Armatura S.A.

Quarterly Report • Aug 31, 2020

• S.C. ARMATURA S.A.

Cluj - Napoca

HALF-YEAR REPORT 2020 S.C. ARMATURA S.A. CLUJ- NAPOCA

Registered office:

400267 Cluj-Napoca 19 Gării Street

Telephone:
Fax:
Email:
Website:

Tax Identification Number: Trade Register Registration Number: Subscribed and paid-in share capital: +40 264 435 367 +40 264 435 368 office@armatura.ro www.armatura.ro

RO 199001 J12/13/1991 4.000.000 RON

The regulated market on which the issued transferable securities are traded:

The shares of S.C. ARMATURA S.A. are traded within the 2nd category of the Bucharest Stock Exchange.

The main features of the transferable securities issued by the Company:

• Number of shares: 40.000.000 A

• Nominal value: 0,1 RON/share

• Registered shares, issued as uncertficated shares, registered in the S.C. Depozitarul Central S.A. independent registry book, as per contract no. 1958 from 19.01.2007

Date of the report: 05.08.2020

• * drawn up in accordance with Regulation no. 5/2018 of the Financial Regulator.
• * the financial statements as at 30.06.2020 have not been audited.

1. Economic and financial statement:

The financial statements have been drawn up in accordance with International Financial Reporting Standards.

S.C. ARMĂTURA S.A.

Cluj - Napoca

FINANCIAL POSITION STATEMENT

	1st ofJanuary 2020	30th of June 2020
Asset
Fixed assets
Tangible fixed assets	24.910.484	24624.395
Intangible fixed assets	9.709	8.161
Real estate investments	4 742 938	4.742.938
Total fixed assets	29.663.131	29.375.494
Current assets
Stocks Clients and other	2.640.638	1.037.961
accounts receivable Cash and	282.329	1.121.319
cash equivalents Short-term	335.922	281.155
financial assets	110.155	O
Total of current assets	3.369.044	2.440.435
Total of assets	33.032.175	31.815.929
Owner's equity and debts
Share capital	18.110.957	18.110.957
Reserves	21.335.091	21.335.091
Balance carried forward
including the balance of the period	-44.288.947	-45.882.546
Total owner's equity	- 4.842.899	-6.436.498
Long-term debts
Loans
Debts related to financial leasing
Deferred tax liabilities	2.666.568	2.666.568
Suppliers and other debts	2.66.568	2.666.568

S.C. ARMĂTURA S.A.

Cluj - Napoca

Current debts

Suppliers and other debts Settlements with	9 829 821	9.765.754
shareholders on share capital Loans	100 25.230.721	100 25.803.010
Provisions for risks and expenses	147.864	16.995
Total of current debts	35.208.506	35.585.859
Total of debts	37.875.074	38,252427
Total owner's equity and debts	33.0892 75	31.84 51.979

STOCK ANALYSIS

The Company's stock has decreased compared to the beginning of 2020, amounting to -1.602.677 lei, with a percentage increase of 60.69 %.

The stock structure from June 30th 2020 is the following:

				· Raw materials and materials	35.472 %
--	--	--	--	-------------------------------	----------

• · End products and goods 27.07 %
• · Goods in progress 37.46 %

	30th of June	1st of January
	2020	2020
Raw materials	977.436	1.794.608
Provisions for raw materials	-628.724	-768.923
Production in progress	692.304	1.404.731
Provisions for goods in progress	-303.520	-601.980
Goods	160.431	160.456
Provisions for goods	-160.431	-160.456
End products	1.458.509	2.010.124
Provisions for end products	-1.180.062	-1.232.219
Other stocks	73.664	163.973
Provisions for other stocks	-51.646	-129.676
Total	1.037.961	2.640.633

ACCOUNTS RECEIVABLE ANALYSIS

On June 30th 2020 the Company's accounts receivable had the following structure:

	30th of June 20220	1st of January 20220
Commercial accounts receivable	1.704.762	866.155
Minus: provision for the depreciation of the commercial accounts receivable	-743.225	-743.225
Commercial accounts receivable - net	961.538	122.930
- out of which, in relation to affiliated entities	781.508
Accrued expenses	91 535	16.985
Advance payments to suppliers	405	913
Minus: provision for the depreciation of the advance
payments
Various debtors	7.000	7.000
Other accounts receivable	60.841	134.501
The current portion of the commercial and other
accounts receivable	1.121.319	282.329

The commercial accounts receivables from June 30th 2020 recorded an increase of 838.990 lei compared to the existing balance in early 2020, with a percentage increase of 297.17 %.

PAYMENT LIABILITIES ANALYSIS

	30th of June 2020	1st of January 2020
Commercial debts	9.502.848	9.381.327
- out of of which, in relation to affiliated entities	9.413.463	9.280.702
Debts with personnel, contributions, social security	197.116	188.685
Value Added Tax (VAT)	0	O
Other debts	65.790	259.809
	9.765.754	9 879 892

The Company's current debts have registered an decreased of -64.067 lei compared to the beginning of 2020, with a percentage increase of 0.65 %.

S.C. ARMĂTURA S.A.

Cluj - Napoca

INCOME AND EXPENSE STATEMENT

	30th of June 2019	30th of June 2020
Revenues	3.932.584	3.076.141
Other operating revenues	11.035	2.955
Changes in stocks of end products
and production to be executed	336.881	-1.264.130
Raw materials and materials	-2.694.725	-939.380
Cost of goods	-14.484	-494.640
Personnel charges	-1.230.324	-1.112.305
Utilities expenses	-178.919	-140.542
Services provided by third parties	-202.881	-205.716
Amortization and depreciation of
fixed assets	-378 704	-287.963
Net movement in the provision for other
risks and expenses	4.315	130.869
Other operating expenses	-309.705	-233.339
Other revenue / (losses), net	110.933	578.052
Operating result	-613.994	-889.998
Financial revenues	34	29
Financial expenses	-751.646	-703.630
		-703.601
Net financial loss	-751.612
Profit / loss before income taxes Revenue / (Expenditure) with current and	-1.365.606	-1.593.599
deferred tax
Ordinary business income (loss)	-1.365.606	-1.593.599

Cluj - Napoca

2. The analysis of the commercial Company's activity

2.1. Presenting and analyzing trends, events or uncertainty factors that are affecting or are likely to affect the corporate liquidity as compared to the same period of the previous year.

The Company's management monitors the provisions related to the corporate liquidity needs to ensure that there is sufficient cash to meet the operational requirements. These provisions take into account the Company's debt financing plans, compliance with agreements, compliance with internal targets on the balance sheet ratios.

The Company is financially dependent on Herz Armaturen Gesmh.

2.2. Corporate governance:

The Company has shares listed on BVB Bucharest (Bucharest Stock Exchange). As a result, the Company applies all the legal provisions in force: updated Law no. 31/1990, OMFP Order 284/2016 (Order of the Minister of Public Finance) for the approval of the Accounting Regulations according to the International Financial Reporting Standards, Regulation ASF 05 / 2018 on reporting, Law no. 297/2004 regarding the stockmarket, BVB regulations and others. All these regulations are public. Until the date of this report, the Company did not adhere to the Corporate Governance Code issued by the Bucharest Stock Exchange (BVB) in 2015. The Company has implemented an Organization and Functioning Regulation, as well as an Internal Order Regulation, which are meant to ensure its functional safety and to contribute to the achievement of the Company's objectives. The internal control system fulfills its established objectives and no significant deficiencies have been identified in the functioning of the internal system. The implemented principles of the internal control system are: the separation of decisions, the existence of automated controls incorporated into the IT application, authorization limits, periodical reports, etc. The Company has an appointed internal auditor, however not an audit committee. There is no distinct department to deal with investors. The Company has a contract with an authorized financial auditor, according to legal requirements, who verifies the financial statements in accordance with the legal provisions in force. The General Assembly has the attributions stipulated by the Law 31/1990 with its subsequent amendments and by the Company's Articles of Incorporation in force at the date of the General Asembly. The procedure for the Shareholders' General assembly and its key attributes are in line with the legislation in force and the Company's Articles of Incorporation. The shareholders' rights and how they can be exercised are provided by the applicable law.

Members of the Board of Directors:

• Akper Saryyev Member
• Matthias Haider Member
• Damir Rutar Member
• Zoran Bankovic Member
• Walter Simmel Member

3. The Company's tangible assets

3.1. Specification of the location and characteristics of the main production capacities in the Company's property.

The equipment and production facilities owned by the Company are located entirely in Cluj-Napoca, 19 Gării Street.

The equipment of the Assembly Department consists mainly of equipment for the assembly of valves or their component parts, pressure test stands, electrostatic painting line and spray painting plant

The processing of large-scale cast iron products is done with the help of CNC machines.

3.2. The outline and analysis of the wear and tear degree of the Company's properties.

At present, the production is limited only to CNC processing and the assembly of valves supplied from third parties. The departments that have been closed are in conservation and regarding the machines that do not have a high degree of wear and tear, one tries to capitalize them.

4. Changes affecting the capital and management of the Company

On the 7th of March, 2013, the Extraordinary General Assembly of Shareholders approved the reduction of the Company's share capital to the "zero" value together with its increase to the amount of 4.000.000 lei by cash contribution by its shareholders. The completion was not possible due to the fact that the shareholder Bugica Radu challenged this decision at the Cluj County Commercial Court, under file no. 817/1285/2013, and the EGA decision was annulled by the court through definitive sentence. From the financial point of view, this affected the Company only in the sense that it was not possible to solve the problem of equity, which on 31.12.2015 was less than 50% of the share capital. The main reason for the annulement was that the Company did not organize an Extraordinary General Assembly in which to discuss the dissolution and liquidation of the Company, previous to the approval of the reduction and increase of the share capital.

On April 20th 2014 within the Extraordinary General Assembly of Sharehoders one has rejected the proposal of the Board of Directors regarding the winding-up and the liquidation of the Company and the Company had one year to come up with a proposal to the shareholders to solve the negative equity situation at the end of 2014.

On February 12th, 2015, the Extraordinary General Assembly of the Shareholders decided to reduce the Company's share capital from 4.000.000 lei by reducing the number of shares from 40.000.000 to 4.000.000 registered shares and simultaneously increasing the share capital from 400.000 lei to the amount of 4.000.000 lei by cash contribution. The notification provided by ASF (Financial Supervisory Authority) regarding the registration of the share capital reduction was sent to the Company on 12.02.2016. Within the Extraordinary General Asembly of Shareholders (EGA) that took place in April 2016 the proposal approved through the EGA Decision no. 01/12.02.2015 was rejected. The same EGA granted the mandate of the Board of Directors to approve and carry out an S.C. ARMATURA S.A.

Cluj - Napoca

Half-year report 2020

increase of the share capital up to the amount of 10.000.000 lei, within one year from the EGA's decision date, but up to the present financial statements no steps have been taken so far.

The reimbursement date of the 5 million Euro loan from shareholder Herz Armaturen Ges.b.h was not prolonged throughout 2019, the maturity date being the 15th of April 2016 (15.04.2016).

During the year of 2017 the Company went through a period of reorganizing its activity by closing the following departments: Iron Foundry, Mechanical Machining, Assembly Department, the Showroom and in February 2018 the Brass Foundry Department was closed.

From the date of the last financial statements until the date of the present semestrial situations no major changes have been recorded in the Company's current activity.

Administrator,

Akper Saryyev

Drawn up by,

Ec.Rus Dana

ARMĀTURA S.A.

INDIVIDUAL FINANCIAL SITUATIONS FOR THE SEMESTER THAT ENDED ON JUNE 30™ 2020

DRAWN UP IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED BY THE EUROPEAN UNION

CONTENTS

PAGE

FINANCIAL POSITION STATEMENT	3 - 4
INCOME AND EXPENSE STATEMENT	5
STATEMENT OF THE OVERALL FINANCIAL RESULT	ട
STATEMENT OF CHANGES IN EQUITY	7
STATEMENT OF CASH-FLOWS	8
NOTES TO INDIVIDUAL FINANCIAL STATEMENTS	9 - 18

ARMĀTURA SA FINANCIAL POSITION STATEMENT ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

	Note	1st of January 2020	30th of June 2020
ASSETS
Fixed assets
Tangible assets Intangible assets Real estate investments	3 4	24.910.484 9.709 4.742.938	24.624.395 8.161 4.742.938
Total fixed assets		29.663.131	29.375.494
Current assets
Stocks Clients and other accounts	5	2.640.638	1.037.961
receivables Cash and equivalents	6	282.329	1.121.319
cash		335.922	281.155
Financial assets Short-term		110.155	0
Total current assets		3.369.044	2.440.435
Total assets		33.032.175	31.815.929
Equity and debt
Share capital Reserves	8	18.110.957 21.335.091	18.110.957 21.335.091
Balance carried forward including the balance of period		-44.288.947	-45.882.546
Total owner's equity		- 4.842.899	-6.436.498
Long-term debts
Loans Debts related to financial leasing Deferred tax liabilities
Suppliers and other liabilities	7	2.666.568	2.666.568
		2.666.568	2.666.568

The notes attached are an integral part of these financial statements.

ARMĀTURA SA FINANCIAL POSITION STATEMENT ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

	Note	1st of January 2020	30th of June 20720
Current liabilities
Suppliers and other debts Settlements with shareholders on	7	9.829.821	9.765.754
share capital		100	100
Loans		25.230.721	25.803.010
Provisions for risks and expenses		147.864	16.995
Total Current debts		35.208.506	35.585.859
Total of Debts		37.875.074	38.252.427
Total owner's equity and debts		33.032.175	31.815.929

Administrator,

Akper Saryyev

Drawn up by,

Ec.Rus Dana

Cas

ARMĀTURA SA INCOME AND EXPENSE STATEMENT FOR THE SEMESTER THAT ENDED ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

	30th of June 2019	30th of June 2020
Revenues	3.932.584	3.076.141
Other operating revenues	11.035	2.955
Change in stocks of end products
and production to be executed	336.881	-1.264.130
Raw materials and materials	-2.694.725	-939.380
Cost of goods	-14.484	-494.640
Personnel charges	-1.230.324	-1.112.305
Utility expenses	-178.919	-140.542
Services provided by third parties	-202.881	-205.716
Amortization and depreciation of
fixed assets	-378.704	-287.963
Net movement in the provision for other
risks and expenses	4.315	130.869
Other operating expenses	-309.705	-233.339
Other revenue / (loss),net	110.933	578.052
Operational result	-613.994	-889.998
Financial revenues	34	29
Financial expenses	-751.646	-703.630
Net financial loss	-751.612	-703.601
Profit/Loss before income taxes	-1.365.606	-1.593.599
Revenue / (Expenditure) with current and deferred tax
Ordinary bussiness income (loss)	-1.365.606	-1.593.599
Number of shares issued	40.000.000	40.000.000
Basic and diluted earnings per share	-0,0341	-0,0398

The notes attached are an integral part of these financial statements.

ARMĀTURA SA STATEMENT OF THE OVERALL FINANCIAL RESULT FOR THE SEMESTER THAT ENDED ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

	30th of June 2019	300 of June 2020
ORDINARY BUSINESS INCOME (LOSS)	-1.365.606	-1.593.595
Other elements of the overrall result:
Earnings /(Loss) from revaluation Buildings
Impact of deferred tax on Revaluation reserves
Other elements of the overall result for related year, net tax
Total overall result associated with the financial exercise	-1.365.606	-1.593.599

Administrator,

Akper Saryyev

Drawn up by,

Ec.Rus Dana firs

FOR THE SEMESTER THAT ENDED ON THE 30TH OF JUNE 2020 STATEMENT OF CHANGES IN EQUITY (in lei, if not specified otherwise) ARMĀTURA S.A. BEL

Existing balance on 1 January 2020	Share capital 18 10:57	20.384.144 reevaluation Reserves trom	Other reserves 950.947	Balance forward carried -44.288.947	-4.842.899 Total
Other elements of the result Profit / (Loss) for the year				-1.586.599	-1.593.599
Overall global result				-1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1	-1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 - 1 - 1 - 1 - 1 - 1 - 1 - 1 - 1 - 1 - 1 -
Existing balance at 30 June 2020	18.10.957	20.384.144	950.947	-45.882.546	-6.436.498

Administrator , Akper Saryyev

Drawn up by,
Ec.Rus Dana Pus

The notes attached are an integral part of these financial statements.

ARMĀTURA S.A. INDIVIDUAL STATEMENT OF CASH-FLOWS FOR THE SEMESTER THAT ENDED ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

	30th of June 2019	30th of June 2020
Cash flows from activities operating
Cash generated from operation	-227.931	-173.806
Interest paid
Net cash generated from operating activities	-277,989	-173.806
Cash flows from investment activities
Acquisitions of tangible fixed assets Net proceeds from the sale of	-64.744	-3.541
tangible assets		12.396
Income from interests	34	29
Net cash used in investment activities	-64.760	8.884
Cash flows from financing activities
Reimbursement of leasing loans Settlements from shareholders
Net cash used in financing activities
Net change in cash and cash equivalents	-292.641	-164.977
Cash and cash equivalents at the beginning of the year	458.044	446.077
Increases /- Decreases	-292.641	-164.922
Cash and cash equivalents at the end of the semester	165.403	281.155

Administrator,

Akper Saryyev

Drawn up by, Ec.Rus Dana

des

ARMATURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE SEMESTER THAT ENDED ON THE 30™ OF JUNE 2020 (in lei, if not specified otherwise)

1 GENERAL INFORMATION

General information

ARMATURA SA ("The Company") was registered in early 1991 at the Trade Register Office from Cluj as a joint-stock company and at the end of 1996 the privatization process was completed. It is currently a fully private owned Company. The Company has its registered office in Cluj Napoca, 19 Gării Street, where it also carries out its production activity.

The object of the Company's activity is the "Manufacturing of valve items", CAEN (Classification of Economic Activities in the National Economy) code 2814 and it operates in the field of metal fittings with experience in producing valves for heating, water and gas installations, today's portfolio of products covering over 1,500 articles of different dimensions. Its customers are national and international companies.

The Company has been listed on the Bucharest Stock Exchange - 2nd category - since 1997.

The Company has no open subsidiaries, is not associated with other companies and does not hold equity securities.

The Company has a subscribed and paid-in share capital of 4.000.000 lei consisting of 40.000.000 shares with a nominal value of 0.1 RON per share.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

The main accounting policies applied in the preparation of these individual financial statements are presented below. These policies have been consistently applied in all the given years. unless otherwise stated.

2.1 Bases for its preparation

The Company's individual financial statements were drawn up in accordance with the provisions of the Ordinance of the Public Finances Ministry no. 2844/2016, for the approval of Accounting Regulations in accordance with the International Financial Reporting Standards, applicable to commercial companies whose securities are admitted to trading on a regulated market, including subsequent amendments and clarifications.

2.2 Segment reporting

A segment is a distinct component of the Company that provides certain products or services (segment of activity) or provides products and services in a particular geographic environment (geographic segment) and which is subject to risks and benefits different from those of other segments. In terms of business segments, the Company does not identify distinct components when it comes to risks and benefits.

ARMATURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE SEMESTER THAT ENDED ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign currency conversion 2.3

Functional and presentation currency (a)

The financial situations are presented in lei (RON), which is the national currency of Romania. The Company keeps its accounting records in lei, it prepares and presents the financial statements in accordance with the applicable laws and with the Regulations on Accounting and the financial and accounting reports issued by the Public Finances Ministry.

Transactions and balances (b)

Foreign currency transactions are converted into functional currency using the exchange rate from the date of the transaction. Earnings and losses resulting from exchange rate differences following the conclusion of these transactions and from the conversion at the end of the financial year, at the year-end exchange rate of monetary assets and denominated liabilities in foreign currency, are reflected in the profit and loss account.

Exchange-rate earnings and losses relating to loans, cash and cash equivalents are presented in the profit and loss account within the "Financial income or expenses" section. All other earnings and losses resulting from the exchange rate are presented in the profit and loss account under "Other revenue / (losses), net".

Monetary assets and liabilities denominated in foreign currencies are expressed in lei at the date of the balance sheet. On June 30th 2020, the exchange rate used to convert balances in foreign currency was the following: EUR = 4,8423 lei (January 1, 2020: 1 EUR = 4,7793 lei). Earnings and losses resulting from the conversion of monetary assets and liabilities are reflected in the profit and loss account over the year.

2.4 Accounting the effects of the hyperinflation

The Romanian economy has experienced periods with relatively high inflation rates and has been considered hyperinflationary according to IAS 29 "Financial Reporting in Hyperinflationary Economies" ("IAS 29").

IAS 29 requires that the financial statements drawn up using the currency of a hyperinflationary economy be restated in terms of the purchasing power at the balance sheet date. Amounts expressed in terms of the purchasing power on December 31st 2003 (end date of the hyperinflation) are considered basis for the net book values in these financial statements.

The Company has decided to reflect the impact of applying IAS 29 in the financial statements drawn up on December 315, 2012 and the recalculation of the amounts presented on December 31st, 2011 and December 31st, 2010. The impact of these adjustments was reflected in the value of the property, share capital and balance carried forward.

ARMATURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE SEMESTER THAT ENDED ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.5 Intangible fixed assets

Intangible fixed assets are presented in the financial statements at acquisition costs less accumulated amortization and are depreciable over a period of 1 to 3 years, their reference values being shown in Note 4.

Tangible fixed assets 2.6

Buildings are presented at their fair value, based on regular assessments, at least once every three years, performed by independent external assessors, less amortization and subsequent depreciation. Any accumulated amortization at the revaluation date is eliminated from the gross book value of the asset and the net amount is recorded as a revalued amount of the asset. All other tangible assets are recorded at the historical cost less amortization. Historical cost includes costs that can be directly attributed to the acquisition of those items.

Subsequent expenses are included in the net book value or recognized as a separate asset, as the case may be, only when the Company's future economic benefits associated with the item are probable and the cost of that item can be measured in a reliable way.

Increases in the book value arising from the revaluation of buildings are credited to "Revaluation reserves" from the owner's equity.

Decreases that compensate increases associated with the same asset are recorded alongside other reserves directly in the owner's equity; all other decreases are recorded in the profit and loss acount. Amounts recorded in revaluation reserves are transferred to the balance carried forward at the end of the useful life of the asset or when the asset is derecognised.

Repairs and maintenance expenses are recorded in the income and expense statement within the period in which they incur. The costs of replacing the major components of tangible assets elements and equipment are capitalized, while the replaced components are being decommissioned.

Earnings and losses from eliminations determined by the comparison of earnings with the net book value are recognized in profit or loss.

Real estate is not amortized. The amortization of other tangible assets elements is calculated using the straight-line method in order to allocate the revalued amount of each asset to its residual value over its expected useful life, as follows:

Type	Nulling i vi years
Buildings	7 - 45
Equipment	2 - 12
Vehicles	3 - 15

ARMATURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE SEMESTER THAT ENDED ON THE 30™ OF JUNE 2020 (in lei, if not specified otherwise)

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The residual value of an asset is the estimated amount that the company could derive from the sale of the asset less the estimated sale costs if the asset already has the age and corresponds to the end-of-life conditions of the asset. The residual value of an asset is zero if the Company estimates the use of the asset until the end of its physical life. Residual asset values and their expected useful life are revised and adjusted accordingly at each balance sheet date.

Real estate investments

Real estate investments are real estate properties (buildings) owned by the Company for the purpose of renting or increasing the value or both, and not for:

• being used in the production or supply of goods or services or for administrative purposes; or

• being sold during the normal course of the business.

A real estate investment is initially assesed at fair value. The Company's accounting policy for the subsequent assessment of real estate investments is based on the fair value model. This policy is equally applied to all owned real estate investments. Assessing the fair value of real estate investments is carried out by evaluators that are members of The National Association of Romanian Authorized Valuers (ANEVAR). Thus, the amortization expense is no longer recognized, and the real estate investment is subject to revaluation with sufficient regularity in order to be recognized at fair value. Gains or losses resulting from changes in the fair value of real estate investments are recognized in the profit or loss account for the time period in which they incur.

At the beginning of 2019, the Company transferred several buildings that are owned for the purpose of leasing in the "Real Estate Investment" category.

2.7 Stocks

Stocks are assessed at their acquisition or production cost. The discharge of stocks is done starting with 2019 by using the FIFO method (first in, first out).

End products and goods to be executed are recorded at the actual production cost.

Where necessary, provision is made for slow moving stocks, with physical wear and tear or obsolence. The probable value of completion is estimated on the basis of the selling price without the final costs and sales expenses.

2.8 Commercial accounts receivable

Receivables are recorded at nominal value less depreciation adjustments.

Commercial accounts receivable are amounts owed by customers for the products or sold goods or for the services provided in the normal course of business.

The provision for depreciation of accounts receivable is established when there is objective evidence that the Company will not be able to collect all the amounts owed to it under the

ARMATURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE SEMESTER THAT ENDED ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

original terms of the receivables. Significant difficulties faced by the likelihood of the debtor to go bankrupt or to undergo a financial reorganization, failure to pay or to comply with payment terms are considered to be signs of depreciation of accounts receivable.

The net book value is reduced by the use of a provision account and the amount of the loss is recognized in the statement of income and expenses in "Other earnings / (losses) - net" in the profit and loss account. When a commercial accounts receivable cannot be recovered, it is charged to expenses, with the corresponding cancellation of the provision for accounts receivable. Subsequent recoveries of previously amortized amounts are credited to the profit and loss account.

2.9 Cash and cash equivalents

For the cash flow statement, cash and cash equivalents include cash-in-hand, bank accounts, demand deposit accounts, other short-term financial investments, overdraft facilities and the short-term part of the restricted cash accounts.

Share capital and reserves 2.10

The share capital composed of common shares is registered at the value established on the basis of the Articles of Incorporation and additional acts, as the case may be, as well as on the supporting documents regarding the capital payments.

According to the law, repurchased shares are presented in the statement of assets, liabilities and equity as a correction of the owner's equity.

Earnings or losses relating to the issuing, repurchasing, sale, free of charge transfers or cancellation of the entity's equity instruments are recognized directly in the owner's equity in the "Earnings / or losses related to the equity instruments" section.

2.11 Loans

Short-term and long-term loans are initially recorded at the amount received, net of borrowing costs. In the following periods, the loans are recorded at amortized cost using the effective yield method, the differences between the amounts received (net of costs of acquisition) and the normal repurchase value being recognized in the profit and loss account over the term of the loan agreement.

Commercial liabilities 212

Commercial liabilities are recognized at fair value.

Commercial liabilities are obligations to pay for goods or services that were purchased in the ordinary course of business from suppliers. Supplier accounts are classified as current debts if the payment is to be made within a year or less than a year (or later, within the normal course of business). Otherwise, they will be presented as long-term debts.

ARMATURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE SEMESTER THAT ENDED ON THE 30™ OF JUNE 2020 (in lei, if not specified otherwise)

2.13 Provisions

Provisions are recognized when the Company has a current (legal or constructive) obligation generated by a previous event, it is likely that an outflow of resources will be required to honor the obligation and the liability can be estimated reliably.

2.14 Employee benefits

During the financial year the Company makes payments to the National Insurance Fund on the account of its employees, as they are all included in the public pension system.

With regard to its employees, the Company does not contribute to any other pension or retirement benefits funds and has no other obligations of the kind.

Benefits given at the termination of the activity

According to the Company's Collective Labor Agreement, the employees will receive on account of their retirement a prize equivalent to two basic salaries from the month previous to their retirement.

2.15 Revenue recognition

Revenue is recorded when the significant risks and benefits of owning the property are transferred to the client. Revenue amounts do not include sales taxes (VAT), but they do include the commercial discounts given. Financial discounts given to customers (discounts) reduce the value of the Company's revenue.

The Company recognizes revenues when their value can be measured in a reliable way, when it is likely to produce the future economic benefits to the entity and well as when specific criteria have been met for each of the Company's activities as described below. The amount of the revenues is not considered as measured reliably until all sales contingencies have been settled. The Company bases its estimates on historical data, taking into account the type of customer, the transaction type and the specific elements of each contract.

Revenues from the provision of services are recognized in the period in which they were provided and in correspondence with the execution stage.

Interest revenue is recognized perioadicaly and proportionately, as the revenue is generated, and on the basis of accrual accounting.

Revenues from renting and / or rights to use assets are recognized on the basis of accrual accounting, as per the contract.

FOR THE SEMESTER THAT ENDED ON THE 30™ OF JUNE 2020 NOTES TO THE INDIVIDUAL FINANCIAL SITUATIONS (in lei, if not specified otherwise) ARMĀTURA S.A.

3 TANGIBLE FIXED ASSETS

	and lings Property build	Vehicles and equipment	Furniture, facilities and equipments	Assets under construction	Total
Financial exercise on 1st of January 2020
nitial net book value	24.269.066	611.479	27.964	1.975	24.910.484
Transfers
Entries		2.647			2.647
Exits		-3.215			-3.215
Amortization charges	673 -222.	-57.655	-5.193		-285.521
Revaluation surplus in owner's equity
Discount from revaluation in income and
expenses statement Transfers
Final net book value
on the 30th of June 2020	24.046.393	553.256	22.771	1.975	24.624.395
Cost or evaluation	24.848.803	6.085.075	111.876	1.975	31.047.729
Accumulated amortization	410 802.	.531.819 9	89.105	0	6.423.334
Net book value	24.046.393	553.256	22.771	1.975	24.624.395

ARMĀTURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL SITUATIONS FOR THE SEMESTER THAT ENDED ON THE 30™ OF JUNE 2020 (in lei, if not specified otherwise)

4 INTANGIBLE FIXED ASSETS

	Information	Advances and other intangible
	systems	fixed assets	Total
Financial exercise on 1st of January 2020
Initial balance	9.709		9.709
Entries	894		894
Amortization charges	-2.442		-2.442
Transfers
Closing balance on the 30m
of June 2019	8.161		8.161
Cost	281.162		281.162
Accumulated amortization	273.001		273.001
Net book value	8.161		8.161

STOCKS 5

	30th of June	1st of January
	20220	2020
Raw materials	977.436	1.794.608
Provisions for raw materials	-628.724	-768.923
Production to be executed	692 304	1.404.731
Provisions for goods in progress	-303.520	-601.980
Goods	160.431	160.456
Provisions for goods	-160.431	-160.456
End products	1.458.509	2.010.124
Provisions for end products	-1.180.062	-1.232.219
Other stocks	73.664	163.973
Provisions for other stocks	-51.646	-129.676
Total	1.037.961	2.640.638

ARMĀTURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL SITUATIONS FOR THE SEMESTER THAT ENDED ON THE 30™ OF JUNE 2020 (in lei, if not specified otherwise)

6 CLIENTS AND OTHER ACCOUNTS RECEIVABLE

	30th of June 2020	1st of January 20720
Commercial accounts receivable	1.704.763	866. 155
Minus: provision for the depreciation of the
commercial accounts receivable	-743.225	-743.225
Commercial accounts receivable - net	961.538	122.930
- out of which, in relation to affiliated entities	781.508
Accrued expenses	91.535	16.985
Advance payments to suppliers	405	913
Minus: provision for the depreciation of the advance
payments
Various debtors	7.000	7.000
Other accounts receivable	60.841	521.382
The current portion of the commercial and other
accounts receivable	1.121.319	232.320

7 SUPPLIERS AND OTHER LIABILITIES

	30th of June 20220	1st of January 2020
Commercial liabilities
- out of of which in relation to affiliated entities	9.502.848	9.381 327
	9.413.463	9.280.702
Debts with personnel, contributions, social security	197.116	188.685
Value Added Tax (VAT)	O	O
Other liabilities	65.790	259.809
	9.765.754	9 829 374
Minus the long-term portion: subsidies
The current portion of the commercial debts and other debts	9.765.754	9.829.824

ARMĀTURA S.A. NOTES TO THE INDIVIDUAL FINANCIAL SITUATIONS FOR THE SEMESTER THAT ENDED ON THE 30TH OF JUNE 2020 (in lei, if not specified otherwise)

8 SHARE CAPITAL

The amount of the subscribed capital on the 30th of June 2020 was of 4.000.000 lei (31ª of December 2019: 4.000.000 lei) representing 40.000.000 shares. All shares have the same voting right, with a nominal value of 0.1 lei / share and are traded on the BVB (Bucharest Stock Exchange), 2nd category.

According to the data supplied by the Central Depository, the shareholder structure on June 30th 2020 is presented as follows:

	Number of shares (pcs)	Amount (lei)	Percentage (%)
Hric Beteiligungs Ges.M.B.H Tridelta Heal	10.400.000	1.040.000	26.0000
Beteiligungsgesellschaft	6.708.418	670.342	16.7535
Herz Armaturen Ges.M.B.H Legal persons Natural persons	13.197.352 3.958.010 5.746.220	1.319.735 395.301 574.622	32 9934 9:325 14.3656
TOTAL	40.000.000	4.000.000	100.0000

Administrator,

Akper Saryyev

Drawn up by,

Ec.Rus Dana

tees

S.C. ARMATURA S.A. 400267 Cluj-Napoca, str. Gării nr.19 Tel: +40 264 435 367, Fax: +40 264 435 368 E-mail: office@armatura.ro, web: www.armatura.ro

Declaration

in accordance with Art. 30 of the Accounting Law no. 82/1991

The financial statements as of 30.06.2020: SC Armatura SA County 12 - Cluj Address: Cluj Napoca, Str. Garii, No. 19 Number in the Trade Register: J12 / 13/1991 Form of ownership: 34 - Stock company Preponderant activity - Manufacture of valves Fiscal identification code: RO 199001

Matthias Haider and Akper Saryyev , as Administrators of SC Armatura SA, takes responsability for the semestrial financial statements as of 30.06.2020 and confirms that:

a) The individual financial statements for 30.06.2020 have been prepared in accordance with International Financial Reporting Standards (IFRS) and the order of Ministry of Finance no. 2844/2016.

b) The accounting policies used in preparing the annual financial statements are in accordance with the applicable accounting regulations.

c) The financial statements present fairly the financial position, financial performance and other information of the activity carried.

d) The legal person develops its activity in conditions of continuity.

Signatures,