1
CONTENTS
HIGHLIGHTS                                                                               1
CHAIRMAN’S STATEMENT                                                         2
CHIEF EXECUTIVE’S STATEMENT                                              4
FINANCIAL REVIEW                                                                    7
BOARD OF DIRECTORS AND CORPORATE ADVISERS             9
DIRECTORS’ REPORT           11
CORPORATE GOVERNANCE REPORT           13
CORPORATE SOCIAL RESPONSIBILITY REPORT           15
ENVIRONMENTAL COMPLIANCE REPORT           16
REMUNERATION COMMITTEE REPORT           17
INDEPENDENT AUDITOR’S REPORT           19
CONSOLIDATED BALANCE SHEET           20
CONSOLIDATED INCOME STATEMENT           21
CONSOLIDATED CASH FLOW STATEMENT           22
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS’ EQUITY           23
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS           24
NOTICE OF ANNUAL GENERAL MEETING           52
SHAREHOLDER INFORMATION           53
HIGHLIGHTS
January 06 Citing sanitary concerns about the quality of raw milk in Ukraine, Russia imposes the de-facto import ban on
the Ukrainian dairy products.
March 06 The Russian import ban triggers massive overcapacity in the Ukrainian domestic production of hard and
processed cheeses.
May 06 Due to the effects of the Russian import ban, Group incurs its first monthly loss; cost
rationalisation programme commenced.
September 06 Cost rationalisation programme is completed with substantial annualised cost savings.
October 06 New product – smoked sausage cheese – is successfully launched throughout Ukraine.
December 06 New skimmed milk powder (SMP) dryer is installed at Starokonstantiniv Dairy Plant; the Group’s SMP capacity
is nearly doubled. 2
CHAIRMAN’S STATEMENT
IN RETROSPECT, 2006 WAS A YEAR OF A FULL-BLOWN CRISIS FOR THE DAIRY INDUSTRY OF
UKRAINE. ALTHOUGH THE GROUP WAS ADVERSELY AFFECTED BY THE RUSSIAN IMPORT BAN
ON THE UKRAINIAN DAIRY PRODUCTS, WE MANAGED TO PRESERVE OUR CORE OPERATIONS
INTACT, TO CUT THE COSTS WHEREVER WE COULD, AND TO BUILD STRONG BASE FOR
GROWTH IN THE FUTURE.
Results
In the context of this challenging environment, I am pleased to announce the Group’s annual
results for 2006. Sales were ‡35.1 million, down from ‡39.9 million in the previous year. On a
comparable basis, EBITDA is reported at ‡2.8 million, as against ‡3.5 million (‡2.9 million
1
) in
the previous year. Profit before tax was ‡1.2 million compared to ‡2.3 million (‡1.8 million
1
) in
2005. Significantly, gross profit margin improved to 20.7% from 16.9% in 2005.
As one of Ukraine’s leading dairy producers, we are ingrained in the fabric of the country’s
business environment. As a significant food exporter, we are also dependent on world markets
and international politics. Imposed in January 2006, the Russian import ban on Ukrainian dairy
products was as much a political decision as it was a turning point for the entire dairy industry of Ukraine. Under huge pricing
pressure and a massive transfer of value to the consumers, Ukrproduct Group successfully resisted the industry-wide price
reductions. I am delighted to confirm that this strategy has worked well – the Group can report trading results for 2006 that are
broadly in line with the pre-crisis results for 2005.
Dividends
The Group is committed to a balanced dividend policy whereby the shareholders are rewarded in line with the trading performance
while a balance between reinvesting profits and dividend distributions is maintained. As a result, the Board is recommending a final
dividend payment of 0.51 pence per ordinary share for the year ended 31 December 2006 which would lead to 0.61 pence per
ordinary share for the full year. If approved at the AGM, the final dividend will be paid on 29 June 2007 to shareholders on the
register as at 1 June 2007.
Strategy
Ukrproduct Group continued with its strategy of developing and retaining its market position
in two core product segments – processed cheese and packaged butter. These will be
supplemented soon by hard cheese – a product that we expect will play a key role in
expanding the Group’s range and in helping to retain and expand the customer base.
The Group’s manufacturing capability remains one of the most up-to-date in Ukraine; a
significant amount of capital expenditure was dedicated this year to both building the new
hard cheese plant and to improving the existing asset base to ensure high quality of the
product offering. The largest single asset put into operation in 2006 was the new skimmed
milk powder (SMP) production facility – this is a timely addition to the Group’s existing SMP
capacity in the midst of a very favourable price trend in the world market.
Brands remain the backbone of our business but it is true to say that this year they have had
to withstand a number of challenges. Intense price pressure, a glut of substitute products in
the market and more discerning consumers have all combined to provide for the most
challenging trading environment in years. Under these conditions, the Group’s premier brands
such as “Our Dairyman” retained their leading market positions and substantially improved
margins. We are dedicated to strengthening our core brands, as well as cautiously nurturing
new brands in hard cheese.
Our distribution network, as in prior years, played a key role in supporting the Group’s sales.
While retail chains develop dynamically in Ukraine, the more traditional channels of
distribution, such as open-air markets, continue to play a material role in selling the Group’s
products. Our distribution subsidiaries throughout Ukraine provide valuable services, and
supply the Group’s executives with quality feedback on most recent developments. We are
satisfied with the current distribution arrangements and in the future we shall be making every
1
 In brackets are comparable alternate prior year figures adjusted for the foreign exchange gain on translation
differences 3
effort to make sure that this distribution structure is supported and maintained.
Since becoming a public company in 2005, the Group has undergone a substantial transformation and is now a vertically integrated,
pan-Ukrainian operator with a significant asset base and leading domestic market shares in processed cheese and packaged butter.
We are also encouraged by our established export operations.
On behalf of the Board, it is with pride and confidence that I congratulate everyone at the Group for their steadfast achievements in
what was a very trying business environment last year. Success is built by people and for people – I am extremely confident that the
coming years will see the significant results of our joint effort.
Jack Rowell
Chairman
23 April 2007 3 3
CHIEF EXECUTIVE’S STATEMENT
IN 2006, UKRPRODUCT GROUP COMBATTED THE ADVERSE CONSEQUENCES OF THE
RUSSIAN IMPORT BAN ON UKRAINIAN DAIRY PRODUCTS AND FINISHED THE YEAR
WITH GOOD OPERATING PROFIT AND A STRONG BALANCE SHEET. IN AN EXTREMELY
CHALLENGING ENVIRONMENT, WE STRENGTHENED THE GROUP’S ASSET BASE,
RETAINED ITS MARKET-LEADING POSITIONS AND PRESERVED THE GROUP’S CORE
DISTRIBUTION CAPABILITY. BY IMPROVING THE QUALITY OF EARNINGS, WE BELIEVE
THAT FOUNDATIONS HAVE BEEN BUILT FOR HEALTHY ORGANIC GROWTH IN THE FUTURE.
Introduction
Much as we are used to the vibrant nature of Ukraine’s business environment, 2006 proved
exceptionally volatile by any measure. The year started with introduction by the Russian
veterinary authorities, of what effectively became an import ban on Ukrainian dairy products.
Remaining in force throughout the year, the ban was the year-defining event. It most profoundly
affected the Ukrainian manufacturers of hard cheese; in particular, those who traditionally
supplied close to 100% of their output to Russia. Suddenly deprived of the long-accustomed
access to the Russian market, these manufacturers dramatically increased supply into the
Ukraine domestic market resulting in substantially reduced prices for hard cheeses. Although
Ukrproduct Group did not produce hard cheese or export to Russia at the time, the indirect
effects of significant oversupply were felt by the Group almost immediately. Some of the
surplus in hard cheese was re-processed into soft cheese thus flooding the Group’s core
markets and putting intense price pressure on its entire product range. Product substitution
effect also had a negative impact: given the plentiful supply of low-priced (albeit often low-
quality) hard cheese, some customers switched from processed cheese in favour of hard
cheese.
In their totality, by mid-year all these developments caused a significant deterioration of
the business environment for the entire dairy industry in Ukraine. In the first six months
of the year, basic product prices remained low and the determination of dairy producers
to maintain sales volumes added to pricing pressures. In this situation, Ukrproduct
Group, although better positioned than some of its competitors to withstand these
pressures, was unable to prevent the first monthly operating loss in its history in May.
Moreover, further margin compression resulted in June and July.
As an immediate response to these pressures, a cost rationalisation programme was
launched, resulting by September in a significant improvement of the Group’s financial
position and a leaner cost base. In parallel, as a matter of business principle, the Board
adopted a strategy of maintaining margins at the sake of volume sales, in particular, by
reducing its presence at open-air markets which traditionally had been a high volume
outlet for processed cheese and butter but at margins lower than those achievable in
other areas.  In the remainder of the year, our strategy proved successful and, despite
lower sales volumes for processed cheese, margins and volumes in every other product
were maintained.  In particular, sales of packaged butter finished the year at a similar
volume to the previous year and at better margins.  Our emphasis, at all times, on quality
found favour with consumers who, encouragingly, appear to be prepared to pay a higher
price for a better quality product.  Throughout the entire year, sales of skimmed milk
powder (“SMP”), our third major product, remained strong although depressed world
prices impacted upon margins in the first half.  The second half, however, proved reasonably
successful as the concurrent droughts in the US and Australia reduced the supply of SMP to
the world market and lead to increased prices.
As a result of these developments, the Group’s sales of ‡35.1 million in 2006 were below those
of 2005. However, we believe the quality of sales and earnings have been substantially enhanced
and, as a consequence of our firm decision to preserve profitability, gross margins have
improved at the gross level to 20.7% in 2006 from 16.9% in the previous year.
Overall, it is my firm belief that not only did we finish 2006 in much better financial shape
than an overwhelming majority of competitors in Ukraine but we also managed to achieve
greater efficiencies throughout the entire business of the Group. 5
Operating review
In the 2005 Annual Report, we noted “slowing GDP growth and weaker consumer spending” in Ukraine. Subsequently, the economy
appeared to gather steam but, by the middle of the year it was clear that food consumption was not going to recover to the levels
observed in 2003-2005; consecutive increases in gas and electricity prices and accumulation of mortgage and personal debts
combined to put pressure on consumers’ food budgets.
Against this background for food consumption, we are pleased with the production and sales of the Group. Production of processed
cheese was 12,800 tonnes (2005: 14,700 tonnes) while output of packaged butter remained stable at 9,200 tonnes in both 2006 and
2005. Production of milk powder also increased during the year totalling over 4,000 tonnes (2005: 3,700 tonnes).
During the year, operating developments of the Group continued according to plan.
Notwithstanding the challenging business environment, the capital expenditure programme continued as planned. The majority of
expenditure was deployed in the building of a new hard-cheese plant at the site of one of our operating plants, Starkon. The hard-
cheese plant is scheduled to become fully operational in May 2007, with trial batches coming off in June and full capacity likely to be
achieved by the end of the year. When fully operational, the plant will be producing up to 3,600 tonnes of hard cheese annually.
Encouragingly, the trading environment and timing for our entry into the domestic hard cheese market appears very favourable for
the Group as small-scale manufacturers are increasingly being put out of business by a combination of high raw milk prices,
inadequate product quality and an inability to reach customers efficiently. With our national network, we believe the Group is much
better positioned to mitigate these factors and to capitalise on the opportunities that the hard cheese segment offers.
Another important capital expenditure item was the installation, in December 2006, of the new SMP dryer at the Starkon plant. The
timing of its installation proved fortunate as, by the end of 2006,  world SMP prices recovered. The new SMP dryer has nearly
doubled the Group’s SMP production capacity and, most importantly, allowed the Group to produce an output of excellent quality
with broader customer acceptance. At the beginning of 2007, the new installation was running at full capacity and is expected to
provide the Group with further significant sales in 2007.
As in the previous year, the Group’s distribution capability was a cornerstone of our performance in 2006. We made selective
investments in our distribution subsidiaries which, in turn, provided the guidance and support to the Group’s sales team in
strengthening relationships with leading retailers. We are seeing the results of our continuing efforts as retailers are keen to retain
and support pan-Ukrainian food manufacturers. At this stage of development, the organised retail chains in Ukraine are keenly
interested in securing a reliable supply of quality foods to their stores.  The directors of the company are aiming for  Ukrproduct
Group to be a partner of choice for such retailers.
Prospects
The Board believes that the Group’s core markets in Ukraine of processed cheese and packaged butter have reached a certain level of
maturity. Consumption-only driven growth has moderated and is unlikely to deliver substantial benefits to the Group. The Board is
looking for future growth by expanding the Group’s market share in traditional products, entering adjacent markets and exploiting
opportunities outside of Ukraine. We are keen to pursue all these routes.
Domestically in Ukraine, our market share in processed cheese and packaged butter should remain intact. Although still challenged
by low-quality, low-price producers, we are observing a gradual return to more normal trading patterns. Stable quality and
predictability of supply from Ukrproduct Group remain the major factors of attraction for emerging retail chains.
Over the years, Ukrproduct Group has paid particular attention to building a vertically integrated operation to maintain the stability of
sales and profitability, notwithstanding the fluctuations in the operating environment. Our industrial assets are now capable of
producing all semi-processed materials required for production of processed cheese and butter; with the launch of the hard-cheese
plant we will extend the value-added chain into reprocessing of whey and production of whey powder. Various stages of our value-
added process help the Group to remain a balanced dairy producer thus securing the overall stability of business.
Another important aspect of our business is customer differentiation. When developing the Group’s distribution capability in the
years of fast growth, we have always kept in mind various customer segments and distribution channels. Some of these channels,
such as independent distributors, have been – and largely remain – reliable partners; their margins are determined by their ability to
deliver agreed sales targets with planned margins. Some other channels, such as open-air markets and small shops, have proved
more of a challenge from the viewpoint of cost of service and margins. Recognising differences in customer requirements, we have
divided our product trademarks among various distribution channels. Such trademarks as “Our Dairyman” and “Kremlin” will only be
supplied to the retail distribution channels whereas “People’s Product”, “Nash CyrOK” and “Divogray” will be channelled through
open-air markets. This division allows the Group to cater to different customer audiences and maintain a cost-effective balance
between customer value and profitability.
Our brand portfolio is another important facet of our business. We believe our brands preserve our sales base and secure profit 6
margins by ensuring customer recognition and delivering a price premium over comparable products. During times of intense price
pressure, our brands such as “Our Dairyman” have maintained volumes and the margins. Two new brands will be introduced with the
launch of our own hard cheese production in May this year. These brands will be positioned in the quality segment of the market.
Outlook
Following the events of 2006, the executive team intends to put a renewed emphasis on the development of branded quality products
for the medium and high-income consumers. For the first time in the Group’s history, our major new initiative – the entry into the
hard cheese market – will be specifically intended for high-end customers. In our other core segments, we are following a similar
approach and are keen to move products upwards both in terms of customer value and price. Our approach is balanced; we are
conscious that dairy products are staple food for the majority of the population, thus any upmarket initiative must be based on the
strength and recognition of our core brands. Importantly, the upmarket product segments have very high entry barriers as capital
expenditure and quality requirements are substantial. Over recent years, we have conducted a substantial modernisation programme
of the Group’s plants resulting in a solid asset base.  We believe that we are well-positioned to capitalise on the growing taste for
quality foods among Ukrainian consumers.
On the basis of our expertise in launching new products and building dairy plants, we are currently working on an expansion
programme for the next five years.
2006 was a significant test of the Group’s ability to progress in a fast-changing, demanding business environment. Our response to
this test gives us confidence for the future.
Iryna Yevets
Chief Executive Officer
23 April 2007 7
FINANCIAL REVIEW
THE MARKET TURMOIL IN 2006 CURTAILED THE EXPECTED GROWTH OF THE BUSINESS AND LIMITED THE POTENTIAL FOR
NET PROFIT. NOTWITHSTANDING THIS SETBACK, THE GROUP MAINTAINED OPERATING PROFITS, SIGNIFICANTLY IMPROVED
ITS OPERATING CASH FLOW AND STRENGTHENED BALANCE SHEET.
Results
The results of the prior year 2005 benefited from the foreign exchange gain on translation differences of ‡0.6 million. As a result of
the change in accounting estimate (please refer to note 5 to Financial Statements), there is no comparable income in the current year
2006. The comparable figures for EBITDA, PBT and net profit adjusted for this item show the alternate prior year figures to reflect the
underlying trading performance of the business.
Sales are reported at ‡35.1 million compared with ‡39.9 million for 2005.  By segment, processed cheese accounted for 36% of
sales or ‡12.7 million; butter for 33% or ‡11.6 million and milk powders for 20% or ‡7.0 million with the balance made up by third-
party products and services. EBITDA for the year was ‡2.8 million versus ‡3.5 million (‡2.9 million
2
) in 2005. Profit before taxes
(PBT) was ‡1.2 million compared to ‡2.3 million (‡1.8 million
2
) with net profit of ‡1.1 million versus ‡2.0 million (‡1.4 million
2
) in
2005. Gross profit margin increased from 16.9% in 2005 to 20.7% in the year under review.
Profitability was adversely affected by a significant increase in the depreciation charge. In 2006, this amounted to ‡1.4 million
compared to ‡0.9 million in 2005 and was a reflection of the substantial increase in the Group’s asset base.
Product segments
The following table shows the gross and PBT margins for 2005 and 2006.
The gross margin in cheese improved slightly as a result of the executive decision to preserve profitability by restricting the sales
volumes. In butter, the dramatic improvement in margins is mostly attributable to a greater production of the own butter with higher
margins. In milk powders, the margins essentially remained stable.
Cash flow and capital expenditure
The net cash flow from operating activities during the year was ‡3.8 million versus a net outflow of ‡1.2 million in 2005. This
reflected a decrease in trade receivables and inventory; the former reflecting the tighter credit terms and the latter, the reduction in
the inventory stored due to the improved availability of semi-processed dairy materials.  The underlying cash generation of the
Group remained strong thus allowing the Group to carry on with the planned capital expenditure of ‡4.5 million. The main
investments were made at the Starkon plant – the installation of the new SMP dryer – and building works and equipment for the
hard-cheese plant.
Bank facilities
The Group has a working capital facility of up to ‡4.5 million provided by Ukraine OTP bank at interest rates fixed in both Hryvna and
US Dollar. Overdraft facilities of up to ‡0.5 million are also available to the Group from various banks in Ukraine. The facility is
renewable in May 2008 and has various clauses protecting the Group from the occurrence of unexpected events. Further funding for
working capital needs and project finance, if necessary, is available from either the principal bankers or other banking institutions in
Ukraine.
 
Cheese Butter Milk powders 
Product / Year 
2006 2005 2006 2005 2006 2005 
Gross margin, % 24.1 23.3 24.7 14.8 12.3 11.4 
PBT margin, % 5.0 9.6 10.1 3.7 9.2 9.5 
 
 
2
 In brackets are comparable alternate prior year figures adjusted for the foreign exchange gain on translation differences. 8
Earnings per share
The basic earnings per share (EPS) in the year were 2.6 pence as compared to 5.0 pence (3.6 pence
2
) in 2005. The basic EPS has
been calculated by dividing net profit attributable to ordinary shareholders by the time-weighted average number of shares in issue
throughout the year. The diluted earnings per share were 2.6 pence for the year versus 4.8 pence (3.4 pence
2
) in 2005.
Dividends
In view of the Group’s positive trading performance and strong cash generation, the Board is recommending a final dividend of 0.51
pence per ordinary share for the year ended 31 December 2006 which would lead to 0.61 pence per ordinary share for the full year
(2005: 0.85 pence). If approved at the AGM, the final dividend will be paid on 29 June 2007 to shareholders on the register as at 1
June 2007.
Dmitry Dragun
Chief Financial Officer
23 April 2007 9
BOARD OF DIRECTORS AND CORPORATE ADVISERS
From left to right:
Sergey Evlanchik
Iryna Yevets
Dr Jack Rowell
Dr Dmitry Dragun
Alexander Slipchuk
Iryna Yevets
Chief Executive Officer
Iryna Yevets is responsible for the Group’s overall performance and operational strategy in Ukraine. Iryna is a qualified accountant
who started her own company, Audit Legal Services in Ukraine in 1994. In 2001 she took up a position as chief accountant at
Latoritsa, a leading integrated food company based in Western Ukraine. She then joined Ukrproduct Group in 2002 as Finance
Director, becoming President of the Ukrainian operating company in 2003 and Chief Operating Officer of the Group in 2004. Iryna
holds Honours in Economics & Engineering from Lviv Engineering University and Global Executive MBA from Erasmus University
(The Netherlands).
Dr Jack Rowell OBE
Non-executive Chairman
Dr Jack Rowell OBE has served as a Board member since November 2004. Dr Rowell has acted as Chairman of a number of
companies in the public and private sectors and was previously a Director on the Board of Dalgety plc with responsibility for the
Consumer Foods Division. Prior to this Dr Rowell was CEO of Golden Wonder, part of the Dalgety Group, and finance director and
then CEO of Lucas, (also part of the Dalgety Group). In parallel to his business career he has long been involved with rugby, being
England coach between 1994 and 1998.
Dr Dmitry Dragun
Chief Financial Officer
Dr Dmitry Dragun is Chief Financial Officer of the Group. Dr Dragun worked at National (Central) Bank of Belarus in a variety of senior
executive positions before joining the Oxford MBA Programme in 1997. Post-MBA, Dmitry has remained in the UK as the Senior
Research Associate in finance at Templeton College, Oxford University’s designated centre of business studies and executive
development. Dmitry joined Ukrproduct Group in 2003 as financial and investment adviser, and was later appointed CFO of the
Group. Dmitry holds PhD degree in International Finance and the Chartered Financial Analyst (CFA
®
) certification.
Alexander Slipchuk
Executive Director
Alexander Slipchuk studied at Far-Eastern High Engineering Marine School in Russia and graduated as a maritime navigator in 1989.
Together with his partner Sergey Evlanchik, Alexander established the securities house Alfa-Broker in 1994, developed the equity
trading business in the far east of the Russian Federation, and acquired initial stakes in the companies that later became part of
Ukrproduct Group. Later in 1998, Alexander took the executive positions at the Molochnik and the Starakonstantinovskiy Dairy
plants, Ukrproduct’s two main operating assets. He serves as the Group’s Executive Director responsible for strategic oversight of the
Group’s operations in Ukraine.
Sergey Evlanchik
Executive Director
Sergey Evlanchik is a founder of Ukrproduct Group. He studied at Vladivostok State University of Economics & Service in the Russian
Federation and Oxford University in the UK, where he received his MBA degree. Together with Alexander Slipchuk, he established the
equity trading company, Alfa-Broker in 1994. After the recess of the Russian and Ukrainian equity markets in 1998, Sergey re-
focused his activities on business development in the industrial sector of Ukraine, the dairy business in particular, joining the
management boards of the companies that later formed Ukrproduct Group. 10
Registered Office
26 New Street
St Helier
Jersey JE2 3RA
Registered Number
88352
CORPORATE ADVISERS
Company secretary
Bedell Secretaries Limited
PO Box 75
26 New Street
St Helier
Jersey JE2 3RA
Nominated adviser and broker
W H Ireland Limited
11 St James’s Square
Manchester M2 6WH
Registered accountants and auditors
BDO Stoy Hayward LLP
8 Baker Street
London W1U 3LL
Jersey legal advisers
Bedell Cristin
PO Box 75
26 New Street
St Helier
Jersey JE4 8PP
Principal bankers
Deutsche Bank International Limited
PO Box 727
St. Paul’s Gate
New Street
St Helier
Jersey JE4 8ZB
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU 11
DIRECTORS’ REPORT
The Directors present their report and the audited financial statements of Ukrproduct Group Ltd for the year ended 31 December
2006.
Principal activities and business review
The main activity of the Company (Ukrproduct Group Ltd) is that of a holding company. The main activities of Ukrproduct Group are
the production and distribution of branded dairy foods in Ukraine and the export of milk powders. The Group is one of the largest
branded food producers in Ukraine with its own nationwide distribution network. More detailed commentary on the Group’s activities
during the year, its financial performance, future plans, and prospects are outlined in the Chairman’s and Chief Executive’s
Statements and in the Financial Review.
Directors and Directors’ interests
The names and brief biographical details of the current Directors are provided on page 9. David Lattimore resigned as a Director on
7 October 2006. Details of the Directors’ remuneration are set out in the Remuneration Committee Report.
The interest of the Directors in the share capital of the Company and the share options granted is shown in the following table.
Employees
The Group is committed to ensuring provision of equal opportunities for all employees, which is reflected by its selection,
recruitment and training policies. The Group considers its employees to be one of its most valuable assets and rewards high
performance through competitive remuneration and incentive schemes. The Directors also consider it a priority to give employees
the opportunity to communicate their ideas and opinions to all levels of management, both directly and through various surveys.
Substantial shareholdings
Shares Share options 
 
2005 2006 2005 2006 
 Executive 
 
 Sergey Evlanchik 
15,000,000 14,872,383 – – 
 Iryna Yevets 
– – 434,299 434,299 
 Alexander Slipchuk 
15,000,000 14,737,383 – – 
 Dr Dmitry Dragun 
– – 217,149 217,149 
 Non-executive 
 
 Dr Jack Rowell 
18,690 18,690 86,860 130,290 
 David Lattimore 
– 10,000 86,860 130,290 
 
Shareholder  Number of ordinary shares Holding % 
Crensel Finance Limited 14,237,383 34.5% 
Densim Group Management SA 14,237,383 34.5% 
Fidelity European Smaller Companies Fund 3,300,000 8.0% 
Chase Nominees Limited 2,007,000 4.9% 
The Bank of New York (Nominees) Limited 1,508,500 3.7% 
HSBC Global Custody Nominee (UK) 1,241,532 3.0% 
Euroclear Nominees Limited 1,200,000 2.9% 
Fitel Nominees Limited (in custody for Crensel Finance Limited 
and Densim Group Management SA) 
1,135,000 2.7% 
Vidacos Nominees Limited 581,000 1.4% 
Pershing Keen Nominees Limited 394,925 0.9% 
 
 
 
   12
As at 20 April 2007, the Company has been notified of the following substantial interests in its issued ordinary share capital (the ten
largest shareholders are reported):
Payment policy
The Group has a general set of guidelines for paying its suppliers based on specific criteria. However, it is normal practice to agree
payment terms with a specific supplier when entering into a purchase contract. The Group seeks to abide by the payment terms
agreed whenever it is satisfied that the goods or services have been provided in accordance with the agreed terms and conditions.
Auditors
For the financial year under review, BDO Stoy Hayward LLP served as auditors to the Group. The Board proposes, subject to a
satisfactory fee arrangement and a three-year review of independence, to reappoint BDO Stoy Hayward LLP as auditors to the Group
for the financial year 2007 at the AGM on 21 June 2007.
All of the current Directors have taken the necessary steps to make themselves aware of any information needed by the Company's
auditors for the purposes of their audit and to establish that the auditors are aware of that information. The directors are not aware of
any relevant audit information of which the auditors are unaware.
Statement of Directors’ Responsibilities
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the
financial position of the company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud
and other irregularities and for the preparation of financial statements which comply with the requirements of the Companies
(Jersey) Law 1991.
The directors have elected to prepare the financial statements for the Group in accordance with International Financial Reporting
Standards (IFRSs).
International Accounting Standard 1 requires that financial statements present fairly for each financial year the company’s financial
position, financial performance and cash flows.  This requires the faithful representation of the effects of transactions, other events
and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the
International Accounting Standards Board’s ‘Framework for the preparation and presentation of financial statements’.  In virtually all
circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards.  A
fair presentation also requires the directors to:
· select and apply appropriate accounting policies;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information; and
· provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand
the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.
Financial statements are available on the Group’s website in accordance with the applicable legislation governing the preparation and
dissemination of financial statements. The maintenance and integrity of the group’s website is the responsibility of the directors. The
directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
Approved by and signed by order of the Board
Authorised Signatory
Bedell Secretaries Limited
Secretary
20 April 2007 13
CORPORATE GOVERNANCE REPORT
Introduction
The Group’s Board has considered the guidance published by the Institute of Chartered Accountants in England and Wales
concerning the internal control requirements of the Combined Code of Corporate Governance and has established an ongoing
process for identifying, evaluating and managing the significant risks faced by the Group.
In general terms, the Group’s corporate governance principles aim to secure adherence to prudent business practice, to prevent
executive excesses harmful to enterprise and to align the managers’ interests with those of shareholders. Driving shareholder value is
key and an underlying motive of corporate governance. The Group is well aware of the heightened requirements for corporate
transparency and the shareholder responsibility advocated by the international business community and regulatory bodies in the UK,
Ukraine, Jersey and internationally. Consequently, the Group has evolved its composition along the lines of clearer responsibility for
Directors and a more transparent holding structure for shareholders. As the Group grows, these policies and procedures will be
developed to reflect the requirements of the Combined Code appropriate to a company of the Group’s size.
The Board
The Group Board consists of one non-executive and four Executive Directors. The biographical details of the Directors are shown on
page 9. The roles of the Chairman of the Board and the Chief Executive of the Group are held separately with a clear division of
responsibility between them. The Chairman of the Board is an independent non-executive Director.
Within the scope of the corporate governance procedures, the Board meets regularly to consider the financial results, budgets, and
major items of capital expenditure of all the Group’s companies. This body is also responsible for formulating, reviewing and
approving the Group’s strategy and the phases of its development.
The meetings of the Board of Directors take place in Ukraine or Jersey, or any other suitable jurisdiction as decided by the Board.
Teleconference calls are also a possibility, when Directors are present in either (or both) Jersey or Ukraine.
The Board has established two committees: Audit and Remuneration.
Audit Committee
Chairman, Jack Rowell
The Audit Committee consists of one non-executive Director. The member of the Audit Committee has relevant financial experience.
This Committee, inter alia, is responsible for reviewing the Annual and Interim financial statements, in addition to the systems of
internal control and risk management, and also for ensuring the integrity of the financial information reported to the shareholders.
The Audit Committee is scheduled to meet at least three times per annum.
Remuneration Committee
Chairman, Jack Rowell
The Remuneration Committee comprises one non-executive Director. This Committee is scheduled to meet at least twice per annum
to advise the Board on the Group’s remuneration strategy and to determine the terms of employment and total remuneration of the
Executive Directors, including the granting of share options. Among others, the objective of this Committee is to attract, retain and
motivate Executives capable of delivering the Group’s objectives. The Remuneration Committee is also responsible for the evaluation
of the performance of Executive Directors.
Investor Relations
The Group meets and encourages communication with its institutional and private shareholders, fund managers, financial analysts
and brokers. In communicating to the above-mentioned parties the Group uses various means such as the annual report, interim
statements, annual general meetings and the Company’s corporate website (www.ukrproduct.com) as necessary.
The Group recognises that the increased transparency is an integral part of being a listed company. As such the Group has set up
procedures to ensure that it discloses price-sensitive information to the market in a timely fashion, regularly consults with its 14
nominated adviser and ensures timely publication of its interim and annual financial statements within the deadlines imposed by the
AIM Rules and the corresponding requirements of the jurisdictions in which the Group is present or operates.
Financial procedures and internal control
The Group adheres to comprehensive and strictly regulated budgeting and reporting procedures that are aimed at more efficient
internal control and risk management. The Board is responsible for the Group’s system of internal control and for reviewing its
effectiveness, however, it is recognised that any control system can only provide reasonable and not absolute assurance against
material misstatement or loss.
The main constituents of the internal control system are:
- documented policies, procedures and authorisation levels;
- clearly defined lines of responsibility in the organisational structure of the Group;
- a management structure which facilitates ease of communication both vertically and horizontally;
- annual budgeting and monthly reporting procedures.
The annual budgets consist of monthly budgets, which are updated each month once actual figures become available. Due to the
dynamic development of the macroeconomic environment of the country the Group operates in, variances in actual figures for sales,
prices and other underlying assumptions from those forecasted may occur. Hence, the budget is flexed to better reflect the future of
the Group. Such variances by each company within the Group are discovered and recommendations for further actions are
formulated.
The internal control system is further enforced by the Group’s internal audit department. The main objectives of the internal audit
function are to ensure the safety of the Company’s assets and the reliability of accounting records. The internal audit department is
responsible for auditing the financial statements and accounting procedures of the companies within the Group, as well as for
disclosing and reducing various types of risks related to Group operations. Each company within the Group has a designated auditor,
who systematically performs the audits. 15
CORPORATE SOCIAL RESPONSIBILITY REPORT
The Group is committed to the principles of corporate social responsibility (“CSR”) and believes that these are in the long-term
interests of its shareholders. Accordingly, the Board is committed to developing and implementing CSR policies which are aimed at:
- promoting equality and fairness among employees, partners and suppliers;
- ensuring safe and healthy working conditions;
- maintaining the Group’s corporate reputation and dedication to business ethics;
- supporting the communities in which the Group operates; and
- establishing long-term and healthy relationships with the Group’s partners, customers and other affiliated parties.
The main elements of the Group’s approach towards fulfilling the objectives outlined above comprise the following:
Employees
The Group is committed to ensuring equal opportunities to all its employees, both current and prospective. Each employee’s efforts
are highly valued and the Board believes that a diverse mix of the workforce facilitates innovation, efficiency and teamwork. As a
matter of corporate policy, regular training and development workshops are conducted for the staff. These are aimed at all employee
groups, including management, technical as well as production personnel. The training programmes encourage the staff to move up
the career ladder and are central to the Group’s continuing growth and success.
Health and safety
Management at business units within the Group are responsible for developing and maintaining the underlying practices that provide
for a healthy and safe working environment. Special attention is given to the production facilities, where the equipment, lighting, air
conditioning, workspace and other constituents undergo constant review and optimisation. Regular monitoring is carried out to
ensure that required standards are met and that employees use the provided communication channels to further develop their
surrounding working conditions.
Customers
Customer satisfaction is at the core of the Group’s business model. Accordingly, the Board is keen to continue supplying the
customers with high quality, affordable products as required by current market demands. The Group’s segmentation practices are
aimed at segregating various customer groups in order to meet their needs with maximum efficiency. In addition, regular marketing
surveys are conducted to ensure maximum value is offered to customers on a consistent basis. 16
ENVIRONMENTAL COMPLIANCE REPORT
Environment
The Group recognises the importance of good environmental practices and seeks to minimise a negative impact that its operations or
products might have on the production sites and surrounding areas. The Group complies with the environmental laws and
regulations of Ukraine and promotes the effective resource management, energy conservation and waste efficiency internally and in
dealings with the third parties. The Group’s modernisation programme of 2005-2008 puts specific emphasis on acquiring and
installing only the most advanced and environmentally-friendly production and auxiliary equipment.
Food safety
At the time of writing of this Report, the Group’s Starkon Plant was in the process of accreditation to ISO 22000 Food safety
management systems – Requirements for any organisation in the food chain, an international standard published in 2005 to ensure
safety of the food supply chains worldwide.
Community support
The Group is keen to develop and maintain partnership relationships with the communities by means of supporting the local
initiatives and charitable events. The Group participates in such initiatives by contributing cash donations and gifts, as well as
employee time, by encouraging staff to participate as volunteers. 17
REMUNERATION COMMITTEE REPORT
This report is prepared by the Remuneration Committee of the Board and sets out the Company’s policy on the remuneration of the
Directors, with a description of service agreements and remuneration packages for each Director.
The Remuneration Committee (the “Committee”)
The Committee comprises one non-executive Director and is chaired by Jack Rowell. This Committee is scheduled to meet at least
twice per annum. The objective of the Committee is to advise the Board on the Group’s overall remuneration policy and to determine
the terms of employment and total remuneration of the Executive Directors and certain senior employees, including the granting of
share options. The Remuneration Committee is also responsible for the evaluation of the performance of Executive Directors.
Remuneration Policy
The Company’s remuneration policy is to provide remuneration packages which:
· are designed to attract, motivate and retain high calibre Executives;
· are competitive and in line with comparable businesses;
· are rooted in practices exercised in countries where the Group operates;
· intend to align the interests of the Executives with those of the shareholders by means of fixed and performance related
remuneration; and
· set challenging performance targets and motivate Executives to achieve those targets both in the short and long-term.
Base salary
The Committee reviews base salaries of the Executive Directors each year taking into account job responsibilities, competitive market
rates and the performance of the Executive concerned. Consideration is also given to the cost of living and the Director’s professional
experience. While determining the base salaries, the Committee also considers general aspects of the employment terms and
conditions of employees elsewhere in the Group.
Incentive bonus plans and equity arrangements
The Committee plans to consider developing long-term equity incentive arrangements to make the overall Executive Remuneration
structure more performance-related, more competitive and aligned with shareholders’ interests.
Service contracts
The appointments of executive Directors are valid for an indefinite period and may be terminated with three months notice given by
either party at any time. The Company’s provision for compensation for loss of office is to provide compensation which reflects the
Company’s contractual obligations.
Bonus Scheme
The Committee has established a cash bonus scheme for Executive Directors based on the overall performance of the Company and
attainment of the operating profit targets.
Non-executive directors
The appointments of non-executive Directors are valid for an indefinite period and may be terminated with three months notice given
by either party at any time. The decision to re-appoint, as well as the determination of the fees of the non-executive Directors, rests
with the Board. The non-executive Directors may accept appointments with other companies, although any such appointment is
subject to the Board’s approval and terms and conditions of Service Agreements. 18
Directors’ remuneration
Details of the Directors’ cash remuneration are outlined below:
Share based payments
In 2005 the company granted share based payments (share options) to the Directors during the year and details are shown below.
The Directors’ Remuneration disclosed above does not include any amounts for the value of options to acquire shares of the
Company.
 Directors 
Share Options Exercise Price, pence Exercise Period 
 Iryna Yevets 
434,299 57.0 to 11/02/2009 
 Dr Dmitry Dragun 
217,149 57.0 to 11/02/2009 
 Jack Rowell 
130,290 57.0 to 11/02/2009 
 David Lattimore 
130,290 57.0 to 11/02/2009 
 
‡ Annual Salary/fee Salary/fees Bonus Total cash 
remuneration 
  2005 2006 2005 2006 2005 2006 2005 2006 
 Executive         
 Sergey Evlanchik 60,000 45,000 56,667 44,500 - – 56,667 44,500 
 Iryna Yevets 50,000 60,000 46,667 46,833 – – 46,667 46,833 
 Alexander Slipchuk 45,000 45,000 45,000 38,250 – – 45,000 38,250 
 Dr Dmitry Dragun 40,000 40,000 38,333 34,000 30,000 30,000 68,333 64,000 
 Non-executive         
 Dr Jack Rowell 30,000 37,500 30,000 31,875 – – 30,000 31,875 
 David Lattimore 25,000 30,000 25,000 24,065 – – 25,000 24,065 
  19
Independent Auditors’ Report to the Shareholders of Ukrproduct Group Ltd
We have audited the group financial statements (the ‘’financial statements’’) of Ukrproduct Group Ltd for the year ended December 31, 2006
which comprise the Group Income Statement, the Group Balance Sheet, the Group Cash Flow Statement, the Group Statement of
Change in Shareholders’ Equity and the related notes. These financial statements have been prepared under the accounting policies
set out therein.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International
Standards on Auditing.
We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in
accordance with the Companies (Jersey) Law 1991.  We also report to you if, in our opinion, the Directors’ Report is not consistent
with those financial statements, if the company has not kept proper accounting records, if we have not received all the information
and explanations we require for our audit.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements.
The other information comprises only the Directors’ Report, the Chairman’s Statement, the Operating and Financial Review and the
Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
Our report has been prepared pursuant to the requirements our engagement letter and for no other purpose.  No person is entitled to
rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of  our
engagement letter or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept
responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing issued by the International Auditing and Assurance
Standards Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the
financial statements, and of whether the accounting policies are appropriate to the group’s and company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.
Opinion
In our opinion:
• the Group financial statements give a true and fair view, in accordance with IFRSs, of the state of the Group’s affairs as at December 31,
2006 and of its profit for the year then ended; and
• the financial statements have been properly prepared in accordance with the Companies (Jersey) Law 1991.
• the information given in the Directors’ Report is consistent with the financial statements.
BDO Stoy Hayward LLP
Chartered Accountants and Registered Auditors
8 Baker Street, London
23 April, 2007 20
CONSOLIDATED BALANCE SHEET
These financial statements were approved and authorised for issue by the Board of Directors on April 20, 2007.
The notes on pages 24 to 51 form part of these financial statements.
 Notes 
As at  
31 December 2006  
‡ ‘000 
As at  
31 December 2005  
(restated) 
  ‡ ‘000 
Assets    
Non-Current Assets    
Property, Plant and equipment 8 10,865 9,528 
Intangible assets 9 1,237 1,333 
Financial assets 10,11 244 97 
Deferred tax assets 12 42 90 
Total non-current assets  12,388 11,048 
    
Current assets    
 Inventories 13 2,650 4,523 
 Trade and other receivables 14 3,710 4,012 
 Other financial assets 15 116 358 
 Cash and cash equivalents 16 159 453 
Total Current assets  6,635 9,346 
    
Total assets  19,023 20,394 
    
Equity and liabilities    
Equity attributable to equity holders    
Share capital 17 4,121 4,121 
Other reserves 19 4,181 5,200 
Retained earnings   4,141 3,815 
Total equity attributable to equity holders of the parent  12,443 13,136 
Minority interest 30 199 246 
Total equity  12,642 13,382 
    
Liabilities    
Non-Current Liabilities    
 Long-term loans 10,20 102 152 
 Deferred tax liabilities 12 767 989 
Total Non-Current Liabilities  869 1,141 
    
Current Liabilities    
 Bank loans and overdrafts 22 3,146 3,042 
 Trade and other payables 23 1,953 2,606 
 Current portion of long term liabilities 21 389 67 
 Current income tax liabilities  24 156 
Total Current Liabilities  5,512 5,871 
Total equity and liabilities  19,023 20,394 
  21
CONSOLIDATED INCOME STATEMENT
The notes on pages 24 to 51 form part of these financial statements.
 Notes 
Year ended  
31 December 2006  
‡ ‘000 
Year ended  
31 December 2005 (restated) 
‡ ‘000 
Revenue 7 35,053 39,962 
    
Cost of  Sales  (27,805) (33,194) 
    
Gross profit  7,248 6,768 
    
 Other operating income  – 594 
 Administrative expenses  (2,720) (2,167) 
 Selling and distribution expenses  (2,616) (2,084) 
 Other operating expenses   (477) (563) 
    
Profit from operations   1,435 2,548 
    
 Finance income  – 41 
 Finance expense  (237) (244) 
    
Profit before taxation  1,198 2,345 
    
 Income tax expense  (119) (337) 
    
Profit for the year  1,079 2,008 
    
 Attributable to:    
 Equity holders  1,095 2,003 
 Minority interest  (16) 5 
  1,079 2,008 
Earnings per share:    
 Basic 27 2.6 5.0 
 Diluted 27 2.6 4.8 
  22
CONSOLIDATED CASH FLOW STATEMENT
The notes on pages 24 to 51 form part of these financial statements.
 Notes 
Year ended  
31 December 
2006  
‡ ‘000 
Year ended  
31 December 2005 
(restated) 
‡ ‘000 
Cash flows from operating activities 
   
Profit before taxation 
 
1,198 2,345 
Adjustments for: 
 
  
Exchange difference  
20 (594) 
Depreciation and amortisation 
8,9 1,359 897 
Loss on disposal of non-current assets 
 16 – 
Interest expense 
 237 244 
Interest income 
 – (41) 
Share based payments 
28 19 76 
(Increase) / decrease in inventories 
 1,396 (1,507) 
(Increase) / decrease in trade and other receivables 
 159 (1,026) 
(Decrease) in trade and other payables 
 (577) (990) 
Cash (used by)/generated from operations 
 
3,827 (596) 
 
 
  
Interest paid 
 
(237) (244) 
Interest received 
 
– 41 
Income tax paid/(refunded) 
 
259 (384) 
Net cash (used in)/generated by operating activities  3,849 (1,183) 
 
 
  
Cash flows from investing activities 
 
  
Payments for property, plant and equipment 
 
(4,551) (3,480) 
Acquisition of subsidiaries (net of cash acquired) 
 
(169) (1,283) 
Proceeds from sale of property, plant and equipment 
 
35 – 
Proceeds from sale of investments 
 
– – 
Net cash used in investing activities 
 
(4,685) (4,763) 
 
 
  
Cash flows from financing activities 
 
  
Proceeds/(repayments) from long term    
        borrowing  
(34) (99) 
Proceeds / (repayments) from issue of bonds 
 
357 (964) 
Proceeds from issue of shares 
 
– 5,158 
Cash paid on liquidation of Ukrproduct Group plc 
 
– (12) 
Dividends paid 
29 
(247) (148) 
Net proceeds from short term borrowing 
 
511 1,656 
Loans repaid / (issued) 
 
25 197 
Net cash generated by/(used in) financing activities  612 5,788 
    
Net increase/(decrease) in cash and cash equivalents  (224) (158) 
Effect of exchange rate changes and restatements on cash and cash 
equivalents  (70) 311 
Cash and cash equivalents at the beginning of the year 
16 453 300 
Cash and cash equivalents at the end of the year 
16 159 453 
  23
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
The notes on pages 24 to 51 form part of these financial statements.
Attributable to equity holders 
 Notes 
Share 
capital 
‡‘000 
Other 
reserves 
‡‘000 
Retained 
earnings 
‡‘000 
Minority 
interest 
‡‘000 
Total 
equity 
‡‘000 
Balance at 1 January 2005  3,000 607 1,412 132 5,151 
Acquisitions  
– – 
– 118 118 
Depreciation on revaluation of non-current 
assets  
 – (108) 108 – – 
Reduction of revaluation reserve  – (25) 25 
– – 
Decrease of minority interest  – 28 15 (43) – 
Exchange differences on translation to the 
presentation currency  – 597  400 34 1,031 
Net income (expense) recognised directly in 
equity  – 492 548 109 1,149 
Profit for the year  
– – 
2,003 5 2,008 
Total recognised income and expense  – 492 2,551 114 3,157 
Dividends paid  – 
– 
(148) – (148) 
Issue of shares   1,121 4,398 
– – 
5,519 
Fund-raising expenses  
– 
(361) 
– – 
(361) 
Share based payments  
– 
76 
– – 
76 
Exclusion from Group  
– 
(12) 
– – 
(12) 
Balance at 31 December 2005 (restated)  4,121 5,200 3,815 246 13,382 
Depreciation on revaluation of non-Current 
Assets 
 – (135) 137 – 2 
Reduction of revaluation reserve  
– 
(4) – – (4) 
Decrease of minority Interest  – 2 (2) (2) (2) 
Exchange differences on translation to the 
presentation currency  – (900) (665) (29) (1,594) 
Net income (expense) recognised directly in 
equity  – (1,037) (530) (31) (1,598) 
Profit for the year  
– – 
1,095 (16) 1,079 
Total recognised income and expense   (1,037) 565 (47) (519) 
Dividends paid 29 
– – 
(247) – (247) 
Issue of shares  
– – – – – 
Share based payments 28 
– 
19 – – 19 
Exclusion from Group  
– 
(1) 8 – 7 
Balance at 31 December 2006  4,121 4,181 4,141 199 12,642 
  24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Group and Principal Activities
The Company is a public limited liability entity registered in Jersey with a registered office at 26 New Street, St Helier, Jersey, JE2 3RA,
Channel Islands.
For the purposes of this financial information the terms “Operating Group” and “Group” have been taken to indicate the companies listed
in note 3(c). The “Operating Group” includes all those subsidiaries of Ukrproduct Group Ltd (the ‘Company’) that operate on the territory
of Ukraine. The “Group” includes the Company and all of its subsidiaries. Ukrproduct Group Ltd became a public company on 11
February 2005, placing 27.2% of its share capital on the Alternative Investment Market of the London Stock Exchange.
The Group’s main activity is production and distribution of dairy-based food products (butter, processed cheese, milk powders) in
Ukraine and abroad. The Group’s sales in Ukraine are managed and facilitated by its own pan-Ukrainian distribution network that
currently employs almost 450 employees and makes use of around 200 vehicles and refrigerated vans.
The Group’s exports are managed by the Company’s two subsidiaries: Ukrprodexpo and Dairy Trading Corporation. Capitalising on the
Group’s strong reputation for quality and business excellence, those companies collaborate with international traders and partners to
export skimmed milk powder and other products to Germany, Denmark, Holland, Japan, Bulgaria and other countries.
The Group’s overall management and production facilities are based in Ukraine, with the HQ in Kyiv. The Group commands leading
positions in the Ukrainian processed cheese and packaged butter markets and owns a range of widely recognisable trademarks in
Ukraine, including “Nash Molochnik”, “Narodniy Product”, “Vershkova Dolina”. The average number of employees of the Group during
the year ended 31 December 2006 was 2,372 (2005 – 1,805).
2. Operating Environment of the Group
The main activities of the Operating Group are concentrated in Ukraine, a country which continues to display characteristics of an
emerging market. The prospects for future economic stability in Ukraine are largely dependent upon the effectiveness of the economic
measures and reforms undertaken by the government, together with legal, regulatory and political developments, which are beyond the
control of the Group.
3. Significant Accounting Policies
The principal accounting policies adopted in the preparation of the financial information are set out below:
(a) Basis of Preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”),
including International Accounting Standards (“IAS”) and Interpretations issued by the International Accounting Standards Board.
The majority of companies making up the Operating Group maintain their accounting records in accordance with Ukrainian regulations.
The financial information has been prepared from those accounting records and adjusted as we consider necessary in order to comply
with IFRS. Accounting records of the Operating Group are maintained in Ukrainian Hryvna (“UAH”). The Hryvna has also been adopted
as the functional currency for the purpose of the consolidated financial statements (see note 3e). Since the Ukrainian Hryvna is not a
major convertible or recognisable currency outside of Ukraine, the financial information has been translated into British pounds sterling
(hereinafter GBP or ‡) at the rates given in note 3(q), as the Group’s presentational currency. The preparation of financial statements in
conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in
the process of applying the Group’s accounting policies.
(b) Changes in accounting policies
In preparing these financial statements, the following amendments to published standards and interpretations to existing standards
effective in 2006 were adopted by the Group.
- IAS 19 (Amendment), Employee Benefits (effective from 1 January 2006).  This amendment introduces the option of an
alternative recognition approach for actuarial gains and losses.  It may impose additional recognition requirements for
multi-employer plans where insufficient information is available to apply defined benefit accounting. As the Group does not
have actuarial gains and losses and does not participate in any multi-employer plans, adoption of this amendment does not
require additional disclosure. 25
- IFRIC 4, Determining whether an Arrangement contains a Lease (effective from 1 January 2006).  IFRIC 4 requires the
determination of whether an arrangement is or contains a lease to be based on the substance of the arrangement.  It
requires an assessment of whether: (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets
(‘the asset’); and (b) the arrangement conveys a right to use the asset.  Management assessed the impact of IFRIC 4 on the
group’s operations by reviewing all the existing arrangements. There was no impact of the adoption of IFRIC 4 on the results
or net assets of the group.
- IAS 39 (Amendment), The Fair Value Option (effective from 1 January 2006).  This amendment changes the identification
of financial instruments classified at fair value through profit and loss and restricts the ability to designate financial
instruments as part of this category.  The Group believes that this amendment should not have a significant impact on the
classification of the financial instruments, as the Group should be able to comply with the amended criteria for the
designation of financial instruments at fair value through profit and loss.  The Group applied this amendment from 1 January
2006, which has no impact on the results or net assets of the group.
- IAS 39 and IFRS 4 (Amendment), Financial Guarantee Contracts (effective from 1 January 2006).  This amendment
requires issued financial guarantees, other than those previously asserted by the entity to be insurance contracts, to be
initially recognised at their fair value and subsequently measured at the higher of: (a) the unamortised balance of the related
fees received and deferred, and (b) the expenditure required to settle the commitment at the balance sheet date. There was
no impact on adoption of this amendment.
The following Standards, interpretations and amendments to published standards effective in 2006 were not relevant to the Group.
- IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast Intra-group Transactions (effective from 1 January 2006).
The amendment allows the foreign currency risk of a highly probable forecast intra-group transaction to qualify as a hedged
item in the consolidated financial statements, provided that: (a) the transaction is denominated in a currency other than the
functional currency of the entity entering into that transaction; and (b) the foreign currency risk will affect consolidated profit
or loss.  This amendment is not relevant to the Group’s operations, as the Group does not have any intra-group transactions
that would qualify as a hedged item in the consolidated financial statements as of 31 December 2006.
- IFRS 1 (Amendment), First-time Adoption of International Financial Reporting Standards and IFRS 6 (Amendment),
Exploration for and Evaluation of Mineral Resources (effective from 1 January 2006).  These amendments are not relevant to
the Group’s operations as the Group is not a first-time adopter of IFRS nor does it carry out exploration for and evaluation
of mineral resources.
- IFRS 6, Exploration for and Evaluation of Mineral Resources (effective from 1 January 2006).  IFRS 6 is not relevant to the
Group’s operations.
 - IFRIC 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (effective
from 1 January 2006).  IFRIC 5 is not relevant to the Group’s operations.
- IFRIC 6, Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment (effective from
1 December 2005).  IFRIC 6 is not relevant to the Group’s operations.
The following Standards, interpretations and amendments to published standards were not yet effective in 2006.
- IFRS 7, Financial Instruments: disclosures and a complementary amendment to IAS 1, Presentation of Financial
Statements – Capital Disclosures (effective from 1 January 2007).  IFRS 7 introduces new disclosures to improve the
information about financial instruments.  It requires the disclosure of qualitative and quantitative information about exposure
to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and
market risk, including sensitivity analysis to market risk.  It replaces IAS 30, Disclosures in the Financial Statements of
Banks and Similar Financial Institutions and the disclosure requirements in IAS 32, Financial Instruments: Disclosure and
Presentation.  It is applicable to all entities that report under IFRS.
The amendment to IAS 1 introduces disclosures about the level of an entity’s capital and how it manages capital.  The Group
assessed the impact of IFRS7 and the amendment to IAS 1 and concluded that the main additional disclosures will be the
sensitivity analysis to market risk and the capital disclosures required by the amendment of IAS 1.  The Group will apply
IFRS 7 and the amendment to IAS 1 to the accounts for the period beginning on 1 January 2007.
- IFRS 8, Operating Segments (effective from 1 January 2009). This standard sets out requirements for disclosure of
information about an entity’s operating segments and also about the entity’s products and services, the geographical areas 26
in which it operates, and its major customers. It replaces IAS 14, Segmental Reporting. The group will apply this standard in
the accounting period beginning on 1 January 2009 and the application will not result in any impact on the results or net
assets of the group.
             - IAS 23 Borrowing Costs (revised) (effective from 1 January 2009). The main change from the previous version is the
removal of the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial
period of time to get ready for use or sale. The Group is currently assessing its impact on the financial statements.
- IFRIC 7, Applying the restatement approach under IAS 29, Financial Reporting in Hyperinflationary Economies (effective
for accounting periods beginning on or after 1 March 2006). IFRIC 7 provides guidance on the application of IAS 29
requirements in a reporting period in which entity identifies the existence of hyperinflation in the economy of its functional
currency, when the company was not hyperinflationary in the prior period. IFRIC 7 is not relevant to the group as none of the
group companies has a currency of hyperinflationary economy as its functional currency.
- IFRIC 8, Scope of IFRS2 (effective for accounting periods beginning on or after 1 May 2006). IFRIC 8 requires
consideration of transactions involving issuance of equity instruments to establish whether or not they fall within the scope
of IFRS 2. It applies to the situations where the identifiable consideration received is less than the fair value of the equity
instruments issued. Management is currently assessing the impact of IFRIC 8 on the accounts.
- IFRIC 9, Reassessment of embedded derivatives (effective for accounting periods beginning on or after 1 June 2006). IFRIC
9 requires the entity to assess whether an embedded derivative is required to be separated from the host contract and accounted
for as a derivative when an entity becomes a party to the contract. Subsequent reassessment is prohibited unless there is a
change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the
contract, in which case reassessment is required. Management is currently assessing the impact of IFRIC 9 on the accounts.
- IFRIC 10, Interim Financial Reporting and Impairment (effective for accounting periods beginning on or after 1 November
2006). IFRIC 10 prohibits the impairment losses recognised in an interim period on goodwill and investments in equity
instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. The group will apply
IFRIC 10 from 1 January 2007 but it is not expected to have any impact on the group’s accounts.
- IFRIC 11, IFRS 2 - Group and Treasury Share Transactions (effective for accounting periods beginning on or after 1 March
2007). Share-based payment transactions in which an entity receives services as consideration for its own equity
instruments shall be accounted for as equity-settled. This applies regardless of whether the entity chooses or is required to
buy those equity instruments from another party to satisfy its obligations to its employees under the share-based payment
arrangement. It also applies regardless of whether:  (a) the employee’s rights to the entity’s equity instruments were granted
by the entity itself or by its shareholder(s); or (b) the share-based payment arrangement was settled by the entity itself or by
its shareholder(s). Management is currently assessing the impact of IFRIC 11 on the accounts.
- IFRIC 12, Service Concession Arrangements (effective for accounting periods beginning on or after 1 January 2008).
IFRIC 12 gives guidance on the accounting by operators for public-to-private service
concession arrangements. IFRIC 12 is not relevant to the Group operations due to absence of such arrangements.
(c) Principles of combination and consolidation
The consolidated financial statements include the results of the companies set out in the table below. As described in note 1, the Group
is comprised of a number of companies which were brought together under a single parent company - Ukrproduct Group Ltd - on
11 February 2005.
The companies which became subsidiaries of Ukrproduct Group Ltd on 11 February 2005 were Ukrproduct Group CJSC, Dairy Trading
Corporation Ltd and Linkstar Ltd. All three companies were ultimately 100% owned equally by Crensel Finance Ltd and Densim Group
Management SA, companies which had incorporated Ukrproduct Group Ltd and were its 100% owners. On 11 February 2005 Crensel
Finance Ltd and Densim Group Management SA made a share exchange with Ukrproduct Group Ltd, granting to the later all their
interests in Ukrproduct Group CJSC, Dairy Trading Corporation Ltd and Linkstar Ltd in exchange for the newly issued shares by Ukrproduct
Group Ltd. As a result of these share exchange transactions Ukrproduct Group Ltd came into full possession of Ukrproduct Group CJSC,
Dairy Trading Corporation Ltd and Linkstar Ltd, while Crensel Finance Ltd and Densim Group Management SA retained full possession
of the enlarged share capital (30 million shares) of Ukrproduct Group Ltd. As the transactions in which Ukrproduct Group Ltd took
control of the other Group companies may be defined as transactions under common control, these transactions fall outside the scope
of IFRS. 27
IFRS contain specific guidance to be followed where a transaction falls outside the scope of IFRS. This Guidance is included at paragraphs
10 to 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. This requires, inter alia, that where IFRS doesn’t
include guidance for a particular issue, the directors may also consider the most recent pronouncements of other standard setting
bodies that use a similar conceptual framework to develop accounting standards. In this regards, it is noted that the United States
Financial Accounting standards Board (FASB) has issued an accounting standard covering business combinations (FAS141) that is
similar in a number of respects to IFRS3. Further there is currently a major project being run jointly by the IASB and FASB to converge
IFRS and US GAAP .
In contrast to IFRS3, FAS141 does include, as an Appendix, limited accounting guidance for transactions under common control which,
as with IFRS3, are outside the scope of that accounting standard. The guidance contained in FAS141 indicates that a form of accounting
that is similar to pooling of interests accounting, which was previously set out in APB Opinion 16, may be used when accounting for
transactions under common control.
Having considered the requirements of IAS8, and the guidance included within FAS141, it is considered appropriate to use a form of
accounting which is similar to pooling of interests when dealing with the transaction in which Ukrproduct Group Ltd acquired its
controlling interests in Ukrproduct Group CJSC, LinkStar Limited, and Dairy Trading Corporation Limited.
In consequence, the results of operations for the period should be reported as though the acquisition of the controlling interest through
transaction under common control occurred at the beginning of the period. The effects of intercompany transactions should be eliminated
in determining the results of operations for the period prior to the acquisition of the controlling interest, meaning that those results are
on substantially the same basis as the results of operations for the period after the acquisition of the controlling interest. Similarly, the
consolidated balance sheets and other financial information should be presented as though the assets and liabilities of the combining
entities had been transferred at the beginning of the period, i.e. 1 January 2005. Financial statements and other financial information
presented for prior years should also be restated to furnish comparative information. All restated financial statements and summaries
should indicate clearly that financial data of previously separate entities is combined.
The results and balances of the following companies have been consolidated:
* Subsidiaries of Agrospetsresursy LLC, the Operating Group’s specialised distribution companies.
** The companies are held through Ukrproduct Group CJSC which is a 100%-owned subsidiary of the Company
Method of combination 
 
Country of 
incorporation 
Group 
holding 
2006 2005 
 Molochnik OJSC** Ukraine 97.6% Acquisition method Acquisition method 
 Ukrprodexpo SC** Ukraine 100% Acquisition method Acquisition method 
 Starokonstantinovskiy Molochniy Zavod   SC**            Ukraine  100% Acquisition method Acquisition method 
 Agrospetsresursy LLC** Ukraine 100% Acquisition method Acquisition method 
 Togoviy Dom Maslayana SC* Ukraine 100% Acquisition method Acquisition method 
 Togoviy Dom Milko SC* Ukraine 100% Acquisition method Acquisition method 
 Agrospetsresursy Dnipro SC* Ukraine 100% Acquisition method Acquisition method 
 Agrospetsresursy Lviv SC* Ukraine 100% Acquisition method Acquisition method 
 Starkon-Moloko LLC** Ukraine 100% Acquisition method Acquisition method 
 Intermilk SC (solvently liquidated in 2006) Ukraine 100% n/a Acquisition method 
 Ukrevroprodukt SC* Ukraine 100% Acquisition method Acquisition method 
 Agrospetsresursy - Kharkov SC* Ukraine 100% Acquisition method Acquisition method 
 Nash Molochnik Private Enterprise SC* Ukraine 100% Acquisition method Acquisition method 
 Ukrproduct-Logistics Private Enterprise**  Ukraine 100% Acquisition method Acquisition method 
 Ukrproduct Group CJSC Ukraine 100% Merger method Merger method 
 Krasilovsky Molochny Zavod Private Enterprise SC** Ukraine 100% Acquisition method Acquisition method 
 Jmerinsky Maslosyrzavod LLC** Ukraine 62.2% Acquisition method Acquisition method 
 Letichevsky Maslozavod OJSC** Ukraine 100% Acquisition method Acquisition method 
 LinkStar Limited Cyprus 100% Merger method Merger method 
 Dairy Trading Corporation Limited BVI 100% Merger method Merger method 
 Ukrproduct Group LTD Jersey  Parent Parent 
  28
(d) Critical accounting estimates and judgments
The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated
based on historical experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. The estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
- Impairment of goodwill. The group is required to test, on an annual basis, whether goodwill has suffered any impairment. The
recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future
cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary.
-Useful lives of intangible assets and property, plant and equipment. Intangible assets and property, plant and equipment are
amortised or depreciated over their useful lives. Useful lives are based on the management’s estimates of the period that the
assets will generate revenue, which are periodically reviewed for continued appropriateness. Due to the long live assets,
changes to the estimates used can result in significant variations in the carrying value.
- Fair value of financial instruments. The group determines the fair value of financial instruments that are not quoted, based on
estimates using present values or other valuation techniques. Those techniques are significantly affected by the assumptions
used, including discount rates and estimates of future cash flows. Where market prices are not readily available, fair value is
either based on estimates obtained from independent experts or quoted market prices of comparable instruments. In that
regard, the derived fair value estimates cannot be substantiated by comparison with independent markets and, in many cases,
could not be realised immediately.
- Inventory. The Group reviews the net realisable value of and demand for its inventory on a quarterly basis to ensure recorded
inventory is stated at the lower of cost or net realisable value. Factors that could impact estimated demand and selling prices
are the timing and success of future technological innovations, competitor actions, supplier prices and economic trends.
- Income taxes. The Group is subject to income tax in several jurisdictions and significant judgement is required in determining
the provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which
the ultimate tax determination is uncertain. As a result, the company recognises tax liabilities based on estimates of whether
additional taxes and interest will be due. These tax liabilities are recognised when, despite the company’s belief that its tax
return positions are supportable, the company believes that certain positions are likely to be challenged and may not be fully
sustained upon review by tax authorities. The company believes that its accruals for tax liabilities are adequate for all open audit
years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies
on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final
tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the
period in which such determination is made.
- Share based payment. The Group has the equity-based option schemes for the executive and non-executive directors. Fair
value of the share options is estimated by using valuation models, such as Black-Scholes and binominal lattice, on the date of
grant based on certain assumptions, such as the expected volatility, expected life of the options and dividend growth rate.
- Legal proceedings. In accordance with IFRS the Group only recognises a provision where there is a present obligation from
a past event, a transfer of economic benefits is probable and the amount of costs of the transfer can be estimated reliably. In
instances where the criteria are not met, a contingent liability may be disclosed in the notes to the financial statements.
Realisation of any contingent liabilities not currently recognised or disclosed in the financial statements could have a material
effect on the group’s financial position. Application of these accounting principles to legal cases requires the Group’s management
to make determinations about various factual and legal matters beyond its control. The Group reviews outstanding legal cases
following developments in the legal proceedings and at each balance sheet date, in order to assess the need for provisions in
its financial statements. Among the factors considered in making decisions on provisions are the nature of litigation, claim or
assessment, the legal process and potential level of damages in the jurisdiction in which the litigation, claim or assessment has
been brought, the progress of the case (including the progress after the date of the financial statements but before those
statements are issued), the opinions or views of legal advisers, experience on similar cases and any decision of the group’s
management as to how it will respond to the litigation, claim or assessment.
(e) Translation from functional to presentation currency
Management has considered what would be the most appropriate functional and presentational currencies for these financial statements.
As a result of this review management has concluded that: 29
(I) the Ukrainian Hryvna is the currency of the primary economic environment in which the Group operates. Consequently
the Ukrainian Hryvna is the most appropriate functional currency for the Group;
(II) the Group should use British pounds sterling as the presentational currency for its Consolidated IFRS financial
statements.
Consequently, management has used the following basis for the translation of Ukrainian Hryvna figures to British pounds for presentation
purposes:
(I) for current year figures all assets and liabilities are translated at the rate effective at the balance sheet date. Income
and expense items are translated at the average rate for the year.
(II) for comparative figures all assets and liabilities are translated at the closing rate existing at the relevant balance sheet
date. Income and expense items are translated at an average rate for the period.
(III) all exchange differences resulting from the application of the translation methods described above are recognised
directly in equity as a separate component of equity (IAS 21.39 (c) )
Actual exchange rates applied in the translation are detailed in Note 3(q) below.
(f) Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns
that are different from those of other business segments. A geographical segment is engaged in providing products or services within
a particular economic environment that are subject to risks and returns different from those of segments operating in other economic
environments.
The Group has recognised business segments as primary format of segment reporting. The secondary format was chosen to be the
geographical segment.
(g) Property, plant and equipment
Figures calculated using Ukrainian statutory accounting rules, have been adopted as deemed depreciated historical cost for property,
plant and equipment as at 1 January 2004. Subsequent additions have been recorded at cost.
With effect from 1 January 2004, the Group adopted the revaluation model (as defined in IAS 16: Property, Plant and Equipment) for all
classes of assets. The Group’s assets were revalued in January 2004. This change of accounting policy was made on the grounds that
management believe that this policy provides more reliable and relevant financial information because it better reflects the value in use
of such assets to the Group. In accordance with the provisions of that standard, the revaluation model has not been applied retrospectively.
All categories of property, plant and equipment are subsequently carried at fair value at the date of revaluation, less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. Changes in fair value are recognised in equity (the “revaluation
reserve”). An appropriate transfer is made from the revaluation reserve to the profit and loss reserve when freehold land and buildings
are expensed through the income statement (eg through depreciation, impairment or sale).
Depreciation is applied to all items of property, plant and equipment with the exception of land. Depreciation is calculated using the
straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:
Buildings           20-40 years;
Plant and machinery           7-15 years;
Equipment and motor vehicles 3-10 years.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in operating profit.
(h) Assets under construction
Assets under construction are reported at their cost of construction including costs charged by third parties and the capitalisation of the
Group’s material costs incurred. No depreciation is charged on assets during construction. Upon completion, all accumulated costs of 30
the asset are transferred to the relevant fixed asset category and depreciated at applicable rates from the time the asset is completed and
ready for use.
(i) Intangible assets
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specialised
software. These costs are amortised over their estimated useful lives (3 years) using the straight-line method. The amortisation expense
is included within administrative expenses in the Income Statement.
Trademarks are shown at historical cost. Trademarks have finite useful lives and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost of trademarks over their estimated useful lives (20 years).
The amortisation expense is included within Selling & Distribution expenses in the Income Statement.
Customer list is shown at fair value at the date of revaluation obtained by using the estimates of the independent valuers, less any
subsequent accumulated depreciation and subsequent accumulated impairment losses. Amortisation is calculated using the straight-
line method to allocate the cost of the customer list over its estimated useful lives (20 years). The amortisation expense is included
within Other expenses in the Income Statement.
(j) Goodwill
Goodwill is excess of acquisition costs above the fair value of the Group’s share in the net assets of a subsidiary or an associated
company at the acquisition date. Goodwill is reported in intangible assets with any impairment being charged to the Income Statement
within administrative expenses. Goodwill is annually assessed with respect to the impairment of value and reported at cost net of total
loss from impairment of value. Gains or losses on disposal of a subsidiary includes the carrying value of goodwill related to the
subsidiary sold.
(k) Impairment of assets
Assets with indefinite useful life are not amortised and are annually assessed with respect to the impairment of their value. Assets
subject to amortisation are assessed with respect to the impairment of their value whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recovered. Whenever the carrying amount of an asset exceeds its recoverable
value, an impairment loss is recognised in income. The recoverable amount is the higher of an asset’s net selling price and value in use.
The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction while value in use is the present
discounted value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal after the end
of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for a cash generating unit.
Impairment charges are included in the administrative expenses line item in the Income Statement, except to the extent they reverse
gains previously recognised in the Statement of Changes in Equity.
(l) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of
finished and unfinished goods comprises raw materials, direct labour, other direct costs and related production overheads (based on
normal operating capacity) but excludes borrowing costs.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments with
original maturities of three months or less. Bank overdrafts are included within borrowings in current liabilities on the balance sheet.
(n) Share-based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement
over the vesting period. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the
options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting
period. Where equity instruments are granted to persons other than employees, the income statement is charged with the fair value
of goods and services received. 31
(o) Revenue recognition
Revenue comprises the invoiced value of sales of goods and services net of value added tax, rebates and discounts after eliminating
sales within the Group. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods
are transferred to the buyer. Revenues and expenses are recognised on an accruals basis.
(p) Income taxes
Taxation has been provided for in the financial statements in accordance with relevant legislation currently in force. The charge for
taxation in the Income Statement for the year comprises current tax and changes in deferred tax. Current tax is calculated on the basis
of the taxable profit for the year, using the tax rates in force at the balance sheet date. Taxes, other than on income, are recorded within
operating expenses.
Deferred income tax is provided, using the balance sheet liability method, for all temporary differences arising between the tax basis of
assets and liabilities and their carrying values for financial reporting purposes except for those difference permanently disallowed. A
deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences can be utilised. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period
when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance
sheet date.
(q) Foreign currency translation
Transactions denominated in currencies other than the Hryvna (“foreign currencies”) are recorded in Hryvna at the exchange rate
effective on the transaction date. Exchange differences resulting from the settlement of transactions denominated in foreign currency
are included in the income statement using the effective exchange rate on that date.
Monetary assets and liabilities denominated in foreign currency are translated into Hryvna at the official exchange rate at the balance
sheet date. Foreign currency gains and losses arising from the translation of assets and liabilities are reflected in the Income Statement
as foreign exchange translation gains and losses.
Income and expense figures have been converted to British pounds for presentation purposes at the average rate for the year. Assets
and liabilities items have been converted to British Pounds (‡) for presentation purposes at the closing rate. The resulting exchange
differences are recognised as a separate component of equity.
For translation of the financial data, the exchange rates of Ukrainian Hryvna to GBP and USD officially set by the National Bank of Ukraine
were used. The weighted average rate for the year was calculated based on the daily exchange rates officially set by the Bank of Ukraine.
(r) Pension costs
The Group contributes to the Ukrainian mandatory state pension scheme, social insurance and employment funds in respect of its
employees. The Group’s pension scheme contributions are expensed as incurred and are included in staff costs. The Group doesn’t
operate any other pension schemes.
(s) Financial assets
The group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired.
Other than financial assets in a qualifying hedging relationship (see below), the group’s accounting policy for each category is as
follows:
Fair value through profit or loss:  This category comprises only in-the-money derivatives.  They are carried in the balance sheet at fair
value with changes in fair value recognised in the income statement.  The group does not have any assets held for trading nor does it
voluntarily classify any financial assets as being at fair value through profit or loss.
 
Hryvna for 
1 GBP (‡) 
Hryvna for 
1 USD ($) 
Official rate as at December 31, 2006 9.9045 5.0500 
Official rate as at December 31, 2005 8.6759 5.0500 
Weighted average rate for 2006  9.3128 5.0500 
Weighted average rate for 2005 9.3129 5.0500 
  32
Loans and receivables:  These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market.  They arise principally through the provision of goods and services to customers (trade debtors), but also incorporate
other types of contractual monetary asset.  They are carried at amortised cost using the effective interest method less any provision for
impairment.
Held-to-maturity investments:  These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities
that the group’s management has the positive intention and ability to hold to maturity.  These assets are measured at amortised cost
using the effective interest method, with changes through the income statement.
Available-for-sale:  Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise
the group’s strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities.  They are carried at
fair value with changes in fair value recognised directly in equity.  Where a decline in the fair value of an available-for-sale financial asset
constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognised in the income statement.
Fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted
securities), the group establishes fair value by using valuation techniques.
(t) Financial liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the asset was acquired.  Other
than financial liabilities in a qualifying hedging relationship (see below), the group’s accounting policy for each category is as follows:
Fair value through profit or loss:  This category comprises only out-of-the-money derivatives.  They are carried in the balance sheet at
fair value with changes in fair value recognised in the income statement.
Other financial liabilities:  Other financial liabilities include the following items:
Trade payables and other short-term monetary liabilities, which are recognised at amortised cost.
Bank borrowings, certain preference shares and the debt element of convertible debt issued by the group are initially recognised at the
amount advanced net of any transaction costs directly attributable to the issue of the instrument.  Such interest bearing liabilities are
subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the
period to repayment is at a constant rate on the balance of the liability carried in the balance sheet.  “Interest expense” in this context
includes initial transaction costs and premia payable on redemption, as well as any interest or coupon payable while the liability is
outstanding.
(u) Dividends
Equity dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when
declared by the directors. In the case of final dividends, this is when approved by the shareholders at the AGM.
(v) Share issue costs
All qualifying transaction costs in respect of the issue of shares are accounted for as a deduction from equity, net of any related tax
deduction. Qualifying transaction costs include:
·     Costs of preparing the prospectus
·     Accounting, tax and legal expenses
·     Underwriting fees
·     Valuation fees in respect of the shares and of other assets
(w) Borrowing costs
Borrowing costs are recognised as an expense in the period in which they are incurred.
4. Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, and price risk), credit risk,
liquidity risk and cash flow interest-rate risk. The Group’s overall risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
Risk management is carried out by the Group Treasurer under policies approved by the Board of Directors. The Group Treasurer
identifies and evaluates financial risks in close co-operation with the Group’s operating units. The management board provides broad 33
guidance and operating principles for overall risk management, as well as written policies covering specific areas, such as foreign
exchange risk, interest-rate risk, credit risk, and investing excess liquidity.
Market risk
Foreign exchange risk
Although the Group is an international operator, the management believe that the foreign exchange risk is minimal at present and is likely
to remain so in the future. The Group’s international operations consist primarily of the export of milk powders to the various markets
around the world. The primary currency for export sales is the US dollar.
The Group’s established corporate policy towards minimising the potential foreign exchange risk is to require the customers to pay for
the export shipments of the skimmed milk powder in full and in advance (from one to two months). The Group’s export operations have
never employed any other payment methods as a matter of corporate principle, and this is expected to continue in the future. Similarly,
the Group has never been engaged in forward transactions and does not expect to conduct these transactions in the future. The
Directors believe that these policies effectively eliminate the foreign exchange risk. The Group’s export-related obligations in Ukraine,
such as payments for raw milk and packaging materials, are all entirely Hryvna-denominated. The UAH/US dollar exchange rate has
been reasonably stable in recent years; the directors have no reason to believe that this is likely to change in the future.
Price risk
The Group is exposed to commodity price risk for its milk powders business segment. The price for this product is predominately
determined by the world market and the activities of large international trading companies in this market. There is always a risk that the
prevailing world marketing price may be insufficient to cover the production costs for skimmed milk powder. Against such a risk, the
Group recognises that there is no effective financial hedge, thus the major instrument employed in management of the price risk is tight
control of operating costs.
Credit risk
The Group has no significant concentrations of credit risk. It has policies in place to ensure that wholesale sales of products both in
Ukraine and abroad are made to customers with an appropriate credit history.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of
committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group’s Treasurer aims to maintain flexibility in
funding by keeping committed credit lines available.
Cash flow and fair value interest-rate risk
As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of
changes in market interest rates.
The Group’s interest-rate risk arises from medium to long-term borrowings. Potentially, borrowings issued at variable rates expose the
Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. Operating Group
policy is to maintain at least 80% of its borrowings in fixed rate instruments. At 31 December 2006, all borrowings were at fixed rates.
5. Change in accounting estimates
Effective from 1 January 2006, the Group changed the accounting estimate of the intra-group loans. In the previously reported
periods, such loans gave rise to the currency exchange differences that were recorded in Income Statement. From 1 January 2006,
the intra-group loans are accounted for as investments in the Ukrainian subsidiaries and reflected in the equity reserves. Had the
estimate been changed on 1 January 2005, the net income for year 2005 would have been ‡1,438,000. The impact on the current
year 2006 was an exchange loss of ‡283,000.
6. Prior year adjustment
In November 2005, the Group acquired Letichiv and Jhmerinka plants. IFRS 3 requires the Purchase Price Allocation (PPA) exercise to
be performed within 12 months from the date of acquisition. Such exercise was performed by an independent valuer Uvecon within the
period of twelve months from the date of acquisition. The corresponding Adjustment to reflect the effects of the PPA exercise on Balance 34
Sheet as at 31 December 2005 was made in the accounts. There was no material effect of the prior year adjustment on Income Statement
and Cash Flow Statement.
 
2005 (as 
previously 
reported) 
‡ ‘000 
Adjustment  
‡ ‘000 
2005 (restated) 
‡‘000 
Assets    
Non-Current Assets    
Property, Plant and equipment 9,034 494 9,528 
Intangible assets 1,551 (218) 1,333 
Investments 97  97 
Deferred tax assets 90  90 
Total non-current assets 10,772  11,048 
Current assets    
Inventories 4,523  4,523 
Trade and other receivables 4,068 (56) 4,012 
Other Financial Assets 358  358 
Cash and cash at bank 453  453 
Total Current assets 9,402  9,346 
Total  assets 20,174  20,394 
    
Equity capital and reserves attributable to equity holders    
Share capital 4,121  4,121 
Other reserves 5,192 8 5,200 
Retained earnings  3,815  3,815 
Minority interest 186 60 246 
Total  equity 13,314  13,382 
Liabilities    
Non-Current Liabilities    
Long-term loans 152  152 
Deferred tax liabilities 837 152 989 
Total Non-Current Liabilities 989  1,141 
Current Liabilities    
Bank loans and overdrafts 3,042  3,042 
Trade and other payable 2,606  2,606 
Current portion of long term liabilities 67  67 
Current income tax liabilities 156  156 
Total Current Liabilities 5,871  5,871 
Total equity and liabilities 20,174  20,394 
 
 
 
 
  35
7. Segment information
At 31 December 2006, the Group was organised on a worldwide basis into three main business segments:
(1) Cheese;
(2) Butter; and
(3) Milk powders
 
2005 (as previously reported) 
‡ ‘000 
Adjustment  
‡ ‘000 
2005 (restated) 
‡ ‘000 
Revenue 39,962 
 
39,962 
  
 
 
Cost of  Sales (33,194) 
 
(33,194) 
  
 
 
Gross profit 6,768 
 
6,768 
  
 
 
Other operating income 594 
 
594 
Administrative expenses (2,167) 
 
(2,167) 
Selling and distribution expenses (2,084) 
 
(2,084) 
Other operating expenses  (563) 
 
(563) 
  
 
 
Profit from operations  2,548 
 
2,548 
  
 
 
Finance income 41 
 
41 
Finance expense (244) 
 
(244) 
  
 
 
Profit before taxation 2,345 
 
2,345 
  
 
 
Income tax expense (337) 
 
(337) 
  
 
 
Profit for the year 2,008 
 
2,008 
  
 
 
Attributable to:  
 
 
Equity holders 2,003 
 
2,003 
Minority interest 5 
 
5 
 2,008 
 
2,008 
Earnings per share:  
 
 
 Basic 5.0 
 
5.0 
 Diluted 4.8 
 
4.8 
  36
The segment results for the year ended 31 December 2006 are as follows:
The basis of pricing of the inter-segment transfers is the current market price at which the goods could be bought on the spot
market externally but not lower than the full production costs plus the accompanying transport expenses.
‡‘000 Cheese Butter 
Milk 
powders 
Total 
dairy 
Services Other 
Un-
allocated 
Total 
Sales, Total 33,399 40,206 16,572 90,177 3,625 6,196 – 99,998 
Sales to internal customers 20,655 28,550 9,536 58,741 2,734 3,470 – 64,945 
Sales to external customers 12,744 11,656 7,036 31,436 891 2,726 – 35,053 
Gross profit 3,075 2,878 866 6,819 171 258 – 7,248 
Administrative expenses 
(1,088) (796) (189) (2,073) (40) – (607) (2,720) 
Selling and distribution 
expenses (1,347) (909) (32) (2,288) (45) – (283) (2,616) 
Other operating income / 
expenses  – – – – – – (457) (457) 
Profit before interest and 
taxation 
640 1,173 645 2,458 86 258 (1,347) 1,455 
Income / loss from exchange 
differences – – – – – – (20) (20) 
Interest expenses 
– – – – – – (237) (237) 
Interest income 
– – – – – – – – 
Profit before taxation 
640 1,173 645 2,458 86 258 (1,604) 1,198 
Taxation 
– – – – – – (119) (119) 
Profit for the year 
640 1,173 645 2,458 86 258 (1,723) 1,079 
 
        
Segment assets 9,237 4,627 2,549 16,413 198 807 – 17,418 
Unallocated corporate assets 
– – – – – – 
1,563 1,563 
Unallocated deferred tax 
– – – – – – 
42 42 
Consolidated total assets 9,237 4,627 2,549 16,413 198 807 1,605 19,023 
         
Segment Liabilities 584 565 208 1,357 57 349 – 1,763 
Unallocated corporate 
liabilities 
– – – – – – 
3,851 3,851 
Unallocated deferred tax 
– – – – – – 
767 767 
Consolidated total liabilities 584 565 208 1,357 57 349 4,618 6,381 
         
Other segment information:                
Depreciation and amortisation 775 351 131 1,257 34 – 68 1,359 
Capital expenditure 2,259 480 1,293 4,032 36 – 28 4,096 
  37
The segment results (restated) for the year ended 31 December 2005 were as follows:
Secondary reporting format – geographical segments:
‡‘000 CheeseButter
Milk 
powders
Total 
dairy
Services Other Unallocated Total
Sales, Total 42,798 36,368 14,287 93,453 3,472 5,094 – 102,019
Sales to internal customers 26,547 24,994 5,772 57,313 2,845 1,899 – 62,057
Sales to external customers 16,251 11,374 8,515 36,140 627 3,195 – 39,962
Gross profit 3,794 1,689 972 6,455 110 203 – 6,768
Administrative expenses (966) (599) (148) (1,713) (26) – (428) (2,167)
Selling and distribution expenses (1,256) (673) (18) (1,947) (31) – (106) (2,084)
Other operating income / expenses  ––– –– – (563) (563)
Profit before interest and taxation 1,572 417 806 2,795 53 203 (1,097) 1,954
Income / loss from exchange 
differences 
––– –– –
594 594
Interest expenses 
––– –– –
(244) (244)
Interest income 
––– –– –
41 41
Profit before taxation 1,572 417 806 2,795 53 203 (706) 2,345
Taxation 
––– –– –
(337) (337)
Profit for the year 1,572 417 806 2,795 53 203 (1,043) 2,008
 
Segment assets 10,227 5,164 1,663 17,054 243 847 – 18,144
Unallocated corporate assets 
––– –– –
2,160 2,160
Unallocated deferred tax 
––– –– –
90 90
Consolidated total assets 10,227 5,164 1,663 17,054 243 847 2,250 20,394
   
Segment Liabilities 904 589 162 1,655 54 379 –2,088
Unallocated corporate liabilities 
––– –– –
3 935 3,935
Unallocated deferred tax 
––– –– –
989 989
Consolidated total liabilities 904 589 162 1,655 54 379 4,924 7,012
         
Other segment information:         
Depreciation and amortisation 525 241 89 855 13 – 29 897
Capital expenditure 2,593 686 240 3,519 45 4 29 3,597
 
Sales by country 
Year ended  
31 December 2006 
‡‘000 
Year ended 
31 December 2005 
‡‘000 
Ukraine 28,459 33,689 
Russia 20 1,376 
Belarus  233 – 
Kazakhstan 202 – 
Georgia 110 – 
Uzbekistan 126 – 
Azerbaijan 339 293 
Armenia 20 – 
Bulgaria 631 431 
Poland – 184 
Holland 332 479 
Algeria 122 – 
Denmark 1,623 669 
Germany 683 2,179 
Other countries 2,153 662 
Total 35,053 39,962 
  38
The majority of the Group’s recognised assets and liabilities are in Ukraine. Sales to the countries in Europe represent sales to
international traders of milk powders located in Europe. These traders consequently resell the milk powders to other countries
worldwide.
8. Property, plant and equipment
Fixed assets with a net book value of  ‡5,680,555 as at 31 December 2006 (‡4,453,000 at 31 December 2005) were pledged as collateral
for loans.
The assets of the Group were revalued in January 2004 according to the revaluation policy. The valuation included a combination of
different methods used by independent appraisers. It was carried out by “Podilia-Expert” LLC (Ukraine), who valued the assets using
the cost and comparables method, and by “BGS-Aktiv” LLC (Ukraine), who used the asset cash generating method.
 
Assets under 
Construction 
‡ ‘000 
Land and 
Buildings 
‡ ‘000 
Plant and 
Machinery 
‡ ‘000 
Vehicles and 
equipment 
‡ ‘000 
Total 
‡ ‘000 
Cost or valuation       
Opening balance at 1 January 2006 1,014 6,339 3,666 3,123 14,142 
Additions/ transfers from AUC 5,477 514 2,158 819 8,968 
Disposals (3,400) (26) (1,290) (436) (5,152) 
Exchange differences on translation to 
the presentation currency (250) (815) (507) (410) (1,982) 
Closing balance 2,841 6,012 4,027 3,096 15,976 
      
Accumulated depreciation       
Opening balance at 1 January 2006 – 1,989 1,218 1,408 4,615 
Depreciation charge – 218 475 602 1,295 
Disposals – (19) (26) (112) (157) 
Exchange differences on translation to 
the presentation currency – (259) (178) (205) (642) 
Closing balance – 1,929 1,489 1,693 5,111 
Net book amount at 31 December 2006 2,841 4,083 2,538 1,403 10,865 
      
Cost or valuation      
Opening balance at 1 January 2005 992 3,941 1,365 1,138 7,436 
Acquisition 3 358 700 458 1,519 
Additions/ transfers from AUC 3,257 1,219 1,210 1,312 6,998 
Disposals (3,401) (14) (53) (148) (3,616) 
Exchange differences on translation to 
the presentation currency 163 835 444 363 1,805 
Closing balance 1,014 6,339 3,666 3,123 14,142 
Accumulated depreciation      
Opening balance at 1 January 2005 – 1,447 552 415 2,414 
Acquisition – 139 305 334 778 
Depreciation charge – 113 219 537 869 
Disposals – (6) 21 44 59 
Exchange differences on translation to 
the presentation currency – 296 121 77 494 
Closing balance – 1,989 1,218 1,407 4,614 
Net book amount at 31 December 2005 
(restated) 1,014 4,350 2,448 1,716 9,528 
  39
9. Intangible assets
The split of the goodwill remaining after Purchase Price Allocation (PPA) exercise as at 31 October 2005 between Letichevsky
Maslozavod OJSC and Jmerinsky Maslosyrzavod LLC plants is as follows.
 
Computer  
software 
‡ ‘000 
Trade- 
marks 
‡ ‘000 
Customer list
‡ ‘000
Goodwill 
‡‘000 Total 
‡ ‘000 
Cost or valuation   
 
  
At 1 January 2006 20 411 752 184 1,367 
Additions 8 – – – 8 
Exchange differences on translation to the presentation currency (3) (42) – – (45) 
At 31 December 2006 25 369 752 184 1,330 
Accumulated amortisation   
 
  
At 1 January 2006 9 19 6 – 34 
Amortisation charge for the year 7 19 38 – 64 
Exchange differences on translation to the presentation currency (2) (3) – – (5) 
At 31 December 2006 14 35 44 – 93 
Net book amount at 31 December 2006 11 334 708 184 1,237 
   
 
  
Cost or valuation   
  
 
At 1 January 2005 7 – – – 7 
Acquisition – – 701 171 872 
Additions 11 383 – – 394 
Disposals (1) – – – (1) 
Exchange differences on translation to the presentation currency 3 28 51 13 95 
At 31 December 2005 20 411 752 184 1,367 
Accumulated amortisation   
  
 
At 1 January 2005 5 – – – 5 
Acquisition – – – – – 
Amortisation charge for the year 5 18 5 – 28 
Disposals (2) – – – (2) 
Exchange differences on translation to the presentation currency 1 1 1 – 3 
At 31 December 2005 9 19 6 – 34 
Net book amount at 31 December 2005 (restated) 11 392 746 184 1,333 
 
 
2005 as previously 
reported 
‡ ‘000 
Adjustment to reflect PPA 
exercise 
‡ ‘000 
2005 (adjusted) 
‡ ‘000 
Letichevsky Maslozavod OJSC 340 (156) 184 
Jmerinsky Maslosyrzavod LLC 817 (817) – 
    
Total goodwill 1,157 (973) 184 
  40
The PPA adjustments made to the book value of assets are shown in the following table.
Upon carrying out an impairment review for the carrying amount of the goodwill, no goodwill write-off was recorded. As the entire
amount of the carrying value of the goodwill after the PPA exercise is attributed to Letichevsky Maslozavod OJSC, the key
assumptions on which the management based the cash flow projections from the plant were, firstly, the continuing value from the
plant is securing the milk supply zone from the competitive milk collectors (the “physical presence competitive defense assumption”)
and, secondly, a cluster of the continuing relevant dairy expertise that existed on the plant (“relevant dairy expertise assumption”). In
the opinion of the management, the values assigned to each of the two key assumptions were as follows: ‡100,000 – to physical
presence competitive defense assumption and ‡84,000 – to relevant expertise assumption. The period over which the cash flows
were assessed to each assumption was under five years although it is the management’s view that the assumption might be relevant
even after this term. The discount rate applied to the projections was 12%.
The intangible asset “Customer list” represents the captive individual suppliers of raw milk in the vicinity of Letichevsky Maslozavod
OJSC and Jmerinsky Maslosyrzavod LLC. In Ukraine, where about 80% of the entire milk comes from the individual producers, the
existing supplier base is very important for the dairy producers and thus is valuable. The acquired asset “Customer list” was
recognised in the accounts on the basis of the Purchase Price Allocation (PPA) exercise conducted within the 12-month period
following the acquisitions of two plants. The asset was valued by an independent valuer Uvecon using the sales comparison method
and depreciated replacement cost (DRC) methods (for tangible assets) and income and cost advantage methods (intangible assets).
10. Financial assets and liabilities – Numerical information
Maturity of financial liabilities
The carrying amounts of financial liabilities, all of which are exposed to cash flow or fair value interest rate risk, are repayable as
follows:
 
As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
In less than 1 year 2,727 2,187 
In more than one year but not more than two years 910 – 
In more than two years but not more than five years – 1,074 
In more than five years  – – 
 3,637 3,261 
 
2005 as previously reported 
‡‘000 
 
  
Letichevskiy  
Maslozavod 
OJSC 
Jmerinskiy  
Maslosyrzavod  
LLC 
 
Adjustment to 
reflect PPA 
exercise 
‡ ‘000 
 
2005 (adjusted) 
‡‘000 
Non-current assets     
Property, plant and equipment 122 234 482 838 
Customer list   752 752 
Current assets     
Cash and cash at bank 1 17  18 
Inventories 16 151  167 
Receivables and prepayments 519 369 (54) 834 
Total assets 658 771 1180 2609 
Trade and other payable 478 740  1218 
Defferred tax   149 149 
Net assets  180 31 1031 1242 
Minority interest  68  58 126 
Net assets acquired 112 31 973 1116 
Acquisition price 452 848  1300 
Goodwill 340 817 (973) 184 
  41
Borrowing facilities
The group has borrowing facilities available at 31 December 2006 in which all conditions have been met.
Interest rate risk
The currency and interest profile of the Group’s financial assets are as follows:
The currency and interest profile of the Group’s financial liabilities are as follows:
Fair values
The book value and fair value of financial assets are as follows:
 Floating rate 
‡ ‘000 
Fixed rate 
‡ ‘000 
Total as at 31 December 
2006 
‡ ‘000 
Total as at 31 December 
2005 
‡ ‘000 
Expiry within 1 year  22 2,705 2,727 2,187 
Expiry within 1 and 2 years – 910 910 – 
Expiry in more than 2 years – – – 1,074 
 22 3,615 3,637 3,261 
 
 Floating rate 
assets 
‡ ‘000 
Fixed rate assets 
‡ ‘000 
Total as at 31 December 
2006 
‡ ‘000 
Total as at 31 December 
2005 
‡ ‘000 
UAH  – 244 244 97 
USD – – – – 
EUR – – – – 
 – 244 244 97 
 
 Floating rate 
liabilities 
‡ ‘000 
Fixed rate 
liabilities 
‡ ‘000 
Total as at 31 December 
2006 
‡ ‘000 
Total as at 31 December 
2005 
‡ ‘000 
UAH  22 3,579 3,601 3,261 
USD – 36 36 – 
EUR – – – – 
     
 22 3,615 3,637 3,261 
 
 Book value as at 
31 December 
2006 
‡ ‘000 
Fair value as at 31 
December 2006 
‡ ‘000 
Book value as at 31 
December 2005 
‡ ‘000 
Fair value as at 31 
December 2005 
‡‘000 
Other investments  244 244 97 97 
     
 244 244 97 97 
  42
The book value and fair value of financial liabilities are as follows:
As at 31 December 2006, the operating lease commitments on uncancellable lease for all the companies included into the
consolidation totaled ‡32,000 (2005:  ‡28,000).
11. Financial assets
Details of investments, including the percentage of the share capital owned by the Operating Group, are as follows:
Financial assets comprise the unlisted certificates of the closed-end venture fund “Dovira-Capital” created for the purposes of
potential acquisitions by the Company in Ukraine. Due to the lack of a developed market all investments have been valued at cost.
The Operating Group's management believes that the carrying value of investments is not significantly different from fair value.
12. Deferred tax
 Book value as at 
31 December 
2006 
‡ ‘000 
Fair value as at 31 
December 2006 
‡ ‘000 
Book value as at 31 
December 2005 
‡ ‘000 
Fair value as at 31 
December 2005 
‡ ‘000 
Bank loans  3,124 3,124 3,042 3,042 
Bank overdrafts 22 22 – – 
Bonds 353 353 61 61 
Promissory notes – – 6 6 
Long-term loans 102 102 152 152 
Other financial liabilities 36 36 – – 
 3,637 3,637 3,261 3,261 
 
 As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Other listed and non-listed investments  (less than 5% holding) 244 97 
   
 244 97 
 
 As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
(restated) 
‡ ‘000 
Deferred tax asset at the beginning of the period 90 36 
Deferred tax liability at the beginning of the period 989 703 
Deferred tax recognised in income statement during the year  (18) (9) 
Reduction in deferred tax due to decrease in property, plant and equipment 
revaluation reserve because of amortisation 
(47) (26) 
Deferred income tax arising on the revaluation of property, plant and equipment – 152 
Exchange differences on translation to the presentation currency (109) 115 
Deferred tax asset at the end of the period 42 90 
Deferred tax liability at the end of the period 767 989 
  43
13. Inventories
As at 31 December 2006 inventories with a value of ‡700,142 were pledged as collateral for the loan received from OTP Bank Ukraine
(‡2,439,000 at 31 December 2005).
14. Trade and other receivables
There is no concentration of credit risk with respect to trade receivables as the Operating Group has large number of customers,
primarily in Ukraine.
15. Other financial assets
Loans issued are denominated in Hryvna, are short term in nature, and are interest free. Loans include  ‡5,000 issued to contracted
transporters of goods for purchase of vehicles and  ‡4,000 issued to Group employees (2005:  ‡13,000 to Group employees).
16. Cash and cash equivalents
 
As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Raw materials  714 2,714 
Finished goods  1,308 1,140 
Other inventories  628 669 
 2,650 4,523 
 
 
As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Trade receivables 2,851 3,249 
Other receivables 440 426 
Prepayments 419 337 
 3,710 4,012 
 
 
As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Cash – in UAH 7 6 
Bank – in UAH 100 409 
Bank – in foreign currency 52 38 
 159 453 
 
 
As at 31 December 
2006 
‡ `000 
As at 31 December 
2005 
‡ `000 
VAT receivable 103 315 
Prepaid profit tax 4 6 
Loans issued (to related parties) – – 
Loans issued (to other parties) 9 37 
 116 358 
  44
17. Share capital
18. Warrants
The Company granted warrants to the broker WH Ireland at the admission to the Alternative Investment Market of the London Stock
Exchange on 11 February 2005. The warrants are exercisable until 11 February 2008.  During the period under review the Company did
not grant warrants to any parties.
Fair value of the warrants granted and outstanding at the end of the year 2006 was estimated to be ‡120,000.
 Authorised 
 
As at 31 
December 
2006 
Number 
As at 31 
December 
2006 
‡ ‘000   
As at 31 
December 
2005 
Number 
As at 31 
December 
2005 
‡ ’000   
     
Ordinary shares of 10p each 50,000  50,000  
     
  5,000  5,000 
     
 Issued and fully paid at beginning and end of the year 
 
2006 
Number 
 2006   
‡ ’000 
2005 
Number 
 2005   
‡ ‘000 
Ordinary shares of 10p each     
At beginning of the year 41,215 4,121 41,215 4,121 
Other issues during the year – – – – 
     
At end of the year 41,215 4,121 41,215 4,121 
 
 
2006 
Weighted 
average 
exercise 
price (‡) 
2006 
Number 
2005 
Weighted 
average 
exercise 
price (‡) 
2005 
Number 
Outstanding at beginning of the year 0.535 1,302,896 0.535 1,302,896 
Granted during the year 
– – – – 
Forfeited during the year 
– – – – 
Exercised during the year 
– – – – 
Lapsed during the year 
– – – – 
     
Outstanding at the end of the year 0.57 1,302,896 0.535 1,302,896 
  45
19. Other reserves
The reduction in revaluation reserve is due to sale of property, plant and equipment which have previously been revalued. The
following describes the nature and purpose of each reserve within owners’ equity.
Fund-raising expenses. The Group has entered into equity-settled share-based transactions with parties other than employees
and has measured the transactions indirectly at the fair value of the instruments granted. This party was WH Ireland who acted as broker
of the fund-raising for the Group by placing ordinary shares on the London Stock Exchange, section AIM in February 2005. The fair
value of the share-based instruments (warrants) given to the broker as part of consideration was ‡120,000.
 Notes 
Share 
premium 
‡ ‘000 
Merger 
reserve 
‡ ‘000 
Share 
option 
reserve 
‡ ‘000 
Translation 
reserve  
‡ ‘000 
Revaluatio
n reserve 
‡ ‘000 
Total 
equity 
‡ ‘000 
Balance at 1 January 2005   – (1,414) – – 2,021 607 
Issue of shares   4,398 – – – – 4,398 
Fund-raising expenses  (361) – – – – (361) 
Share based payments  (120) – 196 – – 76 
Exclusion from Group  – (12) – – – (12) 
Depreciation on revaluation of 
property, plant and equipment  – – – – (108) (108) 
Reduction of revaluation reserve  – – – – (25) (25) 
Decrease of minority interest  – – – – 28 28 
Exchange differences on translation to 
the presentation currency  1 – – 261 335 597 
Balance at 31 December 2005 (restated)  3,918 (1,426) 196 261 2,251 5,200 
Issue of shares   – – – – – – 
Share based payments  – – 19 – – 19 
Exclusion from Group  – (1) – – – (1) 
Depreciation on revaluation of 
property, plant and equipment   – – – – (135) (135) 
Reduction of revaluation reserve  – – – – (4) (4) 
Decrease of minority Interest  – – – – 2 2 
Exchange differences on 
translation to the presentation 
currency  – – 1 (631) (270) (900) 
Balance at 31 December 2006  3,918 (1,427) 216 (370) 1,844 4,181 
 
Reserve Description and purpose 
Share capital Amount subscribed for share capital at nominal value. 
Share premium Amount subscribed for share capital in excess of nominal value. 
Revaluation Gains arising on the revaluation of the Group’s property (other than investment property). The 
balance on this reserve is wholly undistributable. 
Merger Losses arising on the application of the pooling of interests method of consolidation used to 
account for the merger of Ukrproduct Group Ltd and its subsidiaries. 
Share option Amount arising from share based payments (issue of share options). 
Retained earnings Cumulative net gains and losses recognised in the consolidated income statement.  
Translation Amount of all foreign exchange differences arising from the translation of the financial information 
of foreign subsidiaries.  
Minority interest Portion of the profit or loss and net assets of the subsidiary attributable to equity interests that are 
not owned, directly or indirectly through the subsidiaries, by the parent.  
  46
20. Long term loans
Long term loans are repayable in 2008 and consist of ‡101,644 interest free loan as at 31 December 2006 (‡152, 408 as at 31 December
2005). The fair value of the interest free loan has been calculated by discounting the cash flows using a 12% (2005: 12%) discount rate.
21. Current portion of long term liabilities
In 2006, Agrospetsresursy LLC placed bonds denominated in Hryvna in the total amount of  ‡353,376. The bonds bear an interest of
15.0% (2005: 12%) and mature on 7 March 2008.
Other loans are repayable in 2007. The loans are denominated in USD and bear an interest of 11.5%.
22. Bank loans and overdrafts
Bank loans include a secured 3-year credit line of up to UAH 40,000,000 from OTP Bank CJSC (former “Raiffeisen Bank Ukraine”)
denominated in Ukrainian Hryvna (UAH). As at 31 December 2006 an amount of  ‡3,145,597 was drawn from this credit line (2005:
‡3,042,000). The average interest rate as at December 31, 2006 was 14.5% (2005: 15.5%). This loan is secured by the assets of OJSC
Molochnik, Starokonstantinovskiy Molochniy Zavod SC and Starkon-Moloko LLC.
23. Trade and other payables
24. Expenses by nature
 
As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Trade payables  1,325 1,966 
Other payables  233 305 
Prepayments 116 27 
Accruals  252 249 
VAT and other taxation payable  27 59 
 1,953 2,606 
 
 
As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Bonds 353 61 
Promissory notes – 6 
Other loans 36 – 
 389 67 
 
 
As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Raw materials and consumables used,  
cost of goods sold 24,408 28,762 
Changes in inventories of finished goods and work in progress (328) 301 
Wages and salaries 3,227 2,426 
Social security costs 1,152 829 
Deprecation of property, plant and equipment 1,295 869 
Amortisation of intangible fixed assets 64 28 
Operating lease expense (Property) 481 400 
Write-down of inventory to net realisable value 47 – 
Loss on disposal of fixed assets 16 – 
Exchange difference 20 - 
Other expenses 3,236 4,393 
Total cost of goods sold, marketing and distribution costs and administrative 
expenses 33,618 38,008 
  47
25. Employee benefit expense
Remuneration of key management personnel
The key management personnel are those persons remunerated by the Group who are members of the Board of Directors of the
Company (Ukrproduct Group Ltd).
26. Income tax expenses
Income tax comprised the following:
Differences in treatment of certain elements of financial statements by IFRS and Ukrainian statutory taxation regulations give rise to
temporary differences. The tax effect of the movement on these temporary differences is recognised at the rate of 25% (2005: 25%)
 
As at 31 December 
2006  
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Wages and salaries (including key management personnel) 3,227 2,426 
Social security costs 1,152 829 
 4,379 3,255 
 
 
As at 31 December 
2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Salaries 219 257 
Short-term employee benefits – – 
Post-employment benefits – – 
Other long-term benefits – – 
Share-based payments 32 76 
Bonuses 30 30 
Termination benefits – – 
 281 363 
 
 
Year ended 31 
December 2006 
‡ ‘000 
Year ended 31 
December 2005 
‡ ‘000 
Current tax charge – Ukraine 184 348 
Current tax charge – non-Ukraine – 24 
Deferred tax relating to the origination and reversal of temporary differences  (65) (35) 
Income tax charge for the year 119 337 
 
 
As at 31 
December 2006 
‡ ‘000 
As at 31 December 
2005 
‡ ‘000 
Profit before tax – Ukraine 244 895 
Profit before tax – non-Ukraine 954 1,450 
 1,198 2,345 
Tax calculated at domestic tax rates applicable to profits in the relevant countries 80 275 
Expenses not deductible for tax purposes 39 62 
Tax charge 119 337 
  48
The weighted average applicable tax rate was 6.6% (2005: 11.7%). The charge is due to the changes in profitability of the companies
comprising the Group in the respective countries.
Ukraine currently has a system of taxation broadly similar in scope to those of the developed market economies. There are a number of
laws related to various taxes imposed by both central and regional governmental authorities. Although laws related to these taxes have
not been in force for significant periods, the practice of taxation and implementation of regulations are well established, documented
with a sufficient degree of clarity and adhered to by the taxpayers. Nevertheless, there remain certain risks in relation to the Ukrainian tax
system: few court precedents with regard to tax related issues exist; different opinions regarding legal interpretation may arise both
among and within government ministries and regulatory agencies; tax compliance practice is subject to review and investigation by a
number of authorities with overlapping responsibilities.
Generally, tax declarations remain subject to inspection for an indefinite period. In practice, however, the risk of retroactive tax assessments
and penalty charges decreases significantly after three years. The fact that a year has been reviewed does not preclude the Ukrainian tax
service performing a subsequent inspection of that year.
The Group’s management believes that it has adequately provided for tax liabilities in the accompanying financial statements; however,
the risk remains that those relevant authorities could take different positions with regard to interpretive issues.
During the period under review, the Ukrainian companies within the Group paid royalties and interest charge on the outstanding credits
and bonds to another Group company – Linkstar Limited (Cyprus). These payments were not taxable in Ukraine due to the existing
Double Taxation Treaty between Ukraine and Cyprus.
27. Earnings per share
Basic earnings per share has been calculated by dividing net profit attributable to the ordinary shareholders (profit for the year) by the
weighted average number of shares in issue. The diluted earnings per share take into account the potential exercise of all options and
warrants in existence and in the money at the date of this report. The options were granted to the Directors of the Company on 31
January, 2005 and are exercisable until 11 February 2009 at the price of 57 pence. The warrants were granted to the Company’s Brokers
on 31 January 2005 and are exercisable until 31 January 2008 at the price of 53.5 pence.
Although no potentially dilutive instruments existed at 31 December 2006, the company has 1,302,896 share warrants issued to the
nominated broker WH Ireland exercisable until 11 February 2008 at a price 53.5 pence and  912,028 share options issued to the
Directors exercisable until 11 February 2009 at a price 57 pence.  The effect of these warrants and options is antidilutive.
28. Share-based payments
The Company operates an equity-settled share based remuneration scheme for employees. During the period under review the Company
did not grant share options to the Directors. All options granted to the Directors in the prior periods and outstanding as at 31 December
2006 vested on 11 February 2006 and expire on February 11, 2009. During 2006, the exercise price of the options granted to the
Directors was increased from 53.5 pence to 57 pence to reflect the market conditions at the time. As a result of the modifications, no
incremental fair value was granted to the Directors as the new market price reflected the current market conditions and the options
remained out of money during the year. Thus no additional charge was recorded in the accounts.
 31 December 2006 31 December 2005  
Net profit attributable to ordinary shareholders, ‡ '000 1,095 2,003 
Weighted number of ordinary shares in issue  41,214,953 39,924,465 
Basic earnings per share, pence 2.6 5.0 
Weighted number of WH Ireland warrants in the money – 1,152,974 
Weighted number of Directors’ option shares in the money – 807,082 
Diluted average number of shares 41,214,953 41,884,521 
Diluted earnings per share, pence 2.6 4.8 
  49
The fair value of the options granted in 2005 was ‡95,336. An Income Statement remuneration charge of ‡19,336 was recognised in
2006 (2005: ‡76,000).
The fair value of options granted in 2005 has been calculated based on the following data.
To account for dividend yield in the Black-Scholes model, the modified current stock prices were calculated at option grant dates by
subtracting present value of future dividend payments from the actual stock price at those dates. Dividends were assumed to be paid
in two half-yearly instalments. Expected volatility was approximated by an average historical volatility of the peer group companies.
The latter was calculated from daily standard deviations of the peer group stock returns during last 4 years.
29. Dividends
As at 20 April 2007, the Board of Directors proposed the final dividend payment of 0.51 pence per ordinary share for the year ended 31
December 2006 which would lead to 0.61 pence per ordinary share for the full year. If approved at the AGM, the final dividend will be
paid on 29 June 2007 to the shareholders on the register as at 1 June 2007. No tax consequences for the Group will arise out of this
transaction as the Group’s parent company is an entity registered under the Jersey laws.
The directors are proposing a final dividend of 0.51 pence (2005 – 0.50 pence) per share totalling ‡210,000 (2005: ‡206,000). This
dividend has not been accrued at the balance sheet date.
Item 2005 
Option pricing model used 
Adjusted Black-
Scholes 
Weighted average share price at the grant date 0.545 
Exercise price 0.535 
Weighted-average contractual life, years 3.947 
  
Expected volatility 30% 
Expected dividend yield 5% 
Expected dividend growth rate 0% 
Weighted-average risk-free interest rate 4.44% 
 
 
2006 
Weighted 
average 
exercise 
price (‡) 
2006 
Number 
2005 
Weighted 
average 
exercise 
price (‡) 
2005 
Number 
Outstanding at beginning of the year 0.535 912,028 – – 
Granted during the year – – 0.535 998,888 
Forfeited during the year – – 0.535 86,860 
Exercised during the year – – – – 
Lapsed during the year – – – – 
     
Outstanding at the end of the year 0.570 912,028 0.535 912,028 
Exercisable at the end of the year 0.570 912,028 0.535 912,028 
 
 
Year ended 31 
December 2006 
‡ ‘000 
Year ended 31 
December 2005  
‡ ‘000 
Final dividend for 2005 of 0.50 pence (2004 – nil) per ordinary share proposed 
and paid during the year relating to the previous year's results 206 – 
Interim dividend of 0.10 pence (2005 – 0.35 pence) per ordinary share paid during 
the year 41 148 
Total 247 148 
  50
30. Minority interest
As at 31 December 2006 a minority interest of 2.40% (2005: 2.57%) was held in Molochnik OJSC, and 37.85% was held in
Letichevsky Maslozavod OJSC (2005: 37.85%).
31. Related party transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other
party in making financial or operational decisions as defined by IAS 24 “Related Party Disclosures”. In considering each possible related
party relationship, attention is directed to the substance of the relationship, not merely the legal form.
Transactions and balances between the Group companies and related parties are set out below.
Sales of goods and services to related parties and purchases from related parties are summarised below. All sales and purchases were
with related parties under common control of the ultimate beneficiaries of the Company.
Balances due from/(to) related parties at each period end are shown below.
Trade and other payable include payables to the shareholders of the Company.
In 2006, the Group’s commercial relationships with the related parties comprised the purchases and sales and repayment of debts
outstanding. The terms and conditions for the contracts with the related parties were similar to the terms and conditions applied in
dealings with unrelated parties. There were no guarantees given to or provided by from the Group to related parties and vice versa.
The ultimate controlling owners and beneficiaries of the related parties were Messrs Alexander Slipchuk and Sergey Evlanchik.
32. Currency analysis
Currency analysis for the period ended 31 December 2006 is set out below:
 
Year ended 31 December 
2006 
‡ ‘000 
Year ended 31 December 
2005 
‡ ‘000 
Sales 40 160 
Purchases 47 146 
 
 
Year ended 31 
December 2006 
Year ended 31 
December 2005 
(restated) 
Balance at 1/01/2006 246 132 
   
Acquisitions – 118 
Net profit for the period  (16) 5 
Decrease of minority interest (2) (43) 
Exchange differences on translation to the presentation currency (29) 34 
   
Balance at 31/12/2006 199 246 
 
 
As at 31 December 2006 
‡ ‘000 
As at 31 December 2005 
‡ ‘000 
Receivables and prepayments 221 305 
Trade and other payable (41) (419) 
Promissory notes – (6) 
  51
Currency analysis (restated) for the period ended 31 December 2005 is set out below:
‡ ‘000 UAH USD RUR GBP ÅUR Total 
Non-Current Assets       
Property, Plant and equipment 9,516 12 – – – 9,528 
Intangible assets 757 392 – 184 – 1,333 
Investments 97 – – – – 97 
Deferred tax 90 – – – – 90 
Current assets       
Inventories 4,523 – – – – 4,523 
Receivables and prepayments 4,000 9 2 1 – 4,012 
Other Financial Assets 358 – – – – 358 
Cash and cash at bank 415 25 – 13 – 453 
Total  assets 19,756 438 2 198 – 20,394 
Non-Current Liabilities       
Long-term credits 152 – – – – 152 
Deferred tax 989 – – – – 989 
Current Liabilities         
Bank loans and overdrafts 3,042 – – – – 3,042 
Trade and other payable 2,161 – – 368 77 2,606 
Current portion of long term liabilities 67 – – – – 67 
Current income tax liabilities 155 1 – – – 156 
Total liabilities 6,566 1 – 368 77 7,012 
 
‡ ‘000 UAH USD RUR GBP ÅUR Total 
Non-Current Assets       
Property, Plant and equipment 10,854 11 – – – 10,865 
Intangible assets 719 334 – 184 – 1,237 
Investments 244 – – – – 244 
Deferred tax assets 42 – – – – 42 
Current assets         
Inventories 2,650 – – – – 2,650 
Trade and other receivables 3,656 4 5 1 44 3,710 
Other Financial Assets 116 – – – – 116 
Cash and cash at bank 105 15 – 28 11 159 
Total  assets 18,386 364 5 213 55 19,023 
Non-Current Liabilities       
Long-term loans 102 – – – – 102 
Deferred tax liabilities 767 – – – – 767 
Current Liabilities         
Bank loans and overdrafts 3,146 – – – – 3,146 
Trade and other payable 1,718 94 11 33 97 1,953 
Current portion of long term liabilities 353 36 – – – 389 
Current income tax liabilities 23 1 – – – 24 
Total  Liabilities 6,109 131 11 33 97 6,381 
  52
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting (“AGM”) of Ukrproduct Group Ltd will be held on Thursday 21 June 2007 at
10.00am at the offices of CJSC Ukrproduct Group, 14
th
 Floor, 39–41 Shota Rustaveli Street, 01033 Kyiv, Ukraine for the purposes of
considering and, if thought fit, passing the following ordinary resolutions.
1. To receive and approve the Directors' Report and Consolidated Financial Statements of the Group for the year ended 31 December
2006.
2. To receive and approve the Financial Statements of the Company for the year ended 31 December 2006.
3. To receive and approve the Remuneration Committee Report.
4. To approve the payment of a dividend for the year ended 31 December 2006 of 0.61 pence per ordinary share, including a final
dividend of 0.51 pence per share to be paid on 29 June 2007 to shareholders whose names appear on the register of members at the
close of business on 1 June 2007.
5. To authorise the Directors, subject to a satisfactory fee arrangement and a three-year review of independence, to reappoint BDO
Stoy Hayward LLP as auditors to the Company to hold office for the financial year 2007 until the conclusion of the next annual
general meeting.
Approved by and signed by order of the Board
Authorised Signatory
Bedell Secretaries Limited
Secretary
26 New Street
St. Helier
Jersey JE2 3RA
Channel Islands
20 April 2007
NOTES
1. Any member entitled to attend and vote at the AGM is entitled to appoint one or more proxies (who need not be a member of the
Company) to attend and, on a poll, vote instead of the member. Completion and return of a form of proxy will not preclude a member
from attending and voting at the meeting in person, should he subsequently decide to do so.
2. In order to be valid, any form of proxy, power of attorney or other authority under which it is signed, or a notarially certified or
office copy of such power or authority, must reach the Company’s Registrars, Capita Registrars, Proxy Department, The Registry, 34
Beckenham Road, Beckenham, Kent BR3 4TU, not less than 48 hours before the time of the meeting or of any adjournment of the
meeting.
3. As permitted by Regulation 41 of the Uncertificated Securities Regulations 2001, shareholders must be entered on the Company’s
share register at 6.00 pm on Wednesday 20 June 2007 in order to be entitled to attend and vote at the AGM. Such shareholders may
only cast votes in respect of shares held at such time. Changes to entries on the relevant register after that time shall be disregarded
in determining the rights of any person to attend or vote at the meeting.
4. Copies of the service contracts of each of the Directors, and the register of Directors’ interests in shares of the Company kept
pursuant to section 325 of the Act will be available for inspection at the registered office of the Company during usual business hours
on any weekday (Saturdays and public holidays excluded) from the date of this notice until the date of the AGM and at the place of
the AGM from at least 15 minutes prior to and until the conclusion of the AGM. 53
SHAREHOLDER INFORMATION
Website
The Group operates two corporate websites. The website www.ukrproduct.com contains the corporate information and news; the
website www.logistics.ukrproduct.com provides the background information and contact details of the Group’s distribution and
logistics subsidiary. All Group websites are regularly updated.
Administrative enquiries
All enquiries relating to individual shareholder matters should be made to the registrar at: Capita Registrars Shareholders Services
Department, The Registry, 34 Beckenham Road, Beckenham,Kent, BR3 4TU. The registrar will assist with enquiries regarding any
change of circumstances (e.g. name, address, bank account details, bereavement, lost certificates, dividend payment and transfer of
shares). All correspondence should be clearly marked “Ukrproduct Group Ltd” and quote the full name and address of the registered
holder of the shares. Shareholder information, together with a range of online services for Ukrproduct Group Ltd shareholders is also
available at the registrar’s website www.capitaregistrars.com.
Share Price
The current share price of Ukrproduct Group Ltd ordinary shares of 10p nominal value can be accessed via the link to DigitalLook on
www.digitallook.com/ir/aim:UKR. Alternatively, it may be obtained through the website of the London Stock Exchange
www.londonstockexchange.com.
Payment of dividends
As detailed in the Chairman’s report it is Ukrproduct Group Ltd’s intention to pay a final dividend to all shareholders on the record at
1 June 2007. It is more efficient for shareholders and the Company for dividends to be paid directly into bank or building society
accounts. Any shareholder who wishes to receive future dividends in this way should contact Capita Registrars directly or utilise the
online services on the registrar’s website.
Investor Relations
For further copies of the annual financial statements or other investor relations enquiries, please contact:
Bedell Cristin Secretaries Limited
PO Box 75, 26 New Street, St Helier, Jersey JE2 3RA, Channel Islands
Tel: +44 1534 814 876 Fax: +44 1534 814 815
E-mail: jean.walsh@bedelltrust.com, dmitry.dragun@ukrproduct.com
Company registration
Registered Office: 26 New Street, St Helier, Jersey JE2 3RA, Channel Islands
Registered in Jersey with number 88352.
Analysis of Shareholders
The ultimate controlling parties of Ukrproduct Group Ltd are Messrs Sergey Evlanchik and Alexander Slipchuk who collectively
controlled, as of 20 April 2007, 71.8% of the common shares of the company.
Size of shareholding Number of holders % of total Total holding % of total 
Up to 5,000 shares 51 45.9% 127,934 0.3% 
5,001 to 50,000 shares 41 36.9% 700,366 1.7% 
50,001 to 200,000 shares 7 6.3% 649,242 1.6% 
Over 200,000 shares 12 10.9% 39,737,411 96.4% 
Total 111 100.0% 41,214,953 100.0% 
 
Financial Calendar  
31 December 2006 Financial year end 
24 April 2007 Announcement of preliminary results 
21 June 2007 Annual General Meeting 
29 June 2007 Final Dividend Payment 
25 September 2007 Announcement of interim results 
31 December 2007 Financial year end