Consolidated key figures of the Lotus Bakeries Group

IEMarkante gebeurtenissen in 2007GBFRNLBECountry organizations:• Belgium-Luxemburg• Netherlands• FranceCHDEATCZSales organizations:• Germany/Austria/Switzerland• Czech Republic/Slovakia• UK/Ireland• Spain/Portugal• USA• Asia Pacifi c• New Markets Europe• Middle East/India/AfricaSKPTESNew organizational structureAnnouncement of the ending of production ofJaffa Cake Bars for Mc Vities in 2008Signifi cant price increases of various basic ingredients (including fl our, fats,chocolate, syrups) and packaging materialProduction record at Lembeke plant taking it past20 million kilograms.0.400.380.360.340.320.300.280.260.240.220.200.180.16Evolution of flour price - Lotus Bakeries - EUR/kg1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008jan to mrch5

6Karel Boone, Chairman en Matthieu Boone, CEO

iM e s s a g e f r o m t h e Ch a i r m a n a n d t h e CEO2007 was a good year for Lotus Bakeries.Turnover rose considerably, especially in the second halfof the year. Internal growth of 5% in the first half and of14% in the second half was above expectations.Structurally our products are well placed in the market.We have a portfolio of tasty, highly reputed productswith a heavy emphasis on convenience. Many productssuch as gingerbread also have strong “health” profiles.Lotus and Peijnenburg are both very strong brands radiatingseriousness and solidity, identities which againproved their very great worth in 2007.Lotus caramelized biscuits continued on their way tobecoming an internationally recognized product. Turnoverwas also helped by the poor summer weather, whichresulted in very high summer sales in the Benelux andneighbouring countries.strengthening of commercial organizations on exportmarkets.Another major task area is increasing product innovationby developing new and innovative products in 2008. For2008 we are also planning major investments to expandour production capacity for caramelized biscuits and gingerbreadand to make productivity improvements. Thisconstant improvement of our efficiency and productivityis essential for maintaining our competitiveness in orderto extend our position in the international biscuits market.Lotus Bakeries’ management and employees have set towork with determination and commitment to implementthese plans and are - as in the past - strongly motivatedto achieve the company’s strategic ambitions.Organizationally 2007 was a good year. Following thetakeover of Koninklijke Peijnenburg in mid-2006 we haverapidly grown into a tight, well-streamlined organization.The associated adaptations at group level have proceededvery successfully.The integration of the Lotus Bakeries Netherlands organizationinto that of Koninklijke Peijnenburg took placevery rapidly and efficiently, with major savings in theNetherlands.Another feature of 2007 was the very marked upwardmovements in many raw materials prices. The unprecedentedsharp and fast rises for essential ingredients likegrains, syrups and margarines are structural in nature.Lotus Bakeries therefore adjusted its prices as fast aspossible in the course of the fourth quarter of 2007. Thiswas necessary and timely.2008 faces us with new and major challenges. The biggestof these will be handling consumer reactions to ourhigher prices and the strong rise of the euro against theUS dollar and most other foreign currencies. Lotus Bakerieswill cushion these effects by further increasing itscommercial efforts: more advertising and furtherMatthieu BooneCEOKarel BooneChairman7

8Jan Boone, managing director and Jan Vander Stichele, managing director

iiM i s s i o n s t a t e m e n t a n d Co r p o r a t e s t r at e g yMission statementLotus Bakeries will base its sustainable growth andprofitability on:• a focus on authentic products from the biscuit andcake world: caramelized biscuits, gingerbread, wafflesand galettes and bakery specialties. Products that aredistinctive in terms of both quality and customer satisfaction.Customers are entitled to expect the very bestfrom Lotus Bakeries in these specialty areas.• a targeted brand policy: building brands with realcontent. Lotus and Peijnenburg are strong brands,which radiate pride and in which consumers have constanttrust and feel good when consuming.• clear leadership in its specialties.The size and organization of Lotus Bakeries must beadapted to the volume and foreseeable evolution of itsmarket.Corporate strategyLotus Bakeries’ business is producing and selling authenticspecialty biscuits and cakes.Lotus Bakeries seeks to strengthen (or consolidate) eachproduct’s leadership in its local region and create aninternational market for it. This leadership is expressed inthe strong market positions of the Lotus and Peijnenburgbrands.To achieve this, Lotus Bakeries has the following essentialresources:• Brand positions: Lotus Bakeries has two very strongbrands, both with strong content in their home markets(Lotus in Belgium and Peijnenburg in the Netherlands),and highly regarded as specialist producers byconsumers in other countries.- Brands now represent 82% of total annual turnover.- Market investment is systematically targeted atincreasing brand awareness and supporting brandgrowth.- Outside the Netherlands, Lotus will be the brand forall specialty products, chosen with care. In the Netherlands,Peijnenburg will remain the brand for gingerbread,and of other specialties concordant withits market image “Happen naar Peijnenburg (magelke dag)”.• Product ranges in Belgium, the Netherlands andFrance centred around local specialties and strengthenedby those from the other countries. In the othercountries these specialties are valued for their innovativenessand specificity.• Specialized production centres with the technologyto produce price-competitive products that consumersvalue for their quality and unique character.• An expanding commercial organization targeted atspecific market segments and consumer groups in differentcountries. Retail is the primary sales channel inmost markets, but out-of-home consumption (wholesaleand catering) is of growing importance. In theGroup’s key markets (Belgium, Netherlands, France),the Lotus and Peijnenburg brands and sales are stimulatedby active advertising and promotional activities.In other countries an active commercial policy isapplied, adapted to Lotus’s specialist position in thecountry in question.• New product developments and changing consumernutritional requirements (low trans margarine, lowsat margarine, fibre-rich products, less fat, etc.) call fora strong team in areas like product improvement andproduct development. For this Lotus Bakeries has aspecialist team that supports plants in implementingwell-targeted market and marketing changes.• Lotus Bakeries uses a highly efficient integrated MIS(Management Information System), enabling strategiccontrol and daily management of the company’s activitiesto be based on concrete data.In this way Lotus Bakeries will achieve further growthand profitability by strengthening its market and brandposition and through the further internationalization ofits products.9

iiig r o U p pr o f i L e1. Products and marketsLotus Bakeries has opted for a brand policy based onauthentic specialties from the biscuit and cake world:caramelized biscuits, gingerbread, waffl es and galettesand cake specialties. This policy is implemented bystrengthening Lotus Bakeries’ leadership in these productsin their regions of origin, and stimulating their internationalization.Caramelized biscuitsCaramelized biscuits are an original Belgian specialty.They owe their typical taste to the caramelization of thesugar during the baking process. In Belgium, Lotus caramelizedbiscuits are a top product across the biscuit market.Lotus caramelized biscuits are providing increasinglypopular internationally, so that today 65% of sales arerealized outside Belgium. The main foreign markets areFrance, USA, UK and Germany. In June 2007, caramelizedbiscuits were launched in the Netherlands under thePeijnenburg “Koffi eleutjes” brand name. This introductionproved to be very successful.Lotus caramelized biscuits are also a strongly growingsuccess in South Korea, Japan, the Czech Republic, Switzerland,Austria, Israel, Spain and Italy. The other exportmarkets are also developing very well.Waffles and galettesBelgium has long been famed for its waffl es. Lotus Bakerieshas a very wide range here consisting primarily ofLiège waffl es, soft waffl es, fi lled waffl es, galettes (thin,crispy waffl es) and vanilla waffl es. By clearly distinguishingits brand features, Lotus Bakeries is able to persuadeconsumers to opt for quality and specifi city when purchasingthese products in Belgium. 60% of all Lotus waffles are sold outside Belgium, primarily in France, Germanyand the Netherlands.Cake specialtiesThis group of authentic products is diffi cult to bringunder a common denominator. In almost every casethese are specialties that are very popular in their regionand country of origin, and which outstanding quality andstrong branding have deeply anchored in consumerbehaviour and consumption patterns. These products,like frangipane, madeleine, carré confi ture and Zebra inBelgium, Glacés and Enkhuizer cookies in the Netherlandsand Breton butter specialties are therefore mainstaysfor the popularity of the Lotus brand.GingerbreadThis authentic product from the Low Countries (moderndayBelgium and Holland) has developed very strongly inthe Netherlands where strong brands like Peijnenburgand Wieger Ketellapper have been turned into modern,contemporary concepts that match the consumptionpatterns of today’s conscious consumers. Gingerbread isvery popular in the Netherlands, thanks to the quality ofthe product itself and the sense of dynamism inherent inthe brands, with over 30 million kg consumed every year.Koninklijke Peijnenburg has over 60% of the Dutch market.The current dynamism on the Dutch market willobviously be carried forward by the ‘Peijnenburg’ fl agship.In Belgium just 5 million kilos a year are consumed. Gingerbreadis also popular in France. Lotus wants to marketthese products more strongly, fi rst of all in Belgiumand France. This product will be redynamized, with productdevelopment and innovative packaging, under theLotus brand.Gingerbread was successfully launched in Belgium inJune 2007 under the Lotus brand name. The set target of10% market share in six months was exceeded, andunlike previously, the gingerbread market has taken on anew dynamism, turning it from a stagnating into agrowth market.< Cosy breakfast with Lotus gingerbread11

2. Sales organizationsLotus products are consumed both at home and awayfrom home. Lotus has specialist sales teams workingintensively in each market: retail, catering (schools andclinics) and food service (hotels, restaurants, cafés andpetrol stations).Lotus has its own sales organizations for Belgium, theNetherlands, France, Germany/Austria/Switzerland,Czech Republic/Slovakia, UK and, since 1 February2008, also for Spain.In the United States Lotus Bakeries has a joint ventureorganizing both mail order (catalogue) and retail sales. Aspecialist US company also sells Lotus products to airlinecompanies.In South Korea, Japan, Israel, Taiwan, Cyprus, Lebanon,Greece, China, Kuweit and other export countriesLotus Services relies on specialist importers which areprofessionally and successfully selling our products. InSingapore a separate export department has been setup for Asian and Oceanic countries.Harry’s Benelux is a joint venture with Harry’s, marketleader in France in prepacked bakery products. In Belgiumthe company markets a range of bread productswith a shelf life of four to six weeks.3. Production facilitiesOur production sites are:Belgium• At Kaprijke (Lembeke) in East Flanders we producethe full range of caramelized biscuits, as well as frangipane.• In Ghent (Oostakker) in East Flanders, we producemadeleine, Amico, Zebra and Midi. This productionplant also specializes in snack cakes (Marshmallow,Bimbo) and carré confiture.• The production of waffles and galettes is split betweenMeise in Flemish Brabant and Courcelles in Hainault.France• Our plant at Comines, Le Nord, specializes in filledwaffles, coconut products and frangipane under theCremers brand and for distribution labels.• In Briec-de-l’Odet, Brittany, Le Glazik produces theBreton butter products: 4/4 bars, demi lunes, mini4/4s, madeleine, Gâteaux bretons, Galettes bretonnes,Palets and luxury butter biscuits (almond biscuits andhearts).Netherlands• Geldrop, North Brabant, where the famous Peijnenburggingerbread is produced at two plants, P1 andP2, on the same site.• Sintjohannesga, Friesland, the Sintjohannesga site(previously Wieger Ketellapper) produces Frisian cookiesunder the Wieger Ketellapper brand and gingerbreadunder the Peijnenburg brand.• Enkhuizen, North Holland, produces Glacés, battenbergsand Enkhuizer cookies.Lotus Bakeries’ product range involves in a wide range ofdifferent production technologies. Understanding, masteringand further developing these product technologiesis a constant challenge. The additional need to limitthe number of products and technologies per productionunit requires us to concentrate the products andproduction processes in specialist plants.12

3 group profile4. Logistics centreThe products from the various production facilities forma single range that can be ordered by customers. Thelogistics centre at Lokeren (East Flanders, Belgium) collectsproducts from the various production sites anddelivers them to customers in every country and regionexcept the Netherlands and Brittany. In the Netherlandsproducts are delivered by an outside logistics partner.5. Group functions andcountry organizationIn order to implement the strategy and achieve theGroup’s objectives as coherently and efficiently as possible,the entire group organization is designed aroundthem.A key word here is ‘coherence’, with a fundamentaloption for a clear group approach. This group approachis important given that Lotus Bakeries applies a generalbrand strategy, is looking to follow certain customersinternationally, and wants to have its expertise in variousareas available across the Group (Corporate Finance,Corporate Human Resources, Corporate Services Operationsand Secretariat General).A second keyword is ‘efficiency’: a key condition for takingmaximum advantage of the commercial particularitiesof each market and of each country’s own culture.For this reason it is crucial to enable each country tomake its own decisions as far as possible in the concreteinterpretation and application of the policy lines set atgroup level (country organization Belgium, countryorganization Netherlands, country organization Franceand Sales Offices in countries whithout productionsites).The Executive Committee (EXCO) submits the strategy,approves the action plans and determines the corporatepolicies. EXCO is the most important coordination andmanaging corporate body. Apart from the three executivedirectors, EXCO consists of the corporate directorfinance, the corporate director human resources, thegeneral manager Belgium and the general managerNetherlands.13

iVCo r p o r a t e go V e r n a n C eLotus Bakeries has adopted a Corporate GovernanceCharter. This document, the text of which is publishedon its website (www.lotusbakeries.com), is a commitmentto apply the principles of the Corporate GovernanceCode dated 9 December 2004. This charter isadapted when necessary to refl ect changes in the company’sbusiness. The Charter describes the most importantaspects of Corporate Governance at Lotus Bakeriesand the internal regulations of the Board of Directors,Committees and the Executive Committee.This annual report gives details of the application ofLotus Bakeries Corporate Governance Charter. It alsoprovides explanations for any deviations from the provisionsof the Corporate Governance Code.1. Board of Directorsand Committeesof the Board of Directors1.1 Board of Directors1.1.1 Composition• From 01/01/2007 to 31/12/2007, the board consistedof:- Baron Karel Boone until 11 May 2007 and Charlofi nNV from 11 May 2007, represented by their permanentrepresentative, Karel Boone, non-executiveChairman, represent the majority shareholder, BisinvestNV.- Beukenlaan NV, represented by its permanent representative,Matthieu Boone, CEO, represents themajority shareholder, Bisinvest NV.- Cofi goMM BVBA, represented by its permanent representative,Jan Vander Stichele, executive director.- Mercuur Consult NV, represented by its permanentrepresentative, Jan Boone, executive director.- Stanislas Boone, non-executive director, representsthe majority shareholder, Bisinvest NV.- PMF NV, represented by its permanent representative,Johan Boone, non-executive director, representsthe majority shareholder, Bisinvest NV.- Anton Stevens, non-executive director, representsthe majority shareholder, Bisinvest NV.- Michaël Boone & Co BVBA, represented by its permanentrepresentative, Michaël Boone, non-executivedirector, represents the majority shareholder, BisinvestNV.- Count Paul Lippens, independent director.- Christulf BVBA, represented by its permanent representative,Chris Dewulf, independent director.- Jean-Luc Dehaene, independent director.- Herman Van de Velde NV, represented by its permanentrepresentative, Herman Van de Velde, independentdirector.- Wolferen BV (1) , represented by its permanent representative,Johan Lokhorst, non-executive director.This gives us a balanced Board of Directors in which themajority shareholders, the independent directors andexecutive management are adequately represented.All directors’ mandates expire immediately after theAnnual General Meeting of 2009, except for that of WolferenBV, that expires directly after the Annual GeneralMeeting of 2011.Paul Lippens has been a non-executive, independentdirector since 1988. He is also Chairman of the Board ofDirectors of Iscal Sugar NV, a sugar manufacturer and aLotus Bakeries supplier. The Board of Directors believesthat the independence of Paul Lippens is not jeopardizedby this fact, as there is no interference between the purchaseof sugar and the position as director at LotusBakeries. In addition, the fact that Paul Lippens wasappointed for a fourth mandate in May 2005, is in thiscase not considered by the Board of Directors as adverselyaffecting his independence.(1) Appointed by the Ordinary General Meeting of 11 May 2007.15

• Proposal to the Ordinary General Meeting of 9 May2008- Proposal to appoint Christavest Comm. VA, representedby its permanent representative, StanislasBoone, as a director instead of Stanislas Boone.• The CVs of the directors are available on p. 45-46 ofthis annual report and on the corporate website ofLotus Bakeries• The secretary of the Board of Directors is FilipStandaert, Secretary-General.1.1.2 Activities of the Board of DirectorsThe Board of Directors met six times in 2007. All directorswere present at all meetings, except for two directors onone occasion.The subjects dealt with at the meetings were:- recent sales and financial results- results at 30/06 and 31/12 and proposed pressreleases- investment budget and global budget- proposed subjects for the annual report- process of integrating Peijnenburg- the new legislation on public takeover bids- stock options and warrants- agendas for the General Meetings- acquisition projects- reports and recommendations from the Committees- new product introductions- information on concrete activities and organization- evolution basic ingredients.• One situation occurred in the course of 2007 in whichthe procedure of Article 523 of the Companies’ Codeon conflicts of interest was applied in the Board ofDirectors. This concerned the approval of the 2007warrant plan, including the distribution of the numberof warrants to be allocated by function category. Thiswas the case in the Board meetings of 22 June 2007and 18 July 2007. Beukenlaan NV, Mercuur Consult NVand CofigoMM BVBA did not take part in the discussionand approval of this agenda item.• In the course of 2007 no conflicts of interest occurredbetween Lotus Bakeries NV (including its associatedcompanies) and its directors or members of the ExecutiveCommittee, not falling under the conflict of interestrules of articles 523 and 524 ter of the CompaniesCode.• The newly appointed Board member, Wolferen BV, hasreceived information and visiting sessions tailored tohis needs, giving him an understanding of the LotusBakeries strategy, organization and primary activities.All transactions involving shares of Lotus Bakeries NVcarried out in the course of 2007 by persons consideredas insiders and by persons with executive responsibilitywere undertaken in accordance with the rulesof Lotus Bakeries for the prevention of market abuse.1.2 Audit CommitteeThe Audit Committee includes two independent directors:Paul Lippens (Chairman) and Christulf BVBA, representedby its permanent representative, Chris Dewulf.Michaël Boone & Co BVBA, represented by its permanentrepresentative, Michaël Boone and Charlofin NV, representedby its permanent representative, Karel Boone,both non-executive directors, are the two other membersof the Audit Committee. In the case of a tied votethe Chairman has the casting vote. This ensures that theindependent directors have sufficient influence. TheAudit Committee met three times in 2007 and all memberswere present. The external Auditor participated inpart of all three meetings, at which he presented hisfindings to the Audit Committee.The subjects examined were:- systematic handling of a risk area as part of a globalaudit approach- Auditor’s findings and recommendations- IFRS accounting principles- discussion of the external Auditor’s reports in variousfields- proposal to appoint the new statutory Auditor.1.3 Remuneration and NominationCommitteeThe Remuneration and Nomination Committee has fourmembers who are all non-executive directors: ChristulfBVBA (Chairman), represented by its permanent representative,Chris Dewulf, Jean-Luc Dehaene and Paul Lippensare independent directors. Charlofin NV, representedby its permanent representative, Karel Boone is anon-executive, not independent member. The Committeemet three times in 2007, with all members present.The subjects examined were:- salaries, bonuses and benefits for 2007: systems formanagers and executives, and concrete application toExecutive Committee members- appointment of two new members of the ExecutiveCommittee.16

4 corporate governance1.4 Director compensationThe members of the Board of Directors each receive EUR12,500 a year. The Chairman receives EUR 25,000 a year.Each member of the Audit and Remuneration and NominationCommittees receives compensation of EUR 5,000a year.2. Executive Committee• The Executive Committee consists of the followingmembers:- Beukenlaan NV, represented by its permanent representative,Matthieu Boone: CEO and Chairman- CofigoMM BVBA, represented by its permanent representative,Jan Vander Stichele, managing director- Mercuur Consult NV, represented by its permanentrepresentative, Jan Boone, managing director- Wilfried Deleye, corporate director finance- William Du Pré, general manager Belgium- Jos Destrooper, corporate director human resources- Marco de Leeuw, general manager Netherlands(from May 2007).• The secretary of the Executive Committee is Filip Standaert,Secretary-General.• The Executive Committee met twenty-two times in2007. All members were present at all meetings. Therewere no transactions between Lotus Bakeries and themembers of the Executive Committee that were inconflict with the interests of Lotus Bakeries.• As result of the nature of their positions, the membersof the Executive Committee have different employmentstatuses, in Belgium as well as in other countries.Therefore, where necessary, the remuneration istransposed into a gross salary before social chargesassumed by the employer.and accepted:- Karel Boone 750- Matthieu Boone 1,000- Jan Vander Stichele 750- Jan Boone 750- Wilfried Deleye 500- William Du Pré 500- Jos Destrooper 500- Marco de Leeuw 500In 2007 the following warrants, replacing the shareoption plans, were allocated and accepted for the comingyears:- Matthieu Boone 5,000- Jan Vander Stichele 5,000- Jan Boone 5,000- Wilfried Deleye 2,500- William Du Pré 2,500- Jos Destrooper 2,500- Marco de Leeuw 2,500• No special recruitment or departure regulations havebeen agreed with the members of the Executive Committee.3. External auditPricewaterhouseCoopers Bedrijfsrevisoren BCVBA, representedby Mr Lieven Adams, “bedrijfsrevisor”, and MrPeter Opsomer, “bedrijfsrevisor”, was appointed as Auditorof Lotus Bakeries NV on 11 May 2007 by the GeneralMeeting for a term of three years. Its mandate expiresimmediately after the Annual General Meeting of 2010.The compensation received in 2007 for auditing andnon-auditing services by PricewaterhouseCoopersBedrijfs revisoren BCVBA and by people connected toPricewaterhouseCoopers Bedrijfsrevisoren BCVBA, isdescribed on p. 34 of the financial supplement.In 2007 the CEO received the following remuneration:- Fixed compensation: 282,287 EUR- Variable compensation: 127,027 EUR- Other: 62,160 EURIn 2007 the members of the Executive Committee, notincluding the CEO, together received the following remuneration:- Fixed compensation: 858,380 EUR- Variable compensation: 307,422 EUR- Other (group insuranceand miscellaneous): 182,061 EURIn 2007 the following number of options were allocated17