registered office: brașov, 55 iuliu maniu street, 500091...

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Half-year report prepared in accordance with FSA Regulation no. 5/2018 on issuers of

financial instruments and market operations

Report date: August 16th 2018

Name of the trade company: ROPHARMA S.A.

Registered office: Brașov, 55 Iuliu Maniu Street, 500091, Brașov County

Phone/fax: 0268 547230/0268 547231

Sole registration number in the Trade Register Office: 1962437

Number of registration with the Trade Register: J08/2886/2007

Subscribed and paid-up share capital: 51,126,741.30 RON

The regulated market where the issued securities are traded: Bucharest Stock Exchange

Standard category (RPH symbol)

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1. Economic and financial statement of the company

The general assessment elements are presented in the table below:

H1 2017 /

December 31,2017

H1 2018 /

June 30, 2018

∆

∆

%

Operating income 165.840.447 176.451.610 10.611.163 6%

Operation result 3.171.260 3.231.542 60.282 2%

Net profit 2.676.401 2.777.276 100.875 4%

Total assets 242.654.941 267.114.336 24.459.395 10%

Total liabilities 97.331.593 119.113.074 21.781.481 22%

Equity 145.323.348 148.001.262 2.677.914 2%

Profitability of income 2% 2% 0%

Debt ratio 40% 45% 5%

Profitability of assets 1% 1% 0%

Profitability of equity 2% 2% 0%

The share of business segments within revenue is presented as follows:

H1 2017 H1 2018 ∆ ∆ %

Revenue from own pharmacies 165.840.447 173.769.854 7.929.407 5%

Revenue under CRV programs - 2.681.756 2.681.756 n/a

Total 165.840.447 176.451.610 10.611.163 6%

The 6% revenue growth in the main business segment was achieved amid

improvements in service levels, growth in physical unit volumes and the opening of new

pharmacies.

In the first half of 2018, the company recorded revenues within the national cost-

volume-program amounting to 2,681,756 lei, following the trend of the pharmaceutical

market.

Deficient products generated by intra-Community parallel export continue to cause

revenue losses.

The Company recorded a decrease in other revenue by 5% compared to the

previous period, as shown in the table below.

H1 2017 H1 2018 ∆ ∆ %

Rental income 858.800 628.341 (230.459) -27%

Income from service provision 518.074 787.634 269.560 52%

Other operating income 1.647.741 1.463.196 (184.545) -11%

Total other income 3.024.615 2.879.171 (145.444) -5%

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Compared to December 31, 2017, fixed assets at the net book value increased by

15% in the amount of 20,341,471 lei.

The detailed analysis of fixed assets is presented as follows:

December 31st

2017

June 30th

2018 ∆ ∆ %

Tangible assets 57.853.145 58.298.190 445.045 1%

Goodwill 11.613.659 11.613.659 - 0%

Intangible assets 14.898.378 16.451.451 1.553.073 10%

Investments in associates 20.405.057 20.405.057 - 0%

Real estate investments 32.683.069 51.026.422 18.343.353 56%

Total intangible assets 137.453.308 157.794.779 20.341.471 15%

The 15% variation in fixed assets is mainly due to consolidation works carried out

at the building where the new hospital will operate and pharmacy license purchases.

Tangible and intangible assets are depreciated using the straight-line method based

on estimating operating life, starting the month following commissioning.

The documented degree of wear for which assets are subject to impairment is

shown in the table below:

Tangible

assets

Other

intangible

assets

At January 1st, 2016 33% 57%

At December 31st, 2016 26% 63%

At December 31st, 2017 24% 76%

At June 30th, 2018 25% 82%

Following assessment and analysis of the results recorded in 2017 and Q1 2018,

Coface company, market leader in credit risk management during the 2nd quarter of 2018

maintained the risk level for the company at low-risk. The same risk level was also granted

to affiliated companies.

The company's financial obligations have been complied with by not recording

outstanding payments to suppliers, the consolidated state budget, local budgets, or the

health insurance budget and special funds.

The financial statements for the first semester as at 30 June 2018 were reviewed by

the independent external auditor.

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2. Company activity analysis

According to the information provided by market research company CEGEDIM

Romania, the pharmaceutical market from the retail segment recorded an increase of

18.36 %, reaching a value of 6.75 billion lei in the first half of the year 2018, compared

to the same period of the last year.

The turnover reached by ROPHARMA in H1 2018 is 176.5 million lei, achieved

from selling:

• Medical prescription based products in the amount of 126.8 million lei;

• Products issued without medical prescription in the amount of 49.5 million

lei;

Sales of the company are presented below:

Ropharma - NonRx H1 2017 H1 2018 Δ Δ%

Net sales excluding VAT 42,975,347 49,575,518 6,600,171 15.4%

Sales in units 2,994,666 3,138,709 144,043 4.8%

Average value / unit 14.35 15.79 1.44 10.1%

Ropharma - Rx H1 2017 H1 2018 Δ Δ%


Sales in units 3,131,326 3,062,971 (68,355) -2.2%


Ropharma- NonRx & Rx H1 2017 H1 2018 Δ Δ%


Sales in units 6,125,992 6,201,680 75,688 1.2%


Gross margin 32,379,829 34,737,498 2,357,669 7.3%

The turnover achieved by Ropharma SA in 6m - 2018 is of 176.4 million lei, an

increase of 10.6 million lei compared to 6m - 2017.

Unit sales increased by 75.688 units compared to 6m – 2017.

NonRx products, in H1 2018 there was an increase in sales compared with S1

2017, as follows:

- net amount with 6.6 million lei;

- quantitatively with 144,043 units.

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The factors that influenced these variations are:

- streamlining and intensification of marketing campaigns directed at patients,

carried out in collaboration with producers;

- completing the portfolio with products in this category, following the European

markets trend, namely an increase in the share of sales for this segment within

the total sales;

- an effective strategy for commercial campaigns aimed at the patient by

applying the "category" principles to management;

- increase in the quality of services addressed to the patient, result of an efficient

development of the continuous training of pharmacists.

- price adjustments applied by producers

For the product category issued on prescription, in H1 2018 there was a variation of

sales compared to H1 2017, as follows:

- net sales growth of 4 million lei;

- quantitative decrease of 68,355 units.

The factors that influenced this increase are:

- Impossibility to supply the desired level with certain products considered

deficient;

- Very aggressive policy of discount granting to the patient practiced by

competitors;

- Increase in delivery price, applied by producers with direct impact in the

margin of the product.

Among pharmacy chains Ropharma SA ranks 4.

In the first half of 2018, compared to the same period of 2017, was recorded a 31%

increase in revenues from the sale of own portfolio products, thus reaching a value of

8,314,960 lei (retail price, without VAT).

On the retail pharmaceutical market in H1 2018 Ropharma SA recorded 3.1% market

share, CEGEDIM source.

Its own production portfolio consists of 81 products covering 28 therapeutic

areas, developed in line with the current trends in various formulations:

▪ unique range of dietary supplements on the Romanian market

(containing lactoferrin);

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▪ products containing natural active ingredients well known in the

world, resveratrol, red rice yeast, probiotics, inulin, lutein, lactase, colostrum,

Spirulina biomass, silymarin, essential phospholipids, vegetable powders and /

or extracts from: artichoke leaves, mulberry leaves, chicory root, valerian root,

aerial parts of Passiflora, hawthorn fruits and flowers, , pir rhizomes, dead nettle

leaves, hops cones, corn silk, pygmy palm tree, thorn root, thyme, walnut tree

leaves, caraway seeds, leaves, black currant seed, soybean, air parts of red

clover;

▪ original gels, topical: Biocicatrin, tonic Bioflexin, tonic Bioven;

▪ anti-parasitic syrup for children;

▪ innovative formula on the Romanian market - NUTRADOSE range,

products in the form of monodose-based vials containing herbal extracts with

bioavailability superior to other similar products;

In March 2018 was signed a strategic partnership agreement for the sale in Romania

of Specchiasol product portfolio, portfolio of dietary supplements and cosmetics

belonging to one of the most important producers in Italy.

Evaluation of research and development activity

In H1 of 2018, the product research and development has resulted in a diversified

portfolio of products covering a wide range of therapeutic areas, the development strategy

being focused on the manufacture of products so obtained in the two production sites:

- Tg. Mureș: Aesculap Prod SRL

- Chișinău: I.C.S. Eurofarmaco SA

and internal and external GMP certified partners collaboration.

The products of the two factories cover 28 therapeutic areas developed in tune with

the current trends in various formulations and present on the Romania and Moldova

markets.

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During the first half of the year, the following products have been added to the

existing portfolio:

Nutradose Beauty - is a dietary supplement that combines

the incontestable benefits of some modern cosmetics, with the role of improving the

structure and appearance of the skin (elasticity and firmness). The combination of the four

active substances - hydrolysed collagen, coenzyme Q10, hyaluronic acid and vitamin C -

make Nutradose Beauty a great product with good bioavailability.

BioR® E – registered as a dietary supplement, is a natural antioxidant complex containing

biologically active compounds from spirulina biomass: non-essential and

essential amino-acids including immunoactive amino-acids (valine, tryptophan,

threonine, aspartic acid, glutamic acid, alanine, arginine, cysteine, glycine, serine,

gamma-aminobutyric acid), amino-acids structured in peptides and proteins, macro- and

microelements (magnesium, potassium, sodium, iron, chromium, selenium, copper, zinc).

This complex composition is the result of the controlled cultivation of Spirulina

(Arthrospira) platensis cyanobacteria, which ensures their synthesis in biomass, followed

by the application of modern extraction techniques (fractional extraction) and sequential

purification (high purification), processes leading to obtaining a product with bioactive

activity tainted against ordinary Spirulina biomass.

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Aterobior – is a dietary supplement of vegetable origin

consisting of an original combination with synergistic action (spirulina extract and

selenium in the form of sodium selenite) having an antioxidant role and elimination of

toxic metabolic products. Selenium is a mineral with antioxidant properties to help

stimulate immunity, help in male fertility, reduce the risk of pregnancy out of progress

and contribute to thyroid hormone synthesis.

The development strategy aims at completing the portfolio with the latest generation

products, products containing natural active substances - the result of the introduction and

development of the biotechnology/biomedical concept.

For the 2nd semester of 2018, two new products are ready for launch:

Activit Anticârcel Forte – is a dietary supplement that

by combining potassium, magnesium and vitamin B6 helps to reduce involuntary and

painful contractions of the muscles.

Venozen - is a dietary supplement that combines diosamine, micronized hesperidine,

troxerutin, chestnut extract, and vitamin C, useful in the treatment of chronic, chronic,

functional and organic venous insufficiency (sensation of weight, pain, night cramps) in

the treatment of functional signs related to the hemorrhoid crisis.

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3. Situation of the main financial indicators:

H1 2017 /

31 December 2017

H1 2018 /

30 June 2018 ∆ ∆ %

I. Liquidity indicators Current liquidity Current assets (A) 105.201.631 109.319.557 4.117.926 4%

Current liabilities (B) 88.183.195 111.539.962 23.356.767 26%

A/B in number of times 1,2 1,0 Immediate liquidity Current assets (A) 105.201.631 109.319.557 4.117.926 4%

Stocks (B) 38.704.178 35.671.434 (3.032.744) -8%

Current liabilities (B) 88.183.195 111.539.962 23.356.767 26%

(A-B)/C in number of times 0,8 0,7

II. Profitability indicators

EBITDA

Operating result (A) 3.171.260 3.231.542 60.282 2%

Amortization (B) 2.160.527 2.229.737 69.210 3%

A+B in lei 5.331.787 5.461.279 129.492 2%

EBITDA

EBITDA (A) 5.331.787 5.461.279 129.492 2%

Operating income (B) 168.865.063 179.330.781 10.465.718 6%

A/B in % 3,2% 3,0%

Gross margin

Gross margin (A) 32.379.829 34.737.498 2.357.669 7%

Net income from sales (B) 165.840.447 176.451.610 10.611.163 6%

(A/B) * 100 19,5% 19,7%

III. Management ratios

Fixed assets turnover

Operating revenue (A) 168.865.063 179.330.781 10.465.718 6%

Non-current assets (B) 137.453.308 157.794.779 20.341.471 15%

(A/B) in number of times 1,2 1,1

Inventory turnover period

Inventories (A) 38.704.178 35.671.434 (3.032.744) -8%

Cost of sold goods (B) 133.460.618 141.714.112 8.253.494 6%

(A/B) in number of days 52 46

Receivables turnover period

Trade receivables (A) 59.200.447 66.837.157 7.636.710 13%

Operating revenue (B) 168.865.063 179.330.781 10.465.718 6%

(A/B) in number of days 128 136

III. Risk ratios

Interest coverage

Operating result 3.171.260 3.231.542 60.282 2%

Interest expense (B) 77.001 60.660 (16.341) -21%

(A+B)/B in number of times 42,2 54,3

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Cash flow statement has been prepared using the indirect method, according to

which adjustments were made for non-monetary transactions.

In H1 2018, operating activities generated a net cash of Ron 14.584.781.

Purchases of licenses and fitting-out works at the new hospital in Brasov

determined the investment cash to reach 20,128,655 lei.

The evolution of cash flow categories is presented in the table below:

H1 2017 H1 2018 ∆ ∆ %

Cash at the beginning of the period 17.586.829 6.745.725 (10.841.104) 62%

Net cash from /(used in) operating activities (6.932.015) 14.584.781 21.516.796 310%

Net cash from /(used in) investment activities (4.610.340) (20.128.655) (15.518.315) 337%

Net cash from /(used in) financing activities (1.483.834) 1.043.229 2.527.063 170%

Net increase / (decrease) in cash (13.026.189) (4.500.645) 8.525.544 65%

Cash at the end of the period 4.560.640 2.245.080 (2.315.560) 51%

Overdraft - 3.721.243 3.721.243 N/A

4. NON – FINANCIAL STATEMENT

According to the provisions of the Order of the Ministry of Public Finances no.

1938/2017 on the amendment and completion of certain accounting regulations, the

management of Ropharma SA is constantly working on the environmental, social and

personnel aspects, namely human rights, the fight against corruption and bribery.

a) Environmental aspects

The main activities in the field of environmental protection in 2017 were performed in a

planned and organized manner aiming to prevent pollution, to reduce the risks of

producing environmental incidents and to comply with the applicable legal provisions in

the field.

The company keeps records of the waste produced, has concluded and carries out waste

recycling agreements such as the packaging of paper, glass, plastic, metals with operators

accredited by the Ministry of Environment.

Moreover, it complies with the applicable laws on the management and storage of

pharmaceutical substances and preparations, collaborating with authorized companies for

the destruction of expired pharmaceutical products according to the environmental rules.

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b) Personnel issues

The relationship with the company's employees was based on mutual respect, trust and

dialogue.

At 30 June, 2018, Ropharma SA personnel structure consisted of 859 people (operational

staff, support staff, management and members of the Board of Directors).

In the first semestre 2018, 54 people were emplyed 83 employees terminated their

employment with the Company.

Specialized personnel recruitment activities were carried out for the purpose of

performing the company’s business field, with particular emphasis on attracting students

from the final years of the Faculty of Pharmacy of Cluj-Napoca, Iasi, Tg. Mures to know

Ropharma profile and becoming aware of the opportunity of being an employee of this

company

The trade union organization that has 672 employees of Ropharma SA registered is

MEDICA Free Trade Union, having the registered office in Bacau.

The relationships between the employer and the employees are regulated by:

• The Collective Bargaining Agreement registered at the Territorial Labour

Inspectorate Braşov under no. 5/1491/26827 of 06.11.2017 for the period 2017-

2019,

• as well as through the individual labor agreements of the employees.

The center of the human resources policies was the concern to develop the professional

and personal skills of its employees, as well as keeping a climate that encourages the

diversity and the manifestation of the talents of all employees in order to attain the

undertaken strategic goals.

c) Social issues

The company’s social responsibility policy substantiates on a set of principles that define

the interaction between the company on the one hand and the employees, shareholders,

partners, community and the environment on the other hand.

Respecting the principle of financial prudence and transparency, the social actions of the

Company resulted in the development of image and reputation capital

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d) Ethics and Integrity

ROPHARMA adopted a Code of Ethics designed to set the standards that must govern

the day-to-day business and the relationships between ROPHARMA personnel and all

external partners (issuers, participants, investors, press, consultants, suppliers and service

beneficiaries, authorities, etc.), as well as with the institutions and organizations in the

company’s business field (fulfilling the role of socially responsible company).

As a rule of thumb and in all circumstances, ROPHARMA personnel must comply with

the international, national, local regulations and with the professional deontology rules,

as well as the capital market. The same behavior must be adopted in case of unilateral

decisions and other regulations issued by ROPHARMA.

In no case ROPHARMA shall encourage non-ethical behavior and, at the same time, shall

not penalize any employee for respecting this Code regardless of repercussions.

ROPHARMA personnel will never accept the accomplishment, complicity or tacit

acceptance of an act of corruption of any kind in the company’s business ROPHARMA

personnel will not provide material benefits / advantages / gratuities to business partners

or employees / representatives of state institutions in order to influence decisions, to

obtain business commitments or have an advantage over the competitors. ROPHARMA

employees will never accept requesting or receiving for themselves or for another money,

gifts, goods, benefits or other advantages to carry out activities within the scope of their

duties or ROPHARMA’s business field in order to create benefits to those with whom it

has official relationships on behalf of ROPHARMA or to favor a supplier/partner to

conclude a commitment with ROPHARMA.

CEO

Dr. pharm. Mihai Miron

ROPHARMA SA INDIVIDUAL FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED ON 30th OF JUNE 2018 PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED BY THE EUROPEAN UNION

CONTENTS PAGE INDEPENDENT AUDITORS’ REPORT 1-3 INDIVIDUAL STATEMENT OF THE FINANCIAL POSITION 4 INDIVIDUAL STATEMENT OF THE COMPREHENSIVE EARNINGS 5-6 INDIVIDUAL STATEMENT OF CHANGES IN EQUITY 7 INDIVIDUAL STATEMENT OF CASH-FLOWS 8-9 NOTES TO THE FINANCIAL STATEMENTS 10-45 To Shareholders Ropharma SA Brasov, România

ROPHARMA SA

INDIVIDUAL STATEMENT OF THE FINANCIAL POSITION

ON 30th OF JUNE 2018

(in lei, unless otherwise stated)

4

Note 31st of December

2017 30th of June 2018

Assets

Fixed assets

Tangible assets 5 57.853.145 58.298.190

Goodwill 6 11.613.659 11.613.659

Intangible assets 7 14.898.378 16.451.451

Investments in associates 8 20.405.057 20.405.057

Real estate investments 9 32.683.069 51.026.422

Total fixed assets 137.453.308 157.794.779

Current assets

Stocks 10 38.704.178 35.671.434

Trade receivables and other receivables 11 59.200.447 66.837.157

Expenses registered in advance 551.281 844.642

Cash and cash equivalents 12 6.745.725 5.966.323

Total current assets 105.201.631 109.319.557

Total assets 242.654.939 267.114.336

Equity and debt

Equity

Share capital 13 68.698.617 68.698.617

Share premium 2.021.064 2.021.064

Reserves 25.230.165 35.841.091

Revaluation reserves 11.843.435 11.229.032

Own shares - (12.808)

Losses related to capital instruments (113.274) (113.274)

Current earnings 6.093.430 2.777.276

Retained earnings 31.549.912 27.560.265

Total equity 145.323.348 148.001.262

Long-term debt

Long-term loans 14 2.520.312 1.260.541

Deferred tax debts 15 6.628.084 6.312.572

Total long-term debts 9.148.396 7.573.113

Current debts

The current part of long-term loans 2.520.300 2.521.058

Short-term loans 1.322.709 3.721.243

Trade debts and other debts 16 82.139.125 103.916.776

Other taxes and social security obligations 1.930.500 813.078

Deffered income 0 129.336

Provisions 55.096 55.096

Debts on income tax 215.466 383.375

Total current debts 88.183.195 111.539.962

Total debts 97.331.591 119.113.074

Total equity and debts 242.654.939 267.114.336

ROPHARMA SA

INDIVIDUAL STATEMENT OF THE COMPREHENSIVE EARNINGS

FOR THE YEAR ENDED ON 30th JUNE 2018


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Nota 30th of June

2017 30th of June

2018

Operating income

Net income from sales 17 165.840.447 176.451.610

Other income 18 3.024.616 2.879.171

Total operating income 168.865.063 179.330.781

Operating expenses

Cost of goods sold (133.460.618) (141.714.112)

Employee benefits expenses 19 (19.867.565) (21.587.121)

Profit / (loss) on sale of fixed assets 1.046.129 791.602

Services provided by third parties (2.558.808) (2.624.018)

Value adjustments to current assets 150.802 14.884

Amortization for fixed assets (2.160.527) (2.229.737)

Other operating expenses 20 (8.843.216) (8.750.736)

Total operating expenses (165.693.802) (176.099.239)

Operating profit/loss 3.171.260 3.231.542

Financial income 21 149.385 40.347

Financial costs 21 (255.952) (96.292)

Financial result (106.567) (55.944)

Profit before tax 3.064.693 3.175.598

Current income tax 22 (529.829) (713.834)

Deferred income tax 141.536 315.512

Profit from continuing operations 2.676.401 2.777.276

Other elements of the comprehensive earnings

Gains / losses from revaluation of tangible assets 0 0

Income tax related to other elements of the comprehensive earnings

0 0

Other elements of the comprehensive earnings, excluding taxes

0 0

Total comprehensive earnings 2.676.401 2.777.276

Earnings per share 0,0052 0,0054

The financial statements were authorized for issuance by the Board of Directors on 14th of August 2018 and signed on its behalf. Mihai Miron Alin Radasanu Chairman of the Board of Directors Chief Financial Officer

ROPHARMA SA

INDIVIDUAL STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED ON 30th of JUNE 2018

(In lei, unless otherwise stated)

6

Subscribed capital

Capital adjustments

Share premium

Reserves Other

reserves Own

shares Retained earnings

Result from valuation reserves

Revaluation reserves

Result from the

application of IAS/IFRS for the first

time

Result from the

application of IAS 29 for the

first time

Losses related to

capital instruments

Total

12/31/2017 51.126.741 17.571.876 2.021.064 4.599.900 20.630.265 - 5.489.571 12.242.430 11.843.434 37.483.217 (17.571.876) (113.274) 145.323.348

Current comprehensive earnings

2.777.276 2.777.276

Deferred tax related to the difference from the

reevaluation

0 -

Transfer to retained earnings from revaluation reserves

614.403 (614.403) -

Total other elements of the comprehensive earnings

2.777.276 614.403 (614.403) 2.777.276

Allocations to the legal reserve

358.793 (358.793) -

Allocations to other reseves 10.252.133 (10.352.133)

-

Own shares (12.808) (12.808)

Result from error correction (86.554) (86.554)

06/30/2018 51.126.741 17.571.876 2.021.064 4.958.693 30.882.398 (12.808) (2.430.633) 12.856.833 11.229.031 37.483.217 (17.571.876) (113.274) 148.001.261

ROPHARMA SA

INDIVIDUAL STATEMENT OF CHANGES IN EQUITY


(In lei, unless otherwise stated)

7

Subscribed capital

Capital adjustments

Share premium

Reserves Other

reserves Own

shares Retained earnings

Result from valuation reserves

Revaluation reserves

Result from the

application of IAS/IFRS for the first

time

Result from the

application of IAS 29 for the

first time

Losses related to

capital instruments

Total

01/01/2017 51.126.741 17.571.876 2.021.064 4.189.616 20.630.265 - 315.205 11.232.686 9.514.480 37.483.217 (17.571.876) (113.274) 136.400.000

Current comprehensive earnings

6.093.430 6.093.430

Deferred tax related to the difference from the

reevaluatio

(635.943) (635.943)

Revaluation reserve 3.974.642 3.974.642

Transfer to retained earnings from revaluation reserves

1.009.744 (1.009.744) -

Total other elements of the comprehensive earnings

7.290.748 2.244.765 7.110.056 9.432.129

Allocations to the legal reserve

410.284 (410.284) -

Result from error correction (508.780) (508.780)

12/31/2017 51.126.741 17.571.876 2.021.064 4.599.900 20.630.265 - 5.489.571 12.242.430 11.843.434 37.483.217 (17.571.876) (113.274) 145.323.348

ROPHARMA SA

INDIVIDUAL STATEMENT OF CASH-FLOWS

FOR THE YEAR ENDED ON 30th OF JUNE 2018


8

Note 30th of June

2017

30th of June

2018

Net profit 2.676.400 2.777.276

Adjustments for:

Depreciation and amortization expenses 2.160.527 2.229.737

Interest expense and financing related costs 77.001 60.660

Interest income (2.490) (10.150)

Depreciation adjustments for stocks (30.441) 0

Depreciation adjustments for receivables (237.594) (119.930)

Loss / (Profit) on disposal of fixed assets (1.046.129) (791.602)

Deferred tax expenses / (income) (141.536) (315.512)

Net cash from (used in) operating activities before changes in working capital

3.455.737 3.830.480

Changes in working capital:

(Increase) / decrease of the stock 537.940 3.032.744

(Increase) / decrease in trade receivables and other receivables

(8.193.916) (9.463.750)

Increase / (decrease) in trade debts and other debts (2.731.776) 17.480.135

Net cash from (used in) operating activities (6.932.015) 14.879.609

Income tax paid 0 (330.459)

Net cash from / (used in) operating activities (6.932.015) 14.549.150

Cash flows from investing activities:

Purchase of tangible assets (1.833.419) (1.883.180)

Purchase of intangible and financial assets (610.416) (1.553.072)

Purchase of investment property (3.382.457) (18.343.353)

Receipts from assets sales 1.213.461 1.653.608

Interest received 2.490 10.150

Repurchases of own shares 0 (12.808)

Net cash from / (used in) investing activities (4.610.340) (20.128.655)

Cash flows from financing activities:

Loans paid during the year (1.370.605) (1.259.013)

Loans received during the year 0 2.398.534

Interest paid (77.001) (60.660)

Payments related to leasing contracts (36.228) 0

Net cash from / (used in) financing activities (1.483.835) 1.078.861

Net increase / (decrease) in cash and cash equivalents (13.026.189) (4.500.645)

ROPHARMA SA

INDIVIDUAL STATEMENT OF CASH-FLOWS

FOR THE YEAR ENDED ON 30th OF JUNE 2018


9

Cash and cash equivalents at the beginning of the financial year

17.586.829 6.745.725

Cash and cash equivalents at the end of the financial year 4.560.640 2.245.080

Cash and cash equivalents at end of the period include:

Bank accounts and cash 12 4.560.640 5.966.323

Overdraft 0 (3.721.243)

Total 4.560.640 2.245.080

ROPHARMA SA

NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS



10

Note 1. GENERAL INFORMATION Ropharma SA ("The Company") conducts sales of medicines, dietary supplements and para-pharmaceutical products. The main activity of the Company is selling medicines in specialized stores. The company exists since 1991. Since 1999, it became private equity company, conducting sales of medicines and para-pharmaceutical products. In 2007 the company name has changed, and in 2009 took place the merger by absorption of 3 pharmaceutical companies with similar activity. The company is a joint stock company listed on the Bucharest Stock Exchange, established and based in Romania. The registered office address is Iuliu Maniu nr. 55, Brasov. The main market is Romania. Law 91/2015 was published in 2015, amending and supplementing Law 95/2006 on healthcare reform that states that legal entities authorized to supply medicinal products to the population cannot, under national law, engage in wholesale business of medicines. In this context, as from November 2015, the wholesale distribution of medicine was separated from the retail activity and was performed in the company Ropharma Logistic. The shareholders of Ropharma SA on 30th of June, 2018 are: Arrow Pharmaceuticals (31.19%), ADD Pharmaceuticals (17.62%), Rimi Investments (14.07%), the Private Pension Fund Allianz-Tiriac (8.78%), GOA Capital (3.96%), ING Private Pension Fund (3.65%), other legal entities (4.17%) and natural persons (16.56%). According to the acquired certifications, work is carried out in compliance with ISO 9001 standards. Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The main accounting policies applied in preparing these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. 2.1 Compliance statement The individual financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the European Union ("EU"), according to Order nr. 2844/2016 of the Minister of Finance. 2.2 Basis of preparation These interim financial statements ("interim financial statements") have been prepared in accordance with IAS 34 "Interim Financial Reporting" adopted by the European Union. They do not include all the information required for a complete set of financial statements in accordance with the Internat ional Financial Reporting Standards ("IFRS") adopted by the European Union ("IFRS-EU") and must be read together with the annual financial statements as at and for the financial year ended on 31 st of December 2017.

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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The individual financial statements have been prepared in accordance with the historical cost convention, as modified following the revaluation of tangible assets at fair value through equity. Preparation of individual financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It is also required from the management to use reasoning in applying the Company's accounting policies. The areas involving a higher degree of complexity and application of these judgments or where assumptions and estimates have a significant impact on the financial statements are presented in Note 5. 2.3 Business continuity

As a result of the financing activities undertaken and an increased focus on working capital, the Company improved its liquidity position on short and medium term. Forecasts and projections of the Company, taking into account possible reasonable changes in the business performance demonstrates that the Company should be able to operate at current funding levels. As a result of the analysis performed, board members have reasonable expectations that the Company has adequate resources to continue to operate in the foreseeable future. Therefore, the Company shall adopt the going concern principle in preparing its individual financial statements. 2.4 Consolidation These are the individual financial statements of the Company. The Company also prepares consolidated financial statements for the same period of time in accordance with International Financial Reporting Standards as they have been adopted by the European Union. The consolidated financial statements for the half year ended on the 30th of June 2018 shall be issued in due time. 2.5 Foreign Currency Exchange (a) Functional and presentation currency The items included in the financial statements are measured in the currency of the primary economic environment in which it operates ("the functional currency"). The separate financial statements are presented in "Romanian Lei" ("RON"), which is the functional and presentation currency of the company. (b) Transactions and balances Foreign currency transactions are converted into the functional currency using the exchange rates prevailing at the transaction date. Gains and losses resulting from exchange rate differences following the conclusion of such transactions and from the conversion at the end of the financial year, at the exchange rate at the end of year of monetary assets and liabilities denominated in foreign currencies are reflected in the profit and loss account, except where they are recorded in equity as hedging instruments of cash flows against risks and as hedging instruments of net investment against risks.

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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign exchange gains and losses relating to loans and cash and cash equivalents are presented in the profit and loss account in the “financial income and expense” category. 2.6 Tangible assets Land and buildings are presented at fair value, based on periodic evaluations performed at least every three years by independent external valuers, minus the subsequent amortization and depreciation for buildings. Any cumulative amortization at the revaluation date is eliminated from the gross carrying amount of the asset, and the net amount is recorded as the revalued amount of the asset. All other tangible assets are registered at historical cost minus the amortization. Historical cost includes expenses that can be directly attributed to the acquisition of those items. Subsequent expenditures are included in the carrying amount of the asset or recognized as a separate asset, as the case may be, only when the inflow of future economic benefits for the associate is probable and the cost of that asset can be reliably measured. Increases in the carrying amount arising from the revaluation of land and buildings are credited to "revaluation reserves" in equity. Decreases that compensate increases related to the same asset are recorded alongside other reserves directly in equity; all other decreases are recorded in the profit and loss account. Amounts recorded in revaluation reserves are transferred to retained earnings at the end of the useful life of the asset or when the asset is derecognized. Repairs and maintenance expenses are recorded in the income and expenses statement in the financial period in which they are incurred. The costs of replacing the major components of tangible assets and equipment are capitalized when the replaced components are disposed of. Lands are not amortized. Amortization of other items of tangible assets is calculated using the straight-line method to reduce the revalued amount of each asset to its residual value over its useful life as follows: Land facilities 20 years Buildings 32– 48 years Technical installations and vehicles 5 – 18 years Means of transportation 4 – 6 years Office equipment 2 – 10 years The residual value of each asset is the estimated value obtained through the elimination of that asset minus the estimated costs of the elimination, if the asset were already of the age and fulfills the conditions corresponding to the end of its useful life. The residual value of an asset is zero if the company estimates the use of that asset until the end of its physical life.

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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.7 Intangible assets Software

Acquired licenses corresponding to software usage rights are capitalized on the basis of the costs incurred in acquiring and commissioning the respective software. These costs are amortized over their estimated useful life (three to five years). Costs related to the development or maintenance of software programs are recognized as expenses in the period in which they are incurred. 2.8 Depreciation of non-financial assets Assets that have an indefinite useful life are not amortized and are reviewed annually to identify depreciation losses. Assets that are subject to amortization are reviewed to identify depreciation losses whenever events or changes in circumstances indicate that the carrying amount can no longer be recovered. The depreciation loss is the difference between the carrying amount and the recoverable amount of that asset. The recoverable amount is the maximum of the asset's fair value minus the costs of sale and the value in use. For the purpose of evaluating depreciation, the assets are grouped to the lowest level of detail for which independent cash flows (cash-generating units) can be identified. Non-financial assets other than goodwill that have undergone depreciation are reviewed for possible reversal of depreciation at each reporting date. 2.9 Goodwill The goodwill from the date of acquisition of an entity is included in fixed assets. The goodwill is stated at cost, minus the losses accumulated from depreciation. 2.10 Financial assets 2.10.1 Classification Financial assets mainly include cash and cash equivalents, customers and other assimilated accounts. Recognition and measurement of these items is presented in the respective accounting policies. Financial instruments are classified as receivables from granted loans, debts or equity in accordance with the content of the contractual arrangement. Interest, gains or losses associated with a financial instrument classified as a debt are reported as expense or income when incurred.

Financial assets are included in the current assets, except for those with a maturity period greater than 12 months after the end of the reporting period. They are classified as long-term assets. Loans and receivables are classified as "cash and cash equivalents", respectively as "customers and other receivables" in the balance sheet.

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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.10.2 Recognition and evaluation

The company initially recognizes the receivables and deposits at the date when they were initiated. All other financial assets are initially recognized at the date of the transaction when the Company becomes part of the instrument's contractual terms. The Company derecognizes a financial asset when contract rights on the flows generated by the asset expire, or when the rights to cash the contractual cash flows of the financial asset are transferred through a transaction through which the risks and benefits of the property right of the financial asset are significantly transferred. Any interest in the transferred financial asset that is created or retained by the Company is recognized separately as an asset or debt. Loans and receivables are recorded at amortized cost using the effective interest method. 2.10. Depreciation of financial assets The carrying amount of financial assets is analyzed at the end of each financial year to determine whether there is any decrease in value. If such a decrease is probable, the recoverable amount of the asset in question is estimated. If appropriate, a depreciation allowance is recognized in the profit and loss account when the carrying amount of the asset is greater than its recoverable amount. The company first estimates whether there is objective evidence of depreciation. The amount of the loss is measured as the difference between the carrying amount of the asset and the updated value of the estimated future cash flows updated to the actual interest rate of the financial asset. The carrying amount of the asset is low and the amount of the loss is recognized in the consolidated statement of income and expense. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any depreciation loss is the actual interest rate determined on the basis of the contract. As a practical solution, the company can measure depreciation based on the fair value of the instrument using an observable market price. If, in a subsequent period, the amount of the depreciation loss decreases and the decrease can be objectively linked to an event occurring after the recognition of the depreciation (such as an improvement in the debtor's credit rating), the reversal of the depreciation loss previously recognized is recognized in the profit and loss account. 2.11 Stocks Stocks are recorded at the lowest value between the cost and net realizable value. The cost is determined based on the specific identification method. When the specific identification cannot be performed, the company determines the cost based on the first-in, first out (FIFO) method. The cost of the goods includes the costs related to transport-supply and does not include costs related to loans. In the normal course of business, the net realizable value is estimated on the basis of the selling price minus the related variable selling expenses.

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15

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Where necessary, depreciation adjustments are made for slow moving stocks (stocks acquired in the previous financial year for which there has been no turnover in the last six months of the current financial year) or stocks that are physically or morally exploited. a. Trade receivables Trade receivables are initially recognized at fair value minus the depreciation adjustment. Trade receivables are amounts due from customers for goods sold or services provided in the normal course of business. If it is estimated that they will be collected within one year or less than one year (or later, in the normal course of business), they will be classified as current assets. Otherwise, they will be presented as fixed assets. Adjustment for depreciation of trade receivables is established when there is objective evidence that the company will not be able to collect all the amounts owed to it under the original terms of the receivables. The company policy is to provide depreciation adjustments for the following situations:

- the debtor enters into insolvency proceedings, the registered adjustment being at the level of the recorded due and non-due debit;

- the debtor enters into bankruptcy or financial reorganization procedure, the registered adjustment being at the level of the recorded due and non-due debit;

- non-payment or non-compliance with the payment terms, the adjustment being at the level of the debit due from the delivery of goods made during the previous year. The Company does not make adjustments for non-compliance with the payment conditions if there are securities lodged as pledges for the respective debits.

The adjustment is calculated as the difference between the amount recorded in the accounting and the present value of the estimated future cash flows. The carrying amount of the asset is reduced by using an adjustment account, and the amount of the loss is recognized in the profit and loss statement at “value adjustments for current assets”. When a trade receivable cannot be recovered, it is stated on expense, with appropriate reversal of the trade receivables adjustment. Subsequent recoveries of previously amortized amounts are credited to the profit and loss account. b. Cash and cash equivalents For the cash flow statement, the cash and cash equivalents include cash in hand, bank account balances, "over-night" bank deposits, and undistributed meal vouchers. c. Share capital Ordinary shares are classified as part of equity. Additional costs directly attributable to the issue of ordinary shares are recognized as a reduction in equity at net book value. When the share capital recognized as part of equity is repurchased, the amount paid, which includes directly attributable costs, net value of tax effects, is recognized as a reduction in equity. Repurchased

ROPHARMA SA




16

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) shares are classified as treasury shares and are presented as a reduction in equity. When treasury shares are transferred free of charge to employees, they are presented as a reduction in equity. d. Trade debts Trade debts are the obligations to pay for the goods or services that were purchased in the normal course of business from suppliers. Vendor accounts are classified as current debts if the payment is to be made within one year or less than one year (or later, in the normal course of business). Otherwise, they will be presented as long-term debts. e. Loans Loans are initially recognized at the fair value of the received amount, net of transaction costs. Loans are classified as short-term debts, except if the company has an unconditional right to postpone the payment of the debt for at least 12 months of the balance sheet date. The current portion of the long-term debt is included in the current debts. The interest accrued on the balance sheet date is included in “Loans”, within Current debts, if it is not refundable within 12 months. Fees paid when establishing lending facilities are recognized as loan-related costs. Provided that there is proof that it is likely that some or all facilities shall be used, the fees are capitalized as advance payment for the financing services and amortized over the period of the facility to which it is related to. f. Uncertain tax positions

The uncertain tax positions of the company are analyzed by the management at each balance sheet date. Debts are recorded for tax positions for which the management considers that additional charges are likely to be applied if these positions would be verified by the tax authorities. The evaluation is based on the interpretation of the tax laws that were in force at the balance sheet date. Debts corresponding to penalties, interest and taxes other than income tax are recognized on the basis of the best management estimates required to settle the obligation at the balance sheet date.

g. Current and deferred income tax

The company registers current income tax at a rate of 16% of the taxable income determined in accordance with the Romanian Tax Code and related regulations. The tax expense for that period includes current tax and deferred tax. The tax is recognized in the profit and loss account, unless it relates to items recognized in other items of the comprehensive earnings or directly in equity. In this case, the related tax is recognized in other items of the comprehensive earnings or directly in equity. The current income tax expense is calculated on the basis of the tax regulations in force at the balance sheet date. The management regularly evaluates the positions in tax returns as to where the applicable tax regulations are interpretable. This constitutes provisions, where appropriate, based on amounts estimated as due to the tax authorities.

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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred corporate tax is recognized on the basis of the balance sheet liability method for the temporary differences between the tax bases of assets and debts and their carrying amounts in the individual financial statements. However, the deferred corporate tax that results from the initial recognition of an asset or liability in a transaction other than a business combination and which at the time of the transaction does not affect the accounting profit and the taxable profit is not recognized. Deferred corporate tax is determined on the basis of the tax rates (and laws) that have entered into force by the balance sheet date and are to be applied in the period in which the deferred tax to be recovered will be capitalized or deferred tax will be discharged. Deferred tax to be recovered is recognized only to the extent that it is likely that future taxable profit will be available to deduce temporary differences. Deferred tax receivables and debts are compensated when there is a legally enforceable right to compensate current tax receivables with current tax debts, and where deferred tax receivables and debts charged by the same tax authority either to the same taxable entity or to different taxable entities, if there is an intention to compensate the balances on a net basis.

2.12 Employee Benefits

In the normal course of business, the company makes payments to the Romanian state on behalf of its employees, for pension, health and unemployment funds. All employees of the company are members of the Romanian state's pension plan. Payments, salaries, contributions to the pension and social security funds of the Romanian State, annual leave and paid sick leave, bonuses and non-monetary benefits are cumulated during the year in which the related services are provided by the employees of the company.

According to the Romanian law, Romanian companies have the obligation to pay a retirement benefit in the amount of 1 gross salary to each employee at the time of retirement. The Company has no other obligation towards its employees, under the Romanian law, on pensions and does not participate in any other pension plan. The ill-health retirement benefit is granted only if the retirement decision is final.

Employees who are laid off for reasons that do not depend on them will benefit from the active measures to reduce unemployment and from the compensation laid down by law and applicable according to the collective labor agreement. This benefit is worth 1 gross salary.

2.13 Provisions

Provisions are recognized when the Company has a legal or constructive obligation arising from past events, when an outflow of resources embodying economic benefits is required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Restructuring provisions include leasing contract termination penalties and penalties for the termination of employment contracts. No provision for future operating losses is recognized.

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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

A provision for onerous contracts is recognized when the benefits that are expected to be obtained by the Company under a contract are lower than the unavoidable costs of meeting its obligations under the contract. The provision is measured at the present value of the minimum between the expected cost of termination of the contract and the expected net cost of the contract continuation. Prior to provisioning, the Company recognizes any depreciation losses for the assets associated with the contract.

Where there are a number of similar obligations, the probability that an outflow of resources is required for settlement is determined by taking into account the entire category of obligations. The provision is recognized even if the probability of any item included in the same category of obligations is low.

2.14 Revenue recognition The income includes the fair value of the amount received or receivable from the sale of goods and services in the ordinary course of business. The income is net after the deduction of value added tax, rebates and discounts. The Company recognizes income when its value can be reliably measured, when it is probable to produce the future economic benefits for the entity and when specific criteria have been met for each of the Company's activities as described below. The company bases its estimates on the historical results, taking into account the customer type, the transaction type and the elements specific to each contract. (a) Income from sales of goods Sales of goods are recognized when the Company delivers products to customers. Delivery is deemed complete when the products have been shipped to the specified location, wear and loss risks have been transferred and the customer has accepted the products in accordance with the sales contract. (b) Interest income Interest income is recognized on the basis of the effective interest method. Interest income on loans and impaired receivables is recognized on the basis of the initial effective interest rate. (c) Rental income Rental income is recognized on an accrual basis according to the economic substance of the related contracts. (d) Dividend income Dividend income is recognized when determining the right to receive those amounts.

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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.15 Leasing contracts Leasing contracts where a significant portion of the risks and benefits of ownership are assumed by the lessor are classified as operational leases. Payments for operational leasing contracts (net of discounts granted by the lessor) are recorded in the profit and loss account using a straight-line method over the lease term. Leasing contracts for tangible assets in which the Company assumes all risks and benefits related to property are classified as finance leases. Finance leases are capitalized at the beginning of the lease at the lowest value between the fair value of the leased property and the present value of the minimum lease payments Each payment is divided between the element of the capital and the interest to obtain a constant interest rate during the reimbursement. Rent obligations, net of financing costs, are included in other long-term debts. The element of interest for finance costs is transferred to the profit and loss account over the term of the contract so as to obtain a constant periodic interest rate on the remaining balance of the obligation for each period. Tangible assets purchased under finance leases are depreciated over the shorter period of the useful life of the asset or the term of the lease.

2.16 Dividend distribution Dividend distribution is recognized as a debt in the financial statements of the company in the period in which the dividends are approved by the shareholders of the company.

2.17 Changes in accounting policies The following new standards that came into effect on 1st of January 2018 may have an effect on the Company's future financial statements. The following list presents the IFRSs that have been issued and have become mandatory since the 1st of January 2018.

- IFRS 9 Financial Instruments - replaces IAS 39 Financial Instruments: Recognition and Measurement.

IFRS 9 makes significant changes regarding the recognition and measurement of financial assets based on a business model and contractual cash flows and implements a new model for the recognition of depreciation adjustments based on anticipated loss on receivables. Additionally, the standard presents changes in accounting for hedging instruments to better reflect the effect of risk management activities that a company adopts to manage exposures. Except for hedge accounting, IFRS 9 will be applied retrospectively. As allowed by IFRS 9, the Company did not change the figures for the previous period. IFRS 9 presents three main categories for the classification of financial assets: measured at amortized cost, measured at fair value through other elements of the comprehensive earnings, and measured at fair value through profit or loss. We consider that there are no significant differences between the initial evaluation categories under IAS 39 and the new IFRS 9 evaluation categories for the Group's financial assets

ROPHARMA SA




20


Changes in accounting policies (continued) categories on the 1st of January 2018. According to IAS 39, all trade receivables were accounted for at amortized cost minus the depreciation adjustments. As a general rule, IFRS 9 requires equity instruments to be measured at fair value through profit and loss account. At the time of the initial recognition, the Group may irrevocably opt for subsequent changes in the fair value of an investment in an equity instrument for IFRS 9 to be presented in the statement of comprehensive earnings if the investment is not held for trading, or if, in the case of application of IFRS 3, the buyer does not recognize a contingent payment as a result of a business combination. According to IFRS 9, all capital investments will be designated as evaluated at fair value through other elements of the comprehensive earnings. Consequently, any profits and losses arising from changes in fair value will be recorded in the comprehensive result, depreciation adjustments will not be recognized in the profit and losses statement, and the profits and losses from their disposal will not be reclassified in the profit and loss statement. We believe that there is no impact on the recognition and measurement of the Group's financial liabilities due to the fact that the new requirements only refer to the accounting for financial liabilities designated at fair value through profit or loss. The new depreciation model stipulates that the depreciation adjustments to be recognized on the basis of expected loss on receivables and not on the pattern of effective impairment losses provided in IAS 39. Financial assets measured at amortized cost will be subject to depreciation provisions in accordance with IFRS 9. In general, the application of the model regarding anticipated losses from receivables will require early recording of losses from receivables and will lead to an increase in depreciation adjustment for relevant items. Depreciation losses are calculated using a credit risk model, the counterparty's internal or external ratings and the probability of non-payment. For some financial instruments, such as trade receivables, depreciation losses are estimated based on a simplified approach, recognizing anticipated loss from receivables during their life cycles. According to IFRS 9, several hedging instruments and more covered risks will generally meet the conditions for applying hedge accounting. The company, based on customer reviews, has implemented a commercial risk control system and grants maximum credit limits to customers according to 6 risk classes. The evaluation of each client of the Company is made taking into account a set of financial indicators calculated on the basis of financial reports, the history of payments made, risk-benefit analysis, litigations with other creditors, outstanding taxes owed to the state budget, and based on qualitative criteria. The level of commercial credit granted to each client varies according to the risk class to which it belongs, with maximum limits ranging from 3% to 25% of the turnover achieved by each client according to the financial statements published by the clients. Customers who request credit limits higher than 25% must constitute collateral. The collaterals received from the clients are constituted in the following forms: the mortgage on the operating authorization, the mortgage on the contract with the Health Insurance House, pledge on stocks registered in the Electronic Archive, the assignments of receivables, the promissory notes approved by the administrator and the fiduciary contracts.

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21


Changes in accounting policies (continued) For clients who fall into high risk classes, the Company grants shorter payouts than clients who fall in low risk classes.

- IFRS 15 Revenue from Contracts with Customers and related changes - Replaces IAS 18 Revenue, IAS 11 Construction Contracts and Related Interpretations (IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements on Real Estate Construction, IFRIC 18 Transfers of Assets from Customers and SIC 31 Income - Barter transactions involving advertising services).

The objective of IFRS 15 is to clarify the revenue recognition principles. This includes eliminating inconsistencies and weaknesses perceived and improving the comparability of revenue recognition practices generated by companies, industries and capital markets. In this respect, IFRS 15 establishes a unique income recognition framework. The underlying principle of the framework is: that an entity must recognize revenue to describe the transfer of goods or services promised to clients in an amount that reflects the consideration the entity expects to have the right to in exchange for those goods or services.

The revenue is recognized when or as the customer acquires control over the goods or services. The company has adopted the new standard as of 1st of January 2018 but has not applied the requirements of IFRS 15 for previous presented periods. According to the new standard, the evaluation will be made taking into account whether the Company controls those goods or services prior to the transfer to the customer, rather than if it is exposed to the significant risks and benefits of selling goods or services. No significant effects on the Company's financial statements are expected as a result of changes to standards or annual improvements that have entered into force after the 1st of January 2018.

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Note 3. FINANCIAL RISK MANAGEMENT Through its operations, the company is exposed to the following financial risks

- Credit risk - Exchange risk - Liquidity risk

Like all other activities, the company is exposed to risks arising from the use of financial instruments. This note describes the company's objectives, policies and processes for managing these risks and the methods used to evaluate them. Additional quantitative information about these risks is provided in these financial statements. There were no major changes in the Company's exposure to risks related to financial instruments, its objectives, policies and processes for the management of those risks, or the methods used to evaluate them against previous periods, unless otherwise noted herein. Main financial instruments The main financial instruments used by the company, from which the risk of financial instruments arises, are as follows:

- Trade receivables and other receivables - Cash and cash equivalents - Investments in quoted shareholdings - Trade debts and other debts

A summary of the financial instruments held by category is provided below: The general objective of the Board of Directors is to set policies that aim to reduce the risk as far as possible without affecting the competitiveness and flexibility of the company.

Loans and receivables ASSETS 31-Dec-17 30-Jun-18 Trade and assimilated receivables 58.626.679 65.329.156 Cash and cash equivalents 6.745.725 5.966.323

Total 65.372.405 71.295.480

At amortized cost DEBTS 31-Dec-17 30-Jun-18 Trade and similar debts 82.110.419 103.896.708 Short-term loans 3.843.010 6.242.301 Short-term provisions 55.096 55.096

Total 85.953.429 110.194.105

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Note 3. FINANCIAL RISK MANAGEMENT (continued) Further details on these policies are set out below: Credit risk The credit risk is the risk of financial loss to the company that occurs if a client or counterparty to a financial instrument fails to meet its contractual obligations. The company is primarily exposed to credit risk arising from sales to customers. There is a Commercial Policy at company level, approved by the Board of Directors of Ropharma SA. This clearly states the sales conditions and there are conditions in the selection of customers.

Calculation and analysis of net worth (equity)

Indicators (LEI) 31-Dec-17 30-Jun-18 Credits and loans 6.363.322 7.502.841 Cash and cash equivalents (6.745.725) (5.966.323) Net debts (382.403) 1.536.518

Total equity 145.323.348 148.001.262

Net debts in equity (%) -0,26% 1,04% Foreign exchange risk

The company is mainly exposed to foreign exchange risk on purchases made from suppliers of raw materials, packaging and other materials outside Romania. Suppliers from whom the company purchases these items necessary for the production of medicines must have quality documents as provided for in the European Rules for the Registration of Medicines. Therefore, the company cannot limit acquisitions from third countries. Monitoring the payment terms and ensuring the cash availability for the payment, so that the effect of the foreign exchange risk is minimized, is the responsibility of the economic directorate.

On 30th of June, 2018 the net exposure by currency type of the company to the foreign exchange risk was as follows:

For the year ended on

Assets/liabilities in EURO equivalent LEI 31-Dec-17 30-Jun-18

Monetary financial assets - -

Monetary financial liabilities (6.363.322) (7.502.841)

Net financial assets (6.363.322) (7.502.841)

RON/EUR Variation Gain / Loss

RON appreciation against EUR by 5% (318.166) (375.142)

RON depreciation against EUR by5% 318.166 375.142

Impact on earnings - -

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Note 3. FINANCIAL RISK MANAGEMENT (continued)

Assets and liabilities in EURO

31-Dec-17 30-Jun-18

Monetary financial assets - - Monetary financial liabilities (1.365.608) (1.610.155)

Net financial assets (1.365.608) (1.610.155)

The net exposure of the company to foreign exchange risk, in lei equivalent, is presented in the following table: Given the relatively low exposure to exchange rate fluctuations, reasonable fluctuations in exchange rates are not expected to have significant effects in future financial statements. Interest rate risk on cash flow and fair value

The interest rate risk for the company arises from short and long-term loans. Variable interest-rate loans expose the company to cash-flow interest rate risk, which is partly offset by cash placed in "over-night" deposits with variable rates.

Fixed interest loans expose the Company to fair value interest rate risk. In 2018 and 2017, the loans of the company had a variable rate and were denominated in Euro and Usd.

The company dynamically analyzes the exposure to the interest rate. Different scenarios are simulated, taking into account refinancing, renewal of existing positions and alternative funding. Based on these scenarios, the company calculates the impact of the interest rate change on the profit and loss. For each simulation is used the same percentage of change in the interest rate for all currencies. The scenarios apply to each interest-bearing position. Based on the simulations performed, the impact of the 2% decrease / increase of the interest rate on the profit after tax would be reflected in a maximum increase / decrease of 150.057 lei (127,266 lei - 2017). The simulation is performed quarterly to verify whether the maximum potential loss falls within the limit set by the management.

Variable rate instruments 31st of December 2017 30th of June 2018

Total loans and leases 7.440.694 6.363.322

Assets / Debts 31-Dec-17 30-Jun-18 LEI (16.989.638) (32.656.324) EUR (6.363.322) (7.502.841)

Net exposure (23.352.960) (40.159.165)

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Note 3. FINANCIAL RISK MANAGEMENT (continued)

Credit risk

Credit risk arises from cash and cash equivalents, bank deposits and credit exposures, including receivables to be collected and transactions. For customers, there is no independent evaluation; the management evaluates the client's financial standing, taking into account the financial position, past experience and other factors. Individual risk limits shall be established on the basis of internal ratings, within the limits set by the board of directors.

Liquidity risk

Treasury cash flow forecasting is conducted at company level and agreed by the management of the company. The company management monitors its liquidity needs forecast to ensure that there is enough cash to meet the operational requirements so that the company does not break the loan limits or loan arrangements. These forecasts take into account company debt financing plans, compliance with agreements, and compliance with internal targets on balance sheet indicators. The company management invests cash surplus in current interest-bearing accounts, term deposits, by selecting instruments with adequate maturity or sufficient liquidity to provide sufficient margin. The Company's financial debts are analyzed in the table below by relevant maturity group, according to the period remaining at the balance sheet date up to the maturity date of the contract. The values presented in the table are the nominal values updated at the balance sheet date:

30th of June 2018 Under 1 year Between 2 and 5 years

Over 5 years Total

Loans 6.242.301 1.260.541 7.502.842

Finance lease obligations - - -

Suppliers and other debts 103.896.708 - 103.896.708

Total 110.139.008 1.260.541 111.399.549

31st of December 2017 Under 1 year Between 2 and 5 years

Over 5 years Total

Loans 3.843.010 2.520.312 - 6.363.322

Finance lease obligations - - - -

Suppliers and other debts 82.110.419 - 82.110.419

Total 85.953.429 2.520.312 0 88.473.741

Capital risk management The company's objectives on capital management aim to protect the ability of the company to continue its business in the future so as to bring profit to the shareholders and benefits to the other stakeholders, as well as maintaining an optimal capital structure to reduce capital expenditures.

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26

Note 3. FINANCIAL RISK MANAGEMENT (continued) In order to maintain or adjust the capital structure, the company may issue new shares or sell assets to reduce the debt. Like other entities operating in the same field, the company monitors the capital on the basis of the debt ratio. Net debt is calculated by subtracting cash and cash equivalents from the total of loans (including "short and long-term loans" in the separate balance sheet). Total capital is calculated by adding the net debt to the "equity" of the individual balance sheet.

In 2018, the Company strategy consisted of maintaining the debt ratio between 10% and 15%.

The coefficients of the debt ratio on 31st of December 2017 and 30th of June 2018 are as follows:

31st of December 2017

30th of June 2018

Total Loans 6.363.322 7.502.841

Less: Cash and cash equivalents (6.745.725) (5.966.323)

Net debt (382.403) 1.536.518

Total equity 145,323,348 148.001.262

Total capital 145,705,752 146.464.743

Debt ratio -0.26% 1,05%

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27

Note 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including anticipations of future events that are considered reasonable under the given circumstances. Critical Accounting Estimates and Assumptions The company makes estimates and assumptions about the future. The resulting accounting estimates shall, by definition, rarely be equal with the actual results. Estimates and assumptions that involve a high risk level or that cause significant adjustments to the carrying amounts of the asset and liability in the following financial year are addressed below. (a) Current corporate tax The company is paying corporate tax. There are several transactions and calculations for which the final tax determination is uncertain. The Company recognizes the obligations for early tax assessments by estimating whether additional taxes will have to be paid. If the final tax outcome of these operations is different from the initially recorded amounts, the differences will affect the deferred income tax and deferred tax provisions in the period in which the estimate is made. (b) Deferred corporate tax

The Company has made estimates regarding deductible temporary difference (which are those temporary differences that will result in amounts that are deductible for determining the taxable profit for future periods, when the carrying amount of the asset is recovered or settled). (c) Value adjustments for doubtful receivables and for heavy and slow-moving and difficult to sell stocks Value adjustments for doubtful receivables: The estimates of the company management regarding the doubtful receivables are based on the age of non-current balances and on its knowledge of the level of recovery of receivables. Value adjustments for slow-moving and difficult to sell stocks: The estimates of the company management regarding the adjustments for slow-moving and difficult to sell stocks are based on the degree of use (rotation speed), the age of current stocks, and other Information on how they can be capitalized in the upcoming period (including remaining time until expiration).

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Note 5. TANGIBLE ASSETS

Lands and land facilities

Buildings Technical

installations and machinery

Other installations,

machinery and furniture

Fixed assets under

conservation

Fixed assets under

construction

Advances granted

Total

Cost

Balance at 1st of January 2018 16.398.119 35.304.489 12.697.403 8.285.349 3.562.554 176.323 46.092 76.470.329

Inflows - 20.814 10.203 289.821 391.457 2.531.331 3.243.626

Transfers from other asset categories

21.000 294.913 1.573 42.491 468.000 827.977

Outflows 61.000 533.000 1.136.333 12.585 1.655 2.541 1.747.114

Transfers in other asset categories

- - - - 606.615 606.615

Balance at 30th of June 2018 16.358.119 35.087.216 11.572.845 8.605.076 3.562.554 427.510 2.574.882 78.188.203

Accumulated amortization

Balance at 1st of January 2018 - 3.578.232 9.118.514 5.920.439 - - 18.617.185

Amortization 3.683 1.014.740 620.523 439.050 2.077.996

Outflow amortization - 10.982 782.444 11.744 805.170

Balance at 30th of June 2018 3.683 4.581.990 8.956.593 6.347.745 - - 19.890.011

Net carrying amount


Balance at 30th of June 2018 16.354.436 30.505.226 3.616.252 2.257.332 3.562.554 427.510 2.574.882 58.298.192

The lands and buildings of the company were revalued by independent valuers on 31 December 2017. The evaluations have been made on the basis of market information. After the revaluation made in 2017, some of the fixed assets recorded an increase in net carrying amount that is presented in the statement of comprehensive earnings under "Other comprehensive earnings". The revaluation surplus was credited to "Revaluation reserves". Interest in the cost of fixed assets has not been capitalized.

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Lands and land facilities

Buildings Technical

installations and machinery

Other installations,

machinery and furniture

Fixed assets under

conservation

Fixed assets under

construction

Advances granted

Total

Cost


Inflows - 73.070 709.033 446.366 2.520.071 357.806 4.106.346

Revaluation 1.534.393 1.147.493 - - - 2.681.886

Transfers from other asset categories 15.968 1.585.270 682.405 138.102 16.190 2.437.935 Outflows - 11.553 3.036.389 313.779 11.047 325.613 3.698.381 Transfers to other asset categories 65.742 288.262 - 10.499 2.468.614 2.833.117

Balance at 31st of December 2017

16.398.119 35.304.489 12.789.177 8.285.349 3.562.554 176.323 46.894 76.562.905


Balance at 1st of January 2017 - 2.903.683 10.968.396 5.350.394 - - 19.222.473

Amortization 2017 6.736 1.968.166 1.237.205 878.473 4.090.580

Outflow amortization - 7.595 2.995.169 307.770 3.310.534

Revaluation 6.736 1.286.022 - - 1.292.758

Balance at 31st of December 2017 - 3.578.232 9.210.432 5.921.097 - - 18.709.762

Net carrying amount


Balance at 31st of December 2017 16.398.119 31.726.257 3.578.745 2.364.252 3.562.554 176.323 46.894 57.853.143

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30

Note 6. GOODWILL The goodwill of 11,613,659 lei represents the incorporation of pharmacies whose goodwill was identified at the acquisition. The Company did not constitute depreciation adjustments for goodwill because there are reasonable assumptions that result in the generation of subsequent economic benefits. Note 7. INTANGIBLE ASSETS

Other intangible

assets

Licenses for purchased

pharmacies

Advances granted

Total intangible

assets

Cost

Balance at 1st of January 2018 2.253.921 14.211.662 144.409 14.898.378

Inflows 10.726 1.624.000 75.472 1.710.198

Outflows 0 0 5.385 5.385

Balance at 30th of June 2018 2.264.647 15.835.662 214.496 18.314.805


Balance at 1st of January 2018 1.711.614 0 1.711.614

Amortization during the year 151.740 0 151.740

Amortization of outflows 0 0 57.271

Balance at 30th of June 2018 1.863.354 0 1.863.354

Net carrying amount

Balance at 1st of January 2018 542.307 14.211.662 144.409 14.898.378

Balance at 30th of June 2018 401.293 15.835.662 214.496 16.451.451

The Company did not make depreciation adjustments for licenses of purchased pharmacies because there are fundamental premises resulting in the generation of subsequent economic benefits.

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Note 7. INTANGIBLE ASSETS (continued)

Other intangible

assets

Licenses for purchased

pharmacies

Advances granted

Total intangible

assets

Cost

Balance at 1st of January 2017 2.306.318 12.388.313 61.142 14.755.773

Inflows 4.874 1.990.681 83.267 2.078.822

Outflows 57.271 167.332 - 224.603

Balance at 31st of December 2017 2.253.921 14.211.662 144.409 16.609.992


Balance at 1st of January 2017 1.463.753 - 1.463.753

Amortization during the year 305.132 - 305.132

Amortization of outflows 57.271 - 57.271

Balance at 31st of December 2017 1.711.614 0 1.711.614

Net carrying amount

Balance at 1st of January 2017 842.565 12.388.313 61.142 13.292.020

Balance at 31st of December 2017 542.307 14.211.662 144.409 14.898.378

Note 8. INVESTMENTS IN ASSOCIATED ENTITIES On 30th of June 2018, the Company held interest-bearing securities in the following entities:


30th of June 2018

Shareholdings held at Eurofarmaco 1.789.227 1.789.227

Shareholdings held at Teo Health 15.256.380 15.256.380

Shareholdings held at Aesculap Prod 3.250.950 3.250.950

Shareholdings held at Farmaplus 500 500

Shareholdings held at Ropharma Logistic 108.000 108.000

Total 20.405.057 20.405.057

The Company did not make adjustments for the depreciation of shareholdings in the form of participating interests because there are fundamental premises on business plans for subsequent periods, including the possibility of selling some of the participations, resulting in the generation of subsequent economic benefits.

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Note 9. REAL ESTATE INVESTMENTS

Lands Buildings Real estate

investments in progress

Total real estate

investments

Cost

Balance at 1st of January 2018 8.148.354 14.278.031 10.256.683 32.683.069

Inflows - 4.694 19.600.018 19.604.712

Transfer from investments in progress

3.640 3.640

Outflows to other asset categories 21.000 204.000 225.000

Outflows 350.097 689.901 - 1.039.998

Balance at 30th of June 2018 7.777.257 13.392.464 29.856.701 51.026.422


Balance at 1st of January 2018

Amortization during the year

Amortization of outflows

Balance at 30th of June 2018 - - - -

Net carrying amount


Balance at 30th of June 2018 7.777.257 13.392.464 29.856.701 51.026.422

The Company did not make depreciation adjustments for this asset category.

Lands Buildings Real estate

investments in progress

Total real estate

investments

Cost


Inflows - 136.800 7.275.001 7.411.801

Changes to fair value 1.505.358 910.674 2.416.032

Transfer from tangible assets 49.552 345.629 395.181

Outflows - - - -

Balance at 31st of December 2017 8.148.354 14.278.031 10.256.683 32.683.068


Balance at 31st of December 2017 - - - -

Net carrying amount

Balance at 1st of January 2017

Balance at 31st of December 2017 6.593.444 12.884.928 2.981.682 22.460.054

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Note 10. STOCKS Societatea a constituit in cursul anului 2017 ajustări de depreciere pentru stocurile cu miscare lenta dupa cum este prezentat in tabelul de mai jos:

31st of December 2017 30th of June 2018

Goods in warehouses and pharmacies 38.450.632 35.090.010

Goods to be supplied 23.821 396.731

Advance payments for merchandise purchases 90.180 6.773

Consumables and packaging 139.546 177.921

Total 38.704.178 35.671.434

Note 11. TRADE RECEIVABLES AND OTHER RECEIVABLES Movements in receivable depreciation adjustments were included in "value adjustments for current assets" in the statement of comprehensive earnings.


30th of June 2018

Trade receivables 63.256.493 69.557.992

Adjustments for depreciation of trade receivables (7.668.633) (7.548.703)

Receivables from entities in the group 283.852 269.960

Different debtors and other receivables 3.638.314 3.933.254

Adjustments for depreciation of other receivables (883.347) (883.347)

Total financial assets other than cash, classified as loans and receivables

58.626.679 65.329.156

Receivables related to employees 36.440 45.020

Other debts to the state budget 412.036 1.349.696

Advanced payments (prepayments) 125.292 113.285

Total 59.200.447 66.837.157

The fair values of trade and other receivables classified as loans and receivables do not differ significantly from their carrying amounts.

On June 30th 2018, the company recorded adjustments for trade receivables representing customer balance that is unlikely to be collected by the company (more than one year old, worth RON 7.548.703). The receivables of the company were analyzed and evaluated according to criteria established according to the risks per customer categories.

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34

Note 12. CASH AND CASH EQUIVALENTS


30th of June 2018

Current bank accounts 4.778.027 4.661.832

Cash on hand 1.961.805 1.298.212

Other values 5.894 6.279

Total 6.745.725 5.966.323

Note 13. SHARE CAPITAL AND RESERVES SHARE CAPITAL The subscribed share capital of the company on 30th of June 2018 is 51,126,741.30 lei, the nominal value of one share being of Lei 0.1000 per share. The Company has a number of 511,267,413 shares that give equal rights to the shareholders of the company. Ropharma SA has not issued shares that offer preferential rights to the shareholders. In accordance with the provisions of IAS 29 - Hyperinflationary economies, the share capital was restated taking into account the inflation index communicated by the National Statistics Commission. It was applied starting with the balance determined according to GD 500/1994, from the date of submission until 31.12.2003, the date when it was considered that the national economy ceased to be a hyperinflationary one. Subsequent to 31.12.2003 the share capital increased according to the historical amounts registered with the Trade Register. On 31.12.2012, there is a reported loss on the balance sheet of the Company arising from the application for the first time of IAS 29 "Financial Reporting in Hyperinflationary Economies" which is proposed to be covered from the amount resulting from the application of IAS 29 "Financial Reporting in Hyperinflationary Economies" as follows:

Loss retained earnings from the application of IAS 29 for the first time 17.571.876

Share capital adjustments - application for the first time IFRS 17.571.876

According to Order 1690/2012 on the amendment and completion of accounting regulations, the carried forward accounting loss resulting from the transition to application of IFRS, from the adoption of IAS 29 for the first time, and from the use, at the date of transition to application of IFRS, of the fair value as assumed cost is covered by equity (including the amounts reflected in the credit of account 1028 "Adjustments of the share capital"), according to the GMS decision, in compliance with the legal provisions.

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35

On 30th of June 2018, the shareholder structure of Ropharma SA was as follows:

Denumire acționar Number of

shares Amount (RON)

Percentage

Arrow Pharmaceuticals INC 159.470.243 15.947.024 31,19

Add Pharmaceuticals Limited 90.105.929 9.010.593 17,62

Rimia Investments Limited 71.960.258 7.196.026 14,07

Allianz Private Pension Fund 44.902.271 4.490.227 8,78

GOA Capital SA 20.256.428 2.025.643 3,96

NN Private Pension Fund 18,660,995 1,866,100 3.65

Natural persons 84,612,428 8,461,243 16.55

Other legal entities 21,298,861 2,129,886 4.17

Total 511.267.413 51.126.741 100

RESERVES According to the profit registered in 2017, the company constituted legal reserves amounting to 358,793 lei. The legal reserve is deductible in the calculation of the corporation tax within the limit of a 5% share applied to the accounting profit plus the profit expenses until reaches the fifth part of the subscribed and paid share capital. The balance of the legal reserve is 4,958,693 lei and together with the reserves from the fiscal facilities (105,431 lei) and the revaluation reserves (11,229,032 lei) represent non-distributable reserves of shareholders. Note 14. LOANS AND LEASES Bank loans have a different maturity and a variable interest rate linked to the Euribor interest rate plus a margin.


30TH of June 2018

Long-term loans

Long-term bank loans 2.520.312 1.260.541

Financial leasing debts - -

Total 2.520.312 1.260.541

Short-term loans

Current portion of long-term bank loans 2.520.301 2.521.058

Short-term bank loans 1.322.709 3.721.243

Financial leasing debts - -

Total 3.843.010 6.242.301

Total loans 6.363.322 7.502.842

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36

Note 14. LOANS AND LEASES (CONTINUED) The value of letters of bank guarantees given to suppliers:

Equivalent in Lei 31st of December 2017

30th of June 2018

Lei 15.103 2.568

Usd 0 0

Euro 65.072 72.029

Total 80.175 74.597

No. Bank Date of granting the loan

Loan amount

Currency

Interest rate Final maturity date Main in balance at 31.12.2017 Equivalent in

RON

Main in balance at 30.06.2018 Equivalent in

RON

1 Ing Bank 24/08/2005 6.500.000 EUR EURIBOR 1M +

bank margin Until a later date

notified by the bank 1.322.709 3.721.243

3 Ing Bank 6/12/2015 2.000.000 EUR EURIBOR 1M +

bank margin 31/12/2019 5.040.613 3.781.599

Total 8.500.000 6.363.322 7.502.842

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37

Note 15: DEBT TAX LIABILITIES

December 31, 2017 June 30, 2018

Balance at the beginning of the period 5,797,908 6,628,084 Cost / (Income) with deferred tax included in the global income 194,233 (315,512) Cost / (Income) with deferred tax included in equity 635,943 0

Balance at the end of the period 6,628,084 6,312,572

Deferred tax liabilities are the amounts of income tax payable in the future accounting periods in respect of taxable temporary differences. Deferred tax liability was mainly due to the revaluation of buildings and land at fair value, as well as the recognition of value adjustments on trade receivables and other receivables (according to significant accounting policies). Note 16. TRADE DEBTS AND OTHER DEBTS


30th of June 2018

Trade debts 5.777.432 6.485.546

Debts to entities in the group 70.054.913 86.545.303

Asset suppliers 2.153.543 5.017.556

Debts related to employees 1.915.906 1.899.026

Other debts 2.207.435 2.120.547

Received guarantees for good performance 0 1.826.064

Interest to be paid 1.191 2.666

Total debt minus loans, classified as measured at amortized cost

82.110.419 103.896.708

Taxes and social contributions 1.930.500 813.078

Dividends 7.518 7.518

Advances from customers 21.188 12.551

Total 84.069.625 104.729.854

NOTE 17. NET INCOME FROM SALES

June 30th 2017

June 30th 2018

Own pharmacies 165,840,447 173.769.854

CVR program 0 2.681.756

Total net sales 165.840.447 176.451.610

The revenues are made entirely in Romania.

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38

NOTE 18. OTHER INCOMES June 30th 2017 June 30th 2018

Rental income 858.800 628.341

Income from service provisions 518.074 787.634

Other operating income 1.647.741 1.463.196

Total 3.024.616 2.879.171

NOTE 19. EMPLOYEE BENEFITS

June 30th 2017 June 30th 2018

Wage expenses 15.155.366 19.547.494

Expenses for granted meal vouchers 1.254.234 1.224.674

Expenses for insurance and social security 3.457.965 814.953

Total 19.867.565 21.587.121

NOTE 20. OTHER EXPENSES


Expenses for non stockable materials 1.271.068 1.201.735

Rental expenses 4.134.515 4.120.433

Maintenance expenses 462.531 457.282

Utilities expenses 1.083.628 1.241.700

Insurance expenses 165.658 108.842

Protocol expenses 162.509 234.228

Traveling and secondment expenses 202.799 252.219

Postal and telecommunication expenses 168.655 161.728

Expenses on banking services and assimilation 86.168 103.843

Expenses for commissions and fees 180.788 56.614

Expenses for taxes and assimilation 486.497 505.260

Other operating expenses 438.400 306.852

Total 8.843.216 8.750.736

For proper run of the business, the company is holder of 95 rental contracts. The estimated value of the rent expenses for the financial year 2018 is approximately 8.5 million lei. Most contracts are denominated in euro. A rate of 4.65 lei for 1 euro was used to make the estimate.

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39

NOTA 21. FINANCIAL INCOME AND EXPENSE


Income from financial activity

Interest income 2.490 10.150

Income from exchange rate fluctuations 146.895 30.197

Total 624.344 40.347

Expenses for financial activity Interest expenses 77.001 60.660

Income from exchange rate fluctuations 178.950 35.631

Total 255.952 96.292

Financial net result (106.567) (55.944)

NOTE 22. CORPORATE TAX


Current corporate tax expenses 529.829 713.834


Profit before tax 3.064.693 3.175.598

Tax according to statutory tax rate of 16% 490.351 508.096 Effect on corporate tax of:

Legal reserve (24.517) (25.405) Non-deductible expenses 237.624 252.489 Non-taxable incomes (41.171) (13.623) Exemptions for sponsorship (132.457) (156.648) Items similar to income 0 148.925

Corporate tax 529.829 713.834

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40

NOTE 23. STRUCTURE AND NUMBER OF EMPLOYEES


30th of June 2018

Board of Directors (Administrators) 7 7

Executive management 3 3

Advisors & Assistant Manager for General Director 11 10

Acquisitions & Supply 0 0

Sales 776 758

Logistics & Administrative & Auto 30 27

Marketing 11 13

Financial-accounting 16 16

Quality 2 1

Legal 4 3

Informatics 10 9

Human resources 6 6

Internal audit 5 6

Total 881 859

Average number of employees for the period 745 709

Key management personnel include executive directors and administrators, members of the Executive Committee.

List of people on the Board of Directors

2018 Position

Mihai MIRON Chairman

Alin Constantin RADASANU Member

Florentina MIRON Member

Doru Vasile Victor DARABUS Member

Consultinvest Pharm SRL. through representative Mihai BRATESCU Member

Monovia Pharm SRL. through representative Ovidiu NUT Member

United Ropharma SRL. through representative Danut Marian ENE Member

List of people on the executive management 2018 Position

Mihai MIRON CEO

Alin Constantin RADASANU Chief financial officer

Danut Marian ENE Human Resources Director

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41

NOTE 24. CONTINGENCIES

The Company has contingent debts in respect of disputes arising out of ordinary business. No other significant debt due to contingent debt is anticipated. (a) Disputes

The company is the subject of a number of legal proceedings resulting from the normal course of business. The management of the company believes that these proceedings will not have a significant adverse effect on the economic results and financial position of the company, except for those presented in these financial statements.

(b) Taxation

The Romanian tax system has undergone several changes in the recent years and is in a phase of adapting to the case law of the European Union. As a result, there are still different interpretations of the tax legislation. In certain situations, the tax authorities may treat certain aspects differently by calculating additional taxes and charges, and related default interest and penalties (currently, penalties due to the length of the delay, plus 0.05% per day as late payment interest). In Romania, the financial year remains open for fiscal verification for 5 years. The management of the company believes that the tax obligations included in these financial statements are adequate.

(c) Transfer price

Romanian tax legislation includes the principle of "market value", according to which transactions between related parties must be carried out at market value. Local taxpayers who conduct transactions with affiliated parties must prepare and make available to the Romanian tax authorities, at their written request, the transfer pricing documentation. Failure to submit the transfer pricing documentation or submitting an incomplete documentation may result in penalties for non-compliance; In addition to the content of the transfer pricing documentation, tax authorities may interpret transactions and circumstances differently from the interpretation of the management, and may therefore impose additional tax obligations resulting from the adjustment of transfer pricing. The management of the company believes that it will not suffer losses in the case of a fiscal control to check the transfer prices. However, the impact of different interpretations of tax authorities cannot be reliably estimated. This may be significant for the financial position and / or the operations of the company.

(d) Financial crisis Recent volatility of international and Romanian financial markets: The current global liquidity crisis, which began in mid-2007, has resulted, among other things, in a low level of capital market financing, low liquidity levels in the banking sector, and occasionally higher interbank lending rates and high stock-market volatility. Currently, the full impact of the current financial crisis is impossible to anticipate and prevent altogether.

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NOTE 24. CONTINGENCIES (CONTINUED) Recent volatility of international and Romanian financial markets The management of the company cannot reliably estimate the effects on the Company's financial position of the further decline in the liquidity of financial markets and the increase in the volatility of the domestic currency and capital markets indices. The management believes that it has taken all necessary measures to ensure the continuity of the Company under the present conditions. Impact on liquidity The amount of funding in the economy has been significantly reduced recently. This may affect the company's ability to obtain new loans and / or refinance existing loans on terms and conditions similar to previous funding. Impact on clients / lenders Customers and other debtors of the company may be affected by market conditions, which may affect their ability to repay the amounts owed. This may also have an impact on the company management forecasting on cash flows and on the assessment of financial and non-financial asset depreciation. Revaluation of property held at fair value The Romanian real estate market has been severely affected by the recent volatility of international financial markets. Therefore, the carrying amount of tangible assets evaluated at fair value has been updated to reflect market conditions at the balance sheet date. (e) Commitments Guarantees On 30th of June 2018, the company had bank guarantee letters issued as presented in Note 14. If the Company does not fulfill its contractual obligations, these letters become debts. The Company is a guarantor under loan agreements contracted by affiliated companies from ING Bank.

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43

NOTE 25. TRANSACTIONS WITH AFFILIATED PARTIES The following transactions with the affiliated parties were carried out: (a) Sale of commodities, goods and provision of services

Sale of goods H1 2017 H1 2018

Bioef 2.551 2.623

Teo Health 5.832 29.998

Total 8.383 32.621

Reinvoicing of services H1 2017 H1 2018

Bioef 12.837 5.689

Bioterra 7.427 7.437

Ropharma Logistic 1.680.506 1.453.358

Eurofarmaco 26.788 0

Aesculap Prod 173.861 516.845

Teo Health 3.942 24.000

Total 1.905.362 2.007.329

(b) Purchase of goods and services

Purchase of goods H1 2017 H1 2018

Bioef 431.513 238.656


Total 121.433.014 123.222.074

Purchase of services H1 2017 H1 2018

Bioterra 120.953 0

Teo Health 0 0

Ropharma Logistic 0 0

Total 120.953 0

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44

NOTE 25. TRANSACTIONS WITH AFFILIATED PARTIES (CONTINUED) (c) Compensation granted to key management personnel

H1 2017 H1 2018

Administrators' Remuneration 344.471 344.154

Salaries of executive management 327.202 339.474

Total 671.673 683.628

H1 2017 H1 2018

Shares granted to the management personnel 0 0

(d) Year-end balances from sales / purchases of goods / services Receivables are not guaranteed and do not bear interest.

Receivables 31st of December 2017

30th of June 2018

Bioef 30.549 33.156

Bioterra 795.507 803.590

Aesculap Prod 203.384 502.206

Eurofarmaco 32.618 2.292

Teo Health -4.599 24.169

Ropharma Logistic 283.852 269.960

Total 1.341.311 1.635.373

Debts to related parties arise mainly from commodity purchase transactions. Debts do not bear interest.

Debts 31st of December 2017

30th of June 2018

Bioef 0 38.389

Teo Health 704 0


Total 69.925.850 85.748.976

ROPHARMA SA




45

NOTE 25. TRANSACTIONS WITH AFFILIATED PARTIES (CONTINUED) (e) Loans to affiliated parties Loans to associated entities have a maturity of one year. They have an interest rate equal to the reference interest rate communicated by the National Bank of Romania. No loans received from affiliated parties were recorded.


30th of June 2018

Loans to affiliated parties 14.449 2.292

Loans from affiliated parties 0 0

The financial statements were authorized for issuance by the Board of Directors on 14th of August 2018 and signed on its behalf. These financial statements have been reviewed by the independent external auditor. Mihai Miron Alin Radasanu Chairman of the Board of Directors Chief Financial Officer

Str. Iuliu Maniu nr. 55, et. 1, 500091, Brasov County Tel : 0268/547230, 0268/547233 ; Fax : 0268/547231

J08/2886/2007, Sole Registration Number RO1962437, subscribed and paid-up share capital 51.126.741,30 lei E-mail : [email protected] ; Web : www.ropharma.ro

AFFIDAVIT

According to the provisions of article 30 of Accounting Law no 82/1991

The financial statements have been prepared on June 30, 2018 for:

Entity:

Registered office:

Tel. / Fax :

Registered with the Trade Register under no.:

Sole registration number:

ROPHARMA S.A.

str. Iuliu Maniu nr. 55, et. 1, Brasov

0268/547233; 0268/547231

J08/2886/2007

1962437

I, the undersigned, Mihai Miron, according to article 10 paragraph (1) of Accounting Law no

82/1991, as CEO of ROPHARMA S.A. take responsibility for the preparation of the financial

statements on June 30, 2018 and confirm the following:

a) The accounting policies used to prepare the half-year financial statements are in

accordance with the applicable accounting regulations;

b) The half-year financial statements provide a true perspective of the financial position,

financial performance and other information related to the activity carried out;

c) The legal entity carries out its activity in a continuous manner.

CEO

Dr. Pharm. Mihai Miron

mailto:[email protected]

Tel: +40-21-319 9476 Fax: +40-21-319 9477 www.bdo.ro

Victory Business Center 24 Invingatorilor Street Bucharest 3 Romania 030922

This version of our report is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our reports takes precedence over this translation.

Report on Review of Interim Financial Information To the shareholders of Ropharma S.A. Introduction [1] We have reviewed the accompanying individual financial statements of Ropharma S.A. (“the Company”), which comprise the individual statement of financial position as at June 30, 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and notes to the financial statements, including a summary of significant accounting policies. [2] Management is responsible for the preparation and presentation of this interim financial information in accordance with the Order of the Minister of Public Finance no. 2844/2016 “for the approval of accounting regulations in accordance with International Financial Reporting Standards” and related regulations. Our responsibility is to express a conclusion on this interim financial information based on our review Scope of Review [3] We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion

[4] Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial statements does not give a true and fair view of the financial position of the Company as at June 30, 2018, and its financial performance and its cash flows for the six-month period then ended in accordance with the Order of the Minister of Public Finance no. 2844/2016 “for the approval of accounting regulations in accordance with International Financial Reporting Standards” and related regulations. Other aspect [5] This report is made solely to the Company's shareholders, as a body. Our review work has been undertaken so that we might state to the Company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholders as a body, for our audit work, for this report, or for the opinion we have formed. On behalf of,

BDO AUDIT SRL Registered with the Chamber of Financial Auditors of Romania under no. 18/02.08.2001 Name of signing person: Mircea Tudor Registered with the Chamber of Financial Auditors of Romania Bucharest, Romania under no. 2566/25.06.2008 August 16, 2018

registered office: brașov, 55 iuliu maniu street, 500091...

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