Friesland Foods to Modify Shareholding Structure

09/05/08 The general meeting of Zuivelcoöperatie Friesland Foods has approved the proposal submitted by the Board and the Board of Management to amend the shareholding structure. In the future, all dividends will be distributed on A shares, which means that they will be paid to all member farmers pro rata to the value of the milk they supply. The method for determining milk prices will also be modified, by introducing a permanent mark-up of EUR 0.50 per 100 kilos of milk on top of the present competitive milk price.

The general meeting unanimously voted in favour of modifying the shareholding structure and the method for determining milk prices. The modifications will be introduced with retroactive effect to 1 January 2008. To allow for these changes, approval from the general meeting was needed for an amendment to Royal Friesland Foods N.V.’s articles of association.

Over the past few weeks, the proposals to cancel the B shares and the depositary receipts for B shares and to modify the method for determining milk prices were discussed with member farmers and holders of depositary receipts in over 60 regional meetings and one meeting of holders of depositary receipts. It became apparent during the regional meetings that a large majority of the member farmers supported the proposals. They expressed a clear preference for the dividends to be distributed entirely on the basis of the volume of milk supplied, i.e. linking the company’s results to the volume of milk. A further preference was that a market rate of interest, not linked to the company's result, be paid for balance sheet funding.

All B shares and corresponding depositary receipts for B shares will be cancelled. Holders of these depositary receipts for B shares may exchange them for newly issued member’s bonds and/or cash at EUR 106 per depositary receipt. A maximum applies to cash payments, which equals 50% of the aggregate value of all depositary receipts for B shares. A member’s bond is a subordinated perpetual bond with a market rate of interest based on 6-month Euribor (currently approximately 4.7%), plus a mark-up during the first three years of 2.5% (thus working out to approximately 7.2% in this example). These member’s bonds will be tradable on an internal market.

The method for determining milk prices will be modified by introducing a permanent mark-up of EUR 0.50 per 100 kilos of milk on top of the present competitive milk price. This modification will likewise be introduced with retroactive effect to 1 January 2008. The present system of using data from index companies will be continued in 2008.