Notes to the consolidated half-year financial
statements as at 30 June 2017

These consolidated financial statements consist of the unaudited half-year financial statements for HOCHDORF Holding Ltd and its subsidiaries for the reporting period ended 30 June 2017. The consolidated interim financial statements were prepared in conformity with existing guidelines based on the accounting recommendations of Swiss GAAP FER 31 (supplemental recommendations for listed companies) and with the consolidation and measurement principles described in the consolidated annual financial statements for 2016. Income taxes are calculated based on an estimate of the income tax rate expected for 2017 as a whole. The consolidated half-year financial statements are to be read in conjunction with the consolidated financial statements prepared for the financial year ended 31 December 2016, as this represents an updated version of the last complete financial statements. The consolidated half-year financial statements were approved by the Board of Directors on 10 August 2017.

There were no changes to the scope of consolidation during the reporting period.

In March 2017, the stake in Pharmalys Tunisie S.à.r.l. was increased by 2 % to a total of 51 %.

HOCHDORF Swiss Nutrition Ltd was required to furnish a guarantee (performance bond) in the amount of EUR 398,000 for its deliveries to Egypt. The customer can lodge a claim under the performance bond only in the event of non-delivery by HOCHDORF.

Closure of the curd production plant of Uckermärker Milch GmbH, Prenzlau
On 26 June 2017, the Shareholders' Meeting of Uckermärker Milch GmbH (UMP) in Prenzlau decided to close down the curd production operations of UMP as of 31 October 2017. This is due to the loss as of the said date of commissioned orders of a large customer, who has lost significant market shares in the German market. The measure affects 40 of the current 190 employees. The headcount reduction is to take place in a socially compatible manner and with as few dismissals as possible. The works council and the affected employees were informed in July 2017. The resulting need for provisions is now being determined and will be presented in the annual financial statements for 2017.

Estimated purchase price of the Pharmalys companies
The purchase price is calculated on the basis of the average EBIT of 2016 and 2017 of Pharmalys Laboratories SA and Pharmalys Tunisie S.à.r.l., multiplied by a factor of 14. In addition to this, there is a one-off upside compensation of CHF 28-36 million for the increase in the value of the shares of HOCHDORF Holding Ltd from the signing of the Memorandum of Understanding through 24 October 2016. The purchase price is thus variable and will only be finalised as at 31 March 2018. Based on these half-year financial statements as at 30 June 2017, the purchase price estimate does not need to be adjusted. On the basis of the current forecasts, the final purchase price will thus remain in a range of CHF 160-190 million. We believe that it will most likely be closer to the upper end.

Based on our estimates of the product price development and in view of the cyclical business of Pharmalys Laboratories SA, we expect net sales and income to be higher in the second half of the year.

For the first time, this year's half-year financial statements include the Pharmalys companies acquired as of the end of 2016. For this reason, the consolidated income statement cannot be directly compared with that of the previous year. The changing market conditions in other countries (increasing milk prices) resulted in highly heterogeneous company results in the first half of the year. Therefore, the Group result must be evaluated in a differentiated manner. Despite the smaller quantity sold (111,948 tonnes compared to 125,604 tonnes in the previous year), the Group's turnover increased to CHF 312 million. This was especially due to the rising milk and fat prices in the EU. Despite the similar incoming liquid volume (226 million kg compared to 227 million kg in the previous year), HOCHDORF Swiss Nutrition Ltd suffered substantial losses. The main reasons were the lower "Schoggi Law" funding and the reduced production of infant formula due to the temporary loss of quantities in Egypt and Libya. Moreover, shorter delivery times resulted in production stops, as the customers still primarily sold their existing stock. The Cereals & Ingredients Division also sustained some margin losses. Dairy Ingredients, the largest division , was hit hard by the effects of the lower "Schoggi Law" funding and the intensified competition. Due to initiated measures, such as price adjustments, segmentation, portfolio adjustments and seasonal stock reduction, we anticipate a significant increase in earnings in all three areas in the second half of the year. By contrast, Pharmalys Laboratories SA surpassed our expectations. This shows that we have taken the right approach with our strategy of forward integration. HOCHDORF Baltic Milk UAB continues to suffer from the state-influenced milk prices, which cannot be realised in the market. Therefore, the company reported a negative result. Political influences by the authorities still prevent the necessary adjustment of the milk prices, which inevitably leads to falling margins. Uckermärker Milch GmbH performed well in the persistently difficult market environment. The company was able to benefit from the market conditions and achieved a positive result in line with expectations in the first half of the year. However, due to the loss of a large customer as of 31 October 2017 and the announced closure of the curd production plant, we anticipate a correction towards the end of the year and a slightly negative result. Year on year, the quantity produced by the group dropped by 14.7 % in comparison with the same reporting period in the previous year. Due to the seasonal increase in receivables and inventories and the effect of Pharmalys, the cash flow from operating activities amounted to CHF –36.1 million (previous year: CHF –17.0 million). At CHF –30.9 million, the cash outflow from investing activities in the first half of the year was considerably higher than in the previous year (CHF –11.0 million). This was mainly due to ongoing investments in the new factory in Sulgen.

The Group performed well despite the difficult market conditions. We remain optimistic about the outlook for the second half of the year. It remains to be seen how the world market prices will develop. They are on the up, which may reduce the "Schoggi Law" funding gap, but that could also lead to further margin losses.

In view of possible competitive disadvantages compared to unlisted and large listed competitors, customers and suppliers, we have chosen not to present the segment results pursuant to Swiss GAAP FER 31/8.

The Swiss milk market is small and tightly knit, with few key companies and providers. Milk production is in the hands of just a few organisations. On the processing side, the market is shaped by four large dairies, along with cheesemakers. On the customer side, the chocolate industry segment is predominant, likewise with just a few large producers. In the area of infant formula (based on milk), only one other company apart from the HOCHDORF Group produces infant formula for the Swiss and international market.

The balance sheet total went up from CHF 425 million as at 31 December 2016 to CHF 474 million as at 30 June 2017. In the same period, the net debt dropped from CHF 213.4 million to CHF 52.2 million due to the issue of the mandatory convertible bond as of 30 March 2017. For this reason, the equity ratio increased sharply from 10.8 % as at 31 December 2016 to 56.8 % as at 30 June 2017. The syndicated loan covenants have been complied with in full.