Aerostar S.A.

Interim / Quarterly Report • Aug 16, 2019

AEROSTAR S.A. BACĂU INDIVIDUAL FINANCIAL STATEMENTS FOR 30 JUNE 2019

REVIEWED

CONTENT

INDIVIDUAL STATEMENT OF THE FINANCIAL POSITION INDIVIDUAL STATEMENT OF THE PROFIT OR LOSS OTHER ELEMENTS OF THE GLOBAL RESULT INDIVIDUAL STATEMENT OF THE EQUITY'S MODIFICATIONS INDIVIDUAL STATEMENT OF THE CASH FLOWS NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS

AEROSTAR S.A. BACAU INDIVIDUAL STATEMENT OF THE FINANCIAL POSITION ON 30 JUNE 2019 (unless specified otherwise, all amounts are stated in thousand lei)

	Note	30 June 2019	31 December 2018
ASSETS
Non-current assets
Property, plant and equipment	6	142.128	147.763
Intangible assets	5	980	1.043
Investment property	6	7.973	7.930
Long-term financial assets	7	140	140
Total non-current assets		151.221	156.876
Current assets
Inventories	10	92.283	82.368
Trade receivables and other receivables	8;9	63.631	68.376
Cash and cash equivalents	11	178.453	167.545
Total current assets		334.367	318.289
Receivables regarding deferred profit tax	17	11.611	11.132
Prepaid expenses	31	1.074	504
Total assets		498.273	486.801
COMPANY EQUITY AND LIABILITIES
Capital and reserves
Share capital	12	48.729	48.729
Current result	12	28.473	79.921
Result carried-forward	12	58.679	58.324
Other reserves	12	206.632	166.395
Deferred income tax recognized based on own equity	17	(12.681)	(12.195)
Distribution of profit for legal reserve	12	(2.799)	(26.035)
Total company equity	12	327.033	315.139
Subsidies for investments	14	9.065	10.239
Long-term liabilities
Liabilities regarding deferred income tax	17	16.149	16.055
Other long-term liabilities	16	50	45
Total long-term liabilities		16.199	16.100
Long-term provisions	13	97.031	95.796
Current liabilities
Trade liabilities	15	25.495	21.197
Liability with current income tax	23	2.405	2.357
Other current liabilities	16	11.504	9.218
Total current liabilities		39.404	32.772
Short-term provisions	13	9.541	16.755
Total provisions		106.572	112.551
Total liabilities		55.603	48.872
Total company equity, prepaid income, liabilities and		498.273	486.801
provisions

Grigore Filip Doru Damaschin

AEROSTAR S.A. BACĂU INDIVIDUAL STATEMENT OF PROFIT OR LOSS ON 30 JUNE 2019 (unless specified otherwise, all amounts are stated in thousand lei)

	Note	30 June 2019	30 June 2018
Operating income
Income from sales	19	176.779	160.081
Other income	19	1.646	1.266
Income related to the inventories of finished goods and	19
work in progress		8.907	25.186
Income from production of assets	19	520	541
Income from operating subsidies	19	123	8
Total operating income		187.975	187.082
Operating expenses
Material expenses	20	(64.579)	(66.675)
Expenses with employees' benefits	20	(60.660)	(56.552)
Expenses regarding amortization of assets	20	(13.066)	(12.440)
Adjustments regarding currents assets	20	(10.551)	(5.860)
Adjustments regarding provisions	20	5.978	16.820
Expenses regarding external services	20	(12.280)	(13.600)
Other expenses	20	(1.567)	(1.434)
Total operating expenses		(156.725)	(139.741)
Profit/loss from operating activity		31.250	47.341
Financial income	21	5.117	4.579
Financial expenses	22	(2.298)	(2.475)
Financial profit/loss		2.819	2.104
Profit before tax		34.069	49.445
Tax on current and deferred profit	17;23	(5.596)	(3.895)
Net profit of the period		28.473	45.550

Grigore Filip Doru Damaschin

AEROSTAR S.A. BACĂU INDIVIDUAL STATEMENT OF OTHER ELEMENTS OF GLOBAL RESULT ON 30 JUNE 2019 (unless specified otherwise, all amounts are stated in thousand lei)

	30 June 2019	30 June 2018
Net profit of the financial year	28.473	45.550
Deferred income tax recognized on company equity	(130)	(2.235)
Other elements on the global result	(130)	(2.235)
Total global result of the period	28.343	43.315

Grigore Filip Doru Damaschin

AEROSTAR S.A. BACĂU INDIVIDUAL STATEMENT OF THE MODIFICATION OF COMPANY EQUITY FOR THE FINANCIAL YEAR ENDED ON 30 JUNE 2019

			(unless specified otherwise, all amounts are stated in thousand lei)

	Share capital	Reserves	Deferred income tax recognized on equity	Result carried forward	Result of the period	Total equity
Global result
A. Balance on 1 January 2019	48.729	166.396	(12.196)	58.324	53.886*)	315.139
Profitul perioadei					28.473	28.473
Other elements of global result
Deferred income tax recognized on the
account of equity			(485)	355	-	(130)
Distribution of the profit of 2018 on the destinations decided by the
shareholders in OGMS from the 24 April 2019 (Note 12)				53.886	(53.886)	-
Distribution of the profit of the first						-
semester of 2019 for the legal reserves in gross amount		2.799			(2.799)
Total global result relating to the period		2.799	(485)	54.241	(28.212)	28.343
Reserves distributed from the profit of 2018		37.437		(37.437)		-
Dividends related to 2018, paid to the shareholders				(16.449)		(16.449)
Transactions with the shareholders
directly recognized in equity		37.437		(53.886)		(16.449)
B. Balance on 30 June 2019	48.729	206.632	(12.681)	58.679	25.674	327.033
C. Modifications on own equity (NOTE 12)	0	40.236	(485)	355	(28.212)	11.894

* Note:The result of the prior period is 79.921 thousand lei and is influenced by allocation of the profit on the legal reserves in amount of 26.035 thousand lei.

**) The result on 30.06.2019 of 28.473 thousand lei is influenced by the distribution of the profit on legal reserves in the amount of 2.799 thousand lei.

Grigore Filip Doru Damaschin

AEROSTAR S.A. BACĂU INDIVIDUAL STATEMENT OF CASH FLOWS (direct method) FOR THE FINANCIAL YEAR ENDED ON 30 JUNE 2018 (unless specified otherwise, all amounts are stated in thousand lei)

	Note	30 June 2019	30 June 2018
CASH FLOWS FROM OPERATIONS
collected from customers taxes and excises recovered from State Budget		193.291 3.958	158.846 1.272
payments to suppliers and employees		(131.627)	(123.808)
payment of taxes, contributions and dues to		(27.352)	(23.413)
State Budget
payment of profit tax		(6.064)	(3.474)
NET CASH FROM OPERATIONS	27	32.206	9.423
CASH FLOWS FROM INVESTMENTS
interest collected from bank deposits formed		1.877	938
dividends received from subsidiaries		50	90
collected from sales of property, plant and equipment		13	11
interest collected from loans granted		0	2
instalments collected from loans granted		0	3
payments for purchasing property, plant and equipment and intangible assets		(8.248)	(14.329)
NET CASH FROM INVESTMENTS	27	(6.308)	(13.285)
CASH FLOWS FROM FINANCING
ACTIVITIES
dividends paid but unclaimed		99	0
gross dividends paid		(15.437)	(34)
NET CASH FROM FINANCING ACTIVITIES	27	(15.338)	(34)
		10.560	(3.896)
Net increase of cash and cash equivalents
Cash and cash equivalents at the beginning of the period		167.545	163.886
Effect of the exchange rate variation over the	27	348	(52)
cash and cash equivalents
Cash and cash equivalents at the end of the period	11	178.453	159.938

Grigore Filip Doru Damaschin

NOTE 1 - DESCRIPTION OF THE COMPANY

AEROSTAR was established in 1953 and acts in accordance with the Romanian law.

AEROSTAR S.A. operations take place at its registered headquarters located in Bacau, no.9 Condorilor Street, code 600302. According to the Decision of the Board of Directors no.2/14.12.2017, the establishment of a secondary place of business was approved without legal personality (work place) in Iasi, on 25B Aeroportului Street.

The main activity field of AEROSTAR is production.

The main object of activity of the company is "Manufacture of aircraft and spaceships" code 3030.

The company was registered as a shareholding company at the Bacau Trade Register (under number J04/1137/1991), with the current name S.C. "AEROSTAR S.A." and the individual identification code 950531, the European Unique Identifier (EUID) code ROONRC J04/1137/1991.

The Company is listed on the Bucharest Stock Exchange under the ARS code, and the record of its shares and shareholders is kept, as provided by law, by S.C. Depozitarul Central S.A. Bucharest.

During the first semester of 2019, there was no subscription of new shares, nor of any participation certificates, convertible bonds, warranties, options or similar rights.

In terms of accounting regulations, AEROSTAR S.A. is the subsidiary of the company IAROM S.A. and, therefore, the parent company that consolidates the financial statements of the group is S.C. IAROM S.A., with the individual identification code 1555301, having its registered headquarters in Bucharest, 39 Aerogarii Boulevard. The consolidated financial statements for the financial year 2017 were submitted to A.N.A.F. under registration number 150489860/22.08.2018. Copies of the consolidated financial statements can be obtained from the headquarters of the parent company, IAROM S.A. The parent company will prepare and publish a set of consolidated financial statements in accordance with the applicable accounting regulations, for the financial year ended 31.12.2018.

The company has a sole segment of operations in accordance with IFRS 8 and no distinct financial information is available for various components of the entity. The information regarding the sales by categories of products and markets are presented in detail in the Report of the Board of Directors.

The company's policy is focused on maintaining a solid capital basis in order to support the continuous development of the Company and accomplish its strategic objectives.

The company will continue to act firmly so as to ensure the sustainability of its investments and business growth.

The strategy adopted develops the main object of activity of AEROSTAR, so that the aeronautical field represents the major part of the turnover. The general objective is the annual growth of the company's turnover while increasing customer satisfaction. The specific objectives which supports the general objective comprises the continued organic development of the company: the development of the centres of excellence through further modernization, investments and continuous improvement programs and organizational culture development.

The company equity entirely covers the financing needs of production and achievement of the investment volume. Through its dividend policy, the company develops its equity as the sales and investment volume are increasing.

During the first semester of 2019, the company did not use loan capital and neither equity contribution from the shareholders.

NOTE 2 - ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS

2.1. Estimates

The preparation and presentation of the individual financial statements in accordance with IFRS requires the use of estimates, judgements and assumptions affecting the implementation of the accounting policies as well as the reported value of the assets, liabilities, revenues and expenses.

The estimates and judgements are made based on the historic experience as well as on a series of factors considered adequate and reasonable. The accounting estimates and judgements are continuously updated and are based on reasonable expectations with respect to future probable events. The reported accounting values of the assets, the liabilities that cannot be determined or obtained from other sources are based on these estimates considered adequate by the company's management.

Such estimates, as well as the reasoning and assumptions behind them are reviewed on a regular basis and the result thereof is registered in the time period when the estimate was reviewed.

Any change in accounting estimates will be recognized prospectively by its inclusion in the result:

• of the period in which the change occurs if it affects only the respective time period; or

• of the period in which the change occurs and of the subsequent periods, if the change also affects such periods.

The company uses estimates in order to determine:

• the uncertain customers and the adjustments for impairment of related receivables;

• the value of the provisions for risks and expenses to set up at the end of a time period (month, quarter, year) for litigations, for the dismantling of property, plant and equipment, for restructuring, for collateral granted to customers, for obligations towards manpower and other obligations;

• the adjustments for impairment of property, plant and equipment and intangible assets. At the end of each reporting period, the company estimates whether there is any impairment. If such signs are identified, the recoverable amount of the asset is estimated to determine the extent of impairment (if any).

• the lifetimes of property, plant and equipment and intangible fixed assets. The company reviews the estimated periods of use of tangible and intangible fixed assets at least at the end of each financial year to determine the adequacy.

• the inventories of raw materials and materials requiring to set up adjustments for impairment.

• deferred taxes.

Presentation of information

To the extent possible, the company will present the nature and value of a change to an accounting estimate which has an effect in the current/ subsequent period(s).

2.2. Errors

Errors may arise in recognizing, evaluating, presenting or describing the items of the financial statements.

S.C. AEROSTAR S.A. BACAU NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR 30 JUNE 2019

(unless specified otherwise, all amounts are stated in thousand lei)

The company corrects retrospectively the significant errors of the previous period in the first set of financial statements whose publication was approved after discovering them, by:

• restatement of comparative amounts for the prior period in which the error occurred, or

• if the error occurred before the prior period, by restatement of the opening balances of assets, liabilities and equity for the previous presented period.

In the event of an error being identified, the company shall disclose the following information:

• the nature of the error for the prior period;

• the value of the adjustment for each of the previously presented period, to the possible extent:

for each item - row affected from the financial statement;

for the basic result and diluted per share.

• the amount of the correction at the beginning of the first period, previously presented;

• if retrospective reprocessing is impossible for a specific prior period, the circumstances that lead to the existence of such circumstance and a description of how and when such error was corrected.

2.3. Changes in the accounting policies

The change of the accounting policies is only permitted if requested by IFRS or if it results in more relevant or more reliable information with reference to the company operations.

The company modifies an accounting policy only if such change:

• is required by an IFRS or
• results in financial statements that provide reliable and more relevant information with reference to the effects of the transactions, of other events or conditions over the financial performance or cash flows of the entity.

Applying changes in Accounting Policies:

• The entity takes into account a change in the accounting policy that results from the initial implementation of an IFRS in accordance with the specific transitory provisions, if any, of that IFRS; and
• When the entity changes an accounting policy to the initial application of an IFRS that does not include specific transitory provisions.

Presentation of the information

When the initial application of an IFRS has an effect over the current or prior period of time, the company presents, in the explicative notes the following:

• the title of IFRS;
• the nature of the accounting policy change;
• when it is the case, the fact that the change is made as an effect of the transitory dispositions and a description of these transitory provisions;
• for the current period and for each prior period, the amount of adjustments for each affected element from the situation of the financial position, to the extent possible

S.C. AEROSTAR S.A. BACAU NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR 30 JUNE 2019

(unless specified otherwise, all amounts are stated in thousand lei)

When it is impossible to determine the specific effects for one or more accounting prior periods, the Company will apply the new accounting policy of assets and liabilities for the first period for which retrospective application is possible, that may also be the current period.

When a voluntary change of the accounting policy has an effect over the current or prior period, the company presents in the explicative notes:

• the nature of the change of accounting policy;

• the reasons for which the application of the new accounting policy offers more reliable and relevant information;

• for the current period and for each prior period, the amount of the adjustments for each affected item from the financial position, to the extent possible.

NOTE 3 - ACCOUNTING AND EVALUATION PRINCIPLES

3.1. Basis for the preparation and presentation of financial statements

The individual financial statements of AEROSTAR SA are prepared in accordance with the provisions of:

• the International Financial Reporting Standards (IFRS) adopted by the European Union:
• Accounting Law no. 82/1991, republished, as subsequently amended and supplemented;
• O.M.F.P. no. 881/1991 regarding the appliance by the commercial companies whose real estates are admitted at trading on a regulated market of the International Financial Reporting Standards;
• O.M.F.P. no. 2.844/2016 on the approval of the accounting Regulations compliant with the International Financial Reporting Standards;
• O.M.F.P. no. 2.861/2009 for the approval of the Norms regarding the organization and execution of the inventories of elements such as assets, debts and own capital;
• O.M.F.P. nr. 1.826/2003 on the approval of the Explanatory Memorandum regarding some measures of organization and management of the business accounting;
• O.M.F.P. nr. 2.634/2015 regarding the financial accounting documents, including subsequent amendments and additions.

The accounting is kept in Romanian and in the national currency.

The accounting for transactions in foreign currency is carried out both in national currency and in foreign currency.

The financial year is the calendar year.

The financial statements are prepared and reported in thousand lei and all values are rounded to the nearest thousand lei. Due to rounding, the numbers presented do not always accurately reflect the totals provided, and the percentages do not accurately reflect absolute figures.

The financial statements are prepared based on historical cost.

The financial statements are presented in accordance with IAS 1 "Presentation of Financial Statements". The Company has opted for a presentation by nature and liquidity in the statement of financial position and a presentation of income and expenses by nature in the statement of profit or loss, considering that these methods offer information that is relevant to the Company's situation.

3.2. Applied Accounting Policies

Aerostar SA describes the accounting policies applied in each of the notes to the individual financial statements and avoids repeating the text of the standard, unless it is considered relevant to understanding the content of the note.

The most significant accounting policies are presented below:

Accounting Policies regarding property, plant and equipment

The Company has chosen the cost-based model as accounting policy. After recognition as an asset, the property, plant and equipment are accounted at their cost less aggregate impairment and any aggregate impairment losses.

The depreciated cost is allocated systematically over the useful life of the asset and represents the cost of the asset less the residual value.

Taking into account the specific activity and the types of property, plant and equipment in the patrimony of the company, it was considered that the residual values of the property, plant and

equipment are insignificant. Practically, the residual value was calculated at the level of metal waste that may be valued after deduction of dismantling, disassembly and sales expenses.

The impairment methods and useful life are reviewed at least at the end of each financial year and are appropriately adjusted. The useful lifetimes are determined by the commission made up of company's specialists. Any changes are accounted prospectively.

Subsequent expenditures related to property, plant and equipment are added to the net value of the good, when:

• they have as an effect the improvement of the initial technical parameters;
• are the sources of future economic benefits materialized by cash-flows that are supplementary to those initially estimated; and
• can be reliably assessed.

The benefits are realized directly through the increase of revenues and indirectly through reducing maintenance and operating expenses.

All other repair and maintenance expenses performed to ensure the continued use of the property, plant and equipment are recognized in profit or loss when they are carried out. These are performed in order to keep the initial technical parameters.

The spare parts are generally accounted for as inventories and recognized as expense when consumed. If the spare parts and service equipment, with significant values, may only be used in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment if the initial acquisition cost (upon commissioning) of the replaced part can be determined.

To decide whether the recognition is done separately, on separate components, each case is analysed using professional reasoning.

The property, plant and equipment to be used in production or in administrative activities are presented in the situation of the financial position of cost, less any loss accumulated from impairment. Such assets are classified in the respective asset classes when they are completed and ready for use in the manner desired by the management, for the intended purpose.

The management of the company has set an amount for the capitalization of assets at 2.500 lei. All purchases below this amount will be considered as expenses of the period.

Exceptions: Computers are considered to be impaired property, plant and equipment, irrespective of the amount of inventory inflow and will depreciate over expected useful life set by the receiving department. Also, work tools and devices are also accounted for as inventories and recognized as expenses of the period when consumed, irrespective of their initial value, taking into account that they have a useful lifetime less than a year, as well as their degree of specialization (intended to be used for a particular type of product/ service).

In case of internally generated intangible assets, the phases of the production are clearly separated, namely:

• The research phase. The research costs are treated as expenses of the period

• The development phase. The development costs are registered as an intangible asset, if the following conditions are demonstrated:

• the technical feasibility of completing the asset, so that it is available for use or sell;

• the availability of adequate resources financial, human, financial to complete the development;
• the intention to complete and use or sell the intangible asset;
• the ability to use or sell the asset;
• how the asset will generate future economic value;
• the ability to assess costs.

If the company cannot distinguish between the research phase and the development phase of an internal project to create an intangible asset, the company treats the costs of the project as being exclusively incurred during the research phase.

The company has chosen as accounting policy the cost model that requires that the intangible assets to be valued at their net asset value, equal to their cost, except the accumulated impairment and any impairment losses, for those assets.

An investment property is initially valued according to its cost, including any other directly attributable expenses. After the initial recognition, the company has opted for the cost model for all its investments property in accordance with the provisions of IAS 16 for that model.

The transfers to and from the investment property category are made if and only if there is a change in their use.

The transfers between categories do not change the accounting value of transferred property and do not change the cost of that property for the purpose of evaluation or presenting the information. The investment property is amortized according to the same rules as for the property, plant and equipment.

In the category of financial assets, are highlighted:

• Shares held in affiliated companies.
• Other property, plant and equipment.
• Long-term loans as well as interest on them. In this category are included the amounts granted to third parties based on interest-rate contracts, according to the law.
• Other fixed liabilities as well as interests related to them. This category includes collateral, deposits and bills placed with third parties, receivables related to financial leasing contracts.

The long-term financial assets recognized as an asset are measured at the cost of acquisition or at the amount set in their acquisition contract.

The long-term financial assets are presented in the statement of the financial position at the incoming value, less any recognized impairment losses.

Accounting policies on inventory items

The registration of inventories is recorded at the time of the transfer of risks and benefits.

The calculations of those inventories that are not usually fungible and of those goods or services, products are determined by specific identification of their individual costs.

At the inventory outflow and of those active fungible, those are assessed and recorded in the accounting by applying the FIFO method.

Periodically, the management of the company approves the level of the normal technological losses.

The inventory is kept according to quantity and value, by applying the permanent inventory method.

The value adjustments are made for the current assets of the inventory, upon each reporting period, based on the age of inventories, of the resolutions given by the inventory commissions and/ or by the management of the business modules, for the presentation of assets at the lowest value between cost and net achievable value.

Accounting policies on company's liabilities

Company's liabilities are highlighted in the accounting based on third parties accounts. Suppliers and other liabilities accounts are kept by category, as well as by each individual or legal entity.

Income tax to be paid is recognized as a liability within the limit of the unpaid amount.

The registration in the accounting of the excise duties and special founds included in prices or tariffs is made based on the corresponding liabilities accounts, without transferring through the income and expenses accounts.

Operations that cannot be separately recorded in the appropriate accounts and for which further clarification is required are recorded in a separate account 473 Accounts settled from operations under clarification.

Foreign currency liabilities are recorded in the accounting both in RON as well as in foreign currency.

A liability is classified as a short-term liability, also called current liability when:

• it is expected to be settled in the normal course of the company's operating cycle, or

• it is due within 12 months from the balance sheet's date.

All other liabilities are classified as long-term liabilities.

Liabilities that are payable over a term longer than 12 months are long-term liabilities.

Are also considered to be interest-bearing long-term liabilities even when they are due within 12 months of the date of the financial statements, if:

a) the initial term was for a period longer than 12 months; and

b) there is a refinancing or rescheduling agreement that is concluded before the date of the financial statements.

Accounting policies on company's receivables

Receivables include:

• trade receivables, which are amounts owed by customers for goods sold or services rendered in the normal course of the activity;
• commercial revenue (effects) to be collected, third party instruments;
• amounts owed by the employees or affiliated companies
• advance payments to the suppliers of property, plant and equipment, of goods and services; - receivables related to manpower and state budget.

Receivables are accounted for under the accrual basis, according to the legal or contractual provisions.

Customer accounting is kept on categories (internal customers for services and products, as well as external customers for services and products) and on each natural or legal person.

Receivables settled in foreign currency or in RON according to the foreign exchange rate:

Receivables in foreign currencies, which are the result of the company's transaction, are recorded both in RON, as well as in foreign currency.

The transactions in foreign currency are initially recorded at the foreign exchange rate, communicated by the National Bank of Romania, from the date of the operation.

Impairment of receivables with prescribed collection deadlines is performed only after all legal steps have been taken, for their settlement.

The uncertain receivables are recorded separately in the account 4118 Uncertain customers when the payment term stipulated in the contract has exceeded by more than 30 days or there is a dispute with the customer.

In the annual financial statements, receivables are valued and presented in the value which is likely to receive.

When a receivable from a customer was not collected in full at the payment term stipulated in the contract, there are recorded impairment adjustments to the terms and percentages approved by the Board of Directors in the Accounting Policy Manual.

Accounting Policies for Revenue Recognition

In the revenue-related category are included both the revenues received or to be received in own name, as well as gains from any source.

Revenues are classified as follows:

• revenues from operations;
• financial revenues.

The revenue is recognized on an accrual basis.

The revenue is measured at the fair value of the amount received or to be received. The sales revenue is diminished for returns, commercial rebates and other similar discounts.

Revenues from operations include:

• revenues from sales (goods, services, commodities, residual products);
• revenues related to the cost of product inventories;
• revenues from the production of property, plant and equipment;
• revenues from changes in adjustments of assets respectively from impairments or reversals of provisions;
• other operating revenues.

Revenues from the sale of goods are recorded when all of the following conditions are met:

• the company has transferred to the buyer the control on the goods in question;
• the company does not retain the continuous managerial involvement to the level usually associated with the ownership or the actual control over the sold goods;
• the amount of revenue can be accurately assessed;
• it is likely that the economic benefits associated with the transaction will be directed to the entity;
• the costs incurred or to be incurred in connection with the transaction can be precisely measured.

Specifically, the income from the sale of goods are recognized when the company transferred to the buyer the control on the goods in question.

Revenues from rendering of services

The service contracts in the company's portfolio are usually contracts with execution at a specific time, which coincides with the delivery of goods subject to the rendering of services.

As a result, the revenues from the rendering of services are registered when the following conditions are met:

• the company had transferred to the customer the control over the services rendered;
• the amount of the revenue can be accurately measured;
• it is probable that the economic benefits associated with the transaction will be directed to the entity;

If the result cannot be estimated, the revenue is recognized up to the recoverable amount.

The rental revenues from real estate investments are recognized in the income statement on a straight-line basis over the period of the lease.

The financial revenues include interest revenue, foreign exchange revenue, dividend revenue and other financial revenue.

The interest revenues are recognized in the income statement on the basis of accrual accounting using the effective interest method. The interest revenues generated by a financial asset are recognized when it is probable that the company will obtain an economic benefit and when that revenue can be measured accurately.

The dividend revenues generated by investments are recognized when the shareholder's right to receive payment has been determined. The company records dividend revenues at the gross amount that includes dividend tax (when it is the case), which is recognized as income tax expense.

Accounting policies for provisions

Provisions are recognized when the company has a present obligation (legal or implicit) as a result of a past event, it is probable that the company will be required to settle the obligation and a reliable estimate of the amount of the obligation.

The value recognized as provision is the best estimation that can be made regarding the amount required to settle the current obligation at the end of the reporting period, taking into account the risks and uncertainties around the obligation.

The accounting for provisions is kept on the basis of the nature, the purpose or the object for which they were set up.

Provisions for collateral

The company makes provision for collateral when the products or services covered by the collateral are sold.

The amount of the provision is based on historical or contractual information about the collateral granted and is estimated by the share of all possible results with the probability of the realization of each.

Provisions for Risk and Expense

When identifying risks and expenses that the events that occur or are occurring make them probable and whose object is determined with certainty but whose realization is uncertain, the company hedges these risks by making provisions.

The provisions for risks and expense are constituted for items such as litigations, fines, penalties, compensations, damages and other uncertainties.

Provisions for the decommissioning of property, plant and equipment

When the initial recognition of a property, plant and equipment is estimated, the cost of dismantling, removing the item and restoring the site where it is located, as a consequential cost of using the item over a certain period of time.

These consequential costs are reflected by the constitution of a provision that is recorded in the income statement during the lifetime of the property, plant and equipment, by including it in the impairment expense.

The revision of the estimates for the decommissioning and restoration provision is determined by the annual review of the dismantling costs. The Committee of specialists from the company, appointed by decision, establishes, on a regular basis, whether the initial estimates of dismantling costs are appropriate.

Provisions for the employees' benefits

Are recognised for the benefits of the employees granted in accordance with the applicable Collective Labour Agreement, only if:

• the entity has the legal and constructive obligation to make such payments as an outcome of past events; and
• can be achieved a reliable estimate of the obligation.

The provisions are reanalysed at the end of each reporting period, in order to present the most appropriate current estimation.

Accounting Policies on grants and other non-refundable funds

The subsidies are distinctly reflected:

• government grants;
• non-refundable subsidies in the form of grants;
• other amounts received in the form of grants.

Grants are recognized at their approved value. Grants received as non-monetary assets are recognized at fair value.

Government grants are initially recorded as deferred revenue at fair value when there is reasonable assurance that it will be received and the Company will respect the conditions associated with the grant.

Grants that compensate the Company for the expenditures incurred are systematically recorded in the income statement, in the same periods in which expenses are recorded. Grants that compensate the company for the cost of an asset are recorded on a systematic basis in the income statement over the entire lifetime of the asset.

Grants related to income are recorded on a systematic basis as revenues from the periods corresponding to the related expenditures that these grants are to compensate.

In case that, during a specific period, a grant is received for expenses that have not yet been incurred, the subsidies received do not represent income for that current period. They are recognized in the accrual accounting as advance income and are resumed in the income account as the incurred expenses compensate the surplus.

Accounting policies for the production of goods and services

The accounts management in Aerostar is based on the applicable legal provisions and the manual of procedures and work instructions specific to the management accounting, adapted to the specific activity of the Company.

The management accounting consists of:

• collecting direct, indirect and ancillary costs by their nature;
• indirect cost allocation;
• direct and indirect costs deduction.

The purpose of the management accounting is principally to determine the result on production orders or services and on each organizational structure.

According to the accounts regulations, the following items are recognized in the cost of goods, works and services that are recognized as expenses of the period in which they occurred:

a) material losses, labour or other production costs related to scrap and under capacity load work costs;

b) general administration expenses.

The calculation method used in Aerostar is the method based on orders.

This method is suitable for individual and serial production. The object of record and calculate the cost within this method is the order launched for a certain quantity (batch) of products.

The production costs are collected directly on each order (those that are direct) or by distribution (the indirect ones).

The actual cost per unitary product are calculated upon completion of the order by dividing the production costs collected from the respective order to the quantity of products produced on the order.

The orders are launched at a planned price, as applicable.

In case of orders related to export sales the price is expressed in RON by converting the currency to the budgeted foreign exchange rate.

In applying the accounting policies, the Company issues procedures, instructions and work dispositions approved by the executive management.

NOTE 4 – TRANSACTIONS IN FOREIGN CURRENCIES

AEROSTAR considers the Romanian LEU as the functional currency and the financial statements are presented in thousand LEI.

The currency transactions are recorded at the exchange rate of the functional currency at the date of the transaction.

At the end of the Financial Position Statement, the assets and financial liabilities denominated in foreign currency are evaluated in the functional currency using the exchange rate, communicated by the Romanian National Bank, valid on that date:

Currency	30.06.2019
EUR (Euro)	4.7351
USD (American Dollar)	4.1587
GBP (British pound)	5.2735

The favourable and unfavourable exchange rates differences which result from the settlement of the assets and financial liabilities denominated in foreign currency are recognized in the Profit or Loss Statement for the financial year in which they occur.

Considering that 87% from the turnover registered in the reporting period is denominated in USD and EUR, while a significant part of the operating costs is denominated in LEI, the foreign exchange rates variations will affect both its net incomes as well as the financial position as expressed in the functional currency.

In the reporting period the net currency exposure resulted as a difference between the amounts collected from the financial assets and the payment of the financial liabilities denominated in that currency are presented as follows:

Semester I 2019	thousand EUR	thousand MII USD	thousand MII GBP
Collected from financial assets	10.199	26.496	0
Payments of financial liabilities	(5.869)	(9.241)	(278)
Foreign Currency Net Exposure	4.330	17.255	(278)

In the reporting period, the quarterly variation of the foreign exchange rate:

USD/LEU with +2,25% in the first quarter 2019 in comparison with 31.12.2018 and with (0,40%) in the second qurter 2019 in comparison with 31.03.2019

and

EUR/LEU with +1.50% in the first quarter 2019 in comparison with 31.12.2018 and with (0,30%) second quarter 2019 in comparison with 31.03.2019

has determined the registration of a financial profit from favourable exchange rate differences of 865 thousand LEI.

NOTE 5 - INTANGIBLE ASSETS

	30 June 2019				01 January 2019
	Gross values	Depreciation/ Impairment	Net accounting value	Gross value	Depreciation/ Impairment	Net accounting value
Capitalized development costs	19	(19)	0	152	(152)	0
Licences /Trade marks	5.041	(4.279)	762	4.902	(3.926)	976
Other intangible assets	1.664	(1.446)	218	1.413	(1.346)	67
Total	6.724	(5.744)	980	6.467	(5.424)	1.043

Net accounting value

	Balance on 1 January 2019	Increase	Reclassification	Disposals	Depreciation/ Impairment during the period	Balance on 30 June 2019
Capitalized development costs	0	19	0	0	(19)	0
Licenses	976	139	0	0	(353)	762
Other intangible assets	67	252	0	0	(101)	218
Total	1.043	410	0	0	(473)	980

În categoria imobilizările necorporale sunt cuprinse următoarele clase de active de natură şi utilizare similară:

• Cheltuieli de dezvoltare
• Licenţe
• Alte active intangibile

În cadrul altor active intangibile sunt înregistrate programele informatice.

Duratele de viaţă utilă estimate pentru imobilizările necorporale sunt determinate în ani. Duratele de viaţă utilă sunt stabilite de comisii formate din specialiştii societăţii.

Duratele fiscale de funcţionare ale imobilizarilor necorporale sunt reglementate de legislaţia fiscală pentru active.

Cheltuielile cu amortizarea sunt recunoscute în contul de profit şi pierdere utilizând metoda liniară de calcul.

Imobilizările necorporale aflate în sold la 30.06.2019 nu sunt depreciate şi nu s-au constituit ajustări pentru deprecierea acestora.

La determinarea valorii contabile brute a imobilizărilor necorporale societatea foloseşte metoda costului istoric.

Valoarea licenţelor software amortizate complet la data de 30 iunie 2019 şi care sunt încă utilizate este de 2.030 mii lei.

Toate imobilizările necorporale aflate în sold la 30 iunie 2019 sunt proprietatea AEROSTAR.

Creşterile de valori ale imobilizărilor necorporale au fost de 410 mii lei, din care:

• dezvoltarea sistemului informatic de gestionare a producţiei: 252 mii lei
• achiziţia de licenţe software 139 mii lei.

În perioada de raportare nu au fost intrari de licenţe generate intern şi nici dobândite prin combinări de întreprinderi.

În perioada de raportare nu au fost active clasificate drept deţinute în vederea vânzării în conformitate cu IFRS 5.

S.C. AEROSTAR S.A. BACAU NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR 30 JUNE 2019

(unless specified otherwise, all amounts are stated in thousand lei)

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

The Property, plant and equipment on 30 June 2019 and 01 January 2019 comprise the following:

	30 Iunie 2019			01 Ianuarie 2019
	Gross values	Depreciation	Net accounting value	Gross values	Depreciation	Net accounting value
Land	28.401	0	28.401	28.401	0	28.401
Constructions	55.954	(19.239)	36.715	55.736	(16.922)	38.814
Technological equipment and transport	153.577	(80.441)	73.136	149.601	(70.623)	78.978
Other equipment and office equipment	1.563	(544)	1.019	1.348	(466)	882
Investment property	10.629	(2.656)	7.973	10.260	(2.330)	7.930
Property, plant and equipment under construction	2.857	0	2.857	687	-	687
Total	252.981	(102.880)	150.101	246.033	(90.341)	155.692

Net accounting value

	Balanta la 1 Ianuarie 2019	Cresteri	Reclasificari	Cedari/Transfer	Amortizare	Balanta la 30 Iunie 2019
Land	28.401	0	0	0	0	28.401
Constructions	38.814	326	(108)	0	(2.317)	36.715
Technological equipment and vehicles	78.978	4.030	0	0	(9.872)	73.136
Other equipment and office equipment	882	215	0 24	0	(78)	1.019

S.C. AEROSTAR S.A. BACAU NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR 30 JUNE 2019

(unless specified otherwise, all amounts are stated in thousand lei)

Investment property	7.930	261	108	0	(326)	7.973
Property, plant and equipment under construction	687	7.002	0	(4.832)	0	2.857
Total	155.692	11.834	0	(4.832)	(12.593)	150.101

Property, Plant and Equipment are evaluated at their acquisition or production costs minus cumulative depreciation and the impairment losses.

These items are amortized by the Company using the linear method.

Depreciation expenses are recognised in the profit and loss statement.

The following useful lives are assumed:

- constructions	30-50 years
- technological equipment	4-25 years
- vehicles	4-18 years
- other property, plant and equipment	2-18 years
- investment property	25-50 years

The useful lives are established by committees formed by Company's specialists. The useful lifetimes of the Property, Plant and Equipment were reviewed at September 2018.

The fiscal useful lives of the Property, Plant and Equipment are stipulated by the fiscal legislation on assets.

The company did not purchase assets from business combinations, nor did it classify assets for future sale.

The investment property contains a number of 12 real estate – buildings and related lands which are rented to third parties based on renting contracts.

The value of renting incomes in the first semester of 2019 was of 1.083 thousand lei (first semester of 2018: 989thousand lei).

At the date of transition to IFRS, the Company has estimated and included in the cost of the Property, Plant and Equipment the costs estimated with their decommissioning at the end of a useful lifetime.

These costs were reflected in the set-up of a provision, which is recorded in the profit and loss account throughout the lifetime of the Property, Plant and Equipment, by inclusion in the depreciation expense.

The depreciation of an asset begins when the asset is available for use (i.e. when the asset is in the location and condition necessary to operate as wanted by the management) and ends on the day when the asset is reclassified in another category or when it is derecognized.

The depreciation does not end when the asset is not in use.

The land and buildings are separable assets, and their accounts are kept separately, even when they are acquired together.

The land has an unlimited useful lifetime and, therefore, is not submitted to amortization.

In accordance with the provisions of IAS 36 - Impairment of assets, the company proceeded to the identification of any signs of impairment of Property, Plant and Equipment, taking into consideration external and internal sources of information.

External source of information

Market value (market capitalization) has registered a growth of 4 % on 30 June 2019 (769.001 thousand lei) compared to 31 December 2018 (738.546 thousand lei).

The indicator which offers information regarding the interest from the investors in the company listed on the capital market is the market capitalization reported to company equity (MBR).

AEROSTAR continues to register a very good value of the indicator, obtained by the top-rated companies on the capital market which present interest from the investors.

MBR-Market indicator to book ratio	30.06.2019	31.12.2018
Stock exchange capitalization/ company equity	2,4	2,3

Internal source of information:

• the economic performance of the assets is good, all the immobilizations in operation bring benefits to the company

• in the reporting period no changes occurred with adverse effects on the extent and manner in which the assets are used. The rotation of immobilizations (Turnover/Property, Plant and Equipment – indicator monthly monitored) has been at 1,17 rotations, slighty over the level registered in the similar prior period (1,04 rotations).

In conclusion, the Property, Plant and Equipment in the balance sheet on 30.06.2019 are not depreciated and no significant depreciation indicators were identified.

The gross accounting value of the fully depreciated Property, Plant and Equipment which were still in operation on 30 June 2019 is of 7.768 thousand lei.

On 30.06.2019 no mortgages were set on tangible real estate assets in the property of AEROSTAR S.A.

Increases in gross values of the Property, Plant and Equipment, achieved by:	11.834
 acquisition on technical equipment, hardware equipment, equipment of measuring
and control, modernization of buildings	4.832
 investments performed in the first semester of 2019	7.002
Reclassifications, through:
 transferul unei cladiri din imobilizari corporale in investitii imobiliare	108
Decreases in gross values of Property, Plant and Equipment, achieved by:	4.832
 the transfer of the immobilizations in progress under Property, Plant and	4.832
Equipment following their placing in service

S.C. AEROSTAR S.A. BACAU NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR 30 JUNE 2019

(unless specified otherwise, all amounts are stated in thousand lei)

NOTE 7- FINANCIAL ASSETS

	Shares held in affiliated entities	Other immobilized securities	Other receivables - supply bonds	Total
On 1 January 2019	14	92	34	140
Increases/Decreases	-	-	-	-
On 30 June 2019	14	92	34	140

Details of the entity's investments on 30.06.2019 in other companies are the following:

		No. of	Voting	Value of shares held		Financial Information	related to 2018
Subsidiary name/ Registered headquarter	CAEN code	shares/ shares issued	rights (%) held	by Aerostar (thousand lei)	Company's Share capital	Reserve	Net profit	Nominal value/ share	Net asset/ share
Airpro Consult SRL Bacau Condorilor Street no.9	- main activity according to CAEN code 7820	100	100%	10	10	71	66	0,10	1,5
Foar SRL Bacau Condorilor Street no.9	- main activity according to CAEN code 7739	800	51%	4	8	1.739	171	0,01	2,4
ATF S.A Bacau Condorilor Street no.9	- main activity according to CAEN code 2822	20.000	45,75%	92	200	38	1	0,01	0,014
TOTAL	x	x	x	106	218	1.848	238	x	x

AEROSTAR's share contribution in these companies is registered based on cost.

In the first semester of 2019, the company recorded no modifications i.e. no increases/decreases as to the shareholding percentage, maintaining the same influence as in 2018.

All companies in which AEROSTAR holds shares are registered in Romania.

NOTE 8 - TRADE RECEIVABLES

	30 June 2019	31 December 2018
TRADE RECEIVABLES OF WHICH:
Customers, of which:	45.934	54.909
Domestic customers	5.134	9.735
Foreign customers	40.800	45.174
Uncertain customers	1.733	32
Adjustments for impairment of receivables - customers	(871)	(16)
Suppliers – debtors	13.388	10.559
Effects to receive from customers	-	161
TOTAL TRADE RECEIVABLES	60.184	65.645

In accordance with the provisions from the Accounting Policies Manual, to cover the non-recovery risk of the amounts that represent the uncertain trade receivables, the company registers adjustments for the depreciation of the uncertain customers, as follows:

• in percentage of 50% from the from the value of the receivables not collected on time if the due date is between 30 days and 180 days. On June 2019, the company has registered adjustments for depreciation of this nature in value of 861 thousand lei;
• in percentage of 100% from the value of receivables uncollected on time, if the period of delay is bigger than 180 days. On 30 June 2019, the company has registered adjustments for depreciation of this nature in the amount of 10 thousand lei.

When determining the recoverability of a trade receivable, the changes considered were those occurred in the customer's credit rating from the time when the credit was granted till the time of reporting.

Debtors-suppliers have a discount limit in the year 2019.

The receivables expressed in foreign currency were evaluated at the market exchange rate communicated by the National Bank of Romania to close the month of June 2019.

The favourable and unfavourable exchange rates differences between the exchange market rate, to which are accounted the receivables in currency, and the market exchange rate communicated by the National Bank of Romania available for the end of June 2019, were recorded in the related income or expense account.

NOTE 9 - OTHER RECEIVABLES

	30 June 2019	31 December 2018
Receivables relating to manpower and similar accounts	44	8
Receivables related to the budget of social insurance and the state budget, of which:	3.125	2.416
VAT to be recovered 	1923	958
Non-chargeable VAT 	61	49
amounts to be recovered from the National  Health System (allowances on medical leaves)	857	488
- Excise duty to be recovered related to the fuel used	218	826
Operating subsidies to be collected 	44	72
Interest to receive from bank deposits	96	156
Diverse debtors	223	252
Adjustments for the depreciation of the receivables – diverse debtors	(128)	(102)
Other receivables	87	1
TOTAL, OTHER RECEIVABLES	3.447	2.731

To cover the risk of non-recovery of the amounts representing certain categories of receivables– diverse debtors, the company registered adjustments for impairment of diverse debtors in amount of 128 thousand lei.

NOTE 10 – INVENTORIES	30 June 2019	31 December 2018
of which:
Raw materials*	26.897	18.446
Consumables**	34.587	32.621
Other materials	178	78
Semi-finished/ Forgings	1.907	1.907
Packaging	1	19
Finished products	19.025	25.624
Products and services in progress	39.131	23.446
Goods	-	-
Adjustments for impairment of inventories	(29.443)	(19.774)
TOTAL	92.283	82.367
Gross value of the inventory (unadjusted)	121.726	102.141

Note:

*The raw materials directly participate to the manufacturing of the products and are found in the integrally or semi-finished product, either in their initial state, or transformed (bars, pipes, tables, profiles, wiring etc.);

**The consumables participate or help in the process of manufacturing or operating, without being found usually, in the finished product (auxiliary materials, exchange parts, tools, jigs, fixtures, tooling and other consumables).

The inventories are assessed at the lowest value between the cost and the net achievable value.

The net achievable value is the estimated sale price for inventories minus all estimated costs for completion and the estimated costs required for the sale.

The cost of inventories includes: acquisition costs, conversion costs as well as other costs incurred to bring inventories to the state and in the place where they are currently found.

Adjustments of their value are made regularly based on the findings of the inventory commissions and/ or the managers of the production modules in order to present them at the lowest value between the cost and the net achievable value.

Within the Company, the goods which are considered to be depreciated are those that are older than the storage period established by internal decision of the Board of Directors.

For the production inventories in progress, related to the products and services which are not contracted, are constituted adjustments. Their amount on 30.06.2019 is of 7.491 thousand lei.

The total value of inventories recognized as an expense during the period is of 58.234 thousand lei.

AEROSTAR holds inventories of finished products (buffer) at the levels contractually agreed with the customers.

AEROSTAR has no pledged inventories.

NOTE 11 - CASH AND CASH EQUIVALENTS

At the end of the reporting period the cash and cash equivalents consisted in:

	30.06.2019	30.06.2018
Cash	4.221	10.945
Bank deposits	174.225	148.993
Exchange bills and trade effects to collect	7	0
Cash and cash equivalents in the cash-flow	178.453	159.938
statement

The cash contains the current cash available cashier's desk and in banks;

The cash equivalents comprise:

• short-terms bank deposits
• exchange bills and trade effects (promissory notes) submitted to banks for collection

The treasury balance is influenced by the prepaid amounts received from the customers.

There are no restrictions on the cash accounts in the banks.

The value of bank Credit facilities, usable as an overdraft, available for future operations, is of 2.500 thousand USD (10.397 thousand lei).

NOTE 12 – COMPANY EQUITY

The company equity on 30 June 2019 is 327.033 thousand lei. The net increase of the equity in the first semester of 2019 in comparison with 2018 was 11.894 thousand lei.

The modifications of the main elements of the company equity incurred in the first semester of 2019 in comparison with 2018 are the following:

The share capital remained unchanged

On 30 June 2019, the share capital of AEROSTAR SA is 48.728.784 lei, divided in 152.277.450 shares having each a nominal value of 0,32 lei.

• The reserves increased with 40.236 thousand lei on the account of:
• o the distribution to reserves of the reinvested profit related to the first semester 2019 in gross amount of 2.799 thousand lei
• o the distribution for reserves of the amount of 37.437 thousanf lei from the profit related to the financial year 2018
• Other capital elements have increased with the amount of 485 thousand lei on the account of the deferred income tax recognized in company equity.

Result carried-forward:

- has increased with:

• o 355 thousand lei on the account of the deferred profit tax recognized on the account of the company equity
• o 53.886 thousand lei representing the profit to be distributed related to the financial year 2018, registered in the result carried forward until its distribution on the categories approved by the shareholders in the ordinary general meeting from 24 April 2019.
• - and has decreased with the profit of the financial year 2018, distributed as follows:
• o to reserves in the amount of 37.437 thousand lei;
• o for dividends in the amount of 16.449 thousand lei.

Soldul contului de rezultat reportat la 30 iunie 2019, este de 58.679 mii lei, compus din:

• rezultatul reportat provenit din utilizarea, la data trecerii la aplicarea IFRS, a valorii juste drept cost prezumat = 34.914 mii lei;

• rezultatul reportat reprezentând câştigul realizat din rezerve din reevaluare, capitalizat pe măsura amortizării imobilizărilor corporale şi necorporale = 23.765 mii lei;

The balance of the result carried-forward account on 30 June 2019, is of 58.679 thousand lei, comprising:

• the result carried forward coming from the use, on the date of the transition to IFRS, of the fair value as presumed cost = 34.559 thousand lei;

• the result carried-forward representing a surplus obtained from re-evaluation reserves, capitalized as the property, plant and equipment and intangible assets were amortized = 23.765 thousand lei;

The result of the period was of 28.473 thousand lei.

The amount of 28.212 thousand lei which influenced the result line of the period from the company equity at 30.06.2019 represents the arithmetical difference between the result of the period (28.473 thousand lei) and the distributions of the period (56.685 thousand lei).

NOTE 13 - PROVISIONS

	31 December 2018	Increases/ Set-up/ Reclassification of provisions	Reductions/ Resumed/ Reclassification of provisions	Differences from revaluation	30 June 2019
Total provisions	112.551	4.338	(11.480)	1.163	106.572
Provisions for bonds granted to customers	39.584	4.338	(7.002)	458	37.378
Provisions for
decommissioning property,	16.115	0	0	0	16.115
plant and equipment
Provisions for the employee benefits	4.438	0	(4.237)	0	201
Provisions for litigations	5.123	0	(9)	71	5.185
Other provisions	47.291	0	(232)	634	47.693
- of which:
Long-term provisions	95.796	1.944	(1.838)	1.129	97.031
Provisions for bonds granted to customers	27.267	1.944	(1.597)	424	28.038
Provisions for decommissioning property,	16.115	0	0	0	16.115
plant and equipment
Provisions for litigations	5.123	0	(9)	71	5.185
Other provisions	47.291	0	(232)	634	47.693
Short-term provisions	16.755	2.394	(9.642)	34	9.541
Provisions for bonds granted to customers	12.317	2.394	(5.405)	34	9.340
Provisions for employee benefits	4.438	0	(4.237)	0	201

Provisions set up for bonds granted to customers

Provisions set up for bonds granted to customers are made to cover the non-conformance risks of the products sold and the services performed, in accordance with the contractual provisions.

Provisions for decommissioning the Property, Plant and Equipment

Provision for decommissioning of property, especially buildings, are formed to cover the decommissioning costs, of removal of the elements and restoration of the locations in which are placed and included in their cost. The value was estimated using an update annual rate of 4,5%.

Provisions for benefits granted to employees

The provisions for benefits granted to employees are set for the bonus granted according to the clauses of the applicable Collective Labour Agreement (bonus for the end of the financial year, for the end of the production year, for performance) and for the annual holidays leave not taken by the employees in the previous year. Due to the fact that according to the Collective Labour Agreement, the modalities and criteria of the bonuses shall be negotiated with the Committees of Negotiation

and Tracking, at the end of 2019, the value of the provision for these bonuses cannot be estimated on 30.06.2019. In the balance are found only the provisions related to the annual leaves not taken by the employees in 2018.

Provisions for litigations

Provisions for litigations being in evidence on 30.06.2019 are set for probable indemnities payable by the company to a former employee, or to a commercial partner respectively.

The provisions are reanalysed at the end of each reporting period and are adjusted in order to reflect the best estimation of the probable payments.

Other provisions

In Other provisions category are found the provisions set for:

• covering of risks specific to the aviation industry, such as: risk of hidden deffects, risk of discovering quality incidents which can cause damage.
• coverage of some expenses regarding the Company's obligations towards A.J.O.F.M., based on O.U.G. 95/2002.

NOTE 14 - SUBSIDIES

AEROSTAR recognizes as deferred income the subsidies regarding assets.

	30.06.2019	30.06.2018
Balance on 1 January, from which:	10.239	12.677
Subsidies regarding the assets received	10.214	12.649
Inventory surplus of immobilizations	25	28
Subsidies registered on income corresponding to the calculated amortization	(1.172)	(1.222)
Balance on 30 June, from which:	9.065	11.455
Subsidies regarding the assets received	9.042	11.432
Inventory surplus of immobilizations	23	23

The subsidies related to the non-current assets were received for the implementation of 3 investment projects under 3 non-reimbursable financing agreements:

• 1. Contract no. 210304/22.04.2010: " Extension of the manufacturing and assembly capacities for aerostructures for civil aviation", performed between April 2010 – October 2012, the value of the subsidy received from the Ministry of Economy, Trade and Business Environment (MECMA) being of 5.468 thousand lei.
• 1. Contract no. 229226/14.06.2012: 'Set-up of a new manufacturing capacity for diversifying production and export growth', performed between June 2012 and May 2014, the value of the subsidy received from the Ministry of Economy, Trade and Business Environment (MECMA) being of 6.011 thousand lei;
• 1. Contract no. 5IM/013/24.03.2015: "Consolidarea şi dezvoltarea durabilă a sectoarelor de prelucrări mecanice şi vopsitorie prin investiţii performante", derulat în perioada martie – decembrie 2015, valoarea subvenţiei primite de la Ministerul Fondurilor Europene (MFE) fiind de 8.299 thousand lei;

All investment projects in immobilized assets were implemented and finalized in accordance with the contractual provisions undertaken.

The balance registered on 30 June 2019 in amount of 10.239 thousand lei represents the subsidies related to investments in immobilized assets which are to be recorded as income while the calculated amortization is registered as a cost, structured on the 3 contracts as follows:

1. contract no. 210304/22.04.2010: 1.790 thousand lei

2. contract no. 229226/14.06.2012: 2.104 thousand lei

3. contract no. 5IM/013/24.03.2015: 5.148 thousand lei

NOTE 15 - COMMERCIAL DEBTS

	30 June 2019	31 December 2018
Prepaid amounts collected on customers' account	5.072	2.264
Domestic customers-creditors	102	69
Foreign customers-creditors	4.970	2.195
Supplier, of which:	20.418	18.933
Domestic suppliers	6.818	5.545
Foreign suppliers	10.929	10.023
Suppliers-invoices not arrived	747	1.956
Suppliers of non-current assets	1.924	1.409
Commercial effects to pay	5	-
Total commercial debts	25.495	21.197

The payments in advance collected from the customers are for maintenance and aircraft work, with settlement date in 2019.

For the debts registered no mortgages were established.

The favourable or unfavourable exchange rate differences between the market exchange rate to which the debts in foreign currencies are registered and the market exchange rate communicated by the National Bank of Romania for closing the month of June 2019, were registered in the corresponding accounts of revenues or expenses.

NOTE 16 - OTHER LIABILITIES

	30 June 2019	31 December 2018
Other current liabilities, of which:	11.504	9.218
 Liabilities related to manpower and similar accounts	3.625	2.566
 Liabilities related to social security budget and state budget, of which:	4.357	4.709
-VAT payable	-	1.165
- social insurance	3.214	2.604
- Labour safety contribution	205	166
- tax on salary type revenues	623	488
- contribution for disabled people, unemployed	137	128
 Other liabilities, of which:	3.522	1.943
– dividends	2.762	1.711
– diverse creditors	671	147
Other long-term liabilities	50	45

Dividendele aflate în sold la 30 iunie 2019, în sumă de 2.762 mii lei reprezintă:

• 1.052 thousand lei, amount to be paid by AEROSTAR for the dividends related to 2018 to the shareholders who did not present at the offices of the paying agent CEC Bank S.A. (paying agent designated by AEROSTAR);
• 642 thousand lei, amount to be paid by AEROSTAR for the dividends from 2017 to the shareholders who did not present at the offices of the paying agent CEC Bank S.A. (paying agent designated by AEROSTAR);
• 565 thousand lei, amount to be paid by AEROSTAR for the dividends from 2016 to the shareholders who did not present at the offices of the paying agent CEC Bank S.A. (paying agent designated by AEROSTAR);
• 503 thousand lei, amount to be paid by AEROSTAR for the dividends from 2015 to the shareholders who did not present at the offices of the paying agent CEC Bank S.A. (the paying agent designated by AEROSTAR).

NOTE 17 - THE DEFERRED PROFIT TAX

The deferred tax is determined for the temporary differences which occur between the tax base of the assets and liabilities and their accounting basis. The deferred tax is calculated at a tax rate of 16% applicable to the temporary differences when resumed.

The Company estimated and registered liabilities regarding the deferred tax related to non-current assets (which results from differences between accounting and fiscal values, the different useful life, s.o.) and of the reserves and recognized receivables regarding the deferred tax related to the inventories, which were adjusted for depreciation, provisions for customer bonds, provisions for benefits granted to the employees and other provisions.

The structure of deferred income tax registered on 30.06.2019 is:

Liabilities from deferred tax

1. Liabilities related to deferred tax generated by the differences between accounting bases (bigger) and the fiscal ones (smaller) of the non-current assets	2.520
2. Liabilities related to the deferred tax concerning legal reserves	1.559
3. Liabilities on deferred tax related to reserves from the fiscal facility	12.009
4. Liabilities on deferred tax related to the reported result representing a surplus from
revaluation reserves	61
Total liabilities from deferred tax	16.149
Creanţe privind impozitul amânat
1. Receivables on deferred tax related to other provisions set in 2010	888
2. Receivables on deferred tax related to provisions for bonds granted to customers	5.980
set between 2014-2019
3. Receivables on deferred tax related to provisions for manpower benefits	32

Total receivables on deferred tax 11.611

The Company did not recognize receivables on deferred tax related to other provisions for the aviation industry risks due to an uncertainty regarding the fiscal deductibility of the expenses which may occur from the settlement of the obligations arising in the future periods. Therefore, the differences between the tax base and the accounting base would be null.

NOTE 18 - FINANCIAL INSTRUMENTS

A financial instrument is any contract generating simultaneously a financial asset for an entity and a financial liability or an equity instrument for another entity.

The financial assets and liabilities are recognized when AEROSTAR SA becomes part of the contractual provisions of the instrument.

On the reporting date AEROSTAR S.A. does not hold:

• financial instruments kept for making transactions (including derived instruments)
• financial instruments kept till due date
• financial instruments available for sale

The financial assets of AEROSTAR S.A. include:

• cash and cash equivalents
• trade receivables
• trade effects received
• immobilized receivables (bonds for third parties)
• loans granted with interest

The financial liabilities of AEROSTAR S.A. include:

• trade liabilities
• trade effects payable

On the reporting date AEROSTAR does not have financial liabilities concerning financial leasing, overdrafts and long-term bank loans.

The main types of risks generated by the financial instruments held, to which AEROSTAR S.A is exposed are:

• a) credit risk
• b) liquidity risk,
• c) currency risk,
• d) interest rate risk.

a) Credit risk

The credit risk is the risk that one of the parties involved in a financial instrument generates a financial loss for the other party as a result of the failure to meet a contractual obligation, related mainly to cash, cash equivalents (bank deposits) and trade receivables.

The cash and cash equivalents are placed only at first-rank bank institutions considered to have a high solvency rate.

In some cases, specific instruments of commercial credit risk decrease (receipts in advance, letters of payment bank security, confirmed export credentials).

AEROSTAR has no significant exposure toward a single partner and records no significant concentration of receivables on a single geographical area.

Exposure to credit risk

The accounting value of the financial assets, net of the depreciation adjustments, represents the maximum exposure to the credit risk.

	30.06.2019	30.06.2018
Cash and cash equivalents	178.453	159.938
Trade receivables, net of adjustments for depreciation	45.520	45.056
Trade effects received	0	19
Immobilized receivables	51	167
Loans granted with interest	0	82
Total	224.024	205.262

The maximum exposure to the credit risk on the reporting date was:

The maximum exposure to the credit risk on geographical areas for net trade receivables of the depreciation adjustments is:

	30.06.2019	30.06.2018
Domestic market	5.245	5.937
Euro zone countries	13.643	19.088
Great Britain	17.582	12.340
Other European countries	259	576
Other regions	8.791	7.115
Total	45.520	45.056

Depreciation adjustments

The timeframe structure of gross trade receivables on the reporting date was:

		Adjustments for		Adjustments for
	Gross value	depreciation	Gross value	depreciation
	30.06.2019	30.06.2019	30.06.2018	30.06.2018
In due time	44.658		43.832
Past due, total of
which:	1.733	871	1.745	521
1-30 days	5	5	0	0
31-60 days	1.431	715	213	134
61-90 days	40	20	1.518	373
91-120 days	0	0	5	5
Over 120 days	257	131	9	9
Over 1 year	0	0	0	0
Total	46.391	871	45.577	521

The movement in the adjustments for the depreciation of the trade receivables during the year is presented in the following table:

	30.06.2019	30.06.2018
Balance on 1 January	16	1.162
Adjustments set for depreciation	1.651	607
Adjustments for depreciations resumed as	(796)	(1.248)
revenues
Balance on 30 June	871	521

On 30.06.2019, a percentage of 98% from the balance of trade receivables are related to customers which have a payment history.

b) Liquidity risk

The liquidity risk is the risk that AEROSTAR encounters difficulties to meet the obligations associated to the financial liabilities which are settled by cash payments.

AEROSTAR's policy regarding this risk is to maintain an optimum level of liquidity so as to pay for the liabilities, as they become due.

To evaluate the liquidity risk, the treasury cash flows from operations, from investments and from financing operations are monitored and reviewed weekly, monthly, quarterly and yearly in order to determine the estimated level of net liquidity modifications.

Also, the specific liquidity indicators are reviewed monthly (general liquidity, immediate liquidity and rate of general solvency) against the budgeted levels.

Further, in order to reduce the liquidity risk, AEROSTAR maintains annually a liquidity reserve as a Credit Line (usable as an overdraft) granted by banks to a maximum limit of 2,500 thousand USD.

The time intervals used to review the contractual due dates of the financial liabilities, with a view to show the timeframe for the cash flows in due time, are shown in the table below:

	Financial debts	Accounting value	Contractual cash flows	0-30 days	31-60 days	over 60 days
30.06.	Datorii comerciale	19.627	(19.627)	(15.845)	(3.298)	(484)
2019	Efecte comerciale	5	(5)	(5)	0	0
30.06.	Datorii comerciale	25.853	(25.853)	(20.326)	(3.822)	(1.705)
2018	Efecte comerciale	0	0	0	0	0

The cash flows included in the analyses of the due dates are not expected to take place sooner or at significantly different values.

On the reporting date AEROSTAR has no financial liabilities in its records related to financial leasing, bank account overdraft and long-term bank accounts.

On 30.06.2019 AEROSTAR has no records of overdue financial liabilities.

c) Foreign currency risk

The foreign currency risk is the risk that the fair value or future cash flows of a financial instrument fluctuate because of the changes in the currency exchange rates.

Exposure to the foreign currency risk

AEROSTAR is exposed to the foreign currency risks, as 87% from the turnover recorded in the reporting period is denominated in USD and EUR, while a significant part of the operating expenses is denominated in lei.

So, Aerostar is exposed to the risk that the currency exchange rate variations will affect both its net income and its financial position as expressed in lei.

The net exposure to the foreign currency risks of the financial assets and liabilities is presented on the basis of the accounting values denominated in foreign currency registered at the end of the reporting period:

30.06.2019	MII EUR	MII USD	MII GBP
Cash and cash equivalents	628	1.469	8
Trade receivables	1.287	8.219	0
Trade liabilities	(726)	(1.751)	(68)
Net exposure in original currency	1.189	7.937	(60)

Sensitivity analysis

Taking into consideration the net exposure calculated in the above table it can be considered that AEROSTAR is exposed mainly to the foreign exchange risk generated by the variation of the foreign exchange rate USD/LEU.

Taking into consideration the evolution of USD/LEU exchange rate from the last 3 years (2016- 2018), a relatively high volatility of (+/- 10%) can be observed.

Thus, a reasonably possible variation of the foreign exchange rate of +/- 10% may be envisaged to calculate at the end of the reporting period.

The effect of the reasonably possible variation of +/- 10% of the exchange rate USD/LEU over the financial result of AEROSTAR in calculated in the following table:

30.06.2019

Effect of the variation on the financial result	+/- 3.302 thousand lei
Possible reasonable variation of exchange rate	+/- 10%
Net exposure in functional currency	33.018
USD/LEU exchange rates	4,16
Net exposure in the currency of origin (thousand USD)	7.937

d) Interest rate risk

For the reporting period AEROSTAR contracted a multi-product Credit Facility of 7.000 thousand USD, intended for financing the Company's operations, which includes:

• 1) Product A: in amount of 2.500 thousand USD, usable as an overdraft, set up to provide at any given time the necessary financial liquidity and flexibility (liquidity reserve);
• 2) Product B: in amount of 7.000 thousand USD (subject to the aggregate amount used from Product A and product B does not exceed the value of the multi-product Credit Facility), usable under the form of a facility of issuing bonds as instruments to ensure collateral for the commercial contractual obligations by issuing bank bond letters and import Letters of Credit.

The bank interest is applicable only for the overdraft utilized from Product A in amount of 2,500 thousand USD.

As during the reporting period AEROSTAR did not use the Product A, the company revenues and cash flows are independent from the interest rate variations on the banking market.

On 30.06.2019, the level of bonds granted by AEROSTAR under commercial agreements, by issue of bank bond letters amounts to 514 thousand USD (equivalent to 6.200 thousand lei).

On 30.06.2019 no mortgages are set on the property assets in AEROSTAR ownership.

NOTE 19 - OPERATING INCOME

	30 June	30 June
	2019	2018
Revenues from sales, from which: Revenues from product sales	176.779 105.774	160.081 96.750
Revenues from services supplied	68.647	60.283
Revenues from selling goods	977	1.749
Revenues from renting	1.172	1.063
Trade discounts granted	(38)	(1)
Revenues from other activities	247	237
Revenues related to inventories of products finished and in progress	8.907	25.186
Revenues from the production of fixed assets	520	541
Revenues from operating subsidies	123	8
Other revenues from operations	1.646	1.266
Total operating income	187.975	187.082

The company obtained in the first semester of 2019 revenues from subsidies that represent participation expenses at fairs and international expositions financed from the state budget, in amount of 119 thousand lei, respectively subsidies received to conclude apprenticeship contracts, in the amount of 4 thousand lei.

NOTE 20 – OPERATING EXPENSES

	30 June	30 June
	2019	2018
Expenses with employee benefits, from which:	60.660	56.552
Salaries and allowances	54.638	50.624
Expenses with benefits in kind and expenses with ticket meals granted to employees	3.364	3.531
Expenses with social security	2.658	2.397
Expenses with raw materials and materials	53.252	55.629
Energy, water and gas	5.396	4.774
Other material expenses, of which:	5.931	6.272
Expenses with non-inventory materials	949	843
Expenses with goods	842	1.370
Expenses with packing	257	353
Expenses with other materials	3.883	3.706
Expenses with external services, from which:	12.280	13.600
Repairs	4.799	4.682
Transport costs	1.560	1.522
Commissions and fees	796	1.885
Travels, deployments	532	525
Renting expenses	422	388
Other expenses with services supplied by third parties	3.407	3.855
Trade discounts received	(16)	(18)
Amortizations	13.066	12.440
Increase/decrease of adjustments regarding
provisions	(5.978)	(16.820)
Increase/decrease of adjustments regarding
depreciation of current assets	10.551	5.860
Other operational expenses	1.583	1.452
Total operating expenses	156.725	139.741

NOTE 21 - FINANCIAL INCOME

	30 June 2019	30 June 2018
Income from foreign currency exchange differences	3.164	3.273
Income from interest	1.816	1.105
Income from shares held in subsidiaries	137	201
Total financial income	5.117	4.579

The company is exposed to the currency risk generated mainly by the exchange differences USD/RON, with significant influences over the financial result.

Aspects regarding the Company's exposure to the risks generated by the financial instruments held are presented in Note 18 Financial Instruments.

NOTE 22- FINANCIAL EXPENSES

	30 June 2019	30 June 2018
Expenses from exchange rate differences	2.298	2.475
Total financial expenses	2.298	2.475

In the financial expenses category the company only registers expenses from unfavourable exchange rates differences, it does not register expenses regarding financial investments assigned, with the interests or other financial expenses.

NOTE 23 - TAX ON PROFIT

Tax on profit

The tax on profit is recognized in the statement of the profit or loss.

The tax on profit is the tax payable relating to the profit made in the current period, determined in accordance with the fiscal regulations applicable at the reporting date.

The profit tax rate applicable for 30.06.2019 was of 16% the same rate was applied also for the financial year 2018).

	30 June 2019
Gross accounting profit	34.069
Expenses with current tax on profit	6.086

Reconciliation of accounting profit with fiscal profit Differences
Accounting revenues*	192.060	Fiscal incomes	178.410	-13.650
Accounting expenses*	157.992	Fiscal expenses	137.151	-20.841
Gross accounting profit, restated*	34.068	Fiscal profit	41.259	+7.191
Accounting tax (16%)	5.451	Fiscal tax (16%)	6.601	+1.150
		Tax reductions, from which:	515	+515
Tax reductions	-	 related to investments made acc.to Art. 22 Fiscal Code	448	+448
		 sponsoring	67	+67
Tax on final profit	5.451	Tax on final profit	6.086	+635
Applicable legal rate	16,00%	Legal rate applicable	16,00%
Actual average tax rate, calculated on gross accounting profit, restated		17,87%

* The revenues and expenses are obtained after the deduction from the total revenues and the total expenses, respectively, of the revenues and expenses related to activities subject to the specific tax.

The main factors which have affected the actual tax rate:

• Non-deductible expenses in fiscal terms (expenses concerning the set-up or increase of certain provisions and value adjustments regarding the current assets , which are non-deductible fiscally, expenses with fiscally non-deductible accounting amortization a.o.).
• fiscal facilities representing the tax exemption on profit corresponding to the investments performed in accordance with Art.22 of the Fiscal Code and sponsoring;
• the non-taxable income obtained from the recovery of certain non-deductible expenses;

The company has registered at 30 June 2019 a liability regarding tax on current profit in the amount of 2.405 thousand lei related to the second quarter of 2019.

The tax specific to some activities

Starting with 01.01.2017 Aerostar S.A. became taxable for restaurant and public food supply activities. The specific tax related to the first semester of 2019 was in the amount of 26 thousand lei.

NOTE 24 – RESULT PER SHARE

The profit per basic share was calculated based on the profit which can be distributed to the ordinary shareholders and on the number of ordinary shares:

The diluted result per share is equal to the result per basic share, as the company did not register any potential ordinary shares.

IN LEI	30.06.2019	30.06.2018
Profit distributable to ordinary shareholders	28.473.018	45.549.986
Number of ordinary shares	152.277.450	152.277.450
Profit per share	0,187	0,299

NOTE 25 - THE AVERAGE NUMBER OF EMPLOYEES

The average number of employees is 1.741 for the first semester 2019 and 1.832 for the first semester of 2018.

To these is added an average number of employees attracted through the temporary employment agent and used in the production process of AEROSTAR.

The total personnel employed in the activity of AEROSTAR was:

	semester I 2019	semester I 2018
Total employees	1.913	2.044

NOTE 26 - TRANSACTIONS WITH RELATED PARTIES

Acquisitions of goods and services	6 months 2019	6 months 2018
Airpro Consult SRL Bacău	3.677	3.872
Foar SRL Bacău	296	270
TOTAL	3.973	4.142
Sales of goods and services	6 months 2019	6 months 2018
Airpro Consult SRL Bacău	-	-
Foar SRL Bacău	1	1
TOTAL	1	1
Liabilities	Balance at 30.06.2019	Balance at 30.06.2018
Airpro Consult SRL Bacău	510	637
Foar SRL Bacău	93	96
TOTAL	603	733
Dividends collected/to collect by Aerostar	6 months 2019	6 months 2018
Dividends collected by Aerostar
Airpro Consult SRL Bacău	50	90
Dividends to collect by Aerostar
Foar SRL Bacău	87	112
TOTAL	137	202

The transactions with the affiliated parties in the first semester of 2019 consisted in:

• Services provided by AIRPRO CONSULT SRL Bacau to AEROSTAR SA Bacau for temporary manpower
• Machinery rental services provided by FOAR SRL Bacau to AEROSTAR SA Bacau;
• Services provided by AEROSTAR SA Bacau to AIRPRO CONSULT SRL Bacau and FOAR SRL Bacau for space rental and supply of utilities
• Dividends collected by AEROSTAR SA from Airpro Consult SRL Bacău and from Foar SRL Bacău (NOTE 7).

In the first semester of 2019 no transactions were made with the company ATF SA.

NOTE 27 – INFORMATION REGARDING CASH FLOW

The method used in the Cash Flow Statement is the direct method.

The cash flows situation represents the cash flows and cash equivalents classified on operating activities, of investment and financing, thus indicating how AEROSTAR generates and uses the cash and cash equivalents.

In the context of the Cash Flows Statement:

• the cash flows are the amounts collected and paid in cash and cash equivalents;
• the cash means the amounts available in banks and cashier's desk.
• the cash equivalents comprise the deposits formed in banks, bills and promissory notes filed in banks to be collected.

The treasury cash flows from the transactions performed in foreign currency are registered in the functional currency by applying over this value the exchange rate between the functional currency (LEU) and the foreign currency as on the date when the treasury cash flow was generated (date of making payments and collections).

The earnings and losses coming from the exchange rate variation are not treasury cash flows. Nevertheless, the effect of the exchange rate variation over the cash and equivalent held or due in foreign currency is reported in the treasury cash flows statement, but separately from the treasury cash flows coming from operations, investments and financing, with the purpose to reconcile the cash and cash equivalents at the beginning and at the end of the reporting period.

The operating activities are AEROSTAR's main cash-generating activities.

Therefore in the first semester of 2019 the amounts collected from the customers were 193.291 thousand lei, from which 21.631 thousand lei represent the prepaid amounts from the customers, while the payments to the suppliers and employees were in the amount of 131.627 thousand lei.

The operating activity generated a net cash of 32.206 thousand lei.

To increase the operational capacity, through the acquisition of tangible and intangible immobilizations, an amount of 8.248 thousand lei was used from company's own sources.

The value of the treasury cash flows allocated in the first semester of 2019 to increase the operating capacity represents 4% from the aggregate value of the cash used in the framework of operating, investment and financing activities.

As part of the financing activity, the amount of 15.437 thousand lei was paid, representing the dividends granted to the shareholders.

NOTE 28 – LIABILITIES AND OTHER OFF-BALANCE ITEMS

Aerostar registers as off-balance items, the rights, liabilities and goods which are not recognized in the company assets and liabilities, i.e.:

		30 June 2019	31 December 2018
	Liabilities:
o	Bonds granted to customers as letters of bank bonds	0	1.520
o	Bonds received from suppliers – as letters of bank bonds	22.148	11.636
	Goods, from which:
o	inventories of other materials released for use
	(tooling, jigs, fixtures, protection equipment, measuring and control eqpt, technical library etc.)	29.034	26.552
o	material values received in consignment	1.826	1.826
o	tangible and intangible assets –obtained or purchased as a result of co-financed activity	4.151	4.151
o	material values received for processing/repairs	2.504	2.116
	Other values off-balance
o	Liabilities for covering certain future
	obligations to A.J.O.F.M. based on OUG 95/2002 regarding the defence industry	5.550	5.782
o	Royalties, tenant activities, rents and other similar liabilities	2.321	2.335
o	debtors removed from accounts, yet still monitored	586	586
	Certificate de emisii gaze cu efect de seră	2.047	1.678

At the date of 30 June 2019, AEROSTAR had a number of 16.342 greenhouse gas emission certificates.

The market value from the last transaction day of a GES certificate was of 26,45 Euro, according to the TDR Energy market journal (in December 2018: 24,63 euro).

NOTE 29 – REMUNERATION OF THE DIRECTORS

On the date of 30 December 2019, the structure of AEROSTAR's Board of Directors remained unchanged in comparison with the one from 31 December 2018.

Surname and first name Position Profession FILIP GRIGORE President of the Board of Directors Aviation engineer DAMASCHIN DORU Vice-president of the Board of Directors Economist TONCEA MIHAIL - NICOLAE Member of the Board of Directors Aviation engineer LIVIU-CLAUDIU DOROŞ Member of the Board of Directors Economist VÎRNĂ DANIEL Member of the Board of Directors Legal Advisor

The Board of Directors of AEROSTAR S.A.:

In the first semester of 2019 AEROSTAR did not grant advance payments or credits to the members of the Board of Directors and did not make any liabilities on their account as a collateral of any kind.

The compensations of the Directors are approved by the General Meeting of the Shareholders.

In the Ordinary General Meeting from 13 December 2018 the shareholders of the company approved, to freeze the administrators' compensation for the year 2019 at the level agreed in the Ordinary General Meeting of Shareholders from 14 December 2017, namely:

• a net compensation for the BOD members of 4.500 lei

• a maximum level of the additional compensations for the executive members of the Board of Directors, of maximum 10 (ten)times the net remuneration, inclusively;

• empower the Board of Directors to negotiate the additional compensation with the executive members, within the maximum limit approved by the Ordinary General Meeting.

The amount of the gross compensations for the members of the Board of Directors in the first semester of 2019, by virtue of their responsibilities, was of 817 thousand lei.

NOTE 30 –RISK MANAGEMENT

AEROSTAR is exposed to multiple risks and uncertainties which can affect its financial performance. The business lines performed by AEROSTAR, the operational results or the financial statements, may be affected by the materialization of the risk presented further.

AEROSTAR pursues to secure the average and long-term sustainability and the reduction of uncertainty associated with its strategic and financial objectives.

Carrying out the risk management processes provides the identification, analysis, evaluation and management of risks in order to minimize their effects down to an agreed level.

However, risks and uncertainties can exist additional to the elements presented further on, which are currently unknown or considered insignificant, but which may affect in the future the business lines performed by AEROSTAR.

Operational Risk

It is the risk to incur losses or of failure to make the estimated profits determined by:

• performance of certain inadequate processes, systems and manpower or which failed to execute their function properly
• external events and actions: deterioration of the global economic conditions, natural catastrophes or other events which can affect AEROSTAR's assets.

To the Operational Risk it is also assimilated the Legal Risk, defined as the risk of loss, resulting from the fines, penalties and sanctions which can be in charge of AEROSTAR in case of nonapplication or misapplication of dispositions, legal or contractual regulations, as well as the fact that the rights and contractual obligations of AEROSTAR and/or of the business partner are not properly established.

Monitoring and disposal of the legal risk's effects is realised through a permanent information system regarding the legislativemodifications, as well as by organizing a review, endorsement and approval system of the terms and conditions included in the commercial agreements.

AEROSTAR allocates and will continue to allocate investment funds and other operational expenses in order to prevent and manage the operational risk.

In addition, AEROSTAR aims, by setting provisions for risks and related expenses, to have its own funding to cover its risks of exposure.

Also, in order to minimize the operational risk, AEROSTAR annually renews, with companies of 1 st tier insurance-reinsurance, a civil liability insurance contract related to the main business lines (manufacturing of aircraft products and maintenance for commercial aircraft).

The Credit Risk is the risk of AEROSTAR bearing a financial loss as a result of the failure to meet the contractual obligations by a partner, being determined mainly by cash, cash equivalents (bank deposits) and trade receivables.

Cash and cash equivalents are placed only in 1st tier bank institutions, considered as having a high solvency rating.

The credit risk, including the risk of the country in which the customer operates its activity, is managed on each business partner. When necessary, specific instruments of credit risk mitigation are requested (advance payments, letters of bank guarantee, confirmed letters of credit).

AEROSTAR has no significant exposure towards a single partner and does not register a significant concentration of the turnover on a single geographical area.

A presentation of the quantitative information regarding AEROSTAR's exposure to the credit risk is detailed in Note 18 (Financial Instruments) to the Financial Statements.

The Liquidity Risk is the risk for AEROSTAR to encounter difficulties in fulfilling its liabilitiesrelated obligations as they become due.

To manage the liquidity risk, the cash flows are monitored and analysed weekly, monthly, quarterly and annually in order to establish the estimated level of net modifications of the cash. Such reviews provide the basis for the financing decisions and for the capital expenditures.

In order to reduce the liquidity risk, AEROSTAR keeps an annual cash-reserve in the form of a Credit Line usable under the form of an overdraft granted by banks of 2.500.000 USD. During the reporting period, AEROSTAR did not use the Credit Line, all the activities of the Company being financed from its own sources.

The Market Risk is the risk that the fair value or future cash flows of a financial statement will fluctuate due to the modifications of the market price.

The market risk comprises the price risk, exchange rate risk and the risk of the interest's rate.

AEROSTAR is exposed mainly to the price risk determined by the fluctuations of the raw material and of the materials used in the manufacturing processes.

The management of this risk is realised through:

• diversification of the portfolio of suppliers, which offers a larger leverage in negotiations in case the price of raw materials is increased by certain suppliers.
• long-term contract agreements, with provisions on fixed prices.

AEROSTAR is exposed to the exchange rate risk because 87% from the turnover is reported to USD and EUR, while a significant part of the operating expenses is denominated in lei.

Thus, AEROSTAR is exposed to the risk that the exchange rate variations shall affect both its net income, as well as its financial position, as they are expressed in lei.

A sensitivity analysis of AEROSTAR to the foreign exchange rate's variations is detailed in Note 18 (Financial Instruments) in the Financial Statements.

In the reporting period Aerostar did not register financial losses.

As far as the interest rate is concerned, due to the fact that AEROSTAR did not use the contracted Credit Line in the reported period, the income and cash flows are independent from the interest rate variation on the banking market.

NOTE 31- EXPENSES AND INCOME IN ADVANCE

	30 June 2019	31 December 2018
Incomes registered in advance	1.074	504

The expenses made and income realized in the current period, but which relate to the future periods or financial exercises, are recorded distinctively in accounts, as prepaid expenses or income in advance, as applicable.

In the category prepaid expenses, the Company registered the amounts related to the periods or financial years to follow, representing: subscriptions, insurance policies, commissions, trade fairs and conferences participations, taxes and duties, on-line services, IT maintenance, etc., which are allocated on expenses, according to the due.

The company did not register income in advance during the first semester of 2019.

NOTE 32- EVENTS AFTER THE REPORTING PERIOD

The financial calendar 2019 – the following events which will take place:

Presenting the financial statements of the first semester of 2019	16.08.2019
Meeting the press and investors interested for first semester financial
results of 2019	16.08.2019
Presenting the financial results on 30 September 2019	08.11.2019

AEROSTAR S.A did not identify events after the reporting period which may impact the financial statements related to the financial statements for the first semester of 2019.

These individual financial statements which comprise: the statement of the financial position, the statement of the profit or loss, other elements of the global result, the statement of the company equity's modifications, the statement of the cash flows and the explicative notes of the financial statements were approved by the Board of Directors on 14 August 2019 and signed on the behalf of the Board of Directors by:

Grigore FILIP President and General Director

Doru DAMASCHIN Vicepresident and Financial Director

DECLARATION

The undersigned, GRIGORE FILIP, as President of the Board of Directors and General Director of AEROSTAR S.A. and DORU DAMASCHIN, as Vicepresident of the Board of Directors and Financial Director of AEROSTAR S.A., hereby undertake the responsibility for the preparation of the individual financial statements as on 30.06.2019 and we confirm hereby that:

• a) The accounting-financial statements for the first semester of 2019, prepared in accordance with the applicable accounting standards, offer a fair image conforming with the reality of the assets, obligations, financial position, of the profit and loss account of Aerostar S.A. Bacãu;
• b) The report of the Board of Directors for the first semester of 2019, prepared in accordance with the provisions of the Regulation no. 5/2018 issued by the Financial Supervisory Authority – Annex no. 14 provides a correct review of the company's development and performances as well as a description of the main risks and uncertainties specific to the activity of Aerostar S.A. Bacãu.

President of the Board of Directors and General Director, GRIGORE FILIP

Vice-president of Board of Directors and Financial Director, DORU DAMASCHIN