Management Report
In the terms of legal and Bylaws dispositions, the Management of Hypermarcas S.A. (‘Company' or ‘Hypermarcas') submits to its shareholders the Management Report and the individual and consolidated Standard Financial Statements of the Company, as well as the independent auditors report, regarding the fiscal year ended December 31, 2014. Management Statement
In 2014, Hypermarcas advanced some more steps in its sustainable, profitable growth strategy, with strong cash flow generation. We completed in the year a restructuring phase we started back in 2011. More than R$1.0 billion was invested in the consolidation of our operations, modernization of our systems and processes, innovation and product launches. We created a results-driven organization, aimed at value creation to its sharehlders. The results obtained in 4Q14, as well as in the full year of 2014, derive from the implementation of an improvement program carried out under well-coordinated team work through all these years, resulting from deep effort, persistence and perseverance. We managed not only to deliver the financial and economic results we set out for ourselves, but also to consolidate our leading position in the national pharmaceutical industry, surpassing 10% of share in this market. Looking forward, we believe that the company will enter a harvest period, during which it will be able to reap the benefits of the investments we have made over the past few years. Excluding sales related to third-party manufacturing contracts, our Net Revenue accelerated 17.0% to R$1,301.1 million in 4Q14, and we ended the fiscal year of 2014 with Net Revenue of R$4,645.7 million(1), with 11.2% growth on a comparable basis. The company achieved its guidance for the year, reporting Adjusted EBITDA of R$1,106.1 million in 2014, a 10.4% growth compared to 2013. Adjusted EBITDA margin increased by 0.1 p.p., in the same comparison basis, to 23.6% of Net Revenue. That result was achieved in spite of the 17.7% increase of marketing investments compared to the prior year, in nominal terms, to 21.0% of Net Revenue in the fiscal year, in line with the Company's strategy of strengthening the support to its brands in the media, in points of sale and with the medical community. This increase was offset by higher efficiency in the Company's commercial and logistics operations, which led to a 1.6 p.p. reduction in Selling Expenses, as a percentage of Net Revenue. With the reduction of Net Financial Expenses, linked mainly to the hedging of the Company's FX exposure starting from the end of 2013, Net Income advanced 56.9% compared to the prior year, reaching R$402.7 million in 2014. Net Income also advanced in the quarter, with 30.2% increase compared to 4Q13, to R$71.5 million. Both in the fiscal year and in the quarter, the Company increased its Free Cash Flow(2), which grew to R$616.3 million in 2014, against R$452.0 million posted in 2013. In the quarter, the Company posted Free Cash Flow of R$182.3 million, more than double the prior year result. (1) Revenue from the Company's brand portfolio (excluding third-party manufacturing contracts); (2) Free Cash Flow = Cash Flow from Operations + Net Purchase of Property, Plant and Equipment + Purchase of Intangible Assets = R$664.0 million-R$22.7 million-R$25.0 million = R$616.3 million in 2014.

Key Financial Indicators
(R$ million)
Gross Margin -0.8 p.p. (+) Depreciations / Amortizations (+) Other Non-Cash Expenses Adjusted EBITDA (3) Adjusted EBITDA Margin Free Cash Flow (4) EBITDA before non-recurring and non-cash expenses. Please refer to Table 8 of the 4Q14 Earning Release, also available at Free Cash Flow = Cash Flow from Operations + Net Purchase of Property, Plant and Equipment + Purchase of Intangible Assets = R$664.0 million-R$22.7 million-R$25.0 million = R$616.3 million in 2014. Macroeconomic Environment
The year of 2014 was characterized by uncertainties and high volatility in international and domestic markets, with negative impacts over internal economic indicators. In its December 2014 Inflation Report, Brazil's Central Bank estimated that the Brazilian GDP (Gross Domestic Product) would grow 0.2% in the year compared to 2013, pointing out to a growth retraction compared to the prior year, in an environment also marked by rising inflation and consequential interest rate increase as monetary policy tool. In spite of the general performance of the Brazilian economy, the average unemployment rate was kept in low level in 2014, ending the year at 4.8%, the lowest historic rate according the Brazilian Institute of Geography and Statistics (IBGE). In this scenario and in spite of higher inflation in the year, the workers' income remained in a real growth trajectory, advancing 2.7% (discounting inflation) compared to 2013, contributing to the country's salary mass 3.0% expansion in 2014, on the same comparison basis. The maintenance of healthy employment and income levels – combined to a portfolio of daily-use, low ticket-price products – contributed to the resilience of the Company's businesses in 2014. Therefore, Hypermarcas' consolidated Net Revenue advanced 9.9% in the period, compared to 2013. In 2015, the Company will continue on its strategy, based on three pillars, defined by search for productivity gains and operational excellence; demand generation and continuous, relevant innovation, customized to the Brazilian consumer; finally, capillarity in distribution, with strengthened relationship with retailers, broader presence and better exposure of the Company's products in points of sale. Therefore, the Company intends to explore organic growth opportunities, supported by its modern, low-cost operations, in resilient markets under sustainable

expansion. After analyzing the macroeconomic environment and the dynamics of the markets in which it
competes, the Company introduced an Adjusted EBITDA guidance around R$1.2 billion for the fiscal year 2015.
Financial and Operating Performance
The Company's Net Revenue grew 9.9% compared to the prior year, achieving R$4,680.3 million in 2014. In addition, Hypermarcas posted Adjusted EBITDA of R$1,106.1 million in 2014, reaching the Company's guidance for the year. This amount was 10.4% higher than the result posted in fiscal year 2013. Mainly as a function of the reduction of the Company's Net Financial Expenses after the hedging against FX exposure, Net Income growth accelerated in 2014 and was equivalent to 56.9% compared to 2013, amounting to R$402.7 million. In the same period, Free Cash Flow(5) increased R$164.3 million to R$616.3 million in the year. That growth is related to the reduction of the purchase of fixed assets and mainly to the increase of the sale of assets, which amounted to R$156.2 million in 2014. By the end of the fiscal year, the Net Debt/Adjusted EBITDA ratio was reduced to 2.6x from 2.9x in 2013, in line with the Company's deleveraging strategy. Financial Highlights
(R$ million)
1,002.1 1,106.1
Net Revenue
Gross Profit
Adjusted EBITDA
Net Income
5) Free Cash Flow = Cash Flow from Operations + Net Purchase of Property, Plant and Equipment + Purchase of Intangible Assets = R$664.0 million-R$22.7 million-R$25.0 million = R$616.3 million in 2014.

Profile and Business Units
Founded in 2011, Hypermarcas is the largest Brazilian company of branded health and well-being products, with solid presence in Drug, Health, Beauty and Personal Care segments. The company owns a complete portfolio of products and brands, which was built after several successful acquisitions, product launches and intense marketing and innovation work. The company is organized into two business units: Pharma, which concentrates activities related to the
pharmaceutical sector, and Consumer, which focuses on the Beauty and Personal Care markets.
Since 2011, Hypermarcas has adopted a sustainable, profitable, organic growth strategy, with cash flow generation, based on strong brands in leadership position in their respective segments; on efficient, low-cost operations; and on agile, results-driven organization. PHARMA DIVISION IN 2014
Net Revenue in the Pharma division amounted to R$2.584.0 in 2014, with 11.0% growth compared to the prior year. Excluding the contribution of third-party production, growth was 13.5%, above the pharmaceutical market performance in the period. The division continues to increase the demand for its products, with new record market share, which climbed to 10.2% by the end of December, according to data from IMS Health. In 4Q14, the division shut down the activities in the Rio de Janeiro plant, after the transfer of the remaining production to the pharmaceutical complex in Anápolis, which has been posting productivity gains. With the deactivation of the former Mantecorp plant, the real estate was alienated by R$135.0 million. During the year, the division improved processes and strengthened its management process, with better monitoring of managerial indicators. In some areas, such as medical demand generation, such changes have already started to pay off, with growth of the prescription line (RX) both in terms of demand and prescriptions. In sales and merchandising, particularly in Category Management projects, the changes strengthened partnerships with retailers, leading the recognition of Hypermarcas as the Best Supplier of the Year by Abrafarma – the association that gathers the main pharmaceutical retail chains in Brazil. For the second year in a row, the trade marketing team of the division was also acknowledged as the best in activity in the pharmaceutical channel in the country, also according to Abrafarma. The year was also marked by the improvement of the innovation index of the division to 10%. This indicator measures the percentage of sales deriving from products launched over the past three years. A highlight among the new launches, the pill version of Addera D3 (vitamin D) was confirmed as the bestselling launch in the Brazilian market in 2014, with demand surpassing R$41.7 million in 12 months. The performance of the division in the quarter also results from the selective increase of marketing investments in the division, with higher efficiency on the allocation of invested capital. In addition to the expansion of the medical demand generation team and the increase of point-of-sale investment, the Company also had more than 20 OTC brands on radio and TV during the year, including new ads for Atroveran, starred by the actress Grazi Massafera, Estomazil Pastilhas and Estomazil Efervescente, which premiered in 4Q14. CONSUMER DIVISION IN 2014
The Consumer division posted Net Revenue of R$2,096.4 million in 2014, with 8.6% growth compared to the prior year. In 4Q14, Net Revenue grew 14.5% compared to 4Q13, as a result of the strategy of offering products with attractive value propositions to clients and consumers, particularly in selected high-volume categories. That strategy has been leading to gains of market share, which climbed to 8.5% in the last two months of the year, according to information from Nielsen. During the year, the division advanced in the program of restructuring its operations, with only one of the diaper plants to be deactivated, which should be closed by the first half of 2015. In parallel, production lines installed at Senador Canedo have already started to indicate productivity improvements, with gradual reduction of unit costs and increase of produced volumes. In the same manner, the consolidation of the distribution operations in the Distribution Center in Goiânia has been contributing, since April 2014, to the improvement of the logistics efficiency, with impacts on the reduction of commercial expenses and freights, as percentage of Net Revenue. In addition, the reorganization of the management of research and development activities for Consumer products, implemented since 2012, has been contributing for the maintenance of the innovation index in high levels, reaching 79% in the fourth quarter of the year. Among the main launches of the second half of the year, the new Cremer Magic Care diapers stand out. The new diapers are aimed especially at the intermediate value segment of the market, in which the Company has been reporting its highest demand growth. To support these recent launches, the division increased its marketing investments, both in mass media and in point-of-sale activities. In 4Q14, new campaigns were broadcasted for the Pom Pom diapers, for Zero-Cal sweeteners and the new Cenoura & Bronze sun care line. In parallel, the Company has been broadening its trade marketing activities, with new Category Management projects in markets in which it has leading brands, such as body care (with Monange and Paixão), nail polish (with Risqué), men's care (with Bozzano), and incontinence diapers (with Bigfral), as well as in some categories still under development, such as infant diapers (with Pom Pom, Cremer Disney and Sapeka). The division is also exploring opportunities for improving the distribution of its products, with expansion of the semi-exclusive distributors network, which carry a more balanced portfolio of the Company's products and offer more visibility of demand and inventories in the channel, with electronic information sharing. Such partners are already accountable for about half of the sales of the division in the indirect channel. In addition to broadening the distribution in regions they cover, these partners also have commitments related to the merchandising execution in indirect channel stores, contributing to the improvement of the execution in the points of sale. Portfolio
In slightly more than a decade, Hypermarcas consolidated an exceptional portfolio of number-one and number-two brands in the Health and Well-being markets. The strategy of acquisitions of high-growth potential brands resulted in one of the most comprehensive portfolios in Brazil. In the pharmaceutical segment, the Company owns the brands Addera D3, Atroveran, Benegrip, Biotônico Fontoura, Doril, Engov, Episol, Epidrat, Estomazil, Gelol, Histamin, Lacto-Purga, Mirador, Neo Química Genéricos, Polaramine, Rinosoro, and others. Consumer products brands include Adocyl, Avanço, BigFral, Biocolor, Bitufo, Bozzano, Cremer Disney, Cenoura & Bronze, Finn, Jontex, Leite de Colônia, Monange, Olla, Paixão, Pom Pom, Risqué, SaniFill, Sapeka and Zero-Cal. In addition to undergoing continuous innovation and development process, this portfolio is constantly revitalized with significant marketing investments. In 2014, the Company directed 21.0% of its Net Revenue to strengthen the presence of its brands in the media, points of sales and with the medical community. Research and Development
In 2014, Hypermarcas accelerated the activities of innovation and renewal of its comprehensive portfolio of brands and products. During the year, the Company's drug portfolio was increased by 30 new products, 11 of which generics, including one omeprazole, one of the most relevant molecules in the Brazilian market. In the nonprescription line, the Company launched Migrainex, for treatment of headaches and migraines, as well as a brand extension of the Epocler line. In dermocosmetics, the Company launched Glycare (glycolic acid), for facial cleansing, and Episol SPF 100 sunscreen. In branded generics, a product was launched: Neocoflan aerosol (diclofenac diethylamine), for treatment of muscle inflammation. In the Consumer division, the Company intensified the pace of relevant launches, with new formulation and packaging for some of its main brands, including Brazil's traditional men's care brand Bozzano. Risqué's nail polish line was completely renewed, with 100% hypoallergenic formulation and new brush applicator. In addition, Cenoura & Bronze's sun care line was the first mass retail brand to offer infrared radiation protection, with the infra-V technology. In both business divisions, there was expansion of innovation indices: in Pharma, to 10%, compared to 8% in 2013, indicating the percentage of sales resulting from products launched over the past three years; in Consumer, to 79%, indicating the percentage of sales resulting from products launched over the past two years. In 2014, the Company and its subsidiaries Cosmed Indústria de Cosméticos e Medicamentos S.A. and Brainfarma Indústria Química e Farmacêutica S.A. signed an agreement with Finep in order to support the group's innovation, research and new product development activities. The total amount in this line may reach R$290.7 million, of which R$72.2 million have already been withdrawn. Investments
Hypermarcas invested about R$178.9 million in fixed assets in 2014, mainly in projects to consolidate its operating platform in the state in Goiás. By the end of the year, more than 95% of the operations of the Consumer division had already been transferred to that state. With the end of activities in Rio de Janeiro, the Pharma division ended the year with its operating platform virtually consolidated in the Anápolis pharmaceutical complex. Human Resources
The Company disseminated through all its hierarchical levels its Code of Ethical Conduct, which was composed in a collaborative manner by a group representing several areas of the Company. The guidelines of the Code orientate, alongside with the corporate principles defined by the Company's Mission, Vision, Values and Behaviors, all relationships between the Company, its employees and their several stakeholders In addition, the Human Resources department focused on the development of leadership, by means of programs and people meetings, aiming at improvement of its leaders' performance and effective use of their potential. The following table presents the number of Hypermarcas' employees in the past fiscal years: Employees
Administration and Sales Total Employees
Social Responsibility Policy
The Company believes that its employees and the surrounding society are an integrating part of its corporate strategy and thus its Social Responsibility Policy comprises initiatives in several fronts, outstanding the following ones:  Social Assistance: Child Development Center: The Company hosts a daycare institution in its subsidiary located in Anápolis, Goiás, for its employees' children aged zero to six. The facilities are properly equipped to attend to children needs, including attention from qualified nurses and educators, as well as supervision from nutritionists.  Health and Safety: Pregnancy Program: Supports pregnant employees, providing information on procedures for a healthy pregnancy. On the eight pregnancy month, the employee receives a Baby Kit, composed of diapers and other products for infants of brands Pom Pom and York. Motiva Program: Project of health management by which a specialized health solutions team offers medical assistance to any employee and their registered dependents that are in treatment for chronic pathologies.  Life Quality, Education and Inclusion through Sports: Life Quality Program: Includes integration activities, social and sporting events, workplace gymnastics and illness prevention initiatives. Praia Segura Program: Cenoura & Bronze supplies uniforms, in addition to 8,000 sunblock packs, plus equipment that are necessary for the activities of lifeguards in the program, operated by the Sea Corps of Firefighters of the State of São Paulo. The brand also supports the distribution of educational materials and child ID tags as means of intensifying an accident prevention campaign. The project is active during the summer season in 316 beaches in São Paulo, which attract more than 15 million tourists annually. Virna Vôlei Project: founded by Virna Dias, multi-champion with Brazil's Women's Volleyball team, and sponsored by Cenoura & Bronze since 2011. Currently, the project supports 60 children in need from the Pavão e Pavãozinho favela complexes, in Rio de Janeiro. Paralympic Sitting Volleyball: Sponsorship to the men's and women's sitting volleyball teams of CPSP – Clube dos Paraplégicos de São Paulo, with brands Bozzano, Avanço and Monange. About 250 people with connections to CPSP benefit from the sponsorship. Environmental Protection
The activities of Hypermarcas and its subsidiaries are subject to the Brazilian environmental law in the federal, state and municipal jurisdictions. The Company understands its responsibility and complies rigorously with current legislation. In that sense, it adopts corporate policies and programs, in addition to maintaining initiatives related to environmental education, rational use of water, gas emission monitoring and solid waste management, as well as actions to preserve a stream (in the Piteiras stream, in Anápolis, Goiás). In addition, the Company invests in projects targeting the sustainability of its products and also works to reduce its impact on regions where it operates, seeking to consume less and less finite natural resources, generate fewer pollutants and reuse more inputs. The company monitors key environmental indicators (water, energy, effluents and generation/disposal of hazardous and non-hazardous waste), according to national and international best practices. In 2014, the Pharma division increased the capacity of its Effluent Treatment Station in Anápolis from 17.4 cubic meters per hour para 40.0 cubic meters per hour, and reduced from 0.7 liters per produced unit to 0.5 liters per produced unit the average water consumption indicator. In addition, the average energy consumption indicator dropped from 0.12 kW per produced unit to 0.10 kW per produced unit in 2014. In the Consumer division, the Company carries out an initiative that incentivizes the collection and correct disposal of after consumption nail polish bottles. Collected material is co-processed and transformed into energy source for the cement industry, reducing the environmental impact caused by the use of landfills. There are five collectors in the shape of the traditional bottles of the Risqué brand allocated in stores of the retail chain Ikesaki. Since the start of the pilot project, more than 10,000 bottles were collected and processed. Capital Markets
The outstanding shares issued by Hypermarcas are traded under the ticker HYPE3 at BM&FBovespa's Novo Mercado – the segment of the Brazilian stock exchange with the highest corporate governance standards in the Brazilian market – and compose the portfolios of the following stock indices: By the end of 2014, the total number of outstanding shares issued by the Company reached 632,100,787 common shares, of which 58.87% compose the Company's free float. With average daily traded volume of R$40.3 million, HYPE3 shares ended the year quoted at R$16.65, with 5.7% loss compared to the end of 2013. In the same period, the Ibovespa index lost 2.9%. The Company has a Level I ADR (American Depositary Receipts) Program, which are traded in over-the-counter markets in the United States. On December 30, 2014, the Company's Board of Directors approved the launch of a Stock Purchase Option Program (Program 2014-A), within the scope of the Company's Stock Purchase Option Plan approved in the Extraordinary Shareholders' Meeting held on October 10, 2011 (Plan III), having as beneficiaries certain executives and employees. The aggregate volume of the program corresponds to up to 650,000 common shares, or up to 0.102% of the Company's capital stock. The options may be exercised until the final term of eight years, by the exercise price of R$16.48. Dividend Policy
The Brazilian Corporation Law and the Company's By-laws require the shareholders' Ordinary General Meeting to be held up to April 30 of each year where the shareholders must, among other things, decide about the distribution of the annual dividends. All shareholders are entitled to receive the dividends on the date when the dividends were declared. The Company's shareholders will decide about the Board of Directors proposal to allocate the net income for the prior year. The Brazilian Corporation Law defines "net profits" for any fiscal year as net income for that fiscal year, net of any accumulated losses from prior fiscal years, income tax and social contribution taxes and any amounts allocated to the participation of its employees and management in Hypermarcas's net profits in such fiscal year. Hypermarcas mandatory dividend is of at least 25% of the adjusted net income, under the terms of the Brazilian Corporate Law and the Company's By-laws, based on unconsolidated financial statements after the constitution of reserves according to the law. The yearly distribution of dividends, including dividends in excess of the minimum mandatory dividend, requires approval by a majority vote of the holders of Hypermarcas's common shares and will depend on many factors. These factors include the Company's results of operations, financial condition, cash requirements, future prospects and other factors deemed relevant by Hypermarcas's Board of Directors and shareholders. History of Dividend Payment
In 2013, Hypermarcas distributed R$102,111,676.40 in additional dividends related to the reversion of expansion and profit retention reserves accumulated in fiscal years prior to 2012, as decided by the Ordinary Shareholders Meeting convened on April 30, 2013. The amount was equivalent to R$0.163012572 per common share and was paid to shareholders on May 10, 2013. There was no distribution of dividends relative to the fiscal years of 2013 and 2012. In addition, there was no Management proposal for the distribution of minimum mandatory dividends relative to 2014. Issuance of Debentures
On April 28, 2014, the Company carried out its 7th Public Issuance of Debentures, in the total amount of R$400.0 million. The issuance was composed by a single series of 400 debentures with nominal value of R$1.0 million, with remuneration of 110% of the accrued fluctuation of the average daily rates of the overnight DI (Interbank Deposits) and maturity date on April 10, 2019. Spin-off and Incorporation
Partial Spin-off of Hypermarcas and Incorporation of Cosmed Shares
On December 22, 2014, a partial spin-off of Hypermarcas, with the incorporation of the spun-off equity, which corresponded to assets and liabilities related to the manufacturing and commercialization of certain drugs of pertaining to the manufacture and commercialization of certain drugs currently manufactured on the unit located at Jacarepaguá, to its whole-owned subsidiary Cosmed Indústria de Cosméticos e Medicamentos S.A. ("Cosmed"), with subsequential incorporation of shares issued by Cosmed by the Company. By the end of such transactions, the Company's capital stock and the number of outstanding share remained unchanged. Arbitration Panel
In accordance to the Company's By-laws, disputes regarding Bylaws, the Novo Mercado Rules, the Brazilian Corporations Law number 6404/76, the norms edited by the National Monetary Council, by the Central Bank of Brazil and by the Securities and Exchange Commission of Brazil, BM&FBovespa's Rules and other norms applicable to the functioning of capital markets in general must be solved by arbitration, to be conducted in the form of the Rules of the Market Arbitration Panel Rules, established by BM&FBovespa. Relationship with Auditors
Pursuant to CVM Rule number 381/2003, we inform that in December 4, 2013, we contracted our independent auditors for providing services other than those related to external audit; however, those services represent less than 5% of the global remuneration of the external audit services. The services refer to the review of Corporate Income Tax forms (DIPJ) and Social Contribution on Net Income forms, in addition to DIPJ forms of the Company and its subsidiaries, referring to calendar-years 2013. The contract also includes training course about the fulfillment of main DIPJ forms for 2014, calendar-year 2013. The provision of such services has duration of less than one year. The Company's policy in regard to contracting external audit services assures that there is no conflict of interest, loss of independence or objectiveness of the services eventually provided by independent auditors and not related to external audit services. Our external auditors declared to the Management of the Company that the services provided, which correspond to verification of adherence to fiscal regulation, do not influence the independence and objectiveness which are necessary for the provision of external audit services. HYPERMARCAS S.A.
São Paulo, February 6, 2015.

Source: http://hypermarcas.riweb.com.br/Download.aspx?Arquivo=BRfFzDol3mSgzflJwAwH0A==

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