JSC DITTON PIEVADĶĒŽU RŪPNĪCA Reg. No. 40003030187 Višķu St.17, Daugavpils, LV-5410, Latvia

Annual Report for the Year 2021 (Translation from Latvian)

and Corporate Governance Report PREPARED IN COMPLIANCE WITH THE LAW ON ANNUAL ACCOUNTS AND CONSOLIDATED ANNUAL ACCOUNTS

and Independent Auditors` Report (01.01.2021 – 31.12.2021)

Daugavpils 2022

PAGE

Information about the Company………………………………………	3 - 5
Information on the Management Board and Council members …………	6
Report on Corporate Governance ………………………………………	7-9
Council report ……………………………………………………………	10-12
Management report ……………………………………………………	13-16
Financial statements:
Income statement …………………………………………………	17
Balance sheet ………………………………………………………	18-19
Cash flow statement …………………………………………	20
Statement of changes in equity ………………………….…………	21
Appendix to the Annual Report ………………………….…………	22-39
Independent auditor's report ……………………………………………	40-44

INFORMATION ABOUT THE COMPANY

Company name	Ditton pievadķēžu rūpnīca
Legal status	Joint Stock Company
Registration number	40003030187
Registration in Register of Enterprises	Rīga, 03.10.1991.
Registration in Commercial Register Office	Rīga, 29.08.2003.
NACE code	28.15 Manufacture of bearings, gears, gearing and driving elements 68.2 Renting and operating of own or leased real estate 68.3 Real estate activities on a fee or contract basis
Legal address	Višķu St. 17, Daugavpils, LV-5410, Latvia
Fixed capital Number of Public bearers shares Nominal value of one share	10 360 000 EUR 7 400 000 1.40 EUR
Chief Accountant	Jūlija Lavrecka, p.c.010891-10200
Reporting year	01.01.2021– 31.12.2021
Independent auditors and their address	Aktīvs M Audits Ltd. Reg. No. 42403014203 Vienības gatve 99-7, Riga, LV-1058 License No.40 Sworn auditor of the Republic of Latvia Marija Poriete
	Certificate No.6

Persons in charge for drawing up of the financial report: Boriss Matvejevs, phone +371 65402333, e-mail [email protected] Jūlija Lavrecka, phone +371 65402316, e-mail [email protected]

INFORMATION ON SHARES AND SHAREHOLDERS

SHARE PRICE TRENDS

The Company's paid up share capital is EUR 10,360,000, divided into 7,400,000 bearer shares. Each share has a nominal value of EUR 1.40, and each share carries one voting right, the right to one dividend share and one liquidation quota of the total amount of dividends or liquidation quotas, which is equal to the total amount of the shares of this category. The Company's shares are financial instruments (i.e., transferable securities), the circulation of which is regulated by the Commercial Law of the Republic of Latvia (RoL), the Law on the Financial Instruments Market of the RoL and the regulations of the organizer of the regulated market of financial instruments.

SHAREHOLDERS OWNING MORE THAN 5% OF THE COMPANY'S TOTAL SHARE CAPITAL*

Given name, surname or Name	Shareholding,
	%
Eduards Zavadskis	20,00
Vladislavs Drīksne	19,92
MAX Invest Holding SIA	13,63
Maleks S SIA	13,56
SIA "DVINSK MNG"	9,46

* Note: (1) The Company is not keeping a share owner and/or a shareholder register. The above information is provided and updated on the basis of the shareholders list dated 31.05.2021 for the extraordinary shareholders' meeting of AS Ditton pievadķēžu rūpnīca, which was received from Nasdaq CSD under the Commercial Law of the RoL and the Law on the Financial Instruments Market, taking into consideration the statements of shareholders on the acquisition or loss of their holdings submitted to the Company under Section 61 of the Law on Financial Instruments Market.

(2) At 31.12.2021, there was no information at the disposal of the Company regarding the allocation of the shares between the heirs of E. Zavadskis (20,00 % in total) and V.Drīksne (19,92% in total) and the accounting entries in their financial instruments accounts under Section 125 of the Law on the Financial Instruments Market.

There is no additional information and/or regulations governing the procedures specified therein at the disposal of the Management Board provided for in the rest of Section 56.1 "Additional Information to be Included in the Annual Report" of the Law of the Financial Instruments Market (Paragraph one, sub-clauses 2), 3), 4), 5), 6), 7), 8), 9), 10) and 11).

COMPANY BACKGROUND

Joint stock company AS Daugavpils pievadķēžu rūpnīca was established as a result of the privatisation of the State Daugavpils Driving Chain Factory under the Cabinet Order.No. 375-r of 9 August 1994 and the resolution of the Management Board of the state joint-stock company VAS Privatizācijas aģentūra of 2 March 1995 (Minutes No. 25), by reorganising the state-owned company into a joint-stock company.

Upon registration in the Register of Enterprises on 30 August 1995 (registration number 000303018), the Company acquired the status of a public joint-stock company.

On 8 January 2002, AS Daugavpils pievadķēžu rūpnīca was renamed as joint-stock company AS Ditton pievadķēžu rūpnīca (registration No. 40003030187).

On 29 August 2003, AS Ditton pievadķēžu rūpnīca was registered in the Commercial Register (uniform registration number 40003030187).

On 23 January 2015, the Company's share capital was denominated in accordance with the Law on the Procedure for Introducing the Euro of the LoR.

The Company is the successor of rights and obligations of the State Daugavpils Driving Chain Factory under the Terms and Conditions of Privatization, and it carries out its activity based on its Articles of Association.

Some of the types of activity the Company is engaged in are:

manufacture of parts and accessories for motor vehicles;
repair of fabricated metal products, mechanisms and equipment;
installation of production equipment and devices;
sale of motor vehicle parts and accessories;
sale, maintenance and repair of motorcycles, the parts and accessories thereof;
manufacture of metal constructions;
manufacture of metal tanks, reservoirs and containers;
forging, pressing, stamping and rolling of metal; powder metallurgy;
mechanical treatment of metals, treatment and coating of the surface;
manufacture of other fabricated metal products;
warehousing and storage facilities;
buying and selling of owned real estate;
leasing and facility management of owned or leased real estate;
activities with real estate on a contract or fee basis;
building facility management and operating activities;
and other.

INFORMATION ON THE MANAGEMENT BOARD AND COUNCIL MEMBERS

THE MANAGEMENT BOARD

Chairman of the Management Board Rolands Zarāns, re-elected on 14.01.2019 (elected since 15.01.2014). Member of the Management Board Jevgēnijs Koršenkovs (until 22.07.2021).

Information about the shares held by the members of the Management Board

Members of the Management Board	Owned shares *
	Number	%
Rolands Zarāns	none	-
Jevgēnijs Koršenkovs	none	-

COUNCIL

Chairman of the Council Boriss Matvejevs, re-elected on 18.06.2020 (elected since 05.05.2005). Members of the Council Genādijs Zavadskis, re-elected on 18.06.2020 (elected since 05.02.2017). Oto Dzenis, elected on 18.06.2020. Aleksandrs Sokolovs, elected on 18.06.2020.

Information about the shares owned by the members of the Council

Members of the Council	Owned shares*
	Number	%
Boriss Matvejevs	none	none
Genādijs Zavadskis	none	none
Oto Dzenis	none	none
Aleksandrs Sokolovs	700 000	9,46**

Information about the professional experience of the members of the Management Board and Council can be found on the website www.dpr.lv.

* as at 31.05.2021

____________________

** beneficiary of the Shareholder DVINSK MNG, Ltd.

STATEMENT ON CORPORATE GOVERNANCE

§ 1

In arranging for the Issuer's corporate governance, the Management Board and the Council are guided by the Corporate Governance Principles and Recommendations approved by AS Nasdaq Riga (formerly "AS Nasdaq OMX Riga"), which are effective from 1 June 2010, as well as take into consideration the resolutions by the shareholders' meetings.

Information on the application of the principles referred to above and relating to the competence of shareholders is presented to the shareholders at the ordinary annual shareholders' meeting of, when approving the Annual Report. The shareholders have the opportunity to familiarise themselves with the information contained in the Corporate Governance Principles and Recommendations on the website of AS Nasdaq Riga: http://www.nasdaqbaltic.com/files/riga/corp_gov_May_2010_LV.pdf or by submitting the relevant request in writing to the Issuer.

Information on the principles and procedures of application of the Corporate Governance Principles, limitations, exceptions and the practice of the application thereof in 2021 is presented in Annex "Report on compliance with the corporate governance principles" hereof. The shareholders may familiarise themselves with the information presented in the notes to the Annual Report, on the website of NASDAQ CSD, under the section of the relevant Issuer, in the Official System for Central Storage of the Regulated Information, and on the Issuer's website.

§ 2

The internal control system, including internal audit required under the Law on the Financial Instruments Market and the Issuer's Articles of Association, is organised in accordance with the Corporate Governance Principles. Report of the Audit Committee on the internal audit concerning the risk control and management procedures in the course of preparation of the Annual Report for 2021, is provided to the ordinary general meeting of shareholders and added to the file of the materials thereof.

Effectively, the Issuer has established a multi-tiered system for the preparation, control and risk management of the Annual Report:

Tier 1: Preparation of the Annual Report and internal control at the structural units of the Issuer;

Tier 2: Review and approval of the Annual Report on the part of the Management Board of the Issuer;

Tier 3: Audit of the Annual Report by a sworn auditor under the procedure prescribed in the Law on the Annual Financial Statements and Consolidated Financial Statements, the law On Accounting, the Commercial Law and the Law on the Financial Instruments Market of the Republic of Latvia;

Tier 4: The examination of the Annual Report of the Issuer's Council and reporting on the overall performance of the Management Board and the Issuer, which is presented in the report;

Tier 5: The examination of the Annual Report, the efficiency of the internal control and risk management, verification of the independence of the sworn auditors and elimination of deficiencies, which is carried out by the Company's Audit Committee, in accordance with the Law on the Financial Instruments Market, the Regulation (EU) No 537/2014 of the European Parliament and of the Council and the rules of procedure of the Company's Audit Committee, for reporting to the general meeting of shareholders;

Tier 6: Approving the Annual Report at the general meeting of shareholders of the Issuer.

It is obvious that the activity of the bodies specified in Tiers 3, 4, 5 and 6 is independent of the Management's Board of the Issuer and ensures the accuracy and objectivity of the Annual Report.

§ 3

Under the provisions laid down in Sections 56.1 and 56.2 of the Law on Financial Instruments Market, the Issuer is required to provide additional information as follows:

The following shareholders have a significant interest in the Issuer:

Eduards Zavadskis – 20.00%
Vladislavs Drīksne – 19.92%
SIA MAX Invest Holding – 13.63%
SIA Maleks S – 13.56%
SIA DVINSK MNG – 9.46%

(2) At 31.12.2021, there was no information at the disposal of the Company regarding the allocation of the shares between the heirs of E. Zavadskis and V.Drīksne and the accounting entries in their financial instruments accounts under Section 125 of the Law on the Financial Instruments Market.

The Issuer does not have any shareholders with special control powers or limited shareholder voting rights, which are carried by their shares.

The Issuer has put in place the principles and procedures of amending the foundation documents (Articles of Association) and making changes to the composition of the Management Board, including the rotation and/or removal thereof from the office, which are applied in accordance with the provisions of the Financial Instruments Market Law, Commercial Law, the Civil Law and the Labour Law of the RoL, the Law on the Enterprise Register of the Republic of Latvia, the Law on Legal Force of Documents, the declaration on the objectives of the activity, development objectives and mission of AS Ditton pievadķēžu rūpnīca, and the assessment of the said processes, the rules of procedure of convening and holding the shareholders' meetings, other laws and regulations as well as the internal documents of the Issuer approved by the shareholders.

The rights of the members of the Management Board of the Issuer are laid down in the Commercial Law of the Republic of Latvia and the Issuer's Articles of Association, as well as laid down in the scope of work of the Management Board. No additional powers, such as powers to issue or buy back shares have been conferred on the Board Members.

§ 4

The management bodies of the Issuer are:

The general meeting of shareholders,
The Council of the Issuer,
The Management Board of the Issuer.

Each of the bodies has the competence (powers), rights and duties of its own as laid down in the laws of the Republic of Latvia, Regulations and Directives of the European Union, the Corporate Governance Principles, the Issuer's Articles of Association and internal documents, including in the rules of procedure of the Council and the Management Board and in the resolutions of the general meetings of shareholders. The management bodies are independent bodies.

The independence of the resolutions passed by shareholders is ensured under the provisions (Sections 268; 273-286) of the Commercial Law of the RoL, the Law on the Financial Instruments Market (Sections 54, 54.1 - 54.5), the Corporate Governance Principles, the Issuer's Articles of Association, the Declaration of the activity, development objectives and mission of AS Ditton pievadķēžu rūpnīca, and the assessment of these processes, the rules of procedure of convening and holding the general meetings of shareholders, other laws and regulations as well as the internal documents of the Issuer.

According to the Commercial Law, the Law on the Financial Instruments Market, the Articles of Association, the Declaration of the activity, development objectives and mission of AS Ditton pievadķēžu rūpnīca, and the assessment of the said processes, the rules of procedure of the Council and Management Board, other laws and regulations as well as the Issuer's internal documents, the members of the Council and Management Board are independent in discharging their duties and accountable to the shareholders in accordance with the requirements of the law.

The Issuer arranges for and implements the procedures related to the nomination of the candidates of the Council and Management Board and voting for the candidates of the Council and

Management Board, as well as related to the appointment and registration of the members of the Council and Management Board in the Register of Enterprises of the LoR in accordance with the provisions (Sections 268, 284, 292, 296 and 305) of the Commercial Law of the Republic of Latvia on the Law on the Financial Instruments Market (Sections 54, 542 and 546), the provisions of the rules of procedure of convening and holding the general meetings of the shareholders of the Issuer as well as the rules of procedure of the Council and Management Board. Remuneration of the Council and the Management Board members is made in accordance with the Remuneration Policy, which was adopted and approved by the shareholders' meeting, pursuant to the Financial Instruments Market Law of the Republic of Latvia, Directive (EU) No 2017/828 of the European Parliament and of the Council of 17 May 2017. The Remuneration Policy determines the remuneration criteria, taking into account the Company's indicators, reflects the Company's strategic long-term interests and involves Shareholders in the processes of stimulating the Company's management institutions. The internal documents of the Issuer are available on the Issuer's website www.dpr.lv.

The composition of the members of the Council and Management Board is specified on page 6 hereof, as well as on the Issuer's website www.dpr.lv.

હ ર

Due to COVID-19 pandemic and general situation on the markets the risks of Issuer's operating activity have appeared and became actual in the year 2020, 2021 (detailed they are described in the Risk Management Policy of the Joint Stock Company Ditton pievadkežu rūpnīca, Issuer's Management Report and Report of the Council, as well as in the notice of the Management Board in The Central Storage of Regulated Information System, on websites of the Exchange www.nasdaqbaltic.com and of the Issuer www.dpr.lv). Issuer's institution will update and adopt Corporate Governance Principles to get over the negative effect of COVID-19 pandemic, to decrease risks and to optimize terms of recovery of Issuer's operative commercial activity.

The Issuer's operating indicators for the year 2021 show, that the procedures implemented by the Issuer were reasonable and proportionate in relation to potential risks and market conditions and in general gave an opportunity to stabilize the Issuer's positions and to increase the efficiency of its operation.

\$ 6

After the reporting year was closed, additional sanctions were imposed on natural and legal persons of the Russian Federation and the Republic of Belarus in the light of known political developments in the world. The Issuer's activities in these market segments in 2021 accounted for up to 54% of the Issuer's total turnover. Despite the fact that the lists drawn up within the framework of sanctions do not contain the Issuer's partners and natural persons associated with them, the Issuer does not have sufficient information to fully assess the impact of the measures implemented within the sanctions policy on the Issuer and announce its future forecasts. Based on the Issuer's corporate governance principles and acting in accordance with the legislation of the Republic of Latvia and the European Union, procedures were initiated to assess relations with the cooperation partners of these regions, and negotiations were also initiated with state and municipal authorities, the results of which will be announced in accordance with the principles and procedures for the disclosure of inside information.

Chairman of the Management Board AS Ditton pievadķēžu rūpnīca 27 April 2022

Rolands Zarans

REPORT OF THE COUNCIL on the Annual Report for 2021

Issued in accordance with the Commercial Law and the Articles of Association of the Company, and approved by the resolution of the Council of AS Ditton pievadķēžu rūpnīca on 27 April 2022 (Minutes No. 240)

The Council of AS Ditton pievadķēžu rūpnīca herewith declares that the report of the Management Board of the Company to the ordinary shareholders' meeting and the submitted Annual Report for the year 2021 fairly represents the performance of the Company's commercial activity and the financial position thereof.

During the reporting period, the Management Board was engaged in managing the operational and production activities and represented the Company in accordance with the existing laws of the Republic of Latvia, the Articles of Association of the Company, the Declaration of the activity, development objectives and mission of AS Ditton pievadķēžu rūpnīca, and the assessment of the said processes, the resolutions of the general meeting of shareholders and the recommendations of the Council, as well as in accordance with internal Company's documents, procedures and rules approved by the Shareholders.

No objections against the Management Board or the individual members thereof were raised and submitted either by the shareholders or the members of the Council. There is no information at the disposal of the Company on the violation of the principles of independence on the part of the members of the Management Board.

At the ordinary shareholders' meeting of the Company held for approving the Annual Report for the year 2020 on 4 June 2021, the performance of the Management Board in the previous period was rated as satisfactory and deemed appropriate for the Company's objectives and mission, as well as the actual market circumstances. No claims or requests were made in connection with the activities of the Management Board.

The Company's performance for the year 2021 reflected the actual situation of the Company's circumstances as well as the global economic conditions. The causes, circumstances and terms and conditions underlying these indicators are set out in the Management Report.

The Council of the Company represented the interests of the shareholders in the periods between the shareholders' meetings, and in accordance with the global economic conditions prevailing during the reporting period, and supervised the activity of the Management Board within the scope set forth in the Articles of Association of the Company and the laws of the Republic of Latvia.

All in all, six meetings of the Council were held during the reporting period.

At the meetings of the Council the following matters were reviewed:

− on reviewing Company's Annual Report for the year 2020 and report of the Management Board on Operating of the Management Board and Results of Company in 12 months of the year 2020;
− on approval of the Report of the Council to the Annual Report for the year 2020;
− on reviewing and approving the agenda of the ordinary shareholders' meeting (4 June 2021);
− on reviewing draft decisions on the issues of the agenda of the announced ordinary shareholders' meeting on 04.06.2021;
− report of the Management Board on Operating of the Management Board and Results of Company in 3 months of the year 2021;
− on approval of the Company's Financial Report for 3 months of the year 2021;
− on recall of the Management Board member Jevgēnijs Koršenkovs in accordance with the Article 306 of the Commercial Law of the Republic of Latvia;
− report of the Management Board on Operating of the Management Board and Results of Company in 6 months of the year 2021;
− on approval of the Company's Financial Report for 6 months of the year 2021;
− report of the Management Board on Operating of the Management Board and Results of Company in 9 months of the year 2021;
− on approval of the Company's Financial Report for 9 months of the year 2021.

In addition to the above-mentioned meetings, five Council meetings were held with the Council acting in the status of the Company's Audit Committee in accordance with the competences and powers conferred on the Audit Committee. Report on this particular scope of the Council's area of activity will be included in the report of the Audit Committee of AS Ditton pievadķēžu rūpnīca to the ordinary general meeting of shareholders held for the approval of the Company's Annual Report for 2021.

On 4 June 2021, the ordinary shareholders' meeting of the Company rated the performance of the Council in the previous period as satisfactory and deemed it appropriate to the Company's objectives and mission. No claims or requests were made in connection with the activities of the Management Board.

The Council of the Company drew the attention of shareholders to the following important events.

In prior year reports (2019 – 2020) the Council informed the shareholders about the objectivity of the Annual Report and about the consistency thereof with the Company's actual circumstances, as well as systematically informed the shareholders about the market circumstances and the Company's future prospects because the Company is not isolated, but rather forms a part of the global business system and depends on the performance indicators of the said countries, in the markets of which due to their geographical position, logistics and actual presence the Company is represented.

By analysing the development prospects of the Company, which is included in the total world economy, in the report for 2020, the Council noted that the Council of the Company rates its forecasts for the year 2021 with regard to the global market outlook and demand for the Company's goods in the range of "moderately negative" to "moderately positive" in certain geographical market sectors and depending on the assortment of goods. The materialisation of the forecasts depends not only on the Company but also on the future development trends of the global economy, but also on the future dynamics of the world economy, on the impact of the consequences of the COVID-19 pandemic, and on the efficiency of the measures taken and being taken to overcome these consequences, which have a direct impact on both market trends and the Company.

In its report to the Annual Report of the year 2020, the Council stated that it assessed the Company's existing resources and the management procedures planned by the Council and the Management Board as sufficient to overcome the effects of the COVID-19 pandemic and considered that the Company had the potential to overcome the crisis, to continue economic activity and future development. The Council is of the opinion that this forecast corresponds to Company's performance indicators in the year 2021.

The above is evidenced by the summary of the operation performed by the Company in the Annual Report for 2021.

Against the background of the localization of economic threats caused by the COVID-19 pandemic, new factors emerged that negatively affect the Company's operations and the Company's future development prospects. These factors are the consequence of the sanctions imposed on the Russian Federation and the Republic of Belarus, taking into account the volumes of production delivered to these regions as indicated by the Management Board.

It is difficult to overcome the ongoing crisis situation, the causes of which are in no way related to the Company, its production, product quality or its partners. In addition, the Council agrees with the Management Board that it is difficult to make a reliable forecast of the Company's development in the current conditions of uncertainty in all markets. The Council also agrees with the position of the Management Board regarding the preparation of the Annual Report for 2021, based on the principle "going concern assumption" and evaluates the overall Company's development forecast in the range from "moderately negative" to "moderately positive".

The Council notes that in 2021 the Company's Council and the Management Board have developed a new Risk Management Policy of the Joint Stock Company Ditton pievadķēžu rūpnīca, which, among other things, includes the risks of sanctions.

The Council declares that any aggressive and even more act of war are considered unacceptable and criminal.

In the light of the foregoing and the Company's circumstances, the Council considers it appropriate to agree with proposal of the Management Board to approve the Company's Annual Report

for the year 2021 with profit in amount of EUR 130 734, as well as to support the proposal of the Management Board to direct the profit to cover the loss of the previous years and to ask the sharelolders to take the same decision at the shareholder's meeting.

Chairman of the Council AS Ditton pievadķēžu rūpnīca 27 April 2022

Boriss Matvejevs

MANAGEMENT REPORT

On the operating performance of the Company in 2021

In the 12 months of 2021, net turnover amounted to EUR 5 275 426, which is for EUR 721 000 more compared with the relevant 12 months indicator for 2020.

During the reporting period, the Company exported 84% of the goods manufactured by it and services to Eastern and Western markets, including 47% to Eastern markets and 37% - to Western markets, sales in Latvia amounted to 16% of the goods and services.

The Company's performance for 2021 was profit of EUR 130 734 (before taxes).

In 2021, the average statistical number of employees at AS Ditton pievadķēžu rūpnīca was 132. In 2021, the average wages in the Company was EUR 777, which was more than the average

wages in 2020 (ERU 645).

The performance of the Company and the Annual Report with the financial statements (including Appendices), this Management report and the Report on Corporate Governance (with Appendices) was approved by the Company's Management Board (Minutes No. 03/2022 of the meeting of the Management Board of 27 April 2022).

Significant events. Market trends and the Company's development. Risks.

The analysis of Company's operations in 2021 took place in the conditions of the COVID-19 pandemic, which significantly affected the openness of the market, their activity and the situation in the economy. The negative factors worsened during the lockdowns, as well as during the disease increased in the regions. Due to the quarantine and organizational measures imposed in the Company, no mass illness of the employees occurred in the Company, which could cause a complete cessation of production.

Analysis of the Company's operation under conditions of COVID-19 pandemic and lockdowns, as well as new challenges activation of certain risks in the Company's production and commercial activities are given in the Management report of the Annual Report for the year 2020 and in the Financial report for 6 months of the year 2021. All the factors, conditions, reasons and consequences indicated therein were relevant to the Company's operations during the whole year 2021.

When announcing the results of its work, the Company several times drew attention to the fact that the Company is integrated into the world economy and international economic relations, as a result of which the Company depends on the situation on market segments where the Company's as suppliers and as purchasers of raw materials and resources interests are represented.

This objectively does not allow the Company to manage market processes individually and to plan its operations in a sustainable perspective, without taking into account the general trends in all sectors of the economy.

The Company continues to produce and sell its products in two main segments of its markets, which are conditionally divided as follows:

"Western" market or mainly the market of European countries, and
"Eastern" market, i.e., the Russian Federation market, the Customs Union, CIS and Ukrainian markets, as well as the market of Asian countries.

The total indicators of all market segments show an increase in the cost of the Company's goods and services and the Company's net turnover.

Based on the risk diversification program (which is related to the above mentioned market segments), during the implementation of this program (during 5-7 years) the Company's share of the "eastern" segment of the market in terms of sales of goods and services has been significantly adjusted compared to the "western" segment, in favour of reducing dependence on the "eastern" segment of the market, which in 2021 makes up 47% of the Company's total turnover and 56% of the Company's total sales.

During the whole year 2021, the Company continued to implement a loss minimisation programme, based on the optimisation of the internal structure, infrastructure, intellectual and human resources. The Company also sees its reserves in focusing on technologically sophisticated high added value goods, as well as driving an increase in the volume of services and works outside the core production activities.

This effort enabled the Management Board to focus its activity to a single consecutive direction, rendering it more structured, categorised in stages as well as enabled an optimal allocation of resources aimed at improving the Company's economic circumstances.

The Company is seeking to render chargeable services from the programme related to the development of an industrial-technological park in its territory. Within the scope of this programme, the Company carried out the upgrading of its production facilities. This enabled the implementation of effective savings on the costs of maintenance of production facilities, as well as the creation of a commercial offer of the lease of a production facility equipped with the infrastructure necessary for production.

In May-June 2021, tendences of market imbalances and unpredictable increase of prices for raw materials appeared. This had a negative impact on the Company's operation results, as the Company was forced to complete orders placed under other price conditions, as well as due to a decrease in order volumes after the announcement of an increase of the prices for delivered products.

The second wave of such instability followed in September-December 2021, during which, for equally unpredictable and incomprehensible reasons, there was a significant increase in the prices of resources used in production (electricity, gas supply), which had the same consequences as indicated in connection with the increase of the raw material prices.

The stability of production, which usually has a significant period of time (up to 2-4 months) between the order and the receipt of payment for the finished product under that order, depends on stability in all market segments and, if in any of them imbalances occur, in addition to the factors mentioned above, it may in the short term lead to a drop in demand in the markets, price inconsistencies, intensification of competition and aggressive crowding out of certain market segments.

In 2021 the Company operated under very difficult conditions of market instability and unpredictability, however, it closed the year 2021 with a profit of EUR 130 734 (before taxes).

After the end of the reporting year 2021 the current crisis situation arose in the markets in which the Company operates, which has not arisen due to the Company, its economic activities or the work of the Company's management institutions. This is due to the sanctions imposed by the European Union on the Russian Federation and the Republic of Belarus in connection with certain political developments.

In order to analyse the situation, evaluate the Company's prospects and opportunities, and planning of the operating activity management procedures, the Company adopted a Risk Management Policy on January 5, 2022, and on March 25, 2022, the Company's Management Board approved Procedures of the JSC Ditton pievadkēžu rūpnīca in connection with the implementation of measures imposed within the framework of sanctions. In order to coordinate and implement these measures within the framework of sanctions, a responsible person was appointed in the Company.

The initial analytical and marketing research showed that:

firstly, the Company's products for sale are not included in the sanctions lists either by their direct meaning or as "dual purpose" products;

secondly, the Company's partners, its officials and business owners are also not included in the sanctions lists.

This research will be continued.

However, the instability of the situation, systematic correction of the lists of sanctions, lack of systematicity and clarity in the application of sanctions, including to regulate cooperation with partners, do not allow to the Management Board to give a motivated and reliable forecast of the situation, development of the Company and its operating activity immediately.

It will be possible to give such a forecast as the situation stabilizes.

Declaration of the Company's Management Board

The Company's Management Board declares that any acts of aggression, violence or war must be considered as disproportionate, illegal and violate the human right to liberty, life and health.

Approval of the Annual Report and Profit distribution

Taking into account the results of the Company's work in previous years, the Management Board of the Company will submit to the shareholders' meeting an initiative to approve the Annual Report for the year 2021 in the prepared version and to route the profit to cover the losses of previous years.

Risks to which the Company is exposed.

Taking into account the current market challenges and in order to systematize the risks themselves, their consequences, procedures for their identification, control and management, the Council and the Management Board adopted and approved the Risk Management Policy of the Joint Stock Company Ditton pievadķēžu rūpnīca.

This document is disclosed on the Company's website www.dpr.lv.

By determining the Company's risks, as well as the principles and objectives of risk management, the Company relies on the following positions:

The purpose of the Company's Risk Management Policy is to establish common basic principles of risk management and division of responsibilities in the Company in order to identify and manage the most significant factors adversely affecting the Company's operations in time, ensuring strategic goals, successful development and reducing potential losses and/or reputational damage;

The principles set out in the Risk Management Policy are based on international best practice in risk management and binding legislation in the Republic of Latvia;

The risk management policy considers all possible and analysable risks as risks of the Company's sustainable development and as such, which:

have an effect on sustainable planning and implemented investment programs,
have an effect or may have an effect on the Company in the long term or short term,
have an effect or may have an effect on the Company's financial instruments.

The Risk Management Policy considers as Company's risks possible events that may adversely affect the Company's ability to provide production or other operating activities or achieve the set business objectives and effectively implement the Company's operational and development goals and missions approved by the Company's shareholders. The Risk Management Policy considers as critical risks those events that may cause to the Company to cause stop operating, significant financial loss or significant damage to the market reputation, loss of partners and the market, or events that may adversely affect the health and/or life of individuals, but the likelihood of occurrence and/or possible adverse effects of which cannot be precisely determined. Critical risks include all risks of force majeure, if they have occurred and thus caused negative consequences for the Company, and the forecasts for overcoming them are negative.

The Risk Management Policy also includes risk management processes, participation of the Company's institutions and employees in these processes, priorities, responsibility and supervision of these processes.

The Company's Risk Management Policy includes the following risks:

Production risks,
Market risks,
Financial risks,
Management and corruption risks,
Legal and compliance risks,
Risks of sanctions,
Social risks,
Risks of force majeure.

Other significant events

There were no other significant circumstances that affect the Company's Annual Report for the year 2021 in 2021. However, other significant events indicated in the Management Report for the Annual Report for 2020 remain relevant.

STATEMENT OF THE MANAGEMENT'S RESPONSIBILITY

According to the information at the disposal of the Management Board, the financial statements for the year 2021 have been prepared in accordance with the applicable requirements of the laws and regulations and give a true and fair view of the assets, liabilities, financial position and profit of AS Ditton pievadl,ežu rupnica. The Management report contains true information.

Chairman of the Management Board AS Ditton pievadķēžu rūpnīca 27 April 2022

Rolands Zarans

INCOME STATEMENT FOR THE YEAR 2021

	Appendix	2021 I DIR	2020 ETOTR
Net turnover	1	5 275 426	4 554 304
Production cost of goods sold, purchase costs of goods sold or services rendered	2	(4 251 672)	3 698 063
Gross profit		1 023 755	856 241
Selling costs	3	1 074	528
Administrative expenses	4	(678 349)	(644 864)
Other income from operating activities	5	124 807	137 306
Other costs of operating activities	6	(144 327)	(186 132)
Other interest receivable and similar income	7	1 822	1 369
Interest payment and similar expenses	8	(195 901)	(188 635)
to other persons 0		(195 901)	(188 635)
Loss or profit before corporate income tax		130 734	(25 243)
Corporate income tax for the reporting year	9
Loss or profit for the reporting year		130 734	(25 243)
Loss or profit per share		0,018	(0,003)

Appendices from page 22 till 39 are integral parts of these financial statements.

According to the Management Board meeting Protocol the financial statements have been signed on behalf of the Company on 27 April 2022 by

Rolands Zarans Chairman of the Management Board

200

(signature)

BALANCE SHEET AS AT 31.12.2021

ASSETS	Appendix	31.12.2021 BUR	31.12.2020 IBOR
Long-term investments
Intangible investments
Concessions, patents, licenses, trademarks and
similar rights	10		1 611
Total intangible investments			1 611
Fixed assets
Immovable property:
Land		2 061 350	2 061 350
Buildings and structures and permanent crop		1 827 592	1 970 033
Investment property - land
Investment property - buildings
Technological equipment and devices		2 067 559	2 313 382
Other fixed assets and inventory		16 380	23 884
Fixed assets under construction
Total fixed assets	11	5 972 881	6 368 649
Long-term financial investments
Other securities and investments
Total long-term financial investments
TOTAL LONG-TERM INVESTMENTS		5 972 881	6 370 260
Current assets
Inventories
Raw materials, consumables and supplies		437 903	453 464
Work in progress		189 594	152 543
Finished products and goods for sale		247 710	202 839
Goods in transit
Advance payments for inventories		155 849	131 902
Total inventories	12	1 031 056	940 748
Debtors
Trade receivables	13	560 972	400 419
Other debtors	14	23 020	34 644
Deferred expense		634	478
Total debtors		584 626	435 541
Cash		132 969	107 750
TOTAL CURRENT ASSETS		1 748 651	1 484 039
TOTAL ASSETTS		7 721 532	7 854 299

Appendices from page 22 till 39 are integral parts of these financial statements. According to the Management Board meeting Protocol the financial statements has been signed on behalf of the Company on 27 April 2022 by

Rolands Zarāns Chairman of the Management Board

(signature) (signature)

BALANCE SHEET AS AT 31.12.2021

LIABILITIES	Appendix	31.12.2021 EUR	31.12.2020 BUR

Equity Share capital	15	10 360 000	10 360 000
Reserves:
Other reserves		169 251	169 251
Retained loss brought forward from the previous
years		(9 370 970)	(9 345 727)
Loss/profit of the reporting year		130 734	(25 243)
Total equity		1 289 015	1 158 281

Creditors
Long-term creditors:
Loans from credit institutions	16	3 811 577	4 135 577
Deferred income	20	1 050 031	1 133 515
Total long-term creditors		4 861 608	5 499 576
Short-terms creditors:
Loans from credit institutions	16	347 384	170 384
Other loans	17	100 000	3 700
Prepayments received from purchasers		64 787	62 489
Accounts payable to suppliers and contractors		432 514	423 053
Taxes and State mandatory social insurance
payments	18	309 836	475 928
Other creditors	19	81 597	67 631
Deferred income	20	83 484	83 484
Accrued liabilities	21	151 307	140 257
Total short-term creditors		1 570 909	1 426 926
Total creditors		6 432 517	7 196 207
TOTAL LIABILITIES		7 721 532	7 854 299

Appendixes from page 22 till 39 are integral parts of these financial statements.

According to the Management Board meeting Protocol the financial statements have been signed on behalf of the Company on 27 April 2022 by

Rolands Zarāns Chairman of the Management Board

(signature)

CASH FLOW STATEMENT FOR THE YEAR 2021

	Appendix	2021 EUR	2020 IBIOIR
I. Cash flows from operating activities
1. Profit/loss before enterprise income tax		130 734	(25 243)
Adjustments for:
Depreciation of fixed assets	11	404 723	418 583
Depreciation of intangible assets	10	1 611	4 833
Interest payments and similar expenses	8	195 901	188 635
Other interest receivable and similar income	7	(1 822)	(1 369)
Income from sale of fixed assets	11
2. Profit before adjustments to current assets and		731 147	585 439
short-term creditors
Adjustments for:
Increase in accounts receivables		(149 085)	224 402
Increase in inventories		(90 308)	(22 325)
Decrease in accounts payable to suppliers,
contractors and other creditors		(212 801)	(124 766)
Interest payments expenses		(195 901)	(188 635)
Net cash flows from operating activities		83 052	474 115
II. Cash flows from investing activities
Purchases of fixed assets and intangible investments		(8 955)	(2 674)
Proceeds from sale of fixed assets
Net cash flows from investing activities		(8 955)	(2 674)
III. Cash flows from financing activities
Net change in borrowings		(50 700)	(375 423)
Interest payments and similar expenses		1 822	1 369
Net cash flows from financing activities		(48 878)	(374 054)
Net decrease/increase in cash and cash
equivalents		25 219	97 387
Cash and cash equivalents at the beginning of the
reporting year		107 750	10 363
Cash and cash equivalents at the end of fiscal
period		132 969	107 705

Appendices from page 22 till 39 are integral parts of these financial statements.

According to the Management Board meeting Protocol the financial statements have been signed on behalf of the Company on 27 April 2022 by

Rolands Zarans Chairman of the Management Board

(signature)

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR 2021

	Share capital	Reserves	Retained loss	Loss or Profit for the	Total
	EUR	E OR	TENUIR	reporting year ETUR	FUR
31 December 2019	10 360 000	169 251	(9 228 217)	(117 506)	1 183 524
Profit for the year 2019 distribution Profit for the reporting			(117 506)	117 506
year				(25 243)	(25 243)
31 December 2020	10 360 000	169 251	(9 345 727)	(25 243)	1 158 281
Profit for the year 2020 distribution			(25 243)	25 243
Loss for the reporting year				130 734	130 734
31 December 2021	10 360 000	169 251	(9 370 970)	130 734	1 289 015

Appendices from page 22 till 39 are integral parts of these financial statements.

According to the Management Board meeting Protocol the financial statements have been signed on behalf of the Company on 27 April 2022 by

Rolands Zarans Chairman of the Management Board

(signature)

Jūlija Lavrecka Chief Accountant

(signature)

APPENDICES TO THE ANNUAL REPORT

Accounting principles and valuation methods

Fundamental principles of the preparation of the financial statements

The Annual report has been prepared in compliance with the Law on Accounting, Law on the Annual Accounts and Consolidated Annual Accounts and Regulation No.775 on rules of application of the Law on the Annual Accounts and Consolidated Annual Accounts of the Cabinet of Ministers. Income statement is prepared in accordance with format defined in the Appendix 3 of the Law on the Annual Accounts and Consolidated Annual Accounts, i.e., expenses are classified by their function. Under the Section 5 of Law on the Annual Accounts and Consolidated Annual Accounts, the Company is considered as a medium-sized enterprise. Financial statements of the Company are prepared pursuant to provisions of the Section 9 of the Law on the Annual Accounts and Consolidated Annual Accounts. The annual report is prepared in accordance with the requirements of Article 9 of "The Law of the Annual Accounts and Consolidated Annual Accounts". There have been no changes in accounting policies and valuation methods used in prior years. In cases when reclassification of comparatives with no effect on prior year profit and equity are performed, relevant explanations are provided in the Notes to the financial statements or accounting policies.

Items of the annual report are evaluated accordingly to the following accounting principles which are included into Accounting Policy approved on 22 December 2016 (with amendments dated 1 June 2018):

a) The accounting policies used by the Company are consistent with those used in the previous accounting period;
b) Measuring of the items has been carried out with due care, i.e.:
- only the profit accrued up to the balance sheet date has been included in the report;
- all potential risks and losses incurred during the reporting year or in previous years have been taken into account, even in cases information on the noted risks and losses became known between the balance sheet date and date of preparation of these accounts;
- all impairment, depreciation and amortisation amounts have been calculated and taken into account, regardless of whether the Company's performance for the reporting year is a profit or loss
c) The revenue and costs relating to the reporting year have been taken into account regardless of payment dates or invoice receipt or issue dates. Expenses have been matched with the revenue in the reporting year
d) The elements of asset and liability items have been measured separately;
e) Operating activities are identified according to their economic content and substance over their legal from.

In 2021 the bookkeeping was kept on united bookkeeping accounts, which have been approved on 13 May 1993 (with amendments dated 28 December 2017) and according to the Regulation on bookkeeping and accounting dated 8 January 2007, detailing the plan of accounts based on key aspect of the Company`s business operations.

The bookkeeping register based on synthetic accounts is the General ledger, which contains records on transactions from all the accounts. There are various kinds of analytical accounting registers, such as books, cards, lists etc.

The financial statements cover the period 1 January 2021 through 31 December 2021. Information requested by the law on the Company has been disclosed in separate part of this annual report, on page 3.

Going concern disclosure

These financial statements have been prepared under the going concern assumption.

Going concern disclosure (continued)

At 31 December 2021, the current assets of the Company exceeded its total current liabilities by EUR 177,742 thousand (as at 31 December 2020 the current assets exceeded current liabilities by EUR 57,113 thousand). In 2021 short time liabilities are higher than in 2020 by EUR 143,983 thousand.

Company's financial and operative indices showed an improvement in 2021.

In the first quarter of 2022, the so-called "sanctions risks" intensified due to the sanctions policy initiative adopted in the European Union and Latvia against the Russian Federation and the Republic of Belarus. A preliminary analysis of these risks is provided in the Management Report and in the Report of the Council. "Sanction risks" are dynamic and it is currently not possible to make reliable predictions about their future development.

The Company's products are not included in the list of goods and services that are subject to sanctions and are prohibited for export to the Russian Federation and the Republic of Belarus. Nor is the company's product a dual purpose product. The company's partners are also not included in the sanctions lists.

Given the volume of products previously sold by the Company to the Russian Federation and the Republic of Belarus, future decisions of the European Union and Latvian regulatory authorities regarding such sales opportunities, including those related to possible terms of the sales ban, will have a significant role in the Company's future operations, in the event that they are of a temporary nature.

Based on such dynamics, the Company's institutions will make strategic and tactical decisions, informing investors, as well as financial instruments market participants about it in accordance with the established procedure.

Anyway the priority measures of the Company's institutions will be measures aimed at maintaining the Company and its economic activity, activating the possibilities of adjustment of sales and raw material markets to the extent permitted by market conditions, its activity and competing offers.

Foreign currency revaluation

The monetary unit used for financial statements preparations is the European Monetary Unit - euro (EUR). All the monetary assets and liabilities are converted to euro applying the exchange rate of the European Central Bank on the balance sheet date.

31.12.2021	31.12.2020
1 USD = 0,88 EUR	1 USD = 0,81 EUR
1 RUB = 0,01 EUR	1 RUB = 0,01 EUR

The income and loss resulted from fluctuation of foreign currency exchange rate was included in the income statement of the appropriate period.

Long- and short-term items

The amounts received, paid or written off which are due later than a year after the reporting period, are included in long-term items. The amounts received, paid or written off during the year are displayed as short-term items.

Intangible assets

Intangible assets are listed at their cost of acquisition, which are depreciated in a straight-line basis. The depreciation period is 5 years. When events or changes in circumstances indicate that the carrying value of intangible assets may not be recoverable, the intangible assets are reviewed for impairment.

Loss from impairment is recognized when the carrying value of intangible assets exceeds its recoverable amount.

Fixed assets

In accordance with the Company's accounting policies the bookkeeping principles for fixed assets are used also for accounting for investment property assets (refer to section "Investment property").

Fixed assets are carried at their historical cost less accumulated depreciation and impairments. The initial value of fixed assets includes their acquisition cost, including import duties and as well as any other eligible costs regarding the preparation of the assets for their proper operation according to their intended purpose. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

	% a year
Land	Depreciation is not to be calculated
Buildings and engineering structures	5 - 10
Technological equipment and devices	6 - 33
Other fixed assets and inventory	20 - 70

Depreciation is calculated starting with the following month after the asset is put into operation or engaged in commercial activity.

When events or changes in circumstances indicate that the carrying value of tangible assets may not be recoverable, the fixed assets are reviewed for impairment. If there are signs, that the value is not recoverable, and if the carrying values exceeds the estimated recoverable amount, the asset or cashgenerating unit are written down to its recoverable value. The recoverable amount is higher than asset`s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The loss from impairment is recorded in profit and loss account.

An asset is de-recognized upon its disposal, or when no future economic benefits can be expected from its use. The gain or loss on de-recognition calculated as the net disposal proceeds, minus the asset's carrying value is recorded in the income statement in the year when the asset is de-recognized.

Tenant improvement allowance is recorded as a fixed asset and depreciated using the straight-line method over the shortest time spread of the useful life of the capital improvements and lease.

Investment property

Investment property include land, buildings, engineering structures or their parts, which the Company holds as an owner in order to gain rent or in anticipation of a future increase in price (value) and not for product manufacturing or provision of services, for administrative purposes or resell in the ordinary

Investment property (continued)

course of business. Investment property is shown separately from other real estate in order to present a more meaningful information to the financial statements' users. The Company initially recognises investment property at acquisition cost.

The value of the investment property embodies the prime value of the constructions in progress, as well as borrowing costs and other directly attributable to funding of the appropriate object during the period of its preparation as a new object for its intended use.

Capitalisation of borrowing costs for investment property is terminated when no active development of the property is performed during the accounting period. The current repair and maintenance costs of the investment property are included into income statement for the period in which they incurred.

In 2020, based on Article 303 of the Cabinet of Ministers of the Republic of Latvia Regulation No. 755 "Regulations on the Application of the Law on Annual Accounts and Consolidated Annual Accounts", the balance sheet item "Investment properties" is included in the company's fixed assets.

Land is not subject to depreciation. Buildings recognised as investment properties are depreciated by the straight-line method over their useful life, in order to write off the acquisition value of the building to its estimated residual value at the end of the useful life period by using the following rates set by the Management:

	% a year
Buildings and engineering structures	5 - 10

Trade and other receivables

Trade receivables are accounted and reflected in the balance according to original invoiced amount less provisions for doubtful debts. The company creates provisions for unsecured accounts receivable, on the basis of an individual assessment of the accounts receivable. Debts are written off when the retrieval is considered as impossible.

Inventories

Raw materials, consumables and supplies are valued at acquisition cost, plus incidental costs of acquisition, on a strict lower-of-cost-or-market basis. Adequate write-downs have been applied at net selling price due impairment, full or partial outdating of inventories or when production or selling costs of inventories jumped up significantly. Inventories are valued using the FIFO method. Work in progress is valued at the direct cost of materials used. The cost of finished goods is carried at the cost of manufacture, which includes adequate material and labour costs in addition to direct material and production overheads, e.g., energy, ancillary materials, equipment and maintenance costs, depreciation and general manufacturing costs – service costs related to production.

Cash

Cash and cash equivalents comprise cash at bank. The cash flow statement has been compiled based on indirect method.

Accounts payable to suppliers and contractors

Accounts payable to suppliers are recorder at their nominal value.

Loans and borrowings

Loans and borrowings are initially recognized at cost, being the fair value of the proceeds received plus/net of issue costs associated with the borrowing. After initial recognition, borrowings are subsequently measured at amortized cost. Any difference between proceeds (less issue costs associated

Loans and borrowings (continued)

with the borrowing) and the redemption value is recognized in the income statement over the period of borrowings.

Borrowing costs

Borrowing costs are expensed in the period they occur and disclosed in the income statement as interest or similar expense.

Contingencies

Contingent liabilities are not recognised in these financial statements, as these liabilities are accepted only when as assumption of an outflow of resources has been confirmed. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognised in this financial report but disclosed until an inflow of economic benefits is probable. Contingent liabilities and assets are revealed when they are of essential matter.

Investments in capital of other parties

Investments in capital of other parties are recorded on the basis of initial cost method. The cost method is investment accounting method when investments are accounted at its purchase costs. Investor recognizes income only when investor receives from investee distribution of accrued profit resulting after the date of acquisition. In cases when the value of the investment has significantly decreased as a result of conditions which cannot be considered temporary, the accounting value of the investment is decreased to the recoverable value.

Revenue recognition

Revenue is recognised under the assumption of economic benefits, which might flow to the Company, and to the extent, that the revenue can be reliably measured less value added tax and sales-related discounts. Revenue is recognized on an accrual basis. Revenue is recognized at the moment of acquisition when the ownership is transferred to the buyer. Income from interests is accounted on a time spread based on the accrual basis.

Expense recognition

Expenses are recognised in the period they are associated with irrespective of the date of payment.

Accruals for unused vacations

The amount of accrued liabilities is calculated by multiplying employee's average salary (including social tax) of the reporting year and the number of accrued unused vacation days as at the balance sheet day.

Provisions

The provisions are present (legal or constructive) obligations of the Company arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits and amount of which can be reliably estimated.

Donations and funding received

Income from donations and funding received is not recognized until the Company has obtained a reasonable assurance on meeting eligibility rules to receive donations of funding available. Income from donations or funding received is recognized in income statement on a systematic bases and matched with the expense for compensation of which donation or funding is received. Therefore, financial aid granted for long-term investment development purposes, is recorded in the balance as deferred income and included in the income statement on a systematic basis linked to the period of useful life of the fixed assets developed.

Corporates income tax

Corporate income tax for the reporting period is included in the financial statements based on the management's calculations prepared in accordance with Latvian Republic tax legislation.

Application of estimates and key assumptions

The Law of the Republic of Latvia requires that when preparing the financial statements, the management of the Company is expected to share estimates and assumptions that affect the reported and off-balance sheet assets and liabilities on the day of preparation, as well as presented income and expenses of the reporting period. Actual results may differ from these estimates.

Critical judgments and key assumptions concerning the future as well as other uncertainties on the balance sheet date in view of the fact that there exists a substantial risk of the material adjustments to assets and liabilities in next financial years are listed as following.

When assessing accounts receivable and loans, the Company evaluates their retrieval and creates provisions for doubtful accounts receivable and loans, if necessary. After the management of the Company has assessed accounts receivable and loans, it has taken a decision to create additional provisions as of 31 December 2021.
At the end of each reporting year, the Company reviews the useful lives of fixed assets. This assessment and the calculated depreciation may vary.
The Company evaluates advance payments to assess their recoverability and, if necessary, makes provisions for irrecoverable advances. The management of the Company has reviewed the advances paid and believes that there is no necessity for additional provisions as at 31 December 2021.

Related parties' transactions

Related parties transactions are disclosed in accordance with the legal requirements set for medium-sized companies and refers to the instances when such transactions are performed with the shareholders of the Company, its subsidiaries and associates, as well as with the Management (Board and Council members) of the Company, if these transactions are material and outside the standard business scope of the Company.

(1) Net turnover

Net turnover is income gained during the year from sale of produced and purchased products of the Company, as well as income from services net of VAT and less discounts.

Breakdown of net turnover by geographical markets:

	2021	2020
	EUR	EUR
Market
Eastern countries	2 348 693	2 154 238
Western countries	1 924 589	1 661 526
Latvia	1 002 144	738 540
TOTAL:	5 275 426	4 554 304

(2) Production cost of goods sold, purchase cost of goods sold or services rendered

2021	2020
EUR	EUR

	1 394 443
	667 238
	523 007
	398 008
	306 229
	159 413
	165 911
	83 814
4 251 672	3 698 063


2021	2020
	EUR
	528
	-
1 074	528
	1 458 136 771 311 577 355 397 371 446 218 180 735 291 690 128 856 EUR 1 074 -

(4) Administrative expenses

	2021	2020
	EUR	EUR
Administrative staff salaries	460 191	393 406
State mandatory social insurance payments	107 263	94 325
Security expenses	48 245	44 687
Business travel expenses	1 048	2 186
Depreciation and amortisation	8 963	12 161
Professional fees	12 000	10 000
Other administration costs	40 639	88 099
TOTAL:	678 349	644 864
	2021	2020
(5) Other income from operating activities
	EUR	EUR
Decrease in provisions*	27 329	36 434
Assignment of Structural Funds to income (see
Appendix 20)	60 520	60 520
Construction cost compensation (See Appendix 20)	22 964	22 964
Income from exchange rate fluctuations	10 712	17 388
Net income from sale of fixed assets	-	-
Decrease in vacation provision	3 282	-
Other income	-	-
TOTAL:	124 807	137 306

* Of which EUR 26,258 thousand (2020: EUR 33,808 thousand) represents income from decrease of prior year provisions for doubtful receivables made and EUR 1,071 thousand (2020: EUR 2,626 thousand) is decrease in provisions for inventories with low turnover rate due to stock sale.

(6) Other costs of operating activities

	2021 EUR	2020 EUR
Penalties	52 021	56 035
Real estate tax	63 526	32 183
Increase in slow-moving inventories provisions (see
Appendix 12)	-	-
Other operating expense	7 170	21 582
Net loss on foreign exchange rate fluctuations	11 970	8 655
Net loss on decrease of foreign exchange rates	6 489	41 465
Increase in bad debt provisions (see Appendix 13)	3 151	-
Provisions for advance payments	-	1 361
Holiday accruals (increase)	-	24 851
TOTAL:	144 327	186 132

(7) Other interest payment and similar expenses

	2021	2020
	EUR	EUR
other interest income (from unsecured debtor)	1 822	1 369
TOTAL:	1 822	1 369

(8) Interest payment and similar expenses

	2021	2020
	EUR	EUR
Interest payment for loans	195 901	188 635
TOTAL:	195 901	188 635
(9) Corporate income tax
	2021	2020
	EUR	EUR
Corporate income tax for the reporting year	-	-
TOTAL:	-	-

On 31 December 2021, accumulated losses for provisions of enterprise income tax were EUR 4 601 051 (in 2020 EUR 4 601 051*). The rest usage time limit as at 31 December 2021 is one year.

* Due to the decision of the State Revenue Service from 10.06.2019 and the decision of the action sitting of the Senate of the Republic of Latvia from 14.12.2021, the amount of accumulated losses is adjusted in the Corporate income tax declaration for December 2021.

(10) Intangible investments	Concessions, patents, licenses, trademarks and similar rights EUR
At 31 December 2019 Initial value Accumulated amortisation and	58 875
deprecation Book value at 31 December	(52 432) 6 444
The year of 2020 Book value at 1 January Purchase	6 444
Amortisation Book value at 31 December	- (4 833) 1 611
At 31 December 2020 Initial value Accumulated amortisation and	58 875
deprecation Book value at 31 December	(57 264) 1 611
The year of 2021 Book value at 1 January Purchase	1 611 -
Amortisation Book value at 31 December	(1 611) -
At 31 December 2021 Initial value Accumulated amortisation and	58 875
deprecation Book value at 31 December	(58 875) -

All fixed assets of the Company are pledged in favour of JSC Citadele Banka, refer to Appendix 15.

(11) Fixed assets

EUR EUR EUR EUR EUR At 31 December 2019 Initial value 14 868 387 1 246 700 8 370 595 508 732 12 649 25 007 063 Accumulated amortisation and deprecation (11 661 395) (279 867) (5 807 195) (474 048) - (18 222 505) Book value at 31 December 3 206 992 966 833 2 563 400 34 684 12 649 6 784 557 The year of 2020 Book value at 1 January 3 206 992 966 833 2 563 400 34 684 12 649 5 817 724 Reclassified 966 833 966 833 Purchased - 2 106 568 -	TOTAL
	EUR







	2 674
Initial value of excluded fixed
assets - (966 833**) (89 500) (25 782) - (115 282)
Accumulated amortisation of
excluded fixed assets - - 88 904 25 782 - 114 686
Amortisation (84 538) -** (251 528) (11 368) (12 649) (360 083)
Reclassified (depreciation
part) (57 903) (57 903)
Book value at 31 December 4 031 384 - 2 313 382 23 884 - 6 368 650
At 31 December 2020
Initial value 14 868 387 1 246 700** 8 283 201 483 518 12 649 24 881 807
Reclassified 1 246 700**
Accumulated amortisation
and deprecation (12 083 704) (1 246 700)** (5 969 819) (459 634) (12 649) (18 513 157)
Book value at 31 December 4 031 384 - 2 313 382 23 884 - 6 368 650
The year of 2021
Book value at 1 January 4 031 384 - 2 313 382 23 884 - 6 368 650
Purchased - - 5 670 3 285 -	8 955
Initial value of excluded fixed
assets - - (4 550) (23 536) - (28 086)
Accumulated amortisation of
excluded fixed assets - - 4 550 23 536 -	28 086
Amortisation (142 441) - (251 493) (10 789) - (404 723)
Book value at 31 December 3 888 942 - 2 067 559 16 380 - 5 972 881
At 31 December 2021
Initial value 16 115 088 - 8 284 321 463 267 - 24 862 676
Accumulated amortisation
and deprecation (12 226 146) - (6 216 762) (446 887) - (18 889 795)
Book value at 31 December 3 888 942 - 2 067 559 16 380 - 5 972 881

All fixed assets of the Company are pledged in favour of JSC Citadele Banka, refer to Appendix 15, but the equipment purchased in 2017 is encumbered in relation to the investigative activities of the partner.

* On 14 March 2014, the Company signed with the Investment and Development Agency of Latvia an Agreement No.L-IZI-14-0003 on implementation of the project "Construction of industry premises in the free industrial area of JSC DITTON Driving Chain Factory". The project was launched on 14 March 2014 and completed on 7 July 2015. The total costs of the project amounted to EUR 3,376,313, including eligible costs EUR 2,796,430. Ditton Būve Ltd. has performed construction works within the project due to the Construction works contract No. DPR/2014/01 dated 25 July 2014. In accordance with the statement of completion and final acceptance of work dated 25 February 2015, construction works

11) Fixed assets (continued)

costed EUR 2,750,704. On 29 December 2015, the Company received the aid EUR 1,159,833 EUR from the Investment and Development Agency of Latvia (LIAA).

*The significant part of production premises of the Company is held for rent. Before 2017 property for rent was recorded as fixed assets. Starting from 2017, the value of Company`s property for rent (land and buildings) is recognized as investment property. Retrospective reclassification of cost, accumulated depreciation and depreciation expense of the relevant assets has been performed.

** Since the year 2020 production premises of the Company, which are held for rent are reclassified back from investment properties as a part of fixed assets (Land plots, buildings and engineering structures), because the Company has assessed information given before and considers that information in the "Investment properties" has to be given in case it is parent company of the group.

Fixed assets include the land (cadastre number 0500 007 0001), on which the infrastructure facilities of the Company are located and which has been historically purchased on instalment from a commercial company registered in Latvia and pledged in a commercial bank registered in Latvia as collateral security for the seller's loan. The title to the mentioned plot shall be transferred to the Company only after registration in the Land Registry. Under the terms of the purchase agreement, the seller is not entitled to request the cancellation of the land purchase agreement.

The Company's management has assessed the value in use of its fixed assets and investment assets in the balance sheet and considers that their recoverable value is not lower than their carrying value.

(12) Inventories

	31.12.2021 EUR	31.12.2020 EUR
Raw materials, consumables and supplies	474 389	490 793
Provisions for slow-moving items	(36 486)	(37 329)
Raw materials, consumables and supplies, net	473 903	453 464
Work in progress	189 594	152 543
Provisions for slow-moving items	-	-
Work in progress, net	189 594	152 543
Finished products and goods for resale	273 948	229 306
Provisions for slow-moving items	(26 238)	(26 467)
Finished products and goods for resale, net	247 710	202 839
Advances for inventories	157 210	133 263
Provisions for slow-moving items	(1 361)	(1 361)
Advances for inventories, net	155 849	131 902
TOTAL:	1 031 056	940 748
Provisions for slow-moving items:
At the beginning of the year	(65 156)	(66 421)
Increase (Appendices 5 and 6)	-	1 361
Decrease (Appendices 5 and 6)	(1 071)	(2 626)
At the end of the year	(64 085)	(65 156)

(13) Trade receivables

	31.12.2021	31.12.2020
	EUR	EUR
Book value of trade receivables	630 142	492 695
Provisions for doubtful accounts receivable	(69 170)	(92 276)
TOTAL:	560 972	400 419
Provisions for doubtful accounts receivable:
At the beginning of the year	92 276	126 085
Write-off	-	-
Recovered provisions (Appendix 5)	(26 258)	(33 808)
Increase in provisions (Appendix 6)	3 151	-
At the end of the year	69 170	92 276
(14) Other debtors
	31.12.2021	31.12.2020
	EUR	EUR
Input value added tax receivable (VAT)	23 020	34 644
TOTAL:	23 020	34 644

(15) Share capital

The share capital of the Company is EUR 10,360,000 with nominal value of EUR 1,40 per share and a total paid shares of 7,400,000.

The shareholders owning over 5 p% of the shares of the whole capital of the Company as at 31.12.2021 and as at 31.12.2020:

NAME	Shares owned, % 31.12.2021	Shares owned, % 31.12.2020
Eduards Zavadskis*	20,00	20,00
Vladislavs Drīksne	19,92	19,92
MAX Invest Holding SIA	13,63	13,63
SIA "Maleks S"	13,56	13,30
SIA "DVINSK MNG"	9,46	9,46

(16) Loans from credit institutions

Long-term:		Repayment term	31.12.2021	31.12.2020
Loan from JSC Citadele Banka	EUR	15.12.2022	3 811 577	4 135 577
TOTAL long-term loans from credit institutions:			3 811 577	4 135 577

Short-term:		Repayment term	31.12.2021	31.12.2020
Loan from JSC Citadele Banka	EUR	15.12.2022	347 384	170 384
TOTAL short-term loans from credit institutions:			347 384	170 384


		TOTAL loans from credit institutions:	4 158 961	4 305 961

			31.12.2021	31.12.2020
Liabilities due within one year			347 384	170 384
Liabilities due after one year but not more than five years			3 811 577	4 135 577
		TOTAL:	4 158 961	4 305 961

Information on loans received by the JSC Citadele banka as at 31.12.2021 is as follows:

Number and date of the	Currency	Interest	Limit	Repayment
contract		rate		term
Long-term loan No.CI2010- 2.3/1 dated 10.09.2010 (Agreement dated 07.12.2021)	EUR	4,5%+6M EURIBOR	4 952 086 EUR	15.12.2021

The loan is secured by the commercial pledge on all of the Company's assets, including intangible assets, fixed assets, investment assets, inventories, claim rights and Company`s financial instruments on bank accounts in JSC Citadele banka, as a pool of things at the moment of exercising the pledge right.

The guarantees of individual shareholders of the Company and commercial pledges, as well as guarantees of several cooperation partners and real estate pledge serve as an additional collateral security for loan repayment.

The Loan agreements contain covenants upon breach of which the JSC Citadele bank may request the pre-schedule loan repayment or increase the interest rate by 1%. The information available at the moment of preparation of these financial statements shows, that, upon calculation of the ratios set, based on interpretation of specific covenants, the ratios may be or may not be reached, inclusive of accumulated DSCR ratio for the past 12 months, if one-off past loan repayments are not subtracted, is less than 1, but in the year 2019 the Company has managed to contract the services of a finance consultant for the purposes of control over the financial information and preparation of such information. The Company is working with the Bank and finance consultant on close terms and the Management does not have any information that might indicate that the Bank might exercise the above noted rights to require pre-mature repayment of the loans granted.

* On 22 February 2019 the Company concluded agreement with AS Citadele Banka on termination of loan agreement Nr CI2011-2.3/218 and restructuration of short-term liabilities based on the noted agreement in the amount of EUR 449 543, increasing long-term Loan agreement Nr. CI2010-2.3/1 liability to EUR 4 952 086 (see Appendix 16). Taking into account the restructuration performed, short term liabilities decreased below the value of short-term assets.

(17) Other loans

	TOTAL long-term loans from credit institutions:		100 000	3 700
Other loans*	EUR	31.01.2021	100 000*	3 700**
Short-term:		Repayment term	31.12.2021	31.12.2020

* Currency of the loan is EUR. Fixed interest rate 4 per cent per year

** Currency of the loan is EUR. Fixed interest rate 12 per cent per year.

Loan repayment is not secured, without collateral (pledge) registration in public registers.

(18) Taxes and State mandatory social insurance payments

	31.12.2021	31.12.2020
	EUR	EUR
Property tax	150 521	219 730
Personal income tax	50 918	53 857
State mandatory social insurance payments	58 744	113 546
Nature resources tax	345	253
Penalties	37 483	72 143
VAT (Penalty calculated by State Revenue Service)	11 726	16 350
Risk duty	99	49
TOTAL:	309 836	475 928
(19) Other creditors
	31.12.2021	31.12.2020
	EUR	EUR
Salaries	81 507	67 360
Other creditors	90	271
Receivables arising in favour of the personnel	-	-
TOTAL:	81 597	67 631
(20) Deferred income
	31.12.2021	31.12.2020
	EUR	EUR
Long-term:
VA "LIAA" funding Nr.L-IZI-14-0003	736 195	796 714
Construction cost compensation	313 836	336 801
	1 050 031	1 133 515
Short-term
VA "LIAA" funding Nr.L-IZI-14-0003	60 520	60 520
Construction cost compensation	22 964	22 964
	83 484	83 484
TOTAL:	1 216 999	1 216 999

On 14 March 2014, the Company signed an agreement with the Investment and Development Agency of Latvia No.L-IZI-14-0003 on implementation of the project "Construction of industry premises in the free industrial area of JSC DITTON Driving Chain Factory". The project was launched on 14 March 2014 and completed on 7 July 2015. The total cost of the project amounted to EUR 3,376,313, including eligible costs EUR 2,796,430. Under the Construction works contract No. DPR/2014/01 dated 25 July 2014 the Ditton Būve Ltd. has performed construction works within the project. In accordance with the statement of completion and final acceptance of work dated 25 February 2015, the construction cost amounted to EUR 2,750,704.

(20) Deferred income (continued)

On 29 December 2015, the Company received aid in the amount of EUR 1,159,833 EUR from the Investment and Development Agency of Latvia (LIAA) under a 5-year period ban on disposal. The Investment and Development Agency of Latvia (LIAA) has started correspondence with the Company in respect of the fulfilment of the clauses of the agreement No.L-IZI-14-0003.

In accordance with the implementation of the agreement Nr. L-IZI-14-0003 signed in 2014 with the Latvian Investment and Development Agency "On Development of Production Premises for AS "Ditton pievadķēžu rūpnīcas" within the spare production space", project costs, based on project budget assessment, were recognised in the amount of EUR 459 275 less than initially planned. The difference of funding not received from the Agency was charged to the general contractor for construction works as compensation for funding not received. Income from compensation is recognised over the useful life of the asset developed.

(21) Accumulated liabilities

	31.12.2021	31.12.2020
	EUR	EUR
Accrued liabilities for goods and services	63 801	49 469
Vacation accrual	87 506	90 788
TOTAL:	151 307	140 257

(22) Number of employees in the Company

	2021	2020
Average number of employees of the Company during the year:	137	150
- Council members	5	5
- Management Board members	2	2
- Other employees	132	130

Information on remuneration of Council and Management Board members*

	Council		Management Board			Total
		EUR		EUR		EUR
	2021	2020	2021	2020	2021	2020
Fixed part, variable part and
extraordinary items of remuneration	65 242	48 580	42 401	44 628	107 643	93 208
State mandatory social
insurance payments	15 626	11 570	10 002	10 551	25 628	22 121
TOTAL:	80 868	60 150	52 403	55 179	133 271	115 329

* The full Remuneration Report of the Management Board and the Council in accordance with the requirements of the Financial Instruments Market Law of the Republic of Latvia, Directive (EU) No 2017/828 of the European Parliament and of the Сouncil of 17 May 2017 and the Remuneration Policy approved by the shareholders is issued as a separate document as appendix to the Annual report of the Company.

(23) Financial risk management

Financial risk management in the Company is carried out in accordance with Risk Management Policy of the Joint Stock Company Ditton pievadķēžu rūpnīca.

(23) Financial risk management (continued)

In 2021, the following risks were considered to be current financial risks for the Company's operations.

Credit risk

Credit risk is the risk that the Company might have financial loss due to business partner who failed to comply with his obligations towards the Company. Cash, trade receivables and advance payments mainly cause the credit risk.

These risks may be related to either the insolvency of the partners or the cessation of their operating activity, including at the request of third parties, by blocking or seizing the partners' bank accounts, or by the partner's own dishonest conduct.

External prices

Credit risk is associated with a sudden and unpredictable increase in the prices of raw materials and energy resources, as a result of which the Company's orders, based on prices determined before increase, become or may become such as to cause losses to the Company.

Cash

Credit risk related to cash at banks is managed by balancing the financial asset allocation in order to maintain the possibility of choosing the best offers and minimizing the loss of financial resources at the same time.

The Company oversees, assesses and mitigates this risk by appropriate work with Company's partners, for example, limiting or suspending the ongoing and future transactions with unfavourable partners, when the Company receives information about partners` possible problems with meeting their obligations.

This risk is managed and localized, including through systematic marketing research and ensuring that transactions are properly legally secured.

Liquidity risk

Liquidity risk is the risk that the Company may be unable to meet its obligations timely and in full. Liquidity risk appears, when repayment terms of financial assets and liabilities do not match. The aim of the Company's liquidity risk management is to maintain an adequate amount of cash and cash equivalents, and ensure appropriate sufficient funding through credit lines issued by the banks (refer to the Appendix 16) so that the Company fulfils its obligations within the set time limits. The Company regularly monitors financial assets and liabilities mismatches, as well as stability of funding sources for long-term investments.

In the opinion of the Company's management, the Company will have sufficient cash resources to secure its liquidity.

Foreign currency risk

Foreign currency risk is the risk that the Company might have financial loss due to unfavourable fluctuations in exchange rates. This risk arises when financial assets in foreign currency do not match with financial liabilities in the same currency; herewith the Company has open currency positions.

Interest rate risk

Interest rate risk is the risk that the Company might have financial loss due to unfavourable fluctuations in interest rates. The Company experiences such interest rate risk of long- and short-term loans from credit institutions due to variable fixed rates, or when fixed interest period is less than the planned time of the loan repayment, or when credit interest is based on variables, or due to terms of the Loan agreement. The Company does not have any other choice and does not use any tools to mitigate the

(23) Financial risk management (continued)

interest rate risk other than to fulfil loan-borrowing conditions in full and to cooperate with credit institutions.

COVID-19 pandemic risk

COVID-19 pandemic risk is the risk that in the result of decrease of global economy and activity level a significant decrease of Company's production and financial indices, which are integrated in global economy, will appear. Specific feature of this risk is that it does not depend only on Company and Company's risks management, but it depends mainly on external factors and decisions of the management institutions.

The revival of market segments, the recovery of the economy and the implementation of prudent measures to deal with the risk of the COVID-19 pandemic have made it possible to minimize the impact of this risk in 2021.

The impact of this risk is projected to be negligible in 2022.

After the end of the reporting year - 2021 - the Risk of sanctions arose and has a significant impact. It is forecasted that this risk will be actual during the whole year 2022 and possibly beyond. By its nature, the Risk of sanctions activates and deepens the Credit risk and Foreign currency risk, as well as may cause a significant decrease in the Company's production volumes.

(24) Contingent liabilities, pledges and guarantees

The Company issued collateral (guarantees and pledges) in accordance with the long-term loan according to the Loan Agreement No. of 10 September 2010 No. CI2010-2.3/1, which was concluded with A/S "Citadele Banka", in which the Company is a borrower.

The Company had not issued collateral (guarantees and pledges) in accordance with liabilities of the third persons.

(25) Related Person Transactions

The Company had not concluded transactions with related persons in the year 2021.

Due to changes in the Council of the Company, the status of a related person since 18 June 2020 was acquired by LRS, Ltd., registration number 400039223342. As of 3 September 2018, a Real Estate Lease Agreement No. DPR/08/2018 is in force between the Company and LRS, Ltd. The agreement has been concluded in accordance with the conditions of the project "Construction of industry premises in the free industrial area of JSC "Ditton pievadkēžu rūpnīca"

(26) Subsequent events

1) After the end of the financial year, the global economy, in which the Company is integrated, continues to decline, there are no significant tendencies in production growth, and communication and cooperation opportunities are still limited, which is obviously related to the decisions imposing sanctions on the Russian Federation and the Republic of Belarus and on unpredictable trends in the prices of raw materials and resources.

At the time of preparing the Annual report, it is not possible to provide a reasoned forecast of the impact of these factors on the Company, as the situation still remains unstable and the amount of sanctions already imposed and their addressing is being systematically adjusted.

(26) Subsequent events (continued)

2) The Management Board does not note any other significant event that would affect the Company after the end of the financial year at the time of preparation and approval of the Annual Report for the year 2021.

According to the Protocol of the Management Board meeting the financial statements have been signed on behalf of the Company on 27 April 2022 by

Rolands Zarans Chairman of the Management Board

(signature) (signature)

Independent Auditor's Report

To the shareholders of the JSC Ditton pievadķēžu rūpnīca

Our Opinion on the Financial Statements

We have audited the accompanying financial statements of JSC Ditton pievadkežu rupnica ("the Company") set out on pages 16 to 39 of the accompanying annual report, which comprise:

· the balance sheet as at 31 December 2021,
· the profit and loss statement for the year ended on 31 December 2021,
· the statement of changes in equity for the year ended on 31 December 2021,
· the statement of cash flows for the year ended on 31 December 2021, as well as
· the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes.

In our opinion, the accompanying financial statements give a true and fair view of the ISC Ditton pievadležu rūpnīca (the Company) as at 31 December 2021, and of its financial performance and its cash flows for the year ended on 31 December 2021 in accordance with the Law On the Annual Reports and Consolidated Annual Reports of the Republic of Latvia.

Basis for Opinion

In accordance with the Law on Audit Services of the Republic of Latvia, we conducted our audit in accordance with International Standards on Auditing adopted in the Republic of Latvia (ISAs). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Financial Statements section of our report.

We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (incl. International Independence Standards) and independence requirements included in the Law on Audit Services of the Republic of Latvia that are relevant to our audit of the financial statements in the Republic of Latvia. We have also fulfilled our other professional ethics and objectivity requirements in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (incl. International Independence Standards) and Law on Audit Services of the Republic of Latvia.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our Audit Approach

During the audit planning process, we have determined the materially level and assed the risks of material misstatement of the financial statement. Especially we have assed, whether the Management has made subjective assumptions, such as those about significant accounting estimates, which include assumptions and uncertainties about future events. The same as by other audits, performed by us, we have assed management internal control breach risk, including assessment, whether there are evidences of bias indicating a risk of material misstatement due to fraud.

Materiality

The scope of the audit depends on application of materiality. The aim to obtain reasonable assurance that the financial statements are from material misstatements may result from fraud or error. They are considered to be material it individually or aggregate, they are reasonably expected to influence the economic decisions of the users concerning the financial statements.

Basing on our professional judgement, we have set specific materiality the total materially level applicable to the financial statements as a whole and is given in the following schedule. Along with qualitative considerations, they helped us to determine the scope, type, duration of the scope of audit procedures, in order to estimate impact of individual and aggregated misstatements on financial statements as a whole.

Overall materiality	Overall materiality is determined in amount of EUR 114,5 thousand, performance materiality is determined in amount of EUR 80.2 thousand
How have we determined it	I he overall materiality is ca. 1,5% of balance sheet asset value, performance materiality - ca. 70% of the overall materiality
Basis for application of materiality criteria	In our opinion net turnover is one of the main criteria characterizing operating activity of the Company, which draw attention of Company's Management and investors.

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 current period. These matters were addressed in the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matter	Response
1. Valuation of receivables
As disclosed in the note (13) to the financial statements, as at 31 December 2021, the Company's trade receivables are EUR 560,972 thousand, which is 7,3 per cent of the total balance sheet assets.	We have organized remote interviews with the Company's management and evaluated the objectivity of their judgments as regards the financial position of the debtors analysis and the possibility of recovering receivables.
Provisioning amounts required for recoverable amounts and relevant provisions for doubtful receivables amounts are calculated by evaluating significant delay of the term for fulfilment of payment conditions and other justified reasons that	On a random basis, we have studied external validation to make sure that the valuations of receivables do not have essential incompliances.
casts doubt the recovery of the debt. A healthy portfolio of receivables is essential condition for	We have checked term structure of receivables by evaluation of the recoverability of receivables.
financial stability of the Company, so the management of the Company regularly evaluates the settlement situation with buyers and customers, making provisions for doubtful debtors.	We have evaluated accuracy and completeness of information given in the notes to the financial statements regarding the doubtful debtors of the Company.
By assessment the recoverability of receivables, we have paid attention to the settlement of payments for products sold in the eastern markets, which accounts for 47 per cent of the total turnover. By the end of the year the eastern market buyers debts were EUR 274,970 thousand. That amount has been received in January 2022 and until 22 February 2022, we made sure of it during the audit of the annual report. Eastern partners of the Company, their officials and business owners are not included in the sanctions lists.	We got acquainted with information of the Financial Intelligence Service from 16 March 2022 "On sanctions imposed by the European Union" and it's annex with a list of sanctions' subjects.

Reporting on Other Information

Company management is responsible for the other information. The other information comprises:

· Information about the Company, as set out on pages 3 to 5 of the accompanying Annual Report,
· the Management Report, as set out on pages 12 to 14 of the accompanying Annual Report,
· the Statement on Management Responsibility, as set out on page 15 of the accompanying Annual Report,
· the Statement of Corporate Governance, as set out on pages 7 to 9 of the accompanying Annual Report.

Our opinion on the financial statements does not cover the other included in the Annual Report, and we do not express any form of assurance conclusion thereon, except as described in the Other reporting responsibilities applicable to other information in accordance with the legislation of the Republic of Latvia section of our report.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed and in light of the knowledge and understanding of the entity and its environment obtained in the course of our audit, 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.

Other reporting responsibilities applicable to other information in accordance with the legislation of the Republic of Latvia

In accordance with the Law on Audit Services of the Republic of Latvia our responsibility is to consider whether the Management Report is prepared in accordance with the requirements of the Annual Reports and Consolidated Annual Reports of the Republic of Latvia.

Based solely on the work required to be undertaken in the course of our audit, in our opinion:

· the information given in the Management Report for the financial statements are ons prepared is consistent with the financial statements; and
- · the Management Report has been prepared in accordance with the requirements of the Law On the Annual Reports and Consolidated Annual Reports of the Republic of Latvia.

In accordance with the Law on Audit Services with respect to the Statement of Corporate Governance, our responsibility is to consider whether the Statement of Corporate Governance includes the information required in section 56.1, first paragraph, clause 3, 4, 6, 8 and 9, as well as section 56.2, second paragraph, clause 5, and third paragraph of the Financial Instruments Market Law and if it includes the information stipulated in section 56.2 second paragraph, clause 1, 2, 3, 4, 1 and 8 of the Financial Instruments Market Law. In our opinion, the Statement of Corporate Governance includes the information required in section 56.1, first paragraph, clause 3, 4, 6, 8 and 9, as well as section 56.2, second paragraph, clause 5, and third paragraph of the Financial Instruments Market Law and it includes the information stipulated in section 56.2 second paragraph, clause 1, 2, 3, 4, 7 and 8 of the Financial Instruments Market Law.

In accordance with the Law on Audit Services our responsibility is to provide information in the auditors' report as to whether the Company has prepared a non-financial statement and whether the non-financial statement is included in the management report or is prepared as separate part of the annual report. The audited Company is not required to prepare a non-financial statement.

In accordance with the Law on Audit Services our responsibility is also to provide an opinion whether the Remuneration report contains the information referred to in the Financial Instruments Market Law and whether material misstatements are stated in the Remuneration report in connection information provided in the annual report. In our opinion the Remuneration report contains the information referred to in the Financial Instruments Market Law and no material misstatements are stated in the Remuneration with the financial information provided in the annual report.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the financial statements that give a true and fair view in accordance with the International Financial Reporting Standards approved in European Union and for such internal control as management determines is necessary to enable the preparation of financial statements that are from material misstatement, whether due to fraud or error.

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

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibility for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free 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 accordance with ISAs will always detect a material 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 these financial statements.

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

· Identify and assess the risks of material misstatement of the financial statements, 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;
· obtain 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 Company's internal control;
· evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
· conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence objained, whether a material uncertainly exists related to events or conditions that may cast significant doubt on the Company'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 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 Company to cease to continue as a going concem;
- · evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a fair presentation;
· · obtain sufficient appropriate audit evidence about the Company's financial information to provide an opinion on the financial statements.

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

We also provide those charged with a statement that we have complied with relevant ethical requirements regarding independence and objectivity, and to communicate with them all relationships 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 current period and are therefore the key audit matters. We describe these matters in our auditors' 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.

Other statements and approvals to be included in the auditors' report in accordance with the requirements of the regulatory enactments of the Republic of Latvia and the European Union when providing audit services to Companies that are public interest entities

Report on the compliance of financial reports with the requirements of the European Single Electronic Format (ESEF)

The method of reporting financial statements has been applied by the Company to company to comply with Article 3 of the Commission Delegated Regulation (EU) 2019/815 3 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on a single electronic reporting format (ESEF Regulation). The applicable reporting requirements are set out in the ESEF Regulation. Based on these requirements, the financial statements must be submitted in XHTML formal. We certify that the financial statements for the year 2021 complies with the ESEF Regulation in this respect.

Appointment

On 12 October 2021 the persons entrusted with the management of the Company have appointed us to audit the financial statements of the Company for the year ended on 31 December 2021. Total uninterrupted term of our audit engagement is three years, and it includes reporting periods from the year ended on 31 December 2019 until the year ended on 31 December 2021.

We approve that:

· our auditors' opinion is consistent with the additional report submitted to the Company's Audit Committee;
· as it is stated in section 37. of the Law on Audit Services we have not provided prohibited non-audit services given in the Paragraph 1 of the section 5 of the Regulation (EU) No. 537/2014.

During the period covered by our statutory audit, in addition to the audit, we have not provided the services to the Company, the findings of which are not set out in the Management Report attached to the financial statements or in the Company's financial statements.

The responsible swom auditor of the audit service that results in this independent auditor's report is Marija Poriete.

SIA "AKTIVS M AUDITS" Licence No.40

Marija Poriete Marija Poriete Certified Auditor of the Republic of Latvia Member of the Board Certificate No. 6 Vienības gatve 99-7, Rīga Ktivs N 27 April 2022 A 110 110

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Ditton pievadkezu rupnica

2232_rns_2022-06-01_eb379704-9074-4eaa-8497-3374a7b6bafd.pdf

JSC DITTON PIEVADĶĒŽU RŪPNĪCA Reg. No. 40003030187 Višķu St.17, Daugavpils, LV-5410, Latvia

CONTENTS

PAGE

INFORMATION ABOUT THE COMPANY

INFORMATION ON SHARES AND SHAREHOLDERS

SHAREHOLDERS OWNING MORE THAN 5% OF THE COMPANY'S TOTAL SHARE CAPITAL*

COMPANY BACKGROUND

INFORMATION ON THE MANAGEMENT BOARD AND COUNCIL MEMBERS

THE MANAGEMENT BOARD

Information about the shares held by the members of the Management Board

COUNCIL

Information about the shares owned by the members of the Council

STATEMENT ON CORPORATE GOVERNANCE

§ 2

§ 3

REPORT OF THE COUNCIL on the Annual Report for 2021

MANAGEMENT REPORT

On the operating performance of the Company in 2021

Significant events. Market trends and the Company's development. Risks.

Declaration of the Company's Management Board

Approval of the Annual Report and Profit distribution

Risks to which the Company is exposed.

STATEMENT OF THE MANAGEMENT'S RESPONSIBILITY

INCOME STATEMENT FOR THE YEAR 2021

BALANCE SHEET AS AT 31.12.2021

BALANCE SHEET AS AT 31.12.2021

CASH FLOW STATEMENT FOR THE YEAR 2021

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR 2021

APPENDICES TO THE ANNUAL REPORT

Accounting principles and valuation methods

Fundamental principles of the preparation of the financial statements

Going concern disclosure

Going concern disclosure (continued)

Foreign currency revaluation

Long- and short-term items

Intangible assets

Fixed assets

Investment property

Investment property (continued)

Trade and other receivables

Inventories

Cash

Accounts payable to suppliers and contractors

Loans and borrowings

Loans and borrowings (continued)

Borrowing costs

Contingencies

Investments in capital of other parties

Revenue recognition

Expense recognition

Accruals for unused vacations

Provisions

Donations and funding received

Corporates income tax

Application of estimates and key assumptions

Related parties' transactions

(1) Net turnover

(2) Production cost of goods sold, purchase cost of goods sold or services rendered

(4) Administrative expenses

(6) Other costs of operating activities

(7) Other interest payment and similar expenses

(8) Interest payment and similar expenses

(11) Fixed assets

11) Fixed assets (continued)

(12) Inventories

(13) Trade receivables

(15) Share capital

(16) Loans from credit institutions

(17) Other loans

(18) Taxes and State mandatory social insurance payments

(20) Deferred income (continued)

(21) Accumulated liabilities

(22) Number of employees in the Company

Information on remuneration of Council and Management Board members*

(23) Financial risk management

(23) Financial risk management (continued)

Credit risk