CAMPOFRIO FOOD GROUP

Transcription

1 CAMPOFRIO FOOD GROUP UNAUDITED INTERIM SELECTED CONSOLIDATED FINANCIAL INFORMATION NINE MONTH PERIOD ENDED 30 TH SEPTEMBER 2017

2 TABLE OF CONTENTS INTRODUCTION... 1 CONSOLIDATED INCOME STATEMENT... 2 CONSOLIDATED INCOME STATEMENT... 3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 4 CONSOLIDATED CASH FLOW STATEMENT... 5 EXPLANATORY NOTES TO THE UNAUDITED INTERIM SELECTED CONSOLIDATED FINANCIAL INFORMATION... 7 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RECENT DEVELOPMENTS ANNEXE A EXPLANATION OF INCOME STATEMENT ITEMS... 18

3 INTRODUCTION In March 2015, CAMPOFRIO FOOD GROUP, S.A.U. ( Campofrío Food Group or the Company ), incorporated as a public limited company (sociedad anónima) under the laws of Spain, issued 500 million aggregate principal amount of its 3.375% Senior Notes due 2022 (the Notes ) at a price of %. The Company pays interest on the Notes semi-annually on each March 15 and September 15. On February 21, 2017 and on March 23, 2017, the Company carried out two partial redemptions of the Notes amounting to 50.0 million each, at a price of 103.0% plus accrued interest. As a result, the outstanding principal amount of the Notes currently amounts to million. Further, at any time on or after March 15, 2018, the Company may redeem all or part of the Notes by paying a specified premium to the holders. If the Company undergoes a change of control or sells certain of its assets, it may be required to make an offer to purchase the Notes. In the event of certain developments affecting taxation, the Company may redeem all, but not less than all, of the Notes. The Company may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company s liquidity requirements, contractual restrictions and other factors. The Notes are senior debt of Campofrío Food Group and rank pari passu in right of payment to all of Campofrío Food Group s existing and future senior indebtedness. The Notes are guaranteed on a senior basis by certain of the Company s subsidiaries. The Notes are admitted to listing on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF market. The Notes and the Guarantees have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act ). The Notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the U.S. Securities Act ( Rule 144A ) and to certain persons in offshore transactions in reliance on Regulation S under the U.S. Securities Act ( Regulation S ). You are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act provided by Rule 144A. Following the issuance of the new 3.375% Notes maturing in 2022, the Company redeemed all of its outstanding 8.250% Senior Notes due 2016, including applicable premium and accrued and unpaid interest, and paid related fees and expenses in connections with the Offering. The redemption of the outstanding 8.250% Senior Notes due 2016 was executed on April 2, This Unaudited Selected Consolidated Financial Information is provided to the holders of the Notes pursuant to Section Description of the Notes - Reports (2) of the indenture.

4 CONSOLIDATED INCOME STATEMENT Campofrío Food Group (In Thousands of Euros) Operating revenues Net sales and services Actual (unaudited) Nine month ended September 30, % of total oper. revenue Actual (unaudited) % of total oper. revenues 1,456, % 1,415, % Increase in inventories 44, % 29, % Capitalized expenses on Company's work on assets 4, % % Other operating revenue 4, % 3, % Total operating revenues 1,510, % 1,447, % Operating expenses Consumption of goods and other external charges (885,974) (58.6%) (801,928) (55.4%) Employee benefits expense (238,122) (15.8%) (241,203) (16.7%) Depreciation and amortization (42,734) (2.8%) (36,494) (2.5%) Changes in trade provisions (611) (0.2%) (2,088) (0.1%) Other operating expenses (285,096) (18.9%) (297,178) (20.5%) Total operating expenses (1,452,537) (96.1%) (1,378,891) (95.3%) Impairment of non - current assets (306) 0.00% % Other income and expenses 16,949 1,1% % Operating profit 74, % 68, % Financial expenses, net (20,244) (1.3%) (17,141) (1.2%) Other results % 2, % Profit (loss) before tax 55, % 53, % Income taxes (13,935) (0.9%) (18,151) (1.3%) Profit for the period from continuing operations 41, % 35, % Profit for the period 41, % 35, % Non-controlling interests Attributable to equity holders of the parent company 41, % 35, % The accompanying notes are an integral part of this consolidated financial information.

5 CONSOLIDATED INCOME STATEMENT Campofrío Food Group (In Thousands of Euros) Operating revenues Actual (unaudited) Three month ended September 30, % of total oper. revenue Actual (unaudited) % of total oper. revenues Net sales and services 511, % 498, % Increase in inventories 6, % 15, % Capitalized expenses on Company's work on assets % % Other operating revenue 1, % 1, % Total operating revenues 520, % 515, % Operating expenses Consumption of goods and other external charges (311,974) (60.0%) (297,641) (57.7%) Employee benefits expense (78,726) (15.1%) (78,247) (15.2%) Depreciation and amortization (15,192) (2.9%) (12,517) (2.4%) Changes in trade provisions 1, % (360) (0.1%) Other operating expenses (98,029) (18.9%) (101,391) (19.7%) Total operating expenses (502,750) (96.7%) (490,156) (95.0%) Impairment of non - current assets (235) 0.0% - 0,0% Other income and expenses 16, % - 0,0% Operating profit 33, % 25, % Financial expenses, net (5,438) (1.0%) (5,423) (1.1%) Other results % 1, % Profit (loss) before tax 29, % 21, % Income taxes (4,721) (0.9%) (6,240) (1.2%) Profit for the period from continuing operations 24, % 15, % Profit for the period 24, % 15, % Non-controlling interests Attributable to equity holders of the parent company 24, % 15, % The accompanying notes are an integral part of this consolidated financial information.

6 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Campofrío Food Group (In Thousands of Euros) Consolidated statement of financial position at, Sep 30, 2017 Sep 30, 2016 Actual (unaudited) Restated (unaudited) ASSETS Property, plant and equipment 763, ,445 Goodwill 531, ,103 Other intangible assets 256, ,846 Non-current financial assets 681 2,765 Investments accounted for under the equity method 1,960 32,958 Deferred tax assets 98, ,605 Total non-current assets 1,653,215 1,496,722 Biological Assets 2,876 - Inventories 375, ,855 Trade and other receivables 156, ,393 Other current financial assets Other current assets 8,433 8,202 Cash and cash equivalents 186, ,428 Total current assets 729, ,268 Assets classified as held for sale and discontinued operations - - TOTAL ASSETS 2,382,636 2,336,990 EQUITY AND LIABILITES Equity attributable to equity holders of the parent 856, ,971 Equity 856, ,971 Debentures 395, ,829 Interest-bearing loans and borrowings 8,324 - Other financial liabilities 11,821 13,685 Debts with group and associated companies 103,000 - Deferred tax liabilities 134, ,397 Other non-current liabilities Provisions 33,315 44,669 Total non-current liabilities 686, ,727 Debentures Interest-bearing loans and borrowings 3, Trade and other payables 729, ,407 Other financial liabilities 1,998 1,767 Interest with group and associated companies Creditor for income tax 2,300 3,885 Provisions 6,447 8,394 Other current liabilities 94, ,875 Total current liabilities 839, ,292 Liabilities associated to operations on sale or discontinued - - TOTAL EQUITY AND LIABILITIES 2,382,636 2,336,990 The accompanying notes are an integral part of this consolidated financial information.

7 CONSOLIDATED CASH FLOW STATEMENT Campofrío Food Group (In Thousands of Euros) Nine month ended September 30, Actual (unaudited) Restated (unaudited) Operating flows before changes in working capital 94, ,087 Changes in working capital (30,433) (9,174) Cash flows from operating activities 64,562 91,913 Net interest payments (18,241) (18,991) Provision and pensions payment (7,157) (9,524) Income tax paid (11,022) (9,545) Other collection and payments 1, Net cash flows from operating activities 29,224 53,979 Investments in property, plant and equipment (132,930) (71,756) Other cash flows from investing operations, net Investments in group companies (43,535) - Net cash flows from investing activities (176,149) (71,103) Changes in financial assets and liabilities (7,112) (5,394) Debt with associated company 103,000 - Repayments of bank debt - - Repayments of debentures and bonds (100,000) - Net cash flows from financing activities (4,112) (5,394) Net increase/(decrease) in cash and cash equivalents (151,037) (22,518) Cash and cash equivalents at beginning of period 337, ,946 Cash and cash equivalents at end of period 186, ,428 Three month ended September 30, Actual (unaudited) Restated (unaudited) Operating flows before changes in working capital 33,510 40,038 Changes in working capital ,241 Cash flows from operating activities 33,960 69,279 Net interest payments (8,760) (8,957) Provision and pensions payment (1,239) (1,129) Income tax paid (5,433) (3,022) Other collection and payments (8) 126 Net cash flows from operating activities 18,520 56,297 Investments in property, plant and equipment (38,324) (24,309) Other cash flows from investing operations, net Investments in group companies (43,535) - Net cash flows from investing activities (81,748) (23,657) Changes in financial assets and liabilities (1,425) (5,625) Debt with associated company - - Repayments of bank debt - - Repayments of debentures and bonds - - Net cash flows from financing activities (1,425) (5,625) Net increase/(decrease) in cash and cash equivalents (64,653) 27,015 Cash and cash equivalents at beginning of period 251, ,413 Cash and cash equivalents at end of period 186, ,428 The accompanying notes are an integral part of this consolidated financial information.

8 OTHER SELECTED CONSOLIDATED FINANCIAL INFORMATION Campofrío Food Group (In Thousands of Euros) Conciliation from Profit for the period to EBITDA Reported Nine month ended September 30, Actual (unaudited) Actual (unaudited) Profit for the period attributable to equity holders of the parent company 41,546 35,523 Profit (loss) after tax for the period from discontinued operations - - Income taxes 13,935 18,151 Other results (778) (2,159) Financial expenses, net 20,244 17,141 Impairment of assets Depreciation and amortization 42,734 36,494 EBITDA Reported 117, ,150 Conciliation from Profit for the period to EBITDA Reported Three month ended September 30, Actual (unaudited) Actual (unaudited) Profit for the period attributable to equity holders of the parent company 24,279 15,258 Profit (loss) after tax for the period from discontinued operations - - Income taxes 4,721 6,240 Other results (460) (1,178) Financial expenses, net 5,438 5,423 Impairment of assets Depreciation and amortization 15,192 12,517 EBITDA Reported 49,405 38,260 The accompanying notes are an integral part of this consolidated financial information.

9 EXPLANATORY NOTES TO THE UNAUDITED INTERIM SELECTED CONSOLIDATED FINANCIAL INFORMATION Corporate Information Campofrío Food Group, S.A.U. (the Company ), with registered office at Avda. de Europa, Parque Empresarial La Moraleja in Alcobendas (Madrid), was incorporated as a private limited company in Spain on September 1, 1944, under the registered name Conservera Campofrío, S.A. On September 5, 1996, the Company s name was changed to Campofrío Alimentación, S.A. and on December 30, 2008, it was changed to the name, Campofrío Food Group, S.A. In 2015 the Company became a sole shareholder company (sociedad unipersonal) thus starting to use the acronym S.A.U. Campofrío Food Group, S.A.U., for these purposes, is the parent of a group of companies consolidated under the full and equity consolidation methods. The Company is fully owned by Sigma Alimentos España S.L. and it is, therefore, a subsidiary of the Mexican group Sigma Alimentos within the ALFA conglomerate. The Company manufactures and sells products mainly for human consumption. The principal activities of the parent company and the group companies are to manufacture, sell and distribute processed and canned meat and derivatives from pork, poultry and beef by-products and other food products. The Group operates in Spain, France, Belgium, the Netherlands, Portugal, Germany, Italy, United Kingdom, USA and Romania. Basis of preparation The amounts of the consolidated income statement, consolidated statement of financial position and consolidated cash flow statement were prepared in accordance with International Financial Reporting Standards, adopted by the European Union (the IFRS-EU ), in conformity with EU Regulation no. 1606/2002 of the European Parliament and Council. The rest of information and disclosures that are necessary in financial statements elaborated under IFRS-EU are not included since they are not applicable for the purpose of this document. In any case, this selected financial information here presented and the explanatory notes should be read in conjunction with the Campofrío Food Group, S.A.U and subsidiaries Consolidated Financial Statements and Consolidated Management Report for the year ended December 31, Critical Accounting Policies Our consolidated financial statements are prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ( IFRS-EU ) in conformity with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council. The discussion and analysis of our results of operations and financial conditions are based on our consolidated financial statements, which have been prepared in accordance with IFRS-EU. The preparation of our consolidated financial statements requires us to apply accounting methods and policies that are based on difficult or subjective judgments, estimates based on past experience and assumptions determined to be reasonable and realistic based on the related circumstances. The application of these estimates and assumptions affects the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of income and expenses during the reporting period. Actual results may differ from these estimates given the uncertainty surrounding the assumptions and conditions upon which the estimates are based. Main detailed information regarding the Company s accounting policies is provided in Note 2 to our Consolidated Financial Statements for the year ended December 31, Non IFRS-EU Financial Measures This selected financial information could contain non-ifrs-eu measures and ratios, including EBITDA, net debt and leverage and coverage ratios that are not required by, or presented in accordance with, IFRS- EU. We present non-ifrs-eu measures because we believe that they and similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. The non-ifrs-eu measures may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under IFRS-EU. Non-IFRS-EU measures and ratios such as EBITDA, net debt and leverage and coverage ratios are not measurements of our performance or liquidity under IFRS-EU and should not be considered as alternatives to operating

10 profit or profit for the year or any other performance measures derived in accordance with IFRS-EU or any other generally accepted accounting principles or as alternatives to cash flow from operating, investing or financing activities. Net Financial Debt, Liquidity and Capital Resources The following chart sets forth the Company s net Financial debt position as of September 30, 2017 and September 30, NET FINANCIAL DEBT Nine month ended September 30, (In Thousands of Euros) Non-current financial debt Debentures 395, ,829 Interest-bearing loans and borrowings 8,324 - Other financial liabilities 11,821 13,685 Financial derivatives instruments - - Debts with associated companies 103,000 - Current financial debt Debentures Interest-bearing loans and borrowings 3, Other financial liabilities 1,998 1,767 Interest with associated companies Current financial assets Other current financial assets,(87),(390) Cash and cash equivalents (186,663) (309,428) Total Net Financial Debt 338, ,427 As of September 30, 2017, the Company s net financial debt mainly consists of the million outstanding bonds after the two redemption operations in February and March and the million equivalent shareholder loan. It is million higher than in December 2016 and million above the same period last year as a consequence of the cash decrease from the payments of the remaining investments pertaining to the new factory and the payment related to the Caroli Foods Group acquisition in Romania that has been fully funded out of excess cash. As a result, Gross Debt has increased by 11.7 million following the consolidation of the new Romanian subsidiaries bank debt from the transaction closing date on September 1 st. Furthermore, the total net financial debt impact amounts to just 7.5 million once deducted 4.4 million cash and, therefore, it is relatively minor at Company level. Moreover, the Caroli acquisition is fully compatible with the bonds indenture and it was duly disclosed after the closing in compliance with Section 4.03 (a) (iii) Reports and Other Information. Following this acquisition, the now wholly owned Romanian subsidiaries have become Restricted Subsidiaries, whose accounting and financial results are therefore consolidated into Campofrio Food Group S.A.U. The transaction rationale is based on the Company s growth strategy and it aims to add prompt value to the Company. The acquisition is expected to be accretive in terms of margin contribution and it has been fully funded out of existing cash without requiring any external financing, while at the same time preserving the current financial ratios and, needless to say, all the indenture covenants remain widely complied with, in particular, the fixed coverage ratio one. The new Romanian subsidiaries are being integrated in accordance to the Company s policies and, to this extent, Caroli s processes and procedures are being aligned to the corporate processes and procedures from the treasury and cash management standpoint. After all, the Company s balance sheet continues to be rather straight-forward being all debt practically long-term and held at parent Company level without any refinancing risk whatsoever. In this sense, all subsidiaries, except Caroli for the time being, are debt-free and only some minor debt items (i.e. leasing, reimbursable grants, etc.) of rather negligible value on a global basis remain for the time being. Despite the expected cash reduction earmarked for the pending CAPEX, the Company s liquidity position keeps on being very solid amounting to million as of September 30, 2017, consisting of million in cash and cash equivalents, 93.0 million of fully available bank lines in Euros ( 92.0 million committed lines and 1.0 million uncommitted lines) with thirteen different banks. As previously reported, the Company in conjunction with its shareholders has carried out a rationalization process to reduce the total amount of committed bank lines for the sake of simplification and bank fees savings, while at the same time the applicable terms and conditions have been enhanced and the maturities have been extended.

11 To sum up, it is worth nothing the very positive financial evolution of the Company, having significantly improved the resulting leverage ratio, as well as the related interest cover and debt-to-equity ratios, which is being recognized by a favourable evolution of the credit profile by the rating agencies that cover the Company. The following tables set forth the situation of the Company s two main financing sources as of September 30, 2017 and September 30, Debentures Consolidated position at (In Thousands of Euros) 30/09/ /09/2016 Non-current debentures 395, ,829 Current debentures Principal - - Accrued interest Total debentures 396, ,532 Interest-bearing loans and borrowings Consolidated position at (In Thousands of Euros) 30/09/ /09/2016 Debts with associated companies 103,000 Bank loans and credit facilities 11, Senior term loan 11, Credit lines - - Discounted bills payable 0,00-0,- Interest payable 00,0101 0, Interest with associated companies Total 114, The following table sets forth the situation of the Company s current and non-current other financial liabilities as of September 30, 2017 and September 30, Consolidated position at 30/09/2017 Consolidated position at 30/09/2016 Other financial liabilities (In thousands of ) Non-current Current Total Non-current Current Total Financial leases 4,990 1,388 6,378 5,516 1,304 6,820 Other financial liabilities 6, ,441 8, ,632 Total 11,821 1,998 13,819 13,685 1,767 15,452

12 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Campofrío Food Group is the largest European producer of packaged meat products based on net sales. Its products, which are sold under well established and leading brands or unbranded products for third parties, cover a broad range of packaged meat categories, including cooked ham, dry sausages, dry ham, hot dogs, poultry products, cold cuts and pâtés. The Company was founded in 1944 in Burgos, Spain and has expanded to achieve a direct presence in eight European countries (Spain, France, Portugal, The Netherlands, Belgium, Italy, Germany and Romania) and in the United States; although we generate sales in approximately 80 countries worldwide through independent distributors. The Company s market leading brands include Campofrío and Navidul in Spain, Aoste, Justin Bridou and Cochonou in France, Nobre in Portugal, Marcassou in Belgium, Stegeman in The Netherlands, Fiorucci in Italy and Caroli in Romania. For the nine month period ended September 30, 2017, the Company had Net Sales and Services and Reported EBITDA of 1,456.9 million and million, respectively. The Company is headquartered in Madrid, Spain. The Company is primarily engaged in the production and sale of packaged meat products with a focus on cooked ham, dry sausages, dry ham, hot dogs and poultry products. The Company sources meat primarily from third party suppliers which it monitors on a regular basis to ensure that high-quality and hygienic standards are maintained. The meat is then processed in one, or a combination, of our 27 facilities and the final products are sold directly to customers, which include some of the largest retailers in Europe, including Carrefour, Ahold, Auchan, Delhaize and Lidl, as well as directly or through wholesalers to a large number of food service specialists and traditional retail outlets. As a result of its strong relationships with retail and food specialist customers, the Company has also developed a private label or retailer brand business. Factors Affecting Our Results of Operations Raw Material Prices Pig carcass average price Nine month ended September 30, vs. (price in /kg) 2015 % Increase (decrease) over prior period 2017 vs Spain Mercolleida France MPB Netherlands Monfoort Belgium Danis Germany AIM Denmark DC Italy In 4 of the past 5 years, EU28 cereals prices have gradually decreased due to large harvests regionally, and also in the other main grain producing areas worldwide. EU total cereals production rose slightly above last year levels, reaching MT (+0.3%). On one hand, soft wheat output increased 4.0% (141 MT) due to rising yields in key countries (France, UK, Germany and Poland). On the other hand, the corn harvest declined slightly to 58.9 MT, or -0.7%. Despite the higher output, year to date 2017, EU28 soft wheat, barley and corn prices respectively increased by +9.1%, 3.2%, +6.2% US corn and soybean production are expected to level off to 14.2 (-5.9%) and 4.3 (-1.1%) billion bushels, below last year s historical records. Stock to use ratios continued their rise to decade high levels, pressuring prices lower. US ethanol generation now consumes 38.0% of the North American corn crop. In addition, South America (Brazil [114MT] and Argentina [58MT]) harvested record soybean crops this past winter. On a global basis for 2017, total world grain production will drop to 2049 MT, down 79MT or -4.1% versus last year, amounting to the second largest historical crop. With increases for food, feed and industrial uses based on low grain prices, consumption reached an all-time high at 2089 MT. And campaign end stocks decreased -9.0% to 480 MT, with stock to use ratio of 23.0%, down 2 points from last year.

13 Wheat, barley, corn and soybean meal are all key components of the feed ration for pork and poultry production. Their higher prices narrowed the margins for both meat production, leading to the current decrease in output. Starting during the summer 2016, EU farmers responded to rising profitability in pork farming by first stabilizing then increasing the sow herds. While the December 2016 survey showed a slight drop in total pigs (-0.9%) and for breeding sows (-1.6%), the last result from May-June 2017 has turned positive (total pigs +0.5% and sows +0.4%. These decisions impact pork meat output with a 10 to 12 months delayed effect. During 2016, EU28 pork production rose to a record of 23.2 MT, up +1.2%. Performance was strong during the first half of the year (+2.2%), but uneven depending of the country. Year to date 2017, EU pig production dropped by an estimated -2.3%. Several countries were strongly impacted : United Kingdom (- 5.2%), France (-3.1%), Denmark (-5.9%), and Italy (-5.3%). On the other hand, production in Germany (+0.2%), Poland (+0.1%) and Holland (+1.6%) rose slightly. Pork carcass prices surged during the spring in light of the lower supply effect. China s pig and sow population estimated decrease of 95 million and 9.5 million head respectively have led to a loss of -6.0% in pork meat production, triggering a record import demand of pork from Europe, Canada and USA during Chinese imports have more than doubled year over year, and reached 2.3 million tons by year end, to cover the 3.0% gap in its internal supply-demand balance sheet. Since then, during H1 2017, EU pork exports to China slowed down significantly (-27%) due to rising Chinese production (+2.5%), increased competition from USA and Canada s lower pork prices, and rising strength in the euro currency versus the dollar. In USA, 2016 pork production rose +2.5%, leading to prices lower by -7.8% versus the previous year. During the past 9 months in 2017, prices have traded +7.3% above year ago levels, despite a significant rise in pork meat output (+3.1% YTD): it is reflecting the resilient demand from Mexico imports. During 2016, EU28 pork exports rose by +23.0% and reached 4.1 million tons. China imports from EU28 surged +63.0% to 2.3 million metric tons (cwe), and accounted to 54.0% of European pork trade. Japan (+10.0% ) and The Philippines (+12.0%) also contributed to the robust performance. EU28 trade with neighbouring countries (Russia, Belarus, Ukraine) now amounts to just 1.0% of total volumes, in sharp contrast to 2 years ago before the ban. During H1 2017, overall EU exports decreased by 11.2%, led by a sharp drop from China demand (-27% YTD), only offset by an increase from Japan, South Korea and The Philippines. During the first 4 months of 2016, EU28 pork carcass prices were significantly lower than year ago levels due to surplus production. However, the trend reversed sharply during May and June, boosted by the record demand from Chinese imports, and continued until year end. During the Q1 to Q period, the prices evolution reflected the heterogeneous supply and demand conditions in each production basin. Compared to year ago levels, pork quotations increased sharply in all key producing countries: France (+12.1%), Netherlands (+16.9%), Germany (+14.3%), Belgium (+16.6%), Denmark (+13.2%), Spain (+17.9%), due to a large decrease in domestic production combined with lower export demand. In line with the pork carcass prices, all pieces have risen strongly, to surpass their year ago levels in all countries. YTD 2017 public market value of hams increased in the main countries: France (+6.8%), Germany (+6.1%), Belgium (+10.7%), Spain (18.2%). Shoulders prices rose from +23.0% in Spain, to +8.9% in Belgium, +7.3% in Germany, +17.7% in France. After dropping all last year, belly prices rebounded sharply in EU: Germany (+28.6%), Belgium (+19.8%), France (+8.3%), Spain (+37.6%). South Korea and Japan imports of bellies contributed mostly to the trend. Fat, jowls, trimmings all traded above their year ago levels as well. Following a year of attractive feed prices and low carcass quotations, European chicken carcass prices have rebounded (from +4.3% in Spain, to +0.2% in Poland). French turkey shows a price trend with gradual decrease since January (-1.9%) on higher production. The pork and chicken meat market trends stated above affected the Company s raw material costs only indirectly. First, the Company purchases pork and poultry cuts in different proportions, each one following its own supply and demand dynamics. From January to September 2017, the average pork meat price purchased by the Company increased +16.3% versus year ago levels. Second, and more importantly, the cost of goods sold of long-cycle products (cured products) reflects evolutions in raw material prices with a lag time which can vary between 6 and 24 months. Taking into consideration these factors, the pork meat costs for 2017 rose by +22.8% versus the same period last year.

14 Results of Operations Comparison of the nine month period ended September 30, 2017 and the nine month period ended September 30, 2016 Operating Revenues The following table sets forth a detailed breakdown of our operating revenues for the nine month period ended September 30, 2017 and September 30, Operating revenues Nine month ended September 30, (in thousands of ) Actual (unaudited) % of total oper. Revenues Actual (unaudited) % of total oper. revenues Net sales and services 1,456, % 1,415, % % increase in Net sales and services 2.9% Increase in inventories of finished products and work-in-progress 44, % 29, % Capitalized expenses on Company's work on assets 4, % % Other operating revenue 4, % 3, % Total operating revenues 1,510, % 1,447, % % increase in total operating revenues 4.4% Operating revenues increased by 4.4% to 1,510.8 million for the nine month period ended September 30, 2017 compared to 1,447.5 million for the nine month period ended September 30, This result reflects an increase in net sales and services of 2.9% to 1,456.8 million for the nine month period ended September 30, 2017 compared to 1,415.1 million for the nine month period ended September 30, Operating Expenses The following table sets forth a detailed breakdown of operating expenses for the nine month period ended September 30, 2017 and September 30, Operating expenses Nine month ended September 30, (In thousands of ) Actual (unaudited) % of total oper. revenues Actual (unaudited) % of total oper. revenues Consumption of goods and other external charges (885,974) (58.6%) (801,928) (55.4%) Employee benefits expense (238,122) (15.8%) (241,203) (16.7%) Depreciation and amortization (42,734) (2.8%) (36,494) (2.5%) Changes in trade provisions (611) (0.0%) (2,088) (0.1%) Other operating expenses (285,096) (18.9%) (297,178) (20.5%) Total operating expenses (1,452,537) (96.1%) (1,378,891) (95.3%) % increase in total operating expenses 5.3% Total operating expenses increased by 5.3% to 1,452.5 million for the nine month period ended September 30, 2017 from 1,378.9 million for the nine month period ended September 30, The increase in total operating expenses was primarily attributable to an increase in consumption of goods partially offset by other operating expenses. Operating expenses constituted 96.1% and 95.3% of total operating revenues for the nine month period ended September 30, 2017 and 2016, respectively. Consumption of Goods and Other External Charges Consumption of goods and other external charges increased by 10.5% to million for the nine month period ended September 30, 2017 from million for the nine month period ended September 30, Consumption of goods and other external charges constituted 58.6% and 55.4% of total operating revenues for the nine month period ended September 30, 2017 and 2016, respectively. Considered together with the increase in inventories of finished products and work-in-progress presented above, consumption of goods and other external charges increased by 8.8% the nine month period ended September 30, 2017 compared to the same period of 2016.

15 Employee Benefits Expenses Employee benefits expenses decreased by 1.3% to million for the nine month period ended September 30, 2017 from 241,2 million for the nine month period ended September 30, Employee benefits expenses constituted 15.8% and 16.7% of total operating revenues for the nine month period ended September 30, 2017 and 2016, respectively. Depreciation and Amortization Depreciation and amortization increased by 17.1% to 42.7 million for the nine month period ended September 30, 2017 from 36.5 million for the nine month period ended September 30, Depreciation and amortization represented 2.8% and 2.5% of total operating revenues for the nine month period ended September 30, 2017 and 2016, respectively. Changes in Trade Provisions Changes in trade provisions decreased by 70.7% to 1.0 million for the nine month period ended September 30, 2017 from 2.1 million the nine month period ended September 30, Other Operating Expenses Other operating expenses decreased by 4.1% to 285,1 million for the nine month period ended September 30, 2017 compared to million for the nine month period ended September 30, Other operating expenses constituted 18.9% and 21.0% of total operating revenue for the nine month period ended September 30, 2017 and 2016, respectively. Other Income and Expenses For the nine month period ended September 30, 2017 and 2016, other income and expenses comprise the results derived from a business combination achieved in stages. Finance Revenue and Finance Costs Net finance cost increased to 20.2 million for the nine month period ended September 30, 2017, compared to 17.1 million in the same period The relative increase pertains to the mentioned Notes redemption operations associated transaction costs that took place in the first quarter of the year and it is obviously non-recurrent, while debt costs are expected to more than halve what they used to be prior to the refinancing in Overall financing costs are also poised to remain below following the bank lines rationalization exercise benefitting from improved prices Income Tax Expenses An income tax charge of 13.9 million was recognized for the nine month period ended September 30, 2017 compared to a 18.2 million loss in the same period of The effective tax rate was hardly comparable due to the different taxable income across different jurisdictions. Nine month ended September 30, (In thousands of ) Actual (unaudited) Actual (unaudited) Profit before tax 55,481 53,674 Income tax (13,935) (18,151) Profit for the year from continuing operations 41,546 35,523 Profit (Loss) for the Period Profit for the period amounted to 41.5 million gain for the nine month period ended September 30, 2017, compared to 35.5 million gain in the same period of Cash Flow Cash Flows from Operating Activities For the nine month period ended September 30, 2017, the Company generated net cash flows from operating activities amounted to 29.2 million cash in compared to 54.0 million cash in for the nine month period ended September 30, This decrease was primarily attributable to higher working capital deterioration an higher income tax payments.

16 Cash Used in Investing Activities For the nine month period ended September 30, 2017, net cash used in investing activities amounted to million cash out, compared to 71.1 million cash out for the same period in Capital expenditures amounted to million for the nine month period ended September 30, 2017 and 71.8 million for the nine month period ended September 30, The increase in cash out is mainly related to increase in capital expenditures mainly associated to La Bureba new factory. The increase of investments in group companies was due to the acquisition of the Caroli Foods Group. Cash Flow from Financing Activities For the nine month period ended September 30, 2017, net cash flow used in financing activities was 4.1 million cash out, compared to 5.4 million cash out for the same period of The cash flow from financing operations for the nine month period ended September 30, 2017 includes the partly redemption of the Notes issued in 2015 amounting to million at a 103% redemption price offset by the million cash in from a parent company loan provided by our shareholders. Comparison of the three month period ended September 30, 2017 and the three month period ended September 30, 2016 Operating Revenues The following table sets forth a detailed breakdown of our operating revenues for the three month period ended September 30, 2017 and September 30, Operating revenues Three month ended September 30, (in thousands of ) % of total oper. Revenues % of total oper. revenues Actual Actual (unaudited) (unaudited) Net sales and services 511, % 498, % % increase in Net sales and services 2.6% Increase in inventories of finished products and work 6, % 15, % in progress Capitalized expenses on Company's work on assets % % Other operating revenue 1, % 1, % Total operating revenues 520, % 515, % % increase in total operating revenues 0.8% Operating revenues increased by 0.8% to million for the three month period ended September 30, 2017 compared to million for the three month period ended September 30, This result reflects an increase in net sales and services of 2.6% to million for the three month period ended September 30, 2017 compared to million for three month period ended September 30, Operating Expenses The following table sets forth a detailed breakdown of operating expenses for the three month period ended September 30, 2017 and September 30, Operating expenses Three month ended September 30, (In thousands of ) Actual (unaudited) % of total oper. revenues Actual (unaudited) % of total oper. revenues Consumption of goods and other external charges (311,974) (60.0%) (297,641) (57.7%) Employee benefits expense (78,726) (15.1%) (78,247) (15.2%) Depreciation and amortization (15,192) (2.9%) (12,517) (2.4%) Changes in trade provisions 1, % (360) (0.1%) Other operating expenses (98,029) (18.9%) (101,391) (19.7%) Total operating expenses (502,750) (96.7%) (490,156) (95.0%) % increase in total operating expenses 2.6%

17 Total operating expenses increased by 2.6% to million for the three month period ended September 30, 2017 from million for the three month period ended September 30, The increase in total operating expenses was primarily attributable to an increase in consumption of goods partially offset by other operating expenses. Operating expenses constituted 96.7% and 95.0% of total operating revenues for the three month period ended September 30, 2017 and 2016, respectively. Consumption of Goods and Other External Charges Consumption of goods and other external charges increased by 4.8% to million for the three month period ended September 30, 2017 from million for the three month period ended September 30, Consumption of goods and other external charges constituted 60.0% and 57.7% of total operating revenues for the three month period ended September 30, 2017 and 2016, respectively. Considered together with the increase in inventories of finished products and work-in-progress presented above, consumption of goods and other external charges increased by 8.5% the three month period ended September 30, 2017 compared to the same period of Employee Benefits Expenses Employee benefits expenses increased by 0.6% to 78.7 million for the three month period ended September 30, 2017 from 78.2 million for the three month period ended September 30, Employee benefits expenses constituted 15.1% and 15.2% of total operating revenues for the three month period ended September 30, 2017 and 2016, respectively. Depreciation and Amortization Depreciation and amortization increased by 21.4% to 15.2 million for the three month period ended September 30, 2017 from 12.5 million for the three month period ended September 30, Depreciation and amortization represented 2.9% and 2.4% of total operating revenues for the three month period ended September 30, 2017 and 2016, respectively. Changes in Trade Provisions Changes in trade provisions decreased to 1.2 million gain for the three month period ended September 30, 2017 from 0.4 million loss for the three month period ended September 30, 2016 Other Operating Expenses Other operating expenses decreased by 3.3% to 98.0 million for the three month period ended September 30, 2017 compared to million for the three month period ended September 30, Other operating expenses constituted 18.9% and 19.7% of total operating revenue for the three month period ended September 30, 2017 and 2016, respectively. Other Income and Expenses For the nine month period ended September 30, 2017 and 2016, other income and expenses comprise the results derived from a business combination achieved in stages. Finance Revenue and Finance Costs Net finance cost of 5.4 million for the three month period ended September 30, 2017, matches the 5.4 million in the same period Income Tax Expenses An income tax charge of 4.7 million was recognized for the three month period ended September 30, 2017 compared to a 6.2 million loss in the same period of The effective tax rate was hardly comparable due to the different taxable income across different jurisdictions.

18 Three month ended September 30, (In thousands of ) Actual Actual (unaudited) (unaudited) Profit before tax 29,000 21,498 Income tax (4,721) (6,240) Profit for the year from continuing operations 24,279 15,258 Profit (Loss) for the Period Profit for the three month period ended September 2017 amounted to 24,3 million gain for the three month period ended September 30, 2017, compared to 15.3 million gain in the same period of Cash Flow Cash Flows from Operating Activities For the three month period ended September 30, 2017, the Company generated net cash flows from operating activities amounting to 18.5 million cash in compared to 56.3 million cash in for the three month period ended September 30, This decrease was primarily due to lower working capital improvement. Cash Used in Investing Activities For the three month period ended September 30, 2017, net cash used in investing activities amounted to 81.7 million cash out, compared to 23.7 million cash out for the same period in Capital expenditures amounted to 38.3 million for the three month period ended September 30, 2017 and 24.3 million for the year ended September 30, The increase in cash out is mainly related to increase in capital expenditures mainly associated to La Bureba new factory. The increase of investments in group companies was due to the acquisition of the Caroli Foods Group. Cash Flow from Financing Activities For the three month period ended September 30, 2017, net cash flow used in financing activities was 1.4 million cash out, compared to 5.6 million cash out for the same period of 2016.

19 RECENT DEVELOPMENTS On September 1, 2017 Campofrio Food Group acquired approximately 51% of the shares of Caroli Foods Group, BV the holding of a group dedicated to the production and marketing of packaged meats and ready to eat meal in Romania. Campofrio already owned 49% of the shares in the group, and with this transaction becomes the 100% owner of Caroli. The consolidated annual accounts of Caroli Foods Group, BV for the period ending on December 31, 2016 is attached hereto.

20 ANNEXE A EXPLANATION OF INCOME STATEMENT ITEMS Operating Revenues Operating revenues consist of net sales and services, increases in inventories of finished goods and work in progress, capitalized expenses of company work on assets and other operating revenues. Net Sales and Services Our net sales and services consists primarily of the sales of dry, cooked and other meats products, after deduction of rebates and off invoice discounts. Increase in Inventories of Finished Goods and Work in Progress Increase in inventories of finished goods and work in progress includes the positive variation between the closing and opening value of finished products and work in progress. Capitalized Expenses of Company Work on Assets Capitalized expenses of Company work on assets includes personnel costs for staff engaged in facility development and construction and personnel expenses in connection with tangible and intangible assets. Capitalized staff costs are added to the carrying amount for the related asset in property, plant and equipment and amortized over their useful life. Other Operating Revenues Other operating revenues include other income not related to our core activities, such as capital grants release and operating grants. Operating Expenses Operating expenses consist of decrease in inventories of finished goods and work in progress, consumption of goods and other external charges, employee benefits expense, depreciation and amortization, changes in trade provisions and other operating expenses. Decrease in Inventories of Finished Goods and Work in Progress Decrease in inventories of finished goods and work in progress includes the negative variation between the closing and opening value of finished products and work in progress. Consumption of Goods and Other External Charges Consumption of goods and other external charges includes primary purchases of raw material, mainly meats, and other product components such as packaging, spices and other auxiliary materials. This item also includes the stock variation of such materials. Employee Benefits Expense Employee benefits expense includes wages and salaries, dismissal indemnities, social security costs and other employee benefits such as health and life insurance. Depreciation and Amortization Depreciation and amortization includes property, plant and equipment depreciation charges, amortization of other intangible assets with definitive useful life, such as operating software. Costs of property, plant and equipment in use are depreciated on a straight-line basis at annual rates based on the estimated useful life of the assets. Changes in Trade Provisions Changes in trade provisions include mainly changes in trade allowances and reversal from doubtful debtors. Also accounted for in this line item generally, are specific, non-recurring items that are not related to our ordinary business activities. Other Operating Expenses Other operating expenses include all other operating expenses, including services expenses, transport cost, utilities, energies, advertising, marketing and general expenses.

21 Impairment of Assets Impairment of assets includes losses recognized when the recoverable amount of non-current assets is lower than their carrying value. The recoverable value is defined as the higher of the net fair market value or the value in use of each non-current asset. EBIT EBIT is equal to operating revenues less operating expenses. Net Finance Cost Net finance cost includes finance revenue and finance costs. Finance revenue consists of income on loans and other marketable securities, other interest and similar income, exchange rate gains and changes in fair value of financial instruments. Finance cost consists of interest bearing loans and borrowings, other finance costs and exchange losses. Income on Loans and other Marketable Securities Income on loans and other marketable securities consists principally of interest from deposits. Exchange Rate Gains and Losses This item includes gains and losses from the variation on financial liabilities denominated in US dollars, which is partially offset by the existing cash flow hedge accounting, and also includes, to a lesser extent gains and losses from the trading generated by accounts payable and receivables denominated in currencies other than euro. Change in Fair Value of Financial Instruments Change in fair value of financial instruments includes gains and losses from the variation in the fair value of financial instruments that do not qualify for cash flow hedge accounting. Interest Bearing Loans and Borrowings Interest bearing loans and borrowings includes amounts outstanding under the Company s bank loans, credit lines, payables for discounted bills and interest payable. Share of Profit (Losses) of Investments Accounted for Using the Equity Method Results of companies accounted for using the equity method include investments in associates over which we exercise significant influence but which are neither subsidiaries nor jointly controlled entities. Investments are measured initially at acquisition cost, subsequently adjusted for changes to each company s equity, taking into consideration the percentage of ownership and any impairment. Income Taxes Income taxes consists of current tax payable on the taxable profit for the year and deferred tax. The corporate tax rate in Spain was 28% in 2015 and is 25% in 2016 and onwards. Profit (loss) from Discontinued Operations Profit (loss) from discontinued operations represents profit or loss for the year attributable to discontinued operations. Cash Flow Investment in property, plant and equipment This item includes the amount spent to acquire or upgrade assets such as buildings, machinery, equipment, etc. and the fixed assets suppliers change.

22 CAROLI FOODS GROUP BV FINANcIAL REP0RT Prepared in accordance with INTERNATIONAL FINANCIAL REPORTING STANDARDS As adopted by the European Union 31 DEcEMBER2016 Initialed for IdenHfkatlon purpose, Ernst & Voung Accountants LLP

23 Prepared in accordance with International Financial Reporting Standards CAROLI FOODS GROUP BV FINANCIAL REPORT As adopted by the European Union 31 December2016 CONTENTS PAGE Directors report 3-10 tot Identlfkatlofl purpo Ernst & Younq AcCDUfltafltS LIP [ItiaIed

24 DIRECTORS REPORT Caroli Foods Group BV is a holding company that was set up as a private limited company in the SA 49% and 31 December 2015 was Kenes BV 51% and Campofrio Food Group SA 49% the address of its registered office is Martinus Nijhoiflaan 2, 2624 ES Delft, Netherlands. The address of Kenes s.a.r.l. is now Luxembourg 4 rue d Orange. The shareholders structure as at3l December2016 was Kenes s.a.r.i. 51% and Campofrio Food Group Netherlands on 27 September 2007 and was acquired by Kenes BV on 3 March Starting with 5 July Netherlands to Luxembourg and as a result thereof Kenes BV converted into Kenes S.a.r.l. On August 2016 Kenes transferred both statutory seat and effective place of management from (In RON thousand unless othe,wise stated) 31 December for Identificatlon purposey Ernst & Younq Accountants CLP The current composition of the Managing Board deviates from the above mentioned percentage. With regard to the future nominations and appointments, the Managing Board and Supervisory Board will take the gender diversity objectives into account as much as possible. Initlaled held by women. composition of these Boards in terms of gender, to the effect that at least 30 percent of the positions to be Management Board and Supervisory Board, should take into account as much as possible a balanced The Group has taken notice of the fact that large Companies, when nominating members of the Board diversity December 31,201 5). As per management representation the desired gearing ratio should be max 50%. The level of gearing ratio for the year ended December 31, 2016 was 28% (30% for the year ended RON 16,083 in the activity, total proceeds for the year ended December 31, 2016 in amount of RON 12,262 compared to For a cash flow perspective the Company used the working capital and capital expenditure line to finance RON 396,087, compared to RON 338,074 in net profit incurred in 2015, while the revenues for the year ended December 31, 2016 are in amount of Net profit for the year ended December 31, 2016 is in amount of RON 20,963 compared to RON 16,848 Summary of resuits for the financial year June and working capital. The discussions are not yet finalized, the current financing facility is available until facility agreement for the next 3 years for assuring Company needs for the next three years for CAPEX In December 2016 the Company started the discussion with the banks in order to extend the current Summary of financial posïtion at year-end The consolidated entities principal activities consist of the manufacturing and distribution of meat products in Romania. The manufacturing facilities are based in Pitesti and Tulcea, both in Romania. Activities of group cornpanies Foodline Logistics and Caroli Foods SRL Moldova. Foods Group SRL, Caroli Brands SRL, Caroli Management Services SRL, Tabco Campofrio S.A., As at 31 December 2016 and 31 December 2015 the subsidiaries of Caroli Foods Group BV are: Caroli DIRECTORS REPORT CAROLI FOODS GROUP BV

25 Future developments and expected performance department. all consumers needs and also implement the new product development strategy agreed by the marketing The company has a specialized research and development department which is aiming to accommodate Research and development note 2.1 of the financial statements. Hedging activity respect to the EUR. The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with Currency fluctuations and exchange control The market for meat products increases mainly due to consumption increases after the VAT reduction The Romanian economy has grown moderately in 2016 and 2015 and the overall macroeconomic Economic and financial market conditions The Romanian cold cuts market is very fragmented, but Caroli is the market leader. The industry is Competition The Group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk, Iiquidity risk. The Group s Risk management policy Subsequent events The budget for 2017 was compiled taking in consideration the very good evolution in terms of volume and budgeted figures. CAROU FOODS GROUP BV DIRECTORS REPORT 31 December2016 (In RON thousand, unless othendvise stated) EBITDA in The management estimated a volume increase as compared with and an increase in EBITDA. In terms of headcount the Company estimated there is no need for additional employees to sustain the In terms of IT reporting system, the Company approved to kick off the implementation of SAP. The go live is estimated to take place in July overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group s financial performance within certain limits. currently under consolidation and management intends to increase its market share both through organic growth and also through selected acquisitions. situation is stable, with low inflation and low trade and public sector deficits. from 24% to 9% for all food products in June As at 31 December 2016 the impact from the hedging activity was not significant. For details, please refer Inlti&ed for dentificatlon purpos s oni Ernst & Young Accountants LLP 4

26 CAROLI FOODS GROUP BV DIRECTORS REPORT 31 December2016 (In RON thousand unless othe,wise stated) Net foreign currency position The Group s net monetary position in foreign currencies was the following: 31 December2016 (RON 000s) FUR: liability (73,992) 31 December 2015 (RON 000 s) EUR: liability (78,561) The year-end EUR rate as of 31 December 2016 strengthened against RON compared to 31 December 2015 by 0.37%. The impact of a similar change in rates on the current net monetary position of the Group would be as follows: Impact on profit and loss 1 equity 31 December 2016 (RON 000 s) EUR strengthening by 0.37% 302 Net impact: (loss) / gain 1f we consider EUR is strengthening by 2% and USD by 10% the impact on the current net monetary position of the Group would be as follows: Impact on profit and loss 1 equity 31 December 2016 (RON 000 s) EUR strengthening by 2% and USD by 10% 1,650 Net impact: (loss) / gain lnitlaled zçy for ic1entificaton purpan.n1 5 Ernst & Younq Accountants CLP EYr

27 CAROLI F000S GROUP BV DIRECTORS REPORT 31 December2016 (In RON thousanci unless otherwise stated) Methodology 1. The most significant risks and the rïsk reduction measure taken The risk management policies and procedures are key to ensure a proper management of Caroli Foods Group BV. The management understands that risk management is an important process. The risk management system is embedded in the organization from the level of Supervisory Board to the executive directors and key managers, all contributing in identifying risks and the associated control measures. Risk management is part of the agenda of the board and key managers. The Board of executive directors organïzes weekly meetings discussing among operational current issues also the risks company is facing and the measures to be implemented. In addition on quarterly basis key managers meeting takes place, where beside the overall company evolution, the issues faced and the risks are analyzed and the strategy is decided for the next quarter. The most significant risks and the risk reduction measure taken Caroli Foods Group BV analyzes and controls its risks by dividing them into categories such as strategic, operational, financial and compliance. The control measures are subsequently defined for each identified risk. The Company has put measure in place for the majority of the risks and uncertainties identified. For example the control measure relating to the price fluctuation of raw material, encompasses the policy of covering price risk by transferring It to the products selling price. The control measure relating to market contraction encompasses the policy related to crisis management. Initi&ed for dentificatjon put y Ernst 8, Voung Accountants LLP 6

28 CAROLI FOODS GROUP BV DIRECTORS REPORT 31 December2016 (In RON thousand, unless othentvise stated) 2. Appetite for significant risks The current risk profile is determined on the basis of this risk analysis and the control measures. The current risk profile is assessed and compared with the desired risk profile. Action plans are drawn up for each risk if the current profile is graded at a higher level than the desired risk profile to further reduce the existing exposure. Current risk profile Preferred risk profile (2) Risk appetite Low Medm High Risk area Risks controls Strategic SR 1. Market contractions Dedicated marketing and PR campaign due to negative PR Invest in more meat Support from nutntionist SR 2. Market contraction Professional management team, advanced abilities to adapt due to external factors: to changes and to change strategic and tactical decisions financial crises, wars, etc SR 3.Fragmentation of cold The Company strategy is to consolidate the leader position cuts market with a lots of in cold cuts market local players; price National coverage, full presence and dominant leader in competition Modern trade channel International exposure Consumer first strategy Offer the best balance price - quality Invest in brands Dominate strategic categories SR 4.Disloyal competition Lobby to the authorities- VAT reduction implemented starting July 2015 being a big step to decrease disloyal competition; very active role within Romanian Meat Association SR 5. lncrease of private Dedicated campaign for customers to strength Ioyalty to our label brands Presence in private label sector as well Operational OR 1. Product quality does Annual research on development of consumers behavior, not meet the customers yearly customer satisfaction report expectation High awareness and diversification of brands portfolio linked to each consumer category Maintain the very strict control in all production processes The Company is certified 130, HACCP and IFS Yearly the main meat and auxiliary suppliers are evaluated OR 2.Production equipment The Company invests annually in maintenance, renewal and not fully updated with the increase capacities of production equipments. innovation of this industry Equipments providers are from top worldwide producers. Process of creating master plan which includes future development and requirements which will be implemented gradually OR 3.Lack of product NPD plan approved by Baard on each category innovation Annual budget allocated for innovation Specialized innovation and research and development department which put in practice all the marketing NPD projects Knowledge sharing trom riol Cold-cuts producer in Europe Campofrio Food Group Financial FR 1. Price fluctuation of The Company strategy is to react to raw material price and raw material implement price changes. Considering the leader position, the price changes can be absorbed by the market FR 2. Inappropriate cash Strong working capital policy with a optimal balance for management policy inventory, accounts receivable and accounts payable Collection days lower than payable days Available credit mes for potential working capital needs Compliance CR 1.The Company does The Company is certified ISO, HACCP and IFS not comply with hygiene The company is audited for compliance for each above standards certifications Dedicated guality department The Company assesses the potential impact of each risk on the organization and the probability of the risk occurring. The impact includes financial and non-financial factors and presents no changes c LO prior year in current and desired risk profile. for dentiticatlon purposes ernst & Yaurig Accountan S LCP 7 Ly

29 CAROLI FOODS GROUP BV DIRECTORS REPORT 31 December 2016 (In RON thousand, unless othe,wise stated) 3. Quantîfication of the impact on the resuits if the risks materialize We selected from the risks presented above the ones that are more likely to happen and which might have a high and medium impact on the Company s financial position. Price fluctuation of raw material The current raw material price is directly linked to both economic and political situation and gram harvest. The main suppliers of meat are from the European Union because the local market cannot sustain all the quality and quantfty needed. Usually the raw material price fluctuation is transferred to the final consumers. Considering Caroli is the market leader the price increase can be easier implemented. Even though there might be around days delay due to current commercial agreements signed with key accounts chains. The impact in the profit and loss account if none of the price increases can be transferred to the customers is as follows: Increase of raw material price Impact RON OOO Net profit RON OOO Current resuits - 20, 500 3% raw material price increase (4,225) 16,490 5% raw material price increase (7,042) 13,673 Market contraction due to external factors: financial crises, wars, etc. Market contraction can be a high risk factor which generated a consumption decrease as a result of financial crisis started in 2007 and also a consumption increase starting with 2014 when the crisis ended and had a peak starting with June 2015 when the government implemented VAT reduction from 24% to 9%. Market contraction Impact RON OOO Net profit RON OOO Current resuits - 20, 500 5% volume decrease (4,241) 16,474 10% volume decrease (8,482) 12,233 InltI&ed for idenuficatlon purpo S 0fl V ernst & Voung Accountants LLF EYr 8

30 0 Increase No change Decrease High impact and like hood Medium impact and like hood Low impact and like hond CAROLI FOODS GROUP BV DIRECTORS REPORT 31 December 2016 (In RON thousand, unless otherwise stated) Strategic Operational SR t Compared to 2015 Compliance Financial 9

31 CAROLI FOODS GROUP BV DIRECTORS REPORT 31 December 2016 (In RON thousanci unless otheîwise stated) 4. Risks and uncertainties having major ïmpact in the past financial year and the consequences The two risks presented above relatïng to market contraction and raw material price had the main impact in 2011 when the matket contracted and the raw material price reached the historical maximum. In addition, because there was no visibility on how the market and raw material price will evolve, at that time the Company decided not to transfer the raw material price increase to the consumers and thus incurring big losses. Starting from this experience the management strategy is to react to every major raw material price increase and to pass t to the customers. In 2016 the raw material price increased significantly and in October 2016 it was 30% higher than at the beginning of the year. This raw material price did not affect the profitability of the Company, mainly due to consistent application of management strategy to increase prices and control costs. 5. Current improvements in the risk management system Apart from the controls in place presented above, which are continuously improving from one year to another, the Company implemented starting with 2015 two additional controls that are meantto mitigate the operational risks namely: extend the business interruption clause from the insurance policy from 6 months to 18 months and implement and test the product recall policy for products. Signed on behalf of the Board of Directors on 17th of February 2017 Managing Director Khaled El Solh Managing Director Pan Invest Initi&ed for identificat jan PuraoI? Ernst & Younq Accountants LCP 10

32 CAROLI F000S GROUP BV CONs0LIDATED FINANcIAL STATEMENTs Prepared in accordance with INTERNATIONAL FINANCIAL REPORTING STANDARDS As adopted by the European Union 31 DECEMBER2016 Initlaled for IdentfIcaton urpr Ernst & Younq Accountants LLP EYpr

33 General information 3 6 Consolidated statement of financial position as at 31 December Consolidated statement of comprehensive income for CONTENTS PAGE 31 December2016 as adopted by the European Union Ptepared in accordance with International Financial Reporting Standards for Identificatfon purposes on Ernst & Young Accountants CCP Initlaled Notes to the consolidated financial statements Consolidated statement of changes in shareholders equity 11 Consolidated cash flow statement for CONSOLIDATED FINANCIAL STATEMENTS CAROLI FOODS GROUP BV

34 CAROLI F000S GROUP BV CONSOLIDATED FINANCIAL STATEMENTS Prepared in accordance with International Financial Reporting Standards as adopted by the European Union 31 December2016 GENERAL INFORMATION Reporting entity These consolidated financial statements are presented by Caroli Foods Group BV Ç Caroli Foods Group BV or the Company ) and its subsïdiaries (together the Group ). Caroli Foods Group BV (former Mimaja lnvestments BV) was incorporated on 27 September 2007 and was acquired on 3 March 2010 by Kenes BV. Kenes BV and Campofrio Food Group SA have signed on 4 Match 2010 an agreementto merge their operations in Romania and the neighboring countries (inciuding Bulgaria, the Moldova Republic, Serbia, Ukraine and Turkey) into a joint venture. As a result of this agreement, Caroli Foods Group BV, the holding company for the joint opetations, is owned by Kenes BV (51%) and Campofrio Food Group SA (49%). The voting arrangements are such that major operating and financing decisions (approval of annual business plan, dividends, material acquisitions and disposals) require agreement of both parties. Therefore Caroli Foods Group BV is a joint venture between Kenes BV and Campofrio Food Group SA. The main market for the combined Group is Romania. However, the Group plans to expand operations into south-east Europe in future years. The agreement received the approval of the Romanian Competition Council on 30 June Kenes BV was incorporated on 31 August 2000, and was acquired on 28 April 2005 by Librom Limited (former Caroli Foods Limited), a company incorporated under the laws of Cyprus. Subsequently, in August 2016 Kenes BV became Kenes s.a.r.l as a result of a conversion process which moved both statutory seat and effective place of management from Netherlands to Luxembourg. Librom is 100% owned by Sol Holding which is owned by Talal Mohamad Fawzi El-Solh, Lana Halawani El-Solh and Ghida El-Solh. Description of the businesses The consolidated entities principal activities consist of the manufacturing and distribution of meat products in Romania. The manufacturing facilities are based in Pitesti and Tulcea, both in Romania. Following the restructuring process operated after the combination of the Caroli and Campofrio businesses, during 2011 Group s management decided to temporarily close the production facility in Tulcea and concentrate all production in Pitesti. At 31 December 2016 the Group entities employed 1,324 employees (2015: 1,418 employees). Caroli Foods Group BV The entity is a holding company that was set up as a private limited company in the Netherlands on 27 September 2007 and was acquired by Kenes BV on 3 March Starting with 5 July 2010 the address of its registered office is Martinus Nijhoffiaan 2, 2624 ES Delft, Netherlands. lnitialed for cfenuflcation purpos ly Ernst & Ycunq Accountants LCP 3

35 CAROLI F000S GROUP BV CONSOLIDATED FINANCIAL STATEMENIS Prepared in accordance with International Financial Reporting Standards as adopted by the European Union 31 December2016 GENERAL INFORMATION (continued) The shareholders structure as at 31 December 2015 was as follows: Shares Shareholding KenesBV 13,304 51% Campofrio Food Group SA 12,783 49% 26, % The shareholders structure as at 31 December 2016 was as follows: Shares Shareholding Keness.a.r.l. 13,304 51% Campofrio Food Group SA 12,783 49% 26, % Caroli Foods Group SRL The company was incorporated as TC Affaires SRL in Romania on 19 March 1993 as a limited liability company. The main activity consists in meat processing. The address of its registered office is 30, Intrarea Abatorului, Pitesti, Romania. In July 2009 the company changed its name to Caroli Foods Group SRL. The shareholder structure as at 31 December 2016 and as at 31 December 2015 was as follows: Shares Shareholding (%) Caroli Foods Group BV Khaled Mohamad Fawzi El-SoIh Caroli Brands SRL The company was acquired by Kenes BV in April The main activity consists of administration of intellectual property. The address of its registered office is 26Z Bd. Timisoara, Bucharest, Romania. The shareholders structure as at 31 December 2016 and 31 December 2015 was as follows: Shares Shareholding (¾) Caroli Foods Group BV 13, Khaled Mohamad Fawzi El-Solh , Initialed for Identification purpose nly 4 Ernst & Young Accountants LLP Ow.difl5 b bttr EI.n,blIrn wt,id

36 CAROLI FOODS GROUP BV CONSOLIDATED FINANCIAL STATEMENTS Prepared in accordance with International Financial Reporting Standards as adopted by the European Union 31 December2016 GENERAL INFORMATION (continued) Tabco Campofrio SA The Company was incorporated on 14 January 1991 as ajointstock Company based on Government Decision no dated 27 December In March 1998, Campofrio Alimentacion SA, a Spanish company, acquired the majority of the shares of the Company, which subsequently changed its name to Tabco-Campofrio SA. The Company s registered activities consist of the manufacturing and distribution of processed meat products in Romania. The manufacturing facilities are based in Tulcea, Romania. The address of its registered office is 117, Prislav, Tulcea Romania. Following the restructuring process initiated after the combination of the Caroli and Campofno businesses, in 2011 the group management decided to temporanly close the production facility in Tulcea and concentrate all production on Pitesti. The shareholders structure as at 31 December 2016 and 31 December 2015 was as follows: Shares Shareholding bi t 10 Caroli Foods Group BV 2,599, Others 55, ,654, Caroli Management Services SRL The company was set up as a limited Ifability company in Romania on 8 March The main activity consists of providing management consultancy services to group companies. The address of its registered office is 26Z, Bd. Timisoara, Bucharest, Romania. The shareholders structure as at 31 December 2016 and 31 December 2015 was as follows: Caroli Foods Group BV Shares Shareholding (%) Caroli Foods SRL Republic of Moldova The company was set up as a limited liability company in the Republic of Moldova on 8. December 2011 and did not have any activity during 2016 and 2015: Shares Shareholding Caroli Foods Group BV tiaied vi for identffication purooses only

37 CAROLI FOODS GROUP BV CONSOLIDATED FINANCIAL STATEMENTS Prepared in accordance with International Financial Reporting Standards as adopted by the European Union 31 December2016 GENERAL INFORMATION (continued) Starting 31 October 2013 the company is dormant. As of 31 December2016, the company has no significant assets or liabilities. Foodline Logistics The company was set U on June 8th 2015 as a result of a spin-off process from Caroli Foods Group SRL. Considering the market opportunity in the distribution sector, the main purpose of this spin-off was to optimize the distribution costs by providing logistics services for Caroli Foods Group and other potential clients. The shareholders structure as at 31 December 2016 and 31 December 2015 was as follows: Shares Shareholding lol I0 Caroli FocUs Group BV Khaled Mohamad Fawzi El-Solh Management structure The current structure of the Supervisory Baard of CFG BV. and also in place during 2016 is: Mr. Talal El Solh, Supervisory Director A and chairman of the Supervisory Baard of the Company; Mr. Khaled El SoIh, Supervisory Director A of the Company; Mr. Haluk Akdemir, Supervisory Director A of the Company; Mr. Ricardo Joaquin Doehner Cobian, Supervisory Director B of the Company; Mr. Mario Humberto Paez Villarreal, Supervisory Director B of the Company. Starting with 5 July 2010 the managing director of Caroli Foods Group BV is Pan Invest. Khaled El Solh also became a managing director of Caroli Foods Group BV on 29 December 2011 and he is authorized to sign and approve these consolidated financial statements together with Pan Invest. The Romanian entities (Caroli Foods Group SRL, Caroti Brands SRL, Caroli Management Services SRL, Food Line Logistics SRL and Tabco Campofrio SA) are currently managed by an executive baard, presented below: - Chief Executive Officer: Khaled El Solh; - Executive Director: Roxana Manolescu; - Executive Director: Ana-Maria Bajan; - Executive Director: Ovidiu Dusleag; - Executive Director: Tomita Savastre; - Executive Director: George Ungureanu; - Executive Director: Carmen lancu. lnltialed for dentjflcatjon purposes 0fl Ernst & Younq AccoLjn S LLP 6

38 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF FINANCIAL POSITION At31 December2016 (In RON thousand unless otherwise stated) 31 December 31 December Note ASSETS Non-current assets Property, plant and equipment 4 114, ,293 Intangible assets 6 6,093 6,205 Total non-currentassets 120, ,498 Current assets Inventories 9 16,975 17,129 Trade and other receivables 8 38,201 54,140 Current income tax receivables Cash and cash equivalents 10 26,673 24,897 Total currentassets 82,132 96,485 TOTAL ASSETS 202, ,983 SHAREHOLDERS EQUITY Share capital Accumulated deficit (16,727) (20,158) Other reserves 32,725 32,390 Share premium 55,220 55,220 TOTAL SHAREHOLDERS EQUITY 11 71,313 67,547 Non-current liabilities Long-term borrowings 13 33,988 40,665 Deferred tax liabilities 15 6,680 6,91 7 Finance lease liabilities ,002 Government grants 5 2,465 3,045 Total non-current liabilities 43,785 57,629 Current liabilities Borrowings 13 18,648 11,917 Trade and other payables 12 64,742 77,817 Other tax payables 12 3, Current income tax payable Finance lease liabilities Total current liabilities 87,871 93,807 TOTAL LIABILITIES 131, ,436 TOTAL LIABILITIES AND EQUITY 202, ,983 These consolidated financial statements have been authorized for issue on 17th of February 2017 by: Managing Director Khaled El Solh Managing Director Pan Invest The accompanying notes from 1 to 26 are an integral part of these consolidated financial statements. Ernst & Young Accountants ccp

39 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME At 31 December 2016 (In RON thousancj unless otherwise stated) Year ended Year ended 31 December 31 December Note Net revenues Cost of goods sold , (289,588) 338,074 (242,507) Gross margin 106,499 95,567 Marketing expenses Sales and distribution expenses General and administrative expenses (11,352) (41,772) (25,809) (10,442) (36,906) (24,107) Other income / (expense), net ,274 Operating profit Finance income Finance expenses Finance result net Profit before income tax 27,584 25, ,839 2, (5,408) (5,913) (2,569) (3,092) 25,015 22,294 Income tax Profitfortheyear 15 (4,515) (5,446) 20,500 16,848 Total other comprehensive income Total comprehensive income for the year 20,500 16,848 These consolidated financial statements have been authorized for issue on 17th of February 2017 by: Managing Director Khaled EI SoIh Managing Director Pan Invest Initiale entfitionpurposeson Ernst & Younq,trk nwcis The accompanying notes from 1 to 26 are an integral part of these consolidated financial statements. 8

40 impairmentcharge/(release) 4,6 15,063 13,893 For the financial year ended 31 December 2016 Depreciation, amortization and Adjustments for Profit/Loss betore tax ,294 Cash flows from operating activities Note December 31 December Yearended Yearended (All amounts are expressed in Romanian Lel Thousand ( RON ), unless otherwiso stated) 9 The accompanying notes from 1 to 26 are an integral part of these consolidated financial statements. Net cash used in financing activities (18,131) (11,245) Dividends paid (17,069) (13,121) Repayment of borrowings (12,379) (12,801) Repayment of finance lease liability t (945) (1,406) Provision for risks and charges 13,19 - (1,093) Ernst & Voung coltjnts LLP Proceeds from borrowings ton purposes only 12,262 16,083 Cash fiows used in financing activities Net cash used in investing activities (1 7,661) (14,077) and equipment interest received on bank deposits Proceeds from sale of property, plant Cash flows from investing activities Purchaseofproperty, plantand equipment 4,12 (17,754) (14,651) Net cash from operating activities 37,948 30,296 Income tax paid (4,108) (4,090) Interestpaid (1,621) (1,642) Cash flows from operating activities 43,677 36,028 trade and other receivables 16,036 (11,649) other payables (12,415) 14,258 Decrease/(increase) in Decrease / (increase) in restricted cash (54) 1,329 Increase/(decrease) in trade and Decrease! (increase) in inventories 155 (3,903) Operating cash flow before working capital changes 39,955 35,993 of finance lease liabilities 5 10 Foreign exchange losses on revaluation Foreign exchange losses 389 1,155 receivables (net) 8 (111) 506 Provisions for impairment of Provisions for impairment of inventories (net) 9 - Loss/(Gain) on disposal of property plant and equipment and intangible assets (30) (95) Interest income on short term deposits (44) (85) Interest expense 1,634 1,652 Income from grants 5,18 (580) (681) Income from production of fixed assets (1,386) (1,394) (169) CONSOLIDATED CASH FLOW STATEMENT CAROLI FOODS GROUP BV

41 CAROLI F000S GROUP BV CONSOLIDATED CASH FLOW STATEMENT For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON 9, unless otherwise stated) Year ended Year ended 31 December 31 December Note Net change in cash and cash equivalents 2,156 4,974 Cash and cash equivalents at the beginningoftheyear ,969 Increase/(decrease) in cash and cash equivalents 2,156 Foreign exchange differences on 4,974 cash and cash equivalents balances (434) (516) Cash and cash equivalents atthe end of the year 10 26,149 24,427 In Note 10 it is presented the cash and cash equivalent for cash-flow purposes These consolidated financial statements have been authorized for issue on l7th of February 2017 by: Managing Director Khaled EI SoIh Managing Director Pan Invest Initialed for dentfication purposesoni Ernst S Younq Accountants LLP EY,r The accompanying notes from 1 to 26 are an integral part of these consolidated financial statements. 10

42 December 2015 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lel Thousand ( RON ), unless othentvise stated) Total Share Retained Other Share shareholders capital eatnings Reserves premiurn equity Balance as at 31 Decem bot (23,885) 32,390 55,220 63,820 Profit for the year - 16, Other comprehensive income (Note 16) Dividend distribution Total corn prehensive income for the year Other movements Transfer from revaluation reserve related to disposals of revalued assets - (13,121) Balance as at 31 December (20,158) 32,390 55,220 67,547 Total Share Retained Other Share shareholders capital earnings Reserves premum equity Balance as at (20,1 58) 32,390 55,220 67,547 Profit for the year - 20, ,500 Reevaluation Dividend distribution - (17,069) - - (17,069) Total corn prehensive income for the year Other rnovements Balance as at 31 December (16,727) 32,725 55,220 71,313 These consolidated financial statements have been authotized for issue on of February 2017 by: Managing Director Khaled EI SoIh Managing Director Pan Invest Initieled for IdentfIcation Ernst & Voung Accountants LLP The accompanying notes from 1 to 26 are an integral part of these consolidated financial statements. 11, tt,r wrioiq wr51

43 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON, unless otherwise stated) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 1.1 Basis of preparation These financial statements are presented by Caroli Foods Group BV (the Company ) and its subsidiaries (together the Group or the Companies ). These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ( IFRS EU ). They are not the statutory accounts of the Companies. The consolidated financial statements have been ptepared under the historical cost convention, except for property, plant and equipment which are measured at fair value. The preparation of financial statements in conformity with IFRS requites the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disciosed in Note 3. Going concern The Group s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current financing. As at 31 December 2016 and 31 December 2015, the Group has generated positive cash-flows from operations and has complied with ban covenants. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore applies the going concern basis in preparing its consolidated financial statements. Historical changes in Group structure The Group s structure was initially changed during the period through a number of common control transactions in order to streamline the holding structure and align t to the business. Furthermore, in 2010, the EI-Solh family and Campofrio Food Group SA from Spain decided to pool their businesses in Romania and surrounding markets. Campofrio Food Group SA contributed 2,599,277 shares representing % of the share capital of Tabco Campofrio SA in order to acquire 31% of Caroli Foods BV s share capital. In exchange, the Company issued new shares. The difference between the nominal value of the shares issued and the value of the contribution representing Tabco Campofrio SA business was recorded as share premium. As a result of transactions mentioned above, the Company s capital was held as follows: 69% by Kenes BV, 31% by Campofrio Food Group SA. Subsequently Campofrio Food Group SA paid an amount of EUR 12,370,000 on 20 July 2010 in order to acquire an additional 18% of the Company s share capital from Kenes BV. As at3l December 2016, Caroli Foods Group BV is owned asfollows: 51% by Kenes s.a.r.b. and 49% by Campofrio Food Group SA. As at3l December 2015, Caroli Foods Group BV is owned as follows: 51% by Kenes BV and 49% by Campofrio Food Group SA. Initialed for idenfification purposes Ernst & Voung Accou s LIP 12

44 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 All amounts are expressed in Romanian Lel Thousand (RON ), unless othenwise stated) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Taking in consideration that the Group is a joint venture (Shared Premium), it had an accounting policy choice to either record the businesses contributed into the Company at fair value, inciuding goodwill, or at the previous carrying amount in the financial statements of the ventures. The Group elected the policy to record the contribution of businesses at previous carrying amounts. This policy has been consistently applied for businesses contributed by Kenes BV and Campofrio Food Group SA. The Company has chosen to present the consolidated financial statements of Caroli Foods Group BV for the year ended 31 December 2010 full year s results of the merged business for 2010 as though all businesses (Caroli Foods Group BV, Caroli Prod 2000 SRL, Caroli Foods Group SRL, Caroli Brands SRL, Tabco Campofrio SA) had always been combined. The difference between the Company s share capital and the carrying value of assets Iess liabilities, revaluation reserves as of 31 December 2009 and result for the year ended 31 December 2009 was recorded in the joint venture (Shared Premium) reserve (see consolidated statement of changes in shareholders equity). Currency of underlying records As further detailed in Note 1.4, the presentation currency of the Group is the Romanian Lei ( RON ). However, Group companies maintain their accounting records either in RON or the local currency in their country of incorporation if different from Romania (Euro ( EUR ) for Caroli Foods Group BV), and ptepare their statutory financial statements in accordance with the local statutory regulations on accounting and reporting. These financial statements are based on the statutory records, with adjustments and reclassifications recorded for the purpose of fair presentation in accordance with IFRS. New Accounting Pronouncements A) Changes in accounting policy and disciosures las 16 Property, Plant & Equipment and las 38 Intangïble assets (Amendment): Clarification of Acceptable Methods of Depreciation and Amortization The amendment is effective for annual periods beginning on or after 1 January The amendment provides additional guidance on how the depreciation or amortization of property, plant and equipment and intangible assets should be calculated. This amendment clarifies the principle in las 16 Property, Plant and Equipment and las 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, the ratio of revenue generated to total revenue expected to be generated cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets. Management has assessed and the amendment has no impact on the Group s financial position or performance. IFRS 11 Joint arrangements (Amendment): Accounting for Acquisitions of Interests in Joint Operations The amendment is effective for annual periods begiflning on or after 1 ]anuary IFRS 11 addresses the accounting for interests in joint ventures and joint operations. The amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business in accordance with IFRS and specifies the appropriate accounting treatment for such acquisitions. Management has assessed and the amendment has no impact on the Group s financial position or performance. las 27 Separate Financial Statements (amended) The amendment is effective for annual periods beginning on or after 1 January This amendment will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements and will help some jurisdictions move to IFRS for separate financial statements, reducing compliance costs without reducing the information available to investors. Management has assessed and the amendment has no impact on the Group s financial position or performance. Initlaled for ftentificaton 13 Errst & Youn Account8nts LLP

45 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressod in Romanian Lei Thousand ( RON 9, unless othe,wise stated) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) IFRS 10, IFRS 12 and las 28: Investment Entities: Applying the Consolidation Exception (Amendments) The amendments address thtee issues arising in practice in the application of the investment entities consolidation exception. The amendments are effective for annual periods beginning on or after 1 January The amendments clarify that the exemption from presenting consolidated financial statements applles to a patent entity that is a subsidiaty of an investment entity, when the investment entity measures all of its subsidiaries at fair value. Also, the amendments clarify that only a subsidiary that is not an investment entity itself and provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. Finally, the amendments to las 28 Investments in Associates and Joint Ventures allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate orjoint venture to its interests in subsidiaries. These amendments have not yet been endorsed by the EU. Management has assessed and the amendment has no impact on the Group s financial position or performance. las 1: Disclosure Initiative (Amendment) The amendments to las 1 Presentation of Financial Statements further encourage companies to apply professional judgment in determining what information to disclose and how to structure t in their financial statements. The amendments are effective for annual petiods beginning on ot after 1 January The narrow-focus amendments to las clarify, rathet than significantly change, existing las 1 requirements. The amendments relate to materiality, order of the notes, subtotals and disaggregation, accounting policies and presentation of items of other comprehensive income (001) arising from equity accounted lnvestments. Management has assessed and the amendment has no impact on the Group s financial position or performance. The IASB has issued the Annual Improvements to IFRSs Cycle, which is a collection of amendments to IFRSs. The amendments are effective for annual periods beginning on or after 1 January Management has assessed and the amendment has no impact on the Group s financial position or performance. > IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: The amendment clarifies that changing from one of the disposal methods to the other (through sale or through distribution to the owners) should not be considered to be a new plan of disposal, tather it is a continuation of the original plan. There is therefore no interruption of the application of the tequirements in IFRS 5. The amendment also clarifies that changing the disposal method does not change the date of classification. IERS 7 Financial lnstruments: Disciosures: The amendment clarifies that a servicing contract that inciudes a fee can constitute continuing involvement in a financial asset. Also, the amendment clarifies that the IERS 7 disciosures relating to the offsetting of financial assets and financial liabilities are not required in the condensed interim financial report. > las 19 Employee Benefits: The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rathet than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. > las 34 Interim Financial Reporting: The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-tefetence between the interim financial statements and wherever they are included within the greater interim financial report (e.g., in the management commentary or risk report). The Board specified that the other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. 1f users do not have access to the other information in this manner, then the interim financial report is incomplete. Initialed for identification purnoses 051 Ernst & Youncj Accountants LLP 14

46 The standard is effective for annual periods beginning on or after 1 January 2018, with early classification and measurement, impairment, and hedge accounting. The amendment has not yet Measurement and all previous versions of IFRS 9. The standard introduces new requirements for 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B) Standards issued but not yet effective and not early adopted IFRS 9 Financial lnstruments: Classification and Measurement application permitted. The final version of IERS 9 Financial lnstruments reflects all phases of the financial instruments project and replaces las 39 Financial lnstruments: Recognition and The consolidated financial statements comprise the financial statements of the Group and its subsidiaries returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. as at 31 December Control is achieved when the Group is exposed, or has rights, to variable those in las 28, in dealing with the sale or contribution of assets between an investor and its associate has not been yet endorsed by the EU. Management has assessed and the amendment has no Associate or Joint Venture Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its balances between periods and key judgments and estimates. The amendment has not yet been endorsed by the EU. Management has assessed and the amendment has no impact on the Group s exceptiofls), regardless of the type of revenue transaction ot the industry. The standard s requirements and equipment or intangibles). Extensive disciosures will be required, including disaggregation of total been endorsed by the EU. Management has assessed and the amendment has no impact on the The standard is effective for annual periods beginning on or after 1 January IERS 15 establishes revenue; information about performance obligations; changes in contract asset and liability account The amendments address an acknowledged inconsistency between the requirements in IERS 10 and loss is recognized when a transaction involves assets that do not constitute a business, even if these accounting. Management has assessed and the amendment has no impact on the Group s financial The standard is effective for annual periods beginning on or after 1 ]anuary IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties amendment indefinitely pending the outcome of its research project on the equity method of assets are housed in a subsidiary. In December 2015 the IASB postponed the effective date of this CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expcessed in Romanian Lei Thousand ( RON ), unless othe,wise stated) Group s financial position or performance. IFRS 15 Revenue from Contracts with Customers a five-step model that will apply to tevenue earned from a contract with a customer (with limited will also apply to the recognition and measurement of gains and losses on the sale of some non financial assets that are not an output of the entity s ordinary activities (e.g., sales of property, plant financial position or performance. Amendment in IFRS 10 Consolîdated Financia! Statements and las 28 Investments in or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or position or performance. IFRS 16: Leases to a contract, i.e. the customer ( lessee ) and the supplier ( lessor ). The new standard requires lessees to recognize most leases on their financial statements. Lessees will have a single accounting model for all leases, with certain exemptions. Lessor accounting is substantially unchanged. The standard significant impact on the Group s financial position or performance. 1.2 Consolidation (a) Subsidiaries Specifically, the Group controls an investee if, and only if, the Group has: Power over the investee (i.e., existing rights that give it the current ability to di nt the relevant activities of the investee) Initialed Exposure, or rights, to variable returns from its involvement with fr identification purp s the investee The ability to use its power over the investee to affect its returns Ernst & Young Accountants LLP 15

47 presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether has t power over an investee, including: The Group re-assesses whether or not it controls an investee i facts and circumstances indicate that Generally, there is a presumption that a majority of voting rights results in control. To support this 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The contractual arrangement(s) with the other vote holders of the investee Rights arising from other contractual arrangements The Group s voting rights and potential voting rights Inter-company transactions, balances and unrealized gains on transactions between Group companies impairment of the asset transferred. Initialed are elimjnated. Unrealized losses are also eliminated unless the transaction provics evidenn of n The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the statement of comprehensive income. subsequent settiement is accounted for wfthin equity. comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its asset or liability is recognized in accordance with las 39 either in profit or loss or as a change to other date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an amounts of acquirer s identifiable net assets. The Group uses the acquisition method of accounting to account for business combinations. The related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent consideration transferred for the acquisition of a subsidiary is the fair values of the assets transterred, the date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquire either at fair value or at the non-controlling interest s proportionate share of the recognized loss is recognized in profit or loss. Any investment retained is recognized at fair value. transaction. 1f the Group loses control over a subsidiary, it derecognizes the related assets (inciuding balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their and to the non-controlling interests, even if this results in the non-controlling interests having a deficit accounting policies into line with the Group s accounting policies. All intra-group assets and liabilities, subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the there are changes to one or more of the thtee elements of control. Consolidation of a subsidiary begins year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. CAROU FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand (RON ), unless otherwise stated) when the Group obtains control over the subsidiary and ceases when the Group loses control of the Profit or loss and each component of DCI are attributed to the equity holders of the parent of the Group equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or liabilities incurred and the equity interests issued by the Group. The consideration transferred inciudes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition liabilities assumed in a business combination are measured initially at their fair values at the acquisition 1f the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the group is recognized at fair value at the acquisition Group s share of the identifiable net assets acquired is recorded as goodwill. 1f this is less than the fair for identificatlon purp 16 Ernst & Younq Accountants LLP

48 Transactions with non-controlling interests that do not result in loss of control are accounted for as 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Changes in ownership interests in subsidiaries without change of control equity transactions that is, as transactions with the owners in their capacity as owners. The difference (c) Transactions and non-controlling interests interests are also recorded in equity. between fair value of any consideration paid and the relevant share acquited of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling Initialed acquirer s identifiable assets, liabilities and contingent liabilities. There is no recognition of new goodwill or excess of acquirer s interest in the net fair value of the consolidated financial statements of the consolidated entities as if they had been consolidated from the values in the consolidated accounts of Librom Limited related to Caroli Prod 2000 SRL, Caroli Foods Kenes BV and subsequently of Caroli Foods Group BV. The business combinations involving entities under common control are those transactions in which all of the combining entities are controlled by the same party or parties before and after the transaction and that have been accounted for in accordance with the policy described below, which was developed in line with the requirements of las 8, Accounting Policies, Changes in Accounting Estimates and Errors. proportionate share of the amounts previously recognized in other comprehensive income are reclassified the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of comprehensive income are reclassified to profit or loss. measured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value associate, joint venture or financial asset. In addition, any amounts previously recognized in other The Group treats transactions with non-controlling interests as transactions with equity owners of the the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. CAROU F000S GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lel Thousand ( RON ), unless otherwise stated) Group. For purchases from non-controlling interests, the difference between any consideration paid and When the Group ceases to have control or significant influence, any retained interest in the entity is re is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an 1f the ownership interest in an associate is reduced but significant influence is retained, only a to profit or loss where appropriate. (d) Accounting for business combinations involving entities or businesses under common control control is not transitory. Such transactions are outside the scope of IFRS 3 Business Combinations and At the date of a previous Group reorganization, the predecessor book values have been used (no step up to fair values has been applied) in the consolidated financial statements. Therefore, the predecessor Group SRL (former TC Affaires SRL) were adopted in the IFRS consolidated financial statements of In applying the above mentioned policy, the financial statement items of the combining entities for the period in which the combination occurs and for any comparative periods disclosed are included in the beginning of the earliest period presented. for entifjcatiop pirpo Ernst & Younq Accountasts LLP 17

49 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 1.3 Foreign currency translation (a) Functional and presentation currency of the primary economic environment in which the entity operates ( the functional currency ). The functional and Group s presentation currency. consolidated financial statements are presented in Romanian Lei ( RON ), which is the companies Items included in the financial statements of each of the Group s entities are measured using the currency [iitiaied derecognized. All other repairs and maintenance are charged to the income statement during the financial Subsequent costs are included in the asset s carrying amount or recognized as a separate asset, as equipment and borrowing costs for long-term construction projects 1f the recognition criteria are met. impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and Cost and depreciation the closing rate at the date of that statement of financial position; occurred (e.g. the rate at the date of share capital subscription); statement of financial position presented are translated at the historical rate when transaction The resuits and financial position of all the Group entities (none of which has the currency of a hyper expenses. income statement. exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the gains and losses resulting from the settiement of such transactions and from the translation at monthly CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lel Thousand ( RON ), unless otherwise stated) (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange Foreign exchange gains and losses are presented in the income statement within finance income or (c) Group companies infiationary economy) that have a functional currency different from the presentation currency of the underlying statutory records are translated into the presentation currency as follows: a) monetary assets and liabilities for each statement of financial position presented are translated at b) non-monetary assets and liabilities (eg. share capital, investments in subsidiaries) for each c) income and expenses for each income statement are translated at average exchange rates; and d) all resulting exchange differences are recognized in the consolidated income statement. 1.4 Property, plant and equipment Initial recognition Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is period in which they are incurred. tot identificution 2Ut00? Ernst & Younq Accountants CLP 18

50 lncreases in the carrying amount arising on revaluation of property, plant and equipment are credited to costs have not been added to the cost of the assets as the capitalization criteria was not met. charged to the income statement. increases of the same asset are charged against other reserves directly in equity. All other decreases are 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) General and specific borrowing costs directly attributable to the acquisition, construction or production of qualitying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognized in the profit or loss in the period in which they incurred. During the year ended 31 December 2016, respectively 31 December 2015 borrowing revaluation reserves in shareholders equity and other comprehensive income. Decreases that offset previous environment in which the entity operates or in the market to which an asset is dedicated. passage of time or normal use; The indications taken into account by management when assessing the impairment are both from internal and from external sources. amount, which is determined as the higher of an asset s fair value less costs to seli and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognized in the income statement. An impairment loss recognized for an asset in prior years is reversed if there has been disposed, the amounts included in revaluation reserves, presented in Other Reserves line in equity, are transferred to retained earnings. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each Number of years CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand (RON, unless otherwise stated) Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalue amounts over their estimated useful lives, as follows: Buildings Vehicles and machinery 3-16 Furniture and fittings 3-8 reporting period. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within other income/ (expense), net, in the income statement. When revalued assets are At the end of each reporting period management assesses whether there is any indication of impairment of property, plant and equipment. 1f any such indication exists, management estimates the recoverable a change in the estimates used to determine the asset s value in use or fair value less costs to seli. External sources taken into account are: - Whether - Any information that an event with an adverse effect on the entity has taken place during the period, or will take place in the near future, in the technological, market, economic or legal Internal sources taken into account are: - Any evidence of obsolescence or physical damage of an asset. - Any indication that the economic performance of an asset is, or will be, worse than expected. As at 31 December 2015, an independent valuator assessed property, plant and equipment of Tabco Campofrio in order to decide whether any impairment provision is necessary. Based on this report no for identificatjon Ernst & Young Accountants LLP 19 impairment provision was needed. 1 1 Initialed an asset s market value has declined more than would be expected as a result of the

51 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 All amounts are expressed in Romanian Lel Thousand ( RON ), unless othe,wise stated) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) As at 31 December 2016, an independent valuator assessed property, plant and equipment of Tabco Campofrio in order to decide whether any impairment provision is necessary. Based on this report the value of fixed assets increased by RON Intangible assets (a) Trademarks and licenses Acquired trademarks and licenses are shown at historical cost. Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful lives (3 years). The assets useful lives are reviewed, and adjusted 1f appropriate, at the end of each reporting period. (b) Computer software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives (3 years). The assets useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. (c) Brands Brands acquired as part of a business combination are valued at fair value on acquisition based on independent valuator assessment. Brands purchased are valued at cost on acquisition (see Note6). Brands have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of brands over their estimated useful lives, which management and independent evaluator considered to be 15 years. The assets useful lives are reviewed, and adjusted 1f appropriate, at the end of each reporting period. 1.6 Impairment of non-financial assets Further disclosures relating to impairment of non-financial assets are also provided in the following notes: Disclosures for significant assumptions Note 3 Property, plant and equipment Note 4 Intangible assets Note 6 The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. 1f any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or CGU s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects curtent market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. 1f no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly rndd rompaniesor other available fair value indicators. lnfti&ed 20

52 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand (RON 9, unless otherwise stated) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared at Group level. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations are recognfzed in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognized in DCI up to the amount of any previous revaluation. An assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. 1f such indication exists, the Group estimates the asset s or CGU s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to seil and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). 1.7 Financial assets The Group s principal financial assets include loans, trade and other receivables, and cash and short term deposits that derive directly from its operations. The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (a) Financial assets at fair value through profit or loss Group s financial assets at fair value through profit or loss consist of forward contracts with options attached. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group s loans and receivables comprise of trade and other receivables and cash and cash equivalents in the statement of financial position. Inftialed for dentification purpose Ip Ernst & Younq Accountant LLP 21

53 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lel Thousand ( RON ), unless othervvise stated) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) A financial asset (or, where applicable a part of financial asset or a part of a group of similar financial assets) is derecognized when; - the rights to receive cash flows from the asset have expired; or - the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full wfthout material delay to a third party under a pass through arrangement; and either (a) the Group has transterred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. 1.8 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settie on a net basis, or realize the asset and settie the liability simultaneously. 1.9 Impairmentoffinancial assets Assets carried at amortized cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event for events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, the probability that they will enter bankruptcy or other financial reorganization, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For ban and receivables category, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash fbows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the consolidated ncome statement. 1f, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor s credit rating), the reversal of the previously recognized impairment loss is recognized in the consolidated income statement Inventories Inventories are recorded at the bower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses. The cost of inventories is determined using the weighted average cost method. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. nitialed for identification pursose7 Ernst & Voung Accountants LLP 22

54 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON ), unless othe,wise stated) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 1.11 Trade receivables Trade receivables are amounts due from customers for finished goods and merchandise sold or services performed in the ordinary course of business. 1f collection is expected in one year or less tot in the normal operating cycle of the business if longer), they are classified as current assets. 1f not, they are presented as non-current assets. Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents inciudes cash in hand, deposits held at cail with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are shown within borrowings in current liabilities, their function being as a short term ban. Restricted balances are excluded from cash and cash equivalents for the purposes of the statement of cash flow. Balances restricted from being exchanged or used to settle a liability for at east twelve months after the statement of financial position date are included in other non-current assets Share capital The share capital presented in these consolidated financial statements represents only the share capital of the holding company, Caroli Foods Group BV. It does not include the share capital of any of the other Companies in the Group Financial liabilities Financial liabilities within the scope of las 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value and in the case of loans and borrowings, directly attributable transaction costs. The Company s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). 1f not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. 23

55 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the fïnancial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand (RON 9, unless othe,wise stated) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Borrowings Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defet settlement of the liability for at east 12 months after the statement of financial position date. Borrowing costs Borrowing costs consist of interest and other costs that the Company incurs in con nection with the borrowing of funds. lnterest costs on all borrowings are expensed as incurred, except to the extent that they are costs directly attributable to the acquisition, construction or production of a qualifying asset, in which case are capitalized as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting not taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized ot the deferred income tax liability is settied. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferted income tax is provided on temporary differences arising on investments in subsidiaties and associates, except where the timing of the reversal of the temporaty difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foteseeable future Initialed for identificatiofl 24

56 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 All amounts are expressed in Romanian Lei Thousand (RON ), unless othe,wise stated.) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settie the balances on a net basis Government grants Grants from the government and similar bodies are recognized at their fair value where thete is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as governmental grants and are credited to the income statement on a straight-line basis over the expected useful lives of the related assets. Government grants relating to costs are deferred and recognized in the income statement over the period necessary to match them with the costs that they are intended to compensate Employee benefits Wages, salaries, contributions to the Romanian state pension plan (a defined contribution plan) and social insurance funds, paid annual leave, sick leave and bonuses are accrued in the year in which the associated services are tendered by the employees of the Group. The Group has no obligations to provide post employment or other social security and / or health benefits to its employees Provisions Provisions are recognized when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outfiow of resoutces will be required to seftie the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an ouffiow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even 1f the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales between the Group companies. The Group recognizes revenue when the amount of revenue can be reliably measured, t is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group s activities as described below. The amount of revenue is not consideted to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical resuits, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Initialed for Ernst & Younq Accountants LLP f 25

57 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lol Thousand (RON ), unless othepwise stated,,) 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Sales of goods The Group manufactures and seils a range of meat products to various retailers. Sales of goods are recognized when a Group entity has delivered products to the customer, the customer has full discretion over the channel and price to seli the products, and there is no unfulfilled obligation that could affect the wholesaler s acceptance of the products. Delivery does not occur until the products have been shipped to the specified location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied. (b) Sales of services Sales of services are recognized in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. (c) lnterest income Interest income is recognized on a time-proportion basis using the effective interest method Leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased property, plant and equipment and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance lease balance outstanding. The corresponding rental obligations, net of finance charges, are included in finance lease liabilities. The interest element of the finance costs is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Where leases carry a variable cate of interest, such interest is charged to the income statement on an actual basis. The assets acquired under finance leases are depreciated over the useful life of the asset. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the iflcome statement on a straight-line basis over the lease term. The lease term is the non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option Dividend distribution Dividend distribution to the Company s shareholders is recognized as a liability in the Group s financial statements in the petiod in which the dividends are approved by the Company s shareholders. Any dividends declared after the statement of financial position date and before the financial statements are authorized for issue are disclosed in the subsequent events note. lniti&ed for identificationsniv Ernst & Young Accountants LLP 26

58 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON 2, unless otherwise stated) 2 FINANCIAL RISK MANAGEMENT 2.7 Financial risk factors The Group s activities expose it to a variety of financial risks: market risk (inciuding currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk, liquidity risk. The Group s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group s financial performance within certain limits. However, the use of this approach does not prevent losses outside of these lirnits in the event of more significant market rnovements. The Group uses derivative financial instruments to hedge foreign exchange risk. During 2015 the Company used the structured deposits to manage foreign exchange risk. This type of derivative works as follows: the Company negotiate with the bank the arnount that it wants to place in deposits, the period, the interest attached and the strike exchange rate. It at maturity the BNR exchange rate is higher than the strike the Corn pany receives the amount in RON and the related interest, if at maturity the BNR exchange rate is lower, the Company receives the equivalent in EUR. (a) Market risk (1) Price risk The Group is exposed to the market commodity prices (e.g. grains) due to the direct link between these commodities prices and the prices of main raw materials that the Group is buying (i.e. meat). Commodity prices, are exposed to general and specific rnarket movernents. The Group s management performs regular internal assessments, with the objective of ascertaining whether they are likely to exceed certain limits, and to allow the Group to evaluate risks and take actions to mitigate financial impact. However, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements. (ü) Foreign exchange risk The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities. Hedging activity As at3l December2015 the Company has in balance a structured deposit of 1,500 RON, with an interestof 0.95% and a strike rate of The carrying amount of structured deposits approximates the fair value. As at 31 December 2016, the Group does not have any derivative financial instruments in balance sheet. Net position The Group s net monetary position in foreign currencies was the following: 31 December December2075 EUR: liability (73,992) (78,561) The Group is exposed to foreign exchange risk arising from borrowings in foreign currency, primarily with respect to EUR currency. Due to the high costs associated, the Group s policy is not to use derivative financial instrurnents to reduce this risk. Initialed for identification purpos only 27 Ernst & Vöuno Arcr,unt,,l 0

59 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON ), unless othe,wise stated) 2 FINANCIAL RISK MANAGEMENT (continued) At 31 December 2016, 1f the RON had weakened / strengthened by 10% against the EUR with all the other variables held constant, the post-tax result for the year would have been RON 7,399 (2015: RON 7,856 thousand) lower / higher, maf nly as a result of foreign exchange losses / gains on translation of EUR denominated trade payables, borrowings, leasing liabilities and cash deposits. (III) Cash flow and fair value interest rate risk The Group s interest-rate risk arises from its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. At the year end, all short - term borrowings had variable rate. The Group s income and operating cash flows are exposed to changes in EURIBOR interest rates, the Group s short-term and long-term borrowings being at variable interest rates, while the Group has no significant interest-bearing assets. The Group s significant interest bearing liabilities are disclosed in Note 14. The Group has no significant interest-bearing assets and the Group s income and operating cash flows are substantially independent of changes in market interest rates. The Group s long - term borrowings have a variable rate. Due to the high costs associated, the Group does not use any instrument to manage its interest-rate risk. Although considering the negative value for EURIBOR during the last two years, actually, the Company beneficiated of a fixed rate at the level of financial institution margin. The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Group estimates the potential impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions. During 2016, if interest rates on borrowings and bank overdrafts had been 1% basis points higher/lower with all other varfables held constant, the post-tax profit for the year would have been RON 510 (2015: RON 511 thousand) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings. (b) Credit risk Financial assets, which potentially subject the Group to credit risk, consist principally of trade receivables. The Group has policies in place to ensure that sales of goods and services are made to customers with an appropriate credit history. The Group s management reviews aging analysis of outstanding trade receivables and follows up on past due balances. Management assesses the credit quality of the customers taking into account its financial position, past experience and other factors. The monthly credit limit is determined taking into consideration six months average sales to the respective customer as well as the customer s payment term. Cash is placed in internationally recognized financial fnstitutions which are considered at time of deposit to have minimum risk of default, compared to other similar institutions. The carrying amount of accounts receivable represents the maximum amount exposed to credit risk. The Group has no significant concentrations of credit risk. Although collection of receivables could be influenced by economic factors, management belfeves that there is no significant risk of additional loss to the Group, the maximum exposure to credit risk being fair value. lnitiaed for Ernst & Younq Accountants CLP 28

60 clients and cash oufflows to suppliers. For the financial year ended 31 December 2016 through an adequate amount of committed overdraft facilities. Cash flow is forecasted on a weekly rolling analysis for the next 5 weeks by estimating cash collections from inventories, collections and payables. During 2016 the Group s strategy (as in 2015) was to improve liquidity through optimum level of Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding (c) Liquidity risk 2 FINANCIAL RISK MANAGEMENT (continued) (All amounts are expressed in Romanian Lei Thousand (RON ), unless othervvise stated,) 29 Gearing ratio 28% 30% Total capital Ernst & Voung Accountants LLP 98,465 96,783 Total equity for identification put iv 71,313 67,547 Net debt 27,151 29,486 lnitiaied Less cash and cash equivalents (Note 10) (26,673) (24,897) Total borrowings (Notel4) 52,636 52,582 Total finance liabilities (Notel4) 1,188 1, new shares or seli assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt. optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, Total capital is calculated as equity as shown in the consolidated statement of financial position plus net liability as shown in the consolidated statement of financial position) less cash and cash equivalents. concern in order to ptovide retutns for shareholders, benefits for other stakeholders and to maintain an The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going the Group may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue debt is calculated as total borrowings (inciuding current and non-current borrowings and finance lease 2.2 Capital risk management Trade payables (Note 7A) 63,685 2, Leasing (Note 15) ,252 Borrowings (Note 14) 1,237 2,456 16,396 33,838 53,927 At31 December2016 Trade payables (Note 7A) 67,333 1, ,043 Leasing (Note 15) ,055 1,917 Borrowings (Note 14) 1,079 2,142 10,033 42,386 55,640 At37 December month months and 1 year years Total 65,804 Less than 1 and 3 3 months 1 and 5 Between Between Between are the contractual undiscounted cash flows for borrowings and accounts payable. remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed The table below analyses the Group s financial liabilities into relevant maturity groupings based on the CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY CAROLI FOODS GROUP BV

61 The Group measures financial instruments, such as, derivatives, and non-financial assets such as Fair value measurement values of non-derivative financial instruments are presented in theit respective notes. The Group hoids financial instruments as trade receivables, trade payables, borrowings and leasing. Fair 2 FINANCIAL RISK MANAGEMENT (continued) 2.3 Fair value estimation - Level - Level - Level - In - In measurement is directly cc indirectly observable categorized within the fair value hierarchy, described as follows, based on the lowest level input that is the use of unobservable inputs. data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient market participant that would use the asset in its highest and best use. generate economic benefits by using the asset in its highest and best use or by selling t to another interest. use when pricing the asset or liability, assuming that market participants act in their economic best The fair value of an asset or a liability is measured using the assumptions that market participants would The principal or the most advantageous market must be accessible to by the Group. transaction between market participants at the measurement date. The fair value measurement is based and payables, as well as other short term receivables and payables, loans received. nvestment properties, at fair value at each balance sheet date. As of 31 December 2016, carrying amount approximates the fair value for the following items: cash and cash equivalents, trade receivables CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand (RON ), unless otherwise stated) Fair value is the price that would be received to seil an asset or paid to transfer a liabilïty in an orderly on the presumption that the transaction to seli the asset or transfer the liability takes place either: the principal market for the asset or liability, or the absence of a principal market, in the most advantageous market for the asset or liability. A fair value measurement of a non-financial asset takes into account a market participant s ability to All assets and liabilities for which fair value is measured or disclosed in the financial statements are significant to the fair value measurement as a whole: Quoted Valuation techniques for which the lowest level input that is significant to the fair value Valuation techniques for which the lowest level input that is significant to the fair value For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group whole) at the end of each reporting period. External valuers are involved for valuation of significant assets, such as investment properties and At each reporting date, the Group s management analyses the movements in the values of assets and liabilities which are required to be re-measured er re-assessed as per the Group s accounting policies. for 30 Ernst & Ycung Accountants LLP The Group s management, in conjunction with the Group s external valuets, also compares each the the change is reasonable. Initialed changes in the fair value of each asset and liability with relevant external sources t dotermine whethr management. Selection criteria include market knowledge, reputation, independence and whether available for sale financial assets. Involvement of external valuers is decided each year by the Group s professional standards are maintained. categorization (based en the lowest level input that is significant to the fair value measurement as a determines whether transfers have occurred between Levels in the hierarchy by re-assessing measurement is unobservable (unadjusted) market prices in active markets for identical assets or liabilities

62 For the financial year ended 31 December 2016 hierarchy as explained above. Estimates and judgments are continually evaluated and are based on historical information and other factors, 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on 2 FINANCIAL RISK MANAGEMENT (continued) (All amounts are expressed in Romanian Lei Thousand ( RON ), unless otherwise stated) which, according to las 38 Intangible 31!nitiaed related to Tabco Campofrio losses. As of December 31, 2016 the Group has fully derecognized the deferred tax asset in amount of RON 707 Deferred tax assets residual values of these assets can vary depending on a number of factors. Technological innovation, product life cycles, and maintenance programs all irnpact the useful lives and residual values of the assets. The useful life for intangibles such as brands are estimated to be 15 years. assets, are assessed on an annual basis. The actual lives and The Group depreciates its intangibles over their estimated useful lives taking into account residuat values,!ntangibles useful lives changes in the value of property, plant and equipment as at 31 December Based on the market evolution corn pared to prior period and the discussion with the evaluator we considered that no major changes took place in 2016 and we concluded that there was no significant The Group carries its land, buildings and equipment at revalued amounts with changes in fair value being recognized in other cornprehensive incorne. Revaluation of property, plant and equipment seldorn equal the related actual resuits. The estimates and assurnptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outtined makes estimates and assurnptions concerning the future. The resulting accounting estimates will, by definition, including expectations of future events that are believed to be reasonable under the circumstances. The Group below. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY CAROLI FOODS GROUP BV

63 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Le! Thousand (RON ), unless otherwise stated) 4 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment and related accumulated depreciation consist of the following: Year ended 31 December 2015 Assets in Land & Vehicles & Furniture course of buildings machinery & fiftings construction Total Opening net book amount 63,131 39,903 1,208 2, ,679 Additions , ,098 16,471 Transfers 287 3, (3,874) - Disposals (433) (186) - (619) Depteciation charge (2,324) (9,764) (150) - (12,238) Closing net book amount 61,185 47,065 1, ,293 At31 December2015 Cost 76, ,138 2,405 Accumulated depreciation (15,474) (59,073) (1,023) ,863 (75,570) Net book amount 61,185 47,065 1, ,293 Year ended 31 December 2016 Assets in Land & Vehicles & Furniture course of buildings machinery & fittings construction Total Opening net book amount 61,185 47,065 1, ,293 Additions 1,911 9, ,007 17,858 Revaluation of fixed assets (633) Transfers 129 5, (5,451) - Depreciation charge (2,508) (11,050) (184) - (13,742) Closing net book amount 60,084 51,932 1,511 1, ,744 At31 December2016 Cost 78, ,649 2,102 Accumulated depreciation (17,984) (66,717) (591) 1, ,036 (85,292) Net book amount 60,084 51,932 1,511 1, ,744 The additions of RON 17,887 in Vehicles and machinery line are represented by production equipment acquired in order to sustain the increase in production and vehicles acquired in order to support the logistic activity. Fuydepreatedproperty,pnt and equipment as December 2016 am4eron47362-(e4 :i

64 CAROLI F000S GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON, unless othe,wise stated) 4 PROPERTY, PLANT AND EQUIPMENT (continued) Depreciation Deprecïation expense of RON 7,871 (2015: 7,479) has been charged to cost of goods sold, RON 3,003 (2015: 2,359) to sales and distribution expenses and RON 2,868 (2015: 2,400) to administrative expenses. Disposals In 2016 the Group sold 19 vans and 8 cars (2015: 56 vehicles). These were replaced with new ones. Revaluation The property, plant and equipment items are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: The management considers the property, plant and equipment items as Level 2. For property, plant and equipment items, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. External valuers are involved for valuation of all property, plant and equipment items. Involvement of external valuers is decided each year by the Group s management. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. At each reporting date, the Group s management analyses the movements in the values of assets and liabilities which are tequired to be re-measured or te-assessed as per the Group s accounting policies. The Group s management, in conjunction with the Group s external valuers, also compares each the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. The property, plant and equipment items were revalued as at 31 December 2014 by a certified independent evaluator using the following methods for specific classes of assets: replacement cost, discounted cash-flows and market comparison. Considering there were no major changes in the market, a revaluation of property, plant and equipment items was not performed as at 31 December The property, plant and equipment items were revalued as at 31 December 2016 by a certified independent evaluator using the following methods for specific classes of assets: replacement cost, discounted cash-flows and market comparison. The methods used by the independent valuator are in accordance with the International Evaluation Standards (les), as follows: - land is evaluated using the market comparison prices; - buildings are evaluated using two methods: the depreciated replacement cost method and the capitalization of rental income method; - other property, plant and equipment are evaluated using the depreciated replacement cost method. Assets under construction Assets under construction represent mainly improvements and modifications to existing plant and equipment. 33 ce Initiaed for Identification purpose Ernst & Younq Ac sly untsnts LLP

65 lease terms are between 3 and 5 years. The Group leases varfous vehicles and machinery under non-cancellable finance lease agreements. The Pledged Assets Leased assets Bank borrowings are secured on assets with a cost of RON 154,943 (2015: RON 142,862) and a net book value of RON 83,381 (2015: RON 77,413). 4 PROPERTY, PLANT AND EQUIPMENT (continued) (All amounts are expressed in Romanian Lel Thousand (RON ), unless otherwise stated,) For the financial year ended 31 December Cost capitalized for identificaton jrposes o Ernst & Younq Acco nts LLP Initialed Closing balance 2,465 3,045 Release to income (Note 18) (580) (681) Opening balance 3,045 3, December December 2015 Year ended Year ended Below is presented the statement of financial position movement of the grants: The closing balance of RON 2,465 relates only to Caroli Foods Group SRL. 2004, RON 883 in 2006 and RON 2,698 in 2007 from Sapard program funds. Currently there no Tabco-Campofrio SA invested in meat processing and logistic equipment and received RON 3,822 in governmental grants in balance. 2,807 in 2005 and RON 3,572 in 2006 from Sapard program funds. Caroli Foods Group SRL invested in meat processing equipment and received RON 1,239 in 2004, RON Note The Group obtained several grants in previous years and applied the accounting treatment detailed in 5 GOVERNMENT GRANTS Net book amount 2,165 3,561 Accumulated depreciation (1,428) (1,812) finance leases 3,593 5, December December2015 vehicles: Leased assets, where the companies are the lessee under a finance lease, compnse plant, machinery and Additions inciude RON 331 (2015: RON 747) of assets leased underfinance leases. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY CAROLI FOODS GROUP BV

66 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 All amounts are expressed in Romanian Lei Thousand ( RON ), unless otherwise stated) 6 INTANGIBLE ASSETS Intangibles in Licenses & course of software Brands construction Total Year ended 31 December 2015 Opening net book amount 972 5, ,064 Additions Transfers 603 (603) - Amortization charge (1,002) (653) - (1,655) Closing net book amount 1,330 4, ,205 At31 December2015 Cost 8,621 9, ,859 Accumulated amortization (7,291) (4,363) - (11,654) Net book amount 1,330 4, ,205 Intangibles in Licenses & course of software Brands construction Total Year ended 31 December 2016 Opening net book amount 1,330 4, ,205 Additions ,209 Transfers Amortization charge (689) (632) - (1,321) Closing net book amount 1,589 4, ,093 At 31 December 2016 Cost 9,569 9, ,068 Accumulated amortization (7,980) (4,995) - (12,975) Net book amount 1,589 4, ,093 Caroli Brands SRL owns trademarks undet which various Group products are packaged and marketed. Inciuded in Brands are trademarks acquired at cost as at 30 April 2009 and the Maestro Brand that was acquired as part of a business combination on 30 June The Brands are amortized over a perfod of 15 years. The rest of intangibles represent mainly software. The useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. No adjustments were required to be made for useful lives during 2016, respectively Amortization of RON 619 (2015: 1,146) is inciuded in administrative expenses, RON 639 (2015: 474) in cost of goods sold RON 63 (2015: 34) in sales and distribution. Initiaed 35

67 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON ), unless othenivise stated) 7 A) FINANCIAL INSTRUMENTS BY CATEGORY Assets as pet statement of financial position 31 December 2075 Loans and receivables Trade and other receivables excluding 50,754 non-commercial receivables Cash and cash equivalents (Note 10) 24,897 Total 75, December2015 Liabilities at fair value through profit and loss Liabilities as per statement of financial position Borrowings (excluding finance lease liabilities) (Note 14) 52,582 Finance lease liabilities (Note 14) 1,801 Trade and other payables excluding non-commercial liabilities (Notel2) 61,091 Total 115,474 Assets as per statement of financial posïtion 31 December 2016 Loans and receivables Trade and other receivables excluding 44,061 non-commercial receivables Cash and cash equivalents (Note 10) 26,673 Total 70, December2016 Liabilities at fair value through profit and loss Liabilities as per statement of financial position Borrowings (excluding finance 52,636 lease liabilities) (Note 14) Finance lease liabilities (Note 14) 1,188 Trade and other payables excluding non-commercial liabilities (Notel2) 53,843 Total 107,667 7 B) CONCENTRATION OF CREDIT RISK Key accounts (13 clients in total) represent75% of the total trade receivable balance as at3l December 2016 (31 December2015: 70%). lniti&ed for identificotion purpose Q 36 ] ernst & Voung Accou S LLP

68 CAROLI F0005 GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON ), unless otherwise stated) 8 TRADE AND OTHER RECEIVABLES 31 December December 2015 Ttade receivables Less: provisions for uncollectible trade receivables Trade receivables net Receivables from related parties (Note 23) Value added tax and other taxes Other receivables Provision for other receivables Prepayments and accrued income 34,075 47,592 (1,376) (1,442) 32,699 46,150 2,224 2,214 1,363 4, (9) (54) 1,283 1,256 38,201 54,140 There are no external credit ratings for trade receivables not past due and not impaired. These receivables include balances mainly with third parties and some related parties. The management assessed these companies as credit worthy counterparts. No impairment provisions are established for these receivables as there is objective evidence of receipts after the end of the period. Trade receivables are non-interest bearing and are generally due in days based on contractual terms. The Group records specific allowances for the receivables identified as individually impaired, as well as collective allowances based on the ageing of the receivables and the historic data regarding the collection patterns. In situations where the outstanding balances were covered by reasonable warranties or schedule of instalments was conciuded with the customers, the management considered there is no risk for trade receivables recoverability and thus no allowance was recorded. Movements on the Group provision for impairment of trade and other receivables are as follows: Year ended Year ended 31 December December 2015 At 1 January Increase in provision for impairment of receivables Reversal of provisions for receivables collected Reversal of provision for written-off receivables At 31 December 1,496 3, (72) (193) (206) (2,928) 1,385 1,496 The creation and release of provision for impaired receivables has been included in administrative expenses in the income statement. general and The other classes within trade and other receivables are not impaired. (Note 2.3) The aging for the net trade receivables is as follows: 31 December December 2015 Fully performing Up to 3 months overdue 3 to 6 months overdue Net Trade Receivable 19,936 38,529 12,723 7, ,699 46,150 Initialed for idenuficatlon purposes only 37 Ernst & Younq LLP

69 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 All amounts are expressed in Romanian Lei Thousand ( RON ), unless otherwise sta ted) 8 TRADE AND OTHER RECEIVABLES (continued) Foreign currency denominated receivables Total value of receivables denominated in EUR as at 31 December 2016 amountto RON 2,754 (2015: RON 2,952). Piedged receivables Trade receivables are pledged as a guarantee for short term and long term borrowings. As at 31 December 2016 the amount pledged is RON 32,431 (2015: RON 46,277). 9 INVENTORIES Inventories consist of the following: 31 December December2015 Raw materials Packaging and other materials Finished products (at cost) Merchandise Work in progress Allowance for inventories 8,412 8,302 5,805 5,220 3,037 3, (762) (762) 16,975 17,129 Inventories in amount of RON 16,975, representing raw materials, work in progress, finished products, spare parts and others have been pledged as security for borrowings (2015: RON 17,129) (see Note 14). The allowance for inventories is referring mainly to Tabco inventories, which are fully provisioned in amount of RON 466 (2015: RON 466) and allowance from spare parts and auxiliaries of Caroli Foods Group SRL. 10 CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise the following: 31 December December2015 RON denominated balances with banks and cash on hand Foreign currency denominated balances with bank and cash on hand 21,053 18,784 5,620 6,113 26,673 24,897 Initialed for dentificatlon purpos Ernst & Voung Acco,jntants LLF 38

70 CAROLI F0005 GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lel Thousand (RON ), unless otherwise stated.) 10 CASH AND CASH EQUIVALENTS (continued) Cash denominated in foteign currencies are presented below: 31 December December2015 EUR (RON equivalent) USD (RON equivalent) 5,596 6, ,620 6,113 Structure of bank and cash balances: 31 December December 2015 Short term bank deposits Overnight deposits Cash at bank and on hand Checks from clients 16,900 19,154 2,720 3,694 6,822 1, ,673 24,897 The average maturity for short term bank deposits is 30 days. In 2016, the average interest rate received for short term bank deposits was approximately 0.23% (2015: 0.32%) for RON deposits and 0.01% (2015: 0.63%) for EUR deposits. For the purposes of the cash flow statement, cash and cash equivalents inciude the following: 31 December December 2015 Cash and cash equivalents 26,673 24,897 Restricted cash (524) (470) Restricted cash mainly consists of blocked amounts in respect of guarantees retained from employees (as required by law) in 2016 and 2015 and blocked amounts in respect of guarantees given to suppliers in Cash and cash equivalents in amount of RON 26,056 (2015: RON 24,767) have been pledged as security for borrowings (Note 14). Initi&ed for dentifkation purpose ly Ernst & Voung Acc ants LLP 39

71 These consist of statutory retained earnings, statutory revaluatfon reserves and other statutory reserves. December 2016 and 31 December 2015 is in amount of EUR 63,913 representing 63,913 shares). The share capital at 31 December 2016 and 31 December 2015 was RON 95 (authorized capital of EUR 90,000 divided in 90,000 shares of EUR 1 each from which the share capital not issued as at SHAREHOLDERS EQUITY 11.1 Share capital 11.2 Retained earnings and other reserves The share premium reserve is the consequence of a group reorganization upon combining the business 2009 was recorded in the share premium reserve. less liabilities, revaluation reserves as of 31 December 2009 and result for the year ended 31 December Revaluation reserve 31,013 30,678 32,725 32,390 Romanian companies. As of 31 December 2016 the legal reserve which is non-distributable amounts to reserve until the balance of this reserve reaches twenty percent of the statutory share capital of the Retained earnings are distributable in accotdance with Romanian legislation, with certain restrictions (see CAROU FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 All amounts are expressed in Romanian Lei Thousand ( RON ), unless othorwise stated) below). In accordance with Romanian legislation and its Articles of Incorporation, the Romanian companies are obliged to appropriate five percent of its profits per Romanian Accounting Regulations to a statutory RON 1,712(31 December 2015: 1,712). As of 31 December 2016 Other reserves mainly include statutory fixed assets revaluation reserves. 31 December December2015 Legal reserve 1,712 1, Share premïum of Caroli and Campofrio. The difference between the share capital issued and the carrying value of assets 1 nitialed for identification per s ony Ernst & Young ountants LCP 40 EY cç,

72 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (Al! amounts are expressed in Romanian Lei Thousand (RON ), unless otherwise stated) 12 TRADE AND OTHER PAYABLES 31 December December2015 Trade payables Accrued liabilities and other creditors Amounts due to related parties (Note 23) Wages Other payable 50,459 62,505 (217) 5,569 3, ,622 8, ,742 77,817 The amount of RON 680 (2014: RON 1,049) from total trade payables represent balances due to suppliers of property, plant and equipment (note 2.3). Accounts payable denominated in toreign currencies are presented below: 31 December December 2015 RON (FUR equivalent) 28,555 27,197 28,555 27,197 Within the other tax payable, the Company presented the salaries related taxes, value added taxes and tax on property as detailed below 31 December December2015 Salaries related taxes Value added taxes Tax on property 1,985 1,877 1, ,402 2, BORROWINGS As at December 31, 2016 the Group had contracted the following loans: - Long term ban in amount of EUR 10,888 thousand, with a balance of RON 24,722 at 31 December The due date for ban repayment is 27 June 2019; - Long term ban in amount of EUR 5,000 thousand (working capital facility), with a balance of RON 4,541 at3l December The due date for ban repaymentis 27 June 2017; - Long term ban in amount of EUR 7,112 thousand (investmentfacility), with a balance of RON 21,813 at 31 December The due date for ban repayment are 27 June 2019, 27 June 2020 and respectively 27 June Long term ban in amount of EUR 1,000 thousand (facility to issue letters of guaranty), with a balance of RON 0 at 31 December The due date for ban reimbursement is 27 June 2017; - Loan from Campofrio Group SA in amount of RON 1,542 in respect of the reimbursement of the Sapard obligation. As per the ban agreement, the amount is repayable 11 months from the recovery of the Sapard debt, term that can be extended for 12 months until the resolution of the appeal procedure in respect of the Sapard fine. The ban bears no interest. lnltialed for identification purposes 1v Ernst & Young ccountants LLP EYOdOe,t,r 41

73 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand (RON ), unless otherwise stated) 13 BORROWINGS (continued) As at December 31, 2015 the Group had contracted the following loans: - Long term ban in amount of EUR 10,888 thousand, with a balance of RON 34,485 at 31 December The due date for ban repaymentis 27 ]une 2019, - Long term ban in amount of EUR 5,000 thousand (working capital facility), with a balance of RON 4,525 at 31 December The due date for ban repayment is 27 June 2017; - Long term ban in amount of EUR 7,112 thousand (investment facility), with a balance of RON 12, 026 at 31 December The due date for ban repayment are 27 June 2019, 27 June 2020 and respectively 27 June 2021: - Long term ban in amount of EUR 1,000 thousand (facibity to issue letters of guaranty), with a balance of RON 0 at 31 December The due date for ban reimbursement is 27 June 2017; - Loan from Campofrio Group SA in amount of RON 1,537 in respect of the reimbursement of the Sapard obligation. As per the ban agreement, the amount is repayable 11 months from the recovery of the Sapard debt, term that can be extended for 12 months until the resolution of the appeal procedure in respect of the Sapard fine. The ban bears no interest. The interest rate payable for bank loans is situated between 2.5% to 3.5%, all applicable to EUR. 31 December December 2015 Non-current Bank borrowings 32,446 39,129 Loans from related parties (Note 23) 1,542 1,537 33,988 40,665 Current Bank borrowings, current portion Short term loans Accrued interest to be paidl(received) on bank borrowings 18, , , ,916 Total borrowings 52,636 52,582 Bank borrowings are secured by property, plant and equipment (Note 4), receivables (Note 8), inventory (Note 9) and cash and cash equivalents (Note 10). The exposure of the Group s borrowings to interest rate changes is as follows: The carrying amounts of the Group s borrowings are denominated in the following currencies: EUR 51,094-51,045 The Group has the folbowing un-drawn borrowing facilities: Un-drawn facillties 29,381 32,951 As of 31 December 2016 the fair value of borrowings approximates their carrying amount, which is 52,636 (31 December ,582) and is classified atlevel 1. As at 31 December 2016 and 31 December 2015 respectiveby, the Group compbies with all financiab covenants contracted with the banks. Initialed fot IdntIfication 42

74 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 All amounts are expressed in Romanian Lei Thousand (RON ), unless othe,wise sta ted) 14 FINANCE LEASE LIABILITIES Cross finance lease liabilities minimum lease payments 31 December December 2015 No later than 1 year Later than 1 year and no later than 5 years Future finance charges on finance leases ,055 (64) (114) 1,188 1,801 The present value of finance lease liabilities is as follows: 31 December December 2015 No later than 1 year (current) Later than 1 year and no later than 5 years ,002 1,188 1,801 Lease liabilities are effectively secured with the underlying assets, as the rights to the leased asset revert to the lessor in the event of default. The finance lease liabilities are denominated in EUR. (note 2.3) 15 INCOMETAX Year ended 31 December2016 Year ended 31 December2015 Income tax expense current Deferred tax charge/(credit) Income tax 4,761 5,688 (246) (242) 4,515 5,446 Net profit is reconciled to the tax charge as follows: Year ended Year ended 31 December December2015 Profit before tax Theoretical tax charge at statutory rate Deductions Income not subject to tax Expenses not deductible for tax purposes Tax effect of different fiscal and economic useful lives for property, plant and equipment Tax effect of fiscal losses for which no deferred tax assets were recognized Additional amount related to tax inspection Sponsorship 25,015 22,294 4,042 3,567 (1,508) (1,453) 192 (3,793) 3,140 7,281 (286) (281) (1,065) (669) Income tax expense 43 4,515 5,446 lniti&ed for dentificuon purposes 0fl Ernst & Young Account $ CCP

75 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON ), unless otheiwise stated) 15 INCOME TAX (continued) Expenses not deductible for tax purposes inciude fnventories write-offs, penalties expenses, provisions and other non-deductible items. During 2015 the fiscal audit of Tabco Campofrio was finalized. The total amount computed by fiscal authorities is in amount of RON 1,318 penalties and accessories ïncluded, out of which RON 762 is related to income tax. Most of the amount computed by fiscal authorities is related to the period before Joint Venture Caroli Campofrio was formed. Deferred tax balances Deferred tax asseu liabïlities are measured at the enacted statutory effective tax rate of 16% as at 31 December2016 and 31 December2015. Romanian tax legislation does not have the concept of Group tax relief; therefore, deferred tax balances are presented net only if the temporary differences generating them are related to the same company. The gross movement on the deferred income tax account is as follows: Year ended Year ended 31 December December 2015 At 1 January Deferred income tax charge! (credit) to 1/S Deferred tax charged to other comprehensive income At 31 December 6,917 7, (242) 6,680 6,917 The movement in deferred income tax assets and liabilities during 2016, withouttaking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: Deferred tax liabilities Property, plant and equipment Other reserves Revaluation Reserve Total At 31 December 2015 Charged / (credited) to the income statement Deferred taxes related to other comprehensive income ,643 7,624 (944) - (944) At 31 December 2016 (353) 390 6,643 6,680 Deferred tax assets Property, plant and Fiscal Revaluation equipment Accruals losses Reserve Total At 31 December 2015 Charged / (credited) to the income statement Deferred taxes related to other corn prehensive income - - (707) - (707) At 31 December 2016 for identificatlon purposes ly 44 Ernst Ynuno Accountants LLP

76 CAROLI F000S GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON 9, unless otherivise stated) 16 NET REVENUES 31 December December 2015 Gross Revenues Discounts allowed Net revenues 484, ,734 (88,594) (71,660) 396, , OTHER INCOME t (EXPENSE), NET Year ended Year ended 31 December December 2015 Income from grants (Note5) Profit/( loss) on disposals of fixed assets Sponsorship expenses Other (expenses)/cevenues (1,191) (666) 600 1, ,274 Other expenses/revenues mainly include revenues from sales of scrap items. 1$ EXPENSES BY NATURE Cost of goods sold, sales and distribution, general and administrative expenses are analyzed by nature as follows: 31 December 31 December Raw materials and consumable used (see Note 19) Employee benefits expense (see Note 23) Changes in inventories of finished goods and work in ptogress Expenses with merchandise sold Depreciation, amortization and impairment charge/(release) (Note 4, 6) Marketing expenses Utilities expense Services third parties Rent expenses Repairs and maintenance services Provision for impairment of receivables and inventories (Note 9) Provisions for risks and charges Transportation services Taxes, except taxes on income Insurance expenses Telecommunication expense Travel expenses Other expenses 234, ,736 65,319 54,910 (1,037) (3,624) 6,035 4,638 15,063 13,893 11,352 10,442 13,024 13,332 13,325 12,813 2,340 1,979 2,234 2, (1,093) 72 1, ,877 1,408 1,

77 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 All amounts are expressed in Romanian Lei Thousand (RON ), unless otherwise stated,) 18 EXPENSES BY NATURE The main categories of expenses included within cost of sales are RON 237,410 (2015: RON 199,129), raw material, auxiliary, consumable and cost of merchandises; RON 30,049 (2015: RON 24,476) employee benefit expense; RON 8,510 (2015: RON 7,958) depreciation; RON 5,944 (2015: RON 6,198) utilities and RON 7,674 (2015: RON 4,746) other expenses. The main categories of expenses inciuded within sales and distrfbution are RON 20,396 (2015: RON 17,706) employee benefit expense; RON 6,319 (2015: RON 6,342) fuel; RON 7,170 (2015: RON 6,380) servicesthird parties; RON 1,687(2015: RON 1,223) rent expenses; RON 3,066 (2015: RON 2,393) depreciaton and RON 3,134 (2015: RON 2,862) other expenses. The main categories of expenses included within general and administrative expenses are RON 14,874(2015: RON 12,723) employee benefit expense; RON 3,487 (2015: RON 3,547) depreciation; RON 2,838(2015: RON 3,063) services third parties; RON 4,613 (2015: RON 4,774) taxes and other expenses. 19 RAW MATERIALS AND CONSUMABLES USED Year ended Year ended 31 December December2015 Raw materials 175, ,027 Packaging and other auxiliary materials 55,629 54,455 Other materials 2,966 3, , , FINANCE COSTS AND INCOME Year ended Year ended 31 December December2015 Interestexpenses (1,634) (1,165) Finance charges (585) (360) Foreign exchange losses (3,189) (3,901) Finance costs (5,408) (5,913) Interest income Foreign exchange gains 2,794 2,736 Finance income 2,839 2,821 Finance result net (2,569) (3,092) Initiaed for Identificafion purposes o ErflSt&;iqcos Ç 46

78 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand (RON ), unless othe,wise stated,) 21 CONTINGENCIES Legal proceedings From time to time, claims against the Group are received. On the basis of its own estimates and both internal and external professional advice, the Group s management is of the opinion that no material losses will be incurred in respect of claims in excess of ptovisions that have been made these consolidated financial statements. Taxation The Roman ian taxation system is undergoing a process of consolidation and harmonization with the European Union legislation. However, there are still different interpretations of the fiscal legislation. In various circumstances, the tax authorities may have different approaches to certain issues, and assess additional tax liabilities, together with late payment interest and penalties (currently, interest is computed at a rate of 0.03% per day of delay). In Romania, tax periods remain open for tax inspection for 5 years. The Group s management considers that the tax liabilities included in these financial statements are fairly stated. Currently Caroli Foods Group is under fiscal audit for the period January June 2015 for both income tax and for value added taxes. Until the date of this report, the management is not aware of any issues that could generate a significant impact on the financial statements. Transfer pricing Romanian tax legislation includes the arm s Iength principle according to which transactions between related parties should be carried out at market value. Local taxpayers engaged in related party transactions have to prepare and make available upon the written request of the Romanian Tax Authorities their transfer pricing documentation file. Failure to present the transfet pricing documentation file, or presenting an incomplete file, may lead to non-compliance penalties; additionally, notwithstanding the contents of the transfer pricing documentation, the tax authorities may interpret the facts and transactions differently from management and impose additional tax liabilities resulting from transfer price adjustments. The Group s management believes that the Group will not suffer losses in case of a fiscal inspection on the subject of ttansfer prices. However, the impact of any challenge by the tax authorities cannot be entirely predicted. Insurance policies The Companies hold insutance policies in relation to the following: - damage and theft insurance for vehicles; - Comprehensive cover insurance for buildings, equipment, inventories and certain accounts receivable balances; - General liability policy; - Directors and administrators liabilities insurance policy. Environmental matters The enforcement of environmental regulation in Romania is evolving and the enforcement posture of government authorities is continuously being reconsidered. The Group periodically evaluates its obligations under environmental regulations. As obligations are determined, they are recognized immediately. Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation, cannot be estimated but could be material. In the current enforcement climate under existing legislation, management believes that there are no significant liabilities for environmental damage. 1 nitialed for identification PurPoC) Ernst & Voung Accountants LLP 47

79 Later than 1 year and no later than 5 years CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Le! Thousand ( RON, unless otherwise stated) 21 CONTINGENCIES (continued) Commitments Total value of amounts contracted for future rent payments is presented below: 31 December December2015 No later than 1 year 1,804 1,017 3, ,750 1,071 The commitment presented above relate to rented spaces and the Company has the rights to close the contract any time with less than 3 months notice. 22 BALANCES AND TRANSACTIONS WITH RELATED PARTIES Partjes are considered to be related if one party has the ability to control the other party, if the parties are under common control, or if they can exercise significant influence over the other party in making financial or operational decisions as defined by las 24 Related Party Disciosure. Related parties may enter into transactions which unrelated partjes might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties. Caroli Foods Group BV has two shareholders: Kenes s.a.r.l. and Campofrio Foods Group SA. Kenes s.a.r.l is also the shareholder of md Maestro Prodcom SRL. The transactions with related parties mainly consist of purchasing raw materials (from Campofrio Food Group SA) purchasing of finished goods (from Campofrio Food Group SA, Aoste SN, and Cesare Fioruci), purchasing of services provided by Campofrio Food Group Holding, selling finished goods (to md Maestro Prodcom SRL). Other related parties with no transactions during year 2016 and 2015 were: Sol Property, Loyalty Insurance Broker,) Total Meat Marketing and Camporom. Balances and transactions with related parties entities: Balances 31 December December 2015 Trade payables Trade receivables Loans from related partjes 3, ,224 2,214 1,542 1,537 On 6 April 2011, Tabco Campofrio SA had signed a ban agreement for financial support with Campofrio Group SA in amount of RON 3,759 in respect of the reimbursement of the Sapard obligation. As per the ban agreement, the amount is repayable 11 months from the payment of the Sapard debt, term that can be extended for 12 months until the resolution of the appeal procedure in respect of the Sapard fine. The ban bears no interest. On January 24, 2012 Tabco Campofrio received from Sapard an amount of RON 2,306. Subsequently on March 8, 2012, the Company reimbursed to Campofrio Group SA the equivalent in EUR 530,609 of the amount received from Sapard, the ban balance at the end of 2016 being RON i542 (2015: IWNi,5.7). Initiabed for dentifjcatjon purooses ony 48 Ernst & Youn Acc SiTans LLP

80 CAROLI FOODS GROUP BV CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the financial year ended 31 December 2016 (All amounts are expressed in Romanian Lei Thousand ( RON ), unless otherwise stated) 22 BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued) Transactions Net sales Putchases Year ended 31 December ,810 11,089 Year ended 31 December2015 2,810 5, EMPLOYEE BENEFIT EXPENSE Year ended Year ended 31 December December 2015 Salaries Social security costs 54,600 45,910 10,719 8,999 65,319 54, DIRECTORS AND ADMINISTRATORS REMUNERATION Year ended 31 December 2016 Year ended 31 December2015 Current and former managing directors Cutrent and former supervisory baard 9,521 7,926 9,521 7, SUBSEQUENT EVENTS In January 2017 the fiscal control which was on going at the level of Caroli Foods Group SRL for the period June 2015 was finalized. The Company has not yet received the final Imposing Decision, but, according to the final discussion with the ANAF team, the assessment will include amounts which relate to income tax and VAT These amounts are considered immaterial to the financial statements. 26 PROFIT DISTRIBUTION The Company proposed to distribute a dividends amounting to RON 17,069 thousand from general reserve. The dividend distributions were approved by the Board of shareholders in September 13th and December 5th Initialed for dentifcatjc,r, purposes only ErnSt&YounqAccou 49