Supervisory Council of JSC Olainfarm has read the Consolidated and Parent Company’s Annual reports for 2015, as well as Independent Auditors’ Report about it. In addition, the Council has assessed financial position of the Company and Operations of the Management Board during this financial year and hence produced this Report.

The Council values very highly the work conducted by Company’s Board during the last year, as it resulted not only in increased sales volumes but also in record high profits. This has all been achieved in times, when economic situation in several markets important for the Company is facing stagnation or even heavy recession. The Council shares the concerns of the Board regarding declining sales in Belarus, which has for many years been one of the most important markets for the company, therefore the Council urges the Board to take all reasonably justified measures to prevent further declining of sales in this country. The Council is satisfied with very successful cooperation of the Company with the World Health Organization and with very good operations of Company in countries of Central Asia. Both these factors have helped the Company to achieve 4% sales growth despite previously mentioned issues in Russia, Ukraine and Belarus.

During 2015 the Council has paid a very close attention to development of several related companies of the Group. The Council would like to particularly emphasize the rapid and positive developments taking place at Silvanols Ltd. during 2015, when this company, possibly for the first time in its history made significant profit from its basic operations. Also, developments at Latvijas aptieka Ltd. are worth noting as this company keeps increasing number of its pharmacies and in 2015 the number was comfortably above 60.

Consolidated profit of the company in 2015 reached 15.3 million euros, but unconsolidated profit reached 14.6 million euros. Both these numbers are the highest in corporate history and are significantly higher than the results of 2014. Both, consolidated and unconsolidated profit targets have been exceeded, but it should however be noted, that positive foreign exchange fluctuations in early months of 2015, when Russian Rouble gained significant strength have contributed to it. The Council has drawn the attention of the Board that in different circumstances the current margins might be difficult to attain.

Relatively small sales growth, instable situation in several important markets, stagnating or even declining sales of some of Company’s main products have made the Council to again stress the necessity to make greater effort to diversify Company’s sales markets or products offered by companies of the Group. The Council will support any reasonable steps contributing to this, including acquisitions of new companies.

The Council is satisfied that the Board kept its promise previously made to shareholders and after the two year dividend break is suggesting that 17.5% of the profit made in 2015 be paid in dividends. The Council suggests that, although the necessity for the Company to make different investments will not diminish, in order to observe the best interests of shareholders, no more dividend breaks are held in future, should that be possible.

During 2015 the Council of the Company has performed its duties and supervised operations of the Company according to legislation, decisions by the general meeting. The Council has approved financial statements and overviewed operations of Company’s management. During the reporting period 18 Council meetings were held. During these meetings, Board reports, Board composition, plans, planned and actual budgets were reviewed. Agenda items of general meeting was pre-approved. Council found no insufficiencies in Boards operations in 2015. The Board has been in constant consultations with the Council and has taken into account all previously mentioned and other recommendations of the Council targeted at safe further development of the Company.

The Council would like to take this opportunity to thank the Board, all employees of the Company and its partners for successful operations in 2015, to congratulate shareholders with record high results of the last year and to wish successful, stable and positively challenging 2016.

Approved by the Council Meeting on May 6, 2016

Chairwoman of the Council                         Valentina Andrejeva

JSC Olainfarm is one of the biggest pharmaceutical companies in Latvia with more than 40 years of experience in production of medication and chemical and pharmaceutical products. A basic principle of company’s operations is to produce reliable and effective top quality products for Latvia and the rest of the world. Products made by the Group are being exported to more than 40 countries of the world, including the Baltics, Russia, other CIS, Europe, Asia, North America and Australia.

Information prepared by:

Salvis Lapins
JSC Olainfarm
Member of the Management Board
Rupnicu iela 5, Olaine, Latvia, LV 2114
Phone: +371 6 7013 717
Fax: +371 6 7013 777
E-mail: Salvis.Lapins@olainfarm.lv