Contents Condensed Consolidated Interim Statement of Income 3 Condensed Consolidated Interim Balance Sheet 4 Condensed Consolidated Interim Statement of Cash Flows 5 Condensed Consolidated Interim Statement of Changes in Equity 6 Notes to the Condensed Consolidated Interim Financial Information 7 (For tables see attached file) NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION AS OF AND FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2007 1 Background (a) Organization and operations Black Earth Farming Limited (the "Company") is a limited liability company incorporated in Jersey, Channel Islands, on 20 April 2005. The Company is the holding company for a number of legal entities established under the legislation of Cyprus and the Russian Federation. Those entities are together referred to as the "Group". The Company's registered office is 8 Church Street, St. Helier, Jersey. The Group is involved in the acquisition and subsequent management of agricultural assets in Russia. The Company's activities include farming, production of crops and dairy produce and distribution of products in the Russian Federation. The Group commenced operations in 2005. The majority of the subsidiaries were established in 2006. Subsidiaries established in 2007 have limited activities as at 31 March 2007. (b) Russian business environment The Russian Federation has been experiencing political and economic change that has affected, and may continue to affect, the activities of enterprises operating in this environment. Consequently, operations in the Russian Federation involve risks that typically do not exist in other markets. The condensed consolidated interim financial information for the three-month period ended 31 March 2007 reflects management's assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management's assessment. 2 Basis of preparation (a) Statement of compliance This condensed consolidated interim financial information has been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The condensed consolidated interim financial information as of and for the three-month period ended 31 March 2007 has been prepared on a condensed basis, and therefore should be read in conjunction with the consolidated financial statements as of 31 December 2006 and for the period from 01 January to 31 December 2006, as this financial information provides an update of previously reported financial information. All accounting policies described in the consolidated financial statements as of 31 December 2006 and for the period from 01 January to 31 December 2006 have been consistently applied in preparing this condensed consolidated interim financial information. (b) Basis of measurement The condensed consolidated interim financial information as of and for the three-month period ended 31 March 2007 is prepared on the historical cost basis, except that financial investments classified as available-for-sale are stated at fair value. (c) Functional and presentation currency The national currency of the Russian Federation is the Russian Ruble ("RUR"), which is the Company's functional currency and the currency in which these condensed consolidated interim financial information are presented. All financial information presented in RUR has been rounded to the nearest thousand. (d) Use of estimates and judgments Management has made a number of judgments, estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare this condensed consolidated interim financial information in conformity with IFRSs. Actual results could differ from those estimates. 3 Changes in the Group structure During the period from 01 January to 31 March 2007, the Company established a number of new subsidiaries in the region of Voronezh. 4 Revenues (For table see attached file.) 5 General and administrative expenses (For table see attached file.) 6 Warrants granted to personnel In August 2005, the Company established an instrument creating warrants to subscribe for 2 059 000 ordinary shares. 1 200 000 have been granted to senior management in 2005. The subscription price per warrant varies from USD 1.15 to USD 2. (For table see attached file.) 7 Financial income and expenses (For table see attached file.) 8 Income tax and income tax credit The applicable corporate profits tax rate for the Company is 0% (2006: 0%). Companies domiciled in Russia that do not have a status of agricultural producer are subject to a 24% (2006: 24%) corporate profits tax. Companies domiciled in Russia that do have a status of agricultural producer are exempt from corporate profits tax on profit realized from sale of agricultural produce. (For full report see attached file.)
BLACK EARTH FARMING LTD.: CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION AS OF AND FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2007
| Source: Black Earth Farming Ltd.