AB Akola Group

Annual / Quarterly Financial Statement • Apr 8, 2022

INDEPENDENT AUDITOR'S REPORT

To: shareholders of AB LINAS

Report on the audit of the financial statements of AB LINAS and of the consolidated financial statements of the Group

Opinion

We have audited the financial statements of AB LINAS (hereinafter - the Company), and of the consolidated financial statements of AB LINAS and its subsidiary UAB Lino apdaila (hereinafter the Group), which comprise the statement on financial position of the Group and of the Company as of 31 December 2021, the income statement and the statement of other comprehensive income of the Group and the Company for the year then ended, the cash flow statement of the Group and the Company, the statement on changes in equity of the Group and the Company, Notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements of the Group and of the Company present fairly, in all material respects, the financial position of the Group and the Company as of 31 December 2021, the financial performance results of the Group and the Company for the year then ended, and the cash flows of the Group and the Company in accordance with the International Financial Reporting Standards as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements of the Group and the Company section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the requirements of the Law on Audit of Financial Statements of the Republic of Lithuania that are relevant to audit in the Republic of Lithuania, and we have fulfilled our other ethical responsibilities in accordance with the Law on Audit of Financial Statements of the Republic of Lithuania and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the Group and the Company of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Each key audit matter and our response are described below.

1. Transactions with related parties

The Group and the Company, in their financial statements of 2021, disclosed related companies in Note 24. of section 'General' and specified key transactions with the related and associated parties in financial statement's Note 24. All the intercompany transactions are carried out at the prices set out in the contract. We reviewed transfer pricing documentation developed by the management, contracts and transactions with the related parties and evaluated adequacy of the information disclosed in the Note 24.

1. Net realisable value for inventories

As of 31 December 2021, the inventories of the Group and the Company as recorded in the financial statements were worth EUR 5.105 million. The balance of the inventories is significant for the Group; therefore, the management is required to carry out an evaluation with a view to identifying an impairment of obsolete inventory. This is important as the inventory accounts for more than 40 percent of the entire assets of the Group. We have clarified the method used by the management to estimate the net realisable value of the inventory and the impairment of obsolete inventory. We analysed the data of the obsolete inventory, and assessed the sufficiency of the information disclosed in Note 8 of the financial statements of the Group.

Other information

The other information comprises the information included in the Group's annual report, including Corporate Governance Statement, but does not include the consolidated financial statements and our auditor's report thereon. Management is responsible for the other information.

Our opinion on the financial statements of the Group and the Company does not cover the other information and we do not express any form of assurance conclusion thereon, except as specified below.

In connection with our audit of the financial statements of the Group and the Company, our responsibility is to read the other information and, in doing so, consider the other information is materially inconsistent with the financial statements of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

In addition, our responsibility is to consider whether information included in the Group's annual report, including Corporate Governance Statement, for the financial year for which the financial statements are prepared is consistent with the financial statements and whether annual report has been prepared in compliance with applicable legal requirements. Based on the work carried out in the course of audit of financial statements, in our opinion, in all material respects:

• · The information given in the Group's annual report, including Corporate Governance Statement, for the financial year for which the financial statements are prepared is consistent with the financial statements;
• · The Group's annual report, including Corporate Governance Statement, has been prepared in accordance with the requirements of the Law on Consolidated Accounts by Groups of Undertakings of the Republic of Lithuania.

Responsibilities of management and those charged with governance for the financial statement of the Group and the Company

Management is responsible for the preparation and fair presentation of the financial statements of the Group and the Company in accordance with the Law of the Republic of Lithuania on accounting and financial reporting, and International Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of the financial statements of the Group and the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and the Company, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the financial reporting of the Group and the Company process.

Auditor's responsibilities for the financial statements of the Group and the Company

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and the Company as a whole are from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements of the Group and the Company.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We have also:

• Identified and assessed the risks of material misstatement of the financial statements of the Group and the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• Evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Concluded on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements of the Group and the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluated the overall presentation, structure and content of the financial statements of the Group and the Company, including the disclosures, and whether the financial statements of the Group and the Company represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtained sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group and the Company. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We shall communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships UAB "Audito sprendimai" > Code 220258280 > Šeimyniškių st. 16 > 09312 Vilnius > info@auditosprendimai.tr> Tel. +370 5 211 2293>Mob. +370 656 05336

and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the Group and the Company of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

In accordance with the decision made by the General Meeting of Shareholders at 15 May 2020 we have been chosen to carry out the audit of Group's consolidated financial statements. Our appointment to carry out the audit of Group's consolidated financial statements in accordance with the decision made by the General Meeting of Shareholders is renewed every three years and the period of total uninterrupted engagement is five years.

We confirm that our opinion in the section 'Opinion' is consistent with the additional report which we have submitted to the Company and Audit Committee.

We confirm that in light of our knowledge and belief, services provided to the Group are consistent with the requirements of the law and regulations and do not comprise non-audit services referred to in Article 5(1) of the Regulation (EU) No 537/2014 of the European Parliament and of the Council.

In addition to services provided to the Group in the course of audit and disclosed in the annual report or consolidated financial statements, we have not provided any other services except for audit of consolidated financial statements.

Certified auditor Auditor's certificate No 000375 UAB "AUDITO SPRENDIMAI Audit firm's certificate No 001415 Šeimyniškių st. 16, LT-09312 Vilnius 8 April 2022

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