Dear shareholders and business partners,

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2 Dear shareholders and business partners, Europasta SE is one of the leading producers of pasta in Central Europe and also a major regional producer of flours. The company s long-term strategic objective is to maintain its position in the market, build up competitive production capacities and deliver high-quality products both under its own brands and under private mass merchant brands. In the year 2017 the company successfully continued in fulfilling its entrepreneurial plan as approved by the company s shareholders. Company Structure in 2017 The company s structure did not change in The company continued to operate two production plants, one in Litovel (pasta products) and one in Borsov nad Vltavou (wheat and rye mill, special production extruded products, fine semolina and rolled pasta). The company s headquarters are in Borsov nad Vltavou. Since pasta production become concentrated in Litovel in 2013, the company s structure has been stable and effective. The company has sufficient production capacity and modern technologies in all segments. Industrial Investments In 2017 the company made investments totalling th. CZK. The major investments comprised infrastructure, namely the electrical switching stations and supply of cool technological water, automated packaging for the production line for Fava long pasta, and many other smaller investments were also made. In accounting terms, the company s investments in 2017 totalled th. CZK, and the financial effects of most of the investments were in operating savings. In 2018 the company will continue in making investments as in previous years, focusing again on the optimisation and sustainability of the production plants. Sales and Finance Sales of pasta totalled tons, a 1.4% increase. The wheat mill produce fell by 5.5%, totalling tons. The rye mill produce was tons, an increase of 9%. Although the originally anticipated growth in sales volumes was not fulfilled, especially with pasta, the prospects for 2018 are positive and some delayed projects should be carried out in Sales margins were kept similar to those of the previous year. The prices of main raw ingredients were generally stable throughout the year. During the year many projects were carried out which should result in cost savings in 2018, especially in logistics and packaging materials. Adverse trends were seen during the year in the growth of some costs in connection with the overall economic boom. There was an important increase in wage costs, by 7.3% against the previous year. The company has again increased its marketing budget, focusing especially on the Adriana pasta brand. In general, the net profits of th. CZK, based on the IFS EBITDA of th. CZK, are relatively similar to those of the previous year. A slight decrease in EBITDA profits was offset by the financial profits, which were positively influenced especially by the restatement of foreign currency bank loans.

3 During the year the company worked on improving its working capital and reducing liabilities. It fully settled the bank loans of Ideal Slovakia s.r.o., a subsidiary, and bank loans from non-bank institutions. Business and Marketing In 2017 the company continued to systematically build up its brands. In particular, the rise in sales volumes of Adriana pasta was more than 23%. The aggregate market share of all of the company s own brands in the Czech market exceeds 22% and continues to grow, especially as regards value. We also worked on product innovations, especially with Adriana pasta. Our portfolio of brands is quite successful across the categories (Adriana, Zátkovy těstoviny and Rosické těstoviny). The Ideal brand maintains its position in Slovakia. In private labels, we are still successful, reaching a 1.6% increase against 2016 in overall sales. Prospects for 2018 The sales and financial budgets for 2018 anticipate that we will follow up on the results of We expect the company to grow further, emphasising the building up of brands, the high efficiency of its production plants and the high quality of all our product lines. Borsov and Vltavou, 18 February 2017 Ing. Pavel Hrdina Europasta SE Chairman of the Board of Directors

4 Tel: BDO CB s. r. o. Pražská 1247/24 České Budějovice Czech Republic INDEPENDENT AUDITOR'S REPORT to the Shareholders of Europasta SE Opinion We have audited the accompanying financial statements of Europasta SE, with its headquarters at U Sila 246, Boršov nad Vltavou, Czech Republic, IC (Registration Number) , (hereafter the Company) prepared in accordance with Czech accounting regulations, which comprise the balance sheet as at , the income statement, statement of changes in equity and cash flow statement for the period from to and notes to the financial statements, including a summary of significant accounting policies and other explanatory information. In our opinion, the financial statements give a true and fair view of the assets and lilabilities of Europasta SE as at and of the costs, revenues and its profit or loss for the period from to , in accordance with Czech accounting regulations. Basis for Opinion We conducted our audit in accordance with the Act on Auditors and Auditing Standards of the Chamber of Auditors of the Czech Republic, which are International Standards on Auditing (ISAs), as amended by the related application clauses. Our responsibilities under these regulations are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Act on Auditors and the Code of Ethics adopted by the Chamber of Auditors of the Czech Republic and we have fulfilled our other ethical responsibilities in accordance with these regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information included in the Annual Report In compliance with Section 2 (b) of the Act on Auditors, the other information comprises the information included in the Annual Report other than the financial statements and auditor s report thereon. The Board of Directors is responsible for this other information. Our opinion on the on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge of the company obtained from the audit or otherwise appears to be materially misstated. In addition, we assess whether the other information has been prepared, in all material respects, in accordance with the applicable laws and regulations, in particular, whether the other information complies with the laws and regulations in terms of formal requirements and procedures for preparing the other information in the context of materiality, i.e. whether any non-compliance with these BDO CB s. r. o., a Czech limited company (registration Number , registered in České Budějovice, No. C. 3151, certificate of Chamber of auditors No. 094) is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

5 Tel: BDO CB s. r. o. Pražská 1247/24 České Budějovice Czech Republic requirements could influence judgments made on the basis of the other information. Based on the procedures performed, to the extent we are able to assess it, we report that - the other information describing the facts that are also presented in the financial statements is, in all material respects, consistent with the financial statements; and - the other information is prepared in compliance with the applicable laws and regulations. In addition, our responsibility is to report, based on our knowledge and understanding of the Company obtained from the audit, on whether the other information contains any material misstatement of fact. Based on the procedures we have performed on the other information obtained, we have not identified any material misstatement of fact. Responsibilities of the Board of Directors and Supervisory Board for the Financial Statements Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with Czech accounting regulations, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors is responsible for assessing the Company s ability to continue as a going concern, disclosing, as applicable, matters related to the going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Supervisory Board is responsible for overseeing the Company s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the above regulations will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with the above regulations, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial statements, whether BDO CB s. r. o., a Czech limited company (registration Number , registered in České Budějovice, No. C. 3151, certificate of Chamber of auditors No. 094) is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

6 Tel: BDO CB s. r. o. Pražská 1247/24 České Budějovice Czech Republic due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. - Conclude on the appropriateness of the Board of Directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Company to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Board of Directors and Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Ceske Budejovice, Audit firm: Partner: BDO CB s. r. o. Ing. Miroslav Souček Certificate No. 094 Certificate No BDO CB s. r. o., a Czech limited company (registration Number , registered in České Budějovice, No. C. 3151, certificate of Chamber of auditors No. 094) is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

7 Europasta SE ID No.: U Sila 246 Boršov nad Vltavou BALANCE SHEET AS AT ('000 CZK) ASSETS Current Year Prior Year Gross Adjust. Net Net ASSETS B. Fixed assets B.I. Intangible assets B.I.2. Valuable rights B.I.2.1. Software B.I.2.2. Other valuable rights B.I.5. Advance payments for intangible fixed assets and intangible assets under construction B.I.5.1. Advance payments for intangible fixed assets B.I.5.2. Intangible assets under construction B.II. Tangible fixed assets B.II.1. Land, Buildings and structure B.II.1.1. Land B.II.1.2. Buildings and structures B.II.2. Machines, tools and equipment, transportation means, furniture and office equipment B.II.3. Adjustment to acquired fixed assets B.II.4. Other tangibles B.II.4.3. Other tangible fixed assets B.II.5. Advance payments for tangible fixed assets and tangible assets under construction B.II.5.1. Advance payments for tangible fixed assets B.II.5.2. Tangible assets under construction C. Current assets C.I. Inventory C.I.1. Raw materials C.I.2. Work in progress and semi-finished products C.I.3. Finished goods and merchandise C.I.3.1. Finished goods C.I.3.2. Merchandise inventory C.II. Receivables C.II.1. Long-term receivables C.II.1.5. Other receivables C.II Long-term advance payments C.II Other receivables C.II.2. Short-term receivables C.II.2.1. Trade receivables C.II.2.4. Other receivables

8 Europasta SE, ID No Assets pg. 2 BALANCE SHEET AS AT ASSETS Current Year Prior Year Gross Adjust. Net Net C.II Due from state - tax receivables C.II Short-term advance payments C.II Estimated receivables C.II Other receivables C.IV. Cash in hand and bank accounts C.IV.1. Cash in hand C.IV.2. Bank accounts D. Accruals of assets D.1. Deferred expenses D.3. Deferred cash receipts

9 Europasta SE, ID No BALANCE SHEET AS AT LIABILITIES Current Year Prior Year TOTAL EQUITY AND LIABILITIES A. Equity A.I. Registered capital A.I.1. Registered capital Share premium and capital contributions A.II.2. Capital contributions A.II.2.1. Other capital contributions A.II.2.2. Gains or losses from revaluation of assets and liabilities (+/-) A.III. Legal, statutory and other reserve funds A.III.1. Other reserve funds A.III.2. Statutory and other reserves A.IV. Profit/Loss - previous year (+/-) A.IV.1. Retained profits from previous years A.IV.2. Accumulated losses from previous years (+/-) A.IV.3. Other result from previous years (+/-) A.V. Profit/Loss - current year B. + C. Liabilities C. Liabilities C.I. Long-term liabilities C.I.2. Liabilities to credit institutions C.I.7. Liabilities to associates and joint ventures C.I.8. Deferred tax liability C.II. Short-term liabilities C.II.2. Liabilities to credit institutions C.II.3. Advances received C.II.4. Trade payables C.II.8. Other liabilities C.II.8.2. Other short-term borrowings C.II.8.3. Liabilities to employees C.II.8.4. Social security and health insurance liabilities C.II.8.5. Due to state - taxes and subsidies C.II.8.6. Estimated liabilities C.II.8.7. Other liabilities

10 Europasta SE, ID No Liabilities pg. 2 BALANCE SHEET AS AT LIABILITIES Current Year Prior Year D. Accruals of liabilities D.1. Accrued expenses Date: Signature:...

11 Europasta SE ID No.: U Sila 246 Period: to Boršov nad Vltavou PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ('000 CZK) Current Period Prior Sales of own product and services II. Sales of goods A. Production consumption A.1. Cost of goods sold A.2. Raw materials and consumption A.3. Services B. Change in own production inventory (+/-) D. Personnel expenses D.1. Wages and salaries D.2. Social security expenses, health insurance and other expenses D.2.1. Social security expenses and health insurance D.2.2. Other expenses E. Valuation adjustments relating to operating activities E.1. Valuation adjustments of fixed assets E.1.1. Valuation adjustments of fixed assets - permanent E.3. Valuation adjustments of receivables III. Other operating income III.1. Income from fixed assets sold III.2. Income from materials sold III.3. Other operating income F. Other operating expenses F.1. Net book value of fixed assets sold F.2. Net book value of material sold F.3. Taxes and fees F.5. Other operating expenses * Operating profit/loss (+/-) VI. Interest income and similar income 0 10 VI.2. Other interest and similar income 0 10 J. Interest expenses and similar expenses J.2. Other interest and similar expenses VII. Other financial income K. Other financial expense * Profit/loss from financial operations (transactions) (+/-) ** Profit/loss before tax (+/-) L. Income tax L.2. Income tax - deferred (+/-) ** Profit/loss after tax (+/-)

12 Europasta SE, ID No Pg. 2 PROFIT AND LOSS ACCOUNT Period: to Current Period Prior *** Profit/loss of current accounting period (+/-) * Net turnover = I. + II. + III. + IV. + V. + VI. + VII Date: Signature:...

13 Europasta SE ID No.: U Sila 246 Period: to Boršov nad Vltavou STATEMENT OF CHANGES IN EQUITY AS AT AND ('000 CZK) Share capital Capital funds Statutory funds Other result from previous years Accumulat ed profits/l osses brou ght forwar d Profit or loss for the current period Total equity A.I. A.II. A.III. A.IV. A.IV. A.V. A. Balance at Profit of prior year distribution Prior years misstatements correction Profit of current year Balance at Share capital Capital funds Statutory funds Other result from previous years Accumulat ed profits/l osses brou ght forwar d Profit or loss for the current period Total equity A.I. A.II. A.III. A.IV. A.IV. A.V. A. Balance at Loss of prior year distribution Profit of current year Balance at Date: Signature:...

14 Europasta SE ID No.: CASH FLOW STATEMENT Period to ('000 CZK) No P. Opening balance of cash and cash equivalents Cash flows from ordinary activities Z. Profit or loss from ordinary activities before tax A.1. Adjustments for non-cash transactions A.1.1. Depreciation of fixed assets A.1.2. Change in provisions and reserves A.1.3. Profit/(loss) on the sale of fixed assets A.1.4. Revenues from dividends and profit shares 0 0 A.1.5. Interest expense and interest income A.1.6. Adjustments for other non-cash transactions A.* Net operating cash flow before changes in working capital A.2. Change in working capital A.2.1. Change in operating receivables and other assets A.2.2. Change in operating payables and other liabilities A.2.3. Change in inventories A.2.4. Other changes in working capital 0 0 A.** Net cash flow from operations before tax and extraordinary items A.3. Interest paid A.4. Interest received 0 10 A.5. Income tax paid from ordinary operations 0 0 A.6. Receipts and expenditures relating to extraordinary activities 0 0 A.7. Dividends received 0 0 A.*** Net operating cash flows Cash flows from investing activities B.1. Fixed assets expenditures B.2. Proceeds from fixed assets sold B.3. Loan to members of the group 0 0 B.*** Net investment cash flows Cash flow from financial activities C.1. Change in payables from financing C.2. Impact of changes in equity

15 Europasta SE ID No.: CASH FLOW STATEMENT Period to ('000 CZK) No C.2.1. Cash increase in share capital 0 0 C.2.2. Capital payments to partners 0 0 C.2.3. Other cash contributions made by partners 0 0 C.2.4. Settlement of loss by partners 0 0 C.2.5. Payments from capital funds C.2.6. Dividends paid 0 0 C.*** Net financial cash flows F. Net increase or decrease in cash and cash equivalents R. Closing balance of cash and cash equivalents Date: Signature: 2

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17 1. COMPANY DESCRIPTION Establishment and characteristics of the Company The company Europasta SE (the Company ) was established by changing the legal form from the joint stock company (public limited liability company) Europasta N.V. (registration number ) to the European Company SE Europasta based on the decision of shareholders and the notarial deed drawn up on 23 November The Company then changed its headquarters from the Netherlands to the Czech Republic (Boršov nad Vltavou). Since 21 December 2009, the Company has been registered in the Commercial Register kept by the Regional Court in České Budějovice, Section H, Insert 1. On the reference date of 1 January 2010, based on the approved project of asset takeover of 15 March 2010, Europasta SE, as the acquiring company, assumed all assets including rights and obligations from employment relationships of the companies as follows: 1/ Bratři Zátkové, a.s., with the registered office in Boršov nad Vltavou 131, okres České Budějovice, PSČ , Reg. No , registered in the Commercial Register kept by the Regional Court in České Budějovice, Section B, Insert 1055, 2/ BZ Silo, s.r.o., with the registered office in Boršov nad Vltavou 131, PSČ , Reg. No , registered in the Commercial Register kept by the Regional Court in České Budějovice, Section C, Insert 15804, 3/ TERO ROSICE, s.r.o., with the registered office in Rosice, Nádražní 8, PSČ , Reg. No , registered in the Commercial Register kept by the Regional Court in Brno, Section C, Insert 58904, and 4/ ADRIANA - výrobce těstovin s.r.o., with the registered office in Litovel, Tři Dvory, PSČ , Reg. No , registered in the Commercial Register kept by the Regional Court in Ostrava, Section C, Insert 12230, as the companies acquired. On 1 June 2010, foreign investors Productos Alimenticios Gallo S. L. and Cerealis - Produtos Alimentares S.A. joined the Company and acquired 25 per cent of its shares. Lines of business: - letting of immovable property, residential and non-residential premises - manufacture, trade and services not specified in Annexes 1 to 3 of the Trade Licensing Act - miller's trade - bakery, confectionery - installation, repair, inspection and testing of electrical equipment - manufacture, installation, repair of electrical machines and appliances, electronic and telecommunication equipment - road transport - freight 1/16

18 Company s owners: The following are the owners of the Company as at 31 December 2017: Ing. Pavel Hrdina 1/3 Productos Alimenticios Gallo S.L. 1/3 Cerealis - Produtos Alimentares S.A. 1/3 Company s rregistered office: U Sila 246 Boršov nad Vltavou Registration number: Members of the Board of Directors and the Supervisory Board as at 31 December 2017 Board of Directors Ing. Pavel Hrdina Rui Manuel De Amorim Silva e Sousa Supervisory Board Petra Hrdinová Pedro Antonio Espona Massana Carlos Ignacio Espona Massana Changes in the Commercial Register There were no changes in the Commercial Register during Organization structure The Company includes two divisions Adriana Litovel, Bratři Zátkové Boršov nad Vltavou, and a subsidiary trading company operating on the Slovak market IDEÁL Slovakia, s. r.o. 2. MAIN BASES FOR PREPARATION OF FINANCIAL STATEMENTS The attached individual financial statements (unconsolidated) was prepared in accordance with Act No. 563/1991 Coll., on Accounting, as amended (hereinafter referred to as the Accounting Act ), and Decree No. 500/2002 Coll., implementing certain provisions of Act No. 563/1991 Coll., on Accounting, as amended, for purposes of entities that are businesses maintaining double-entry accounting, as amended, as applicable for the years 2017 (hereinafter referred to as the implementing Decree to the Accounting Act). According the Accounting Act par. 1b this entity is called big which has the consequences to the extent of this Notes. 2/16

19 3. GENERAL ACCOUNTING PRINCIPLES, ACCOUNTING METHODS AND THEIR CHANGES AND DEVIATIONS The valuation methods applied by the Company in preparing the financial statements are as follows: a) Intangible fixed assets Intangible fixed assets are measured at their purchase prices that include acquisition prices and related acquisition costs. Intangible fixed assets costing up to CZK 60 thousand amortised as expensed. Depreciations are calculated based on the purchase price and estimated useful life of the asset. The depreciation plan is updated in the course of using the intangible fixed assets based on the expected useful life. The estimated useful life is stated as follows: Number of years Software 3 Capitalised subsequent costs of intangible fixed assets increase their purchase price. b) Tangible fixed assets Tangible fixed assets are measured at their purchase prices that include acquisition prices, transportation costs, customs duties, and other related acquisition costs. Tangible fixed assets costing up from CZK 5 thousand to CZK 40 thousand are depreciated over a period of 24 months to expenses. Capitalised subsequent costs of tangible fixed assets increase their purchase price. Repairs and maintenance are expensed as incurred. Depreciations Depreciations are calculated based on the purchase price and estimated useful life of the asset. The depreciation plan is updated in the course of using the tangible fixed assets based on the expected useful life. The estimated useful life is stated as follows: Number of years (from-to) Buildings (structures) 35 Food processing machines Food conveyors and other equipment Revaluation differences on acquired assets Miscellaneous non-current tangible assets /16

20 c) Financial assets Non-current financial assets comprise equity interests in controlled or controlling entities and entities under significant influence, and are recorded at their purchase prices. The equity interests in controlled or controlling entities and entities under significant influence are measured, as at the balance sheet date, by the equity method (by the share of ownership in the equity) and changes in valuation are captured through asset and liability revaluation differences in the equity of the Company. d) Financial resources Financial resources consist of cash on hand and cash in bank. e) Inventories Materials are valued at their purchase prices. The purchase price includes acquisition price, including costs related to the acquisition (customs fees, transportation costs, shipping charges, postage and packing, commissions, etc.). Decreases in materials are measured at average prices. Work in progress and finished goods are measured at production costs that include the costs of materials, labour, direct real purchased services and production overheads. Due to nature of the inventory there were no need of the provisions to the inventory. f) Receivables Receivables are measured at their nominal value as incurred. Purchased receivables are measured at their purchase prices. The valuation of doubtful receivables is reduced by allowances to expenses of their realizable value based on assessments of individual borrowers and an accounts receivable aging schedule. Accrued assets (estimated amounts) are valued on the basis of expert estimates and calculations. In the item - other receivables, also the values resulting from the revaluation of financial derivatives at fair value are recorded. Receivables and accrued assets (estimated amounts) are broken down into short-term (maturity within 12 months inclusive) and long-term (maturity longer than 12 months) with that the short-term ones are due within one year from the balance sheet date. g) Derivatives Derivatives are initially measured at their purchase prices. In the attached balance sheet, the derivatives are reflected in other short-term receivables. As at the balance sheet date, the derivatives (trading derivatives) are measured at fair value. Changes in the fair values of derivatives held for trading are recorded in financial expenses, or revenues. h) Equity Legal capital of the Company is reported in the amount recorded in the Commercial Register of the Regional Court. Other capital funds are represented by capital surplus paid by the owners Asset revaluation differences incurred in accordance with the revaluation of financial assets of the company Ideal Slovakia, s. r.o. 4/16

21 i) Liabilities Long-term and short-term liabilities are reported at their nominal values. The entity shows a long-term liability to ing. Pavel Hrdina in the amount of CZK 78,768 thousand. The liability bears an average interest rate according to the current bank rate of received long-term loans. Long-term and short-term liabilities to credit institutions are recorded at nominal value. Short-term liabilities to credit institutions also involve part of long-term liabilities to credit institutions, which are due within one year from the balance sheet date. Accrued liabilities (estimated amounts) are valued on the basis of expert estimates and calculations (customer bonuses are calculated on the basis of valid commercial contracts). j) Leasing The Company accounts for leased assets so that the lease payments are expensed. The lease payments are accrued. k) Foreign exchange operations Assets and liabilities acquired in foreign currencies are valued in Czech crowns, and for converting foreign currency transactions the daily exchange rates of the ČNB are used. As at the balance sheet date, the items of pecuniary nature were valued at the exchange rates valid as at 31 December and announced by the Czech National Bank. Realized and unrealized foreign exchange gains and losses are recognized in financial revenues, or financial expenses of the year. l) Use of estimates The preparation of financial statements requires the Company's management to make estimates and assumptions that affect the reported values of assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. The Company's management made these estimates and assumptions on the basis of all relevant information available. Nevertheless, given the nature of estimates, the actual values in the future may differ from these estimates. m) Recognition of revenues and expenses Revenues and expenses are recognized as accrued, i.e. in the period, to which they relate. n) Income tax Income tax expense is calculated using an applicable tax rate from the accounting profit increased or decreased by permanently or temporarily tax non-deductible expenses and non-taxable income (e.g. creation and clearing of other provisions and allowances, entertainment expenses, differences between book and tax depreciations, etc.). Furthermore, the items reducing the tax base (donations), deductibles (tax loss) and discounts on income tax are taken into account. Deferred tax liability reflects the tax effect of temporary differences between the carrying values of assets and liabilities in terms of financial reporting and determining the tax base with respect to the time period of implementation. Furthermore, it is resulted from the unamortised tax losses where it is real to use them in relation to tax revenues. 5/16

22 o) Subsidies / Investment incentives A subsidy is recognized at the time of its adoption or unquestionable right to adoption. Received subsidies to cover costs are recorded in operating or financial revenues. p) Subsequent events The impact of events that occurred between the balance sheet date and the date of the financial statements is reflected in the financial statements in case that these events provide further evidence about the facts existed as at the balance sheet date. In the case that between the balance sheet date and the date of the financial statements important events occurred, taking into account the facts that occurred after the balance sheet date, the effects of such events are disclosed in the Notes to the financial statements, but are not recorded in the financial statements. q) Correction of errors from previous years Corrections of errors from previous years in the case of significant items are charged against the other retained earnings. Minor repairs are reflected in profit or loss for the current period. There were active balances of deferred expenses from prior years corrected in the financial statements amounting to CZK 1,000 thousand with the impact to the other retained earnings. 6/16

23 4. FIXED ASSETS a) Non-current intangible assets (in thousands CZK) PURCHASE PRICE Opening Closing Increases Disposals Transfers balance balance Software Other valuable rights Advances given on non-current intangible assets Unfinished non-current intangible assets Total Total ALLOWANCES AND ACCUMULATED AMORTIZATION Opening Depreci Closing Book Disposals Transfers Allowances balance ations balance value Software Other valuable rights Advances given on non-current intangible assets Unfinished non-current intangible assets Total Total The Software is represented mainly by the accounting information systems. Other valuable rights are licences and trademarks. The additions are represented by trademark IDEAL and disposals of other valuable rights by Babiččiny nudle license. 7/16

24 b) Non-current tangible assets (in thousands CZK) PURCHASE PRICE Opening Closing Increases Disposals Transfers balance balance Lands Buildings (Structures) Tangible movable things and their groups (describe) Revaluation differences on acquired assets Miscellaneous non-current tangible assets Prepayments for tangible fixed assets Long-lived tangible assets in progress Total Total ALLOWANCES AND ACCUMULATED AMORTIZATION Opening Depreci Closing Allowanc Book Disposals Transfers balance ations balance es value Lands Buildings (Structures) Tangible movable things and their groups (describe) Revaluation differences on acquired assets Miscellaneous non-current tangible assets Prepayments for tangible fixed assets Long-lived tangible assets in progress Total Total Buildings are production and administration premises in Boršov nad Vltavou and Litovel. Tangibles are represented by mill, pasta and storage technologies. 8/16

25 c) Non-current financial assets (in thousands CZK) The entity owns a 100 % interest in the company IDEAL Slovakia, s. r.o, Kutlíkova 17, Bratislava, Slovakia. The ownership interest is valued using the equity method, the legal capital of the company amounts to EUR 640,277. As at December 31, 2017, the entity reported negative equity and therefore the valuation is decrease to zero. The subsidiary is considered insignificant pursuant to 22a paragraph. 3 of the Accounting Act and therefore Europasta company does not prepare consolidated financial statements. 5. INVENTORIES As at 31 December 2017, the Company's inventory amounted to CZK 145,134 thousand (as at 31 December 2016 CZK 149,388 thousand) encumbered with a lien to cover CZK 145,134 thousand. Raw material consists of grain, packaging and flour. Finished goods are pasta products and flour. 6. RECEIVABLES Other long-term receivables consist of a residual of a loan takeover drawn originally by the subsidiary IDEAL Slovakia. Current receivables from business relationships (trade receivables) amounts to CZK 146,021 thousand, thereof CZK 23,449 thousand constitute past due receivables. The allowance on doubtful receivables amounted to CZK 4,283 thousand as at 31 December 2017 (CZK 4,283 thousand as at December 2016). Accounts receivable aging schedule: Receivables as at December 31 (account 311x and 315x) Receivables as at December 31 (account 311x and 315x) Until due date Within 30 days Within 90 days Within 180 days Within 365 days Over 1 year Total Short-term advances consist of ordinary items (ie. energy or subscription). There was booked 100% allowance to the Senior house receivables amounting to TCZK 83. The accrued assets (estimated amounts) include primarily the assumed insurance payments and the accrued items related to the collection of supplier bonuses. 9/16

26 7. ALLOWANCES Allowances reflect a temporary diminution in the value of assets (mentioned in points 6). Changes in allowance accounts (in thousands CZK ): Allowances on: Balance as at 31 December 2015 Net change in 2016 Balance as at 31 December 2016 Net change in 2017 Balance as at 31 December 2017 receivables legal receivables other Total The legal allowances are created in accordance with Act on Reserves and are tax deductible. 8. CURRENT FINANCIAL ASSETS AND RESOURCES As at 31 December 2017 and 31 December 2016, the Company had the following balances: Balance as at 31 December Česká spořitelna a. s Unicreditbank Komerční banka ČSOB a. s Total Balance as at 31 December 9. ACCRUED ASSETS Pre-paid expenses include the rent paid in advance and advertising and marketing expenses which according to the decision of the entity relate to further periods. 10. EQUITY See the separate statement. We propose to transfer the net income for 2017 to the retained earnings of prior years. 11. NON-CURRENT LIABILITIES The non-current liabilities to Mr. Pavel Hrdina as at 31 December 2017 amounting to CZK 78,768 thousand (as at 31 December 2016 CZK 78,768 thousand). Other non-current liabilities are represented by long-term bank loans and deferred tax liability. 10/16

27 12. CURRENT LIABILITIES As at 31 December 2017 and 31 December 2016, the Company had the following trade payables (in thousands CZK): Liabilities as at 31 December (account 321x) Liabilities as at 31 December (account 321x) Until due date Within 30 days Within 90 days Within 180 days Within 365 days 0 9 Over 1 year Total Current financial assistance represents the liabilities to the Factoring of Česká spořitelna a. s. Accrued liabilities involve primarily the liabilities from customer discounts and bonuses. Their amount is determined on the basis of commercial contracts. Other liabilities consist mainly of liabilities to the company PH Finance. Summary of short-term bank loans see a separate paragraph. 13. LIABILITIES TO CREDIT INSTITUTIONS Loans by banks Total Short-term Long-term Total Short-term Long-term Česká spořitelna a. s Unicreditbank Total Long-term loans by maturity Bank loans are secured by receivables, real estate and manufacturing facilities of the company. thousand CZK and further Total Property Division Brothers Zátkové, wheat and rye mill are secured in favor of the Czech Savings Bank, a. s. The production facility division Adriana is secured in favor of UniCredit Bank Czech Republic, a. s. The interest expense related to the liabilities to lending institutions (except factoring) in 2017 amounted to CZK 3,916 thousand (in 2016 CZK 5,205 thousand). 11/16

28 14. INCOME TAX The Company quantified the deferred taxes as follows (in thousands CZK): Deferred tax items Deferred tax receivable Deferred tax liability Deferred tax receivable Deferred tax liability Difference between book value and tax carrying value of fixed asset Retained tax losses prior years Total Net LEASING Leased assets of the Company (in thousands CZK): 2017 Total lease payments Paid as at 31 December 2017 Maturity under 1 year Maturity in following years Wrapping and cartoning machines Trucks Personal cars Total Total lease payments Paid as at 31 December 2016 Maturity under 1 year Maturity in following years Wrapping and cartoning machines Trucks Personal cars Total ITEMS NOT STATED IN BALANCE SHEET As at 31 December 2017, the Company had assets in operational records These assets are divided by divisions (in thousands CZK) Corporate Headquarters 1,786 Production Division Adriana 3,268 Production Division Bratři Zátkové 4,678 12/16

29 17. REVENUES Breakdown of the company's revenues from sales of goods, products and services from ordinary activities (in thousands CZK): Revenues from the sales of own mill and pasta products in 2017 were as follows: Domestic revenues Export Total Mill products Pasta products Total Revenues from the sales of own mill and pasta products in 2016 were as follows: Domestic revenues Export Total Mill products 231, ,943 Pasta products 435, , ,798 Total 666, ,902 1,060,741 Thereof: Transactions with related parties Ideal Slovakia: Pasta products , PERSONNEL EXPENSES Breakdown of personnel expenses (thousand CZK): Average count of employees and senior staff and personnel expenses for the year 2017: 2017 Number of employees Labour costs Liabilities for social security and health insurance Social costs Employees N/A Senior staff N/A Total /16

30 Average count of employees and senior staff and personnel expenses for the year 2016: 2017 Number of employees Labour costs Liabilities for social security and health insurance Social costs Employees N/A Senior staff N/A Total of 2017 to the board members amounted to CZK 2,400 thousand (in the year 2016 amounted to CZK 2,400). Total rewar ds paid in the report ing period 19. INFORMATION ON TRANSACTIONS WITH RELATED PARTIES Receivables as at Liabilities as at IDEÁL Slovakia, s.r.o Cerealis S. A Grupo Gallo Commercial Gallo Celkem SIGNIFICANT ITEMS OF INCOME STATEMENT The item services represents payments to external suppliers for services of manufacturing nature. Other operating income consists of currency exchange gains, insurance benefits, green bonus and received subsidies. Other operating expenses include insurance premium and unclaimed VAT. Other financial expenses consist of payments to financial institutions and a factoring company. 21. FEES CHARGED BY STATUTORY AUDITOR Statutory audit Reported amounts are influenced by invoicing preliminary audit 2016 in January GOING CONCERN ASSUMPTION The financial statements as at 31 December 2017 have been prepared on a going concern basis. The attached financial statements, therefore, do not include any adjustments that might result from this uncertainty. 14/16

31 23. SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE After the balance sheet date 31 December 2017 until the compilation of the Financial statements, no significant events beyond the normal course of events have occurred that would affect the presentation of these Financial statements. 24. STATEMENT OF CASH FLOWS (SEE ANNEX) The cash flow statement has been prepared under the indirect method. 25. STATEMENT OF CHANGES IN EQUITY The detailed statement of changes in equity of the Company is listed in a separate statement. Prepared on: February 21, 2018 Name and signature of the Company's statutory body: Pavel Hrdina 15/16