intranet programmes. Robert af Jochnick has been a Oriflame International SRL Moldova 100
director of Cypoint AB from 2001 until July 2007. Oriflame Mongolia XXK Mongolia 100
In 2007 Credus Management AB, a Swedish company wholly owned Oriflame Kosmetika MN doo. Montenegro 100
by Rober t af Jochnick, invoiced Oriflame for consultancy fees to Oriflame Maroc SARL Morocco 100
Oriflame by employees of Credus, other than Robert af Jochnick and
Oriflame Kosmetiek BV. Netherlands 100
Alexander af Jochnick, who was employed by Credus Management AB.
Administrative and employee costs are incurred on behalf of Medi- Oriflame Holdings BV. Netherlands 100
cover Holdings SA in connection with the shared office facilities in Zetes Licence BV. Netherlands 100
Waterloo, Brussels. These costs are recharged to Medicover. Jonas af Oriflame Norge A/S Norway 100
Jochnick is the Chairman of, and a major shareholder in Medicover. Oriflame Peru S.A. Peru 100
Robert af Jochnick is a board member of Medicover. In addition, Medi- Oriflame Poland SP zoo. Poland 100
cover has entered into agreements with certain of the Group’s sub- Oriflame Products Poland SP zoo. Poland 100
sidiaries in Poland, Romania, Hungary, the Czech Republic and Estonia
Oriflame Property Investments SP zoo. Poland 100
to provide private health care benefits to employees.
Oriflame Cosmeticos Ltda Portugal 100
SC Cosmetics Oriflame Romania srl. Romania 100
Note 21 • Group companies Oriflame Cosmetics LLC Russia 100
Oriflame Products LLC Russia 100
The Company holds, whether directly or indirectly, 20% or more of Oriflame Kosmetika d.o.o. Serbia 100
the issued share capital of the following companies:
Per centage Oriflame Slovakia SPOL ro. Slovak Republic 100
Country of share capital Oriflame Kozmetica d.o.o. Slovenia 100
Name incorporation held, % Oriflame Cosmeticos S.A. Spain 100
Oriflame Azerbaijan LLC Azerbaijan 100 Oriflame Lanka Private Ltd Sri Lanka 100
Oriflame Cosmetics LLC Armenia 100 Nordium AB Sweden 100
Oriflame Kozmetika BH. D.o.o. Sarajevo Bosnia 100 Oriflame Cosmetics AB Sweden 100
Oriflame Bulgaria EOOD Bulgaria 100 Oriflame International Services Sweden 100
Oriflame Cosmetics Foreign LLC Belarus 100 Zetes Holdings AB Sweden 100
Oriflame Management SA Belgium 100 Zetes SA Switzerland 100
Oriflame de Chile SA Chile 100 Oriflame Cosmetics (Thailand) Ltd Thailand 100
Oriflame Cosmetics (China) Co. Ltd China 100 Oriflame Management Asia Ltc Thailand 100
Oriflame de Colombia SA Colombia 100 Oriflame Kozmetik
Oriflame Kozmetika Croatia doo. Croatia 100 Urunleri Ticaret Sirketi Ltd. Turkey 100
Oriflame Czech Republic SPOL R.O Czech Republic 100 DP “Oriflame Cosmetics” Ukraine Ukraine 100
Oriflame Software sro Czech Republic 100 DP ”Rielty Ukraine” Ukraine 100
Oriflame International ApS Denmark 100 Oriflame Vietnam Ltd. Vietnam 100
Oriflame del Ecuador SA Ecuador 100

Note 22 • Provisions, commitments and contingent liabilities
(a) Provisions
’000 Tax Restructuring Bonus & Other Total

litigations profit sharing
Balance at 1 January 2007 7,477 2,910 5,114 1,018 16,519
Provisions made during the year 3,719 25,813 6,872 – 36,404
Provisions used during the year – (14,535) (5,114) (1,018) (20,667)
Provisions reversed during the year (3,549) – – – (3,549)
Balance at 31 December 2007 7,647 14,188 6,872 – 28,707
Tax litigation provisions relate to several jurisdictions where the Group (b) The Group had minimum annual lease commitments under non-
received tax assessments and is in the process of defending its tax posi- cancelable operating leases at 31 December as follows:
tions. The provisions are based on management’s experience in each
’000 2007 2006
jurisdiction, external advice related to the case, the state of develop-
ment of the country’s tax system, and consider likely outcomes to de- Within one year 6,849 6,538
termine the level of accruals. The outcome of these litigations is ex- Between one and three years 6,314 5,933
pected to be decided within up to three years. Between three and five years 1,505 3,658
The Group is undergoing a comprehensive restructuring program to Over five years 457 289
better support the Group as it continues to expand and grow. This 15,125 16,418
entails creation of a lean and more integrated organisation with more
powerful product development and shorter lead times. The new op- The Group’s lease agreements consist mainly of office and warehouse
eration platform involves: rentals, none of which are individually significant.There are no subleases.
• Establishing of new Group Support Office in Stockholm for market- (c) The Group had bank guarantees in place of 6.4 million ( 2.9 million).
ing, packaging development, purchasing, catalogue development, and
supply chain; (d) The Company’s subsidiaries are involved in litigation in respect of
• Moving Group Finance from Waterloo, Belgium to the existing man- which the Board of Directors consider that either the timing and out-
agement office in Fribourg, Switzerland; come of the litigation is too uncertain to quantify at this stage and/or the
• Moving the Swedish sales function to the new Group Support Office possibility of an adverse outcome is remote and/or in the event that there
in Stockholm; was such an adverse outcome, the financial consequence is not likely to
• Moving Quality Assurance from Dublin to Stockholm; be material.The Company continues to actively monitor and defend such
• Shifting logistics closer to main markets by moving Central Logistics litigation.
from Waterloo to Warsaw and integrating the Nordic Hub in Malmö,
Sweden with the existing Group Distribution Hub in Warsaw;
• Reinforcing the Group’s IT and online operations in Prague, Czech Note 23 • Pensions
republic;
• And, as a consequence of the above, closing the offices in Waterloo All subsidiaries within the Group operate defined contribution schemes.
and Malmö. Pension costs charged for the year for these schemes amounted to 4.0
million ( 4.3 million).
Total costs associated with this restructuring range from 30 to 35
million. The restructuring is expected to be finalised by the end of
2008. During the year ended 31 December 2007, 25.8 million of ex-
pense was recognised, primarily related to employee termination costs,
with a remaining provision as of 31 December 2007 of 14.2 million.
The Company maintains a bonus and profit sharing program to in-
centivise its employees and senior management respectively. The bo-
nus program awards the employees based on individual performance
and achieved targeted operating profit levels. Under the profit sharing
program, a percentage of pre-tax profits are allocated to a pool, and
these funds are then distributed to eligible senior managers based on a
number of performance-related criteria. The bonus and the profit shar-
ing are paid in the first quarter of the next year after finalising the year
end audit of the Group.

Note 24 • Financial instruments and financial Strategic currency exposure
risk management Strategic currency exposure arises in countries, which are not part of
the European Monetary Union (EMU), or whose currencies are not
24.1 Financial risk factors pegged to the euro. When the exchange rate of the non-EMU curren-
Overview cies fluctuates against the euro, it affects the gross margin in those
The Group has exposure to the following risks from its use of financial countries, as 80% of the Group’s products are sourced and produced
instruments: within the EMU.
• Market risk The objective of the Group is to hedge any currency transaction
• Credit risk exposure by seeking to match revenues and costs in the same cur-
• Liquidity risk rency. However, given the geographical diversity of the Group’s opera-
tions, a significant portion of sales is generated in currencies other than
This note presents information about the Group’s exposure to each of those in which the majority of expenses are incurred. In circumstances
the above risks, the Group’s objectives, policies and processes for where revenues and costs cannot be matched, the currency transac-
measuring and managing risk, and the Group’s management of capital. tion exposure may be hedged by periodically adjusting prices or by
Further quantitative disclosures are included throughout these consoli- applying the hedging policy.
dated financial statements. Management of the Company adopted a policy to hedge the esti-
The Board of Directors has overall responsibility for the establish- mated Russian Rouble (RUB) related exposure in respect of forecast-
ment and oversight of the Group’s risk management framework. The ed sales and expenses in Russia when this is economically efficient. The
Group’s risk management policies are established to identify and ana- Company also hedges up to 100% of selected currency transaction
lyse the risks faced by the Group, to set appropriate risk limits and exposures by entering into a variety of forward contracts in currencies
controls, and to monitor risks and adherence to limits. Risk manage- in which subsidiaries of the Group transact business, to the extent that
ment policies and systems are reviewed regularly to reflect changes in forward contracts are available in the market at a reasonable cost.
market conditions and the Group’s activities. As at 31 December 2007 there were a variety of forward exchange
contracts outstanding for an amount equivalent of 91.0 million ( 59.0
I Market Risk million) with a maturity between January and June 2008 to hedge se-
Market risk is the risk that changes in market prices, such as foreign lected currency transaction exposures.
exchange rates, interest rates will affect the Group’s income or the The Group does not apply hedge accounting for the variety of for-
value of its holdings of financial instruments. The objective of market ward contracts that economically hedge monetary assets and liabilities
risk management is to manage and control market risk exposures within foreign currencies, mainly intra-group. Both the changes in fair value
in acceptable parameters, while optimising the return on risk. of the forward contracts and the foreign exchange gains and losses
The Group buys and sells derivatives in the ordinary course of busi- relating to the monetary assets and liabilities are recognised in the
ness, and also incurs financial liabilities, in order to manage market risks. income statement. At 31 December 2007, the fair value of these for-
Generally the Group seeks to apply hedge accounting in order to ward contracts was 1.1 million ( 0.5 million) gain.
manage volatility in profit or loss. During 2007 the Group closed in total 112.9 million ( 183.0 mil-
lion) forward contracts related to the above mentioned variety of for-
(a) Foreign currency risk ward contracts. The total net realised gain of all forward contracts
Translation exposure closed in 2007 was 1.8 million ( 0.6 million loss), of which none was
Translation exposure arises because the profits and losses and assets recognised as an effective hedge, and all of it was recognised in the
and liabilities of operating subsidiaries are reported in the respective gain and loss on exchange in the income statement.
currencies of their country of incorporation. Profits and losses and as- Cont’d
sets and liabilities in the various local currencies are translated into
euros, the reporting currency. For those countries with a reporting
currency other than the euro, profits and losses are translated at aver-
age exchange rates and assets and liabilities are translated at closing
exchange rates. Fluctuations in exchange rates against the euro will
give rise to differences. These differences are recorded as translation
gains or losses in shareholders’ equity.
Transaction exposure
Currency transaction exposure arises whenever a subsidiary enters
into a transaction using a currency other than its measurement cur-
rency. If the relevant exchange rates move between the date of the
transaction and the date of final payment, the resulting currency bal-
ance will produce a gain or loss on exchange. Such gains or losses are
included in financial expenses.

Note 24 cont’d
Exposure to currency risk
The Group’s exposure to foreign currency risk was as follows based on ’000 equivalents of notional amounts:
2007 CLP CZK DKK KZT PLN RUB SEK SKK UAH
In ´000 equivalents
Intragroup trading balances 2,830 1,685 3,039 6,677 (6,571) 39,651 11,838 1,489 6,951
Trade receivables/(payables) – – – – 10,217 – (3,199) – –
Gross balance sheet exposure 2,830 1,685 3,039 6,677 3,646 39,651 8,639 1,489 6,951
Forward exchange contracts (1,000) (3,000) (2,999) (3,500) (6,136) (40,000) (14,400) (1,500) (5,300)
Net exposure 1,830 (1,315) 40 3,177 (2,490) (349) (5,761) (11) 1,651
2006 CLP CZK DKK KZT PLN RUB SEK SKK UAH
In ´000 equivalents
Intragroup trading balances 4,253 329 3,005 4,129 (5,743) 43,972 9,068 1,439 1,023
Trade receivables/(payables) – – – – 9,449 – (712) – –
Gross balance sheet exposure 4,253 329 3,005 4,129 3,706 43,972 8,356 1,439 1,023
Forward exchange contracts – – (2,998) – (3,000) (40,000) (6,646) (1,425) (1,062)
Net exposure 4,253 329 7 4,129 706 3,972 1,710 14 (39)
The following significant exchange rates applied during the year: Effect on equity in million 2007 2006
Average rate Reporting date rate RUB (0.6) (0.5)
2007 2006 2007 2006 UAH (0.1) 0.0
RUB 35.01 34.10 35.93 34.70 KZT (0.1) (0.1)
KZT 168.00 158.20 177.17 167.12 PLN (0.4) (0.4)
UAH 6.89 6.32 7.45 6.65
PLN 3.78 3.90 3.58 3.83 (b) Interest rate risk
Hedging
In April 2006, the Group decided to hedge its exposure to changes in
Sensitivity analysis
interest rates on average for 75% of its forecasted loan debts until July
The Group trades in more than forty currencies. We have selected 2009 via interest rate swap agreements, denominated in euro. The
the top four sales operations and we show their impact on operat- hedged amount as at 31 December 2007 was 148.8 million. The
ing profit and equity. This analysis assumes that all other variables, Company receives the 6 month euro floating rate bi-annually and pays
in particular interest rates, the exchange rates of other currencies the fixed swap rates on average 3.8%.
to the euro, the selling prices of the Oriflame entities in the coun-
tries under review, remain constant over the year. The analysis is The Group classifies the interest rate swap as a cash flow hedge and
performed on the same basis as 2006. One percent strengthening states it at fair value. The fair value of the swap at 31 December 2007
of the euro against the following currencies would have increased was an asset of 1.4 million ( 0.6 million).
(decreased) the Group operating profit or loss and equity to the
Cash flow sensitivity analysis for variable rate instruments
extent shown below: A change of 100 basis points in interest rates at the reporting date
would have increased (decreased) equity and profit or loss by the
Effect on Group operating profit in % 2007 2006 amounts shown below. This analysis assumes that all other variables, in
RUB (1.3%) (1.4%) particular foreign currency rates, remain constant. The analysis is per-
UAH (0.3%) (0.3%) formed on the same basis as 2006.
KZT (0.2%) (0.2%)
PLN (0.0%) (0.0%)

Profit or loss Equity
Effects in ’000 100 bp 100 bp 100 bp 100 bp
31 December 2007 increase decrease increase decrease
Variable rate interest bearing liabilities (2,398) 2,398 – –
Interest rate swap 1,593 (1,593) 3,247 24
Cash flow sensitivity (net) (805) 805 3,247 24
31 December 2006
Variable rate interest bearing liabilities (1,884) 1,884 – –
Interest rate swap 1,098 (1,098) 3,449 (2,744)
Cash flow sensitivity (net) (786) 786 3,449 (2,744)
II Credit risk At balance sheet date there was no significant concentration of credit
Credit risk is the risk of financial loss to the Group if a customer or risk. The maximum exposure to credit risk is represented by the carry-
counterparty to a financial instrument fails to meet its contractual obli- ing amount of each financial asset in the balance sheet.
gations, and arises principally from the Group’s receivables from cus-
tomers. III Liquidity risk
There is a credit policy in place and the exposure to credit risk is Liquidity risk is the risk that the Group will not be able to meet its fi-
monitored on an ongoing basis. Management performs ongoing evalu- nancial obligations as they fall due. The Group’s approach to managing
ations of the credit position of its consultants. Due to the nature of the liquidity is to ensure, as far as possible, that it will always have sufficient
direct sales industry, the Group does not have significant exposure to liquidity to meet its liabilities when due, under both normal and stressed
any individual customer. (See note 13) conditions, without incurring unacceptable losses or risking damage to
Cash and cash equivalent deposits are only with counterparties that the Group’s reputation.
have high credit ratings and therefore management does not expect
any counterparty to fail to meet its obligations.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
Carrying Contractual Less than 1–3 3–5 More than

31 December 2007 amount cash flows 1 year years years 5 years
’000
Non-derivative financial liabilities
Bank loans 244,015 (278,729) (32,109) (100,771) (145,849) –
Finance lease liabilities 831 (999) (535) (464) – –
Trade and other payables 133,902 (133,902) (133,902) – – –
Bank overdraft 253 (253) (253) – – –
Derivative financial liabilities
Forward exchange rate contracts
Outflow: 190 (191) (191) – – –
31 December 2006
’000
Non-derivative financial liabilities
Bank loans 254,134 (306,282) (31,176) (58,591) (216,515) –
Finance lease liabilities 1,125 1,488 489 535 464 –
Trade and other payables 103,443 (103,443) (103,443) – – –
Bank overdraft 232 (232) (232) – – –
Derivative financial liabilities
Forward exchange rate contracts
Outflow: 39 (39) (39) – – –
Cont’d

Note 24 cont’d
Cash Flow hedges
The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur and
to impact the profit or loss:
2007 2006
Carrying Expected Less than 1–3 More than Carrying Expected Less than 1–3 More than
’000 Amount cash flows 1 year years 3 years Amount cash flows 1 year years 3 years
Interest rate swaps:
Assets 1,431 1,431 1,006 425 – 648 648 (208) 856 –
24.2 Capital risk management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future develop-
ment of the business. The Board of Directors has adopted a dividend policy to the effect that, absent changes in the Company’s operations or
capital structure, Oriflame intends to distribute, over the long term, at least 50 per cent of the Company’s annual profit after tax as dividends.
24.3 Fair value estimation

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows:
31 December 2007 31 December 2006

’000 Carrying amount Fair value Carrying amount Fair value
Trade and other receivables 92,295 92,295 78,328 78,328
Cash and cash equivalents 63,080 63,080 62,000 62,000
Interest rate swaps used for hedging:
Assets 1,431 1,431 648 648
Other forward exchange rate contracts
Assets 1,325 1,335 516 523
Liabilities (190) (191) (39) (39)
Bank loans (244,015) (246,123) (254,134) (256,713)
Trade and other payables (133,902) (133,902) (103,443) (103,443)
Finance lease liabilities (831) (893) (1,125) (1,285)
Bank overdraft (253) (253) (232) (232)
(221,060) (223,221) (217,481) (220,213)
Unrecognised (loss) gain (2,161) (2,732)
Basis for determining fair values Non-derivative financial liabilities

The following summarises the significant methods and assumptions Fair value is calculated based on the present value of future principal
used in estimating the fair values of financial instruments reflected in and interest cash flows, discounted at the market rate of interest at the
the above. reporting date.
Derivatives Trade and other receivables and payables

The fair value of forward exchange contracts is based on their listed The carrying values less impairment provisions of trade receivables and
market price. payables are assumed to approximate their fair values.
The fair value of interest rate swaps is based on broker quotes.
Those quotes are tested for reasonableness by discounting estimated
future cash flows based on the terms and maturity of each contract
and using market interest rates for a similar instrument at the reporting
date.

KPMG Audit Téléphone +352 22 51 51 1
9. Allée Scheffer Fax +352 22 51 71
L-2520 Luxembourg audit@kpmg.lu
www.kpmg.lu
Report of the independent auditors

To the Shareholders of Oriflame Cosmetics S.A.
Report on the consolidated financial statements

Following our appointment by the General Meeting of the Shareholders dated 21 May 2007, we have audited
the accompanying consolidated financial statements of Oriflame Cosmetics S.A., which comprise the consoli-
dated balance sheet as at 31 December 2007 and the consolidated income statement, consolidated statement of
changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant
accounting policies and other explanatory notes.
Board of Directors’ responsibility for the consolidated financial statements
The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards as adopted by the EU. This respon-
sibility includes: designing, implementing and maintaining internal control relevant to the preparation and
fair presentation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances.
Responsibility of the Réviseur d’Entreprises
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing as adopted by the Institut
des Réviseurs d’Entreprises. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the con-
solidated financial statements. The procedures selected depend on the judgement of the Réviseur d’Entreprises,
including the assessment of the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error. In making those risk assessments, the Réviseur d’Entreprises considers internal control rel-
evant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of ac-
counting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial posi-
tion of Oriflame Cosmetics S.A. as of 31 December 2007, and of its financial performance and its consolidated
cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted
by the European Union.
Report on other legal and regulatory requirements
The consolidated management report, which is the responsibility of the Board of Directors, is consistent with the
consolidated financial statements.
Luxembourg, 14 April 2008 KPMG Audit S.à r.l.

Réviseurs d’Entreprises
D.G. Robertson
KPMG Audit S.à r.l. a Luxembourg Société à Responsabilité Limitée T.V.A. LU 20379877
and a member firm of the KPMG network of independent member Capital: 25.000
firms affiliated with KPMG International, a Swiss cooperative. R.C.S. Luxembourg B 103590

Corporate governance report
Corporate governance, management and control of the Oriflame before the General Meeting. Notice to convene the General
Group is apportioned between the shareholders / SDR holders at the Meeting shall be submitted by Oriflame at the earliest six and at
General Meetings of shareholders (“General Meeting(s)”), the Board the latest four weeks before the meeting.
of Directors (the “Board”), its elected committees and the CEO in Oriflame does not host its General Meetings in the Swedish
accordance with Luxembourg law and Oriflame’s Articles of Associa- language as the location for Oriflame General Meetings is
tion and Management practice. Oriflame complies with the Swedish Luxembourg and the majority of voting rights are held by in-
Code of Corporate Governance1 (the “Code”) to the extent that dividuals and entities located outside Sweden. Oriflame does
the Code is not in conflict with Luxembourg law or regulations. not enable for participation in General Meetings at a distance.
This Corporate Governance Report has not been reviewed Oriflame did however, in order to compensate for the above,
by Oriflame’s auditors. host a shareholders’ day in Swedish in Stockholm on 25 April
2007 where shareholders/SDR holders had the opportunity to
General Meetings meet with members of the Board and Management and to ask
In accordance with Oriflame’s Articles of Association as last questions related to the Annual General Meeting. In advance of
amended by the Extraordinary General Meeting on 21 May the Annual General Meeting 2008 such a shareholders’ day will
2007, the Annual General Meeting (AGM) of Oriflame shall be held on 24 April. Exact time and location will be announced
be held on 19 May of each calendar year, or the next following in connection with the notice to the Annual General Meeting
weekday should 19 May be a holiday or weekend. and will be posted on Oriflame’s web site.
At the General Meetings, being Oriflame’s highest decision
making forum, resolutions are passed with respect to adop- Board of Directors
tion of the income statement and balance sheet as well as the The Board has established rules of procedure which set forth
consolidated income statement and balance sheet; dispositions how and when the Board convenes, and includes instructions for
of Oriflame’s profit and loss according to the adopted balance the allocation of duties and responsibilities within and between
sheet; discharge from liability for the Board members and the Board and the CEO. The rules of procedure also contain
Auditor; election of Board members and certain other matters instructions for financial reporting and set forth how reporting
provided by law and the Articles of Association. In accordance to the Board is to proceed. During 2007, the Board reviewed
with Luxembourg law any changes to the Articles of Associa- and revised the rules of procedure for the Board as well as the
tion needs to be approved by an Extraordinary General Meeting instructions for the CEO.
(EGM), which is why the Company sometimes hosts an EGM In accordance with Luxembourg law, the Board is respon-
in connection with the AGM. sible for the management of the Company’s affairs. The Board
A shareholder may attend and vote at General Meetings in also monitors the performance of the obligations of the CEO, is
person or by proxy. A SDR holder who has been duly regis- responsible for ensuring that the Company’s organisation fulfils
tered as such with the Swedish Securities Register Centre (VPC its purpose, and conducts continuous evaluations of the Compa-
AB), may vote at the meeting by proxy, yet not in person. A ny’s procedures and guidelines for management and investment
SDR holder wishing to attend a General Meeting must notify of the Company’s funds.
Oriflame of his/her intention to attend. The manner in which to At the 2007 Annual General Meeting a nomination proc-
notify Oriflame and in which to issue proxy cards is described in ess was adopted for the election of Nomination Committee
the notice convening the General Meeting. members, whose task is to prepare and submit proposals to the
The General Meetings offer shareholders/SDR holders the Annual General Meeting for the election of the Board members
opportunity to raise matters and questions concerning Oriflame and the size of the fees paid to Board members and other Com-
and the results of the year under review, whereby shareholders mittees of the Board (currently being the Audit Committee and
and SDR holders are entitled to have matters considered at the Remuneration Committee).
General Meetings. To ensure inclusion in the convening notice, Although Luxembourg law and Oriflame’s Articles of Associa-
a request for a matter to be raised must have reached Oriflame tion permit a Board member of a Luxembourg company to remain
(corporate.governance@oriflame.com) at the latest seven weeks in office for up to six years, Oriflame’s Board members are appointed
1)
The Swedish Code of Corporate Governance as first published in 2005, including any instructions
issued by the Swedish Corporate Governance Board up until 31 December 2007.

at the Annual General Meeting and, unless re-elected, remain in Board composition and attendance at Board and
office for a term of one year. If a vacancy arises during the course Committee meetings during 2007
of the financial year, the Board is entitled to elect a replacing Board
member to fill the vacancy for the period until the next Annual Board member Attendance
General Meeting of the Company. Board Remuneration Audit
In accordance with Oriflame’s Articles of Association, the meeting Committee Committe
Board shall consist of not less than three, and not more than ten,
Board members without deputies. Currently, the Board consists Robert af Jochnick
of nine members, of which all were elected at the Annual Gen- (Chairman) 10 3
eral Meeting held on 21 May 2007. Lennart Björk 7 3
The Board consists of principal shareholders and persons in- Magnus Brännström 10
dependent of such shareholders. The CEO is also a member of Marie Ehrling* 5 1
the Board. Other Company staff may from time to time partici- Bodil Eriksson** 2
pate in Board meetings in order to make presentations or present Lilian Fossum* 3 2
reports as requested by the Board. Alexander af Jochnick* 6
Remuneration to the Chairman of the Board and the Board Jonas af Jochnick 10 2
members is determined by resolution adopted by the Annual Helle Kruse Nielsen 9 2
General Meeting. The 2007 Annual General Meeting resolved, Christian Salamon 7 2
as suggested by the Nomination Committee, that €62,500 be Kim Wahl** 4 1
paid to the Chairman of the Board and that €25,000 be paid to Total number of
each respective remaining non-executive director for the period meetings in 2007: 10 3 2
between the AGM 2007 and the AGM 2008. The Annual Gen-
eral Meeting further approved, as suggested by the Nomination * Board member since 21 May 2007
Committee, to allocate €10,000 to each member of the Audit ** Board member until 21 May 2007
Committee and €5,000 to each member of the Remuneration
Committee. Nomination Committee and nomination process
According to the rules of procedure, the Board shall convene At the Annual General Meeting held on 21 May 2007, the meet-
at least four times per year, of which at least one meeting is to ing resolved to approve the following nomination process for the
focus on business strategy issues. During the financial year 2007, election of the Nomination Committee:
Oriflame held ten Board meetings, out of which one was a strat-
egy meeting covering two full days. At the meetings the Board is • the Chairman of the Board shall convene the five largest share-
assisted by a secretary who is not a member of the Board. holders of the Company, as it is known by the Company at
The Board meetings begin with a discussion of the Com- that time, at the end of the third quarter of the year. These
pany’s financial situation. The various financial reports and the shareholders then have the right to appoint a member each of
Annual Report are reviewed before being published. Other top- the Committee. If any of the five largest shareholders declines
ics discussed at Board meetings include general strategies, overall its right to appoint a member of the Committee, or if a mem-
business reviews, long and short term targets, human resources, ber resigns from the Committee and is not replaced by a new
investments, capital distribution, compliance and remuneration. member appointed by the same shareholder, the shareholder
The average attendance rate at Board meetings held in 2007 next in size shall be given the opportunity to appoint a member
was 83 per cent. The Board members participate in all discussions. of the Committee. If several of the shareholders decline their
Board members may however not vote on any motion in which right to appoint members of the Committee, no more than the
they have a conflict of interest. A Board member is not counted eight largest shareholders need to be contacted. The Committee
in the quorum of a meeting if a conflict of interest disallows him/ should be chaired by one of its members. No more than two
her from voting on a particular motion. Board members shall de- of the Committee’s members should also be members of the
clare the nature of any conflict of interest prior to deliberating and Board. If any of the shareholders having appointed a member
voting on the issue, and such declaration is entered in the minutes to the Committee sells a not insignificant part of their shares
of the meeting. The conflict of interest is reported at forthcoming in the Company and ceases to qualify as a large shareholder
Annual General Meeting of shareholders. with rights to appoint a member to the Committee, the respec-
Members of the Oriflame Management are from time to tive member should resign from the Committee, and a new
time invited to meetings with the Board in order to present is- member should be appointed by the next large shareholder. The
sues related to their specific areas of responsibility. Auditing is- Chairman of the Board shall, as part of the Committees’ work,
sues are carefully considered by the Audit Committee and then present any matters regarding the Board’s work that may be of
reported to the Board of Directors. At least once per year the importance for the Committee’s work, including an evaluation
Board meets with the auditors without the CEO or other mem- of the work of the Board and the requirements and skills set to
bers of senior management being present. be represented by the Directors, to the Committee;
For more information about Board members, please read
the section “Board members” below.

• individual shareholders shall have the possibility to give sug- Lennart Björk, Marie Ehrling, Lilian Fossum, Helle Kruse Nielsen
gestions regarding members of the Board to the Committee for and Christian Salamon are independent of the Company, the
further assessment within its scope of work; Company’s Management and the Company’s large shareholders.
• information regarding the composition of the Committee shall Magnus Brännström is not independent from the Company,
be made public at least six months before the annual general being the Company’s CEO. Robert, Jonas and Alexander af
meeting; and Jochnick are not independent from the Company nor from its
• the Committee shall have the right to charge the Company costs major shareholders: Robert and Jonas af Jochnick are co-found-
for recruitment consultants, if it is deemed necessary to get an ers of the Company and together with other members of the af
adequate selection of candidates for members of the Board. Jochnick family they constitute the largest shareholder of the
Company. They have been members of the Board for more than
The task of the Nomination Committee is to prepare and sub- 12 years. Alexander af Jochnick was an employee of the Com-
mit proposals to the Annual General Meeting for the election of pany from 1999 to 2007. Alexander af Jochnick continues to be
Board members and the size of the fees paid to Board members involved in the Company outside his duties as a Board member
and other Committees of the Board (currently being the Audit on a request and availability basis determined by the CEO. Re-
Committee and Remuneration Committee). muneration for his assignments outside the directorship is on a
The Nomination Committee is intended to meet as often as time spent basis and does not exceed EUR 100,000 per annum
necessary, but at least once per year. During 2007 the Nomina- and the Board is continuously informed of his assignments for
tion Committee met three times. All meetings were attended by the Company.
each and everyone of the committee members. After a review of the Board’s compensation the Nomination
In accordance with the nomination process approved by the Committee resolved to propose to the 2008 Annual General Meet-
Annual General Meeting, the Chairman of the Board, Robert af ing to leave the board and committee remuneration unchanged.
Jochnick, may be elected to the Nomination Committee, which The Nomination Committee resolved to propose to the 2008
did indeed occur in 2007. Carlos von Hardenberg, Templeton; Annual General Meeting that the current Auditors, KPMG, be
Per Hesselmark, Stichting af Jochnick Foundation; Åsa Nisell, re-elected.
Robur; Carl Rosén, 2nd AP-Fund, were also appointed to the
Committee. Per Hesselmark has acted chairman of the Nomina- Remuneration Committee
tion Committee. No remunerations were paid to the members Each year following the Annual General Meeting, the Board ap-
of the Nomination Committee. points a Remuneration Committee. The Remuneration Com-
The work of the Nomination Committee constituted in mittee elected in 2007 consists of three members, being Lennart
2007 comprised the following: Björk, Lilian Fossum and Robert af Jochnick. The task of the
As a basis for the Committee’s work, information on the Committee is to review remuneration and other material terms
Company’s operations and strategic focus was presented by the of employment for the Company’s executive directors, senior
Chairman of the Board at the first meeting. The Chairman of executives and other key personnel. Based on its reviews the
the Board also reported on the Board’s work during the year. Remuneration Committee prepares proposals for resolutions,
After evaluating the work of the Board the Committee drew subject to final approval by the Board.
the conclusion that the Board has been functioning well and The Remuneration Committee meets when necessary. Dur-
that the critical competences have been adequately represented ing 2007 the Remuneration Committee has met three times.
on the Board.
The aim of the principal owners is that elected Board Audit Committee
members shall represent knowledge and competence relevant The Company’s Audit Committee is appointed by the Board
for Oriflame’s operations. Independent Board members are in- each year following the Annual General Meeting. The Audit
cluded in compliance with requirements that apply for publicly Committee reviews internal and external information, works
listed companies in Sweden. with the external Auditor on the audit plan and internal con-
trols, and discusses with management the audit results. The Au-
The Nomination Committee has thereafter formulated propos- dit Committee reviews matters related to the Company’s and the
als for the Annual General Meeting to be held on 19 May 2008. Group’s accounting, financial reporting and internal control as
The proposals have encompassed details relating to the: well as financial risk exposure and risk management. It further-
i. composition of the Board of Directors; more reviews the work of the Auditors. Based on their reviews
ii. fees paid to Board members; and the Audit Committee prepares proposals for resolutions, subject
iii. appointment of Auditors. to final approval by the Board. The Audit Committee meets at
least biannually. In 2007 the Audit Committee met twice.
The Nomination Committee has decided to propose to the 2008 Current members of the Audit Committee are Marie Ehrling,
Annual General Meeting that it re-elect all current board members Jonas af Jochnick, Helle Kruse Nielsen and Christian Salamon.
(being Robert af Jochnick (Chairman), Lennart Björk, Magnus
Brännström, Marie Ehrling, Lilian Fossum, Alexander af Jochnick,
Jonas af Jochnick, Helle Kruse Nielsen and Christian Salamon).

Auditor is headed by the CEO. In addition to the CEO, the Corporate
The Annual General Meeting held on 21 May 2007 resolved to Committee consists of Jesper Martinsson (Chief Operating Of-
elect KPMG Audit S.à r.l. as independent auditor in respect of ficer) and Gabriel Bennet (Chief Financial Officer).
the statutory accounts until the close of business of the next An-
nual General Meeting to be held on 19 May 2008. Executive Business Review
KPMG Audit S.à r.l. is the Luxembourg member firm of The day-to-day business of the Group is in turn reviewed in a
KPMG International and has been engaged as Oriflame’s inde- cross functional Integrated Business Management Procedure.
pendent auditor since 21 May 2007. The KPMG Audit S.à r.l. Once a month, the Corporate Committee invites certain senior
team is headed by Dennis Robertson. During the past three managers to an Executive Business Review meeting, in which
years, KPMG Audit S.à r.l. has provided advice to the Company the current supply and demand status within the Group is re-
on fiscal matters. Apart from his engagement with Oriflame, viewed and decisions are taken to alter any direction (if any).
Dennis Robertson holds no assignments for any persons affili- To the Executive Business Review the Global Supply Director,
ated with Oriflame or for any of Oriflame’s larger shareholders. the Chief Marketing Officer, the Business Development Direc-
Dennis Robertson and members of his team met with the tor and the Human Resource Director are normally invited. The
Board on 19 February 2008 in order to present their findings Executive Business Review covers all core business processes
and report on their views on the quality of Group reporting and within Oriflame, such as New Product Development, Demand
affiliated matters related to Group auditing. Dennis Robertson & Catalogue and Supply Chain. The process is illustrated by the
and his team members have also regularly met with the Audit model below.
Committee.
Regional management
Oriflame Management and Organisation Oriflame distributes its products through a network of over 2
CEO and Corporate Committee million independent sales consultants in 60 countries. Group
The CEO is appointed by the Board and is responsible for the segmentation is based on geographic cosmetics sales by region,
day-to-day control of the Group. Oriflame’s Chief Executive Of- currently being CIS & Baltics, Central Europe & Mediterra-
ficer Magnus Brännström was born in Sweden in 1966. He stud- nean, Western Europe & Africa, Asia and Latin America. Each
ied law and received his Masters of Science in Business Adminis- region has its own staff and resources to facilitate its effective
tration and Economics from Uppsala University. Mr. Brännström control and is headed by a Regional Director. Each Regional
worked for Spendrups, a Swedish brewery, before joining Ori- Director reports to the COO.
flame as Managing Director of Russia in 1997. He then became Oriflame has local presence in each region in the form of
Regional Director for the CIS and Asia regions. Mr. Brännström wholly owned sales companies in a total of 47 markets. In 13
assumed his position as CEO of Oriflame in March 2005. countries, Oriflame acts through franchise arrangements with
The Corporate Committee is responsible for the implemen- local distributors rather than through subsidiaries. Oriflame is a
tation of the Group strategy, business control and the distribu- decentralised organisation where the local sales companies take
tion of resources between the regions. The Corporate Committee full responsibility for managing their sales consultants and de-
Latest view & Executive

recommendation Business Review
Chaired by the CEO
Strategy
Business Plan
Performance
Supply Review Product Review

Chaired by the Chaired by the
Global Supply Director Chief Marketing Officer
Integrated Reconciliation
Financial appraisal
Demand & Cat.

Review
Chaired by the COO

livering products. The sales companies are organised into three Risk management
main areas: Sales and Marketing, Operations and Finance & Strategic and operational risks
Administration. Most sales companies operate with their own Oriflame’s business depends significantly upon its ability to retain
warehouse facilities and are headed by a managing director. In its existing sales consultants and recruit new sales consultants. If
addition to daily operations, the tasks of regional management management is unsuccessful in this regard, the Company’s sales
include drawing up proposals for strategic regional development are likely to decline. In addition, the loss of key high-level sales
and investment. These are reviewed by the corporate functions consultants could adversely impact the growth of the distribu-
and presented to the Board for approval. tion network and, as a result, sales.
Oriflame’s operations in the CIS region accounted for over
Global Support and Service 50 per cent of Group sales and profits in 2007. The Company’s
The sales companies are supported by global service functions. business could be materially adversely affected by political and
The global support and service functions consist of directors and economic instability in this region.
staff for the Finance, Supply, IT and Online, Marketing and Sales of Oriflame products depend to a significant extent
Sales Support functions. upon brand recognition and the goodwill associated with the
Today, Oriflame’s global support and service functions are lo- Company’s trademarks and trade names, and its business could
cated primarily in Fribourg, Switzerland; Warzaw, Poland; Stock- be harmed if its brand recognition is hurt or if management is
holm, Sweden; Prague, Czech Republic and Bray, Ireland where unable to protect the trademarks and trade names.
support functions in the fields of R&D, Marketing, Sales Support, Oriflame is dependent on its manufacturing facilities in
Global Supply, IT, Online and Finance are placed. The teams work Poland, Sweden, India, China and Russia as well as on third-party
together with the common objective of giving Oriflame a competi- manufacturing facilities. Any interruption in these facilities, or
tive advantage by supplying first class service and support to the the loss of a third-party manufacturer, could negatively impact
local sales companies. the business, financial condition and results of operations.
Principles of remuneration for senior executives Financial risks

Salaries Given the significant international aspects of Oriflame’s business,
Oriflame offers competitive salaries according to position and governmental authorities may question its inter-company trans-
market in order to attract and retain the best individuals for the fer pricing policies, assert conflicting claims over the taxation of
positions. company profits or change their laws in a manner that could in-
crease its effective tax rate or otherwise harm the business.
Fixed and variable components Oriflame is exposed to the risk of currency fluctuations in
Oriflame allocates 16 per cent of any increase in operating profit many countries and these fluctuations may have a material ef-
to profit sharing to be shared among the top 60 executives. The fect on the results of operations and financial condition. The
allocation is according to position and flexed according to per- Company experiences both currency translation and currency
formance in the year. transaction exposure. Currency fluctuations may affect the com-
In 2005 the Company implemented a share incentive plan parability of Oriflame’s results between financial periods.
running over a 3 year period and covering the top (approx.) 150
Executives and Managers. Each year the individuals covered by Other risks
the plan have been invited to invest in a number of shares at the Oriflame is exposed to economic, political, legal and business
current market price. In return for this they will receive between risks associated with its international sales and operations, par-
0 and 4 free shares in three years time, depending on the increase ticularly in emerging markets.
in operating profit. For further information, see Note 19 to the
consolidated financial statements in the Annual Report. Report on internal control and monitoring
Oriflame’s internal control procedures cover all units within the
Pensions Group and include policies for measurement, acquisition and
Members of the Senior Management are offered pension benefits protection of assets, controlling the accuracy and reliability of
that are competitive in the country where the individual is resi- reports, benchmarking between units to share best practice and
dent. Oriflame pays pensions into an independent defined con- ensuring compliance with defined guidelines.
tribution scheme. In addition, Oriflame has defined contribution Each region and the Supply division has appointed a con-
schemes for some of its employees and is in compliance with pen- troller who reports directly to the CFO. The controller is respon-
sion requirements in the countries in which it operates. sible for the implementation of internal controls and reporting
in accordance with Group guidelines and for ensuring that local
Non-monetary benefits laws and regulations are followed.
Members of the Corporate Committee and certain other Executives All companies prepare monthly and quarterly reports to
are entitled to customary non-monetary benefits such as company Group requirements. These reports are the base for the Group
cars and company health care. Moreover, certain individuals may be consolidated accounts and local performance measurements on
offered company housing and other benefits such as school fees. sales and profitability.

Oriflame uses Cognos Controller for financial reporting and
consolidation. Data is stored in a central database from which
it can be retrieved for analysis and follow up at a Group, region
and sales company level.
Oriflame has a distinct operational and legal structure with
transparent organisation and sales activities. The Group organi-
sation safeguards well-established allocation of responsibilities
and safeguards guidelines for internal control and supervision.
In 2007 the Audit Committee proposed, however, together with
the CFO, to have the internal control and risk management of
the Company reviewed by one of the “Big Four” audit firms.
The review has been initiated and is expected to be concluded
during the first half of 2008. Upon recommendation from the
Audit Committee, the Board resolved in its meeting of 19 Feb-
ruary 2008 to continue to operate without a formal internal
audit function.
This report on internal control and monitoring has not been
reviewed by Oriflame’s auditors.
Comply or Explain
According to the Code, the Nomination Committee is to make
recommendations on audit fees. The Nomination Committee
has resolved not to propose the Auditor’s remuneration to the
Annual General Meeting as this is not a matter for General
Meetings under the Articles of Association of the Company or
under the laws of Luxembourg.
Oriflame does not host its General Meeting in the Swedish
language as the location for Oriflame General Meetings is Luxem-
bourg and the majority of voting rights are held by individuals and
entities located outside Sweden.

Board of Directors
1 2 3 4 5
1. Robert af Jochnick 2. Lennart Björk 3. Marie Ehrling 4. Lilian Fossum 5. Alexander af Jochnick
Born in 1940. Born in 1942. Born in 1955. Born in 1962. Born in 1971.
Co-founder of Oriflame Elected to the Board in Elected to the Board in Elected to the Board in Elected to the Board in
and Chairman of the Board 2005. 2007. 2007. 2007.
since 2000. Member of the Remunera- Member of the Audit Member of the Remunera- BSc in Business Administra-
Elected to the Board in tion Committee. Committee. tion Committee. tion Stockholm School of
1970. Chairman of the board of BSc Stockholm School of BSc in Business Administra- Economics.
Member of the Nomina- Gant Company AB. Economics. tion Stockholm School of Member of the board of
tion Committee and the Shareholding in Oriflame Chairman of the board of Economics. Cibes Lift AB and Credus
Remuneration Committee. as at 31 December 2007 Homemaid AB. Member of the board of Management AB.
LLB Stockholm University (including immediate family Board member of Nordea Holmen AB, Svensk Shareholding in Oriflame
and BSc in Business members): 10,000. Bank AB, Securitas AB, BevakningsTjänst AB and as at 31 December 2007:
Administration Stockholm Independent from the Safegate AB, World Åhléns AB. 362,514.
School of Economics. Company and its major Childhood Foundation and Executive Vice President Not independent from the
Chairman of Credus shareholders. CASL at Stockholm School and CFO of Axel Johnson Company nor its major
Management AB, Mint of Economics. AB. shareholders.
Capital Ltd and the af Shareholding in Oriflame Shareholding in Oriflame
Jochnick Foundation. as at 31 December 2007 as at 31 December 2007
Board member of (including immediate family (including immediate family
Medicover Holding S.A., members): 300. members): 500.
the World Childhood Independent from the Independent from the
Foundation, GoodCause Company and its major Company and its major
Foundation, GoodCause shareholders. shareholders.
Holding AB and Research
Institute of Industrial
Economics.
Shareholding in Oriflame
as at 31 December 2007
(including immediate family
members): 3,693,201.
Not independent from the
Company nor its major
shareholders.

6 7 8 9
6. Jonas af Jochnick 7. Helle Kruse Nielsen 8. Christian Salamon 9. Magnus Brännström

Born in 1937. Born in 1953. Born in 1961. Born in 1966.
Co-founder of Oriflame. Elected to the Board in Elected to the Board in Chief Executive Officer.
Elected to the Board in 2005. 1999. Elected to the Board in
1970. Member of the Audit Member of the Audit 2005.
Member of the Audit Committee. Committee. Law studies and MSc,
Committee. BSc from Copenhagen MSc Royal Institute of Uppsala University.
LLB Stockholm University. Business School. Technology. MBA Harvard Shareholding in Oriflame
MBA Harvard Business Board member Gumlink Business School. as at 31 December 2007
School. A/S, Vin&Sprit AB, and Chairman of the board of (including immediate family
Chairman of Medicover Aker BioMarine ASA. OSM Holding AB and members): 181,709.
Holding S.A., Celox S.A. Shareholding in Oriflame NCAB Holding AB. Not independent from the
and Oresa Ventures S.A. as at 31 December 2007: Board member of Lamiflex Company being CEO.
and a board member of 0. International AB, E. Öhman
Sigma Asset Management. J:or (Luxembourg) S.A. and
Independent from the
Shareholding in Oriflame Company and its major Oresa Ventures S.A.
as at 31 December 2007 shareholders. Advisory board member
(including immediate family of Sustainable Technologies
members): 5,049,573. Fund and Investment
Not independent from the Committee member of
Company nor its major Fagerberg & Partners.
shareholders. Shareholding in Oriflame
as at 31 December 2007:
4,020.
Independent from the
Company and its major
shareholders.

Senior management
Magnus Brännström Gabriel Bennet Rolf Berg Inge Heinsius Stefan Karlsson
Chief Executive Officer Chief Financial Officer Global Human Chief Marketing Officer Business Development
Resources Director Director
Jonathan Kimber Jesper Martinsson Michael Cervell Sandro Ragonesi Jonas Hedberg
Global Supply Director Chief Operating Officer Global Director Regional Director Regional Director
Sales Support Latin America Western Europe & Africa
Johan Nordström Johan Rosenberg Thomas Ekberg Carlos Gonzalesguerra Robin Chibba
Regional Director Central Regional Director Regional Director Asia Regional Financial Regional Financial
Europe & Mediterranean CIS & Baltics Controller Latin America Controller
Western Europe & Africa

Tatiana Egorova Pontus Muntzing Michaela Beltcheva Christian Jönsson
Regional Financial Regional Financial Legal Director IT Director
Controller CIS & Baltics Controller Asia
Georgi Karapanchev Patrik Linzenbold Magnus Bruhn Edwin Koehler

Finance Director Investor Relations Group Planning Director Group Purchasing
Manager Director
Sean Monaghan Joanna Poplawska Neil Holden Pavlina Marinova

Group Quality Assurance Group Manufacturing NPD Process Director Sales Operations Director
Director Director
Mary Lord David James Jolanta Pastor Stephen Syrett

Research and Development Global Creative Director Marketing Director Catalogue & Forecasting
Director Skin Care & Toiletries Director

www.oriflame.com
Reports and information can be obtained from:
Oriflame Management S.A., 20 rue Philippe II, L-2340 Luxembourg
Copyright © 2008 by Oriflame Cosmetics S.A. All rights reserved.This annual report is produced by Oriflame Cosmetics in cooperation with Vero and Wildeco. Photos: Oriflame Cosmetics. Printing:Tryckfolket, Sweden.

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ANNUAL

Financial calendar 2008

• First quarter 2008 and Shareholders’ Day on 24 April, 2008

Oriﬂame Annual report 2007 | 1

Oriﬂame Annual Report 2007 | 3

Key ﬁgures 2007 2006 Change, %

4 | Oriﬂame Annual Report 2007

Asia 1% (0) Latin America 2% (3)

Cash flow from

2,000 120 400 80 1,000 200

Capital employed Sales

6 | Oriﬂame Annual Report 2007

Size of direct selling market Size of market

World (LHS) World (LHS)

Oriﬂame Annual Report 2007 | 7

8 | Oriﬂame Annual Report 2007

The majority of these measures were initiated in 2007. One of

10 | Oriﬂame Annual Report 2007

The establishment of product and catalogue

Oriﬂame Annual Report 2007 | 11

12 | Oriﬂame Annual Report 2007

Oriﬂame Annual Report 2007 | 13

“To be or not to be,” is the motto

14 | Oriﬂame Annual Report 2007

Olga & Milan Vlajic,

“I am a woman who did not believe that

Oriﬂame Annual Report 2007 | 15

Oriﬂame Annual Report 2007 | 17

18 | Oriﬂame Annual Report 2007

Oriﬂame Annual Report 2007 | 19

In 2007, Oriﬂame launched a major international initiative to Highlights 2007

20 | Oriﬂame Annual Report 2007

FRAGRANCE Sales of Fashion Accessories were slightly suppressed as they have

Get a gorgeous, natural calcium and phosphor

prevent cavities & fight Helps prevent cavities.

resh Multi-action OptiFresh Multi-action

Oriﬂame Annual Report 2007 | 21

24 | Oriﬂame Annual Report 2007

Logistics and supply chain

Oriﬂame Annual Report 2007 | 25

26 | Oriﬂame Annual Report 2007

Oriﬂame Annual Report 2007 | 27

Miriam Larsson and

“Sitting together means

32 | Oriﬂame Annual Report 2007

…and clean packaging …suppliers and society

Production Resources Liquid waste

Oriﬂame Annual Report 2007 | 33

Robert af Jochnick: Our aim is to become role models within

34 | Oriﬂame Annual Report 2007

“Our aim is to become role models within

Oriﬂame Annual Report 2007 | 35

INDIA – Deepalaya (www.deepalaya.org)

RUSSIA – MiraMed (www.miramed.org)

36 | Oriﬂame Annual Report 2007

Oriﬂame Annual Report 2007 | 37

38 | Oriﬂame Annual Report 2007

Operating proﬁt, million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Average sales force, ’000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

A number of factors impact sales and margins between quarters:

EBITDA Operating capital Return on capital employed

Oriﬂame Annual Report 2007 | 39

Oriﬂame Cosmetics top 10 shareholders as at 31 December 2007*

Source: VPC and share register