Annual Report 2007frieslandfood

Annual Report 2007
Royal Friesland Foods N.V.
The power of milk Vision 2015
Annual Report 2007 Royal Friesland Foods N.V.

Blankenstein 142
7943 PE Meppel
T +31 (0)522 27 62 76
F +31 (0)522 27 64 44
The Netherlands
mail@frieslandfoods.com
www.frieslandfoods.com
Annual Report 2007
This is a translation of the authentic text published in Dutch.

Only the Dutch annual report will be submitted to the shareholder fot approval.
1
Contents
General
Profile Friesland Foods 4
Foreword 5
Friesland Foods at a glance 6
Headline figures 6
Graphics 6
Organisation 8
Structure 9
Mission, vision and strategy 16
Supervisory Board
Composition of the Supervisory Board 18
Supervisory Board report 19
Board of Management
Composition of the Board of Management 21
Board of Management review 28
Risk management 42
Corporate governance 46
Financial statements
Consolidated income statement 50
Consolidated balance sheet 51
Consolidated cash flow statement 52
Consolidated statement of changes in equity 53
Notes to the consolidated financial statements 55
Principal subsidiaries 80
Company balance sheet 81
Company income statement 81
Notes to the company financial statements 82
Other information
Auditor’s report 84
Provisions of the Articles of Association governing profit appropriation 85
Report on depositary receipts for Class B shares 86
Report of Stichting toezicht certificaten Friesland Foods 87
Five-year summary 88
World map of locations 92
Key drive brands 92
Product introductions in 2007 94
Senior management 101
Operating companies 102
2
Growth
Milk is power. Milk is life. Milk is health The dairy world is set to change drastically
and pleasure all rolled into one. Milk has in the period up to 2015. Friesland Foods
everything that people need to make a start aims to offer its member dairy farmers
in life, to grow, but also to enjoy life: energy, (who own the company) and employees
nutrients and vitamins. Friesland Foods sustainable perspectives for the future.
offers these essential building blocks for For this reason, this Annual Report looks
the body in its dairy products, ingredients forward as well as back. There are many
and fruit-based drinks. These products changes waiting to happen. Our long-term
combine flavour, fitness and convenience, strategy as advocated in Vision 2015 will
and contribute to a healthy and active life, be the theme of this Annual Report as
each and every day. Hundreds of millions of we intend to rely on it as our guideline in
people all over the world consume Friesland weathering the upcoming changes.
Foods products every day, at breakfast, in
their coffee or tea, during lunch and dinner,
or as a snack.
Royal Friesland Foods N.V. 3

Profile
Friesland Foods
Friesland Foods has a tradition of more for consumers are key characteristics. In
than 125 years, in which the company has the professional market, Friesland Foods
developed into a leading producer and is a key supplier of dairy products to
supplier of dairy products, fruit-based drinks bakeries, restaurants and bars, and fast-
and ingredients. The company boasts strong food chains. In addition, Friesland Foods is
market and brand positions in Western and a co-innovator and supplier of high-grade
Central Europe, Southeast Asia, West Africa ingredients to producers of food products
and the Middle East. On a global scale, and pharmaceuticals.
Friesland Foods has 14,600 employees.
Revenue was 5.1 billion euros in 2007. Friesland Foods has cooperative roots:
dairy farmers own the company and are
Friesland Foods sells a rich, varied offering of its suppliers of milk. This guarantees
nutritious, tasty and healthy food products commitment and quality in the production
under well-known, reliable brands. Taste, chain.
health, convenience, reliability and vitality
4 Annual Report 2007

Foreword
Esteemed members, spread of operations across various product and the Board of Management have developed
categories and countries, and to solid market a proposal for the revision of the milk pricing
The year 2007 was an exceptional and turbulent positions in Asian, Middle Eastern and African system, the share structure and the dividend
year. Increasing demand for dairy products in countries where the economy and population, as policy. This proposal will be discussed with the
growth economies in particular and slightly well as consumption levels, are recording robust members of the cooperative in April 2008.
lagging supplies of milk in a number of regions growth. In the medium and long term, Friesland
in the world led to a special dynamic in the dairy Foods expects the volume of member milk to Challenge
market. For the first time there was a shortage of increase by approximately 20 to 30 percent. For me personally 2007 was also an exceptional
milk. Thanks, in part, to the commitment of our Friesland Foods guarantees the purchase and and turbulent year. After the unexpected
employees, Friesland Foods managed to respond sale of member milk. This milk will be used, withdrawal by our President, Luc Dahlhaus, I was
adequately to the changing market environment. among other purposes, to meet the growing given the privilege to lead this great company
This has resulted in marked growth in revenue demand for milk by Friesland Foods’ foreign together with my colleagues, which was truly
and a good profit. And that is precisely what production sites. The Medium Term Strategy Plan an experience in these exciting times. It was a
we intend to achieve with Vision 2015, our 2008-2010 was defined in 2007 based on the challenge that went beyond merely achieving
long-term strategic plan: a healthy and growing policy principles of Vision 2015. operational targets. Milk is one of the most
enterprise offering its member dairy farmers important sources of nutrition in the world. We
and employees sustainable perspectives for the We may be able to accelerate even faster do not always realise this in the Netherlands;
future. towards the targets defined in Vision 2015. after all, we all grew up on milk. My long-
Within the scope, Friesland Foods and Campina standing experience in different countries in
Increases in revenue and profit are involved in exploratory talks about a the world has demonstrated to me how special
Revenue rose by 8.5 percent, landing at 5.1 merger. The first informal talks between the and important milk is for the development and
billion euros. Profit for the year was up 35 Chairmen of the Boards of the Cooperatives and growth of children and adults alike. This is where
percent to 172 million euros. This increase in the Presidents of the Boards of Management our challenge lies in the future: offering our
profit was attributable, in part, to non-recurring were held in September 2007. When they dairy products to one billion people in the world,
income items, as well as to a higher operating discovered that they held similar views, a letter whether they are poor or well-off. Our business
profit. After world market prices for milk powder of intent was signed in December 2007 and allows us to do just that: we have the milk, the
and butter had soared, the company came in the announcement was made that exploratory potential consumers, the knowledge, the people
a position, in the course of the second half of talks were taking place. Friesland Foods and and the brands to build a strong bridge between
the year, to gradually raise its selling prices of Campina expect their merger to strengthen ‘West and East’, a bridge that is the pillar
fresh and long-life dairy products and cheese their international position and facilitate supporting the success of our business.
in Western Europe where contracts so allowed. further growth. It is in the best interest of our
In Asia and Africa, in particular, but also in a member dairy farmers, employees, customers Succession
number of industrial and professional product and consumers that the enterprise bolsters Cees ’t Hart has now been appointed to take
segments, the company was yet unable to fully its operations and continues to grow. A draft up the position of President of the Board of
recharge increases in the milk prices and in the merger agreement is expected to be discussed Management with effect from 1 May 2008. We
cost of raw materials to the customer, which with the members and the Works Council in April wish him every success in further expanding our
resulted in pressure on margins in the fourth 2008, following which a decision will be taken company and achieving our mission: creation
quarter of 2007. Overall, Friesland Foods again in May. After the competition authorities have of both long-term and short-term value for
managed to improve its net profit margin from given their approval, the merger process will our owners, the member dairy farmers, by
5.5 percent in 2006 to 5.9 percent in 2007. then be finalised by the end of 2008. undertaking profitable international dairy and
dairy-related operations.
Vision 2015 Structure
Friesland Foods fleshed out its long-term Current and expected developments in the dairy Theo Spierings
strategic vision in 2007 in Vision 2015, a plan market have made us realise that the existing Acting President of the Board of Management
focusing on sustainable value creation for its structure and milk pricing system at Friesland
member dairy farmers. This plan centres around Foods may result in an unwelcome imbalance
growth. Friesland Foods is well-placed to achieve in milk pricing as well as in income allocation
further growth and profit improvements in the to milk and capital. In collaboration with the Meppel, the Netherlands, 28 February 2008
medium and long term thanks to the broad Regional Councils, the Board of the cooperative

Friesland Foods
at a glance
Headline figures
Good financial performance Results 2007 2006

In millions of euros
•Profit for the year up 35 percent, rising to 172 million euros thanks,
Revenue 5,075 4,675
in part, to non-recurring income items
Operating profit 299 257
•Milk price up by 20 percent, rising to 37.07 1 euros per
Profit for the year 2 172 128
100 kilograms of milk
Dividend 60 45
•Increase in profit for the year chiefly attributable to cheese, milk
powders and ingredients
•Margin developments in fresh dairy products in the Netherlands
and cream-based products disappointing
Balance sheet 2007 2006
•Volume growth of 9 percent in Asia and Africa, higher raw material
costs could not be fully passed on
Total assets 2,990 2,651
Revenue on the rise Equity 1,157 1,050
Net debt 3 582 574
•Revenue up by 8.5 percent, rising to 5.1 billion euros
•Revenue increases in all regions and business groups
•Revenue quality continues to improve
Strong financial position Ratios 2007 2006
•Marginal drop in solvency ratio to 38.7 percent

Operating profit as a % of revenue 5.9 5.5
due to higher working capital
Profit for the year as a % of revenue 3.4 2.7
•Further improvements in financing ratios
Profit for the year as a % of average equity
attributable to equity holders of the parent 18.7 15.4
Equity as a % of total assets 38.7 39.6
1
Estimate of competitive milk price (inclusive VAT) used in 2007 financial statements.
2
In the financial statements profit for the year is defined as profit for the year attributable to equity holders of the parent.
3
Net debt represents non-current interest-bearing borrowings and current borrowings less cash and cash equivalents.
4
The 2003 figures have been adjusted broadly in line with IFRS.
Operating profit as a percentage

Revenue of revenue 4 Profit for1 the year 4
Nettowinst
In millions of euros In % In millions of euros
5,200 7 180 172
5,075
5.9 160
5,000 6
5.5
140
128
4,800 5 4.8
4,675 4.3 120
4.2
104
4,600 4,575 4 100 96 96
4,449
4,419
4,400 3 80
60
4,200 2
40
4,000 1
20
3,800 0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Friesland Foods
at a glance
Cash flows Cash flows 2007 2006

•Cash flows from operating activities down despite higher profit
Net cash flows from operating activities 225 244
for the year due to higher working capital as a result
of increases in volume and value of inventories Investment in property, plant,
equipment and intangible assets 187 166
•Investing activities relate mainly to the construction of a
Depreciation and amortisation 124 126
second production site in Vietnam (Hanam), the installation
of a second spray-dryer in Salatiga (Indonesia) and the
expansion of the cheese-storage facility in Workum (the
Netherlands) Per share of EUR 46.00 2007 2006
In euros
Increase in dividend Earnings per share, basic 15.63 12.92

Dividend proposed per Class A share 2.62 2.39
• Total dividend distribution up 35 percent
Dividend proposed per Class B share 10.24 6.81
• Dividend on Class A shares 0.36 euros per
100 kilograms of milk
Highest price of depositary receipts for
• Dividend per depositary receipt for Class B share 10.24 euros
Class B shares 84.00 70.00
Drop in number of employees Lowest price of depositary receipts for
•Number of employees down by 730 (5 percent), due, in
Closing price of depositary receipts for
particular, to restructuring in Central Europe
Staff 2007 2006

Average number of FTEs
Employees 14,582 15,312
Dividend per Class A share and

Operating cash flows Earnings per share 4 Class B share
In millions of euros In euros In euros
350 18 12
308 15.63
16 10.24
300
281 10
14
252 12.92
250 244
225 12 8
10.63 10.74
10.21 6.81
200 10
6 5.32
150 8
4.32
6 4 3.48
100
2.57 2.39 2.62
4 2.16
2 1.74
50
2
0 0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Share A Share B

Friesland Foods
at a glance
Organisation
Board of Management
Corporate Staff
Classic Dairy Industrial Consumer Products Europe Consumer Products

International
Friesland Foods Cheese Friesland Foods Domo Friesland Foods Western Europe Friesland Foods
Frisan Flag Indonesia
Friesland Foods Butter Friesland Foods Kievit Friesland Foods Hellas
Friesland Foods
Friesland Foods Fresh Friesland Foods Professional Friesland Foods Central Europe Dutch Lady Vietnam
Friesland Foods Romania Friesland Foods

Foremost Thailand
Friesland Foods Dutch Lady

Malaysia/Singapore/Hong Kong
Friesland Foods
WAMCO Nigeria
Friesland Foods Middle East
Friesland Foods
Consumer Products
Friesland Foods started to adjust its organisational

structure in 2007 in line with the long-term strategy
plan Vision 2015. The company has been divided
into four business groups: Classic Dairy, Industrial,
Consumer Products Europe and Consumer Products
International. Operating companies with similar
strategic targets and/or types of activities were
joined in these business groups.

Friesland Foods
at a glance
Structure
(Former) Member dairy farmers

Member dairy farmers with depositary receipts
for B shares
Dividend
Zuivelcoöperatie Friesland Foods U.A.
on A shares
Dividend
on A shares
Dividend
on depositary receipts
for B shares
Friesland Foods B.V. Friesland International B.V.
Royal Friesland Foods N.V. shares are held by company’s own quality assurance system decide to distribute dividend on Class A shares
Zuivelcoöperatie Friesland Foods U.A. For a for farm milk. This allows Friesland Foods rather than to retain earnings, the dividend
portion of these shares, depositary receipts to assure compliance with customer and will be allocated to the members in proportion
for shares have been issued to member dairy consumer requirements of the quality of to the value of the milk supplied in that year.
farmers, including those who have stopped the milk and the way it is produced on dairy Members and former members who hold
farming. Royal Friesland Foods N.V. is the sole farms. Zuivelcoöperatie Friesland Foods U.A. depositary receipts for Class B shares will directly
shareholder of Friesland Foods B.V. and Friesland has members in the Netherlands only. The receive a dividend in proportion to the share
International B.V., among other subsidiaries. The milk supplied by these members is processed capital invested by them.
Dutch activities are concentrated in Friesland at production locations in the Netherlands,
Foods B.V. and the foreign activities in Friesland Belgium and Germany. Within the scope of Vision 2015, Friesland Foods
International B.V. started to review its current structure in 2007
Friesland Foods pays the member dairy farmers with a view to achieving more balanced member
Friesland Foods processes approximately of the cooperative a competitive price for the participation in operating income. The review
6.9 billion kilograms of milk annually. In the milk they supply. The members are paid a price also includes an assessment of the milk pricing
Netherlands, Friesland Foods purchased for the milk supplied based on developments in system, the share structure and dividend policy.
5.3 billion kilograms of milk from 9,417 dairy the milk prices paid by four competitor Western Any decisions on changes in the structure will
farms owned by members of Zuivelcoöperatie European dairy companies. The members of be taken in 2008. Because of these discussions,
Friesland Foods U.A. in 2007. The milk has the cooperative are also entitled to dividend. the trade in depositary receipts for Class B shares
to meet the criteria laid down in Qarant, the If Zuivelcoöperatie Friesland Foods U.A. should was (temporarily) suspended at the end of 2007.

The power of milk
Vision 2015
Accelerate growth
Vision 2015
10
The power of milk
What do a baby in Vietnam, a grandmother in Nigeria,

a child in Germany and a farmer in the Netherlands
all have in common?
What do 6 billion people around the world all share?
11
Vision 2015
They all started with milk. Milk was their first source of
energy, of vitamins, of essential building blocks that the
body needs. Both literally and figuratively, it gave them
something to grow on. That is the enormous power of milk.
12
The power of milk
Milk is goodness.
Milk means power. Milk means nutrition.
Milk means life. Milk means health.
Milk means pleasure. Milk is a miracle.
13
Vision 2015
The farmers’ cows stand as a symbol for the source of

pure goodness. They are our secret weapon. Every single
day, they deliver.
14
Healthy changes - Healthy chances
The power of milk
Leveraging a changing business environment to our

advantage. This encapsulates the long-term vision of
Friesland Foods as described here. Friesland Foods is
committed to turning the changes that we see into
sustainable advantages. It is with this ambition in mind
that we have developed Vision 2015.
15
Friesland Foods
at a glance
Mission, vision and strategy
The reform will have a profound impact on Depending on EU decision-making, milk quotas
Mission the environment in which the group, the for dairy farmers are almost certain to have
cooperative, and the member dairy farmers of been abolished by 2015. In the period up to
Creation of both long-term and short-term Friesland Foods operate. The main effects for EU 2015, Friesland Foods expects the volume of
value for our owners, the member dairy farmers, Member States will be the abolition of export member milk to increase by approximately 20
by undertaking profitable international dairy support, less domestic support and import to 30 percent. Friesland Foods guarantees the
and dairy-related operations. protection, and the abolition of milk quota. purchase and sale of member milk. This milk will
be used, among other purposes, to meet the
Development, production and sale of a wide Friesland Foods expects worldwide demand for growing demand for milk by the group’s foreign
range of reliable, natural and nutritious dairy dairy products to outpace supply. This trend production sites.
products that contribute to a healthy and was already clearly visible in 2007. The broad
active life. spread of operations across various product
categories and countries, as well as the solid Targets
market positions in countries recording robust
economic growth in Asia, the Middle East and Vision 2015 aims to create sustainable value for
Vision 2015 Africa, ensure that Friesland Foods is well placed the member dairy farmers.
to achieve further medium-term and long-term
The dairy world is a dynamic one. To allow the growth and profit improvement. The targets defined in Vision 2015 are as follows:
company to constantly cater to changes and •achieving an average increase in net sales by
to continue to offer its member dairy farmers/ The policy reform will have far-reaching 6 to 7 percent per annum in the period from
owners and staff perspectives for the future, consequences for both Friesland Foods and 2006 to 2015;
Friesland Foods defined a long-term strategy its member dairy farmers. The price threshold •doubling shareholder value;
plan by the name of Vision 2015 in 2006/2007. for dairy products will be dropped due to the •facilitating an increase in member milk by
This plan centres around growth. reduction in government subsidies and the 20 to 30 percent;
liberalisation of the market. As a result, the •posting a profit for the year that is structurally
The plan was motivated by the announced selling prices of dairy products will gravitate higher than 3 percent of revenue;
reform of European dairy policy and the towards the prices on the world market and •offering dairy products to one billion
implications of a potential WTO agreement. increasingly show fluctuations. consumers in 2015.
Strategy
In order to achieve the targets, a strategy has

Ensuring Sustainable been developed that rests on the following three
Shareholder Value Growth pillars:
Extend and Defend Build Business Create Viable I Extend and defend core business in cheese,
Core Business in Cheese, in Emerging Markets Long -Term fresh and long-life dairy products;
Fresh and Long-Life Ingredients Business
II Build business in emerging markets;
Achieve Cost-Leadership in Accelerate Growth in Invest in Existing III Create viable long-term ingredients business.
Cheese & Fresh Dairy Existing Emerging Markets Ingredients Business
I The first pillar is extending and defending

core activities relating to cheese, fresh and
Continue Value Enter into New Create and Build long-life dairy products. This is achieved, on
Added Strategy Emerging Markets New Ingredients
True Branded Europe Business
the one hand, by streamlining processes and
further cost-cutting, and by supporting the
strong brands in Europe. Investments will be
made in brand development and innovation.

Friesland Foods
at a glance
II The second pillar is building business in In the period leading up to 2010, the business Malaysia for the activities involving the branded
emerging markets, in particular Asia, Africa, group Industrial will concentrate mainly on products. This Unit coordinates activities in
the Middle East and Greece. This will mainly creating value by processing more Dutch the areas of marketing, innovation and human
be achieved by growth initiatives in the member milk. Product innovation and resources for the different operating companies
countries in which Friesland Foods currently technological improvements are prerequisites of the Consumer Products International and
already has market presence, but also by for achieving the growth targets. Focus will be Consumer Products Europe business groups.
launching activities in untapped countries. on the added value of products and worldwide In the course of 2008, a new innovation
Export activities from the Netherlands will be expansion of the ingredients-based activities. infrastructure will be implemented for the
further stepped up as well. With a view to achieving the ambitious growth Consumer Products Europe and Consumer
targets, Friesland Foods will gradually increase its Products International business groups.
III The third pillar is the objective to create production capacity over the coming years, both This structure is designed to guarantee that
viable long-term ingredients business in the Netherlands and in growth markets. investments in innovations yield adequate
worldwide. Increasing consumption on a returns.
global scale causes a growing lack of milk The business group Consumer Products Europe
ingredients in different parts of the world seeks to achieve profitable growth in branded A corporate centre for head-office functions
(e.g. Asia and Africa). With its ingredients- products such as Chocomel, Fristi, Friesche will be established in the first half of 2008. This
related activities, Friesland Foods builds a Vlag (coffee enrichers), Appelsientje, CoolBest, corporate centre will comprise the Board of
bridge between milk supplies of her member DubbelFrisss, Milli, Pöttyös and Completa. It Management and a number of corporate support
dairy farmers and growing demand for dairy aims to accelerate revenue growth in Greece departments. In February 2008, a number of
products in the rest of the world. with NoyNoy. support services for the Netherlands, Germany
and Belgium were transferred to a shared
The business group Consumer Products services organisation.
Medium Term Strategy Plan 2008-2010 International focuses on boosting the production
of nutritious dairy-based products and their Recruitment and selection, and staff
The Medium Term Strategy Plan 2008-2010 was sales to consumers of all ages and across socio- development will be areas for urgent attention
defined in 2007 based on the policy principles economic groups. Revenue growth is essential. in the planning period; this will be necessary to
of Vision 2015. The Medium Term Strategy Priority is given to further development of actually achieve the growth targets. This goes
Plan formulates targets and activities for each positions in these international markets; we are for the corporate culture and the envisaged
business group. The activities undertaken by the on our way to serving one billion consumers. corporate identity as well, both with respect
operating companies within a business group are Temporary margin fluctuations as a result of to the group as a whole and regarding the
now more attuned to each other than ever. This changes in prices of raw materials are accepted individual divisions.
is designed to promote mutual collaboration in the process.
and accelerate the achievement of the strategic Advertising and promotional expenses will
targets of Friesland Foods. The organisational structure will also be further keep pace with the revenue figure. Further
geared to the policy principles and targets of development of the key drive brands will
The business group Classic Dairy collaborates Vision 2015. At the end of 2007, the Dutch fresh continue to take top priority for Friesland Foods.
closely with clients to create added value, based dairy activities were transferred to Friesland
on cost leadership. Its activities involve cheese, Foods Fresh, a new operating company in the Friesland Foods is very much focused on
milk powder and fresh dairy products. This Classic Dairy business group. The activities managing overheads and working capital.
business group comprises most of the milk- of Friesland Foods Consumer Products will Structural reductions in overheads and working
processing activities in the Netherlands. be split on a step-by-step basis. In 2008, the capital are planned for 2008. This is to lead to
activities in the Middle East and Hong Kong lower costs and a working capital position that
will be transferred to the Consumer Products is in balance with revenue increases in 2009 and
International business group. The Beilen-based following years.
activities will become a division of Friesland
Foods Domo. These adjustments are expected
to have been effected by the end of 2008. A
Business Development Unit was established in

Composition of the
Supervisory Board
Sybren S.U. Attema (1960) Walter J.A. Gerritsen (1971) Henk Scheffers (1948)
Chairman of the Board of Zuivelcoöperatie Member of the Board of Zuivelcoöperatie Member of the Supervisory Board since 2006.
Friesland Foods U.A. and, as such, Chairman of the Friesland Foods U.A. Member of the Supervisory Eligible for reappointment in 2010.
Supervisory Board of Royal Friesland Foods N.V. Board since 2005. Other positions held: member of the Investment
Chairman of the Supervisory Board since Eligible for reappointment in 2009. Committee of NPM Capital N.V., member of
December 2003, member of the Supervisory Occupation: dairy farmer. the Supervisory Board of Wolters Kluwer N.V.,
Board since 1997. Other positions held: Vice-Chairman of the Dutch Chairman of the Audit Committee of Wolters
Eligible for reappointment in 2008. chapter of European Dairy Farmers, member of the Kluwer N.V., member of the Supervisory Board
Occupation: dairy farmer. Board of Rabobank Didam. of Aalberts Industries N.V., Vice-Chairman of the
Other positions held: board member of the Dutch Supervisory Board of Flint Holding N.V.
Dairy Association (NZO), member of the dairy Jorrit Jorritsma (1954)
farming committee of the Dutch Dairy Board Secretary of the Board of Zuivelcoöperatie Jan Cees P. Vogelaar (1962)
(Productschap Zuivel). Friesland Foods U.A. Member of the Supervisory Member of the Board of Zuivelcoöperatie
Board since 1999. Friesland Foods U.A. Member of the Supervisory
Piet Boer (1960) Scheduled to retire in 2009. Board since 2002.
Vice-Chairman of the Board of Zuivelcoöperatie Occupation: dairy farmer. Eligible for reappointment in 2010.
Friesland Foods U.A. Vice-Chairman of the Other positions held: Chairman of the Supervisory Occupation: dairy farmer/arable farmer/wind
Supervisory Board since January 2004, member Board of Rabobank ‘De Stellingwerven’, Chairman energy producer.
of the Supervisory Board since 1999. of Projectenfonds Noord Nederland. Other positions held: member of the board of
Scheduled to retire in 2009. Innovatienetwerk Groene Ruimte en Agroclusters
Occupation: dairy farmer. Frans A.M. Keurentjes (1957) of the Ministry of Agriculture, Nature and Food
Other positions held: member of the Supervisory Member of the Board of Zuivelcoöperatie Quality, member of the Advisory Council of the
Board of Alfa Top-Holding B.V. Friesland Foods U.A. Member of the Supervisory Animal Sciences Group of Wageningen University
Board since 2006. and Research Centre.
Rob ter Haar (1950) Eligible for reappointment in 2010.
Secretary of the Supervisory Board since January Occupation: dairy farmer.
2004, member of the Supervisory Board since Other positions held: member of the Supervisory
2001. Board of Rabobank West-Groningen, Executive Committee of
Eligible for reappointment in 2009. member of the Executive Committee of the the Supervisory Board
Other positions held: Chairman of the Supervisory Noorderzijlvest District Water Board (Waterschap Sybren Attema, Chairman
Board of Parcom Ventures B.V., member of the Noorderzijlvest), member of the Northern Piet Boer
Supervisory Board of Unibail-Rodamco S.A., Agricultural Tenancies Authority (Grondkamer Rob ter Haar
member of the Supervisory Board of Maxeda B.V., Noord), Member of the Provincial Parliament of
member of the Supervisory Board of B.V. Sperwer the Province of Groningen. Audit Committee of
Holding. the Supervisory Board
Jan Peelen (1940) Henk Scheffers, Chairman
Jentje de Boer (1962) Member of the Supervisory Board since 2000. Jentje de Boer
Member of the Board of Zuivelcoöperatie Eligible for reappointment in 2008. Rob ter Haar
Friesland Foods U.A. Member of the Supervisory Other positions held: member of the Supervisory Jan Cees Vogelaar
Board since 2004. Board of Corporate Express N.V., member of the
Eligible for reappointment in 2008. Supervisory Board of Arcadis N.V., Chairman of the
Occupation: dairy farmer. Supervisory Board of VVAA Groep B.V., member
of the Supervisory Board of Albron B.V., member
of the Supervisory Committee of the Netherlands
Genomics Initiative (NROG).

Supervisory
Board report
Financial statements and Resignations and reappointments Without the Board of Management being
appropriation of profit present, the Supervisory Board evaluated the
In accordance with the rotation schedule, Jakob performance of the Board of Management
At the Supervisory Board meeting of 28 February Draijer resigned from the Supervisory Board and its individual members. The Supervisory
2008, the members of the Supervisory Board of Royal Friesland Foods N.V. on 19 December Board also discussed its own performance
and the Board of Management signed the 2007 2007. The Board is highly appreciative of Jakob and that of its individual members. The Board
financial statements drawn up by the Board of Draijer’s contribution to the Supervisory Board, considered candidates for the succession of Luc
Management. The financial statements were of which he had been a member since 1998. Dahlhaus, who retired as President of the Board
audited by Deloitte Accountants B.V., who issued Piet Boer and Jorrit Jorritsma were due to retire of Management of Royal Friesland Foods N.V.
an unqualified auditor’s report on them. The by rotation at the end of 2007; both were due to health reasons on 1 May 2007. In January
Supervisory Board has approved the proposal by eligible for reappointment. The Supervisory 2008, the Supervisory Board decided to appoint
the Board of Management to retain 112 million Board decided to reappoint them for a new term Cees ’t Hart (49) President of the Board of
euros of the profit for 2007 of 172 million euros, of office of two years. The new term of office Management of Friesland Foods as from
to add this amount to the general reserve and will end after two years because both are due to 1 May 2008. The Board also discussed filling
to declare a cash dividend of 60 million euros, retire at the end of 2009 and are not eligible for the vacancy that opened up when Robert van
that is, 2.62 euros per Class A share of 46.00 reappointment to the Board of Zuivelcoöperatie Ballegooijen left the company. In addition, the
euros nominal value each and 10.24 euros per Friesland Foods U.A. The rotation schedule used supervisory directors considered candidates for
Class B share of 46.00 euros nominal value each. by the Supervisory Board is geared to that used the succession of Jakob Draijer. The Supervisory
The Annual General Meeting of Shareholders by the Board of the cooperative. Board took a financial training course early
adopted the 2007 financial statements on in 2007. During the year under review, the
28 February 2008 and, in accordance with Supervisory Board paid visits to two operating
Article 21(2)(d) of the Articles of Association, Topics discussed companies. A delegation from the Supervisory
endorsed the Board of Management’s conduct Board attended several consultative meetings of
of affairs during the year under review and, in The Board met six times during the year under the Central Works Council.
accordance with Article 21(2)(e) of the Articles of review. At the meetings, the following topics,
Association, endorsed the supervision exercised among other issues, were discussed: the vision The Supervisory Board’s Executive Committee,
by the Supervisory Board during the same year. and strategy of Friesland Foods (Vision 2015) which serves as a combined remuneration
and the related restructuring operations, committee and selection/appointment
the exploratory merger talks with Campina, committee, met on six occasions during the
the company’s annual report and financial year to prepare the decision-making process by
statements, as well as the audit of the financial the Supervisory Board on the following topics:
statements (including consultations with the the vision and strategy of Friesland Foods
independent external auditor), the management (Vision 2015) and the related restructuring
letter and its follow-up, financial developments, operations, the exploratory merger talks with
the budget and the Medium Term Strategy Campina, the division of duties within the Board
Plan 2008-2010, investments and disposals, of Management, candidates for the succession
the revision of the pension plan structure, the of Luc Dahlhaus, filling the vacancy created
remuneration of the members of the Board of by the departure of Robert van Ballegooijen,
Management, the division of duties within the candidates for the succession of Jakob Draijer,
Board of Management and the reappointment of the reappointment of two members of the
two members of the Supervisory Board. Supervisory Board and the remuneration of
the members of the Board of Management. In
addition, the Executive Committee conducted
progress meetings with the individual members
of the Board of Management.

Supervisory Board report
Audit Committee Word of appreciation
The Audit Committee met on five occasions The Supervisory Board would like to express its
during the year to prepare the decision-making huge appreciation for the Board of Management
process by the Supervisory Board on the of Friesland Foods. Under the leadership of
following topics: the company’s annual report acting President Theo Spierings, the Board of
and financial statements, as well as the audit of Management and senior management have
the financial statements (including consultations superbly steered the company through very
with the independent external auditor), the turbulent times by adjusting the corporate
management letter and its follow-up, the strategy and organisation, based on our
progress of the audit of the financial statements long-term strategy plan Vision 2015, defining
and the customer satisfaction survey conducted the Medium Term Strategy Plan 2008–2010,
by the auditor. In addition, the Audit Committee responding proactively to major changes in the
discussed an internal risk management and marketplace, and taking the initiative to start
control system, the status of the treasury policy, merger talks with Campina. All of these projects
the covenant with the Dutch tax authorities, have been tackled with enormous vigour and
the revision of the pension plan structure and dynamism. The company’s employees are also
compliance with regulations and codes of to be complimented. Taking a flexible approach
conduct. There were no transactions in the year to changes in circumstances and organisational
under review involving material conflicts of requirements, learning new working methods,
interest of Board of Management or Supervisory dealing with constant scale increases and taking
Board members (as defined in the Supervisory responsibility for work processes require a high
Board regulations). All external Supervisory level of willingness to change. The Supervisory
Board members are independent within the Board members are well aware that this is easier
meaning of the Dutch Corporate Governance said than done. For their agility, the employees
Code. deserve a compliment, as well as for their efforts
over the past year.
Meppel, the Netherlands, 28 February 2008
The Supervisory Board

Composition of the
Board of Management
Theo C.A. Spierings (1964)

Acting President of the Board of Management of Friesland Foods since 23 March
2007. Member of the Board of Management and Chief Operating Officer since
2005, and employee of Friesland Foods (and legal predecessors) since 1986.
Responsibilities:
Classic Dairy business group
Industrial business group
Other responsibilities:
Company Secretary
Corporate Human Resources
Corporate Supply Chain
André A. Boudewijns (1955)

Employee and Chief Financial Officer of Friesland Foods since 2005.
Responsibilities:
Corporate Finance & Reporting
Corporate Information & Communication Technology
Corporate Legal Affairs
Corporate Public Affairs
Corporate Risk & Control
Corporate Strategy
Corporate Treasury
Johan G.M. Priem (1954)

Employee and member of the Board of Management and Chief Operating Officer
of Friesland Foods (and legal predecessors) since 1997.
Responsibilities:
Consumer Products Europe business group
Consumer Products International business group
Business Development Unit
Other responsibilities:
Cooperative Affairs
Corporate Research

Board of
Management review
Vision 2015
The road ahead is determined by our vision for the future.

The world is changing. And we are changing right along
with it. Milk is only getting more interesting.
More and more people want dairy in every conceivable
form, to enjoy at every possible moment.
22 Jaaroverzicht 2007
Board of
Management review
The power of milk
If we want to continue to be successful in the future,

we know we can rely on the millions of people who
love our product. It’s simply a matter of offering that
product in the right variation, at the right place and
at an affordable price.

Board of
Management review
Vision 2015
New worlds are opening before us. New cultures with new
customs. New target groups with new wishes and needs.
Are we sufficiently prepared? Milk and people are the basic
ingredients for our success. That’s why Friesland Foods will
invariably pay close attention to what customers and con-
sumers have to say.
24 Jaaroverzicht 2007
Corporate
Board of
governance review
Management
The power of milk
Understanding what people need, and making and supplying

what people want, is precisely what motivates us.

Jaarrekening
Board of 2007
Management review
Vision 2015
How will people think about dairy in the future?

What will the wishes and needs of the future be?
What changes do we expect?
Do we see risks?
Do we see opportunities?
26 Jaaroverzicht
Jaaroverzicht
2007
2007
Corporate
Board of
governance review
Management
The power of milk
It is only logical therefore that

we always put the user first,
both in terms of how we think and
how we act. Now and into the future.

Board of
Management review
Friesland Foods delivered a good Profit for the year was raised by a non-recurring financial statements is 37.07 euros per 100
income item as a result of the sale of Friso baby kilograms of milk (inclusive of 5.374 percent
performance in 2007. Profit for the year rose
and infant foods in the Netherlands. Moreover, VAT). Adjusted for differences in the fat and
by 35 percent, landing at 172 million euros restructuring expenses were lower than last year. protein content of the milk, this represents an
Operating profit showed a modest increase. increase by 6.16 euros (inclusive of VAT) per 100
(2006: 128 million). Revenue was up 400
kilograms of milk (20 percent) relative to the
million euros on 2006, rising to 5.1 billion The year 2007 was characterised by sharp market price of milk in 2006. For 2006, Friesland
increases in the world market prices of milk and Foods paid a competitive milk price of 30.84
euros (8.5 percent). Revenue growth was
whey powder, and butter due to the globally euros (inclusive of VAT) per 100 kilograms of
posted in all business groups and regions increasing demand for dairy products and milk, at 4.435 percent fat and 3.483 percent
somewhat lagging supplies of milk. Selling prices protein. This is lower by 0.35 euros per 100
thanks mainly to higher selling prices. In
in other product categories such as cheese, kilograms of milk than the provisional milk
Asia and Africa, volumes increased as well. fresh and long-life dairy in Western Europe also price of 31.19 euros per 100 kilograms of milk
started to rise over the course of the year. World published in May 2007. The annual report of
Margins did come under pressure here in the
market prices for powders and butter have one of the index companies showed that the
last quarter of the year in particular because dropped since September. milk price paid was not fully based on the
results it had achieved in the market and that
increases in the cost of raw materials were
In Central Europe, Asia and Africa, and in the the milk price was partially equity-financed. In
not fully covered by higher selling prices. professional cream-based products segment, such instances, the Friesland Foods Milk Price
the cost of raw materials could not, for the time Regulations stipulate that the milk price needs
The increase in profit was attributable to the
being, be fully recharged to the customer, which to be adjusted accordingly. Allowance will be
Classic Dairy and Industrial business groups. led to pressure on margins. In addition, currency made for this adjustment in the settlement for
developments and the abolition of export 2007, which will take place in May 2008.
subsidies had an adverse effect on revenue. This
was offset by higher sales volumes. The employee benefits expense was up
Sales of key drive brands were up 12 percent on 2 percent, rising to 448 million euros. The
2006. number of employees dropped by 730, landing
at 14,582. In the Consumer Products Europe
business group, 743 jobs were lost due to
Results restructurings, whereas the staff base in the
Industrial business group increased by
Operating profit was up 42 million euros, 71 people.
16 percent, rising to 299 million euros.
Operating profit as a percentage of revenue Restructuring expenses amounted to 11 million
(ROS) increased from 5.5 to 5.9 percent. euros (2006: 24 million), which was due mainly
to the cost of the shut-down of the Groningen-
The cost of raw materials and consumables, based production site and the restructuring of
and goods for resale rose to 3.2 billion euros. the corporate staff departments.
The increase by 335 million euros (12 percent)
was attributable to the higher cost of raw The income tax expense increased by 2 million
materials on the world market and higher milk to 65 million euros. The tax burden dropped by
prices in the Netherlands. In 2007 Friesland 3 percent to 25 percent of pre-tax profit due, in
Foods processed 6.9 billion kilograms of milk, particular, to one-off tax benefits in 2007 and
5.3 billion kilograms of which were supplied non-recurring tax expenses in 2006.
by Dutch member dairy farmers. This is the
same figure as in 2006. Based on the forecast As a result of these developments, profit for
developments in milk prices paid by the index the year increased to 172 million euros. Profit
companies in 2007, the milk price used in the for the year as a percentage of revenue was 3.4

Board of
Management review
percent (2006: 2.7 percent). This marks the first the ratio of operating profit before depreciation
time that Friesland Foods reached the target of and amortisation plus dividends from associates
achieving a net profit margin of more than 3 and exclusive of exceptional items to interest
percent. (interest coverage ratio) should be at least
3.5 : 1. This ratio was 13.0 : 1 at year-end 2007
(2006: 12.8 : 1).
Cash flows
Friesland Foods has contracted loan capital
Net cash flows from operating activities from different groups of lenders (banks and
amounted to 225 million euros in 2007 (2006: investors), which is beneficial to the company’s
244 million). This drop was caused chiefly by flexibility. In addition to having been raised with
higher working capital. The increase in working Dutch and foreign banks, a substantial portion
capital was seen in inventories in particular, the of the company’s funding has been contracted
main reason being sharp increases in the cost from institutional investors in the United States Departure of Luc Dahlhaus
of raw materials during the year. These resulted and private investors in Europe. The majority of
in higher values of inventories, especially in the bank loans are comprised of a syndicated credit Luc Dahlhaus retired from Friesland Foods
fourth quarter of the year. In addition, inventory facility of 550 million euros, the remaining term in April 2007. Many members of staff and
volumes saw modest increases at year end. to maturity of which is no more than three external business relations came to say their
years. Friesland Foods has contracted a credit at farewells to him at a reception held in his
Investments in land, buildings, plants, equipment favourable conditions. At year-end 2007, 340 honour. Mr Dahlhaus worked for Friesland
and intangible assets increased by 21 million million euros had been drawn on the credit facility. Foods and its predecessors for over 31 years.
euros relative to 2006. Key investment projects His time in Nigeria, West Africa, where he
in 2007 included the cheese-storage facility arrived at the age of 37 with his wife and two
in Workum (the Netherlands), the second Increase in dividend daughters, was very special to him, and in
spray-dryer in Salatiga (Indonesia) and the November 2007 he was made a Member of
construction of a second production site in Total dividend distributions on Classes A and B the Order of the Federal Public by President
Vietnam (Hanam). In 2007 Friesland Foods shares increased by 35 percent compared with Obasanjo of Nigeria - only the third Dutch
spent 39 million euros less on acquisitions than 2006. The dividend per Class A share is 2.62 national to receive this distinction. Mr
in 2006 (42 million euros). euros (2006: 2.39 euros), and 10.24 euros per Dahlhaus took the opportunity to donate the
Class B share or depositary receipt for Class money raised at his farewell reception
B share (2006: 6.81 euros). As in 2006, the (37,000 euros) to the Olu Akinkugbe
Financial position dividend distribution on Class A shares reached Foundation. The foundation was set up several
the maximum amount as provided in the Articles years ago in honour of the former chairman
Equity was up 10 percent in 2007. The solvency of Association. Based on the dividend distributed of the supervisory board of Friesland Foods
ratio (equity as a percentage of total assets) on Class A shares, Zuivelcoöperatie Friesland WAMCO Nigeria, Chief Olu Akinkugbe, to
dropped, however, to 38.7 percent (2006: 39.6 Foods will distribute 0.36 euros exclusive of VAT provide mothers and children in Nigeria with
percent). This was the result of higher total per 100 kilograms of milk to the member dairy information and advice on nutrition in order
assets due to an increase in working capital. Net farmers (2006: 0.33 euros exclusive of VAT). to prevent malnutrition, poor health and child
debt rose by 8 million to 582 million euros. mortality.
On 2 March 2007 share premium reserve A of
Friesland Foods comfortably meets the 62 million euros was converted into Class A
requirements imposed by lenders, as expressed share capital at a nominal value of 46.00 euros
in the headline figures. The ratio of net debt each. As a consequence, the Class A share
to operating profit before depreciation and capital has increased to 330 million euros. The
amortisation plus dividends from associates and number of Class A shares rose from 5,840,363 to
exclusive of exceptional items is not allowed 7,179,950. The Class B share capital amounts to
to exceed 3.5 : 1. At year-end 2007 this ratio 186 million euros. The ratio of Class A to Class B
was 1.4 : 1, the same as in 2006. In addition, shares is now 64 : 36.

Board of
Management review
Exploratory merger talks between Significant synergy benefits are expected, for
New method for ingredient Friesland Foods and Campina instance in purchasing, production, logistics,
production marketing, sales and overheads.
Friesland Foods and Campina announced on 19
In 2007 Friesland Foods Domo decided to December 2007 that they were exploring the The starting point in the further explorations
invest in a new method for the production possibility of a merger between their respective is that the international business of Friesland
of ingredients. The new technology is special cooperatives and dairy operations as a means Campina should create clear added value for
because it extracts ingredients directly from for accelerating towards their targets. Friesland its member dairy farmers and offer them the
milk rather than from whey, which has been Foods and Campina expect their merger to opportunity to grow alongside the new company
the standard procedure up to now. The main considerably strengthen their international without experiencing any restrictions where
advantage of the new technology is that the position and facilitate further growth in Europe, milk volumes are concerned. The merger should
extracted ingredients, such as protein, lactose Asia and Africa. It is in the best interest of the lead to the establishment of a new cooperative
and minerals, are very pure. Another benefit member dairy farmers (who will become the by the name of Zuivelcoöperatie Friesland
is that milk is much richer in substance joint owners of Friesland Campina), customers, Campina in which, after the merger, all current
than whey, offering better opportunities consumers and employees that the enterprise members of Friesland Foods and Campina should
for producing high-quality dairy-based bolsters its operations and continues to grow. participate equally and have the same rights and
ingredients. The new technology allows milk obligations, with voting rights in proportion to
to be separated under very mild conditions. Strength and versatility the volume of milk supplied.
“We will soon be able to supply highly pure The merger is bound to give rise to a leading
products to our customers, which will find all multinational dairy company. The spread over Process
manner of applications in their preparation product groups and geographies, and the strong The Supervisory Boards, Boards of Management,
methods. We are also creating extra potential brands and international scale in research, the General Meeting of Friesland Foods and
for our customers by giving them the option production, marketing and sales are sure to the Council of Members of Campina are
to source our ingredients in liquid form as make Friesland Campina a versatile enterprise. supportive of the merger talks. The Boards of the
well,” said project leader Jaap de Slegte. The One that will be able to capitalise on the ever- Cooperatives and the Boards of Management
construction of the new production facility increasing pace of changes in market conditions, signed a letter of intent on 17 December 2007,
will begin in 2008. The development of this including: based on which the strategy, synergies, control
new technology is Friesland Foods’ answer • ongoing liberalisation/deregulation structure, financial position and milk pricing
to the growing demand for ingredients and (EU/WTO); systems will be reviewed. They plan to present
the expected increase in milk supply by its • a highly volatile world dairy market; a draft merger agreement to the members, the
member dairy farmers. • increasing global competition; and Works Council and the trade unions in April
• increasing dairy foods consumption levels on a 2008, and intend to ask for the approval of a
global scale. merger agreement by the General Meeting of
Friesland Foods and the Council of Members of
Both companies expect to be able to use the Campina by May 2008. The merger agreement
merger to accelerate towards achieving the is subject to the approval of the European
following strategic targets as a single enterprise: Commission and the Netherlands Competition
• bolstering growth in brands and added-value Authority (NMa). The merger is expected to be
product concepts; completed by the end of 2008.
• achieving cost leadership through scale
in production and more flexibility in milk
processing for cheese and consumer milk
products;
• enhancing market and brand positions in
emerging markets; and
• consolidating global dairy ingredients
activities.

Board of
Management review
Developments by region Developments by business group
Revenue from European activities increased by All business groups can look back on a turbulent
8 percent to 3.9 billion euros in the year under year, with market dynamics having a different
review. The increase was achieved mainly by effect on every group. Friesland Foods seeks
the Dutch activities as a result of higher selling to maintain or increase its market share in all
prices of dairy products. Revenue from activities markets where it has a presence.
undertaken in Hungary fell due to restructurings
in 2006 and early in 2007.
Classic Dairy
Despite the reduction in export subsidies The Classic Dairy business group comprises
on cheese, condensed milk and low-fat and most of the milk-processing activities in the
whole-milk powder, total operating profit in Netherlands. These are Friesland Foods Cheese,
Europe rose by 42 percent to 230 million euros. Friesland Foods Fresh and Friesland Foods Butter.
Operating profit as a percentage of revenue In the second quarter of 2007 prices of milk Successful introduction of
increased to 5.9 percent (2006: 4.5 percent). powder and butter were on the rise in particular, pasture milk
which was attributable to growing demand for
In Asia, revenue rose by 12 percent to 977 dairy products and lagging supply. As a result In April 2007 Friesland Foods introduced
million euros (2006: 873 million). Operating of this situation, a shift took place in the use of pasture milk. This milk is obtained from cows
profit was down 14 percent to 85 million farm milk. In order to be able to meet the higher that graze outdoors for at least six hours a
euros (2006: 99 million) due to the fact that demand for butter and powder, the production day, 120 days a year. This milk is available
the higher cost of raw materials was not fully of cheese was scaled down temporarily. Prices on for sale in Dutch supermarkets under the
covered by higher selling prices, and an increase the cheese market went up as well in the second popular Friesche Vlag brand as well as under
in advertising and promotional expenses. In half of 2007. This resulted in substantially higher under private labels. In addition, Stichting
Asia, operating profit as a percentage of revenue selling prices for cheese. The large demand for Weidegang, a foundation for the promotion
fell from 11.3 percent to 8.7 percent. dairy has translated into higher selling prices. of outdoor grazing, was set up at the initiative
of Friesland Foods, to increase the visibility
In the other regions, revenue was up 8 percent, Thanks to these developments, revenue in the of cows in fields. A grazing bonus at the
rising to 338 million euros (2006: 314 million). Classic Dairy business group rose by 5 percent end of the year encourages farmers to keep
Key countries are Nigeria and Saudi-Arabia. to 1.6 billion euros. The favourable results are their cows outdoors. Friesland Foods has
Operating profit showed a 15% drop in this mainly attributable to the good showing by committed itself to setting aside 2 million
region, from 36 million euros in 2006 to 30 Friesland Foods Cheese and Friesland Foods euros a year for this bonus over a three-year
million euros in the year under review. Again, Butter. The operating losses incurred by these period. Around 80 percent of Friesland Foods
the cause lay in the fact that the high cost of operating companies in 2006 were reversed members participate in this scheme, and
raw materials could not be fully incorporated in and profits posted in 2007. This is particularly together they supply nearly 4 billion kilograms
the selling price. In the other regions, operating remarkable where the milk powder and butter of milk. Fresh milk, buttermilk, yoghurt and
profit as a percentage of revenue was down activities are concerned. The performance of long-life dairy products made from pasture
from 11.5 to 8.9 percent. the operating company Friesland Foods Fresh milk are now available in supermarkets.
continued to be disappointing. Although a range Pasture milk products are produced at the
of price increases were implemented over the Groningen and Nijkerk production locations.
course of the year, margins still come in below
those posted in other product groups.

Board of
Management review
Friesland Foods Cheese The Friesland Foods Cheese facility in Leerdam The ambition of Friesland Foods Butter is to
The financial performance of Friesland Foods was revamped in 2007. Following property offer the best of taste through innovative
Cheese in 2007 improved sharply on 2006. alterations, the site has doubled in surface partnerships. Health, convenience, taste and
Revenue rose markedly thanks mainly to higher area in order to meet the growing demand functional features are key priorities now and in
selling prices, for instance of pre-packaged for pre-packaged products. In view of this, the the near future. Innovations at Friesland Foods
cheese. Higher sales volumes accounted for a activities of the small-product packaging facility Butter mainly involve developing new packaging
modest increase in revenue. Especially in the in Wolvega were further expanded as well. This and fractioning milk fats.
second half of 2007, Friesland Foods Cheese facility puts out more than 3.5 million consumer
managed to ride the wave of the surging market, packages per week. In 2007 the Director of Friesland Foods Fresh
despite high milk prices, the lagging dollar and Operations became responsible for Maturing, Friesland Foods successfully introduced pasture
the abolition of EU subsidies. Where long-term Packaging and Logistics so as to streamline milk in April 2007. The entire product range of
contracts had been concluded, the higher milk and fine-tune the operating process. Focus is fresh dairy, including products marketed under
prices could not immediately be recharged to on efficiency and quality improvements. World the Friesche Vlag brand and private labels, is
the customer. This delay in recharges was a Class Operations Management (WCOM) will be now made of milk from cows that are out to
factor in the Netherlands in particular. rolled out further throughout Friesland Foods pasture from spring to autumn. The introduction
Cheese. of pasture milk allowed Friesland Foods to
Friesland Foods Cheese launched a new increase prices for the first time in years. But
commercial approach in 2007. The operating The storage and maturing facility in Meppel despite a total of three further price hikes in
company formed two commercial groups that was closed in 2007 in line with the previously 2007, the performance of fresh dairy products
are tailored to its key sales channels: European initiated restructuring of the cheese activities. continues to be disappointing. Due to pending
Retail and International Markets. European Some of the activities have been transferred to contracts, price increases for most private-label
Retail focuses on cheese sales to European other cheese-producing facilities. products could not be implemented until the
supermarkets in the Benelux, Germany and end of 2007. Revenue was up on 2006. The
France. International Markets concentrates Friesland Foods Butter sales, marketing and production activities were
mainly on cheese sales to other European Friesland Foods Butter in particular managed to transferred to Friesland Foods Fresh, the new
countries and the rest of the world. The business make the most of the booming market and the operating company and a division of the Classic
unit for Spain is a division of International higher demand for dairy products worldwide. Dairy business group, as at 1 November 2007.
Markets. The most important commercial The positive developments were attributable to It was announced in 2007 that the production
results in 2007 were strong growth in pre- higher selling prices and sales of more fractioned facility in Groningen would be closed down in
packaged products and growth in low-fat products. Although revenue was up markedly mid-2008 and that the fresh dairy activities
cheese products. The year 2007 also saw a and profit improved sharply, demand did drop in would be bundled in Nijkerk.
worldwide reintroduction of the Frico brand. the second half of 2007 as a result of the high
The reintroduction of the Castillo de Holanda prices of butter and milk powder. EU export
brand also proved to be a success formula on the subsidies for dairy products were abolished
Spanish Canary Islands. completely in the first half of the year. The
selling prices of milk powder, whey and butter
were increased over the course of the first half
of 2007, as soon as contracts so allowed. The
selling prices of butter and milk powder dropped
at year end. This was due, in part, to a temporary
decline in demand. The market for milk fat in
particular is in need of a new equilibrium.

Board of
Management review
Industrial The renovated plant for the production of

This business group comprises the activities of galacto-oligosaccharides in Borculo became
the operating companies Friesland Foods Domo, operational in the first half of the year. This
Friesland Foods Kievit and Friesland Foods expansion of the production capacity allows
Professional. This group posted an increase in Friesland Foods Domo to respond to the sharp
revenue by 24 percent to 797 million euros. This increase in demand for soluble dietary fibres
was attributable, for the most part, to growth in for children’s foods, dairy products and drinks.
high value-added speciality products at Friesland Friesland Foods Domo and Australian dairy
Foods Domo and Friesland Foods Kievit. company Warrnambool Cheese and Butter
Factory Holdings Ltd. concluded a joint venture
Friesland Foods Domo agreement on 13 July 2007. They will jointly
The performance of Friesland Foods Domo build a new production facility for ingredients
improved sharply in 2007, with revenue rising in Australia, which will become operational in
considerably also. The results for 2007 are the 2009. The 50/50 joint venture under the name
best in the history of Friesland Foods Domo. In Great Ocean Ingredients Pty Ltd. will produce
addition to higher selling prices, sales volumes nutritional and functional ingredients for the
were up as well, thanks, in particular, to higher infant nutrition, food and pharmaceutical
sales of Vivinal GOS and Vivinal MCA (milk industries throughout the world. This partnership Awards for Friesland Foods Frisian
calcium). The production of lactose and pharma is in line with the policy pursued by Friesland Flag Indonesia and Friesland Foods
lactose was reduced for the production of Vivinal Foods to create innovations in collaborative Foremost Thailand
GOS. alliances. The provision of bespoke solutions
to customers results in excellent customer Friesland Foods Frisian Flag Indonesia and
The good showing of Friesland Foods Domo was satisfaction. In 2007 Friesland Foods Domo Friesland Foods Foremost Thailand both won
mainly attributable to the growing demand for introduced further efficiencies in its distribution, awards in 2007, Frisian Flag for the best large
functional foods, such as infant nutrition and sales, marketing and service by concentrating foreign company in Indonesia and Foremost
health foods. The chosen strategy to change the distribution activities for pharmaceuticals for the best Dutch company in Thailand.
from a bulk-oriented organisation into a leading and food ingredients in Europe (excluding Spain) Frisian Flag Indonesia, the country’s leading
supplier of high-grade ingredients has clearly in one division. dairy producer, was one of a total of 5,160
paid dividends. In 2007, an important decision companies judged on management, product
was taken to invest in new milk-separation Constant innovation has been one of the pillars quality, production facilities, corporate social
technology, so as to add even more value to of the success of Friesland Foods Domo over responsibility and environmental awareness.
high-quality milk components. Demand for high the past years. In order to keep this innovation The company has two factories in Jakarta and
value ingredients continues to grow. process going, Friesland Foods Domo is produces a wide range of dairy products locally.
committed to hiring talented researchers and The company is also a very active supporter
continually making investments in research of the production of local fresh milk and
facilities. One of the key objectives of the processes milk from 30,000 farmers in Java
innovation process is to add value to raw every day.
materials. For this purpose, the chain from raw
materials to new products needs to be managed Foremost came first out of 200 Dutch
as best as possible. companies active in Thailand. Managing
director Ian Gearing believes that Foremost
won the award because it is an innovative,
bold company, as demonstrated by products
such as Foremost Calcimex Beautiva. This milk
with collagen and aloe vera helps to promote
beauty from the inside out.

Board of
Management review
It is the ambition of Friesland Foods Domo Friesland Foods Professional

to consistently introduce new products over Revenue generated by Friesland Foods
the next few years as well; for this reason, it Professional saw a significant increase in 2007,
undertakes short-term, medium-term and although profit dropped sharply. This was due
long-term projects. For Friesland Foods Domo, to the fact that the strong increase in the price
2007 was a year in which many new ideas and of milk fat could not be fully covered by higher
concepts saw the light of day; these are expected selling prices. Revenue from the foodservice
to be followed up successfully in 2008. channel is expected to grow further, for instance
by spreading product sales over more countries.
Friesland Foods Kievit In Germany and France, the company introduced
Friesland Foods Kievit did well in 2007. Profit an improved whipped cream product in a spray
was up sharply thanks to a significant increase can for professional users. The new nozzle
in revenue, stability of margins despite sizeable improves the firmness of the whipped cream
increases in the cost of raw materials, and topping. A new spray can production line was
Whipped cream presented at its best higher sales of speciality products. A sales office launched at our production facility in Lummen,
specifically targeting the Asian market opened Belgium. The semi-industry segment also
In 2007 Friesland Foods Professional its doors in Salatiga, Indonesia, early in 2007. showed further growth. In addition to the bakery
developed a new nozzle for cream-filled The expansion of the production capacity in sector, the food industry is gaining more and
spray cans used in the catering industry to Salatiga with a new spray-dryer is proceeding on more of a presence in this segment. The growth
enable whipped cream to be presented very schedule. The food industry continues to display in the semi-industrial segment has resulted in
professionally. A new cream-filled spray can a growing interest in encapsulated fish oils, capacity restrictions in Nuenen.
line was also brought into production. In which were introduced a number of years ago.
the opinion of Stefaan Naeyaert, product As a result of increasing demand, a five-shift Owing to sharp increases in the price of butter
group manager for cream at Friesland Foods system is now being employed at the Dutch in combination with the abolition of EU
Professional, there is a growing demand for production facility in Meppel. subsidies, returns for customers in the bakery
cream-filled spray cans. “Once the new spray and ice cream industries in particular have
can line was in place, work could start on In addition to geographical expansion, such become subject to severe pressure, potentially
a new nozzle. That was necessary,” said Mr as in Asia, innovation is another key to further causing the risk of a decline in demand because
Naeyaert. “A market survey of our customers growth for Friesland Foods Kievit. Building on customers will start to use substitution products.
revealed that we could improve our product the successful innovations of the past few years, Friesland Foods Professional seeks to resolve this
in a number of areas. The presentation of the a separate business unit was formed for the situation together with its customers.
whipped cream, for instance, could look more development of new encapsulation technologies.
professional, and in addition we strengthened
the nozzle. The surface pressed when serving
cream has been made larger and more
sturdy, making it easier to handle.” The new
nozzle was introduced in Italy and Spain in
September 2007 and will be introduced in
Belgium and the Netherlands in 2008. “Initial
responses have been very positive,” said Mr
Naeyaert. “Sales are up compared to last
year.”

Board of
Management review
Consumer Products Europe Chocomel celebrated its 75th anniversary in

This business group comprises the activities 2007. Revenue from Chocomel rose significantly
undertaken by the operating companies Friesland in 2007 thanks, in part, to the introduction
Foods Western Europe, Friesland Foods Hellas, of Chocomel Hot in 2007. Its success was
Friesland Foods Central Europe and Friesland mainly attributable to the wide range of
Foods Romania. The strategy of the Consumer Chocomel applications. Chocomel is available in
Products Europe business group focuses on supermarkets as well as in bars and restaurants,
improving the market position and strengthening and can be consumed either hot or cold.
brands. This has led to better brand positioning for
Chocomel/Cecemel, Milli, Pöttyös and NoyNoy. Friesche Vlag coffee creamer delivered a good
However, the focus on maintaining and/or performance in 2007, with revenue rising
improving market share and the brand position slightly. DubbelFrisss had a challenging year due
has also resulted in a significant decline in profit to substantial competition in this segment. Fristi
as a result of the inability to fully recharge did well in 2007 without posting exceptional
increases in purchase prices to the customer. On a growth. The same goes for Extran, the sports Chocomel Hot at the push of
positive note, revenue did show limited growth. drink. a button
In July 2007 the activities of Friso baby and infant Friesland Foods Hellas The launch of Chocomel Hot capsules for
foods in the Benelux countries were sold to Hero In Greece, revenue from the NoyNoy label Senseo coffee machines proved a great
Nederland B.V. because they were no longer showed a marked increase. In 2007 Friesland success. “Even though the targets for
in line with Friesland Foods’ strategic vision. Foods Hellas launched a comprehensive and Chocomel Hot capsules were ambitious,
Friesland Foods will continue to produce the varied offering of Dutch cheese under this we have exceeded our expectations. We’re
Friso baby and infant foods products for Hero. In strong label. Increases in milk prices and higher surprised at how much demand there is,”
addition, Friesland Foods will continue to focus advertising and promotional expenses caused said Dax Denneboom, senior brand manager
on developing and selling infant formula and profit to drop strongly. The introduction of for Chocomel at Friesland Foods Western
children’s foods, under the Friso name, among NoyNoy cheese was the result of a partnership Europe. Chocomel has responded to trends
other labels, in a number of foreign markets. between the operating companies Friesland by enabling people to enjoy the same high-
Friesland Foods discontinued its operations in Foods Hellas and Friesland Foods Cheese, and quality Chocomel experience at home as they
Slovakia and the Czech Republic early in 2007. is a good example of synergies within Friesland can find in bars and restaurants. Chocomel
The market positions in these countries were too Foods. The new NoyNoy cheese comes in Hot is easy, fast and offers excellent product
weak and there was no prospect of improvement. 22 different varieties. With this introduction, quality thanks to its patented system of
Friesland Foods Hellas has strengthened its Chocomel Hot capsules and a special capsule
Friesland Foods Western Europe position in the Greek dairy market. Although holder. The capsules contain a Chocomel
Revenue generated by Friesland Foods Western NoyNoy yoghurt is doing well, the Greek yoghurt concentrate that is mixed with hot water
Europe showed marked growth. Appelsientje put market is fiercely competitive, causing pressure from a Senseo machine in the capsule’s
in an excellent performance in the Netherlands on margins. special mixing chamber, creating an extra
and Belgium. The mild variety, which was layer of foam. Chocomel Hot is available
introduced in 2006, was a particular success. Friesland Foods Central Europe in supermarkets, where it can be found in
The CoolBest label developed well thanks mainly Dairy consumption in Hungary fell by 7 percent, the same section as coffee pods. A new
to the introduction of new fruit flavours such causing a drop in revenue, due to a decline in production line has been set up in Kalkar,
as pomegranate and açaí. In 2007 CoolBest purchasing power and the high inflation rate. Germany, to produce Chocomel Hot capsules.
introduced CoolBest Vitaday, the first fruit juice Reductions in the product offering and customer
containing prebiotics. These ingredients have numbers over the course of 2006 still affected
a beneficial effect on the intrinsic strength of the revenue figure for 2007. Profit did see a rise
the immune system by selectively stimulating however.
the growth and/or activity of one or a limited
number of bacteria in the colon.

Board of
Management review
North and
South America
Africa and
the Middle East
2%
125
13%
646
Asia
35%
The Milli label is on its way to reach the 100 22% Revenue broken down 1.760 Europe excluding
million euros revenue mark in Hungary and 1.127 by geographical area the Netherlands
Romania. Although revenue from Pöttyös In millions of euros
did not increase in Hungary, its market share

did rise. Much attention was paid in 2007 to
efficiency improvements and streamlining of
work processes. The World Class Operations
28%
Management quality system was an important 1.417
source of input in this regard. In Hungary,
production has now been concentrated in two
locations, in Mátészalka and Debrecen. The Netherlands
Friesland Foods Romania

Revenue in Romania showed a marked increase,
mainly thanks to higher selling prices. Profit 32%
fell, however, due to higher advertising and Consumer Products
1.611
International 32%
promotional expenses, and lower exceptional Classic
Revenue broken down 1.635 Dairy
income items than in 2006. Friesland Foods shut
down a production facility in Romania in 2007 by business group 1
and announced that another branch will close In millions of euros
its doors in 2008. The main reasons for closing
these facilities are cost inefficiencies and the lack
of growth potential at the sites in question.
20% 16%
1.018 797
Consumer Products Industrial

Europe
1
Excluding revenue ‘Other’ of 14 million euros.
Operating profit broken down by region

250
230
200
162
150
99
100
85
50 36
30
0
Europe Asia Other
2006
2007

Board of
Management review
Consumer Products International Friesland Foods Frisian Flag Indonesia

This business group comprises the operating In Indonesia marked growth was achieved mainly
companies in Indonesia, Nigeria, Thailand, in the enhanced children’s foods and ready-to-
Vietnam, Malaysia/Singapore/Hong Kong, and drink milk segments. Revenue was up strongly.
the Middle East, as well as the export activities The Indonesian market was characterised by
of Friesland Foods Consumer Products. Vision increases in volumes as well as in price levels.
2015 projected an acceleration in revenue Rising advertising and promotional expenses
growth. This was achieved with a 9 percent were contributing factors also.
increase in revenue.
Despite the implementation of a number of price
In Asia and Africa, Friesland Foods aims to have increases, profit was down to a limited extent.
price increases keep pace with the local rate The first initiatives were also taken in 2007 for
of inflation. The purpose of this policy is to a project aimed at reaching more consumers
maintain and, where possible, improve market with dairy products. Where the market strategy
positions, even if it means accepting lower used to be to target the high and middle-income Special project in Indonesia
margins. This policy was successful in 2007; segments, in 2007 Friesland Foods started
market shares increased, although the profit to introduce products that are affordable for The aim of Friesland Foods Indonesia is to
figure was down temporarily as a result of this low-income earners as well, including Yes!, an supply food to everyone in Indonesia by
policy. inexpensive dairy-based drink. The low price and making nutritious milk products accessible to
new distribution model has tapped a new, large the entire Indonesian population, including
A key driver of revenue growth is the higher target group, tying it in with Friesland Foods’ the poorest of the poor. In Indonesia, 35
budget for advertising and promotional strategy to reach more consumers. percent of the population (80 to 100 million
activities. Revenue from all key drive brands people) are classified as poor. A special market
increased in 2007; all operating companies Friesland Foods Dutch Lady Vietnam strategy, which is based on affordability, has
shared in the revenue growth and strengthened Revenue generated by Friesland Foods Dutch been developed to target this group. The focus
their market positions. Volumes increased in Lady Vietnam was up significantly thanks is on selling products to women and children,
Asia and Africa. In all countries, focus was on mainly to higher revenues from infant formula. specifically the products Yes! Mut Mut, Yes!
improving the position of enhanced nutrition This success can be attributed to the improved Milkshake and Yes! Fruity in 90-ml bottles.
for infants and children between the ages of 0 positioning of the Friso label. Profit was down
and 6. significantly, however, chiefly as a result of Since the target group is a new one, the
higher advertising and promotional expenses, company has decided to introduce the product
It is Friesland Foods’ international ambition and the inability to fully recharge increases in through trusted members of the community
to reach one billion consumers with dairy the cost of raw materials to the consumer. Great in addition to marketing it through existing
products in 2015. The plan to treble the number headway was made in northern Vietnam with distribution channels. Housewives from within
of consumers has been formalised in Vision the construction of a second production facility the community are trained as distributors for
2015. The goal is to achieve the highest possible that will become operational early in 2008. Frisian Flag Indonesia, referred to as Kartinis.
value of member milk. Friesland Foods is in the This new facility was built to accommodate Each Kartini recruits a team of six housewives
position to fulfil that bridging function with its production increases, as well as for logistical to work as housewife retailers (Putris) and
milk, in the form of powder and ingredients. reasons. manages the team. Putris sell the products
The ‘one-billion-consumers vision’ is also an to kiosks and consumers. Young women from
important source of inspiration for staff. within the community are trained as sales
clerks for Frisian Flag Indonesia, referred to as
Srikandis. The Srikandis sell products directly
to consumers: door-to-door, at schools and
through health centres.

Board of
Management review
Friesland Foods Foremost Thailand Friesland Foods Middle East

For the first time in years, Friesland Foods has Activities in the Middle East are aimed at
been able to implement sharp price increases expanding the Rainbow product range. The
in Thailand. This is exceptional because prices products that used to be sold as Jamjoom were
of dairy products are regulated by the Thai rebranded as Rainbow in 2007. This is in line
government. These price increases were with the ambition to achieve a regional branding
insufficient, however, to offset the hikes in the policy and market homogeneous concepts
cost of raw materials. This caused the profit to in every region. Rainbow is a tea enricher, a
drop considerably. Revenue was up markedly as milk product designed to be added to tea. A
a result of higher volumes and prices. From its number of new varieties were introduced in
base in Thailand, Friesland Foods has now also 2007. Friesland Foods has also started to market
directed its focus on Cambodia and Laos, mainly children’s foods in the United Arab Emirates.
with children’s foods produced by the company
in Vietnam. Friesland Foods Consumer Products
New look for Peak in Nigeria Friesland Foods Consumer Products experienced
Friesland Foods Dutch Lady Malaysia/Singapore/ a difficult year. The high cost of raw materials
In Nigeria, Peak means milk. This well known Hong Kong in combination with the reduction in export
brand was updated in 2007 with a new In Malaysia Friesland Foods successfully subsidies and the weak US dollar caused profit
look, a new recipe and a new slogan (Peak. introduced a no-fat yoghurt and comfortably to fall sharply despite modest revenue growth.
For Stronger Bodies ‘n’ Sharper Minds), achieved its growth targets in the children’s In West African countries such as Ghana, Ivory
in response to increased competition in foods segment. Profit was up markedly as Coast, Cameroon, Togo, Benin, Gabon and
Nigeria. Its packaging was modernised but well, which helped Friesland Foods Dutch Lady Burkina Faso, growth is falling short of earlier
not drastically changed, as Siska Schipper, Malaysia to improve its market position and expectations.
marketing manager at Friesland Foods become a key player in the Malaysian market.
WAMCO Nigeria, explained. “The symbols Strong growth was registered for Friso in
on the packaging are still as relevant as they Singapore and Hong Kong.
always were. The mountain stands for peak
performance, and the palm trees for growth Friesland Foods WAMCO Nigeria
and good nutrition - things that matter a Friesland Foods clearly takes pole position
great deal to Nigerians.” in the Nigerian market. The Peak label was
relaunched in 2007. The new variety contains
The operating company adapted the recipe added vitamins and is broadly marketed, so
on the basis of a UNICEF study into the that it is now within reach for new consumers.
most common vitamin and mineral deficits Accordingly, revenue was up significantly. Profit
found among the population in developing saw a modest drop only due to the favourable
countries. Ingredients such as vitamins A, B1, exchange rate of the Nigerian naira to the US
B12 and iodine were added to support the dollar and a number of price increases.
development of the body and the mind. The
slogan was also changed, to reflect Nigerian
culture and society. Ms Schipper explained,
“As Nigerians are proud, performance-
focused and want to excel both physically and
intellectually, we decided to incorporate that
in the brand image.”

Board of
Management review
Innovation Human resources policy
Innovation plays a key role in the growth Friesland Foods aspires to be a reliable,
ambitions of Friesland Foods. Friesland Foods committed and dynamic employer. By making
Corporate Research specialises in strategic targeted investments in our envisaged corporate
research with a view to creating added value. culture, Friesland Foods aims to increase its
It is the supplier of new technologies and employees’ expertise and improve their work
technological building blocks. New technology effectiveness. In concrete terms, this means
is not only being developed at Friesland Foods, safety in the workplace, excellent opportunities
but also in collaboration with universities, for employee development, good working
competence centres and other enterprises. conditions, a pleasant work climate and fitting
remuneration.
In terms of innovation, Friesland Foods
focuses mainly on large growth segment and Vision 2015 will have a major impact on human
growth markets where we already have a resources policy. It is a huge challenge for the Putting the Customer First for
presence. Friesland Foods Corporate Research organisation to achieve the growth ambitions successful change management
and Friesland Foods Domo work together in the market on the one hand and to pursue
to substantiate health claims attributed to cost leadership on the other. The organisational The dairy world is undergoing many changes,
ingredients that Friesland Foods produces structure was revised in 2007 in order to and Friesland Foods is preparing for the
and applies on a global scale. In addition, the facilitate this. The company was divided into future with Vision 2015. This vision is already
partners collaborate in the further development four business groups: Classic Dairy, Industrial, being realised, as can be seen at Friesland
of the ingredient Vivinal GOS, which closely Consumer Products Europe and Consumer Foods Butter. Having seen a great deal of
mirrors the worldwide trend to live a healthy Products International. Operating companies support from Europe disappear, this operating
and active life. Besides children’s foods, there with similar strategic targets and/or types of company was reorganised along more
are a host of opportunities in the markets for activities were joined in these business groups. market-oriented lines, and to great success.
clinical foods, dairy foods, fruit-based drinks, The company achieved excellent results
and for products containing probiotics. Friesland Another development in 2007 was the in the market in 2007 with its butter and
Foods invests heavily in researching consumer establishment of a Business Development Unit, milk powder products. According to former
requirements. This offers a clear understanding which supports our operating companies in Asia, general manager Douwe Tamminga, these
of how preferences vary from country to Africa and Europe in their commercial activities good results are largely attributable to the
country. Process optimisation and fractioning and human resources policies. A Shared Service cultural change project known as Putting the
techniques are areas of urgent attention also. Centre for Human Resources Nederland was set Customer First. “Our organisation was highly
From a nutritional perspective, emphasis is on up in 2007 as well. This Centre addresses issues milk-driven and mostly internally focused.
improvement of the immune system, bone relating to conditions of employment for all our The cultural change project literally puts our
development and weight control. Friesland companies operating in the Netherlands. This internal and external customers first in our
Foods sets store by being able to guarantee a structure allows the company to streamline thoughts and actions. We also apply the same
high and constant product quality at the lowest and standardise working methods. The Shared attitude within our own organisation, where
possible cost. Quality as it is perceived by Service Centre will be expanded in 2008 to all the departments are in effect each other’s
consumers is decisive in this respect, which is include other activities such as ICT. customers.” Where in the past staff were used
why it is the topic of extensive studies. Milk is a to focusing on milk in their work, now they are
highly perishable product. Extension of the life of expected to focus on service and customers.
products while preserving their quality and taste “Our Putting the Customer First project can
is and will remain a key research area. be said to have had a stimulating effect.”

Board of
Management review
In terms of staff recruitment, Friesland Foods Corporate social responsibility

will more emphatically promote itself as the Corporate social responsibility
company behind the well-known labels and as Corporate social responsibility and sustainability
an internationally oriented employer. Leadership form an integral part of the operations of People
and professional development programmes Friesland Foods. Within this scope, Friesland Being an inspiring employer that respects
will be available so as to offer the employees Foods undertakes a range of activities to people and encourages them to put forth their
the tools to manage, and cope with, change. create sustainable value. In order to share this best efforts.
In addition, a strategic policy plan will be policy with the outside world, a sustainability
developed for the international career planning report was published for the first time in Profit
of our managers. 2007. Friesland Foods will continue to issue Striking a balance between optimum
sustainability reports once every two years. profitability and broad responsibilities.
In 2007 the production facilities worldwide
started to follow the principles of World Class The first Friesland Foods sustainability report Planet
Operations Management. The company has describes how Friesland Foods processes Acknowledging responsibility towards society
implemented this programme because it will natural raw materials into healthy products at large and the environment.
help on the way towards becoming a ‘world- using sustainable processing techniques. Each
class’ enterprise in 2015 where many savings link in the production chain is vital in order to Partners
have already been achieved and ongoing ultimately allow the delivery of a high-quality Promoting an inspiring network of partners
improvement is business as usual. An internal product. As farm milk is Friesland Foods’ and creating mutual understanding and
developed change management training is linked most important resource, special attention loyalty.
to this program. is focused in the sustainability report on
assuring the quality and food safety of milk, Portfolio
It was announced in 2007 that the Groningen- and encouraging the local production of farm Offering a wide range of food products that
based production site would be shut down. By milk in the countries where Friesland Foods meet consumer demands.
relocating the production facility from Groningen has operations. In addition to milk, fruit is
to Nijkerk, 70 jobs will be lost in Groningen. The an important ingredient as well. Friesland
Groningen site will be shut down in mid-2008. Foods promotes the responsible production
The redundant employees will be eligible for the of fruit by maintaining good relations with
Friesland Foods Redundancy Plan. The years of suppliers. Responsible processing is centred
reorganising the cheese activities finally came to on human and environmental aspects. On a
an end with the closure of the Meppel location global scale, focus is on training and educating
in June 2007. Production facilities were closed employees, and creating a safe and healthy
also in Satu Mare and Deta in Romania, in working environment. Friesland Foods seeks
Gyöngyös and Nagyvánhegyes in Hungary, and to continually improve our environmental
in Nitra in Slovakia. performance, e.g. by implementing ISO 14001
in all production locations. The production chain
European Consultative Forum ends with the dairy products and fruit-based
In 2007 a European Consultative Forum was juices that we produce. Our healthy products
established for Friesland Foods. This Forum are geared to local trends in society in the areas
addresses employee participation issues on a of food and health.
pan-European level. In close consultation with
employee representatives of the European
branches, agreements were made about the
approach to, and responsibilities regarding, the
discussion of relevant issues that affect the
interests of our employees across Europe.

Board of
Management review
Support for Osteoporosis Foundation Outlook
In 2007 Friesland Foods made a creative We will see selling prices of dairy products
contribution to a healthy society with its support fluctuate in 2008 more than we were
for the Thai Osteoporosis Foundation. As each accustomed to in the past. This could already
person in Thailand drinks on average just 20 be identified in 2007. Slight changes in supply
litres of milk a year, many of them miss out and demand are enough to lead to major
on the essential nutrients necessary for strong price fluctuations, particularly in milk and
bones that are found in milk. To raise awareness whey powders, and butter. This is the result
of osteoporosis among the population, of the ever-progressing liberalisation of the
Friesland Foods supports the activities of the dairy market, the abolition of export subsidies,
Thai Osteoporosis Foundation in many ways. a greater variety in supplies due to weather
These include participating in events such as the conditions and consumer purchasing patterns.
Calcimex Bone Check Road Show, where people Now, more than ever, it is a question of timing;
can have their bones checked and learn about determining the price level and the maturity
the nutrients needed for strong bones. of a contract can have a huge impact on
selling prices and margins. This may also cause
greater variances in the milk prices that are
paid to the member dairy farmers of different
dairy companies. Consumption levels of dairy
products worldwide are expected to continue to
increase and Friesland Foods is likely to achieve
its growth targets. Pressure on margins will stay
strong in 2008 as a result of the high cost of
raw materials, particularly in Asia and Africa. The
Board of Management of Friesland Foods is not
making any forward-looking statements about
the company’s financial performance in 2008.
The Board of Management

Risk management
Doing business means taking risks. The Risk management and internal control • guidelines and procedures for treasury and
currency management;
achievement of business objectives is
The Board of Management bears the ultimate • guidelines and procedures for business
contingent, in part, on external economic responsibility for managing the risks associated insurance;
factors, the unpredictability of market

with the company’s objectives and the reliability • a system of internal management
of the internal and external financial and other representations about compliance with
developments, calamities and human reports. Friesland Foods bases its internal control guidelines, procedures and standards.
structure on the principle that the management
factors. In 2007 the company worked on
boards of the operating companies bear the Early in 2007 the Board of Management assessed
a more integrated approach to identifying primary responsibility for the day-to-day the key risks and uncertainties associated with
performance, compliance and monitoring of the the company’s new long-term strategy plan
the risks and uncertainties inherent in
systems that have been put in place to manage (Vision 2015). All operating companies also
the corporate objectives, their internal the key operational risks to which the company performed risk assessments during the year
is exposed as best as possible. under review within the scope of the Medium
management and control, and securing
Term Strategy Plan 2008-2010.
the effectiveness of the internal control In designing and evaluating the structure of
our risk management and control systems, the A Corporate Risk & Control Department
structure.
international COSO framework was used as was formed in 2007. This corporate support
a frame of reference. Friesland Foods has the department assists the Board of Management
following standards, procedures and guidelines and the operating companies in performing risk
in place for controlling its business processes: assessments, designing their risk management
• a code of conduct governing all employees of and internal control systems, and monitoring the
Friesland Foods; systems’ effectiveness.
• systems for operational and financial
planning, including setting budgets and other With however much care these systems and
operational and financial targets; controls are designed, they do not provide
• guidelines and procedures for the format and absolute assurance that the strategic,
drafting of management reports and financial operational, (financial) reporting and compliance
reporting; objectives will consistently and fully be achieved.
• periodic review of the achievement of set Reality shows that:
targets based on pre-defined critical success • decision-making processes are prone to human
factors for all operational and functional error;
disciplines; • different factors need to be weighed
• guidelines for the continuity and reliability of consistently when accepting risks and
electronic data processing; implementing controls;
• guidelines for the management of production • agreements within the company may be
processes and quality controls based on ignored;
internationally recognised and certified • conspiracies between officers can lead to the
methodologies; circumvention of internal controls;
• a quality assurance system for milk and raw • minor errors or mistakes can have major
materials; consequences.
• standards, procedures and guidelines for food
safety;
• procedures for crisis management;
• authorisation procedures and segregation of
duties;
• whistle-blowing procedures;

Risk management
Business risks Political risks In control statement

Friesland Foods occupies important market and
There were no major changes in the risk profile brand positions in Southeast Asia, West Africa, With due observance of the limitations that
of Friesland Foods in 2007 compared with last Central Europe and the Middle East. Political are inevitably inherent in any risk management
year. What follows is a brief description of a and economic changes in these regions might and internal control systems, our internal risk
number of significant business risks incurred by have consequences for the operations in these management and control systems provide
Friesland Foods and the related specific controls. countries and could thus affect the financial reasonable assurance that our financial reports
performance and position of Friesland Foods. are free of material misstatement and that these
Product and service variances Despite the fact that a number of countries systems were adequate and effective in 2007.
Friesland Foods incurs its largest risks in experienced dramatic changes over the past few There are no indications that they will not be
respect of its day-to-day production and years, Friesland Foods occupies a relatively stable adequate and effective in the current year.
service provision. These include: production position in the different regions. The company
interruptions, product contamination, products translates changes into adjustments to its The phrase ‘reasonable assurance’ is taken to
and supplies that do not meet the proper product range, pricing, organisational measures mean the level of assurance that would be
specifications, and disruption of logistical and the embedding of its operations in the provided by a director acting with due care under
services. Friesland Foods anticipates these risks local environment. Risks are spread through the the given circumstances. The set of procedures
by using various quality assurance systems, spreading of activities, both where products and involving the internal risk management and
including HACCP, ISO, HALAL and Qarant, its geographical presence are concerned. control systems, and the related findings,
own quality assurance system for the production recommendations and measures have been
of farm milk, which tracks products throughout Our focal points for the longer term include the discussed with the Audit Committee and the
the production chain. Operational policy also development of the right staff competences, the Supervisory Board.
includes educating and training employees, increase in the average age of our employees and
using and updating crisis manuals, evaluating succession issues. In addition, extra attention is
variances and taking measures to prevent paid to formulating an appropriate and timely
variances. Friesland Foods works with natural response to trends in information technology.
products. An unexpected outbreak of animal
disease, particularly in cattle, could have an The list of risks outlined above is not necessarily
adverse effect on the production and sale of exhaustive. Risks that have not been recognised
dairy products, i.e. on the financial performance at present or are not considered material may
of Friesland Foods. subsequently have a significant adverse effect on
Friesland Foods’ ability to achieve its operational
Changing customer requirements objectives. The internal reporting systems, the
Changes in the market happen in quick budget cycle and the standards, procedures and
succession. Customers are increasingly guidelines of Friesland Foods are geared, in part,
tightening conditions, and consumers expect to the timely identification of these risks.
more and more of products and their uses.
Governments impose new requirements in
the areas of food safety, health and product
information. There are major differences in
this regard among the countries in which
Friesland Foods is active. The approach to
these changes and the regular review of the
competitive position are priorities in the
company’s strategy, its innovation initiatives,
organisational structure, annual planning and
policy implementation.

Jaarrekening
Board of 2007
Management review
The Future of Friesland Foods
Vision 2015
All of these new developments represent

a unique opportunity for Friesland Foods.
44 Jaaroverzicht
Jaaroverzicht
2007
2007
Board
Corporate
ofgegevens
Overige
governance review
Management
The power of milk
We already have all the ingredients for success:

• Friesland has a growing consumer base
• Friesland generates sufficient milk for growth
• Friesland has the concepts and ingredients to bridge milk and
consumers
• Friesland Foods is well structured for growth
• The merger with Campina will accelerate the realisation of
Vision 2015

Corporate
governance
Corporate governance at Friesland Foods The cooperative’s General Meeting On the proposal of the Board of the cooperative,
of Members the General Meeting of Members sets the
involves the General Meeting of Members
number of members of the Board. The Board
and the Board of Zuivelcoöperatie Friesland The members of the cooperative are assigned by members are appointed by the General Meeting
the Board to one of twelve geographical regions. of Members from among the members of the
Foods U.A., as well as the Annual General
Each region has a Regional Meeting to which cooperative upon the binding nomination of the
Meeting of Shareholders, the Supervisory all active members within the region belong. Chairmen of the Regional Councils (known as the
The members of the Regional Meeting elect Platform). A Board member can be suspended
Board and the Board of Management of
the Board for the region, known as the Regional or removed at any time by a resolution of
Royal Friesland Foods N.V. The cooperative Council and consisting of eight natural persons. the General Meeting of Members passed by
The cooperative’s General Meeting of Members a majority of at least two-thirds of the votes
is the sole shareholder of the company.
comprises all the members of the twelve cast at this meeting. The General Meeting of
The cooperative is an exempted statutory Regional Councils. At least two General Meetings Members sets the remuneration to be granted to
of Members are held each year, at least one of the Board members of the cooperative.
two-tier cooperative. The company is an
which is held within six months of the end of the
exempted statutory two-tier company, financial year. The Board of the cooperative requires the
approval of the General Meeting of Members
but has opted to apply the two-tier regime
for specific important decisions on operations,
voluntarily. as well as for major decisions concerning the
legal and capital structure of the company,
and decisions concerning major investments,
all of which are described in the Articles of
Association. Approval is required, inter alia,
for proposed amendments to the Articles of
Association of the cooperative and of the
company, as well as for proposed amendments
Cooperative to the Articles of Association of the company’s
direct and indirect subsidiaries that conduct
Member dairy farmers (organised in regions) the business activities. Approval is also required
in certain cases for decisions of the Board to
Regional Councils exercise the voting rights attaching to the shares
held by the cooperative.
General Meetings of Members
Board The Board of the cooperative

Diagram of the
General Meeting of Shareholders
governance structure The Board of the cooperative is responsible
Supervisory Board for the affairs of the cooperative, in particular
protecting the interests of the members in the
Board of Management cooperative and in the business activities carried
out by the company and its subsidiaries. The
Operating Companies Management maximum term of office for a Board member is
five consecutive financial years. A member of the
Employees Board who stands down at the end of his term
of office can be immediately reappointed for at
Company most one more term.

Corporate governance
The company’s General Meeting of The company’s Board of Management The external members of the Supervisory
Shareholders Board are selected and appointed based on the
The Board of Management is responsible for following criteria: social experience involving the
All the company’s Class A and Class B shares the policy and the operational affairs of the practical aspects of being a supervisory director,
are held by the cooperative, which gives the company. The Board members are appointed for insight into international business, general social
cooperative full control at the General Meeting an indefinite period. Their employment terms background and specific affinity with social
of Shareholders of the company. The Board of and conditions, including remuneration, are set relations, human resources and organisation,
the cooperative exercises the voting rights at by the Supervisory Board. and experience in the multinationals arena. One
the General Meeting of the company on behalf of the members of the Supervisory Board is a
of the cooperative, in certain cases subject to so-called financial expert, meaning that he has
the formal approval of the General Meeting of The company’s Supervisory Board gained relevant knowledge of, and experience in,
Members. finance and accounting with a major legal entity.
The Supervisory Board supervises the
The cooperative acts as the administration conduct of company affairs by the Board of The members of the Supervisory Board are
office for the Class B shares for which depositary Management and has the authority to approve appointed for a term of four years. External
receipts have been issued. The cooperative’s certain decisions of the Board of Management members of the Supervisory Board stand
powers in relation to the holders of depositary described in the Articles of Association. The down after ten years. The term of office of
receipts are exercised by the Board of the Supervisory Board has the powers as laid down a Supervisory Board member who is also a
cooperative. The way in which the Board of the in the provisions of Book 2 of the Dutch Civil member of the cooperative’s Board always ends
cooperative exercises these powers is supervised Code regarding two-tier companies, such as upon termination of this Board membership.
by a trust office established for that specific the appointment of members of the Board of
purpose: Stichting toezicht certificaten Friesland Management, the number of members of the The Supervisory Board has an Executive
Foods. The holders of the depositary receipts Board of Management and the approval of a Committee and an Audit Committee. The
do not have the rights conferred by law upon number of other statutory decisions by the Executive Committee consists of the Chairman,
holders of depositary receipts issued with the Board of Management. In the performance of the Vice-Chairman and the Secretary of the
cooperation of a company. The Board of the their duties, the members of the Supervisory Supervisory Board.
cooperative convenes an exploratory meeting Board must be led by the interests of the
for the holders of depositary receipts once a company and its related businesses. The Executive Committee coordinates the
year, following the adoption of the company’s general contacts with the Board of Management.
financial statements, at which it renders account An agreement has been concluded with The Executive Committee also provides the
for the dividend policy of the company. the Central Works Council concerning the input for decisions of the Supervisory Board on
composition of the Supervisory Board, the the selection and appointment of members of
The company’s financial statements are required profile for members of the Supervisory the Board of Management and the Supervisory
submitted for adoption to the company’s annual Board, the strengthened recommendation rights Board. Finally, it provides the input for decisions
General Meeting of Shareholders. A decision on of the Central Works Council in the appointment on the remuneration policy, the remuneration
the appropriation of profit is also taken at this of members of the Supervisory Board, and the of individual members of the Board of
meeting. way in which the Central Works Council shall Management and the remuneration policy for
exercise these rights. Based on this agreement, senior management.
The General Meeting of Shareholders of the the Supervisory Board is properly composed if
company has the authority to approve certain two-thirds of its members are Board members The Audit Committee consists of a member
decisions of the Board of Management as of the cooperative (the internal members) and of the Executive Committee other than its
described in the Articles of Association. These if one-third of its members are recruited from Chairman, the financial expert of the Supervisory
concern important decisions on operations, as outside (the external members). The chosen Board, and two members of the Supervisory
well as major decisions concerning the legal composition reflects the member dominance of Board who are also Board members of the
and capital structure of the company (and two-thirds of the total number of Supervisory cooperative. The duties of the Audit Committee
the companies in which it holds shares) and Board members permitted by law for large are preparatory in nature and concern the
decisions concerning major investments. cooperatives. This member dominance is carried accuracy and completeness of the financial
through to company level. reporting, the internal accounting and control

systems, risk management, compliance It follows from the chosen control structure that cooperative, members of the Supervisory Board
with regulations, and the appointment and final control is indirectly in the hands of the and the Board of Management, and a few other
procedures of the independent external auditor. General Meeting of Members of the cooperative. categories of employees of the company.
Neither the Executive Committee nor the Audit This means that the holders of depositary
Committee has the authority to make decisions receipts for Class B shares have no voting rights, Deviations from the Code ensuing from
independently. Both committees report to the nor do they have the right to table agenda items policy decisions of the company
full Supervisory Board. or attend the General Meeting of Shareholders
of the company. As the cooperative acts as the The members of the Board of Management of
trust office, it is not independent. Supervision the company are appointed for an indefinite
The Dutch Corporate Governance Code is exercised, however, by Stichting toezicht period. The influence of the cooperative on
certificaten Friesland Foods. the members of the Board of Management in
Although neither the Corporate Governance the exercise of their duties is intrinsic in the
Code nor the Order in Council directly applies to The business activities are carried out by overlap of persons who are members of the
the cooperative and the company, the company the company. Within this framework, the Board of the cooperative, the General Meeting
will actively apply the principles and best cooperative is involved in defining corporate of Shareholders of the company and the internal
practice provisions of the Code and the Order strategy, including the related policy principles. members of the Supervisory Board. For this
in Council. This notwithstanding, the company The General Meeting of Members of the reason – as well as because of the anticipated
has evaluated these principles and best practice cooperative has no formal powers regarding upward pressure on remuneration –, the best
provisions in relation to the ‘family’ nature approval or adoption of the company’s financial practice provision of appointing members of the
of the business and the private character of statements or regarding the appropriation of Board of Management for a four-year term is not
the company. As a result, it has decided not profit. followed.
to apply a number of them. Moreover, some
other principles and best practice provisions are For practical reasons, Friesland Foods has placed
rendered inappropriate due to certain policy Deviations from the Code ensuing from the the duties that the Corporate Governance
decisions that the company has made. private character of the company Code confers upon the appointment and
remuneration committees in the hands of single
For Friesland Foods, the General Meeting of The private character of the company means committee: the Executive Committee of the
Members of the cooperative is the body to that the remuneration of individual Board of Supervisory Board. The number of seats on other
which an account is rendered each year on Management members and other important supervisory boards and other positions that
the structure of the company in broad terms provisions in their employment contracts members of the Supervisory Board and the Board
and on its compliance with the Code, as well are not published. Friesland Foods does not of Management are allowed to hold is decided
as to major changes relating to either aspect. grant share options to its employees. Against on a case-by-case basis by the Supervisory
Friesland Foods has whistle-blowing procedures this background, no rules have been drawn Board according to the demands placed on the
in place. up regarding private investments in other time of the member concerned. Each member
companies by members of the Board of of the Supervisory Board and the Board of
Management and the Supervisory Board. If Management must ensure that he devotes
Deviations from the Code ensuing from necessary, a temporary embargo can be placed sufficient time and attention to the company
the special structure of the Company on the trade in the securities of other companies, to guarantee proper fulfilment of his duties as a
based on the insider trading regulation. This Board member. Although Friesland Foods does
Due to the special structure of Friesland regulation also includes a rule for the trade in not have an internal audit department, it did
Foods and the resulting member dominance bonds of the company applying to members establish a Corporate Risk & Control Department
on the Supervisory Board, the Code’s best of the Supervisory Board and the Board of in 2007, which is concerned with assuring the
practice provision that all Supervisory Board Management, and a few other categories of effectiveness of the internal risk management
members, with the exception of not more than employees of the company. The Model Code for and control systems.
one person, shall be independent cannot be the prevention of insider trading includes a rule
complied with. This best practice provision will for the trade in depositary receipts for Class B
only be applied to the external members of the shares in the company applying to members of
Supervisory Board. the Regional Councils, Board members of the

Financial
statements 2007

Financial statements 2007
Consolidated income statement 1 2007 2006

in millions of euros, unless stated otherwise
Revenue (3) 5,075 4,675

Rental income 5 8
Other operating income (4) 40 10
Operating income 5,120 4,693
Costs of raw materials, consumables and goods for resale 2 (5) – 3,232 – 2,897
Employee benefits expense (6) – 448 – 439
Depreciation and amortisation – 124 – 126
Other operating expenses (7) – 1,017 – 974
Operating expenses – 4,821 – 4,436
Operating profit 299 257
Share of profit of associates 3 3

Finance income and costs (8) – 29 – 26
Profit before tax 273 234
Income tax expense (9) – 65 – 63

Profit for the year from continuing operations 208 171
Profit for the year attributable to perpetual notes providers 3 –9 –9

Profit for the year attributable to equity holders 199 162
0 0
Profit for the year attributable to minority interests – 27 – 34

Profit for the year attributable to equity holders of the parent 172 128
Attributable to equity holders of the parent (10)

Per share of EUR 46,00 4
in euros
Earnings per Class A share, basic 12.98 11.34
Earnings per Class B share, basic 20.20 15.21
Earnings per Class A share, fully diluted 12.58 9.22
Earnings per Class B share, fully diluted 20.20 15.21
Earnings per share, basic 15.63 12.92
Earnings per share, fully diluted 15.32 11.38
Dividend proposed for the year per Class A share 5 2.62 2.39
Dividend proposed for the year per Class B share 10.24 6.81
Dividend distributed for the year per Class A share 5 2.39 2.57
Dividend distributed for the year per Class B share 6.81 5.32
1 See the notes on pages 55 to 79 inclusive.

2 The figures for 2006 have been restated due to the reclassification of costs of raw materials and consumables and other operating expenses.
3 The figures for 2006 have been restated, because the changed classification of the perpetual notes to equity has resulted in the compensation on these notes being classified as profit attribution.
4 The per-share amounts have been calculated on the basis of non-rounded figures.
5 The Class A shares issued in 2007 following the conversion of share premium reserve A share in the dividend A for 2006.

Consolidated balance sheet 2007 2006

At year-end, before appropriation of profit, in millions of euros, unless stated otherwise
Assets
Non-current assets
Property, plant and equipment (12) 861 835
Intangible assets (13) 609 606
Deferred tax assets (22) 23 14
Investments in associates (14) 13 11
Derivative financial instruments 1 (31) 11 13
Financial assets (15) 17 3
1,534 1,482
Current assets
Inventories (16) 703 490
Trade and other receivables (17) 588 496
Government grants 2 5
Income tax receivable 6 9
Cash and cash equivalents (18) 132 145
1,438 1,150
Assets held for sale (19) 18 19

0.0 0.0
Equity and liabilities

Equity
Issued capital 516 454
Share premium 19 81
Unrealised gains and losses arising from cash flow hedges 13 12
Currency translation reserve –4 13
Retained earnings 429 302
Equity attributable to equity holders of the parent (34) 973 862
Minority interests 59 64
Perpetual notes 2 (20) 125 124
Total equity 1,157 1,050
Non-current liabilities
Pensions and other long-term employee benefits (21) 92 84
Deferred tax liabilities (22) 27 25
Provisions (23) 7 4
Non-current interest-bearing borrowings (24) 422 434
579 566
Current liabilities
Current borrowings (25) 292 285
Trade and other payables (26) 892 703
Income tax payable 43 38
Provisions (23) 21 6
1,248 1,032
Liabilities held for sale (27) 6 3

Total equity and liabilities 2,990 2,651
0.0 0.0
Net debt 3 582 574
1 The figures for 2006 have been restated, because the derivative financial instruments were partly reclassified from current to non-current.
2 The figures for 2006 have been restated, because the perpetual notes are reclassified as equity, on account of enhanced insight.
3 Net debt represents non-current interest-bearing borrowings and current borrowings less cash and cash equivalents.

Consolidated cash flow statement 2007 2006

In millions of euros, unless stated otherwise
This statement shows the cash flows generated by Friesland Foods, translated
into euros where applicable. The cash flow statement was prepared using the
indirect method.
Cash flows from operating activities

Profit before tax 273 234
Adjustments for:
Interest expense 1 28 25
Depreciation and amortisation 124 126
Impairment of property, plant and equipment, intangible assets and assets
held for sale 0
16
Movements in working capital – 138 – 56
Movements in pensions and other long-term employee benefits 10 12
Movements in provisions 18
42 123
Cash flows from operating activities 315 357
Income tax paid – 63 – 88
Interest paid 1 – 27 – 25
Net cash flows from operating activities 225 244
0.0 0.0
Cash flows from investing activities

Investment in property, plant and equipment and intangible assets – 187 – 166
Disposals of property, plant and equipment, intangible assets and assets
held for sale 28 24
Acquisitions (33) –3 – 42
Net cash flows used in investing activities – 162 – 184
0.0 0.0
Cash flows from financing activities

Dividends paid to equity holders of the parent – 45 – 36
Dividends paid to minority interests – 25 – 21
Profit distributed on perpetual notes 1 –9 –9
Drawn non-current interest-bearing borrowings 20 10
Repayment of non-current interest-bearing borrowings – 11 –3
Movements in current borrowings and derivative financial instruments –2 10
Net cash flows used in financing activities – 72 – 49
Net cash flows –9 11
Cash and cash equivalents at beginning of year 145 134

Net cash flows –9 11
Translation differences in cash and cash equivalents –4
Cash and cash equivalents at end of year 132 145
0.0 0.0
1 The figures for 2006 have been restated because the changed classification of the perpetual notes has resulted in the compensation on these notes being classified as profit distribution.


Equity
attributable to
equity holders of Minority
the parent interests Perpetual notes Total
At beginning of year 862 64 124 1,050
Movements in unrealised gains and losses 1 1

Currency translation differences – 17 –6 – 23
Amortisation of issue costs 1 1
Profit for the year 172 27 9 208
Total income and expense 156 21 10 187
Profit distributed to perpetual notes providers –9 –9
Acquisition of shares from minority interest holders –1 –1
At end of year 973 59 125 1,157
0.0 0.0 0.0 0.0
2006
Equity
attributable to
equity holders of Minority
the parent interests Perpetual notes Total
At beginning of year 796 66 124 986

0
Currency translation differences –4 –3 –7
Profit for the year 128 34 9 171
Total income and expense 132 31 9 172
Profit distributed to perpetual notes providers –9 –9
Acquisition of shares from minority interest holders – 30 – 12 – 42
At end of year 862 64 124 1,050
0.0 0.0 0.0


Unrealised gains
Equity attributable to equity holders and losses arising Currency
of the parent (34) from cash flow translation Retained
Issued capital Share premium hedges reserve earnings Total
At beginning of year 454 81 12 13 302 862

Currency translation differences – 17 – 17
Profit for the year 172 172
Total income and expense 1 – 17 172 156
Issue of Class A shares chargeable to share premium
reserve A 62 – 62 0
At end of year 516 19 13 –4 429 973
2006
Unrealised gains
and losses arising Currency
from cash flow translation Retained
Issued capital Share premium hedges reserve earnings Total

0

Currency translation differences –4 –4
Total income and expense 8 –4 128 132
Acquisition of shares from minority interest holders – 30 – 30
At end of year 454 81 12 13 302 862

Notes to the consolidated financial statements Financial statements 2007
Accounting policies to derivative financial instruments were partly a foreign currency are translated using the
reclassified from current to non-current. exchange rates as at the dates when the fair
General and basis of consolidation Unless stated otherwise, the financial state- value was determined.
Royal Friesland Foods N.V. is a public limited ments have been prepared on a historical cost Assets and liabilities of foreign subsidiaries are
liability company having its registered office basis, except for derivative financial instru- translated at the currency rate of exchange
in Meppel, the Netherlands. The consolidated ments and employee-related obligations ruling at the balance sheet date; their income
financial statements for the year ended arising from defined benefit plans, which have and expenses are translated at the average
31 December 2007 comprise the financial been measured at fair value. exchange rate during the year. Translation
statements of Royal Friesland Foods N.V. In preparing the financial statements, Friesland differences on the profit of the foreign
and its subsidiaries (jointly referred to as Foods used judgements, estimates and subsidiaries, arising from differences between
Friesland Foods). assumptions based on historical experience the average rate of exchange and the year-end
After having been approved by the Supervisory and various other factors that it believed to be rate are taken directly to equity. Similarly,
Board, the consolidated financial statements reasonable under the circumstances, the results differences on the currency translation of
for the year ended 31 December 2007 were of which form the basis for making judgements equity of foreign subsidiaries and in relation
authorised for issue in accordance with a about the carrying values of assets and to receivables on and payables to subsidiaries
resolution of the Board of Management on liabilities that are not readily apparent from that qualify as net investments in a foreign
28 February 2008. other sources. The actual results may differ operation and whose settlement is not
Subsidiaries are fully consolidated, and all from management’s estimates. This applies in expected in the near future are also taken to
intragroup balances, transactions, income and particular to the assumptions made relative to equity.
expenses are eliminated in full. The financial the milk price payable to the members of Translation differences relating to foreign
statements of the subsidiaries are prepared Zuivelcooperatie Friesland Foods U.A. The subsidiaries are recognised as a separate
for the same year under review as the parent assumptions used in recognising goodwill component of equity. Upon the sale of a
company, using consistent accounting policies. (intangible assets) create a risk of restatement foreign subsidiary, the cumulative gain or loss
Subsidiaries are consolidated from the date of this asset’s carrying value in future financial previously reported in equity is included in the
on which Friesland Foods obtains control, and years. income statement.
continue to be consolidated until the date
that such control ceases. Minority interests Effect of new IFRS standards Segment information
in subsidiaries are presented separately in Friesland Foods has not opted for early applica- The group segments for which financial
the balance sheet and the income statement. tion of the following new standards that will be information is provided are defined based on
Friesland Foods’ interests in joint ventures are mandatory for financial years beginning on or profitability and risk profiles, with primary
recognised as investments in associates. after 1 January 2008: segment reporting by geographical area based
The income statement is presented in accor- - IFRS 8 Operating segments on the location of the assets. Friesland Foods
dance with the provisions of Section 402 of - IFRS 23 Borrowing costs charges sales between segments as if these
Part 9 of Book 2 of the Dutch Civil Code. Friesland Foods does not expect the applica- were transactions with third parties. Second-
tion of these new standards and interpre- ary information is reported by business group.
tations to have a significant effect on the These groups include: Classic Dairy, Industrial,
Summary of significant financial statements. Consumer Products Europe and Consumer
accounting policies Products International.
Foreign currency translation Segment assets and liabilities disclose the
General The consolidated financial statements are situation at year-end. Eliminations show
The consolidated financial statements have presented in euros, which is Friesland Foods’ inter-segment balances.
been prepared in accordance with International functional currency. Monetary assets and
Financial Reporting Standards (IFRS), which liabilities denominated in foreign currencies Property, plant and equipment
have been accepted by the European Union, are translated at the currency rate of exchange Property, plant and equipment are stated
and their interpretations as adopted by the ruling at the balance sheet date. Income and at the lower of cost, less depreciation on a
International Accounting Standards Board expenses denominated in foreign currencies are straight-line basis over the useful life of the
(IASB). translated at the currency rate of exchange assets, taking into account any residual value,
ruling at the date of the transaction. All excluding the costs of day-to-day servicing,
Changes in the accounting policies differences are taken to the income statement and recoverable amount. Cost is stated net
On account of enhanced insight, the perpetual with the exception of differences on foreign of investment grants where applicable. Such
notes, previously classified as loan capital, are currency borrowings that provide a hedge cost includes the cost of replacing part of such
now presented as equity. This adjustment was against a net investment in a foreign entity. plant and equipment when that cost is incurred
also applied to the comparative figures for These are taken directly to equity until the if the recognition criteria are met.
2006. In addition, the interest charge for these disposal of the net investment, at which time Property, plant and equipment also include
perpetual notes has been disclosed as part of they are recognised in the income statement. assets of which Friesland Foods has acquired
the appropriation of profit. This adjustment did Non-monetary items that are measured in beneficial ownership under finance lease
not have any impact on the profit attributable terms of historical cost in a foreign currency agreements.
to equity holders for the years 2007 and 2006. are translated using the exchange rates as at Leased assets are capitalised at the inception
In the comparative figures for 2006, the the dates of the initial transactions. Non- of the lease at the fair value of the leased
amounts receivable as well as payable relative monetary items measured at fair value in property or, if lower, at the present value of the

minimum lease payments. Capitalised leased For the purpose of impairment testing, good- of future economic benefits embodied in the
assets are depreciated over the shorter of the will acquired in a business combination is, from asset are accounted for by changing the amor-
estimated useful life of the asset and the lease the acquisition date, allocated to each of tisation period or method, as appropriate, and
term or valued at the lower recoverable value. Friesland Foods’ cash-generating units, or treated as changes in accounting estimates.
Annual depreciation is calculated at fixed per- groups of cash-generating units, that are Intangible assets with indefinite useful lives are
centages of cost. Land is not depreciated. expected to benefit from the synergies of the tested for impairment annually either individu-
The carrying values of plant and equipment combination, irrespective of whether other ally or at the cash-generating unit level. Such
are reviewed for impairment when events or assets or liabilities of Friesland Foods are intangibles are not amortised. The useful life
changes in circumstances indicate that the assigned to those units or groups of units. Each of an intangible asset with an indefinite life
carrying value may not be recoverable. Where unit or group of units to which the goodwill is is reviewed annually to determine whether
an indication exists that the carrying amount so allocated: indefinite life assessment continues to be
of a cash-generating unit exceeds its recover- - represents the lowest level within Friesland supportable. If not, the change in the useful life
able amount, the asset is considered impaired Foods at which the goodwill is monitored for assessment from indefinite to finite is made on
and is written down to its recoverable amount. internal management purposes; and a prospective basis.
The recoverable amount of property, plant and - is not larger than a segment based on either Computer software is measured at cost less
equipment is based on the higher of an asset’s Friesland Foods’ primary or Friesland Foods’ amortisation on a straight-line basis over the
fair value less costs to sell and its value in use. secondary reporting format determined in useful life of the asset, taking into account any
In assessing value in use, the estimated future accordance with IAS 14 Segment Reporting. impairment losses. The amortisation rate is
cash flows are discounted to their present Impairment is determined by assessing the 20%. The asset’s residual value and useful life
value using a pre-tax discount rate that reflects recoverable amount of the cash-generating are reviewed annually, and adjusted if appro-
current market assessments of the time value unit (group of cash-generating units) to which priate, at each financial year-end. Where the
of money and the risks specific to the asset. the goodwill relates. recoverable amount of computer software is
Where an asset is concerned that does not Where the recoverable amount of the cash- less than the carrying amount, an impairment
independently generate cash inflows, the re- generating unit is less than the carrying loss is recognised.
coverable amount of the cash-generating unit amount, an impairment loss is recognised. In Following initial recognition, intangible as-
to which the asset belongs is determined. assessing the recoverable amount, the esti- sets are carried at cost less any accumulated
Impairment losses are taken to the income mated future cash flows are discounted to their amortisation and any accumulated impairment
statement. present value using a pre-tax discount rate losses. Internally generated intangible assets,
The asset’s residual value and useful life are that reflects current market assessments of the excluding capitalised development costs, are
reviewed, and adjusted if appropriate, at each time value of money and the risks specific to not capitalised and expenditure is recognised
financial year end. An item of property, plant the cash-generating unit. in the income statement in the year in which
and equipment is derecognised upon disposal Where the recoverable amount of the cash- the expenditure is incurred.
or when no future economic benefits are generating unit is less than the carrying Research costs are expensed as incurred. An
expected from its use or disposal. Any gain amount, an impairment loss is recognised in intangible asset arising from development ex-
or loss arising on derecognition of the asset the income statement. penditure on an individual project is recognised
(calculated as the difference between the net Where goodwill forms part of a cash- only when Friesland Foods can demonstrate
disposal proceeds and the carrying amount of generating unit (group of cash-generating the technical feasibility of completing the
the asset) is included in the income statement units) and part of the operation within that intangible asset so that it will be available for
in the year the asset is derecognised. unit is disposed of, the goodwill associated use or sale, its intention to complete and its
with the operation disposed of is included in ability to use or sell the asset, how the asset
Intangible assets the carrying amount of the operation when will generate future economic benefits, the
Intangible assets are separately identifiable determining the gain or loss on disposal of the ability of resources to complete and the
non-financial assets that have no physical sub- operation. Goodwill disposed of in this circum- availability to measure reliably the expenditure
stance, e.g. goodwill and computer software. stance is measured based on the relative values during the development. Following the initial
Goodwill acquired in a business combination is of the operation disposed of and the portion of recognition of the development expenditure,
capitalised. Goodwill is the excess of the cost the cash-generating unit retained. the cost model is applied requiring the asset to
of the business combination over Friesland Goodwill arising from the acquisition of shares be carried at cost less any accumulated amor-
Foods’ interest in the net fair value of the iden- from minority interest holders is deducted tisation and accumulated impairment losses.
tifiable assets and liabilities, and contingent directly from equity. Any expenditure capitalised is amortised over
liabilities of the acquired operations. The useful lives of intangible assets are the period of expected future sales from the
Goodwill acquired in a business combination is, assessed to be either finite or indefinite. related project.
from the acquisition date, allocated to each of Intangible assets with finite lives are amortised The carrying value of development costs is
Friesland Foods’ cash-generating units that are over the useful economic life and assessed for reviewed for impairment annually when the
expected to benefit from the synergies of the impairment whenever there is an indication asset is not yet in use or more frequently when
combination. that the intangible asset may be impaired. an indication of impairment arises during the
As from 1 January 2004, goodwill acquired in The amortisation period and the amortisation year under review.
business combinations and goodwill already method for an intangible asset with a finite
disclosed in the balance sheet has no longer useful life are reviewed at least at each finan-
been amortised. Goodwill is reviewed for cial year-end. Changes in the expected useful
impairment annually. life or the expected pattern of consumption
56 Annual report 2007

Taxes Financial assets losses are recognised over the expected aver-
Current tax assets and liabilities for the current Financial assets are recognised at amortised age remaining working lives of the employees
and prior periods are measured at the amount cost, taking into account any allowances for participating in the plans.
expected to be recovered from, or paid to, the uncollectible amounts deemed necessary.
taxation authorities. The tax rates and tax laws Provisions
used to compute the amount are those that Inventories Provisions are recognised when Friesland Foods
are enacted or substantively enacted at the Raw materials and consumables are valued at has a present obligation (legal or constructive)
balance sheet date. the lower of cost on a first-in, first-out basis, as a result of a past event, it is probable that
Deferred income tax is provided using the net of an allowance for obsolescence, and net an outflow of resources embodying economic
liability method on temporary differences at realisable value if appropriate. benefits will be required to settle the obliga-
the balance sheet date between the tax bases Finished goods are stated at the lower of tion and a reliable estimate can be made of the
of assets and liabilities and their carrying full absorption cost, net of an allowance amount of the obligation. If the effect of the
amounts for financial reporting purposes. for obsolescence where necessary, and net time value of money is material, provisions are
Deferred income tax assets are recognised for realisable value if appropriate. Full absorption discounted using a current pre-tax rate that
all deductible temporary differences, carry- cost comprises the cost of direct materials reflects, where appropriate, the risks specific to
forward of unused tax credits and unused tax and labour and a proportion of manufacturing the liability.
losses, to the extent that it is probable that overheads based on normal operating capacity. Provisions for restructuring are formed when
taxable profit will be available against which Net realisable value is the estimated selling Friesland Foods has a detailed formal plan for
the deductible temporary differences, and the price in the ordinary course of business, less the restructuring and has started to implement
carry-forward of unused tax credits and unused estimated costs of completion and the the restructuring plan or has raised a valid
tax losses can be utilised. estimated costs necessary to make the sale. expectation in those affected that it will carry
The carrying amount of deferred income tax Inventories are stated net of unrealised gains out the restructuring by announcing its main
assets is reviewed at each balance sheet date on intragroup transactions. features to those affected by it.
and reduced to the extent that it is no longer
probable that sufficient taxable profit will be Trade and other receivables Non-current borrowings
available to allow all or part of the deferred Trade and other receivables are recognised All non-current borrowings are initially
income tax asset to be utilised. Unrecognised and carried at original invoice amount less recognised at the fair value of the considera-
deferred income tax assets are reassessed at an allowance for any uncollectible amounts. tion received less directly attributable issue
each balance sheet date and are recognised to Provision is made when there is objective costs. After initial recognition, non-current
the extent that it has become probable that evidence that Friesland Foods will not be able borrowings are subsequently measured at
future taxable profit will allow the deferred tax to collect the debts. Bad debts are written off amortised cost using the effective
asset to be recovered. when identified. interest method. In calculating amortised cost,
Deferred income tax assets and liabilities are allowance is made for all costs, premiums or
measured at the tax rates that are expected to Cash and cash equivalents discounts in relation to the issue of the loan.
apply to the year when the asset is realised or Cash and cash equivalents comprise cash at Increases or decreases in value are recognised
the liability is settled, based on tax rates (and banks and in hand and short-term deposits. in the income statement for the year in which
tax laws) that have been enacted or substan- the liabilities are no longer disclosed in the
tively enacted at the balance sheet date. Pensions and other long-term employee balance sheet or their value is restated, as well
Income tax relating to items recognised di- benefits as during the periodic assessment of amortised
rectly in equity is recognised in equity and not Friesland Foods operates a number of defined cost. If hedge accounting is used for deriva-
in the income statement. benefit plans that mainly relate to the pension tive financial instruments, however, to hedge
Deferred tax assets and deferred tax liabilities plan of the Dutch divisions. These plans are the fair value of non-current borrowings, the
are offset, if a legally enforceable right exists comprised principally of an indexed average liability in question is measured at amortised
to set off current tax assets against current salary plan. In addition, Friesland Foods has a cost adjusted for the value of the derivative
tax liabilities and the deferred taxes relate to number of defined contribution plans for some financial instrument.
the same taxable entity and the same taxation foreign operations. The pension plans of the
authority. Dutch employees are insured with an insurance Leases
company and some industry-wide pension Finance leases are recognised at the present
Investments in associates funds. value of the minimum lease payments. Lease
Unconsolidated associates are accounted for The cost of providing benefits under the payments are apportioned between the finance
under the equity method of accounting. An different pension plans is determined charges and reduction in the lease liability so
associate is an entity in which the Friesland separately for each plan using the ‘pro- as to achieve a constant rate of interest on
Foods has significant influence rather than jected unit credit actuarial valuation method’. the remaining balance of the liability. Finance
control and which not a subsidiary. Friesland Actuarial gains and losses are recognised as charges are recognised directly in the income
Foods recognises its interests in joint ventures income or expense when the net cumulative statement. The amounts for the reduction
using the equity method. unrecognised actuarial gains and losses for in the outstanding liability due in the next
each individual plan at the end of the previous financial year are recognised as current liabili-
year under review exceed 10% of the higher ties. Issue costs, if any, are deducted from the
of the present value of the pension obligation payments qualifying as non-current liabilities
and the fair value of plan assets. These gains or and recognised as an expense in the income

statement on a straight-line basis over the Finance income and costs stated at amortised cost for which the
lease term. Finance income comprises interest received on effective interest method is used is amortised
Capitalised leased assets are depreciated over loans to and other interest-bearing receivables to the income statement.
the shorter of the estimated useful life of the from third parties, currency translation gains For cash flow hedges that qualify for hedge
asset and the lease term, if there is no reason- on financial assets and liabilities, and gains accounting, the effective portion of the gain
able certainty that Friesland Foods will obtain on derivative financial instruments. Finance or loss on the derivative financial instrument
ownership by the end of the lease term. costs comprise interest paid on loans and other is recognised directly in equity, while the
Leases where Friesland Foods does not retain interest-bearing borrowings from third parties, ineffective portion is recognised in the income
substantially all the risks and benefits of own- currency translation losses on financial assets statement.
ership of the asset are classified as operating and liabilities and losses on derivative financial Gains or losses from hedges of investments in
leases. Operating lease payments are recog- instruments. foreign operations are recognised directly in
nised as an expense in the income statement in equity.
the year to which they relate. Dividends Any amounts previously recognised in equity
In accordance with Dutch law and the provi- are subsequently reclassified into profit or loss
Revenue recognition sions of the Articles of Association governing in the same period during which the hedged
Costs are determined with due observance of profit appropriation, dividends qualify as an future cash flows, anticipated future trans-
the aforementioned accounting policies and appropriation of profit in the year in which they action or contractual obligation affect profit or
allocated to the financial year to which they are declared by the Annual General Meeting of loss, such as when a forecast sale or purchase
relate. Revenue is recognised to the extent that Shareholders and are subsequently distributed. occurs. If, however, a hedged anticipated
it is probable that, and in the year in which, the Other dividends are carried as liabilities in the future transaction should subsequently result
economic benefits will flow to Friesland Foods period in which they are declared. in recognition in the balance sheet of a non-
and the revenue can be reliably measured. financial asset or liability, or an anticipated
Losses are accounted for in the year in which Derivative financial instruments future transaction regarding a non-financial
they are foreseeable. Friesland Foods uses derivative financial instru- asset or liability should be reclassified into
ments such as forward currency contracts, a contractual obligation subject to fair value
Revenue interest rate swaps and forward rate agree- hedge accounting, any amounts previously
This relates to the sale of goods to custom- ments (FRAs) to hedge its risks associated with recognised in equity are added to the original
ers, exclusive of sales tax, less any discounts, interest rate and foreign currency fluctuations. cost or other carrying amount of the asset or
etc. Export grants received are recognised as Such derivative financial instruments are liability or of the contractual obligation.
revenue. recognised at fair value in the balance sheet. Derivative financial instruments that do not
Revenue is recognised when the significant The fair value of forward currency contracts qualify for hedge accounting are classified as
risks and rewards of ownership of the goods is calculated by reference to current forward held for sale and any changes in their fair value
have passed to the buyer. exchange rates for contracts with similar are taken directly to the income statement.
maturity profiles. The fair value of interest rate Friesland Foods discontinues hedge account-
Government grants swap contracts is determined by reference to ing if the hedging instrument expires or is
Government grants are recognised at fair value market values for similar instruments or by sold, terminated or exercised or the hedge no
where there is reasonable assurance that the calculating their present value based on longer meets the criteria for hedge accounting.
grant will be received and all attaching condi- current market information. Any amounts previously recognised in equity
tions will be complied with. When the grant For the purpose of hedge accounting, hedges remain in equity until the forecast transaction
relates to an expense item, it is recognised as are classified as fair value hedges when occurs. If the forecast transaction is no longer
income over the period necessary to match the hedging the exposure to changes in the fair expected to occur, amounts previously recog-
grant on a systematic basis to the costs that it value of a recognised asset or liability or nised in equity are transferred to the income
is intended to compensate. contractual obligation. They are classified as statement for that period.
Where the grant relates to an asset, the fair cash flow hedges when hedging exposure to A hedging relationship qualifies for hedge
value is deducted from the carrying amount variability in cash flows that is either accounting if there is formal designation and
of the asset and is released to the income attributable to a particular risk associated documentation of the hedging relationship
statement over the expected useful life of the with a recognised asset or liability, or to a and if the hedge is determined actually to have
relevant asset by equal annual instalments. currency risk associated with a contractual been highly effective throughout the financial
obligation denominated in a foreign currency, reporting periods for which the hedge was
Costs of raw materials, consumables and or to a forecast transaction. designated.
goods for resale For fair value hedges that qualify for hedge
This item represents the costs of raw materi- accounting, any changes in the fair value of the
als and consumables or the purchase price of derivative financial instrument are recognised
products sold. The costs of raw materials and in the income statement. The carrying amount
consumables are calculated based on the first- of the hedged item or hedged contractual
in, first-out principle. obligation is adjusted for gains and losses
attributable to the risk being hedged, and
gains and losses are taken to the income
statement. Any adjustment to the carrying
amount of a hedged financial instrument

1 Segment information 2007

Eliminations
and
Segmentation by geographical location of assets Europe Asia Other unallocated Total
Sales to external customers 1 3,766 971 338 0

5,075
Inter-segment sales 155 6 – 161 0
Total revenue 3,921 977 338 – 161 5,075
Rental and other income 43 1 1 45
Total operating income 3,964 978 339 – 161 5,120
Operating profit 230 85 30 – 46 299

Finance income and costs and share of profit of associates – 26 – 26
Income tax expense – 65 – 65
Operating profit as a % of revenue 5.9 8.7 8.9 5.9
Carrying amounts of assets employed in operating activities 2 2,300 393 103 – 15 2,781
Carrying amounts of other assets 209 209
2,990 0.0
Liabilities resulting from operating activities 3 827 166 66 – 16 1,043
Other liabilities 790 790
1,833 0.0
Investment in property, plant, equipment and intangible assets 121 56 5 5 187
Depreciation, amortisation and impairment of property, plant,
equipment, intangible assets and assets held for sale – 99 – 18 –4 –3 – 124
Allocation to provisions and non-cash expense pension costs 50 3 1 0
54
Share of profit of associates 3 0 0 0
3
Investments in associates 13 0 0 0
13
‘Other’ mainly relates to West-Africa and the Middle East and ‘unallocated’ mainly relates to corporate
staff departments.
Intersegment sales are partly valued at market prices and based on a resale minus method and partly
based on a cost plus method.
2007
Consumer Consumer
Products Products Eliminations
Segmentation by business group Classic Dairy Industrial Europe International and other Total
Sales to external customers 1,635 797 1,018 1,611 14 5,075

Carrying amounts of assets employed in operating activities 2 832 394 253 713 589 2,781
Investment in property, plant, equipment and intangible assets 55 45 21 61 5 187
equipment, intangible assets and assets for sale. – 46 – 21 – 18 – 35 –4 – 124
The part ‘other’ of the segment ‘Eliminations and other’ relates to corporate staff departments
and Cooperative Affairs & Raw Materials.
1 For a breakdown of revenue by geographical sales market, reference is made to page 61.
2 Excluding deferred tax assets, investments in associates, financial assets, income tax receivables, cash and cash equivalents and assets held for sale.
3 Concerns pensions and other long-term employee benefits, provisions, trade and other payables and derivative financial instruments.

Segment information 2006

Eliminations
and
Segmentation by geographical location of the assets Europe Asia Other unallocated Total
Sales to external customers 1 3,493 868 314 0

4,675
Inter-segment sales 132 5 – 137 0
Total revenue 3,625 873 314 – 137 4,675
Rental and other income 16 2 18
Total operating income 3,641 875 314 – 137 4,693
Operating profit 162 99 36 – 40 257

Finance income and costs and share of profit of associates – 23 – 23
Income tax expense – 63 – 63
Profit for the year from continuing operations 171 0.0
Operating profit as a % of revenue 4.5 11.3 11.5 5.5
Carrying amounts of assets employed in operating activities 2 2,084 293 80 –7 2,450
Carrying amounts of other assets 201 201
2,651 0.0
Liabilities resulting from operating activities 3 665 131 31 – 11 816
Other liabilities 785 785
1,601 0.0
equipment, intangible assets and assets held for sale – 117 – 17 –5 –3 – 142
Allocation to provisions and non-cash expense pension costs 30 2 2 1 35
Share of profit of associates 3 0 0 0
3
Investments in associates 11 0 0 0
11
‘Other’ mainly relates to West-Africa and the Middle East and ‘unallocated’ mainly relates to corporate
staff departments.
Intersegment sales are partly valued at market prices and based on a resale minus method and partly
based on a cost plus method.
2006
Consumer Consumer
Products Products Eliminations
Segmentation by business group Classic Dairy Industrial Europe International and other Total
Sales to external customers 1,550 644 975 1,474 32 4,675

Carrying amounts of assets employed in operating activities 2 711 302 247 575 615 2,450
Investment in property, plant, equipment and intangible assets 43 31 22 59 11 166
equipment, intangible assets and assets for sale. – 45 – 21 – 24 – 36 – 16 – 142
The part ‘other’ of the segment ‘Eliminations and other’ relates to corporate staff departments
and Cooperative Affairs & Raw Materials.
1 For a breakdown of revenue by geographical sales market, reference is made to page 61.
2 Excluding deferred tax assets, investments in associates, financial assets, income tax receivables, cash and cash equivalents and assets held for sale.
3 Concerns pensions and other long-term employee benefits, provisions, trade and other payables and derivative financial instruments.

2 Exchange rates Year-end 2007 Average 2007 Year-end 2006 Average 2006
1
Principal exchange rates
US dollar 1.47 1.37 1.32 1.26

Hungarian forint (per 100) 2.53 2.51 2.52 2.64
Indonesian rupiah (per 10,000) 1.38 1.26 1.19 1.15
Romanian leu 3.58 3.33 3.38 3.53
Malaysian ringgit 4.87 4.71 4.65 4.62
Nigerian naira (per 100) 1.74 1.72 1.69 1.61
Thai baht (per 100) 0.43 0.44 0.47 0.47
Vietnamese dong (per 10,000) 2.36 2.21 2.12 2.01
3 Revenue 2007 2006

Revenue by geographical sales market
% %
Europe, exclusive of the Netherlands 1,760 35 1,609 34
The Netherlands 1,417 28 1,378 30
Asia and Australia 1,127 22 998 21
Africa and the Middle East 646 13 584 13
North and South America 125 2 106 2
5,075 100 4,675 100
0.0 0.0 0.0 0.0
Differences with the breakdown of sales to external customers by geographical location of the assets arise
from the classification by area where the sales were made.
Revenue is inclusive of EUR 32 million (2006: EUR 70 million) in various government grants. These
government grants relate principally to exports of cheese, butter and milk powder, and to butter processing.
The conditions of these grants have been met and the related obligations fulfilled.
4 Other operating income

Other operating income includes gains on services rendered to external customers, insurance payments,
proceeds from the sale of property, plant and equipment and business activities.
In the year under review, business activities were sold generating a gain of EUR 32 million.
These transactions involved assets in the amount of EUR 16 million, but no liabilities.
Insurance payments as a result of insured events, net of costs, were EUR 1 million (2006: nil).
5 Costs of raw materials, consumables and goods for resale 2007 2006
% %
Raw materials 2 2,619 81 2,306 80
Packaging materials 2 458 14 441 15
Third-party products 155 5 150 5
3,232 100 2,897 100
0.0 0.0 0.0 0.0
6 Employee benefits expense 2007 2006

% %
Wages and salaries 362 81 352 81
Social security costs 51 11 50 11
Pension costs 35 8 37 8
448 100 439 100
0.0 0.0 0.0 0.0
Employees by geographical segment (average number of FTEs):

The Netherlands 4,921 34 4,936 32
Europe, exclusive of the Netherlands 4,352 30 5,062 33
Asia 4,411 30 4,342 29
Other 898 6 972 6
14,582 100 15,312 100
0.0 0.0 0.0 0.0
1 EUR 1 expressed in the relevant currency.

2 The figures for 2006 have been restated due to the reclassification of costs of raw materials, packaging materials and other operating expenses.

2007 2006
Employees by business group (average number of FTEs): % %
Classic Dairy 2,396 17 2,452 16
Industrial 1,226 8 1,155 8
Consumer Products Europe 4,293 29 5,036 33
Consumer Products International 6,336 44 6,342 41
Other 331 2 327 2
14,582 100 15,312 100
0.0 0.0 0.0 0.0
7 Other operating expenses 2007 2006

Transport costs 232 221
Advertising and promotional expenses 207 194
Work outsourced out and temporary staff 139 118
Utilities 118 117
Maintenance and repair costs 80 75
Other 1 241 249
1,017 974
Other operating expenses include:

- Research and development costs for new products amounting to EUR 29 million (2006: EUR 24 million).
- Leasing charges that qualify as operating lease payments amounting to EUR 7 million (2006: EUR 12 million).
- Various government grants of EUR 8 million (2006: EUR 7 million). The conditions of these grants have
been met and the related obligations fulfilled.
8 Finance income and costs 2007 2006

Interest income 5 2
Interest expense – 28 – 25
Gains/losses on currency exchange rate differences –6 –3
– 29 – 26
0.0 0.0
9 Income tax expense 2007 2006

Breakdown of tax expense
Current tax expense – 72 – 56
Deferred tax expense 7 –7
– 65 – 63
Breakdown of deferred tax expense 0.0 0.0
Property, plant and equipment –2 –2

Intangible assets –2 –3
Employee benefits –2 7
Inventories, receivables, debts and provisions 9 – 10
Unused tax losses and facilities 2 –7
Other 2 8
7 –7
0.0 0.0
Profit before tax less share of profit of associates and profit for the year
attributable to perpetual notes providers 261 222
Tax expense Amount % Amount %

Theoretical tax rate 69 26 52 23
Non-deductible expenses 4 2 3 1
Untaxed income –1 0
–1 0
Unrecognised tax losses for the year 1 0

1 0
Changes in deferred taxes due to reduction in tax rate 0

3 2
Sale of subsidiaries –2 –1 2 1
Other –6 –2 3 1
Effective tax burden 65 25 63 28
0.0 0.0 0.0 0.0
The theoretical tax rate is calculated by weighting the applicable tax rate in each country by the profit or loss posted in that country.
Unrecognised tax losses amounted to EUR 18 million at year-end 2007 (2006: EUR 15 million).
1 The figures for 2006 have been restated due to the reclassification of costs of raw materials, packaging materials and other operating expenses.

10 Earnings per share and attribution per share 2007 2006

Basic earnings per share amounts are calculated by dividing profit for the year attributable to equity holders of the parent by
the weighted average number of shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the profit attributable to equity holders of the parent by the
weighted average number of shares outstanding during the year adjusted for the effects of the dilution as a result of the
conversion of the Class A share premium reserve into Class A shares.
Average number of issued and paid-up Class A shares, basic 6,959,744 5,840,363
Conversion of share premium reserve A into Class A shares 0
1,339,587
Adjustment of new shares to full year 220,206
Number of Class A shares, fully diluted 7,179,950 7,179,950
Number of Class B shares 4,033,865 4,033,865
Average total number of issued and paid-up shares, basic 10,993,609 9,874,228
Average total number of shares, fully diluted 11,213,815 11,213,815
Number of issued and paid-up Class A shares at year-end 7,179,950 5,840,363

Number of issued and paid-up Class B shares at year-end 4,033,865 4,033,865
Total number of issued and paid-up shares at year-end 11,213,815 9,874,228
Earnings attributable to Class A shares, basic 91 66

Earnings attributable to Class B shares, basic 81 62
Earnings attributable to equity holders of the parent 172 128
Per share of EUR 46.00 1 (in euros)

Earnings per Class A share, basic 12.98 11.34
Earnings per Class B share, basic 20.20 15.21
Earnings per Class A share, fully diluted 12.58 9.22
Earnings per Class B share, fully diluted 20.20 15.21
Earnings per share, basic 15.63 12.92
Earnings per share, fully diluted 15.32 11.38
Proposed dividend for the year per Class A share 2 2.62 2.39
Proposed dividend for the year per Class B share 10.24 6.81
Dividend distributed for the year per Class A share 2 2.39 2.57
Dividend distributed for the year per Class B share 6.81 5.32
Where the dividend portion is concerned, the attribution of earnings to Class A and B shares is based on the provisions
governing the appropriation of profit, and the addition to the reserve is distributed proportionately to the capital issued
at year-end in accordance with the provisions of the Articles of Association.
In the Annual General Meeting of Shareholders, each Class A share and Class B share will entitle the holder to one vote.
11 Proposed appropriation of profit 2007 2006

Subject to the approval of the Supervisory Board, the Board of Management
has proposed to appropriate the profit attributable to equity holders of the Addition to Dividend
parent for 2007 as follows: reserves distribution Total Total
Retained earnings 112 112 83

Distribution of cash dividend on Class A shares 19 19 17
Distribution of cash dividend on Class B shares 41 41 28
112 60 172 128
0.0 0.0
Non-retained earnings will be distributed. The amount available for distribution on a Class B share is twice as high as that
on a Class A share. The actual distribution on Class A shares per year is capped at an amount based on the total nominal
value of the Class A shares plus the balance of share premium reserve A at the balance sheet date, at a rate corresponding
with the average effective return on certain treasury bonds increased by one hundred and fifty (150) basis points.
1 The per-share amounts have been calculated on the basis of non-rounded figures.
2 The Class A shares issued in 2007 following the conversion of share premium reserve A share in the dividend A for 2006.

If, in any financial year, the amount available for distribution on Class A shares should exceed this cap,
any excess will be distributed on the Class B shares. This holds true for 2007 and 2006.
For 2007, a cash dividend of EUR 2.62 (2006: EUR 2.39) per Class A share of EUR 46.00 nominal value
each and a cash dividend of EUR 10.24 (2006: EUR 6.81) per Class B share of EUR 46.00 nominal value
each will be distributed on 7 March 2008.
12 Property, plant and equipment 2007

Other Not employed
Land and Plant and non-current in business
buildings equipment assets operations Total
0
Net carrying amount at beginning of year 255 517 57 6 835

Additions 41 123 16 0
180
Disposals –1 –2 – 16 –4 – 23
Currency translation differences –3 –5 –2 0
– 10
Transfers 18 – 19 –8 9 0
Depreciation charge for the year – 23 – 85 – 13 0
– 121
Impairment 1 –1 0
Net carrying amount at end of year 288 528 34 11 861
0.0 0.0 0.0 0.0 0.0
Cost 588 1,436 103 20 2,147

Accumulated depreciation and impairment – 300 – 908 – 69 –9 – 1,286
2006
Other Not employed
Land and Plant and non-current in business
0 buildings equipment assets operations Total
Net carrying amount at beginning of year 264 515 52 6 837

Additions 27 112 20 0
159
Disposals –6 –4 –6 0
– 16
Currency translation differences –2 –3 0 0
–5
Transfers –6 –8 7 7 0
Transfer to assets held for sale –7 –7
Depreciation charge for the year – 19 – 91 – 13 0
– 123
Impairment –3 –4 –3 – 10
0.0 0.0 0.0 0.0 0.0
Cost 514 1,409 142 18 2,083

Accumulated depreciation and impairment – 259 – 892 – 85 – 12 – 1,248
The depreciation rates are between 4% and 10% for buildings, between 5% and 20% for plant and
equipment and between 5% and 20% for other non-current assets.
On 1 October 2007, the depreciation rates were revised based on an investigation. For 2007 this results in
the depreciation charges being on balance EUR 3 million lower. On the basis of a full year, the depreciation
charges would have been EUR 12 million lower.
Impairment relates mainly to the downward revaluation of the appraised net realisable value of property,
plant and equipment affected by restructuring decisions.
The net carrying amounts of buildings, plant and equipment to which finance leases relate amount to
EUR 21 million (2006: EUR 10 million).
The net carrying amount at year-end includes EUR 95 million (2006: EUR 56 million) in non-current assets
under construction.

13 Intangible assets 2007 2006

Goodwill Software Totaal Goodwill Software Totaal
Net carrying amount at beginning of year 595 11 606 598 8 606

Additions 0
7 7 0
7 7
Disposals 0 0
0 0
–1 –1
Currency translation differences –1 0
–1 1 0
1
Amortisation charge for the year –3 –3 –3 –3
Impairment 0 –4 –4
Net carrying amount at end of year 594 15 609 595 11 606
0.0 0.0 0.0 0.0 0.0 0.0
Cost 659 35 694 660 25 685

Accumulated amortisation and impairment – 65 – 20 – 85 – 65 – 14 – 79
Net carrying amount at end of year 594 15 609 595 11 606
For the purposes of impairment testing, goodwill is allocated to the cash-generating units Western Europe and Central
Europe. The recoverable amounts of both cash-generating units have been determined based on the medium-term plan until
2010. The discount rate applied to cash flow projections is 7.4% for Western Europe (2006: 7.2%) and 12.1% on average for
Central Europe (2006: 12.6%). Cash flows beyond 2010 are extrapolated using a growth rate that is the same as the current
inflation rates in the countries in question.
The annual amortisation rate for software is 20%.
14 Investments in associates 2007 2006

Net carrying amount at beginning of year 11 11
Investment 2 0
Changes as a result of the income statement 3 3

Dividends received –3 –3
Net carrying amount at end of year 13 11
0,0 0,0
Net asset value Share of profit Share of revenue Shareholding as % Share of revenue Shareholding as %
CSK Food Enrichment B.V., Leeuwarden,

the Netherlands 5 2 n.b. 49 15 49
Het Kaasmerk B.V., Leiden,
the Netherlands 1 0
n.b. 49 1 49
Great Ocean Ingredients Pty Limited,
Allansford, Victoria, Australia 1 3 0
n.b. 50
Unifine Debic Ingredientes de Pastelaria S.A.
Lissabon, Portugal 1 1 0
n.b. 50 3 50
El Castillo Debic Food Service S.L.,
Barcelona, Spain 1 3 1 n.b. 50 17 50
13 3 36
0,0 0,0 0,0
Share in assets Share in assets
Non-current assets n.b. 6

Current assets n.b. 7
Equity n.b. 7
Non-current liabilities n.b. 1
Current liabilities n.b. 5
When these financial statements were prepared, the associates’ balance sheets and revenue figures for 2007 were not yet
available.
,
15 Financial assets 2007 2006

Loan notes 5 3
Non-current receivables 12
17 3
0.0 0.0
16 Inventories 2007 2006

Raw materials and consumables 232 137
Finished goods and goods for resale 471 353
703 490
0.0 0.0
1 These are joint ventures.

17 Trade and other receivables 2007 2006

Trade receivables 519
519 439
Provision for doubtful debts – 14
– 14 – 12
Other receivables 33
33 29
538
538 456
Tax receivable (exclusive of income tax) and receivable of social security contributions 50
50 40
588
588 496
0.0 0.0 0.0
Provision for doubtful debts

At beginning of year – 12
– 12 – 17
Currency translation differences 0 0
1
Charged to the income statement –4
–4 –3
Released to the income statement 1
1 0
Trade receivables written off 1

1 2
Received on trade receivables written off 5
At end of year – 14
– 14 – 12
0.0 0.0
Term of payment exceeded by trade and other receivables

Prompt payment 426
426 357
Term of payment exceeded by up to 3 months 106
106 91
Term of payment exceeded by 3 to 6 months 4
4 3
Term of payment exceeded by more than 6 months 2
2 5
538
538 456
0.0 0.0 0.0
Trade and other receivables are non-interest-bearing and generally fall due between 10 and 90 days.
With respect to its trade receivables, Friesland Foods has accepted pledges, which can be cashed in, sold
or re-pledged. The fair value of these pledges totals EUR 14 million.
18 Cash and cash equivalents 2007 2006

Deposits 25
25 29
Other cash and cash equivalents 107
107 116
132
132 145
0.0 0.0 0.0
Of cash and cash equivalents, EUR 34 million (2006: EUR 32 million) is not at the Company’s free
disposal. This relates to EUR 25 million in deposits and EUR 9 million in issued guarantee.
The guarantee issued concerns a pledge for a documentary letter of credit and is valid until
August 2008.

19 Assets held for sale

Assets held for sale relate to land, buildings, plant and equipment of EUR 11 million
(2006: EUR 16 million) and current assets of EUR 7 million (2006: EUR 3 million), which will be
sold within one year. The assets are available for sale as a result of restructuring and because of a
business activity does no longer fit in the strategy of the company.
These assets are recognised at the lower of their carrying amount and fair value less costs to
sell based on valuation reports.
The balance of the impairment losses and of the difference between the market price and the
carrying amount was EUR 3 million (2006: EUR 1 million). This amount was recognised in the
income statement under other operating income.
2007
2007 2006
Net carrying amount at beginning of year 19
19 18
Transfer from property, plant and equipment 0 0
7
Addition current assets 7
7 3
Disposals –9
–9 –7
Impairment 1
1 –2
Net carrying amount at end of year 18
18 19
0.0 0.0
20 Perpetual notes
In 2003, Friesland Foods issued perpetual cumulative subordinated notes for an amount of
EUR 125 million with a coupon of 7.125%, the effective interest rate of 7.66% being based on
amortised issue costs and share premium income. The notes are listed on Euronext Amsterdam.
There is no repayment commitment, but the notes can be repaid in full each year, for the first time
on 2 June 2008. Royal Friesland Foods has to inform the holders of the notes at least 30 days and
not more than 60 days in advance. The notes are subordinated to the claims of all present and
future creditors, to the extent that these are not subordinated.
Interest payments may be deferred, provided that Royal Friesland Foods N.V. has not distributed
any dividend in the 12 months prior to the annual coupon date. Deferred interest will be payable on
the date on which dividend is next distributed.
21 Pensions and other long-term employee benefits

Friesland Foods operates a number of defined benefit plans that mainly relate to the pension
plan of its Dutch operations. This plan is comprised principally of an indexed average salary
plan. In addition, Friesland Foods has a number of defined contribution plans for some foreign
operations. The pension plans of the Dutch employees are insured with an insurance company and
some industrial-wide pension funds. The most important pension plan insured with an insurance
company has a profit-sharing agreement based on a segregated investment fund and has a required
coverage ratio (the ratio of plan assets to the pension obligation calculated under the conditions of
the insurance contract) of at least 115%.
At year-end 2007, the coverage ratio of the insured pension plan was 125% (2006: 124%), thereby
fulfilling the contractual obligation vis-à-vis the insurance company.
In 2007, part of the pension obligation of the Dutch operations (nearly all pensioners and
deferreds) was transferred to another insurance company, which was done in such a way that
Friesland Foods no longer has any obligation. As a result, this pension obligation will no longer be
disclosed in the balance sheet. Under the provisions of IAS 19, this concerns a termination of the
pension scheme for this specific group of insured persons. This has led to a write-off of the costs
not yet recognised relative to years of past service and part of the actuarial gains and losses not yet
recognised.
The following tables summarise the assumptions used in determining the (movements in the)
present value of pension obligation and the plan assets and the components of the net benefit
expense recognised in the consolidated balance sheet and income statement.

Assumptions 2007 2006

Discount rate 5.5% 4.4%
Age-related salary increases 0 - 2% 0 - 2%
Wage inflation 2.7% 2.5%
Price inflation 2.2% 2.0%
Indexation
- actives 2.7% 2.5%
- pensioners 0 - 2% 0 - 2%
Francise trend 2.2% 2.0%
Expected rate of return on plan assets 5.5% 5.5%
Breakdown of pension costs payable at year-end

Present value of pension obligation 762 1,640
Fair value of plan assets 790 1,546
– 28 94
Past-service cost not yet recognised – 35

Unrecognised actuarial gains and losses at year-end 120 25
92 84
0.0 0.0
Movements in pension costs payable

At beginning of year 84 73
Pension costs of defined benefit plans 31 30
Contributions paid – 21 – 18
Currency translation differences –2 –1
At end of year 92 84
0.0 0.0
Present value of pension obligation

At beginning of year 1,640 1,654
Changes due to new pension plan 39
Increase in present value of pension obligation 37 40
Interest expense 64 66
Benefits paid – 53 – 65
Currency translation gains and losses –2 –1
Transfer of pension obligation – 717
Actuarial gains and losses – 207 – 93
At end of year 762 1,640
0.0 0.0
Funded pension obligation 690 1,567

Pension obligation not yet funded 72 73

Fair value of plan assets 2007 2006

At beginning of year 1,546 1,487
Expected return on plan assets 71 80
Contributions received 21 18
Benefits paid – 53 – 65
Transfer of pension obligation, single premiums – 792
Actuarial gains and losses –3 26
Unrecognised actuarial gains and losses

At beginning of year 25 – 94
Present value of pension obligation 207 93
Plan assets –3 26
Release due to transfer of pension obligation – 109
Past-service cost not yet recognised

At beginning of year 35
Liability in respect of new pension plan 39
Depreciation –3 –4
Write-off due to transfer of pension obligation – 32
At end of year 0 35
Pension costs disclosed in the income statement

Increase in present value of pension obligation 37 40
Interest expense 64 66
Expected return on plan assets – 71 – 80
Depreciation of past-service cost 3 4
Gain/loss on transfer of pension obligation –2
Expense item disclosed in income statement by virtue of IAS 19-based
defined benefit plans 31 30
Pension costs by virtue of defined contribution plans and industry
multi-employer plans 10 11
Employees’ share in pension costs –6 –4
35 37
0.0 0.0
The industry multi-employer plans are defined benefit plans. The funds are unable to provide
Friesland Foods with the required information. As a result, the related contributions are recognised as being
for defined contribution plans.
Friesland Foods expects to contribute EUR 20 million to its defined pension plans in 2008.
The key investment categories based on percentage of fair market value of total assets are: % %
Shares 47 43
Fixed-interest securities 40 41
Convertible bonds 5 6
Real estate 7 5
Other 1 5
0.0 0.0
Expected return on plan assets is based on the expected long-term return on the basis of the long-term
investment strategy and the different investment categories. A long-term return is assumed for each long-
term investment category making allowance for the long-term risk of the investment and historical returns
of the investment category in question. A weighted average expected long-term return is determined based
on the long-term return from each investment category and the strategic asset allocation.

Five-year summary 2007 2006 2005 2004 2003

Present value of pension obligation 762 1,640 1,654 1,502 1,310
Fair value of plan assets 790 1,546 1,487 1,343 1,280
– 28 94 167 159 30
Actuarial gains and losses on pension obligation
(excess/deficit) 207 93 – 97 – 146
Actuarial gains and losses on plan assets (deficit/excess) –3 26 115 34
22 Deferred taxes 2007 2006

Assets by type of temporary difference
Intangible assets 21 18
Employee benefits 8 10
Inventories, receivables, derevative financial instruments,
debts and provisions 16 7
Unused tax losses and relief facilities 8 5
53 40
0.0 0.0
Liabilities by type of temporary difference

Property, plant and equipment 23 21
Intangible assets 20 16
Inventories, receivables, derevative financial instruments,
debts and provisions 8 7
Other 6 7
57 51
Net debt 4 11
0.0 0
Disclosed as follows in the balance sheet:

Deferred tax assets 23 14
Deferred tax liabilities 27 25
Net debt 4 11
Friesland Foods expects to be able to offset unused tax losses against future profits.
23 Provisions 2007 2006

Restructuring
provisions Other provisions Total Total
At beginning of year 7 3 10 10
Charged to the income statement 12 13 25 8
Released to the income statement –1 –1 – 2 –3
Utilised –5 – 5 –5
At end of year 13 15 28 10
0 0 0 0
Non-current provisions 4 3 7 4
Current provisions 9 12 21 6
13 15 28 10
Restructuring provisions
Restructuring provisions will result in future cash outflows. Since their present value is not materially
different, the provisions are recognised at their non-discounted value.
The restructuring provisions relate to a number of projects, in particular the production plant situated in
Groningen and the corporate staff departments.
Other provisions
These provisions are formed for obligations of which the extent or likelihood is uncertain at the balance
sheet date. The timing of the cash outflow of these provisions is uncertain. These provisions are stated at
actual value since their present value is not materially different. Non-current provisions are mainly medium-
term in nature.
The other provisions also comprise an amount of EUR 5 million for onerous contracts.

24 Non-current interest-bearing borrowings 2007 2006

Amounts owed Amounts owed Other amounts
to institutional to syndicate of owed to credit
investors credit institutions institutions Other debts Total Total

Additions 0
20 20 10
Repayments –4 –7 – 11 –3
Transfer to current borrowings –8 –1 –9 –2
Amortisation of issue costs 1 1
Adjustment for currency / interest rate swap – 13 – 13 – 20
At end of year 149 250 0 23 422 434
2007 2006
Total Interest % Interest %
Repayment schedule and interest rates: 2009 - 2012 After 2012 repayment at year end at year end
Amounts owed to institutional investors 70 79 149 4.7 4.5

Amounts owed to syndicate of credit institutions 250 0
250 3.0 3.0
Other debts 12 11 23 5.7 5.8
Total 332 90 422 3.7 3.8
Amounts owed to institutional investors comprise private placements for a total amount of USD 213
million. These loans are recognised at amortised cost, adjusted for the value of the fair value hedge
contracted for the loan.
The amounts owed to syndicate of credit institutions concern an unconditional multicurrency credit facility
of EUR 550 million. This facility will mature in 2010.
The main terms and conditions applying to the loans and credit facility are:
- the ratio of net debt to operating profit before depreciation and amortisation plus dividends from
associates, and exclusive of exceptional items must not exceed 3.5 : 1.
- the ratio of operating profit before depreciation and amortisation plus dividends from associates, and
exclusive of exceptional items to interest must be at least 3.5 : 1.
The loans and amounts drawn from the credit facility become repayable on demand if the above terms and
conditions cease to be met.
By means of a cross-currency interest rate swap, repayment and interest obligations to institutional
investors denominated in USD have been converted into EUR, and fixed interest rates have been converted
into floating interest rates. The USD 213 million portion has been fixed at EUR 181 million through the swap
referred to above. The floating interest rates are based on six-month EURIBOR plus a mark-up.
The interest rate on the amounts owed to a syndicate of credit institutions was fixed through two swaps,
within a spread of 2.9% and 3.4%. The interest rates on these swaps range only based on the ratio of net
debt to operating profit before depreciation and amortisation plus dividends from associates, and exclusive
of exceptional items.
Finance leases 2007 2006

Total lease payment 29 12
Present value of lease payments 21 11

Included in current borrowings –2 –3
19 8
The finance leases are recognised as ‘Other amounts owed to credit institutions’ and ‘Other debts’.
EUR 8 million will be repaid in the years 2009 to 2012, and EUR 11 million in subsequent years. The average
interest rate on these amounts owed and debts at year-end 2007 was 5.5% (2006: 5.9%).
The lease instalments payable comprise an amount of EUR 26 million (present value EUR 18 million) for a
joint venture agreement with a third party for the ripening, storage and packaging of cheese. This agreement
expires in 2015.

25 Current borrowings 2007 2006

Current portion of non-current interest bearing borrowings 10 2
Bank overdraft 282 283
292 285
0.0 0.0
At year-end 2007, ‘Bank overdraft’ included an amount of EUR 90 million in the form of a current drawing
on the unconditional multicurrency credit facility included in ‘non-current interest bearing borrowings.’
Of this amount the interest rate of EUR 50 million has been hedged within a spread of 2.9% and 3.4%.
The interest rate of the other EUR 40 million is floating and is based on EURIBOR plus a mark-up depending
on the ratio of net debt to operating profit before depreciation and amortisation plus dividends from
associates, and exclusive of exceptional items. Friesland Foods can determine the interest period to which
the EURIBOR applies.
Other amounts under ‘Bank overdraft’ relate mainly to conditional bank overdrafts. This item also includes
short-term borrowings from institutions other than banks.
The average interest rate on current borrowings at year-end 2007 was 4.1% (2006: 3.2%).
26 Trade and other payables 2007 2006

Amounts owed to Dutch dairy farmers 302 221
Amounts owed to other suppliers 338 257
Amounts owed relating to investing activities 35 42
Tax payable (exclusive of income tax) and social security contributions 19 22
Other payables 198 161
892 703
0.0 0.0
Trade and other payables are non-interest-bearing and generally fall due between 10 and 90 days, except for
a portion of the amounts owed to dairy farmers, which is paid in the month of May following the financial
year.
27 Liabilities held for sale

The liabilities held for sale concern liabilities of a business activity whose operations are no longer in line
with the company’s strategy.
28 Security
No security has been provided for current and non-current borrowings.
29 Commitments and contingencies 2008 2009 - 2012 After 2012 2007 Total 2006 Total
Commitments: non-current assets and guarantees
Guarantees to third parties 17 0 0
17 48
Rental and lease obligations 23 38 18 79 64
Purchase commitments relating to non-current assets 21 0 0
21 22
Other commitments 4 4 1 9 8
65 42 19 126 142
The guarantees to third parties relate mainly to guarantees issued relating to export grants.
Friesland Foods has granted an outside party the right, subject to certain conditions, to indirectly acquire 4%
of the shares in PT Frisian Flag Indonesia in the period from 2007 to 2011, and an additional 4% indirectly in
the period 2012 to 2015 inclusive. This right has not been used in 2007.
30 Related party disclosures

Zuivelcoöperatie Friesland Foods U.A., the shareholder, and Friesland Foods B.V., a subsidiary of Royal
Friesland Foods N.V., have agreed that the latter will purchase from the cooperative the milk supplied to
it by its members (5.3 billion kgs for 2007). The price to be paid for this milk is based on the price paid by
Friesland Foods B.V. for 2005, indexed annually to the movements in the milk prices paid by four Western
European dairy companies relative to 2005. The financial statements include the estimated amount due at
year-end. The estimate is based on the provisional information of the dairy companies in question.

In 2008, based on the annual reports of the dairy companies concerned, the actual index for 2007 is
determined. The result that arises due to the difference between the estimated and the actual index is taken
to the income statement for 2008. Owing to the extreme volatility of the milk price in 2007, the estimate is
more complex than in previous years. When estimating the milk price, all relevant information of the dairy
companies concerned as available upon the compilation of the financial statements, is taken into account.
However, the actual milk price can still differ substantially from the milk price estimated for the financial
statement purposes.
Friesland Foods has rented milk tanks to members of Zuivelcoöperatie Friesland Foods U.A. (2007: EUR 5
million, 2006: EUR 7 million). On 1 October 2007, these milk tanks and rental activities were transferred to
a third party.
Friesland Foods has sold milk tanks to members of Zuivelcoöperatie Friesland Foods U.A. (2007: EUR 2
million, 2006: EUR 6 million).
31 Financial instruments and risks

For notes to the objectives and policies with regard to the role of derivatives and other financial instruments
in Friesland Foods’ activities, please refer to pages 76 and 77.
Carrying amounts and fair values of financial instruments 2007 2006

Carrying Carrying
Assets amount Fair value amount Fair value
Financial assets 17 17 3 3
Trade and other receivables 588 588 496 496
Derivative financial instruments 18 18 18 18
Cash and cash equivalents 132 132 145 145
Liabilities
Perpetual notes 125 125 124 129
Non-current interest-bearing borrowings 422 422 434 435
Current borrowings 292 292 285 285
Trade and other payables 892 892 703 703
Derivative financial instruments 31 31 19 19
The fair value is the amount that would have been received or paid had the assets or liabilities been settled at the balance
sheet date without further obligations. The fair value of the perpetual notes is based on the closing price on Euronext
Amsterdam as at year-end. The fair value of derivative financial instruments relating to forward currency contracts is
calculated by reference to current forward exchange rates for contracts with similar maturity profiles. With respect to
interest rate swap contracts, it is determined by calculating their present value based on current market information. The fair
value of all other items is determined based on the discounted value of the estimated future cash flows at discounts rates
that reflect current market assessments.
Cash flows financial liabilities

2007 2008 2009 - 2012 After 2012 Total
Non-current interest-bearing borrowings – 26 – 371 – 96 – 493
Current borrowings – 292 – 292
Trade and other payables – 892 – 892
Derivative financial instruments – 16 – 15 – 31
– 1,210 – 387 – 111 – 1,708
2006 2007 2008 - 2011 After 2011 Total

Non-current interest-bearing borrowings – 18 – 377 – 94 – 489
Current borrowings – 285 – 285
Trade and other payables – 703 – 703
Derivative financial instruments – 10 –9 – 19
– 1,006 – 387 – 103 – 1,496

The cash flows of the financial liabilities comprise undiscounted principal amounts and interest that have been recognised in
the period in which payment falls due.
Receivables and debts denominated in currencies other than the local currency 2007 2006
Receivables and Receivables and
cash and cash cash and cash
equivalents Debts equivalents Debts
US dollar 15 40 15 23
Euro 6 12 3 3
Indonesian rupiah 4 2 0 0
Hungarian forint 4 0
19 0
Pound Sterling 4 3 2
The amounts disclosed concern cash and cash equivalents, receivables and debts denominated in currencies other than the
local currency, net of the amounts for which the currency risk has been hedged by means of derivative financial instruments.
Interest on borrowings and perpetual notes can be broken down as follows 2007 2006
Carrying Carrying Carrying Carrying
amount amount amount amount
exclusive of inclusive of exclusive of inclusive of
hedging hedging hedging hedging
Fixed rate 307 458 300 487

Floating rate 532 381 543 356
839 839 843 843
Contract volume Fair value at Contract volume Fair value at

Hedging activities at year-end year-end at year-end year-end
Fair value hedges

Cross currency interest rate swaps 181 – 31 181 – 19
Cash flow hedges

Interest rate swaps for the purposes of fixing interest on non-current
liabilities 300 11 350 13
Other derivative financial instruments carried as assets 96 7 90 3
Other derivative financial instruments carried as liabilities 15 7
Derivative financial instruments not subject to hedge accounting

Carried as assets 28 44 2
Carried as liabilities 11 20
Fair value at Fair value at

Total derivative financial instruments year-end year-end
Carried as assets 18 18
Carried as liabilities 31 19
Fair value hedges

Friesland Foods has contracted currency interest rate swaps on loans of USD 213 million as a result of
which the repayment and interest obligations relating to amounts owed to institutional investors have been
converted into obligations denominated in EUR and the fixed interest was converted into floating interest.
Cash flow hedges

The interest rate swaps were contracted to convert the floating-interest obligations on non-current liabilities
into fixed-interest obligations.
Of the other derivative financial instruments carried as assets, an amount of USD 134 million (2006: USD
125 million) relates to the hedging of estimated future cash flows from export income and HKD 223 million
(2006: HKD 186 million) from import payments.
The hedges comply with the documentation requirements for hedge accounting of IAS 32/39 and are tested
for effectiveness prior to and during their term.

Derivative financial instruments not subject to hedge accounting

These derivative financial instruments relate to contracted sales and purchases, outstanding receivables and
payables, and bank balances. The changes in the value of the derivative are largely offset by counterweight
value changes in receivables, payables and bank balances. These qualify as natural hedges rather than as
speculative instruments.
Contract volume Contract volume

at year-end at year-end
Maturity schedule of derivative financial instruments
2008 2009 - 2012 After 2012 2007 2008 - 2011 After 2011
Fair value hedges

Cross currency interest rate swaps 86 95 86 95
Cash flow hedges
Interest rate swaps for the purposes of fixing interest
on non-current liabilities 50 250 50 300
Other derivative financial instruments carried as
assets 96 90
Other derivative financial instruments carried as
liabilities 15 7
Derivative financial instruments not subject to hedge

accounting
Carried as assets 28 44
Carries as liabilities 11 20
Derivative financial instruments relating to foreign currency risks Year-end 2007 Year-end 2006
Forward-bought Forward-sold Forward-bought Forward-sold
Contractvolumes currencies EUR currencies currencies EUR currencies
US dollar 132 185 141 185

Japanese yen 2 276 1 190
Hong Kong dollar 21 223 18 186
Pound Sterling 3 2 1 1
158 161
Derivative financial instruments relating to interest rate and

currency risk on non-current interest bearing borrowings 2007 2006
Contract volumes in EUR
Euro 300 350
US dollar 181 181
481 531
32 Financial risk management: objectives and policy

Management of risks relative to Friesland Foods’ capital
Friesland Foods manages its capital in order to maintain a good credit rating (investment grade at the
relevant credit rating agencies) and to ensure that the continuity of the subsidiaries as a going concern is
safeguarded. The return to the stakeholders in Friesland Foods is maximised through optimising the best
possible mix of debt and equity. Within this same scope, Friesland Foods applies guidelines for the solvency
ratios of different types of subsidiaries.
The capital structure of Friesland Foods comprises debt (including non-current interest-bearing borrowings
and current borrowings) and equity in the form of equity attributable to equity holders of the parent,
minority interests and perpetual subordinated notes.

Management of financial risks

Friesland Foods’ principal financial instruments, other than derivatives, comprise loans from credit
institutions and institutional investors, perpetual notes, and cash and cash equivalents. The main purpose of
these financial instruments is to raise finance for Friesland Foods’ operations from a diversity of markets and
investors. Friesland Foods has various other financial assets and liabilities such as trade receivables and trade
payables, which arise directly from its operations. Friesland Foods closely monitors the market risks relative
to all financial derivative instruments.
Friesland Foods also enters into derivative transactions, including principally forward currency contracts
and interest rate swaps. The purpose is to manage the interest rate and currency risks arising from Friesland
Foods’ operations and its sources of finance. It is, and has been throughout the year under review, Friesland
Foods’ policy that no trading in financial instruments shall be undertaken. The main risks arising from
Friesland Foods’ financial instruments are foreign currency risk, interest rate risk, liquidity risk and credit
risk. Friesland Foods has policies in place to manage the above risks.
Currency fluctuations
Since Friesland Foods conducts business worldwide, a considerable share of the assets, liabilities and results
is sensitive to currency fluctuations. The purpose of the defined group policy for managing transaction
risks is to limit the financial performance’s exposure to currency fluctuations. In hedging transaction risks,
allowance is made for specific product and market considerations. Currency risks resulting from investments
in foreign subsidiaries and associates are not hedged. The risk associated with currency mismatches between
assets and liabilities is mitigated by funding foreign subsidiaries in local currencies where possible. The
solvency requirements that Friesland Foods imposes on foreign subsidiaries do result in certain currency risk,
however.
Currency fluctuations sensitivity analysis

Friesland Foods is mostly sensitive to currency fluctuations of the US dollar compared with the euro. The
below stated breakdown outlines the impact of a 10% strengthening of the US dollar exchange rate on
the valuation of monetary assets and liabilities as at year end which are denominated in US dollars. A 10%
exchange rate change is assumed to be an actual possibility. The impact is apparent from a change in profit
and in the other equity components. A positive figure means an increase in profit and in the amount of the
other equity components, while a negative figure means a decrease.
Impact on 2007 2006

Profit for the year from continuing operations –3 –1
Other equity components – 10 – 11
At a 10% weakening of the US dollar rate compared with the euro the above stated amounts for 2007 are
respectively + EUR 2 million and + EUR 8 million.
The impact on the profit for the year from continuing operations mainly concerns receivables, cash and
cash equivalents and debts. The impact on the other equity components mainly concerns the valuation of
derivatives for cash flow hedges.
Interest rate risk

The objective of interest rate risk management is to limit the effect of interest rate fluctuations on profit
and reduce interest expense where possible. Interest rate derivatives are used to match borrowings to the
intended interest rate risk profile. In order to manage the risk profile, the Board of Management has decided
on a spread for the ratio of floating to fixed-interest components, as well as for the modified duration 1)
of the receivables portfolio. It is the policy of Friesland Foods to have its interest-bearing debt with fixed
interest rates account for about 60% of total interest-bearing debts including perpetual notes. At year-end
2007, this was 65% (2006: 70%).
1 A measure for the volatility of the fair value of the loans portfolio for a change of 1 percentage point in interest rate.

Interest rate fluctuations sensitivity analysis

The below stated sensitivity analysis was performed based on the impact of the interest rates on derivatives
and other financial instruments as at year end. For cash and cash equivalents and debts with variable
interest rates, the analysis was performed based on the assumption that the outstanding amount as at year
end was outstanding for the full year. In the analysis, an increase or decrease of 50 basis points is used as an
actual possible change in the interest rates. An increase or decrease of 50 basis points has the impact as set
out below, where an increase in the rates leads to a negative impact and a decrease to a positive impact on
profit.
Impact on: 2007 2006

The impact is caused by financial instruments with variable interest rates.
Liquidity risk
Friesland Foods’ objective is to maintain a balance between continuity of funding and flexibility through the
use of various financial instruments. Friesland Foods’ policy is that not more than one-third of borrowings
should mature in any twelve month period. At year-end 2007 this is 2% of the borrowings. In addition, total
net debt should be fully hedged by long-term loans and unconditional credit facilities. At year-end 2007, this
was fully hedged. Friesland Foods manages its liquidity risk in particular by keeping a substantial amount
available under an unconditional syndicated credit facility of EUR 550 million, which will expire in 2010.
Of this facility, EUR 210 million was unused as at year-end 2007 (2006: EUR 145 million).
Credit risk
Friesland Foods is exposed to credit risks associated with its trade receivables, cash and cash equivalents,
and derivative financial instruments. Friesland Foods monitors credit risk by systematically monitoring
credit ratings of its customers and financial counterparties. Friesland Foods trades generally with recognised,
creditworthy third parties with whom it maintains long-standing trading relations. The credit position of
customers that are considered less creditworthy or are subject to political transfer risks is hedged by regular
trade credit instruments or credit insurance in accordance with the financial risk management policy of
Friesland Foods. Thanks to the spread of geographical areas and product groups, there is no significant
concentration of credit risk in the trade receivables of Friesland Foods.
Where possible, cash and cash equivalents have been deposited with first-class international banks,
i.e. banks with credit ratings of at least ‘single A’. However, since a significant portion of cash and cash
equivalents has been deposited by subsidiaries in relatively unstable political climates, these assets are
subject to local country risks. In order to mitigate these risks where possible, Friesland Foods pursues an
active dividend policy in relation to these subsidiaries. Derivative financial instruments are traded only
with financial institutions with good credit ratings, i.e. credit ratings of at least ‘double A’. Friesland Foods’
maximum risk exposure in relation to these instruments is equal to the current carrying amount.
33 Acquisitions 2007 2006

Fair value of acquired net asset value
Goodwill 30
Acquisition of shares from minority interest holders 3 12
Investment 3 42
3 42
Cash flows from acquisitions 0.0 0.0
Cash payments –3 – 42
In 2007, capital was contributed to the new joint venture Great Ocean Ingredients Pty Limited, Allansford,
Victoria Australia.
In 2006, the acquisition of 21.9% of the shares from minority interest holders resulted in an increase in the
interest in PT Frisian Flag Indonesia, a subsidiary, from 56.2% to 78.1%.

34 Equity attributable to equity holders of the parent

2007 2006
Number of Number of Number of Number of
Class A shares Class B shares Total shares Class A shares Class B shares Total shares
At beginning of year 5,840,363 4,033,865 9,874,228 5,840,363 4,033,865 9,874,228

Issue of shares charged to share premium reserve A 1,339,587 1,339,587
At end of year 7,179,950 4,033,865 11,213,815 5,840,363 4,033,865 9,874,228
0 0 0 0 0 0
Issued capital 330 186 516 269 185 454
Breakdown by shares and reserves 2007

Unrealised gains
and losses Currency
arising from cash translation Retained
Issued capital Share premium flow hedges reserve earnings Total
Class A shares 330 0

8 –3 250 585
Class B shares 186 19 5 –1 179 388
At end of year 516 19 13 –4 429 973
0.0 0.0 0.0 0.0 0.0 0.0
2006
Unrealised gains
and losses Currency
Issued capital Share premium flow hedges reserve earnings Total
Class A shares 269 62 8 7 176 522

Class B shares 185 19 4 6 126 340
At end of year 454 81 12 13 302 862
0.0 0.0 0.0 0.0 0.0 0.0
Issued capital
The authorised capital amounts to EUR 863 million, divided into 12,500,000 Class A shares of
EUR 46.00 nominal value each and 6,250,000 Class B shares of EUR 46.00 nominal value each.
The Class A shares and B shares are held by Zuivelcoöperatie Friesland Foods U.A.
Depository receipts of Class B shares are held by member farmers or former member farmers of
Zuivelcoöperatie Friesland Foods U.A.
Detailed breakdown of shares and reserves 2007

Unrealised gains
and losses Currency
Class A shares and reserves Issued capital Share premium flow hedges reserve earnings Total

Total income and expenses for the year 0 – 10 91 81
Issue of Class A shares charged to share premium A 62 – 62 0
Rounding difference –1 –1
Dividends paid – 17 – 17
At end of year 330 0 8 –3 250 585
2006
Unrealised gains
and losses Currency
Class A shares and reserves Issued capital Share premium flow hedges reserve earnings Total

Total income and expenses for the year 5 –3 66 68
At end of year 269 62 8 7 176 522

2007
Unrealised gains
and losses Currency
Class B shares and reserves Issued capital Share premium flow hedges reserve earnings Total
At beginnning of year 185 19 4 6 126 340

Rounding difference 1 1
At end of year 186 19 5 –1 179 388
2006
Unrealised gains
and losses Currency
Class B shares and reserves Issued capital Share premium flow hedges reserve earnings Total
At beginnning of year 185 19 1 7 97 309

At end of year 185 19 4 6 126 340
Pursuant to the Articles of Association, a dividend may be distributed if and to the extent that the balance of
the share premium reserves and the general reserves is positive.
The Articles of Association stipulate that the Company keeps separate general reserves for the Class A and
Class B shares. Movements in the general reserve are allocated in proportion to the issued capital at the
end of the year, with the exception of dividend, which is allocated in accordance with the appropriation of
profit. The unrealised gains and losses arising from cash flow hedges and the currency translation reserve are
statutory reserves that are not distributable.
Unrealised gains and losses arising from cash flow hedges 2007 2006
Gains and losses arising from cash flow hedges 7 13
Transferred to income statement –6 –1
Income tax on gains and losses and transfers –4
0.0 0.0
35 Renumeration of members of the Supervisory Board and the Board of Management 2007 2006
Supervisory Board
Short-term benefits 0.8 0.7
Board of Management 1
Short-term employee benefits 3.7 3.3
Long-term employee benefits 0.6 0.4
Pension plans 0.5 0.5
4.8 4.2
1 The figures for 2006 have been restated to reflect non-financial benefits as well.

Principal subsidiaries 1
at 31 december 2007
Royal Friesland Foods N.V. Friesland Foods Romania

Friesland Brands B.V., Meppel, the Netherlands Napolact S.A., Cluj-Napoca, Romania (91.4%)
Friesland Foods B.V., Meppel, the Netherlands S.C. Friesland Romania S.A., Satu Mare, Romania (99.9%)
Friesland International B.V., Meppel, the Netherlands S.C. Industrializarea Laptelui Mures S.A., Târgu Mures, Romania (90.3%)
Friesland Foods Cheese Friesland Foods Hellas

Frico Cheese Packaging B.V., Wolvega, the Netherlands Friesland Hellas S.A.C.I., Maroussi, Greece
Friesland Foods Canarias S.A., Las Palmas, Spain
Friesland Foods Cheese Deutschland GmbH, Essen, Germany Friesland Foods WAMCO Nigeria
Friesland Foods Cheese Ibérica S.L., Barcelona, Spain Friesland Foods WAMCO Nigeria Plc, Lagos, Nigeria (52.8%)
Friesland Foods Cheese France S.A.S., Sénas, France
Kaasfabriek Eyssen B.V., Oosthuizen, the Netherlands Friesland Foods Frisian Flag Indonesia
Kaashandel Culemborg B.V., Hardinxveld-Giessendam, the Netherlands PT Frisian Flag Indonesia, Jakarta, Indonesia (78.1%)
K.H. de Jong’s Exporthandel B.V., Drachten, the Netherlands
Société Industrielle Fromagère S.A.S.U., Charmoille, France Friesland Foods Foremost Thailand
Foremost Dairies Co (Bangkok) Ltd, Bangkok, Thailand (99.6%)
Friesland Foods Fresh Friesland Foods Foremost (Thailand) Public Company Ltd., Bangkok,
Friese Ekologische Zuivel B.V., Drachten, the Netherlands Thailand (99.6%)
Friesland Foods Domo Friesland Foods Dutch Lady Vietnam

Friesland Foods Domo UK Ltd, Saltney, United Kingdom Dutch Lady Vietnam Food & Beverage Company Ltd, Ho Chi Minh City,
Vietnam (70%)
Friesland Foods Kievit Dutch Lady Ha Nam Food and Beverage Company Ltd, Phu Ly,
PT Kievit Indonesia, Jakarta, Indonesia Vietnam (70%)
Friesland Foods Professional Friesland Foods Dutch Lady Malaysia/Singapore/Hong Kong

Friesland Foods Professional Belgium N.V./S.A., Lummen, Belgium Dutch Lady Milk Industries Berhad, Petaling Jaya, Malaysia (50.1%)
Friesland Foods Professional Deutschland GmbH, Aachen, Germany Friesland Foods Ltd, Hong Kong
Friesland Foods Professional France S.A.S., Créteil, France Friesland (Singapore) Pte Ltd, Singapore
Friesland Foods Professional Italy S.r.l., Calderara di Reno (BO), Italy
Friesland Foods Middle East
Friesland Foods Western Europe Friesland Arabia Ltd, Jeddah, Saudi Arabia
A.L. Hoogesteger Fresh Specialist B.V., Zwanenburg, the Netherlands
Friesland Foods Deutschland GmbH, Kalkar, Germany Friesland Foods Consumer Products
Friesland Foods België/Belgique N.V./S.A., Bornem, Belgium Friesland Coberco West Africa SARL, Abidjan, Ivory Coast
Friesland Foods Riedel B.V., Ede, the Netherlands Friesland Foods Cameroun SARL, Douala, Cameroon
Friesland Ghana Ltd, Accra, Ghana
Friesland Foods Central Europe
Friesland Hungária zRt, Debrecen, Hungary
1 Unless stated otherwise, the subsidiaries are wholly owned.

Company balance sheet and Company income statement Financial statements 2007
Company balance sheet 1 2007 2006

at year-end, before appropriation of profit
Assets
Non-current assets
Investments in subsidiaries (2) 975 861
Loans to subsidiaries (3) 713 10
Derivative financial instruments 2 11 13
1,699 884
Current assets
Amounts due from subsidiaries (4) 184 996
192 1,001
Cash and cash equivalents 8 10

0.0 0.0

Equity
Equity attributable to equity holders of the parent (5) 973 862
Perpetual notes 3 125 124
1,098 986
Non-current liabilities
Deferred tax liabilities 3 3
Derivative financial instruments 2 31 19
Non-current interest-bearing borrowings (6) 399 412
433 434
Current liabilities
Current borrowings 204 270
Loans from subsidiaries (7) 130 176
Income tax payable (8) 14 15
Other current liabilities 12 9
Derivative financial instruments (9) 8 5
368 475
Total equity and liabilities 1,899 1,895

0.0 0.0
Company income statement 2007 2006
Share of profit of subsidiaries 171 125

Other income 1 3
Proposed appropriation of profit

Addition to reserves 112 83
Dividend 60 45
172 128
1 See the notes on pages 82 to 83 inclusive.

2 The figures for 2006 have been restated, because the derivative financial instruments were partly reclassified from current to non-current.
3 The figures for 2006 have been restated, because the perpetual notes are reclassified as equity, on account of enhanced insight.

Notes to the Company financial statements Financial statements 2007
1 General
Accounting policies and notes
These financial statements were prepared in accordance with Dutch statutory provisions and regulations.
The financial statements are presented in accordance with the provisions of Section 362(8) of Part 9 of Book
2 of the Dutch Civil Code, which stipulates the application of consistent accounting policies in the company
and consolidated financial statements.
For the accounting policies concerning the valuation of assets and liabilities, and the presentation of the
income statement, reference is made to the section ‘Accounting policies’ on pages 55 to 58. For items
not dealt with in the notes to the company financial statements, reference is made to the notes to the
consolidated financial statements. Consolidated subsidiaries are accounted for using the equity method.
A statutory reserve is formed for the retained earnings of subsidiaries where distribution is subject
to restrictions.
A list of subsidiaries, branches and associates, and interests in joint ventures, prepared in accordance
with legal provisions, is available for inspection at the Company’s offices and has been filed with the
Trade Register in Meppel, the Netherlands.
2 Investments in subsidiaries 2007 2006

Currency translation differences – 17 –3
Dividend – 42 – 34
Goodwill – 30
Other movements 2 1
0.00 0.00
3 Loans to subsidiaries 2007 2006

Drawn 707
Transferred to current –7
Repayments –4
0.0 0.0
Repayment schedule 2009 - 2012 After 2012 Total

Loans to subsidiaries 713 713
The loans granted relate mainly to the financing of subsidiaries. The average interest rate was 5.5% at
year-end 2007 (2006: 4.8%).
4 Amounts due from subsidiaries

Current assets also include loans granted to subsidiaries.
The average interest rate on loans of EUR 169 million was 5.4% and on loans of EUR 15 million 0% at year-
end 2007 (2006: 5.4% on loans of EUR 772 million and 0% on loans of EUR 224 million).
5 Equity attributable to equity holders of the parent 2007 2006

Currency
Revaluation translation General
Issued capital Share premium reserve reserve reserve Total Total
Class A shares 330 0

8 –3 250 585 522
Class B shares 186 19 5 –1 179 388 340
At end of year 516 19 13 –4 429 973 862

A statutory reserve is formed for the retained earnings of subsidiaries where distribution is subject to
restrictions. This does not apply to the years 2007 and 2006, however.
The revaluation reserve and the currency translation reserve are statutory reserves and therefore
undistributable.
6 Non-current interest-bearing borrowings 2007 2006

Amounts owed Amounts owed Other amounts
to institutional to syndicate of owed to credit
investors credit institutions institutions Total Total
At beginning of year 162 249 1 412 432

Additions 0 0
1
Repayments –1 –1
Amortisation issue costs 1 1 0
Adjustment for currency/interest rate swap – 13 – 13 – 21

At end of year 149 250 0 399 412
0.0 0.0 0.0 0.0 0.0
Total Interest % at Interest % at

Repayment schedule and interest rates 2009 - 2012 After 2012 repayment year end year end
Amounts owed to institutional investors 70 79 149 4.7 4.5

Amounts owed to syndicate of credit institutions 250 250 3.0 3.0
Total 320 79 399 3.6 3.6
For the notes to amounts owed to institutional investors and amounts owed to syndicate
of credit institutions, reference is made to page 71 of the notes to the consolidated
financial statements.
7 Loans from subsidiaries

The interest rate at year-end 2007 was 4.8% on loans of EUR 65 million and was nil on loans of EUR 65 million.
8 Income tax payable

A fiscal unit has been formed among the group companies located in the Netherlands. The Company is the
first liable party for the income tax debts.
9 Derivative financial instruments

The difference in the amount with the consolidated financial statements involves the fair value of derivative
financial instruments transacted with a subsidiary.
10 Commitments and contingencies

The Company has issued a liability statement for Friesland Brands B.V. in accordance with Section 403 of
Part 9 of Book 2 of the Dutch Civil Code.
Board of Management Supervisory Board

Royal Friesland Foods N.V. Royal Friesland Foods N.V.
Theo C.A. Spierings, acting President Sybren S.U. Attema, Chairman

André A. Boudewijns Piet Boer, Vice-Chairman
Johan G.M. Priem Rob ter Haar, Secretary
Jentje de Boer
Walter J.A. Gerritsen
Jorrit Jorritsma
Frans A.M. Keurentjes
Jan Peelen
Henk Scheffers
Jan C.P. Vogelaar

Auditor’s report
To the shareholders of Auditor’s responsibility Opinion with respect to the consolidated

Royal Friesland Foods N.V. financial statements
Our responsibility is to express an opinion on
Report on the financial statements the financial statements based on our audit. We In our opinion, the consolidated financial
conducted our audit in accordance with Dutch statements give a true and fair view of the
We have audited the accompanying financial law. This law requires that we comply with financial position of Royal Friesland Foods N.V.
statements of Royal Friesland Foods N.V., ethical requirements and plan and perform the as at 31 December 2007 and of its result and
Meppel, the Netherlands, for the year 2007 audit to obtain reasonable assurance whether cash flows for the year then ended in accordance
as set out on pages 50 to 83. These financial the financial statements are free from material with International Financial Reporting Standards
statements consist of the consolidated misstatement. as adopted by the European Union and with Part
financial statements and the company 9 of Book 2 of the Dutch Civil Code.
financial statements. The consolidated financial An audit involves performing procedures to
statements comprise the consolidated balance obtain audit evidence about the amounts and
sheet as at 31 December 2007, the income disclosures in the financial statements. The Opinion with respect to the company
statement, the cash flow statement and the procedures selected depend on the auditor’s financial statements
statement of changes in equity for the year then judgment, including the assessment of the
ended, and a summary of significant accounting risks of material misstatement of the financial In our opinion, the company financial statements
policies and other explanatory notes. The statements, whether due to fraud or error. In give a true and fair view of the financial position
company financial statements comprise the making those risk assessments, the auditor of Royal Friesland Foods N.V. as at 31 December
company balance sheet as at 31 December considers internal control relevant to the entity’s 2007 and of its result for the year then ended in
2007 and the company income statement for preparation and fair presentation of the financial accordance with Part 9 of Book 2 of the Dutch
the year then ended and the notes. statements in order to design audit procedures Civil Code.
that are appropriate in the circumstances, but
not for the purpose of expressing an opinion
Management’s responsibility on the effectiveness of the entity’s internal Report on other legal and regulatory
control. An audit also includes evaluating the requirements
The Board of Management of Royal Friesland appropriateness of accounting policies used and
Foods N.V. is responsible for the preparation the reasonableness of accounting estimates Pursuant to the legal requirement under Section
and fair presentation of the financial statements made by management, as well as evaluating the 393(5)(e) of Book 2 of the Dutch Civil Code, we
in accordance with International Financial overall presentation of the financial statements. report, to the extent of our competence, that the
Reporting Standards as adopted by the We believe that the audit evidence we have Board of Management review is consistent with
European Union and with Part 9 of Book 2, of obtained is sufficient and appropriate to provide the financial statements as required by Section
the Dutch Civil Code, and for the preparation of a basis for our audit opinion. 391(4) of Book 2 of the Dutch Civil Code.
the Board of Management review in accordance
with Part 9 of Book 2 of the Dutch Civil
Code. This responsibility includes: designing, Amsterdam, the Netherlands, 28 February 2008
implementing and maintaining internal
control relevant to the preparation and fair Deloitte Accountants B.V.
presentation of the financial statements that P.J.M. Peerlings
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.

Other information
Provisions of the Articles of Association

governing profit appropriation
The provisions on the appropriation of profit Unretained profit shall be distributed. The
are included in Article 28 of the Articles of amount available for distribution on a Class
Association. These can be summarised as B share shall at least be twice the amount to
follows: profit shall be distributed after adoption be distributed on a Class A share. The amount
of the financial statements showing such actually to be paid on Class A shares per annum
distribution to be legitimate. shall not exceed an amount calculated on the
total nominal value of the Class A shares plus
The General Meeting of Shareholders is share premium reserve A on the balance sheet
authorised to retain part of the profit on a date, at a percentage equal to the average
proposal from the Board of Management, effective return on certain government bonds
which shall be subject to the approval of the plus 150 (in words: one hundred and fifty) basis
Supervisory Board. The retained profit shall be points.
added to general reserves A and B in proportion
to the capital issued in the form of Class A and If, in any financial year, the amount available for
Class B shares outstanding on the last day of the distribution on Class A shares should exceed the
last financial year. aforementioned maximum, the excess shall be
distributed on the Class B shares.

Report on depositary receipts
for Class B shares
Report of the Board of Zuivelcoöperatie In 2007 the highest price of the depositary Meppel, the Netherlands, 28 February 2008
receipts for Class B shares was 84.00 euros on 27
Friesland Foods U.A., the cooperative, on
September 2007 and the lowest price was 74.00 The Board of Zuivelcoöperatie Friesland Foods U.A.
the administration of registered Class B euros on 25 January 2007.
S.S.U. Attema, Chairman
shares in the capital of Royal Friesland
The dividend will be released for payment on P. Boer, Vice-Chairman
Foods N.V. 7 March 2008. In September 2007 the Boards J. Jorritsma, Secretary
of Zuivelcoöperatie Friesland Foods U.A. and J. de Boer
Depositary receipts for Class B shares in Royal Stichting toezicht certificaten Friesland Foods W.J.A. Gerritsen
Friesland Foods N.V. are traded on an internal U.A. decided to cancel the trading days for F.A.M. Keurentjes
exchange. Member dairy farmers and former depositary receipts for Class B shares scheduled J.C.P. Vogelaar
members of Zuivelcoöperatie Friesland Foods for 29 November 2007 and 31 January 2008, the
U.A. may hold or trade depositary receipts. reason being to prevent the potential trade in Price of depositary receipts of B shares
In euros
There are six trading days per year, in principle. depositary receipts for Class B shares on unequal
terms based on a discrepancy in information. 85
The Board of Zuivelcoöperatie Friesland For this reason, the Boards of Zuivelcoöperatie 83
Foods U.A. exercises all rights attaching to the Friesland Foods U.A. and Stichting toezicht 81
registered Class B shares. The administration of certificaten Friesland Foods decided, in January 79
the shares is supervised by a trust office by the 2008, not to hold a trading day in March 77
name of Stichting toezicht certificaten Friesland 2008, but rather to schedule the next trading 75
Foods. Rabobank Nederland has been appointed day for 29 May 2008. This was decided in 73
as an independent administrator. view of the adoption of a proposed resolution
71
on 9 April 2008 by the General Meeting of
69
At 31 December 2007 the number of depositary Zuivelcoöperatie Friesland Foods U.A. about
67
receipts for Class B shares administered was the revision of the organisational and income
65
4,033,864. This number of depositary receipts, allocation structure. As soon as the proposed
25 January 2007
29 March 2007
31 May 2007
26 July 2007
27 September 2007
29 November 2007
each with a nominal value of 46.00 euros, resolution is announced in April, all stakeholders 31 January 2008
represents a total nominal value of 185,557,744 will have the same information at their disposal
euros. and there will be no risk of trading on unequal
terms.
Trading volume of depositary

receipts for B shares
In numbers
Price and trading volume of depositary receipts for Class B Shares
50,000 47,468
Date Price in euros Demand Supply Done Traded in
45,000
(double counting) euros
40,000
2007 36,740
35,000 33,428
25 January 74.00 d/b 1) 30,120 17,117 28,976 2,144,224
30,000 28,976
29 March 75.00 d/b 32,653 25,815 47,468 3,560,100 26,414
31 May 77.00 d/b 21,847 13,427 26,414 2,033,878 25,000
26 July 80.00 d/b 28,047 16,714 33,428 2,674,240 20,000

27 September 84.00 d/b 27,050 21,501 36,740 3,086,160 15,000
29 November Trading day cancelled 10,000
5,000
2008
0
31 January
25 January 2007
29 March 2007
31 May 2007
26 July 2007
27 September 2007
29 November 2007
31 January 2008
Trading day cancelled
1
d/b done/bid

Report of Stichting toezicht certificaten
Friesland Foods
One of the objectives of Stichting The activities performed by the foundation Under the terms of the Model Code, an embargo
during the year under review as part of its on trading was imposed in the spring of 2007
toezicht certificaten Friesland Foods
supervisory duties included the following: on the Members of the General Meeting of the
(‘the foundation’) is to supervise the • elaborating on its report for 2006 at the cooperative for the time between the receipt of
meeting of depositary receipt holders of 13 the draft Annual Report 2006 of Royal Friesland
administration of the non-cancellable
April 2007; Foods N.V. (under embargo) and 8 March 2007,
registered depositary receipts for Class B • monitoring compliance with the internal stock the date of publication of the Annual Report.
exchange regulations; This embargo applied to the trading day of 29
shares issued by Zuivelcoöperatie Friesland
• reviewing the reports on the trade in March 2007. The reason for the embargo was
Foods U.A. (‘the cooperative’) in the name depositary receipts on the trading days held the inside information possessed by Regional
in 2007; Council members concerning the Annual Report.
of Royal Friesland Foods N.V. In doing so,
• monitoring compliance with the Model Code;
the foundation should protect the interests • supervising the way in which the Board of the Under the terms of the Model Code, an embargo
cooperative exercised its powers under the on trading was imposed in mid-2007 on the
of the depositary receipt holders, the
share administration rules; members of the Board and of the General
cooperative, the organiser of the internal • putting up 2,454 depositary receipts for Class Meeting of the cooperative. This embargo was
B shares for sale that should have been sold in instituted on 12 June 2007 and was in effect
stock exchange and the internal stock
2006 (this relates to the depositary receipts until at least 31 December 2007. The embargo
exchange manager. of members who have not stopped farming was imposed in connection with information
that come under the exclusive control of the that was exchanged with the persons in question
foundation). These depositary receipts were within the scope of the discussion about the
sold on the internal stock exchange in the structure. Any orders submitted for the trading
course of 2007; day of 26 July 2007 were cancelled. No orders
• taking the decision, in connection with the were submitted by members of the Board and
discussion about the structure of Friesland the Regional Council members for the trading
Foods, to cancel the trading days scheduled for day of 27 September 2007.
29 November 2007, 31 January and 27 March
2008, in consultation with the Board of the Luc Dahlhaus resigned from the Board of the
cooperative and the internal stock exchange trust office as at 1 May 2007; the vacancy
manager. The next trading day was scheduled created by his resignation will be filled by the
for 29 May 2008. new President of the Board of Management.
The Board has established that the procedures

were performed in accordance with the Amsterdam, the Netherlands, 28 February 2008
applicable rules.
The Board of Stichting toezicht certificaten
Friesland Foods
W.G. van Hassel, Chairman

F.H.J. Boons
F.K. van Zinderen Bakker
S.S.U. Attema

Other information
IFRS IFRS IFRS IFRS Dutch GAAP

Headline figures 1
Income statement
Revenue 5,075 4,675 4,419 4,449 4,575
Operating profit before amortisation of goodwill 299 257 211 188 188
Profit for the year attributable to equity holders of the parent 172 128 104 96 56
Dividend 60 45 36 28 22
Balance sheet
Total assets 2,990 2,651 2,580 2,487 2,398
Capital base 2 1,157 1,050 986 883 809
Equity attributable to equity holders of the parent 973 862 796 699 621
Net debt 582 574 581 587 667
Cash flows
Net cash flows from operating activities 225 244 252 281 308
Depreciation and amortisation 124 126 121 119 147
Staff (average number of FTE’s)

Employees 14,582 15,312 16,438 17,580 18,005
Ratios
Operating profit as % of revenue 5.9 5.5 4.8 4.2 4.1
Profit for the year attributable to equity holders of the parent as a % of
revenue 3.4 2.7 2.4 2.2 1.2
Profit for the year attributable to equity holders of the parent as a % of
average equity attributable to equity holders of the parent 18.7 15.4 13.9 14.5 8.8
Capital base as a % of total assets 2 38.7 39.6 38.2 35.5 33.7
Per share of EUR 46.00 (in euros)

Earnings per share, basic 15.63 12.92 10.74 10.21 6.20
Dividend proposed for the year per Class A share 2.62 2.39 2.57 2.16 1.74
Dividend proposed for the year per Class B share 10.24 6.81 5.32 4.32 3.48
Number of outstanding shares (in thousands) 11,214 9,874 9,874 9,426 9,379
Average number of outstanding shares (in thousands) 10,994 9,874 9,687 9,406 9,033
Highest price of depositary receipts for Class B shares (in euros) 84.00 70.00 58.50 58.00 60.00
Lowest price of depositary receipts for Class B shares (in euros) 74.00 61.00 52.50 50.00 53.10
Closing price of depositary receipts for Class B shares (in euros) 84.00 70.00 58.50 53.00 58.00
1 For an explanation of the concepts and changes compared with the previous financial statements, reference is made to the notes to the financial statements.
2 Capital base includes equity and convertible liabilities.

Other information

Consolidated income statement 1
Revenue 5,075 4,675 4,419 4,449 4,575

Rental income 5 8 11 14
Other operating income 40 10 6 7 18
Costs of raw materials, consumables and goods for resale – 3,232 – 2,897 – 2,818 – 2,864 – 2,993
Employee benefits expense – 448 – 439 – 425 – 423 – 432
Depreciation and amortisation – 124 – 126 – 121 – 119 – 112
Other operating expense – 1,017 – 974 – 861 – 876 – 868
Operating profit before goodwill amortisation 299 257 211 188 188
Goodwill amortisation – 35
Operating profit 299 257 211 188 153
Share of profit of associates 3 3 4 2 4

Finance income and costs – 29 – 26 – 25 – 28 – 34
Profit before tax 273 234 190 162 123
Income tax expense – 65 – 63 – 55 – 34 – 29

Profit for the year from continuing operations 208 171 135 128 94
Profit for the year attributable to perpetual notes providers –9 –9 –9 –9 –5

Profit for the year attributable to equity holders 199 162 126 119 89
Profit for the year attributable to minority interests – 27 – 34 – 22 – 23 – 33

Profit for the year attributable to equity holders of the parent 172 128 104 96 56
0.0 0.0 0.0 0.0 0.0
Per share of EUR 46.00 (in euros)

Earnings per share, basic 15.63 12.92 10.74 10.21 6.20

Other information

Consolidated balance sheet 1

at year-end, before appropriation of profit
Assets
Property, plant and equipment 861 835 837 809 774
Intangible assets 609 606 606 609 591
Deferred tax assets 23 14 18 11 14
Investments in associates 13 11 11 10 22
Derivative financial instruments (non-current) 11 13 7 0 0
Financial assets 17 3 15 23 2
Inventories 703 490 455 429 415
Trade and other receivables 588 496 467 443 495
Government grants 2 5 8 12 0
Income tax receivable 6 9 3 3 8

Derivative financial instruments (current) 7 5 1 1 0
Cash and cash equivalents 132 145 134 132 77

Assets held for sale 18 19 18 5
Total assets 2,990 2,651 2,580 2,487 2,398
0.0 0.0 0.0

Issued capital 516 454 454 434 431
Share premium 19 81 81 100 102
Unrealised gains and losses arising from cash flow hedges 13 12 4 –7
Currency translation reserve –4 13 17 8
Retained earnings 429 302 240 164 88
Equity attributable to equity holders of the parent 973 862 796 699 621
Minority interests 59 64 66 59 63
Perpetual notes 125 124 124 123 122
Total equity 1,157 1,050 986 881 806
Convertible debt 2 3
Pensions and other long-term employee benefits 92 84 73 47 46
Deferred tax liabilities 27 25 18 22 39
Provisions (non-current) 7 4 5 22 43
Derivative financial instruments (non-current) 31 19 2 25 0
Non-current interest-bearing borrowings 422 434 449 381 557

Current borrowings 292 285 266 336 184
Trade and other payables 892 703 705 725 698
Income tax payable 43 38 70 36 22
Provisions (current) 21 6 5 10 0
Derivative financial instruments (current) 1 0 0
Liabilities held for sale 6 3

Total equity and liabilities 2,990 2,651 2,580 2,487 2,398
0.0 0.0 0.0 0.0 0.0
Capital base 2 1,157 1,050 986 883 809

Net debt 582 574 581 587 667
2 Capital base includes equity and convertible liabilities.

Other information

in millions of euros, unless stated otherwise
Consolidated cash flow statement 1
Cash flows from operating activities

Profit before tax 273 234 190 162 123
Interest expense 28 25 24 30
Goodwill amortisation 0 0
35
Depreciation and amortisation 124 126 121 119 112
Impairment of property, plant, equipment, intangible assets and assets
held for sale 0
16 10 6 5
Amortisation of issue costs of non-current borrowings 3 2 2
Investments in associates –1 –1 –4
Movements in working capital – 138 – 56 – 38 24 41
Movements in pensions and other long-term employee benefits 10 12 24 19 26
Movements in provisions 18 – 22 – 18 –3
Cash flows from operating activities 315 357 311 343 337
Income tax paid – 63 – 88 – 34 – 34 – 29
Interest paid – 27 – 25 – 25 – 28
Net cash flows from operating activities 225 244 252 281 308
Cash flows from investing activities

Investment in property, plant, equipment and intangible assets – 187 – 166 – 185 – 166 – 177
Proceeds from sale of property, plant, equipment, intangible assets and
assets held for sale 28 24 19 8 2
Acquisitions –3 – 42 0
–3 –7
Proceeds from sale of subsidiaries and business activities 9 9 2
Net cash flows used in investing activities – 162 – 184 – 157 – 152 – 180
Cash flows from financing activities

Dividends paid to equity holders of the parent – 45 – 36 – 28 – 22 – 34
Dividends paid to minority interests – 25 – 21 – 22 – 17 – 23
Profit distributed on perpetual notes –9 –9 –9 –9
Issue of Class B shares 1 1 4
New perpetual notes 0
125
Drawn non-current interest-bearing borrowings 20 10 258 7 201
Issue costs on non-current borrowings –2 –9
Repayment of non-current interest-bearing borrowings – 11 –3 – 204 –3 – 67
Repayment of convertible debt –2 –1 –5
Other changes of financial assets 8
Movements in current borrowings and derivative financial instruments –2 10 – 89 – 85 – 328
Net cash flows used in financing activities – 72 – 49 – 97 – 129 – 128
Net cash flows –9 11 –2 0 0
Cash and cash equivalents at beginning of year 145 134 132 135 90
Net cash flows –9 11 –2 0 0
Translation differences in cash and cash equivalents –4 4 –3 – 13

Cash and cash equivalents at end of year 132 145 134 132 77
0.0 0.0 0.0 0.0 0.0

Other information
Locations
The Netherlands Europe
•• Sales
Production
•• Belgium
Germany
•• Italy
The Netherlands
•• Sales and production

Head office
•• France
Greece
•• Romania
Spain
• Hungary
Key drive brands
Broad-based
dairy brands
Specific segments
Drinks

Other information
Africa and the Middle East Asia
•• Ghana
Nigeria
•• Hong Kong
Indonesia
•• Saudi Arabia
•• Malaysia
Singapore
United Arab Emirates
•• Thailand
Vietnam

Other information
Product introductions in 2007

Appelsientje FruitSensatie Reason for launch
Responding to the need among customers to
Product type be surprised by new, exciting fruit flavours.
Fruit-based drink. For Appelsientje FruitSensatie, familiar and new
types of fruit have been selected.
Target group
Consumers in the Netherlands.
Castillo de Holanda Reason for launch

Responding to the growing demand for cheese
Product type products that contribute to a healthy lifestyle.
Range of healthy, low-fat and low-salt
Gouda cheese varieties. Target group
Young, health-conscious people in the Spanish
Canary Islands.
Cécémel Frappé Reason for launch

Responding to the trend of textures that are
Product type a cross between eating and drinking. Creating
Cécémel Frappé represents an ice-cold a new consumption moment for Cécémel: the
chocolate sensation. It is available in bars summer season.
and restaurants only, and is prepared fresh.
The basis of the product is Cécémel Frappé Target group
concentrate and crushed ice. Adults in Belgium.
Chocomel Hot Reason for launch

Allowing consumers to prepare a high-quality
Product type cup of hot chocolate at home.
Hot chocolate drink that can be prepared
in the Senseo® coffee pad machine Target group
using a special capsule holder and Adults in the Netherlands.
Chocomel Hot capsules.
Completa stick Reason for launch

Updating the look of Completa powdered coffee
Product type creamer, making it look better and increasing its
Powdered coffee creamer in a new convenience. This product also responds to the
single-use pack. need for customised coffee moments, where and
whenever you want.
Target group
Coffee consumers in Hungary.

Other information
CoolBest Açai Reason for launch

Broadening the CoolBest product offering by
Product type adding a new exotic fruit to the PowerFruits
Refrigerated fruit-based drink. range. Açaí is a berry from the Amazon that is an
exceptional source of dietary fibre.
Target group
Health-conscious adults in the Netherlands.
CoolBest VitaDay Reason for launch

Broadening of the CoolBest product range with
Product type a new concept. VitaDay with added prebiotics
Refrigerated fruit-based drink containing boosts our natural resistance to disease and
prebiotics. selectively stimulates the growth and/or activity
of bacteria in the colon.
Target group
Health-conscious and active adults in the
Netherlands.
Debic whipped cream Reason for launch

Developing a new nozzle that creates a whipped
Product type cream topping that is visually equal to that
Sweetened and unsweetened whipped cream. created by a professional whipping cream
machine.
Target group
Professional chefs in Europe.
Dots Giant Reason for launch

Responding to the growing demand for healthy
Product type snacks.
Fresh dairy bar made from freshly curdled cream
containing chocolate. Target group
Young people in Romania between the ages of
18 and 30.
Dutch Lady 0% Fat Drinking Yoghurt Reason for launch

Responding to the rapidly growing demand for
Product type yoghurt and capitalising on the success of Dutch
No-fat yoghurt drink with a new apple-aloe Lady yoghurt drinks with their unique double-
vera flavour containing active bacterial cultures; fruit combinations.
contains fruit juice and has 25 percent fewer
calories than other low-fat yoghurt drinks. Target group
Women in Malaysia between the ages of
20 and 40.

Other information
Dutch Lady Step 1 and Step 2 Reason for launch

Dutch Lady Growing Up Milk 123 and 456 Responding to the need for healthy foods by
enriching products with TT-Ratio™, that help
Product type babies, toddlers and infants to better process
Milk powder for babies, toddlers and infants, information.
enriched with TT-ratio.
Target group
Malaysian mothers of babies, toddlers and
infants.
Dutch Lady Sterilised Milk Reason for launch

Responding to the changing consumption habits
Product type of teenagers outside the home.
Sterilised, low-fat milk in a chocolate or
strawberry flavour. Target group
Young people in Malaysia between the ages of
13 and 18.
Foremost Calcimex Beautiva Reason for launch

Responding to the need for trendy and beauty
Product type ingredients in foods.
Long-life, no-fat milk product containing
pomegranate, currant juice and collagen. Target group
Students and young female professionals.
Foremost Hi-5 Mixed Berry and Carrot Reason for launch

Foremost Hi-5 Red Bean and Pearl Barley Responding to the need among consumers
for value-added foods that help to improve
Product type eyesight, increase energy levels and generally
Long-life soy milk. boost health.
Target group
Health-conscious adults over the age of 20 in
Thailand.
New design for Frico Reason for launch

Creating a new design that ties in with consumer
Product type demands and gives the Frico cheese label an eye-
All cheese slices for the self-serve corner in the catching new look.
supermarket and traditional cheeses for staff-
assisted dispensing. Target group
Adults and families in Germany.

Other information
Frico Chevrette Reason for launch

Broadening of the product offering in response
Product type to the growing demand for goat’s cheese.
Ripened goat’s cheese.
Target group
Adults in Spain, Russia and the US in particular.
Low-fat Frico Edam Reason for launch

Broadening of the low-fat cheese range in
Product type response to the growing number of health-
Low-fat Edam cheese. conscious consumers in export markets.
Target group
Adult, health-conscious consumers in the UK,
Russia and the Middle East.
Frico Frühlings-Gouda, Mai Gouda, Herbst Reason for launch

Gouda and Winter Gouda Offering a new range of seasonal specialities.
The cheeses are characterised by the specific
Product type seasonal features and the different maturing
Four flavoursome, semi-soft cheeses. periods. Each cheese is available in a different
season.
Target group
Adults and families in Germany.
Frico Leicht & Lecker Rucola Reason for launch

Broadening the product range of Frico Leicht &
Product type Lecker by adding rocket, a popular ingredient.
A flavoursome, semi-soft low-fat cheese Responding to the growing demand for low-fat
containing added rocket. The absolute fat products.
content is only 12 percent.
Target group
Women in Germany between the ages of
30 and 59.
Friesche Vlag Cappuccino Reason for launch

Responding to the growing demand for serving
Product type customised and luxurious coffees at home.
Convenient powder sachets used for creating
a rich layer of cappuccino foam. The foamer is Target group
produced by Friesland Foods Kievit. Adults in the Netherlands.

Other information
Friesche Vlag Eftelingvla Reason for launch

Responding to the need for flavourful, healthy
Product type desserts for the entire family that bring a little
Semi-skimmed custard containing added fun to the dinner table.
calcium.
Target group
Families with children in the Netherlands.
Friesche Vlag Magere Fruityoghurt Reason for launch

Responding to the need for flavourful and
Product type healthy products containing fewer calories. Two
Low-fat yoghurt containing added fruit or flavours continuing no added fruit, but fruit juice
fruit juice. were developed especially for children.
Target group
Friesche Vlag pasture milk Reason for launch

Taking up our corporate social responsibility
Product type by preparing all fresh dairy products under the
All fresh dairy products sold under the Friesche Vlag label from pasture milk. Pasture
Friesche Vlag label. milk is obtained from cows that graze outdoors
from spring to autumn.
Target group
Frisian Flag Liquid Milk Reason for launch

Responding to the need for larger (family) packs
Product type and creating a presence on the milk market.
Milk in a one-litre family pack. Family packs are available in the flavours
skimmed milk, whole milk and chocolate.
Target group
Families with children in Indonesia.
Frisian Flag Powder Milk Reason for launch

Responding to the trend that chocolate milk
Product type is a growing segment of the Indonesian milk
Chocolate-flavoured milk powder. market by improving product features and
packaging materials.
Target group
Modern Indonesian mothers in urban areas with
children between the ages of 6 and 12.

Other information
Frisian Flag Step 1 & Step 2 Reason for launch

Frisian Flag 123 & 456 Powder Milk Responding to the need for healthy foods by
enriching products with TT-Ratio™, that help
Product type babies, toddlers and infants to better process
Milk powder for babies, toddlers and infants, information.
enriched with TT-ratio.
Target group
Mothers of babies, toddlers and infants in
Indonasia.
Milli Caucasian Kefir Reason for launch

Responding to the growing demand by health-
Product type conscious families for healthy dairy products
Freshly fermented dairy product. containing added natural probiotics, based on a
traditional recipe from the Caucasus.
Target group
Modern, working mothers in Romania between
the ages of 25 and 45.
Nedgold Reason for launch

Creating a consistent and recognisable look for
Product type the Nedgold product range through package
Butter and butter oil. restyling. The new package design is based on
the so-called ‘Holland feel’, taste and quality.
Target group
Consumers and the food service industry
worldwide, with focus being placed on the
Middle East, the Far East and Africa.
NOYNOY FUN FUN

Reason for launch
Product type Broadening of the product range by adding a
Children’s yoghurt with a top cup. new [cookie/biscuit] flavour that is especially
popular with children.
Target group
Children in Greece between the ages of 5 and 11.
NoyNoy Cheese Reason for launch

Responding to the growing need for a healthy
Product type lifestyle by offering a unique, innovative range
Varied offering of yellow cheese, consisting of of yellow cheeses. This reinforces the leading
22 different products. position of NoyNoy on the Greek market.
Target group
Women in Greece.

Other information
Peak Reason for launch

Introducing a new package design and better
Product type ingredients.
Unsweetened condensed whole milk and
instant whole-milk powder. Target group
Mothers in Nigeria.
Peak Milk Powder sachet Reason for launch

Increasing Peak’s market share in Nigeria by
Product type offering smaller-size packs.
Extra enriched instant whole-milk powder.
Target group
Mothers in Nigeria.
Pöttyös Túró Bonbon Reason for launch

Creating a new consumption moment: the
Product type family moment. A dairy product to celebrate a
Bonbon-type dairy dessert made from curdled special occasion and/or to enjoy together.
milk containing a creamy nut filling.
Target group
Well-educated men and women in Hungary.
Rainbow Strawberry Milk Drink No Sugar Reason for launch

Added Broadening the product range in response to the
need for healthy foods.
Product type
Long-life milk-based drink. Target group
Women and families with children between the
ages of 6 and 12 in the Middle East.
Yes! Susu Reason for launch

Responding to the growing demand for milk in
Product type Tetra Fino packs, which are relatively cheaper
Milk product in a Tetra Fino pack. than the standard cartons and bottles.
Target group
Children in Indonesia between the ages of
7 and 14.

Other information
Senior management
Head office
as at 28 February 2008
Friesland Foods
Corporate directors
Blankenstein 142 T +31 522 27 62 76 W.S.J.M. Buck Corporate Public Affairs
7943 PE Meppel F +31 522 27 64 44 J.H.W. Elfers Interim Director of Corporate Human Resources
P.O. Box 124 mail@frieslandfoods.com G.W.J. Heerink Cooperative Affairs
7940 AC Meppel www.frieslandfoods.com H.L.M. Hermsen Corporate Strategy
The Netherlands H.E. Huistra Corporate Supply Chain
T. Jongsma Corporate Research
R.J.P. Koning Corporate Legal Affairs/Company Secretary
Board of Management K.A. Springer Corporate Treasury
T.C.A. Spierings Acting President and Chief Operating Officer L.H.L. Steenbrink Corporate Finance & Reporting
Classic Dairy business group F.J. Voortman Corporate Information & Communication Technology
Industrial business group Vacancy Corporate Risk & Control
Company Secretary
Corporate Human Resources
Corporate Supply Chain
A.A. Boudewijns Chief Financial Officer

Corporate Finance & Reporting
Corporate Information &
Communication Technology
Corporate Legal Affairs
Corporate Public Affairs
Corporate Risk & Control
Corporate Strategy
Corporate Treasury
J.G.M. Priem Chief Operating Officer

Consumer Products Europe business group
Consumer Products International business group
Business Development Unit
Cooperative Affairs & Raw Materials
Corporate Research
Friesland Foods Corporate Research
Harderwijkerstraat 41006 T +31 570 69 59 11

7418 BA Deventer F +31 570 69 59 18
P.O. Box 87
7400 AB Deventer
The Netherlands

Other information
Operating companies
Business group Classic Dairy
Friesland Foods Cheese Friesland Foods Butter Friesland Foods Fresh
Friesland Foods Cheese develops, produces, Friesland Foods Butter processes milk and Friesland Foods Fresh produces and sells fresh
matures, markets and sells a wide range of cream into a wide range of butter and butter dairy products and dairy-based drinks.
traditional Dutch cheeses, including Gouda, oil products, and milk powders. The products
Edam and Maasdam, as well as speciality are sold globally as ingredients to leading food Address
cheeses under the Frico label. producers, including bakeries, and the chocolate Gildenstraat 30 T +31 33 247 62 22
and ice-cream industries. Butter and butter oil 3861 RG Nijkerk F +31 33 245 48 87
Address (butter ghee) are sold to consumers in Europe P.O. Box 1089
Frisaxstraat 4 T +31 561 69 22 22 and the Middle East. The branches of Friesland 3860 BB Nijkerk
8471 ZW Wolvega F +31 561 61 21 15 Foods in Africa and Asia are key buyers of milk The Netherlands
P.O. Box 4 powder.
8470 AA Wolvega Management
The Netherlands Address M. Ligthart Managing Director
Kanaalstraat 4-6 T +31 573 28 84 44 J.R. Hoekzema Director of Finance
Management 7241 DA Lochem F +31 573 28 84 56 C.G. van Leeuwen Director of Sales
W.S. van Walt Meijer Managing Director P.O. Box 97 L. Rippen Director of Marketing
B. Kats Director of Finance & 7240 AB Lochem A.A. van Schaik Director of Operations
Accounting The Netherlands
J.H. Helms Interim Director of
Human Resources & Management
Communications K.A. de Jong Managing Director
J.T. de Haan Commercial Director of M.H. ten Bloemendal Human Resources
International Markets Manager
A.J.M. Verhoeven Director of Operations P.G. Boer Manager of Sales
F.J.J. Saelman Commercial Director of J.H. van Hout Operations Manager
European Retail Group Lochem
Business units I.C. Ogink Director of Finance &
Friesland Foods Cheese Benelux Accounting
Nijkerk, the Netherlands H. van Bochove
Friesland Foods Cheese Deutschland
Essen, Germany A.C. Schrieks
Friesland Foods Cheese Export
Wolvega, the Netherlands J.T. de Haan
Friesland Foods Cheese France
Sénas, France J.C.A. Asselberghs
Friesland Foods Cheese Ibérica
Barcelona, Spain M.A. Lassance
Key brand names
Key brand names Key brand names

Other information
Business group Industrial
Friesland Foods Domo Friesland Foods Kievit Friesland Foods Professional
Friesland Foods Domo develops, produces and Friesland Foods Kievit encapsulates functional Friesland Foods Professional develops, produces,
markets high-quality ingredients and semi- ingredients for the worldwide food industry. markets and sells a range of value-added dairy
finished products based on whey and milk. Its Encapsulation is increasingly gaining ground products for the professional and foodservice
product range includes (semi)demineralised as a means to provide access to functional market such as bakeries, fast-food chains, and
whey products, high-protein whey concentrates, ingredients in products. Friesland Foods Kievit the hotel and catering industry. Its product
biofunctional ingredients and various types creates leading products for customers by range comprises cream-based products, butter
of lactose (milk sugars). These ingredients are undertaking joint innovation initiatives. specialities, fillings and desserts, and ice-cream and
supplied to the infant nutritian, foods and On a global scale, Friesland Foods Kievit focuses milkshake mixes.
pharmaceutical industries throughout the world. on the following core segments: beverages,
enhanced nutrition, infant formula, savoury Address
Address and bakery. The product offering includes Grote Baan 34 T +32 13 310 310
Hanzeplein 25 T +31 38 467 74 44 coffee creamers, soup creamers, foamers and 3560 Lummen F +32 13 310 319
8017 JD Zwolle F +31 38 467 75 55 nutritional oil powders. Belgium
P.O. Box 449 E lummen.info@frieslandfoods.be
8000 AK Zwolle Address
The Netherlands Oliemolenweg 4a T +31 522 23 81 38 Management
7944 HX Meppel F +31 522 23 81 00 F. Smeulders Managing Director
Management P.O. Box 189 P.R. Helderman Commercial Director
R.A. Joosten Managing Director 7940 AD Meppel H. Loomans Director of Finance & ICT
E.W. Groot Koerkamp Director of Finance & The Netherlands J.H. Weijers Director of Operations
Accounting
K.E. Horn Director of Technology Management Business units
Z.W. Leene Commercial Director I.L.M. de Grefte Managing Director Friesland Foods Professional International
H. van Pel Director of Operations L. Coolen Commercial Director Food Service Chains
S.M. Zweers Director of Human D.A.J. Kirpestein Director of Innovation Lummen, Belgium L. Witters
Resources A.J. Leegstra Director of Finance & Friesland Foods Professional International
Accounting Lummen, Belgium J. Thirion
A.M. Verbeek Operations Manager Friesland Foods Professional Germany
Aachen, Germany P.J.J. Vandermeulen
Business unit Friesland Foods Professional France
Friesland Foods Kievit Indonesia Créteil, France P. Parzy
Salatiga, Indonesia A.R. Bouwer Friesland Foods Professional
The Netherlands
Nuenen, the Netherlands U.A.E. Melort
Friesland Foods Professional Belgium
Lummen, Belgium U.A.E. Melort
Friesland Foods Professional Semi Industry
Nuenen, the Netherlands B. Leirs
Friesland Foods Professional
Spraycans/Insourcing
Brand Lummen, Belgium P.J.J. Vandermeulen
Brand Key brand names

Other information
Business group Consumer Products Europe
Friesland Foods Western Europe Friesland Foods Hellas Friesland Foods Central Europe
Friesland Foods Western Europe is responsible Friesland Foods Hellas produces, markets and Friesland Foods Central Europe develops,
for the development, production, marketing and sells dairy products in Greece. Its product range produces, markets and sells fresh dairy products,
sale of dairy-based drinks, coffee enrichers, fruit includes infant and children’s foods, condensed dairy snacks and coffee enrichers in Hungary.
juices and sports drinks for the Dutch, Belgian milk, long-life milk, chocolate milk, yoghurt,
and German markets. cheese and cream products. Address
1134 Budapest, Váci út 33 T +36 1 802 7700
Address Address 1394 Budapest, Pf. 363 F +36 1 802 7709
Horapark 4 T +31 318 43 92 00 44 Kifissias Avenue T +30 210 61 66 400 Hungary
6717 LZ Ede F +31 318 43 92 01 15125 Maroussi F +30 210 61 66 449
P.O. Box 159 Greece Management
6710 BD Ede J.A.M.F. Castelein Managing Director
The Netherlands Management E.H.B.V. Joosten Director of Operations
G.J. Sklikas Managing Director M. Fejes Poórné Director of Human
Management R. van Deventer Director of Finance & Resources
F. Rijna Managing Director Administration J. Sipos Director of Trade
J.H.D. Habets Director of Human J.K. Kallergis Director of Human Marketing
Resources Resources P. Szautner Director of Consumer
D.J.A. Hoekstra Director of Operations A. Mantis Director of Marketing Marketing & New
F.A.M. Reefman Director of Marketing J. Siambanis Director of Sales Business Development
P.L.S. Reekmans Director of Business Units M. Skaramagas Director of Operations C. Vasvári Director of Finance &
H. van Someren Director of Finance & Administration
Accounting
Business units
Friesland Foods België/Belgique
Bornem, Belgium T. van Daele
Friesland Foods Deutschland
Kalkar, Germany S. Schulz
A.L. Hoogesteger Fresh Specialist
Zwanenburg,
The Netherlands M.A.M. van ‘t Hek
Key brand names
Key brand names Key brand names

Other information
Business group Consumer Products International
Friesland Foods Romania Friesland Foods Friesland Foods

Frisian Flag Indonesia Dutch Lady Vietnam
Friesland Foods Romania develops, produces, Friesland Foods Frisian Flag Indonesia produces, Friesland Foods Dutch Lady Vietnam produces,
markets and sells mainly fresh dairy products, markets, sells and distributes dairy products in markets and sells dairy products in Vietnam.
dairy snacks and coffee enrichers in Romania. Indonesia, the archipelago comprising 7,000 Its product range includes infant formula and
islands. Its product range includes infant and children’s foods, condensed milk, milk powders,
Address children’s foods, condensed milk, milk powders long-life milk, yoghurt drinks and yoghurt.
Calea Baciului 2-4 T +40 264 50 20 00 and long-life milk.
400230 Cluj Napoca F +40 264 41 38 55 Address
Romania Address Binh Hoa Commune T +84 65 0754 422
Jalan Raya Bogor Km 5 T + 62 21 841 09 45 Thuan An District F +84 64 0754 726
Management Jakarta 13760 F + 62 21 877 95 376 Binh Duong Province
J.A.M.F. Castelein Interim Managing Director P.O. Box 4074 Vietnam
O. Frunzar Director of Finance & Jakarta 13040
Administration Indonesia Management
S. Kacso Director of Logistics J. Bles Managing Director
C.D.A. Nicula Director of Human Management S. Ahmed Director of Operations
Resources C.H.M. Ruygrok Managing Director C.V. Hai Interim General Director
R. Orbulescu Director of Marketing E.M. Klavert Director of Sales T.Q. Huan Director of Trade
D. Radu Director of Sales J. Langhout Director of Operations Marketing
J. Szasz Director of Operations H.H. Poedjono Director of Human P.J.F. Kerckhaert Director of Finance &
Resources/General Affairs Accounting
M.H. Rooding Director of Finance & J.W. Kivits Director of Consumer
Accounting Marketing
L. Xie Director of Consumer N.H. Thiet Director of Human
Marketing Resources
Key brand names
Key brand names

Brand

Other information
Friesland Foods Friesland Foods Dutch Lady Friesland Foods

Foremost Thailand Malaysia/Singapore/Hong Kong WAMCO Nigeria
Friesland Foods Thailand produces, markets and Friesland Foods Dutch Lady Malaysia produces,
sells dairy products in Thailand. Its product range markets and sells dairy products in Malaysia. Friesland Foods WAMCO Nigeria produces,
comprises condensed milk, milk powder, fresh Its product range includes infant formula and markets and sells dairy products in Nigeria. Its
and long-life milk, and yoghurt drinks. children’s foods, condensed milk, milk powders, product range comprises condensed milk, long-
long-life milk and yoghurt drinks. life milk and milk powders.
Address
6th Floor S.P. Building T +66 2620 1900 Address Address
388 Phaholyothin road F +66 2273 0214 13, Jalan Semangat T +603 7956 7477 Plot 7B Acme Road T + 234 1 271 51 00
Samsen Nai, Phayathai 46200 Petaling Jaya F +603 7955 2985 Ogba F + 234 1 271 51 01
Bangkok 10400 Malaysia Ikeja Industrial Estate
Thailand Lagos State
Management Nigeria
Management J.P.F. Laarakker Managing Director
I.M. Gearing Managing Director A. van Berlo Director of Operations Management
R. Chongcharoenrat Director of Human F. Huang Director of Corporate K. Garg Managing Director
Resources Affairs I.A. Agoye Director of Corporate
J.S. Krol Director of Finance & B. Khoo Director of Sales Affairs
Accounting M.A. Rahim Director of Human H.R. Berghorst Operations Manager
V. Paovarojkit Director of Sales Resources S. Bulthuis Finance Manager
H. Pijffers Director of Operations W.C. Soon Director of Finance & P. Eshikena Sales Manager
K. Tangkiriphiman Director of Marketing Administration R. Maduekwe Human Resources
P. Yoosamran Director of Corporate J.P. Tanis Director of Marketing Manager
Affairs
Business units
Friesland Foods Hong Kong
Hong Kong F. van Amelsvoort
(until 15 March 2008)
C.L. Saw
(from 15 March 2008)
Friesland Foods Singapore
Singapore E. Koh Boon Leng
Key brand name Key brand names
Key brand names

Other information
Friesland Foods Middle East Friesland Foods Business Development Unit

Consumer Products
Friesland Foods Middle East produces and Friesland Foods Consumer Products develops, Address
imports dairy products from the Netherlands, produces and sells mainly long-life dairy products 13, Jalan Semangat T +603 7956 7477
and markets them in Saudi-Arabia, Kuwait, in a selected number of markets in Europe, 46200 Petaling Jaya F +603 7955 2985
Bahrain, Qatar, the United Arab Emirates and Africa, Latin-America and Asia. Its product range Malaysia
Oman. Its product range includes condensed comprises condensed milk, long-life milk, coffee
milk, long-life milk, milk powders, growing-up enrichers, milk powders, and infant formula and Management
milk, yoghurt and cream products. children’s foods. K. Maggioros Director of Business
Development Unit
Address Address L. Girish Marketing Manager for
No. 306, 3rd Floor T +966 2652 9231 P. Stuyvesantweg 1 T +31 58 299 91 11 Infants/Toddlers
Arabian Business F +966 2652 9246 8937 AC Leeuwarden F +31 58 299 22 86 E.I.E.M. Janmaat Human Resources
Center P.O. Box 226 Development Manager
Arabian Business Center 8901 MA Leeuwarden J. Ler Consumer Marketing
King Abdullah Street The Netherlands Manager for Adults/Family
Jeddah
Kingdom of Saudi Arabia Management
H. Huistra Managing Director
Management P. Leliefeld Interim Director of Human
M. Potter Managing Director Resources
K. Bakhsh Director of Finance & E. Vos Finance & Accounting
Administration Manager
A. Khan Director of Operations
(until 1 April 2008) Business units
R.J. Reinders Director of Operations Friesland Foods Export
(from 1 April 2008) Leeuwarden, the Netherlands T.G.H. Smalbraak
G.J. Scheringa Commercial Director Friesland Foods Research & Development
Vacancy Director of Human Leeuwarden, the Netherlands G.H.W. Willems
Resources Friesland Foods Supply Point Beilen
Beilen, the Netherlands P.C. Beemsterboer
Friesland Foods Supply Point Leeuwarden
Leeuwarden, the Netherlands C.J. van Wees
Friesland Foods West Africa
Accra, Ghana P. Verhaak
Key brand names
Key brand names

Annual Report 2007
The power of milk Vision 2015
Annual Report 2007 Royal Friesland Foods N.V.

Blankenstein 142
7943 PE Meppel
T +31 (0)522 27 62 76
F +31 (0)522 27 64 44
The Netherlands
mail@frieslandfoods.com
www.frieslandfoods.com

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Annual Report 2007

Royal Friesland Foods N.V.

The power of milk Vision 2015

Annual Report 2007 Royal Friesland Foods N.V.

Royal Friesland Foods N.V.

This is a translation of the authentic text published in Dutch.

Foods products every day, at breakfast, in

their coffee or tea, during lunch and dinner,

Royal Friesland Foods N.V. 3

developed into a leading producer and is a key supplier of dairy products to

and the Middle East. On a global scale, and pharmaceuticals.

Friesland Foods has 14,600 employees.

dairy farmers own the company and are

under well-known, reliable brands. Taste, chain.

health, convenience, reliability and vitality

4 Annual Report 2007

Royal Friesland Foods N.V. 5

Good ﬁnancial performance Results 2007 2006

Strong ﬁnancial position Ratios 2007 2006

•Marginal drop in solvency ratio to 38.7 percent

Operating proﬁt as a percentage

6 Annual Report 2007

Cash ﬂows Cash ﬂows 2007 2006

Increase in dividend Earnings per share, basic 15.63 12.92

Staff 2007 2006

Dividend per Class A share and

Royal Friesland Foods N.V. 7

Classic Dairy Industrial Consumer Products Europe Consumer Products

Friesland Foods Romania Friesland Foods

Friesland Foods Dutch Lady

Friesland Foods Middle East

Friesland Foods started to adjust its organisational

8 Annual Report 2007

(Former) Member dairy farmers

Friesland Foods B.V. Friesland International B.V.

Royal Friesland Foods N.V. 9

What do a baby in Vietnam, a grandmother in Nigeria,

The farmers’ cows stand as a symbol for the source of

The power of milk

Leveraging a changing business environment to our

Mission, vision and strategy

In order to achieve the targets, a strategy has

I The ﬁrst pillar is extending and defending

16 Annual Report 2007

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18 Annual Report 2007

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Audit Committee Word of appreciation

Meppel, the Netherlands, 28 February 2008

The Supervisory Board

20 Annual Report 2007

Theo C.A. Spierings (1964)

André A. Boudewijns (1955)

Johan G.M. Priem (1954)

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The road ahead is determined by our vision for the future.

The power of milk

If we want to continue to be successful in the future,

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