CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES AUDIT REPORT

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES AUDIT REPORT 95

96 97

Contents CONSOLIDATED ANNUAL ACCOUNTS Page Consolidated Balance Sheet 100 Consolidated Income Statement 101 Consolidated Cash Flow Statement 102 Consolidated Statement of Changes in Equity 103-104 Notes to the Consolidated Financial Statements 105-173 CONSOLIDATED ANNUAL ACCOUNTS References to Notes to the Financial Statements I: Detail of group companies 174-175 II: Tangible assets 176 III: Other Intangibles Assets 177 CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED ANNUAL ACCOUNTS IV: Non-Current Financial assets V: Investments accounted for under the equity method VI: Detail of Minority Interests and contribution to consolidated results 178 179 180-181 VII: Minority interests 182 VIII: Long and Short-term provisions 183 CONSOLIDATED MANAGEMENT REPORT References to Notes to the Financial Statements 184-189 99

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES Consolidated Balance Sheets at December 31, () ASSETS NOTE EQUITY AND LIABILITIES NOTE Property, plant and equipment 6 333,549 270,052 Issued capital 52,644 52,644 Goodwill 7 135,477 137,460 Share premium 202,499 202,499 Other intangible assets 8 12,528 14,214 Other reserves 33,274 18,398 Non-current financial assets 9 23,494 24,489 Translation differences 3,616 3,075 Treasury shares (36,124) (2,457) Investments accounted for under the equity method 10 528 680 Profit (loss) attributable to equity holders of the parent 30,093 25,353 Biological assets 953 842 Deferred tax assets 27 29,304 52,935 Equity attributable to equity holders of the parent 286,002 299,512 Other non-current assets - 47 Equity attributable to minority interests 16,453 16,165 Non-current assets 535,833 500,719 Equity 16 302,455 315,677 Biological assets 2,195 1,918 Inventories 11 202,556 220,628 Debentures 17 229,402 258,427 Trade and other receivables 12 99,213 108,491 Interest-bearing loans and borrowings 18 25,474 17,558 Other current financial assets 13 1,086 1,100 Other financial liabilities 19 76,128 62,822 Other current assets 412 988 Deferred tax liabilities 27 26,889 17,433 Cash and cash equivalents 14 207,858 213,370 Other non-current liabilities 20 23,014 26,516 Provisions 21 32,677 22,516 Current assets 513,320 546,495 Non-current liabilities 413,584 405,272 Assets classified as held for sale and discontinued operations 15 58,507 9,490 Debentures 17 1,334 2,774 Interest-bearing loans and borrowings 18 49,486 36,028 Trade and other payables 22 243,374 275,993 Other financial liabilities 24 51,784 1,217 Income tax payable 27 3.824 7.492 Provisions 21 11 18 Other current liabilities 23 13,823 12,233 Current liabilities 363,636 335,755 Liabilities directly associated with assets classified as held for sale and discontinued operations 15 27,985 - Total liabilities 805,205 741,027 TOTAL ASSETS 1,107,660 1,056,704 TOTAL EQUITY AND LIABILITIES 1,107,660 1,056,704 CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES Consolidated Income Statements for the years ended December 31, () Operating revenues Net sales and services 28 864,554 835,016 Increase in inventories of finished goods and work in progress 4,654 3,540 Capitalized expenses of Company work on assets 510 451 Other operating revenues 10,685 9,499 Operating expenses 880,403 848,506 Decrease in inventories of finished goods and work in progress 123 7,208 Consumption of goods and other external charges 438,284 419,532 Employee benefits expense 29 141,386 136,379 Depreciation and amortization 28,971 26,915 Changes in trade provisions 439 1,229 Other operating expenses 214,276 202,834 823,479 794,097 CONSOLIDATED OPERATING PROFIT 56,924 54,409 Finance revenue NOTE Income on loans and other marketable securities 358 763 Other interest and similar income 7,183 3,153 Exchange rate gains 18,306 20,646 Change in fair value of financial instruments 2,759 1,934 28,606 26,496 Finance costs Interest-bearing loans and borrowings 16,332 10,186 Other finance costs 7,441 8,816 Exchange losses 15,459 19,921 39,232 38,923 NET FINANCE COST (10,626) (12,427) Share of profit (loss) of investments accounted for using the equity method (153) 240 Gain (loss) on disposal of non-current assets 7,869 2,113 PROFIT BEFORE TAX 54,014 44,335 Income taxes 27 (22,480) (16,496) PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 31,534 27,839 LOSS FOR THE YEAR FROM DISCONTINUED OPERATIONS 15 (908) (2,203) PROFIT FOR THE YEAR 30,626 25,636 Attributable to: Minority interests 533 283 Equity holders of the parent 30,093 25,353 Earnings per share for continuing operations: 4 - basic, for profit for the year attributable to equity holders of the parent 0,602 0,520 - diluted, for profit for the year attributable to equity holders of the parent 0,602 0,520 Earnings per share: - basic, for profit for the year attributable to equity holders of the parent 0,585 0,483 - diluted, for profit for the year attributable to equity holders of the parent 0,585 0,483 100 101

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENT for the years ended December 31, () NOTE Operating profit from continuing operations 56,924 54,409 Operating loss from discontinued operations 15 (233) (2,336) Depreciation and amortization 28,971 29,586 Other non-cash income and expenses (8,454) (4,744) Operating profit before changes in working capital 77,208 76,915 Changes in working capital (23,190) (8,011) Cash flows from operating activities 54,018 68,904 Net interest expense (14,911) (13,746) Payments for restructuring - (5,151) Income tax paid (2,008) (595) Receipt of government grants 5,455 - Net cash flows from operating activities 42,554 49,412 Amount received from sale of subsidiaries - 5,015 Purchase of fixed assets (41,703) (45,778) Proceeds from sale of fixed assets 15,222 11,307 Purchase of other financial assets (982) (2,744) Acquisitions of subsidiaries 7 (964) - Loans to subsidiaries - (113) Collection of loans granted 38 5,837 Net cash flows used in investing activities (28,389) (26,476) Change in current interest-bearing loans and borrowings 9,359 14,684 Change in non-current interest-bearing loans and borrowings (7,730) (6,531) Purchase/sale of treasury shares (4,049) 5,401 Dividends paid (16,036) (27,312) Net cash flows from financing activities (18,456) (13,758) (4,291) 9,178 Net increase in cash and cash equivalents Cash and cash equivalents at January 1 14 213,370 204,192 Cash and cash equivalents at December 31 14 209,079 213,370 (4,291) 9,178 CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended December 31, () Equity attributable to equity holders of the parent Total equit Minority interests Total Treasury shares Profit for the year attributable to equity holders of the parent Translation difference Other reserves Share premium (Note 16 Issued capital (Note 16) Balance at December 31, 52,644 202,499 18,398 3,075 25,353 (2,457) 299,512 16,165 315,677 Change in measurement of derivative financial instruments - - 5,395 - - - 5,395-5,395 Net increase in reserves for foreign currency translation differences - - - 541 - - 541 26 567 Total income and expense for the year recognized directly in equity - - 5,395 541 - - 5,936 26 5,962 Profit for the year - - - - 30,093-30,093 533 30,626 Total income and expense for the year - - 5,395 541 30,093-36,029 559 36,588 Distribution of profit: To dividends - - - - (16,036) - (16,036) - (16,036) To voluntary reserves - - 13,570 - (13,570) - - - - To reserves at consolidated companies - - (4,253) - 4,253 - - - - Measurement of other own equity instruments - - 164 - - - 164-164 Treasury shares (289) (289) - (289) Sale of treasury shares - - - - - 24,316 24,316-24,316 Purchase of treasury shares - - - - - (57,694) (57,694) - (57,694) Dividends of subsidiaries - - - - - - - (271) (271) Balance at December 31, 52,644 202,499 33,274 3,616 30,093 (36,124) 286,002 16,453 302,455 102 103

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended December 31, (thousands of euros) Equity attributable to equity holders of the parent Total equity Minority interests Total Treasury shares Profit for the year attributable t o equity holders of the parent Translation differences Other reserves Share premium (Note 16) Issued capital (Note 16) Balance at December 31, 2004 52,644 202,499 31,191 (3,049) 39,655-322,940 16,986 339,926 Measurement of derivative financial instruments - - (26,442) - - - (26,442) - (26,442) Measurement of other own equity instruments - - 649 - - - 649-649 Treasury shares - - 3,098 - - (7,003) (3,905) - (3,905) Impact of first-time application of IAS 32 and IAS 39 (Note 2.f) - - (22,695) - - (7,003) (29,698) - (29,698) Change in measurement of derivative financial instruments - - (2,643) - - - (2,643) - (2,643) Net increase in reserves for foreign currency translation differences - - - 6,124 - - 6,124 13 6,137 Total income and expense for the year recognized directly in equity - - (2,643) 6,124 - - 3,481 13 3,494 Profit for the year - - - - 25,353-25,353 283 25,636 Total income and expense for the year - - (2,643) 6,124 25,353-28,834 296 29,130 Distribution of 2004 profit To dividends - - - - (27,312) - (27,312) - (27,312) To voluntary reserves - - 6,005 - (6,005) - - - - To reserves at consolidated companies - - 6,338 - (6,338) - - - - Sale of treasury shares - - (244) - - 13,542 13,298-13,298 Purchase of treasury shares - - - - - (8,996) (8,996) - (8,996) Sale of other own equity instruments - - 446 - - - 446-446 Acquisition of minority interests and other - - - - - - - (1,117) (1,117) Balance at December 31, 52,644 202,499 18,398 3,075 25,353 (2,457) 299,512 16,165 315,677 Campofrío Alimentación, S.A. and Subsidiaries Notes to the Consolidated Annual Accounts 1. Corporate information Campofrío Alimentación, S.A. (the parent Company), with registered office at Avda. de Europa, Parque Empresarial la Moraleja in Alcobendas (Madrid), was incorporated as a private limited company in Spain for an indefinite period on September 1, 1994, under the registered name Conservera Campofrío, S.A. On June 26, 1996 the Company s name was changed to its present name. Campofrío Alimentación, S.A. is the parent of a Group of companies consolidated under the full and equity consolidation methods. Appendix I provides the detail of the companies included in the Campofrío Group consolidation scope, along with their activities, registered addresses and the percentage of ownership. The corporate purpose and principal activity of the parent company and the Group companies are to manufacture, sell and distribute processed and canned meat and derivatives from pork and beef by-products and other food products. The Group operates throughout Spain from factories in Burgos, Villaverde (Madrid), Torrijos (Toledo), Ólvega (Soria), Torrente (Valencia) and Trujillo (Cáceres) and through its subsidiaries in Russia, France, Romania and Portugal. All Group companies fiscal years end on December 31. The consolidated annual accounts have been prepared based of the preliminary annual accounts of the Group companies, drawn up by their respective directors. 2. Basis of presentation of the consolidated annual accounts a) Basis of presentation The accompanying consolidated financial statements were prepared by the directors of the parent company in accordance with the International Financial Reporting Standards (IFRSs) adopted by the European Union (EU IFRS). The Campofrío Group has adopted the latest versions of all applicable standards issued by the EU Accounting Regulatory Committee (EU-IFRS), whose application is mandatory at December 31,. 104 105

The individual annual accounts of each Group company will be presented for approval at the respective General Shareholders Meetings within the periods established by prevailing legislation. The directors of the parent company consider that no significant changes will be made to the consolidated annual accounts as a result of these meetings. The Campofrío Group s consolidated financial statements for are drawn up by the parent company s Board of Directors on March 29, 2007. They are expected to be approved by the parent company s shareholders in general meeting without modification. The figures contained in the documents which make up the consolidated financial statements are expressed in thousands of euros, unless otherwise indicated Interpretations IFRIC 7 Applying the Restatement IFRIC 8 Scope of IFRS 2 Approach under IAS 29 Financial Reporting Mandatory application: financial years beginning on or after in Hyperinflationary Economies March 1, Share-Based payment May 1, IFRIC 9 Reassessment of Embedded Derivatives June 1, IFRIC 10 Interim Financial Reporting and Impairment November 1, IFRIC 11 Group and Treasury Share Transactions March 1, 2007 b) Comparison of information As required by IAS 1, for comparative purposes, the information contained in these consolidated annual accounts for is presented with the information relating to and does not in itself constitute the consolidated annual accounts for. The figures differ from those of the approved consolidated annual accounts due to the application of IFRS 5 relating to discontinued operations in. The results obtained from these operations in have been reclassified from each income statement caption to Loss for the year from discontinued operations solely for comparative purposes. c) Draft IFRS and interpretations of the International Financial Reporting Interpretations Committee (IFRIC) The Campofrío Group has applied all the standards or interpretations issued and in force at January 1,. At the date of preparation of the consolidated financial statements, the following IFRS and IFRIC interpretations have been published, but were not mandatory: IFRIC 12 Service Concession Arrangements January 1, 2008 The directors of the parent company estimate not have a material impact on the consolidated that the adoption of the aforementioned financial statements in the period of their initial standards, amendments and interpretations will application. d) Accounting policies The accompanying consolidated annual accounts measured at carrying amount, which is lower than are made up of the consolidated balance sheet, the fair value less costs to sell. consolidated income statement, the consolidated cash flow statement, the consolidated statement Accounting policies have been applied in a of changes in equity and the notes to the financial consistent manner by all Group companies. statements, which are integral part of the consolidated annual accounts. These consolidated The main accounting principles applied by the annual accounts are presented in accordance Campofrío Group in the preparation of the with historical cost principles except for financial consolidated financial statements under EU-IFRS instruments held for trading and available-for-sale are as follows: financial assets that have been measured at fair value. Non-current assets held for sale have been Standards and amendments Mandatory application: financial years beginning on or after IFRS 7 Financial Instruments: Disclosures January 1, 2007 IFRS 8 Operating Segments January 1, 2009 Amendment to IAS 1 Presentation of Financial Statements Capital Disclosures January 1, 2007 Guidance for amended IFRS 4 January 1, 2007 d.1) Uso de estimaciones The preparation of the annual accounts under EU- IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the amounts of assets, liabilities, income and expenses. These estimates and assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount of the assets and liabilities that are not readily apparent from other sources. 106 107

Estimates and assumptions are reviewed on an ongoing basis. The impact of changes in accounting estimates is recognized in the period in which the estimates are changed if they affect d.2) Basis of consolidation The consolidated annual accounts comprise the financial statements of Campofrío Alimentación, S.A. and subsidiaries. The financial statements for the subsidiaries have the same financial year end as the parent company s and have been prepared using the same accounting standards. Any restatements necessary due to differences in accounting criteria have been made. only that period, or in the period of the changes and future periods if they affect both current and future periods. The information relating to subsidiaries and associates, as well as each company s contribution to consolidated results, is shown in Appendices I (Details of Group companies) and VI (Detail and composition of minority interests and the contribution to consolidated results)), which form an integral part of this note. d.2.4 Transactions between companies included in the consolidation scope The following transactions and balances have been eliminated on consolidation: - Reciprocal receivables and payables and the expenses and income from intra-group transactions. d.2.5 Year-end dates The closing date for the financial statements of the companies making up the Campofrío Group is - Income from the purchase and sale of property, plant and equipment and unrealized gains on inventories, if the amount is significant. - Internal dividends and debit balance due to interim dividends recorded by the company that paid them. December 31. d.2.1 Consolidation principles d.2.6 Minority interests Subsidiaries are consolidated from the date on which control is obtained from the company to the Group, and cease to be consolidated from the moment when that control is transferred away from the Group. In the event of the Group losing control of a subsidiary, the consolidated annual accounts include the results of the portion of the year during which the Group held control. The value of the share of minority interests in equity interests on the consolidated balance sheet and in and results for the year of consolidated subsidiaries Profit (loss) attributable to Minority interests in is shown in Equity attributable to Minority the consolidated income statement, respectively. d.2.7 Translation of financial statements of foreign subsidiaries d.2.2 Subsidiaries The balance sheet and income statement headings The difference between the equity of foreign The full consolidation method is used for companies within the consolidation scope: (i) in which the parent company has a direct or indirect interest greater than 50% and holds a majority of the voting rights in the corresponding governing bodies; (ii) in which the ownership interest is 50% or less and the parent company has control over the management. of consolidated foreign companies are translated to euros at the year-end exchange rate, which means: All assets, rights and liabilities are translated to euros at the exchange rate ruling at the close of companies, including the balance of the income statement, translated at year end exchange rates and the equity obtained translating the assets, rights and liabilities by applying the criteria set forth above are shown under Translation differences, under d.2.3 Associates the foreign subsidiaries accounts. equity in the consolidated balance sheet. Companies over which the Campofrío Group holds no control, but exercises significant influence, have which it holds an interest of more than 20%, with the exception of specific cases in which the Group Income statement headings are translated at the average exchange rate. been consolidated under the equity method. For the purposes of the preparation of the consolidated holds a smaller percentage interest but there is clear evidence of the existence of significant influence. d.3) Goodwill annual accounts, the Group has been deemed to exercise significant influence over the companies in Goodwill acquired in a business combination is initially measured at cost; i.e. the excess of the cost of the business combination over the parent company s interest in the net fair value of identifiable assets, 108 109

liabilities and contingent liabilities acquired from the investee. In subsequent acquisitions of minority interests, any excess of the Group s interest over the fair value of the interest is recognized as an increase in goodwill. If the parent company s interest in the fair value of the identifiable assets, liabilities and contingent liabilities exceed the cost of the business combination, the parent company reconsiders the identification and measurement of the assets, liabilities and contingent liabilities of the acquiree, as well as the measurement of the cost of the business combination. It recognizes any excess that continues to exist after this reconsideration in profit and loss. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired. d.4) Other intangible assets Other intangible assets acquired by the Group are stated at cost less accumulated amortization and any accumulated impairment losses. Internally generated intangible assets -excluding capitalized development costs- are not capitalized. Costs are charged against profits for the year in which they were incurred. An intangible asset is recognized only if it is probable that it will generate future income for the Group and that its cost can be reliably measured. Costs incurred in each particular development project are capitalized when the Group can For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units or groups of cash-generating units expected to benefit from the combination s synergies, irrespective of whether other Group assets or liabilities are assigned to those units or groups of units. Impairment is determined by assessing the recoverable amount of the cash-generating unit or groups of cash-generating units to which the goodwill relates. If the recoverable amount of the cash-generating unit or group of cash-generating units is less than the carrying amount, the Group recognizes an impairment loss. Goodwill impairment losses cannot be reversed in future periods. demonstrate the technical viability of completing the intangible asset in order to use it or sell it, the intention of completing the asset use it or sell it, the ability to generate future economic benefits, the availability of resources to complete it, and its ability to measure expenditure attributable to the intangible asset reliably. Following initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and any accumulated impairment losses. Capitalized development costs are amortized over the period of expected future sales from the related project. The amortization expense on other intangible useful life. Intangible assets are amortized from the assets with finite lives is recognized in the income date they are available for use. The amortization statement on a straight-line basis over their estimated percentages used are as follows: Software Patents and licenses 20% - 25% 5% - 33% Gains or losses arising from the disposal of an asset and recorded in the income statement when intangible asset are carried at the difference between the asset is disposed. the net proceeds and the carrying amount of the d.5) Property, plant and equipment Property, plant and equipment are stated at cost, All other expenses are charged to the consolidated including all costs and expenses directly related to income statement when incurred. the assets acquired until they are available for use and legal revaluations made by the Group up to The depreciation expense is recognized in the the transition date to adjust the value of the assets income statement on a straight-line basis over the to inflation, less accumulated depreciation and estimated useful life of each asset. The assets are any impairment loss. depreciated from the moment they are available for use. Leased assets in which the terms of the contract transfers to the Group substantially all the risks Depreciation is calculated on a straight-line and benefits incidental to ownership are classified basis to write off the cost of the assets over their as leases. Properties acquired by such leases are estimated useful lives, as follows: stated at the lower of their fair value and the present value of the minimum lease payments at the beginning of the lease term, less accumulated depreciation and any impairment loss. Subsequent expenses incurred in connection with the asset are only capitalized when such expenses increase the future economic benefits of the related asset. Elements Años vida útil Buildings 33 50 Plant and machinery 5 16 Other installations, tools and furniture 4 17 Other 4 13 110 111

At each year end, the Group reviews and adjusts, where necessary, the assets residual values, useful lives and depreciation method. In accordance with the accounting treatment allowed by IAS 23, borrowing costs that are directly d.6) Financial Assets Financial investments classified as held for trading are measured at fair value, with any resulting gain or loss recognized in the income statement. Fair value is the market price at the balance sheet date. Loans, receivables, and financial investments which the Group has the positive intent and ability to hold to maturity are recorded at their amortized cost less any impairment losses. Other financial investments held by the Group are classified as available-for-sale and are measured at their fair value. Any changes in fair value are recognized directly in equity ( Other reserves ) except impairment losses, which are included directly in the income statement. When these investments are sold, any accumulated gains or losses directly recognized in equity are included in the income statement. attributable to the acquisition or development of property, plant and equipment are capitalized when assets require more than a year to be ready for use. If an available-for-sale investment has no reference market price in an active market and there is no other way to reasonably determine its fair value, the investment is carried at cost less any impairment loss. Loans and receivables in the balance sheet maturing in under 12 months from the consolidated balance sheet date are classified as current and those maturing in over 12 months as non-current. The Group records the appropriate impairment provisions for loans and receivables when circumstances make it reasonable to classify these assets as bad or doubtful debts. d.8) Impairment of assets d.8.1 Impairment of property, plant and equipment and intangible assets. Impairment losses are recognized for all assets or, Impairment losses in respect of cash-generating units where appropriate, for cash-generating units, when are allocated first to reduce the carrying amount an asset s carrying amount exceeds its recoverable of any goodwill allocated to the cash-generating amount. Impairment losses are recognized in the units and, then, to reduce the carrying amount of consolidated income statement. the other assets based on a review of the individual assets that show indications of impairment. The Group assesses the carrying amount of noncurrent assets at each consolidated balance sheet Except in the case of goodwill, a previously date to determine whether there is any indication recognized impairment loss is reversed if there has of impairment. If any such indication exists, the been a change in the estimates used to determine Group makes an estimate of the asset s recoverable the asset s recoverable amount. Such reversal is amount. recognized in the consolidated income statement. The recoverable amount is the higher of the net The increased amount cannot exceed the carrying sale price and its value in use. In assessing value in amount that would have been determined, net use, the estimated future cash flows are discounted of depreciation, had no impairment loss been to their present value using a pre-tax discount rate recognized for the asset. that reflects current market assessments of the time value of money and the risks specific to the asset. For assets that do not generate highly independent cash flows, the recoverable amount is determined for the cash-generating units to which the asset belongs. d.7) Investments accounted for under the equity method d.8.2 Impairment of financial assets Group investments in associates are accounted for under the equity method of accounting. Under the equity method, investment in associates are carried in the consolidated balance sheet at cost plus postacquisition changes in the Group s share of net assets of the associate less any impairment losses. The consolidated income statement reflects the percentage interest in the results of the associate. When there has been a change recognized directly in the equity of the associate, the Group recognizes its share of the change in Other reserves and discloses this, when applicable, in the statement of changes in equity. When a decline in the fair value of an available for-sale financial asset has been directly recognized in equity and there is objective evidence that the asset is impaired, the cumulative losses previously reported in equity are included in the income statement. The cumulative loss recognized in profit or loss is the difference between cost and If the fair value of a debt instrument classified as available for sale increases and this increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, this loss can also be reversed in the consolidated income statement. current fair value. The recoverable amount of held-to-maturity investments and receivables at their amortized Reversals in respect of equity instruments value is calculated as the present value of expected classified as available-for-sale are not recognized future cash flows discounted at the original in profit for the year. effective interest rate. Current investments are not shown at their discounted value. 112 113

Impairment losses on held to maturity financial an event occurring after the impairment loss was d.11) Trade and other receivables investments or receivables carried at amortized cost are reversed if the subsequent increase in the recoverable amount can be objectively related to recognized. Trade receivables mainly relate to sales made by the Group in Spain and are carried on the accompanying consolidated balance sheet at In the transfer of assets where the Group retains substantially all the risks and rewards of the asset, the asset is not derecognized. A financial liability is d.9) Biological assets Biological assets are measured both initially and at year end at fair value less estimated costs to sell. Gains or losses arising on initial recognition of a biological asset at fair value less estimated costs to sell caused by subsequent changes in fair value less estimated costs to sell are included in the consolidated income statement of the financial year in which they arise. their nominal value, net of the amounts ceded in keeping with the securitization agreement signed by the parent company. Discounted bills pending maturity at December 31 are included in the accompanying consolidated recognized for the same amount as the consideration received and the asset is subsequently measured at amortized cost. The financial asset transferred continues to be measured using the same criteria as before the transfer. Both the income generated on the transferred financial asset and the expenses of balance sheets under Trade receivables, with a the financial liability are recognized in the income d.10) Inventories balancing entry in Interest-bearing loans and statement, without a balancing entry. Inventories are valued at the lower of acquisition or production cost and net realizable value, generally by applying the following criteria: - Commercial inventories, raw materials and other consumables: average weighted cost and in certain Group companies purchase costs on a FIFO (firstin, first-out) basis; both criteria are equivalent. Net realizable value is the estimated selling price in the ordinary course of the Group s business, less estimated costs of completion and the estimated costs necessary to the make the sale. The cost of hams with curing periods of more than a year includes the cost of interest charges directly attributable to their production, which can be calculated according to each product s degree borrowings. The Group derecognizes a transferred financial asset when the rights to receive the cash flows from the assets have been fully transferred or when the Group retains these rights but has assumed an obligation to pay them to a third party or has transferred substantially all the risks and rewards of the asset. The Group makes provisions for bad or doubtful debts to cover balances of a certain age or if circumstances exist that allow them to be reasonably classified as doubtful debts. - Finished goods and work in progress: generally at the average cost of raw and other materials of curing. Capitalized interest on inventories at December 31, and amounts to 4,282 d.12) Cash and cash equivalents consumed and, in certain Group companies, on a FIFO basis. Both valuation criteria are equivalent and include the applicable portion of direct and indirect labor costs and manufacturing overheads. and 4,417 thousand euros, respectively. Cash and cash equivalents comprise cash at banks and in hand and short-term deposits with an d.13) Capital increase costs original maturity of three months or less and not exposed to significant changes in value. When determining the value of inventories of finished goods a degree of wastage must be taken Capital increase costs are recognized in Capital and reserves net of any tax effect. into account for products that undergo a curing process. d.14) Treasury shares Parent company shares held by the Group are cancellation of the treasury shares. Consideration deducted from equity. No gain or loss is recognized paid or received is recognized directly in equity. in profit or loss for the year on the purchase, sale or 114 115

d.15) Provision d.18) Pensions and other post-employment benefits Provisions are recognized in the consolidated Provisions are reviewed at each consolidated The parent Company and certain Group companies The Group is also obliged to pay bonuses to balance sheet where the Group has a present balance sheet date and adjusted to reflect the supplement the retirement, orphan and widowhood certain employees on the basis of length of service. obligation (either legal or tacit) as a result of a past current best estimate of the liability. pensions of certain employees or the beneficiaries Liabilities accrued in this regard are included under event and it is probable that an outflow of resources of these employees. These commitments are based Provisions on the consolidated balance sheets. embodying economic benefits will be required If the effect of the time value of money is material, on individual agreements with employees on an to settle the obligation. Amounts recognized as provisions are discounted using a current pre- entirely voluntary basis and are not binding for provisions are the best estimate of the amounts tax rate that reflects, where appropriate, the risks other employees. The Group has estimated accrued required to offset the current value of those specific to the liability. When discounting is used, actuarial liabilities at December 31, and, obligations at the consolidated balance sheet date. the increase in the provision due to the passage of having recorded provisions under Provisions for time is recognized as an interest expense. liabilities and charges under liabilities on the consolidated balance sheets. d.16) Financial liabilities Financial liabilities are initially measured at fair value less attributable transaction costs. After initial recognition, financial liabilities are measured at amortized cost, with any differences between cost and redemption value recorded in the consolidated income statement over the period of the borrowings using the effective interest rate method. Contracts that require an entity to repurchase own is initially recognized under IAS 39, its fair value (the present value of the redemption amount) is reclassified as equity. Subsequently, the financial liability is recorded under IAS 39. If the contract expires before the cash is paid, the carrying amount of the financial liability is reversed to equity. Liabilities maturing in less than 12 months from balance sheet date are classified as current, while d.19) Government grants Government grants are recognized where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the years necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, its fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset. shares for cash or other financial assets give rise to a financial liability for the present value of the those with longer maturity periods are classified as non-current. d.20) Income taxes redemption amount. When the financial liability Corporate income tax in the consolidated income The Group recognizes deferred tax liabilities for statement includes current and deferred income all taxable temporary differences, except: d.17) Transactions in foreign currency tax. Income tax expense is recognized in the Transactions in foreign currency are translated to euros at the exchange rate ruling at the date of the transaction. Gains or losses from foreign currency transactions are recognized in the consolidated income statement as they occur. Receivables and payables in foreign currency are translated to euros at the year-end exchange rate. Unrealized exchange differences on transactions are included in the consolidated income statement. consolidated income statement except when the tax is directly related to equity, in which case the tax is recognized accordingly in this caption. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to when the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. the tax authorities taking the tax rates prevailing at the consolidated balance sheet date and including in respect of taxable temporary differences any tax adjustments from previous years. associated with investments in subsidiaries and associates, where the timing of the reversal of Deferred income tax is provided using the liability the temporary differences can be controlled and method on temporary differences between the tax it is probable that the temporary difference will bases of assets and liabilities and their carrying not reverse in the foreseeable future. amounts in the annual accounts. 116 117

The Group recognizes deferred income tax date and recognizes them to the extent that it has assets for all deductible temporary differences, become probable that future taxable profit will carryforward of unused tax credits and unused tax allow the deferred tax asset to be recovered. losses, to the extent that it is probable that taxable profit will be available against which the deductible Deferred income tax assets and liabilities are temporary difference, and the carryforward of measured at the tax rates that are expected to be unused tax credits or losses can be utilized, except: applied to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) where the deferred income tax relating to the that have been enacted or substantively enacted at deductible temporary difference arises from the consolidated balance sheet date. the initial recognition of an asset or liability a transaction that is not a business combination Income tax relating to items recognized directly and, at the time of the transaction, affects neither in equity is recognized in equity and not in the the accounting profit nor taxable profit or loss. consolidated income statement. in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assts are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the differed income tax asset to be utilized. The Group also reviews unrecognized deferred income tax assets at each balance sheet d.21) Derivative financial instruments and hedging EThe Group uses derivative financial instruments All derivative instruments are acquired to hedge such as forward currency contracts and interest rate the Group s risks associated with interest rate swaps to hedge its risks associated with interest rate and foreign currency fluctuations. However, in and foreign currency fluctuations. Such derivative accordance with the requirements of IAS 39, some financial instruments are initially recognized at fair of these instruments may no be eligible for hedge value on the date on which a derivative contract is accounting. entered into and are subsequently measured at fair value. Derivatives are carried as assets when the Any gains or losses arising from changes in the fair fair value is positive and as liabilities when the fair value on derivatives that do not quality for hedge value is negative. accounting are taken directly to net profit or loss for the year. The fair value for forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by valuation methods such as discounted cash flow using market interest rates. For the purpose of hedge accounting, hedges are classified as: fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability; cash flow hedges when hedging exposure to variability in cash flows that is neither attributable to a particular risk associated with a recognized asset or liability or a forecast transaction; hedges of a net investment in a foreign operation. A hedge of the foreign currency risk of a firm commitment is accounted for as a cash flow hedge. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting, and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument s effectiveness in offsetting the exposure to changes in the hedged item s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. Hedges that meet the strict criteria for hedge accounting are accounted for as follows: Fair value hedges Fair value hedges are hedges of the Group s exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss. For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged, the derivative is remeasured at fair value and gains and losses from both are taken to profit or loss. For fair value hedges relating to items carried at amortized cost, the adjustment to carrying value is amortized through profit or loss over the remaining term to maturity. Any adjustment to the carrying amount of a hedged financial instrument for which the effective interest method is used is amortized to profit and loss. Amortization may begin as soon as an adjustment exists and must begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the income statement. The changes in the fair value of the hedging instrument are also recognized in profit or loss. 118 119

The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting, or the Group revokes the designation. Any adjustment to the carrying amount of a hedged financial instrument for which the effective interest rate method is used is amortized to profit or loss. Amortization may begin as soon as an adjustment exists and must begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. Cash flow hedges Cash flow hedges are a hedge of the exposure to variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could effect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognized directly in equity (other reserves), while the ineffective portion is recognized in profit or loss. hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken to profit or loss. Hedge of a net investment Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly in equity (translation differences), while any gain or loss relating to the ineffective portion is recognized in profit or loss. On disposal of foreign operation, the cumulative value of any such gains or losses recognized directly in equity is transferred to profit or loss. d.22) Recognition of revenues and expenses Revenues and expenses are recognized at the Interest income moment the goods or services represented by them take place, regardless of when actual payment or Revenue is recognized as interest accrues. collection occurs. Dividends Revenue is recognized to the extent that it is probable that the economic benefits related to the Revenue is recognized when the shareholder s right transaction will flow to the Group and the revenue to receive the payment is established. can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: Sale of goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. d.23) Assets classified as held for sale and discontinued operations d.23.1 Assets classified as held for sale Amounts taken to equity are transferred to the income statement when the hedge transaction affects profit or loss, such as when hedged financial income or expense is recognized or when a forecast sale or purchase occurs. Where the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability. If the forecast transaction is no longer expected to occur, the amounts previously recognized in equity are transferred to profit or loss. If a Assets are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction, rather than through continuing use. This condition is considered to be met when the sale is highly probable, the asset is available for immediate sale in its current state and the transaction is expected to take place within 12 months of its classification as held for sale. d.23.2 Discontinued operations Discontinued operations are those have been disposed of, are available for sale or are classified as held for sale, and represent a separate major line of business or geographical area of operations or are part of a single coordinated disposal plan. Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Once assets are classified as held for sale, they are no longer depreciated. Profit or loss on discontinued operations is presented as a single amount after tax on the face of the income statement. 120 121

d.24) Related parties f.3) Measurement of derivative financial instruments The Group regards as related parties its direct and board members and key managers. At the date of first application of IAS 32 and 39 in reserves or profit and loss depending on the type indirect shareholders and associates, as well as its (January 1, ), the Group measured its derivative of derivative. instruments at fair value, recognizing the amounts d.25) Environmental issues Expenses relating to decontamination and equipment and are depreciated using the same restoration work in contaminated areas, as well criteria described in paragraph d.5) above. as the elimination of waste and other expenses incurred to comply with environmental protection A provision is recorded on the liabilities side of the legislation are expensed in the year to which they consolidated balance sheet to cover the financial relate, unless they correspond to purchases of assets incorporated in equity to be used over an extended expenses relating to any contingent liabilities that could arise due to these concepts. 3. Segment information period, in which case they are recorded in the corresponding heading under Property, plant and The Group s primary segment reporting format - Romania: Production and sale of processed is geographical segments and its secondary (cooked) meats in Romania. e) Changes in consolidation scope information by business segments. The operating businesses are organized and managed separately - Russia: Production and sale of processed meats In, 814 Americas Inc. was sold, and therefore excluded from the consolidation scope. Degaro, S.R.L. Tulcea, which had been accounted for under the equity method until 2004, was included On December 29,, the parent company acquired 100% of the shares of Carnes Selectas 2000, S.A. As a result, this subsidiary was included in the consolidation scope at December 31,. according to the geographical area in which the activity takes place, with each segment being a strategic business unit providing different products and servicing different markets. (cooked and prepared meals) in Russia. - RoW: Holding companies and investments disposed by the Group during the year. as a new subsidiary after the Company acquired an additional interest. The geographical and main commercial activity segments are as follows: The Group s business segments are based on the nature of the products: f) Application of IAS 32 and IAS 39 The restatements made at the beginning of with the first application of IAS 32 and 39 are as follows: - Iberian Peninsula: Production and sale of processed meats (cured hams, cold and cooked meats, and prepared meals) in Spain and Portugal, - Cured hams - Sausages and cooked meats - Other products and corporate structure and corporate structure. f.1) Treasury shares Under IAS 32, treasury shares are deducted from equity and no gain or loss is recognized in profit or loss on the purchase or sale or own equity instruments. Under IFRS, the amount paid or received is recognized directly in equity. - France: Production and sale of processed meats (cured hams and sausages) carried out in France. Information on this segment is presented as a discontinued operation (Note 15). f.2) Equity instruments 3.a) Geographical segments At December 31, 2004, the Company had a contract with a financial entity whereby, among other conditions, the parent Company would the sale of 300,000 shares of the parent company. At January 1,, the Group recognized the fair value of this contract as an increase in equity. The following tables present consolidated income statement and consolidated balance sheet information regarding the Group s geographical segments for the years ended December 31, and (in thousands of euros): compensate the financial entity or receive from it, in cash, the possible loss or profit it could incur in 122 123

Continuing operations Discontinued operations Year ended December 31, Iberia Romania Russia RoW Adjustments Total France Total Operations Operating revenues External operating revenues 757,587 34,576 88,240 - - 880,403 74,221 954,624 Inter-segment operating revenues 54,516 2,788 - - (57,304) - - - 812,103 37,364 88,240 - (57,304) 880,403 74,221 954,624 Operating expenses Supplies 389,857 21,492 61,863 - (34,805) 438,407 39,130 477,537 Depreciation and amortization 23,084 1,797 4,090 - - 28,971 2,571 31,542 Other operating expenses 331,782 10,662 36,092 64 (22,499) 356,101 32,753 388,854 744,723 33,951 102,045 64 (57,304) 823,479 74,454 897,933 OPERATING PROFIT 67,380 3,413 (13,805) (64) - 56,924 (233) 56,691 NET FINANCE COSTS (10,626) (1,100) (11,726) Share of profit of investments accounted for using the equity method (153) - (153) Gain on disposal of non-current assets 7,869 4 7,873 PROFIT BEFORE TAX 54,014 (1,329) 52,685 Corporate income tax (22,480) 421 (22,059) PROFIT FOR THE YEAR 31,534 (908) 30,626 Continuing operations Discontinued operations Year ended December 31, Iberia Romania Russia RoW RoW Total France Total Operations Non-current assets 525,388 20,141 46,388 - (56,084) 535,833 25,851 561,684 Current assets 504,596 12,269 36,149 1,466 (41,160) 513,320 32,656 545,976 TOTAL ASSETS 1,029,984 32,410 82,537 1,466 (97,244) 1,049,153 58,507 1,107,660 Non-current liabilities 406,144 8,976 5,237 706 (7,479) 413,584 6,510 420,094 Current liabilities 319,336 7,354 59,889 274 (23,217) 363,636 21,475 385,111 TOTAL LIABILITIES 725,480 16,330 65,126 980 (30,696) 777,220 27,985 805,205 Purchases of assets (*) 30,044 3,386 7,839 - - 41,269 2,539 43,808 (*) Includes property, plant and equipment of other intangible assets 124 125

Continuing operations Discontinued operations Year ended December 31, Iberia Romania Russia RoW Adjustments Total France Total Operations Operating revenues External operating revenues 708,683 32,091 97,574 1,250 8,784 848,382 76,040 924,422 Inter-segment operating revenues 58,713 1,883 - - (60,472) 124 (124) - 767,396 33,974 97,574 1,250 (51,688) 848,506 75,916 924,422 Operating expenses Supplies 368,824 19,661 67,525 768 (30,038) 426,740 40,144 466,884 Depreciation and amortization 23,211 1,484 2,176 44-26,915 2,671 29,586 Other operating expenses 317,045 9,860 34,780 408 (21,651) 340,442 35,437 375,879 709,080 31,005 104,481 1,220 (51,689) 794,097 78,252 872,349 OPERATING PROFIT 58,316 2,969 (6,907) 30 1 54,409 (2,336) 52,073 NET FINANCE COSTS (12,427) (964) (13,391) Share of profit of investments accounted for using the equity method 240-240 Gain on disposal of non-current assets 2,113 6 2,119 PROFIT BEFORE TAX 44,335 (3,294) 41,041 Corporate income tax (16,496) 1,091 (15,405) PROFIT FOR THE YEAR 27,839 (2,203) 25,636 Year ended December 31, Iberia France Romania Russia RoW Adjustments Total Non-current assets 462,425 25,355 17,635 42,496 - (47,192) 500,719 Current assets 508,409 30,985 10,509 31,995 521 (35,924) 546,495 Non-current assets held for sale 9,490 - - - - - 9,490 TOTAL ASSETS 980,324 56,340 28,144 74,491 521 (83,116) 1,056,704 Non-current liabilities 393,321 26,707 7,194 861 693 (23,504) 405,272 Current liabilities 283,875 23,131 7,548 38,806 172 (17,777) 335,755 TOTAL EQUITY 677,196 49,838 14,742 39,667 865 (41,281) 741,027 Purchases of assets (*) 32,245 3,026 2,440 7,575 - - 45,286 (*) Includes property, plant and equipment of other intangible assets 126 127

3.b) Business segments The following tables present revenue and certain asset information regarding the Group s main At December 31, Cured hams businesses for the years ended December 31, and (in thousands of euros): Cold and cooked meats Other Total 4. Earnings per share Earnings per share amounts are calculated by dividing net profit for the year from continuing operations attributable to ordinary equity holders of the parent by the number of ordinary shares outstanding. parent by the average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Sales to external customers from continuing operations 185,247 593,116 86,191 864,554 Sales to external customers from discontinued operations 6,436 67,785-74,221 Diluted earnings per share amounts are calculated by dividing the net profit from continuing operations attributable to ordinary equity holders of the The Group did not carry out any transaction to lead to a difference between basic and diluted earnings per share. Total segment assets -Continuing operations: Property, plant and equipment and other intangible assets 71,265 225,352 49,460 346,077 Inventories 136,734 54,914 10,908 202,556 -Discontinued operations: Property, plant and equipment and other intangible assets 6,080 13,500 2,526 22,106 Inventories 11,492 4,308 3,745 19,545 Acquisitions of property, plant and equipment From continuing operations 3,183 27,950 10,137 41,270 From discontinued operations 153 1,359 1,026 2,538 Earnings per share from continuing operations Euros - Basic, for profit for the year attributable to ordinary equity holders of the parent 0.602 0.520 - Diluted, for profit for the year attributable to ordinary equity holders of the parent 0.602 0.520 The following reflects the profit and share data used in the basic and diluted earnings per share computations: Net profit attributable to ordinary equity holders of the parent from continuing operations 30,920 27,285 Profit (loss) attributable to ordinary equity holders of the parent from discontinued operations (827) (1,932) At December 31, Sales to external customers from continuing operations 179,494 595,373 60,149 835,016 Sales to external customers from discontinued operations 6,436 69,480-75,916 Total segment assets Cured hams Cold and cooked meats Other Total Property, plant and equipment and other intangible assets 69,768 176,029 38,469 284,266 Inventories 142,240 67,718 10,670 220,628 Acquisitions of property, plant and equipment 3,082 22,819 19,385 45,286 Net profit attributable to ordinary equity holders of the parent 30,093 25,353 Weighted average number of ordinary shares for basic earnings per share 51,403 52,493 Effect of dilution: Share options - - Redeemable preference shares - - Weighted average number of ordinary shares adjusted for the effect of dilution 51,403 52,493 There have been no transactions involving ordinary annual accounts which have not been taken into shares or potential ordinary shares between the account in the calculation of earnings per share in reporting date and the date of completion of these. 128 129

5. Dividends paid and proposed 6. Property, plant and equipment The parent company s Board of Directors will the year ended December 31, for approval at The detail of the movement in this heading in the fully consolidated companies located outside of propose the following appropriation of results for the General Shareholders Meeting: and is provided in Appendix II, which forms Spain is as follows: an integral part of this note. The net value of property, plant and equipment at December 31, and corresponding to To voluntary reserves: Profit for the year 23,967 23,967 At the same meeting, the parent company s Board of Directors will submit a proposal for approval of the payment of a dividend in kind, entailing the delivery of 2,105,749 treasury shares to shareholders in the proportion of one share for every 24 held. This dividend will be charged to the share premium arising from the 13,160,931 euros capital increase and share premium of 86,730,535.29 euros approved by shareholders in general meeting on March 2, 2002 and carried out on May 21, 2002 before registered Madrid notary Manuel Rodríguez Marín under number 1,680 of his protocol. The distribution of parent company profit for the year ended December 31, and paid in was the following: Cost 174,091 161,485 Accumulated depreciation (85,672) (80,826) The net carrying value of plant and equipment held under finance leases included in assets in the 88,420 80,659 accompanying consolidated balance sheet is the following. Buildings, plant and machinery 1,936 12,473 Other 997 921 2,933 12,394 To dividends: Profit for the year 16,036 16,036 The dividend for amounted to 0.30 euros per share. Finance lease payments made prior to amounted to 5,037 thousand euros and in to 2,494 thousand euros, leaving an outstanding balance at December 31, of 9,692 thousand euros. Purchase options amounted to 36 thousand euros. Pending payments by year of maturity in are as follows: 1,217 2007 2,367 2008 1,704 2009 876 Subsequent years 3,528 Total (Note 19) 8,475 130 131

Payments of finance lease liabilities made prior to Pending payments by year of maturity in are amounted to 7,531 thousand euros and in as follows to 2,497 thousand euros, leaving pending payments at December 31, in subsequent years of 2,867 thousand euros. Purchase options amount to 36 thousand euros. 2007 (Note 24) 817 2008 535 2009 246 2010 242 Subsequent years 971 Total (Note 19) 1,994 7. Goodwill and business combinations Goodwill The detail of movements in goodwill for the cashgenerating to which it is allocated in and is the units or groups of cash-generating units following: 31.12.06 Discontinued operations Disposals Translation differences 31.12.05 Increases Decrease for removal from consolidation scope Translation differences 31.12.04 Increases Campofrío Portugal, S.A. 5,168 - - - 5,168 - - - - 5,168 Grupo Campofrío Montagne Noire 1,670 285 - - 1,955 - - (68) (1,887) - Total Meat Marketing, S.R.L. 1,708 - - - 1,708 - - - - 1,708 Grupo Navidul y Omsa Alimentación, S.A. 127,257 - - - 127,257 - - - - 127,257 814 Americas Inc. 578 - - (578) - - - - - - Grupo Campomos 1,188-184 - 1,372 - (28) - - 1,344 137,569 285 184 (578) 137,460 - (28) (68) (1,887) 135,477 132 133

In, 814 Americas Inc. was removed from the consolidation scope due to the sale of the shareholding. Accordingly, the goodwill assigned to the acquisition was cancelled. In, the parent company entered into negotiations over the sale of its shareholdings in the Campofrío Montagne Noire group. The goodwill arising on this cash-generating unit was recognized in Assets classified as held for sale and discontinued operations (see Note 15). The parent company has begun assessing on an annual basis goodwill for any excess of cost over recoverable amount. This assessment is carried out for each of the cash-generating units to which the goodwill is allocated. The recoverable amount is the price at which the cash-generating units could be sold to independent parties less any related transaction costs provided fair value can be estimated reliably. When fair value cannot be estimated reliably or there is indication of an impairment loss, the carrying Business combinations On December 29,, the parent company acquired 100% of the shares of Carnes Selectas 2000, S.A. In these annual accounts, the date of first consolidation for this subsidiary was considered to be December 31,, given the negligible difference between the amounts on both dates. amount of the investee is compared to the value in use obtained from discounted cash flow analysis. These calculations are based on the estimations of the expected future cash flows by the cash-generating units according to current operating results and business plans. According to the judgments and estimates made by the parent company s directors, the expected future cash flows attributable to the cash-generating units or groups of cash-generating units to which goodwill is allocated indicate that the net value of each goodwill allocated at December 31, and may be recovered. Remeasurement of the identifiable assets and liabilities of Carnes Selectas 2000, S.A. to fair value at December 31, and the cost of the business combination were as follows: Assets Property, plant and equipment Appendix II 46,145 21,980 68,125 Other intangible assets Appendix III 206-206 Deferred tax assets 55-55 Non-current financial assets Appendix IV 3-3 Non-current assets 46,409 21,980 68,389 Trade and other receivables 5,721-5,721 Cash and cash equivalents 36-36 Current assets 5,757-5,757 Total assets 52,166 21,980 74,146 Equity and liabilities Note Carrying amount Adjustments Fair value Interest-bearing loans and borrowings 16,998-16,998 Deferred tax liabilities - 6,594 6,594 Non-current liabilities 16,998 6,594 23,592 Interest-bearing loans and borrowings 7,192-7,192 Trade and other payables 4,981-4,981 Other current liabilities 628-628 Current liabilities 12,801-12,801 Total liabilities 29,799 6,594 36,393 Carrying amount of the net assets 22,367 15,386 37,753 Cost and other expenses related to the acquisition 33,455 Difference compared to the cost of the business combination 4,298 The difference between the carrying amount and cost of the net assets acquired in the business combination is recognized in Other operating revenues in the income statement. Net cash used in the transaction was as follows: Cash payment at the acquisition date (1,000) Cash and cash equivalents acquired 36 Net cash used (964) 134 135

As the business was acquired on December 29,, it did not contribute to consolidated revenue or profit for. Had the acquisition taken place on January 1,, it would have contributed 25,041 thousand euros of revenue, which would have been eliminated on consolidation as it entailed sales to the Campofrío group. The contribution to net profit would have been 1,135 thousand euros. Loans to associates (Note 31) - - Loans granted 722 722 Non-current loans on disposal of assets 19,061 20,701 Other loans 161 676 19,944 22,099 8. Other intangible assets The detail of the movement in intangible assets at III, which forms an integral part of this note. December 31, and is shown in Appendix Patents and Licenses In 2000, Omsa Alimentación, S,A,, a subsidiary out activities throughout Europe. As a result of taken over in the year 2003, entered into a brand that agreement, Omsa Alimentación, S,A, paid a license with Oscar Mayer Foods, the terms of which, total of 3,618 thousand euros to be booked as an in compliance with certain conditions, extends to expense over a twenty-year period, the length of the the year 2020 and cover the possibility of carrying contract. Loans to associates mainly relates a loan arranged on October 10, 2002 with Campoaustral, S,A, which is collateralized by a mortgage taken out on the factory where the company carries out its business. The transaction had an initial grace period, with five equal annual payments of principal and interest. The first was paid on September 30,. This loan is repaid at an annual interest rate of Libor plus 1%, Following the sale of the shareholding in Campo Austral, S,A, the parent company settled the loan in. Loans granted corresponds to loans granted by the Group to personnel and to certain members of the parent company s Board of Directors. Loans to board members were granted in 1991 and bear interest below market rates, payable annually. The loans mature on December 18, 2007, but the Group considers them to be long term, as the parent company s directors estimate that they will be renewed upon maturity. Non-current loans on disposal of assets corresponds to the pending receivable balances related to sales of property, plant and equipment made in prior years and bear market interest rates. The most important balance correspond to the non-current receivable from Proinserga de Inversiones, S.A. for the sale made in 2004 of the company Primayor Foods, S.L. The detail at December 31, and by maturity was the following: 9. Non-current financial assets Año 2007 1,415 The detail of the movement in non-current financial assets in and is shown in Appendix IV, Other loans which forms an integral part of this note. Año 2008 1,415 Año 2009 1,886 Año 2010 2,358 Año 2011 2,358 Total 9,432 The detail of this heading is shown below and the movement at December 31, and in Appendix IV: 136 137

10. Investments accounted for under the equity method 11. Inventories The detail of Inventories at December 31 is as The detail of the movement in investments accounted The following table provides a summary of the follows: for under the equity method at December 31, financial information of these investments at and are shown in Appendix V, which forms an integral part of this note. December 31, and : Goods for resale 842 1,661 Raw materials and other consumables 34,888 39,965 Work in progress 125,250 132,170 December 31, Finished goods 41,304 46,668 Byproducts 336 4 Non-current assets Current assets Equity Profit (loss) for the year Non-current liabilities Current liabilities Ordinary revenues Prepayments 183 160 Provisions (247) - Navidul Cogeneración, S.A. 1,220 3,699 1,810 (392) 2,356 1,144 5,497 202,556 220,628 Cogeneradora Burgalesa, S.L. 393 1,497 29 (62) 47 1,815 7,042 Non-current assets Current assets Equity December 31, Profit (loss) for the year Non-current liabilities Current liabilities Ordinary revenues Navidul Cogeneración, S.A. 1,828 3,683 1,129 682 2,272 1,428 6,062 12. Trade and other receivables The detail of this heading at December 31 is the following: Cogeneradora Burgalesa, S.L. 49 1,156 90 2-1,113 5,812 Trade receivables 86,067 86,417 Associates (Note 31) 2,163 2,137 Other accounts receivable 17,406 20,463 Employees 414 525 Tax receivables (Note 27) 14,908 20,757 120,958 130,299 Provisions (21,745) (21,808) 99,213 108,491 138 139

a) Trade receivables c) Provisions At December 31, Trade receives includes 3,405 thousand euros in bills discounted at banks pending maturity (1,857 thousand euros in ). At December 31,, the amount of the collection rights waived by the parent Company pursuant to the contract signed December 30, 2004 between the parent company and BBVA Factoring E.F.C., S.A., as the agent, and other financial institutions b) Other accounts receivable This caption at December 31, and includes a receivable from insurance companies of 6,693 thousand euros. This debt arose out of a claim for damages resulting from an accident that occurred in 2001 in the production center at Rivas (Madrid). Due to the lack of agreement with the insurance companies that should pay the indemnity for the damage, on June 17, 2002 the Group filed a lawsuit in the Court of First Instance number 4 in Alcobendas (Madrid) to recover the amount owed plus late payment interest. At the time of drawing up these consolidated annual accounts no judicial ruling has been issued in this respect. was 111,350 thousand euros (112,612 thousand euros in ). In January, the securitization contract signed with Societé Genérale Bank Nederland N.V. in effect in previous years was cancelled and replaced with the non-recourse factoring contract mentioned previously. The parent company s directors, in agreement with the conclusions reached by their legal advisors, consider that there is no risk of non-payment of the aforementioned indemnities, given that at the time of the accident the insurance policies taken out by the Group had sufficient coverage, and that the problem lies more in a legal interpretation regarding the allocation of the responsibility for paying the claim on the part of the insurers involved. The movement in provisions for bad or doubtful debts in and was the following: Balances at January 1 21,808 20,752 Allocations made in the year 691 1,100 Recovery of balances previously provisioned (125) (38) Provisions applied (565) (6) Discontinued operations (64) - Balances at December 31 21,745 21,808 13. Other current financial assets The detail of Other current financial assets at December 31 is the following: Loans to associates (Note 31) 1,711 1,741 Held-to-maturity investments 24 - Provisions (Note 31) (649) (641) 1,086 1,100 140 141

14. Cash and cash equivalents The detail of this heading at December 31 is the following: Miles de euros Short-term deposits 66,091 190,091 Short-term investments 31,750 19,363 Cash at banks and in hand 110,017 3,916 Short-term deposits at December 31, and mainly includes deposits maturing the following year. These deposits earned interest of 2.98% in (2.13% in ). Short-term investments at December 31, and mainly include a deposit at a financial institution maturing in the following year. This deposit earned interest of 3.36% in (2.09% in ). 207,858 213,370 In the consolidated cash flow statement, Cash and cash equivalents includes: Short-term deposits 66,091 190,091 Short-term investments 31,750 19,363 Cash at banks and at hand 110,017 3,916 Cash at banks and at hand from discontinued operations (Note 15) 1,221-15. Non-current assets held for sale and discontinued operations The detail of assets classified as held for sale and discontinued operations at December 31 was the following: 209,079 213,370 Discontinued operations 12/31/06 Transfers 12/31/05 Additions Disposals Disposals 12/31/04 Additions Property, plant and equipment Cost: Land and buildings 9,452 - - (547) 8,905 - (8,905) - - Plant and machinery 11,869 - (561) (10,661) 647 - (647) - - 21,321 - (561) (11,208) 9,552 - (9,552) - - Accumulated depreciation Buildings (10) - - - (10) - 10 - - Plant and machinery (5,582) - 311 5,219 (52) - 52 - - (5,592) - 311 5,219 (62) - 62 - - Financial Assets 3,156 - (3,156) - - - - - - Assets from discontinued operations - - - - - - - 58,507 58,507 18,885 - (3,406) (5,989) 9,490 - (9,490) 58,507 58,507 142 143

In 2003, the parent company s management entered into negotiations to sell the shareholdings in Primayor Foods, S.L. and Primayor Ganadería, S.A. On March 4, 2004, all shares comprising the share capital of Primayor Foods, S.L. were transferred to Proinserga de Inversiones, S.A. In, Primayor Ganadería, S.A. was sold. In 2004, the Group decided to discontinue activity at the Sollana plant belonging to the Valpro Alimentación, S.A. group, so the related assets were restated as assets classified as held for sale. In, some of the Sollana plant s assets were sold or derecognized. The remainder, which were transferred to other Group plants, were classified as property, plant and equipment. Land and buildings at December 31, mainly relate to the land on which the Sollana plant was located. In, the Group sold the Sollana plant as well as the remaining assets classified as held for sale in to third parties. The purchase price of these transactions were collected in full in. The gain obtained from these transactions amounted to 5,916 thousand euros In, the parent company s management entered into negotiations to sell the shareholdings in Campofrío Montagne Noire, S.A. and subsidiaries. On January 24, 2007, the parent company signed an agreement with a French company outside the Group for the sale of 100% of Campofrío Montagne Noire, S.A. At December 31, the parent company held 90% of this subsidiary s shares. As part of the agreed transaction, on January 24, 2007 it acquired the remaining 10%. At the date of preparation of these consolidated annual accounts, the aforementioned sale transaction had yet to be carried out. The income statement for Campofrío Montagne Noire, S.A. and subsidiaries for and is as follows: Operating revenues Net sales and services 74,221 76,040 Other operating revenues - (124) Operating expenses 74,221 75,916 Consumption of goods and other external charges 39,130 40,144 Employee benefits expense 11,575 11,398 Depreciation and amortization 2,571 2,671 Changes in trade provisions 3 23 Other operating expenses 21,175 24,016 74,454 78,252 OPERATING LOSSES (233) (2,336) Finance revenue Other interest and similar income 1 (371) Finance costs 1 (371) Other finance costs 1,101 593 1,101 593 NET FINANCE COST (1,100) (964) Gain (loss) on disposal of non-current assets 4 6 PROFIT BEFORE TAX (1,329) (3,294) Income taxes 421 1,091 LOSS FOR THE YEAR FROM DISCONTINUED OPERATIONS (908) (2,203) Attributable to: Minority interests (81) (271) Equity holders of the parent (827) (1,932) 144 145

The main assets and liabilities of Campofrío Montagne Noire, S.A. and subsidiaries at December 31 were: Campofrío Montagne Noire, S.A. s consolidated cash flow statement for the years ended December 31, and is as follows: Assets Note Property, plant and equipment Appendix II 21,805 - Goodwill 7 1,887 - Deferred tax assets 1,781 Other intangible assets Appendix III 301 - Non-current financial assets Appendix IV 77 - Non-current assets 25,851 - Inventories 19,545 - Trade and other receivables 11,629 - Other current assets 261 - Cash and cash equivalents 14 1,221 - Current assets 32,656 - ASSETS FROM DISCONTINUED OPERATIONS 58,507 - Operating loss (233) (2,336) Depreciation and amortization expense 2,571 2,671 Operating profit before changes in working capital 2,338 335 Working capital adjustments 1,917 544 Net cash flows from operating activities 4,255 879 Net interest received/(paid) (1,099) (964) Net cash flows from operating activities 3,156 (85) Purchase of property, plant and equipment (2,539) (3,026) Net cash flows used in investing activities (2,539) (3,026) Change in current financial liabilities 2,556 (2,199) Change in non-current financial liabilities (2,181) 2,367 Net cash flows from financing activities 375 168 992 (2,943) Net increase in cash and cash equivalents Cash and cash equivalents at January 1 229 3,172 Cash and cash equivalents at December 31 1,221 229 Equity and Liabilities Notas 992 (2,943) Interest-bearing loans and borrowings 707 - Other financial liabilities 3,752 - Other non-current liabilities Note 20 1,794 - Provisions Appendix VIII 257 - Non-current liabilities 6,510 - Interest-bearing loans and borrowings 7,490 - Trade and other payables 11,619 - Other financial liabilities 719 - Basic and diluted earnings per share for and, calculated as indicated in Note 4, were the following: Earnings per share: from discontinued operations Basic, for profit for the year attributable to equity holders of the parent (0.017) (0.037) Diluted, for profit for the year attributable to equity holders of the parent (0.017) (0.037) Other current liabilities 1,647 - Current liabilities 21,475 - LIABILITIES FROM DISCONTINUED OPERATIONS 27,985-146 147

16. Equity This agreement was approved at the parent Direct or indirect shareholdings equal to 10% company s General Shareholders Meeting on or more in the share capital held by corporate The detail of the movement in capital and reserves Changes in Equity for the years ended December June 25, 2004. investors at December 31 are as follows: is shown in the Consolidated Statement of 31, and. a) Issued capital At December 31, and, share capital consists of 52,643,724 ordinary shares with a par value of one euro each. All shares are subscribed, fully paid and bear the same rights and obligations. All are represented by book entries and are listed on the Madrid and Barcelona stock exchanges. Share capital increase In its meeting held on May 18, 2004, Campofrío Alimentación, S,A, s Board of Directors agreed to submit for approval at the parent company s General Shareholders Meeting a proposal to grant the Board power to approve a capital increase, in either a lump sum or in smaller amounts, of up to 26,321 thousand euros, subject to the terms, limits and conditions set forth in article 153,1,b) and 159,2 of the Spanish Corporation Law. In particular, the aforementioned agreement established that: The capital increase could be approved by the Board of Directors in a lump sum or in smaller amounts by issuing ordinary shares with a par value of one euro each, recorded via the bookentry system, and bearing the same rights as the remaining outstanding ordinary shares. The Board was empowered to determine the date as of which the new shares would be entitled to a portion of the Company s profits. The new shares should be paid in via monetary contributions to capital. The Board of Directors would freely determine t he issue price of new shares. For new share issues, the Board of Directors would be empowered to suppress pre-emptive subscription rights, If the pre-emptive subscription right is maintained, the Board may decide whether to allocate unsubscribed shares in application of pre-emptive subscription rights or declare incomplete subscription under the terms of article 161 of the Spanish Corporation Law. If the Board of Directors were to make use of its power to suppress pre-emptive subscription rights, the issue price of the new shares would be set at the Board s discretion, within the limits of and subject to the provisions of article 159.2 of Spanish Corporation Law. In this case, the Board of Directors could declare incomplete subscription, as set out in article 161 of the Spanish Corporation Law. The Board of Directors would likewise be authorized to request that the new shares be listed on the stock exchange. This authorization would be valid for a maximum period of five years as of the date the agreement granting this power is approved at the General Shareholders Meeting. Company Percentage shareholding Carbal, S.A. (*) 22.20% 22.20% Smithfield Foods, Inc (**) 22.98% 22.41% (*) 10.29% of this shareholding is held by Carbal S.A. through Bitonce, S.L. (**) 20.51% of this shareholding is held by Smithfield Foods, Inc through Cold Field Investments, LLC and 2.47% through Smithfield Insurance Co.Ltd. b) Treasury shares At the General Shareholders Meeting of June 23,, the shareholders approved several motions which included authorizing the Company or its subsidiaries to acquire, during an 18-month period, shares of Campofrío Alimentación, S.A. for treasury shares representing up to 5% of the share capital at a price no greater than 5% of the share price. At December 31,, the Group had 2,588,451 of own equity instruments of the parent company, equivalent to 4.92% of share capital. At December c) Legal reserve Other reserves under equity attributable to equity holders of the parent company at December 31, and included a Legal reserve of 10,529 thousand euros. Companies are obliged to transfer 10% of the profit for the year to a legal reserve until such reserve reaches an amount equal to 20% of the 31,, the Group held 183,362 treasury shares, equivalent to 0.35% of share capital. In, the Company bought and sold treasury shares amounting to 57,694 and 24,316 thousand euros, respectively. In, the Company bought and sold treasury shares amounting to 8,996 and 13,298 thousand euros, respectively. share capital. This reserve is not distributable to shareholders and may only be used to offset a debit balance on the income statement provided no other reserves are available. 148 149

d) Share premium h) Translation differences At December 31, and, the share premium of the parent company, which from the individual annual accounts amounted to 202,499 the parent company s annual accounts prepared under Spanish GAAP of 103,571 thousand euros at December 31, (112,574 thousand euros at The detail of this heading at December 31 is shown in Appendix VI, which forms an integral part of this note. thousand euros, is freely distributable as dividends, provided that the combined amount of the share premium and voluntary reserves does not fall below the unamortized start-up and research and development costs and goodwill appearing in December 31, ). i) Minority interests The detail of the movement in Minority interests at December 31, and is provided in Appendix VII, which forms an integral part of this note. e) Differences arising from converting capital to euros In 2000 the Group denominated its share capital in euros, To assign the shares the exact par value mentioned previously, capital was reduced by 121 thousand euros, This amount was recorded in restricted reserves under the heading Differences arising from converting capital to euros under Other reserves in equity attributable to equity holders of the parent company. 17. Debentures f) Voluntary reserves At December 31, the voluntary reserves of the parent company, which from the individual annual accounts amounted to 6,152 thousand euros (39,178 thousand euros at December 31, ), are freely distributable as dividends provided that the combined amount of the share premium and voluntary reserves does not fall below the unamortized start-up and research and development costs and goodwill appearing in the parent company s annual accounts prepared under Spanish GAAP of 103,571 thousand euros at December 31, (112,574 thousand euros at December 31, ). The detail of debentures issued at December 31 is the following: Non-current debentures 229,402 258,427 Current debentures 1,334 2,774 230,736 261,201 g) Reserves in consolidated companies The balance of this heading on the consolidated subsidiary is shown in Appendix VI, which forms balance sheet comprises the adjusted results of an integral part of this note. subsidiaries, subsequent to the dates of their acquisition up to December 31, and. The detail of Reserves in consolidated companies by On February 20, 2003 the Group issued bonds with a face value of 294,000 thousand dollars. Both the due dates and the interest rates of the issue are affected by the Group s compliance with a series of ratios and other financial covenants, calculated on the basis of the annual audited consolidated accounts for the duration of the issue until its maturity. As stated in Note 26, this issue is hedged by exchange- and interest-rate hedges. The detail of the maturity and interest rates of the debentures is as follows: 150 151

Thousands of dollars Interest rate 2010 75,000 5,41% 2007 At December 31, Subsequent 2008 2009 2010 years Total 2013 199,000 6,15% 2015 20,000 6,34% Total 294,000 Bank loans and credit facilities 33,159 4,945 4,840 3,999 3,314 460 50,717 Discounted bills payable 1,857 - - - - - 1,857 Interest payable 1,012 - - - - - 1,012 At December 31,, accrued interest on the instruments maturing in 2007 amounted to 1,334 thousand euros (2,774 thousand euros at December 31, ), included under Current debentures. 36,028 4,945 4,840 3,999 3,314 460 53,586 Annual interest rates applicable to the loan balances At December 31, the Group has unused drawn down at December 31, range from credit facilities amounting to 105,427 thousand 2.64% to 4.19% (2.35% to 2.94% in ). euros (130,450 thousand euros in ). 18. Non-current and current interest-bearing loans and borrowings 19. Other non-current financial liabilities The detail of this caption at December 31 is as follows: The detail of this caption at December 31 is as follows: Bank loans and credit facilities 70,001 50,717 Discounted bills payable 3,405 1,857 Interest payable 1,554 1,012 74,960 53,586 Finance leases (Note 6) 1,994 8,475 Other non current financial liabilities 476 - Financial assets measured at fair value (Note 26) 73,658 54,347 The classification by maturity is the following: 76,128 62,822 At December 31, 2007 2008 2009 2010 Total Bank loans and credit facilities 44,527 9,183 8,491 7,800 70,001 Discounted bills payable 3,405 - - - 3,405 Interest payable 1,554 - - - 1,554 49,486 9,183 8,491 7,800 74,960 152 153

20. Other non-current liabilities 21. Current and non-current provisions The detail of Other non-current liabilities at December 31 is the following: Deferred income 20,266 24,439 Other liabilities 2,748 2,077 Deferred income mainly includes non-refundable government grants given by Public Institutions to various Group companies related to specific property, plant and equipment investment projects. The parent company s directors consider that all 23,014 26,516 the requirements of the capital grants received are being met. The detail of which at December 31 is the following: The detail of the movement in these headings in and is shown in Appendix VIII, which forms an integral part of this note: Non-current The balance of Commitments with employees includes the provision corresponding to the parent company s and certain Group companies commitments to supplement the retirement, orphan and widowhood pensions currently received by certain retired employees or their beneficiaries. These commitments are based on individual agreements with employees on an entirely voluntary basis, and are not binding for other employees. The Group has estimated accrued actuarial liabilities at December 31, and, having recorded provisions under this heading. any possible commitments that might arise with regard to these sales, Non-current financial assets mainly corresponds to the provision recorded for certain investments, equivalent to the proportion of their negative equity, where the shareholders have the positive intention to maintain the investees. Fixed assets expenses corresponds to the provisions made to cover the estimated costs to be incurred in urban development and demolition as a result of the Expropriation Agreement related to one of the Company s old factory premises and to the sale of a plot of land. The Group deemed it prudent to set up other provisions to cover certain unsettled claims and litigation in. Original grants received Received at the beginning of the year 64,424 58,515 Received during the year 902 5,909 65,326 64,424 Less income recognized Cancellation of government grants (38,872) (34,113) During the year (3,290) (4,759) (42,162) (38,872) Other 2,093 2,084 Items corresponding to companies excluded from consolidation (3,197) (3,197) Discontinued operations (Note 15) (1,794) - (2,898) (1,113) 20,266 24,439 In addition, the parent Company and certain Group companies are obliged to pay bonuses to certain employees on the basis of length of service. Liabilities accrued in this regard are included in this provision. Taxes corresponds to the provision recorded by the parent Company to cover the potential liability relating to contested tax assessments (see Note 27). As a result of the sale of certain fixed assets made by the Group, a provision has been recorded to cover 154 155

22. Trade and other payables 24. Other current financial liabilities The detail of this heading at December 31 is as follows: The detail of this heading at December 31 was the following: Public bodies (Note 27) 7,500 9,282 Payable to related companies (Note 31) 3,245 3,075 Trade payables 232,629 263,636 243,374 275,993 Amounts owed to financial institutions for the purchase of shareholdings 21,509 - Other loans 29,458 - Other financial liabilities (Note 6) 817 1,217 51,784 1,217 Other loans includes the debt derived form two equity link swap contracts entered into by the parent company in with a financial institution bearing interest at the Euribor rate plus a market spread. These contracts expire in 2007 23. Other current liabilities The detail of this heading at December 31 is as follows: Miles de euros 25. Risk management policy Payable to suppliers of property, plant and equipment 6,708 3,277 Wages and salaries payable 6,905 8,644 Other liabilities 210 312 13,823 12,233 The business and operations of Group companies expose them to foreign currency, interest rate and other risks, which are managed centrally. The Group s operations are exposed to two basic types of financial risk: 1. Interest-rate risk, from financing denominated in euros or foreign currency at floating and fixed rates. The Group manages these risks via hedges using derivative financial instruments, with the aim of minimizing or limiting the impact of potential fluctuations in interest and exchange rates. These derivatives are entered into with renowned financial institutions 2. Foreign currency risk, from commercial operations, balance sheet items or financing in foreign currency. 156 157

26. Derivative financial instruments The expected movements in cash in the coming years arising from the derivatives entered into by the from December 31, were the following: The Group s does not generally use financial instruments that expose it to negative market contingencies that could undermine its equity. Only where the risk warrants, the Group uses derivatives or similar instruments in an attempt to achieve maximum effectiveness in the hedging relationship. It avoids speculative positions in the domestic and international financial markets. The Group has designated the fair value, cash flow and other hedge relationships to which it wishes to apply hedge accounting, having complied with the documentation and other content requirements of IAS 32 and 39. The detail of the market value of derivative contracts entered into by the Group at December 31, and and their maturities are as follows: Cash flow hedges (1,452) (1,557) (1,636) (1,695) (25,839) (32,179) Fair value hedges 1,545 693 491 347 (15,390) (12,314) Derivatives at fair value 2007 2008 2009 Subsequent years Totales and with changes in results (1,454) (1,410) (1,369) (1,322) (4,299) (9,854) TOTAL (1,361) (2,274) (2,514) (2,670) (45,528) (54,347) Notional pending maturity Situation at 12/31/05 and 12/31/06: Fair value at 12/31/05 Fair value at 12/31/06 Notional 2010 2013 2015 27. Tax situation Cash flow hedges (32,179) (40,565) 161,324 69,124 73,767 18,433 Fair value hedges (12,314) (24,631) 109,728-109,728 - Derivatives at fair value The detail of amounts due from public bodies at December 31 is the following: and with changes in results (9,854) (8,462) 109,728-109,728 - TOTAL (Note 19) (54,347) (73,658) Current The notional amount of derivative contracts entered into relates to the amount on which future settlement of the derivative is made. The amount recorded against equity during the year ended December 31, corresponding to cash flow hedges and other similar instruments after tax was 5,395 thousand euros. In, this amount was 2,643 thousand euros. The expected movements in cash in the coming years arising from the derivatives entered into from December 31, are the following: Sundry taxes receivable from the Treasury 4,786 10,957 Recoverable VAT 10,122 9,800 Taxes receivable (Note 12) 14,908 20,757 Deferred tax assets Carryforwards of unused tax credits 3,739 16,062 2007 2008 2009 2010 Subsequent years Totales Deferred income tax asset Spanish companies 25,487 36,686 Cash flow hedges (2,319) (2,315) (2,275) (13,984) (19,672) (40,565) Fair value hedges (441) (919) (888) (856) (21,527) (24,631) Foreign subsidiaries 78 187 29,304 52,935 Derivatives at fair value and with changes in results (1,467) (1,393) (1,332) (1,280) (2,990) (8,462) TOTAL (4,227) (4,627) (4,495) (16,120) (44,189) (73,658) 158 159

The detail of credit balances with public bodies is the following: Current Taxes payable to the Treasury 4,738 5,267 Amounts payable to social security agencies 2,523 3,870 Other 239 145 Taxes payable (Note 22) 7,500 9,282 Current tax liabilities 3,824 7,492 Deferred tax liabilities Deferred tax liability 26,889 17,433 Taxable profits, determined in keeping with prevailing tax legislation, are subject to a 35% tax for companies located in Spain and a tax that varies from 16% to 34% for foreign subsidiaries. Nevertheless, the resulting taxable income may be reduced by certain allowable deductions. Campofrío Alimentación, S,A, files taxes under the consolidated tax scheme, as the parent Company of Group no, 54/97 and Gecalial, S.L., Valpro Alimentación, S.A., and La Montanera, S.A., as subsidiaries. The reconciliation of the income tax expense calculated by multiplying accounting profit by the tax rate applicable in Spain and actual income tax is the following: Consolidated profit before taxes 54,014 44,335 Income tax expense calculated at the domestic tax rate 18,905 15,517 Permanent differences From individual companies 1,154 (1,600) From consolidation adjustments 328 64 Deductions and credits (2,079) (390) Adjustments for international tax rates (569) (157) Adjustments for change in the tax rate 778 - Other 3,963 3,062 Income tax expense 22,480 16,496 Effective tax rate 41.6% 37.2% The tax reform in Spain approved by Law 35/, of November 28, changed the general tax rate from 35% to 32.5% in 2007 and 30% thereafter. As a result, the Group has restated its deferred tax assets and liabilities, which will reverse in coming years in accordance with the new tax rates, for a net amount of 778 thousand euros. This amount is recognized in Income tax expense in the consolidated income statement for the year ended December 31,. In, the Group obtained a deduction for reinvestment of extraordinary income provided for by Article 42 of RDL 4/2004 of March 5 on profit of 371 thousand euros, having fulfilled its reinvestment commitment by investing 706 thousand euros in the year. Deductions for reinvestment in prior years are the following: Divestments made in for which the Group received a profit of 520 thousand euros and from which deductions worth 103 thousand euros were made, gave rise to investment commitments worth 691 thousand euros. These commitments were met by investment made in, and the Group availed itself of the deduction for reinvestment of extraordinary income provided for by RDL 4/2004, of March 5. In addition, in the Group met its commitment to reinvest 1,693 thousand euros related to the deferral for reinvestment in preceding years of 1,038 thousand euros related to Omsa Alimentación, S.A. The 1,792 thousand euros of reinvestment commitments related to divestments made in 2003 for which the Group received a profit of 997 thousand euros, and from which deductions worth 199 thousand euros were made, were met by investments made in 2003, with the Group availing itself of the deduction for reinvestment of extraordinary income provided for by Law 43/1995, of December 27, and the RDL 4/2004 of March 5. In addition, the Group recorded 1,181 worth of tax credits for this item as its directors consider that this complies with prevailing regulations. This tax asset was decreased in by 324 thousand euros as a result of the new tax rates applicable to the deduction for reinvestment of extraordinary income from January 1, 2007 arising from the changes in Law 35/ of November 28 on personal income tax withholding and the partial amendment to corporate tax, non-resident withholding and estate tax laws. Divestments made in 2002 for which the Group received a profit of 1,922 thousand euros, and from which deductions worth 327 thousand euros were made, gave rise to investment commitments worth 2,304 thousand euros. These commitments were met by investments made in 2002, and the Group availed itself of the deduction for reinvestment of extraordinary income provided for by Law 43/1995, of December 27. Divestments made in 2001 and previous years for which the Group received a profit of 63,170 thousand euros, and from which deductions worth 10,379 thousand euros were made, gave rise to investment commitments worth 76,628 thousand euros. These commitments were met by investments made in 1999, 2000 and 2001, and the Group availed itself of the deduction for reinvestment of income from past years provided for by Law 24/2001, of December 27. In accordance with current Spanish legislation, taxes cannot be considered definitive until they have been inspected by the tax authorities or the inspection period of four years has elapsed. In December 2000 the inspection process begun in previous years concerning various tax declarations 160 161

filed by the parent company (Income Tax statements for the years 1991 to 1995, Value Added Tax declarations for the years 1993 and 1994 and Personal Income Tax (IRPF) withholdings for the years 1993 to 1995 all inclusive) was completed. As a result of that inspection several tax assessments were issued, some of which were signed in agreement and others in disagreement. In December 2003 the inspection process begun in previous years concerning various tax declarations filed by the companies belonging to the subgroup headed by Omsa Alimentación, S.A. (Income Tax declarations for the years 1997 to 2000, Value Added Tax declarations for the years 1999 to 2001 and Personal Income Tax (IRPF) withholdings and the withholdings and payments on account on equity investments for the years 1991 to 2001 all inclusive) was completed, All the above are the responsibility of Campofrío Alimentación, S.A., except for any part that might be recovered from the guarantee for that purpose provided by the sellers of the shares of Ajino, S,L, acquired in 2003. As a result of this inspection, tax assessments were issued and signed in disagreement. side of the balance sheet in order to cover the risk of an adverse ruling. In accordance with prevailing Spanish tax legislation, when applicable regulations are applied to determine the tax assessment basis and negative tax results are obtained, losses declared may be carried forward to be offset against profits over a period of fifteen years as of the year in which they arise and applied proportionally as deemed appropriate. Loss carry forwards are offset when the tax declarations are filed and may be verified by the corresponding tax authorities. The parent Company at December 31, had the following loss carryforwards to be offset against future profits: Other Group companies had the following loss December 31: carryforwards to be offset against future profits at Available through Available through 2007 3,118 1,025 2008 7,811 2007 3,118 2009 358 2008 7,811 2010 358 2009 358 2011 564 2010 358 2013 309 2013 322 2015 2,640 2015 1,856 2016 4,726 2017 17,564 No limit - 19,884 No limit 3,737 36,149 28. Net sales and services In relation to the tax assessments signed in disagreement and appealed by the parent company due generally to varying interpretations of tax legislation, notwithstanding the uncertainty inherent to all administrative or judicial processes, the parent company s external advisors consider that the final outcome of the appeals filed will be favorable for the Group. Although the parent company s Directors are confident that the ruling on the appeals will be in the Group s favor, they have decided to record a provision on the liabilities The breakdown of net sales and services in and by geographical market is as follows: Spain 644,982 644,060 Foreign market 219,572 190,956 864,554 835,016 Year arising Available through 2002 2017 17,536 162 163

29. Personnel expenses 30. Operating leases The detail of this heading in and is as follows: Wages, salaries, et al, 108,177 106,140 Dismissal indemnities 1,519 1,875 Social security costs 29,094 25,989 Other welfare charges 2,596 2,375 The Group has operating leases on certain assets. These leases have an average life of between 1 and 9 years, with no renewal option included in the contracts and in most cases are adjusted in accordance with the annual CPI. There are no restrictions placed on the Group by entering into these leases. Future minimum operating lease payments at December 31, and are the following: In, the average number of employees of Campofrío Alimentación, S.A. and its fully 141,386 136,379 consolidated subsidiaries is 5,687 (5,712 in ), the detail by professional category is the following: Within one year 1,977 2,018 After one year but not more than five years 2,756 524 More than five years - - 4,733 2,542 Professional category Number of employees Directors, engineers and technical staff 331 362 Administrative staff 440 462 Production staff 3,630 3,562 Sales and distribution staff 1,286 1,326 5,687 5,712 164 165

31. Related-party transactions and balances Associates Transactions with associates were the following: Transactions between the parent company and its have been eliminated on consolidation. The detail subsidiaries, which are related parties, are part of is not disclosed in this note. the companies ordinary business and object and Significant shareholders Revenues Transactions carried out in and with significant shareholders, all on an arms length basis, were the following: Net sales 23 31 Finance revenue 44 39 Other operating revenues 188 180 Expenses 255 250 Significant shareholder Group companies Nature of the relationship Type of transaction Operating expenses, external services 4,793 4,005 4,793 4,005 D. Pedro Ballvé Lantero Campofrío Alimentación, S.A. Contractual Loan 601 601 D. Pedro Ballvé Lantero Campofrío Alimentación, S.A. Contractual Loan interest 24 - The detail of current and non-current receivables from related parties at December 31 is the following: D. Pedro Ballvé Lantero Campofrío Sale of raw Alimentación, S.A. Contractual materials to the Telepizza Group 27 1,193 D. Pedro Ballvé Lantero Campofrío Sale of raw Alimentación, S.A. Contractual materials to Telepizza Group 733 - Smithfield Foods, Inc. Campofrío Sale of 814 Alimentación, S.A. Contractual Americas Inc. (193) 6,429 Smithfield Foods, Inc. Campofrío Purchase of Alimentación, S.A. Contractual goods 1,284 - Smithfield Foods, Inc. Campofrío Alimentación, S.A. Contractual Sale of goods 64 - D. Luís Serrano Martín Campofrío Purchase of Alimentación, S.A. Contractual raw materials to Agroibérico de Raza, S.L. 20,739 30,958 Caja de Burgos Campofrío Acquisition Alimentación, S.A. Contractual of shares 22,509 - Loans to related companies (Non-current financial assets) (Note 9) Campo Austral, S.A. - - Related companies (Trade and other receivables) (Note 12) Cogeneradora Burgalesa, S.A. 71 70 Navidul Argentina, S.A. 803 803 Campofrio Brasil LTDA 771 771 OMSA Francia 314 360 Other 204 133 Loans to related companies (Current financial assets) 2,163 2,137 Caja de Burgos Campofrío Alimentación, S.A. Contractual Loan 24,190 - Navidul Cogeneración, S.A. (Note 13) 1,062 1,100 D. Luís Serrano Martín La Montanera, S.A. Contractual Sale of raw materials to Agroibérico de Raza, S.L. 6,606 8,214 166 167

The detail of payables to related companies at December 31, is as follows (note 22): Cogeneradora Burgalesa, S.A. 1,079 692 Navidul Cogeneración, S.A. 2,166 2,383 3,245 3,075 At December 31, and, the Group had no pension plan or life insurance policies for former or current members of the Board of 2. Identification of senior management and total compensation paid in and : Senior management Directors nor had it given any guarantees on their behalf. Directors and Senior Management Name Position José Luís Macho Conde Group Managing Director Members of the Board of Directors and senior managers of the Campofrío Group, as well as the people and companies they represent, were not involved in any extraordinary and/or relevant transactions to the Company in or. Jesús de la Viuda Martínez Miguel Ángel Ortega Bernal Alfredo Sanfeliz Mezquita General Financial Director General Human Resources Director General Secretary José Miguel Garrido Cristo International Managing Director a) Compensation and other benefits Fernando Valdés Bueno Iberian Peninsula Managing Director The parent Company has adopted the reporting model provided in Appendix I of the Annual Corporate Governance Report for listed companies established by the National Securities Market Commission and approved in its Circular 1/2004 of March 17. 1. Compensation to directors in and : The detail of remuneration accrued in the Group by members of the parent company s Board of Directors at December 31, is as follows: Compensation Total compensation paid to senior management 1,593 1,821 Compensation referred to above relates to shortterm employee benefits. Salaries 985 1,012 Attendance fees 578 510 1,563 1,522 168 169

b) Other information on the Board of Directors The Directors of the parent company have the activity which comprises the parent company s informed that they hold at December 31, corporate purpose: the following shareholdings in companies whose activity is identical, similar or complementary to 32. Commitments and other contingencies a) Guarantees Director Investee Shareholding Position/Function Pedro Ballvé Lantero Tele Pizza, S,A, 22,50% Chairman Desarrollo Ganadero Español, S.A. 38,70% (*) Board Member Fernando Ballvé Lantero Tele Pizza, S,A, 22,50% - Desarrollo Ganadero Español, S.A. 38,70% (*) Board Member Luís Serrano Martín Agroibéricos Deraza, S.L. Less than 5% - Caja de Ahorros Municipal de Burgos (represented by José Mª Achirica Martín) Carnes Selectas 2000, S.A. - Board Member Robert A. Sharpe Smithfield Foods, Inc, Less than 1% President International Operations (*) Indirect investments shared by Pedro Ballvé Lantero and Fernando Ballvé Lantero The Directors have also confirmed the following in respect of positions held and duties performed in companies with identical, similar or complementary activities to those which comprise the activity corresponding to the parent company s corporate purpose and in respect of activities performed on their own behalf or on account of third parties that are identical, similar or complementary to that which comprise the parent company s corporate purpose: Director Company Position/Function Juan José Guibelalde Iñurritegui Jamones Burgaleses, S.A. Chairman The transactions with related parties have been carried out at arm s length. Navidul Extremadura, S.A. Chairman in representation of Campofrío Alimentación, S.A. At December 31, the Group has extended guarantees to third parties totaling 32,578 thousand euros (35,647 thousand euros in ) for various items, the most significant of which are as follows: - 1,262 thousand euros corresponds to a guarantee extended to the Burgos City Council in relation to certain demolition and construction work to be carried out as a result of the Expropriation Agreement on an old Group factory. - 1,928 thousand euros corresponds to guarantees given to EAGF related to the deferred payment of certificates relating to applications for aid from the EU from 1993 to 1995. - 1,771 thousand and 3,629 thousand euros, respectively, correspond to guarantees submitted to the National Inspection Office of the Spanish Treasury for tax assessments related to 1995 and 1993 income tax, respectively which the Company signed in disagreement on December 1, 2000. - 772 thousand euros correspond to a guarantee submitted to the high court of administrative appeals of the Canary Islands to obtain the suspension of a court decision that has been appealed to said court. - 950 thousand euros correspond to a guarantee submitted to cover potential failure to comply with commitments assumed in relation to the representation, distribution and technical assistance contract in the Dominican Republic. - 1,326 thousand euros correspond to the guarantee given in relation to the application for aid for the project to build the Ólvega plant. - 3,837 thousand euros correspond to a guarantee given in relation to the sale of certain items fixed assets made in 2003. - 4,000 thousand euros correspond to a guarantee given to various financial entities in relation to transactions authorized by those entities in favor of Campofrío Montagne Noire, S.A. - 5,486 thousand euros correspond to bank guarantee deposited with the National Tax Inspection Office with regard to tax assessments resulting from an inspection of Grupo Omsa accounts that were signed in disagreement. The Directors consider that any unforeseen liabilities at December 31, arising as a result of the abovementioned guarantees and commitments will not have a significant effect on the annual accounts. 170 171

b) Commitments related to the sale of treasury shares 34. Additional information At December 31, 2004, the parent Company has 2.f.2). This contract was cancelled at maturity a contract with a financial entity whereby, among other conditions, the parent company would compensate the financial entity or receive from it the potential loss or profit incurred in the sale of 300,000 shares of the parent company (see Note in, with the result detailed in the consolidated statement of changes in equity. Audit fees of the Group s consolidated annual accounts and of the individual annual accounts of the companies that comprise the Group in amounted to 684 thousand euros (648 thousand euros in ). In addition, fees paid during the year for other services rendered by the Group s statutory auditor in amounted to 173 thousand euros (294 thousand euros in ). c) Share purchase commitments On January 7, 2003, the parent company signed an agreement with a financial entity and another company whereby it received a call option on all the shares of Jamones Burgaleses S.A. held by the abovementioned companies, to be exercised 33. Environmental issues In and the Group did not incorporate systems, equipment or installations for significant amounts to protect and improve the environment. The net carrying value of related assets included in the accompanying consolidated balance sheet at December 31, amounts to 459 thousand euros (715 thousand euros in ). The Group also recorded in approximately 1,348 thousand euros in environmental protection and improvement expenses (1,032 thousand euros in ). between the fourth year after the signing of the contract and January 31, 2011. The parent company also granted a put option on the same shares to these companies. The accompanying consolidated balance sheet includes no environmental provision given that the parent company s directors consider that at year end there are no potential risks associated with the Group s business regarding prevention, reduction or restoration due to environmental damages and that any related risks that might exist would not be significant. 35. Events after the balance sheet date On January 24, 2007, the parent company signed Alimentación, S.A. had agreed with the Spanish an agreement with a French company outside the Branch of Société Générale that the latter would Group regarding the sale of 100% of Campofrío grant Campofrío a purchase option on a total of Montagne Noire, S.A. At December 31, the 2,105,000 own shares of the parent company. This parent company held 90% of this subsidiary s transaction was agreed upon for the execution of shares. As part of the agreed transaction, on the agreement reached by the Board of Directors January 24, 2007 it acquired the remaining 10%. of the parent company in their meeting held on At the date of preparation of these consolidated February 20, 2007, which established that an annual accounts, the transaction had yet to be dividend in kind would be paid to the shareholders carried out. of the parent company through an equity-settled share base payment On March 1, 2007, the parent company announced that on February 28, 2007 Campofrio 36. Additional note for english translation These financial statements are presented on IFRS). Consequently, certain accounting practices the basis of International Financial Reporting applied by the Group may not conform with Standards adopted by the European Union (EU- generally accepted principles in other countries. 172 173

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAIL OF GROUP COMPANIES December 31, and () Appendix I Page 1 of 2 Percentage ownership Direct Year of Company incorporation Duration Registered address Principal activity Indirect Fully consolidated La Montanera, S.A. (*) 1987 Indefinite Toledo (Spain) Iberian pig farm 100.00 100.00 - - Campofrío Montagne Noire, Manufacture, processing S.A. and subsidiaries (*) 1990 99 years Fenouillet (France) and sale of food products. 90.00 90.00 - - CampoMos and subsidiaries (*) 1990 Indefinite Moscú (Russia) Manufacture, processing and sale of food products. 100.00 100.00 - - Campofrio Portugal, S.A. (*) 1996 Indefinite Mem-Martins (Portugal) Manufacture, processing and sale of food products. 100.00 100.00 - - SC Tabco Campofrío,,S.A. (*) 1991 Indefinite Tulcea (Romanía) Manufacture, processing and sale of food products. 97.92 97.92 - - Tenki International Holding, B.V. (***) 1989 Indefinite Haarlem (Holland) Holding company 100.00 100.00 - - Valpro Alimentación, S.A.. (*) 1994 Indefinite Valencia (Spain) Manufacture, processing, marketing and sale of cattle, pork and sheep food products. 100.00 100.00 - - Campofrío Internacional Finance S.A.R.L. (*) 2003 Indefinite Luxembourg Holding company 100.00 100.00 - - Total Meat Marketing, S.R.L. (***) 2001 Indefinite Nicolae Balcescu (Romania) Holding company 100.00 100.00 - - Navidul Extremadura, S.A. (*) 1997 Indefinite Madrid (Spain) Manufacture of hams and shoulder hams. 47.48 47.48 - - Jamones Burgaleses, S.A. (*) 1998 Indefinite Burgos (Spain) Processed food production services. 40.00 40.00 - - Degaro, S.R.L. Tulcea (****) 2002 Indefinite Tulcea (Romania) Livestock raising - - 100.00 100.00 Carnes Selectas, S.A. (**) 1999 Indefinite Burgos (Spain) Operation of a slaughterhouse and production of meat products. 100.00 - - - Gecalial, S.L. 1984 Indefinite Madrid (Spain) Activities related to marketing, sale, manufacture, processing and industrialization of livestock farming and meat products. 100.00 100.00 - - This appendix forms an integral part of Notes 1 and 2 of the notes to the financial statements and should be read together with them. (*) Audited by Ernst & Young in and (**) Audited by Deloitte (*** ) Not audited (****) Audited by Ernst & Young in CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAIL OF GROUP COMPANIES at December 31, and () Appendix I Page 2 of 2 Porcentaje de participación Direct Year of Company incorporation Duration Registered address Registered address Direct Consolidated under the equity method Navidul Cogeneración, S.A. (*) 1997 Indefinite Madrid (Spain) Implementation and operation of equipment and installations for the development of energy-related technologies. 35.00 35.00 - - Cogeneradora Burgalesa, S.L. (**) 1996 Indefinite Burgos (Spain) Operation of a thermoelectric plant to optimize electricity consumption for industrial and services sector use. 50.00 50.00 - - This appendix forms an integral part of Notes 1 and 2 of the notes to the financial statements and should be read together with it. (*) Audited by Ernst & Young (**) Not audited 174 175

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAILS OF MOVEMENT IN PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, AND () Appendix II 12/31/04 Additions Disposals Additions to consolidation scope Removal from consolidation scope Transfers Other movements (i) 12/31/05 Additions Disposals Additions to consolidation Discontinued operations Other movements (i) scope Transfers 12/31/06 Restated cost Land and buildings 182,450 5,683 (5,807) 735-1,869 3,171 188,101 5,292 (3,138) 41,219 13,704 (26,658) 318 218,838 Plant and machinery 261,564 11,886 (7,858) 722-9,826 3,207 279,347 11,058 (6,808) 26,663 7,858 (14,743) 94 303,469 Other installations, tools andfurniture 50,692 6,223 (1,688) 5 (143) (620) 454 54,923 4,665 (653) 216 1,353 (937) (44) 59,523 Other 22,203 3,225 (1,547) 32 - (9) 695 24,599 1,560 (628) 27 322-104 25,984 Assets under Royal Decree 2/85 53 - - - - - - 53 - - - - - - 53 Prepayments and work in progress 12,268 14,013 (665) 588 - (5,479) 1,866 22,591 19,287 (5) - (26,389) (964) (137) 14,383 529,230 41,030 (17,565) 2,082 (143) 5,587 9,393 569,614 41,862 (11,232) 68,125 (3,152) (43,302) 335 622,250 Accumulated revalued depreciation Buildings (56,071) (3,758) 1,985 - - - (855) (58,699) (4,731) 3,166 - - 10,362 (62) (49,964) Plant andmachinery (174,203) (14,520) 6,656 (8) - (1,048) (2,801) (185,924) (15,750) 9,778-2,518 10,306 72 (179,000) Other installations, tools and furniture (35,576) (4,046) 1,186-44 732 (266) (37,926) (4,554) 545 - - 829 12 (41,094) Other (15,510) (2,562) 1,469 - - 172 (373) (16,804) (2,356) 604 - - - (34) (18,590) Assets under Royal Decree 2/85 (53) - - - - - - (53) - - - - - - (53) (281,413) (24,886) 11,296 (8) 44 (144) (4,295) (299,406) (27,391) 14,093-2,518 21,497 (12) (288,701) Provisions (156) - - - - - - (156) - 156 - - - - - 247,661 16,144 (6,269) 2,074 (99) 5,443 5,098 270,052 14,471 3,016 68,125 (634) (21,805) 323 333,549 (i) The balances shown in this column mainly reflect the impact of translation differences related to foreign companies. This appendix forms an integral part of Note 6 of the notes to the financial statements and should be read together with it. CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAIL OF MOVEMENTS IN OTHER INTANGIBLE ASSETS FOR THE YEARS ENDED DECEMBER 31, AND () Appendix III 12/31/04 Increases Decreases Translation differences Transfers Additions to consolidation scope Removal from consolidation scope 12/31/05 Increases Decreases Additions to Translation consolidation Discontinued differences Transfers scope operations 12/31/06 Cost Development expenses 975 789 (33) 116-18 - 1,865 - - (17) (19) - - 1,829 Patents and licenses 6,722 786 (3) 247 - - - 7,752 62 (6) (47) 126 - (2,473) 5,414 Software 29,903 830 (3) 235 82 6 (323) 30,730 1,490 (170) 20 2,131 386 (470) 34,127 Work in progress 994 1,607 (185) - (82) - - 2,334 241 - - (1,440) - - 1,135 Lease premiums - 243 (19) - - - - 224 - - - - - - 224 Other 2,201 - - 34 - - - 2,235 153 (330) (2) (174) - - 1,882 40,795 4,255 (243) 632-24 (323) 45,140 1,946 (506) (46) 634 386 (2,943) 44,611 Accumulated amortization Development expenses (246) (362) - - - - - (608) (435) 6 10 - - - (1,027) Patents and licenses (2,533) (461) 2 - - - - (2,992) (586) - 11 - - 2,234 (1,333) Software (22,377) (3,620) 45 (33) - - - (25,985) (2,702) 164 (34) - (180) 408 (28,329) Other (1,173) (54) - (114) - - - (1,341) (53) - - - - - (1,394) (26,329) (4,497) 47 (147) - - - (30,926) (3,776) 170 (13) - (180) 2,642 (32,083) 14,466 (242) (196) 485-24 (323) 14,214 (1,830) (336) (59) 634 206 (301) 12,528 This appendix forms an integral part of Note 8 of the notes to the financial statements and should be read together with it. 176 177

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAIL OF MOVEMENTS IN OTHER NON-CURRENT FINANCIAL ASSETS FOR THE YEARS ENDED DECEMBER 31, AND () Appendix IV 12/31/04 Increases Removal from consolidation scope Decreases Additions to consolidation scope Transfers and other Removal from consolidation scope movements 12/31/05 Increases Decreases Additions to consolidation scope Transfers to discontinued operations Transfers and other movements 12/31/06 Investment held to maturity Campoimport, S.L. 87 - - - - - 87 - - - - - - 87 Frigotrans, Lda. 327 - - - - - 327 - - - - - - 327 Toreador, S.L. 19 - - - - - 19 - - - - - - 19 Grupo Navidul Portugal Lda. 819 - - - - - 819 - - - - - - 819 Navidul Argentina, S.A. 1,588 - - - - - 1,588 - - - - (357) - 1,231 NBF Brasil, Ltda.. 228 - - - - - 228 - - - - - - 228 Larrabezúa Inmobiliaria, S.L. 4 - - - - - 4 - - - - - - 4 Corporación Empresarial 585 - - - - - 585 - - - - - - 585 Sodical, S.A. 300 - - - - - 300 - - - - - - 300 Roscamimpex 35 - - - - - 35 - - - - - - 35 Auxiliar de Cobros, S.A. 6 - - - - - 6 - - - - - - 6 Dibaq Nutripet, S.L. 540 - - - - - 540 - - - - - - 540 Calidalia, S.A. 40 - - - - - 40 - - - - - - 40 Back 2 Basic, S.L. 308 - - - - - 308 - - - - - - 308 Fleury Michon Especialitées d Europe 198 - - - - - 198 - - - - - - 198 Other 1,545 134 - - - - 1,679 1,253 - (264) - - - 2,668 Navidul Especialidades Europeas, S.A. 194 - - - - - 194 - - - - - - 194 6,823 134 - - - 6,957 1,253 - (264) - (357) - 7,589 Other loans 28,186 49 - (5,007) (1,129) 22,099 19 - (225) - (81) (1,868) 19,944 Held-to-maturity investments 273 - - (1) - 272 21 - (1) 3-295 35,282 183 - (5,008) - 30,457 1,293 - (490) 3 (438) (1,868) 27,828 Provisions (4,839) - - - - (4,839) - - 144-361 - (4,334) 30,443 183 - (5,008) (1,129) 24,489 1,293 - (346) 3 (77) (1,868) 23,494 This appendix forms an integral part of Note 9 of the notes to the financial statements and should be read together with it. CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAILS OF MOVEMENT IN INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHODFOR THE YEARS ENDED DECEMBER 31, AND () Appendix V Navidul Cogeneración, S.A. Cogeneradora Burgalesa S.L. Degaro SRL Tulcea TOTAL Balances at December 31, 2004 396 44 303 743 Share in: Results 1 239-240 Additions to consolidation scope due to full consolidation - - (303) (303) Balances at December 31, 397 283-680 Share in: Results (137) (16) - (153) Balances at December 31, 261 267-528 This appendix forms an integral part of Note 10 of the notes to the financial statements and should be read together with it. 178 179

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAIL OF MINORITY INTERESTS AND CONTRIBUTION TO CONSOLIDATED RESULTS at December 31, () Appendix VI Page 1 of 2 Share of minority interests in Contribution to Company Percentage ownership Capital Reserves Total Translation differences Benefits (loss) for the year Capital and reserves Translation differences Profit (loss) or the year Reserves in consolidated companies for continuing operations Reserves in consolidated companies for discontinued Translation operations differences Profit (loss) Fully consolidated Valpro Alimentación S.A. 100% 12,020 4,007 16,027-8,364 - - - (248) - - 3,705 La Montanera, S.A. 100% 902 5,004 5,906-582 - - - 1,234 - - 582 Campofrío Montagne Noire, S.A. and subsidiaries 90% 17,341 (2,344) 14,997 - (919) 1,959 - (81) - (14,525) - (828) CampoMos and subsidiaries 100% 15,453 31,095 46,548 (3,521) (16,951) - - - 11,899-1,916 (16,951) Campofrio Portugal, S.A. 100% 5,000 (3,598) 1,402-466 - - - (38,873) - - 466 SC Tabco Campofrío, S.A. 97.92% 12,152 (271) 11,935 1,884 2,766 248 39 57 5,027-1,845 2,708 Tenki International Holding B.V. and subsidiary (*) 100% 2,721 (3,393) (672) - (35) - - - (12,351) - - (35) Gecalial, S.L. 100% 41,316 (10,650) 30,666-2,146 - - - 48 - - 2,146 Campofrio Internacional Finance S.A.R.L (*) 100% 12 76 88-62 - - - 76 - - (178) Jamones Burgaleses, S.A. 40% 8,665 143 8,808-503 5,285-302 43 - - 19 Navidul Extremadura, S.A. 47.48% 13,626 2,347 15,973-486 8,390-255 1,014 - - 231 Degaro, S.R.L. 100% 1,000 (225) 775 20 79 - - - (705) - (165) 79 Carnes Selectas 2000, S.A. 100% 17,841 4,527 22,368 - - - - - - - - - Total Meat Marketing SL (*) 100% 100 (48) 52 20 215 - - - (47) - 20 215 148,149 26,724 174,873 (1,597) (2,236) 15,881 39 533 (32,882) (14,525) 3,616 (7,841) Consolidated under the equity method Navidul Cogeneración, S.A. 35% 1,923 (113) 1,810 - (391) - - - (224) - - 137 Cogeneradora Burgalesa, S.A. 50% 30 63 93 - (33) - - - 33 - - 16 1,953 (50) 1,903 - (424) - - - (191) - - 153 150,102 26,674 176,776 (1,597) (2,660) 15,881 39 533 (33,073) (14,525) 3,616 (7,994) This appendix forms an integral part of Note 16 of the notes to the financial statements and should be read together with it. (*) Unaudited CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAIL OF MINORITY INTERESTS AND CONTRIBUTION TO CONSOLIDATED RESULTS at December 31, (Figures in thousands of euros) Appendix VI Page 2 of 2 Share of minority interests in Contribution to Company Percentage ownership Capital Reserves Total Translation differences Benefits (loss) for the year Capital and reserves Translation differences Profit (loss) Reserves in consolidated companies Translation differences for the year Profit (loss) Fully consolidated Valpro Alimentación S.A. 100% 12,020 3,267 15,287-740 - - - (1,375) - 1,127 La Montanera, S.A. 100% 902 4,477 5,379-527 - - - 705-527 Campofrío Montagne Noire, S.A. and subsidiaries 90% 17,341 (135) 17,206 - (2,209) 2,230 - (271) (12,592) - (1,932) CampoMos and subsidiaries 100% 6,788 39,177 45,965 (3,059) (8,082) - - - 19,978 2,498 (8,082) Campofrio Portugal, S.A. (previously Fricarnes, S.A.) 100% 5,000 (3,748) 1,252-150 - - - (39,023) - 150 SC Tabco Campofrío, S.A. 97.92% 12,152 (3,273) 8,879 681 3,056 184 15 63 2,034 668 2,993 Tenki International Holding B.V. and subsidiary (*) 100% 2,721 (3,384) (663) - (9) - - - (12,341) - (9) Gecalial, S.L. 100% 41,316 (11,014) 30,302-364 - - - (316) - 364 Campofrio Internacional Finance S.A.R.L (*) 100% 12 246 258-70 - - - 246-70 Jamones Burgaleses, S.A. 40% 8,665 77 8,742-517 5,245-310 17-207 Navidul Extremadura, S.A. 47.48% 13,626 2,003 15,629-344 8,208-181 854-163 Degaro, S.R.L. Tulcea 100% 1,000 (152) 848 (47) (73) - - - (633) (97) (73) Total Meat Marketing SL (*) 100% 100 (50) 50 6 2 - - - (50) 6 2 121,643 27,491 149,134 (2,419) (4,603) 15,867 15 283 (42,496) 3,075 (4,493) Consolidated under the equity method Navidul Cogeneración, S.A. 35% 1,923 (795) 1,128-682 - - - (462) - 239 Cogeneradora Burgalesa, S.A. 50% 30 60 90-3 - - - 31-1 1,953 (735) 1,218-685 - - - (431) - 240 123,596 26,756 150,352 (2,419) (3,918) 15,867 15 283 (42,927) 3,075 (4,253) This appendix forms an integral part of Note 16 of the notes to the financial statements and should be read together with it. (*) Unaudited 180 181

CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES MOVIMIENTO DE INTERESES MINORITARIOS PARA LOS EJERCICIOS ANUALES TERMINADOS EN 31 DE DICIEMBRE DE Y () Appendix VII Navidul Extremadura, S.A. Jamones Burgaleses, S.A. Campofrío Montagne Noire, S.A. Grupo CampoMos SC Tabco Campofrío, S.A. TOTAL Balances at 12/31/2004 8,209 5,548 3,036 8 185 16,986 Share in Results 181 310 (271) - 63 283 Translation differences - - - - 15 15 Other movements - (303) (808) (8) - (1,119) Balances at 12/31/ 8,390 5,555 1,959-263 16,165 Share in Results 255 302 (81) - 57 533 Translation differences - - - - 24 24 Other movements - (271) - - - (271) Balances at 12/31/ 8,645 5,586 1,878-344 16,453 This appendix forms an integral part of Note 16 of the notes to the financial statements and should be read together with it. CAMPOFRÍO ALIMENTACIÓN, S.A. AND SUBSIDIARIES DETAILS OF MOVEMENT IN LONG AND SHORT-TERM PROVISIONS at December 31, and () Appendix VIII 12/31/04 Increases Decreases Transfers 12/31/05 Increases Decreases Discontinued operations 12/31/06 Non-current Commitments with employees 1,917 32 (192) - 1,757 - (100) (227) 1,430 Non-current financial assets 1,901 - - - 1,901 - - - 1,901 Taxes 8,136 - - - 8,136 - - - 8,136 Commitment for sale of fixed assets 4,970 - (89) - 4,881 - - - 4,881 Fixed asset expenses - - - 1,340 1,340 - (88) - 1,252 Other 4,500 - (39) 40 4,501 10,946 (340) (30) 15,077 21,424 32 (320) 1,340 22,516 10,946 (528) (257) 32,677 Current Restructuring 4,513 - (4,473) (40) - - - - - Fixed asset expenses 1,751 - (411) (1,340) - - - - - Other 318 - (300) - 18 - (7) - 11 6,582 - (5,184) (1,380) 18 - (7) - 11 This appendix forms an integral part of Note 21 of the notes to the financial statements and should be read together with it. 182 183

Campofrío Alimentación, S.A. and Subsidiaries Consolidated Management Report In accordance with the provisions of article 171 of Spanish Corporation Law, as amended, the most relevant facts related to business activity for Campofrío Alimentación, S.A. and subsidiaries (the Campofrío Group) for are indicated below. This Consolidated Management Report complements the economic and financial information provided by the Group, which is expanded on in the Notes to the Consolidated Financial Statements. In addition to this report, the annual report is published prior to holding the General Shareholders Meeting to approve the annual accounts for. This report describes the key events in the development of the Group during the year and presents a summary of the financial information compared to previous years. Following the guidelines of the Aldama Report, the Financial System Reform Law and the Freedom of Information Law, the parent company will post its annual report on its Web page at www.campofrio. es as it has done in past years, thereby meeting the aims of transparency and dissemination recommended by those three documents. CAMPOFRÍO ALIMENTACIÓN, S,A, AND SUBSIDIARIES CONSOLIDATED MANAGEMENT REPORT 1. Business performance and operations of Campofrío Alimentación, S.A. and subsidiaries The Campofrío Group reported net attributable profit for of 30 million euros, 19% higher than the 25.4 million euros obtained in. Revenue in the year rose 4%, from 835 million to 865 million euros. Despite record high raw materials prices, the Group still managed to increase operating profit in by 5%, from 54.4 million euros to 56.9 million euros. Throughout the year, the Iberian Peninsula division fared extremely well, enabling Campofrío to become one of the largest food groups in Spain and leader in its segment, achieving higher growth than the market. Profit before taxes for the division soared 33% to 64 million euros, while the pre-tax/sales 185

margin improved 26%. This strong performance was achieved despite an average 8.5% increase in raw materials prices to five-year highs. This was made possible by the general strategy followed by the Group during the year. To back its brands, the Group considerably stepped up spending on marketing and innovation. Its guiding principle of Health, Flavor and Convenience led new products to contribute 16.5% of brand revenue in Spain. In addition, Campofrío Alimentación, S.A. met the targets of its strategy laid out for in the Cured Ham division. The development of its Navidul brand helped drive a 25% increase in operating profit before taxes. Meanwhile, the division increased its presence in the self-service segment, achieving a 26% increase in the year. In the International division, Campomos, the Group s subsidiary in Russia, continued to struggle, mostly due to a 25% jump in raw material prices in that country. Nonetheless, the Campomos brand was strengthened and is now the second choice among Russians. This, coupled with a reduction in operating expenses and the self-supply farm initiative begun in, greatly improves the subsidiary s chances to grow in modern distribution, while leading the refrigerated prepared dishes market. In Romania, Tabco-Campofrío bolstered its leadership position and continued to command high margins. The self-supply farm initiative covers much of the subsidiary s supply needs. It has been highly successful and played a huge role, as did innovations and the project team. The increase in consolidated operating profit, lower financial expenses and higher gains from the disposal of assets not used in operations fuelled a 22% increase in profit before taxes from continuing operations to 54 million euros. On December 29,, the parent company acquired 100% of the shares of the Spanish company Carnes Selectas 2000, S.A. The Group s net financial debt at year end stood at 225 million euros, 37% higher than the year before. The increase came from the recent acquisition of the Carnes Selectas 2000, S.A. slaughterhouse, the 41.7 million euro investment plan carried out during the year (e.g. the start-up of the farm initiative in Russia and the new Torrijos warehouse), as well as the recognition of parent company treasury shares. 2. Events subsequent to December 31, On January 24, 2007 the Group entered into an the Board of Directors of the parent company in agreement with French company Maïsadour their meeting held on February 20, 2007, which Vivadour Val de Sèvre Holding regarding the sale established that an dividend in kind would be of 100% of the shares of the Montagne Noire paid to the shareholders of the parent company Group for approximately 14 million euros. The through an equity-settled share base payment via transaction will imply a cash inflow for the Group the delivery of one share for every 24 held, subject of 50 million euros. to the related adjustments. This implies more than an 80% increase on last year s dividend taking the On March 1, 2007, the parent company announced share price recorded at December 31,. that on February 28, 2007, Campofrío Alimentación, S.A. had agreed with Société Générale, Spain branch, a call option in favor of Campofrío on 2,105,000 shares of the parent company held by that company. This transaction was agreed upon for the execution of the agreement reached by 3. Number of employees In, the Group had an average of 5,687 employees, down from 5,712 in. 4. Research and development activities In the Iberian Peninsula, the Group s plans going restructuring is complete and the farm initiatives forward are to remain committed to its core business are underway. The Group hopes its commitment to and continue innovating through investment in innovating and developing new product categories marketing and RD&I, while streamlining costs and will lead to better results. pursuing operating excellence. For the international business, it will endeavor to maintain its leadership position in Romania and Russia now that 186 187

5. Acquisition of treasury shares At December 31,, the Group held 2,588,451 During, the Group bought and sold own shares of the parent company, representing 4.92% 57,694 and 24,316 thousand euros, respectively, of of share capital. At December 31,, the Group own equity instruments. In, it bought and sold held 183,362 treasury shares, equivalent to 0.35% 8,996 and 13,298 thousand euros, respectively. of share capital. On March 29, 2007, the members of the Board of Directors of Campofrío Alimentación, S,A, (the parent company) have drawn up the consolidated annual accounts, made up of the consolidated balance sheet, the consolidated income statement, the consolidated cash flow statement, the consolidated statement of changes in equity and the notes to the consolidated financial statements for the year ended December 31,, as well as the consolidated management report for the year then ended, signed by each one in the Spanish original of this document, and by the Secretary to the Board of Directors on all the pages of these documents for identification, 6. Risk management policy D. Pedro Ballvé Lantero (Chairman) D. Luis Serrano Martín (Vice Chairman) The business and operations of Group companies The Group manages these risks via hedges using expose them to foreign currency, interest rate and derivative financial instruments, with the aim of other risks, which it manages. minimizing or limiting the impact of potential fluctuations in interest and exchange rates. The Group s operations are exposed to two basic types of financial risk: These derivatives are entered into with renowned financial institutions. The choice is based on the D. Juan José Guibelalde Iñurritegui (Board Member) D. Fernando Ballvé Lantero (Board Member) 1. Interest-rate risk, from financing denominated service and counterparty risk in current transactions, in euros or foreign currency at floating and fixed with importance attached to the institution s rates. belonging to the Group s banking pool. 2. Foreign currency risk, from commercial operations, balance sheet items or financing in foreign currency. D. Guillermo de la Dehesa Romero (Board Member) D. Robert A. Sharpe (Board Member) Caja de Ahorros Municipal de Burgos D. Yiannis Petrides (representada por D. José Mª Achirica) (Board Member) (Board Member) D. Manuel Gil Madrigal D. Alfredo Sanféliz Mezquita (Board Member) (Secretary-Non-board member) 188 189

CAMPOFRÍO ALIMENTACIÓN S.A. ANNUAL ACCOUNTS CAMPOFRÍO ALIMENTACIÓN, S.A. Balance sheet at December 31, and (Expressed in thousands of euros) ASSETS LIABILITIES Fixed assets Shareholders equity Start-up cost 67 565 Share capital 52.644 52.644 Intangible assets 111.618 121.087 Share premium 202.499 202.499 Fixed assets 138.120 125.047 Reserves 34.807 51.660 Investments 204.744 161.379 Profit for the year 23.967 16.036 454.549 408.078 313.917 322.839 Deferred expenses 1.089 1.223 Deferred income 7.319 8.926 Current assets Provisions for liabilities and charges 32.594 22.177 Stock 182.404 180.111 Debtors 107.979 108.907 Short-term investments 114.947 225.310 Long-term creditors Short-term own shares 17.343 1.170 Group and associated companies 271.052 271.052 Cash at bank and in hand 104.816 229 Other creditors 1.944 284 Prepaid expenses 44 230 Unpaid portion of equity investments 286 286 527.533 515.957 273.282 271.622 Current liabilities Amounts owed to credit institutions 58.314 5.413 Group and associated companies 68.121 38.320 Trade creditors 206.061 227.974 Other non-trade debt 23.563 27.987 356.059 299.694 Total 983.171 925.258 Total 983.171 925.258 The acconpanying notes form an integral part of the consolidated annual accounts 191

CAMPOFRÍO ALIMENTACIÓN, S.A. Profit and Loss Acount for the years ended December 31, and (Expressed in thousands of euros) EXPENSES INCOME Operating Expenses Operating Income Decrease in stocks of finished products and work in progress - 5.102 Consumption of goods 350.518 325.107 Net turnover 721.553 684.905 Personnel expenses 107.652 104.212 Increase in stocks of finished goodsand work in progress 3.642 - Depreciation and amortization expense 25.815 25.600 Changes in trade provisions (29) 385 Work performed by the Company on fixed assets 114 55 Other operating expenses Other operating income External services 193.372 185.643 Ancillary income 5.081 6.128 Taxes 3.556 3.119 Other grants 618 673 Total operating expenses 680.884 649.168 Total operating income 731.008 691.761 Operating profit 50.124 42.593 Financial costs Financial income Group subsidiaries 15.024 12.630 Income from equity investments 859 202 Associated companies 78 29 Income from other marketeable securities and long-term receivables 169 405 Other debts 6.011 6.932 Other interest and similar income 5.733 3.804 Foreign Exchange losses 39 56 Exchange gains 9 48 Total financial expenses 21.152 19.647 Total financial income 6.770 4.459 Continue CAMPOFRÍO ALIMENTACIÓN, S.A. Profit and Loss Acount for the years ended December 31, and (Expressed in thousands of euros) EXPENSES INCOME Profit on ordinary activities 35.742 27.405 Net financial expenses 14.382 15.188 Extraordinary losses and expenses 2.530 8.971 Extraordinary profit and income 2.981 6.193 Extraordinary income 451 - Extraordinary losses - 2.778 Profit before taxes 36.193 24.627 Income taxes 12.226 8.591 Profit for the year 23.967 16.036 The acconpanying notes form an integral part of the consolidated annual accounts. 192 193

CAMPOFRÍO ALIMENTACIÓN, S.A. Avenida de Europa, 24 Parque Empresarial La Moraleja 28108 Alcobendas - Madrid (España) Tel: (34) 91 484 27 00 www.campofrio.es