Pieno Zvaigzdes

Quarterly Report • May 23, 2008

Pieno Žvaigždės, AB Confirmation of the Management

2008 05 21 Vilnius

Interim Financial Statements for the three months 2008

We hereby confirm that to the best of our knowledge, the attached not audited Pieno žvaigždes, AB Interim Financial Statements for the three months 2008 prepared in accordance with International Financial Reporting Standards give a true and fair view of the assets, liabilities, financial position and profit of Pieno žvaigždės, AB.

Pieno Žvaigždės, AB Aleksandr Smagin CEO Pieno Žvaigždės, AB Audrius Statulevičius CFO

PIENO ŽVAIGŽDĖS, AB

INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS OF 2008

VILNIUS, MAY 2008

1. Balance sheet3
2. Income statement4
3. Cash flow statement 5
4. Statement on changes in equity6
5. Notes to financial statements 7

Financial statements prepared according IFRS, not audited

1. Balance sheet

Thousand Litas	2008.03.31	2007.12.31
Assets
Property, plant and equipment	236 285	239 047
Intangible assets	1 548	1 724
Investments available for sale	275	275
Long-term receivables	6 692	6 314
Deferred tax	-	-
Total non-current assets	244 800	247 360
Inventories	78 882	75 758
Receivables	59 665	50 809
Cash and cash equivalents	2 326	2 702
Total current assets	140 873	129 269
Total assets	385 673	376 629
Equity
Share capital	54 205	54 205
Share premium	27 746	27 246
Own shares	(4 108)	(4 108)
Reserves	28 002	28 294
Retained earnings	44 354	52 875
Total equity	149 699	158 512
Liabilities
Government grants	3 799	2 083
Interest-bearing loans and borrowings Deferred tax	139 470 1 050	99 366 1 050
Total non-current liabilities	144 319	102 499
Provisions	-	870
Interest-bearing loans and borrowings	29 633	60 071
Income tax payable	3 791	3 790
Trade and other amounts payable	58 231	50 887
Total current liabilities	91 655	115 618
Total liabilities	235 974	218 117
Total equity and liabilities	385 673	376 629

2. Income statement

Thousand Litas	2008.03.31	2007.03.31
Revenue	150 154	141 963
Cost of sales	(126 497)	(115 636)
Gross profit	23 657	26 327
Other operating income, net	370	192
Sales and administrative expenses	(30 267)	(21 483)
Operating profit before finance costs	(6 240)	5 036
Finance income	104	88
Finance expenses	(2 676)	(1 940)
Finance income/expenses, net	(2 572)	(1 852)
Profit before tax	(8 812)	3 184
Corporate income tax	-	(573)
Profit for the year	(8 812)	2 611
Earnings per share (Litas)	-	0,05

3. Cash flow statement

Thousand Litas	2008.03.31	2007.03.31
Cash flows from operating activities
Profit before tax	(8 812)	3.184
Adjustments:
Depreciation and amortisation	10 781	9.267
Amortisation of government grants	(448)	(510)
Unrealised gain/loss on foreign currency exchange	58	11
Interest income/expenses, net	2 514	1.841
Cash flows from ordinary activities before changes	4 093	13.793
in the working capital
Change in inventories	(3 124)	(10.179)
Change in receivables	(9 292)	6.071
Change in trade and other payable amounts	6 473	4.158
Cash flows from operating activities	(1 850)	13.843
Interest paid	(2 514)	(1.841)
Profit tax paid
Net cash flow from operating activities	(4 364)	12.002
Cash flows from investing activities
Acquisition of property, plant and equipment	(8 241)	(22.513)
Acquisition of intangible assets	(230)	(41)
Proceeds on sale of property	628
Proceeds on disposal of investments held for sale	-
Net cash flow used in investing activities	(7 843)	(22.554)
Cash flows from financing activities
Loans received	9 150	1.027
Repayment of borrowings	(2 937)	(4.394)
Issue (redemption) of shares	0	0
Dividends paid	0	0
Payment of finance lease liabilities	3 454	14.721
Government grants received	2 164	0
Net cash from/(used in) financing activities	11 831	11.354
Change in cash and cash equivalents	(376)	802
Cash and cash equivalents at 1 January	2 702	1.407
Cash and cash equivalents at 30 September	2 326	2.209

4. Statement on changes in equity

Share capital	Share premium	Own shares	Compulso ry reserve	Revalua tion reserve	Other reserves	Retained earnings	Total equity
54 205	27 246	(1 108)	5 420	3 894	11 491 (7 991)	13 119 7 991	114 267
						(9 432)	(9 432)
				(173)		206	33
54 205	27 246	(1 108)	5 420	3 721	3 500	30 376	18 492 123 360
54 205	27 246	(1 108)	5 420	3 721	3 500 200	30 376 (200)	123 360
						(10 779)	(10 779) (3 000)
				15 626			15 626
				(173)		173
54 205	27 246	(4 108)	5 420	19 174	3 700	52 875	33 305 158 512
54 205	27 246	(4 108)	5 420	19 174	3 700	52 875	158 512
				(291)		291	0
							(8 812) 149 700
	54 205	27 246	(3 000) (4 108)	5 420	18 883	3 700	18 492 33 305 (8 812) 44 354

5. Notes to financial statements

The head office of AB Pieno Žvaigždės ("the Company") is located in Vilnius, Lithuania. AB Pieno Žvaigždės was established by way of merger of stock companies Mažeikių Pieninė, Pasvalio Sūrinė and Kauno Pienas.

As at 31 December 2003 the Company owned 64,2% shares of the subsidiary AB Panevėžio Pienas. During the year 2004 the Company acquired the remaining shares of AB Panevėžio Pienas. As of 30 November 2004 AB Panevėžio Pienas was merged to AB Pieno Žvaigždės and acquired the status of a branch.

The main office of the Company is located in Vilnius and the branches – in Mažeikiai, Pasvalys, Kaunas and Panevėžys.

Ordinary shares of the Company are quoted in the Vilnius Stock Exchange.

The Company is engaged in production and sales of milk products to retail stores directly and through distributors.

Statement of compliance

These are the financial statements of a separate company AB Pieno Žvaigždės, which have been prepared in accordance with International Financial Reporting Standards (IFRS).

Key figures of Pieno Zvaigzdes, AB

Key figures	2008 03 31	2007 03 31
Sales, thousand. LTL	150 154	141 963
Gross profit, thousand. LTL	23 657	26 327
EBITDA	4 093	13 793
Current ratio	1,5	1,8
Book value per share (Litas)	2,76	2,32
Earnings per share (Litas)	-	0,05

Inventories

Inventories, thousand LTL	2008 03 31	2007 12 31
Raw materials	17 284	17 408
Stored production	61 283	58 156
Goods for resale	315	194
	78 882	75 758

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

Segment reporting

A segment is a distinguishable component of the Company that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Company sales production mainly in domestic market, Russia, Eastern Europe. All company's assets located in Lithuania.

Post balance sheet events

There were no significant events after the balance sheet date.