Genera d. d. The consolidated and unconsolidated financial statements and annual report as of 30 June 2016 together with authorized auditor s report

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2 Genera d. d. The consolidated and unconsolidated financial statements and annual report as of 30 June 2016 together with authorized auditor s report

3 Genera d.d. June 30, 2016 Content Annual report 2-8 Responsibility for the Financial Statements 9 Independent auditor's report to the stockholders of Genera d.d Financial statements: Consolidated balance sheet as at 30 June Unconsolidated balance sheet as at 30 June Consolidated Income Statement for the year ended 30 June Unconsolidated Income Statement for the year ended 30 June Consolidated Statement of Cash Flows for the year ended 30 June Unconsolidated Statement of Cash Flows for the year ended 30 June Consolidated Statement of Changes in Equity for the year ended 30 June Unconsolidated Statement of Changes in Equity for the year ended 30 June Notes to Financial Statements 22-55

4 Genera d.d. June 30, 2016 ANNUAL REPORT Total consolidated revenues of the Genera Group in the period January-June 2016 decreased by 18.7% compared to the previous year and amounted to HRK million. The main reasons for the lower income are the abandonment of human drugs segment and the dynamics of revenues related to contract manufacturing. 50% of total sales was accomplished in export markets. The decline in sales also reflected in the decline in gross profit by 25.3%, and it amounted to HRK 40.1 million. This year was marked by significant one-time expenses totaling HRK 17.6 million. The stated figure relates to the costs of restructuring and related severance costs, costs of exiting the business area of human pharmaceuticals and other value adjustments related to receivable accounts and inventories. These costs were one of the necessary measures to create preconditions conducive to achieving business success of the Company in the future. These costs also include items associated with the demolition of buildings and warehouses that are not in use, and this construction project was driven by the objective of achieving higher standards of safety and security at the production site in Kalinovica. Following all this, operating loss of Genera Group for 2016 amounted to HRK 12.3 million, and net loss to HRK 10.7 million. In the observed period, Genera continued investments in both tangible and intangible assets. Total investments in 2016 amounted to HRK 4.2 million, of which the intangible assets relates to HRK Since the vaccines are the strategic determinant of the company, during the observed period, priority was the investments in their further development, all in the aim of expansion to international markets. Business activities related to the development of the product portfolio of the Genera Group The key business activity that marked this period is the registration of vaccine Avishield ND. Registration according to the Decentralized Procedure (DCP) was successfully completed in January 2016 in 12 European Union Member States: UK, Belgium, Spain, Greece, Croatia, Hungary, Netherlands, Germany, Poland, Portugal, Romania and Slovenia. This product, called Pestikal La Sota SPF has already been present in Croatia, Turkey, Morocco, Algeria, Egypt, Iran, Sri Lanka, Ukraine, Albania, Kosovo, Macedonia, and Bosnia and Herzegovina for years. Obtaining this European registration decision significantly increased the number of markets and expanded the territory in which Genera may place this poultry vaccine against the Newcastle disease. In June 2016, Avishield ND vaccine was successfully launched in the German market. Avishield was chosen as the umbrella name for all the existing and future company products in the line of poultry vaccines. In the same period, the key activity related to the range of veterinary medicinal products is the completion of DCP procedure for antiparasitic Canihelmin plus in eight EU Member States (Spain, Bulgaria, Czech Republic, Ireland, Germany, Poland, Romania and the UK). This demanding process was completed in product registration in April

5 Genera d.d. June 30, 2016 ANNUAL REPORT (continued) In the same period, in Vaccine assortment, decisions for the renewal of registrations of 7 vaccines are obtained. The documents for registration renewal of 1 vaccine are submitted for further procedure. In the segment of veterinary medicines, in the same period, 2 new decisions are obtained in two countries, and decisions for 5 registration renewals. The files for registration renewal were sumitted for 4 products. During 2016, in the segment of business development, Genera continues all activities with the aim of expanding and modernizing the product portfolio through its own development and through cooperation with foreign partners. In the observed period, the developmental biology laboratory continued developing new poultry vaccines. Five safety and efficacy studies were initiated for existing vaccines. In addition, one study was initiated on the product from the KF portfolio of veterinary medicines, all that with the aim of making the EU documentation. In the same period, the total of 7 new products is licensed behind agro portfolio for the market of Croatia and Bosnia and Herzegovina. Significant events in the previous period/the restructuring and integration of Genera in Dechra In the stated period, and in line with the strategy of the parent company, Genera was restructured, and thus have been achieved the prerequisites for long-term business development of Genera and its contribution to the development of Dechra Group. The new organization reflects the company's focus on the development of the core veterinary business. In order to make decisions about restructuring, project team consisting of Dechra and Genera employees led by the integration director and member of the board Jan Jaap Korevaar, in the period from October 2015 to May 2016 carried out an in-depth assessment of the business and prepared the plan of integration. This comprehensive business analysis has led to the conclusion that the Company is engaged in a wide range of different business activities, many of which are not crucial for the future of business; they do not bring profits and they weaken the company s competitive position in the market. It was found that due to the lack of a clear focus of the organization, and because of doing business in different areas, a very high cost was generated. Since these business activities are not profitable, the Company does not achieve the profit that could be invested in future growth and business development. Instead, the Company gets onto debt to maintain the existing state. Based on this analysis, the following conclusions and decisions were made: 1. It is necessary to focus the Company's activities on profitable business areas that are crucial for the future prosperity of the Company. The Company shall cease performing those business activities that do not represent the core business of the Company and that generate significant losses. Therefore, the Management Board decided to abolish the business area Genera Lijekovi, as well as the sale of disinfectants for human use. 4

6 Genera d.d. June 30, 2016 ANNUAL REPORT (continued) 2. In order to ensure greater focus of the Company, it is necessary to take the following organizational steps: All activities associated with vaccines will be merged into a separate business unit, which includes the development, registration and production of poultry vaccines. Sales of veterinary medicinal products, food supplements for animals and disinfectants for veterinary use will be organized into two regions: the Adriatic region and Rest of the world region. Agro segment will be organized in a separate organizational unit and will include licensing, registration, marketing and sales of agricultural products, and products for pest and rodent control. 3. The profitability of the Company needs to increase urgently in order to allow reinvestment of profits in future business activities in Kalinovica. For this reason, operating costs must significantly reduce. 4. The Company needs to be restructured, taking into account the reduction of production activities at the facility of special nutritional supplements, because of the business partner s decision on the establishment of their own factory and facility for liquid sterile preparations, due to lack of investment in it. The restructuring process reflected in the number of workers needed for business operations since the found number of employees was unsustainable. In consultation with union representatives, 47 people were bestowed within the program. Severances are paid in amounts more favorable than those provided for in the Labor Act and the Work Regulations, and in particular taking into account the categories of employees with conditions for early or age retirement, employees with more than 18 years of service, as well as people with disabilities. The objectives of this restructuring and integration process are creating narrower and healthier organizational structure of the Company that will enable future investment in the development and production of veterinary vaccines in Croatia. In order to realize these objectives, Management has made the following decisions: Launching the project of opening quarters for experiments on poultry in accordance with GLP (Good Laboratory Practice), which will accelerate the development of a wider range of vaccines in the future. Starting the work of the Laboratory for the development of pharmaceutical products, with the aim of making the formulation and development of analytical methods for the projects of the Company. Extending the registration team to facilitate the registration of the Company's and Dechra s products for export markets. As of the end of June 30, 2016, reorganization of the business was carried out and the organizational structure established by the new Regulations on the business organization. In May, the project of Dechratization of Genera was launched, including all activities associated with the change of company name from Genera d.d. to Dechra d.d. The change of the Company s name is planned by the end of 2016, and the project includes a number of related changes in the field of registration, production and compliance with numerous regulatory obligations. As part of the project, the brand and the overall visual identity of the company will change. 5

7 Genera Inc. 30 June 2016 ANNUAL REPORT (continued) Other significant events in 2016 On January 2016, the stockholders of Genera were informed on fair compensation which the Company commits to pay in the amount of HRK per stock. In accordance with the provisions of Article 332, paragraph 9 of the Capital Market Act, deciding on fair compensation involved information from Zagreb Stock Exchange d.d. on trading Company's stocks on a regulated market, in the last 3 months prior to the date of invitation to the emergency session of General Meeting, on December 9, According to the Zagreb Stock Exchange d.d. verification, dated December 30, 2015, the average weighted price of common stock of the Company ( trading code VERN-R-A) for a period from September 8, 2015 to December 8, 2015, stood at HRK In the mentioned period, the Common stock of the Company (trading code VERN-R-A) generated 64.62% trading days (42 trading days), at the regulated market of the Zagreb Stock Exchange. As a final fair compensation, the Company has determined the amount of HRK per stock, corresponding to a price per stock of the Company in the mandatory takeover offer for the Company, announced by Dechra Pharmaceuticals PLC in September In February 2016, the stockholders are informed on the termination of the listing of Genera d.d. company on the Zagreb Stock Exchange. February 17 was the last day of trading in stocks of Genera at the Zagreb Stock Exchange under the trading code VERN-R-A. The decision to withdraw stocks of Genera from listing on the Zagreb Stock Exchange d.d. was adopted by a majority of more than nine tenths of the votes at the General Meeting held on January 19, In March 2016, the stockholders of GENERA d.d. were informed on rights to purchase stocks exercised by the Company and payment of fair compensation for stocks Genera, according to which the Company is required to pay fair compensation in the amount of HRK per stock as of 10 May The payment of fair compensation for the Company's stocks was made through the Central Depository & Clearing Company. On 10 May , the Central Depository & Clearing Company executed the corporate action of payment of fair compensation by delisting and transferring stocks coded VERN-R-A to the account of the issuer GENERA d.d. The stockholders who, due of the decision to withdraw stocks coded VERN-R-A from the listing on the regulated market, required from the issuer to take over their stocks, were paid fair compensation in the amount of HRK per stock. The process of merging Genera Analitika d.o.o. to Genera d.d. was launched by the decision of the Management Board of Genera d.d. as Founder of the company of stated Company in April Based on the contract on the merger from April 2016, and in the context of measures to strengthen business efficiency of Genera d.d., the contracting parties have agreed that the company Genera Analitika d.o.o. integrates to Genera d.d., as a company acquirer, by transferring the entire property, rights and all of its obligations to the acquirer company. In June 2016, the Commercial Court in Zagreb issued a registration merger of Genera Analitika d.o.o. to Genera d.d. as the acquirer company. The reason for the merger is establishing better business and functional organization of the company Genera d.d. and its subsidiaries with the aim of directing the activities of the company Genera d.d. to profitable business areas. Merger will enable application of optimal business processes and streamlining of operations through centralization of certain business functions, which will affect the overall increase in business efficiency of Genera d.d. 8

8 Genera Inc. 30 June 2016 ANNUAL REPORT (continued) In 2016, Supervisory Board held three sessions. At the constituent meeting of the Supervisory Board in January 2016, it was found that the majority stockholder of the Company, Eurovet Animal Health B.V., based on a stipulation, made a decision of appointing Mr. Ian David Page as a member of the Supervisory Board. Mr. Ian David Page was elected Deputy Chairman of the Supervisory Board. In addition, it was found that the Company s Meeting, held on January 19, 2016, elected two new members of the Supervisory Board, Mrs. Ana Hanžeković and Mrs. Suzanne Cross, for a term until the term expiry of other members of the Supervisory Board. At the same session, it is also established that members of the Board authority to represent has changed, so that all members of the Board represent the Company independently and individually. At the session held in May 2016, Board s report on the operations in 2015 was accepted and the audited financial statements of the Company for 2015 are established. In addition, the Supervisory Board proposed that the General Meeting take a decision on covering the loss for 2015, so that the loss in the amount of HRK 11,874, transfers to the next periods. As one of the measures to strengthen the Company's business efficiency, the approval for the merger of Genera Analitika d.o.o. to Genera d.d. was given at this session. At the meeting held in June 2016, it was determined that Anne Françoise Michele Nesmes Rankine submitted unconditional resignation to the President of the Management Board and the resignation shall take effect on the date of acceptance of the duties by the new President of the Board. By unanimous decision of the present members of the Supervisory Board, Tony Griffin was appointed as a new member of the Board and will serve as President of the Board. The mandate of Tony Griffin will start running the first day following the acceptance of the appointment. It is determined that Mr. Jan Jaap Korevaar continues his mandate as a member of the Board of Genera d.d. Mr. Jan Jaap Korevaar, a member of the Board of Genera presented the integration process. As a part of the presentation, Mr. Korevaar also presented in detail extraordinary costs that affected results in In January 2016, the General Stockholders Meeting of Genera d.d. was held at the headquarters of the Company. All the decisions of the General Meeting were adopted by all agenda items, with the same content as they were proposed in the invitation issued to the public in December 2015, through the Official Gazette, the Zagreb Stock Exchange, HANFA, the Court Register, the Croatian News Agency HINA and the Company's website. The decision on the withdrawal of the Company's stocks from listing on the Zagreb Stock Exchange d.d., published in item 6 of the agenda, was made by majority larger than nine tenths of the votes. In 2016, Genera continued the traditional cooperation with the Faculty of Veterinary Medicine of the University of Zagreb by awarding scholarships to final-year students. 9

9 Genera Inc. 30 June 2016 ANNUAL REPORT (continued) Business events after the balance sheet date On 5 July 2016, the General Stockholders Meeting was held at the headquarters of the company Genera d.d., in Kalinovica (City of Sveta Nedjelja), Svetonedeljska 2. At this Assembly, all decisions were accepted as they were proposed and made public by the Court Register and the Official Gazette. After the balance sheet date, there were no other important business events, which could significantly materially affect business and position of the Company and the Group. Description of most important risks and uncertainties The Company and the Group are primarily exposed to financial risks, such as the risk of changes in exchange rates, credit risk, liquidity risk and interest rate risk. The risk of exchange rate is the risk of change of the value of financial instruments, due to changes in exchange rates. The Company and the Group are mostly exposed to risk of change of EUR. Change in exchange rates has positive and negative effects on the business of the Genera Group. Since the Group is oriented towards increasing exports and exports have increasingly significant stock of Group revenue, stable kuna exchange rate is not favorable for the operation and at the same time reduces the international competitiveness of the Group. Interest rate risk supposes the risk that the interest cost of a financial instrument will fluctuate over time. The Company and the Group have long-term credit liabilities, subject to fixed interest rates, so the Company is not exposed to the stated risk. Credit risk is the risk that one party to an agreement will default on its obligations and thus cause a financial loss to the other party. The Company and the Group have adopted the policy of only dealing with creditworthy companies secured by guaranties, which decreases the risk of financial loss from defaults. Company and the Group are not exposed to any significant credit risk exposure to any single counterparty or group of counterparties having similar characteristics. The Company and the Group manage the liquidity risk by accompanying projected and actual cash flow comparing it with the maturity of financial assets and liabilities. In 2016, the Company has contracted insurance of claims for targeted domestic and overseas buyers. The intention is to further reduce the risks of debt collection. 1 0

10 Genera Inc. 30 June 2016 ANNUAL REPORT (continued) Due to the complex geopolitical situation in Iran, there is a certain risk of collection and sales in doing business with the traditional and long-term partner from this country. No resolutions that have so far referred to Iran, affected the veterinary medicinal products. The entire business operations of Genera is harmonized with securing and managing risks in the field of health, security and environment. All activities in implementing safety at work have been directed at deflection or minimizing risks in accordance with national legislation. Set of financial statements for the period from January 1 to June 30, 2016, including the notes, contains, according to the best knowledge of the Board, a true presentation of development, results and position of the Company and the companies included in consolidation, and is an integral part of this report. /stamp GENERA Inc. seated at Kalinovica Svetonedeljska 2/ 20 September 2016 /signature illegible/ Jan Jaap Korevaar Board Member 1 1

11 Genera Inc. 30 June 2016 Responsibility for the financial statements Pursuant to the Croatian Accounting Act, in force for reporting periods ending on June 30, 2016, the Board is responsible for ensuring that the financial statements for each financial year are prepared in accordance with applicable accounting standards, so as to give a true and fair view of the financial position, results of operations, changes in equity and cash flows of the Company and the Group for that period. Management has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Board continues to adopt the going-on concern basis in preparing the consolidated financial statements. In preparing those financial statements, the Board is responsible that: appropriate accounting policies are selected and then applied consistently; judgments and estimates are reasonable and prudent; valid accounting standards are applied, and that any significant material departure is disclosed and explained in the financial statements; and the financial statements are prepared on the going-concern basis, unless it is inappropriate to presume that the Group will continue in business. The Board is responsible for keeping proper accounting records, which will at any time, with reasonable accuracy, reflect the financial position of the Company and the Group, as well as comply with the Croatian Accounting Act. Management is also responsible for safeguarding the assets of the Company and the Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Management has the responsibility to submit to the Supervisory Board its annual report, together with the consolidated and unconsolidated financial statements. After that, the Supervisory Board has to approve the annual financial statements for submission to the adoption to the General Meeting. The consolidated and unconsolidated financial statements were approved by the Management Board for submission to the Supervisory Board and are signed by: On behalf of and for Genera Inc.: /signature illegible/ Jan Jaap Korevaar Board Member /stamp: GENERA Inc. seated at Kalinovica Svetonedeljska 2/ Kalinovica, 20 September

12 Independent Auditor's Report To Stockholders and Management Board of Genera d.d. Report on the financial statements We have audited the attached unconsolidated financial statements of the company Genera Inc. (The "Company"), and consolidated financial statements of Genera Inc. and its subsidiaries (the "Group"), comprising unconsolidated and consolidated statement of financial position as of 30 June 2016, and unconsolidated and consolidated statements of comprehensive income, changes in equity and cash flows for the six-month period then ended, and notes comprising a summary of significant accounting policies and other explanatory information. Board s responsibility for the consolidated and unconsolidated financial statements The Management Board is responsible for the preparation and fair presentation of these unconsolidated and consolidated financial statements, in accordance with Croatian financial reporting standards, and for those of internal control, as management determines is necessary to enable the preparation of unconsolidated and consolidated financial statements that are free from material misstatement, whether due to fraud or errors. Auditor's responsibility Our responsibility is to express an opinion on these unconsolidated and consolidated financial statements based on our audit. We conducted our audit in accordance with International Auditing Standards, which require that we comply with ethical requirements, plan, and perform the audit to obtain reasonable assurance about whether the unconsolidated and consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the unconsolidated and consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the unconsolidated and consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the unconsolidated and consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the unconsolidated and consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the unconsolidated and consolidated financial statements are presented fairly, in all material respects, the financial position of the Company and the Group as at June 30, 2016, the results of their operations and cash flows for the six-month period then ended, in accordance with the Croatian Financial Reporting Standards. Report on other legal and regulatory requirements We have read the accompanying Annual Report of the Group for the year ended June 30, 2016 on pages 2 to 8. We have confirmed that the information contained in the Annual Report describing information also shown in the consolidated financial statements, in all material respects are in accordance with the consolidated financial statements. PricewaterhouseCoopers d.o.o., Ulica kneza Ljudevita Posavskog 31, Zagreb, Hrvatska T: +385 (1) , F:+385 (1) , Trgovački sud u Zagrebu, broj Tt-99/7257-2, MBS: ; OIB: ; Temeljni kapital: 1,810, kn, uplaćen u cijelosti; Uprava: Hrvoje Zgombić, predsjednik; J. M. Gasparac, član; S. Dušić, član; T. Maćašović, član; Žiro-račun: Raiffeisenbank Austria d.d., Petrinjska 59, Zagreb, IBAN: HR

13 pwc Other issues Company's financial statements for the period ended 30 June 2015, have not been revised by us nor any other auditors. /handwritten: PricewaterhouseCoopers Ltd./ PricewaterhouseCoopers Ltd. Zagreb, 20 September 2016 /signature illegible/ Siniša Dušić Board Member /signature illegible/ Kristina Dimitrov Authorized Auditor pwc PricewaterhouseCoopers Ltd. 3 for audit and consulting services Zagreb, Ulica kneza LJ. Posavskog 81

14 GENERA Inc. Financial statements June 30, 2016 Consolidated Balance Sheet Note (all amounts expressed in thousands of HRK) June 30, 2016 December 31, 2015 ASSETS Concessions, patents, licenses, trademarks, software and other right Intangible assets in course of construction Intangible assets Land Buildings Facilities and equipment Tools, operative inventory and transportation assets Tangible assets in course of construction Advances for tangible assets 4 6 Investment property Tangible assets Long-term receivables - 73 Deferred tax assets FIXED ASSETS Raw materials and supplies Work in progress Final products Merchandise Stock Receivables from related parties Accounts receivable Receivables from employees and members Receivables from government and other institutions Other receivables Short-term receivables Cash at bank and in hand CURRENT ASSETS Prepaid expenses and accrued income TOTAL ASSETS Notes to financial statements are an integral part of the financial statements 12

15 GENERA Inc. Financial statements June 30, 2016 Consolidated Balance Sheet (continued) (all amounts expressed in thousands of HRK) LIABILITIES Note June 30, 2016 December 31, 2015 Equity capital Legal reserves Reserve for own stocks Treasury stocks (14.634) (10.878) Reserves from profit (8.606) (4.850) Retained earnings (accumulated losses) (48.480) (33.499) Foreign exchange differences on foreign operations (7) (1) Profit/(loss) for the financial year (13.584) (14.987) EQUITY Provisions for jubilee awards and severance payments Provisions Long-term liabilities to banks 13a Long-term payables to related companies Other long-term liabilities Deferred revenue Long-term liabilities Liabilities due to related parties Liabilities to banks and other financial institutions 13b Commitments towards suppliers Liabilities due to employees Taxes, contributions and other benefits Other current liabilities Short-term liabilities Accrued expenses and deferred income TOTAL LIABILITIES Notes to financial statements are an integral part of the financial statements 13

16 GENERA Inc. Financial statements June 30, 2016 Unconsolidated Balance Sheet Note (all amounts expressed in thousands of HRK) June 30, 2016 December 31, 2015 ASSETS Concessions, patents, licenses, trademarks, software and other right Intangible assets in course of construction Intangible assets Land Buildings Facilities and equipment Tools, operative inventory and transportation assets Tangible assets in course of construction Advances for tangible assets 5 6 Investment property Tangible assets Stocks in related parties Long-term financial assets Long-term receivables - 73 Deferred tax assets FIXED ASSETS Raw materials and supplies Work in progress Final products Merchandise Stock Receivables from related parties Accounts receivable Receivables from employees and members Receivables from government and other institutions Other receivables Short-term receivables Loans to related parties Short-term financial assets Cash at bank and in hand CURRENT ASSETS Prepaid expenses and accrued income TOTAL ASSETS Notes to financial statements are an integral part of the financial statements 14

17 GENERA Inc. Financial statements June 30, 2016 Unconsolidated Balance Sheet (continued) (all amounts expressed in thousands of HRK) LIABILITIES Note June 30, 2016 December 31, 2015 Equity capital Legal reserves Reserve for own stocks Treasury stocks (14.634) (10.878) Reserves from profit (8.610) (4.854) Retained earnings (accumulated losses) (48.247) (36.626) Profit/(loss) for the financial year (13.539) (11.874) EQUITY AND RESERVES Provisions for jubilee awards and severance payments Provisions Long-term liabilities to banks 13a Long-term payables to related companies Other long-term liabilities Deferred revenue Long-term liabilities Liabilities due to related parties Liabilities to banks and other financial institutions 13b Liabilities due to suppliers Liabilities due to employees Taxes, contributions and other benefits Other current liabilities Short-term liabilities Accrued expenses and deferred income TOTAL LIABILITIES Notes to financial statements are an integral part of the financial statements 15

18 GENERA Inc. Financial statements June 30, 2016 Consolidated Income Statement (all amounts expressed in thousands of HRK) Note Unaudited Jan-June 2016 Jan-June 2015 Sales income Other operating income OPERATING INCOME Changes in inventories of work in progress and finished goods Costs of raw materials 22 (23.326) (38.856) Cost of goods sold (22.407) (20.430) Other costs 23 (13.652) (11.683) Material costs (59.385) (70.969) Net salaries and wages (14.903) (15.890) Taxes and contributions from salaries (8.889) (8.472) Contributions on salaries (4.849) (4.022) Staff costs 24 (28.641) (28.384) Amortization 25 (6.988) (7.519) Other costs 27 (11.532) (10.550) Impairment of current assets 26 (8.740) (32) Provisions (3.382) - OPERATING EXPENSES ( ) ( ) Interest income and foreign exchange differences from non-related parties FINANCIAL INCOME Interest expense and exchange rate differences from non-related parties (3.097) (5.157) FINANCIAL EXPENSES 28 (3.097) (5.157) TOTAL REVENUE TOTAL EXPENDITURES ( ) ( ) Share of loss under the equity method - (317) PROFIT OR LOSS BEFORE TAXES (13.186) Income tax 29 (398) (4.042) PROFIT OR LOSS OF THE PERIOD (13.584) Notes to financial statements are an integral part of the financial statements 16

19 GENERA Inc. Financial statements June 30, 2016 Unconsolidated Income Statement (all amounts expressed in thousands of HRK) Note Unaudited Jan-June 2016 Jan-June 2015 Sales income Other operating income OPERATING INCOME Changes in inventories of work in progress and finished goods (2.350) Costs of raw materials 22 (22.568) (38.736) Cost of goods sold (18.306) (13.668) Other costs 23 (13.136) (10.589) Material costs (54.010) (62.993) Net salaries and wages (13.653) (13.438) Taxes and contributions from salaries (8.251) (6.905) Contributions on salaries (4.551) (3.376) Staff costs 24 (26.455) (23.719) Amortization 25 (6.858) (6.949) Other costs 27 (14.655) (11.479) Impairment of current assets 26 (8.740) - Provisions (3.002) - OPERATING EXPENSES ( ) ( ) Interest income and foreign exchange differences from related parties Interest income and foreign exchange differences from non-related parties FINANCIAL INCOME Interest expense and exchange rate differences from related parties (59) (42) Interest expense and exchange rate differences from non-related parties (3.028) (6.611) FINANCIAL EXPENSES 28 (3.087) (6.653) TOTAL REVENUE TOTAL EXPENDITURES ( ) ( ) PROFIT OR LOSS BEFORE TAXES (13.155) Income tax 29 (384) (3.908) PROFIT OR LOSS OF THE PERIOD (13.539) Notes to financial statements are an integral part of the financial statements 17

20 GENERA Inc. Financial statements June 30, 2016 Consolidated Statement of Cash Flows (all amounts expressed in thousands of HRK) Unaudited Jan-June 2016 Jan-June 2015 CASH FLOW FROM OPERATING ACTIVITIES Profit/(loss) before tax (13.186) Amortization Decrease in inventories Other cash flow increases Total increase in cash flow from operating activities Decrease in current liabilities Increase of current receivables Increase in inventories Other decrease in cash flow Total decrease in cash flow from operating activities NET INCREASE OF CASH FLOW FROM OPERATING ACTIVITIES (9.438) CASH FLOW FROM INVESTING ACTIVITIES Cash receipts from sale of tangible and intangible assets - 4 Cash receipts from interest 2 94 Other cash receipts from investing activities Total cash receipts from investing activities Purchase of tangible and intangible assets Purchase of own stocks Other cash inflows from investing activities Total cash flow decrease from investing activities NET DECREASE OF CASH FLOW FROM INVESTING ACTIVITIES (7.952) (6.766) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from loan principal, debentures, loans and other borrowings Total cash inflow from financing activities Repayment of loans and bonds Total cash outflow from financing activities NET DECREASE OF CASH FLOW FROMFINANCING ACTIVITIES (2.472) (549) Total decrease in cash flow (4.776) (16.753) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Notes to financial statements are an integral part of the financial statements 18

21 GENERA Inc. Financial statements June 30, 2016 Unconsolidated Statement of Cash Flows (all amounts expressed in thousands of HRK) Jan-June 2016 Unaudited Jan-June 2015 CASH FLOW FROM OPERATING ACTIVITIES Profit/(loss) before tax (13.155) Amortization Decrease in inventories Other cash flow increases Total increase in cash flow from operating activities Decrease in current liabilities Increase of current receivables Increase in inventories Total decrease in cash flow from operating activities NET INCREASE OF CASH FLOW FROM OPERATING ACTIVITIES (5.906) CASH FLOW FROM INVESTING ACTIVITIES Cash receipts from sale of tangible and intangible assets - 4 Cash receipts from interest 2 93 Other cash receipts from investing activities Total cash receipts from investing activities Purchase of tangible and intangible assets Purchase of own stocks Other cash inflows from investing activities Total cash flow decrease from investing activities NET DECREASE OF CASH FLOW FROM INVESTING ACTIVITIES (8.076) (11.795) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from loan principal, debentures, loans and other borrowings Total cash inflow from financing activities Repayment of loans and bonds Total cash outflow from financing activities NET DECREASE OF CASH FLOW FROMFINANCING ACTIVITIES (2.472) Total decrease in cash flow (4.726) (16.111) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Notes to financial statements are an integral part of the financial statements 19

22 GENERA Inc. Financial statements June 30, 2016 Consolidated Statement of Changes in Equity (all amounts expressed in thousands of HRK) Equity capital Legal reserves Reserves for own stocks Own stocks Foreign ex. diff. on foreign operations Retained profit/(transferred loss) Profit/(loss) for the year Minority interest Total January 1, (5.975) (7) (24.945) (13.503) Result schedule (5.328) - Transactions in own stocks (4.903) (4.903) Transactions with minority interests (13.503) Profit for the year Unaudited June 30, (10.878) (7) (33.173) January 1, (10.878) (1) (33.499) (14.987) Result schedule (6) (14.981) Transactions in own stocks (3.756) (3.756) Profit for the year (13.584) - (13.584) June 30, (14.634) (7) (48.480) (13.584) Notes to financial statements are an integral part of the financial statements 20

23 GENERA Inc. Financial statements June 30, 2016 Unconsolidated Statement of Changes in Equity (all amounts expressed in thousands of HRK) Equity Legal Reserves for own stocks Own Retained earnings/ capital reserves stocks (transferred loss) Profit/(loss) for the year Total January 1, (5.975) (10.392) Result schedule (11.366) - Transactions in own stocks (4.903) - - (4.903) Profit for the year Unaudited June 30, (10.878) January 1, (10.878) (36.626) (11.874) Result schedule (11.874) Transactions in own stocks (3.756) - - (3.756) Merger Genera Analitika d.o.o Profit for the year (13.539) (13.539) June 30, (14.634) (48.247) (13.539) Notes to financial statements are an integral part of the financial statements 21

24 GENERA Inc. Financial statements June 30, General information on the Company - History and Development of the Company and the Group Genera d.d. (The "Company") was established on November 6, 2000 in Croatia, as a limited liability company, registered at the Commercial Court in Zagreb (number ), named Veterina d.o.o. Pursuant to the resolution of the General Meeting, held on June , the Company changed the name from Veterinary d.d. to Genera d.d. The Company s seat is in Kalinovica, Svetonedjeljska 2, Rakov Potok, Republic of Croatia. Company stock has been listed since 2007 in the Official Market of the Zagreb Stock Exchange d.d. (ZSE: VERN-R-A). By the Decision of the Stockholders' Meeting of May 7, 2007, the Company changed its legal form from a limited liability company into a joint stock company whose stocks are listed on the Zagreb Stock Exchange. On January 19, 2016, emergency General Meeting of stockholders was held at the company's headquarters in Kalinovica, where the decision to withdraw the Company's stocks from listing on the Zagreb Stock Exchange d.d. was made by the majority of more than nine tenths of the votes cast. February 17, 2016 was the last day of trading in stocks of Genera at the Zagreb Stock Exchange, and by the February 18, 2016 the listing of company stocks on the Zagreb Stock Exchange under the trading code VERN-R-A ceases. Group's core activity is the production, development and sales of vaccines and veterinary drugs, feed additives, disinfectants and plant protection products. On June 30, 2016, the Group had 236 employees (the Company had 228), while on December 31, 2015 the Group had 265 employees (the Company 231). On June 30, 2016 Genera group is made of following companies: - Genera d.d., Croatia parent company - Genera SI d.o.o., Slovenia - Genera d.o.o. Sarajevo, Bosnia and Herzegovina - Genera Pharma d.o.o., Serbia The company Genera Analitika d.o.o., Croatia merged with the parent company on June 14, Until April 10, 2015, the Group had an associated company - Genera istraživanja d.o.o., which participated in the profit by 19.17%. In 2016, the Company changed the business year from the calendar year to the year ending on June 30. The Supervisory Board, Management Board and directors The Supervisory Board members are: Ivan Majdak, President Ian David Page, Deputy president Suzana Cross, member Ana Hanžeković, member Mladen Vedriš, member Franjo Gregurić, member Marcel Majsec, member Management Board members are: Anne-Francoise Michele Nesmes Rankine, Board President Jan Jaap Korevaar, Board member 22

25 GENERA Inc. Financial statements June 30, Basic preparations a) Statement of compliance The financial statements of the Company and the Group are prepared in accordance with the Croatian Financial Reporting Standards ("CFRS"). The financial statements were approved by the Management Board, on September 20, b) Basis of preparation of financial statements The financial statements of the Company and the Group have been prepared on a historical cost basis, except for derivative financial instruments, financial assets at fair value through profit and loss, financial instruments available for sale (other than those that are not traded in an active market, which are recognized at cost less impairment), measured at fair value. The financial statements of the Company and the Group have been prepared on a going-concern basis. c) Functional and presentation currency The financial statements of the Company and the Group are presented in Croatian kuna which is the functional and presentation currency of the Company and are rounded to the nearest thousand (HRK '000), unless otherwise indicated. On June 30, 2016, the exchange rate of 1 USD and 1 EUR amounted to HRK or HRK respectively (On December 31, 2015: HRK 6.992, or HRK respectively). d) Use of estimates and judgements The preparation of financial statements in accordance with CFRS requires Management Board to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making an estimate of the value of assets and liabilities, which cannot be obtained from other sources. Actual results may differ from these estimates. These estimates and underlying assumptions are subject to regular review. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period in which it was made or in the period of the revision and future periods, if the revision affects both current and future periods. 23

26 GENERA Inc. Financial statements June 30, Summary of significant accounting policies The accounting policies described below are the Company's accounting policies that have been applied consistently by all the Group members, to all periods presented in these financial statements. When referred to the Company's accounting policies, the stated also applies to the Group. a) Principles and methods of consolidation Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies that generally, but not necessarily, includes more than half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. List of subsidiaries of the Group entities is contained in Note. In the unconsolidated financial statements, investments in subsidiaries are initially recognized at cost and subsequently at cost less impairment losses. Testing of investments in subsidiaries for impairment is performed if there are the indicators. Non-controlling interests Non-controlling interests are measured at the proportionate stock of investors in the net assets of the entity in which the investment was made on the date of acquisition. Affiliates Affiliates are entities in which the Company has between 20% and 50% of the voting rights or in which it has significant influence but not control. In the consolidated financial statements of the Company, investments are listed using the equity method. Under this method, the Company's stock in the profits or losses of affiliates is recognized in profit or loss, from the date that significant influence commences until the date that significant influence ceases. Investments are initially recognized at cost and adjusted for changes in the investor's stock of the net assets of the entity in which the investment was made. In the unconsolidated financial statements, investments in affiliates are initially recognized at cost and subsequently at cost less impairment. Transactions eliminated on consolidation (with subsidiaries) Balances and transactions between Group members and any unrealized gains from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with companies in which there are common interests and with companies where the Company stocks control with other owners has been eliminated to the extent of the Company in such societies. Unrealized gains resulting from transactions with companies in which stocks are eliminated against the investment in this company. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that it does not constitute impairment. Loss of control After losing control of a subsidiary (branch), the Group derecognizes the assets and liabilities, any noncontrolling interest in it and the other components of equity. 24

27 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) a) Foreign currencies Loss of control (continued) Any surplus or deficit arising on the loss of control is recognized within profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date of loss of control. After that, it is recorded as an investment valued by the equity method or as financial asset available for sale, depending on the level of influence retained. Transactions in foreign currencies are translated into the functional currency using the valid exchange rates on the day of transaction. Monetary assets and liabilities denominated in foreign currencies on drawing up the balance sheet date are translated into the functional currency at the exchange rate ruling at that date. Gains or losses from foreign exchange differences arising from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Non-monetary assets and items measured at historical cost in foreign currency are not retranslated by new foreign exchange rates. Non-monetary assets and liabilities denominated in foreign currencies stated at historical cost, are translated into functional currency at the foreign exchange rates ruling at the transaction date. Group companies (members) Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Croatian kuna, which is also the functional currency of the Company. Income and expense items and cash flows of foreign operations are translated into functional currency using the exchange rate that reflects the exchange rate on the transaction, and their assets and liabilities are translated at exchange rates at the end of the year. All exchange differences arising from the translation of these are presented within equity. Net investment in Group members Exchange rate differences arising on translation of the net investment in foreign operations are taken to equity. When a foreign operation is sold, foreign exchange differences are recognized in the income statement as part of the gain or loss on sale. b) Intangible assets (i) Owned assets Intangible assets acquired by the Group are stated at cost less accumulated amortization and impairment losses. Intangible assets consist of software, whose estimated useful life is 5-8 years. (ii) Licenses and similar rights The costs of the Company and the Group to acquire licenses (registration files) and similar rights of third parties are capitalized to the extent of the probable future economic benefits, if they will flow to the company. Licenses are amortized over their estimated useful lives, but not exceeding 10 years. The estimated useful lives are reviewed annually. Impairment reviews are undertaken if there are indications of impairment. Changes in the expected useful life of future economic benefits is stated in the change period or method of amortization and treated as a change in accounting estimate. 25

28 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) c) Intangible assets (continued) (iii) Subsequent costs Subsequent costs are capitalized only when they increase the future economic benefits embodied in the asset. All other expenditure is recognized in profit or loss in the period when they are incurred. (iv) Amortization Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use. (v) Goodwill Goodwill represents the difference between the fair value of the acquisition cost and the fair value of the Group's interest in the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Goodwill is allocated to cashgenerating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business merge in which the goodwill arose. The Group allocates goodwill to each business segment in which it operates. Gains or losses from the sale of an entity include the carrying amount of goodwill relating to the entity sold. (vi) Research and development expenses Research costs are recognized in the income statement in the period in which they occur. Internal development costs are capitalized as intangible assets only when development costs can be reliably measured, the products or process are technically and commercially feasible, it is probable that future economic benefits will flow to the Company and the Group, the Company and the Group has sufficient resources to complete the development and to use or sell the asset. The expenditure capitalized includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognized in the income statement in the period in which they occur. Development projects acquired through in-licensing (produced by partners that the Company licenses and sells in the market under its own brand), business merges or separate purchases are capitalized as intangible assets (in the amount of payments made by the Company and the Group to third parties and affiliates). Such intangible assets are stated at cost less accumulated amortization and impairment losses. They are amortized on a straight-line basis over the period of the expected benefit, and at each balance sheet date are examined to determine whether there is any indication of impairment. (vii) Assets under construction Assets under construction refers to the property that at the balance sheet date is not available for use, and from which the Company and the Group expect future economic benefits. Assets under construction are not amortized. 26

29 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) c) Business combinations Business combinations are executed using the purchase method. Assets and liabilities are measured at fair value at the acquisition date, which is the date by which the acquisitor gained control of the acquiree. Non-controlling interest is measured according to the proportionate stock of non-controlling interest in the fair value of the identifiable net assets of the acquired company. Costs related to the acquisition (consultants, lawyers, accountants, consultants' fees) are recognized in the income statement in the period in which incurred. d) Merger of companies under common control Business combination involving businesses under common control is a business combination in which are all businesses that participate in a business combination under the control of the same party (or parties) before and after the business combination, so that there is no transfer of control. The predecessor method of accounting is used to carry out the merger of entities under common control. According to the method, the carrying amount of an ancestor are transferred in society successors by book value of assets and liabilities of ancestor of the consolidated financial statements of the highest entity that has joint control and which prepares the consolidated financial statements. The results and balance sheet of the acquired company are included prospectively from the date of acquisition or business combination between entities under common control. At the date of the merger, the transactions and balances between the companies, as well as unrealized gains and losses on transactions are void. The net assets of the acquired company are recognized in equity and reserves. e) Property, facilities and equipment i) Assets under construction Assets under construction refers to the property that at the balance sheet date is not available for use, and from which the Company and the Group expect future economic benefits. Assets under construction are not amortized. ii) Owned assets Tangible assets are shown at cost less accumulated amortization and impairment losses. Cost includes all costs directly attributable to bringing the asset to a place and working condition for its intended use, including the proportion of the related borrowing costs for property, facilities and equipment incurred during the period of their construction (if they meet the criteria for capitalization). When certain property, facilities and equipment have different useful lives, they are treated as individual parts of an item of property, facility and equipment. iii) Subsequent costs Subsequent costs are included in the item of property, facilities, equipment only when they increase the future economic benefits embodied in the asset and if they will flow to the Company, and if the costs can be measured reliably. All other expenditure is recognized in profit or loss in the period when they are incurred. 27

30 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) f) Property, facilities and equipment (continued) iv) Amortization Amortization is charged to profit or loss using the straight-line basis over the estimated useful lives of property, facilities and equipment. Land and assets under construction are not amortized. The estimated useful life of the asset as follows: iv) Amortization Buildings Facilities and equipment Facility tools and office supplies Other tangible assets 25 years 8-10 years 5-10 years 5 years Amortization methods and useful lives are reviewed annually and adjusted if there are justifiable reasons. v) Leased assets Leases in which the Company assumes all risks and rewards of ownership are classified as finance leases. Facilities and equipment acquired through finance leases are recognized in the statement of financial position as assets at the lower of fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. f) Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial time to get ready for its intended use or sale, are added to the cost of the asset until assets are substantially ready for their intended use or sale. All other borrowing costs are charged to the income statement in the period in which they occur. g) Investment property Investment property is property held either to earn rental income or for capital appreciation or both. Investment property is initially measured at cost. After initial recognition, investment property is measured at cost less accumulated depreciation and accumulated impairment losses. The cost of investment in real estate includes the purchase price and all direct costs. Investment property under construction (in progress) is classified as investment property during construction. After putting into use, investment property will be amortized over 25 years. h) Financial instruments i.) Non-derivative financial instruments Non-derivative financial instruments comprise investments in stocks and bonds, trade and other receivables, cash and cash equivalents, loans, accounts payable and other liabilities. 28

31 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) j) Financial instruments (continued) Non-derivative financial instruments are measured at their fair value, plus transaction costs, in the case of financial instruments not at fair value through profit or loss. Non-derivative financial instruments are measured in the manner described below. A financial instrument is recognized if the Company and the Group become a party to the contractual provisions of the instrument. Financial assets are derecognized if the contractual rights of the Company and the Group to the cash flows from the asset expire, if the Company and the Group transfer the financial asset without retaining control or substantially transfer all risks and rewards of the asset. Regular way purchases and sales of financial assets are recognized on the trade date i.e. the date that the Company and the Group commit to purchase or sell the asset. Financial liabilities are derecognized if the obligations are discharged, canceled or they expire. Accounting for finance income and expense is discussed in note 3 p). Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognized at fair value plus any directly attributable transaction costs. After initial recognition, loans and receivables are measured at amortized cost calculated using the effective interest method, less any impairment losses. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and in bank accounts and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the cash management of the Company and the Group are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows. Held-to-maturity investments If the Company and the Group have the positive intent and ability to hold debt securities to maturity, they are classified as held-to-maturity investments. Investments held to maturity are measured at amortized cost using the effective interest rate method, less any impairment losses. Financial assets available for sale Investment of Company and the Group in stocks and debt instruments classified as available for sale. After initial recognition, they are measured at fair value with changes recognized in other comprehensive income, except for impairment losses (see Note 3 k) and i)) or the gain or loss on foreign currency exchange rates of monetary assets available for sale. The cumulative gain or loss in equity is transferred to profit or loss when the investment is derecognized. 29

32 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) j) Financial instruments (continued) Investments at fair value through profit or loss An instrument is classified at fair value through profit or loss if the Company and the Group hold them for trading or is designated as such upon initial recognition. Financial instruments are determined at fair value through profit or loss if the Company and the Group manage these investments and make decisions about their purchase and sale based on their fair value. Upon initial recognition, attributable transaction costs are recognized in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Other Other non-derivative financial instruments are measured at amortized cost using the effective interest rate method, less any impairment losses. ii.) Non-derivative financial liabilities Financial assets and liabilities are faced and the net amount is shown in the financial books only if the Company has a legal basis for confrontation and intends either to realize assets, i.e., settle the obligation on a net basis or simultaneously realize the asset and settle the liability. The Company classifies non-derivative financial liabilities in the category of other financial liabilities. Such financial liabilities are initially recognized at fair value plus any directly attributable transaction expenses. Subsequent to initial recognition, these financial liabilities are measured at amortized cost calculated using the effective interest rate. Other financial liabilities consist of loans and borrowings, trade payables and other liabilities. i) Stockholders equity Common stocks Stock capital consists of common stocks. Costs that are directly attributable to the issue of new stocks, which are not related to business combinations, are recorded as a deduction from equity. Stocks repurchase The amount paid for the stocks, including directly attributable costs, is recognized as a decrease in equity and reserves. Repurchased stocks are classified as treasury stocks and presented as a deduction to equity and reserves. j) Inventories Inventories consist of raw materials, spare parts, finished products and merchandise. Inventories are measured at cost or net realizable value, whichever is lower. Costs of inventories comprise all purchase costs, costs of conversion and other costs incurred in bringing the inventories to their present location and in a certain state. The cost of raw material and valued by the weighted average prices, while finished goods and semi-finished products are valuated at standard prices. Small inventory is depreciated by 100% when put into use, other than tires that are described linearly over 12 months. 30

33 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) k) Impairment Value adjustment of inventory goods is performed on item by item basis if those inventories are damaged, if they have become wholly or partially obsolete, or if their selling prices have declined. A financial asset is reduced if objective evidence indicates that one or more events have had a negative effect on future cash flows of that asset. Impairment of financial assets measured at amortized cost is calculated as the difference between the carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. Impairment of financial assets for sale is calculated in relation to their current fair value. Individually significant financial assets are tested for impairment on an individual level. Other financial assets are assessed collectively with other financial assets of the Company and the Group of the similar credit risk. Impairment losses are recognized in profit or loss. The cumulative loss in respect of financial assets available for sale recognized directly in equity is removed from equity and recognized in profit or loss. An impairment loss is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and financial assets available for sale that are debt securities, the reversal is recognized in profit or loss. For financial assets available for sale that are equity securities, the reversal is recognized directly in equity. ii.) Non-financial assets The carrying value of non-financial assets of the Company and the Group, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is assessed. For goodwill and intangible assets that have indefinite lives or that are not yet ready for use, the recoverable amount is determined at each reporting date. An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Cash-generating unit is the smallest group of assets that can be identified and generates cash flows that are independent from other assets and groups of assets. Impairment losses are recognized in profit or loss. Impairment losses relating to cash generating units are allocated first to reduce the amount of goodwill allocated to the units, and then to reduce the carrying value of the actual amount of the other assets in the unit (group of units) in the same proportion. The recoverable amount of an asset or cash-generating unit is recognized in the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset. 31

34 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) m) Impairment (continued) ii.) Non-financial assets (continued) Impairment loss on goodwill is not reversed. Impairment losses recognized in prior periods are assessed at the reporting date for any indications that the loss no longer exists or has decreased. An impairment loss is reversed if there is a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only if the carrying value of the assets does not exceed the carrying amount that would have been determined, minus depreciation, and impairment losses on assets not recognized. l) Provisions A provision is recognized if, and only if, the Company or the Group has a present obligation (legal or constructive) as a result of a past event and it is likely that to settle the obligation outflow of economic resources will be required and if possible a realistic estimate of the amount. The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured on the basis of estimated cash flows, the amount is the present value of the expected expenditure required to settle the obligation. If it is expected that some or all of the expenditures required to settle a provision will be compensated by a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of compensation can be measured reliably. m) Employees earnings i.) Contributions to mandatory pension fund Obligations for contributions to mandatory pension fund are recognized as an expense in profit or loss in the period in which they occur. ii.) Severance and jubilee award costs Severances and jubilee awards are determined based on valuations carried out at each balance sheet date. Actuarial gains and losses are recognized in the period in which they arise in the income statement. Past service cost is recognized immediately to the extent that the benefits are already vested. Otherwise, it is amortized on a basis over the average period until the entitlement to benefits. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation. iii.) Bonuses Liabilities for employee bonuses are recognized in provisions based on the formal plan of the Company, when based on the previous experience of Management Board, or key employees, it can be realistically expected the bonuses to be received and when the amount of the bonus can be determined before the publication of financial statements. 32

35 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) m) Employees earnings (continued) iii.) Bonuses (continued) Liabilities for bonus plans are expected to be settled within 12 months of the reporting date and are measured at the amounts expected to be paid. Liabilities for employee bonuses are recognized in provisions based on the formal plan, when based on the previous experience of Management Board, or key employees, it can be realistically expected the bonuses to be received and the amount of the bonus can be determined before the publication of financial statements. n) Revenue recognition Sales revenue is recognized in the net of returns, discounts, bonuses and premiums, as well as for taxes directly connected with the sale of products and services rendered, represent amounts invoiced to third parties. Revenue is recognized at the time the goods is shipped or services performed, and when the significant risks and rewards of ownership of the goods are transferred to the buyer. Sale of goods Revenue from the sale of goods is recognized when all of the following conditions are met: The Company has transferred to the buyer the significant risks and rewards of ownership of the goods; The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; The amount of revenue can be measured reliably; It is probable that the economic benefits associated with the transaction will flow to the Company; and The costs incurred in respect of the transaction can be measured reliably. Services Revenues on services are recognized in profit or loss to the stage of completion of the transaction at the reporting date. The stage of completion is assessed based on the documentation of the work. o) Accounting presentation of leases lessee is the Company Leases of property, facilities, equipment and intangible assets where the company accepts almost all benefits and risks of ownership are classified as finance leases. Finance leases are capitalized at the lower of fair value and the estimated present value of the related lease payments. Corresponding obligation for rent, net of financial expenses is recorded within the long-term and short-term liabilities, depending on the maturity. The interest element of the finance costs is charged to profit or loss over the lease period. Property, facilities and equipment acquired under a finance lease are amortized over their useful lives. Leases of assets, under which the benefits and risks of ownership are retained by the lessor, are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the lease term. If an operating lease is terminated before the expiry of the lease, all payments to the lessor in the form of penalty is recognized as an expense in profit or loss in the period in which there has been a cancellation. 33

36 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) p) Financial income and expenses Financial income and expenses comprise interest payable on loans and borrowings using the effective interest method, interest receivable on funds invested, dividend income, gains and losses from foreign exchange differences, gains and losses on financial assets at fair value through profit and loss. Interest income is recognized in the income statement as it accrues, using the effective interest rate. Dividend income is recognized in the income statement on the date when the right to receive payment. Finance expenses comprise interest expense on borrowings, changes in the fair value of financial assets at fair value through profit or loss, the impairment loss of financial assets, loss from exchange rate differences. Borrowing costs are recognized in profit or loss using the effective interest rate, except those on qualifying assets (Note 3f). q) Taxes Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss up to the amount of income tax relating to items recognized directly in equity when the income tax expense is recognized in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous periods. Deferred tax is provided using the balance sheet liability, and to account for temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of goodwill; the initial recognition of an asset or liability in a transaction other than a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled companies, when it is probable that the situation will not change in the near future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse based on the laws in effect at the reporting date. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available to be utilized. Deferred tax assets are reduced to the extent that it is no longer likely to be available as tax relief. 34

37 GENERA Inc. Financial statements June 30, Summary of significant accounting policies (continued) r) Segment information The segment is part of the Company and the Group which can be removed or as a part engaged in providing products or services (business segment), or as a part engaged in providing products or services with in a particular economic environment (geographical segment), which is subject to risks and rewards that differ from those of other segments. The Company and the Group do not report, i.e. there is no internal reporting according to segments other than income by geographical area. At the level of the Company, sales revenues include veterinary medicinal products, vitamin and mineral supplements, disinfectants for veterinary use, plant protection products and human medicines. s) Comparatives Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures. 4. Mergers Pursuant to the Merger Agreement, the decision of General Meeting and the decision of the Commercial Court of June 14, 2016, the company Genera Analitika d.o.o. was merged with all its assets, rights and obligations to the Company. The effect of coupling was as follows: June 14, 2016 Deferred tax assets 16 Inventories - Receivables from related parties Receivables 146 Cash and cash equivalents 10 Liabilities due to related parties (661) Liabilities due to suppliers (438) Other liabilities (931) Effect on equity and reserves 273 Since the merger relates to the company under the joint control of the owner of the company Genera d.d., the effect of the merger in the amount of HRK 273 thousand was recognized in equity and reserves. 35

38 GENERA Inc. Financial statements June 30, Intangible assets Changes in the value of intangible assets of the Group in 2015 and 2016 were as follows: Software Registration Assets under Total file construction HRK '000 HRK'000 HRK'000 HRK'000 Purchase value Balance at 1 January Addition of assets in Transfer from assets under construction (1.932) - Other reductions/increases (206) (2.356) (599) Balance at 31 December Reclassification (2.225) - Addition of assets in Transfer from assets under construction (4.040) - Expense (18) (45) - (63) Booking out previously adjusted assets - - (568) (568) Balance at 30 June Accumulated amortization Balance at 1 January Charge of the current year Disposals (206) (69) - (275) Asset value adjustment Balance at 31 December Charge of the current year Disposals Booking out previously adjusted assets - - (734) (734) Asset value adjustment Balance at 30 June Net book value At 31 December Balance at 30 June

39 GENERA Inc. Financial statements June 30, Intangible assets (continued) Changes in the value of intangible assets of the Company in 2015 and 2016 were as follows: Purchase value Software Registration file Assets under construction Total HRK '000 HRK '000 HRK '000 HRK '000 Balance at 1 January Addition of assets in Transfer from assets under construction (1.295) - Expense (206) (133) (142) (481) Merger of Genera Lijekovi d.o.o Balance at 31 December Addition of assets in Transfer from assets under construction (4.040) - Expense - (45) (568) (613) Balance at 30 June Accumulated amortization Balance at 1 January Charge of the current year Book out as expenditure (206) (62) - (268) Merger of Genera Lijekovi d.o.o Asset value adjustment Balance at 31 December Charge of the current year Book out as expenditure - (13) - (13) Asset value adjustment (568) 166 Balance at 30 June Net book value At 31 December Balance at 30 June Assets under construction of the Company and the Group relates to the registration files, which are under investigation by the authorized institution, for the purpose of obtaining licenses for the manufacture and sale of certain products. 37

40 GENERA Inc. Financial statements June 30, Property, facilities and equipment Changes in the value of long-term tangible assets of the Group during 2015 and 2016 were as follows: Land Buildings Facilities and equipmen Tool, facility and office supplies Tangible assets under constructio Advances for tangible assets Purchase value HRK '000 HRK '000 HRK'000 HRK'000 HRK'000 HRK'000 HRK '000 At 1 January Addition of assets in Transfer of advances (1.887) - Transfer from assets under (9.650) - - Expenditure or reduction - - (10.213) (366) (1.897) - (12.476) At 31 December Investment property - (2.391) (2.391) Addition of assets in Transfer of advances (20) (20) Transfer from assets under (659) - - Expenditure or reduction - (5.060) (1.825) (974) - - (7.859) At 30 June Accumulated amortization At 1 January Amortization for the period Disposals - - (10.159) (366) - - (10.525) At 31 December Investment property - (1.984) (1.984) Amortization for the period Disposals - (5.012) (1.821) (301) - - (7.134) Asset value adjustment At 30 June Total Net book value At 31 December At 30 June On June 30, 2016, the Group used assets that are fully amortized, and of purchase value of HRK 161,591 thousand HRK (2015: 161,431 thousand HRK). 38

41 GENERA Inc. Financial statements June 30, Property, facilities and equipment (continued) Changes in the value of long-term tangible assets of the Company during 2015 and 2016 were as follows: Tools, facilities Land Buildings Facilities and and office equipment supplies Tangible asset under con. Advances for tangible assets Purchase value HRK'000 HRK'000 HRK '000 HRK'000 HRK '000 HRK'000 HRK '000 At January 1, Addition of assets in Transfer of advances (1.872) - Transfer into use (9.296) - - Expenditure or reduction - - (10.213) (181) (1.897) - (12.291) Merger of Genera Lijekovi d.o.o At December 31, Addition of assets in Transfer of advances (20) (20) Transfer into use (1.757) - 1 Expenditure or reduction - (5.002) (1.825) (986) - - (7.813) Merger of Genera Analitika d.o.o At June 30, Accumulated amortization At January 1, Amortization for the period Expenditure or reduction - - (10.210) (180) - - (10.390) Merger of Genera Lijekovi d.o.o At December 31, Amortization for the period Expenditure or reduction - (5.002) (1.806) (311) - - (7.119) Asset value adjustment Merger of Genera Analitika d.o.o At June 30, Net book value At December 31, At June 30, Total 39

42 GENERA Inc. Financial statements June 30, Property, facilities and equipment (continued) On June 30, 2016, the Company used the assets that are fully depreciated, and of purchase value of 161,591 thousand HRK (2015: 161,096 thousand HRK). a) Investment property - Company Buildings Purchase value HRK'000 At January 1, Increases 165 Merger of Genera Lijekovi d.o.o. (12.999) At December 31, Merger Genera Analitika d.o.o. (23.949) At June 30, Accumulated amortization At January 1, Amortization for the period Merger of Genera Lijekovi d.o.o. (8.791) At December 31, Amortization for the period 527 Merger Genera Analitika d.o.o. (17.563) At June 30, Net book value At December 31, At June 30, Leased assets - Company In 2015, the total area under buildings amounted to 32,670 square meters and included 10,031 square meters of space that has been leased to subsidiaries. In 2016, the total area under the buildings is 29,910 square meters and there is no more space leased to subsidiaries. Area under the buildings has been reduced because of demolition and removal of old buildings. The total amount of the demolished building in 2016 amounts to 2,760 square meters. The Management Board has estimated the fair value of total real estate (l and and buildings) of the Company to the amount of 126,920 thousand HRK. 41

43 GENERA Inc. Financial statements June 30, 2016 b) Investment property - Group Buildings Purchase value HRK'000 At January 1, At December 31, At June 30, Accumulated amortization At January 1, Amortization for the period 96 At December 31, Amortization for the period 48 At June 30, Net book value At December 31, At June 30, Inventories Group Group Company Company June 30 December 31 June 30 Dec Raw materials and supplies HRK' HRK' HRK' HRK' Final products Work in progress Merchandise Inventories value adjustment (7.271) (560) (7.271) (560) Accounts receivable Group Group Company Company June 30 December 31 June 30 December Accounts receivable in the country HRK' HRK' HRK' HRK' Accounts receivable abroad Provision for impairment (22.158) (22.540) (22.158) (22.540) The movement of provision for impairment of receivables were as follows: 42

44 GENERA Inc. Financial statements June 30, 2016 Group Group Company Company HRK '000 HRK '000 HRK '000 HRK'000 1 January Impairment during the year Collected during the year (1.240) (10) (1.240) (10) 30 June Other receivables Group Group Company Company 30. June 31. Dec 30. June 31. Dec HRK '000 HRK '000 HRK '000 HRK'000 Receivables from employees and members Receivables from government and other institutions Other receivables Financial assets Group Group Company Company 30. Jun Dec Jun Dec 2015 HRK '000 HRK '000 HRK '000 HRK '000 Loans to subsidiaries Cash and cash equivalents Bank accounts in HRK Group Group Company Company 30 June 31 Dec 30 June 31 Dec HRK' HRK' HRK' HRK' Bank accounts in foreign currency By cash deposited in banks the Group and the Company receive a vista interest at the rate ranging from 0.01% % per year. 43

45 GENERA d.d. Financial statements June 30, Equity and reserves June 30, 2016 December 31, 2015 Number of % Number of % stocks stocks EurovetAnimalHealth ,99 Marijan Hanžeković ,99 Genera d.d. (own) ,10 Genera d.d. (own) ,97 Suić Goran ,14 Drpić Grozdana ,19 Žagar Živojin ,10 Perić Ivan ,14 Nikolić Igor ,08 Lekić Zvonko ,10 Other ,59 Other , On June 30, 2016 the registered and paid up equity amounts to 184,486 thousand HRK (December 31, 2015: 184,486 thousand HRK). Stock capital consists of 1,844,860 stocks (December 31, 2015: 1,844,860 stocks). The nominal value of each share is HRK 100 (December 31, 2015: 100 HRK). Own (treasury) stocks On June 30, 2016 the Company holds 186,400 own stocks (December 31, 2015: 165,488 stocks) of the total nominal value of 18,640 thousand HRK and of the purchase value of 14,634 thousand HRK. 13. Loans a) Long-term loans Currency Nominal interest rate Due date Group Group Company Company 30. June 31. Dec 30. June 31. Dec HRK 000 HRK 000 HRK 000 HRK 000 Secured bank loans HRK 3.00% % Secured bank loans EUR 4.00% % Unsecured loans of banks EUR 3.47% % 2016 and financial institutions Current portion - (20.136) - (20.136) The maturities of long-term loans for the Group and the Company are as follows: Group Group Company Company 30 June 31 Dec 30 June 31 Dec HRK'000 HRK'000 HRK'000 HRK'000 Less than one year Between 1 and 5 years More than 5 years Current portion - (20.136) - (20.136)

46 GENERA Inc. Financial statements June 30, Loans (continued) b) Short-term loans Group Group Company Company Nominal 30. June Dec June Dec 2015 Curren interest rate Due date HRK 000 HRK 000 HRK 000 HRK 000 Dechra Pharmaceuticals PLC HRK 4% Current portion Provisions Group Group Company Company 30. June 31. Dec 30. June 31. Dec Provisions for jubilee awards and severances HRK '000 HRK '000 HRK '000 HRK' Long-term liabilities to subsidiaries Group Group Company Company 30 June 31 December 30 June 31 December HRK '000 HRK '000 HRK '000 HRK '000 Long-term loan Dechra, HRK Long-term loan, EUR Secured bank loans are secured by a corporate guarantee of Dechra Pharmaceuticals PLC. 16. Liabilities due to suppliers Group Group Company Company 30 June 31 Dec 30 June 31 Dec Suppliers in the country HRK' HRK' HRK' HRK' Foreign suppliers Liabilities for unbilled goods

47 GENERA Inc. Financial statements June 30, Other liabilities Group Group Company Company. June 30, Dec 31, June 30, Dec 3, Liabilities to employees for severances and salaries Taxes and contributions Other liabilities HRK'000 HRK'000 HRK'000 HRK' Deferred revenue Group Group Company Company 30 June 31 Dec 30 June 31 Dec HRK'000 HRK'000 HRK'000 HRK'000 Deferred revenue Long-term Short-term note Most of the deferred revenue in the amount of 28,058 thousand (2015: 28,503 thousand HRK) relates to deferred revenue on the basis of the financing facility for the production of Mepron of third party, and for which the Company has no cash outflow. Deferred revenue is recognized in the period when the amortization costs are recognized, arising from fixed asset spending Mepron production facility. 19. Accrued expenses and deferred income Group Group Company Company 30 June 31 December 30 June 31 December Accrued expenses of super-rebate for customers Accrued severance expenses Accrued expenses for non-received invoices Short-term portion of deferred revenue note 18 Other expenses HRK'000 HRK'000 HRK'000 HRK'

48 GENERA Inc. Financial statements June 30, Sales revenue Sales revenues per markets were as follows: Group Group Unaudited Company Company Unaudited HRK' HRK' HRK' HRK'000 Croatia Super-rebates and discounts in Croatia (6.555) (9.048) (6.555) (7.728) Bosnia and Herzegovina Slovenia Serbia Macedonia Germany Iran Other countries Super-rebates and discounts abroad (1.033) (1.195) (896) (1.021) Other operating revenues Group Group Unaudited HRK '000 Company Company Unaudited HRK ' HRK '000 HRK '000 Revenue from reversal of provisions Revenue from services in the domestic Revenue from services in foreign market Revenue from the sale of fixed assets Revenue from rental property Revenue from recoveries Other income The cost of materials and energy Group Group Unaudited HRK ' Company Company Unaudited HRK ' HRK '000 HRK '000 Raw materials and supplies Energy Spare parts and small inventory

49 GENERA Inc. Financial statements June 30, Cost of services Group Group Unaudited Company Company Unaudited Telecommunications services HRK' HRK' HRK' HRK' Transportation services Maintenance Rent Publicity Occupational health services Consulting services Computer services Cleaning services Restructuring costs Production services Other services Staff costs Group Group Unaudited HRK' Company Company Unaudited HRK' HRK'000 HRK'000 Net salaries and wages Taxes and contributions from Contributions on salary The average number of employees in the Group during 2016 was 253 (2015: 276). During the year, the Group accounted for 3,623 thousand (2015: 8,195 thousand) contributions for mandatory pension fund. The average number of employees in the Company during 2016 was 225 (2015: 232). During the year, the Company has accounted for 3,376 thousand HRK ( 2015: 7,163 thousand HRK) of contributions for mandatory pension fund. 25. Amortization Group Group Unaudited Company Company Unaudited HRK '000 HRK '000 HRK '000 HRK '000 Intangible assets Tangible assets Investment property

50 GENERA Inc. Financial statements June 30, Value adjustment Group Group Unaudited Company Company Unaudited Inventories HRK' HRK' HRK' HRK'000 - Buyers Long-term intangible assets Other operating expenses Group Group Unaudited HRK ' Company Company Unaudited HRK ' HRK '000 HRK '000 Business trip expense Employee remuneration (transport) Authorial fees and service contracts Supervisory Board compensations Non-production services Representation Insurance premiums Costs of environment protection Banking fees Cost of professional training Taxes and contr. dependent on result Agents commissions Cost of quality control Other costs Net financial result Group Group Unaudited Company Company Unaudited HRK'000 HRK'000 HRK'000 HRK'000 Financial income Interest income and foreign exchange gain from related parties Interest income and foreign exchange gain from unrelated parties Financial expenses Interest expense and foreign exch. loss from related parties Interest expense and foreign exch. loss from unrelated parties Net financial result (839) (3.075) (818) (3.573) 49

51 GENERA Inc. Financial statements June 30, Income tax and deferred taxes Group Group Company Company Unaudited Unaudited HRK '000 HRK '000 HRK '000 HRK'000 Current tax (1.694) (20) (1.633) (20) Deferred tax (4.022) (3.888) (398) (4.042) (384) (3.908) Effective income tax rate reconciliation: Group Group Company Company Unaudited Unaudited HRK '000 HRK '000 HRK '000 HRK'000 Profit before tax (13.186) (13.155) Income tax at the rate of 20% (2.669) (3.381) Non-deductible expenses (5.762) (497) (5.754) (344) Non-taxable income and tax deductions Effect of different tax rates (1) (1) - - Utilization of previously unrecognized tax losses Unrecognized tax losses Use of unrecognized deferred tax (895) (203) Income tax (expense)/income 398 (4.042) 384 (3.908) Effective tax rate 3% 30% 3% 23% Deferred tax assets Group Value adjustment, Tax losses reservation Total and accrued expenses HRK'000 HRK'000 HRK'000 Balance at 1 January Tax charged to profit or loss At 31 December Balance at 1 January Tax charged to profit or loss (576) Balance at 30 June

52 GENERA Inc. Financial statements June 30, Income tax and deferred taxes (continued) Company Tax losses Total HRK'000 HRK'000 HRK'000 Balance at 1 January Tax charged to profit or loss At 31 December Balance at 1 January Tax charged to profit or loss (576) Balance at 30 June Structure of deferred tax assets of the Group: June 30, 2016 HRK '000 Tax losses from 2014 expires on 30 June Tax losses from 2015 expires on 30 June Tax losses from 2016 expires on 30 June Tax losses from 2015 expires on 31 Dec Total tax losses: 105 Temporary tax differences: Total tax losses and temporary differences: Not recognized as deferred tax assets: (2.028) Recognized as deferred tax assets: Croatian tax legislation does not allow tax losses between companies within the Group. To date, the Tax Administration has not conducted an audit of the income tax returns of the Company. In accordance with applicable law, the Tax authorities may at any time inspect books and records within 3 years after the expiry of the year when the tax liability is reported and may impose additional tax assessments and sentence. The Company's Board is not aware of any circumstances, which may give rise to a potential material liability in this respect. Croatian Income Tax Act is subject to different interpretations and changes in respect of certain costs that reduce the tax base. Interpretation of the law by the Board concerning the Company's transactions with related parties may be challenged by the relevant authorities. The Tax Administration may take more determined attitude in the interpretation of law and assessments, and there is the possibility that they challenge those transactions and activities that have not been disputed in the past. The Tax Administration can review all open financial periods within three years, preceding the year in which the inspection was performed. 51

53 GENERA Inc. Financial statements June 30, 2016 The Company's Management Board believes that their interpretation of the relevant law is applicable and that the Company will hold in its tax position. 30. Balances and transactions with subsidiaries and affiliated parties The Company believes that it has an immediate related party relationship with its key stockholders (see note 15), and entities under their control or influence (subsidiaries and affiliates); key management (see below); close family members of key management personnel; and legal entities that are controlled or significantly influenced by key management personnel and their close family members, in accordance with the provisions set out in International Accounting Standards 24: Related Party Disclosures ( IAS 24 ). Sale/purchase of prod. and services Revenues Expenses Unaudited Unaudited HRK'000 HRK'000 HRK'000 HRK'000 Genera Analitika d.o.o Genera Lijekovi d.o.o Genera SI d.o.o., Slovenia Genera d.o.o., Sarajevo - 12 Genera Pharma d.o.o., Belgrade Dechra Veterinary Products A/S By Loan Agreement of 30 May 2011, and the annexes in 2016, the company Genera d.o.o. Sarajevo, Bosnia and Herzegovina, was approved loans totaling EUR 493 thousand (3,780 thousand HRK), due date on December 31, Receivables on 30 June 2016 amounted to 557 thousand (December 31, 2015: 433 thousand HRK). Realized interest income in 2016 amounted to HRK 33,000 (2015: 21 thousand HRK). Review of business transactions that the Company had with related parties in 2016 and 2015: Receivables Liabilities 30 June 31. Dec 30 June 31. Dec HRK '000 HRK'000 HRK '000 HRK'000 Operating activities: Dechra Veterinary products A/S Genera Analitika d.o.o Genera SI d.o.o., Ljubljana

54 GENERA Inc. Financial statements June 30, 2016 Review of financial transactions that the Company had with related parties in 2016 and 2015: Receivables Liabilities 30 June 31. Dec 30 June 31. Dec Financial activities HRK '000 HRK'000 HRK '000 HRK'000 Dechra Pharmaceutical PLC Genera d.o.o., Sarajevo Genera Pharma d.o.o., Belgrade In 2016, the Company has received a loan from the subsidiary Dechra Pharmaceutical PLC, in the amount of HRK 3,500 thousand and EUR 4,700 thousand euros, while during 2015 the Company received a loan in the amount of HRK 5,000 thousand. 31. Compensation of key management personnel Total compensation fees paid to key management personnel of the Group amounted to HRK 1,312 thousand ( 2015: 8,350 thousand HRK). Total fees paid to key management personnel of the Company amounts to HRK 1,312 thousand (2015: 7,897 thousand HRK). Compensation of key management personnel relates to short-term employee benefits. The fee applies to short-term benefits of 4 members (2015: 6 members) of the Board and other key management personnel - directors. 32. Financial risk management In their use of financial instruments, the Company and the Group are exposed to the following risks: credit risk liquidity risk market risk This note presents information about the Company and the Group's exposure to each of the above risks, the objectives of the Company and the Group, policies and procedures for measuring and managing risk of the Company and the Group and managing capital of the Company and the Group. Management Board has overall responsibility for the establishment and control of the risk management framework of the Company and the Group. There are no written procedure on risk management (Company and the Group did not use derivative financial instruments to actively hedge against financial risks) but the Board monitors operational risks of the Company and the Group, including the establishment of authorization and accountability. Exposure to credit, interest rate and exchange rate risks is a part of ordinary operations of the Company and the Group. Company and the Group did not use derivative instruments to protect themselves from these risks. 53

55 GENERA Inc. Financial statements June 30, Contractual and potential liabilities The following table shows the guarantees and letters of credit: Group 2016 HRK 000 Group 2015 HRK 000 Company 2016 HRK 000 Company 2015 HRK 000 Guarantees - in HRK Letters of credit in foreign currency The Company documented letters of credit as security for payment to foreign suppliers, or for achieving prolonged payment dates. All obligations under the letters of credit are also included in the total trade payables and do not present additional or increased obligation of the Company. The Company duly pays all its obligations to open letters of credit to maturity. Liabilities for operating lease Annual liabilities under non-cancellable operating leases are as follows: Group 2016 HRK 000 Group HRK Company 2016 HRK 000 Company 2015 HRK 000 Within one year From 1 to 5 years Operating leases relate to vehicle rental. During 2015, the Group recognized HRK 1,831 thousand (2014: 2,007 thousand HRK) of expenses in the income statement in the name of the operating lease. During 2015, the Company recognized HRK 1,657 thousand (2014: 1,694 thousand HRK) of expenses in the income statement in the name of the operating lease. Potential liabilities The Company and the Group are defendants in several lawsuits that have arisen in the ordinary course of business of the Company and the Group. According to the Board opinion, the final outcome of these matters will be in favor of the Company and the Group, therefore no provision has been made. As at December 31, 2015 the Company had no capital liabilities. 54

56 GENERA Inc. Financial statements June 30, Significant accounting estimates and judgements Critical judgments in applying accounting policies The preparation of financial statements in accordance with CFRS requires the Board to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are continuously reviewed. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods, if the revision affects both current and future periods. (i) Deferred tax assets Deferred tax assets represent income taxes recoverable through future deductions from taxable profits and are recorded in the statement of financial position. Deferred tax assets are recognized up to the tax benefit that is likely to be achieved. In determining future taxable profits and the amount of tax revenue that is likely to be realized in the future, Management Board makes judgments and makes estimates based on taxable income from the previous year and the expectations of future income that are believed to be reasonable under the circumstances. (ii) Profit tax Calculation of income tax is made on the basis of interpretation of current laws and regulations. The calculations, which are the basis for the calculation of income tax can be assessed by tax authorities. (iii) Useful lives of property, facilities and equipment The Company reviews the estimated useful lives of property, facilities and equipment at the end of each annual reporting period. There were no changes in estimates of the lifetime of the long-term asset. (iv) Consequences of certain lawsuits The Company is a party to certain lawsuits arising in the normal course of their operations. Management Board uses estimates when the probable outcome of these actions has been estimated, and the provisions are recognized on a consistent basis. (v) Impairment test of investments in subsidiaries and loans to subsidiaries Every year the Company tests the recoverability if there is an indication of testing recoverability of investments in subsidiaries and loans granted to subsidiaries. The calculation used projections of future cash flows and other factors such as the discount rate and the rate of growth. 55

57 GENERA Inc. Financial statements June 30, Significant accounting estimates and judgements (continued) (vi) The test for impairment of inventories If the assets are in excess of the recoverable amount, in that case the Company recognizes an impairment loss. The Company has made the assessment of recoverable/fair value of all assets of the business areas of human pharmaceuticals and adequately recognized impairment on the balance sheet date. (vii) Borrowing costs Borrowing costs are attributable cost of the registration dossier relating to the acquisition and preparation of the registration dossier i.e. qualifying asset. Registration dossier is an asset that necessarily takes a substantial time to get ready for its intended use. Borrowing costs are attributable to the registration dossier until the file is ready for its intended use or sale. (viii) Registration file Company is exposed to the risk of procedure for registration and approval of drugs that depends on the regulator and the quality of registration documentation obtained from licensed partners. The risk is reduced through a process prescribed by the regulator, constant communication with them and checking the quality of the initial documentation provided by the partners. The process of registration itself takes between 1 and 4 years. For activated files, and for those in preparation, the market is analyzed and based on the projected future economic benefits their recoverability is estimated. 56

58

59 Genera d.d. Konsolidirani i nekonsolidirani financijski izvještaji i godišnje izvješće na dan 30. lipnja godine zajedno s izvješćem ovlaštenog revizora

60 Genera d.d. 30. lipnja 2016 Sadržaj Godišnje izvješće 2-8 Odgovornost za financijske izvještaje 9 Izvješće neovisnog revizora dioničarima Genera d.d Financijski izvještaji: Konsolidirana bilancana dan 30. lipnja Nekonsolidirana bilancana dan 30. lipnja Konsolidirani račun dobiti i gubitka za godinu završenu 30. lipnja Nekonslidirani račun dobiti i gubitka za godinu završenu 30. lipnja Konsolidirani izvještaj o novčanim tijekovima za godinu završenu 30. lipnja Nekonsolidirani izvještaj o novčanim tijekovima za godinu završenu 30. lipnja Konsolidirani izvještaj o promjenama kapitala za godinu završenu 30. lipnja Nekonsolidirani izvještaj o promjenama kapitala za godinu završenu 30. lipnja Bilješke uz financijske izvještaje 22-55

61 Genera d.d. 30. lipnja 2016 GODIŠNJE IZVJEŠĆE Ukupni konsolidirani prihodi Genera Grupe u razdoblju I-VI godine smanjili su se za 18,7% u odnosu na prethodnu godinu te iznose 107,8 milijuna kuna. Glavni razlozi nižih prihoda su napuštanje segmenta humanih lijekova te dinamika prihoda vezano uz ugovornu proizvodnju. 50% ukupne prodaje ostvareno je na izvoznim tržištima. Pad prodaje odrazio se i na pad bruto dobiti od 25,3%, te ona iznosi 40,1 milijun kuna. Ovu godinu obilježili su značajni jednokratni troškovi u ukupnom iznosu od 17,6 milijuna kuna. Navedeni iznos odnosi se na troškove restrukturiranja i povezanih otpremnina, troškove izlaska iz poslovnog područja humane farmaceutike te druga vrijednosna usklađivanja koja se odnose na potraživanja i zalihe. Navedeni troškovi bili su jedna od nužnih mjera za stvaranje preduvjeta koji će omogućiti postizanje poslovnog uspjeha Društva u budućnosti. U ove troškove uključene su i stavke povezane s rušenjem zgrada i skladišta koje nisu u upotrebi, a ovaj građevinski zahvat potaknut je ciljem ostvarivanja viših standarda sigurnosti i osiguranja na proizvodnoj lokaciji u Kalinovici. Slijedom svega navedenoga operativni gubitak Genera Grupe za godinu iznosi 12.3 milijuna kuna, a neto gubitak 10,7 milijuna kuna. U promatranom razdoblju Genera je nastavila investicijska ulaganja, kako u materijalnu, tako i u nematerijalnu imovinu. Ukupne investicije u godini iznose 4,2 milijuna kuna, od čega se na nematerijalnu imovinu odnosi 2,17 milijuna kuna. Budući da su cjepiva strateška odrednica kompanije, tijekom promatranog razdoblja, ulaganja u njihov razvoj i dalje su imala prioritet, a sve sa ciljem ekspanzije na internacionalna tržišta. Polovne aktivnosti vezano za razvoj proizvodnog portfelja Genera Grupe Ključna poslovna aktivnost koja je obilježila ovo razdoblje je registracija cjepiva Avishield ND. Registracija po decentraliziranoj proceduri (DCP) uspješno je završena u siječnju u 12 članica Europske unije, i to u Velikoj Britaniji, Belgiji, Španjolskoj, Grčkoj, Hrvatskoj, Mađarskoj, Nizozemskoj, Njemačkoj, Poljskoj, Portugalu, Rumunjskoj i Sloveniji. Ovaj proizvod pod nazivom Pestikal La Sota SPF već je godinama prisutan na tržištima Hrvatske, Turske, Maroka, Alžira, Egipta, Irana, Sri Lanke, Ukrajne, Albanije, Kosova, Makedonije, te Bosne i Hercegovine. Ishodovanjem ovog europskog registracijskog rješenja značajno se povećava broj tržišta i proširuje teritorij na kojima Genera može plasirati ovo peradarsko cjepivo protiv New Castle- ske bolesti. U lipnju Avishield ND cjepivo uspješno je lansirano na Njemačko tržište. Avishield je izabran kao krovno ime za sve postojeće i buduće proizvode iz linije peradarskih cjepiva kompanije. U istom vremenskog razdoblju, ključna aktivnost vezano uz asortiman veterinarskih lijekova je završena DCP procedura za antiparazitik Canihelmin plus u osam članica Europske unije (Španjolskoj, Bugarskoj, Češkoj, Irskoj, Njemačkoj, Poljskoj, Rumunjskoj i Velikoj Britaniji). Ovaj zahtjevan postupak završen je registracijom proizvoda u travnju

62 Genera d.d. 30. lipnja 2016 GODIŠNJE IZVJEŠĆE (nastavak) U asortimanu Cjepiva, u istom vremenskom razdoblju, ishodovana su rješenja za obnovu registracija sedam cjepiva, te je u postupak predana dokumentacija za obnovu registracije 1 cjepiva. U segmentu veterinarskih lijekova u istom razdoblju ishodovana su dva nova rješenja u dvije zemlje te rješenja za 5 obnova registracija, a u postupak obnove predana su 4 registracijska file-a. Tijekom godine u segmentu razvoja poslovanja Genera nastavlja sve aktivnosti s ciljem proširenja i modernizacije proizvodnog portfelja vlastitim razvojem te kroz suradnju sa stranim partnerima. Razvojni laboratorij biologije je u promatranom razdoblju nastavio s razvojem novih peradarskih cjepiva. Pet studija neškodljivosti i učinkovitosti je pokrenuto za postojeća cjepiva te je u pokrenuta jedna studija na proizvodu iz KF portfelja veterinarskih lijekova, a sve s ciljem izrade EU dokumentacije. U istom razdoblju licencirano je ukupno 7 novih proizvoda iza agro portfelja za tržišta Hrvatske i Bosne i Hercegovine. Značajna događanja u proteklom razdoblju / Restrukturiranje i integracija Genere u Dechru U navedenom razdoblju a sukladno strategiji matične kompanije provedeno je restrukturiranje Genere kojim su ostvareni preduvjeti za dugoročan razvoj poslovanja Genere i doprinos razvoju Dechra grupe. Nova organizacija odražava usmjerenost kompanije na razvoj matičnog, veterinarskog poslovanja. Kako bi se donijele odluke o restrukturiranju, projektni tim sastavljen od zaposlenika Dechre i Genere na čelu s integracijskim direktorom i članom Uprave Janom Jaapom Korevaarom u razdoblju od listopada do svibnja vršio je dubinsku procjenu poslovanja i pripremao plan integracije. Ova sveobuhvatna analiza poslovanja dovela je do zaključka da se Društvo bavi širokim rasponom različitih poslovnih aktivnosti, od kojih mnoge nisu niti ključne za budućnost poslovanja, te ne donose dobit i slabe konkurentsku poziciju tvrtke na tržištu. Ustanovljeno je da zbog nedostatka jasne usmjerenosti organizacije i zbog poslovanja na različitim područjima nastaju vrlo visoki troškovi, a budući da te poslovne aktivnosti nisu profitabilne, Društvo ne ostvaruje dobit koju bi moglo uložiti u budući rast i razvoj poslovanja već se za održavanje postojećeg stanja zadužuje. Na osnovi ove analize doneseni su sljedeći zaključci i odluke: 1. Nužno je usmjeriti aktivnosti Društva na profitabilna poslovna područja koja su ključna za budući napredak Društva. Društvo prestaje obavljati one poslovne aktivnosti koje ne predstavljaju osnovnu djelatnost Društva i koje stvaraju značajne gubitke. Stoga je Uprava Društva odlučila ukinuti poslovno područje Genera Lijekovi, kao i prodaju dezinficijenasa za ljudsku uporabu. 3

63 Genera d.d. 30. lipnja 2016 GODIŠNJE IZVJEŠĆE (nastavak) 2. Kako bi se osigurala veća usmjerenost Društva, potrebno je poduzeti sljedeće organizacijske korake: Sve aktivnosti povezane sa cjepivima bit će objedinjene u zasebnu poslovnu jedinicu koja obuhvaća razvoj, registraciju i proizvodnju peradarskih cjepiva. Prodaja veterinarsko-medicinskih proizvoda, dodatka prehrani za životinje i dezinficijensa za veterinarsku primjenu bit će organizirana kroz dvije regije: regiju Adriatic i regiju Ostatak svijeta. Agro segment bit će organiziran u zasebnoj organizacijskoj jedinici i obuhvaćat će poslove licenciranja, registracije, marketinga i prodaje agro proizvoda, te proizvoda za dezinsekciju i deratizaciju. 3. Profitabilnost Društva hitno se mora povećati, kako bi se omogućilo reinvestiranje dobiti u buduće poslovne aktivnosti u Kalinovici. Iz tog se razloga značajno moraju smanjiti ukupni troškovi poslovanja. 4. Društvo je potrebno restrukturirati uzevši u obzir smanjenje proizvodnih aktivnosti u pogonu specijalnih nutritivnih dodataka zbog odluke poslovnog partnera o osnivanju vlastite tvornice i pogonu tekućih sterilnih oblika zbog manjka investiranja u njega. Proces restrukturiranja odrazio se na broj radnika koji je potreban za obavljanje poslovnih operacija budući da je zatečeni broj zaposlenih bio neodrživ. Uz savjetovanje sa sindikalnim povjerenicima u okviru programa zbrinuto je 47 radnika. Otpremnine su isplaćivane u povoljnijim iznosima od onih propisanih Zakonom o radu i Pravilnikom o radu, a posebno vodeći računa o kategorijama zaposlenika s uvjetima za prijevremenu ili starosnu mirovinu, zaposlenicima s više od 18 godina staža kao i osobama s invaliditetom. Ciljevi ovog restrukturiranja i integracijskog procesa su stvaranje uže i zdravije organizacijske strukture Društva koja će omogućiti buduća ulaganja u razvoj i proizvodnju veterinarskih cjepiva u Hrvatskoj. Radi realizacije ovih ciljeva Uprava je donijela sljedeće odluke: Pokrenut projekt otvaranje nastambe za pokuse na peradi u skladu s GLP-om (Dobrom Laboratorijskom Praksom), koja će ubrzati razvoj šireg raspona cjepiva u budućnosti. Pokretanje rada Laboratorija za razvoj farmaceutskih proizvoda, s ciljem izrade formulacija i razvoja analitičkih metoda za projekte Društva. Proširenje registracijskog tima kako bi se olakšala registracija proizvoda Društva i Dechrinih proizvoda za izvozna tržišta. Završno s 30. lipnja provedena je reorganizacija poslovanja te je ova organizacijska struktura utvrđena novim Pravilnikom o poslovnom organiziranju. U svibnju je pokrenut i projekt Dekratizacije Genere koji obuhvaća sve aktivnosti povezane s promjenom imena kompanije iz Genera d.d. u Dechra d.d. Sama promjena imena kompanije planirana je do kraja 2016 godine, a projekt uključuje niz povezanih promjena u području registracija, proizvodnje te zadovoljavanje brojnih regulatornih obveza. U okviru projekta mijenjat će se brand kao i cjelokupni vizualni identitet kompanije. 4

64 Genera d.d. 30. lipnja 2016 GODIŠNJE IZVJEŠĆE (nastavak) Ostala značajnija događanja u godini U siječnju dioničari Genere obaviješteni su o pravičnoj naknadi koju se Društvo obvezuje isplatiti u iznosu od 179,60 kn za jednu dionicu. Određivanje pravične naknade uključilo je, u skladu s odredbom članka 332. stavak 9. Zakona o tržištu kapitala, podatke Zagrebačke burze d.d. o trgovanju na uređenom tržištu dionicama Društva u zadnja 3 mjeseca prije dana objave poziva na izvanrednu Glavnu skupštinu, 9. prosinca godine. Sukladno potvrdi Zagrebačke burze d.d. od dana 30. prosinca godine, prosječna ponderirana cijena redovne dionice Društva (oznake VERN-R-A) u razdoblju od 8. rujna godine do 8. prosinca godine iznosila je 170,68 kn, dok je u navedenom razdoblju na uređenom tržištu Zagrebačke burze d.d. redovnom dionicom Društva (oznake VERN-R-A) ostvareno 64,62% trgovinska dana (42 trgovinska dana). Kao konačnu pravičnu naknadu Društvo je odredilo iznos od 179,60 kn za jednu dionicu, što odgovara iznosu cijene za jednu dionicu Društva u obveznoj ponudi za preuzimanje Društva koju je u rujnu godine objavilo društva Dechra Pharmaceuticals PLC. U veljači dioničari su informirani o prestanku uvrštenja dionica društva Genere d.d. na Službenom tržištu Zagrebačke burze. 17. veljače bio je zadnji dan trgovine dionicama Genere na Službenom tržištu Zagrebačke burze pod oznakom VERN-R-A. Odluka o povlačenju dionica Genere iz uvrštenja na Zagrebačkoj burzi d.d. donesena je većinom većom od devet desetina danih glasova na Glavnoj skupštini održanoj 19. siječnja U ožujku dioničari GENERE d.d. obaviješteni su o načinu ostvarenja prava na otkup dionica od strane Društva i isplate pravične naknade za dionice Genere prema kojoj je Društvo obvezno isplatiti pravičnu naknadu u iznosu od 179,60 kn za jednu dionicu na dan 10. svibnja godine. Isplata pravične naknade za dionice Društva izvršena je putem Središnjeg klirinškog depozitarnog društva. 10. svibnja Središnje klirinško depozitarno društvo provelo je korporativnu akciju isplate pravične naknade delistiranje preknjižbom dionica oznake VERN-R A na račun izdavatelja GENERA d.d. Dioničarima koji su, zbog odluke o povlačenju dionica oznake VERN-R-A s uvrštenja na uređenom tržištu, zahtijevali od izdavatelja da preuzme njihove dionice isplaćena je pravična naknada u iznosu od 179,60 HRK po dionici. Proces pripajanja Genera Analitike d.o.o. Generi d.d. pokrenut je odlukom Uprave društva Genere d.d. kao Osnivača društva navedenog Društva u travnju godine. Temeljem sklopljenog ugovora o pripajanju iz travnja a u okviru mjera jačanja poslovne efikasnosti Genere d.d., ugovorene strane su se suglasile da se društvo Genera Analitika d.o.o. pripoji društvu Genera d.d. kao društvu preuzimatelju, prijenosom cijele imovine, prava i svih svojih obveza na društvo preuzimatelja. U lipnju Trgovački sud u Zagrebu objavio je upis pripajanja društva Genera Analitika d.o.o. društvu Genera d.d. kao društvu preuzimatelju. Kao razlog pripajanja utvrđuje se uspostava kvalitetnije poslovne i funkcionalne organizacije društva Genera d.d. i ovisnih društava s ciljem usmjeravanja aktivnosti društva Genera d.d. na profitabilna poslovna područja. Ovim pripajanjem, omogućit će se primjena optimalnih poslovnih procesa kao i racionalizacija poslovanja kroz centralizaciju određenih poslovnih funkcija, što će utjecati na ukupno povećanje poslovne efikasnosti društva Genera d.d. 5

65 Genera d.d. 30. lipnja 2016 GODIŠNJE IZVJEŠĆE (nastavak) U godini održane su tri sjednice Nadzornog odbora. Na konstituirajućoj sjednicu Nadzornog odbora u siječnju godine utvrđeno je da je većinski dioničar Društva, Eurovet Animal Health B.V., na temelju odredbe donio odluku o imenovanju gospodina Ian-a David-a Page-a za člana Nadzornog odbora. G. Ian David Page izabran je za zamjenika predsjednika Nadzornog odbora. Također, utvrđeno je da je skupština Društva održana 19. siječnja godine izabrala dva nova člana Nadzornog odbora, gđu. Anu Hanžeković i gđu. Suzanu Cross, na mandat u trajanju do isteka mandata ostalim članovima Nadzornog odbora. Na sjednici je utvrđeno i da se promijenilo ovlaštenje za zastupanje članova Uprave na način da svi članovi Uprave zastupaju Društvo samostalno i pojedinačno. Na sjednici održanoj u svibnju primljena su na znanje izvješće Uprave o poslovanju u godini te su utvrđena revidirana financijska izvješća Društva za godinu. Također, Nadzorni odbor Društva predložio je da Glavna skupština donese odluku o pokriću gubitka za godinu, na način da se gubitak u iznosu od ,69 HRK prenosi u naredna razdoblja. Kao jednu od mjera jačanja poslovne efikasnosti Društva, na ovoj sjednici dana je suglasnost za pripajanje društva Genera Analitika d.o.o. Generi d.d. Na sjednici održanoj u lipnju utvrđeno je da je Anne Françoise Michele Nesmes Rankine podnijela bezuvjetnu ostavku na mjesto predsjednice Uprave Društva te da ostavka stupa na snagu s danom prihvata dužnosti novog Predsjednika Uprave. Jednoglasnom odlukom prisutnih članova Nadzornog odbora, Tony Griffin imenovan je za novog člana Uprave i obnašat će dužnost Predsjednika Uprave. Mandat Tony-a Griffin-a počet će teći prvog sljedećeg dana nakon prihvata imenovanja. Utvrđuje se da Jan Jaap Korevaar nastavlja svoj mandat člana Uprave Genere d.d. G. Jan Jaap Korevaar, član Uprave Genere prezentirao je integracijski proces. U okviru prezentacije integracijskog procesa g. Korevaar detaljno je prezentirao i izvanredne troškove koji su utjecali na rezultate godine. U siječnju u sjedištu Društva održana je Glavna skupština dioničara GENERE d.d. Sve odluke na Glavnoj skupštini Društva usvojene su po svim točkama dnevnog reda u istom sadržaju u kakvome su bile i predložene u pozivu objavljenom javnosti u prosincu putem Narodnih Novina, Zagrebačke burze, HANFE, Sudskog registra, Hrvatske izvještajne novinske agencije te internet stranica Društva. Odluka o povlačenju dionica Društva iz uvrštenja na Zagrebačkoj burzi d.d., objavljena pod točkom 6. dnevnog reda, donesena je većinom većom od devet desetina danih glasova. Genera je u godini nastavila i tradicionalnu suradnju s Veterinarskim fakultetom Sveučilišta u Zagrebu stipendirajući studente završnih godina studija. 6

66 Genera d.d. 30. lipnja 2016 GODIŠNJE IZVJEŠĆE (nastavak) Poslovni događaji nakon datuma bilance Dana 5. srpnja održana je i Glavna skupština dioničara u sjedištu društva Genera d.d., u Kalinovici (Grad Sveta Nedjelja), Svetonedeljska 2. Na ovoj skupštini sve odluke prihvaćene su kako su bile i predložene te javno objavljene putem Sudskog registra i Narodnih novina. Nakon datuma bilance nije bilo drugih važnijih poslovnih događaja koji bi značajno materijalno utjecali na poslovanje i stanje Društva i Grupe. Opis najznačajnijih rizika i neizvjesnosti Društvo i Grupa su prije svega izloženi financijskim rizicima, kao što su rizik promjene deviznih tečajeva, kreditni rizik, rizik likvidnosti i rizik kamatnih stopa. Rizik promjene deviznih tečajeva je rizik promjene vrijednosti financijskih instrumenata uslijed promjene tečajeva. Društvo i Grupa uglavnom su izloženi riziku promjene tečaja EUR-a. Promjena deviznih tečajeva ima pozitivne i negativne učinke na poslovanje Genera Grupe. Budući da je Grupa orijentirana ka povećanju izvoznih aktivnosti te izvoz ima sve značajniji udio u prihodima Grupe, čvrst tečaj kune ne ide u prilog poslovanju i istovremeno umanjuje međunarodnu konkurentnost Grupe. Kamatni rizik pretpostavlja rizik da će troškovi kamata na financijske instrumente biti promjenjivi tijekom razdoblja. Društvo i Grupa imaju dugoročne obveze po kreditima na koje se primjenjuju fiksne kamatne stope, tako da Društvo nije izloženo navedenom riziku. Kreditni rizik je rizik da jedna strana ugovornog odnosa neće izvršiti svoje obveze te će time uzrokovati nastajanje financijskog gubitka drugoj strani. Društvo i Grupa su prihvatili politiku poslovanja samo s kreditno sposobnim i jamstvima osiguranim društvima čime se umanjuje mogućnost nastajanja financijskih gubitaka zbog neispunjenih obveza. Društvo i Grupa nisu izloženi većem kreditnom riziku naspram svojih partnera ili grupe klijenata koji imaju slične karakteristike. Društvo i Grupa upravljaju rizikom likvidnosti na način da prate predviđeni i stvarni novčani tijek uspoređujući ga s dospjelosti financijske imovine i obveza. U Društvo je ugovorilo police osiguranja potraživanja za ciljane domaće i inozemne kupce. Namjera je dodatno smanjiti rizike naplate potraživanja. 7

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69 Izvješće neovisnog revizora Dioničarima i Upravi društva Genera d.d. Izvješće o financijskim izvještajima Obavili smo reviziju priloženih nekonsolidiranih financijskih izvještaja društva Genera d.d. ( Društvo ) i konsolidiranih financijskih izvještaja društva Genera d.d. i njegovih ovisnih društava ( Grupa ) koji obuhvaćaju nekonsolidirani i konsolidirani izvještaj o financijskom položaju na dan 30. lipnja godine te nekonsolidirane i konsolidirane izvještaje o sveobuhvatnoj dobiti, promjenama kapitala i novčanom toku za šestomjesečno razdoblje tada završeno, te bilješke koje se sastoje od sažetka značajnih računovodstvenih politika i ostalih objašnjavajućih informacija. Odgovornost Uprave za nekonsolidirane i konsolidirane financijske izvještaje Uprava je odgovorna za sastavljanje i objektivan prikaz ovih nekonsolidiranih i konsolidiranih financijskih izvještaja u skladu s Hrvatskim standardima financijskog izvještavanja i za one interne kontrole za koje Uprava odredi da su potrebne za omogućavanje sastavljanja nekonsolidiranih i konsolidiranih financijskih izvještaja koji su bez značajnog pogrešnog prikazivanja, uslijed prijevare ili pogreške. Odgovornost revizora Naša je odgovornost izraziti mišljenje o ovim nekonsolidiranim i konsolidiranim financijskim izvještajima na osnovu naše revizije. Reviziju smo obavili sukladno Međunarodnim revizijskim standardima koji nalažu pridržavanje etičkih pravila, te planiranje i provođenje revizije kako bi se s razumnom mjerom sigurnosti utvrdilo da su nekonsolidirani i konsolidirani financijski izvještaji bez materijalno značajnih grešaka. Revizija uključuje provođenje procedura u svrhu pribavljanja revizijskih dokaza o iznosima i objavama u nekonsolidiranim i konsolidiranim financijskim izvještajima. Odabir procedura ovisi o prosudbi revizora, uključujući i procjenu rizika materijalno značajnih grešaka u nekonsolidiranim i konsolidiranim financijskim izvještajima, koje mogu nastati kao posljedica prijevare ili pogreške. U procjenjivanju tih rizika, revizor razmatra interne kontrole relevantne za subjektovo sastavljanje i objektivan prikaz nekonsolidiranih i konsolidiranih financijskih izvještaja u svrhu provođenja revizijskih procedura u skladu s postojećim okolnostima, a ne u svrhu izražavanja mišljenja o učinkovitosti internih kontrola poslovnog subjekta. Revizija isto tako uključuje ocjenu primjerenosti računovodstvenih politika, razumnost računovodstvenih procjena koje je definirala uprava, kao i ocjenu cjelokupnog prikaza nekonsolidiranih i konsolidiranih financijskih izvještaja. Uvjereni smo da su nam pribavljeni revizijski dokazi dostatni i čine odgovarajuću osnovu u svrhu izražavanja našeg mišljenja. Mišljenje Prema našem mišljenju, nekonsolidirani i konsolidirani financijski izvještaji fer prezentiraju, u svim značajnim odrednicama, financijski položaj Društva i Grupe na dan 30. lipnja godine, rezultate njihovog poslovanja i novčane tokove za šestomjesečno razdoblje tada završeno sukladno Hrvatskim standardima financijskog izvještavanja. Izvješće o ostalim zakonskim i regulatornim zahtjevima Pročitali smo priloženo Godišnje izvješće Grupe za godinu koja je završila 30. lipnja na stranicama 2 do 8. Potvrdili smo da su podaci, sadržani u Godišnjem izvješću koji opisuju informacije također prikazane i u konsolidiranim financijskim izvještajima, u svim značajnim odrednicama, u skladu s konsolidiranim financijskim izvještajima. PricewaterhouseCoopers d.o.o., Ulica kneza Ljudevita Posavskog 31, Zagreb, Hrvatska T: +385 (1) , F:+385 (1) , Trgovački sud u Zagrebu, broj Tt-99/7257-2, MBS: ; OIB: ; Temeljni kapital: 1,810, kn, uplaćen u cijelosti; Uprava: Hrvoje Zgombić, predsjednik; J. M. Gasparac, član; S. Dušić, član; T. Maćašović, član; Žiro-račun: Raiffeisenbank Austria d.d., Petrinjska 59, Zagreb, IBAN: HR