2007 Campina Annual Report EN

Annual Report 2007

Campina

Annual Report 2007

Contents 2007 Highlights

2

Structure

6

Profile

7

Key Figures

8

Our milk price in 2007

9

Report of the Board of Zuivelcoöperatie Campina u.a. and of the Supervisory Board of Campina BV •> Report of the Remuneration Committee

11 13

Report of the Executive Board of Campina BV •> Financial Review •> Strategy •> Results in 2007 by Group: • Consumer Products Europe • Cheese & Butter • Industrial Products •> Working for Campina •> Campina and corporate social responsibility •> Outlook

16 16 17

Our governance model •> Corporate governance •> Risk management

37 37 37

Review of Zuivelcoöperatie Campina u.a.

40

Administrative organisation

44

Financial statements •> Accounting Policies •> Consolidated balance sheet •> Consolidated profit and loss account •> Consolidated cash flow statement •> Notes to the consolidated balance sheet •> Notes to the consolidated profit and loss account •> Notes to the consolidated cash flow statement •> Principal participating interests •> Balance sheet of Zuivelcoöperatie Campina u.a. •> Profit and loss account of Zuivelcoöperatie Campina u.a. •> Notes to the balance sheet and profit and loss account of Zuivelcoöperatie Campina u.a.

49 50 54 56 57 58 69 73 74 75 76 77

Other information •> Auditor’s report •> Appropriation of surplus/milk payments/issue of bonds

79 79 80

Five years in figures

83

Consolidated profit and loss account

84

Campina’s global presence •> Groups / subsidiaries / joint ventures

86

Consultative bodies

88

21 25 28 30 34 36

Queen visits Campina Queen Beatrix of the Netherlands at the Campina production facility in Maasdam in November: a special day for Campina and all the staff involved.

Performance price € 36.93 +

Cash milk price: Performance price € 36.93 + 13.5 percent

Share of brand products up once more The share of the main brands Campina, Landliebe and Mona in Campina’s turnover rises. In 2007, brand products account for 48 percent (2006: 47 percent).

The performance price for 2007 including VAT amounts to € 36.93 (2006: € 32.53). Excluding VAT, the performance price is € 35.07 (2006: € 30.93). This represents a sharp increase of 13.5 percent in the performance price excluding VAT for milk with the same fat and protein content, compared with 2006. The cash milk price for 2007 excluding VAT is € 34.57 per 100 kg of milk, an increase of 16.5% compared to 2006.

Turnover + € 408 million Campina posts a turnover of € 4,032 million in 2007, 11 percent (€ 408 million) higher than in the preceding year (2006: € 3,624 million). This change on the previous year is almost entirely due to the relatively large price increases of dairy products in the second half of 2007.

2

Optiwell and Landliebe

Cheese

Optiwell Control and Landliebe cheese take the prizes for the most successful product launches in German supermarkets during 2007. Optiwell Control also wins the MOPRO Star 2007 award for best innovation.

A new storage facility for traditional North-Holland cheese is built at Lutjewinkel. The previous storage unit in Alkmaar is closed and replaced by a brand new cheese maturing plant.

Successful partnership The joint venture DMV Fonterra Excipients marks its first anniversary. A partnership that has already proved highly successful. DMV Fonterra Excipients is clearly a solid enterprise, as market leader in the production and sale of excipients for medicines.

13.5%

€ 34.57 + 16.5% Good year for Russia

Farmers on TV

Thailand

Campina farmers are given leading roles

During the summer, Campina publishes

in the television advertising campaign for

details of a joint venture with the Thai dairy

the new Campina milk. Casting for the

company Thai Advance Food, a leading

new TV campaign takes place during

producer of low-fat yoghurt and yoghurt

the Members’ Council, and leads to the

drinks marketed under the Betagen brand.

2007 is another record year for Campina in Russia. Results again exceed expectations and demand remains high. Time to invest in a new line for drinks.

‘discovery’ of fresh new talents Jan Cees Schep and Arno Droogh.

3

Merger On 19 December, Friesland Foods and Campina announce they are holding exploratory merger talks. The announcement is approved by the Members’ Councils of both cooperatives. Members will be given the chance to air their views on the merger agreement at a Members’ Council meeting to be held in May 2008.

Campina remains the

biggest brand! Departure of Justin Sanders

Good cause Campina sets a new trend, this time through the introduction of milk with a more balanced fatty acid composition. At the beginning of April, Agriculture Minister Gerda Verburg marks the official launch of the new product by taking part in a charity milking contest. Her opponents are skating star Barbara de Loor and the chairman of Campina’s Cooperative Council Ankie Wijnen.

4

At the end of December, CEO Justin Sanders announces that he is leaving Campina. Mr Sanders bids farewell to the company he has so emphatically put on the map at the Members’ Council meeting in the Brabanthallen in Den Bosch, where the planned merger is announced.

Campina Management League Campina’s training programme for promising young talents, the Campina Management League, ends with course members being asked to devise a business case. The participants show themselves to be both inventive and enthusiastic. Campina’s CEO Justin Sanders hands out the prizes for the winning business case. The winners are given the chance to go on a working visit to Campina Russia.

School milk The government of the German region of North Rhine-Westphalia launches a programme together with Campina to supply school milk to children each morning. Many of the country’s children leave home without breakfast, which affects their academic performance.

Again the biggest brand

It is high time for a counteroffensive. From 2008, Campina will therefore supply milk to a large number of schools in North Rhine-Westphalia.

In January 2007, Campina is again named the topselling brand in Dutch supermarkets. The ranking takes into account all Campina’s dairy products, from yoghurt to cheese.

Growth with Satro In November, Campina announces plans to acquire Satro GmbH, the ingredients subsidiary of the German dairy cooperative Humana. Satro’s product package ties in perfectly with DMV International’s product portfolio. The takeover was completed on 31 December 2007.

Chatting with the boss

Milner en Volmer

Arthur van Benthem, Group Director

Campina’s Cheese & Butter group will be

Consumer Products Europe, introduces

concentrating on the Milner brand and the

a number of online chat sessions to

position of its North-Holland cheese. In the

openly and freely discuss the group’s

summer, Campina Cheese & Butter sells its

growth strategy with his staff. During

cheese-making plant in the Belgian village

these sessions, Mr van Benthem is happy

of Passendale. The maker of Belgian cheese

to reply online to anyone wishing to

specialties now becomes part of the

chat with him.

Bongrain SA company.

5

Campina

Annual Report 2007

Structure as at 1 January 2008

Zuivelcoöperatie Campina u.a.

5,542 (NL) - 54 (B) – 1,535 (G) total 7,131 members 48 Departments 9 Districts Members’ Council (194)

Board (13) Supervisory Board

Co-operative Council (27) Shareholders’ Meeting

Executive Board Management Board

Campina BV Corporate Staff & Service Centers

Consumer Products Europe

Cheese & Butter

Industrial Products

CPE Netherlands Woerden (NL)

Campina Buttergold Tilburg (NL)

Creamy Creation Rijkevoort (NL)

CPE Germany Heilbronn (G)

Campina Holland Cheese Tilburg (NL)

DMV International Veghel (NL)

CPE International Aalter (B)

Campina Valess Tilburg (NL)

Holland Dairy Feed Veghel (NL)

CPE Supply Chain Zaltbommel (NL) Campina International Veghel (NL)

6

Member Services

Campina is an international dairy cooperative run jointly by over 7,000 member farmers and some 6,900 employees. The people at Campina are all committed professionals with a passion for dairy. Campina is owned by its member farmers, who are rooted in the Dutch, German and Belgian countryside. Buyers of Campina’s dairy products or dairy ingredients are therefore contributing to the livelihood of its farmers.

•>

Vision

Campina wants to grow as a company and become more meaningful to its member farmers, employees, commercial clients and consumers. In doing so, it reflects its core values: being close to consumers, natural, healthy and sustainable.

•>

Aim

Campina’s member farmers depend for their livelihood on the company’s performance in the market. Over the years, Campina aims to pay its members the highest possible price for their milk.

•>

Customers

For people who want to lead healthy lives, eat and drink healthy products and still enjoy what they consume, dairy is the answer. Dairy contains the important nutrients people need to stay vital and fit. Primary school pupils drink school milk supplied by Campina. In supermarkets, consumers find a broad range of healthy Campina dairy products to satisfy everyone’s needs and tastes. For industrial clients, Campina creates generic products and customised applications. Campina continually researches the wishes and needs of consumers and commercial clients to ensure that it develops and produces products that suit their needs.

Mission

Campina’s mission is to add value to the milk supplied by its member farmers. In everyday dairy products, from Campina milk with a more balanced fatty acid composition to traditional Gouda cheese. But also in countless innovative and health-conscious dairy products which consumers now regard as an important part of their diet. From Milner to Campina Optimel/Optiwell and Vifit. Campina is also an essential and reliable supplier of ingredients for the food and pharmaceutical industries.

•>

•>

profile

Campina

•>

Products

Whatever Campina makes contains the very best of dairy. Vitamins, calcium and minerals. Campina milk with a more balanced fatty acid composition. North Holland cheese, desserts, yoghurts by Mona, Landliebe or Campina Puddis, and butter - with or without a low fat content. Campina dairy products add value. And consumers enjoy them, which is why Campina is the biggestselling brand in Dutch supermarkets, why Landliebe is one of the best-loved brands in Germany and why Campina Fruttis is so popular in Russia. And Campina ingredients are what help the food and pharmaceutical industries lift their products to greater heights.

•>

Markets

Campina is active in the production of healthy dairy products for consumers under its main brands Campina, Landliebe and Mona - from London to Moscow and from the United States to Japan. It is also a prominent partner in the global food and pharmaceutical industries.

Strategy

To obtain the highest possible milk price, Campina has developed a strategy based on growth, efficiency and innovation. Growth in regions and product groups where it has identified opportunities for marketing value-added products. Efficiency in production and logistics to keep costs to a minimum. And innovation in product development and processes to keep our company at the forefront.

7

Campina

Annual Report 2007

Key figures

2007

2006

2005

2004

2003

4,032 36.43 34.57 36.93 35.07

3,624 31.28 29.68 32.53 30.93

3,569 32.21 30.57 32.96 31.32

3,559 32.89 31.21 33.39 31.71

3,655 33.56 31.85 34.56 32.85

85 95

124 90

150 84

140 82

138 80

608 29.0

603 32.8

567 32.1

536 32.1

524 32.8

4,799 3,441 7,768 443 4.34 3.48

4,742 3,399 8,151 417 4.35 3.46

4,823 3,399 8,576 396 4.34 3.47

5,205 3,422 8,794 389 4.38 3.47

5,222 3,458 9,084 381 4.37 3.46

Operations Net turnover (€ millions) Cash milk price in € per 100 kg (incl. VAT) Cash milk price in € per 100 kg (excl. VAT) Performance price in € per 100 kg (incl. VAT) Performance price in € per 100 kg (excl. VAT) Investment and depreciation Investment in tangible fixed assets (€ millions) Depreciation of tangible fixed assets (€ millions) Equity Equity (€ millions) Equity (as % of the balance sheet total) Milk supply and processing Total milk processed (million kg) Milk supplied by members (million kg) Average number of members supplying milk Average milk delivery per member (1,000 kg) Average fat content (%) Average protein content (%)

8

Campina

Annual Report 2007

Our milk price in 2007

Demand outstrips supply • • • •

Rise in demand for milk Production unable to keep pace with demand Explosive increase in the price of raw materials European subsidies completely abolished

2007 was a year of unexpected and unprecedented fluctuations in milk prices, Price quotations for whey powder, butter and skimmed milk powder rose – and fell again – sharply. At the end of 2006, a milk price of around € 26.00 per 100 kg was regarded as realistic for 2007. This turned out to be completely wide of the mark: 2007 milk prices increased to higher levels than anyone thought possible.

•> GLOBAL DAIRY MARKET The sharp increase in the milk price was heavily influenced by developments on the global market. The emerging economies in Asia, such as China and India, generated growing demand for dairy products. Meanwhile, Australia and New Zealand were hit by droughts, which reduced milk yields. The worldwide supply of milk therefore went down, while demand continued to rise. The high price of oil and dairy market reforms also helped to push up prices. As a result, worldwide public milk stocks were reduced to zero, as were stocks of butter.

•> PEAK PRICES The global price of whey powder steadily increased from November 2006 to April 2007, then began to fall. From March 2007, the price of skimmed milk powder shot up on the world market. The price of butter followed suit starting in May 2007. Butter prices peaked at € 400 per 100 kg in September, roughly the same time that the price of skimmed milk powder peaked at € 375 per 100 kg compared with € 225 per 100 kg in September 2006.

to one-year contracts, this could not be done straightaway. In August, the price of caseinate, an important product for the Industrial Products group, reached a level that was totally unforeseen at the beginning of 2007. These high prices naturally resulted in higher returns. But in most markets, they also led to a drop in demand. In Germany, for example, the sales volume of butter in consumer packaging, which was much more expensive, fell sharply. In some parts of the world, the high prices led to a fall in demand for dairybased raw materials among industrial buyers, who switched to vegetable-based fats and proteins. This drop in demand also carries the risk that these buyers will not return to dairy-based ingredients.

•> LONG TERM Campina focuses on supplying added-value dairy products and, as part of this effort, invests in long-term relationships with buyers. More goes into these contracts than ‘just’ capital and goods. Partnership, innovation and trust are long-term investments. Campina’s approach generates stability, which is vital for a company. Campina is minimally, if at all, involved in trading in skimmed milk powder and whey powder. This was initially a disadvantage in 2007. However, the decline in the price of raw materials in November once again demonstrated the relativity of the milk powder business. In many cases, the prices Campina agreed with its clients in 2007 continue to apply in 2008.

The price of milk During the second half of 2006, the price of skimmed milk powder gradually began to rise. Campina responded by preparing to pass these increases on to the market in the form of higher product prices. The price of skimmed milk powder continued to climb in 2007, reaching unforeseen levels. This was followed by an increase in the price of whey powder and butter. Clearly, an increase or decrease in the price of milk powder and whey powder has an impact on the use of Campina milk.

As soon as it could, Campina passed on this sharp rise in the price of raw materials to its industrial clients and consumers. However, due to the fact that most clients had three-month

9

EU Income of manufacturing of Cheese / Wheypowder, SWP / Butter and WMP / Butter (in EUR) 550 500 450

Euro for 100 kg of milk

400 350 300 250 200 Mar

Apr

May

Jun

Jul

Aug

Sept

Oct

Nov

Dec

Cheese / Butter / Whey SMP / Butter

Dairy markets are likely to experience sharp price fluctuations over the next few years. This is due to the fact that in food markets, there is only a narrow gap between a shortage and a surplus. Moreover, the abolition of export refunds and internal subsidies means that EU dairy policy is no longer geared to absorbing sharp price fluctuations. These dramatic price fluctuations benefit traders in raw materials for the dairy industry. To them, the position of the producer - the dairy farmer - is irrelevant. Thanks to the broad spread of its product range, Campina is able to absorb these price fluctuations in the best possible way. Its policy of concluding contracts and establishing long-term relationships with clients creates stable markets, which guarantees long-term security for its members.

Outlook

WMP / Butter

In the diagram, the blue line indicates the valorisation (determination of the value) of milk used to make cheese, butter and whey powder. The orange line indicates skimmed milk powder and butter and the green line whole milk powder and butter.

Where is milk produced? The EU member states account for the lion’s share of global milk production. In 2006 they supplied 131 million tonnes, followed by India with 92 million tonnes and the US with 84 million tonnes. New Zealand and Australia produce 15 and nine million tonnes respectively, but export a relatively high proportion of this. The three regions – Europe, India and the US – that produce almost half the world’s milk consume most of it themselves. India exports less than one million tonnes and the US just six million tonnes. Of the 655 million tonnes of milk produced worldwide in 2006, only 45 million was available for export outside these regions.

Price fluctuations Campina’s revenues tracked the increase in prices for butter and skimmed milk powder, but with some delay. This is because Campina does not trade in bulk products but instead converts the milk into products for consumers and industrial buyers. The contracts it concludes with clients only allow higher prices to be passed on to the market at a later stage. However, the advantage of this approach is that these higher prices will continue to apply for some time.

10

The increase in milk prices led to more milk being produced in the European Union and on the world market. But the sharp increase in prices also led to a drop in demand. As a result, prices fell at the end of 2007 and the beginning of 2008. This will inevitably have an impact on the advance milk price from dairy companies. The recent instability is an example of the price fluctuations that market analysts foresee. Because the safety net of the EU subsidies has been eliminated, the market is susceptible to sharper fluctuations than ever before. In light of these uncertainties, we will not comment on the expected milk price for 2008. There is still room for some growth in milk production within the current quota schemes, but only a more flexible quota system will enable a sustained boost in production. The European Commission is proposing an extra quota increase from April 2008, over and above the additional 0.5 percent granted to 11 member states. The entire European agricultural policy will also be reviewed in 2008. The future of European agriculture and a possible reform of agricultural policy will be evaluated (a process known as the ‘Health Check’). The evaluation will also consider how the dairy sector can best prepare for the abolition of the milk quota system in 2015. The European Commission is pressing for a gradual increase of the quota. This would lead to a rise in milk production, particularly in the Netherlands, Spain, Belgium, Finland and Austria.

Campina

Annual Report 2007

Report of the Board / Supervisory Board

The financial statements of Zuivelcoöperatie Campina u.a. for the year 2007 included in this annual report have been prepared under the responsibility of the Board, in accordance with Article 47 of the Articles of Association. The financial statements have been audited by KPMG Accountants N.V., which has issued an unqualified auditors’ report. The findings of the external auditors arising from their audit have been discussed by the Board in the presence of KPMG Accountants N.V. The consolidated financial statements include the financial statements of Campina BV.

The general meeting of shareholders of Campina BV is expected to approve the company’s financial statements at its meeting on 6 March 2008, subject to the contingent condition that the financial statements of Zuivelcoöperatie Campina u.a. be adopted by the Members’ Council. Subject to the same contingent condition, and in accordance with Article 32 of the Articles of Association, the general meeting of shareholders of Campina BV discharged the Executive Board of responsibility for its management and the Supervisory Board of responsibility for its supervision in the year under review. The proposed appropriation of the 2007 operating surplus is presented in ‘Other information’ (page 81). At its meeting on 7 May 2008, the Members’ Council of Zuivelcoöperatie Campina u.a. will be invited to adopt the 2007 financial statements and to discharge the Board of responsibility for its management of the business in 2007, in accordance with the recommendation of the Cooperative Council to be submitted to that meeting.

•> BOARD The Board of Zuivelcoöperatie Campina u.a. consists of thirteen members: ten member farmers and three external Board members. The Board members are automatically also members of the Campina BV Supervisory Board. The year 2007 was a year of contrasts. The year ended with news that was both positive and exceptional. In other words,

the announcement of the exploratory talks on a merger with Friesland Foods, which would create the world’s largest dairy cooperative owned by its member farmers. Campina’s continuing development of differentiated milk flows and the sharp rise in the milk price were also favourable developments during the year. However, things looked quite different in mid-2007, when hundreds of dairy farmers in the Netherlands, Germany and Belgium decided to resign from the cooperative, despite all the efforts undertaken by Board members and other officials to persuade them otherwise. The wave of resignations began when over 500 German member farmers decided to leave Campina because of their dissatisfaction with the system used for determining advance milk payments, their expectations of developments in milk prices and the perception of the absolute level of Campina’s advance milk price in relation to the milk price on an annual basis. This was exceptionally bad news for all those committed to the spirit of a cooperative. The Board consequently set up a committee, comprising both Dutch and German members, to look into the causes of this dissatisfaction and make recommendations for restoring confidence in the cooperative. The committee recommended aligning the level of advance milk payments more closely to the specific environment (including in the Netherlands and Belgium) and abandoning the requirement that German members have milk cooling tanks large enough to hold six milkings by 1 January 2015. Concerns also arose during the summer months among member farmers in the Netherlands and Belgium. Prompted by the sharp rise in competition for ex-farm milk, members started complaining about Campina’s levels of ambition, the way in which members exercise control, financing, the system used for determining milk prices and the cooperative’s relationship with its members. A further 150 members in the Netherlands, Germany and Belgium subsequently resigned their membership with effect from 1 April 2008. Following intensive consultations, dozens of dairy farmers later decided to reverse their decision and remain part of the cooperative. The Board also devoted considerable attention in 2007 to the Dutch launch of Campina’s milk with a more balanced fatty acid composition and was at the forefront of initiatives to draw more attention to the issue of recruiting and guiding dairy farmers and achieving further improvements in measurements, regulations and systems. In addition, the Board members gave

11

Campina

Annual Report 2007

the green light for a unique project in Germany: the Landliebe cattle feed concept, which is seeking to reinforce the authentic and natural character of the dairy brand. Once the concept has been introduced, all the extra feed purchased by Landliebe farmers for their cows will derive from crops traditionally cultivated in Germany and grown either in Germany or elsewhere in Europe. The Board obviously also discussed ways to further improve the quality of feed bought in from outside. From 1 January 2008, Campina members in the Netherlands are only allowed to buy feed from suppliers whose insurance policies have been checked by external experts. This will provide extra guarantees of quality, without increasing the administrative burden to member farmers. In 2007, Campina amended its Articles of Association to ensure that membership certificates continue to constitute equity under the international IFRS accounting standards and are registered in members’ own names. Following the proposal to amend the Articles of Association, intensive consultations were held with members in late 2006. The Board consequently decided that the amendment should be voted on at the Members’ Council meeting in April 2007 rather than at the meeting in December 2006. This allowed scope for further discussions, which resulted in the Members’ Council voting in April 2007 in favour of the proposed amendment. In response to fundamental changes in dairy farming and the relationship between members and their cooperative, the Board decided in the spring of 2007 to realign the principles on which the cooperative operates, as well as the supply conditions, the way in which members exercise control, the financing and the milk price. If the merger talks with Friesland Foods prove successful, the various rules and regulations applied by Friesland Foods and Campina will be harmonised. The Board has consequently decided to include the cooperative realignment of Campina in that harmonisation process.

•> SUPERVISORY BOARD The Supervisory Board met ten times during the year under review. Matters discussed at these meetings included the sharp increase in milk prices that had taken everyone in the market by surprise and the ways in which Campina will be seeking to optimise the benefits of the increase for its member farmers. This involved critically examining the growth strategy, which is based on a broad portfolio of added-value products aimed at differentiation between brands and supermarket brands. Although it was decided to continue this strategy, the Board gave consideration to whether and how Campina could reallocate its milk flows in order to benefit more from rising world market prices. Needless to say, the Supervisory Board also discussed the exploratory talks between Campina and Friesland Foods in depth, with various meetings held to consider whether and,

12

if so, how the merger could create an even better basis for improving the milk prices received by Campina’s member farmers. The new Friesland Campina group is expected to be better positioned to anticipate and respond effectively to the increasing pace of change in the market. If the merger goes ahead, both groups expect to be able to accelerate their growth strategies by operating as a single player focused on achieving strong growth in brands and concepts, greater economies of scale in production, greater flexibility in milk processing, a further reinforcement of market and brand positioning in growth markets both in and outside Europe and further strengthening of the dairy ingredient activities throughout the world. The Supervisory Board expects this strategic reinforcement to have a beneficial impact on milk prices for member farmers. During the year under review the Supervisory Board also gave its approval to continue other aspects of Campina’s international growth strategy, including the decision to collaborate with Thai Advance Food in a joint venture, Betagen Holding Ltd., selling healthy yoghurt drinks in Thailand. In addition, the Supervisory Board approved the acquisition of the German ingredients specialist Satro GmbH. Regular topics discussed included disposals and acquisitions, the markets in which Campina operates and Human Resources, specifically in relation to senior management. The Supervisory Board met with the external auditors, KPMG Accountants N.V., on two occasions during the year, including the discussions in October 2007 on the required design of the financial administration, the internal controls and internal compliance audit and KPMG’s audit activities. The findings in respect of the audit of the 2007 financial statements were discussed in March 2008. During the year under review, the Supervisory Board also met in the absence of the Executive Board to consider such matters as the profile and composition of the Supervisory Board and the functioning of the Supervisory and Executive Boards.

•> MEMBERSHIP OF THE EXECUTIVE BOARD It was announced at the end of the year under review that Justin Sanders would be leaving Campina after more than fifteen years with the dairy cooperative, roughly half of which were spent as CEO. His decision was linked to the announcement on 19 December of the intended merger between Campina and Friesland Foods. The merger will mark the start of a new era, and it was agreed by those concerned that it would be wiser if Mr Sanders, who has left his mark on Campina over the past fifteen years, did not move to the new group. Mr Sanders therefore decided, in consultation with the Supervisory Board, to leave Campina in order to optimise the merger’s chances of success. The Supervisory Board regrets that it has not proved possible for Mr Sanders to continue as CEO in the new structure and

would like to express its appreciation of the way in which he has made his expertise and entrepreneurial skills available to Campina over the past fifteen years.

Report of the Remuneration Committee

Kees Gielen, CFO of Campina, took over Mr Sanders’ responsibilities as CEO on an interim basis from 1 January 2008 and will, for the time being, combine these with his responsibilities as CFO.

Campina has a Remuneration Committee consisting of C.H. Wantenaar (Chairman), J.H.G.M. Uijttewaal and H.A. van Karnebeek.

We would also like to take this opportunity to thank the members of the cooperative for the trust they have placed in us. The Supervisory Board very much appreciates the efforts made by the staff and the policies pursued by the Executive Board during the year. Zaltbommel, 4 March 2008 On behalf of the Board/Supervisory Board C.H. Wantenaar Chairman

The Remuneration Committee met on eight occasions during the year under review. The following topics were discussed at these meetings: bonus targets for 2007, settlement of bonus targets for 2006, the salary policy and matters concerning the merger talks. Further details of the remuneration of the Board, the Supervisory Board, the Co-operative Council and the Executive Board, and the Company’s remuneration policy are presented in the Notes to the Financial Statements. The Remuneration Committee’s primary task is to prepare Supervisory Board decisions on the remuneration of and the remuneration policy for the members of the Executive Board. The Remuneration Committee also acts as the Selection and Appointments Committee. Zaltbommel, 4 March 2008 On behalf of the Board/Supervisory Board C.H. Wantenaar Chairman

13

Weight control

is all about

balance

Campina has introduced Optimel Control (in the Netherlands) and Optiwell Control (Germany): dairy drinks that help you eat less. Food producers can therefore help consumers to live healthy, balanced lives - a role Campina is happy to take on.

Go for gold: eat breakfast Dutch speed skater Sven Kramer believes that if you want to win gold, breakfast isn’t a meal you can afford to skip. Last year, he launched the Bread Information Centre’s (Voorlichtingsbureau Brood) National School Breakfast campaign, to encourage parents and children to start the day with a good breakfast. Campina is supporting

Campina = healthy

the initiative by making available chocolate milk and Yogho Yogho yoghurt drink. A 150ml glass of semi-skimmed milk provides children from ages 4 to 8 with: Nutrients Vitamin B12 Vitamin B2

RDI* 45% 40%

Nutrients Calcium Protein

RDI* 25% 25%

Also phosphorous, magnesium, zinc, vitamin B6, folic acid and vitamin A * RDI (Recommended Daily Intake) represents the average requirements of the Dutch population.

A cow gives milk. A unique product packed with the nutrients that the human body needs, such as proteins, vitamins and calcium. Due to their exceptional composition, dairy products are an essential part of the increased focus on a healthier and more vital lifestyle.

Campina’s brands exemplify qualities of milk. Trollinger Marathon Around 60 Campina employees take part in the Trollinger Marathon in Heilbronn (Germany) on 20 May, which had Dutch and German colleagues running side by side. Campina Germany sponsored the event, raising almost € 7,000 for UNICEF.

14

healthy

the unique

A healthy start Campina launched a major programme to supply milk to primary school pupils in Germany. Too many children are currently leaving home in the morning without eating breakfast. This prompted the provincial government of Nordrhein-Westphalia to invest in the supply of school milk. A challenge enthusiastically taken up by Campina, the country's biggest supplier of school milk.

In the summer of 2007, Campina introduced a new product in the Belgian market: Calcifort Calcifort, a calcium-rich dairy drink. With Calcifort, Campina has created a dairy product that makes an extra contribution to human health. And Calcifort is also close to the heart of Campina: milk as the source of calcium, vitamins and minerals. 15

Campina

Annual Report 2007

Report of the Executive Board of Campina BV

Financial review Campina is dedicated to adding value to the milk supplied by its owners, the some 7,000 member farmers who live and work in the Netherlands, Germany and Belgium. Campina does this by collecting the milk as efficiently as possible and converting it into products that will strengthen its market position. The stronger Campina’s market position and the lower its costs, the better it is for Campina and thus for its member farmers.

•> RESULTS PER GROUP Total turnover of the Consumer Products Europe (CPE) group rose by 7 percent. During the year under review, Campina was often unable to directly pass on the sharp increase in raw materials prices to the market due to the year-long contracts it had already concluded with clients. As a result, CPE’s total margin and result decreased compared to 2006. This was further aggravated by the continuing supermarket (price) competition and the further growth in supermarket brands in 2007. Volume fell slightly; this was entirely accounted for by private label dairy products (supermarket brands).

Campina’s earnings, once costs have been deducted, constitute the performance price for every 100 kg of milk supplied by its members. The lion’s share of the performance price goes into the members’ bank accounts and a portion is invested in the further consolidation of the cooperative. After all investments in innovation, international growth and efficiency add long-term value to the milk produced by the member farmers.

Growth in turnover of CPE Netherlands brand products more than compensated for the downturn in sales of private label products. Low-fat and organic concepts were especially successful.

•> PERFORMANCE PRICE / CASH MILK PRICE The performance price including VAT for 2007 amounted to € 36.93 (2006: € 32.53). Excluding VAT, the performance price was € 35.07 (2006: € 30.93). Compared to 2006, this represents a sharp increase of € 4.14 or 13 percent in the performance price excluding VAT for milk with the same fat and protein content. The cash milk price excluding VAT for 2007 was € 34.57 per 100 kg of milk. Individual income compensation paid to dairy farmers as part of the agricultural reforms was fixed at a maximum of € 3.56 per 100 kg of milk, which was unchanged from 2006. Taking this EU compensation into account, milk income for member farmers was well above the level of 2006.

•> TURNOVER Campina posted turnover of more than € 4 billion in 2007, 11 percent (€ 408 million) higher than in the preceding year (2006: € 3,624 million). This increase on the previous year was almost entirely due to the relatively large price increases for dairy products in the second half of 2007. The share of the main brands Campina, Landliebe and Mona in consumer products turnover rose slightly to 48 percent (47 percent in 2006).

16

Turnover in Germany rose 10 percent due to the growth in sales of Landliebe and Campina Optiwell products, which performed well thanks to successful new concepts. Although the volume of private label dairy products on the German market fell, turnover rose, albeit slightly. By preserving its margins - despite far higher raw materials prices - and implementing cost savings, CPE Germany achieved a slightly better result in 2007 compared with 2006. Turnover in the rest of Europe rose 12 percent thanks to growth in Belgium, Russia and other East European countries. Turnover and results in the UK were down due to lower sales in a major supermarket chain. The Cheese & Butter group realised turnover growth of over 3 percent, mainly due to its cheese activities. Butter sales were virtually unchanged from 2006. The Campina Buttergold division’s margins were pressured by the increase in fat prices/ butter price quotations in 2007, combined with the market’s standard practice of working with fixed annual contracts. The Cheese & Butter group result was therefore lower than in 2006. Sales of Campina Milner and the activities in Greece contributed to the growth in turnover for cheese. Campina divested Belgian cheese maker Passendale and the group’s goat cheese activities (which include the international Chevagne label) in 2007.

The sale was prompted by Campina’s decision to concentrate on the international marketing of naturally matured semi-hard cheese, with an emphasis on the Campina Milner and Campina Volmer brands and North Holland cheese with an EU Protected Designation of Origin (PDO). The market for milk fat products was under severe pressure in 2007 due to the high price level, the disappearance of the export refunds and the limited availability of raw materials. For Campina Buttergold, these factors resulted in a limited decline in sales, with priority given to strategic business areas and returns, particularly in the field of industrial specialities. The turnover of the Industrial Products group rose by 37 percent. Turnover for all industrial activities increased. This was partly due to the joint venture DMV Fonterra Excipients, whose turnover was fully consolidated, and to the Dairy Ingredients business line and Holland Dairy Feed business unit, chiefly as a result of higher sales prices and also – in the case of Dairy Ingredients and Holland Dairy Feed – to higher volumes. The result of the Industrial Products group was significantly higher compared to the previous financial year.

•> PROCESSED MILK The total volume of processed milk in 2007 was 4,799 million kg, up 1 percent compared to the previous year (2006: 4,742 million kg). A substantial reduction in the production of basic products in Germany’s white dairy segment led to a decline in levels of milk processed in that country. Milk supplies from member farmers remained largely stable, despite the regrettable departure of a number of German members midway through the year.

Staffing levels at Industrial Products rose by 56 percent due to the expansion of the group’s activities and the joint venture with Thai Advance Food/Betagen as well as the acquisition of Satro. Personnel costs for Campina as a whole increased by a total of € 38 million. Amortisation and depreciation of intangible/tangible fixed assets amounted to € 122 million in 2007, up € 7 million compared to 2006, due to the completion of major investment projects. Research and development expenses fell by 5 percent. Advertising and promotion expenses increased to € 115 million (2006: € 105 million).

•> RESERVES AND BALANCE SHEET The proposed appropriation to the general reserve for 2007 is € 0.50 per 100 kg of milk, or € 17 million (€ 1.25 per 100 kg of milk in 2006). The Board also proposes to fix the issue of subordinated bonds, as part of the cash milk price, at € 17 million, or € 0.50 per 100 kg of milk supplied (2006: € 0.25). Equity rose to € 608 million at year-end 2007 (an increase of € 5 million), representing 29 percent of the balance sheet total (2006: 32.8 percent).

Strategy Campina’s strategy consists of five spearheads: • International growth • Innovation • Efficiency • Harmonisation • Quality

Milk processing in millions of kg

The Netherlands Germany Other countries Total Campina

2007 3,452 860 487 4,799

2006 3,234 951 557 4,742

•> OPERATING EXPENSES Operating expenses amounted to € 3,989 million in 2007 (2006: € 3,614 million). The cost of raw materials rose by € 313 million. Energy costs increased by € 12 million. The number of employees increased by 8 percent, thanks to the start of the joint venture between Campina and Thai Advance Food, a leading producer of low-fat special yoghurts and yoghurt drinks marketed under the Betagen label. Staffing levels at all the groups fell, with the exception of the Industrial Products group, partly due to the winding up of production activities and various efficiency projects, notably in Germany.

•> INTERNATIONAL GROWTH Campina has a strong market position through its consumer dairy products in Europe and its marketing of dairy ingredients worldwide. It is working to achieve better margins in Western Europe and seeking expansion in growth markets in the Middle East and Asia. In addition, Campina is taking steps to globally strengthen its leading position as a supplier of specific dairy ingredients. In order to be able to tap new markets, Campina will focus on international product concepts and production and R&D facilities that can be used to serve several markets.

•> INNOVATION Added value is linked to products that are emotionally and intrinsically distinctive. In consumer products, this distinctiveness concerns to health-related aspects, ease of use, taste and production method. Campina’s international specialist innovation centres are working on innovations in dairy drinks and desserts (Campina Innovation in Foodvalley Wageningen, the Netherlands), cheese and butter (Tilburg, the Netherlands) and ingredients (Innovium in Foodvalley Wageningen, the Netherlands).

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Campina’s innovation centres maintain close contacts with universities and leading research institutes in various countries. These incubators ensure the development of specific innovations for the market segments in which Campina wants to strengthen its position. Each innovation yields honest, tasty, natural dairy products and ingredients that surprise consumers and business partners, using milk and milk components as a rich basis.

•> EFFICIENCY The more Campina prospers as a cooperative, the better it is for its owners: the member farmers. Cost control and efficiency throughout the dairy chain, from the collection and processing of the milk to delivering the products, are an integral part of this. Large-scale production plants, many of which perform an international function, are a key element of Campina’s ongoing drive for efficiency throughout the dairy chain.

•> HARMONISATION A single global consumer brand (Campina), which shares its name and logo with the company. This alone shows that harmonisation is an important issue for Campina. Harmonisation reduces the costs and the time required to introduce new products and concepts, which ties in with Campina’s efforts to manage costs and exploit strategic opportunities.

•> QUALITY Campina is a leading player in the global dairy market. Millions of consumers and clients worldwide must be able to count on the quality of all its dairy products and ingredients. And quality means quality throughout the dairy chain. This is about the quality of the products as well as the production processes, from the feed given to cows to milk processing and right up to product preparation.

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In autumn 2007, Friesland Foods and Campina made a momentous announcement. On 19 December, they announced that they would be studying ways in which a possible merger might help them to achieve their goals. Friesland Foods and Campina are confident that the merger will considerably strengthen their international positions, enabling further growth with consumer products in Europe, Asia and Africa and with ingredients worldwide.

Exploratory merger talks between Friesland Foods and Campina

Consolidation and growth are in the interests of the member farmers, who would become collective owners, and of clients, consumers and staff. The merger is scheduled for completion in 2008, subject to approval by the Campina Members’ Council, the general meeting of member dairy farmers of Friesland Foods and the European Commission. Completion of the merger would result in the creation of one of the world’s leading dairy cooperatives owned by member farmers. The diversity in product groups, geographical markets, strong brands, and global increase in scale for research, production, marketing and sales will turn Friesland Campina into a more competitive company. A company that will be able to respond efficiently to the increasingly rapid market changes. The combined turnover of Friesland Foods and Campina amounts to some 8.3 billion euros. Together, they employ around 22,000 people, and between them have some 17,000 associated dairy farms in the Netherlands, Germany and Belgium. These supply a total volume of 8.7 billion kilos of milk (2006 figures). A merger between the two dairy cooperatives would tie in seamlessly with the growth strategy Campina launched a few years ago. Campina has consistently said that it will concentrate on growth through innovative dairy in Europe, the Middle East and Asia, and a leading position with specific dairy ingredients worldwide. The company has always stressed that it was more than capable of expanding under its own steam, through organic growth and strategic acquisitions, but did not rule out partnerships or mergers based on equality. Obviously, such a partner-

ship (see Campina’s joint ventures with Fonterra and Thai Advance Food/Betagen) or equal merger must involve the creation of extra value for the member farmers.

•> A STRONGER AND MORE DYNAMIC COMPANY Friesland Foods and Campina both expect that the new company, Friesland Campina, will be able to better anticipate and respond more decisively to the increasingly rapid changes in market conditions such as: • far-reaching liberalisation / deregulation (EU/WTO); • a strongly fluctuating global market for dairy products; • increasing competition, regional as well as global; • a worldwide increase in consumption of dairy products. Should the merger take place, both companies expect to accelerate the execution of their respective strategies by focusing as a single company on: • stronger growth in brands and added-value product concepts; • larger scale production, product development and marketing, and greater flexibility in the processing of milk; • further strengthening of market and brand positions in emerging markets; • further global strengthening of dairy ingredients activities.

•> STRUCTURE OF THE COOPERATIVE The purpose of the exploratory talks is to determine whether the multinational Friesland Campina will generate additional added value for its member farmers through the milk price and other aspects, and whether it will facilitate milk volume growth in line with the anticipated growth of the new company. The starting point will be the creation of a new cooperative under the name Zuivelcoöperatie Friesland Campina, in which at the time of the merger all the existing members of Friesland Foods and Campina will participate as equals, with the same rights and obligations, and voting rights in proportion to the volume of milk they supply. Subsequent stages of the exploratory talks will consider membership regulations, member financing and the method for determining milk prices.

•> PROCESS The Supervisory Boards, Boards of Management, directors of the cooperative, the general meeting of member dairy farmers of Friesland Foods and the Members’ Council of Campina all support the discussions. The Boards of Management and directors of the cooperatives have signed a letter of intent. This framework will include an investigation into strategy and synergies, the organisational structure needed to achieve the new company’s objectives, governance, capital structure and milk regulations. The aim is to submit a merger agreement to the general meeting of member dairy farmers of Friesland Foods and the Members’ Council of Campina for approval by May 2008. The competition authorities will also have to issue a decision.

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Strategy and results in 2007

Strategy

Results in 2007

Page

GROWTH Campina is aiming for better margins in Western Europe, growth with innovative dairy products in the Middle East and Asia, and a leading global position with specific dairy ingredients.

• • • • • •

Acquisition of German ingredients specialist Satro GmbH Joint venture in Thailand for healthy yoghurt drinks Focus on Milner, Volmer and North Holland cheese Landliebe school milk programme Growing sales of organic dairy Exploratory merger talks between Friesland Foods and Campina

12 12 25 22 22 19

• • • • • • •

Campina’s new milk (Netherlands) Opitimel/Optiwell Control Most innovative company Landliebe feed concept Nominated for national and European innovation and CSR award Distinctive with new packaging Calcifort

22 22 22 22 34 24 23

• • • • •

Concentration of production of fresh dairy in the Netherlands Total Productive Manufacturing, including in Belgium and Germany Efficiency improvements in plants Project KOOC (complexity reduction) New approach to purchasing

24 24 24 24 34

INNOVATION Campina produces delicious, honest and natural dairy products and ingredients that surprise consumers and business partners. The key elements are tasty, natural and nutritious.

EFFICIENCY/COST CONTROL Campina is a cooperative dairy company. This means that the better the company performs, the better it is for Campina’s owners: the member farmers. Cost control and efficiency are integral parts of this effort.

HARMONISATION Campina combines the best of the market positions and working methods within the groups and organisational forms in order to continue to grow in strategic segments at the lowest possible cost.

• Share of main brands in turnover • Campina biggest brand in Dutch supermarkets

16 5

• Q2 Programme • Campina Management League

43 30

QUALITY Campina is a leading player in the European and global dairy markets. Millions of consumers and clients must be able to count on the quality of all its dairy products and ingredients.

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Management Board

What does the Consumer Products Europe group make? Consumer Products Europe (CPE) primarily focuses on the production, marketing and sale of natural, dairy-based products that tie in with a healthy lifestyle. The group is active throughout Europe, where it makes and sells fresh and long-life dairy products such as milk, desserts, yoghurts and dairy drinks. The group’s European strategy is regionally implemented by CPE Netherlands, CPE Germany, CPE Russia and CPE International, each of which is responsible for marketing and sales in their own region. The CPE Supply Chain covers logistics, production, purchasing and research & development. •> 2007 IN BRIEF In 2007, Consumer Products Europe (CPE) strengthened its reputation as an innovator of natural, dairy-based products that tie in with a healthy lifestyle. With products like Vifit, Optimel/ Optiwell and Optimel/Optiwell Control, the dairy drink that helps weight control, CPE won over millions of new European consumers. The successful launches of dairy products under brands such as Landliebe and Campina also contributed to this. During the year under review, CPE radically intensified its strategy to pursue a brand/product portfolio approach aimed at achieving higher margins and faster growth. To this end, it took initial steps in 2007 to generate more profitable growth over the coming years. Strategy and innovation were organised along European lines to create synergy and better sales opportunities for innovative concepts and to combine the strengths of each country. CPE also launched a number of large-scale projects to reduce the complexity of production and logistical processes and to boost returns.

Consumer Products Europe

TURNOVER IN 2007: €2,040 million (2006: €1,904 million) EMPLOYEES: 4,059 (2006: 4,046) KEY BRANDS: Campina, Landliebe and Mona DIRECTOR: A.A.J.M (Arthur) van Benthem, Member of the Campina

Despite excellent performances among brand products in various markets – including the Netherlands, Germany, Belgium, the United States, the United Kingdom and Russia – the group’s returns were under pressure. The sharp rise in the cost of raw materials, especially for basic dairy products, could not be directly passed on to the market due to the constraints imposed by annual agreements with commercial buyers. The group’s margin and result were therefore lower than in 2006. This situation was further exacerbated by the continued price squeeze caused by competition among the supermarkets. CPE did, however, achieve a general margin improvement and made a good start to 2008.

•> STRATEGY OF THE CONSUMER PRODUCTS EUROPE GROUP CPE wants to be the consumer’s preferred choice as an innovator of natural, dairy-based products that tie in with a healthy lifestyle (the health & wellness segment). Researchers expect (product) developments in the food industry to become increasingly important for the health and the well-being of consumers. CPE’s focus on health & wellness will therefore also be expected to help accelerate profitable growth.

The second spearhead strategy is to expand market positions in Russia. CPE has a profitable business in (long-life) yoghurt and yoghurt drinks in Russia, whose dairy market posts high growth figures year-on-year, especially for yoghurt drinks and quark. There is also growing interest in functional health foods. The third element in the strategy is to develop the out-of-home channel, particularly in company restaurants, petrol stations and public transport catering outlets. Dairy still only accounts for a small proportion of this market and has the potential to open up new opportunities in dairy consumption. CPE is concentrating on a brand/product portfolio strategy based on higher prices, higher margins and more targeted spending on advertising and promotion. The success of this

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strategy will depend on putting the consumer first at all times. CPE will therefore invest heavily in identifying consumer needs and behaviour, so that it can respond with the right dairy products. To this end, it is working on a selection of groundbreaking innovations. Other goals include lower costs, an increasing number of major product launches and a more targeted application of promotional resources and actions. Significant progress is being made in reducing the complexity of production processes, especially for low-margin products, cutting back on item numbers and reducing the number of ingredients. The private label activities (supermarket brands) will become secondary to building brand positions. Private label activities with low margins will be adapted to achieve a medium-term return on investment. CPE is also making specific investments in its workforce, given that it needs dairy professionals with passion who deliver results in line with its strategy and associated targets. It has therefore launched an ambitious training and internal communications programme.

The sugar content in Campina’s custard was also reduced in response to the consumer health trend. Mona had a difficult year, losing market share to low calorie dairy products. During the year under review, Mona worked hard on a new, clearer and more modern positioning and product range. The new positioning will be launched in 2008. Ecomel, Campina’s organic dairy business unit, proved that organic products are relevant to a growing group of consumers. Ecomel saw a sharp rise in sales of its Groene koe and Zuiver Zuivel brands. The new look and approach of these brands boosted sales at all retail outlets and led to an increase in the number of outlets. There was also good growth in the out-ofhome market. GOALS FOR 2008 AND BEYOND •> Growth in sales of Campina Optimel, Campina Vifit and Goedemorgen! •> Reposition Mona

•> PERFORMANCE IN 2007 •> PERFORMANCE IN 2007

CPE Germany

CPE Netherlands •> Campina continued its strong presence in almost all Dutch supermarkets during 2007 through its broad package of consumer dairy products and the main brands Campina, Campina Optimel, Mona and Campina Vifit. Once again, for the sixth consecutive year, the company maintained its position as the biggest brand in Dutch supermarkets.

However, Campina is more than a turnover booster for the supermarket sector. A study of the innovative capacity of the food industry by researchers at Radboud University Nijmegen named Campina as the undisputed front-runner among food manufacturers operating on the Dutch market. Campina has shown that it clearly understands the consumer’s need for a healthy, more active lifestyle combined with a healthy diet. Sales of Campina Optimel, for example, grew by 46 percent, partly due to the launch of the unique product Optimel Control. Vifit also registered significant growth. Another area where Campina showed its innovative power was in basic dairy products, through the introduction of a new type of milk with a more balanced fatty acid composition. The new Campina milk reached the supermarket shelves in April and is satisfying expectations by strengthening Campina’s brand position. This was followed in the autumn by the introduction of custard, yoghurt and porridges made with the new milk.

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•> CPE Germany’s key brands in German and Austrian supermarkets are Landliebe, Campina Optiwell, Campina Fruttis and Campina Puddis. Milk, desserts, yoghurts, cream, butter and quark are the main products sold.

Turnover of Landliebe, one of the most popular dairy brands in German supermarkets, rose sharply. This was partly due to investments in advertising and promotion and to a revitalisation of the product range. Consumers responded enthusiastically to the new yoghurt and improved butter. Despite a relatively stagnant consumer market, turnover in both of Landliebe’s key product categories was substantially higher than in 2006. In 2007, Landliebe also launched two important initiatives which added further to the brand values. The first was the introduction of a feed concept for Landliebe dairy farmers using only traditional home-grown cattle feed. The second was the expansion of Landliebe school milk in a large number of German regional states. Efforts to improve margins in Germany proved successful. In Germany, as in other countries, health & wellness is more than a passing trend. Sales of low fat, low calorie dairy products showed strong growth. The ongoing popularity of Campina Optiwell desserts and the successful introduction of Campina Optiwell Control provided overwhelming proof of this: not only was Optiwell Control the best-selling new dairy product on the

market, it was also the most successful retail product launch in Germany. The focus is now on expanding the customer base of a million satisfied consumers. Campina Optiwell is market leader in the rapidly growing low-fat desserts segment, and the second biggest seller of yoghurts. GOALS FOR 2008 AND BEYOND •> Growth in sales of Campina Optiwell desserts and Optiwell Control •> Reposition Landliebe and introduce new Campina Puddis products

GOALS FOR 2008 AND BEYOND •> Strengthen position in Belgium by expanding range of milk and cream •> Invest in expansion of market share of Yazoo milkshakes (United Kingdom) in retail and in out-of-home •> Growth of dessert concepts in selected countries in Central Europe

•> PERFORMANCE IN 2007

CPE Russia •> PERFORMANCE IN 2007

CPE International •> CPE International focuses on the marketing and sale of dairy products in Belgium, the United Kingdom and Spain under the brands Campina, Yazoo, Mondelice and Joyvalle, as well as on exports to other European countries.

CPE International achieved a positive result. In Belgium, the position of the Campina brand was further improved. Sales of milk under the Campina label grew steadily. The new ‘low-lactose’ milk was a valuable addition to the existing, differentiated range of Campina milk. By splitting the lactose, the milk in this new product is more digestible for consumers who are normally lactose-intolerant. In 2007, Campina Calcifort, a yoghurt drink with a high calcium content, was successfully launched. The sales volume of all Campina products and dairy products marketed under the Joyvalle brand rose, while the market shrank slightly. Campina UK had a good year. Sales of Yazoo, the milk drink marketed by Campina in the United Kingdom, also experienced a sharp growth in volume, resulting in a significant increase in market share. Yoghurt sales under the Tesco supermarket chain’s Retail Owned Brand (a premium supermarket brand) were also successful, although margins were squeezed due to the substantial rise in the cost of raw materials.

•> In Russia, Campina markets and sells yoghurt and yoghurt drinks under the Campina Fruttis and Nezhny brands.

Excellent results were achieved in this country, with the growth in turnover going well beyond the growth of the market segments in which Campina is active. This substantially increased the company’s market share in yoghurts and yoghurt drinks. Since this year, Campina has also been producing coffee creamer locally, which will enable CPE to accelerate its expansion in this segment. To this end, Campina invested in a coffee creamer production line in November 2007 and is currently investing in a second yoghurt drink line. The Russian economy is growing fast, increasing the purchasing power of many consumers. However, this is also accompanied by high inflation, which in 2007 pushed up the price of dairy products by as much as 25 percent. In October, Russia’s trading sector intervened under heavy political pressure, freezing milk and wheat product prices for a four-month period. As a result, the 50 percent increase in milk prices could only be partially passed on in sales prices during the final months of 2007. GOALS FOR 2008 AND BEYOND •> Launch dairy in health & wellness segment under Campina brand •> Growth in turnover and market share of Campina Fruttis and Nezhny yoghurt and yoghurt drinks

Sales and margins in France and Spain were under severe pressure. Campina products were relatively expensive in 2007. As a result, the company struggled to maintain its market position in both Spain and France. The export of Campina Fruttis and Puddis to countries in Central Europe remained stable despite the increase in retail prices due to the rising cost of raw materials.

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•> PERFORMANCE IN 2007 •>

•> PERFORMANCE IN 2007

•> Historically, CPE has had a large number of different products, packagings and ingredients. This has led to inefficiency, complexity and costs, which have yielded insufficient or no returns. In 2007, Campina therefore launched the KOOC (Knock Out Operational Costs) project to reduce operational costs.

•> From January 2008, Campina International became part of the group Consumer Products Europe. The production and sale of consumer products in distant countries fits seamlessly with the CPE group’s product portfolio.

CPE Supply Chain

The project will also investigate opportunities for specialising in the various production locations. This could lead to a redeployment of activities over the coming years, to improve operational efficiency. CPE also addressed ways to optimise production in Aalter (Belgium), where a successful project was launched to substantially boost the efficiency of the production lines. The project involved staff from the Dutch and German organisation, to ensure that the experience gained could be transferred to other countries. In the context of improvements to business processes, the companies in Germany and Belgium began the introduction of TPM (Total Productive Manufacturing), following the example of the Netherlands. TPM is a management improvement system in which employees are closely involved (see also ‘Working for Campina’, page 30). In the Netherlands, the TPM system has been applied since 2005 and, up to now, focuses on improvements to the operational efficiency of production lines. In 2007, investments in production facilities were mainly directed at new forms of packaging and (outer) packaging machines in Heilbronn and Gütersloh (Germany). Investments in the Netherlands centred on the introduction of dairy products with a more balanced fatty acid composition. A number of plants also applied energy-saving measures. In Aalter, a water conservation project was launched and in Maasdam (the Netherlands) the company plans to invest in a waste water pre-purification installation. In preparation for the closure of the production facility in Heiloo (the Netherlands) in the second half of 2008, a portion of production was already relocated to Eindhoven, Maasdam and Rotterdam. GOALS FOR 2008 AND BEYOND •> Further implementation of product optimisation and rationalisation of complexity (KOOC project) •> Reduce environmental burden with a focus on energy and waste water

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Campina International

Campina International is primarily active in Asia, Africa and the Middle East, where it markets consumer products. It also has a production plant in Thailand through a joint venture with the Thai dairy company Betagen. In July 2007, Campina concluded the Betagen Holding Ltd. joint venture with a new partner in Thailand: Thai Advance Food. The joint venture produces and sells a probiotic yoghurt drink under the Betagen label. This dairy drink has sold well for many years, and its success continued through 2007. The partnership with Betagen is doing extremely well. During the year under review, Thai Advance Food/ Betagen initiated a redesign and standardisation of its systems and processes (SPRINT project). Meanwhile, Campina ended its joint venture with Thai Dairy Industries in 2007. In Vietnam, Campina International operates a sales organisation for dairy products under the Campina, Yippee and Yo-Good brands. The goal for 2008 is to adjust the product portfolio to generate better results. The Direct Export Overseas (DEO) business unit focuses on sales of milk powder, canned cream, condensed milk and long-life dairy products. In 2007, DEO’s margins came under severe pressure from the sharp increase in raw material prices. Contract agreements prevented DEO from sufficiently transferring these price increases to the market. In segments where prices did go up, demand fell. The expansion of the range of yoghurts sold under the Campina Fruttis brand yielded a good result.

Campina Botergoud/Buttergold, Campina Valess

DIRECTOR: P.J.H. (Piet) Hilarides, Member of the Campina Management Board

What does the Cheese & Butter group make? The Cheese & Butter group produces and sells cheese, butter and Campina Valess meat replacement products for consumer markets and industrial clients. The Campina Holland Cheese division produces North Holland cheese, naturally matured Gouda cheese, Milner cheese - cheese with a reduced fat content and specialties such as MonChou, mainly for the European market. The Campina Buttergold division makes butter for the consumer market and for industrial processors such as the baking industry. The division markets its products throughout Europe and beyond: some of the industrial products are exported to the Far East. The Campina Valess division forms part of the Cheese & Butter group. Campina Valess is a dairy-based meat replacement product.

•> 2007 IN BRIEF Sales figures for Campina Milner reduced fat cheese rose following increased growth in the Netherlands and Greece. Sales of North Holland cheese (under the Campina Volmer brand) are growing steadily. Campina Holland Cheese succeeded in increasing its supermarket prices for naturally matured Gouda cheese in response to the sharp rise in price quotations for cheese on the European market. Higher cost prices for specialties such as Campina Milner were also passed on in the sales prices. Over the year as a whole, the increase in sales prices combined with the rise in whey prices was enough to offset the higher cost of raw materials. Campina Holland Cheese recorded a sharp increase in turnover and ended the year with a positive result.

Cheese & Butter

TURNOVER IN 2007: € 1,057 million (2006: € 1,029 million) EMPLOYEES: 803 (2006: 857) KEY BRANDS: Campina Milner, Campina Volmer,

The market in 2007 was not favourable for Campina Buttergold. The division increased its retail prices and the prices of industrial specialties several times, but this was not enough to offset the increase in cost prices. Although Campina Buttergold achieved a higher return from its markets than in 2006, the high prices it was forced to pay for milk fat, instead within Campina itself, meant that it ended the year in the red.

The Campina Valess division achieved a sharp increase in turnover, partly due to the launch of the Valess concept in Belgium and Switzerland. As a result, Campina Valess saw its turnover improve dramatically following two years of growth.

•> STRATEGY OF THE CHEESE & BUTTER GROUP Campina’s member farmers benefit from the optimum processing and sale of cow’s milk. Herein lies the strength and expertise of the Cheese & Butter group. The group therefore wants to fully focus on the production and international marketing of naturally matured semi-hard cheese made from cow’s milk, with Campina Milner, Campina Volmer and the unique North Holland cheese as its spearhead products. The Campina Holland Cheese division is making specific investments in its reduced fat cheese Campina Milner, and wants to achieve the same strong position it has built up in the Netherlands and Greece in other European countries. One of these target countries is Spain. The launch will be fully supported through television commercials. The division is also taking steps to strengthen the position of pre-packaged cheese in the supermarkets. Campina Holland Cheese is continuing to invest in efficiency measures to maintain its low cost strategy. As a specialist in milk fats, Campina Buttergold wants to continue growing in the industrial specialties segment in Europe and the Far East. In the consumer products segment, the goal is to maintain existing volume, especially in key markets such as the Netherlands and Germany. Butter consumption in the

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consumer market is currently stagnating. Campina Buttergold will therefore launch one or two new products in consumer markets while further improving the taste and spreadability of its reduced fat butter. At the end of 2007, contracts were agreed with clients in the Far East. Significant growth was achieved in the European market for special bakery products, where several new products will be introduced. Campina Valess wants to ensure that more European consumers enjoy its products in the coming years. This means that in the countries where the unit is already active - the Netherlands, Belgium and Switzerland - it will be expanding its range while other Northern European countries will also be introduced to this unique product. Campina Valess also wants to focus on cutting costs in relation to recipes, logistics and packaging.

•> PERFORMANCE IN 2007

Campina Holland Cheese •> 2007 was a good year for the division. Campina Holland Cheese succeeded in increasing its supermarket prices for naturally matured Gouda cheese in response to the sharp rise in price quotations for cheese on the European market. Higher cost prices for specialties such as Campina Milner were also passed on in sales prices.

Milner White, the feta variety for the Greek market, had an excellent year. During 2007 Campina Milner was also launched in Spanish supermarkets, starting with the Barcelona region. Sales of North Holland cheese fell slightly, with turnover rising following a price increase. Sales of North Holland cheese under the Campina Volmer label were growing steadily. In 2007, Campina signed a contract to sponsor a special 2008 tour of the popular Dutch folk singer Jan Smit. It is hoped this will increase brand familiarity and boost sales of North Holland cheese. Sales of pre-packaged cheese showed positive growth and were given an extra boost by the construction of new production lines at Cheese Packers Campina, the group’s packaging unit. Campina Holland Cheese is taking measures to strengthen the position of pre-packaged cheese in the supermarket. In order to maintain its low cost strategy, the division again invested in efficiency measures. Examples included the closure of the cheese storage facility in Alkmaar (the Netherlands) and the opening of a new storage unit in the highly automated plant at Lutjewinkel (the Netherlands). GOALS FOR 2008 AND BEYOND •> Expand Milner and North Holland cheese •> Sharp focus on cost price leadership •> Maintain total sales of naturally matured cheese

•> PERFORMANCE IN 2007

Campina Buttergold Over the year as a whole, the increase in sales prices combined with the rise in whey prices was enough to offset the higher cost of raw materials. Campina Holland Cheese registered a 15 percent increase in turnover and ended the year with a positive result. During the year under review, Campina sold Belgian cheese maker Passendale, which specialises in semi-soft Belgian cheese specialties. The sale was prompted by Campina’s decision to concentrate on the international marketing of naturally matured semi-hard cheese, with the emphasis on Campina Milner, Campina Volmer and North Holland cheese with the Protected Designation of Origin stamp from the European Union. With this strategy in view, Campina also disposed of its goat cheese activities, including the international brand Chevagne, which were sold to Amalthea van Dijk BV. The sale is completely in line with Campina’s resolve to fully concentrate its cheese activities on naturally matured semi-hard cheese from cow’s milk. Sales of Campina Milner, the cheese with a reduced fat content, experienced favourable growth in the Netherlands and Greece. ‘Milner with mustard’ and ‘Milner Oud’ were added to the range. Milner’s quality and taste were also further improved.

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•> The Campina Buttergold division has divided its markets into consumer products (butter in small packets and 250g cartons), industrial specialties (functional products sold worldwide) and basic products (butter oil and butter in large packs).

Campina Buttergold had never before experienced the sharp fluctuations in butter prices witnessed in 2007, with rises and falls of up to € 0.40 per kilo per week. In the summer, the price of butter stood at € 4.37 a kilo. The increase in butter price quotations in the summer led one or two large commercial buyers to raise their prices, a move they repeated later in the year. In Germany, where short-term contracts are the norm, price rises could be implemented more quickly than in the Netherlands, where it is more common to work with annual contracts. In German supermarkets, the price of a packet of butter thus rose from € 0.79 to € 1.19. This led to high returns in the short term, but also to a fall in demand soon after.

These rapid price rises were less than favourable for Campina Buttergold. The division raised its retail prices and the price of industrial specialties several times, but this was not enough to offset the increase in cost prices. Although Campina Buttergold achieved a higher return from its markets than in 2006, the high prices it was forced to pay for milk fat, including within Campina itself, meant that it ended the year in the red. At the end of 2007, one or two new contracts were signed with commercial clients for industrial specialties destined for the export markets, despite the fact that export restitutions were eliminated. The sharp increase in prices in 2007 made it difficult to fully realise the targeted growth in volume. Demand fell in many markets. The sharp increase in prices led some buyers of milk fat to switch to vegetable-based products. The concern is that some of these consumers will not come back when prices decline again. GOALS FOR 2008 AND BEYOND •> Accelerate growth for industrial specialties •> Maintain the volume for consumer products •> Sharp focus on cost price leadership

•> PERFORMANCE IN 2007

Campina Valess •> The Campina Valess division improved dramatically in 2007. Turnover increased by 25 percent, partly due to the launch of Campina Valess in Belgium and Switzerland. Following two years of turnover growth, Valess is clearly experiencing accelerated growth.

A new introduction in 2007 was Campina Valess filled with Milner cheese, which proved highly popular with consumers. During the year under review, Valess was positioned more as a ‘healthy alternative to meat’ with a premium flavour (e.g. Valess with cream sauce and Valess with tomato sauce). In 2008, Valess is aiming for a sharp increase in sales in the Netherlands, Belgium and Switzerland. Campina also wants to roll out its Valess product in other northern European countries in 2008. Margins on Valess will be improved through cost cuts in the areas of raw materials, logistics and packaging. An increase of scale will also contribute to improve margins. GOALS FOR 2008 AND BEYOND •> Significant improvement in turnover in the Netherlands, Belgium and Switzerland •> Launch Valess in other northern European countries •> Improve margins through cost cuts in logistics, packaging and recipes

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Respitose, Primojel, Primellose, Nutrifeed, Creamy Creation

DIRECTOR: F.M.W. (Frans) Visser, Member of the Campina Management Board

What does the Industrial Products group make? It’s all about business-to-business: the Industrial Products group focuses on industrial clients. DMV International, the largest division in the group, supplies a broad range of ingredients to the food industry and excipients to the pharmaceutical industry. Products range from dough stabilizers for the baking industry to Respitose, a lactose that acts as a carrier for inhaled medicines, and hypoallergenic protein hydrolysates (proteins that are used in baby food and elicit fewer allergic reactions). The business unit Creamy Creation makes dairy liqueurs for distilleries worldwide. Holland Dairy Feed specialises in young animal feed under the Nutrifeed brand.

•> 2007 IN BRIEF The Industrial Products group posted an excellent result, with a 30 percent growth in turnover. Conditions on the global dairy market made it possible for the group to realise better prices in most market segments compared to previous years. Prices for basic products such as caseinates and whey products rose substantially, especially in the first half of 2007. The price of whey products settled back down again later in the year as milk production rose sharply and shortages no longer dictated the market. The joint venture DMV Fonterra Excipients, whose turnover is fully consolidated, achieved an excellent performance. The Dairy Ingredients business line and the Holland Dairy Feed business unit also performed well. They formed the foundation of the group’s growth in turnover and the associated improvement in the results. Food Systems was affected by the sharp rise in the price of raw materials. These were translated into higher sales prices wherever possible, but this was not enough to fully

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offset the increase in the costs of raw materials. Despite a combination of high prices for dairy ingredients, the weak dollar and lower export subsidies, Creamy Creation managed to maintain its market position.

Industrial products

TURNOVER IN 2007: € 846 million (2006: € 650 million) EMPLOYEES: 1,743 (2006: 1,190) KEY BRANDS: DMV, Esprion, Lactoval, Aerion, Textrion, Pharmatose,

•> STRATEGY OF THE INDUSTRIAL PRODUCTS GROUP Industrial Products aims to equal and, where possible, surpass its results in 2008. Whether this can be achieved will depend partly on developments in the international dairy market. The price development of generic products such as milk powder and whey powder is a determining factor. ‘Operational excellence’ – producing at the lowest possible costs, which was given an extra boost with the completion of Veghel Force, will further contribute to the result in 2008.

In the business lines that bring value-added products to the market, such as Food Systems and Nutrition, the focus will be on strengthening market positions. Food Systems’ acquisition of Satro has made a positive contribution to its product portfolio and position in the food industry ingredients segment. The biggest challenge for DMV Fonterra Excipients in 2008 will be to maintain its position, including current price levels.

Creamy Creation aims to significantly extend its radius of activities through its new production unit in the United States. By expanding production volume, the unit hopes to achieve a better result in 2008. To this end, the focus will be on innovations for existing clients and geographic expansion in Asia and Latin America. The business unit Holland Dairy Feed will seek to maintain its market position and boost turnover by launching new products and concentrating on growth markets outside the European Union. GOALS FOR 2008 AND BEYOND •> Maintain margins in highly fluctuating markets •> Achieve greater flexibility through shorter contract periods

•> PERFORMANCE IN 2007

DMV International •> The Dairy Ingredients business line, which chiefly produces milk and whey-based dairy ingredients, is part of the DMV International division. The main product groups are caseinates, milk powder replacements and lactose (the type of lactose used in the food rather than the pharmaceutical industry).

Dairy Ingredients had a good year, with results significantly higher than in previous years. Demand for dairy ingredients was exceptionally strong, especially in the first half of the year, outpacing supply. This was due to lagging milk production worldwide, chiefly in Australia and New Zealand, and strong economic growth in some regions. The sharp rise in the price of dairy ingredients was passed on in sales prices as soon as possible. Buyers in the food industry and elsewhere responded by partially switching to cheaper alternatives. This ultimately reduced demand and depressed sales prices. DMV’s activities in Argentina were unable to benefit from the favourable market developments there because the Argentine government is keeping dairy product prices low and discouraging exports through taxation. The Food Systems business line is also part of DMV International. Added-value products such as stabilisers, toppings for the dairy and baking industries, whiteners and foamers for coffee and ingredients for soups and sauces are the business line’s key product groups. They are sold mainly to commercial clients in the dairy industry, bakeries, producers of soups and drink powders as well as related sectors. Results were under pressure in 2007 due to the fact that the high price of raw materials could not be fully passed on to clients, most of whom have concluded annual contracts with DMV International. In November 2007, Campina announced plans to acquire Satro GmbH, the ingredients subsidiary of the German dairy cooperative Humana. Satro makes ingredients for the food industry. Its main areas of application are dairy, instant desserts and ready mixes for the food industry and drinks. The takeover is of great importance for a number of regional market positions and new sales channels.

company Vitalus Nutrition, is part of the Nutritionals business line. In 2007, Nutritionals increased its sales and improved its results. During the year under review, DMV Vitalus benefited significantly from the opportunities created by the alliance and from the strong dairy market. GOALS FOR 2008 AND BEYOND •> Achieve better margins and keep result at 2007 level, despite the sharply fluctuating market •> Strong growth in all market segments and improvements in production •> Growth in volume and further improvements in profitability •> Integration of Satro

•> PERFORMANCE IN 2007

Creamy Creation

•> The dairy liqueurs produced by the Creamy Creation business unit are sold to distilleries all over the world, which prepare them for the consumer market.

Creamy Creation maintained its market position in 2007. High prices for dairy ingredients, particularly cream, the weak dollar and reduced export subsidies put pressure on the margins. Despite stable sales, the business unit posted a lower result than in 2006. At the end of 2007, a new production unit was completed in Batavia, the United States. This will allow Creamy Creation to extend production to the American continent and expand its total production volume. GOALS FOR 2008 AND BEYOND •> Improvement in the results •> Increase in volume of sales among existing clients and expansion of markets

Proteins are the core activity of the Nutritionals business line. At its plant in Delhi (US), Nutritionals produces protein hydrolysates from dairy proteins or other raw materials (such as wheat or soy) for use in specific applications such as baby food and laboratory cultures. Nutritionals also sells milk protein concentrates, lactoferrin and Praventin, which help to maintain supple and healthy skin. The Food Systems and Nutritionals business lines were separated at the beginning of 2007. DMV Vitalus, a joint venture between DMV International and the Canadian

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Campina

Annual Report 2007

•> PERFORMANCE IN 2007

Holland Dairy Feed •> Feed for young animals such as calves, piglets and chicks is the core of the business of Holland Dairy Feed, which is a leading player in this market under the Nutrifeed brand. Holland Dairy Feed exports to more than 60 countries.

Despite the difficult market conditions, Holland Dairy Feed retained its market position during the year under review and posted a good result. For Holland Dairy Feed customers, the price of products such as whey powder and skimmed milk powder is a key reference. These products in particular experienced significant price fluctuations and, together with the weak dollar, severely hampered exports. Buyers looked for cheaper alternatives such as soy and wheat protein, which led to a fall in demand. GOALS FOR 2008 AND BEYOND •> Maintain and expand market positions, including turnover growth, through the introduction of new products

•> PERFORMANCE IN 2007

Joint venture DMV Fonterra Excipients •> DMV Fonterra Excipients specialises in the production of excipients for medicines used in tablets, capsules and inhaled medicines. The joint venture is global market leader in the high-quality pharmaceutical lactose segment.

Its production facilities in Foxhol (the Netherlands), NörtenHardenberg (Germany) and Kapuni (New Zealand) all operate quality care systems which meet the extremely strict requirements demanded by the pharmaceutical industry. In addition, DMV and Fonterra also supply significant amounts of pharmaceutical lactose to the joint venture. 2007 - the first year in which the joint venture operated fully as a unit - proved successful. High value-added products such as lactose used for inhaled medicines and direct compression techniques, performed above the market average. GOALS FOR 2008 AND BEYOND •> At least match 2007 results, despite sharp fluctuations in the market

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Working for Campina Employees are the foundation of the Campina company’s success. This is the guiding principle of the company’s HR (Human Resources, personnel and organisation) policy. In practice considerable attention is therefore given to staff development at all levels. Campina wishes to profile itself as an attractive employer that offers opportunities to its employees, encouraging them to be entrepreneurial and to use their knowledge and expertise to best effect. There was a clear shortage of manpower on the labour market in 2007. Vacancies took longer to fill and required more effort. Nevertheless, Campina has no desire to make concessions regarding the quality of new employees. Staff turnover in 2007 remained below 2006 levels. Keeping employees interested and committed to the company means constantly looking for new challenges to engage them. During the year under review, this included implementing the following initiatives: • training programmes; • an age-aware personnel policy; • TPM (Total Productive Manufacturing), in which employees use their knowledge and experience to improve business processes; • career development. Training was provided at all levels and locations of the company, ranging from professional training to courses designed to help managers improve their management skills. Campina Germany devised a long-term skills improvement programme for all managers. In 2007, Campina launched the programme Passion for Campina, in which approximately 1,000 employees were informed about company strategy – from corporate culture and the associated HR vision to the financing of Campina, corporate social responsibility and, of course, the role of the cooperative. In the context of Management Development, Campina relaunched its international training programme for future management: the ‘young potentials’ and ‘management potentials’. A Marketing Mastercourse was also provided for Campina staff at Tilburg University. In addition, each country, discipline and company held its own courses and training workshops as necessary. Continuing education and ongoing development is another important aspect of an age-aware personnel policy. In order to keep employees ‘fit’ until retirement age, it is important to continue investing in their knowledge and expertise. Campina’s appraisal system, which applies to all staff, helps track where and how staff can best be deployed. TPM, Total Productive Manufacturing, is a manpower improvement system which Campina adopted from Japan. If staff are allowed to analyse problems and devise solutions themselves, they will make their own improvements to business processes.

TPM has already led to many valuable contributions from employees. In 2007, the system was also launched at the production facilities in Belgium and Germany. In May 2007, Campina announced the proposed closure of its production facility in Heiloo (the Netherlands) and the significant impact this would have on those directly affected. As is customary when such unavoidable decisions are taken, every effort was made to find alternative employment for the staff concerned, within Campina and elsewhere. The transport of dairy products, which is currently handled by Campina’s subsidiary Zutrans, will be handed over to an external contractor. Therefore, during the year under review, Campina looked for the most suitable candidate in consultation with Zutrans employees. Absenteeism rose slightly throughout the company in 2007, despite efforts to reduce the levels and the professional supervision and counselling of those on sick leave. No direct causes could be identified for this increase, although long-term analysis shows that absenteeism tends to go up during periods of economic prosperity.

•> PENSION Campina reached agreement with its pension fund concerning their financial relationship, whereby the risk to Campina is limited. Agreements governing the allowance policy for retired employees and the administrative structure of the fund were also concluded.

The European Works Council For many years, Campina employees in the Netherlands, Germany and Belgium were represented in the International Consultative Committee (CIO) during talks with management. At the end of 2007, the European Works Council (EWC) was established through a series of EU Directives and transposed into Dutch law. Due to the ongoing internationalisation, organising employee representation on a pan-European level as well as on a country-by-country basis is seen as increasingly important, given that decisions taken in one country can have far-reaching consequences in another (e.g. regarding employment). The number of EWC representatives for each country is arranged on a proportional basis. The Netherlands has four representatives in the EWC, Germany has three and Belgium two. The EWC must be notified and consulted on all decisions with a potential cross-border impact. Unlike a works council, however, it does not have the right to issue an opinion.

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Green soy:

Cows for Africa Campina’s organic brands, Zuiver Zuivel and Groene koe, have launched a consumer savings campaign for the donation of cows to farmers in Africa. As a result, enough money is collected to donate 75 cows to families in Cameroon. Each family uses the cow to generate a basic daily income and, more importantly, to pay for their children’s education.

Cows primarily eat grass, which is supplemented with feed. The cattle feed contains soy grown in South America. In 2006, Campina started buying sustainably produced soy, which is cultivated using methods that spare tropical rain forests in South America and for which local farmers are paid a better price. The import of a first consignment of responsibly produced soy in 2006 marked the start of this new initiative. In 2007, the volume of imported soy was increased to cover all consumer products marketed under the Campina, Landliebe and Mona labels.

Campina = sustainable Everywhere in the world where Campina is active, it strives to achieve sustainability throughout the dairy chain, from cow feed through product transport. Campina stimulates an open dialogue with social organisations and other interest groups.

Sustainable working methods are Campina therefore looks beyond Dashboards and in-trays Recycling starts with separating waste, as practised by Campina in Heilbronn (Germany). Plastic packaging residues are ground into tiny particles and reworked into a granulate by a Dutch company. This granulate is then used in the manufacture of in-trays and car dashboards. Altogether it’s a win-win situation: less waste and a reduction in the use of raw materials.

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sustainable

vitally important. today, towards tomorrow.

Conserving energy The Sustainability Agreement concluded

‘Ei van Columbus’

between the government and Dutch industry

In November 2007, Campina is nominated for the ‘Ei van Columbus’, a Dutch government prize for sustainable innovations. The prize is awarded every two years by the Dutch government for products, services, technologies or social initiatives regarded as genuinely innovative. Campina is nominated for its decision to buy in sustainably produced soy. Campina is also nominated for the European equivalent of the ‘Ei van Columbus’: the European Business Awards for the Environment.

2 percent between 2008 and 2020. Campina

sets an annual energy reduction target of wants to achieve this by reducing energy consumption throughout the chain from feed producer to retail outlet. A lower energy consumption will also help to reduce greenhouse gas emissions.

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Campina

Annual Report 2007

Campina and corporate social responsibility Campina strives to interpret corporate social responsibility (CSR) in the most practical way possible, reflecting the dairy cooperative’s belief that CSR is primarily something that requires action, not words. Campina consequently seeks to achieve a healthy balance between its economic performance, on the one hand, and its environmental and social performance on the other, while remaining very aware at all times of the importance of creating economic value. Campina actively seeks to do business in a socially responsible way. This is hardly surprising, given the core values that guide our operating strategy: being close to consumers, natural, healthy and sustainable. Campina also believes that corporate social responsibility ties in with its brands, the company and the image it wants to generate among all its stakeholders. Campina also aims to be one of the world’s leading dairy companies and a front-runner in the food industry. To achieve these ambitions, Campina will continue devoting considerable attention to corporate social responsibility over the coming years. Campina continued putting its CSR ambitions into practice in the 2007 financial year. Detailed information on this will be published in early summer of 2008 in the form of the group’s CSR report. Consequently, this Annual Report only discusses the issues in outline. In 2007, Campina’s efforts to implement CSR in a practical way were recognised both externally and internally. Externally in the form of nominations for a national and European award for its efforts to promote socially responsible soy, and internally through the attention devoted to and enthusiasm generated by CSR via the Campina Management League and the Passion for Campina programme (see ‘Working for Campina’). Campina’s CSR policies – and specifically its soy initiative – were also praised and quoted as an example worth copying in the media and by organisations in society and government ministries.

•>

ENVIRONMENTAL PERFORMANCE Campina produces, processes and distributes a broad range of dairy and dairy-related products. This inevitably places a burden on the environment. However, Campina’s environmental policy consistently aims to keep the environmental impact of its operations to a minimum, without losing sight of its role as a commercially healthy enterprise. Continual improvement of its environmental performance is an important guiding principle of Campina’s environmental policy, while integrating this policy into the group’s core processes (production, purchasing, r&d, engineering, marketing & sales and logistics) is a key goal. Efficient consumption of energy and raw materials remains a high priority.

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Campina’s environmental officers therefore continued to focus considerable efforts on reducing the group’s use of water and energy in 2007. The strict HACCP (Hazard Analysis Critical Control Points) guidelines require the group’s production lines and equipment to be cleaned regularly, and this obviously requires the production companies to use water. One of the major objectives at all locations during the year under review was consequently to reduce the volumes of water used, although the major savings achieved in recent years are making it increasingly difficult to achieve new savings.

Energy use in PetaJoules

Netherlands Germany Belgium Middle and Eastern Europe, US and Thailand Total

2007 4.87 2.36 1.39

2006 4.65 2.34 1.56

2005 4.79 2.26 1.57

0.67 9.29

0.50 9.05

0.55 9.17

•> SOCIALLY RESPONSIBLE SOY Campina cows feed primarily on crops such as grass and corn grown by the member farmers themselves, but they are also fed other products such as soy. In various parts of Latin America, soy production leads to a range of environmental and social problems. Campina consequently reached agreement in 2006 with the World Wildlife Fund, the Netherlands Society for Nature and the Environment and Solidaridad on an initiative designed to encourage responsible production of soy. The plan that has been agreed, which focuses on Latin America, seeks to produce soy in a way that does not result in the destruction of valuable habitats rich in biodiversity, such as the Amazon rainforest. It will also enable local farmers to earn a respectable living, while working conditions will comply with internationally recognised standards. In addition, the use of pesticides will be within the limits considered ecologically acceptable and the chain will be structured in an economically responsible manner. Campina’s goal is to import around 150,000 tonnes of responsibly produced soy by 2011. This soy will be fed to the Campina cows that produce the farm milk used in all the products processed in the Netherlands, Germany and Belgium. In line with the agreed plan, during the year under review Campina continued purchasing soy produced in a socially responsible way. The cooperative bought just over 30,000 tons of green soy in 2007, enough to cover the annual requirements of the cows producing the milk for all Campina and Landliebe dairy products consumed in the Netherlands, Germany and Belgium. Campina also joined the Round Table for Responsible Soy (RTRS), an international alliance of companies and social and political organisations seeking, among other things, to set internationally recognised criteria for sustainably produced soy.

As a result of the soy agreement between Campina and the various organisations, the dairy cooperative was nominated for two prizes during the year. Firstly, the ‘Ei van Columbus’ prize awarded by the Dutch government in recognition of innovation and corporate social responsibility. This prize is a joint initiative of six government ministries – the Ministry of Housing, Spatial Planning and the Environment, the Ministry of Health, Welfare and Sport, the Ministry of Economic Affairs, the Ministry of Foreign Affairs, the Ministry of Education, Culture & Science and the Ministry of Agriculture, Nature and Food Quality – and is designed to encourage innovation and corporate social responsibility. Campina was nominated in the sustainable business category. The cooperative was also nominated for the European equivalent of the ‘Ei van Columbus’: the European Business Awards for the Environment. In 2007, the soy initiative had a particularly strong impact in Germany, where Campina continued working on its Landliebe cattle feed initiative. The idea behind this initiative is that all extra feed given to the cows producing milk for Landliebe products should derive from crops originating from Germany or elsewhere in Europe. This will avoid the need to cultivate soy in Latin America and ship it to Europe. By only using crops originating from Germany and other European countries for Landliebe products, Campina is continuing to progress along the route to more sustainable cattle feed.

•> ASSESSMENT OF 2006 CSR REPORT Campina published its 2006 CSR report in mid-2007. This report used the internationally accepted guidelines of the Global Reporting Initiative (GRI) as a reference. In a comparative study of international companies performed by PricewaterhouseCoopers and commissioned by the Dutch Ministry of Economic Affairs, Campina was rated 21st of the 174 companies surveyed (2006: 34th place). The purpose of this comparative survey is to highlight the extent to which the largest Dutch companies are transparent in their reporting on social issues and their effects.

•> SOCIAL PROJECTS Campina’s care for people, the environment and society was also reflected by the establishment of the Campina Care Foundation at the end of 2006. All Campina’s social projects are being transferred to this foundation. These projects aim to make a practical contribution to improving the prospects of underprivileged groups in society. The foundation does this by providing support to various projects and organisations trying to enhance the opportunities for these groups in society and by promoting greater awareness of their situation among the general public. During the year under review Campina once again provided support for various clean water projects operated by the Red Cross in Vietnam, while its organic brands - Groene koe and Zuiver Zuivel - launched a successful consumer action enabling cows to be bought for African farmers. In the United Kingdom, Campina set up a tag rugby project to encourage 450,000 children to get more involved in sport.

Our vision In Campina’s view, corporate social responsibility is about doing business in the context of rapidly changing social relationships and developments. In doing so, we try to balance three aspects: • People: Campina wants to be an attractive employer to all its employees. It therefore communicates transparently and openly with its staff, giving them plenty of scope to develop and further their careers; • Planet: Campina is aware of its role in society and the impact of its commercial activities, such as energy and water consumption, emissions of effluent and atmospheric pollution, noise and the safety of installations. Campina acknowledges its responsibility to the environment and society at large. We therefore not only want to operate sustainably, but also embed ourselves in the heart of the community; • Profit: An economic return is crucial for any business, including Campina. But Campina also tries to create a healthy balance between its economic performance and its environmental and social responsibilities.

Another good example was the launch of the Klus Contact (Job Contact) project, which was devised in 2007 in conjunction with the Dutch Red Cross. Together with large numbers of secondary school pupils, Marja van Bijsterveldt, the State Secretary for Education, Culture and Science, fired the starting gun to mark the launch of this project at the Van Maerlant College in Eindhoven in early 2008. This unique project provides social placements, which have been a compulsory component of Dutch secondary school education since 2007. The project focuses on what is unfortunately an ever growing group of lonely and isolated people, who are often housebound owing to a handicap or chronic illness. Via this project, young people carry out everyday chores, such as mowing lawns, replacing light bulbs, playing games or collecting prescriptions. They might also help someone with their shopping or accompany them on a walk, all in return for study points.

Campina’s 2007 Corporate Social Responsibility report will be published in early summer 2008. More information on Campina and corporate social responsibility can be found on www.campina.com.

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Campina

Annual Report 2007

Outlook The year 2007 was a very unusual one for the dairy industry as a whole. Prices for basic dairy products rose to record highs during the year, only to fall rapidly towards the year-end. The main drivers behind these movements were the effects of the weather and rising demand for basic dairy products. Fluctuations of this nature are likely to be more frequent in the EU dairy market in the future, with most of the impact seen in the prices for basic dairy products. Campina will ensure that it is equipped to avoid as many of the adverse consequences as possible while seeking, wherever feasible, to benefit from developments. Campina’s primary focus over the coming period will continue to be on expanding its turnover of value-added products. The group has been pursuing this strategy for many years, and it continues to generate benefits, as demonstrated by the increase in the turnover of health concepts such as Campina Optimel and Campina Milner. The continuing growth in pharmaceutical lactose, for example, also clearly shows the value of investments in this segment. Campina’s added-value strategy enables the dairy cooperative to pay good milk prices to its member farmers. During the past year the EU reduced the export refunds on butter and the internal subsidies on processed butter to zero, reflecting Brussels’ policy of striving to ensure a competitive agricultural policy in Europe. Competition among international dairy producers in both the EU and world markets will continue to intensify, while quota increases and the accession of new members to the EU will also have an impact on the European dairy market. Various European dairy groups have made substantial investments in increasing their cheese capacity. Although cheese prices are currently relatively high, the forecast is that it will prove difficult to maintain the current level of prices in 2008. Innovation has always been an important part of Campina’s strategy and will remain so in the future. Our investments in brands and added-value products are designed to generate consistently high milk prices for our member farmers. Over the coming year we will once again be investing close to € 100 million in these activities. Although most of these investments will be designed to achieve growth, a portion will be used to improve our efficiency. In late 2007, Campina announced the start of exploratory talks with Koninklijke Friesland Foods NV on the possibility of a merger. If these discussions lead to a merger, the two companies will create the largest dairy cooperative in the world. This strong

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new group, owned by its member farmers, will be one of the major players in the international dairy products market, with a strong position in the European, African and Asian consumer products markets and an even stronger position in the worldwide dairy ingredients market. The merger will also allow member farmers to continue to be paid a good milk price in the future. The member farmers of Campina and Friesland Foods are expected to express their views on the proposed merger at a Members’ Council meeting and general meeting of member dairy farmers respectively on 7 May 2008. The two groups will then have to wait for the decision of the European Commission, which is expected to be announced in autumn 2008. Until then, the two groups will continue to operate independently. Any prediction of turnover for 2008 will be heavily dependent on how milk prices develop over the year. The current view is that Campina’s turnover is likely to continue rising in 2008, partly because of the price increases that have already been achieved. In addition, the acquisitions made in 2007 will also help generate higher turnover. The current policy on reserves and the external bank financing arranged are sufficient for Campina to execute the policies it has set for itself. The number of employees (adjusted for the effects of acquisitions) will continue to decrease in 2008. Zaltbommel, 4 March 2008 The Executive Board Kees Gielen

Campina

Annual Report 2007

Our governance model

Corporate Governance Campina regards corporate governance as the way in which transparency within Campina is organised as well as the regulation of relations between Zuivelcoöperatie Campina u.a. and Campina BV and of relations within these two legal entities. This concerns the relations between the Executive Board, the Supervisory Board, the Cooperative Council and the Members' Council.

To Campina, good corporate governance is one of the key conditions for the realisation of its strategic goals. On the basis of the Campina corporate governance model, the member farmers jointly exert influence or monitor progress in both the cooperative and the business. This underscores Campina’s cooperative character. Integrity and transparency are other key elements of corporate governance at Campina. Although Campina’s main priorities in realising its strategic objectives on the basis of its corporate governance model are the interests of its member farmers, it gives equal consideration to the interests of consumers, customers, society as a whole and of course, its employees.

•> CORPORATE GOVERNANCE AND CODES The National Cooperative Council for Agriculture and Horticulture (NCR) drew up a code of conduct for cooperatives in 2005. The aim of this code is to improve cooperative entrepreneurship, the involvement of the members and supervision of the cooperative. The NCR code has a number of principles for each of these three areas and a number of rules that must be followed. For the full text of the code, see www.cooperatie.nl. Campina supports the aims of the NCR code and complies with its principles and rules. The Dutch Corporate Governance Code (the ‘Tabaksblat’ Code) is primarily intended for listed companies. Campina’s cooperative form of business differs from that of a listed company in several ways, including the object of the organisation and the position of the Supervisory Board. The relationship between Campina and its member farmers differs from, and is more diverse than the relationship between a listed company and its shareholders. Comparisons are therefore not easily made. All these differences

make precise compliance with the Tabaksblat Code less relevant in the case of a cooperative.

Risk management The Executive Board is responsible for managing the risks associated with corporate activities, the reliability of internal and external financial reporting and compliance with all relevant legislation and regulations as well as the company’s financing. To this end, a system of guidelines, procedures, systems and organisational measures is in force within Campina. The main elements relate to: • responsibilities and powers for each functional discipline; • identification and control of risks associated with corporate activities, including a disaster plan; • the content and realisation of budgets and regular internal and external financial reports; • internal control measures and separation of functions in the administrative processes and systems. • the continuity and reliability of automated data processing; • financing activities and management of exchange rate and interest rate risks; • assurance of product quality and food safety, based on internationally recognised and certified methods, in line with current legislation and regulations in the countries where Campina operates. Management of the groups and subsidiaries is responsible for the correct application of and compliance with these guidelines, systems and procedures. The subsidiaries themselves assess annually whether they have complied with the group guidelines referred to above. Their self-assessment is then evaluated by the Executive Board. There are also internal audits at the various business units. The Executive Board conducts regular talks with the management of the groups on the realisation of the strategic and operational targets, based in part on periodic financial and operational reports and the annual budget cycle.

37

Campina

Annual Report 2007

Campina’s Corporate Governance Model: Zuivelcoöperatie Campina u.a. The geographical area of operations of Zuivelcoöperatie Campina u.a. is divided into 48 departments in the Netherlands, Germany and Belgium. The Council Members of these departments are elected by the member farmers. The departments are combined into nine districts, each governed by a District Council consisting of Council Members of the departments in the district in question. District Chairmen are elected by the relevant District Council meeting. The cooperative’s highest governing body is the Members’ Council, which meets at least twice a year. The members of the Members’ Council are elected directly by the member farmers during the District meetings. The number of candidates depends on the volume of milk (in kilograms) supplied by the members of each department. In 2007, the Members’ Council had 194 members. The cooperative is supervised by a Board, consisting of member farmers (the District Chairmen), external Board members and a management consisting of the members of the Executive Board of Campina B.V. In addition to the statutory cooperative bodies (the Members’ Council and the Board), Zuivelcoöperatie Campina u.a. has a Cooperative Council, which supervises the Board’s actions in a number of areas as laid down in the Articles of Association. The Cooperative Council also advises the Board and the Members’ Council. The Members’ Council appoints the members of the Board and the Cooperative Council. Campina BV The business of Zuivelcoöperatie u.a. is in fact managed by Campina B.V. (and its subsidiaries). Zuivelcoöperatie Campina u.a. holds all the shares in Campina B.V. Campina BV has a statutory two-tier status with a Supervisory Board that supervises the policy of the Executive Board as well as the general progress of the company and its business. The Supervisory Board consists of member farmers (District Chairmen) and external Supervisory Board members. Campina’s Executive Board forms the management of Campina B.V., in accordance with its Articles of Association. In addition, Campina B.V. has a Management Board consisiting of the members of the Executive Board and the directors of the Consumer Products Europe, Cheese & Butter and Industrial Products groups. The Management Board, which is ultimately accountable to the Executive Board, is internally responsible for determining company policy.

38

As a dairy company, Campina is exposed to both general business risks and the specific risks presented by the dairy market. The global dairy market is marked by sharp fluctuations in the price of basic dairy products and by a fairly constant supply of the raw material, i.e. milk. The extent to which this risk is limited by the EU’s market regulation policy is steadily diminishing. Furthermore, sales prices are fixed with customers for relatively long periods in a number of markets, whereas the purchase prices of milk are subject to short-term fluctuations. In order to limit these risks, Campina’s strategy is to increase the share of value-added products in overall turnover and minimise costs by working as efficiently as possible. As a dairy company, Campina is heavily dependent on constant supplies and the quality of the raw material milk. An outbreak of animal diseases or similar crises can jeopardise both milk supplies and the production and sale of dairy products. This risk is limited by the internal quality assurance system for milk: Campina Farm Milk Quality Assurance (Netherlands), Qualitäts-Management (QM Milch, Germany) and Integrated Milk Quality Assurance (IKM, Belgium), and by systems for tracking & tracing raw materials and final products. The proper operation of and compliance with quality systems is regularly assessed through internal and external verifications. Campina has an internal crisis management organisation that strictly controls milk supplies and product sales in the event of an emergency, in order to mitigate the damage to the business. As an internationally operating company, Campina runs exchange rate risks. The main currencies for Campina outside the euro zone are the US dollar, the Russian rouble and the pound sterling. The aim of foreign currency risk management, which is subject to policies defined in detail, is to avoid unwanted fluctuations in the price of milk resulting from these exchange rate movements. Exchange rate risks relating to operational transactions are generally hedged but translation risks are not. Campina uses member financing and short-term debts and bank loans to finance the business. The company runs an interest rate risk on these loans, much of which is hedged. The remaining interest rate risk is considered acceptable in view of the ratio of long and short-term debts to fixed and current assets. Each year, the Executive Board discusses and evaluates the internal risk management and control systems with the Supervisory Board and KPMG. The system of internal control and management measures described above is designed to achieve the best possible management of the risks associated with corporate activities. Nevertheless, internal control and management measures provide no absolute certainty that all relevant risks will be identified in good time, or that all losses, material inaccuracies in internal and external reports, fraud and violations of legislation and regulations will be prevented. Taking account of the above limitations, the Executive Board is of the opinion that the guidelines, procedures, systems and

organisational measures described above provide a reasonable degree of certainty that: • the main risks associated with the business activities will be identified and adequately managed in good time; • the Executive Board will be informed accurately and in good time of the extent to which the company’s strategic and operational goals are realised; • internal and external financial reports contain no material inaccuracies; • the business complies with all relevant legislation and regulations. Likewise, there are no indications that the risk management and control systems will not operate properly in the current year.

39

Campina

Annual Report 2007

Review of Zuivelcoöperatie Campina u.a.

• Shift in milk price tests relationship between the cooperative and its members • Further expansion of differentiated milk flows • Future-oriented rules in the light of merger talks with Friesland Foods 2007 was one of the most eventful years in the history of the Campina dairy cooperative. The ongoing development of differentiated milk flows, which was enthusiastically received by the member farmers, together with a dramatic increase in the price of milk which took the market completely by surprise, coincided with events that tested the relationship between Campina and its member farmers. Regrettably, this resulted in a loss of members. Nevertheless, the year ended with a positive initial response from the members to the news that Campina and Friesland Foods were holding merger talks.

•> RELATIONSHIP WITH MEMBER FARMERS The turbulence in the international dairy market, which caused milk prices to reach unexpected and unprecedented levels during 2007, and the resulting sudden increase in competition for farm milk, undeniably marked the activities of the Campina cooperative in 2007. Due to a combination of factors, in the weeks leading up to 1 July 2007, over 500 member farmers in Germany decided to cancel their membership of the Campina cooperative as of 1 January 2008. A survey of the departing members found that the system used for determining advance milk payments, their expectations of developments in milk prices and the perception of the absolute level of Campina’s advance milk price were the main reasons behind their decision to leave the cooperative. These events prompted the Board to set up a committee to identify the reasons for the substantial and unexpected loss of members, and to recommend ways of restoring confidence. The commission issued its recommendations in the summer. It highlighted the need to align the level of advance milk payment more closely to the specific environment (including in the Netherlands and Belgium) and abandoning the requirement for

40

German members to invest in a cooling tank large enough to hold six milkings per 1 January 2015. The committee also stressed the need for the cooperative to be more alert to developments in Germany when issuing communications. In the summer, when the international market prices for basic dairy products rose sharply, competition for farm milk in the Netherlands and Belgium also dramatically intensified. These turbulent developments prompted much discussion between Campina and its members, mainly about fundamental issues such as Campina’s levels of ambition, the way in which members exercise control, financing, the system used for determining milk prices and Campina’s relationship with its members. By 1 October, a further 150 member farmers in the Netherlands, Germany and Belgium resigned their membership from 1 April 2008. Dozens of dairy farmers later decided to reverse their decision and remain part of the cooperative. The turbulent market and the obvious need to improve relations with its members prompted Campina to focus extra attention on relationship management and communication in 2007. Starting in the summer, the presentation and argumentation used in its communication were revised to take more specific account of members’ reactions. The website MyCampina.com, which includes news and a discussion forum for members as well as information about their milk and the milk list, played an important role. The number of visits to the website exceeded all expectations. Campina’s German members gained access to the site in 2007. Extra attention was also given to the content and structure of the autumn departmental meetings, which attracted substantially higher attendances (49 percent) than in the autumn of 2006.

•> FURTHER EXPANSION OF DIFFERENTIATED MILK FLOWS To secure a distinctive position in the market, Campina differentiates the farm milk used in some of its products through variations in production and/or composition, and compensates the farmers concerned for the additional costs incurred. Campina has been a leading supplier of organic milk in the Netherlands for many years, and now has over 100 member farmers supplying organic milk. In 2007, increased demand for organic milk and the decision by some organic dairy farmers to cancel their membership of Campina prompted considerable attention to the recruitment of new organic dairy farmers. 2007 was the year in which Campina launched its milk with a more balanced fatty acid composition in the Netherlands. This milk flow is referred to within the cooperative as ‘Campina

brand milk’. During the first few months of 2007, more than 500 enthusiastic Dutch member farmers in selected regions began to adapt the diet they gave their cows. A special feed combined with outdoor grazing during the spring and summer months are meant to ensure that Campina brand milk contains 20 percent more unsaturated fatty acids and twice the amount of healthy Omega-3 fatty acids on an annual basis than regular milk. In 2007, Campina not only focused considerable attention on the recruitment and support of its dairy farmers, but also on further refining its measurements, regulations and systems. Campina also devoted a lot of attention to keeping its members informed and motivated, and to maintaining close contacts with the suppliers who provide cattle feed and related technical advice to the farmers. The introduction of Campina brand milk was widely welcomed by the farmers and cattle feed companies alike. In the summer of 2007, to satisfy demand from a few buyers of private label liquid milk in the Netherlands, Campina began collecting the milk separately from members in selected regions whose cows are meadow-grazed. In early summer, Campina began canvassing members in certain regions in Germany to gauge their interest in the Landliebe cattle feed concept, which aims to enhance the authentic and natural character of the Landliebe dairy brand by giving cows European-origin feed of the kind traditionally grown in Germany. Unfortunately, the sudden and unprecedented competition for farm milk in the summer delayed this project. However, the recruitment drive resumed in the autumn. Many German members showed a serious interest in taking part in the Landliebe programme. The implementation of the Landliebe feed concept in 2008 should make a significant contribution to strengthening the commitment of Campina’s German members to their cooperative. In 2007, Campina gave considerable attention to encouraging dairy farmers to hold ‘open days’ on their farms, especially in the Netherlands. The aim was to bring to life Campina’s value of being ‘close to consumers’. The members responded enthusiastically to this initiative.

•> CAMPINA QUALITY FARM MILK As previously announced, Campina took active steps during the year under review in the area of quality assurance related to the cattle feed purchased by the members. From 1 January 2008, Campina members in the Netherlands will only be allowed to buy feed from suppliers whose insurance policies have been checked by external experts. Member farmers can consult the list of approved suppliers on the members’ website www.MyCampina.com. This will provide extra guarantees of quality, without increasing the administrative burden for member farmers. At the end of 2007, Campina and other dairy companies in the Netherlands agreed to take specific steps to control bovine TB and salmonella, starting in 2008. Each company, including Campina, will draw up its own systems, but it was also decided that joint facilities would be set up for sampling and research and a common zero measurement would be established in 2008.

•> MODERNISING THE COOPERATIVE’S RULES AND SYSTEMS In 2007, Campina amended its Articles of Association to ensure that memberhip certificates continue to constitute equity under the international IFRS accounting rules and are registered in members’ own names. Following the proposal to amend the Articles of Association, intensive consultations were held with members in late 2006. The Board consequently decided that the amendment should be voted on at the Members’ Council meeting in April 2007 rather than at the meeting in December 2006. This allowed scope for further discussions, which resulted in the Members’ Council voting in April 2007 in favour of the proposed amendment. The shift in market competition for farm milk led to a decision to revise the system of advance payments and to a necessary adjustment of the quantum surcharge. In response to fundamental changes in dairy farming and the relationship between members and their cooperative, the Board decided in spring 2007 to realign the principles on which the cooperative operates, as well as the supply conditions, the way in which members exercise control, the financing and the milk price. If the merger talks with Friesland Foods prove successful, the various rules and regulations applied by Friesland Foods and Campina will be harmonised. It was consequently decided to include the cooperative realignment of Campina in the harmonisation process and to use the experience and insights gained in one process to benefit the other.

•> GOALS FOR 2008 Campina’s goal for 2008 is to boost members’ confidence in Campina as a cooperative that is dedicated to upholding their position in the market. This will be done by implementing decisions taken in 2007 to revise its systems, and by exercising care and openness both when dealing with and keeping member farmers informed. The turbulent developments in 2007 have helped both the management of the cooperative and the Campina employees gain experiences and insights that will assist this process. In addition, the introduction of the Landliebe feed concept among members in Germany and the further roll out of Campina brand milk in the Netherlands will serve to strengthen the bond between Campina and its members. The challenge will be to link the enthusiasm of consumers and clients with that of member farmers in a lasting and effective way. Unless strictly necessary, Campina will not be launching any new concepts or systems for the cooperative in 2008, due to the exploratory merger talks with Friesland Foods. These talks will result in an ongoing harmonisation process between Friesland Foods and Campina, and a continuous and active exchange of information and dialogue with the member farmers aimed at further strengthening their position in a dynamic, international dairy market.

Milk supplied by members, 2007 Netherlands

Germany

Belgium

Total

Milk supplied (million kg)

2.847

566

28

3.441

Average fat content%

4,372

4,169

4,229

4,338

Average protein content%

3,504

3,389

3,450

3,484

41

Outdoor grazing Campina encourages its member farmers to graze their cows outdoors, season permitting. Campina is in favour of outdoor grazing since happy, healthy cows provide good, wholesome milk. Moreover, cows grazing in open meadows are an attractive sight. Allowing cows to graze freely in the open contributes to the valuable contact between people and cows, the natural source of our milk.

Campina milk is different Since April 2007, Campina’s liquid milk (the Netherlands) has had a more balanced fatty acid composition, thanks to the combination of special natural feed supplements and outdoor grazing. As a result, Campina milk contains 20% more unsaturated fatty acids on an annual basis than regular milk. This sets Campina milk - approximately 200 million litres of which are consumed in the Netherlands each year - apart from other milk.

Campina = natural The source of Campina makes the difference. The company is jointly owned by around 7,000 member-farmers in the Netherlands, Germany and Belgium. These farmers are firmly rooted in their local communities, close to the consumer, but are also part of a cooperative which over the years has grown into a dairy multinational.

The cows themselves, the weather give milk its unique wholesome Passion for Campina Passion for Camina is a course programme for all staff covered by the collective labour agreements for senior managers. Approximately 1,000 employees from the Netherlands and Belgium attend the 2007 session. The aim: to broaden their knowledge of Campina. Corporate director HRM Anton Ooijen: ‘It is important to build a shared foundation so that together we can ensure we add value to milk.’ 42

natural and their feed and natural properties. Adding value to milk Campina employees do their best to make dairy products according to the highest Q2 system quality standards. The annual Q2 awards are the reward for those efforts. In March 2007, the Q2 golden award was presented to the team in Elsterwerda

‘Consumers must increase their focus on nutrients that are vital to good health’ ‘Nutrition campaigns should emphasise what people ought to be eating instead of telling them what they should avoid,’ argued professor Toon van Hooijdonk on accepting the Chair in Dairy Science & Technology at Wageningen University. A scientific appeal for more publicity on the healthy aspects of dairy.

43

Campina

Annual Report 2007

Administrative organisation

Board / Supervisory Board

Executive Board

Company Secretary

-

- C.J.M. Gielen RA, acting CEO a.i. from 1-1-2008 / CFO - J.J.G.M. Sanders, CEO up to and including 31-12-2007

- J.M.M. Lourens

C.H. Wantenaar (Chairman)* J.H.G.M. Uijttewaal (Vice-Chairman)* E. Berbecker J.H.M. Hommen H.A. van Karnebeek* J.P.C. Keijsers J.A.A. van Lankvelt R.P.M. Luijben P.J.W. Roorda S.R.F. Ruiter H. Stöcker A.P. Verhorst A. Wouters

* Also a member of the Remuneration Committee

Cooperative Council / Shareholders’ Meeting - Mrs A.M. Wijnen-Pronk (Chairwoman) - H.F.M. van Casteren (first Vicechairman) - F. Pohlmann (second Vice-chairman) - T. van Bruggen - S.P.J. Buisman - T.W.A. van der Burg - G.M. ten Haaf - P.J.M. Hoeks - H. Jäger - H.G.J.M. Janssen - A.P.H.J. Kersten - P.N. Kruiswijk - W.G.J.P. Maas

-

W.S. Mostert J.M.C. Muskens G.A.M. Peeters J. Peters B. de Peuter M.M.E.H. Rompelberg Mrs M.T. Rutten-Witte M. Schlösser M.G.A. Vermunt F.A.M. Versteden G.J.W.M. Vollering A. Vornweg N. Wellie P.H. de Wit

Board / Supervisory Board: other positions C.H. Wantenaar (1949)*

J.H.G.M. Uijttewaal (1962)*

J.H.M. Hommen (1943 )

Position: Chairman as from 2001 Nationality: Dutch Appointment to the Board: 1991 Available for re-election in: 2009 Term of office ends: 2014

Position: Vice-Chairman as from 2005 Nationality: Dutch Appointment to the Board: 2003 Available for re-election in: 2008 Term of office ends: 2018

Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 2006 Available for re-election: 2008 Term of office ends: 2013

Supervisory and other directorships: - Chairman, Central Superlevy Organ - Vice-Chairman, Dairy Farming Certification Organisation - Board member, National Cooperative Council - Board member, Dutch Dairy Association (NZO) - Chairman, NZO Sustainable Milk Production Committee - Board member, Rabobank Soest-Baarn-Eemnes

Supervisory and other directorships: - Board member, Rabobank Maas en Waal

Former Vice-Chairman / CFO of the Executive Board, Royal Philips Electronics NV Supervisory and other directorships:

E. Berbecker (1959)

Supervisory and other directorships: - Chairman of Supervisory Council, Academisch Ziekenhuis Maastricht - Chairman, Reed Elsevier - Chairman of Supervisory Board, TIAS Nimbas Business School BV - Chairman of Supervisory Board, TNT NV - Chairman of Supervisory Board, ING Groep NV

Position: Member of Board/Supervisory Board Nationality: German Appointment to the Board: 2006 Available for re-election: 2010 Term of office ends: 2021 Supervisory and other directorships: - Member, Kreisausschuss Märkischer Landwirtschaftsverband - Member, Milchausschuss Märkischer Landwirtschaftsverband

44

H.A. van Karnebeek (1938)*

R.P.M. Luijben (1958)

H. Stöcker (1964)

Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 1996 Cannot be re-elected for reasons of age Term of office ends: 2008

Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 2005 Available for re-election in: 2008 Term of office ends: 2021

Position: Member of Board/Supervisory Board Nationality: German Appointment to the Board: 2005 Available for re-election in: 2008 Term of office ends: 2021

Former deputy chairman of the Executive Board, AKZO Nobel N.V.

P.J.W. Roorda (1948)

Supervisory and other directorships: - Chairman of Supervisory Board, Pechiny N.V. - Chairman of Supervisory Board, Brill N.V. - Chairman of Supervisory Board, Bruynzeel B.V. - Member of Supervisory Board, Frans Maas Groep N.V. - Member of Supervisory Board, Glaverbel B.V.

J.P.C. Keijsers (1955) Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 2006 Available for re-election: 2009 Term of office ends: 2020 Supervisory and other directorships: - Vice-Chairman Board, Rabobank Geldrop/Heeze-Leende

Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 2003 Available for re-election in: 2010 Term of office ends: 2018

Supervisory and other directorships: - Chairman, Landesvereinigung Milchwirtschaft NRW - Deputy Chairman, Kreisbauernschaft Oberberg - Member, Kreisstelle Oberberg der Landwirtschaftskammer NRW - Member, Milch, Rheinischer Landwirtschaftsverband RLV working group

Former Member of Executive Board, Sara Lee International

A. Verhorst (1960) Supervisory and other directorships: - Member of Supervisory Council, the Haga hospital in The Hague - Member of Supervisory Council, Hogeschool INHOLLAND - Member of Supervisory Board, TNO Bedrijven BV

S.R.F. Ruiter (1958) Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 2006 Available for re-election: 2009 Term of office ends: 2021

Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 2006 Available for re-election: 2010 Term of office ends: 2021 Supervisory and other directorships: - Chairman, De Hoeksche Waard section of LTO-Noord - Chairman, Coöperatief Koelhuis “Mastland” - Member, Wellant College Dairy Technical Committee - Member of Provincial Government, LTO Noord, province of South Holland

J.A.A. van Lankvelt (1952) Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 1994 Term of office ends: 2009 Supervisory and other directorships: - Chairman, ‘Dommelstroom’ plot exchange project - Deputy Board Chairman, Rabobank Nuenen-Son en Breugel - Board member, ‘Dommelstroom’ land-use planning organisation - Board member, Waterschap De Dommel

Supervisory and other directorships: - Member of Provincial Government, LTO-Noord, province of North Holland - District Chairman, CR-Delta - Member of Supervisory Council, Rabobank

A. Wouters (1961) Position: Member of Board/Supervisory Board Nationality: Dutch Appointment to the Board: 2001 Available for re-election in: 2009 Term of office ends: 2018

* Also a member of the Remuneration Committee

45

A joint effort on desserts in Korea A satisfying example of cooperation between DMV International (the Netherlands), Campina in Gütersloh and Campina in Elsterwerda (both in Germany). All three operating companies worked together to teach people at Korea’s Maeil Dairy Industry how to make ‘Fruchtstrudel’. The swirled strudel desserts will be available on Korean supermarket shelves from March.

Clean water for people in Vietnam Campina is working with the Red Cross to establish a water supply for the inhabitants of seven villages in Vietnam, a country where Campina wants to increase sales of its dairy products. Campina wants to be close to consumers, including those further afield

Campina = close to consumers The source of Campina makes the difference. The company is jointly owned by around 7,000 member-farmers in the Netherlands, Germany and Belgium. These farmers are firmly rooted in their local communities, close to the consumer, but are also part of a cooperative which over the years has grown into a dairy multinational.

Campina wants to feel connected to its products for. In all its Tag Rugby Campina UK is creating a new sponsorship activity for 450,000 British children in the form of Tag Rugby, a safe and enjoyable game played in school playgrounds. Campina will be donating equipment for the pupils. It’s an excellent way of getting children to do more physical exercise. And, together with Campina’s delicious ‘Yazoo’ milk drink, it also encourages them to lead a healthier life.

46

On the farm Campina farmers make every effort to provide consumers with the tastiest dairy products. During the open days, consumers can take a peek around the farm and, of course, sample delicious Campina dairy products. Campina is also a member of the Friends of the Countryside (‘Vriend van het Platteland’) Foundation, which is committed to strengthening the bond between consumers and the Dutch countryside. In addition to the Open Days, there are also events which give people the chance to learn about farming in the Netherlands. Let’s celebrate the countryside!

close to consumers

the people it makes markets, worldwide.

Close to consumers in Moscow Russian consumers find more and more Campina products in the cooling section of their supermarkets, such as here in Moscow. Campina offers consumers both reliable and innovative products. Particularly in the health and wellness segment.

47

Campina

Annual Report 2007

Financial statements

Accounting policies

dairy ingredients and its closing balance sheet has been consolidated in full.

•>

GROUP STRUCTURE AND BASIS OF CONSOLIDATION The Campina group consists of:

- Zuivelcoöperatie Campina u.a., - Campina BV,

Valuation and determination of the result

both registered in Zaltbommel, and their subsidiaries. •> GENERAL The consolidated financial statements include the financial data

The financial statements have been prepared in accordance

of Zuivelcoöperatie Campina u.a. and companies over which it

with the provisions of Part 9 of Book 2 of the Netherlands

can directly or indirectly exercise controlling influence.

Civil Code.

The financial data of group companies is included in the conso-

Unless stated otherwise, the accounting policies are based on

lidated financial statements from the date that the Campina

the historical cost convention. Expenses are attributed to the

group has controlling influence until the time that control

period in which the income with which they are associated is

ceases. The assets, liabilities and results of the consolidated

recognised. Where this is possible within the annual reporting

group companies are fully consolidated. Minority interests in

rules, due account is taken of the cooperative nature of the

group companies are disclosed separately in the consolidated

business in allocating income and charges to the operating

balance sheet and consolidated profit and loss account.

result. This means that, as far as possible, income and charges are allocated through the milk price to the dairy farmers who

The principal group companies included in the consolidated

were members of the cooperative in the relevant period.

financial statements are listed on page 74. Results that a consolidated group company realises on transactions with other group companies are eliminated in full from

•> USE OF ESTIMATES In accordance with generally accepted accounting principles

the consolidated financial statements insofar as they have not

estimates and assumptions are used when drawing up the finan-

been made through transactions with third parties. These results

cial statements and they affect the reported amounts. The actual

are eliminated from the individual financial statements in pro-

outcomes may differ from these amounts.

portion to the interest held in the group companies concerned. •> FOREIGN CURRENCY TRANSLATION •> ACQUISITIONS In March 2007, Campina acquired the remaining 50% of

50

Transactions denominated in foreign currencies are recorded at the exchange rate on the transaction date. Related assets and

the shares in the joint venture in Vietnam, whose name was

liabilities are translated at the exchange rate on the balance

then changed to Campina Vietnam Co. Ltd. On 2 July 2007,

sheet date and any translation gains and losses are taken to the

Campina acquired 50% control of the Betagen Holding Ltd joint

profit and loss account. Income and expenses of foreign group

venture, established in Hong Kong, which is consolidated pro-

companies are translated at the exchange rate on the trans-

portionately. Betagen’s activities are the production and sale of

action date; assets, equity and liabilities are translated at the

consumer dairy products in Thailand. Finally, the entire share

exchange rate on the balance sheet date. Gains and losses

capital of Satro GmbH, established in Lippstadt, Germany, was

arising from the translation of the shareholders’ equity of

acquired on 31 December. Satro GmbH produces and sells

foreign group companies are taken direct to equity, as are trans-

lation gains and losses arising on loans to those group companies which have the nature of permanent financing. If and to

•> FINANCIAL FIXED ASSETS Participating interests where significant influence can be

the extent that loans or futures contracts are entered into in

exercised over financial and operating policies are carried at the

foreign currencies to hedge exchange rate movements on the

group’s share in their equity, established using Campina’s

net investment in foreign group companies, exchange gains and

accounting policies. Participating interests over which no signifi-

losses on those loans or futures contracts are also taken direct

cant influence can be exercised are stated at the lower of cost

to equity. Exchange gains and losses taken direct to equity are

and market value. Listed securities are carried at market value

disclosed separately as a non-distributable reserve for foreign

on the balance sheet date. All realised and unrealised changes

exchange gains and losses.

in value in listed securities are taken to the profit and loss account. Other securities are carried at the lower of cost and market value. Receivables included in financial fixed assets are

•> ACQUISITIONS AND DISPOSALS OF GROUP COMPANIES Newly-acquired group companies are recognised using the purchase accounting method and carried at the fair value of the

carried at face value less any necessary provisions. Financial fixed assets with a term of less than one year are included in current assets.

acquired assets and liabilities at the time of the acquisition. The purchase price consists of the consideration paid for the acquisition plus any costs directly attributable to the acquisition.

•> IMPAIRMENT OF FIXED ASSETS Each year there is an assessment of whether there are indications that intangible, tangible or financial fixed assets may

•> INTANGIBLE FIXED ASSETS Positive differences between the price paid on the acquisi-

have been impaired. If there has been impairment, the asset concerned is written down to net realisable value.

tion of participating interests (by share or asset/liability transactions) and their net asset value, which is the total fair value of the assets and liabilities of the participating interest at the date of acquisition, are capitalised as goodwill. Intangible fixed assets

•> STOCKS Stocks are carried at the lower of cost or net realisable

from acquisitions are recognised at the fair value of the acqui-

value. Cost includes all costs associated with purchase or

red intangible fixed assets determined at the time of the acqui-

production, using the FIFO (first in, first out) method. The milk

sition less accumulated amortisation and impairment. Licences

component of stocks is carried at purchase price at the balance

and intellectual property acquired from third parties, including

sheet date. Costs of production include direct costs plus the

patents and trade marks, are capitalised at cost. Computer soft-

share of indirect costs attributable to production, taking into

ware is carried at cost. Development expenses are capitalised

account the stage of processing. Indirect costs include wages,

as intangible fixed assets if, after demonstrating a product’s

salaries and social security charges of indirect staff, amortisation

technical feasibility, it is probable that it can generate future

and depreciation of fixed assets and external costs. Amounts

economic benefits. All intangible fixed assets are amortised on a

received for production under EU dairy industry support

straight-line basis using historical cost. The amortisation period

schemes are deducted when determining the production costs.

is determined from the useful economic life of the asset.

The value of stocks is stated less a provision for obsolescence.

•> TANGIBLE FIXED ASSETS

•> RECEIVABLES

Tangible fixed assets are carried at cost less accumulated

Receivables are carried at face value less a provision for

depreciation. Depreciation is computed on a straight-line basis

doubtful amounts determined by a specific review of the

on cost over the useful economic life of the asset. Land is not

recoverability of individual receivables.

depreciated. The cost of improvements to tangible fixed assets is capitalised and depreciated over the useful economic life. Maintenance and repair costs for tangible fixed assets are taken to the profit and loss account. Investment grants are deducted from the cost of the asset and depreciated over the useful

•> CASH AND CASH EQUIVALENTS Cash and cash equivalents, which are cash in hand and demand bank balances, are carried at face value.

economic life of the asset.

51

Campina

Annual Report 2007

•> MINORITY INTERESTS IN GROUP COMPANIES Minority interests in group companies are carried at the

Tax Deferred tax is recognised on differences between the valuation

value of the minority interests in the net asset value of the

of assets and liabilities in the financial statements and their

group companies concerned.

value for tax purposes which when realised or settled lead to the payment or settlement of tax. Deferred tax liabilities and assets within the same fiscal entity are netted insofar as their

•> PROVISIONS Pension obligations

terms are the same. Deferred tax assets, including those for tax losses available for relief, are recognised if and to the extent

The pension plans are defined benefit and defined contribution

that it may be reasonably assumed that they will be realised in

plans. Obligations for payments to the defined contribution

due course. Deferred tax is computed at the nominal tax rates

plans are recognised as an expense in the profit and loss account

applicable in the different countries.

when they fall due. Other The pension obligations in respect of defined benefit plans are

The other provisions relate to obligations and risks associated

calculated annually on the basis of expected future develop-

with business activities and are carried at face value.

ments in interest rates, salaries and life expectancy. The actuarially-computed present value of the obligations less the fair value of the plan assets, allowing for unrecognised actuarial results and unrecognised past service costs, is recognised as the pension

•> SUBORDINATED BONDS Subordinated bonds are carried at face value.

obligation or as a pension asset in financial fixed assets. The discount rate used is the yield at the balance sheet date on bonds with an AAA credit rating with maturity dates similar to the term

•> CREDITORS, ACCRUALS AND DEFERRED INCOME

of the pension obligations. The calculation is performed by a

Creditors and liabilities other than provisions are carried

qualified actuary using the projected unit credit method.

at face value.

Actuarial gains and losses resulting from changes in assumptions for calculating the pension obligations or differences between the expected and actual yield on fund assets are recognised in the profit and loss account over the expected average remaining employment period. This only applies if and insofar as the actua-

•> NET TURNOVER Net turnover is the proceeds from the sale and delivery of goods and services to third parties less discounts granted to

rial gains or losses exceed 10% of the higher of the pension

customers and taxes levied on turnover. Net turnover includes

obligations and the fair value of the plan assets.

export subsidies.

If the calculation of the net pension obligations gives a positive

Turnover is only recognised if there is reasonable assurance that

balance, the asset recognised is limited to the sum of any unre-

future benefits will accrue to the enterprise and that these bene-

cognised actuarial losses and pension charges for past service

fits can be reliably estimated.

and the present value of any future repayments by the fund or reductions in future pension contributions. When the plan bene-

Turnover is recognised when the risks and rewards of ownership

fits are changed, the portion of the changed benefit relating to

have been transferred to the buyer, recovery of the consideration

past service is recognised in the profit and loss account over the

is probable, the cost and possible return of goods can be estima-

average period until the benefits become vested. To the extent

ted reliably, and there is no further management involvement

that the benefits vest immediately, the expense is recognised

with the goods.

immediately in the profit and loss account. The net obligation for other deferred employee remuneration is recognised in the same way as for defined benefit plans, except that the actuarial gains and losses are recognised immediately in

•> COST OF SALES Cost of sales includes all costs of acquiring or producing the goods and services sold.

the profit and loss account. Reorganisations Reorganisation provisions relate to non-recurring redundancy

Selling expenses are the direct and indirect costs of selling

and other expenses resulting from restructuring plans that have

and distribution, including the costs of the sales organisation,

been announced and are being implemented. They are carried

transport, advertising and promotions.

at face value.

52

•> SELLING EXPENSES

•> GENERAL ADMINISTRATIVE EXPENSES General administrative expenses are the costs of the organisation’s management and head-office departments.

•> OTHER OPERATING INCOME This includes results on sales of tangible fixed assets, rental income and results on sales of consolidated participating interests.

•> FINANCIAL INCOME AND EXPENSE This is interest income and expense, changes in value and book profits and losses on disposals of securities and receivables included in financial fixed assets. Interest expense includes bank charges.

•> TAX Tax on the operating result is computed using tax rates applicable in the various countries, taking into account tax facilities and non-deductible costs.

•> CASH FLOW STATEMENT The consolidated cash flow statement has been prepared using the indirect method. The cash and cash equivalents in the cash flow statement consist of cash, bank balances and current amounts owed to credit institutions. Cash flows denominated in foreign currencies are translated at the exchange rate on the transaction date. The purchase price to acquire and the sales price on selling group companies are included in the cash flow from investing activities. The cash and cash equivalents held by bought or sold group companies are deducted from the purchase or selling price respectively.

53

Consolidated balance sheet after proposed appropriation of the surplus and issue of bonds

€ million

note

31-12-07

31-12-06

Intangible fixed assets

(1)

276.4

223.1

Tangible fixed assets Land and buildings Plant and equipment Other fixed assets

(2) 233.9 415.9 82.9

208.6 369.6 144.8

732.7

723.0

7.3 55.0

10.8 27.0

62.3

37.8

71.2 12.1 319.0

66.3 7.2 240.3

402.3

313.8

459.3 2.5 130.5

379.4 7.5 124.0

592.3

510.9

28.4

29.4

2,094.4

1,838.0

Fixed assets

Financial fixed assets Non-consolidated participating interests Other receivables and securities

(3)

Current assets Stocks Raw materials and consumables Semi-finished goods Finished goods and goods for resale

Receivables Trade debtors Commodity boards and intervention agencies Other receivables, prepayments and accrued income

Cash and cash equivalents

Total assets

54

(4)

(5)

(6)

€ million

note

Equity General reserve Statutory reserve for foreign exchange gains and losses Statutory reserve for participating interests Membership certificates

Minority interests in group companies

Long-term liabilities Subordinated bonds Members’ loans Other

Current liabilities Amounts owed to members Amounts owed to credit institutions Creditors Tax and social security charges Pensions Other liabilities, accruals and deferred income

Total equity and liabilities

31-12-06

(7)

(8)

Group equity Provisions Pension obligations Reorganisations Tax Other

31-12-07

471.3 (18.4) 3.1 152.4

452.8 (3.5) 2.1 152.0

608.4

603.4

43.1

27.3

651.5

630.7

93.0 17.7 2.3 8.4

88.4 5.9 5.4 9.1

121.4

108.8

186.6 96.7 15.7

176.9 88.9 8.8

299.0

274.6

232.1 348.4 251.3 25.7 4.8 160.2

217.4 181.1 231.3 12.3 0.8 181.0

1,022.5

823.9

2,094.4

1,838.0

(9)

(10)

(11)

55

Consolidated profit and loss account after proposed appropriation of the surplus

€ million

note

2007

2006

Net turnover

(12)

4,032.2

3,623.6

Cost of sales

(13)

3,572.3

3,215.2

459.9

408.4

386.5 30.0

370.8 28.0

Total expenses

416.5

398.8

Net operating profit

43.4

9.6

17.2

54.1

60.6

63.7

(19.2)

(18.4)

41.4

45.3

Gross profit Selling expenses General administrative expenses

Other operating income

(13) (13)

(14)

Net operating profit including other operating income Financial income and expense

(15)

Surplus on ordinary activities before tax Tax

(16)

-

-

Results of non-consolidated participating interests

(17)

1.8

0.9

Surplus after tax

43.2

46.2

Minority interests

(26.0)

(3.7)

Net operating surplus

17.2

42.5

(= amount to be taken to the general reserve as decided by the Members’ Council1)

1)

56

Pursuant to Article 48 (clause 1) of the articles of association of Zuivelcoöperatie Campina u.a. (see other information on page 80). The Members’ Council approved the proposed appropriation of the surplus for 2006 on 25 April 2007.

Consolidated cash flow statement after proposed appropriation of the surplus and issue of bonds

€ million

2007

2006

60.6

63.7

122.3 (152.9) (9.3) 16.8 5.2 (24.1) 1.3

115.3 (15.3) (43.9) 8.2 (27.7) (21.8) 3.4

19.9

81.9

Acquisitions and disposals of interests in group companies Investment in tangible and intangible fixed assets Investment in and grants of financial fixed assets Disposals of tangible and intangible fixed assets Repayment of financial fixed assets

(105.6) (95.4) (0.1) 11.8 2.2

37.4 (131.7) (2.9) 6.8 0.6

Cash flow from investing activities

(187.1)

(89.8)

Increase/(decrease) in membership certificates and bonds Increase/(decrease) in long-term loans from members Increase/(decrease) in current loans from members Increase/(decrease) in member financing

(6.6) 7.7 14.7 15.8

(8.9) (0.9) 15.6 5.8

Dividends paid to third parties with a holding in group companies Other long-term financing Increase/(decrease) in other long-term financing (non-members)

(9.6) (7.3) (16.9)

(3.8) (3.8)

Cash flow from financing activities

(1.1)

2.0

Total cash flow

(168.3)

(5.9)

Cash and cash equivalents and current amounts owed to credit institutions at 1 January

(151.7)

(145.8)

Cash and cash equivalents and current amounts owed to credit institutions at 31 December

(320.0)

(151.7)

Cash and cash equivalents and current amounts owed to credit institutions at 31 December: Cash and cash equivalents Current amounts owed to credit institutions

28.4 (348.4)

29.4 (181.1)

(320.0)

(151.7)

Net operating profit including other operating income Adjustments to arrive at the cash flow from operating activities: Depreciation and amortisation (Increase)/decrease in working capital 1) Increase/(decrease) in provisions Reserved for issue of deferred bonds Book profits and losses and impairment of fixed assets Interest paid Interest received Cash flow from operating activities

1)

Excluding cash and cash equivalents, amounts owed to credit institutions and amounts owed to members.

57

Notes to the consolidated balance sheet € million

(1) Intangible fixed assets

Total Prepayments and assets under construction Other intangible fixed assets Software Licences and intellectual property Goodwill Balance at 1 January Cost Accumulated amortisation

353.0 (151.4)

9.8 (2.1)

77.6 (68.6)

-

4.8 -

445.2 (222.1)

201.6

7.7

9.0

-

4.8

223.1

Movements in book value Additions Reclassifications Transfers Amortisation Impairment Foreign exchange gains and losses

50.8 (19.2) (0.8) (2.3)

(0.9) -

8.4 0.5 4.4 (6.3) -

24.3 (0.6) (1.9)

1.6 (0.3) (4.4) -

85.1 0.2 (27.0) (0.8) (4.2)

Net movement

28.5

(0.9)

7.0

21.8

(3.1)

53.3

Balance at 31 December Cost Accumulated amortisation

400.6 (170.5)

9.8 (3.0)

87.5 (71.5)

22.4 (0.6)

1.7 -

522.0 (245.6)

230.1

6.8

16.0

21.8

1.7

276.4

Book value at 1 January

Book value at 31 December

Additions relate to the acquisition of the remaining 50% holding in Campina Joint Venture Company in Vietnam, the acquisition of the 50% holding in Betagen Holding Ltd., and the acquisition of Satro GmbH. The total acquisition price paid for these companies was € 105.6 million. The acquisition price for Betagen Holding Ltd included € 14.4 million attributed to the trade name and € 9.9 million attributed to the network of agents. The investment in the network of agents and the trade name has been recognised as other intangible fixed assets and is being amortised over 20 years. As the acquisition of Satro GmbH took place on 31 December 2007, the establishment of the fair value of its assets and liabilities has not yet been completed. The allocation of the purchase price to the assets and liabilities acquired will be completed during 2008 and any related adjustments will be made in the opening balance sheet for 2008. Goodwill relates chiefly to strategic acquisitions and mergers in the past, including in Germany. In view of its strategic nature, goodwill is predominantly amortised over 20 years. The average remaining amortisation period on goodwill is 14 years. Licences and intellectual property are amortised over 5 to 10 years. Software is amortised over 3 to 5 years.

58

(2) Tangible fixed assets

Total Not used in business operations Prepayments and assets under construction Other fixed assets Plant and equipment Land and buildings Balance at 1 January Cost Accumulated depreciation Book value at 1 January Movements in book value Additions Consolidations and deconsolidations Reclassifications Transfers Disposals Depreciation Impairment Foreign exchange gains and losses Net movement Balance at 31 December Cost Accumulated depreciation Book value at 31 December

416.8 (208.2)

1,163.4 (793.8)

161.3 (120.4)

96.9 -

50.6 (43.6)

208.6

369.6

40.9

96.9

7.0

723.0

7.3 21.2 2.1 13.4 (2.3) (14.0) (1.6) (0.8)

25.5 15.4 (1.7) 87.4 (3.3) (70.0) (5.7) (1.3)

6.3 0.2 3.5 (0.3) (10.3) (0.1)

46.2 0.5 (0.7) (105.0) (1.1) -(0.1)

(0.1) 0.7 (0.6) (1.0) -

85.3 37.1 (0.2) (7.6) (95.3) (7.3) (2.3)

25.3

46.3

(0.7)

(60.2)

(1.0)

9.7

461.3 (227.4)

1,283.1 (867.2)

162.5 (122.3)

36.7 -

51.5 (45.5)

233.9

415.9

40.2

36.7

6.0

1,889.0 (1,166.0)

1,995.1 (1,262.4) 732.7

The estimated fair value of tangible fixed assets at the balance sheet date was some € 226 million (2006: € 205 million) higher than the value stated in the consolidated balance sheet and, with the exception of land, has been determined from index figures and taking into account commercial obsolescence as a result of technological developments. The fair value of the land in the business premises has been determined from the price of industrial land. The expected useful economic lives and associated depreciation periods are 25 years for buildings, 10 years for plant and equipment and 3 to 8 years for other fixed assets. Land is not depreciated. Impairment relates chiefly to the closure of a production site. The book value at the end of the year included € 0.4 million (2006: € 0.0 million) of assets acquired under financial leases. These assets are not legally the property of Campina.

59

(3) Financial fixed assets

Total Pensions Other receivables and securities Non-consolidated participating interests Balance at 1 January

10.8

6.7

20.3

37.8

Movements in the financial year Disposals/repayments Result Dividend Changes in value Reclassifications including pensions (see note 9)

(1.3) 1.8 (1.1) (2.9)

(0.9) 3.9 14.8

10.2

(2.2) 1.8 (1.1) 3.9 22.1

Net movement

(3.5)

17.8

10.2

24.5

7.3

24.5

30.5

62.3

Balance at 31 December

The remaining term of the other receivables, securities and pensions is longer than one year. With effect from 2007, the holding in Alaska Milk Corporation, previously reported in non-consolidated participating interests, is reported in other securities and carried at market value. Other receivables include € 11.9 million for receivables related to corporate income tax.

(4) Stocks Stocks are stated after deduction of a provision of € 14.0 million for obsolescence and lower market value (2006: € 9.5 million). € 60.6 million of the stocks is stated at lower market value (2006: € 46.6 million).

(5) Other receivables, prepayments and accrued income

Receivables on non-consolidated participating interests Other receivables Prepayments and accrued income

31-12-07

31-12-06

0.3 119.5 10.7

2.1 106.4 15.5

130.5

124.0

Other receivables, prepayments and accrued income predominantly have a term of less than one year. Other receivables include corporate income tax receivable of € 36.1 million (2006: € 32.3 million) and sales taxes receivable of € 40.3 million (2006: € 39.2 million).

60

(6) Cash and cash equivalents This concerns balances on bank accounts and petty cash. The balances on the bank accounts are at the free disposal of Campina.

(7) Equity Campina has prepared the balance sheet after the proposed appropriation of the surplus. Campina has chosen to present its balance sheet in line with the milk settlement payment to members for the financial year.

General reserve

Balance at 1 January Net operating surplus (according to proposed appropriation of the surplus) Discount Movement in statutory reserve for participating interests Transfer from statutory reserve for foreign exchange gains and losses Balance at 31 December

2007

2006

452.8

410.8

17.2 (1.0) 2.3

42.5 (0.1) (0.4) -

471.3

452.8

2007

2006

Statutory reserve for foreign exchange gains and losses

Balance at 1 January

(3.5)

1.9

Additions/(withdrawals) during the year

(12.6)

(5.4)

Transfer to general reserve

(2.3)

Balance at 31 December

(18.4)

(3.5)

Foreign exchange gains and losses relate mainly to the holdings in Hong Kong, Russia, the United Kingdom and the United States.

Statutory reserve for participating interests

Balance at 1 January Result Dividend received Balance at 31 December

2007

2006

2.1

1.7

2.0 (1.0)

1.6 (1.2)

3.1

2.1

The statutory reserve for participating interests consists of movements in the value of non-consolidated participating interests which cannot be required to make dividend distributions as Campina does not have controlling influence.

61

Membership certificates

Balance at 1 January

2007

2006

152.0

152.6

Members’ deposits Purchases

5.0 (4.6)

Balance at 31 December

4.4 (5.0)

152.4

152.0

Membership certificates represent nominal amounts paid in by the members of Zuivelcoöperatie Campina u.a. on membership certificates. The nominal value is € 4.54 each. All members have to purchase membership certificates. Membership certificates are registered. Members may purchase them at the issue price, which is set annually by the Board. The issue price has been € 6.00 per certificate since 1 April 2007. The Board has decided not to increase the issue price for existing members from 1 April 2008. Since 1 April 2001 new members other than heirs of existing members, have been required to purchase certificates at a price of € 10.50 each. The Board has decided to leave the issue price for new members unchanged from 1 April 2008. Membership certificates may be repurchased by the cooperative on request when a member ceases business or on termination of membership for any other reason, at the current repurchase price, which is the same as the issue price for members at that time. Such repurchase is conditional on milk having been supplied under these membership certificates in the past. As a result of members leaving, a total of 3,163,256 membership certificates will be repurchased at the current repurchase price of € 6.00 each on 1 January 2008 and 1 April 2008.

Statement of total result Pursuant to Annual Reporting Guideline 265.201, the total result of Campina is as follows:

2007 Balance of equity at 1 January

603.4

567.0

Foreign exchange gains and losses

(12.6)

(5.4)

Total direct movements in equity

(12.6)

(5.4)

17.2

42.5

Consolidated net operating surplus after tax Total result of the Company Discount Movements in membership certificates

62

2006

4.6 0.4

37.1 (0.1) (0.6)

Movements in equity in respect of members

0.4

Balance of equity at 31 December

608.4

(0.7) 603.4

(8) Minority interests in group companies

Balance at 1 January Minority interests in the result Foreign exchange gains and losses Dividend paid Other movements Increase in the minority interest in DMV Fonterra Excipients GmbH & Co. KG Balance at 31 December

2007

2006

27.3

1.5

26.0 (0.3) (9.6) (0.3)

3.7 0.7 -

-

21.4

43.1

27.3

Minority interests at the end of 2007 were mainly the 50% minority interest in the capital of DMV Fonterra Excipients GmbH & Co. KG (31 December 2006: 50%), the 50% minority interest in the capital of DMV Vitalus Ingredients NV (31 December 2006: 50%) and the 0.5% minority interest in the capital of CMG Grundstücksverwaltungs- und Beteiligungs AG (31 December 2006: 0.7%).

(9) Provisions

Pension obligations General The pension plan for employees in the Netherlands is an average pay scheme based on the number of years of membership, up to € 52,507. Above this amount, there is a defined contribution plan. An exception to this is a final pay scheme for employees born before 1955. These plans are largely administered by Stichting Pensioenfonds Campina. The pension obligation managed in-house relates almost entirely to pension commitments to current and former employees of MKW and Strothmann in Germany. Investments are held to cover part of this provision. The plan assets relate to pension plans administered by third parties. Presentation in the financial statements The net pension obligation is computed as follows: 31-12-07 Present value of pension obligations managed in house Present value of pension obligations administered by third parties Fair value of plan assets Unrecognised charges for past service Unrecognised actuarial gains and (losses) Recognised net pension obligations

86.4 1,025.9 (1,072.7) (18.0) 40.9 62.5

31-12-06 94.3 1,123.4 (1,102.4) (19.4) (27.8) 68.1

63

The movements recognised in the pension obligation in the balance sheet for the defined benefit plan were as follows:

2007

2006

68.1

92.6

13.5 4.2 (17.4) (5.9)

4.2 4.2 (26.3) (6.6)

Net pension obligations at 31 December

62.5

68.1

Reclassification as financial fixed assets (see note 3)

30.5

20.3

Pension obligations at 31 December

93.0

88.4

Net pension obligations at 1 January Charge recognised in the profit and loss account (see note 13) Employees’ contributions Pension contributions remitted to third parties Pensions paid (managed in-house)

Persuant to Annual Reporting Guideline 271.321, the reclassification as financial fixed assets is of a pension asset. The reclassified amount will be netted against future contribution refunds. Campina is entitled to contribution refunds from the pension fund if the funding ratio of the pension fund exceeds an agreed figure in any year. The principal actuarial assumptions (weighted averages) at 31 December were:

Discount rate Expected return on plan assets Future pay inflation Future pension increases

2007

2006

5.3% 6.2% 3.0% 2.0%

4.5% 5.2% 3.0% 2.0%

The mortality rate for 2007 and 2006 was set using the 2006 pensions table (generation variant) without backward age adjustment.

Provisions for reorganisations, tax and other

Balance at 1 January Addition charged to the profit and loss account Consolidation/deconsolidation/transfers Withdrawals Release to the profit and loss account Balance at 31 December

64

Reorganisations

Tax

Other

5.9

5.4

9.1

18.1 (5.8) (0.5)

1.7 (4.1) (0.6) (0.1)

0.9 (0.6) (1.0)

17.7

2.3

8.4

Of the total amount of provisions, € 17.7 million (2006: € 6.9 million) have a term of less than 1 year, € 10.8 million (2006: € 10.0 million) have a term of between 1 and 5 years and € 92.9 million (2006: € 91.9 million) have a term of more than 5 years. Reorganisations The provisions for reorganisations chiefly concern Dutch, Belgian and German activities. Tax The tax provision included net long-term deferred tax assets of € 64.5 million (2006: € 58.2 million). Other Other provisions relate chiefly to claims and environmental risks.

(10) Long-term liabilities

Subordinated bonds The balance at 1 January 2007 incorporates the proposal to issue 164,759 C bonds on 1 June 2007. 2007 Balance - A bonds, 1997/2001 issue; repayment on - B bonds. 2002/2006 issue; repayment on - C bonds, 2007/2011 issue; repayment on

at 1 January 1 June 2017 1 June 2022 1 June 2027

Movements in the financial year Issue of bonds Repurchase of bonds and other movements Balance at 31 December - A bonds, 1997/2001 issue; repayment on 1 June 2017 - B bonds, 2002/2006 issue; repayment on 1 June 2022 - C bonds, 2007/2011 issue; repayment on 1 June 2027

2006

50.0 118.7 8.2

52.6 124.3 -

176.9

176.9

16.8 (7.1)

8.2 (8.2)

47.7 114.1 24.8

50.0 118.7 8.2

186.6

176.9

Member farmers may be required to use part of the cash settlement payment to purchase negotiable subordinated bonds. The A bonds were issued in the period 1997/2001. Under the conditions applying to the B bonds, subordinated bonds with a nominal value of € 50 each were issued in the period 2002/2006, up to a maximum of € 200 million. B bonds were issued in five tranches, each on 1 June, commencing on 1 June 2002 and ending on 1 June 2006. The C bonds are being issued in up to five tranches, with the first tranche having been issued on 1 June 2007 and the final tranche being issued on 1 June 2011. The proposed issue of 335,456 C bonds on 1 June 2008 has been incorporated in these financial statements.

65

The bonds are interest-bearing. The interest rate is set annually and is one percentage point above the yield on 4-5 year government bonds. The interest rate risk that Campina is exposed to is hedged for an amount totalling € 100.0 million (2006: € 100.0 million). An interest rate swap has been used to fix the interest rate payable on the bond loans as described above at 3.97% until June 2011. The interest rate in 2007 was 4.95% (2006: 4.33%). The first holder may sell the bonds back to the cooperative after three months from the date of issue at 75% of the nominal value. The cooperative is obliged to repurchase bonds at 100% of their nominal value within twelve months after the member ceases business or the bonds are inherited. The cooperative may redeem bonds early. Claims for redemption of the bonds are subordinated to all amounts owed to the cooperative’s other creditors. The subordination is restricted to compulsory liquidation, suspension of payments and similar situations. In such a situation, claims for redemption of the bonds will only be paid when all other non-subordinated amounts have been paid in full to the cooperative’s creditors. The subordination does not relate to amounts owed to the cooperative’s creditors that are subordinated in similar ways or to a greater extent than claims for redemption of the bonds. Members’ loans These are three-year deposits lent by members. The average interest rate was 4.38% (2006: average 3.5%). Of these loans, € 24.6 million are repayable within a year (2006: € 27.1 million). It is expected that most of the loans falling due in 2008 will be renewed. Other The other long-term liabilities relate chiefly to loans from third parties.

(11) Current liabilities Amounts owed to members These include members’ current accounts of € 53.7 million (2006: € 57.1 million). The average interest rate was 2.5% (2006: average 2.25%). They also include non-interest-bearing amounts due for milk payments for December 2007 and the subsequent payment. Tax and social security charges These amounts relate chiefly to VAT, wage tax and corporate income tax liabilities. The corporate income tax payable is € 12.9 million (2006: € 4.1 million).

Other liabilities, accruals and deferred income

31-12-07

31-12-06

Amounts owed to non-consolidated participating interests Other liabilities Accruals and deferred income

6.0 51.6 102.6

1.5 33.3 146.2

160.2

181.0

Amounts owed to non-consolidated participating interests relate mainly to participating interests over which Campina cannot exercise significant influence. Other liabilities include deposit liabilities of € 12.4 million (2006: € 10.6 million) and repayments of € 5.6 million due on long-term loans (2006: nil). Accruals and deferred income include salaries and wages payable of € 17.9 million (2006: € 17.0 million), holiday pay payable of € 9.6 million (2006: € 9.5 million) and accrued holiday entitlements of € 14.3 million (2006: € 15.7 million).

66

Security No security has been provided for amounts owed to credit institutions.

Financial instruments and risk management Foreign exchange risk management Operating results are affected by exchange rate movements resulting from exports and activities outside the euro zone. Foreign currency risk management aims, within detailed policy guidelines, to avoid unwanted fluctuations in the price of milk resulting from these exchange rate movements. Transactions that are subject to exchange rate fluctuations are generally hedged. In addition to existing foreign currency positions, risks related to future buying and selling transactions that will very probably occur may also be hedged. Financial derivatives, mainly forward foreign exchange contracts, are used to hedge currency risks. Foreign exchange sale contracts with a face value of € 82 million (2006: € 143 million) and market value of € 86 million (2006: € 144 million) had been entered into at 31 December 2007 to cover foreign exchange risks.

31-12-07

31-12-06

Face value

Market value

Face value

Market value

US dollar Pound sterling Japanese yen

34 47 1

35 50 1

53 89 1

53 90 1

Total

82

86

143

144

Currency translation risks on investments in foreign participating interests are regularly assessed. These translation risks are only hedged in exceptional circumstances. Interest rate risk management Interest rate risk is managed by the use of interest rate swaps with the policy being to fix the interest rate on existing (strategic) financing requirements for the long term. In addition to the interest rate swap of € 100 million referred to in note 10, which was entered into specifically to hedge the interest rate risk on the bond loans, interest rate swaps to cover part of the other interest rate risks had been entered into at year end with a joint notional amount of € 200.0 million (2006: nil). These contracts expire in 2012. The fixed interest rates payable on these interest rate swaps are between 3.97% and 4.41% (2006: 3.97%). The market value of all interest swap contracts at the balance sheet date was € 1.8 million (2006: € 0.5 million). Credit risk management Campina monitors credit risks, which vary between countries (the Netherlands, Germany, Belgium and other EU countries in particular) and customer categories, using information and reporting systems. Various instruments, the most important of which are bank guarantees and credit insurance, are also deployed to minimise these risks.

67

Market value of financial assets and liabilities The estimated market value of the financial assets and liabilities does not differ significantly from the book value at the year end, except for the interest on subordinated bonds which is higher than the market rate (see note 10).

Contingent liabilities

Rental and lease commitments Capital expenditure commitments Guarantees issued, mainly for export and bank guarantees

31-12-07

31-12-06

42.4 19.3 44.7

33.4 22.0 81.3

Of the long-term rental and lease commitments, € 31.5 million (2006: € 22.2 million) have a remaining term of more than one year, of which € 17.7 million (2006: € 5.8 million) have a term of 5 years or more. Rent and lease charges during 2007 were € 18.1 million (2006: € 20.3 million). Campina is involved in a number of legal proceedings relating to its normal operations. Campina does not expect the total liabilities arising from these legal proceedings to materially affect its financial position. Provisions have been formed for all third-party claims likely to be awarded against Campina. Under the terms of the joint-venture agreement with Fonterra concerning DMV Fonterra Excipients, Campina is obliged to take over the 50% interest of its joint-venture partner, Fonterra, on at least the same conditions as applied at the time of the sale of the interest to Fonterra in 2006. The joint-venture partner may exercise this option in 2009, 2011 or 2013.

68

Notes to the consolidated profit and loss account € million (12) Net turnover

2007

%

2006

%

By group: Consumer Products Europe: - Netherlands - Germany - International

683.2 868.7 488.5

17 22 12

677.6 788.1 438.0

19 22 12

Total Consumer Products Europe

2,040.4

51

1,903.7

53

Cheese & Butter Industrial Products Other

1.057.3 846.1 88.4

26 21 2

1.028.5 650.1 41.3

28 18 1

4,032.2

100

3,623.6

100

1.299.5 1.068.2 310.6 683.7 170.0 218.1 118.0 51.0 64.1 49.0

32 26 8 17 4 6 3 1 2 1

1.122.2 993.2 262.1 649.3 165.7 155.8 101.5 27.7 95.4 50.7

31 27 7 18 5 4 3 1 3 1

4,032.2

100

3,623.6

100

By geographical area: Netherlands Germany Belgium Rest of the EU European countries outside the EU Australia/Asia North America South America Middle East Africa

Trade transactions with non-consolidated participating interests are at market prices and on commercial payment terms.

69

(13) Operating expenses

By function: Cost of sales Selling expenses General administrative expenses

By cost category: Cost of raw materials. consumables and goods for resale Wages and salaries Social security and pension charges Amortisation. depreciation and impairment of tangible and intangible fixed assets Cost of subcontracted work and other external costs

2007

%

2006

%

3,572.3 386.5 30.0

89 10 1

3,215.2 370.8 28.0

89 10 1

3,988.8

100

3,614.0

100

2,847.8 261.8 108.4

71 7 3

2,534.7 254.2 77.9

70 7 2

130.4 640.4

3 16

120.6 626.6

3 18

3,988.8

100

3,614.0

100

Cost of raw materials and consumables included milk payments due to members of € 1,189.4 million (2006: € 1,009.0 million). Cost of raw materials and consumables also included movements in stocks during the financial year. The cost of subcontracted work and other external costs included accommodation and maintenance of € 206.2 million (2006 € 197.0 million) and selling expenses of € 248.3 million (2006: € 245.2 million). Pension charges were € 27.2 million (2006: € 11.5 million) analysed as follows:

2007

2006

19.9 1.4 54.5 (57.5) (0.6)

22.2 1.4 50.6 (49.7) -

(4.2)

(16.1) (4.2)

Pension charges - defined benefit plans

13.5

4.2

Pension charges - defined contribution plans

13.7

7.3

Total pension charges

27.2

11.5

Current service costs Costs in respect of past service Interest on obligation Expected return on plan assets Value adjustment Non-recurring effect of changes in the Dutch pension plan Employees’ contributions

70

The actual return on plan assets for 2007 was € -3.5 million (2006: € 67.7 million). Research and development costs were € 24.7 million (2006: € 26.6 million). Directors, as referred to in Section 2:383 of the Netherlands Civil Code, received remuneration of € 1.1 million in 2007 (2006: € 1.1 million). The directors are the members of the Board and cooperative Council, a total of 42 people in 2007 (2006: 50 people). The following information on the remuneration of current and former members of the Executive Board is disclosed voluntarily. The remuneration (including pension charges) of the members of the Executive Board was € 2.0 million in 2007 (2006: € 2.2 million), being two persons in both 2007 and 2006 (partly). It also includes a provisional long-term bonus. The remuneration does not include any amounts for termination packages. The Supervisory Board sets the remuneration, aiming for a rate of compensation competitive with similar businesses in the Netherlands. The comparison includes both fixed and variable long and short-term elements.

Average number of employees

(in full-time equivalents)

2007

2006

Consumer Products Europe: - Netherlands - Germany - International

1,266 1,826 967

1,280 1,901 865

Total Consumer Products Europe

4,059

4,046

Cheese & Butter Industrial Products Member Services Corporate Support Services / Campina Innovation

803 1,743 67 142

857 1,190 68 141

6,814

6,302

2,720 4,094 60%

2,684 3,618 57%

of whom working in the Netherlands of whom working abroad % of employees outside the Netherlands

The average number of employees rose by 8.1% overall as a result of the Betagen Holding Ltd joint venture in Hong Kong, which has operating activities in Thailand.

71

14) Other operating income Other operating income in 2007 was chiefly a book profit on the sale of real estate, income from the sale of activities and rental income. Other operating income in 2006 was chiefly a book profit realised on the sale of the 50% interest in DMV Fonterra Excipients GmbH & Co. KG to Fonterra, income as a result of a past contractual right on the sale of a former participating interest and rental income.

(15) Financial income and expense

Changes in value and income from receivables and securities included in financial fixed assets Interest and similar income Interest and similar expense

2007

2006

3.6 1.3 (24.1)

3.4 (21.8)

(19.2)

(18.4)

(16) Tax Campina’s business activities are subject to tax in various countries under the relevant national tax laws and tax rates. The cooperative is subject to tax in the Netherlands on additions to the general reserve less the results on foreign participating interests which are covered by the participation exemption, and other items. This resulted in a negative taxable amount for the Dutch fiscal entity in 2007. As in 2006, the tax payable abroad was offset in full against the Dutch tax gain. Certain of Campina’s foreign group companies have loss relief, sometimes without time limitation, and comparable tax facilities of some € 170 million (2006: about € 208 million), obtained mainly through acquisitions. Deferred tax assets in respect of available loss relief are not recognised except as reported in the notes on the tax provision.

(17) Results of non-consolidated participating interests This is Campina’s share in the results of the non-consolidated participating interests, movements in value and results on sale of non-consolidated participating interests.

72

Notes to the consolidated cash flow statement € million For various reasons, certain items in the cash flow statement differ from the movements in the relevant balance sheet items. In 2007, the differences were caused mainly by foreign exchange gains and losses and the consolidation of assets and liabilities acquired during the financial year. The acquisitions relate to the Betagen Holding Ltd. joint venture and Satro GmbH.

Increase/(decrease) in other long-term financing Increase/(decrease) in member financing Cash flow from investing activities Cash flow from operating activities

Total cash flow Foreign exchange gains and losses Differences as a result of changes in accounting policy, consolidation and deconsolidation

Cash flow associated with balance sheet movements Intangible fixed assets Tangible fixed assets Financial fixed assets

(53.4) (9.7) (24.5)1)

38.0 -

(4.2) (2.5) -

(57.6) 25.8 (24.5)

27.8 98.9 (26.7)

Working capital Stocks Receivables Other current liabilities

(88.5) (81.4) 16.5

16.2 19.4 (28.8)

(3.3) (4.1) 1.2

(75.6) (66.1) (11.1)

(75.6) (66.1) (11.1)

20.8 12.71) 9.7 7.7 7.1

(14.4)

12.9 -

33.7 12.7 9.7 7.7 (7.3)

43.2 12.7 16.8 -

(0.4) -

-

-

Group equity Provisions Subordinated bonds Members’ loans Other long-term liabilities Current amounts owed to members Total cash flows

1)

14.7 (168.3)

-

-

14.7

30.4

-

(137.9)

19.9

(85.4) (73.1) 2.2

-

(156.7)

-

-

-

-

0.5 (7.1) 7.7 14.7 15.8

(9.6) (7.3) (16.9)

The cash flow associated with balance sheet movements was calculated taking account of the reclassification described in note 9.

73

List of the principal participating interests The principal consolidated participating interests in which Zuivelcoöperatie Campina u.a. has a direct or indirect interest and their place of establishment are listed below. They are all wholly-owned unless stated otherwise. Netherlands

Germany

Belgium

Argentina Austria China Curaçao France Greece New Zealand Russia Spain Thailand

USA United Kingdom Vietnam *

Campina BV, Rosmalen Campina Buttergold BV, Rosmalen Campina Holland Cheese BV, Rosmalen Campina International BV, Rosmalen Campina International Holding BV, Rosmalen Campina Management BV, Rosmalen Campina Nederland BV, Rosmalen Campina Nederland Holding BV, Rosmalen Campina Services BV, Rosmalen Campina Zuivel BV, Rosmalen CPC (Campina Prepack Cheese) BV, Rosmalen Creamy Creation BV, Rosmalen DMV International BV, Rosmalen Ecomel BV, Rosmalen Holland Dairy Feed BV, Rosmalen Polderland Zuivel BV, Rosmalen Valess BV, Rosmalen Zutrans BV, Rosmalen DMV Fonterra Excipients BV, Rosmalen (50%)** Campina GmbH, Heilbronn CMG Grundstücksverwaltungs- und Beteiligungs AG, Heilbronn (99.5%) Satro GmbH, Lippstadt DMV Fonterra Excipients GmbH & Co. KG, Goch (50%)*/** Campina NV, Aalter Campina Milkfat Products NV, Houthulst Campina Cheese Specialities NV, Passendale Inovatech Argentina SA, Villa Nueva Campina Austria Handelsgesellschaft mbH, Stainach DMV International Ltd, Hong Kong Betagen Holding Ltd, Hong Kong (50%) DMV Vitalus Ingredients NV, Willemstad (50%)** Campina France sarl, Val de Meuse France Crème sarl, Saint-Paul-en-Jarez Campina Hellas AE, Athens DMV Fonterra Excipients Ltd, Auckland (50%)** Campina OOO, Moscow Lactéos Campina sl, Barcelona Campina (Thailand) Ltd, Bangkok (69.0%) Betagen Co. Ltd, Bangkok (50%) Inter Advance Foods Co. Ltd, Bangkok (50%) DMV USA LP, Wilmington Campina UK Ltd, Horsham Campina Vietnam Co. Ltd, Ho Chi Minh City

Inclusion of these subsidiaries in the consolidated financial statements of Zuivelcoöperatie Campina u.a. means that, pursuant to §264b of the German Handelsgesetzbuch, they are exempt from the publishing and auditing their financial statements under the provisions that apply to companies (§§264-335 Handelsgesetzbuch).

** Campina has controlling influence over these companies and so they are fully consolidated with disclosure of minority interests. A complete list of participating interests is available for inspection at the trade registry in Tiel, the Netherlands.

74

Balance sheet of Zuivelcoöperatie Campina u.a. after proposed appropriation of the surplus and issue of bonds

€ million

note

31-12-07

31-12-06

(1)

479.6 400.0

517.4 400.0

879.6

917.4

241.9 2.1

160.0 9.3

244.0

169.3

Cash and cash equivalents

0.2

-

Total assets

1,123.8

1,086.7

31-12-07

31-12-06

456.0 152.4

451.4 152.0

608.4

603.4

186.6 96.7

176.9 88.9

283.3

265.8

232.1 -

217.4 0.1

232.1

217.5

1,123.8

1,086.7

Fixed assets Financial fixed assets Participating interests in group companies Receivable from Campina BV

Current assets Receivables Amounts owed by group companies Tax and social security charges

€ million

note

Equity General reserve Membership certificates

Long-term liabilities Subordinated bonds Long-term members’ loans

Current liabilities Amounts owed to members Other creditors, accruals and deferred income

Total equity and liabilities

(2)

(2)

(2)

75

Profit and loss account of Zuivelcoöperatie Campina u.a. after proposed appropriation of the surplus

€ million

note

2007

2006

Net turnover

(3)

1,224.4

1,031.0

General administrative expenses

(4)

3.7

3.4

1,220.7

1,027.6

Interest income Interest expense

(5)

Surplus on ordinary activities

20.0 (8.9) 1,231.8

1,038.6

Results of participating interests

(6)

Available for milk payments

(7)

1,206.6

1,051.5

Milk payments

(7)

1,189.4

1,009.0

17.2

42.5

Net operating surplus

(25.2)

20.0 (9.0)

12.9

(= amount to be taken to the general reserve as decided by the Members’ Council1)

1)

76

Pursuant to Article 48 (clause 1) of the articles of association of Zuivelcoöperatie Campina u.a. (see other information on page 80). The Members’ Council approved the proposed appropriation of the surplus for 2006 on 25 April 2007.

Notes to the balance sheet and profit and loss account of Zuivelcoöperatie Campina u.a. € million See pages 50 to 53 of the financial statements, which form part of these notes, for information on the accounting policies.

(1) Participating interests in group companies

Balance at 1 January Result Foreign exchange gains and losses Balance at 31 December

2007

2006

517.4

509.9

(25.2) (12.6) 479.6

12.9 (5.4) 517.4

These are wholly-owned group companies, Campina BV, Milchverwaltung Campina GmbH and CV Campina, the 5.3% holding in CMG Grundstücksverwaltungs- und Beteiligungs AG and the 5.6% holding in Campina GmbH. (2) Other notes to the balance sheet Please see the consolidated financial statements and notes for information on these balance sheet items. (3) Net turnover Net turnover includes delivery of farm milk to Campina BV and its subsidiaries. (4) General administrative expenses General administrative expenses include remuneration of € 1.1 million (2006: € 1.1 million) to Board and Cooperative Council members. This related to 42 people in 2007 (2006: 50). (5) Interest This includes group interest income of € 20.0 million (2006: € 20.0 million). (6) Results of participating interests These are the results of the participating interests listed in note 1. (7) Milk payments available and to be distributed A total of € 1,206.6 million of milk payments is available for 2007 (2006: € 1,051.5 million). € 17.2 million has been added to the general reserve in accordance with the proposal for the appropriation of the surplus. Cash milk payments for the members were € 1,189.4 million (2006: € 1,009.0 million) of which € 16.8 million (2006: € 8.2 million) will be distributed by the issue of subordinated bonds. Tax The profit and loss account of the cooperative does not include tax. Tax gains and charges of the members of the Dutch fiscal entity are included in their individual profit and loss accounts.

77

Contingent liabilities Statement of liability Zuivelcoöperatie Campina u.a. has issued a statement of joint and several liability pursuant to section 403 (clause 1) of Part 9 of Book 2 of the Netherlands Civil Code for liabilities arising from legal transactions of its Dutch group companies, Campina BV, Campina International Holding BV, Campina Nederland Holding BV, Campina Zuivel BV, Zutrans BV, CPC (Campina Prepack Cheese) BV and Campina Management BV. These liabilities of € 220.7 million (2006: € 65.3 million) have been included in the consolidated balance sheet. Tax Zuivelcoöperatie Campina u.a. and its Dutch subsidiaries form a fiscal entity for corporate income tax and VAT purposes and so Zuivelcoöperatie Campina u.a. is jointly and severally liable for the tax owed by the fiscal entity as a whole.

Related parties Financial transactions with members of the Board and cooperative Council of Zuivelcoöperatie Campina u.a. are subject to the same terms and conditions as transactions with other member farmers. Zaltbommel, 4 March 2008

78

Executive Board

Board/Supervisory Board

C.J.M. Gielen (acting CEO/CFO)

C.H. Wantenaar (Chairman) J.H.G.M. Uijttewaal (Vice-Chairman) E. Berbecker J.H.M. Hommen H.A. van Karnebeek J.P.C. Keijsers J.A.A. van Lankvelt R.P.M. Luijben P.J.W. Roorda S.R.F. Ruiter H. Stöcker A.P. Verhorst A. Wouters

Other information

Auditors’ report

To the Members’ Council of Zuivelcoöperatie Campina u.a. Report on the financial statements We have audited the financial statements for the year 2007 of Zuivelcoöperatie Campina u.a., Zaltbommel, the Netherlands, as presented on pages 50 to 78 of this Annual Report, which comprise the consolidated and individual balance sheet as at 31 December 2007, the consolidated and individual profit and loss account for the year then ended and the notes thereto. Executive Board’s responsibility for the financial statements The cooperative’s Executive Board is responsible for the preparation and fair presentation of the financial statements and for the preparation of the Report of the Executive Board, both in accordance with Part 9 of Book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Zuivelcoöperatie Campina u.a. as at 31 December 2007, and of its operating surplus for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Report on other legal and regulatory requirements Pursuant to the legal requirement under 2:393 sub 5 part e of the Netherlands Civil Code, we report, to the extent of our competence, that the Report of the Executive Board is consistent with the financial statements as required by 2:391 sub 4 of the Netherlands Civil Code.

Eindhoven, the Netherlands, 4 March 2008 KPMG ACCOUNTANTS N.V. E.H.W. Weusten RA

79

Appropriation of the surplus/milk payments/issue of bonds

Articles of association provisions governing the appropriation of the operating surplus The provisions governing the appropriation of the operating surplus are set out in article 48 of the articles of association which states: 1: Any operating surplus as shown by the duly adopted financial statements, or such part as may be determined by the Members’ Council on the recommendation of the Board, may be distributed in cash and/or credited to the members’ current accounts to the extent permitted by law. Any remaining operating surplus will be added to the reserves. 2: Such part of the reserves as may be determined by the Members’ Council on the recommendation of the Board may be distributed in cash and/or credited to the members’ current accounts to the extent permitted by law. 3: Any deficit disclosed by the financial statements will be defrayed as far as possible in such manner as may be determined by the Members’ Council on the recommendation of the Board, and in the following sequence: as a charge against the reserves; and as a charge against the nominal value of the membership certificates. Proposed appropriation of the surplus and issue of bonds A total of € 1,206.6 million is available for milk payments in respect of 2007. In accordance with the proposed appropriation of the surplus, € 17.2 million will be allocated to the general reserve and € 1,189.4 million will be distributed in cash as milk payments to members. Of this amount, € 16.8 million will be paid by means of a subordinated bond issue. This proposal has been incorporated in the balance sheet, profit and loss account and the statements set out on pages 81 and 82.

80

Milk payments/performance price/appropriation of the surplus/issue of bonds

in € per 100 kg milk delivered under membership certificates

2007

2006

(3.30) 12.96 23.51

(3.30) 11.49 19.41

33.17

27.60

(0.08)

(0.08)

33.09

27.52

36.93 (1.86)

32.53 (1.60)

Performance price excl. VAT

35.07

30.93

Available surplus

1.98

3.41

Proposed appropriation of the surplus: taken to the general reserve

0.50

1.25

Settlement payment (excl. VAT) VAT 2)

1.48 0.08

2.16 0.12

Settlement payment (incl. VAT)

1.56

2.28

Issue of subordinated bonds

0.50

0.25

Negative base price Fat Protein

Fixed deduction Advance milk payment Performance price (incl. VAT)1) VAT 2)

1)

2)

Adjusted for differences in fat and protein content, the performance price rose by € 4.01 per 100 kg compared with 2006; based on actual fat and protein content, the performance price rose by € 4.14 per 100 kg. The VAT amounts in this statement are based on the official rates for Dutch agriculture (landbouwforfait).

81

Breakdown of the milk price

in € excluding VAT

2007

2006

(3.30) (0.08)

(3.30) (0.08)

2.99 0.10

2.64 0.11

3.09

2.75

Average fat content (%)

4.34

4.35

Per kg protein (average)1) advance settlement payment

6.75 0.30

5.61 0.48

7.05

6.09

3.48

3.46

Negative base price per 100 kg of milk Fixed deduction Per kg fat (average)1) advance settlement payment

Average protein content (%)

1)

82

These are average prices; different amounts are paid into individual milk payment accounts as a result of differences in delivery patterns and the effects of surcharges. Based on the proportions of fat and protein contents per kg of milk, the milk price includes 35.3% for fat and 64.7% for protein. The comparative figures for 2006 were 36.2% and 63.8%.

Five-year summary Consolidated balance sheetafter appropriation of the surplus and issue of bonds

€ million

2007

2006

2005

2004

2003

Intangible fixed assets Tangible fixed assets Financial fixed assets Stocks Receivables Cash and cash equivalents

276 733 62 402 593 28

223 723 38 314 511 29

234 685 16 325 478 27

251 622 16 295 476 8

243 581 25 278 458 9

Total assets

2,094

1,838

1,765

1,668

1,594

General reserve (including statutory reserve) Members’ reserve account Membership certificates

456 152

451 152

414 153

382 154

370 2 152

Equity

608

603

567

536

524

Minority interests in group companies

43

27

1

1

1

Group equity

651

630

568

537

525

Provisions

121

109

132

143

161

Subordinated bonds Other long-term liabilities Total long-term liabilities

187 112 299

177 98 275

177 102 279

159 96 255

131 87 218

Current amounts owed to members Current amounts owed to credit institutions Other current liabilities

232 349 442

217 181 426

202 173 411

207 93 433

213 67 410

Total equity and liabilities

2,094

1,838

1,765

1,668

1,594

Assets

Equity and liabilities

83

Consolidated profit and loss account after appropriation of the surplus

€ million

2007

2006

2005

2004

2003

Net turnover Cost of sales

4,032 3,572

3,624 3,215

3,569 3,167

3,559 3,168

3,655 3,254

Gross profit

460

409

402

391

401

Selling expenses General administrative expenses

386 30

371 28

362 32

347 36

345 36

Total expenses

416

399

394

383

381

Net operating profit

44

10

8

8

20

171) (20)

541) (19)

27 (12)

9 (14)

14 4

Surplus on ordinary activities before tax

41

45

23

3

38

Tax Results of non-consolidated participating interests

2

1

2

17 (2)

(2) (1)

Surplus after tax

43

46

25

18

35

Minority interests

(26)

(4)

17

42

25

17

35

2007

2006

2005

2004

2003

Performance price in € per 100 kg (incl. VAT)

36.93

32.53

32.96

33.39

34.56

Milk supplied by members (million kg)

3,441

3,399

3,399

3,422

3,4582)

Other operating income Financial income and expense

Net operating surplus (= amount to be taken to the general reserve as decided by the Members’ Council)

Performance price and milk supply

1) 2)

84

-

Please see note 14 for information on other operating income, With effect from 2003, the milk supply includes milk delivered by German and Belgian members.

(1)

-

85

Campina

Annual Report 2007

Campina’s global presence

Groups and subsidiaries

as at 1 January 2008

CAMPINA BV Executive Board

Consumer Cream Products

CPE Supply Chain

C.J.M. Gielen RA, acting CEO from 01.01.2008 / CFO J.J.G.M. Sanders, CEO – up to and including 31.12.2007

E. Schut Oud Gastel www.campina.com

Secretary: J.M.M. Lourens

J. Kippers Oldenzaal www.polderland.com

C.L.P. Versteijnen Hogeweg 9 NL-5301 LB Zaltbommel P.O. Box 2100 5300 CC Zaltbommel Tel.: + 31 (0) 418 57 13 00 Fax: + 31 (0) 418 57 15 88 www.campina.com

Head Office

Hogeweg 9, NL-5301 LB Zaltbommel P.O. Box 2100, NL-5300 CC Zaltbommel Tel.: + 31 (0) 418 57 13 00 Fax: + 31 (0) 418 57 15 82 www.campina.com Member Services

Director: A.K. Schaap Hogeweg 9, NL-5301 LB Zaltbommel P.O. Box 2085, NL-5300 CB Zaltbommel Tel.: + 31 (0) 418 57 13 00 Fax: + 31 (0) 418 57 15 89 www.campina.com

CONSUMER PRODUCTS EUROPE Director: A.A.J.M. van Benthem Hogeweg 9, NL-5301 LB Zaltbommel P.O. Box 2100, NL-5300 CC Zaltbommel Tel.: + 31 (0) 418 57 13 00 Fax + 31 (0) 418 57 15 82 www.campina.com CPE Netherlands

S.G. van den Berg De Bleek 1, NL-3447 GV Woerden P.O. Box 222, NL-3440 AE Woerden Tel.: +31 (0) 348 42 99 11 Fax +31 (0) 348 42 94 72 www.campina.nl www.mona.nl www.vifit.nl www.optimel.nl

86

Polderland Zuivel

Ecomel

J.N. Zomerdijk Limmen www.ecomel.nl CPE Germany

M. Feller Wimpfener Straße 125 D-74078 Heilbronn P.O. Box 3151 D-74021 Heilbronn Tel.: +49 (0) 7131 48 90 Fax +49 (0) 7131 48 94 47 www.campina.de www.landliebe.de www.optiwell.de www.optiwellcontrol.de CPE International

E. De Cock Venecolaan 17 B-9880 Aalter Tel.: +31 (0) 93 25 33 33 Fax + 31 (0) 93 74 05 71 www.campina.com

N. Reuss Wimpfener Straße 125 D-74078 Heilbronn P.O. Box 3151 D-74021 Heilbronn Tel.: + 49 (0) 7131 48 90 Fax: + 49 (0) 7131 49 94 47 www.campina.de

CHEESE & BUTTER Director: P.J. Hilarides Jules Verneweg 87 NL-5015 BH Tilburg P.O. Box 9294 NL-5000 HG Tilburg Tel.: +31 (0) 13 549 04 90 Fax: +31 (0)13 549 04 91 www.campina.com Campina Holland Cheese

P.J. Hilarides Tilburg

Campina Belgium

Campina Hellas

C. Bolsius Aalter www.campina.be www.joyvalle.be

M. Maroulides Athene

Campina Russia

R.J. Steetskamp Moscow www.campina.ru Campina UK

J. Lee Horsham www.campina.co.uk Lactéos Campina

A. Rocca Barcelona www.campina.es

Campina Cheese Specialties

N.L.H. Pauli Passendale Campina Buttergold

P.S. Weltevreden Tilburg Campina Valess

W.M.J.G. van den Heuvel Tilburg www.valess.nl

INDUSTRIAL PRODUCTS

LOCATIONS

Director: F.M.W. Visser NCB-Laan 80 NL-5462 GE Veghel P.O. Box 13 NL-5460 BA Veghel Tel.: +31 (0)413 37 22 22 Fax: +31 (0)413 34 36 95 www.campina.com

Argentina Villa Nueva

Netherlands Antilles Curaçao

Austria Stainach

New Zealand Kapuni

Belgium Aalter Klerken Sleidinge

Romania Bucharest

DMV International

www.dmv-international.com Business Line Nutritionals D.C. Clark Ph.D. Delhi (NY) USA Business Line Dairy Ingredients

H.A.M. Joosten from 15 February 2008 Veghel Business Line Food Systems

S.D. Alexander Veghel Creamy Creation

M.M.G.M. van den Hoven Rijkevoort www.creamy-creation.com Holland Dairy Feed

H.J. Sips Veghel www.nutrifeed.com DMV Fonterra Excipients (50%)

H. Ermens Goch (D) www.dmv-fonterra-excipients.com DMV Vitalus Ingredients (50%)

W. van Vredendaal Curaçao

* A complete list of subsidiaries has been registered at the Chamber of Commerce in Tiel (the Netherlands)

as at 1 January 2008

China Hong Kong Denmark Vejle-Ø France Saint-Paul-en-Jarez Germany Cologne Elsterwerda Goch Gütersloh Heilbronn Lippstadt Nörten-Hardenberg Prenzlau Schefflenz Greece Athens Japan Tokyo The Netherlands Bleskensgraaf Born Foxhol Eindhoven Heiloo ’s-Hertogenbosch Limmen Lutjewinkel Maasdam Oldenzaal Oud Gastel Rotterdam Rijkevoort Tilburg Veghel Wageningen Woerden Zaltbommel

Russia Moscow Stupino Singapore Singapore

JOINT VENTURES

as at 1 January 2008

Germany DMV Fonterra Excipients GmbH & Co KG Goch Netherlands Antilles DMV Vitalus Ingredients NV Curaçao Thailand Campina Betagen Co. Ltd Bangkok The Netherlands De Coöperatieve Zuivelinvesteerders U.A. (49%)

Spain Barcelona Switzerland Zurich Thailand Bangkok Nakhonprathom Ukraine Kiev United Arab Emirates Dubai United Kingdom Horsham Redhill United States Batavia Delhi Vietnam Ho Chi Minh City

87

Campina

Annual Report 2007

Representative bodies

As at 1 January 2008

European Works Council:

Works Council Belgium

Employees’ representatives

- R. Desmedt

- J. de Graaf - Chairman (Netherlands)

- P. Vanlaere

- T. Bekaert (Belgium)

- Ms M. Verplancke

- S. Carapezza (Germany)

- C. Vertenten

- R. Desmedt (Belgium)

- K. de Vries

- R. Otto (Germany)

- P. de Zutter

- H. de Rouw (Netherlands)

- Ms R. Aernoudt

- A. Steinbach (Germany)

- B. Vanderjeugd

- E. Tuppe (Netherlands) - vacancy for the Netherlands

Gesambtbetriebsrat Germany The International Consultation Committee became part of the European Works Council from 1 January 2008.

- S. Carapezza (Chairman) - R. Geisenheimer - W. Hofman - Ms A. Holz

Dutch Central Works Council

- K. Karweger - H. Maaß

- J. de Graaf (Chairman)

- R. Otto

- J. Bergakker

- A. Steinbach

- H. Boogaard

- Ms H. Wachtel

- T.C.A. Broekmans

- Ms H. Zimmermann

- H. de Bruijn - W. van Bakel - C. Claassen - B. Derissen - F.J.S. van Langen - G. Moret - A. Op ‘t Hoog - J.W.M. van Oort - J.A.H. Raaijmakers - N.M. Reijne - H.J.G.H. de Rouw - P.W.A. Thijs - E.C.J.M. Tuppe - M.J.M. Vergouwen - Ms G.S. Verhoeff - P.E.C. Warnink - J.J.M. Welles

Supporting the European Works Council and Central Works Council in the Netherlands: Ms C. Timmermans, Official Secretary, Works Council

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it’s in our nature