LIABILITIES AND EQUITY Current liabilities

Trade and other payables 12 20,390 13,576 21,832 Current income tax liabilities 272 16 119 Other taxes payable 1,569 822 978 Short-term loans and borrowings 13 44,148 30,986 66,707 Other current liabilities – – – –––––––– –––––––– –––––––– 66,379 45,400 89,636 –––––––– –––––––– ––––––––

Non-Current Liabilities

Loans and borrowings 13 59,524 61,949 27,460 Deferred income tax liability 43,274 25,993 25,208 Other non-current liabilities 521 496 367 –––––––– –––––––– –––––––– 103,319 88,438 53,035 –––––––– –––––––– ––––––––

Total liabilities 169,698 133,838 142,671 –––––––– –––––––– ––––––––

Equity attributable to owners of the Company

Share capital 2,500 2,500 2,500 Revaluation reserve 31,305 32,689 21,615 Currency translation reserve (7,474) (14,152) (12,875) Retained earnings 29,598 16,525 7,353 –––––––– –––––––– –––––––– 55,929 37,562 18,593 –––––––– –––––––– –––––––– Non-controlling interests 13,274 12,648 8,949 –––––––– –––––––– –––––––– Total equity 69,203 50,210 27,542 –––––––– –––––––– ––––––––

TOTAL LIABILITIES AND EQUITY 238,901 184,048 170,213

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Condensed consolidated interim statement of comprehensive income

(All amounts in euro thousands unless otherwise stated)

Half year Notes 2010 2009 Revenue 14 121,094 100,383 Cost of sales 15 (74,986) (66,788) –––––––– –––––––– Gross Profit 46,108 33,595 –––––––– ––––––––

Government grants recognised as income 251 28

Selling and distribution expenses 16 (9,912) (9,702) Administration expenses 17 (13,135) (13,917) Other expenses, net 18 (5,960) (1,293) –––––––– ––––––––

Operating Profit 17,352 8,711 –––––––– ––––––––

Finance income 603 82

Finance expenses (6,828) (7,612) Foreign exchange gain/(loss), net 1,216 218

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Profit before tax 12,343 1,399 Income tax 19 (636) (1,143) –––––––– ––––––––

Profit for the year 11,707 256

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Other comprehensive income/(loss) Exchange differences on translating to presentation currency 8,220 (1,828) –––––––– ––––––––

Total comprehensive income/(loss) for the year 19,927 (1,572)

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Profit attributable to: Owners of the Company 11,544 (19)

Non-controlling interests 163 276

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11,707 256

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Total comprehensive income/(loss) attributable to: Owners of the Company 18,204 (1,420) Non-controlling interests 1,723 (151)

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19,927 (1,572)

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Condensed consolidated interim statement of cash flows

(All amounts in euro thousands unless otherwise stated)

Half year

2010 2009

Cash flow from operating activities: Profit before taxation 12,343 1,399 Adjustments for: Depreciation and amortization 4,492 3,884 Foreign exchange loss (1,216) (218)

Loss from revaluation and disposal of property, plant and equipment 82 (33)

Change in provision and write off of trade and other accounts receivable (81) 278

Change in provision and write off of unrealised VAT 5,156 320

Finance costs, net 6,225 7,530 Gain realised from acquisitions – –

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Operating cash flows before working capital changes 27,001 13,160 –––––––– ––––––––

Changes in assets and liabilities: (Increase)/decrease in accounts receivable 3,974 (485)

(Increase)/decrease inventories (4,750) (2,209) (Increase) decrease other taxes receivable (17,271) (2,944) (Decrease)/increase in other taxes payable 567 332

(Decrease)/increase in accounts payable 3,490 5,214 –––––––– ––––––––

Cash used by operations: 13,011 13,068 –––––––– ––––––––

Interest paid (6,790) (7,544) Interest received 602 82

Income taxes paid (449) (1,040) –––––––– ––––––––

Net cash from operating activity 6,374 4,566 –––––––– ––––––––

Investing activities: Proceeds from sale of property, plant and equipment 15 93

Acquisition of property, plant and equipment (1,833) (905)

Acquisition of subsidiaries and non-controlling interest, net of cash acquired (696) –

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Net cash from investment activity (2,514) (812)

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Financing activities: Other payments paid off – (569)

Proceeds from borrowings 37,087 12,657 Repayment of borrowings (40,784) (17,286) –––––––– ––––––––

Net cash from financial activity (3,697) (5,198) –––––––– ––––––––

Effect of exchange rate changes on cash and cash equivalents 1,171 (26)

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Net decrease in cash 1,334 (1,470) Cash at beginning of the period 6,676 3,181 –––––––– ––––––––

Cash at the end of the period 8,010 1,711

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Condensed Consolidated interim statement of changes in equity

(All amounts in euro thousands unless otherwise stated)

Attributable to equity holders of the company Foreign

currency Total Non-

Share Additional translation Revaluation Retained stockholders’ controlling Total capital capital reserve reserve earnings equity interests equity Balance at 1 January 2009 2,500 – (11,474) 22,758 6,230 20,014 9,100 29,114 Profit for the year – – – – (19) (19) 276 257 Other comprehensive loss – – (1,401) – – (1,401) (428) (1,829) –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Total comprehensive income

for the year – – (1,401) – (19) (1,420) (152) (1,572) –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– Realised revaluation reserve,

net of income tax – – – (1,143) 1,143 – – –

Balance at 30 June 2009 2,500 – (12,875) 21,615 7,354 18,594 8,948 27,542 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Balance at 1 January 2010 2,500 – (14,152) 32,689 16,525 37,562 12,648 50,210

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Profit for the year – – – – 11,544 11,544 163 11,707 Other comprehensive income/(loss),

net of tax effect – – 6,660 – – 6,660 1,560 8,220 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Total comprehensive income

for the year – – 6,660 – 11,544 18,204 1,723 19,927 Acquisition of minority shares

in Ostankino – – 18 217 (72) 163 (1,097) (934) Realised revaluation reserve,

net of income tax – – – (1,601) 1,601 – – – –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Balance at 30 June 2010 2,500 – (7,474) 31,305 29,598 55,929 13,274 69,203

Notes to the condensed consolidated interim financial statements

(All amounts in euro thousands unless otherwise stated)

1. The Group and its operations

These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union for the six months ended 30 June 2010 for Milkiland N.V. (the “Company”) and its subsidiaries (together referred to as the “Group” or “Milkiland”).

The Company was incorporated on 13 July 2007 under Dutch law as a private limited liability company (B.V.). On 23 May 2008 the Company was converted into a public limited liability company (N.V.). The address of its registered office is Reinwardtstraat 232, 1093HP, Amsterdam, the Netherlands and the principal place of business is 9 Boryspilska Str., 02090, Kyiv, Ukraine.

The Company is owned by 1, Inc. Cooperatief (holding 94 per cent. of shares) and R-Assets Cooperatief (holding 6 per cent. of shares). The Company is ultimately controlled by two individuals, who hold 94 per cent. and 6 per cent. voting rights respectively.

The Company mainly acts as a holding company and exercises control over the operations of its subsidiaries.

Milkiland is a dairy processing Group, producing and distributing dairy products in Europe and worldwide with the major focus on Russia and other CIS countries. The production facilities of the Group are located in Ukraine and in Russia, able to process about 1,100 thousand tones of milk per year. The factories purchase milk from local farmers and produce cheese, butter, whole-milk products, powdered milk, casein and other products.

The Group was fully formed in 2008 through reorganization. In January 2008 the Company acquired 100 per cent. of corporate rights of Daughter Enterprise “Milkiland-Ukraine” (Ukraine) from Milkiland Corporation (Panama) for USD 1,980 thousand and 100 per cent. of corporate rights of Milkiland Corporation from Axel Management Inc. for EUR 2,410 thousand.

DE “Milkiland-Ukraine” holds the interest in other Ukrainian subsidiaries of the Group.

On January 2008 the Company purchased 75.23 per cent. of shares of JSC Ostankino Dairy Combine from third parties having paid USD 41,000 thousand.

At the date of this report LTD Lvivskyy Molochny Kombinat is under the procedures of liquidation. Taking into the consideration that the share of the company in this entity is 38 per cent., a 100 per cent. reserve was counted for all it’s net assets as well as for all investments of the Group in LTD Lvivsky Molochny Kombinat.

During the six months ended 30 June 2010 the Group acquired 2.41 per cent. of non-controlling interest in JSC Ostankino Dairy Combine (note 5).

For the period from 1 January 2010 to 30 June 2010 the Company had the following direct and indirect subsidiaries:

30 June 31 December

2010 2009

Effective share Effective share Name Location of ownership of ownership Milkiland Corporation Panama 100% 100%

JSC Ostankino Dairy Combine Russia, Moscow 77,64% 75,23% DE Milkiland Ukraine Ukraine 100% 100%

DE Aromat Ukraine 100% 100%

PE Prometey Ukraine 100% 100%

PE Ros Ukraine 100% 100%