Raport al Consiliului de Administratie 30.06bvb.ro/...SIF2-BVB-Raport-CA-Sit-fin-2016-consolidate-auditate-eng.pdf · IFRS = International Financial Reporting Standards ... Administration

SIF Moldova SA Directors’ Consolidated Report - 2016

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Directors’ Consolidated

Report

2016

SIF Moldova SA Directors’ Consolidated Report – 2016

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Contents:

1. Presentation of the development and performance of SIF Moldova’s Group activities and position

1.1. Consolidation area

1.2. Abstract regarding subsidiaries (object of activity, main financial results)

1.3. Influences resulted from consolidation operations

1.3.1. Comparative assets status

1.3.2. Comparative status of liabilities and equity

1.3.3. Comparative analysis of overall result

1.4. Predictable development of SIF Moldova Group and activities in the research and

development areas.

1.4.1. Group’s objectives and strategies for 2017

1.4.2. Estimation of 2017 investment budget

2. Analysis of IFRS results of SIF Moldova Group

2.1. Key financial indicators (comparative presentation)

2.1.1. Liquidity indicators

2.1.2. Activity indicators

2.1.3. Profitability indicators

2.1.4. Other indicators

3. Description of the main risks and uncertainties the SIF Moldova Group is facing

3.1. Risk management objectives and policies, including the policies for their coverage.

3.1.1. Market risk

3.1.2. Credit risk

3.1.3. Liquidity risk

3.1.4. Tax related risks

3.1.5. Risk corresponding to the economic environment

3.1.6. Operational risk

3.2. Exposure to market risk, credit risk, liquidity risk and treasury flow risk

3.2.1. Market risk exposure

3.2.2. Credit risk exposure

3.2.3. Liquidity risk exposure

3.2.4. Treasury flow exposure

4. Important events occurred after the end of the financial year

4.1. SIF Moldova SA

4.2. Mecanica Ceahlau SA

4.3. Regal SA

4.4. Agrointens SA

4.5. Hotel Sport Cluj SA

4.6. Tesatoriile Reunite SA

4.7. Opportunity Capital SA

4.8. Real Estate Asset SA

4.9. Casa SA

5. Information regarding own share purchase by SIF Moldova Group

6. Corporate Governance

6.1. Corporate Governance Code

6.1.1. Structure and operation method of the board of directors, management bodies,

supervision bodies and Group Committees

6.1.1.1. General Shareholders’ Meeting

6.1.1.2. Board of Directors

6.1.1.3. Audit Committee

6.1.1.4. Investment policies – strategies Committee

6.1.1.5. Appointing committee


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6.1.1.6. SIF Moldova ‘s Executive Management

6.1.2. Protecting SIF Moldova’s interests/assets through legal procedures

6.2. Main characteristics of the internal control and risks management systems of SIF

Moldova Group

6.2.1. Internal control system

6.2.2. Internal audit system

6.2.2. Risk management system

Legend:

IFRS = International Financial Reporting Standards

Note: all amounts are presented in RON if not otherwise specified.


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1. Presentation of the development and performance of SIF Moldova’s

Group activities and position

SIF Moldova SA („The Company”) is a collective placement organism functioning in Romania in

compliance with (a) special regulations regarding financial investment companies; (b) regulations

regarding companied allowed for trading on a regulated market; (c) legal provisions regarding

companies; (d) provisions of the Memorandum of Association and internal regulations.

The Company is the succesor of Fondul Proprietății Private II Moldova, reorganized and transformed in

compliance with the provisions of Law no. 133/1996.

The Company is headquartered in Str. Pictor Aman no. 94C, Bacău municipality, Bacău district,

Romania.

The Company also operated through its agencies headquartered in Iaşi and Bucharest.

The main object of activity of the Company is financial investments. The main object of activity of the

Company (as per NACE) is: 6499 – Other financial services n.c.a – and consists in:

Administration and management of financial instruments, derived financial instruments and other

instrument qualified as such through the regulations of the National Securities Commission (CNVM),

whose attributions and prerogatives have been taken over by the Financial Supervision Authority

(F.S.A);

Administration and management of shares, bonds and other rights derived from them, in companies

that are not traded or closed;

Other auxiliary and connected activities, in compliance with applicable regulations.

The company is self-managed in unitary system.

The shares of the Company have been entered with Bucharest Stock Exchange, 1st category, with SIF2

identifier, stating with November 1st, 1999.

The shares and shareholders records are kept according to the law, by S.C. Depozitarul Central S.A.

București.

The assets storage services are provided by BRD - Société Générale S.A. – company certified by the

National Securities Commission.

1.1. Consolidation area

The consolidated financial statements for the financial year concluded on December 31st, 2016 comprise

the Company and its subsidiaries (hereinafter referred to as “Group”) as well as the interests of the

Group in its associated entities.

The subsidiaries are entities under the Group’s control. Control represents the power to lead the

financial and operational policies of an entity in order to obtain benefits from activities. The financial

statements of the subsidiaries are included in the consolidated financial statements from the time control

begins to be exercised up to the time control ceases. The accounting policies of the Group have been

modified for the purpose of aligning them to those of the Group.

Associated entities are those companies in which the Group can exercise a significant influence but

not control over financial and operational policies. The consolidated financial statements include the

quota of the Group from the results of the associated entities, based on the equivalence method, from the

date the Group has started to exercise significant influence, up to the date when this influence ceases. SIF

Moldova Group does not have associates on December 31st 2016.

The Group’s policies regarding consolidation bases can be found in the notes of the Group’s consolidated

financial statements.


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Based on the analysis of direct and indirect holdings from SIF Moldova’s portfolio for year 2016, the

following entities have been identified as subsidiaries:

No. Subsidiary name % SIF Moldova holding 31.12.2016 Company type (closed/ listed)

1 Mecanica Ceahlau SA 63,30 BVB - REGS (MECF)

2 Regal Galati SA 93,02 BVB – ATS (REGL)

3 Tesatoriile Reunite SA 99,99 not traded

4 Casa SA 99,02 not traded

5 Asset Invest SA 99,99 not traded

6 Real Estate Asset SA 99,99 not traded

7 Opportunity Capital SA 99,99 not traded

8 Agrointens SA 99,99 not traded

9 Agroland Capital SA 99,99 not traded

10 Hotel Sport Cluj SA indirect holding through Opportunity Capital SA holding 99,99% of capital. not traded

Note: In comparison to 2015, the number of companies in the consolidation has decreased from eleven

to ten (Agribusiness Capital SA being cancelled following the voluntary liquidation process).

Note: The presented percentages represent the holding quota of SIF Moldova in the share capital of the entities presented, on December 31st 2016.

Hotel Sport Cluj

Indirect holding

CASA Bacău

99,02%

Mecanica Ceahlău Piatra Neamț

63,30%

Agrointens București

99,99%

Agroland Capital Bacău

99,99%

Asset Invest Bacău

99,99%

Opportunity Capital Bacău

99,99%

Ţesătoriile Reunite București

99,99%

SIF Moldova

Regal Galați

93,02%

Real Estate Asset Bacău

99,99%


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Status of reciprocal holdings of entities included in the consolidation area

Subsidiary name Shareholders No. shares % holding Nominal value (lei)

Agrointens SA

SIF Moldova SA 1.132.716 99,99

10 CASA SA 1 0,001

TOTAL 1.132.717 100

Agroland Capital SA

SIF Moldova SA 12.000 99,992

10 Asset Invest SA 1 0,008

TOTAL 12.001 100

Opportunity Capital SA

SIF Moldova SA 222.336.440 99,999

0,1 Asset Invest SA 1.900 0,001

TOTAL 222.338.340 100

Hotel Sport Cluj SA

Opportunity Capital SA 19.329.398 99,999

1 CASA SA 1.936 0,001

TOTAL 19.331.334 100

Real Estate Asset SA

SIF Moldova SA 683.237.050 99,9997

0,1 Asset Invest SA 1.900 0,0003

TOTAL 683.238.950 100

Asset Invest SA

SIF Moldova SA 38.330.420 99,997

0,1 CASA SA 1.000 0,003

TOTAL 38.331.420 100

CASA SA

SIF Moldova SA 3.248.682 99,026

2,5 Other shareholders 31.946 0,974

TOTAL 3.280.628 100

Tesatoriile Reunite SA

SIF Moldova SA 4.587.525 99,999

2,5 CASA SA 1 0,001

TOTAL 4.587.526 100

Regal SA

SIF Moldova SA 1.116.258 93,021

0,1 A.A.A.S. BUCURESTI 29.035 2,42

Other shareholders 54.707 4,559

TOTAL 1.200.000 100

Mecanica Ceahlau SA

SIF Moldova SA 151.866.807 63,30

0,1 Roumanian Investment.Fund 72.468.784 30,21

Other shareholders 15.572.869 6,49

TOTAL 239.908.460 100

The consolidated financial statement of the Company for the financial year concluded on December 31st

2016 include the Company and its subsidiaries (hereinafter referred to as “Group”) as well as the Group’s

interests in associated entities.

1.2. Abstract regarding subsidiaries (object of activity, main financial results)

The Group’s basic activities are the financial investments carried out by the Company, as well as the

activities carried out by the subsidiaries, consisting mainly in the following activities :

Business and management consultancy;

Rental and sale of own real estate;

Manufacture of agricultural machines and equipment;

Food manufacture and sale;

Fabric manufacture;

Fruit growing;

Wood exports;

Hotel activities


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Mecanica Ceahlău S.A.

The activity of the Company is the manufacture of agricultural machines and logging.

Setup in 1921, S.C. Mecanica Ceahlău S.A. Piatra – Neamț is today one of the most well-known

manufacturers of agricultural machines both in Romania and abroad.

The machines and equipment manufactured by „Mecanica Ceahlău” cover all agricultural works, from

solid preparation for seeding to harvesting.

Țesătoriile Reunite S.A.

The main object of activity is real estate development.

The company Tesatoriile Reunite has been setup in 1933.

At present it comprises a unit operating in the field of industrial real estate renting.

Main financial results (IFRS)

2016 2015 Evolution

Total assets 23.704.647 17.881.542 32,56%

Turnover 5.590.813 1.227.884 455,3%

Profit (loss) (491.960) (475.743) n/a

ROE % n/a n/a n/a

ROA % n/a n/a n/a

Regal S.A.

The main objects of activity of the company are public food provision – restaurants, production of pastry

and confectionary products and selling these products, as well as the rental of own real estate.

S.C. Regal S.A. was set up in 1990 through the resolution of Galati district prefecture, as a joint stock

company, based on Law no. 15/1991 and Law no. 31/1990.

The company has its own confectionary – pastry laboratory providing the clients with a large variety of

high-quality products. .

Casa S.A.

Setup in 1999 as a joint stock company, based on Law no. 31/1990, the main object of activity of the

Company consists in consultancy for business and management.


2016 2015 Evolution

Total assets 58.321.538 58.065.581 0,44%

Turnover 39.146.703 30.173.750 28,49%

Profit (loss) 2.105.150 2.243.040 -6,15%

ROE % 5,18 4,28 0,9 pp

ROA % 3,61 3,86 -0.25 pp


2016 2015 Evolutie

Total assets 3.477.000 3.530.888 -3,12%

Turnover 1.086.098 1.053.151 3,12%

Profit (Loss) 85.689 117.681 -27,18

ROE % 2,59 3,54 -0,95 pp

ROA % 2,46 3,33 -0.87 pp


2016 2015 Evolution

Total assets 9.941.365 9.690.504 3,17%

Turover 1.259.384 1.247.606 0,94%

Profit (Loss) 172.379 235.671 -26,85%

ROE % 1,75 2,47 -0,72 pp

ROA % 1,73 2,43 -0,7pp


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Asset Invest S.A.

The main object of activity is business and management consultancy.

Real Estate Asset S.A.

Setup in 2014 as a joint stock company based on Law no. 31/1990, the main activity object of the

company is consultancy for business and management.


2016 2015 Evolution

Total assets 67.071.842 67.634.803 -0,83%

Turnover 14.982 - n/a

Profit (Loss) (525.592) (668.216) n/a

ROE % n/a n/a n/a

ROA % n/a n/a n/a

Agrointens S.R.L.

Setup in 2014 as a joint stock company based on Law. 31/1990, the main object of activity of the

company is business and management consultancy.

Hotel Sport S.A.

Setup in 2015, the company Hotel Sport S.A. operated as a closed-type joint stock company and carries

out its activity based on Law no. 31/1990.

According to NACE classification (code 5510) the main object of activity of the company is hotel activity

and other similar accommodation services.

Main fiancnial results (IFRS)

2016 2015 Evolution

Total assets 26.136.809 27.796.936 -5,97

Turnover 1.807.876 132.329 1.266

Profit (Loss) (1.350.217) (124.425) n/a

ROE % n/a n/a n/a

ROA % n/a n/a n/a

Main Financial results (IFRS)

2016 2015 Evolution

Total assets 3.922.987 3.754.022 4,5%

Turnover 633.339 397.609 59,28%

Profit (loss) 66.504 (27.098) 245,42

ROE % 1,76 n/a n/a

ROA % 1,70 n/a n/a


2016 2015 Evolution

Total assets 13.504.552 12.201.715 10,68

Turnover 3.841.627 3.135.258 22,53

Profit (Loss) 200.573 726.237 -72,38

ROE % 3,09 6,03 -2,94

ROA % 1,49 5,95 -4,46


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Agroland Capital S.A.

Setup in 2014 as joint stock company based on Law no. 31/1990, the main object of activity of the

company is the purchase and sale of own real estate property.

Main financial resutls (IFRS)

2016 2015 Evolution

Total assets 87.398 112.186 -22,09

Turnover 271 - n/a

Profit (Loss) (23.667) (10.025) n/a

ROE % n/a n/a n/a

ROA % n/a n/a n/a

1.3. Influences resulted from consolidation operations

1.3.1. Comparative assets status

The table below presents the comparative status of assets based on the figures in the individual financial

statements and consolidated statements drafted in compliance with IFRS.

Balance position Copany Group Differences

Cash and cash equivalents 931.024 7.570.471 6.639.447 Bank deposits 117.794.735 128.163.158 10.368.423 Financial assets at fair value through the progit or loss account 128.999.673 132.052.544 3.052.871 Financial assets available for sale 1.448.569.452 1.299.085.922 (149.483.530) Investments held to maturity 9.573.804 9.573.804 0 Real estate investments 3.505.273 11.329.891 7.824.618 Intangible assets 113.180 9.495.295 9.382.115 Tangible assets 8.140.477 70.148.481 62.008.004 Biologic assets - 1.868.564 1.868.564 Other assets 1.347.293 42.230.149 40.882.856 Total assets 1.718.974.911 1.711.518.279 (7.456.632)

1.3.2. Comparative status of liabilities and equity

The table below presents the comparative statements of liabilities and equity based on the figures in the

individual and consolidated financial statements, drafted in compliance with IFRS.

Balance position Company Group Differences

Loans - 9.145.719 9.145.719 Dividends to pay 29.258.494 29.319.122 60.628 Provisions for risks and expenses 3.452.286 5.020.583 1.568.297 Liabilities regarding deferred profit tax 69.089.754 66.139.361 (2.950.393) Liabilities regarding current profit tax - 543.845 543.845 Other liabilities 17.082.627 12.783.782 (4.298.845) Total liabilities 118.883.161 122.952.412 4.069.251 Share capital 539.720.149 539.720.149 - Reported result 445.783.128 485.007.295 39.224.167 Reserves from the reevaluation of tangible assets 9.095.516 8.618.009 (477.507) Reserves from the reevaluation of financial assets available for sale 616.216.703 545.110.922 (71.105.781) Other equity elements (10.723.746) (10.723.746) - Total equity assignable to company shareholders 1.600.091.750 1.567.732.629 (32.359.121) Minority interest 20.833.238 20.833.238 Total equity 1.600.091.750 1.588.565.867 (14.913.264)


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1.3.3. Comparative analysis of overall result

Overall result position status Company Group Differences

Revenue

Revenue from dividends

118.775.487 118.065.476 (710.011) Revenue from interest 1.216.794 1.279.014 62.220 Other operational revenue 3.639.068 57.198.874 53.559.806 Earning from investments

Net earnings from assets sale 94.672.066 94.747.761 75.695 (Net loss)/Net earnings from the reevaluation of financial assets at fair value through profit or loss

(6.263.193) (6.502.197) (239.004)

Expenses Losses from assets impairment (46.908.657) (47.065.756) (157.099)

Expenses with the creation of provisions for risks and expenses

(145.628)

(729.456) (583.828)

Other operational expenses (31.182.914) (82.968.956) (51.786.042) Operational profit 133.803.023 134.024.760 221.737 Financing expenses - (436.067) (436.067) Profit before taxation 133.803.023 133.588.693 (214.330) Profit tax (10.505.003) (11.146.941) (641.938) Net profit of the financial year 123.298.020 122.441.752 (856.268) Other overall result elements

Reserve increase/ (decrease) from the reevaluation of tangible assets, net of deferred tax 1.418.212 5.727.039 4.308.827 Reserve transfer from the reevaluation to the reported result following the sale of tangible assets - - - Net modification of reserve from the reevaluation at fair value of financial assets available for sale. 165.342.680 129.426.263 (35.916.417) Other overall result elements 166.760.892 135.153.302 (31.607.590) Total overall result for the period 290.058.912 257.595.054 (32.463.858)


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1.4. Predictable development of SIF Moldova Group and research and

development activities.

1.4.1. Group’s objectives and strategies for 2017

“Key” elements of the 2017 Activity Program

The “key” elements of the multiannual investment strategy presented and approved by the shareholders

in the General Meeting in 2014-2017 is based on an assigning of resources that insures the sustainable

development of SIF Moldova’s activity and satisfying shareholders’ interests, both on the short and on

the long term:

The solid/ sustained investment policy is the base of the long-term increase of the managed assets

value, a basic elements for the consolidation of investors’ trust.

The predictable dividend policy, which remunerates invested capital at a higher yield than those

offered by monetary placements, is meant to satisfy the short-term interests of the shareholders. At the

same time, the presence of low yields on the monetary market favors investments, which serves the

average and long-term interests of the shareholders.

Capital operations through the running of a share buy-back program for the purpose of reducing the

share capital.

The main objectives of own shares buy-back program are:

increase of unitary assets and profit per share, as well as the lowering of net assets and trading

price discount

increasing the shareholders’ yields based on the possible sustaining of trading quotation increase

increasing the weight of capital holding for existent shareholders

The running of a buy-back program with the reduction of the share capital is beneficial both for the

company and for the shareholders, irrespective whether the latter chose to sell or keep their holdings

In 2016 we have continued the programs started in the private equity area in 2015. 2017 will lay under

the continuity sign both from the perspective of developing initiated programs, and from the perspective

of identifying new ones.

Strategies defined for assets portfolios:

Increase for the Majority Holdings portfolio – “private equity” type approach within existent majority

holdings (real estate, agriculture, other sectors)

Recalibration for the CORE portfolio – listed portfolio which offers liquidity for SIF Moldova assets,

representing the main income and source generator for new investments.

Restructure for the SELL portfolio – continuation of the restructure/ sale of the “historic” portfolio.

Portfolio weight in total assets value:

CORE69.4%

Majority Holdings10.03%

SELL6.65%

Other assets13.82%

Portfolio srtucture on31.12.2016


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5.60%

11.73%10.02%

0.00%

10.00%

20.00%

2014 2015 2016

Evolutie Portofoliu DM(% in valoare totala active)

Assets structure and investment policy

In 2017, the directors’ strategy aims to manager resources/ assets in order to increase net assets on

average and long-term, at the same time with the implementation of a rigorous control of potential risks.

The investment activity is carried out abiding by prudential and legal exposure limits, in agreement with

macroeconomic tendencies.

In 2017 as well, private- equity type investments will target the real-estate and agriculture sectors, given

the average and long-term increase potential of these sectors. In the real estate sector, residential

developments started in 2016 will continue. Extension/consolidation opportunities in the agricultural

area will be analyzed, for future management under return conditions and sale at higher prices.

We will maintain exposure on the energy and utilities sector, since these are able to supply constant and

predictable liquidities.

The financial –banking sector, which in 2015 indicated a real stabilization through the rerunning of

credits, remains in SIF Moldova’s attention, as it has already important recources in a solid bank, under

constant development after the absorption of another bank and the acquiring of performing assets held

in a bank in difficulty.

In year 2017 we will conclude the SIF Moldova Group restructure process for the purpose of increasing

the efficiency of its activity through new approaches that would lead to the improvement of financial

performance for the managed projects portfolio.

Majority Holding portfolio (MH)

SIF Moldova, through its Strategy for 2014-2018 has

proposed investments with a private equity-type

approach in sectors with increase potential, on which

investors (mainly the international ones) cannot be

exposed to with ease, selected in order to generate

NAV yield increase, on the long-term.

Mention: The 10,02% weight of Majority Holding

Portfolio does not include the value of Hotel Sport Cluj

SA since on 31.12.2016 Opportunity Capital SA

company (shareholder of Hotel Sport Cluj SA is still

under voluntary liquidation procedure.

Later event: In January 2017 Opportunity Capital SA was cancelled. Thus the inclusion of Hotel Sport

Cluj SA value would lead to a weight of about 11.14% of total assets value for MHP

The development of this portfolio abides by a set of conditions:

abidance by the prudential limits of the investment policy, as defined by specific regulations.

notification of the shareholders, through press releases in compliance with the principles taken on

through the corporate governance of SIF Moldova Group.


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The investment policy will focus on businesses with average/long-

term increase potential based on successful entrepreneurs and

professional management, low risk/reward ratio, financial support

of running projects. Investments will provide value generation

through attractive yields in comparison to other investment

options.

The condition to accept an investment is that the internal

return rate be higher than the financial cost of the investment

intended. In order to maximize project return, we can go for a mix

of sources, credits and capital increases. We intend to continue this

approach in 2017 as well.

Risk analysis also includes the project sensitivity analysis. The

sensitivity analysis determines the way in which performance

indicators evolve, depending on specific indicators.

2017 Investment budget will be assigned on the 2 main

portfolios (“Majority Holding” and “CORE”) with

recalibration possibility, depending on the opportunities

offered by the market.

In 2017 as well, private equity investments will target real-estate

and agriculture, given the high average and long-term increase

potential of these sectors. In the real estate sector, we will continue

the residential developments begun in 2016. We will analyse

extension/consolidation possibilities in the hotel, agriculture, social

work/ health fields, targeting professional management under

rentability conditions and sale at higher prices.

The yield/risk benchmarks of each investment will be carefully monitored through internal procedural

structures.

In a report published by Eurostat on 19.01.2017, it is stated the housing prices in Romania have

registered an increase of 7,1% in the 3rd quarter of 2016 in comparison to the similar period in 2015;

while in the Euro area, the increase has been of ,4% and of 4,3% in the European area.

For year 2017 we maily forecast :

the beginning of construction for the “Baba Novac Residence” Project, Bucharest (which includes 6

blocks of flats with 363 appartments). We think that the come-back of the market is mainly there,

and along with the constant demand for appartments at reasonable prices for average sizes, this

sector is well qualified for investment;

In the Veranda Mall project we aim to start negotiations to prepare a most advantageous exit sooner

than initially intended;

The purchase and financing of new real-estate projects of average size, in order to optimize risks and

reduce the execution and exit times.

Real Estate Sector

Rules applied as per AFIA

legislation

Private-equity type investment

policy to obtain control over

untraded companies is in

agreement with the multiannual

investment strategy and legal and

prudential risk limits of SIF

Moldova without being the main

investment policy.

In the selection and monitoring of

investment in untraded shares SIF

Moldova applied a high legel of

diligence: the staff has proper

professional competence and

knowledge for the assets it invest

in, the same diligence requirements

being applied in the negotiation

phase, before the conclusion of an

agreement.

SIF Moldova is a shareholder with

over 95% holding in all untraded

companies setup according to the

2014- 2018 investment strategy.

These assets are evaluated in

compliance with the evaluation

policies and procedures, their value

being reported on a monthly basis.


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The tourism sector has increase potential in the following years, given the economic increase and

increase of people’s incomes. In a Eurostat statistic report on 28.09.2016 Romania is presented to have

recorded in the 1st half of 2016 an increase of nights spent in tourist units of 8,8% in comparison to the

same period in 2015, while in the EU, the increase has been of only 2.9%.

In 2017 we will also start the project to upgrade Hotel Sport Cluj.

Research objectives focus on the selection of projects in the agricultural field, that woul lead to the

meeting of rentability indicators and capital increase. The purchase of a blueberry farm by Agrointens,

has aimed the obtaining of income through specialized and professional management and later sale at

higher prices.

The advantages of blueberry cultures are based on the long-term exploitation period (40 to 50 yers), high

tolerance to diseases and pests, increasing external demand, as well as high production yield. The

investment in intensive blueberry culture was grounded on the average and long-term value increase

potential of this type of plantation.

In 2017 Agrointens SA aims to implement the investment project « Extension of BLUEBERRY Farm ;

Purchase of new lands and setup of new blueberry plantations ».

Investment structure:

land purchase;

plantation setup, purchase of machines and equipment, work capital, etc.

We are analyzing the opportunity of expending investment projects in the field of social work and health.

1.4.2. Investment budget estimate

The 2017 Activity Program will abide by the principles implemented in the previous years, regarding:

the management of the three defined portfolios (MH, CORE and SELL),

continuation of majority holdings development strategies

use of CORE and SELL holdings depending on the market opportunities and resource need

abidance by legal conditions, namely:

20% limit applied to intangible assets, less debts, balance;

20% of total assets in tangible assets and monetary market instruments not allowed for trading ;

Liquidities management plays an important role in creating an optimum structure in order to insure the

fruition of investment opportunities, payment of dividends to the shareholders, ressources necessary for

the company to carry out its activity.

2017 ACTIVITY PROGRAM OBJECTIVES

70 mil. lei revenue from investments

Profit net of 95 mil. lei

Investment program: 250 mil. lei

Hotel sector

Agriculture sector

Social work/ health sector


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2. Analysis of IFRS results for SIF Moldova Group

2.1. Financial key indicators (coparative presentation)

2.1.1. Liquidity indicators

Through the analysis of the liquidity indicators we determine the company’s ability to

honor, at a certain point, the payment obligations taken on, based on current assets.

The liquidity term indicates the ability of an asset to be turned into money with minimal

value loss.

Current liquidity indicators measure the Company’s ability to honor its short-term debts. Current

liquidity indicators is calculated as a ratio between the company’s current assets and its short-term debts.

The higher the value of the current liquidity indicator, the higher the Company’s ability to honor its

short-term debts, without resorting to long-term financing ressources. Otherwise, when the obtained

value is subunitary. the Company will have to resort to external financing ressources.

Irrespective of the activity sector the company operates in, the value that is considered optimal for the

current liquidity indicators is of about 2. For an accurate interpretation of the level of current liquidity

rate, it must be compared with the average level per branch or that registered by competitors.

Quick liquidity indicator shows the Company’s ability to honor its short-term debts through the most

liquid current assets of the Company.

Indicator name 2014 2015 2016

Current liquidity indicator 3,47 4,48 7,41

Quick liquidity indicator 3,33 4,22 6,77

2.1.2. Activity indicators

Activity indicators reveal the efficiency a company has in using its assets.

Fixed-assets turnover indicator is calculated as a ratio beteen the revenue from current activity and

fixed assets.

The turnover speed of fixed-assets evaluates the efficiency of fixed-assets management through the

analysis of the turnover obtained by a certain quantity of fixed-assets.

Total assets turnover indicator is calculated as a ratio between turnover and total assets.

Total assets turnover speed analysis the turnover obtained by a certain quantity of total assets.


Fixed-assets turnover speed 0,25 0,15 0,19

Total assets turnover speed 0,21 0,12 0,18

2.1.3. Profitability indicators

Profitability indicators reflect the efficiency of activities carried out by a company,

regarding its ability to generate profit from available ressources.

Return on equity (ROE) is calculated as a ratio between profit before the payment of interest and

profit tax expenses and equity.

The return on equity represents one of the most impotant indicators used to measure a company’s

performance. The main objective of any business is to maximize the investments made by shareholders.


16

Therefore, a high ROE value indicates that the investment made by the shareholders has been turned

into a large profit by the company’s management.

Return on assets (ROA) is calculated as a ratio between net profit and total assets of the company and

measures the efficiency with which assets are used from the point of view of the profit obtained,

indicating how many lei are obtained for each leu invested in company’s assets.

Return on assets is, along with return on equity, one of the most important return indicators of a

company.

Result per basic share is ascertained as a ratio between net profit or loss of a company during a

financial yer, and the number of ordinary shares present over that period.

Result per basic share represents, from financial point of view, an important indicator when the results

of a company over a period of time are compared, or when the results obtained are compared to the

results of other companies in the same sector of activity.

For a proper interpretation of this indicator, its evolution over a period of several years should be taken

into consideration. .


ROE (%) 0,18 0,09 0,08

ROA (%) 0,14 0,07 0,08

Result per basic share (lei/share) 0,34 0,09 0,12

Dividend per share 0,06 0,05 0,12

2.1.4. Other indicators


Debt recovery period 25,53 44,25 22,12

Debt payment period 154,22 252,31 169,72

Degree of indeptment (%) 8,67 8,60 8,26

Equity return (%) 18,25 8,88 8,44


17

3. Description of the mains risks and uncertainties the SIF Moldova

Group is facing

3.1.The risk management objectives and policies, including policies for their

coverage.

The management of the Group thinks that risk management should be carried out in a consistent

methodological framework and that their management is an important part of the strategy regarding

return maximization, obtaining the targeted level of profit while maintaining an acceptable risk exposure

and abidance by legal regulations. The risk management structure set by the management of the Group is

an integral part of the Group’s strategic objectives.

The investment activity exposes the Group to a series of risks associated to the financial instruments held

and the financial markets it operates on. The main risks the Group is exposed to are:

Market risk (interest rate risk, currency risk and price risk)

Liquidity risk;

Credit risk;

Taxation risk;

Risk corresponding to the economic environment;

Operational risk.

The general risk management policy aims to maximize the Group’s profit reported to the risk level it is

exposed to and lower potential adverse variations on the Group’s financial performance. The Group has

implemented policies and procedures for the management and evaluation of the risks it is exposed to.

These policies and procedures are presented within the section dedicated to each risk type.

3.1.1. Market risk

The market risk is defined as the risk to register a loss, or not to obtain the expected profit, as a result of

price, interest rate and currency exchange rate fluctuations. For an efficient market risk management, we

use methods of technical and fundamental analysis, forecasts regarding the evolution of economic

branches and financial markets, taking into consideration:

return evaluations corresponding to the share portfolio

setting the concentration limits for assets in the same market, geographic position or economic sector

setting the presence limits on new markets

setting bearable risk limits

tolerance to risk concentrations

strategic assignment of long term investments based on the principle according to which the market

will correctly determine the fundamental value

tactical, short-term assignment which involves the use of the market’s short-term variations in order

to obtain profit.

The selection of investment opportunities is carried out through:

technical analysis;

Fundamental analysis – ascertaining the issuer’s ability to generate profit;

Comparative analysis – ascertaining the relative value of an issuer, in relation to the market or other

similar companies

Statistical analysis – ascertaining tendencies and correlations using price history and traded

volumes.

The Group is exposed to the following market risk categories:


18

(i) Price risk

The Group is exposed to price risk as there is the possibility that the value of financial instrument

fluctuate following the change of market prices.

(ii) Interest rate risk

The Group is confronted with interest rate risk due to its exposure to the negative interest rate

fluctuations. The change of the interest rate on the market directly influences the income and expenses

corresponding to the financial assets and debts bearing variable interest, as well as the market value of

those bearing fixed interest.

The Group does not use derived financial instruments in order to protect itself from interest rate

fluctuations.

(iii) Currency risk

Currency risk is the risk of registering losses or failing to achieve the estimated profit following the

negative fluctuations of the currency rate. The Group is exposed to currency rate fluctuations, but it does

not have a formalized policy to cover currency risk. Most of the Group’s financial assets and liabilities are

expressed in national currency; the other currencies used for operations are EUR, USD, GBP, CZK, PLN

and CAD.

Most financial assets and liabilities of the Group are expressed in national currency and therefore

currency rate fluctuations do not significantly affect the Group’s activity. The exposure to currency rate

fluctuations are mainly due to deposits and shares in currency.

3.1.2. Credit risk

The Group is exposed to the credit risk corresponding to the financial instruments stemming from the

possible failure to fulfill the payment obligations that a third party has towards the Group. The Group is

exposed to credit risk following investment made in bank deposits and bonds issued by municipalities or

companies, current accounts and other claims.


Liquidity risk represents the risk of registering loss or failing to reach estimated profits, resulted from the

impossibility to at any time honor short-term payment obligations, without these involving excessive

costs or losses that cannot be borne by the Group.

The Group’s financial instruments may include investments in shares that are not traded on an organized

market and that consequently may have low liquidity. Therefore the Group may have difficulties in the

quick liquidation of investments in these instruments at a value close to the one set in the company’s net

asset calculation model for financial investment companies, as foreseen by Regulation no..15/2004

issued by CNVM in order to fulfill its own liquidity requirements.

3.1.4. Taxation risk

The Romania tax system is subject to various interpretation and constant changes that might be

retroactive. In certain situations, tax authorities might adopt a position that is different to that of the

Group and may calculated interest and tax penalties. Although the tax corresponding to a transaction

may be minimal, penalties may be large, depending on the interpretation of the tax authority.


19

Moreover, Romanian Government has under its subordination a number of agencies authorized to

control Romanian and foreign companies carrying out their activities in Romania. These verifications are

largely similar to those carried out in many other countries, but they may also extend on legal or

regulation areas the Romanian authorities might be interested in.

Statements regarding taxes and levies may be subjected to control and revision over a period of five

years, usually after their submittal date. In compliance with legal provisions applicable in Romania, the

controls may be subjected to additional verifications in the future.

The management of the Group thinks that it has registered accurate values int eh tax accounts, and other

debts to the state, but there is a chance that the authorities will have a position that is different from that

of the Group.

Starting with January 1st 2007, following Romania’s adherence to the European Union, the Group had to

be subjected to the tax regulations of the European Union, and implement the changes brought on by

European law. The way in which the Group has implemented these changes remains open for tax audit

for a priod of 5 years.

The last control of the Ministry of Public Fiancée the Group was subjected to covered the period up to

January 1st 2010. Therefore the Group’s debts at this date may be the object of future verifications.

3.1.5. Risk corresponding to the economic environment

Romanian economy continues to show the specific traits of an emerging economy and there is a high

uncertainty risk regarding the development of the politic, economic and social environment in the future.

The management of the Group is interested to estimate the nature of the changes that will take place in

the economic environment of Romania and what their effect will be on the financial, operational and

treasury status of the Group.

Among the characteristics of Romanian economy we have the presence of a currency that is not fully

convertible outside borders and a low liquidity degree of the capital market.

The management of the Group cannot foresee the effects of the crisis that will impact the financial sector

in Romania nor their potential impact of the current financial statements.

The management of the Group considers that it has taken the necessary measures for the sustainability

and development of the Group under current market conditions.

3.1.6. Operational risk

Operational risk is defined as the risk of registering loss or failure to reach estimated profit due to some

internal factors, such as improper running of some internal activities, the presence of improper staff or

systems or due to external factors such as economic conditions, changes on the capital market,

technological progress. Operational risk is inherent to all Group activities.

The policies defined for the management of operational risk have taken into consideration all event types

that might generate significant risks and methods of their manifestation, in order to eliminate or lower

financial or reputational losses.


20

3.2. Exposure to market risk, credit risk, liquidity risk and treasury flow risk.

3.2.1. Market Risk Exposure

Exposure to price risk

The group is exposed to price risk as there is the possibility that financial instruments fluctuate following

changes on the market.

The Group is exposed to the risk associated to the variation of financial assets at fair value through the

profit or loss account and financial assets available for sale 80% of the total shares with active market

held by the Group on December 31st 2016 (31st December 2016:73%) represented investments in

companies that were part of the BET index of Bucharest Stock Exchange, index weighted with stock

exchange capitalization and created to reflect the general tendency of the prices of the ten most liquid

shares traded on Bucharest Stock Exchange.

A positive variation of 10% of the financial assets at fair value through the profit or loss account would

lead to an increase of profit before taxation with 11.092.414 lei (December 31st 2015: 9.677.111 lei), a

negative variation of 10% having an equal net impact, of negative value.

A positive variation of 10% of the prices of financial assets available for sale would lead to an increase of

equity, net of profit tax, of 108.569.389 lei (December 31st 2015: of 90.684.207 lei), a negative

variation of 10% having an equal net impact, of negative value. The Group holds shares in companies

operating in various sectors of activity, as follows:

December 31st 2016 % December 31st 2015 % Financial activities, banking and insurance 758.892.143 57 741.281.794 68 Transport, storage communication 153.922.945 12 108.758.953 10 Chemical and petrol industry 130.259.303 10 64.510.364 6 Textile industry 25.081.439 2 6.222.922 1 Pharmaceutical industry 38.769.224 3 40.419.219 4 Manufacture of machines, equipment and tools 34.944.926 3 18.680.167 2 Whole sale, retail sale, tourism and restaurants 76.220.574 5,7 4.251.844 0,4 Manufacture of transportation means 74.387.804 6 61.303.469 6 Energy industry 29.765.604 2 29.714.636 3 Real estate transaction, rental, other services 8.042.463 0,6 1.992.113 0,2 Construction materials industry 117 0,0 4.876.839 0,4 Other 6.017.801 0,5 4.729.005 0,4 TOTAL 1.336.304.342 100 1.086.741.325 100

As it can be observed in the table above, on December 31st 2016 the Group mainly held shares in

companies from the financial-banking and insurance field, with a 57% ratio of total portfolio, in decrease

in comparison to the ratio held on December 31st 2015.

Exposure to interest rate risk

On December 31st 2016 and December 31st 2015, most Group assets and liabilities are not bearing

interest. Therefore the Group is not significantly affected by the interest rate fluctuation rate. The cash

excess or other similar money availabilities in invested in short-term investment titles, with a maturity of

1 to 6 months.


21

The following tables present the Group’s exposure to interest rate risk

Net value on December 31st 2016

< 1 month

1-3 months 3-12

months >1 year

No interest rate risk

Financial assets Cash and cash equivalents 7.570.471 - - - 7.570.471 Bank deposits 128.163.158 8.561.769 119.310.773 290.617 - - Financial assets available for sale at fair value though the profit or loss account

132.052.544 - - - 132.052.544

Financial assets available for sale 1.299.085.922 - - - 1.299.085.922 Investments held to maturity 9.573.804 212.619 37.440 9.323.745 - Other financial assets 16.026.551 - - - 16.026.551 Total financial assets 1.592.472.451 8.561.769 119.523.392 328.057 9.323.745 1.454.735.488

Financial liabilities

Dividends to pay 29.319.122 - - - 29.319.122 Other financial liabilities 11.201.400 - - - 11.201.400 Loans 9.145.719 - 924.379 8.221.340 - Total financial liabilities 49.666.241 - - 924.379 8.221.340 40.520.522

Net value on December 31st

2015 < 1 month 1-3 months 3-12 months >1 year No interest risk

Financial assets Cash and cash equivalents 5.512.013 - - - - 5.512.013 Bank deposits 99.706.272 - 89.633.395 10.018.741 - 54.136 Financial assets at fair value through the profit or loss account 115.203.699 - - - -

115.203.699

Financial assets available for sale 1.124.199.137 - - - -

1.124.199.137

Investments held to maturity 9.593.199

220.256 37.437

9.335.506 - Other financial assets 22.461.687 - - - - 22.461.687 Total financial assets 1.376.676.007 - 89.853.651 10.056.178 9.335.506 1.267.430.672 Financial liabilities Dividends to pay 42.542.917 - - - - 42.542.917 Other financial liabilities 11.486.935 - - - - 11.486.935 Loans 8.551.468 - - - 8.551.468 - Total financial liabilities 62.581.320 - - - 8.551.468 54.029.852

The impact on the Group’s net profit of a modification of ± 100 bp of the interest rate corresponding to

the variable interest bearing assets and liabilities, and expressed in other currency, corroborated with a

modification of ± 500 bp of the interest rate corresponding to assets and liabilities bearing variable

interest and expressed in lei is 6.821.456 (December 31st 2015: ± 5.040.225 lei ).

Currency risk exposure

The assets expressed in lei and in other currency on December 31st 2016 and December 31st 2015 are

presented in the tables below

RON EUR USD Other

currency December 31st 2016 Financial assets Cash and cash equivalents 7.085.648 373.327 15.346 96.150 Bank deposits 126.528.362 1.634.796 - Financial assets at fair value through the profit or loss account 132.052.544 - Financial assets available for sale 1.296.731.256 - 2.354.666 Investments held to maturity 2.357.600 7.216.204 - Other financial assets 16.026.551 - Total financial assets 1.580.781.961 9.224.327 15.346 2.450.816 Financial liabilities Dividends to pay 29.319.122 Other financial liabilities 11.201.400 - Loans 9.145.719 - Total financial liabilities 49.666.241 - - -


22

RON EUR USD Other

currency December 31st 2015 Financial assets Cash and cash equivalents 5.102.979 305.506 13.210 90.318 Bank deposits 99.706.272 - - - Financial assets at fair value through the profit or loss account 115.203.699 - - - Financial assets available for sale 1.123.617.348 - - 581.789 Investments held to maturity 9.593.199 7.223.701 - - Other financial assets 22.461.687 - - - Total financial assets 1.375.685.184 7.529.207 13.210 672.107 Financial liabilities Dividends to pay 42.542.917 - - - Other financial liabilities 11.486.935 - - - Loans 8.551.468 - - - Total financial liabilities 62.581.320 - - -

The net impact on the Group’s profit of a modification of ± 15% of RON/EUR currency exchange

corroborated with a modification of ± 15% of RON/USD, RON/GBP, RON/CZK. RON/PLN namely

RON/CAD currency exchange on December 31st 2016, all other variables remaining constant is

of1.753.573 lei (December 31st 2015± 148.623 lei).

3.2.2. Credit risk exposure

On December 31st 2016 and December 31st 2015, the Group did not hold real guarantees as insurance, nor

other improvements of credit rating. On December 31st 2016 and December 31st 2015, the Group did not

register any outstanding financial assets that are not depreciated. The maximum credit risk exposure of

the Group is 161.030.722 lei on December 31st 2016 and 137.199.171 on December 31st 2015 and can be

analyzed as follows:

Exposure from deposits and current accounts

December 31st 2016 December 31st 2015 Banca Transilvania 122.409.199 84.995.095 BRD - Group Societe Generale 5.243.928 8.489.791 BCR 906.887 1.905.223 Other commercial banks 6.870.352 9.754.175 Total 135.430.366 105.144.284

Exposure from investments held to maturity

31 decembrie 2016 31 decembrie 2015 Bacău Municipal bonds 117.920 129.820 Horezu Municipal bonds - - GDF Suez Bonds 2.239.680 2.239.678 Felix Municipal bonds - - Banca Transilvania bonds 7.216.204 7.223.701 Total 9.573.804 9.593.199

Various debtors and trade receivables

December 31st 2016 December 31st 2015 AAS Bucuresti 53.890.207 46.350.276 Banca Transilvania - - Depozitarul Central 1.047.218 1.278.266 BRS Depozitar (94.907) 4.395.490 Other various debtors and trade receivables 19.515.572 23.039.259 Adjustments for depreciation (58.331.538) (52.601.602) Total 16.026.552 22.461.687

The adjustments for depreciation cover all amounts of trade receivables for AAS Bucuresti.


23


The structure of assets and debts of the Group has been analyzed for the remaining period from the

balance date until the contractual maturity date, for the financial year concluded on December 31st 2016

and the financial year concluded on December 31st 2015 as follows

Accounting value < 3 months 3 - 12 months > 1 year No pre-set maturity

December 31st 2016 Financial assets

Cash and cash equivalents 7.570.471 7.570.471 - - - Bank deposits 128.163.158 127.872.541 290.617 - Financial assets at fair value through the profit and loss account

132.052.544 - - - 132.052.544

Financial assets available for sale

1.299.085.922 - - - 1.299.085.922

Investments held to maturity 9.573.804 212.619 37.440 9.323.745 - Other financial assets 16.026.551 - - - 16.026.551 Total financial assets 1.592.472.451 135.655.632 328.057 9.323.745 1.447.165.017 Financial liabilities Dividends to pay 29.319.122 - - - 29.319.122 Other financial liabilities 11.201.400 - - - 11.201.400 Loans 9.145.719 - 924.379 8.221.340 - Total financial liabilities 49.666.241 - 924.379 8.221.340 40.520.522

Accounting value < 3 months 3 - 12 months > 1 year No pre-set maturity

December 31st 2015 Financial assets Cash and cash equivalents 5.512.013 5.512.013 - - - Bank deposits 99.706.272 89.633.395 10.018.741 - 54.136 Financial assets at fair value through the profit and loss account 115.203.699 - - - 115.203.699

Financial assets available for sale

1.124.199.137 - - - 1.124.199.137 Investments held to maturity 9.593.199 220.256 37.437 9.335.506 - Other financial assets 22.461.687 - - - 22.461.687 Total financial assets 1.376.676.007 95.365.664 10.056.178 9.335.506 1.261.918.660 Financial liabilities Dividends to pay 42.542.917 - - - 42.542.917 Other financial liabilities 11.486.935 - - - 11.486.935 Loans 8.551.468 - - 8.551.468 - Total financial liabilities 62.581.320 - - 8.551.468 54.029.852

3.2.4. Exposure to treasury flow risk

2016 2015 Net cash resulted from exploitation activities 82.672.753 97.917.721 Net cash used in investment activities (1.133.104) (32.360.842) Net cash used in financing activities (41.302.465) (41.129.520) Net increase in cash and cash equivalents 40.237.185 24.427.359 Cash and cash equivalents on 1st January 95.205.828 70.778.469 Cash and cash equivalents of December 31st 135.443.013 95.205.828


24

Cash and cash equivalents include the items presented in the table below: December 31st 2016 December 31st 2015 Cash with the cashier 303.263 74.000 Current bank deposits 7.267.208 5.438.013 Bank deposits with maturity under 3 months 127.814.518 89.633.395 Attached receivables 58.023 60.420 Cash and cash equivalents 135.443.013 95.205.828 Bank deposits with maturity over 3 months 290.617 9.958.320 Blocked deposits - 54.136 Total 290.617 10.012.456

In the table below you can find the reconciliation of cash and cash equivalents with the accounting

balance:

December 31st 2016 December 31st 2015 Cash and cash equivalents 7.570.471 5.512.013 Bank deposits 128.163.159 99.706.272 less deposits with a maturity over 3 months and blocked deposits (290.617) (10.012.457) Cash and cash equivalents in the cash flow statement 135.443.013 95.205.828


25

4. Important events occurred after the end of the financial year 4.1. SIF Moldova SA

1. Extraordinary General Meeting of Shareholders on 04.04.2017 at first convening;

Adopted resolutions (current report 04.04.2017):

Resolution 1

Approves the election of the secretariat of the Extraordinary General Meeting comprised of 3 individuals

entered in the vote ballots, from among the company’s shareholders, in compliance to art. 129 line (2)

Law no. 31/1990 regarding companies: Nicolaescu George Catalin, Puscas Michaela, Sofian Virginia.

Resolution 2

Approves the running of a share buy-back program with the purpose of reducing the share capital, with

the following main characteristics:

a) Purpose of the program: The company will buy-back shares in the Program in order to reduce its

share capital, through the cancellation of the shares in compliance with applicable legal provisions. .

b) the maximum number of shares that can be bought back : 29.000.000 shares.

c) minimum price per share: the minimum purchase price will the the BVB market price at the time the

purchase is made.

d) maximum price per share: 1,5 lei.

e) Program duration: max. 12 months from the date the resolution is published in Romania’s Official

Gazette part IV.

f) the payment of bought-back shares will be made from the distributed profit entered in the 2016

financial statements, according to the provisions of art. 103 index 1 Law no. 31/1990 regarding

companies.

g) Share purchase within the Program will be run through all allowed market operations, which can also

include public purchase offers initiated by the Company, while abiding by the law.

Authorizing the Board of Directors and its members individually, to adopt all necessary resolutions in

order to fulfill the decision regarding the running of the share buy-back program.

Resolution 3

Approves the modification of Art. 7 line 3, thesis 1 of SIF Moldova’s Memorandum of Association, as

follows:

Current form: „The company is managed by a board of Directors comprised of 7 members, natural

individuals, elected or appointed by the Ordinary General Meeting for a period of 4 years with the

possibility of being re-elected.

Draft modification: „The company is managed by a Board of Directors comprised of 5 members,

natural individuals, elected or appointed by the ordinary General Meeting for a period of 4 years, with

the possibility of being re-elected.”

Resolution 4

Approves the modification of Art. 7, line 19 of SIF Moldova’s Memorandum of Association, by including

letter i) index 1 with the following content:

”Art. 7, line (19) The Board of Directors has the following attributions:

i^1) adopting the proper measures for the setting and application of corporate governance principles,

regarding the following items, without limitation to them:

1. Setting the relevant criteria for the monitoring of executive /higher company management activity

and the activity of the company as a whole, as well as annual evaluation of the criteria application

method;


26

2. analyzing the adequacy, efficiency and update of the risk management system in order to have an

efficient management of held assets, as well as of the way the corresponding risks the company is

exposed to, are managed;

3. making sure that the requirements regarding the outsourcing/assignment of some operational

activities or positions, both before the occurrence and over the entire duration of the

outsourcing/assignment are abided by;

4. analyzing and setting the remuneration policy so that it corresponds to the business strategy, long-

term objectives and interests and comprise measures for the prevention of conflict of interest

occurrence;

5. insuring the development and application of ethical and professional standards in order to insure a

professional and responsible conduct on the company level and prevent the occurrence of conflict of

interest;

6. approval of the Company’s risk appetite and tolerance limits, as well as of the procedure to identify,

evaluate, monitor, manage and report the significant risks that the company is or could be exposed

to;

7. drafting the plans to insure activity continuity and for emergency situations and their half-yearly

evaluation.”

Resolution 5

Approves 21.04.2017 as registration date (ex-date 20.04.2017) for the shareholders impacted by the

effects of the resolutions adopted by the Extraordinary General Meeting of Shareholders.

Resolution 6

Empowers the Board of Directors and its individual members to fulfill the resolutions adopted by the

Extraordinary General Meeting of Shareholders.

2. Ordinary General Meeting of Shareholders on 04.04.2017 at first convening; Adopted

resolutions (current report on 04.04.2017):

Resolution 1

Approves the election of the Ordinary General Meeting secretariat comprised of 3 individuals entered on

the vote ballots, from among the shareholders of the company, in compliance with art. 129 line (2) Law

no. 31/1990 regarding companies: Nicolaescu George Catalin, Puscas Michaela, Sofian Virginia.

Resolution 2

Approves the Activity Report of the Board of Directors for year 2016, including the “Corporate

Governance Code” of SIF Moldova revised, in compliance with the provisions of FSA Regulation no.

2/2016.

Resolution 3

Approves the individual financial statements (IFRS), for financial year 2016, accompanied by

the opinion of the financial auditor:

total revenue 212.040.222 lei

total expenses 78.237.199 lei

profit before taxation 133.803.023 lei

profit tax 10.505.003 lei

net profit 123.298.020 lei

Resolution 4 - approves:

a) a) The 2016 net profit distribution, as follows:

- net profit to be distributed 123.298.020 lei

- legal reserves 1.545.865 lei


27

- Dividends 44.975.884 lei

- Other reserves 76.776.271 lei

b) gross dividend of 0,044 lei/share.

c) the costs corresponding to the payments are borne from net dividend value.

d) The payment of dividends is made through the Central Depository and payment agent Banca

Transilvania in order to insure the continuity of the dividend payment process for SIF Moldova

shareholders.

e) Approves the date of 12.09.2017 as registration date (ex-date 11.09.2017) and date 02.10.2017 as

dividend payment date

Resolution 5

Approves the expiry of dividends corresponding to financial year 2013 set by OGMS on 15.04.2014,

uncollected by 14.07.2017 and their registration according to applicable regulations.

Resolution 6

Approves the discharge of administration for financial year 2016.

Resolution 7

Approves the 2017 Activity Report, in agreement with 2014-2018 Investment Policies Statement (OGMS

Resolution no. 8/15.04.2014).

Approves the revenue and expense budget for financial year 2017:

total revenue: 157.458.164 lei

total expenses: 47.625.091 lei

gross profit: 109.833.073 lei

net profit: 95.049.774 lei

Resolution 8

Approves the election of the Board of Directors for a 4 years’ mandate (2017 – 2021), with the

maintaining, during the mandate period, of the Administration Agreement and Management Agreements

approved through EGMS no. 2/01.04.2015 published in Romania’s Official Gazette part 4, no. 2207 of

29.04.2015; OGMS no. 15, 16 and 17 of 05.04.2013 published in Romania’s official gazette part IV no.

2213 of 22.04.2013.

Resolution 8.1.

Approves the result of administrator’s election through secrete vote: Ceocea Costel, Ciorcila Horia Doros

Liviu Claudiu, Iancu Catalin-Jianu-Dan, Radu Octavian Claudiu.

Resolution 9

Approves the appointment of Deloitte Audit SRL as financial auditor for a period of 2 years (2017-2019),

given the result of secret vote and provisions of SIF Moldova’s Memorandum of Association. .

Resolution 10

Approves the date of 21.04.2017, as registration date (ex-date: 20.04.2017) of the shareholders impacted

by the effects of the resolutions adopted by the ordinary general meeting of shareholders, with the

exception of the resolution concerning dividend.

Resolution 11

Empowers the Board of Directors and its individuals member for the fulfillment of the resolutions

adopted by the Ordinary General Meeting of Shareholders.

***


28

The General Shareholders Meeting has taken note of the resolutions adopted by the Board of Directors in

its first extraordinary meeting regarding the management structures for the 2017-2021 mandate, namely:

Election for the positions of President of the Board of Directors –Mr. Costel Ceocea.

Election for the positions of vice-president of the Board of Directors - Mr.Radu Octavian Claudiu

Appointment of General Manager- Mr.Doros Liviu-Claudiu

Appointment of adjunct General Manager - Mr.Iancu Catalin-Jianu-Dan.

The fulfillment of compliance obligations, based on the resolutions adopted by the General Meetings of

Shareholders on 04.04.2017 was carried out as follows:

Through current report no. 1797 of 04.04.2017 the shareholders and investors were informed about

the election of the management structure;

Through current report no.. 1798 of 04.04.2017 EGMS and OGMS resolutions were published, at the

same time they were submitted to the Trade Registry for mentions and publication in Romania’s

Official Gazette part IV, making sure they are opposable to third parties.

In order to insure the continuation of the company’s management and engagement until FSA authorizes

the modifications occurred in the management structure, SIF Moldova has informed third parties

(banks, institutions, etc), the provisions of the company’s Memorandum of Association (FSA approval

no. 217/17.06.2015), according to which “In the transitionary period between the date the mandates of

the former directors expire and the date the new directors are validated by the competent authority,

the company’s management is insured by the former directors”.

3. Offering SIF2 shares to managers, directors and employees of the company, according

to the company’s remuneration policy (current report of 11.04.2017)

Following OGMS resolution no. 3/04.04.2017 to approve the individual financial statements (IFRS) for

financial year 2016, together with the opinion of the financial auditor, the Board of Directors has

approved “The share-based payment plan 2016” as part of the benefits plan for year 2016. The shares

offered that are to be assigned to the managers, directors and employees are part of the shares bought-

back by SIF Moldova, according to the buy-back programs approved by EGMS resolution no.

4/01.04.2015 and no. 8/25.04.2016. The receipt of rights (share transfer) will be carried out at the time

each beneficiary exercises his right, after the fulfillment of the 12 months period from the signing of the

“Share based payment agreement”, but no more than 15 months from the signing date. “The notification

document” drafted in compliance to CNVM Regulation no. 1/2006 (Annex no. 21) has been made public

through current report on 11.04.2017 and posted on the website www.sifm.ro.

4. Approval of the public share buy-back offer issued by SIF Modlova – FSA resolution no. 734/30.05.2017 (current report 31.05.2017) Through FSA resolution no. 734/30.05.2017 the public share purchase offer for SIF Moldova shares has

been approved with the mail following characteristics :

number of shares that are object of the offer: 25.000.000 (2,4081% of share capital);

purchase price: 1 leu/share;

run period: 07.06.2017 – 27.06.2017;

Subscription locations: as per offer document presented on www.sifm.ro .

The purpose of the program is the reduction of the share capital through the cancellation of bought-back

shares. The capital reduction will pe presented for approval in the following general meeting of

shareholders.

The program objectives is the lowering of discount between unitary value of net asset and trading price,

increase of quotation and liquidity for SIF2share with the effect of increasing profit per share.

Results of the public offer:

Number of shares subscribed: 27.163.657

Allocation index: 0,9203473597

(Announcement of June 27, 2017)

http://www.sifm.ro/

http://www.sifm.ro/


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4.2. Mecanica Ceahlau SA

The Ordinary General Meeting of Shareholders on 26.04.2017 has approved the assignment of the net

profit obtained in financial year 2016 of 2.105.150 lei as follows:

Net profit 31st December 2016 lei

Net profit to be assigned 2.105.150

Legal reserves 126.928

Dividends 1.175.551,45

Other reserves 802.670,55

4.3. Regal SA

The Ordinary General Meeting of shareholders on 20.04.2017 has approved the assignment of the net

profit obtained in financial year 2016, worth 85.689 lei as follows:

Net profit 31st December 2016 lei

Net profit to be assigned 85.689

Loss coverage of previous years 21.204

Dividends 64.485

4.4. Agrointens SA

Important contracts:

GRATIAN BERATUNG & IMMOBILIEN SRL – service agreement for 4 months, starting on

01.06.2017.

Subscription type contract 20 hours, entered with FAST UK – blueberry consultant.

On 21.04.2017 land was purchased in the Mandra/Brasov area, through 3 sale-purchase agreement

with a total purchase value of 2.506.470,93 lei, corresponding to 552.001 euro at an exchange rate of

4,5407 lei. Through the agreements thus entered, a total of 441.600 square meters of land was

purchased. The Mandra lands are located about 30 km away from the Vistea farm.

Other events:

EGMS on 03.04.2017 approved

the contracting of a credit facility for a work capital of 1.5 mil lei from Banca Transilvania ;

approves the guaranteeing of the credit with a mortgage on the collections and current balance;

(ii) mortgage contract type 1 on the real estate in AI property as well as on the blueberry

plantations cultivated on these lands; (iii) mortgage on the agricultural machines, transportation

means and office supplies corresponding to the plantation;

the contracting of a credit facility for investments of 2.5 mil lei from Banca Transilvania for the

setup of cultures and purchase of equipment. Approves the guaranteeing of the credit with: (i)

mortgage contract on the collections and current account, (ii) mortgage contract type II on the

real property of AI as well as on the blueberry plantation on the lands; (iii) mortgage contract on

the agricultural equipment, transportation means and office supplies corresponding to the

plantation;

EGMS on 14.04.2017 has approved: the proposal of CA Agrointens SA regarding the project

"Extension of BLUEBERRY farm investment; purchase of Manda land, about 45,46 ha worth

568.250 euros and purchase recovery of land Vistea 5ha worth 85.0000 euro; increase of Agrointes

SA capital with the amount of 3.004.950 lei for investment financing, through the contribution of

shareholder SIF Moldova.

Significant events that might influence the basic activity (blueberry production): in June 2017 there

was a weather event, namely hale, that affected the plantation in Vistea. Following this event, the

damages are currently being evaluated with the insurer Gothaer, for possible damages.


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On 30.04.2017, the accounting value of tangible assets mortgaged represents 62,66% of the total assets

of the company. The total assets value of the company was 15.121.281 lei.

4.5. Hotel Sport Cluj SA

EGMS on 16.01.2017: approved the modification of the company Memorandum of Association following

the modification of the shareholding structure, through the entry of SIF Moldova, with a number of

19.329.398 shares representing 99,99% of total capital based on assets transfer document no.

175/17.11.2016 and Trade Registry Office resolution no. 48/04.01.2017 on the cancellation of

Opportunity Capital SA.

After obtaining the building permit for updating and façade laying for the hotel in December 2016, the

company is working on the PT phase of the project in order to obtain the quantity needs list and the

working instructions needed for the auction phase of the execution works.

4.6. Tesatoriile Reunite SA

EGMS on 16.06.2017 approved: the investment in “Baba Novac Residence” in concomitant execution

phases; the valuation of the land Spataru Preda in the preparing phase, increasing the share capital with

14.204.380 lei, in order to partially finance the building of the Baba Novac Residence project and

expenses for land preparation in Spataru Preda 5.

Important contracts

16.01.2017: Brokerage contract with the partner real estate agency - CBAR Moșilor-Dacia S.R.L, in

return for a total commission of 3% of the sale price (VAT included) for the living unit the real estate

transaction is closed for. At present the Agency is preparing the launch campaign of the BNR project,

drafting of BNR website, participation to real estate fairs. de

22.05.2017 the building permits for “Baba Novac Residence” project was obtained.

20.06.2017 contract signing with the general entrepreneur Octagon Contracting & Engineering SA to

build the residential complex and start construction.

4.7. Opportunity Capital SA

Based on the voluntary liquidation process, the company is cancelled on 04.01.2017, as per TRO Bacau

resolution no.. 48.

4.8. Real Estate Asset SA

01.01.2017: REA goes under the administration of the General Department for Large Taxpayers

Administration (notification no. 589-SA/27.12.2016)

31.01.2017: CA al Professional Imo Partners SA – majority shareholder of Veranda Obor SA – has

approved the signing of addenda to the credit contracts entered with Raiffeisen Bank. The extension

of the limit date for project completion has a direct impact on the issuing of the guarantees instituted

on the shares held by REA at Nord SA. CEFS/Veranda Obor representatives have requested the

financing bank to analyze the possibility of issuing the guarantees before the formal Project

completion date ( deferred for 30.06.2017)

EGMS on 04.05.2017 decided: Reduction of capital with the amount of 536.053 lei representing the

value of the shares subscribed and not paid in the capital increase approved by EGMS on 31.07.2015;

Proper modification of REA’s Memorandum of association; voluntary dissolution, liquidation and

cancellation of REA, appointment of liquidator Arbanas & Negrii; delivery of REA archive to Casa SA;

method to fulfill the liquidator’s mandate regarding the running of the procedure and assignment of

patrimony (assignment to SIF Moldova of the shares held by REA in the companies Professional Imo

Partners SA, that is 24.307.608 shares Nord SA, that is 1.658.681 shares).

4.9. CASA SA

EGMS on 28.04.2017 has decided to sell by auction the space in Bacau, Str. Marasesti no. 4. No bidder

showed up in the first stage.


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5. Information regarding own share purchase by SIF Moldova Group

Through current report on 06.03.2017 investors were informed about the completion of the own share

buy-back program, as per EGMS resolution of SIF Moldova no. 4/25.04.2016.

The results of the operation run between 15.06.2016 – 03.03.2017 are the following:

No. of purchase shares: 9.581.936 (0,923 % of share capital)

Average price: 0,7661 lei

Total share value: 7.341.134 lei

On the reporting day, the total holding of SIF2 shares is 16.000.000, as per OGMS resolution no.

8/25.04.2016, including the shares purchased as per EGMS resolution no. 4 /01.04.2015 and not

assigned.

Through FSA resolution no. 734/30.05.2017 the public share purchase offer for SIF Moldova shares has

been approved with the mail following characteristics :

number of shares that are object of the offer: 25.000.000 (2,4081% of share capital);

purchase price: 1 leu/share;

run period: 07.06.2017 – 27.06.2017;

Subscription locations: as per offer document presented on www.sifm.ro .

Results of the public offer:

Number of shares subscribed: 27.163.657

Allocation index: 0,9203473597

(Announcement of June 27, 2017)

Stock Option Plan program coordinates corresponding for 2016

OGMS on 25.04.2016 has approved the running of “stock option plan” (SOP)-type programs, to

distribute SIF2 shares free of charge to the directors, managers and employees of SIF Moldova, the

source being the shares not used in the buy-back program approved by EGMS on 01.04.2016 and

shares that are to be bought-back through the program approved by EGMS on 25/26.04.2016, a

maximum of 16.000.000 shares of which a maximum 10.400.000 shares can be used for 2016.

The Board of Directors has been empowered to adopt all measures necessary to fulfill the resolution

within legal and statutory limits, by going through all stages and formalities for program

implementation. de

The running of a SOP as part of the benefits plan for directors, manager and employees for year 2016

(Variable remuneration) can be achieved within the limitation of the Memorandum of Association

and CCM 2016-2017, and in compliance with AFIA law, namely:

for managers and directors – the actual level of the benefit plan is set by the Board of Directors,

after the approval of the annual financial statements 2016 by the General Meeting of

Shareholders.

for employees – the share plan can be assigned according to the law and in compliance with the

remuneration policy annually set by the Board of Directors.

at least 50% of the variable remuneration will consist in SIF2 shares (e.g. awarded through SOP)

The number of shares to be assigned to each beneficiary is set on the date the beneficiary rights are

awarded (date of the conclusion of the share-based payment agreement entered between SIF

Moldova and the Beneficiaries), after the approval of the annual financial statements 2016 by the

General Meeting of Shareholders. Exercising the right to receive shares free of charge will be within a

minimum deadline of 12 months from the signing date of the share-based payment contract, entered

between the company and shareholders.

http://www.sifm.ro/


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6. Corporate Governance

6.1. Corporate Governance Code

We have run the process of aligning the Corporate Governance Code of SIF Moldova to the

provisions of ASF regulation no. 2/2016. Its revised form (including articles from Reg. 2/2016)

is structured as follows:

Chapter. 1. ORGANIZATIONAL STRUCTURE. ASSIGNMENT OF POSITIONS AND

RESPONSIBILITIES (ASF reg no. 2/2016 – art. 4 line.2; a) insuring a transparent and

proper organizational structure; b) proper assignment and proper separation of

responsibilities)

1.1. GENERAL SHAREHOLDERS’ MEETING

1.2. BOARD OF DIRECTORS (Reg. 2/2016 Chapter II Board Responsibilities art. 7 – 22)

1.3. EXECUTIVE MANAGEMENT (Reg. 2/2016 Chapter III Responsibilities of executive

management (…) art. 23 – 28)

1.4. KEY POSITIONS (Reg. 2/2016 Chapter III Responsibilities (…) of the individuals holding

key positions art. 29 – 31)

Cap. 2. CONFLICT OF INTEREST AND THEIR MANAGEMENT (Reg. 2/2016 Chapter IV – Conflict

of interests and their management art. 32 – 40)

Cap. 3. PERMANENT RISK MANAGEMENT POSITION (Reg. 2/2016 – art. 4 line 2: c) proper risk

management/ risk management; Chapter V Risk Management and Risk Management

Position art. 41 – 48)

Cap. 4. PERMANENT INTERNAL CONTROL POSITION (ASF regulation no. 2/2016 – art. 4 line 2:

d) adequacy of policies and strategies such as the internal control mechanisms)

Cap. 5. PERMANENT INTERNAL AUDIT POSITION (Reg. ASF no. 2/2016 – art. 4 line.2: d)

adequacy of internal control policies and strategies and management)

Cap. 6. COMMUNICATION STRATEGY (ASF regulation no. 2/2016 – art. 4 line 2 e) insuring an

efficient communication system and information issue)

Cap. 7. CONFIDENTIAL INFORMATION REGIME ( ASF register no. 2/2016 – art. 4 line 2 f)

applying solid operational procedures, that prevent the issue of confidential information)

Cap. 8. SHAREHOLDERS’ RIGHTS

Cap. 9. FINANCIAL REPORTING

Cap. 10. INVESTMENT STRATEGY

Cap. 11. ASSETS MANAGEMENT

Cap. 12. DIVIDEND POLICY. SHARE BUY-BACK.

Cap. 13. EVALUATION OF COMPANY AND SIF2 SHARE PERFORMANCE

Cap. 14. POLICIES IN THE FIELD OF HUMAN RESOURCES. REMUNERATION POLICY.

Cap. 15 RESTRUCTURE PROCESS. COMPANY REORGANISATION.

Cap. 16. SOCIAL RESPONSIBILITY

Cap. 17. CODE REVISAL

The corporate governance code of SIF Moldova aligned to the provisions of ASF regulation no.

2/2016 regarding the application of corporate governance code by authorized entities, regulated and

supervised by ASF.

Statement regarding the application of corporate governance principles according to the

provisions of ASF reg. no. 2/2016 regarding the application of corporate governance code by

authorized entities, regulated and supervised by ASF.

The corporate governance code of SIF Moldova, abides by all 41 principles foreseen in the new

Corporate Governance Code of BVB (current reports no. 12.01.2016; 25.04.2016).

Statement regarding the abidance by the corporate governance code stipulated in the

Corporate Governance Code of Bucharest Stock Exchange.


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6.1.1. Structura si modul de operare ale organelor de administratie, organelor de

conducere, a organelor de supraveghere si a Comitetelor Grupului

6.1.1.1. THE GENERAL MEETING OF SHAREHOLDERS

The supreme government body of SIF Moldova is the General Meeting of Shareholders (GMS). Ordinary

and Extraordinary General Meetings of Shareholders are convened by the Board of Directors in

compliance with legal and statutory provisions.

The General Meeting of Shareholders adopts resolutions based on drafts proposed by the Board of

Directors and/or shareholders. GMS resolutions, signed by the president of the meeting, are reported to

FSA and BVB and made public by publishing in a national newspaper, Romanian Official Gazette, part

IV, FSA Bulletin, presented on the official website and at the headquarters. GMS resolutions are

enforceable (to be applied immediately) from the moment they are adopted, if there is no other date on

which they should become enforceable, mentioned in their wording, or stipulated by legal provisions.

Running and voting procedures

Recommended principles:

Directors have a legal obligation to look after the interests of all shareholders. If

shareholders do not vote they cannot complain when their views are not taken into

account..

The settlement of participation and voting procedures is an exclusive attribute of the Board of Directors.

Ever since the General Meeting of Shareholders of April 2008, SIF Moldova has implemented the vote by

correspondence with electronic transmission, in accordance with the Directive 2007/36/CE of the

European Parliament and of the Council from 11th of July 2007 receiving the notice of CNVM for

elaborated procedure. Subsequently, the implementation of the provisions of Directive in the Regulation

no.6/2009, has maintained the compliance of the Procedure content with the Regulation requirements.

The Board of Directors will be able to decide the holding of GMS, by electronic means, consisting in:

1. the transmission in real time of the General Meeting of Shareholders;

2. the bidirectional communication in real time, fact that allows shareholders to address

the Board of Directors at a long distance;

3. a voting system during the GMS that does not need a representative physically present

at the meeting

This procedure observes the community legislation in the field, “Directive 2007/36/CE of the European

Parliament and of the Council from the 11th of July 2007, on the exercise of certain shareholders’ rights

within the quoted commercial companies”, transposed in the national legislation in the “Regulation no.

6/2009 on the exercise of certain shareholders’ rights within the annual general meetings of commercial

companies”.

The Board of directors recommends that for certain issues relating to the agenda of the GMS, such as the

discussion, approval and/or modification of the annual financial statements, the dividend settlements,

election/revocation of Board members, the appeal of Board members, the dissolution/liquidation of the

company - not to use the electronic online voting.

Quorum requirements and decision making

Articles 18, 19 of SIF Moldova’s Memorandum of Association, foresee the following requirements

concerning quorum requirements and decision-making:


34

(18) for the validity of deliberations in the ordinary general meeting the presence of

shareholders holding at least one fourth of the total number of vote rights is necessary. The

resolutions of the ordinary general meetings are taken with a majority of votes cast. If the

ordinary general meeting cannot work because the requirements in the previous paragraph are

not met, the meeting will adjourn following a second convening, where it can deliberate on the

items on the agenda of the first meeting, irrespective of the quorum, taking decisions with the

majority of votes cast.

(19) For the validity of deliberations of the extraordinary general meeting the presence of

shareholders holding at least ¼ of total vote rights is required, and for the following convening,

the presence of shareholders representing at least 1/5 of total vote rights. Decisions are taken

with the majority of votes held by the present or represented shareholders. The decision to

modify the main object of activity of the company, reduce or increase share capital, change the

legal form, merge, dissolve or divide the company is taken with a majority of at least 1/3 of vote

rights held by present or represented shareholders.

Mentions regarding the holding limit of 5% of SIF Moldova’s capital.

The acquiring, holding and selling of SIF Moldova shares is made abiding by the provisions of Law no.

297/2004 regarding capital market and FSA regulations regarding the interdiction to directly or

indirectly hold more than 5% of vote rights.

SIF Moldova has harmonized its Memorandum of Associations with the provisions of art. 2811 of Law

297/2004. Thus, art 3 of the Memorandum of Association foresees that:

(8) Any individual can acquire under any title, or can hold, along or together with the individuals its

acts concentrated with, shares issued by the financial investment company resulted from the

transformation of Fondul Proprietatii Private, but no more than 5% of the capital of the

financial investment company.

(9) The exercise of the right to vote is suspended for the shares held by shareholders exceeding the limit

foreseen by art. (8).

The persons mentioned at paragraph (8) have the obligation, at achieving the 5% threshold, to inform

in no more than 3 working days the financial investment company, CNVM and the regulated market

where the respective obligations are traded

Within 3 months from the date of exceeding the limit of 5% of the registered capital of the financial

investment company, the shareholders who are in this situation are obliged to sell the shares that

exceed the limit of ownership.

The regulation for the application of art 2861 of Law no. 297/2004 on the capital market in Romania by

FSA has been made through FSA instruction no. 6/2012 (approved by FSA Order 140/14.12.2012),

that has annulled FSA instruction no. 1/2006.

6.1.1.1.1. Vote policy for the general meetings of the companies in the portfolio

The exercise of shareholder attributions conferred by Law no. 31/1990 R and FSA regulation has been

made through the representatives in the General Meetings of Shareholders.

The exercise of SIF Moldova’s shareholder attributions in the companies in its portfolio is regulated

through:

- internal regulations;

- system, operational and work systems.

SIF Moldova has set a procedure for its activity regarding the exercise of SIF Moldova’s shareholder

attributions in the companies in its portfolio, the procedure including the general framework for the

operations concerning:


35

1) drafting of retranslation mandates entered between SIF Moldova as Representative and

Represented or in the General Meeting of Shareholders.

2) mail analysis elements of the convening notice for the general meetings – form aspects regarding

lawfulness aspects, as well as fund aspects regarding the issues on the agenda from the point of

view of the interest it presents to the company and shareholders;

3) preparing for GMS participation: analysis of the documentation/information provided to the

sharehodlers and justification of the vote option.

4) granting the representation mandate/ special/mandate / power of attorney, vote through

correspondence.

The Board of Directors of SIF Moldova aims to make regular analysis on internal procedures in order to

improve them in agreement with new situations in current practice and update them with all

modifications of applicable law.

SIF Moldova evaluates its vote right only following a conscious decision.

Depending on the issued discussed for which the shareholders’ right is requested to adopt decisions in

the interest of the shareholders and company, our vote can be to support the suggestions of managers or

reject them.

VOTE POLICY FOR THE COMPANIES IN THE PORTFOLIO

A. Aspects concerning the management of companies

In compliance with the best practices, SIF Moldova supports the proposals of the managers of the

companies regarding:

- name change

- headquarters change;

- stock market listing

- setting the location and date of the annual general meeting

- acceptance/approval of financial statements;

- certification to transfer reserves and assign revenue;

- amendment to the individuals with signature authorization;

- approval of the modification of accounting records keeping methods

- acceptance of work agreements;

- appointment of internal auditors;

- approval of protocols and other formalities.

In the best interest of the shareholders, SIF Moldova will consider the vote “against” for any proposal in

case there are no information or the information have been insufficiently presented.

B. Election of the auditors

In compliance with the best practices and in order to reach the shareholders’ best interest, under normal

conditions, SIF Moldova will consider the “for” vote for the following proposals:

- election/authorization of auditors;

- interdiction for the auditors to engage in non-audit services for the company.

SIF Moldova will consider to vote “against” for the cases when:

- there is a certain concern regarding the independence of the auditors or the activity carried out by

them for the company in the past;

- there are suggestions that request the companies: to look for offers from other auditors; rotate

audit companies only for opportunist and/or comfort reasons.

C. Board of Directors

Regarding aspects connected to the Board of directors, normally SIF Moldova wants to support the

management. Nevertheless, the company will vote against the management in case corporate

performance has been low or in case the Board seems to lack independence.


36

In compliance with best practices and for the best interest of the shareholders, SIF Moldova will

normally vote “for” the following proposals:

- retribution of managers for the actions carried out in good will, the vote against will be

considered for proposals of unfair retribution, given the performances of the company.

- modifications of the Board number of members, that seems to have a legitimate business purpose

and does not mainly target reasons against take-over.

SIF Moldova will consider voting “against” in case there is:

- a limitation regarding the shares held by directors;

- a time limitation for the shareholder’s mandate. The companies benefit from experienced

managers and shareholders’ control is best exercised through annual vote;

- requirement for syndicate or special representation of interests in the Board of Directors;

- requirement to offer two candidates for each position in the board of directors.

D. Election of the Board of Directors

In elections of directors that have not been contested, SIF Moldova will consider the vote “against” for:

- directors who have had a low performance

- directors who have not acted in the interest of the company

In the following cases SIF Moldova will vote following a case to case analysis:

- in case of electing directors who have been challenged;

- in case of some low performance, the support for the election of a majority of independent

directors will be taken into consideration;

SIF Moldova will consider voting „for”:

- cumulative vote;

- increase of shareholder’s ability to request special general meetings.

SIF Moldova will consider voting “against” :

- limitation of shareholder’s ability to appoint or revoke managers. SIF Moldova aims to support

the proposals to reestablish the shareholders’ authority in this field. From case to case, a series of

suggestions that authorize the Board of Directors to make interim appointment;

- classes of shares with unequal vote right;

- awarding rights to the board of directors that are not compliant with applicable law.

E. Capital Structure

The management of companies must be very flexible regarding the setting of the company’s financial

structure and it is recommended that the proposals of management in this field, are supported.

Nevertheless the rejection of the proposal must be considered when these impose barriers against

potential take-overs.

SIF Moldova will consider voting „for” :

- increasing share capital with reserve contributions

- share buy-back programs in case all shareholders can participate under equal conditions;

- diminishing the share capital following the annulment of bought back shares

When following capital operations there are the premises that SIF Moldova’s interests will be affected,

the vote will be the object of case-to case analysis.

SIF Moldova will consider the vote “against”:

- increasing the share capital with contribution in kind

- share capital increases without preference right granted to shareholders

For votes on the issues below, SIF Moldova will make case to case analysis:

- contracting credits and pawning/mortgaging company goods;

- issue of corporate bonds;


37

- mergere or division of companies;

- conversion of shares from one category to another;

- conversion of a bond category in another or in shares.

F. Corporate governance

In case of voting for the following issues, SIF Moldova will make a case to case analysis:

- modifications of the memorandum of association. Support must be offered to the revisions of

memorandum of associations that are solidly business motivated. It is recommended that those

that seem to be made exclusively for the purpose of consolidating defense against a take-over

should be opposed.

- setup or closing of secondary offices: branches, agencies, or other such units without legal

personality;

- anticipatory dissolution of the company

SIF Moldova will consider voting „against” :

- consultative shareholders committes. Since management must request action indications from

shareholders, it is recommended that action methods be left to the latitude of management;

- limitations regarding share holding or vote rights;

The justification of the vote option is made based on a careful analysis of the documents provided to the

shareholders, made by investment analysist, taking into consideration the approaches/proposals of he

board of directors and in compliance with sharehodlers’ interests.

Participation to the General Meetings of Shareholders is made through:

- legal representative – president, vice president, managing directors

- appointed representative from among employees;

- external collaborators;

- vote through correspondence and electronic vote.

Usually vote is cast through proxies/ mandates for the benefit and best interest of SIF Moldova’s

shareholders, in order to reduce the costs of representation in general meetings.

Company financing (incl. agencies)

In case of OGMS and EGMS convened by agencies of SIF Moldova, based on justification notes drafted

« Special Power of Attorneys » are submitted for the approval of :

- DCD – if the requests of the agencies entered on the agenda abide by the sectorial strategy

approved by BD, within the maximum limits assigned as well as the expected profitability interval

for investments in that particular sector ;

- if the request of the agency, entered on the agenda does not abide by the sectorial strategy

approved by BD within the maximum limits assigned and the profitability internal expected for

investments in that particular sector,the appoval for the revision of SIF indicators/position in

GMS of the branch is requested;

Special power of attorneys are submitted to the GMS secretariat and written down in the GMS Protocol

register, in the agency.

With regards to SIF Moldova subsidiaries, the investment analyst in collaboration with the Majority

Holdings Portfolio will report on a quarterly basis (on the basis of the requested information / GMS

decisions adopted) on the economic and financial situation, the stage of the Budget fulfillment, the

investment program and the performance / profitability criteria proposed.

Non-attendance at GMS

There are situations that justify the non-attendance proposal.

a) possible conflict of interest between SIF and company

b) Lack of relevant information that would allow adopting a decision regarding the operation

submitted for approval;


38

c) conflicting and unclarified information that might manipulate the will of the shareholders.

d) other specific situations.

In case based on professional reasoning and taking into consideration the actual status regarding that

particular company, it is ascertained that the involvement of shareholder SIF Moldova in GMS is not

necessary due to a conjunctural situation or general policy interests of SIF Moldova in relation to the

companies classified in various categories, the non-attendance proposal of SIF shareholder to GMS is

issued and information on the resolutions adopted during the GMS will be obtained at a later date.

6.1.1.2. BOARD OF DIRECTORS

Abidance by the provisions of Reg. 2/2016 ChII Board’s responsibilities art. 7 - 22

The structure and members of the Board of Directors are set according to the requirements of specific

law, applicable to each category of regulated entities, so that it efficiency meets the obligations

assigned to it. (art. 7)

The basic responsibilities of the Board concerning the application of corporate governance are

presented in the Memorandum of Association and developed in internal policies and/or regulations, in

compliance with the specific legislation applicable to each category of regulated entities. (art. 8)

The Board, can create, depending on the nature, volume and complexity of the regulated entity’s

activity, consulting committees assigned with the drafting of basic recommendation for the Board. (art.

9)

The assignment of board responsibilities to executive/ higher management is made according to the

provisions of Companies Law no. 31/1990, republished with the later amendments and additions, and

specific law applicable to each category of regulated entities. (art. 10)

The board of directors is responsible for strategic management, meeting the objectives set ad,

depending on the management system, drafts/ approves the Business Plan, and has the obligation,

based on formal and transparent orders, to evaluate the financial position. (art. 11. - (1))

The Board is bound to set relevant criteria for the monitoring of executive /higher management

activity results and SIF Moldova as a whole, and to evaluate the way these criteria are applied, on an

annual basis. (art. 11. - (2))

The activities carried out by SIF Moldova and their development perspectives are analyzed at least

once a year by the Board. (art. 12.)

The Board is responsible to make sure that there is a proper framework for the verification of the way

in which specific law regarding F.S.A reporting is applied (art. 13)

The Board can decide, together with the financial auditor on a formal and transparent framework

through which correct, complete and on time information are provided, concerning the way in which

financial reporting principles and practices, including prudential reporting ones, are applied. (art. 14)

The Board is responsible to making sure there is a proper framework in place, for the verification of

information sent to FSA, at its request, regarding certain actions carried out by the regulated authority

(Art. 15).


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The Board analysis the adequacy, efficiency and update of the risk management/administration

system, for an efficient management of assets held by SIF Moldova, as well as the way the risks the

company is exposed to, are managed. (Art. 16.1).

The risk administration/management system previously mentioned insures the concordance of control

activities with the risks generated by the activities and processes that are subject to the control. (art. 16.

2)

The internal control system of SIF Moldova is created on the proper hierarchic level and reports

directly to the Board of executive/higher management, depending on the case, independent of the

organizational, operational and support structures that it controls and monitors. (art. 17. 1)

The internal control system of SIF Moldova insures the verification of the adequacy of the risk

identification, evaluation, monitoring, management and reporting actions, the viability of financial

and non-financial information reported internally and externally, and their compliance with specific,

applicable law, as well as with SIF Moldova’s internal decisions. (art. 17. 2)

The Board insures the abidance by the requirements regarding the outsourcing/assignment of some

operational activities or functions, both before they are carried out and while these are

outsourced/assigned (art. 18-(1)).

The outsourcing/ assignment of some operational activities or functions is made only according to

specific legislation and provided none of the following consequences will occur :

a) significant deterioration of the quality of SIF Moldova’s governance system

b) unjustified increase of operational risk ;

c) impossibility of FSA to monitor the abidance by SIF Moldova by its assigned obligations ;

d) prevention of the provision of continuous and quality services to the consumers of financial

products. (art. 18. - (2))

The Board analysis and sets the remuneration policy so that it corresponds to the business strategies,

long-term objectives and interests and includes measures for the prevention of conflict of interest

occurrence. (art. 19. - (1))

The Board makes sure that all engagements regarding remuneration are correctly and responsibly

structures and that the remuneration policies allow the promotion of efficient risk management

without taking on risks that exceed SIF Moldova’s risk tolerance level . (art. 19. - (2))

The remuneration policy is set based on a fundamental analysis of the individual performance of the

paid individual, a careful assignment of the expenses of the regulated entity, where possible, as well as

avoiding the setting of bonuses that allow excessive risk taking.(art. 19. - (3))

The remuneration level is set in strict connection with the responsibilities and engagements

corresponding to the attributions. (art. 20)

The Board, executive/high management, depending on the case, are bound to communicate with the

interested parties, based on a communication strategy, that abide by at least the following

requirements :

a) insuring an equitable treatment of shareholders and interested parties ;

b) information communication in due time;

c) insurance of a transparent communication framework (art. 21)

For the groups where the mother-company has its headquarters in Romania and is one of the regulated

entities foreseen under art. 4, the Board of the mother-company has the general responsibility of


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insuring a proper internal governance of the group, a governance systems corresponding to the

structure, activities and risks, both on the group and agency level. (art. 22. - (1))

The Board of the mother- company sets a governance system that contributes to an efficient

supervision of its agencies, and taken the nature, volume and complexity of risks to which the group

and agencies are exposed into consideration, while at the same time abiding by the legal and

governance responsibilities of the agencies (art. 22. - (2))

The Board of the agency applies internal governance principles and policies similar to those of the

mother company with the exception of the case where legal requirements stipulate own policies should

be set. (art. 22. - (3))

The Board of the agency together with the board of the mother company which has its headquarters in

Romania and is a regulated entity (…) evaluate the decisions and practices on the group level in order

to make sure that these abide by legal provisions or prudential norms applicable to the agency and do

not affect a healthy and prudent management. (art. 22. - (4))

Detailing of the assignment of functions and responsibilities of the Board of Directors –

excerpt from the corresponding regulations -part of AFIA certification documentation -

The company is managed by a Board of Directors comprised of at least 5 members, natural individuals,

elected or appointed by the general meeting for a four years’ period, with the possibility of being re-

elected. The members of the Board of Directors are FSA approved.

In its activity, the Board of Directors adopts resolutions. The resolutions of the board of directors are

valid if more than half its members are present and decisions are adopted with the majority vote of

present members. The president of the Board of Directors will have decisive vote in case of a tie. The

president of the board of directors who, at the same time, is CEO of the Company cannot have a decisive

vote. Legally adopted resolutions are mandatory for the directors and other managers, and are

enforceable from the time they are communicated in writing or from the general notice sent through the

secretariat of the Board of Directors, if they do not foresee a later deadline on which they are to come into

force, in their wording.

The Board of Directors elects a president and vice-president from among its members. The president of

the Board of Directors can also cover the CEO position in the company, the vice-president can also cover

the adjunct CEO position. The president chairs the meetings. In case the president is absent, the works

are conducted by the vice-president.

The members of the Board of Directors can be represented in the board meetings only by other members.

An attending member can only represent a single absent member.

The statutory provisions regulate the situations concerning:

a) the management of the company in the interim period from the date the mandates of the former

directors expire up to the validation date of the new directors by the competent authority;

b) Board completion procedure, when there are vacant positions ;

c) organization and course of Board of Directors meeting.

The Board of Directors has the following basic competencies, which cannot be assigned:

setting the company’s main activity and development direction;

setting the accounting and financial control policies, as well as approval of financial planning;

appointing and revoking directors and setting their rights and obligations;

supervision of directors’ activity;

drafting the annual report, organization of the general shareholders’ meeting and implementation of

its resolutions;


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submission of the request for the opening of the company’s insolvency procedure;

accurate fulfillment of all attributions set for the Board of Directors by the general meeting of

shareholders;

setup/ closing of agencies and other secondary offices, without legal personality, or change of their

headquarters;

setting and approval of the vote procedures in the general meeting of shareholders;

setup of other companies or legal entities, including holdings in the share capital of other

companies, according to legal regulations;

pledging, renting, setup of first degree movable security and mortgage on the company’s property.

approval of the exceeding of the limit set by the provisions of Law no. 31/1990, with the approval of

the competent authority and in compliance with the regulations issued by it, for the buyback of own

shares, issued according to art. 4 of Law no. 133/1996, in the property of their initial buyers. The

acquired shares can be used, based on the resolution of the Board of Directors, with the approval of

the competent authority, for the purpose of lowering the share capital or regulating the course of

own shares on the capital market.

Other attributions of the Board of Directors:

drafting general investment policies;

contracting bank loans;

entering contracts with the depositor, auditor and entity keeping the shareholders’ records;

assignment of company representation right to other directors or employees, setting the limitations

of the mandate;

approval of the company’s internal regulation and internal control procedures, internal audit, risk

management and legal assistance for employees, directors and members of the Board of Directors;

negotiation of the collective employment contract;

approval of the setup/dissolution of the Management Committee with the quorum for adopting

resolutions foreseen in the Memorandum of Association;

approval of the organization of the company, organization chart, functions status and wage

limitations;

appointment and revoking of director replacements and setting their remuneration;

approval of the appointing, employment, discharge of office or firing of department directors, setting

their rights and obligations

making sure that the company has an IT system that allows the safe keeping of market price records

for each asset in the portfolio, net asset value, unitary value of net asset for the regulated reporting

periods, records of the calculation method for all commissions, taxes and fees due, keeping the

records of these operations for at least five years;

approval of the regular reports of the internal audit, internal control and risk management

departments;

approval of the investigation plan of internal control;

ordering measures for the remedy of any infringement of the law, applicable regulations for the

capital market or internal procedure by SIF Moldova or by its employees, following the analysis of the

proposals presented in writing by the internal control department representative;

notification of FSA and involved capital market institutions, about the situations identified by the

representative of the internal control department regarding the infringement of legal regime

applicable to the capital market and on the measures adopted;

approval of the multiannual and annual internal audit plan and necessary resources;

approval and periodical revision of the Risk management policy, procedures and methodologies for

the identification, measurement, management and monitoring of relevant risks to which the

company is or could be subjected to, at any time;

approval of risk profile and risk tolerance for significant risks;


42

approval of the crisis simulation results and recommendation presented by the risk management

function

approval of the periodic risk reports from the risk management department;

evaluation and periodic examination (half-yearly) of the efficiency of the measures and procedures

implemented for risk management and ordering proper measures for the improvement of possible

deficiencies;

approval of the results of the periodical self-evaluation of operational risks and internal control

system, as well as the answer to risk plan which includes measures for the prevention and lowering of

operational risks;

approval and regular(half-yearly) evaluation of the business continuity plan and the plan for

emergency situations, in order to eliminate or lower risks;

approval of the classification of information on insider and confidential categories and of the

measures taken to manage them

approval of the assets evaluation methods as per International Evaluation Standards, namely:

o market-based approach methods;

o income-based approach methods;

o cost-based approach methods;

o other applicable methods.

approval and examination of any modification of the assets evaluation policy and procedures

periodical evaluation and examination of the efficiency of policies, measures and procedures

instituted to meet the obligations foreseen by AFIA legislation

settling any other issued set by the general meeting of shareholders or legal regulations or

provisions.

The main objective of the Board of Directors on the average and long term, defined and determined by

the particularities of SIF Moldova and the macroeconomic context it operates in, is to insure a balance

between the continuity of the activity under optimal conditions and meeting the shareholders’

expectations.

The obligations and responsibilities of the directors are regulated by the provisions regarding the

mandate and the ones especially foreseen by Law no. 31 /1990 with its later amendments and additions,

Law no. 297/2004 with its later amendments and additions, applicable FSA regulations and statutory

ones.

The members of the board of directors hold the proper knowledge, competencies and experience to

understand the activities of the company, especially the main risks associated to these activities, as well

as the assets SIF Moldova invests in.

6.1.1.3. Audit Committee

The audit committee is a permanent committee, independent of SIF Moldova management,

subordinated to the Board of Directors. The Audit Committee supports the Board of Directors in fulfilling

its responsibilities in the field of financial reporting, internal and external control and risk management.

The members of the Audit Committee are set by the Board of Directors.

The audit committee is comprised of at least two members elected from non-executive managers.

The members of the Audit Committee must have the proper experience corresponding to the attributions

they have within the committee. At least one member of the Audit Committee must have accounting

and/or audit competence.

Attributions. responsibilities:

it monitors the financial reporting process;


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it monitors the efficiency of internal control, audit and risk management systems within SIF

Moldova;

approves the Internal audit Chart and internal audit and control procedures;

analyses and approves the multiannual internal audit plan and the resource need for this activity;

analyses and approves the annual investigation plan of internal control and its modifications;

it makes sure that the internal audit and internal control analysis and reports drafted are in

compliance with the audit and control plans approved by the Board of Directors;

receives the internal audit report, analyses and approves the findings and recommendation of

internal audit and measures plan for their implementation;

receives the report of the internal control representative, analyses and approves the ascertainments

and recommendations of internal control and the measures plan for their implementation;

analyses and approves the annual report regarding internal audit activity;

analyses and approves the annual report regarding internal control activity;

analyses and approves the annual report regarding risk management;

analyses and approves the risk reports of the risk management department, analyses and periodically

monitors (half –yearly) the efficiency of the risk management system, based on the risk report;

approves the Accounting Policies Handbook of SIF Moldova

monitors the credibility and integrity of the financial information issued by the Company, especially

through the revision of the relevance and consistency of accounting standards adopted by it;

makes recommendations to the Board of Directors regarding the election of the external auditor;

monitors the auditing of annual and consolidated financial statements;

collaborates with the external financial auditor in order to clarify relevant aspects stemming from the

financial reports;

analyses the findings and recommendation of the financial auditor regarding significant deficiencies

of internal control concerning financial reporting;

analyses the audit report and/or opinion of the financial auditor regarding essential aspects resulting

from financial audit, as well as regarding the financial reporting process and recommends necessary

measures;

verifies and monitors the financial auditor’s independence, and especially, the delivery of additional

services.

6.1.1.4. Investment policies- strategies Committee

(optional committee, setup through BD resolution in relation to BD structure and investment strategy).

Role, establishment method:

The Investment Policies- Strategies Committee is a permanent consultative committee, independent

from the executive management of SIF Moldova, subordinate to the Board of Directors.

The Investment Policies –Strategies Committee assists the Board of Directors in fulfilling its

responsibilities in the field of drafting investment policies and strategies, following-up the abidance by

resolutions concerning the application of investment policies, analysis of the portfolio of financial

instruments and management of connected risks.

The members of the Investment Policies –Strategies Committee are set by the Board of Directors. The

Investment Policies –Strategies Committee is comprised of at least 2 elected members, usually non-

executive managers.

The members of the Investment Policies –Strategies Committee must have an experience appropriate for

the attributions it is assigned within the committee.

Attributions, responsibilities:

Issues recommendations to the Board of Directors regarding the annual/ multiannual investment/

disinvestment strategy.

Issues recommendations to the Board of Directors regarding:


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o maximization of financial instruments portfolio performance;

o assignment of assets for performance increase, correlated to the GMS approved activity

program with the investment/disinvestment strategy approved by the Board of Directors

and economic forecasts;

For the justification of the recommendations presented to the Board of Directors, it drafts

documents and investigations in its competence area.

6.1.1.5. Appointing Committee

Role, establishment method:

The appointing committee is a permanent committee, with consultative function, independent from the

executive management of SIF Moldova, subordinate to the Board of Directors.

The Committee assist the Board of Directors in fulfilling its responsibilities in the field of appointing

members for management positions and their payment.

The Committee is comprised of a number of at least 2 members elected from among non-executive

directors, abiding by the independence requirement foreseen by Companies Law.

Attributions, responsibilities:

The Appointing Committee has the following main attributions (the list is not exhaustive):

drafts recommendation regarding the policy for the appointing of company managers and directors to

be presented for GMS approval;

drafts recommendations regarding the remuneration policy for managers, directors and employees of

the company;

can draft recommendations regarding the remuneration policy on the level of SIF Moldova group.

submits to the Board of Directors the annual report regarding the indemnity and other advantages

granted to the managers and directors during the financial year;

approves the documentation that is provided to the financial auditor for the analysis of transactions

reported according to art. 225 Law no. 297/2004 and, following the audit report, will recommend the

measures that should be taken, if any;

drafts recommendations regarding the covering of vacant positions in the Board of Directors, with the

abidance by GMS resolutions and applicable law;

drafts recommendations regarding the adopting of the resolution of the Board of Directors and/or

executive management for the appointing, employment, discharge of office, or dismissal of

department managers and staff in key positions and control position, as well as for setting the their

indemnity level and rights and obligations;

drafts recommendations regarding the appointing of candidates for various management positions;

periodically evaluates the level of acquirement and application of specialized knowledge and makes

recommendation regarding the continuous update process of the professional knowledge of managers

and directors ;

makes recommendations for the improvement of knowledge regarding the company’s activity for the

purpose of applying best corporate governance practices ;

monitors the abidance by the transparency, information and reporting requirements and obligations,

concerning information in this activity area ;


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6.1.1.6. EXECUTIVE MANAGEMENT

Abidance by the provisions of Reg. 2/2016 Ch. III Responsibilities of executive

management (…) art. 23 - 28

Executive/ higher management is responsible for the management and good running of the activities of

the regulated entity, including those of the application of policies, strategies and objective reaching.

(art. 23)

SIF Moldova includes in its internal procedures/policies/ regulations, provisions regarding the

recruiting and selection of the members of executive/higher management and renewal of the mandate

of existent ones. (art. 24 – (1))

SIF Moldova makes sure that the members of executive management/ higher management prove to

have the professional competence and relevant experience in compliance with the activity carried out

and assigned attributions, knowledge about the applicable law and good practices and have a good

reputation and integrity. (art. 24 – (2))

To fulfill its attributions and exercise its competence executive/higher management acts within a well-

structured framework with specific objectively, clearly defined and in compliance with applicable

specific legislation. (art. 25)

Executive/higher management supplies the Board with qualitative and quantitative information in due

time, at its request or through its own initiative, following the fulfillment of obligations in an operative

and efficient manner. (art. 26)

Executive/higher management is responsible for the integrity and accuracy of reports and other

information regarding the activity and financial status of the regulated entity, according to applicable

specific legislation. (art. 27)

Executive/higher management makes sure that the information foreseen under art. 15 Reg 2/2016:

“The Board is responsible to make sure that there is a proper framework for the verification of

information sent to FSA, at the latter’s request, regarding some actions carried out by the

regulated entity”

are available according to specific law applicable to each category of regulated entities and that the

information reporting deadline has been abided. (art. 28)

Detailing the assignment of functions and responsibilities of executive management –

excerpt from the applicable regulation

The executive management of the company is insured, in compliance with the provisions of the

Memorandum of Association, resolutions of the board of directors and applicable regulations, by the

General manager, adjunct general manager and executive manager, who act as directors of the company

in the sense of Companies Law no. 31/1990.

The executive management is appointed by the Board of Directors, according to statutory provisions.

Executive management:

is empowered to manager and coordinate the daily activity of the company, corresponding to the

activity coordinated by each director.

is responsible for the application of general investment policies, insurance of the abidance by internal

regulations and work procedures.


46

informs the Board of Directors regarding the activity carried out between its regular meetings.

In the field of risk management, executive management is responsible for:

insures the implementation of the Risk management policy, procedures and method for the

identification, measurement, management and monitoring of risks to which the company is or could

be exposed to, approved by the Board of Directors;

adopting proper and efficient measures, processes and techniques for the monitoring and control of

all relevant risks, in compliance with the risk management policy;

insurance of the resources necessary for the implementation of the risk management system;

setting the competences and responsibilities concerning risk management on each line of activity;

application and proper and efficient abidance by the risk limits taken on, including in crisis

situations, as well as abiding by the risk profile approved by the Board of Directors;

insurance of crisis simulations;

setting and maintaining a proper risk exposure system;

periodic (half-yearly) evaluation of the business continuity plan for emergency situations in order to

eliminate risks or lower them;

development of an integrated risk culture on the level of SIF Moldova, based on a full understanding

of the risks the company faces and the way these are managed, taking into consideration its risk

tolerance/appetite.

In the field of compliance insurance, the directors are responsible for:

approval of compliance policy;

analysis, at least once a year, of the compliance policy and its implementation method within SIF

Moldova;

insurance of the resources necessary for the implementation of conformity policies;

ordering of measures for the control of compliance risk.

President of the Board of Directors

The president is elected by the Board of Directors from among its members and also covers position of

Chief Executive Officer in the company.

As President of the Board of Directors:

he convenes the Board of Directors;

he chairs the meetings of the Board of Directors;

he follows the fulfillment of Board of Directors’ resolutions;

he conducts GMS works and presents for debate and approval the items entered of GMS agenda.

The Chief Executive Officer enforces the resolutions of the Board of Directors, for which purpose he

issues written resolutions and orders. His decisions and orders are immediately enforceable and produce

effects from the moment they are submitted to the individuals competent to fulfill them

The CEO has the following attributions:

a) direct and effective management of the company’s activity in compliance with the general objectives

set by GMS ;

b) implementation of general investment policies of the company;

c) management of the company’s patrimony within the limits set by the law, Memorandum of

Associations and GMS or Board of Directors resolutions;

d) patrimonial engagement of the company in its legal relationship with third parties, through his own

signature ;

e) enters agreements, with the exception of those that are the competence of the Board of Directors ;

f) approval of measures regarding the protection of the integrity of tangible, intangible assets in the

patrimony of the company;


47

g) trading and/or negotiating attributions in the relationship with third parties, regarding the assets or

rights of the company within the limitations foreseen by the law, Memorandum of Association, GMS

or the Board of Directors;

h) representation of the company in the relationship with third parties in before courts, as well as the

right to transfer representation rights to employees or third parties based on written mandate ;

i) collaboration with the company’s auditor, Depository of the company and entity keeping the

shareholders’ records, as well as with the other control or supervision bodies of the company;

j) approval of the content of market and shareholders informational reports regarding any action that

is subjected to a reporting obligation ;

k) internal (functional) organization of the company, taking into consideration the legal provisions,

Memorandum of Association of the company, internal regulation, organizational chart as well as the

resolutions of the Board of Directors ;

l) employment, promotion and dismissal of the company’s employees as well as taking disciplinary

measures for the employees of the company in compliance with legal and internal regulations;

m) periodical notification of the company’s employees as well as the negotiation of the individual

employment contracts and work conditions with them ;

n) remuneration of employees within the limitations set by CCM and/or the Board of Directors ;

o) verification and control attribution for the way the company’s employees fulfill their tasks or other

individual under a contractual relationship with the company ;

p) notification of the Board of Directors and company regarding the activity carried out, according to

applicable legislation;

q) other attributions set by the Board of Directors of the company through resolution or expressly

foreseen by legal provisions.

The President CEO coordinates the entire activity of the company in compliance with the attribution of

executive staff and organizational chart. The President CEO coordinates the daily activity of the following

departments: Internal Audit, Internal Control, Risk Management, Financial Department, Legal

Department, Corporate Governance Code, the activity regarding labor safety and health and the fire

prevention and extinction activity.

The CEO directs and coordinates the Management Committee.

In case of absence, the attributions assigned by the Board of Directors will be the competence of the vice-

president and the actual management of the company will be insured by the Adjunct CEO and executive

director.

The Vice-president of the board of directors

The vice-president is elected by the Board of Directors from among its members and also covers the

Adjunct CEO position in the company.

In the absence of the President CEO, he fulfills his attributions corresponding to his quality of President

of the Board of Directors and along with the directors in the Management Committee, he insures the

actual management of the company.

As Adjunct CEO he has the following attributions:

a) implementation of Board of Directors’ resolutions;

b) direct and actual management of the company’s activity in compliance with the general objectives

set by GMS;

c) management of the company’s patrimony within the limitations set by the law, Memorandum of

Association, resolution of the general meetings of shareholders or Board of Directors;


48

d) patrimonial engagement of the company in its legal relationship with third parties through his own

signature in agreement with the provisions of internal regulations and within the set competence

limitations;

e) conclusion of contracts, with the exception of those that are the competence of the Board of

Directors and/or President CEO;

f) approves the measures regarding the protection of the integrity of movable and immovable assets in

the patrimony of the company;

g) trading and/or negotiating attributions in the relationship with third parties, regarding the assets or

rights of the company within the limitations foreseen by the law, Memorandum of Association, GMS

or the Board of Directors

h) representation of the company in the relationship with third parties in before courts, as well as the

right to transfer representation rights to employees or third parties based on written mandate ;

i) collaboration with the company’s auditor, Depository of the company and entity keeping the

shareholders’ records, as well as with the other control or supervision bodies of the company;

j) approval of the content of market and shareholders informational reports regarding any action that

is subjected to a reporting obligation ;

k) internal (functional) organization of the company, taking into consideration the legal provisions,

Memorandum of Association of the company, internal regulation, organizational chart as well as the

resolutions of the Board of Directors;

l) control and promotion of company employees according to legal and internal regulations;

m) remuneration of employees within the limitations set by CCM and/or the Board of Directors ;

n) verification and control attributions regarding the way the company’s employees or other individuals

in a contractual relationship with the company fulfill their tasks;

o) notification of the Board of Directors of the company regarding the activity carried out, according to

applicable law;

p) other attributions set by the Board of Directors of the company through resolutions or expressly


Vice-president Adjunct CEO insures the daily coordination of the following departments: “CORE”

Portfolio, “SELL” Portfolio, “Transactions” Office. The competence of the portfolio is set through BD

resolution.

In case of absence, the attributions assigned by the Board of Directors will be the competence of the

President and the effective management will be insured by the CEO and Executive Director.

Executive Director

The Executive Director is appointed by the Board of Directors who sets his specific attributions.

The Executive Director insures the daily coordination of the “Majority Holdings” Portfolio activity. The

competence of the “Majority Holding” Portfolio is set through BD resolution.

The Executive Director has the following attributions:

a) direct and actual management of the company’s activity, according to the general objectives set by

GMS;

b) management and coordination of the management of the company’s portfolio where SIF Moldova

holds a majority position, according to internal regulations;

c) representation of the company in the relationship with third parties, regarding the exercise of

shareholder right in the companies where SIF Moldova has a majority position, as well as the right to

transfer representation rights to employees or third parties, through a written mandate;

d) approves the content of the market and shareholders notification reports regarding any action or

deed that is object of a legal reporting obligation, connected to the activity it coordinates;


49

e) verification and control attributions of the way the employees carrying out the coordinated activity

fulfill their tasks;

f) notification of the Board of Directors and the company regarding the activity carried out, according

to applicable law;

g) other attributions set by the Board of Directors and the company through resolutions or expressly


In case of absence his attribution will be the competence of the Vice-president adjunct CEO.

When the CEO and adjunct CEO are absent from the company for a reason, the Executive Director

insures the actual management of SIF Moldova along with the director replacement appointed within the

limitation of the following competences:

1. approves collection and payment operations.

2. Signs documents to third parties.

3. Approves the transaction of financial instruments including participations to capital increase, within

the limitation of the amount set through the decision of the Board of Directors.

4. approves the conclusion, modification or cancellation of contracts, within BVC limitations approved

and the limitations set by the Board of Directors.

5. approves legal actions for the purpose of protecting the interests of SIF Moldova in the litigations

with other institutions or companies.

Management Committee

According to statutory provisions the Board of Directors can assign part of its attributions to a

Management Committee comprised of managers that can also be directors of the company.

Through the decision of the Board of Directors it was decided that the Management Committee be

comprised of three members, namely: President CEO, Vice-president adjunct CEO and Executive

Director.

The Management Committee insures the supervision of the company’s activity between the meetings of

the Board of Directors, within the limitations of its assigned competencies.

The Board of Directors has assigned the following attributions to be the competence of the Management

Committee:

1. adopting decisions regarding the implementation of general investment policies set by the Board of

Directors;

2. adopting decisions regarding the harmonization of the specific objectives of the portfolios

coordinated by the directors;

3. solving any other issues set by the Board of Directors.

Organization and conduct of the Management Committee’s activity

Between the meetings of the Board of Directors, the Management Committee carries out its activity

within the competence limitations set and presents in the Board of Directors meeting the decisions

adopted and status of the running operations.

The legally adopted decisions are mandatory for the directors and employees and enforceable from the

time they are communicated in writing, if there is no other later deadline for their becoming enforceable

mentioned in their content. The decisions of the Management Committee are adopted with a majority of

its members’ votes. Vote cannot be cast through a representative in the Management Committee.

The CEO manages and coordinated the Management Committee and in this quality, he:


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a) convenes the Management Committee whenever necessary to present issues that fall under its

competence for debate and approval;

b) follows up the fulfillment of the Management Committee’s resolutions;

c) informs on adopted decisions, in each meeting of the Management Committee.

6.1.2. The protection of SIF Moldova interests/assets by legal and out-of -court

procedures

The legal assistance, consultancy and representation procedure is carried out by the Legal Department in

agreement with SIF Moldova’s objectives with stress being laid on legal counsel, the solving of possible

conflict amiably, and approach of alternate solutions to prevent / solve divergences.

The department is specialized, having attributions and responsibilities on specific activity categories.

According to internal norms and procedures, the Legal Department insures the collection, registration,

submittal of specific notifications and correspondence, the diligent representation in all cases where the

company acts as party, as well as the technical-legal monitoring of the activities carried out by attorneys

employed by SIF Moldova.

In the legal assistance, counsel and representation the corporate governance principles are abided by,

and there is a constant concern for the initiation of all measures to protect the legitimate rights and

interests of the company, at the same time with the insurance of a full and diligent information of

shareholders regarding the status and solving method of litigations.

6.2. Main features of the internal control and risk management systems of SIF

Moldova Group

6.2.1. Internal Control System

FSA reg . 2/2016 – art. 4 line 2: d) adequacy of policies and strategies; as well as internal control

mechanisms

SIF Moldova institutes and maintains a permanent and efficient compliance verification

function, which is independent.

The Internal Control department is structurally and hierarchically subordinated to the Board of

Directors.

The Internal control department insures the supervision of SIF Moldova’s abidance by applicable law for

the capital market, as well as internal procedures and regulations.

In fulfilling the attributions assigned to him, the representative of the internal control department

reports to the Board of directors and notifies directors. In case during the activity it ascertains that the

legal regiment applicable to the capital market, including internal procedures of the company are

infringed, it is bound to inform the Board of Directors and directors of SIF Moldova within one working

day; in case the members of the Board of directors receive such a notification, they immediately notify

FSA and capital market institutions involved about the ascertained situation and measures adopted.

Staff of the department

Each individual employed in the internal control department is subjected to FSA certification and

entered in FSA Public Register. In case the company presents more individuals with internal control

attributions for certification, the certification request is accompanied by the detailed responsibilities of

each individual employed in the internal control department.


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The compliance officer position is similar to that of internal control department representative.

In case one of the individuals with internal control attributions is absent, his attributions and

responsibilities are automatically taken over by another certified individual. In case SIF Moldova no

longer has a representative of the internal control department, or in case he is temporarily unavailable,

according to applicable legal provisions, one of the directors will temporarily fill the position of internal

control department representative, abiding by the legally set time frame and FSA notification

In order to allow the individual(s) appointed as representative(s) of the internal control department to

fulfill their responsibilities correctly and independently, SIF Moldova must make sure that the following

requirements are met:

a) the person(s) has/have the authority, resources and experience needed, as well as access to all

relevant information;

b) the person(s) appointed as representative of the internal department bear(s) the responsibility of

abiding by the attributions corresponding to the internal control position and for any reporting

concerning the abidance by applicable regulations, in which he will especially state if the proper

measures have been taken to remedy possible deficiencies;

c) in case of SIF Moldova, given the nature, volume and complexity of its activity as well as given the

nature and variety of services and activities carried out, the representative of the internal control

department can be involved in the carrying out of services and activities that he monitors, with the

abidance by applicable legal provisions and prior notification sent to FSA

d) on setting the remuneration of individuals the following must be taken into account: the

remuneration level must allow SIF Moldova to employ qualified and experiences staff; the

individuals’ objectivity must not be affected by the method remuneration is set; variable

remuneration must be based on objectives that are specific for the position and must be set

exclusively based on performance criteria on AFIA level; remuneration is directly supervised by

the Remuneration Committee.

e) individuals are evaluated for the fulfillment, and maintaining the requirements regarding

professional competence and experience, integrity and good reputation and governance, during the

entire time they carry out their activity, according to applicable legal provisions

The attributions and responsibilities of the representative(s) of the internal control department are the

following:

a) monitors and regularly verifies the application of legal provisions incidental to SIF Moldova’s

activity, of internal rules and procedures and acts according to its competencies in order to prevent

and suggest measures for the remedial of any situation when the law, applicable incidental

regulations for the capital market or internal regulations and procedures of SIF Moldova are

infringed by SIF Moldova or its employees; monitors the implementation of suggestions and

recommendations;

b) periodically monitors and evaluates the adequacy and efficiency of measures, policies and procedures

set according to applicable regulations and actions taken to remedy deficiencies concerning the

company’s abidance by its obligations;

c) offers counseling and assistance to relevant persons responsible for carrying out activities for the

abidance of requirements imposed to SIF Moldova, according to applicable regulations.

d) makes sure that the reports that SIF Moldova must submit to F.S.A and capital market entities are

submitted within the deadline set by applicable regulations;

e) analyses and approves the documents submitted by SIF Moldova to F.S.A in order to obtain the

certifications foreseen by F.S.A regulations;

f) analyses and approved informative /advertising materials of SIF Moldova;

g) analyses and approves the documents drafted by SIF Moldova according to work procedures;

h) approves the development of new strategies, investment policies, relevant organizational changes and

investments on new markets and in new products;

i) verifies the abidance by prudential regulations;


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j) insures the notification of SIF Moldova and its employees regarding the legal regimen applicable to

the capital market, both in regard to approved norms and in draft legislation that present interest for

the activity of the company, in order to make suggestions/ recommendations/ observations, if

needed;

k) is responsible for the supervision of the solving and management of complaints regarding SIF

Moldova activity on the capital market, keeping the complaints register and periodical reporting to

ASF of the status of recorded complaints.

Through CEO decision, a permanent committee is set up to analyze all shareholder’s petitions and

suggest, if the case be, measures adopted by management to improve the situations notified, the

communication of the answer to the complaint make is made abiding by legal deadline.

l) creates a process to identify, register, monitor, prevent and disclosure of conflicts of interests,

manages the internal procedure regarding Conflict of interest.

m) manages the specific work procedure regarding the Supervision of international sanction

application on the capital market - in applying express regulations of FSA; RCCI who can be a

member of the Committee (through CEO resolution), in which quality he also insures the relationship

with FSA.

n) manages the specific work procedure regarding the Prevention and fight against money laundering

and finance of terrorist acts – in applying national legislation and express FSA regulations; RCCI who

can be a member of the Committee (through CEO resolution) a quality in which he insures the

relationship with FSA and National Office for the Prevention and Fight against Money Laundering.

Carrying out permanent and regular control :

1. drafting of the annual investment plan(s) abiding by the following principles/ criteria:

(a) includes control objectives according to applicable legal regulations and represents part of an

integrated control process within SIF Moldova( internal control, internal audit and risk

management);

(b) is drafted based on the risk analysis that might occur from the activities carried out by SIF Moldova,

considering the “ Register of Operational risks identified which might affect SIF Moldova’s activity”,

drafted by the Risk Management Department;

(c) the activities that it carries out, in order to verify the compliance of the company’s activity to

applicable legal regulation, SIF Moldova’s policy and procedures, are periodical and permanent

control activities;

(d) the main component of the activity is pro-active permanent control, exercised through the

continuous supervision and monitoring of activities that fall under the competence of internal

control, in order to prevent the occurrence of legal and internal non-compliance;

2. Making investigations and reporting to higher management:

(a) presents a report regarding the investigation plan to the Board of Directors of SIF Moldova, for

debate and approval; the report is priory approved by the Audit Committee

(b) reports to the Board of Directors and directors on the cases when the legal framework applicable to

the capital market, internal regulations and work procedures have been infringed, within one

working day, in order to remedy the ascertained situations.

(c) submits an activity report to the Board of directors on a quarterly basis

(d) annually sends the Board of Directors a report regarding activities carried out and the investigation

program/plan suggested for the following year. The report and investigation plan approved by the

Board of Directors are submitted to FSA.

6.2.2. Internal Audit System

FSA regulation no. 2/2016 – art. 4 line 2: d) adequacy of internal control policies, strategies and

mechanisms


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SIF Moldova sets and maintains the permanent internal audit function that is separate

and independent from other functions and activities if SIF Moldova

The department is subordinated to the Board of Directors.

For the purpose of guiding the activity, the internal audit department develops policies and procedures

aligned to the requirements of internal standards for the professional practise of internal audit.

Attributions and responsibilities:

a) helps the company, both as a whole and its structure, through opinions and recommendations;

b) assists the company in risk management;

c) contributes to the improvement of risk management, control and governance processes;

d) evaluates the adequacy and efficiency of controls regarding governance, operations and systems of

SIF Moldova;

e) draft policies and procedure for the exercise of the audit activity, as well as any modification of them;

f) conducts risk evaluations for the activities carried out by SIF Moldova, at least once a year;

g) sets, implements and maintains an audit plan in order to evaluate and examine the efficiency and

adequacy of the internal control systems and mechanisms, and procedures of SIF Moldova;

h) notifies the Audit Committee and Board of Directors about the plan regarding internal audit activity,

and necessary resources, including significant interim modifications;

i) carries out the missions included in the annual plan;

j) issues recommendations based on the results of the activity carried out;

k) at the request of the Audit Committee, Board of Directors or directors carries out missions on the

spot or exceptional missions (not included in the internal audit annual plan) ;

l) verifies the abidance by recommendations;

m) at the end of each mission, reports on issues concerning internal audit and regarding the adequacy of

the adopted measures to remedy possible deficiencies;

n) records any relevant information that supports the conclusions and results of the engagement isi

coordoneaza activitatea cu auditorul financiar, pentru a asigura indeplinirea corespunzatoare a

obiectivelor de audit si pentru a minimiza suprapunerea;

o) periodically reports to the Board of Directors and the Audit Committee about the purpose of the audit

activity, authority, responsibility and functioning of the internal audit activity, in relation to the set

plan;

p) verifies if management has accepted a level of residual risk that would be unacceptable for SIF

Moldova and notifies the Board of Directors about the cases when no decision regarding residual risk

was taken, in order to solve this situation;

q) carries out formalized counsel missions (included in the Internal Audit Plan), informal, exceptional

or in emergency cases, at the express request of the Board of Directors or executive management.

Internal audit carried out insurance missions and counseling missions.

Insurance missions offer an independent evaluation of the governance processes, risk management

and control process within SIF Moldova. Insurance missions are carried out through the following

stages: planning of the internal audit activity, preparation of the internal audit mission, on-site

intervention, internal audit report, following-up the recommendations and quality analysis.

Activitatea se defsfasoara astfel:

1. planificarea activitatii de audit intern: intocmirea, avizarea si aprobarea planului

multianual de audit intern si a planului anual de audit intern, in conformitate cu cerintele

Standardelor internationale pentru practica profesionala a auditului intern si cu reglementarile

nationale.

2. preparation of internal audit mission:

informing the leader of the activity that is to be audited, regarding the tart of the internal

audit mission;


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collection and processing of information regarding the structure, activity, program/project or

audited operations, in order to facilitate the drafting of procedures regarding risk analysis and

verification;

identification and analysis of specific risks and evaluation of internal control in the audited

process/ activity/ structure, so that the audit effort be oriented towards the riskiest areas;

drafting the internal audit mission program to make sure the internal audit mission is carried

out under good conditions, in order to cover all auditable objectives and their associated risks;

meeting the representatives of the audited structure in order to introduce the members of the

internal audit team, purpose of the mission, objectives set for the internal audit mission and

work methods, as well as setting a calendar for the meetings.

3. on-site intervention:

collection of audit evidence for the purpose of the audit team’s building an opinion about the

strong and weak points of the process/ activity/ organizational structure audited and

submittal of audit evidence based on which the ascertainments, recommendation and general

conclusion of the audit mission will be presented;

ascertainment and reporting of identified irregularities.

4. drafting the internal audit report:

drafting the internal audit report project; sending the internal audit report project to the

audited structure for the purpose of having it analyzed and for the presentation of its

standpoint regarding the ascertainments and recommendations of auditors;

analysis of the observations submitted by the audited structure concerning the internal audit

report project

analysis, endorsement and approval of the internal audit report and action plan for the

implementation of recommendations.

5. follow-up of recommendations: insurance that the recommendations presented following

the internal audit missions are properly implemented on the set deadlines and evaluation of

consequences in case they are not applied.

6. analysis of the quality of the internal audit activity: for the purpose of offering a

reasonable insurance that the internal audit abides by its Charter, functions efficiency and

contributes to the creation of added value and improvement of company’s operations and in order

to make sure that in the internal audit missions all internal audit mission objectives have been

achieved at a high quality standard

Counseling missions are consultative and connected activities that have the role of adding value and

improvement the governance, risk management and control processes of SIF Moldova, without the

auditors taking on the responsibility of management.

The specific methodology for the formalized counseling missions involves going through specific

activities: initiation of counseling mission, opening meeting, collecting and processing information,

drafting the counseling mission program, collection and analysis of audit evidence, making the analysis

and formulating the ascertainments, revision of work documents, drafting and communicating the report

of the counseling mission and follow-up of recommendations.

6.2.3. Risk management system

FSA regulation no. 2/2016 – art. 4 line.2: c) proper risk administration / risk management

Law no. 74/2015 – Ch. II, art. 5, line (2) : main activities that an AFIA may carry out while managing a

FIA are the following: b) risk management .

Abidance by the provisions of Reg. 2/2016 Ch V Risk management/ administration and

risk management/ administration function art. 41 - 48


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SIF Moldova applies procedures and strategies for the management/ administration of risks and sets

the requirements for their periodical revision. (art. 41)

The Board approves the risk appetite and risk tolerance limitations for SIF Moldova, as well as the

procedure for the identification, evaluation, supervision, management and reporting of significant

risks to which SIF Moldova is, or could be exposed to. (art. 42)

The procedure for the identification, evaluation, monitoring, management and reporting of significant

risks foreseen in the previous paragraph comprises references to at least the following aspects:

a) definition of risk categories and their evaluation methods;

b) presentation of the way in which the regulated entity manages each relevant risk category and

area, as well as possible risk accumulations;

c) maintaining risk tolerance limits for each relevant risk category, depending on the general risk

appetite, in compliance with specific requirements of the law in the field;

d) setting the frequency and description of the periodical stress tests and presentation of situations

justifying the carrying out of tests, on the spot.

(art. 43)

The Board, executive/higher management, depending on the case, makes sure that the procedure

mentioned under art. 42 is applied, and that the proper instruments, techniques and mechanisms are

used in its application (art. 44).

The evaluation of the risk management/administration system efficiency, as adopted by SIF Moldova

is made by the board of directors on a half-yearly basis based on the risk report, depending on the

policies, procedures and verifications carried out. (art. 45).

The risk management/administration function reports to the executive/higher management the risks

identified as being potentially significant, in compliance with the applied procedure. (art. 46)

The risk management/administration position has the obligation to report on specific risk areas both of

its own initiative and at the request of the Board of executive/higher management( art. 47).

SIF Moldova drafts clear action plans in order to insure business continuity for emergency situations

in order to eliminate or minimalize risks. (art. 48. - (1))

The plans to insure business continuity and in case of emergency situations are evaluated on a half-

yearly basis by the Board and executive/higher management. (art. 48. - (2))

Risk management policy - excerpt from AFIA certification documentation

1. General risk management framework

Risk management is an important component of the strategic objectives of SIF Moldova in the process of

maximizing profit and minimalizing risk exposure.

The Board of Directors of SIF Moldova understands that risk management must be carried out within a

consistent methodological framework.

Risk management system is comprised of:

relevant elements of SIF Moldova’s organizational structure, with a central role for the permanent

risk management function.

policies and procedures regarding risk management that are relevant for the company’s

investment policy


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measures, processes and techniques connected to the measurement and management of risks

that SIF Moldova uses.

1.1. Relevant elements of SIF Moldova’s organizational structure with a central role for

the permanent risk management position.

One of the central components of the risk management system is the permanent risk management

position. This position plays a central role in defining the policy regarding the management and

monitoring of risks in the company, in order to insure permanent compliance of the risk level with the

risk profile of the company.

Risk management responsibility is not limited to the level of the specialists in the risk field or control

functions. Operational structures, under the supervisions of the management functions are first of all

responsible for the daily management of risks, taking into consideration the risk appetite and in

compliance with the policies, procedures and controls of SIF Moldova.

SIF Moldova management aims to dedicate enough time for the examination of risk connected issued

through active involvement and provision of proper resources for the management of all relevant risks

the company is subjected to.

The general corporate governance model in the field of risk management in SIF Moldova is the 3 lines of

defense model:

1. First line of “defense” – is provided by the business and support areas that have the first

responsibility and importance for the effective control of risks in the daily operations carried out.

The first line of defense takes on and manages daily operations carried out on a daily basis, in

compliance with the activities carried out. Individuals in the functional department from the

business and support areas pro-actively manage risks through the development of procedures

that keep the risks specific for the activity carried out, under control.

The first line of delimiting risk is responsible for the execution of risk policies, minimal standards

and the framework set by the second line of risk delimitation.

2. The second line of “defense” – is provided by the compliance/ internal control function and

the risk management function, that supply proper mechanisms to the first line of “defense”.

The risk management position is independent from the activity that generate risk exposures, it

develops policies and procedures for risk management on the level of the entire company and

insure risk management of the whole process.

3. The third line of “defense” – is provided by the internal and external audit position. The

mission of this line is to offer a specialized, independent evaluation of the efficiency of the risk

management process and internal control/compliance system.

Risk management department insures the permanent risk management function, it is hierarchically

and functionally independent from the activities that generate risk exposures and has the following

responsibly:

it drafts and implements efficient policies, procedures and methodologies for risk management, as

well as any modification of them

constant identification, measurement, management and monitoring of all relevant risks for the

investment policy and to which SIF Moldova is or could be exposed (art.42);

it reports to the board of directors the risks identified as being potentially significant in compliance

with applied procedures.

reports regarding specific risk areas both from its own initiative and at the request of the Board of

executive/higher management.


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substantiates and proposes risk limits, monitors and abides by them and notifies the management

structure in due time, in case it thinks that the risk profile is not compliant with these regulations or

if there is a significant risk that the risk profile become non-compliant with these limitations;

it makes sure that the risk profile of SIF Moldova, as notified to the investors, abides by the risk

limitations set to cover at least the market, issuer, liquidity and operational risks;

it notifies the Board of Directors of SIF Moldova, on a quarterly basis updated information regarding

the following aspects:

o abidance of the company’s risk profile as notified to investors by the set risk limits;

o adequacy and efficiency of risk management process.

it periodically notifies the Board of Directors about information connected to the current risk level

that SIF Moldova is exposed to as well as to any existent identification of existent or possible

exceeding of set risk limits, in order to make sure that quick and proper measures can be taken;

it suggests measures to prevent and lower risks and monitors their implementation;

evaluates the company’s risk profile depending on the risk appetite and tolerance by the Board of

Directors;

it analyses on a quarterly basis the relevant risks that SIF Moldova is exposed to and drafts risk

reports to the Board of Directors, regarding them.

it makes crisis stimulations under the conditions and with the frequency foreseen by internal

procedures and regulations of FSA.

it offers assistance to the Board of Directors / executive management regarding the identification of

SIF Moldova’s risk profile (art.42);

it monitors that the assets categories of SIF Moldova abide by legal and internal, applicable

prudential limits, including abidance by the assets value of the relevant benchmark and abiding by

the own fund and own additional funds requirements

classification on risk classes of the assets portfolio form the point of view of the assets’ liquidity

degree

analysis of risks associated to SIF Moldova’s engaging in new activities

participates to the examination of the proper nature of the plans to insure business continuity and for

emergency situations, drafted by the specialized department

monitors and verifies the implementation or all corrective measures to prevent and lower risks,

resulted in the self-evaluation of operational risks and internal control within departments;

it initiates the self-evaluation of operational risks within all departments of SIF Moldova, providing

counsel regarding the identification and evaluation of risks and setting the proper measures to limit

possible consequences of these risks. The results of the self-evaluations made in the department are

quantified by the Risk Management department in the “Risk Map” of the company and the “Risk

Answer Plan”. based on the exposure to operational risk, the profile of operational risks is then

drafted.

Each individual employed in the risk management department must have competence, professional

experience as well as good reputation and integrity. At the same time, each individual is subject to FSA

certification and must meet the edibility requirements and be registered in FSA Public Register.

The permanent risk management function has the necessary authority and access to all relevant

information in order to fulfill its specific functions and maintain regular contact with executive

management and the board of Directors of SIF Moldova, in order to supply them with updated

information, based on which quick remedy measures can be taken, if necessary.

1.2. Policies and procedures regarding the management of relevant risks for the

company’s investment policy.

The risk management policy represents another pillar of the risk management system. SIF Moldova

sets, implements and maintains a proper and formalized policy for risk management which:


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identifies all relevant risks that SIF Moldova is or could be exposed to ;

comprises the policies necessary to allow the evaluation of the company’s exposure to market risk,

issuer (credit) risk and liquidity risk, as well as exposure on all other relevant risks that could have a

significant level, including operational risks.

The risk management policy includes at least the following elements:

techniques, processes, instruments and proper and efficient measures for :

o the identification, measurement, management and monitoring of risks that the company is or

could be exposed to, at any given time

o including the abidance by quantitative and qualitative risk limits, or both, set to cover all relevant

risks

techniques, instruments and measures that allow the evaluation and monitoring of the company’s

liquidity risk under normal and exceptional liquidity conditions, including through crisis

stimulations made regularly

assignment of responsibilities regarding risk management within the company

quantitative, qualitative risk management or both set in order to cover all relevant risks and the

abidance by the company’s risk profile, communicated to investors

conditions, content, frequency and destination or reports drafted by the permanent risk management

function

protection measures against conflict of interest of the risk management function.

The risk management policy:

covers all business structure, control/compliance, support functions, being adequate for the size and

complexity of the company’s activity.

it is proper for the nature of the company’s activity, taking into consideration that SIF Moldova:

o is a closed investment fund, that does not have exercisable buyback rights and whose actions are

allowed for trading on the capital market;

o does not resort to loans in carrying out its activity and does not invest in derived financial

instruments to increase the equity yield, thus not being exposed to the the leverage

effect.

is correlated to the investment policy, aiming to cover the risks specific to each assets category in

which SIF Moldova invests, as well as with its support obligations.

In order to insure the efficiency of the risk management policy, it is revised at least annually by the Board

of Directors.

SIF Moldova applys procedures and methodologies to manage/administer risks and set the conditions of

their periodical revision.

Procedures for the identification, evaluation, monitoring, management and reporting of significant

risks include reference to at least the following aspects:

defining the risk categories and their evaluation method;

presentation of the method in which SIF Moldova manages each category of relevant risk area, as

well as possible risk accumulations;

mentioning of the risk tolerance limits for each category of relevant risk category, depending on the

general risk appetite, in compliance to specific requirements of the law in the field ;

setting the frequency and description of the periodical stress tests and presentation of the

circumstances that justify the organization of other stress tests on the spot . (art. 43)

The Board of Directors makes sure that on the level of SIF Moldova, the procedures for the identification,

evaluation, monitoring, management and reporting of significant risks are applied, and in their

application proper instruments, techniques and mechanisms are used. (art. 44).


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1.3. Measures, processes and techniques connected to the measurement and management

of risks, used by SIF Moldova

SIF Moldova has the proper means, processes and techniques, that are efficient, and properly formalized,

to insure:

the identification, measurement, management and monitoring of risks that the company is or could

be exposed to, at any given time;

the accurate measurement, based on solid and viable data, of the risks corresponding to the positions

held and of their contribution to the global risk profile

abidance by the set risk limits

the carrying out, when needed of regular ex post tests, in order to examine the validity of the risk

measurement methods which include model-based forecasts and estimates

the carrying out of crisis simulations and proper periodical analysis of scenarios to answer to the

risks coming from potential changes of the market conditions that might have a negative effect on SIF

Moldova.

the abidance by the current risk level by the set risk limitations

the institution, application and maintaining of proper procedures, which in case of actual or

anticipated infringements of SIF Moldova’s risk limits would allow the tanking of quick corrective

measures in the investors’ interests.

the existence of proper systems and procedures to manage liquidities, according to the requirements

st by applicable regulations.

The measures, processes and techniques mentioned above and proportional to the nature, volume and

complexity of SIF Moldova’s activity and correspond to the risk profile of the company, as communicated

to investors.

The risk management process is carried out by going through the following stages:

risk identification – the risks are defined as perceived by the company, the component elements are

identifed and risk generating events are described.

risk evaluation and measurement – are made for each type of identified risk, with the held of some

quantitative and qualitative methods using preset databases and indicators

risk monitoring – the risk indicators are monitored as they evolve, as well as their abidance by legal

and internal rules set

risk management and control – measures are suggested to keep risks under control in case it is

ascertained that these exceed the limits, and are then reported to the management structure.

2. Functional and hierarchical separation of the risk management position

The risk management position is separated from a functional and hierarchic point of view from the

operational units, including the investment (portfolio) monitoring function, the following conditions

being met:

the individuals involved in exercising the risk management function are not supervised by individuals

responsible for the performance of operational units, including the management position for SIF

Moldova’s investments (portfolio). I

individuals involved in exercising the risk management function are not engaged in activities within

the operational units or investment (portfolio) management function, thus insuring their

independence;

individuals involved in exercising the risk management function are paid according to meeting the

objectives connected to this function, independent from the performance of operational units,

including that of investment (portfolio) management. The payment of the staff in risk management

positions is directly supervised by the appointing committee.

The functional and hierarchic separation of the risk management position is insured on the entire level of


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SIF Moldova’s hierarchic structure, up to the management body.

3. Specific protection methods against conflict of interest in the risk managmeent activity

SIF Moldova maintains a proper policy in order to prevent, manage and monitor conflict of interests in

the risk management process.

Conflicts of interest might occur under the following situations, without being limited to them:

the risk management staff carrying out business or support activities, particularly investment

management activities.

payment of the staff responsible for risk management depending on the performance of the business

units, especially the performance of investment management position.

Subordination of the risk management staff to some operational structures, particularly the

investment management function.

Specific protection methods against conflict of interest in the risk management area, consist in:

making sure, through the organizational chart and internal regulations that the risk management

function is functionally and hierarchically separated from the business and support structures,

particularly those in investment management. The risk management activity is organized in an

individual department, subordinated to the Board of Directors;

the risk management function is represented in the board of directors by the president CEO whose

authority is on the level of the investment (portfolio) function represented by the vice-president

adjunct CEO and Executive Director, thus insuring the necessary authority in the relationship with

the investment management function.

The payment of individuals involved in exercising the risk management function is set according to

objectives connected to its position, independent of the performances achieved by the business

position, thus insuring objectivity in the evaluation of investment connected risks. The payment of

individuals in risk management positions is directly supervised by the Appointing Committee.

The decisions made by the risk management position are based on viable data, that are subjected to a

proper degree of control according to risk management procedures;

The risk management position is subjected to the independent examination of internal audit and

audit committee, in order to make sure that the decisions are the result of an independent process.

The audit committee has the necessary resources to examine the risk management position and its

members are independent.

do not fulfill any tasks that would come into conflict with this position and are not supervised by an

individual covering a position that would conflict with the risk management function, making

decisions based on data that they can be properly evaluated, the decision-making process being up

for revisal.

The individuals responsible for risk management function are bound to:

o inform the Board of Directors, audit committee and executive management if their objectiveness

or independence is actually or apparently affected by actions such as: limitation of the activity

purpose, limitation of the access to financial or informational resources, etc;

o report to the management structure as well as to the Board of Directors, any situation when its

objectivity and impartially can be actually or potentially influenced, or if there are uncertainties

regarding a situation that might be considered to prejudice their objectivity or impartiality;

o avoid any action or connection with or form another employee, shareholders, representative of

issuers in the investment program if these could create the impression that the objectivity of the

staff would be prejudices (for example: accepting money, presents or entertainment, etc. of

significant value).

The Board of Directors of the Company and the Audit committee set the protection measures against

conflict of interest, periodically examine their efficiency and take corrective measures on time in order to

remedy possible deficiencies.


61

4. Evaluation, monitoring and revision of risk management systems

The evaluation of the efficiency of the risk management system adopted by SIF Moldova is made by the

Board of Directors on a half-yearly basis, based on the risk report, depending on the policies, procedures

and controls made.

The Board of Directors evaluates, monitors and re-examines the following aspects on a half-yearly basis:

adequacy and efficiency of the risk management policy, the measures, processes and techniques for :

o the identification, measurement, management and monitoring of risks that the company is or

could be exposed to, at any time

o insurance of set risk limits ;

o extent to which the company abides by the risk management policy, above mentioned measures,

processes and techniques;

adequacy and efficiency of measures taken to improve deficiencies occurred in the running of the risk

management process

fulfillment of risk management position;

adequacy and efficiency of the measures aimed to insure the functional and hierarchic separation of

the risk management position

Moreover, the risk management systems are revised when:

risk management processes and procedures and the processes and techniques for the identification,

measurement, management and monitoring of risks at any time, are subjected to significant changes

internal or external events indicate that an addition re-examination is needed

SIF Moldova’s investment policy and objectives are subjected to significant change.

SIF Moldova updates its risk management systems based on the results of the above mentioned re-

examination and notifies FSA regarding any significant modification of the risk management policy and

of the measures, processes and techniques used to manage risks.

5. Risk limits

SIF Moldova sets and applies quantitative and qualitative risk limits or both, taking into consideration all

relevant risks. In case only qualitative limits are set, SIF Moldova must be able to justify this approach

before the competent authority .

Qualitative and quantitative risk limits cover at least the following risks :

market risk;

credit risk (since SIF Moldova does not grant loans, the issuer risk is managed);

liquidity risks;

counterparty risk (not applicable);

operational risks.

On setting risk limits, SIF Moldova takes into account investment policy and used assets. These risk

limitations correspond to the risk profile of SIF Moldova communicated to investors and approved by the

Board of Directors.

***

The consolidated management report for 2016 has been approved by the Board of SIF

Moldova on June 30, 2017.

President & CEO

Costel Ceocea

Chief Accountant

Cristina Andries

Internal Control

Michaela Puscas


62

SIF MOLDOVA SA

Consolidated Financial Statements

for the year ended as at December 31, 2016

Prepared in accordance with International Financial Reporting Standards

as adopted by the European Union

CONTENTS:

PAGE:

Independent auditor’s report 1 – 2

Consolidated statement of comprehensive income 3 – 4

Consolidated statement of financial position 5

Consolidated statement of changes in shareholders’ equity 6 – 7

Consolidated statement of cash flows 8 – 9

Notes to the consolidated financial statements 10 – 65

SIF MOLDOVA SA

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

AS AT DECEMBER 31, 2016

(all amounts are expressed in RON, unless specified otherwise)

Notes attached are an integral part of these consolidated financial statements.

3

In LEI Note 2016 2015

Revenue

Revenue from dividends 9 118.065.476 26.837.170

Revenue from interest 10 1.279.014 1.691.426

Other operational revenue 11 57.198.874 38.397.618

Earning from investments

Net earnings from assets sale 12 94.747.761 122.313.846

(Net loss)/ Net earning from the reevaluation of financial

assets at fair value through the profit or loss account 13 (6.502.197) (3.972.242)

Expenses

(Losses) / re-running losses from assets impairment 14 (47.065.756) (1.953.011)

Expenses with the setup of risk and expenses provisions (729.456) 1.106.690

Other operational expenses 15 (82.968.956) (63.593.684)

Operational profit 134.024.760 120.827.813

Financing expenses (436.067) (77.798)

Profit before taxation 133.588.693 120.750.015

Profit tax 16 (11.146.941) (23.081.481)

Net profit of financial year 122.441.752 97.668.534

Other overall result elements

(Increase) /Decrease of reserve from the reevaluation of

tangible assets net of deferred tax 5.727.039 (126.973)

Transfer from the revaluation reserve to retained earnings

following the sale of tangible assets - -

Revaluation of assets available for sale fair value, net of

deferred tax 19 e) 215.845.820 (46.689.351)

Reserve decrease due to the sale of financial assets

available for sale 19 e) (86.419.557) 110.633.603

Other overall result elements 135.153.302 63.817.279

Total overall result corresponding to the period 257.595.054 161.485.813

SIF MOLDOVA SA

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

AS AT DECEMBER 31, 2016



4

In Lei 2016 2015

Net profit pertaining to

Company shareholders 121.661.692 96.781.127

Non-controlling interest 29 780.060 887.406

122.441.752 97.668.533

Comprehensive income pertaining to 258.144.455 165.615.846

Company shareholders (549.401) (4.130.033)

257.595.054 161.485.813

The consolidated financial statements were approved by the Board of Directors on June 29, 2017 and

were signed on its behalf by:

Costel Ceocea, Cristina Andrieş,

President Chief Accountant

SIF MOLDOVA SA

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED DECEMBER 31, 2016



5

In LEI Note 31st December

2016

31st December

2015

Assets

Cash and cash equivalents 17 7.570.471 5.512.013

Deposits at banks 18 128.163.158 99.706.272

Financial assets at fair value through profit or loss 19 a 132.052.544 115.203.699

Financial assets available for sale 19 b 1.299.085.922 1.124.199.137

Investments held to maturity 19 c 9.573.804 9.593.199

Investment property 20 11.329.891 11.213.326

Intangible assets 21 9.495.295 5.476.491

Tangible assets 21 70.148.481 77.351.594

Biological assets 1.868.564 1.868.564

Other assets 22 42.230.149 38.389.615

Total assets 1.711.518.279 1.488.513.910

Liabilities

Borrowings 23 9.145.719 8.551.468

Dividends payable 24 29.319.122 42.542.917

Provisions for risk and charges 25 5.020.583 4.290.795

Deferred tax liability 26 66.139.361 54.537.734

Current tax liability 27 543.845 2.852.688

Other liabilities 27 12.783.782 15.292.055

Total liabilities 122.952.412 128.067.657

Equity

Equity 28 539.720.149 539.720.149

Share capital 485.007.295 383.412.453

Retained earnings 8.618.009 7.624.546

Reserves from revaluation of property, plant and

equipment 19 e)

545.110.922 415.684.659

Reserves from revaluation of financial assets

available for sale

(10.723.746) (7.378.192)

Total equity attributable to Company

shareholders 1.567.732.629 1.339.063.615

Non-controlling interest 29 20.833.238 21.382.638

Total equity 1.588.565.867 1.360.446.253

Total liabilities and equity 1.711.518.279 1.488.513.910





SIF MOLDOVA SA

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY




6

In LEI Share capital Reserves from the

reevaluation of

tangible assets

Reserves from the

reevalaution of

financial assets

available for sale

Reported result Other equity

elements

Total assignable

to the

shareholders

Non-controlling

interests

Total

Balance on 1st January 2016 539.720.149 7.624.546 415.684.659 383.412.453 (7.378.192) 1.339.063.615 21.382.638 1.360.446.253

Overall result

Finacial year profit 121.661.692 121.661.692 780.060 122.441.752

Other overall result elements - -

Incease (decrease ) of reserve from the revaluation of

tangible assets 993.463 4.809.154 5.802.617 (75.578) 5.727.039

Transfer of reserve from revaluation to reported result

following the sale of tangible assets - - -

Revaluation at fair value of financial assets available for

sale, net of deferred tax 215.845.820 215.845.820 215.845.820

Reserve decrease following the sale of financial assets

available for sale (86.419.557) (86.419.557) (86.419.557)

Changes in subsidiaries holding (2.303.417) (2.303.417) (1.253.884) (3.557.300)

Total shareholders transactions, directly aknowledged

in equity

- 993.463 129.426.263 124.167.429 - 254.587.155 (549.401) 254.037.754 Shareholders transactions directly aknowledged in

equity -

Share capital increase - - - -

Own bought-back shares (3.345.554) (3.345.554) (3.345.554)

Other transfers - - -

out-dated dividends according to the law 23.678.296 23.678.296 23.678.296

Dividends to pay for 2015 (46.250.883) (46.250.883) (46.250.883)

Total shareholders transactions, directly aknowledged

in equity

- - - (22.572.587) (3.345.554) (25.918.141) - (25.918.141)

Balance on December 31st 2016 539.720.149 8.618.009 545.110.922 485.007.295 (10.723.746) 1.567.732.629 20.833.238 1.588.565.867

SIF MOLDOVA SA

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY




7

In LEI Share capital Reserves from the Reserves for the Reported result Other elements Total assignable Non-controlling Total

Balance on January 1st 2015 487.811.191 7.276.334 351.740.408 368.013.009 - 1.214.840.942 25.512.671 1.240.353.613

Overall result

Profit of the financial year 96.781.127 96.781.127 887.406 97.668.533

Other overall result elements - -

Increase (Decrease) of reserve from the revaluation of

tangible assets 426.599 (450.917) (24.318) (169.817) (194.135)

Reserve transfer from the revaluation to reported result

following the sale of tangible assets (78.387) (78.387) (78.387)

Revaluation at fair value of financial assets available for

sale, net of deferred tax (46.689.351) (46.689.351) (46.689.351)Reserve decrease following the sale of financial assets

available for sale 110.633.603 110.633.603 110.633.603

Changes in subsidiaries holding 1.708.846 1.708.846 (4.847.623) (3.138.776)

Total overall result corresponding to the period - 348.212 63.944.251 98.039.056 - 162.331.519 (4.130.033) 158.201.485

Transaction with shareholders, directly aknowledged in

equity -

Share capital increase 51.908.958 (51.908.958) - -

Own bought-back shares (7.378.192) (7.378.192) (7.378.192)

Other transfers 81.438 81.438 81.438

out-dated divideds according to the law 21.719.773 21.719.773 21.719.773

Dividends to pay for 2014 (52.531.866) (52.531.866) (52.531.866)

Total transactions with shareholders directly acknowledged in equity 51.908.958 - - (82.639.612) (7.378.192) (38.108.847) - (38.108.847)

Balance on December 31st 2015 539.720.149 7.624.546 415.684.659 383.412.453 (7.378.192) 1.339.063.615 21.382.638 1.360.446.253

SIF MOLDOVA SA

CONSOLIDATED STATEMENT OF CASH FLOWS




8

In LEI 2016 2015

Cash flows from operating activities:

Profit before tax 133.588.693 120.750.015

Adjustments for:

Reversals of impairment of financial assets 47.065.756 1.953.011

Gain / loss on sale of tangible assets - 3.931

Net gain (Net loss) on financial assets at fair value through profit or loss 6.502.197 3.974.232

Adjustment for financial assets available for sale (80.985.879) (79.367.246)

Dividend income (118.065.476) (26.837.170)

Interest income (1.279.014) (1.691.426)

Charges of provisions for risk and charges 729.456 (1.106.690)

Write back of provisions for other assets (3.025) (1.388.841)

Other adjustments 2.054.230 3.523.438

Changes in operating assets and liabilities:

Acquisition of financial assets at fair value through profit or loss (24.320.318) (14.956.544)

Sales of financial assets at fair value through profit or loss 785.091 8.013.853

Acquisition of financial assets available for sale (166.534.478) (143.167.624)

Sales of financial assets available for sale 168.262.363 210.795.941

Changes in the investments held to maturity 12.760 1.184.500

Changes in deposits with maturity more than 3 months 9.721.840 17.468.201

Other assets changes (767.382) (10.811.096)

Other liabilities changes 8.201 840.075

Collected dividends 112.384.821 23.242.268

Collected income 1.288.046 1.881.734

Income tax paid (7.775.129) (16.386.839)

Net cash resulted from exploitation activities 82.672.754 97.917.723

Investment activities

Payments for the purchase of tangible assets (1.133.104) (32.360.842)

Collection from the sale of intangible assets and real estate investments - -

Net cash used in investment activities (1.133.104) (32.360.842)

Financing activities

Dividends paid (35.796.383) (42.302.795)

Changes in short-term loans 594.251 8.551.468

Buy-back shares (6.100.333) (7.378.192)

Net cash used in financing activities (41.302.465) (41.129.520)

Net increase in cash and cash equivalents 40.237.185 24.427.359

Cash and cash equivalents on January 1st 95.205.828 70.778.469

Cash and cash equivalents on December 31st 135.443.013 95.205.828

SIF MOLDOVA SA

CONSOLIDATED STATEMENT OF CASH FLOWS




9

Reconciliation of cash and cash equivalents with the balance sheet:

In LEI 31st December

2016

31st December

2015

Deposits at banks 7.570.471 5.512.013

Placements with banks with maturity of less than 3 months and blocked deposits 128.163.159 99.706.272

Less deposits with maturity over 3 months and blocked deposits (290.617) (10.012.457)

Cash and cash equivalents in the cash flow statement

135.443.013 95.205.828





SIF MOLDOVA SA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



10

1. REPORTING ENTITY

SIF Moldova S.A. (“the Company”) is a collective investment body operating in Romania in accordance

with the provisions of Law 31/1990 on commercial companies and Law 297/2004 on capital market, as

subsequently amended and supplemented.

The Company is the successor of Fondul Proprietatea Privată II Moldova, reorganized and transformed in

accordance with the provisions of Law no. 133/1996.

The registered office of the Company is located at strada Pictor Aman, nr. 94C, Bacău municipality,

Bacău County, Romania. The Company also operates through its representative offices located in Iași and

Bucharest.

According to its statute, the Company’s core field of activity is:

administration and management of financial instruments, derivative financial instruments and other

instruments qualified as such by the regulations of the National Securities Commission (NSC);

administration and management of shares, bonds and other rights arising therefrom in companies

not traded or closed;

other ancillary and related activities, in accordance with the regulations in force.

The Company is self-administered.

The Company's shares are listed on the Bucharest Stock Exchange, Category I, code SIF2, starting from

November 1, 1999.

The shares and shareholders are recorded according to law by S.C. Depozitarul Central S.A. Bucharest.

The assets are deposited with BRD – Société Générale S.A. – company authorized by the National

Securities Commission.

The Company’s consolidated financial statements for the year ended December 31, 2016 refer to the

Company and its subsidiaries (herein after “the Group”) and the Group’s interests in associates.

The Group’s core activities consist in the financial investment activity carried out by the Company, and

the activities carried out by subsidiaries consisting primarily in business consultancy and management,

renting and operating of own or leased real estate, manufacture of machinery and equipment, restaurants,

cultivation of bearer shrubs, strawberries, nut trees and other bearer trees.

SIF MOLDOVA SA




11

2. BASES OF PREPARATION

(a) Statement of Compliance

The consolidated financial statements are prepared by the Company in accordance with the International

Financial Reporting Standards adopted by the European Union (“IFRS”). The consolidated financial

statements were prepared in accordance with the Rule of the Financial Supervisory Authority no. 39/2015

for the approval of accounting regulations in accordance with International Financial Reporting Standards

applicable to entities authorized, regulated and supervised by the Financial Supervisory Authority,

operating in the Financial Instruments and Investments Sector (FSA).

Within the meaning of Rule 39/2015, International Financial Reporting Standards, hereinafter referred to

IFRS, are the standards adopted according to the procedure provided by Regulation no. 1606/2002 of the

European Parliament and the EU Council of 19 July 2002 on the application of international accounting

standards, as subsequently amended and supplemented.

The Company subsidiaries’ accounting is kept in RON in accordance with Romanian Accounting

Standards (“RAS”). Such accounts are restated to reflect the existing differences between accounts

according to RAS and those according to International Financial Reporting Standards adopted by the

European Union (“IFRS”). Accordingly, RAS accounts are adjusted in all material respects to reflect the

IFRS provisions adopted by the European Union.

The most important changes made to the Romanian Accounting Standards financial statements to align

them to the requirements of the International Financial Reporting Standards (“IFRS”) adopted by the

European Union are:

the grouping of more elements in more comprehensive categories;

adjustment of investment property for valuation at fair value in accordance with IAS 40 –

“Investment property” (according to RAS, investment property is not recognized separately, since

it represents property, plant and equipment measured in accordance with IAS 16 “Property, plant

and equipment);

adjustments of property, plant and equipment for valuation in accordance with the Group’s

accounting policies and IAS 16 “Property, plant and equipment”;

adjustments for the recognition of deferred income tax assets and liabilities, in accordance with

IAS 12 “Income tax” (according to RAS, deferred tax is not recognized); and

disclosure requirements in accordance with International Financial Reporting Standards adopted by

the European Union (“IFRS”).

(b) Presentation of financial statements

The consolidated financial statements are presented in accordance with IAS 1 “Presentation of financial

statements”. The Group has adopted a liquidity-based presentation in the statement of financial position

and a presentation of income and expenses by their nature in the statement of comprehensive income, as it

considers that such presentation methods offer reliable and more relevant information compared to those

that would have been presented using alternative methods permitted by IAS 1.

SIF MOLDOVA SA




12

2. BASES OF PREPARATION (continued)

(c) Functional and presentation currency

The Group management considers that the functional currency, as defined by IAS 21 “Effects of changes

in foreign exchange rates”, is the Romanian Leu (RN). The consolidated financial statements are

presented in RON, rounded at the closest RON value, which the Company’s management has chosen as

presentation currency.

(d) Bases of measurement

The consolidated financial statements are prepared at fair value for derivative financial instruments,

financial assets and liabilities at fair value through profit and loss and available-for-sale financial assets

except those for which fair value cannot be reliably determined.

Other financial assets and liabilities, and non-financial assets and liabilities are carried at amortized cost,

revalued amount or historical cost.

(e) Use of estimates and judgments

The preparation of the consolidated financial statements in accordance with IFRS requires the

management to make estimates and assumptions that affect the application of accounting policies and the

reported values of assets and liabilities, income and expenses. The judgments and assumptions related to

such estimates are based on the historical experience and other factors deemed reasonable for such

estimates. The results of such estimates are the basis of the judgments regarding the carrying amounts of

assets and liabilities which cannot be obtained from other sources. Actual results may differ from these

estimates.

The judgments and assumptions underlying the financial statements are revised periodically. The

revisions of accounting estimates are recognized when the estimate is revised if it affects only that period

or in the period when the estimate is revised and in future periods if the revision affects both the current

and future periods.

3. BASES OF CONSOLIDATION

(a) Subsidiaries

Subsidiaries are entities controlled by the Group. Control is when the Group is exposed, or has rights, to

variable returns from its involvement with the investee and has the ability to affect those returns through

its power over the investee. When evaluating control, the Group must also consider the potential or

convertible voting rights exercisable at that time.

The subsidiaries’ financial statements are included in the consolidated financial statements as of the

moment when control is exercised until the cessation thereof. The accounting policies of the Group’s

subsidiaries have been changed to be aligned to the Group’s policies.

SIF MOLDOVA SA




13

BASES OF CONSOLIDATION (continued)

(a) Subsidiaries (continued)

The list of consolidated subsidiaries as at December 31, 2016 is as follows:

Field of activity December 31,

2016

December 31,

2015

Casa

Business and other management consultancy

activities 99,02%

99,02%

Mecanica Ceahlău

Manufacture of agricultural

and forestry machinery 63,30% 60,81%

Regal

Manufacture of pastry goods

and cakes, and renting of own

or leased real estate 93,02% 93,01%

Ţesătoriile Reunite Real estate development 99,99% 99,99%

Asset Invest

Business and other

management consultancy

activities 99,99% 99,99%

Agribusiness Capital S.A

Business and other



Opportunity Capital

Business and other



Real Estate Asset S.A.

Business and other



Agroland Capital

Buying and selling of own

real estate 99,99% 99,99%

Agrointens

Business and other



Hotel Sport

Hotels and similar

accommodation 99,99% 99,99%

(b) Associates Associates are companies in which the Group may exercise significant influence but not control over the

financial and operational policies.

The consolidated financial statements include the Group’s share in the result of associates according to

the equity method, as of the date when the Group started to have significant influence until the date when

such influence ceases. If the Group’s share in the associates’ loss exceeds the carrying amount of the

investment, then the carrying amount is reduced to nil value and subsequent losses are not recognized

except if the Group has the legal or constructive obligation to make payments on behalf of the associate.

Interests where the Group holds between 20% and 50% of the voting rights, but over which it exerts no

significant influence are classified as available-for-sale financial assets.

Associates are accounted for using the equity method and are initially carried at cost. The Group’s

investment includes the goodwill identified at acquisition less cumulated impairment. The consolidated

financial statements include the Group’s share in income and expenses and changes in the associates’

equity, after adjustments to align the accounting policies to the Group’s policies, as of the date when the

significant influence begins until it ceases. When the Group’s share in losses exceeds the interest in the

entity accounted for using the equity method, then the book value of such interest (including any long-

term investments) is reduced to nil value and the recognition of future losses is disrupted except when the

Group has a liability or made payments on behalf of the investee.

SIF MOLDOVA SA




14

3. BASES OF CONSOLIDATION (continued)

(b) Associates (continued)

Based on the analysis of quantitative and qualitative criteria presented in IAS 28 “Investments in

Associates and Joint Ventures” (revised in 2011), the Group concluded that it holds no investments in

associates as at December 31, 2016 and December 31, 2015.

(c) Transactions written off upon consolidation

Inter-Group settlements and transactions as well as unrealized gains resulting from inter-Group

transactions shall be eliminated entirely from the consolidated financial statements. Unrealized gains on

transactions with associates or jointly controlled entities shall be eliminated within the limit of the

Group’s holding percentage. Unrealized gains from transactions with an associate shall be eliminated

against the investment in the associate. Unrealized losses shall be eliminated identically to unrealized

gains, but only if there is no indication of impairment.

4. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies have been applied consistently to all periods presented in the consolidated

financial statements prepared by the Group.

The consolidated financial statements have been prepared on a going concern basis which assumes that

the Group will continue to operate in the foreseeable future. To assess the applicability of this

assumption, the management analyzes the cash inflow forecasts.

(a) Foreign currency transactions

Operations denominated in foreign currencies are recorded in RON at the official exchange rate on the

transaction date. Monetary assets and liabilities denominated in foreign currencies at the balance sheet

date are translated into RON at the exchange rate of that date.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the

exchange rate at the end of the year of monetary assets and liabilities denominated in a foreign currency

are recognized in the statement of comprehensive income except those recognized in equity as a result of

their registration based on hedge accounting.

Translation differences on elements in the form of interests held at fair value through profit or loss are

presented as gains or losses on fair value. The translation differences on elements in the form of financial

instruments classified as available-for-sale are included in the reserve from the change of fair value of

such financial instruments.

The exchange rates of the main foreign currencies were:

Currency

December 31,

2016

December 31,

2015 Variation

EUR 1: LEU 4.5411 1: LEU 4.5245 -0.37%

USD 1: LEU 4.3033 1: LEU 4.1477 +3.62%

SIF MOLDOVA SA




15

4. SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Accounting for the effect of hyperinflation

In accordance with IAS 29, the financial statements of an entity whose functional currency is the currency

of a hyperinflationary economy shall be stated in terms of the measuring unit current at the end of the

reporting period (non-monetary items shall be restated using a general price index as at the acquisition or

contribution date).

According to IAS 29, an economy is hyperinflationary if, inter alia, the cumulative inflation rate over

three years exceeds 100%.

The continued decrease of the inflation rate and other factors related to the characteristics of the

Romanian economic environment indicate that the economy whose functional currency was adopted by

the Group is no longer hyperinflationary, the effects of which were felt in the financial periods starting

from January 1, 2004. Thus, the provisions of IAS 29 have been adopted in the preparation of the

consolidated financial statements as at December 31, 2003.

Thus, values expressed in the current measuring unit as at December 31, 2003 are treated as basis for the

accounting values reported in the consolidated financial statements and do not represent valued amounts,

replacement cost or any other measurement of the current value of the assets or the prices of the potential

current transactions.

For the purpose of preparing the consolidated financial statements, the Group adjusts the following non-

monetary items to express them in the current measuring unit as at December 31, 2003:

- share capital;

- available-for-sale financial assets carried at cost;

- property, plant and equipment (land) and intangible assets.

(c) Cash and cash equivalents

Cash and cash equivalents include: actual cash, current accounts and deposits with banks (including

blocked deposits and interest on bank deposits).

In the preparation of the statement of cash flows, the Group considers the following as cash and cash

equivalents: actual cash, current bank accounts, deposits with initial maturity of less than 90 days and

interest thereon (excluding blocked deposits).

(d) Financial assets and liabilities

(i) Classification

The Group classifies financial instruments it holds in the following categories:

Financial assets or financial liabilities at fair value through profit or loss

Such category includes financial assets or financial liabilities held for trading and financial instruments

designated as at fair value through profit or loss upon initial recognition.

The Group includes a financial asset or liability in this category if such has been acquired primarily for

purpose of speculation (to generate short-term profit).

Derivative financial instruments are classified as held for trading if they are not instruments used for

SIF MOLDOVA SA




16

hedging.


(d) Financial assets and liabilities (continued)

(i) Classification (continued)

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and

fixed maturity that the Group has the positive intention and ability to hold to maturity. Held-to-maturity

investments are carried at amortized cost using the effective interest method less impairment.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market, other than those that the Group intends to sell immediately or in the near term.

They consist primarily in bank deposits.

Available-for-sale financial assets

Available-for-sale financial assets are those financial assets that are not classified as loans and

receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Upon initial recognition, equity instruments classified as available-for-sale financial assets for which

there is an active market are measured at fair value and changes in fair value other than impairment

losses, such as gains and losses on the exchange rate variation related to financial instruments, are

recognized directly to equity.

When the asset is derecognized, the cumulated gain or loss is transferred to profit or loss.

(ii) Recognition

The assets and liabilities are recognized when the Group becomes contract party in the conditions of the

instrument. Financial assets and liabilities are measured upon initial recognition at fair value plus directly

attributable trading costs, except investments in shares whose fair value could not be reliably determined

and which are initially carried at cost.

(iii) Offset

The Company offsets financial assets and liabilities, and the net result is presented in the statement of

financial position if and only if it has a legally enforceable right of set-off intends either to settle on a net

basis, or to realize the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis if and only if it is permitted by accounting standards or

for the gain or loss resulting from a pool of similar transactions such as those deriving from the

Company’s trading.

(iv) Measurement at amortized cost

The amortized cost of a financial asset or financial liability is the amount at which the financial asset or

financial liability is measured at initial recognition minus principal repayments, plus or minus the

cumulative amortization using the effective interest method, minus any impairment losses.

SIF MOLDOVA SA




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(v) Measurement at fair value

Fair value is the amount for which an asset could be exchanged, a liability settled, between

knowledgeable, willing parties in an arm's length transaction.

The fair value of financial assets and liabilities is determined based on the quotations in an active market.

A financial instrument has an active market if quoted prices are readily and regularly available for such

instrument and such prices reflect regular arm’s length market transactions.

Instruments traded in an active market are measured at fair value by multiplying the number of shares

held by the closing price of the last trading day in the corresponding reporting period.

If a financial asset is quoted in more active markets, then the Group uses the quotation of the most

advantageous market, considering all barriers/costs associated to accessing each of the markets.

Available-for-sale financial assets for which there is no active market and for which fair value cannot be

reliably determined are carried at cost and are tested periodically for impairment.

For all other financial instruments, fair value is calculated using measurement techniques. Measurement

techniques include techniques based on net discounted value, discounted cash flows, comparison with

similar instruments for which there is no observable market price and other measurement techniques.

The value resulting from using a measuring model is adjusted depending on certain factors, as

measurement techniques do not reliably reflect all the factors considered by market participants when

entering into a transaction. Adjustments are registered so as to reflect risk models, the differences

between sale and purchase quotes, liquidity risks and other factors. The management considers that such

adjustments are required to reliably present the financial instruments at fair value in the statement of

financial position.

(vi) Identification and evaluation of loss of value

Financial assets carried at amortized cost

The Group analyzes at each reporting date whether there is any objective evidence of the impairment of a

financial asset. A financial asset is impaired and impairment losses are incurred if, and only if, there is

objective evidence of impairment as a result of one or more events that occurred after the initial

recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated

future cash flows of the financial asset or group of financial assets that can be reliably estimated.

To determine whether an asset is impaired, the Group takes into account relevant loss generating events

such as significant long-term decline in fair value below cost; market and industry conditions, to the

extent that they influence the recoverable amount of the asset; financial conditions and near-term

prospects of the issuer, including any specific adverse events that may influence the operations of the

issuer, the issuer's recent losses, the qualified independent auditor's report on the most recent financial

statements of the issuer etc.

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(vi) Identification and evaluation of loss of value (continued)

If there is objective evidence that an impairment loss on financial assets carried at amortized cost has

been incurred, the amount of the loss is measured as the difference between the asset's carrying amount

and the present value of estimated future cash flows using the effective interest rate of the financial asset

at initial recognition.

If a financial assets measured at amortized cost has a variable interest rate, the discount rate for measuring

any impairment loss is the current variable interest rate determined under the contract.

The carrying amount of an asset is reduced through use of an allowance account. The amount of the loss

shall be recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related to

an event occurring after the impairment was recognized, the previously recognized impairment loss shall

be reversed by adjusting an allowance account. The amount of the impairment loss decrease shall be

recognized in profit or loss.

Available-for-sale financial assets

In case of available-for-sale financial assets, when a decline in the fair value of an available-for-sale

financial asset has been directly recognized in equity and there is objective evidence that the asset is

impaired, the cumulative loss that had been directly recognized in equity shall be reclassified from equity

to comprehensive income even though the financial asset has not been derecognized.

The amount of the cumulative loss that is reclassified from equity to comprehensive income shall be the

difference between the acquisition cost (net of any principal repayment and amortization) and current fair

value, less any impairment loss on that financial asset previously recognized in comprehensive income.

Impairment losses recognized in comprehensive income for an investment classified as available-for-sale

shall not be reversed through profit or loss. If, in a subsequent period, the fair value of an impaired

investment increases, the amount of the increase shall be recognized directly to other comprehensive

income.

Thus, in the period ended December 31, 2016, SIF Moldova recognized in the statement of

comprehensive income the impairment of the securities of SNP, BVB, ELMA, Casa de Bucovina,

Agribusiness, Reale Estate Asset, Opportunity, Lactate Natura, Catalist in total amount of RON 45.4

million, further to the decrease of their fair value below cost by over 30%.

To determine whether an available-for-sale financial asset carried at cost because the fair value cannot be

reliably established is impaired, the Group considers relevant loss events, such as the significant long-

term decrease of fair value below cost; the market conditions and the conditions of the field of activity, to

the extent they influence the recoverable value of the asset; the financial conditions and short-term

perspectives of the issuer, including any specific adverse events likely to influence the issuer’s operations,

issuer’s recent losses, the independent auditor’s qualified report on the latest financial statements of the

issuer etc.

Given the inherent limitations of the methodologies applied and the significant uncertainty of how assets

are measured in local and international markets, the Group’s estimates can be substantially revised

subsequent to the approval of the financial statements.

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(vii) Derecognition

The Group derecognizes a financial asset when the rights to the cash flows from the financial asset expire,

or when the Group has transferred the contractual rights to the cash flows from the financial asset in a

transaction in which it has transferred substantially all the risks and rewards of ownership.

Any interest in the transferred financial assets retained by the Group or created for the Group is

recognized separately as asset or liability.

The Group derecognizes a financial liability when the contractual obligations terminated or when the

contractual obligations are annulled or expire.

In accordance with IAS 39, if an entity transfers a financial asset in a transfer that qualifies for

derecognition in its entirety and retains the right to service the financial asset for a fee, it shall recognize

either a servicing asset or a servicing liability for that servicing contract. If the fee to be received is not

expected to compensate the entity adequately for performing the servicing, a servicing liability for the

servicing obligation shall be recognized at its fair value. If the fee to be received is expected to be more

than adequate compensation for the servicing, a servicing asset shall be recognized for the servicing right

In addition, in accordance with IAS 39, if, as a result of a transfer, a financial asset is derecognized in its

entirety but the transfer results in the entity obtaining a new financial asset or assuming a new financial

liability, or a servicing liability, the entity shall recognize the new financial asset, financial liability or

servicing liability at fair value.

On derecognition of a financial asset in its entirety, the difference between:

- the carrying amount; and

- the sum of (i) the consideration received (including any new asset obtained less any new liability

assumed) and (ii) any cumulative gain or loss that had been recognized in other comprehensive

income shall be recognized in profit or loss.

If the transferred asset is part of a larger financial asset (e.g. when an entity transfers interest cash flows

that are part of a debt instrument) and the part transferred qualifies for derecognition in its entirety, the

previous carrying amount of the larger financial asset shall be allocated between the part that continues to

be recognized and the part that is derecognized, based on the relative fair values of those parts on the date

of the transfer. For this purpose, a servicing asset shall be treated as a part that continues to be recognized.

The difference between:

- the carrying amount allocated to the part derecognized; and

- the sum of (i) the consideration received for the part derecognized (including any new asset

obtained less any new liability assumed) and (ii) any cumulative gain or loss allocated to it that had

been recognized in other comprehensive income shall be recognized in profit or loss. A cumulative

gain or loss that had been recognized in other comprehensive income is allocated between the part

that continues to be recognized and the part that is derecognized, based on the relative fair values of

those parts.

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(e) Other financial assets and liabilities

Other financial assets and liabilities are carried at amortized cost using the effective interest method, less

any impairment losses.

(f) Inventories

Inventories encompass goods purchased and held for resale in the ordinary course of business, work in

progress, awaiting sale in the normal course of business, or assets in the form of raw materials, materials

and other consumables, awaiting use in the production process or to deliver services.

Inventories are measured at the lower of cost and net realizable value. The cost of inventories shall

comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to

their present location and condition. Net realizable value is the estimated selling price in the ordinary

course of business less the estimated costs of completion and the estimated costs necessary to make the

sale. The cost of inventories of items that are not ordinarily interchangeable and goods or services

produced and segregated for specific projects shall be assigned by using specific identification of their

individual costs. The cost of interchangeable inventories is determined using the “first-in, first-out”

(FIFO) formula.

(g) Investment property

Investment property is property (land or a building — or part of a building) held by the Group to earn

rentals or for capital appreciation or both, rather than for:

- use in the production or supply of goods or services or for administrative purposes; or

- sale in the ordinary course of business.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another

portion that is held for use in the production or supply of goods or services or for administrative purposes.

If these portions can be sold separately (or leased out separately under a finance lease), the Company

accounts for the portions separately. If the portions cannot be sold separately, the property is treated as

investment property only if an insignificant portion is held for use in the production or supply of goods or

services or for administrative purposes.

(i) Recognition

Investment property shall be recognized as an asset when, and only when:

- it is probable that the future economic benefits that are associated with the investment property will

flow to the Group; and;

- the cost of the investment property can be measured reliably.

(ii) Measurement

Initial measurement

An investment property shall be measured initially at its cost. Transaction costs shall be included in the

initial measurement. The cost of a purchased investment property comprises its purchase price and any

directly attributable expenses (for example, professional fees for legal services, property transfer taxes

and other transaction costs).

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(g) Investment property(continued)

(ii) Measurement (continued)

The value of the Group’s investment property as at December 31, 2016 and December 31, 2015 is

presented in Note 19.

Subsequent measurement

The Group’s accounting policy on the subsequent measurement of investment property is based on the

fair value model. Such policy is applied consistently for all investment property. The fair value

measurement of investment property is conducted by valuers of the National Association of Romanian

Valuers (ANEVAR). Fair value is based on market price quotations adjusted, if applicable, so as to reflect

the differences in the nature, location or conditions of such asset. Such valuations are periodically revised

by the Group’s management.

Gains or losses from the change of the fair value of investment property are recognized in the profit or

loss of the period in which they occur.

The fair value of investment property reflects the market conditions as at the balance sheet date.

The Company’s last fair value measurement of investment property was performed on December 31,

2016 by SC Evaluări Consultanţă Management – ECM SRL Bacău, for subsidiary Mecanica Ceahlău as

at December 31, 2016 the Company conducted the revaluation of investment property through an own

commission of specialists and through SC IPIEV Consulting SRL for Ţesătoriile Reunite as at December

31, 2016.

(iii) Transfers

Transfers to or from investment property are performed when and only when there is a change in the use

of such asset.

To transfer one investment property measured at fair value to property, plant and equipment, the implicit

cost of the asset for the purpose of its subsequent registration shall be its fair value as at the date when the

use is changed.

(iv) Derecognition

The carrying amount of an investment property shall be derecognized on disposal or when the investment

is withdrawn from use for good and no future economic benefits are expected from its disposal.

The gain or loss arising from the disposal or sale of an investment property shall be included in profit or

loss when the property is disposed of or sold.

(h) Tangible and intangible assets

(i) Recognition and measurement

Property, plant and equipment recognized as assets are initially carried at cost by the Group. The cost of

an item of property, plant and equipment comprises the cost of purchase, including unrecoverable fees,

after deducting all trade price discounts and any directly attributable costs incurred in bringing the asset to

its present location and condition so that it can be used as intended by the management, such as:

employee related expenses arising directly from the construction or acquisition of the asset, site layout

costs, initial delivery and handling costs, installation and assembly costs, professional fees.

SIF MOLDOVA SA




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(h) Tangible and intangible assets (continued)

(i) Recognition and measurement (continued)

The value of the Group’s tangible and intangible assets as at December 31, 2016 and December 31, 2015

is detailed in Note 20.

Property, plant and equipment are classified by the Group into the following classes of assets of the same

nature and with similar uses:

- land;

- buildings;

- plant and machinery;

- vehicles;

- other property, plant and equipment.

Buildings are stated at revalued amount, which represents the fair value as at the revaluation date less any

subsequently cumulated depreciation and any impairment losses.

The fair value is based on market price quotations, if applicable adjusted to reflect the differences in the

nature, location or conditions of such asset.

Revaluations are performed by specialized valuers, ANEVAR members. The frequency of the

revaluations of the Group’s buildings is imposed by the dynamics of the markets.

The other categories of property, plant and equipment are carried at cost, less cumulated depreciation and

impairment allowance.

Repairs of maintenance and repair of property, plant and equipment are registered by the Group in the

statement of comprehensive income as they appear, and significant improvements to property, plant and

equipment which increase the value or useful life thereof, or significantly increase the capacity to

generate economic benefits are capitalized.

(ii) Depreciation

Depreciation is calculated on a straight-line basis over their estimated useful life, as follows:

Buildings 40 years

Equipment 2-12 years

Vehicles 4-8 years

Furniture and other property, plant and equipment 4-12 years

Land is not depreciated.

Intangible assets fulfilling the recognition criteria of the International Financial Reporting Standards are

carried at cost less cumulated amortization. The amortization of intangible assets is registered in profit or

loss on a straight-line basis over an estimated period of maximum 3 years.

The depreciation/amortization methods, estimated useful lives and residual values are revised by the

Group management at each reporting date.

Property, plant and equipment which is disposed of or sold are deregistered from the balance sheet along

with the corresponding cumulated depreciation. Any gain or loss arising from such operation is included

in the current profit or loss.

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(i) Impairment of assets other than financial assets

The carrying amount of Group assets that are not in the form of financial asset, other than deferred tax,

are revised at each reporting date to identify any impairment evidence. If such evidence exists, the

Company estimates the recoverable value of such assets.

An impairment loss is recognized when the carrying amount of an asset or a cash-generating unit exceeds

its recoverable amount. A cash-generating unit is the smallest identifiable group of assets that generates

cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Impairment losses are recognized in the statement of comprehensive income.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of

disposal and its value in use.

To determine the value in use, future cash flows are discounted using a discount rate before tax which

reflects the current market conditions and risks specific for such asset.

Impairment losses recognized in previous periods are measured at each reporting date to determine if they

have decreased or still exist. Impairment losses are reversed if a change occurred in the estimates to

determine the recoverable value. Impairment losses are reversed if and only if the carrying amount of the

asset does not exceed the carrying amount which would have been calculated, net of

amortization/depreciation and impairment, should the impairment loss had not been recognized.

(j) Share capital

Ordinary shares are recognized in the share capital. Incremental costs directly attributable to an issuance

of ordinary shares are deducted from capital, net of taxation effects.

(k) Non-controlling interests

Represent a share of profit or loss and net assets not held, directly or indirectly, by the Group and

presented in the consolidated statement of profit or loss and other comprehensive income and in equity in

the consolidated statement of financial position, separately from the equity of the parent company’s

shareholders. The changes in holdings in subsidiaries which do not result in a loss of control are

accounted for as transactions between shareholders in their capacity of shareholders.

(l) Dividends to be paid

Dividends are treated as profit allocation in the period in which they have been declared and approved by

the General Meeting of Shareholders.

Dividends declared prior to the reporting date are registered as liabilities as at the reporting date.

(m) Provisions for risks and charges

Provisions are recognized in the statement of financial position when an obligation arises for the Group

from past events, the settlement of which is expected to result in an outflow from the entity of resources

embodying economic benefits and the value of the obligation can be reliably estimated. To determine the

provision, future cash flows are discounted using a discount rate before taxation, which reflects current

market conditions and the risks specific to such liability.

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(n) Income from the sale of goods and delivery of services

Income from the sale of goods and delivery of services is registered net of trade discounts, value added

tax and other turnover taxes.

Income from the sale of goods shall be recognized in profit or loss when the Group has transferred to the

buyer the significant risks and rewards of ownership of the goods, which most often coincides with the

delivery thereof.

Income from the delivery of services is recognized in profit or loss depending on the execution stage

thereof.

(o) Interest income

Interest income and expenses are recognized in the statement of comprehensive income using the

effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future

cash payments or receipts through the expected life of the financial instrument or, when appropriate, a

shorter period to the net carrying amount of the financial asset or financial liability.

(p) Dividend income

Dividend income is recognized in profit or loss on the date the right to receive it is established.

In case of dividends received as shares as alternative to cash payment, dividend income is recognized at

the level of the cash that would have been received, according to the increase of the related participation.

The Group does not register dividend income on the shares received under a free title when they are

distributed proportionally to all shareholders.

The Group registers dividend income at gross value which includes dividend tax, which is recognized as

current income tax expense. The actual calculation is made in accordance with the tax provisions in force

as at the calculation date.

(q) Rental income

Income from rentals arise from investment property leased by the Group as operating leases and are

recognized in profit or loss on a straight-line basis over the entire lease.

(r) Employee benefits

(i) Short-term benefits

Employee short-term benefits include salaries, premiums and social security contributions. Employee

short-term benefits are recognized as expenses when the services are delivered. The Group recognizes a

provision for the amounts expected to be paid as short-term cash premiums or profit sharing schemes

when the Group has a present legal or constructive obligation to pay such amounts as a result of past

services delivered by employees and when such obligation can be reliably estimated.

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(r) Employee benefits (continued)

(ii) Defined contribution plans

The Group makes payments on behalf of its employees to the Romanian state pension scheme, health and

unemployment fund in the ordinary course of business.

All the Group’s employees are members of the plan and also have the legal obligation to contribute

(through the social contributions) to the Romanian state pension scheme (a State defined contribution

plan). All related contributions are recognized in the profit or loss of the period when they are incurred.

The Group does not have any other additional obligations.

The Group is not enrolled in any independent pension scheme and, consequently, does not have any other

obligations in this respect. The Group is not enrolled in any other post-retirement benefit scheme. The

Group does not have the obligation to deliver further services for its former or current employees.

(iii) Employee long-term benefits

The Group’s net obligation as regards long-term services benefits consists of the future benefits which

employees earned in exchange for the services delivered by them in current and previous periods.

The Group does not have the obligation to grant employees benefits on the retirement date.

(s) Gains or losses on foreign exchange differences

Foreign exchange transactions are registered in the functional currency (Leu), by converting the foreign

currency amount at the official exchange rate communicated by the National Bank of Romania on the

transaction date.

As at the reporting date, foreign exchange monetary items are translated using the closing exchange rate.

Exchange differences arising on the settlement of monetary items or on translating monetary items at

rates different from those at which they were translated on initial recognition during the period or in

previous financial statements shall be recognized in profit or loss in the period in which they arise.

(t) Income tax

Income tax comprises current and deferred tax. Current income tax comprises tax on dividend income

recognized at gross value.

Income tax is recognized in the statement of comprehensive income or in other elements of

comprehensive income if the tax refers to items of equity.

Current tax is the tax payable on the profit obtained in the current year, determined based on the

percentages applied as at the reporting date and all adjustments from previous periods.

For the financial year ended December 31, 2016, the income tax rate was 16% (December 31, 2015:

16%). The tax rate related to taxable dividend income was 5% (December 31, 2015: 16%). Deferred tax is

determined using the balance sheet method for temporary differences arising between the tax base for

calculating tax for assets and liabilities and their carrying amount, used for reporting purposes in the

consolidated financial statements.

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(t) Income tax (continued)

Deferred tax shall not be recognized for the following temporary differences: initial recognition of

goodwill, initial recognition of an asset or liability in a transaction which is not a business combination

and affects neither accounting profit nor taxable profit and differences associated with investments in

subsidiaries, provided they are not reversed in the near future.

Deferred tax is calculated based on the taxation percentages expected to be applicable to temporary

differences when reversed, based on the legislation in force as at the reporting date. Deferred tax assets

and liabilities are offset if and only if there is a legally enforceable right to set off current tax assets

against current tax liabilities and if the deferred tax assets and the deferred tax liabilities relate to income

taxes levied by the same taxation authority on either the same taxable entity; or different taxable entities

which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and

settle the liabilities simultaneously.

Deferred tax assets are recognized if and only if future profit is probable, which can be used to cover the

tax loss. The asset is revised at the closing of each financial year and is decreased if the related tax benefit

is improbable to be realized. Additional taxes arising from the distribution of dividends are recognized on

the same date as the obligation to pay the dividends.

(u) Earnings per share

The Group presents basic and diluted earnings per share for ordinary shares. Earnings per share are

calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted

average number of ordinary shares for the reporting period. Earnings per share are calculated by adjusting

the profit or loss attributable to ordinary shareholders of the Company and the weighted average number

of ordinary shares to the dilution effects generated by the potential ordinary shares.

Dividends are treated as profit allocation in the period in which they have been declared and approved by

the General Meeting of Shareholders. The profit available for distribution is the profit for the year

registered in the financial statements prepared in accordance with International Financial Reporting

Standards.

(v) Segment reporting

A segment is a distinct component of the Group involved in income and expense generating operations

(including income and expenses determined by the interaction with the other Group elements) whose

operating results are periodically revised by the entity’s decision-maker regarding the resources to be

allocated to the segment and its performance is assessed, and for which financial information is available.

The criteria based on which the Group determines operating segments in accordance with IFRS 8

“Operating segments”, are:

The reported income of the operating segment, including sales to external clients and inter-segment

sales or transfers, account for 10% or more of the combined income, internal or external, of all

operating segments;

The reported absolute value of the profit or loss of the operating segment accounts for 10% or more of

the higher absolute value of (i) the reported combined profit for all operating segments that have not

reported any loss and (ii) the reported combined loss in all the operating segments that have reported

loss;

The assets of the operating segment account for 10% or more of the combined assets of all operating

segments;

If the management considers that an operating segment identified as reportable segment in the

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(v) Segment reporting (continued)

immediately preceding period maintains its relevance, the information of such segment shall be

reported separately in the current period, regardless of whether or not they meet the reporting criteria.

The Group operates mainly in the following areas: Business and other management consultancy activities,

renting and selling own real estate, manufacture of agricultural machinery and equipment, manufacture

and sale of food products, manufacture of fabrics, growing of fruits, forestry exports and hotel activities.

(w) New standards and interpretations

The following sections present: the list of new standards, amendments and interpretations of already

existing standards effective in the financial year ended December 31, 2015, the list of new standards,

and amendments and interpretations of the standards adopted by the International Accounting Standards

Board (IASB) and the European Union (UE) but not effective yet for the financial year ended December

31, 2015 and the list of new standards, and amendments and interpretations of the standards adopted by

the International Accounting Standards Board, but not adopted yet by the European Union for the

financial year ended December 31, 2015.

(i) Standards and interpretations effective in the current period

The following standards and amendments to the existing standards issued by the International

Accounting Standards Board („IASB”) and adopted by the EU are effective for the current period:

Amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests

in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures” - Investment

Entities: Applying the Consolidation Exception - adopted by the EU on 22 September 2016

(effective for annual periods beginning on or after 1 January 2016),

Amendments to IFRS 11 “Joint Arrangements” – Accounting for Acquisitions of Interests in Joint

Operations - adopted by the EU on 24 November 2015 (effective for annual periods beginning on

or after 1 January 2016);

Amendments to IAS 1 “Presentation of Financial Statements” - Disclosure Initiative - adopted by

the EU on 18 December 2015 (effective for annual periods beginning on or after 1 January 2016),

Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” -

Clarification of Acceptable Methods of Depreciation and Amortization - adopted by the EU on 2

December 2015 (effective for annual periods beginning on or after 1 January 2016,

Amendments to IAS 16 “Property, Plant and Equipment” and IAS 41 “Agriculture” - Agriculture:

Bearer Plants - adopted by the EU on 23 November 2015 (effective for annual periods beginning

on or after 1 January 2016),

Amendments to IAS 19 “Employee Benefits” - Defined Benefit Plans: Employee Contributions -

adopted by the EU on 17 December 2014 (effective for annual periods beginning on or after 1

February 2015),

Amendments to IAS 27 “Separate Financial Statements” - Equity Method in Separate Financial

Statements - adopted by the EU on 18 December 2015 (effective for annual periods beginning on

or after 1 January 2016),

Amendments to various standards “Improvements to IFRSs (cycle 2010-2012)” resulting from the

annual improvement project of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS

38) primarily with a view to removing inconsistencies and clarifying wording - adopted by the EU

SIF MOLDOVA SA




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(w) New standards and interpretations (continued)

(i) Standards and interpretations effective in the current period (continued)

on 17 December 2014 (amendments are to be applied for annual periods beginning on or after 1

February 2015),


annual improvement project of IFRS (IFRS 5, IFRS 7, IAS 19 and IAS 34) primarily with a view

to removing inconsistencies and clarifying wording - adopted by the EU on 15 December 2015

(amendments are to be applied for annual periods beginning on or after 1 January 2016).

(ii) Standards and interpretations issued by IASB and adopted by the EU but not yet effective

At the date of reporting these financial statements, the following standards, amendments and

interpretations were issued by IASB and adopted by the EU, but not yet effective:

IFRS 9 “Financial Instruments” - adopted by the EU on 22 November 2016 (effective for annual

periods beginning on or after 1 January 2018),

IFRS 15 “Revenue from Contracts with Customers” and amendments to IFRS 15 “Effective date of

IFRS 15” - adopted by the EU on 22 September 2016 (effective for annual periods beginning on or

after 1 January 2018).

IFRS 9 includes requirements on financial instruments regarding recognition, classification and

measurement, impairment losses, derecognition and hedge accounting:

Recognition and Measurement: IFRS 9 comes with a new approach regarding the classification of

financial assets, and comprises three main categories of financial assets: measured at amortized

cost, at fair value through other comprehensive income, at fair value through profit or loss,

determined by the characteristics of cash flows and the business model based on which an asset is

held. Such unique principle-based approach replaces the classification categories of financial assets

under IAS 39: held to maturity, loans and advances and available-for-sale financial assets. The

new model will also determine a single impairment model applicable to all financial instruments.

According to IFRS 9, embedded derivatives in contracts where the host instrument is a financial

instrument for the purpose of this standard, are not separate, the entire hybrid instrument is taken

into account for classification.

Impairment losses: IFRS 9 introduces a new model for impairment losses, based on expected loss,

which will require the faster recognition of expected losses on the impairment of receivables. The

standard provides that entities should register expected impairment losses on receivables upon the

initial recognition of the financial instruments and also recognize much faster expected impairment

losses throughout the entire useful life thereof.

Hedge accounting: IFRS 9 introduces a model which is significantly improved regarding hedge

accounting, which comprises additional disclosure requirements regarding risk management. The

new model is a significant update of hedge accounting, which enables the accounting treatment to

be aligned to risk management activities.

SIF MOLDOVA SA




29


(w) New standards and interpretations (continued)

Own credit risk: IFRS 9 eliminates the volatility in the profit or loss arising from the change in

credit risk related to liabilities measured at fair value. The change in the accounting requirements

related to such liabilities implies that revenues from the mitigation of an entity’s own credit risk

will no longer be recognized through profit or loss.

(iii) Standards and interpretations issued by IASB, but not yet adopted by the EU

As at the reporting date of these financial statements, IFRS as adopted by the EU, do not significantly

differ from the regulations adopted by the IASB, except for the following standards, amendments and

interpretations whose application has not been approved by the EU yet as at the authorization date of

these financial statements:

IFRS 14 “Regulatory Deferral Accounts” (effective for annual periods beginning on or after 1

January 2016) – the European Commission decided not to initiate the adoption of this interim

standard, and to wait the issue of the final standard;

IFRS 16 „Leasing” (effective for annual periods beginning on or after 1 January 2019);

Amendments to IFRS 2 “Share-based Payment” - Classification and Measurement of Share-based

Payment Transactions (effective for annual periods beginning on or after 1 January 2018), the

adoption is expected in the second half of 2017,

Amendments to IFRS 4 “Insurance Contracts” - Applying IFRS 9 Financial Instruments with

IFRS 4 Insurance Contracts (effective for annual periods beginning on or after 1 January 2018 or

when IFRS 9 “Financial Instruments” is applied first time), the adoption is expected in 2017,

Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in

Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture with subsequent amendments (the effective date has been postponed

indefinitely until the research project regarding the equity method is complete),

Amendments to IFRS 15 “Revenue from Contracts with Customers” - Clarifications to IFRS 15

Revenue from Contracts with Customers (effective for annual periods beginning on or after 1

January 2018),

Amendments to IAS 7 “Statement of Cash Flows” - Disclosure Initiative (effective for annual

periods beginning on or after 1 January 2017),

Amendments to IAS 12 “Income Taxes” - Recognition of Deferred Tax Assets for Unrealised

Losses (effective for annual periods beginning on or after 1 January 2017),

Amendments to IAS 40 “Investment Property” - Transfers of Investment Property (effective for

annual periods beginning on or after 1 January 2018),


annual improvement project of IFRS (IFRS 1, IFRS 12 and IAS 28) primarily with a view to

removing inconsistencies and clarifying wording (amendments to IFRS 12 are to be applied for

annual periods beginning on or after 1 January 2017 and amendments to IFRS 1 and IAS 28 are to

be applied for annual periods beginning on or after 1 January 2018),

IFRIC 22 “Foreign Currency Transactions and Advance Consideration” (effective for annual

periods beginning on or after 1 January 2018).

SIF MOLDOVA SA




30

5. Segment reporting

Segment reporting is disclosed depending on the Group’s and the parent company’s activities.

Transactions between business segments are made at arm’s length. The segment assets and liabilities

include both elements directly attributable to such segments, and elements that may be allocated using a

reasonable basis. The Group and parent company consist of the following business segments:

Financial investment services

Manufacture of agricultural equipment and machinery

Others: the Group and the parent company include in this category services and products offered by

Group companies in the following fields: business and management consultancy, renting and

selling of own real estate, manufacture and trade of food, cultivation of fruits, hotel activities.

5.1 Segmenting of revenue, expenses and the result

Group Financial investments Mecanica Other

In LEI 31st December 2016 31st December 2016 31st December 2016 31st December 2016

Revenue

Revenue from dividends 118.065.476 118.045.995 - 19.481

Revenue from interest 1.279.014 1.216.794 2.307 59.912

Other revenue from investments - - - -

Other revenue from operations 57.198.874 3.880.001 39.144.395 14.174.478

Earnings from investments

Net earnings from currency rate differences - - - -

Net earnings from assets sale 94.747.761 94.672.066 64.656 11.038

Net earnings from the reevaluation of financial assets

at fair value through the profit and loss account (6.502.197) (6.504.125) - 1.928

Expenses

Loss from asset impairment (47.065.756) (46.908.657) 208.538 (365.637)

Expenses with risk and expenses provisions (729.456) (146.072) 164.836 (748.220)

Other operational expenses (82.968.956) (31.182.470) (36.822.737) (14.963.750)

Operational profit 134.024.760 133.073.532 2.761.996 (1.810.769)

Financing expenses (436.067) - (50.006) (386.061)

Profit before taxation 133.588.693 133.073.532 2.711.990 (2.196.831)

Profit tax (11.146.941) (10.505.003) (606.840) (35.098)

Net profit of financial year 122.441.752 122.568.529 2.105.150 (2.231.928)

SIF MOLDOVA SA




31

5.1 Segmenting of revenue, expenses and the result (continued)

Group Financial investments Mecanica Other

In LEI Notes 31st December 2015 31st December 2015 31st December 2015 31st December 2015

Revenue

Revenue from dividends 26.837.170 26.837.170 - -

Revenue from interest 1.691.426 1.563.181 8.019 120.226

Other revenue from investments 420 - - 420

Other revenue from operations 38.397.198 1.035.876 30.128.591 7.232.731

Earnings from investments

Net earnings from currency rate differences - - - -

Net earnings from assets sale 122.313.846 122.075.073 218.484 20.289

Net earnings from the reevaluation of financial assets

at fair value through the profit and loss account (3.972.242) (3.974.232) - 1.990

Expenses

Loss from asset impairment (1.953.011) 359.143 - (2.312.154)

Expenses with risk and expenses provisions 1.106.690 359.113 763.577 (16.000)

Other operational expenses (63.593.685) (26.594.729) (28.113.692) (8.885.264)

Operational profit 120.827.812 121.660.595 3.004.979 (3.837.762)

Financing expenses (77.798) - (48.357) (29.441)

Profit before taxation 120.750.014 121.660.595 2.956.622 (3.867.203)

Profit tax (23.081.481) (22.195.661) (713.583) (172.237)

Net profit of financial year 97.668.533 99.464.934 2.243.039 (4.039.440)

The accounting policies on segment reporting are the Group’s policies described in Note 4.

SIF MOLDOVA SA




32

5.2 Segmenting of assets and liabilities

Group Financial

investment

services

Manufacture of

agricultural

machines and

equipment

Other

In LEI31 st December

2016

31 st December

2016

31 st December

2016

31st December

2016

Assetss

Cash and cash equivalents 7.570.471 931.024 4.980.904 1.658.543

Bank deposits 128.163.158 117.794.735 629 10.367.794

Fianncial assets at fair value through the profit and

loss account 132.052.544 128.999.673 3.046.521 6.350

Financial assets available for sale 1.299.085.922 1.230.473.042 - 68.612.880

Investments held to maturity 9.573.804 9.573.804 - -

Real-estate investments 11.329.891 3.505.273 465.632 7.358.987

Intangible assets 9.495.295 113.180 571.122 8.810.993

Tangible assets 70.148.481 10.511.485 21.778.510 37.858.486

Total assets 44.098.713 1.334.639 27.478.221 15.285.854

Total assets 1.711.518.279 1.503.236.854 58.321.538 149.959.887

Liabilities

Loans 9.145.719 - - 9.145.719

Dividends to pay 29.319.122 29.258.494 60.628 (0)

Risk and expenses provisions 5.020.583 3.452.286 803.745 764.552

Liabilities regarding deferred profit tax 66.139.361 68.877.438 - (2.738.078)

Liabilities regarding current profit tax 543.845 4.636 539.209 -

Other liabilities 12.783.783 17.028.309 3.624.083 (7.868.609)

Total liabilities 122.952.413 118.621.163 5.027.666 (696.416)

Group Financial

investments

Manufacture of

agricultural

machines and

equipment

Other

In LEI31st December

2015

31st December

201531st December 2015 31st December 2015

Assetss

Cash and cash equivalents 5.512.013 613.851 2.319.371 2.578.791

Bank deposits 99.706.272 91.015.193 450 8.690.629

Fianncial assets at fair value through the profit and

loss account 115.203.699 112.215.485 2.981.865 6.349

Financial assets available for sale 1.124.199.137 1.028.735.266 - 95.463.871


Real-estate investments 11.213.326 3.264.341 465.631 7.483.356


Tangible assets 77.351.594 7.165.148 22.228.260 47.958.188

Total assets 40.258.177 6.269.024 29.997.036 3.992.117

Total assets 1.488.513.908 1.259.165.412 58.065.581 171.282.919

Liabilities

Loans 8.551.468 - - 8.551.468

Dividends to pay 42.542.917 42.394.161 33.542 115.214

Risk and expenses provisions 4.290.795 3.306.214 968.581 16.000

Liabilities regarding deferred profit tax 54.537.734 57.326.171 - (2.788.437)

Liabilities regarding current profit tax 2.852.688 2.555.318 364.389 (67.019)

Other liabilities 15.292.056 16.150.938 4.230.636 (5.089.518)

Total liabilities 128.067.658 121.732.802 5.597.148 737.708

SIF MOLDOVA SA




33

6. MANAGEMENT OF SIGNIFICANT RISKS

The Group’s management considers that risk management must be done in a consistent methodological

framework and that risk management is an important component of the strategy of return maximization,

obtaining a desired level of profit by maintaining an acceptable risk exposure and compliance with legal

regulations. Formalizing risk management procedures determined by the Group’s management is integral

to the strategic objectives of the Group.

The Group’s investing activity exposes it to various risks associated with financial instruments held and

the financial markets in which it operates. The main risks to which the Group is exposed are:

market risk (interest rate risk, currency risk and price risk);

liquidity risk;

credit risk;

tax risk;

economic environment risk;

operating risk.

The general risk management strategy seeks to maximize the Group’s profit by reference to the level of

risk to which it is exposed and maximize any adverse variations on the Group’s financial performance.

The Group has implemented risk management and assessment policies and procedures. Such policies and

procedures are presented in the section dedicated to each type of risk.

(a) Market risk

Market risk is defined as the risk of incurring a loss or not obtaining the expected profit, as a result of

price fluctuations, interest rates and foreign exchange rates.

For an efficient market risk management, the Group uses technical and fundamental analysis methods,

forecasts on the evolution of economic branches and financial markets, taking into account:

the return evaluations corresponding to the share portfolio;

the limits of concentration of assets in the same market, geographical area or economic sector;

the limits of presence in new markets;

the tolerable risk limits;

tolerance to risk concentrations;

the strategic allocation of long-term investments based on the principle according to which the

market will determine the correct fundamental value;

the short-term tactical allocation, which requires the use of short-term market variations to obtain

profit.

The selection of investment opportunities is made through:

a technical analysis;

fundamental analyses – determining the issuer’s capacity to generate profit;

comparative analyses – determining the relative value of an issuer in relation to the market or other

similar companies;

statistic analyses-determining the value based on prices history and transactions volumes.

SIF MOLDOVA SA




34

6. MANAGEMENT OF SIGNIFICANT RISKS (continued)

(a) Market risk (continued)

The Group is exposed to the following categories of market risk:

(i) Price risk

The Group is exposed to price risk, given that the value of financial instruments is likely to fluctuate due

to market price changes.

The Group is exposed to the risk associated with the variation of the price of financial assets at fair value

through profit or loss and available-for-sale financial assets. 80% of the Group’s total shares traded in an

active market as at December 31, 2016 (December 31, 2015: 73%) represented investments in companies

part of the BET index of the Bucharest Stock Exchange, weighted by the stock capitalization and created

to reflect the overall tendency of the prices of the ten most liquid shares traded on the Bucharest Stock

Exchange.

A 10% positive variation of the price of financial assets at fair value through profit or loss would lead to a

profit increase after taxation by RON 11,092,414 (December 31, 2015: RON 9,677,111), a 10% negative

variation having an equal and opposite net impact.

A 10% positive variation of the price of available-for-sale financial assets would lead to an equity

increase, net of income tax, by RON 108,569,389 (December 31, 2015: by RON 90,684,207), a 10%

negative variation having an equal and opposite net impact.

The Group holds shares in companies operating in various sectors of activity, as follows:

In LEI 31st

December

2016

% 31st December

2015

%

Financial brokerage and insurance 758.892.143 57% 741.281.794 68%

Transport, storage and communication 153.922.945 12% 108.758.953 10%

Chemical and petrochemical industry 130.259.303 10% 64.510.364 6%

Textile industry 25.081.439 2% 6.222.922 1%

Pharmaceutical industry 38.769.224 3% 40.419.219 4%

Manufacture of machinery and equipment 34.944.926 3% 18.680.167 2%

Wholesale, retail, tourism and restaurants 76.220.574 5,7% 4.251.844 0,4%

Manufacture of vehicles 74.387.804 6% 61.303.469 6%

Energy industry 29.765.604 2% 29.714.636 3%

Real estate, renting and other services 8.042.463 0,6% 1.992.113 0,2%

Building materials industry 117 0,0% 4.876.839 0,4%

Others 6.017.801 0,5% 4.729.005 0,4%

TOTAL 1.336.304.342 100% 1.086.741.325 100%

SIF MOLDOVA SA




35



As it revealed in the table above, as at December 31, 2016 the Group was holding primarily shares in

companies operating in finance and banking and insurance, accounting for 57% of the total portfolio, less

than the percentage was registered as at December 31, 2015.

(ii) Interest rate risk

The Group faces interest rate risk due to its exposure to negative interest rate fluctuations. Changes in the

market interest rate directly influences income and expenses regarding variable interest bearing financial

assets and liabilities, and the market value of fixed interest financial assets and liabilities.

As at December 31, 2016 and December 31, 2015, most of the Group’s assets and liabilities are not

interest bearing. Therefore, the Group is not significantly affected by the risk of interest rate fluctuations.

The excess of cash or other assimilated cash equivalents is invested in short-term investment titles with

maturity between 1 to 6 months.

SIF MOLDOVA SA




36



(ii) Interest rate risk (continued)

The Group does not use derivative financial instruments to hedge interest rate fluctuations.

The following tables present the Group’s exposure to interest rate risk as at December 31, 2016 and December 31, 2015.

In LEI

Net

amount as at

December 31,

2016

Less than 1

month

1 to

3 months

3 to 12

months

more than

1 year

No interest risk

Financial assets

Cash and cash equivalents 7.570.471 - - - - 7.570.471

Deposits at banks 128.163.158 8.561.769 119.310.773 290.617 - -

Financial assets at fair value through profit

or loss 132.052.544

-

- - - 132.052.544

Available for sale financial assets 1.299.085.922 - - - - 1.299.085.922

Investments held to maturity 9.573.804 - 212.619 37,440 9.323.745

Other financial assets 16.026.551 - - - - 16.026.551

Total financial assets 1.592.472.451

8.561.769

119.523.392 328.057 9.323.745 1.454.735.488


Dividends payable 29.312.122 - - - - 29.312.122

Other financial liabilities 11.201.400 - - - - 11.201.400

Borrowings 9.145.719 - - 924.379 8.221.340 -

Total financial liabilities

49.666.241

-

-

924.379

8,551,468

40.520.522

SIF MOLDOVA SA




37




In LEI

Net

amount as at

December 31,

2015

Less

than 1

month

1 to

3 months

3 to 12

months

more than

1 year

No interest risk

Financial assets

Cash and cash equivalents 5,512,013 - - - - 5,512,013

Deposits at banks 99,706,272 - 89,633,395 10,018,741 - 54,136


or loss 115,203,699

-

- - - 115,203,699

Available for sale financial assets 1,124,199,137 - - - - 1,124,199,137

Investments held to maturity 9,593,199 - 220,256 37,437 9,335,506

Other financial assets 22,461,687 - - - - 22,461,687

Total financial assets 1,376,676,007

-

89,853,651 10,056,178 9,335,506 1,267,430,672


Dividends payable 42,542,917 - - - - 42,542,917

Other financial liabilities 11,486,935 - - - - 11,486,935

Borrowings 8,551,468 - - - 8,551,468 -

Total financial liabilities

62,581,320

-

-

-

8,551,468

54,029,852

SIF MOLDOVA SA




38




The impact on the Group’s net profit of a change of ± 100 bp in the interest on variable interest bearing

assets and liabilities and expressed in other currencies corroborated with a change of ± 500 bp in the

interest on variable interest bearing assets and liabilities and expressed in RON is 6.821.456 (December

31, 2015: ± RON 5.040.225).

(iii) Currency risk

Currency risk is the risk that the Group incurring losses or not realizing profit as a result of unfavorable

fluctuations in the exchange rate. The Group is exposed to foreign exchange rate fluctuations, but misses

a formalized policy to hedge currency risk.

Most of the Group’s financial assets and liabilities are expressed in the national currency and, therefore,

exchange rate fluctuations do not significantly affect the Group’s activity. The exposure to foreign

currency fluctuations is mainly due to deposits and shares in foreign currency.

As at December 31, 2016 and December 31, 2015, assets expressed in Lei and other currencies are

presented in the following tables.

În LEI RON EUR USD Other

currency

31st December 2016

Financial assets

Cash and cash equivalents 7.085.648 373.327 15.346 96.150

Deposit at banks 126.528.362 1.634.796 - -

Financial assets at fair value through profit or loss 132.052.544 - - -

Available for sale financial assets 1.296.731.257 - - 2.354.666


Other financial assets 16.026.551 - - -

Total financial assets 1.580.781.961 9.224.327 15.346 2.450.816


Dividends to pay 29.319.122 - - -

Other financial liabilities 11.201.400 - - -

Loans 9.145.719

Total financial liabilities 49.666.241 - - -

SIF MOLDOVA SA




39



(iii) Currency risk (continued)

In LEI RON EUR USD Other

currency

31st December 2015

Financial assets

Cash and cash equivalents 5.102.979 305.506 13.210 90.318

Deposit at banks 99.706.272 - - -


or loss 115.203.699 - - -

Available for sale financial assets 1.123.617.348 - - 581.789


Other financial assets 22.461.687 - - -

Total financial assets 1.375.685.184 7.529.207 13.210 672.107


Dividends to pay 42.542.917 - - -

Other financial liabilities 11.486.935 - - -

Loans 8.551.468

Total financial liabilities 62.581.320 - - - The net impact on the Group’s profit of a change of ± 15% of the RON/EUR exchange rate corroborated

with a change of ± 15% of the RON/USD, RON/GBP, RON/CZK, RON/PLN and RON/CAD exchange

rates as at December 31, 2016, with all the other variables remaining constant, is RON 1.753.573

(December 31, 2015: RON ± 148.623).

(a) Credit risk

The Group is exposed to credit risk related to financial instruments, arising from any non-fulfillment by a

third party of its obligations towards the Group. The Group is exposed to credit risk further to investment

in bank deposits and bonds issued by municipalities or business entities, or further to current accounts and

other receivables.

As at December 31, 2016 and December 31, 2015 the Group did not hold real guarantees as insurance, or

other improvements of credit rating. As at December 31, 2016 and December 31, 2015 the Company did

not register overdue, but not impaired, financial assets.

SIF MOLDOVA SA




40


(b) Credit risk (continued)

The Group’s maximum exposure to credit risk is in amount of RON 161.030.722 as at December 31,

2016, in amount of RON 137.199.171 as at December 31, 2015 and can be analyzed as follows:

Exposures from held-to-maturity investments


2016

31st December

2015

Banca Transilvania 122.409.199 84.995.095

BRD - Group Societe Generale 5.243.928 8.489.791

BCR 906.887 1.905.223

Other commercial banks 6.870.352 9.754.175

Total 135.430.366 105.144.284

The annual average interest rate for exposures from current accounts and bank deposits is 0.47%.

Exposure from bonds- HTM


2016

31st December

2015

Bacău municipal bonds 117.920 129.820

GDF Suez bonds 2.239.680 2.239.678

Banca Transilvania bonds 7.216.204 7.223.701

Total 9.573.804 9.593.199 Government bonds Bacău are due on October 31, 2026 and the interest rate is the average of 6M ROBID

and 6M ROBOR reference rates, plus a 0,85% margin. Bonds GDF Suez Energy Romania are due on

October 30, 2017 and the interest rate of 7,4%. Bonds Banca Transilvania are due on May 22, 2020 and

the interest rate is the 6M EURIBOR reference rate, plus 6,25% margin.

Sundry debtors and trade receivables


2016

31st December

2015

AAAS Bucuresti 53.890.207 46.350.276 Banca Transilvania - -

Central depository 1.047.218 1.278.266

BRD Depositary (94.907) 4.395.490

Other various debtors and

commercial debts 19.515.572 23.039.259

Impairment adjustments (58.331.538) (52.601.602)

16.026.552 22.461.687 Impairment allowances cover all the amounts corresponding to the trade receivables against AAAS

Bucharest.

SIF MOLDOVA SA




41


(c) Liquidity risk

Liquidity risk is the risk of registering losses or not realizing the estimated profit, arising from the impossibility to honor at any time the short-time payment

obligations, without this involving excessive costs or losses that cannot be supported by the Group.

The Group’s financial instruments may include investments in shares not traded in an organized market and which may therefore have low liquidity. Therefore,

the Group may face difficulties in rapidly liquidating its investments in such instruments at a value close to the value determined based on the computation model

of the net assets of financial investment companies provided by Regulation no. 09/2014 issued by FSA to fulfill its own liquidity requirements.

The structure of the Group’s assets and liabilities has been analyzed based on the remainder of the period spanning from the balance sheet date until the contract

maturity date, both for the financial year ended December 31, 2016 and the financial year ended December 31, 2015, as follows:

In LEI Accounting value under 3 months between 3 and

12 months

over 1 year no pre-set maturity

31 decembrie 2016

Financial assets

Cash and cash equivalents 7.570.471 7.570.471 - - -

Deposits at banks 128.163.158 127.872.541 290.617 - -

Financial assets at fair value through

the profit or loss account 132.052.544 - - - 132.052.544

Financial assets available for sale 1.299.085.923 - - - 1.299.085.923

Investments held to maturity 9.573.804 212.619 37.440 9.323.745 -

Other financial assets 16.026.551 - - - 16.026.551

Total financial assets 1.592.472.451 135.655.632 328.057 9.323.745 1.447.165.018


Dividends to pay 29.319.122 - - - 29.319.122

Other financial liabilities 11.201.400 - - - 11.201.400

Loans 9.145.719 924.379 8.221.340 -

Total datorii financiare 49.666.241 - 924.379 8.221.340 40.520.522

SIF MOLDOVA SA




42


(b) Liquidity risk (continued)

In LEI Accounting value under 3 months between 3 and

12 months

Over 1 year no pre-set maturity

31st December 2015

Financial assets

Cash and cash equivalents 5.512.013 5.512.013 - - -

Deposits at banks 99.706.272 89.633.395 10.018.741 - 54.136

Financial assets at fair value through

the profit or loss account 115.203.699 - - - 115.203.699

Financial assets available for sale 1.124.199.137 - - - 1.124.199.137

Investments held to maturity 9.593.199 220.256 37.437 9.335.506 -

Other financial assets 22.461.687 - - - 22.461.687

Total financial assets 1.376.676.007 95.365.664 10.056.178 9.335.506 1.261.918.659


dividends to pay 42.542.917 - - - 42.542.917

Other financial liabilities 11.486.935 - - - 11.486.935

Loans 8.551.468 8.551.468 -

Total financial liabilities 62.581.320 - - 8.551.468 54.029.852

SIF MOLDOVA SA




43


(d) Tax risk

The Romanian tax system is subject to various interpretations and permanent changes that may be

retroactive. In certain cases, the tax authorities may adopt difference positions from the Group’s position

and may calculate interest and penalties. Although the tax for a transaction may be minimum, penalties

may be high, depending on the interpretations of the tax authorities.

In addition, there are agencies subordinated to the Government of Romania, which are authorized to

control both Romanian and foreign entities operating in Romania. Such controls are largely similar to the

controls conducted in many other countries, but can also extend to legal or regulatory fields of interest for

the Romanian authorities.

The tax statements may be subject to control and review for a period of five years, generally after their

submission date. In accordance with the legal regulations in force in Romania, the periods under review

may be subject to additional controls in the future.

The Group’s management considers that it has accurately registered the amounts in the accounts

corresponding to taxes, levies and other State liabilities; however, the authorities may have a different

position than the Group.

Starting from January 1, 2007, after Romania joined the European Union, the Group had to comply with

the tax regulations of the European Union and implement the changes brought by the European

legislation. The way in which the Group has implemented such changes remains subject to tax audit for a

period of five years.

The latest control conducted by the Ministry of Public Finance covered the period up to January 1, 2010.

Therefore, the Group’s liabilities up to that date may be subject to a further verification.

(e) Economic environment risk

The Romanian economy is still having the characteristics of an emerging economy and there is a

significant degree of uncertainty regarding the future development of the political, economic and social

environment. The Group’s management attempts to estimate the nature of the changes that will occur in

the Romanian economic environment and their effect on the financial standing and operating and cash

flow result of the Group.

Among the characteristics of the Romanian economy are also a currency that is not fully translatable

abroad and a low degree of liquidity in the capital market.

The Group’s management cannot predict all of the effects of the crisis that will affect the Romanian

financial sector or the potential impact thereof on these financial statements. The Group’s management

considers that it has taken all the required measures for the Group to be sustainable and develop in the

current market conditions.

SIF MOLDOVA SA




44


(f) Operating risk

Operating risk is defined as the risk of registering losses or not realizing the estimated profit due to

internal factors such as the improper carrying out of internal activities, existence of improper personnel or

systems or due to external factors such as economic conditions, changes in the capital market,

technological advances. Operating risk is inherent to all of the Group’s activities.

The described policies for operating risk management considered any type of event that may cause

significant risks and modalities in which they may manifest, to eliminate or reduce financial or

reputational losses.

(g) Capital adequacy

The management policy regarding capital adequacy focuses on maintaining a robust capital base in order

to support the Group’s continued development and the achievement of its investment objectives.

The Group’s equity includes share capital, various types of reserves and retained earnings. As at

December 31, 2016, the Group registered equity in amount of RON 1.588.565.867 (December 31, 2016:

RON 1.360.446.253).

The Group or the Company do not form the object of capital adequacy legal requirements.

7. PURCHASES AND SALES OF SUBSIDIARIES

(a) Purchases of subsidiaries

In 2016, SIF Moldova participated in the subsidiaries’ increase of share capital as follows:

Tesatoriile Reunite SA Bucharest – in-kind contribution in total amount of RON 6.727.500

Opportunity Capital SA - in-kind contribution in total amount of RON 4.005.000.

SIF Moldova set itself to make investments in 2016 that require the development of existing majority

holdings (real estate), but also new investments through special entities (hotel industry, agriculture);

investment decisions have a degree of maturity/impact on the estimated profit on the long and medium

term.

(b) Sales of subsidiaries

Further to the restructuring and optimization plan, the Board of Directors of SIF Moldova approved in

March 2016 the restructuring of the architecture of the SIF group by eliminating level N-1, investment

management companies, further to which the subsidiaries kept their specific investment operator activity.

In 2016, the Group maintained its control over all subsidiaries.

As at December 31, 2016 Agribusiness Capital SA initiated the voluntary liquidation proceedings, further

to which SIF Moldova became a direct shareholder in Agrointens SA and Agroland Capital.

Opportunity Capital SA is in voluntary liquidation.

After the reporting period, the restructuring of group SIF Moldova will continue, in order to streamline

the business through new approaches leading to an improvement of the financial performance of the

portfolio of projects managed.

SIF MOLDOVA SA




45

8. FINANCIAL ASSETS AND LIABILITIES

Accounting classifications and fair values

The table below summarizes the carrying amounts and fair values of the Group’s financial assets and liabilities as at December 31, 2016:

In LEI Fincial assets at fair

value through the

profit and loss

account, on initial

aknowledgement

Available for sale Amortized cost Total accounting

value

Fair value

Cash and cash equivalents - - 7.570.471 7.570.471 7.570.471

Deposits at bank - - 128.163.158 128.163.158 128.163.158

Financial assets at fair value through the profit and

loss account 132.052.544 - - 132.052.544 132.052.544

Financial assets available for sale 1.299.085.923 1.299.085.923 1.299.085.923

Investments held to maturity - - 9.573.804 9.573.804 9.573.804

Other financial assets - - 16.026.552 16.026.552 16.026.552

Total financial assets 132.052.544 1.299.085.923 161.333.985 1.592.472.451 1.592.472.451

Dividends to pay - - 29.319.122 29.319.122 29.319.122

Loans - - 9.145.719 9.145.719 9.145.719

Other financial liabilities - - 11.201.400 11.201.400 11.201.400

Total datorii financiare - - 49.666.241 49.666.241 49.666.241

SIF MOLDOVA SA




46

FINANCIAL ASSETS AND LIABILITIES (continued)

The table below summarizes the carrying amounts and fair values of the Group’s financial assets and liabilities as at December 31, 2015:

In LEI Financial assets at

fair value through

the profit and loss

account, on initial

aknowledgement

Available for sale Amortized cost Total accounting

value

Fair value

Cash and cash equivalents - - 5.512.013 5.512.013 5.512.013

Deposits at bank - - 99.706.272 99.706.272 99.706.272


loss account 115.203.699 - - 115.203.699 115.203.699

Financial assets available for sale 1.124.199.137 1.124.199.137 1.124.199.137

Investments held to maturity - - 9.593.199 9.593.199 9.684.481

Other financial assets - - 22.461.687 22.461.687 22.461.687

Total financial assets 115.203.699 1.124.199.137 137.273.171 1.376.676.007 1.376.767.289

Dividends to pay - - 42.542.917 42.542.917 42.542.917

Loans - - 8.551.468 8.551.468 8.551.468

Other financial liabilities - - 11.486.935 11.486.935 11.486.935

Total datorii financiare - - 62.581.320 62.581.320 62.581.320

SIF MOLDOVA SA




47

9. DIVIDEND INCOME

Dividend income is registered at gross value. The tax rates of dividends for the financial year ended

December 31, 2016 were 5% and nil (2015: 16%). Dividend income by main accounts is presented in the

table below:

In LEI 2016 2015

Banca Transilvania 86.043.802 -

SNTGN Transgaz 7.398.707 5.841.790

OMV Petrom - 2.410.709

Aerostar 1.910.879 2.004.698

Transelectrica 2.701.331 2.857.600

SIF Oltenia 3.738.805 3.415.483

SNGN Romgaz SA 7.155.000 2.992.500

Biofarm 2.147.315 2.013.108

Other 6.969.637 5.301.282

Total 118.065.476 26.837.170

10. INTEREST INCOME

În LEI 2016 2015

Interest income on deposits and current accounts 658.313 1.016.393

Interest income on held to maturity investments 620.701 675.033

Total 1.279.014 1.691.426

11. OTHER OPERATING REVENUES

In Lei 2016 2015

Revenue from production sale 32.016.004 28.357.071 Revenue from service delivery 697.852 471.179

Revenue from rents 3.457.782 3.450.849

Revenue from merchandize sale 8.733.700 4.453.832

Stock variation 4.277.197 -

Revenue from recovered debts 568.342 365.866 Revenue from damages, fines, penalties - -

Other operational revenue 7.447.997 1.298.821

Total 57.198.874 38.397.618

SIF MOLDOVA SA




48

11. OTHER OPERATING REVENUES (continued)

In Income from sale of production, Mecanica Ceahlau accounts for 88 % with RON 28.219.699 (RON

25.233.657, namely 89% in 2015), representing the sale of own goods.

In Income from sale of merchandise, Mecanica Ceahlau accounts for 98% with RON 8.601.777 (RON

4.211.875 namely 95% in 2015) representing the sale of goods in distribution (tractors, herbicide

equipment, front loaders).

In Other operating revenues, SIF Moldova accounts for 41% with RON 3.073.751 (RON 251.881 namely 19%

in 2015), of which RON 2.415.314 represents revenues from assignment of litigating rights of Textila

Oltul.

The revenues from changes in inventories come from the capitalization of costs in project Baba Novac

Residence of Tesatoriile Reunite.

In Rental income, Tesatoriile Reunite registers RON 930.221 (RON 788.884 in 2015), followed by Casa SA

with RON 819.164 (RON 889,055) and Regal SA with RON 739.199 (RON 786,437 in 2015).

SIF MOLDOVA SA




49

12. NET GAINS ON THE SALE OF ASSETS

In Lei 2016 2015

Net revenue from the sale of financial assets available

for sale 94.994.675 120.758.471

Net loss from the sale of financial assets at fair value

through the profit and loss account (246.914) 1.555.375

Total 94.747.761 122.313.846

Income from sales of shares classified as available-for-sale financial assets was in amount of RON

165.699.850 (2015: RON 190.689.588), the cost related thereto being RON 92.359.826 (2015: RON

85.661.134), of which RON 21.578.956 represents the fair value adjustment registered previously in the

revaluation reserve related to available-for-sale assets and transferred upon the sale to profit or loss. The

gain obtained was RON 94.994.675 (2015: RON 120.758.471). Such transactions from 2016 consisted

primarily in selling the shares held with Antibiotice, Banca Transilvania, Fondul Proprietatea and Sanex.

13. NET LOSS / (GAIN) ON THE REVALUATION OF THE ASSETS AT FAIR VALUE THROUGH

PROFIT OR LOSS

In LEI 2016 2015

Net loss/ (net earning from the re-evaluation of

financial assets held for trading (6.504.125) 3.974.231

Net loss / (net earnings) from the re-evaluation of

derived financial instruments 1.928 (1.989)

Total (6.502.197) 3.972.242

The net gain of RON 6.504.125 (2015: loss of RON 3.974.231) represents the difference from the

revaluation at fair value of shares and fund units held at fair value through profit or loss.

14. LOSSES (IMPAIRMENT REVERSALS) ON THE IMPAIRMENT OF ASSETS

In Lei 2016 2015

Losses (impairment re-run) from the impairment of

financial assets available for sale 47.274.294 1.953.011

Losses (impairment re-run) from the impairment of

other assets (208.538) -

Total 47.065.756 1.953.011

SIF MOLDOVA SA




50

15. OTHER OPERATING EXPENSES

In LEI 2016 2015

Expenses with wages and other staff expenses 25.231.490 21.882.695

Expenses with external services 19.385.990 13.898.029

Expenses with commissions 6.107.346 6.612.597

Expenses for protocol and advertising 567.455 515.083

Other operational expenses 31.676.676 20.685.280

Total 82.968.956 63.593.684

Other operating expenses include expenses with the amortization of non-current assets, travel expenses

and telecommunications, expenses with repair and maintenance, etc. The average number of employees

for the financial year ended December 31, 2016 was 232 (2015: 297).

16. INCOME TAX

In LEI 2016 2015

Current profit tax

Current profit tax (16%) 5.684.079 17.104.670

Dividend tax (16%) 5.680.655 3.594.902

11.364.734 20.699.572

Deferred profit tax

Financial assets available for sale 124.209 4.713.523

Real-estate investments - 5.221


loss account - (41.205)

Provisions for management benefits (451.723) (1.180.183)

Provisions for risks and other expenses 109.721 (1.115.448)

(217.793) 2.381.909

Total 11.146.941 23.081.481

SIF MOLDOVA SA




51

16. INCOME TAX (continued)

The reconciliation between profit before tax and expense with income tax through profit or loss:

In LEI 2016 2015

Profit before taxation 133.588.694 120.750.015

Tax in compliance with the statutory tax rate of

16% (2015: 16%) 21.374.191 19.320.002

Profit tax effect of

non-deductible expenses 12.469.088 24.015.405

non-taxable income (22.454.788) (20.423.926)#NAME? 5.235.370

Registration and re-runs of time differences (241.550) 170.000

Profit tax 11.146.941 23.081.481

The effective income tax rate in 2016 is 8 % (2015 - 19%).

17. CASH AND CASH EQUIVALENTS

December 31,

2016 December 31,

2015

Current accounts in bank 303.263 74.000

Total cash and cash equivalents

7.267.208 5.438.013

7.570.471

5,512,013

The current bank accounts are permanently at the Group’s disposal and are not restricted.

18. BANK DEPOSITS

In LEI December 31,

2016 December 31,

2015

Term deposits 128.105.135 99.591.716

Attached receivables 58.023 60.420

Blocked deposits 54.136

Total deposits at banks

128.163.158

99.706.272

Bank deposits are permanently at the Group’s disposal and are not restricted.

SIF MOLDOVA SA




52

19. FINANCIAL ASSETS

a) Financial assets at fair value through profit or loss


2016

31st December

2015

Fund units 20.976.907 21.305.471

Shares 111.075.637 93.898.228

Total 132.052.544 115.203.699

b) Available-for-sale financial assets


2016

31st December

2015

Shares evaluated at fair value 1.218.635.508 1.068.259.739

Shares evaluated at estimated

fair value 6.593.197 18.481.586

Fund units evaluated at fair

value 73.857.217 37.457.813

Total 1.299.085.922 1.124.199.137

As at December 31, 2016 and December 31, 2015 the category of shares measured at fair value includes

primarily the value of the shares held with Banca Transilvania, BRD - Groupe Societe Generale S.A.,

OMV Petrom.

Shares at fair value have been measured by multiplying the number of shares held as at the balance sheet

date with the closing price on the last trading day of the reporting period.

The movement of available-for-sale financial assets in the financial years ended December 31, 2016 and

December 31, 2015 is presented in the table below: In LEI Shares evaluated at fair

value

Shares evaluated at

estimated value Fund units Total

31st December 2014 969.056.185 20.289.828 48.862.305 1.038.208.318

Net variation during the period 2.111.337 777.185 (10.721.988) (7.833.466)

Transfer between categories 290.568 (290.568) - -

Losses from impairment - (3.449.846) (682.504) (4.132.350)

Fair value modification 96.801.649 1.154.986 - 97.956.635

31st December 2015 1.068.259.739 18.481.586 37.457.813 1.124.199.137

Net variation during the period 49.959.639 (6.606.336) 35.017.494 78.370.797

Transfer between categories 4.477.402 (4.477.402) - -

Losses from impairment (3.338.111) (804.649) - (4.142.760)

Fair value modification 99.276.839 - 1.381.910 100.658.749

31st December 2016 1.218.635.508 6.593.197 73.857.217 1.299.085.922

Information on the inter-category transfer represents the net value of shares that migrated from the

category of shares measured at fair value/cost to the category of shares measured at cost/fair value, due to

the arising/fall of an active market for such instruments.

SIF MOLDOVA SA




53

19. FINANCIAL ASSETS (continued)

c) Held-to-maturity investments


2016

31st December e

2015

Corporate bonds 9.455.884 9.463.379

Municipal bonds 117.920 129.820

Total 9.573.804 9.593.199 d) Fair value hierarchy

The table below analyzes the financial instruments carried at fair value depending on the measurement

method. The fair value levels depending on the input in the measurement model have been defined as

follows:

Level 1: quoted prices (not adjusted) in active markets for identical assets or liabilities

Level 2: inputs other than the quoted prices included in Level 1, observable for assets or liabilities

either directly (e.g.: prices), or indirectly (e.g.: price derivatives)

Level 3: inputs for assets or liabilities that are not based on observable market data (unobservable

inputs). 31st December 2016

In LEI Level 1 Level 2 Level 3 Total

Financial assets at fair value

through the profit and loss

account 132.052.544 - - 132.052.544

Financial assets available for

sale 1.228.527.354 70.558.569 1.299.085.922

1.360.579.898 - 70.558.569 1.431.138.466

31st December 2015

In LEI Level 1 Level 2 Level 3 Total

Financial assets at fair value

through the profit and loss

account 115.203.699 - - 115.203.699

Finacial assets available for sale 1.057.907.804 - 21.666.096 1.079.573.901

1.173.111.503 - 21.666.096 1.194.777.600 Change in level 3 fair value

In LEI2016 2015

On January 1st 21.666.096 25.268.573

Total loss acknowledged in the profit or

loss account 950.290 (2.051.779)

Total earnings acknowledged in other

overall result elements 46.465.800 -

Purchases during the period 313.533 977.911

Sales during the period (6.970) (6.667.987)

Level 3 transfers from fair value hierarchy 1.169.820 4.139.378

On 31st December 2016/2015 70.558.569 21.666.096

SIF MOLDOVA SA




54


c) Held-to-maturity investments (continued)

Transfers to fair value level 3 represent listed investments for which the company considered that there is

no active market and the company prepared valuation reports for December 31, 2016. The main

transferred companies are: Iasitex, Chimcomplex, Rulmenti, etc.

In 2016, the Company classified in Level 1 securities measured based on the closing prices of the BSE,

TSX stock exchanges on the last trading day. This measurement level includes fund units measured based

on their net asset unit value certified by the fund depository and shares without active market measured at

the last quoted price.

The investments classified in Level 3 have been measured by independent valuers, based on the financial

information provided by the monitoring departments, using measurement techniques that maximize the

use of relevant observable inputs and minimize the use of unobservable inputs, with the management’s

supervision and review, which makes sure that all inputs underlying the valuation reports are accurate and

adequate. Level 3 also includes investments that have not been subject to valuation, their amount being

insignificant.

Financial

assets

Fair value as

at December

31, 2016

Measurement

method

Unobservable input,

value ranges

Unobservable input vs.

Fair value – sensitivity

Listed

majority

holdings

25,750,352

Income-based

approach –

discounted cash

flow method

Weighted average cost of

capital 8.97% - 11.29%

The lower the weighted

average cost of capital, the

higher the fair value, and

vice versa.

Discount for lack of

control, values ranging

from 7.05% to 10.5%

The lower the discount for

lack of control, the higher

the fair value and vice versa.


liquidity, values ranging

from 9.8% to 16.8%


lack of liquidity, the higher


Long-term income rate of

growth: max. 2%

The higher the long-term

income rate of growth, the

higher the fair value and

vice versa.

Unlisted

minority

holdings

32,780,287

Income-based

approach –

discounted cash

flow method

Weighted average cost of

capital 8.4% - 12.75%

The lower the weighted

average cost of capital, the

higher the fair value, and

vice versa.


control, values ranging

from 7.71% to 20.46%


lack of control, the higher




from 9.8% to 16.8%




Long-term income rate of

growth: max. 3%

The higher the long-term

income rate of growth, the

higher the fair value and

vice versa.

SIF MOLDOVA SA




55

Unlisted

minority

holdings

410,468

Market approach

– comparable

companies

EBITDA multiple - max.

9.7

The higher the EBITDA

multiple, the higher the fair

value and vice versa.



from 9.8% to 16.8%




TOTAL 58,941,107

The valuation model applied determines in a consistent manner a single impairment model applicable to all

financial instruments.

EBITDA multiple: means the most relevant multiple used in measuring a participation and is calculated

using information available for comparable listed companies (in the same geographical location, size of

industry, target markets and other factors that the valuers consider relevant).

The trading multiples for comparable companies are determined by dividing the company’s net worth by

the related EBITDA ratio and then applying the discounts, for reasons such as lack of liquidity and other

differences among the companies under review and the valued company.

Discount for lack of liquidity: means the discount applicable to comparable market multiples, to reflect the

liquidity differences between the portfolio company subject to valuation and the comparable companies

considered. The valuers estimate the discount for lack of liquidity based on their professional judgment,

considering the market conditions for liquidity and the particularity of the assessed company.

Discount for lack of control: means the discount applied to reflect the absence of control and is used in the

discounted cash flow method for determining the value of minority interests in the assessed company’s

equity.

Weighted average cost of capital: means the cost of the company’s capital in nominal terms (inflation

included), based on a Capital Asset Pricing Model. All capital sources – shares, bonds and other long-term

debts – are factored in in the calculation of the weighted average cost of capital.

Net price / profit (P/E): the P/E ratio is a prospective market ratio which calculates the value of an

investment relative to the resulting profits, by share price to net share profit. Such ratio shows how willing

the market is to pay for a company based on its current profits. Investors often use this ratio to assess the

market value of an investment based on future estimated profits per share.

Price / book value of equity (P/BV): the P/BV ratio assesses the market price of a company relative to

equity (net asset). Such ratio reflects the ratio that investors are willing to pay for the value of the net asset

per share. The P/BV ratio varies significantly depending on the field of activity. A company that requires

more assets (for instance, a manufacturing company that has production spaces and equipment) will

generally register a Price/ book value of equity significantly lower than in the case of a company whose

revenues come from services provision (for instance, consulting company).

SIF MOLDOVA SA




56


e) Reserve from fair value revaluation of available-for-sale financial asset net of deferred tax

In LEI 2016 2015

On January 1st 415.684.659 351.740.408

Net earnings from the revaluation of

financial assets available for 175.618.159 173.552.873

(Earnings) / Loss corresponding to the

transfer into the profit or loss account

following the sale of financial assets

available for sale

(86.419.557) (110.633.603)

Effect of the loss in the profit and loss

account from the impairment of financial

assets available for sale

40.227.661 1.024.981

On december 31st 545.110.922 415.684.659

SIF MOLDOVA SA




57

20. INVESTMENT PROPERTY


2016

31st December

2015

Balance on January 1st 11.213.326 11.250.815

Fair value changes - -

Increases (decreases) 116.565 (37.489)

Balance on 31st December 11.329.891 11.213.326

The increase means the result of the revaluation of investment property at fair value determined in valuation

reports as at December 31, 2016.

The fair value valuation of investment property is conducted by independent external valuers, members of the

National Associations of Valuers in Romania (ANEVAR), except for the investment property held by

Mecanica Ceahlau, which determined the market value of investment property in amount of RON

465.631 through its own committee of specialists.

Fair value is based on market price quotations, adjusted, if needed, so as to reflect the differences in the nature,

location and conditions of such asset. Such valuations are revised periodically by the Company’s

management.

The last fair value measurement of the Company’s investment property was made as at December 31, 2016 by

Evaluări Consultanţă Management ECM SRL Bacău, for Casa SA Bacău the latest fair value

measurement of investment property was conducted as at December 31, 2012 by Evaluări Consultanţă

Management ECM SRL Bacău.

The investment property held as at December 31, 2016 are classified in Level 3 fair value.

21. INTANGIBLE AND TANGIBLE ASSETS

Gross accounting value January 1st 2016 Increases Decrases

31st December

2016

Intangible assets 7.294.674 4.509.874 1.441 11.803.108

Intangible assets 726.158 - - 726.158

Pending intangible assets

8.020.832 4.509.874 1.441 12.529.265

Total

Tangible assets 34.601.882 420.938 7.927.216 27.095.605

Land 28.810.572 495.240 580.530 28.725.282

Buildings 21.625.991 630.677 108.628 22.148.040

Equipment 7.640.660 1.227.068 540.028 8.327.700

Transportation means 706.541 38.195 69.543 675.193

Other fixed means 610.905 1.491.960 716.649 1.386.216

Pending tangible assets

93.996.550 4.304.079 9.942.593 88.358.036

SIF MOLDOVA SA




58

21. INTANGIBLE AND TANGIBLE ASSETS (continued)

Cummulated amotization 1st January 2016 Increases Decreases

31st December

2016


Intangible assets

2.544.339 491.072 1.441 3.033.970

Total

Tangible assets - - - -

Lands 2.945.908 2.115.267 690.527 4.370.648

Buildings 12.054.868 - - 12.054.868

Equipment 1.148.925 145.240 26.460 1.267.705

Transportation means 495.256 21.410 332 516.334

Other fixed means

16.644.956 2.281.917 717.319 18.209.555

Total

Net accounting value 2.772.990 as per BS 9.495.295 Cheltuieli cu

amortizarea 9.495.295

Intangible assets 70.148.481

Tangible assets as per BS 70.148.481

In 2016, Agrointens purchased land in total amount of RON 413.803. The decrease in the land value is

due to the transfer of the land held by Tesatoriile Reunite on Street Eufrosina Popescu, in the category of

goods in progress, in order to execute the Baba Novac real estate project.

Impairment losses recognized in profit or loss were classified to expenses with the

amortization/depreciation and impairment of non-current assets.

The carrying amount of tangible assets mortgaged or pledged under the loan contracts entered into by the

Group entities as at December 31, 2016 amounts to RON 24.419.212 (December 31, 2015: RON

20.900.000).

The net book value of fixed assets purchased in finance lease as at December 31, 2016 is RON 445,541.

22. OTHER ASSETS


2016

31st December

2015

Vairous debtors 74.358.091 75.063.289

Divideds to collect -

Other assets 26.203.596 15.927.928

Minus adjustment for various

debtors impairment (58.331.538) (52.601.602)

Total 42.230.149 38.389.615 Sundry debtors include primarily amounts arising from final court decisions in amount of RON

56.496.561. For doubtful amounts, the Group calculated impairment allowances.

Other assets include primarily inventories from subsidiaries Mecanica Ceahlau and Tesatoriile Reunite.

They are detailed herein below:

SIF MOLDOVA SA




59

22. OTHER ASSETS (continued)


2016

31st December 2015

Raw materials and materials 1.398.854 1.427.267

Production in manufacturing process 14.100.367 1.986.556

half-staff 64.112 -

Finisches products 9.423.228 10.616.461

Commodities 2.044.870 928.815

Adjustment for value impairment (264.826) (138.702)

Stocks at net value 26.766.605 14.820.397

The impairment allowance for sundry debtors can be analyzed as follows:

În LEI 31st December

2016

31st December

2015

On January 1st (52.601.602) (40.132.128)

Setup (5.838.591) (13.630.085)

Rerun 108.655 1.160.611

On december 31st (58.331.538) (52.601.602)

23. BORROWINGS

As at December 31, 2016, the Group registered outstanding borrowings of RON 9.145.719.

Hotel Sport Cluj signed with Banca Transilvania a loan contract in December 2015, the value of the

mortgaged plant, property and equipment being RON 20.900.000. The loan was contracted for a 10-year

term, at a variable annual interest rate of 4.42%.

24. DIVIDENDS PAYABLE


2016

31st December

2015

Dividends payable for 2012 642 24.012.576

Dividends payable for 2013 6.866.746 7.044.594

Dividends payable for 2014 10.963.755 11.485.747

Dividends payable for 2015 11.487.979 -

Total dividende de plată 29.319.122 42.542.917 Dividends payable not collected within 3 years from the date of their declaration are annulled for

exceeding the limitation period, according to law.

SIF MOLDOVA SA




60

25. PROVISIONS FOR RISKS AND CHARGES


2016

31st December

2015

Provision for litigation 5.020.583 4.290.795

Total 5.020.583 4.290.795

Regarding the amounts collected by the Group through court officers, AAAS filed legal proceedings

contesting the enforced amounts. The provisions for litigation represent amounts collected by the Group

through court officers between 2011 and 2016 and subsequently contested by AAAS.

The litigation provision can be analyzed as follows:


2016

31st December

2015

1-Jan 4.290.795 5.397.486

Charge 2.525.733 2.035.594

Release (1.795.945) (3.142.285)

31-Dec 5.020.583 4.290.795

26. DEFERRED INCOME TAX LIABILITIES

Deferred income tax liabilities as at December 31, 2016 are triggered by the elements detailed in the table

below:

In LEI Assets Liabilities Net

Intangible assets - - -

Tangible assets (169.005) - (169.005)


loss account (899.476) - (899.476)

Financial assets available for sale 437.891.557 - 437.891.557

Real-estate investments 2.289.544 - 2.289.544

Provisions for management benefits - (10.052.459) (10.052.459)

Provisions for litigations and other provisions - (3.452.286) (3.452.286)

Other assets (12.236.871) - (12.236.871)

Total 413.371.004

Temporary net differences 16% quota 413.371.004

Liabilities regarding deferred profit tax 66.139.361

SIF MOLDOVA SA




61

26. DEFERRED INCOME TAX LIABILITIES (continued)

Other assets includes the difference between the accounting base and the fiscal base for goods in progress

existing at Tesatoriile Reunite transferred from property, plant and equipment.

Deferred income tax liabilities as at December 31, 2015 are triggered by the elements detailed in the table

below:

Assets

Liabilities

Net

Intangible assets - - -

Property, plant, equipment - 12,057,243 (12,057,243)

Financial assets at fair value through profit or loss - 257,529 (257,529)

Available for sale financial assets 358,142,877 (2,491,219) 360,634,096

Investment property 3,033,767 - 3,033,767

Provision for management benefices (7,376,146) - (7,376,146)

Provisions for litigation and other provisions (3,116,106) - (3,116,106)

Total

340,860,839

Net temporary differences - 16% 340,860,839

Deferred tax liability

54,537,734

The changes in outstanding deferred tax liabilities for 2016 and 2015 are as follows:

December 31,

2016 December 31,

2015

Balance as at January 1 54.537.734 39.961.977

Changes through profit or loss (217.793) 2.345.901

Changes through other comprehensive income 11.819.420 12.229.856

Balance as at December 31

66.139.361

54.537,734

As at December 31, 2016, deferred income tax recognized directly by reducing equity amounts to RON

66.357.154 (December 31, 2015: RON 55.147.982), being generated by tangible assets and available-for-

sale financial assets measured at fair value.

27. OTHER LIABILITIES

In LEI December 31,

2016 December 31,

2015

Suppliers – invoices not received 725.405 807.279

Current income tax liability 543.845 2,852.688

Tax and duties 1.148.940 2,997.841

Profit sharing liability 10.052.459 7,376.146

Other liabilities 856.978 4,110,789

Total

13.327.627

18.144.743

Profit-sharing liabilities represent the amounts that will be distributed from the net profit of the year to

employees according to the provisions of the Collective Employment Contract and directors according to

management contracts. Current income tax liabilities have been paid by the Group on term.

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62

28. EQUITY AND RESERVES

(a) Share capital

The Group’s shareholding as at December 31, 2016 and December 31, 2015 is as follows:

31st December 2016 No. of

shareholders

No. of shares Amount

(RON)

(%)

Natural individuals 5.768.263 453.939.226 45.393.923 43%

Natural persons 269 584.239.950 58.423.995 57%

Total 5.768.532 1.038.179.176 103.817.918 100%

31st December 2015 No of

shareholders

No. of shares Amount

(RON)

(%)

Natural persons 5.774.995 461.331.672 46.133.168 44%

Companies 304 576.847.504 57.684.750 56%

Total 5.775.299 1.038.179.176 103.817.918 100%

All shares are ordinary, subscribed and fully paid in as at December 31, 2016. All shares entitle to the

same voting right and have a nominal value of RON 0.1/share. The number of shares authorized for

issuance equals the number of shares issued. In 2016 and 2015, there were no changes in the number of

shares issued.

Thus, the share capital in 2016 is RON 103.817.918 (December 31, 2015: RON 103.817.918).

The right to hold shares up to 1% of the share capital has been amended by Law 11 of January 6, 2012

(effective from January 13, 2012), to 5% of the share capital, namely 51.908.959 shares.

(b) Reserves from the revaluation of available-for-sale financial assets

Such reserve includes the net cumulated changes in the fair values of available-for-sale financial assets

from the date they are classified as such to the date they are derecognized or impaired.

Reserves from the revaluation of available-for-sale financial assets are registered at a value net of the

related deferred tax. The value of deferred tax recognized directly through the reduction of equity is

presented in Note 25.

(c) Legal reserves

According to the legal requirements, the Company establishes legal reserves in amount of 5% of the profit

registered according to RAS, up to 20% of the share capital. The value of the legal reserve as at

December 31, 2016 is RON 27.392.670 (December 31, 2015: RON 25.828.070).

Legal reserves cannot be distributed to shareholders.

SIF MOLDOVA SA




63

EQUITY AND RESERVES (continued)

(d) Dividends

In 2016, the Group declared dividends in amount of RON 46.250.883 related to 2015 (2014: RON

52.531.866 related to 2014), and RON 0.04/share (2015: RON 0.05/share).

In 2016, the Group annulled the distribution of dividends in amount of RON 23.678.295 related to 2012

(2015: RON 21.719.773 related to 2011).

(e) Other items of equity – Own shares

In 2016, the Company completed the last program of buy-back of SIF2 shares rolled out between August

6, 2015 and February 2, 2016 in accordance with SIF Moldova EGMS Resolution no. 4/April 1, 2015.

The cumulated results of such operation are as follows:

- maximum number of shares to acquire 10.381.791 (1% of the share capital);

- the average price per purchase is RON 0,7939;

- the total value of shares is RON 8.242.350.

- objective: allocation of shares to administrators and employees, according to law.

Out of such shares, the Company allocated to employees and directors a number of 3.963.711 (0.3818%

of the share capital) in total amount of RON 3.151.547 representing the profit sharing for 2015 – share

component.

By EGMS Resolution no. 4/April 25, 2016 SIF Moldova approved the second buy-back program of

maximum 1% of the share capital with the aim of allocating shares to directors, officers and employees,

according to law and the constitutive act:

- the maximum number of shares to acquire 10.381.791 (1% of the share capital);

- maximum acquisition price RON 62,5 considering the completion of the nominal value

consolidation;

- maximum duration of the program: 18 months from the publication of the EGMS in the Official

Journal Part IV;

- objective: allocation of shares to administrators and employees, according to law and the

constitutive act.

As at December 31, 2016 under such program, 7.006.423 shares in total amount of RON 5.215.869 were

purchased (0.6749% of the share capital), at an average price of purchase of RON 0.7445/share.

The total shares purchased in 2016 amount to 8.285.570 representing 0,7981% of the share capital (2015

– 9.102.628 representing 0,8768% of the share capital) in total amount of RON 6.497.101 (2015 – RON

7.378.192).

Total own shares of the Company as at December 31, 2016: 13.424.487 representing 1,2931% of the

share capital (2015 – 9.102.628 representing 0,8768% of the share capital).

The buy-back program complies with the exemption conditions provided by the legislation regarding

market abuse, which allow transactions in the issuer’s closed periods (art. 5(1) of EU Regulation no.

596/2014; art. 4(2) letters a) and b) of EU Delegated Regulation no. 1052/2016).

SIF MOLDOVA SA




64

28. EQUITY AND RESERVES (continued)

(e) Other items of equity – Own shares (continued)

The outset of the Stock Option Plan program for 2016 are:

the OGMS of April 25, 2016 approved the roll-out of stock option plans (SOP) for the gratuitous

allocation of SIF2 shares to the directors, officers and employees of SIF Moldova, from the

shares not used in the buy-back program approved EGMS of April 1, 2015 and the shares to be

buy-bought through the program submitted to the approval of the EGMS of 25/26 April 2016, of

maximum 16.000.000 shares of which maximum 10.400.000 shares will be used for 2016.

The Board of Directors was authorized to take all the measures to put into practice the resolution

within the legal and statutory limits, by going through all the stages and formalities required to

implement the programs.

A SOP, as part of the benefit plan for administrators, managers and employees for 2016 (variable

remuneration), may be rolled out within the limits provided by the Constitutive Act and the

Collective Employment Contract for 2016-2017 and in accordance with the AFIA legislation,

namely:

- for directors and officers – the actual level of the benefit plan is determined by the Board of

Directors, after the General Meeting of Shareholders approves the annual financial statements

for 2016

- for employees – the shares may be granted according to law and the remuneration policy

established annually by the Board of Directors

- at least 50% of the variable remuneration shall consist of SIF2 shares (i.e. granted under the

SOP).

The number of shares that will be allocated to each beneficiary shall be established when the

beneficiaries’ right is granted (date of conclusion of the share-based payment agreement between SIF

Moldova and beneficiaries), after the approval of the annual financial statements for 2016 by the General

Meeting of Shareholders. The right to receive shares under a free title shall be exercised within minimum

12 months from signing the share-based payment agreement between the company and beneficiaries.

29. Non-controlling interest

Represent a share of the profit or loss and the net assets not held, directly or indirectly, by the Group and

presented in the consolidated statement of profit or loss and other comprehensive income and in equity in

the consolidated statement of financial position, separately from the equity of the parent company’

shareholders. The changes in holdings in subsidiaries which do not result in a loss of control are

accounted for as transactions between shareholders in their capacity of shareholders.

December 31,

2016 December 31,

2015

Balance as at January 1 21.382.638 25.512.671

Profit attributable to non-controlling interests 780.060 887.406

Changes in the Group’s structure (1.329.460) (5.017.439)

Balance as at December 31

20.833.238 21.382.638

SIF MOLDOVA SA




65

30. EARNINGS PER SHARE

The earnings per share have been calculated based on the profit attributable to ordinary shareholders and

the average weighted number of ordinary shares:

December 31,

2016 December 31,

2015

Profit attributable to ordinary shareholders 123.298.020 96.781.127

Average weighted number of ordinary shares 1.038.179.176 1.038.179.176

Basic earnings per share

0,119

0,093

Diluted earnings per share equal the basic earnings per share, as the Group has not registered potential

ordinary shares.

31. CONTINGENT COMMITMENTS AND LIABILITIES

(a) Legal proceedings

As at December 31, 2016, the Company was involved in 32 lawsuits as defendant and 103 lawsuits as

plaintiff.

The lawsuits in which the Company acts as either defendant or plaintiff and whose object influence the

Company’s patrimony are registered in accounting.

Out of the 103 pending lawsuits in which the Company acts as plaintiff, 65 files relate to AAAS disputes.

For the amounts claimed by the Company and obtained by final and irrevocable court decisions, the

Company registered in accounting AAAS receivables – for a part of which the enforcement proceedings

have been filed.

Out of the 32 files in which the Company is involved as defendant, 15 files have been opened by AAAS

further to the enforcements executed by SIF Moldova.

The lawsuits filed by AAAS against the enforcements executed by the Company are detailed below:

Total contingencies at the beginning of the period RON 20.065.528

Disputes initiated in 2016 RON 4.391.336

Court rulings in favor of SIF RON 13.332.558

Contingent liabilities as at 31.12.2016 RON 11.124.306

Out of the total contingent assets registered as at December 31, 2016 in amount of RON 23.474.435,

RON 7.981.037 represents the counter value of the agreement for the takeover of litigating rights

concluded between Textila Oltul and SIF Moldova, RON 3.644.554 represents the counter value of shares

and interest owed by Vastex after SIF Moldova’s withdrawal from the shareholding, and RON 634.672

represents amounts claimed by SIF Moldova in lawsuits against AAAS, having as their object the

recovery of trial expenses and damages claimed in connection with amounts obtained in lawsuits.

Amounts representing contingent assets will be registered in the balance sheet when a final and

irrevocable court decision is obtained or when they are received.

SIF MOLDOVA SA




66

31. CONTINGENT COMMITMENTS AND LIABILITIES (continued)

(b) Environment contingencies

Environment regulations are still developing in Romania, and the Company has not registered any

liabilities as at December 31, 2016 and December 31, 2015 for any expected costs, including legal and

consulting fees, site surveys, the design and implementation of recovery plans, related to environmental

matters.

The Company’s management does not deem significant the expenses with any environmental matters.

(c) Transfer pricing

The Romanian tax legislation has been providing rules on transfer pricing between affiliates ever since

2000. The current legislative framework defines the principle of “market value” for transactions between

affiliates as well as the methods of determining transfer prices. Thus, it is probable that the tax authorities

should conduct verifications of the transfer pricing to verify that the tax result and/or customs value of

imported goods is not distorted by the effect of the prices practiced in the relations with affiliates. The

Group cannot measure the result of such verifications.

(d) Other contingent commitments and liabilities

As at December 31, 2016, subsidiary Mecanica is involved in 52 lawsuits as plaintiff for the receivables

not received, for which is established impairment allowances of 100%, namely RON 400.140 and 91

lawsuits in which it acts as defendant (of which 90 lawsuits related to labor disputes). The Company

established an allowance of RON 7.100 for the lawsuits against MTM Proiect Construct SRL (contract

no. 28/15.05.2014).

32. TRANSACTIONS AND BALANCES WITH RELATED PARTIES

Associates of the Group

The balances and transactions between the Group members were removed in the consolidation process

and are not disclosed in this note.

As at December 31, 2016 and December 31, 2015, the Group has not registered associates.

Key management personnel

December 31, 2016

The members of the Board of Directors of SIF Moldova S.A. are: Ceocea Costel (President and CEO),

Doros Claudiu (Vice-president and Deputy CEO), Catalin Jianu Dan Iancu (Head of Steering Committee)

Horia Ciorcila, Radu Hanga, Octavian Claudiu Radu and Gheorghe Albu.

December 31, 2015

The members of the Board of Directors of SIF Moldova S.A. are: Ceocea Costel (President and CEO),

Doros Claudiu (Vice-president and Deputy CEO), Catalin Jianu Dan Iancu (Head of Steering Committee)

Horia Ciorcila, Radu Hanga, Octavian Claudiu Radu and Gheorghe Albu.

SIF MOLDOVA SA




67

32. TRANSACTIONS AND BALANCES WITH RELATED PARTIES (continued)

The Group has not concluded transactions with affiliates nor has it registered outstanding amounts in

relation to them. The Group has not received or granted guarantees in favor of any related party.

The salaries and allowances paid or payable to the key management personnel as at December 31, 2016

amounted to RON 6.669.225 (December 31, 2015: RON 5.583.484).

Directors received profit-sharing payments in amount of RON 5.329.766 (December 31, 2015: RON

7.114.443).

As at December 31, 2016, the members of the Board of Directors held shares in SIF Moldova in total

amount of 14.059.070 shares accounting for 1,35% of the share capital (as at December 31, 2015 they

held 11.289.727 shares representing 1,09% of the share capital).

33. SUBSEQUENT EVENTS

In January 2017, the voluntary liquidation and de-registration of Opportunity Capital SA (99.99%) were

registered.

Further to such process, SIF Moldova registered ownership interests in Hotel Sport SA.



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Raport al Consiliului de Administratie 30.06bvb.ro/...SIF2-BVB-Raport-CA-Sit-fin-2016-consolidate-auditate-eng.pdf · IFRS = International Financial Reporting Standards ... Administration