Half-year Report 2012 Royal FrieslandCampina N.V. 2 Half-year Report 2012

Key figures

2012 2011 2011 first first change full half-year half-year % year 5,089 million euro Results in millions of euros revenue up by 7.6% Revenue 5,089 4,730 7.6 9,626 Operating profit 217 210 3.3 403 Profit for the period 138 127 8.7 216

Balance sheet in millions of euros

Balance sheet total 6,368 5,544 5,739 37.6 % Equity 2,397 2,166 2,264 Equity attributable to the solvency after acquisition of shareholder of the Company and other capital providers 2,280 2,057 2,148 Alaska Corporation Net debt 1 1,059 920 699 Equity as a percentage of the balance sheet total 37.6% 39.1% 39.4%

Cash flow in millions of euros

Net cash from operating 247 million euro activities 247 63 508 Net cash used in investing operational cash flow improved activities - 461 - 119 - 340

Value creation for member dairy farmers in euros per 100 kilos of milk (excl. VAT at 4.41% fat, 3.47% protein)

36.51 euro Guaranteed price 34.14 2 36.33 - 6.0 36.94 Pro forma performance milk price down by 5.5% premium 3 1.42 1.38 2.9 1.10 Pro forma registered reserve member bonds 3 0.95 0.92 3.3 0.73 Pro forma milk price 3 36.51 38.63 - 5.5 38.77 Pro forma meadow milk euro premium 4 0.32 0.03 0.03 2.37 Pro forma special supplements 5 0.11 0.12 0.12 performance premium and Pro forma milk price registered reserve up by 3.0% + supplements 36.94 38.78 - 4.7 38.92

Milk supplied by members in millions of kilos 4,560 4,513 1.0 8,838

1 The net debt relates to long-term interest-bearing debts, borrowings from financiers 4 As of 2012 dairy farmers who put their cows out to pasture receive a meadow milk and the balance of obligations to and claims from associated companies less cash and premium of 0.50 euro per 100 kilos of milk. Averaged over all FrieslandCampina cash equivalents. member milk this is 0.32 euro per 100 kilos of milk. 2 This relates to the balance of the guaranteed price of 34.17 euro and an adjustment of 5 Special supplements concern the total amount of payouts per 100 kilos of milk –0.03 euro for a too high estimate over the first half of 2012. of 1.20 euro for Campina milk, of 8.60 euro for organic milk and of 1.00 euro for 3 The definite performance premium, registered reserve and milk price are determined Landliebe milk. on the basis of the profit figures for the whole year. Royal FrieslandCampina N.V. 3

Major developments in the first half of 2012

Revenue up Improved result

• Revenue up by 7.6 percent to 5,089 million euro due • Operating profit up to volume growth (2.4 percent), higher sales prices, by 9.4 percent. After currency translation effects and the acquisition of Alaska reservation of the Milk Corporation in the (63 million euro, meadow milk premium of 1.3 percent) 15 million euro (2011: 2 million euro), operating profit up by 3.3 percent to 217 million euro • Volume growth of strategic product categories 4.5 percent.

Pro forma performance premium up, • Net cash from operating activities up to 247 pro forma milk price down • Profit for the period up by million euro (first half of 8.7 percent to 138 million 2011: 63 million euro) • Guaranteed price down to 34.14 euro per 100 kilos milk euro due primarily to better management of working capital • Pro forma performance • Pro forma milk price premium (1.42 euro) and for members of the pro forma distribution Cooperative down to • Improved result from of member bonds (0.95 36.51 euro per 100 kilos the Consumer Products euro) up in total to 2.37 milk (first half of 2011: International, Ingredients euro per 100 kilos milk 38.63 euro per 100 kilos and Consumer Products milk) Europe business groups

• Pro forma meadow milk • Drop in result from Cheese, Butter & Milkpowder business premium of 0.32 euro per group as a result of significantly lower sales prices 100 kilos milk (first half of especially of butter (-27 percent) and milk powder 2011: 0.03 euro) (-15 percent)

Profit Revenue Pro forma milk price in millions of euros in millions of euros in euros per 100 kilos of milk, excl. VAT

285 9,626 38.63 38.77 300 10,000 8,972 40 36.51 34.35 8,160 32.38 4,896 129 216 8,000 4,644 30 26.59 27.34 200 4,056 89 6,000 182 20 156 4,000 5,089 100 104 138 4,730 127 4,104 4,328 10 2,000 78 0 0 0 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 ■■■ first half-year first ■■■ first half-year first ■■■ first half-year first ■■■ second half-year half-year ■■■ second half-year half-year ■■■ second half-year half-year 4 Half-year Report 2012

Good result in the first half year despite a difficult European market

FrieslandCampina can look back on a good first half of 2012. Both revenue and result rose despite the difficult market conditions in Europe and the steep drop in the market prices for butter and milk powder. In part due to this the guaranteed price of milk from the member dairy farmers was less than in the first half of 2011. Asia, where FrieslandCampina achieved a quarter of its total revenue, made a major contribution towards the revenue growth and improved result. The volume of infant & toddler nutrition has increased in both the Ingredients and Consumer Products International business groups.

The acquisition of Alaska Milk Corporation (AMC) – the number-2 dairy company in the Philippines – means a substantial strengthening of our activities in Asia. With its nearly 100 million inhabitants this archipelago is a fast-growing economy and a significant market for FrieslandCampina. AMC’s activities fit in very well with FrieslandCampina’s activities in Asia.

Due to the increasing demand for pre-packed cheese, Friesland­ Campina intends acquiring the cheese packaging company IDB . A letter of intent for the acquisition of two dairy companies in Serbia has not been followed-up because agreement could not be reached regarding the transaction conditions.

Market uncertainties had an effect during the first half of the year. In the European home market FrieslandCampina was confronted with the effects of the euro crisis and the negative development The disappearance of the milk quota in 2015 and the difficult of the disposable income of many consumers, which put volumes economic situation in Europe are creating a new dynamic in the under pressure. Despite this Consumer Products Europe succeeded global dairy market. FrieslandCampina is seeing an acceleration of in improving its passing on of cost increases to the market. the international consolidation of dairy companies. This is partly a FrieslandCampina’s team in deserves a positive mention. In reaction to the merger of Friesland Foods and Campina and partly exceptionally difficult conditions they maintained a good level of due to business determining their position ahead of the ending of result. In the market stagnated as a result of the uncertain the milk quota within the European Union in 2015. In the coming political situation in the country. Globally, sales prices were under years, the markets will become even more volatile. The route2020 pressure, especially the prices for butter and skimmed milk powder. strategy is proving its robustness in these difficult and volatile This led to lower results from the Cheese, Butter & Milkpowder conditions and forms a solid basis for further growth and result business group. improvement.

In 2012 FrieslandCampina has once again taken major steps forward in its endeavours to achieve the forecast growth of its Cees ’t Hart activities in a climate-neutral way. Social organisations, customers CEO Royal FrieslandCampina N.V. and politicians have reacted positively to the initiatives and action plans aimed at reducing the pressure on the environment throughout the entire chain from dairy farm to packaging. As of 2012 FrieslandCampina is encouraging cows being put out to pasture by paying a meadow milk premium of 0.50 euro per 100 kilos of milk. In the the Campina Dichtbij (Campina Close By) campaign involved a unique event – dairy farmers and FrieslandCampina employees went out together, door-to-door, offering consumers a carton of Campina milk. Royal FrieslandCampina N.V. 5

First half of 2012: Volume growth contributes towards higher revenue and profit

In the first half of 2012, the revenue of Royal Friesland­ Campina N.V. rose by 7.6 percent to 5,089 million euro. Profit for the period rose by 8.7 percent to 138 million euro. Volume growth and higher sales prices, to offset the increased costs, contributed towards the revenue growth and improved result. The infant & toddler nutrition category achieved the strongest growth in both the consumer and business to business markets.

The results from operating activities were 9.4 percent higher than Organic revenue growth amounted to 6.3 percent. The currency for the first half of 2011. After the reservation of 15 million euro translation effect on revenue amounted to 63 million euro positive. (2011: 2 million euro) for the payment of the meadow milk premium (amounts to 0.32 euro per 100 kilos of milk calculated over all The Consumer Products Europe business group’s net revenue from member milk) operating profit rose by 3.3 percent to 217 million third parties fell by 1.1 percent to 1,427 million euro due to volumes euro. decreasing as a result of lower consumer spending, while sales prices rose slightly. The market share of several brands was under The Consumer Products International and Ingredients business pressure. The market share of the Campina brand increased in the groups once again increased both their revenue and their result. Netherlands. Consumer Products Europe improved its result despite the difficult market conditions in Europe. Its revenue dropped due to pressure Consumer Products International (Asia, Africa, the Middle East on volume. The Cheese, Butter & Milkpowder business group’s and FrieslandCampina Export) achieved an increase of net revenue revenue and result both fell primarily due to low sales prices for from third parties of 24.1 percent to 1,495 million euro. The butter and milk powder. increase was due to volume growth, especially of infant & toddler nutrition. The Friso brand once again performed well. Revenue Increased revenue was given a further boost by higher sales prices, the acquisition of Revenue for the first half of 2012 rose by 7.6 percent to Alaska Milk Corporation and a positive currency translation effect 5,089 million euro. Volume growth, higher sales prices and (53 million euro). In Nigeria revenue growth stabilised as a result of currency translation effects contributed towards the increase in the political unrest. The market share of infant & toddler nutrition revenue. The acquisition of Alaska Milk Corporation contributed was increased in most countries. The market shares of dairy-based 63 million euro (or 1.3 percent) towards the revenue growth. beverages were under pressure.

Introduction new packaging Friso in Vietnam. 6 Half-year Report 2012

The Cheese, Butter & Milkpowder business group achieved Cheese, Butter & Milkpowder achieved a negative operating profit net revenue from third parties of 1,188 million euro – a drop of of 109 million euro. The 80 million euro drop in operating profit 0.9 compared with the first half of 2011. The decrease, the result was due to increased pressure on the margins of much of the of lower sales prices particularly of butter and milk powder, was commodity range, the sales prices of butter and milk powder in partly offset by a higher volume. particular were far lower. The Cheese operating company achieved a satisfactory performance in view of the market conditions while Ingredients’ net revenue from third parties rose by 12.8 percent to the Cheese Specialties operating company with branded cheese 836 million euro. The business group achieved a rise in revenue improved its result slightly. through increased volume and higher market prices which offset the higher raw materials costs. Ingredients succeeded in improving its operating profit by 19.1 percent to 106 million euro. This business group also improved Improved operating profit its results because, by contrast with the first half of 2011, the The results from operating activities were 9.4 percent higher higher raw materials prices could be passed on. than for the first half of 2011. After reserving 15 million euro (2011: 2 million euro) to pay the meadow milk premium (spread across all The business groups’ results incorporate the performance premium member milk amounts to 0.32 euro per 100 kilos) operating profit and the reservation of member bonds, which are charged to the rose by 3.3 percent to 217 million euro. different business groups according to the quantity of member dairy farmers’ milk it processed. This had the greatest downwards Operating expenses in the first half of 2012 rose by 7.7 percent effect on the result of Cheese, Butter & Milkpowder because this to 4,879 million euro due to higher packaging materials, raw business group processed around 55 percent of the members’ milk. materials and energy costs (first half of 2011: 4,532 million euro). Payments to member dairy farmers fell by 3.8 percent to Higher profit 1,696 million euro in the first half of 2012 as a result of the lower The profit over the first half of 2012 rose by 8.7 percent to guaranteed price (first half of 2011: 1,763 million euro). 138 million euro (first half of 2011: 127 million euro). The higher profit was achieved due to the increased operating profit and Consumer Products Europe’s operating profit was 40 million euro reduced financing expenses , slightly offset by higher tax expenses (first half of 2011: 8 million euro). The business group was able to compared to the first half of 2011. improve its result due to far-reaching efficiency improvements, cost control and passing-on of higher raw materials prices. Improved cash flow Cash flow from operating activities rose to 247 million euro (first The Consumer Products International business group achieved an half of 2011: 63 million euro) mainly due to better working capital operating profit of 224 million euro – an increase of 21.7 percent. management. The net cash flows from investing and financing Since the second half of 2011 it has been possible to pass the activities rose as a result of the acquisition of Alaska Milk higher raw materials and packaging costs on in the sales prices. Corporation. This has improved the margins compared to the first half of 2011.

Operating profit Operating profit as a percentage Operating cash flows in millions of euros of revenue in % in millions of euros

786 500 7 800 434 403 6 5.5 517 400 196 4.8 600 193 5 4.4 4.2 4.3 508 444 300 258 4 3.2 400 445 2.7 359 200 148 3 238 210 217 2 200 269 100 247 1 110 0 0 0 85 63 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012 ■■■ first half-year first ■■■ first half-year first ■■■ first half-year first ■■■ second half-year half-year ■■■ second half-year half-year ■■■ year half-year Royal FrieslandCampina N.V. 7

Acquisition of Alaska Milk Corporation On 20 March 2012 FrieslandCampina gained control of the Philippians dairy company Alaska Milk Corporation (AMC). On this date FrieslandCampina increased its shareholding from 8 percent to 68.5 percent. On 14 June 2012 FrieslandCampina’s interest was further increased to 97.7 percent. AMC produces, distributes and sells dairy-based beverages and milk powders under the brand names Alaska, Carnation, Liberty, Alpine and in the Philippines. The acquisition has strengthened FrieslandCampina’s position in Asia – a strategic growth area in the context of route2020. Since 20 March 2012 AMC has been consolidated as a component of the Consumer Products International business group. In the three months to 30 June 2012 AMC contributed 63 million euro net revenue and 7 million euro profit towards FrieslandCampina’s results. FrieslandCampina acquired AMC with a cash payment of 341 million euro.

Financial position As at 30 June 2012 net debt amounted to 1,059 million euro. This 139 million euro increase compared with the end of 2011 was due to the greater need for financing to pay for acquisitions.

On 30 June 2012 equity was 2,397 million euro (end of 2011: Acquisition of Alaska Milk Corporation, the 2,264 million euro). Equity was strengthened by the attribution of number two dairy company of the Philippines. profit. Solvency (equity as a percentage of the balance sheet total) fell to 37.6 percent (end of 2011: 39.4 percent) due to the increase of The pro forma performance premium over the first half of 2012 the balance sheet total primarily as a result of the acquisition of was 1.42 euro per 100 kilos of milk excluding VAT (first half of 2011: Alaska Milk Corporation. 1.38 euro per 100 kilos of milk). The pro forma reservation for member bonds over the first half of The balance of financing income and expenses fell by 22 million 2012 amounted to 43 million euro. This amounts to 0.95 euro per euro, which resulted in an expense of 18 million euro. The reduction 100 kilos of milk (first half of 2011: 0.92 euro per 100 kilos of milk). was due primarily to the positive currency translation effect on an interim short-term loan. The net interest expense was 20 million Since 1 January 2012, member dairy farmers who put their cows euro (first half of 2011: 26 million euro). out to pasture in the meadow for at least six hours a day on at least 120 days a year have received a meadow milk premium of The result from joint ventures and associates rose from 5 million 0.50 euro per 100 kilos of milk. Until this year the meadow milk euro in the first half of 2011 to 7 million euro in the first half of premium was 0.05 euro per 100 kilos of milk. Calculated over all 2012. member milk the meadow milk premium amounts to 0.32 euro per 100 kilos of milk. Taxation amounted to 68 million euro (first half of 2011: 48 million euro). The increase was primarily due to the higher profit. In the FrieslandCampina pays member dairy farmers premiums for first half of 2011 taxation was offset by an exceptional tax rebate in specific product propositions, such as organic milk. Member dairy 786 the Netherlands. farmers who supply Campina milk receive a reimbursement for 800 expenses of 1.20 euro, members who supply organic milk receive 517 Milk price for member dairy farmers a premium of 8.60 euro and members who supply Landliebe milk 600 508 444 The milk price FrieslandCampina pays its member dairy farmers receive 1.00 euro per 100 kilos of milk. Calculated over the total 400 445 comprises the guaranteed price, the performance premium and the quantity of FrieslandCampina the premiums amount to 0.11 euro 359 value of the fixed member bonds per 100 kilos of milk. per 100 kilos of milk. 200 269 247 The guaranteed price over the first half of 2012 amounted to 0 85 63 34.14 euro excluding VAT per 100 kilos of milk with 4.41 percent fat 2009 2010 2011 2012 and 3.47 percent protein (first half of 2011: 36.33 euro, whole of 2011: 36.94 euro). 8 Half-year Report 2012

2012 World Champion

The effect of the higher milk production during the first half of 2012 was lower sales prices worldwide, especially for butter and milk powder. The price of butter fell especially sharply due to worldwide demand hardly increasing and the high volume of supply, especially from New Zealand. Despite the favourable Euro/US dollar relationship – for exports from the EU –, European butter could not be offered on the world market at a favourable Vermeer, the 2012 WCMA World Champion, is the fi rst reduced-fat, reduced-salt cheese price. The Dutch listed price dropped from 3,460 euro per ton to take top prize. in January 2012 to 2,400 euro per ton (a decrease of around 30 Beyond compare and without compromise to taste or texture, Vermeer’s caramel richness and crystalline bite pleasure the palate. Pair with orchard fruits or rustic bread to create that perfect percent) in May. After May the price recovered slightly. cheese board. Vermeer’s award marks the second cheese in the Dutch Masterpiece family to win the World Championship. Its fellow Dutch Masterpiece, Rembrandt, was crowned WCMA World Champion in 2004. Both are lovingly produced by the renowned Steenderen plant; both are world class. Despite the weak euro the European dairy industry was able to Exclusively imported by Jana Foods, this award winning cheese is a must have for your specialty profit from the healthy demand for milk protein (skimmed milk case. For more information please visit www.janafoods.com

IMPORTED FROM HOLLAND powder, whey products and caseinate-protein) on the world market. As a result, the prices for these products remained at a reasonable level and did not fall as sharply as the price of butter. This offset, to Vermeer: World champion cheese. a degree, the disappointing demand for dairy products in Europe due to the economic crisis. Dutch cheese production increased slightly. Sales rose due to increased export to countries both in the Compared with the first half of 2011 the interest on member bonds EU and further afield. The price of naturally ripened Gouda cheese rose from 17 million euro to 22 million euro as a result of the fell slightly. increased number of member bonds, the increased Euribor and the increase of the supplement from 2.5 percent to 3.0 percent Implementation of the route2020 strategy since June 2011. The profit attributable to the shareholder of the FrieslandCampina’s route2020 strategy is aimed at growth and Company (the Cooperative) amounted to 80 million euro (2011: value creation in selected markets and product categories. In the 78 million euro). first half of 2012 the overall volume rose by 2.4 percent but the strategic value drivers achieved a volume growth of 4.5 percent. Financing Most of the volume growth was achieved in the consumer and FrieslandCampina raises loans from different groups of lenders business to business markets for infant & toddler nutrition. The (member dairy farmers, banks and investors). The major portion dairy-based beverage category also achieved growth, most of of the loan capital has been borrowed from financial institutions it in Asia. Developments in Europe lagged behind as a result of inside and outside the Netherlands. The major portion of the the euro crisis. With the acquisition of Alaska Milk Corporation bank loans comprises of a committed credit facility amounting FrieslandCampina has taken a first step in geographical expansion to 1 billion euro and with a term to the end of August 2015. In as a component of route2020. The Philippines, a country with a addition FrieslandCampina has taken out loans of 308 million strong economic growth and a fast-growing population, offers dollars and 25 million euro with institutional investors. At the end great opportunities for infant & toddler nutrition. In addition, of June 2012 private loans of 500 million dollars were taken out Alaska Milk Corporation’s product range complements both with institutional investors in the United States. These private FrieslandCampina’s product range and existing activities in Asia. loans, which will come into effect on 30 August 2012, have terms of between 5 and 15 years. The reasons for the loans include the To achieve the desired growth in infant & toddler nutrition, in 2011 financing of acquisitions, such as the acquisition of Alaska Milk a start was made on a 130 million euro investment programme Corporation in the first half of 2012. in FrieslandCampina Domo’s production facilities in Beilen and Bedum. The expansion must be completed in 2013. The decision Market developments during the first half of 2012 has now been taken to invest a further 75 million euro in the The first half of 2012 was characterised by a higher production facility in Bedum. A new drying tower is being installed for the of milk due to favourable weather conditions. Globally milk production of infant & toddler nutrition ingredients and a new production increased by around 5 percent. Milk production in New packing hall is being built. This investment must be completed in Zealand was extremely high with an increase of nearly 10 percent, 2014/2015. In Veghel 35 million euro is being invested in expanding virtually all of which was sold on the world market. Australian milk the milk processing capacity. production rose by 5 percent and production in the United States rose by over 3.5 percent. In , milk production increased by over 8 percent. In the EU milk production rose by 2.5 percent. Royal FrieslandCampina N.V. 9

In the dairy-based beverages category, 35 million euro is being Safety invested in expanding the production capacity for evaporated Regrettably, in June 2012 an employee of a building company milk at FrieslandCampina in Leeuwarden. This expansion is carrying out construction work at Alaska Milk Corporation’s site FrieslandCampina’s response to the growing demand for these in the Philippines fell while working and died as a result of his products from the Middle East and Asia. wounds. FrieslandCampina is working on reducing the number of job-related In the cheese category, the intended acquisition of IDB Belgium is accidents and increasing safety in the workplace for both its own FrieslandCampina’s response to the growing demand for pre-sliced employees and employees of third parties. Most of the accidents and pre-packaged cheese. Although sales of branded cheese in that have occurred have been due to unsafe handling. Vigorously Europe are troublesome, the export of cheese to other regions is promoting safe handling will bring about a clear reduction in the growing. number of accidents. Most of the employees in the Netherlands and Belgium have now completed training courses and the courses Value creation for the member dairy farmers developed positively. are now being rolled-out in the remaining countries. Standards As profit has increased so too has the performance premium to have been introduced at all FrieslandCampina’s sites for, among member dairy farmers and the reserve of bonds registered in the other aspects, Lock-out Tag-out (standard for machine safety names of members. through, for example, maintenance work) and third parties working at the sites and in the buildings. A safety management system has Other initiatives in the context of route2020 are: also been introduced at all FrieslandCampina sites. • Improving safety. • Achieving the sustainability targets safeguarded in the European Union conditions related to the merger Company and the Cooperative: In the period 1 January to 30 June 2012 the Dutch Milk Foundation - Implementation of the sustainability programme at member approved three requests from dairy farmers wishing to terminate dairy farms; their membership of FrieslandCampina under the severance - Further steps in the purchase of sustainable raw materials; scheme with a payment of 5.00 euro per 100 kilos of milk (first - Further energy, water and waste efficiency measures half of 2011: 11). In total this involved 1.4 million kilos of milk. - 30 percent of electricity used is green electricity generated by This condition was stipulated by the European Union in 2008 in member dairy farmers; connection with the merger between Friesland Foods and Campina. - Collaboration agreement with the (Dutch) Red Cross related to addressing undernourishment. • Integrating the sales activities for consumer products into a single, new, sales organisation in the context of ‘One face to the customer’. • Integrating the export activities of FrieslandCampina Cheese Specialties and FrieslandCampina Export in a new FrieslandCampina Export organisation based in Wolvega. • Intensifying employee training and education programmes.

Revenue by business group Revenue by geographic area in millions of euros in millions of euros

1,495 1,600 1,443 1,427 1,600 1,250 1,205 1,199 1,188 1,216 1,213 1,222 1,241 1,200 1,200 968 836 741 800 800 633 656 509 556

400 400 142 143 154 201

0 0 Other Europe Products Products Germany North and Consumer Consumer Ingredients Middle East International & Milkpowder Africa and the South America Rest of Europe Cheese, Butter The Netherlands Asia and Australia ■■■■■ first half-year 2012 ■■■■■■ first half-year 2012 ■■■■■ first half-year 2011 ■■■■■■ first half-year 2011 10 Half-year Report 2012

Outlook The economic outlook remains uncertain. The forecast is that consumers in Europe will continue to be reticent in their spending due to the economic situation and that, as a result, consumption will remain under pressure. At a global level dairy product consumption is expected to increase slightly this year due to the demand in the emerging markets. As a result of the drought in the United States, rising animal feed prices and the lagging behind of milk production in the EU, the worldwide supply of milk could come under some pressure. Small fluctuations in supply and demand on the world market have major consequences for the Farmers and employees on the road together price development of dairy products. FrieslandCampina cannot for the consumer action Campina Dichtbij. make any concrete statement regarding the expected result for the whole of 2012.

Risks Management statement The risks and uncertainties that could have an adverse material The members of the Executive Board of Royal FrieslandCampina effect on the Company’s result and shareholders’ equity were N.V. declare that, to the best of their knowledge, the condensed described in the 2011 Annual Report as were the ways in which half-year report (prepared in accordance with the applicable the Company manages these risks. Reference to this description reporting regulations for interim reporting) gives a true and of risks and uncertainties should be deemed a component of this fair view of the assets, liabilities, financial position and profit of half-year report. Royal FrieslandCampina N.V. and the companies included in the consolidation; and that the report of the Executive Board gives a The major risks and uncertainties for the second half of 2012 are true and fair view of the information required in accordance with related to the development of world-market prices, raw materials Article 5:25 d (8) of the Financial Supervision Act. availability and foreign currency exchange rates. Substantial changes in the prices of raw materials (for example due to weather conditions), or a continuing scarcity of supply of certain products, Cees (C.C.) ’t Hart could have a negative effect on FrieslandCampina’s results and Chief Executive Officer financial position. Being able to pass on higher cost prices in good time depends on several factors including the duration of contracts Kees (C.J.M.) Gielen and the ability of markets to absorb the higher prices. Chief Financial Officer As far as consumer products are concerned, a further worsening of economic conditions in Europe would have an adverse effect on Kapil (K.) Garg sales margins. Such risks are monitored very closely and, where Chief Operating Officer Consumer Products International possible, the Company implements additional measures to mitigate these risks. FrieslandCampina is also active in Greece and, in view Piet (P.J.) Hilarides of the economic conditions, has adjusted its plans so as to limit the Chief Operating Officer Cheese, Butter & Milkpowder possible drop the result. Roelof (R.A.) Joosten If the euro exchange rate continues to worsen this will not Chief Operating Officer Ingredients (immediately) constitute an adverse risk for the Company due to its export position and the concentration of member dairy farmers Freek (F.) Rijna and production in the Netherlands, Germany and Belgium. Chief Operating Officer Consumer Products Europe Other risks and uncertainties that have not, as yet, been recognised, or have not yet been considered significant, could in the future have a substantial effect on FrieslandCampina and its Amersfoort, 24 August 2012 goals, revenue, results, assets and liquidity. Royal FrieslandCampina N.V. 11

Consumer Products Europe

Results 2012 2011 2011 in millions of euros first first full half-year half-year year Revenue from third parties 1,427 1,443 2,892 Internal supplies 51 52 104 Operating profit 40 8 61 Operating profit as a % of 2.8 0.6 2.1 revenue from third parties

• Recovery in a difficult market with low consumer confidence • Margins improved, revenue down • Efficiency measures and cost management contribute towards improvement in result • Market shares under pressure; growth for the Campina brand

In the first half of 2012 the Consumer Products Europe business group recovered from its disappointing result in 2011. Margins improved although revenue fell. Consumer Products Europe’s In Hungary the dairy snack Pöttyös showed a positive revenue from third parties was 1,427 million euro – a drop of development. The volume of basis dairy was, however, under 1.1 percent compared with the first half of 2011. The difficult pressure due to sharp price competition. Both volume and revenue economic conditions in Europe and low consumer confidence kept were lower than last year. In Romania the volume remained consumer spending down. The market share of several brands virtually the same. Revenue and result remained under pressure. was under pressure. This resulted in continued pressure on sales volumes. Operating profit rose to 40 million euro through a slight FrieslandCampina in Russia can look back on a good first half year. recovery of the margins and cost management. Both revenue and result improved. There was an investment in further capacity expansion at the production facility in Stupino. In the Netherlands and Belgium the result was better than in the first half of 2011. Revenue remained at the same level. A positive FrieslandCampina Professional was able to improve its result, development was the increased market share of Campina fresh partly due to efficiency improvements. Revenue and volume were dairy in the Netherlands. The positioning of Dutch meadow milk under pressure due to the difficult market conditions in the out-of- has been successful. In May around 5,000 member dairy farmers, home market segment. Consumers spent less in restaurants and supported by 1,200 employees, personally offered consumers a cafes, which meant lower revenue. special carton of Campina milk. During the campaign dairy farmers knocked on the doors of around 350,000 households in 135 towns In the Netherlands a start was made on integrating the and villages throughout the Netherlands. marketing and sales activities for branded products in a new operating company FrieslandCampina Branded Netherlands/ The result in Germany was also better than in the first half of Belgium. Customers receive a single account team for the entire 2011 thanks to a slight recovery of the margins. The keen price FrieslandCampina product package. In Aalter the doubling of the competition means cost reduction remains a key focal point. production capacity of long-life dairy products was completed. FrieslandCampina performed well in Greece in view of the Production in Kalkar (Germany) finished at the end of May 2012 extremely difficult market conditions. The volume rose slightly and, as announced earlier, moved to Aalter (Belgium) and Patras while margins came under pressure. Revenue remained stable. (Greece). 12 Half-year Report 2012

Consumer Products International

Results 2012 2011 2011 in millions of euros first first full half-year half-year year Revenue from third parties 1,495 1,205 2,460 Internal supplies 96 87 173 Operating profit 224 184 347 Operating profit as a % of 15.0 15.3 14.1 revenue from third parties

• Acquisition of Alaska Milk Corporation in the Philippians growth market • Revenue rises due to volume growth, price increases and positive currency translation effects • Investments in advertising & promotion contribute towards growth • Results in Nigeria negatively influenced by the political situation

The Consumer Products International business group’s revenue from third parties in the first half of 2012 rose by 24.1 percent to 1,495 million euro. The revenue increase was driven by volume growth, price increases and positive currency translation effects. Sales of infant & toddler nutrition showed especially good growth. In a number of countries, price increases resulting from higher costs related to packaging, energy and sugar were passed on. Market shares of dairy-based beverages were under pressure. By contrast, in most countries the market share of infant & toddler nutrition increased. The acquisition of Alaska Milk Corporation contributed 63 million euro towards the revenue growth. The positive currency translation effect amounted to around 53 million euro. Operating profit rose by 21.7 percent to 224 million euro (first half of 2011: 184 million euro). Royal FrieslandCampina N.V. 13

FrieslandCampina and FrieslandCampina China once again developed positively with Friso infant & toddler nutrition. In China the distribution of Friso was extended to include additional cities. In Hong Kong the Black & White and Completa brands (milk for tea and coffee) performed well. Both brands have built up strong positions in tea shops.

FrieslandCampina /Singapore achieved growth in dairy- based beverages and infant & toddler nutrition. Revenue, volume and profit were all better than for the first half of 2011.

FrieslandCampina ’s performance in the first half of the year was satisfactory. Revenue, volume and result all improved. Sales of , long-life milk and fresh dairy in particular FrieslandCampina Middle East is also succeeding in maintaining its made a positive contribution. revenue and result at the same level as in the first half of 2011.

In revenue rose slightly. Operating profit over the first FrieslandCampina Export had a good first half of the year with half of the year remained stable compared to the first half of 2011. volume, revenue and result all improving. Sales of infant & toddler nutrition once again showed an upwards trend and recovered from a disappointing 2011. In May a new Since 2012 the production facility in Leeuwarden, formerly part product aimed at children aged one year or more was introduced. of the Consumer Products Europe business group, has been part This introduction is expected to reinforce FrieslandCampina’s of the Consumer Products International business group. To meet position in this market segment. the growing demand for , during the coming years 35 million euro will be invested in expanding the production FrieslandCampina Vietnam’s revenue, volume and result all capacity for these products in Leeuwarden. improved compared to the first half of 2011. Sales of dairy based beverages and Friso children’s nutrition in particular rose. FrieslandCampina’s new regional office in Singapore opened in March 2012. A number of regional activities are coordinated from Alaska Milk Corporation has been part of FrieslandCampina since this office. 20 March 2012. Since this date its revenue and results have been consolidated. AMC’s revenue and volumes developed well in the second quarter.

After years of robust growth, in the first half of 2012 the results of FrieslandCampina Wamco Nigeria/West Africa were affected by the unrest in the country, which had a negative effect on consumers’ spending patterns. Attacks on government buildings and churches in the north-east of Nigeria disrupted public life, including distribution. The situation in the region has now stabilised somewhat. Revenue and result were roughly at the same level as in the first half of 2011. The volume decreased slightly. 14 Half-year Report 2012

Cheese, Butter & Milkpowder

Results 2012 2011 2011 in millions of euros first first full half-year half-year year Revenue from third parties 1,188 1,199 2 ,474 Internal supplies 146 190 348 Operating profit - 109 - 29 - 97 Operating profit as a % of - 9.2 - 2.4 - 3.9 revenue from third parties

• Revenue down due to falling sales prices with a slightly higher sales volume • Pressure on margins due to falling sales prices for commodities, butter and milk powder • More cheese exported

During the first half of 2012 the Cheese, Butter & Milkpowder business group’s revenue from third parties fell by 0.9 percent to Within FrieslandCampina Cheese Specialties cheese export 1,188 million euro. Although sales volume was higher than for the developed positively. More cheese was export worldwide and, first half of 2011, revenue fell as a result of lower prices across in particular, to the Middle East and North Africa. In Europe the the entire business group. Operating profit fell to 109 million market conditions remained difficult, which led to pressure on euro negative due to the increasing margin pressure for butter margins. Thanks to promotion campaigns sales volume remained and milk powder. On average the listed prices for butter were the same, for example in Greece where despite the difficult 27 percent lower than in the first half of 2011. The operating profit situation the volume of cheese sales was maintained. Vermeer of Cheese, Butter & Milkpowder was negatively influenced by the cheese (Cantenaar in the Netherlands) was declared the best attribution of the performance premium and the registered reserve cheese in the world at the international cheese competition in to the different business groups in proportion to the quantity of Wisconsin. A remarkable achievement for a cheese containing less member milk received. Operating profit as a percentage of revenue fat and less salt to be praised for its taste. amounted to –9.2 percent (first half of 2011: -2.4 percent). FrieslandCampina Butter had a disappointing first half year. The In the light of the market conditions FrieslandCampina Cheese can operating company’s result was significantly lower than for the look back on a satisfactory first half year in which a lower revenue first half of 2011. The demand for butter fell worldwide. Sales of was achieved as a result of lower sales prices. The lower sales butter specialties were also under pressure. The listed prices of prices also led to pressure on margins. As a result of changing butter were at their lowest since 2009. market demand the product mix was adjusted to incorporate slightly more pre-packed and pre-sliced cheese than in previous The result of FrieslandCampina Milkpowder was also down. Sales years. The intended acquisition IDB Belgium, announced on 11 June prices fell by around 15 percent, in line with the listed prices, which 2012 and expected to be completed in September 2012, is in-line resulted in pressure on margins. Over 50 percent of the milk with this. The investments in expanding the cheese production powder production was taken by FrieslandCampina facilities in capacity in Workum, Balkbrug and Marum are proceeding as Asia and Africa. planned. As announced in 2010, at the end of 2012 the cheese production facility in Varsseveld will be closed. Royal FrieslandCampina N.V. 15

Ingredients

Results 2012 2011 2011 in millions of euros first first full half-year half-year year Revenue from third parties 836 741 1,512 Internal supplies 230 202 418 Operating profit 106 89 189 Operating profit as a % of 12.7 12.0 12.5 revenue from third parties

• Revenue and result improved further • A high demand for dairy ingredients for infant & toddler nutrition • All operating companies contributed towards growth • New investments in capacity expansion for ingredients production and packaging capacity consumer units

The Ingredients business group performed well with a revenue from third parties amounting to 836 million euro – a 12.8 percent increase compared to the first half of 2011. The increase in revenue was, to a great extent, due to higher sales prices. During the first half of 2011 the higher raw materials prices could not, or could FrieslandCampina Creamy Creation’s revenue, volume and not immediately, be passed on due to on-going contracts. Volume result were at a higher level despite a difficult start in 2012. The development was limited by the utilisation of the total capacity in a operating company, in cooperation with customers, worked on the number of production facilities. Operating profit rose by 19.1 percent development of new, nutritious beverages with dairy ingredients. to 106 million euro. The United States and Africa are the most important sales markets.

The revenue from and sales volume of FrieslandCampina Domo rose. FrieslandCampina Dairy Feed had a good first half year. The result The high demand for both infant & toddler ingredients and nutritious improved while volume decreased due to a reduced supply of raw dairy ingredients continued to increase. In addition to the previously materials from other FrieslandCampina companies. The export of announced 130 million euro investment, in 2014/2015 an amount of both calf milk and piglet feed increased further. 75 million euro will be invested in expanding the production capacity for infant & toddler nutrition ingredients in Bedum. The DFE pharma joint venture performed well. Revenue rose thanks to the good demand for excipients (carrying materials) and FrieslandCampina Kievit saw its revenue rise due to higher by passing on the high raw materials prices for lactose. The result sales prices. The improved result was partly due to the portfolio also improved. The acquisition of Brahmar Cellulose in India in 2011 improvement programme. The volume development of creamers means excipients (carrying materials) based on cellulose can now came under some pressure. also be offered.

FrieslandCampina DMV performed well. Revenue and result As of 2012 FrieslandCampina Satro is a separate operating company improved due to both higher sales prices and increased demand. within the Ingredients business group. The company supplies Much of the caseinate production (protein) was used internally. products based on dairy and plant raw materials, such as cocoa, During the second half of 2012 work will start on an around sugar and coffee for use in vending machines. The revenue and 35 million euro investment to expand the processing of milk in result of comparable activities were virtually the same as for the Veghel. first half of 2011. 16 Half-year Report 2012

Condensed consolidated income statement

In millions of euros

first half-year 2012 first half-year 2011

Revenue 5,089 4,730 Other operating income 9 12 Operating income 5,098 4,742

Operating expenses - 4,881 - 4,532 Operating profit 217 210

Share of profit of joint ventures and associates 7 5 Finance income and costs - 18 - 40 Profit before tax 206 175

Income tax expense - 68 - 48 Profit for the period 138 127

Profit attributable to: • providers of member bonds 22 17 • providers of perpetual notes 4 4 • shareholder of the company 82 78 • shareholder and other providers of capital of the company 108 99 • non-controlling interests 30 28 Profit for the period 138 127

Consolidated statement of comprehensive income

In millions of euros

first half-year 2012 first half-year 2011

Profit for the period 138 127

Effective portion of cash flow hedges, net of tax 4 7 Currency translation differences, net of tax 28 - 19 Other comprehensive income for the period, net of tax 32 - 12 Total comprehensive income for the period 170 115

Attributable to: • shareholder and other providers of capital of the company 137 93 • non-controlling interests 33 22 Royal FrieslandCampina N.V. 17

Condensed consolidated statement of financial position

In millions of euros

30 June 2012 31 December 2011 Assets Property, plant and equipment 1,750 1,660 Intangible assets 1,281 945 Deferred tax assets 221 224 Financial assets 262 262 Non-current assets 3,514 3,091

Inventories 1,168 1,085 Receivables 1,239 1,139 Cash and cash equivalents 443 420 Assets held for sale 4 4 Current assets 2,854 2,648

Total assets 6,368 5,739

Equity Issued capital 370 370 Retained earnings and reserves 761 645 Perpetual notes 126 130 Member bonds 1,023 1,003 Equity attributable to shareholder of the company 2,280 2,148 and other providers of capital Non-controlling interests 117 116 Total equity 2,397 2,264

Liabilities Deferred tax liabilities 123 63 Interest-bearing borrowings 908 891 Other non-current liabilities 379 479 Non-current liabilities 1,410 1,433

Current borrowings 591 250 Other current liabilities 1,970 1,792 Current liabilities 2,561 2,042 Total liabilities 3,971 3,475

Total equity and liabilities 6,368 5,739 18 Half-year Report 2012

Condensed consolidated statement of cash flows

In millions of euros

This statement shows the cash flows, translated into euros where applicable. Cash flows denominated in foreign currencies are translated into euros at the exchange rates ruling on the transaction date. The cash flow statement has been prepared using the indirect method.

first half-year 2012 first half-year 2011

Profit before tax 206 175 Depreciation and amortisation of property, plant, equipment and intangible assets 93 95 Movements in inventories, receivables and liabilities - 63 - 218 Other operating activities 11 11 Net cash from operating activities 247 63

Investment in property, plant, equipment and intangible assets - 177 - 131 Acquisitions - 298 Other investing activities 14 12 Net cash used in investing activities - 461 - 119

Interest-bearing borrowings drawn and repayments 338 117 Other financing activities - 109 - 75 Net cash from financing activities 229 42

Net cash flow 15 - 14

Cash and cash equivalents at 1 January 420 292 Net cash flows 15 - 14 Translation differences in cash and cash equivalents 8 - 11 Cash and cash equivalents at 30 June 443 267

Condensed consolidated statement of changes in equity

In millions of euros

first half-year 2012 first half-year 2011

Equity attributable Equity attributable to shareholder to shareholder of the company Non- of the company Non- and other providers controlling and other providers controlling of capital interests Total of capital interests Total At 1 January 2,148 116 2,264 1,961 110 2,071 Total comprehensive income for the period 137 33 170 93 22 115 Transactions with shareholder and other providers of capital: • dividends paid to non-controlling interests - 40 - 40 - 23 - 23 • amounts paid to providers of perpetual notes -8 -8 -8 -8 • amounts paid to providers of member bonds - 40 - 40 - 28 - 28 • addition member bonds for the period 43 43 41 41 • other changes - 2 - 2 Total transactions with shareholder and - 5 - 40 - 45 3 - 23 - 20 other providers of capital Changes in ownership interests in subsidiaries: • acquisition of subsidiary with non-controlling 8 8 interests At 30 June 2,280 117 2,397 2,057 109 2,166

Royal FrieslandCampina N.V. 19

Notes to the condensed consolidated half-year figures

In millions of euros, unless stated otherwise

General The estimated negative impact on equity and the expected positive Royal FrieslandCampina N.V. has its registered office in impact on net income would be: Amersfoort, the Netherlands. The address is: Stationsplein 4, 3818 LE, Amersfoort, the Netherlands. The consolidated financial Equity EUR - 69 million statements for the half year ended 30 June 2012 comprise the Net Income EUR 5 million financial statements of Royal FrieslandCampina N.V. and its subsidiaries (jointly referred to as FrieslandCampina). The eventual effect per 1 January 2013 will depend on the development of interest rates and investments. Zuivelcoöperatie FrieslandCampina U.A. is the sole shareholder of Royal FrieslandCampina N.V. (FrieslandCampina). No impact on the cash flow statement is anticipated. The employee benefit disclosures will also be affected by the amendments to IAS The half-year figures in this report have not been audited or 19. Currently FrieslandCampina does not anticipate adopting this subjected to a limited review. standard before its effective date.

Accounting policies Judgements, estimates and assumptions This half-year report was prepared in accordance with IAS 34 The preparation of the consolidated half-year financial statements ‘Interim financial reporting’, insofar as endorsed by the European in conformity with IFRS requires management to make Union. This half-year report must be read together with the 2011 judgements, estimates and assumptions that affect the application financial statements, which were prepared in accordance with IFRS of accounting policies and the reported amounts of assets, as endorsed by the European Union and their interpretations as liabilities, income and expenses. The actual results may differ from adopted by the International Accounting Standards Board (IASB). management’s estimates.

The accounting policies applied in this consolidated half- The assumptions and estimates are reviewed on an ongoing basis. year report are consistent with the policies for valuation and For an overview of the most important assumptions please see the determination of result and the calculation methods used in 2011 Financial Statements. During the first half of 2012 there were preparing the 2011 financial statements. The company has, in no major changes. addition, applied the following new or amended IFRS and IFRIC interpretation as per 1 January 2012: Financial risk management - IFRS 7 Disclosures of transfers of financial assets. The most important objectives and procedures of the financial risk management within FrieslandCampina are consistent with This new amendment to the existing standard has had no material the objectives and procedures presented in the 2011 consolidated effect on the equity, result or explanatory notes. financial statements.

FrieslandCampina has also investigated the impact of IAS 19 Seasonal influences Employee Benefits in 2012. Amendments to IAS 19, effective for There is no significant seasonal pattern when comparing the first annual periods beginning on or after January 1, 2013, introduce half and the second half of a year. requirements to recognise actuarial gains and losses immediately in other comprehensive income, to calculate the expected return Segmentation on plan assets based on the rate used to discount the defined The identified operating segments are the separate segments benefit obligation and to recognise past-service costs immediately within FrieslandCampina for which financial information is available in the income statement. These amendments will have a material that is frequently evaluated by the highest decision making effect on FrieslandCampina’s financial statements, in particular body (Executive Board) in order to come to decisions regarding because, FrieslandCampina currently applies the corridor method the attributing of the available means to the segment and to and after the amendment, FrieslandCampina shall recognise determine the performance of the segment. FrieslandCampina has all actuarial gains and losses arising immediately in other divided the operating segments into business groups: Consumer comprehensive income. Products Europe; Consumer Products International; Cheese, Butter & Milkpowder and Ingredients. The impact was determined by applying the revised IAS 19R to current post-employment plans based on the 31 December 2011 pension costs payable and the 2012 pension costs recognised through the income statement. 20 Half-year Report 2012

Notes to the condensed consolidated half-year figures

In millions of euros, unless stated otherwise

first half-year 2012 Segmentation by business groups

Consumer Consumer Cheese, Products Products Butter & Europe International Milkpowder Ingredients Other Elimination Total Sales to external customers 1,427 1,495 1,188 836 143 5,089 Inter-segment sales 51 96 146 230 - 523 Total revenue 1,478 1,591 1,334 1,066 143 - 523 5,089

Operating profit 40 224 - 109 106 - 44 217 Share of profit of joint ventures and associates 4 2 1 7 Finance income and costs - 18 Income tax expense - 68 Profit for the period 138

Operating profit as a % of sales to external 2.8 15.0 - 9.2 12.7 4.3 customers Carrying amount of assets employed in operating 1,727 1,353 1,036 1,246 674 - 505 5,531 activities Carrying amount of other assets 837 6,368

first half-year 20111

Consumer Consumer Cheese, Products Products Butter & Europe International Milkpowder Ingredients Other Elimination Total Sales to external customers 1,443 1,205 1,199 741 142 4,730 Inter-segment sales 52 87 190 202 - 531 Total revenue 1,495 1,292 1,389 943 142 - 531 4,730

Operating profit 8 184 - 29 89 - 42 210 Share of profit of joint ventures and associates 1 2 2 - 1 1 5 Finance income and costs - 40 Income tax expense - 48 Profit for the period 127

Operating profit as a % of sales to external 0.6 15.3 - 2.4 12.0 4.4 customers Carrying amount of assets employed in operating 1,503 607 783 888 1,539 - 463 4,857 activities Carrying amount of other assets 687 5,544

1 Due to internal transfers, the comparative figures in the segmentation by business groups have changed compared to the Half-year Report 2011. Royal FrieslandCampina N.V. 21

Notes to the condensed consolidated half-year figures

In millions of euros, unless stated otherwise

Acquisitions The trade and other receivables comprise gross contractual During the first half of 2012 FrieslandCampina acquired control amounts of EUR 13 million, of which EUR 1 million was expected to over Alaska Milk Corporation (AMC). The acquisition date is be uncollectible at the acquisition date. 20 March 2012, the date on which FrieslandCampina increased its stake in AMC from 8% to 68.5%. On 14 June 2012, after the Goodwill closure of the mandatory tender offer, FrieslandCampina increased Goodwill has been recognised as a result of the acquisition as its stake further to 97.7%. follows:

AMC is involved primarily in the manufacture, distribution and sale of dairy based beverages and milk powders under the Alaska, Total consideration transferred 341 Carnation, Liberty, Alpine and Milkmaid brands. This acquisition Non-controlling interest, based on full fair value 8 provides FrieslandCampina with a platform that is in line with the Fair value of existing interest in AMC 20 strategic route2020 goals and further strengthens its position in Fair value of identifiable assets - 223 the strategic growth area Asia. Goodwill 146

As of the acquisition date, AMC has been consolidated as part The non-controlling interest of 2.3% is measured based on the fair of the Consumer Products International business group. In the value method. The price per share for the non-controlling interest 3 months to 30 June 2012 AMC contributed revenue of EUR is equal to the price per share paid on the acquisition of the 63 million and profit of EUR 7 million towards FrieslandCampina’s controlling interest. results. If the acquisition had occurred on 1 January 2012, the Management estimates that consolidated revenue for the first half Before the acquisition, FrieslandCampina’s existing 8% interest in year would have been EUR 5.150 million and consolidated profit AMC was classified as a financial asset at fair value through profit would have been EUR 144 million. In determining these amounts or loss. This resulted in a gain of EUR 3 million in the first half the Management has assumed that the fair value adjustments that of 2012. This gain is included under ‘net finance expenses’ in the arose at the date of acquisition would have been the same if the income statement for the first half year 2012. acquisition had taken place on 1 January 2012. The goodwill relates primarily to the synergies expected to be FrieslandCampina acquired AMC by paying a cash consideration of achieved from integrating AMC into the Consumer Products EUR 341 million. International business group. The included goodwill is expected to be fiscally non-deductible. The major assets acquired and liabilities assumed recognized at the acquisition date are as follows: Acquisition related costs of EUR 6 million are included under

‘other expenses’ in the income statement for the first half year and Identifiable assets acquired and liabilities assumed include legal fees and due diligence costs. Property, plant and equipment 41 Intangible assets 148 Operating expenses Inventories 35 Operating expenses include the milk payments to member farmers Other financial assets 40 of EUR 1,696 million (first half-year 2011: EUR 1,753 million). Cash 43 Deferred tax liabilities - 42 Net finance costs Other payables - 42 The decrease in finance income and costs in the first half of 2012 Total net identifiable assets 223 is due primarily to a positive translation effect on receivables and liabilities in foreign currencies. In addition, a gain of EUR 3 million The fair values of the net identifiable assets acquired and liabilities is recognised on the valuation of the interest in AMC held by assumed have been determined based on the preliminary purchase FrieslandCampina before the moment at which control of AMC was price allocation performed by a third party. FrieslandCampina will acquired. finalise the purchase price allocation during the measurement period. 22 Half-year Report 2012

Income tax expense During the first half of 2012 an amount of EUR 15 million was The income tax expense was determined using the integrated capitalised in respect of the global IT standardisation programme approach, with the effective tax rate being based on the outlook FrieslandCampina started in 2010. During the first half of 2012 for the whole of 2012. The 33.0% tax expense in the first half of the system went live for the first group of operating companies. 2012 is higher than the weighted average of 28.1%. This is due to a Rolling-out the system to the other operating companies will take number of reasons including the writing off of losses in Germany several years. capitalised in the past and non-deductible source tax on received dividends from Nigeria, Indonesia and Thailand. During the first half of 2012 the value of the liability in respect of the put option related to DMV-Fonterra Excipients GmbH & Co KG Property, plant and equipment (DFE-pharma) rose by EUR 2 million. This increase in value has The development of property, plant and equipment during the first been added to the goodwill. On 30 June 2012 the total liability half of 2012 can be specified as follows (in millions of euro): related to the put option amounted to EUR 126 million and was recognised in ‘other current liabilities’.

Carrying amount at 1 January 1,660 Impairment tests Consolidation and deconsolidation 41 In previous years the impairment test was carried out during the Additions 130 fourth quarter. As of 2012 the impairment test will be carried Disposals - 3 out during the second quarter. The change in the timing of the Currency translation differences 8 impairment test will not affect its outcome. Depreciation - 85 (Reversal of) Impairment - 1 The impairment test comprises calculating the recoverable Carrying amount at 30 June 1,750 amounts per group of cash flow-generating units once a year, or at another time if there is an indication for impairment. Goodwill is The investments in consolidation and deconsolidation relate monitored and tested at the business group level (groups of cash primarily to property, plant and equipment amounting to EUR flow-generating units). Due to the acquisition of AMC as of 2012 41 million acquired from AMC. The investments of EUR 130 million goodwill will also be allocated to Consumer Products International. relate primarily to the expansion of the production capacity in the Netherlands. The aggregate carrying amounts of goodwill allocated to each cash-generating unit are as follows: Intangible fixed assets The development of intangible non-current assets during the first Consumer Products Europe 760 half of 2012 can be specified as follows (in millions of euros): Consumer Products International 154 Ingredients 112 Carrying amount at 1 January 945 1,026 Consolidation and deconsolidation 294 Additions 18 The principle assumptions applied when calculating the business Currency translation differences 30 value per business group are: Amortisation - 8 Change in value in connection with put option 2 Business group % % % Carrying amount at 30 June 1,281 Pre-tax Terminal Budgeted discount The investments in consolidation and deconsolidation relate value EBITDA rate primarily to the intangible fixed assets acquired from AMC Consumer Products Europe 2 5-9 12 (EUR 148 million) and the goodwill related to this acquisition Consumer Products International 2.5 16-18 16 (EUR 146 million). The intangible fixed assets comprise mainly Ingredients 2 15-21 11 brand names and client relations and will be amortised in 20 to 40 years. Royal FrieslandCampina N.V. 23

Budgeted EBITDA margins are based on current experience, Interest bearing borrowings specific expectations for the near future and market-based growth To finance possible acquisitions, on 13 March 2012 FrieslandCampina rates. The discount rates are based on statements from financial has issued a Bridge Loan of EUR 600 million with a term of 5 years. advisers. The discount rates are pre-tax, in accordance with IAS This loan has a variable interest rate plus spread (2.3% for the first 36.55. period). On 30 June 2012 EUR 200 million was drawn from the Bridge Loan. This amount has been recognised as current because The recoverable amounts, being the value in use, of the cash- it will be repaid on 30 August 2012. generating units were determined on the basis of the 2012 budget and long term plans. For the period after 2017 a growth rate was To replace the Bridge Loan, on 29 June 2012 FrieslandCampina used that is equal to the expected long-term inflation rates of up to has placed private loans amounting to USD 500 million with 2% for Consumer Products Europe and Ingredients and up to 2.5% institutional investors in the United States. These private loans, for Consumer Products International. which will come into effect on 30 August 2012 and have terms of between 5 and 15 years and a fixed interest rate in dollars of 3.1% The outcome of the impairment tests was that the recoverable to 4.2%, depending on the term and this will be used to finance the amount exceeds the carrying amounts of the cash-generating Acquisition of Alaska Milk Corporation and other investments. units. As of 29 June 2012 the future USD repayments and interest Sensitivity to changes in assumptions charges related to these private loans have been hedged via cross The impairment test showed that the estimated recoverable currency swaps into EUR obligations with a fixed interest rate of amount of Consumer Products Europe exceeds the carrying 2.8% to 4.0%, depending on the term, via cross currency swaps as amount by EUR 297 million. The Executive Board has identified a hedge to cash flows. Cash flow hedge accounting has been applied two important assumptions which, if changed, could lead to to these cross currency swaps. On 30 June 2012 the value of these impairment. The extent to which one of these two assumptions cross currency swaps was EUR 0.4 million negative. must change in order for the estimated recoverable amount to equal the carrying value is shown for each assumption. Commitments and contingencies Commitments and contingencies do not materially differ from those Change needed for the carrying amount to equal the recoverable included in the most recently published Financial statements (2011). amount: Related-party transactions Pre-tax discount rate + 2% There were no changes in respect of the nature and size of the Estimated EBITDA - 1% related parties compared with the notes to the 2011 financial statements. The values attributed to the important assumptions represent Management’s judgement regarding future developments in Subsequent events Consumer Products Europe and are based on both external and No events that must be included in the 2012 half-year report have internal sources. occurred since the balance sheet date.

The outcome of the impairment testing of Consumer Products International and Ingredients showed that the recoverable Amersfoort, 24 August 2012 amount amply exceeded the carrying value of the cash flow generating units. In these instances a reasonable amendment of the assumption will not lead to a lower recoverable value than the carrying value of these business groups.

Inventories An amount of EUR 162 million (first half-year 2011: EUR 118 million) of the inventories of finished goods and goods for resale was carried at lower market value. In the first half-year of 2012 the write-down of inventories to net realisable value amounted to EUR 22 million. Every day Royal FrieslandCampina provides hundreds of millions of people around the world with healthy food that is rich in valuable nutrients. FrieslandCampina’s wide product range includes dairy-based beverages, infant & toddler nutrition, cheese, butter, , desserts and nutritious dairy- based ingredients. FrieslandCampina is active around the world and focuses not only on consumer markets but also supplies professional customers, the food industry and the pharmaceutical sector.

With an annual revenue of about 10 billion euro FrieslandCampina is one of the world’s largest dairy companies. In the field of consumer products the Company is active in many European countries, in Asia and in Africa. Sales to industrial customers take place worldwide. FrieslandCampina’s own offices and facilities in 26 countries employ a total of 19,000 people. FrieslandCampina’s products find their way to more than 100 countries.

Royal FrieslandCampina N.V. is owned by Zuivelcoöperatie FrieslandCampina U.A., which has 14,400 member dairy farms in the Netherlands, Germany and Belgium.

Royal FrieslandCampina N.V. Stationsplein 4 3818 LE Amersfoort The Netherlands T +31 33 713 3333 www.frieslandcampina.com